CHINA CENTRAL PROPERTIES LIMITED

Transcription

1 CHINA CENTRAL PROPERTIES LIMITED INTERIM REPORT 2008

2 CORPORATE PROFILE Listed on the Alternative Investment Market of the London Stock Exchange ( AIM ), China Central Properties Limited ( CCP or the Company ) is a real estate investment company focusing on the development of partially-completed property projects in major and secondary cities in the Chinese Mainland. The Company is affiliated with the Shui On Group, which is a leader in property investment and development, construction and construction materials in China.

3 OUR PROJECTS Shenyang Central Plaza, Phase II OUR PROJECTS Dalian Xiwang Building (Computer rendering photo) Chongqing Ruiqi Building (Computer rendering photo) Beijing Huapu Centre (Computer rendering photo) Beijing Fengqiao Villas Beijing Shengyuan Centre Chengdu Orient Home

4 CONTENTS Inside Front Corporate Profile 02 Management Discussion and Analysis 10 Report on Review of Interim Financial Information 11 Condensed Consolidated Income Statement 12 Condensed Consolidated Balance Sheet 14 Condensed Consolidated Statement of Changes in Equity 16 Condensed Consolidated Cash Flow Statement 18 Notes to the Interim Condensed Consolidated Financial Statements Inside Back Corporate Information

5 MANAGEMENT DISCUSSION AND ANALYSIS FINANCIAL HIGHLIGHTS Interim Results The Company s turnover for the six months ended 30 June 2008 was approximately US$18 million, compared with a nil turnover for the previous interim reporting period from 9 February 2007 (date of incorporation) to 30 June Unaudited consolidated profit after taxation and minority interest was approximately US$25 million compared with a loss of approximately US$3 million in the interim period in Interim Dividend The Board has declared an interim dividend of 1.0 pence (approximately US1.8 cents) per share (2007: nil) to shareholders whose names appear on the Company s register of members at the close of business on 26 September The interim dividend will be paid on 15 October BUSINESS REVIEW The Company has continued to make progress in investing in the special sector of partially-completed properties in major and secondary cities in the Chinese Mainland and a number of projects have been successfully acquired since early SOCAM Asset Management (HK) Limited, our investment manager, has further strengthened its ability in deal sourcing, construction management, disposal and leasing. Its experienced management team, backed up by Shui On Group s proven track record and reputation in the real estate and construction sector in the Chinese Mainland, has continued to contribute positively to CCP s business development. 2 CHINA CENTRAL PROPERTIES LIMITED INTERIM REPORT 2008

6 MANAGEMENT DISCUSSION AND ANALYSIS In the fifteen months since listing in June 2007, the following have been achieved: Of the six projects injected into CCP at listing (the Initial Portfolio ) by Shui On Construction and Materials Limited ( SOCAM ), Huapu Centre and Shengyuan Centre in Beijing, Xiwang Building in Dalian as well as a substantial portion of Central International Plaza in Qingdao were disposed of within the Company s profit target. Approximately 22,000 square metres of Central Point in Chengdu were also sold in July Proceeds generated from such sales will be applied to new investments. Construction work on all but two of the six projects in the Initial Portfolio has been substantially completed. Since listing, eight more projects have been acquired with an attributable developable gross floor area ( GFA ) of approximately 925,000 square metres, representing an increase of 195% on the Initial Portfolio of 473,000 square metres. By 30 June 2008, net funds raised in June 2007 of approximately US$535 million were fully invested in the existing portfolio. INTERIM REPORT 2008 CHINA CENTRAL PROPERTIES LIMITED

7 MANAGEMENT DISCUSSION AND ANALYSIS Property Portfolio The table below summarises the Company s total developable GFA as at 31 August 2008: Project Name Huapu Centre - disposal Shengyuan Centre - disposal Location All GFA figures are in square metres rounded to the nearest thousand Total Developable GFA Beijing 128,000 (128,000 ) Beijing 43,000 (43,000 ) Estimated Completion Year Property Type ** C ** C Fengqiao Villas Beijing 72, R Central Point - disposal Chengdu 120,000 (22,000 ) 2010 CO Orient Home* Chengdu 168, CO Ruiqi Building Chongqing 86, CRE Haomen Building Chongqing 10, C Nanyang Building Chongqing 53, RE Qianxinian Building Chongqing 35, CE Xiwang Building - disposal Dalian 89,000 (89,000 ) ** C Chuangyi Centre Guangzhou 100, RE Central International Plaza - disposal Qingdao 63,000 (55,000 ) ** CRE Central Plaza (Phase I)* Shenyang 209, CO Central Plaza (Phase II)* Shenyang 264, CO TOTAL 1,103,000 C : Commercial RE : Residential and retail R : Residential CE : Commercial and retail CO : Composite CRE : Commercial, residential and retail * CCP has 50% interest in Chengdu Orient Home, 70% interest in Shenyang Central Plaza (Phase I) and 40% interest in Shenyang Central Plaza (Phase II). The GFAs shown are the effective shares attributable to CCP. ** Substantially completed before disposal Note: Guangzhou Dapeng International Plaza, which CCP agreed to acquire in April 2008, has not been included in the above table due to the uncertainties described in page 7 below. 4 CHINA CENTRAL PROPERTIES LIMITED INTERIM REPORT 2008

8 MANAGEMENT DISCUSSION AND ANALYSIS BEIJING Huapu Centre This Grade A commercial complex, with two 24-storey office towers and 128,000 square metres of GFA, is in Beijing s prime Dongcheng District. It was disposed of in February 2008 with a gain of approximately US$43 million. Shengyuan Centre Shengyuan Centre is a Grade A office development in Beijing s well-established Lufthansa business district and has two towers of 18 storeys and 9 storeys respectively and a GFA of 43,000 square metres. The project was disposed of and this transaction will be completed in the second half of Fengqiao Villas This up-market western-style villa project has a total of 187 residences in the affluent suburban Shunyi district. An additional 35 villas were acquired in June 2008, giving a total of 130 villas in the present portfolio. Efforts to purchase more villas will continue and refurbishment will commence at the end of CHENGDU Central Point This property project is in the new central business district. The earthquake in May 2008 did not cause any structural damage to the existing structure. The project comprises an existing 35-storey commercial tower in Phase I and an adjacent newly developed office tower of 30 storeys. When fully developed, 120,000 square metres of GFA will be available by Approximately 22,000 square metres in the existing towers was acquired by a financial institution in July INTERIM REPORT 2008 CHINA CENTRAL PROPERTIES LIMITED

9 MANAGEMENT DISCUSSION AND ANALYSIS CHENGDU (continued) Orient Home Situated near a major station of the future metro line, this site will accommodate 13 residential towers, together with serviced apartments and a retail podium. It is a joint venture project held equally by SOCAM and the Company. Planning application is in progress and GFA of 336,000 will be available on completion in CHONGQING Ruiqi Building This building is in the vicinity of Chongqing s central business and shopping districts and has a 24-storey residential tower and a retail podium with a total GFA of 86,000 square metres. It is set for completion in Haomen Building Located in the business district and opposite the JW Marriott Hotel as well as the future Chongqing International Finance Centre, this building is designed to become a special-purpose entertainment centre with upscale food and retail outlets GFA of 10,000 square metre. Completion is expected in Nanyang Building The existing structure will be demolished and rebuilt to a luxurious residential block in 2010 with GFA of 53,000 square metres to take advantage of the view of the Yangtze River and its proximity to the Holiday Inn Hotel and the International Convention and Exhibition Centre. Qianxinian Building Located in the busy Guangyinqiao shopping area, this building has a GFA of 35,000 square metres. Government approval for its conversion to an upmarket 21-storey office tower with a retail podium shall be forthcoming and construction will commence towards the end of CHINA CENTRAL PROPERTIES LIMITED INTERIM REPORT 2008

10 MANAGEMENT DISCUSSION AND ANALYSIS DALIAN Xiwang Building Xiwang Building, a Grade A 40-storey office tower with 89,000 square metres, is near the city centre of Dalian. It was sold to an international investment fund in June 2008 at a consideration of RMB1,050 million (approximately US$153 million) and the transaction is expected to be completed in the second half of The sale provides useful funds at an appropriate time for further acquisitions of projects. GUANGZHOU Chuangyi Centre Chuangyi Centre is in the well known Tianhe district, which is home to a number of Grade A offices and affluent residential areas. Planning has been submitted to convert part of the original commercial and retail space to enhance the residential portion. A total GFA of 100,000 square metres will be available on completion in Dapeng International Plaza This 51-storey office tower is on top of a retail podium and is adjacent to the Guangzhou Garden Hotel in the heart of Guangzhou city. A complete refurbishment will convert this building to a Grade A composite complex of 129,000 square metres in the second half of At the date of this report, certain conditions required have not been fulfilled by the vendor and there is a likelihood that the transaction will not be completed. INTERIM REPORT 2008 CHINA CENTRAL PROPERTIES LIMITED

11 MANAGEMENT DISCUSSION AND ANALYSIS QINGDAO Central International Plaza This project is in the heart of Qingdao s central business district. Only a very small number of office, retail and residential units remain which are expected to be cleared soon. To ensure a quick sale of the outstanding stock, a small loss is incurred. SHENYANG Shenyang Central Plaza, Phase I This site was acquired in an auction in 2007 and at the north end of the Golden Corridor, the future business and economic centre of Shenyang. It is also close to the cluster of government central administration office buildings. Construction works are proceeding as scheduled and the contemporary multi-use complex will house 298,000 square metres of three residential towers, hotel/serviced apartments and retail facilities when completed in CCP s effective interest in this project is 70%, with an international investment fund as the 30% co-investor. Shenyang Central Plaza, Phase II Joint venturing with SOCAM and a shareholder of CCP, the Company s 40% interest will see the development of a major commercial, retail and entertaining centre. Relocation is progressing satisfactorily. The total GFA of 660,000 square metres, together with the adjoining Phase I, will become a landmark of Shenyang in CHINA CENTRAL PROPERTIES LIMITED INTERIM REPORT 2008

12 MANAGEMENT DISCUSSION AND ANALYSIS PROSPECTS Annual growth in the Chinese economy in 2007 has exceeded 10% for the fifth consecutive year. However, extensive austerity measures which have been in force over the last few years, together with the slowdown in the global economy, have recently shown that the goals set by the Central Government to prevent the economy from overheating, to avoid large fluctuations and to achieve both balanced and rapid growth, are now looking more realisable. It is expected that selective austerity measures will continue to be imposed by regulators on different sectors of the economy, in particular, the property market, to curb excessive growth and to maintain stability. The number of developers which over-expanded in the past two years and are now suffering under the tight credit policies has increased. Consolidation is evident and weaker players being eliminated will create an increasing number of partiallycompleted property projects. The Company, with its ample cash resources generated from the sale of properties as aforementioned, will be well placed in the coming months to capture more attractive opportunities, including greenfield property developments. Caution has been exercised by the Company and the project selection criteria has been tightened to allow for unexpected and continuous deterioration in the investment environment in the Chinese Mainland. Meanwhile, projects in the existing portfolio have broadly complied with their original development plans and are expected to generate a stream of steady income in the foreseeable future, albeit those in Chongqing and Chengdu may encounter certain delays, due partly to local governments placing priority on rehabilitating the vast area affected by the earthquake in May The first fifteen months of operation have proved that CCP s unique business model is successful. The Company was able to upgrade acquired distressed properties to a high standard, to dispose of completed properties in a timely and overall profitable manner and to replenish the Company s portfolio promptly. We are confident that the Company s successful investment records, together with the close relationship with the reputable Shui On Group, will continue and value will be created for our shareholders. INTERIM REPORT 2008 CHINA CENTRAL PROPERTIES LIMITED

13 REPORT ON REVIEW OF INTERIM FINANCIAL INFORMATION TO THE BOARD OF DIRECTORS OF CHINA CENTRAL PROPERTIES LIMITED (incorporated in the Isle of Man with limited liability) Deloitte. 德勤 Introduction We have reviewed the interim financial information set out on pages 11 to 36 which comprises the condensed consolidated balance sheet of China Central Properties Limited as of 30 June 2008, and the related condensed consolidated income statement, the condensed consolidated statement of changes in equity and the condensed consolidated cash flow statement for the six-month period then ended and selected explanatory notes. The directors are responsible for the preparation and presentation of this interim financial information in accordance with International Accounting Standards 34 Interim Financial Reporting ( IAS 34 ) issued by the International Accounting Standards Board. Our responsibility is to express a conclusion on this interim financial information based on our review, and to report our conclusion solely to you, as a body, in accordance with our agreed terms of engagement, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report. Scope of Review We conducted our review in accordance with Hong Kong Standard on Review Engagements 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believe that the interim financial information is not prepared, in all material respects, in accordance with IAS 34. Deloitte Touche Tohmatsu Certified Public Accountants Hong Kong 16 September CHINA CENTRAL PROPERTIES LIMITED INTERIM REPORT 2008

14 CONDENSED CONSOLIDATED INCOME STATEMENT NOTES to USD'000 (unaudited ) to USD'000 (unaudited ) Turnover 3 17,514 - Cost of sales (17,056 ) - Gross profit Gain on disposal of properties interests 23 42,686 - Other income 7,375 3,075 Investment management fee to a related company 22 (5,353) (200) Other operating expenses (14,200 ) (1,822 ) Finance costs 4 (12,357 ) (1,230 ) Changes in fair value of derivative financial instruments 5 6,621 (2,799) Share of profit of jointly controlled entities Gain on re-purchase of own convertible bonds 2,491 - Write-down of properties held for sale (3,019) - Profit (loss) before taxation 25,688 (2,976) Income tax expense 6 (653) - Profit (loss) for the period 7 25,035 (2,976 ) Earnings (loss) per share: 8 Basic US8.42 cents US(8.39) cents Diluted US8.42 cents US(8.39) cents INTERIM REPORT 2008 CHINA CENTRAL PROPERTIES LIMITED 11

15 CONDENSED CONSOLIDATED BALANCE SHEET AS AT 30 JUNE 2008 NOTES (unaudited) (audited) Non-current Assets Properties interests ,283 Interests in jointly controlled entities 11 29, Amounts due from jointly controlled entities 15 96,922 - Property, plant and equipment 1,498 1,488 Deposits for acquisition of properties companies , ,505 Other non-current assets Current Assets 253, ,497 Properties held for sale 163, ,042 Properties under development for sale 337, ,261 Deposits for acquisition of properties held for sale 2,916 - Foreign exchange forward contracts 14 2,589 14,835 Amounts due from related companies 10 13,971 12,974 Amounts due from jointly controlled entities 15 26,469 28,539 Trade and other receivables 13 69,419 28,677 Pledged bank deposits 84, ,592 Bank balances and cash 154, , , ,877 Total Assets 1,110,146 1,091, CHINA CENTRAL PROPERTIES LIMITED INTERIM REPORT 2008

16 CONDENSED CONSOLIDATED BALANCE SHEET AS AT 30 JUNE 2008 Capital and Reserves NOTES (unaudited) (audited) Share capital 16 5,809 5,901 Share premium 569, ,749 Reserves 85,771 27,004 Total Equity 661, ,654 Non-current Liabilities Convertible bonds , ,221 Bank borrowings due after one year 18 29,158 66,397 Current Liabilities 188, ,618 Trade and other payables 68,065 57,360 Embedded derivatives in the convertible bonds 17 13,028 16,624 Bank borrowings due within one year , ,852 Loans from related companies 19 26,140 19,513 Amounts due to related companies 10 6,213 4,816 Amounts due to jointly controlled entities 15 13,722 - Taxation payable 2,621 2, , ,102 Total Liabilities 448, ,720 Total Equity and Liabilities 1,110,146 1,091,374 INTERIM REPORT 2008 CHINA CENTRAL PROPERTIES LIMITED 13

17 CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Share capital Share premium Capital redemption reserve Translation reserve Retained profit/ (accumulated loss ) Total equity At 1 January 2008 (audited) 5, ,749-23,348 3, ,654 Purchase of own shares (Note 16 (i)) (92) - (5,312) - - (5,404) 5, ,749 (5,312 ) 23,348 3, ,250 Exchange differences arising on translation of financial statements from functional currency to presentation currency recognised directly in equity ,044-39,044 Profit for the period ,035 25,035 Total recognised income and expense for the period ,044 25,035 64,079 At 30 June 2008 (unaudited) 5, ,749 (5,312) 62,392 28, , CHINA CENTRAL PROPERTIES LIMITED INTERIM REPORT 2008

18 CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Share capital Share premium Capital redemption reserve Translation reserve Retained profit/ (accumulated loss ) Total equity At 9 February Issue of shares for cash (Note 16 (ii) & (iv)) 3, , ,203 Issue of shares for the acquisition of contributing projects (Note 16 (iii)) 2, , ,872 Transaction costs attributable to issue of new shares - (14,425 ) (14,425 ) 5, , ,650 Exchange differences arising on translation of financial statements from functional currency to presentation currency recognised directly in equity Loss for the period (2,976 ) (2,976 ) Total recognised income and expense for the period (2,976) (2,084) At 30 June 2007 (unaudited) 5, , (2,976) 573,566 INTERIM REPORT 2008 CHINA CENTRAL PROPERTIES LIMITED 15

19 CONDENSED CONSOLIDATED CASH FLOW STATEMENT NOTE to USD'000 (unaudited) to USD'000 (unaudited) Operating activities Profit (loss) before taxation 25,688 (2,976) Adjustments for: Finance costs 12,357 1,230 Changes in fair value of derivative financial instruments (6,621) 2,799 Depreciation Interest income (2,488) (1,288) Imputed interest income on amounts due from jointly controlled entities (3,252) - Share of profit of jointly controlled entities (986) - Gain on disposal of properties interests (42,686) - Gain on re-purchase of own convertible bonds (2,491) - Write-down of properties held for sale 3,019 - Expenses on issue of derivative financial instruments Operating cash flows before movements in working capital (17,234) 516 Decrease (increase) in properties held for sale 14,310 (256) Increase in properties under development for sale (26,462) (1,441) Increase in deposits paid for acquisition of properties held for sale (2,916) - Decrease (increase) in trade and other receivables 20,546 (1,018) Increase in trade and other payables 8,469 16,992 Cash (used in) generated from operations (3,287) 14,793 PRC income tax paid (1,218) (35) Net cash (used in) from operating activities (4,505 ) 14,758 Investing activities Cash acquired from the acquisition of contributing projects - 29,988 Increase in properties interests (13,136) (3,546) Deposits paid for acquisition of properties companies (15,356) - 16 CHINA CENTRAL PROPERTIES LIMITED INTERIM REPORT 2008

20 CONDENSED CONSOLIDATED CASH FLOW STATEMENT NOTE to USD'000 (unaudited) to USD'000 (unaudited) Additions to properties under development - (1,429) Additions to property, plant and equipment (281) (62) Receipt from foreign exchange forward contracts 17,305 - Advances to jointly controlled entities (99,650) - Decrease in pledged bank deposits Proceeds from disposal of properties interests ,461 - Interest received 2,488 1,288 Advances (to) from related companies (150) 795 Net cash from investing activities 8,422 27,295 Financing activities Interest paid (10,300) (246) Proceeds from issue of shares - 355,203 Transaction costs of issue of new shares - (14,425) Proceeds from new bank borrowings raised 103,063 1,970 Repayment of bank borrowings (35,467) (11,885) Proceeds from issue of convertible bonds - 200,000 Expenses on issue of convertible bonds - (6,129) Purchase for own shares (5,404) - Re-purchase for own convertible bonds (22,917) - Advances from (net repayment to) related companies 6,261 (39,458) Net cash from financing activities 35, ,030 Net increase in cash and cash equivalents 39, ,083 Cash and cash equivalents at the beginning of the period 110,957 - Effect of foreign exchange rate changes 4, Cash and cash equivalents at the end of the period Bank balances and cash 154, ,133 INTERIM REPORT 2008 CHINA CENTRAL PROPERTIES LIMITED 17

21 NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. General Information China Central Properties Limited (the Company ) is a limited liability company incorporated in the Isle of Man on 9 February Its shares were listed on the Alternative Investment Market ( AIM ) of the London Stock Exchange on 13 June The addresses of registered office and principal place of business of the Company are Athol Street, Douglas, Isle of Man, IM1 1LB and 1101, 11th Floor, Shui On Centre, 6-8 Harbour Road, Wan Chai, Hong Kong, respectively. The Company acts as an investment holding company and through its subsidiaries (together with the Company collectively referred to as the Group ) are principally engaged in property investment focusing primarily on investing in medium to large partially-completed property projects in major and secondary cities in the People s Republic of China (the PRC ). The Group may also invest in other property projects, if appropriate opportunities arise, that conform with the Company s investment criteria. The interim condensed consolidated financial statements for the current period cover a six-month period from 1 January 2008 to 30 June The corresponding comparative amounts shown for the income statement, statement of changes in equity, cash flow statement and related notes cover a period from 9 February 2007 (date of incorporation) to 30 June 2007 and therefore may not be comparable with amounts shown for the current period. The interim condensed consolidated financial statements have been prepared using accounting policies that conform with International Financial Reporting Standards and in accordance with International Accounting Standard ( IAS ) No.34 Interim Financial Reporting issued by the International Accounting Standards Board. These interim condensed consolidated financial statements include all adjustments, which are, in the opinion of management, necessary to fairly state the results of the interim period. Interim results are not necessarily indicative of results to be expected for the full year. 18 CHINA CENTRAL PROPERTIES LIMITED INTERIM REPORT 2008

22 NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. GENERAL INFORMATION (continued) The interim condensed consolidated financial statements are presented in the currency of the United States ( US Dollars or USD ), which is different from the functional currency of the Company and other group entities, i.e. Renminbi ( RMB ). The Group s management has elected to use USD as the presentation currency as they believe USD is the appropriate presentation currency for the international users of the Group s financial statements. 2. PRINCIPAL ACCOUNTING POLICIES The interim condensed consolidated financial statements have been prepared on the historical cost basis except for certain financial instruments which are measured at fair values. The accounting policies used in the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group s annual financial statements for the period from 9 February 2007 (date of incorporation) to 31 December 2007, except as described below. In the current interim period, the Group has adopted, for the first time, the following new International Financial Reporting Interpretations Committee Interpretations ( IFRICs ) issued by the IASB, which are effective for the Group s financial year beginning on 1 January IFRIC 11 IFRIC 12 IFRIC 14 IFRS 2 - Group and Treasury Share Transactions Service Concession Arrangements IAS 19 - The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction The adoption of these new IFRICs had no material effect on the results and financial position of the Group for the current or prior accounting periods. Accordingly, no prior period adjustment has been required. INTERIM REPORT 2008 CHINA CENTRAL PROPERTIES LIMITED 19

23 NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 2. PRINCIPAL ACCOUNTING POLICIES (continued) The Group has not early applied the following new and revised International Financial Reporting Standards ( IFRS ), amendments, or IFRICs that have been issued but are not yet effective. IFRSs (Amendments) Improvements to IFRSs 1 IAS 1 (Revised) Presentation of Financial Statements 2 IAS 23 (Revised) Borrowing Costs 2 IAS 27 (Revised) Consolidated and Separate Financial Statements 3 IAS 32 & 1 (Amendments) Puttable Financial Instruments and Obligations Arising on Liquidation 2 IAS 39 Eligible Hedged Items 3 IFRS 1 & IAS 27 (Amendments) Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate 2 IFRS 2 (Amendment) Vesting Conditions and Cancellations 2 IFRS 3 (Revised) Business Combinations 3 IFRS 8 Operating Segments 2 IFRIC 13 Customer Loyalty Programmes 4 IFRIC 15 Agreements for the Construction of Real Estate 2 IFRIC 16 Hedges of a Net Investment in a Foreign Operation 5 1 Effective for annual periods beginning on or after 1 January 2009 except the amendments to IFRS 5, which is effective for annual period beginning on or after 1 July Effective for annual periods beginning on or after 1 January Effective for annual periods beginning on or after 1 July Effective for annual periods beginning on or after 1 July Effective for annual periods beginning on or after 1 October CHINA CENTRAL PROPERTIES LIMITED INTERIM REPORT 2008

24 NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 2. PRINCIPAL ACCOUNTING POLICIES (continued) The directors of the Company anticipate that the application of these standards, amendments or interpretations will have no material impact on the results and financial position of the Group except for the adoption of IFRS 3 (Revised) and IAS 27 (Revised) and IFRIC 15. The adoption of IFRS 3 (Revised) may affect the accounting for business combination for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 July IAS 27 (Revised) will affect the accounting treatment for changes in a parent s ownership interest in a subsidiary that do not result in a loss of control, which will be accounted for as equity transactions. IFRIC 15 may affect the timing of the revenue recognition on the sales of properties until all criteria in paragraph 14 of IAS18 are satisfied. The directors of the Company are in the process of assessing the impact of the application of these standards and interpretations on the results and the financial position of the Group. 3. TURNOVER AND Segmental Analysis The Group s turnover for the period represents income from sale of developed properties. The disposal of the Group s properties interests, namely Beijing Huapu Centre, as mentioned in note 23, has not been presented as turnover as the property was intended to be developed for future use as investment property and therefore was classified as non-current asset in the balance sheet as at 31 December The property was accounted for in accordance with IAS 16 Property, Plant and Equipment until construction or development was complete. According to IAS 1 Presentation of Financial Statements, gains and losses arising from the disposal of non-current assets are determined as the difference between the proceeds on disposal, net of any related selling expenses, and the carrying amount of the assets. Accordingly, the net result of disposal of Beijing Huapu Centre is shown separately in the condensed consolidated income statement. No information of segment revenue, segment results, segment assets or segment liabilities for business segments or geographical segments has been presented as the management considers the Group has only one segment which is development of partially-completed properties in the PRC. Accordingly, no segment results, assets or liabilities are presented. INTERIM REPORT 2008 CHINA CENTRAL PROPERTIES LIMITED 21

25 NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 4. FINANCE COSTS to to Interest on bank borrowings 7, Interest on loans from related companies Amortised interest expense on convertible bonds (Note 17) 11, ,995 1,730 Less: amount capitalised to properties under development (7,638) (500) 12,357 1, CHANGES IN FAIR VALUE OF DERIVATIVE FINANCIAL INSTRUMENTS to to Changes in fair value of: - Embedded derivatives in relation to convertible bonds issued (Note 17) 1,562 (2,157) - Foreign exchange forward contracts Realised 6,931 - Unrealised (1,872) (642) 6,621 (2,799 ) 22 CHINA CENTRAL PROPERTIES LIMITED INTERIM REPORT 2008

26 NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 6. INCOME TAX EXPENSE to to Current tax - PRC Enterprise Income Tax Land appreciation tax Entities established in the PRC are subject to the PRC Enterprise Income Tax rate at 25% (2007: 33%). Land appreciation tax is levied at progressive rates ranging from 30% to 60% on the appreciation of land value, being the proceeds from sales of properties less deductible expenditures including amortisation of land use rights, borrowing costs, business taxes and all property development expenditures. The tax is incurred upon transfer of property ownership. 7. PROFIT (LOSS) FOR THE PERIOD Profit (loss) for the period has been arrived at after charging (crediting): to to Interest income (2,488) (1,288) Imputed interest income on amounts due from jointly controlled entities (3,252) - Rental income (1,635) (28) Net foreign exchange loss (gain) 6,647 (1,759) INTERIM REPORT 2008 CHINA CENTRAL PROPERTIES LIMITED 23

27 NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 8. EARNINGS (LOSS) PER SHARE The calculation of the basic and diluted earnings (loss) per share attributable to the ordinary equity holders of the Company is based on the following data: to to Earnings (loss) for the period: Earnings (loss) for the purposes of basic earnings (loss) per share 25,035 (2,976) Number of shares: Weighted average number of ordinary shares for the purposes of basic earnings (loss) per share 297,284 35,454 The computation of diluted earnings per share in 2008 (2007: diluted loss per share) did not assume the conversion of the Company s outstanding convertible bonds since their exercise would result in an increase in earnings per share (2007: a decrease in loss per share). 9. DIVIDENDS During the interim period, a dividend of 1.0 pence (approximately US1.8 cents) (2007: Nil) per share was declared to the ordinary equity holders. 24 CHINA CENTRAL PROPERTIES LIMITED INTERIM REPORT 2008

28 NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 10. AMOUNTS DUE FROM/TO RELATED COMPANIES (unaudited ) (audited ) Amounts due from: A holding company of a shareholder (Note a, Note 19) 11,269 11,075 Fellow subsidiaries of a shareholder 2,702 1,899 13,971 12,974 Amounts due to: A holding company of a shareholder Fellow subsidiaries of a shareholder (Note b) 6,189 4,119 The balances are unsecured and repayable on demand. 6,213 4,816 Notes: (a) The amount due from a holding company of a shareholder mainly represents receivable arising from a back-to-back funding arrangement, which bears interest at rates ranging from % to % (31 December 2007: from % to %) per annum, between a holding company of a shareholder and a subsidiary of the Company. (b) The amounts due to fellow subsidiaries of a shareholder are interest free and mainly represent fee payable in relation to the construction and project management services. INTERIM REPORT 2008 CHINA CENTRAL PROPERTIES LIMITED 25

29 NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 11. INTERESTS IN JOINTLY CONTROLLED ENTITIES (unaudited ) (audited ) Cost of unlisted investments in jointly controlled entities (Note) 26,928 - Exchange realignment Share of post-acquisition profits 1, , Note: Included in cost of investment is an amount of USD26,928,000 which represents deemed contribution arising from fair value adjustment on interest free loans advanced to jointly controlled entities (detail as set out in note 15). 12. DEPOSITS FOR ACQUISITION OF PROPERTIES COMPANIES The amount as at 30 June 2008 represents deposits paid for acquisition of interests in partially-completed property companies located in Guangzhou in the PRC. 13. TRADE AND OTHER RECEIVABLES Included in trade and other receivables is an amount of USD59,768,000 due from the acquirer in relation to the disposal of properties interests, Beijing Huapu Centre, of which approximately USD4,374,000 is due in August 2008 and USD55,394,000 by December FOREIGN EXCHANGE FORWARD CONTRACTS (unaudited) (audited ) Foreign exchange forward contracts - assets 2,589 14, CHINA CENTRAL PROPERTIES LIMITED INTERIM REPORT 2008

30 NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 14. FOREIGN EXCHANGE FORWARD CONTRACTS (continued) The major terms of the foreign exchange forward contracts as at 30 June 2008 are as follows: Notional amount Maturity Currency Forward rate Sell USD40,000, December 2008 RMB/USD RMB7.114/USD1 Sell USD40,000, December 2008 RMB/USD RMB7.113/USD1 Sell USD20,000, December 2008 RMB/USD RMB6.442/USD1 Sell USD50,000, June 2009 RMB/USD RMB6.1495/USD1 15. AMOUNTS DUE FROM/TO JOINTLY CONTROLLED ENTITIES Amounts due from jointly controlled entities of principal amounts of approximately USD120,598,000 are not expected to be settled within twelve months from the balance sheet date, accordingly, the balances are classified as non-current. On application of IAS 39 Financial Instrument-Recognition and Measurement, the fair values of these amounts are determined based on effective interest rate of 7% (31 December 2007: Nil) per annum on initial recognition. The difference between the principal amounts of the advances and their fair values, determined on initial recognition amounting to approximately USD26,928,000, has been included in the investment costs in jointly controlled entities as deemed contribution to the jointly controlled entities. Amounts due from jointly controlled entities are unsecured, non-interest bearing and repayable on demand. Amounts due to jointly controlled entities are unsecured, non-interest bearing and repayable on demand. INTERIM REPORT 2008 CHINA CENTRAL PROPERTIES LIMITED 27

31 NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 16. SHARE CAPITAL Authorised share capital: Number of shares Nominal value (unaudited) (audited) Ordinary shares of 0.01 each 331,227, ,227,320 3,312,273 3,312,273 Issued and fully paid: Ordinary shares of 0.01 each Balance at beginning of the period 298,602,000-2,986,020 - Issue of shares (Notes (ii) to (iv)) - 298,602,000-2,986,020 Shares repurchased and cancelled (Note (i)) (4,619,553) - (46,196) - Balance at end of the period 293,982, ,602,000 2,939,824 2,986, CHINA CENTRAL PROPERTIES LIMITED INTERIM REPORT 2008

32 NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 16. SHARE CAPITAL (continued) Nominal value (unaudited ) (audited ) Shown in the condensed consolidated financial statements as 5,809 5,901 The movement of issued share capital is as follows: (i) During the period from 9 April 2008 to 30 June 2008, the Company purchased 4,619,553 ordinary shares of 0.01 each in the Company at prices ranged from 0.57 to 0.71 per share. The purchased shares have upon acquisition been cancelled. (ii) On 13 June 2007, the Company issued and placed 151,230,000 ordinary shares of nominal value of 0.01 each for admission to AIM at the price of 1.00 per share ( Placing Price ). (iii) On 13 June 2007, the Company issued 119,004,000 ordinary shares as consideration shares for the acquisition of the contributing projects pursuant to the asset injection agreements. (iv) On 25 June 2007, the Company issued 22,684,000 ordinary shares upon completion of the over-allotment option in connection with the Company s placing of ordinary shares. In addition, an existing shareholder has, as a result of the exercise of the over-allotment option and pursuant to a top-up right in the subscription agreement, subscribed for 5,684,000 new ordinary shares in the Company at the Placing Price. All shares issued above are ranked pari passu in all respects. INTERIM REPORT 2008 CHINA CENTRAL PROPERTIES LIMITED 29

33 NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 17. CONVERTIBLE BONDS On 13 June 2007, the Company issued USD200 million 2.00 per cent. coupon convertible bonds due on 13 June 2012 (the Convertible Bonds ). The Convertible Bonds are denominated in USD and are convertible into fully-paid shares with par value of 0.01 each of the Company. The net proceeds received from the issue of the convertible bonds have been split between a straight debt component and the embedded derivatives which comprise conversion option, bondholders redemption options and issuer redemption option (collectively the derivative component ). Straight debt component is stated at amortised cost at the effective interest rate of 14.56% per annum. The derivative component is stated at fair value. During the period from 16 April 2008 to 7 May 2008, the Company purchased USD26,000,000 in principal amount of the Convertible Bonds at a price range of 87 to 89 per cent. of their principal amounts. The purchased Convertible Bonds have upon acquisition been cancelled. 30 CHINA CENTRAL PROPERTIES LIMITED INTERIM REPORT 2008

34 NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 17. CONVERTIBLE BONDS (continued) The movement of the Convertible Bonds for the period is as follows: Compound Straight debt embedded derivatives (unaudited) (audited) (unaudited) (audited) At the beginning of the period 173,221-16,624 - Convertible bonds issued on 13 June ,177-32,443 Amortised interest charged during the period (Note 4) 11,632 13, Changes in fair value (Note 5) - - (1,562) (15,819) Payment of coupon interest during the period (1,937) (2,000) - - Re-purchase by the Company during the period (23,374) - (2,034) - At the end of the period 159, ,221 13,028 16,624 At 30 June 2008, USD25 million (31 December 2007: USD25 million) of the principal amount of the Convertible Bonds are held by a subsidiary of Shui On Construction and Materials Limited ( SOCAM ). INTERIM REPORT 2008 CHINA CENTRAL PROPERTIES LIMITED 31

35 NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 18. BANK BORROWINGS (unaudited ) (audited ) Amount due within a period of On demand or within one year (under current liabilities) 130, ,852 More than one year, but not exceeding two years (under non-current liabilities) 29,158 66, , ,249 Analysis of bank borrowings by currency: Denominated in RMB (Note a) 100, ,249 Denominated in HKD (Note b) 59, , ,249 Notes: (a) The bank borrowings denominated in RMB as at 30 June 2008 are interest bearing at the following rates per annum and subject to the maturity dates stated below: Interest rate per annum Maturity date USD'000 (unaudited) 7.56% 10 January ,158 93% of The People s Bank of China ( PBOC ) Prescribed Interest Rate 18 July 2008 to 18 October , % of PBOC Prescribed Interest Rate 8 August , ,013 The bank borrowings as at the balance sheet date were secured by certain property under development for sale and pledged bank deposits. (b) All bank borrowings denominated in HKD are unsecured, interest bearing at 1-month Hong Kong Interbank Offered Rate plus margin rates ranging from 0.75% to 1.25% per annum, and are due for repayment on or before 28 April CHINA CENTRAL PROPERTIES LIMITED INTERIM REPORT 2008

36 NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 19. LOANS FROM RELATED COMPANIES The loans are from fellow subsidiaries of shareholders and represent advances for financing the acquisition and construction of certain contributing projects. As at 30 June 2008, other than an amount of USD11,663,000 (31 December 2007: USD11,395,000) due to a subsidiary of SOCAM under the back-to-back funding arrangement, which bears interest at 98% of PBOC Prescribed Interest Rate per annum and an unsecured loan of USD8,748,000 due to a jointly controlled entity of SOCAM, which bears interest at 105% of PBOC Prescribed Interest Rate per annum, the remaining amounts are unsecured, interest free and repayable on demand. 20. CONTINGENT LIABILITIES (i) At 30 June 2008, a subsidiary of the Company had outstanding guarantees issued in favour of banks amounting to USD9,627,000 in respect of mortgage facilities granted to the buyers of its residential properties. In the opinion of directors, the likelihood of payment of guarantee is remote, accordingly, the fair value of the financial guarantee contracts is not significant. (ii) At 30 June 2008, the Company and its wholly owned subsidiary, China Central Properties (BVI) Limited, have jointly given an indemnity in favour of a shareholder of the Company with respect to certain guarantees granted by the shareholder of the Company in favour of a bank as security for a bank loan granted to a then wholly owned subsidiary of the Company (the subsidiary ) with an outstanding amount of RMB540 million (approximately USD78.7 million). During the period ended 30 June 2008, the subsidiary was sold to an independent third party who agreed to procure the repayment of the bank loan and this obligation is guaranteed by the parent company of the independent third party. In the opinion of the Directors of the Company, the fair value of the indemnity is insignificant at initial recognition and the Directors consider that the possibility of the default of the parties involved is remote, accordingly, no value has been recognised in the interim condensed consolidated financial statements. INTERIM REPORT 2008 CHINA CENTRAL PROPERTIES LIMITED 33

37 NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 21. CAPITAL COMMITMENTS (i) On 9 April 2008, the Group entered into a sale and purchase agreement (the Agreement ) with a third party to acquire 100% of the registered capital of Guangzhou Heyin Plaza Development Company Limited, the holder of a partially completed development project in Guangzhou (the Project ). The consideration for the acquisition is RMB60,000,000 (approximately USD8,748,000), which represents the acquisition cost in respect of the Project of approximately RMB1,388,000,000 (approximately USD202,359,000) net of liabilities of and related to the Project. Up to the balance sheet date, the Group had paid refundable deposit of USD3,499,000 and the Group had a commitment for this project amounting to USD198,860,000 at 30 June Up to the date of this report, certain conditions precedents set out in the Agreement have not been fulfilled by the seller on or before the specified date stipulated under the Agreement. Pursuant to the terms stipulated under the Agreement, the Group has the right to terminate the agreement in the event the conditions precedents are not fulfilled by the specified completion date. The Directors are in the process of evaluating the case and consider that there is a possibility that this transaction may not be completed and the commitment may therefore not be required. (ii) At 30 June 2008, the Group had a commitment to invest in a jointly controlled entity contracted but not provided in the interim condensed consolidated financial statements of USD7,289, RELATED PARTY TRANSACTION (i) During the period, the Group incurred an investment management fee amounting to approximately USD6,385,000 (2007: USD200,000). The fee comprised a base fee of approximately USD5,040,000 (2007: USD200,000), of which USD1,032,000 (2007: Nil) was capitalised under properties under development, and a performance fee of approximately USD1,345,000 (2007: Nil), payable by the Group to SOCAM Asset Management (HK) Limited, a subsidiary of a shareholder of the Company. 34 CHINA CENTRAL PROPERTIES LIMITED INTERIM REPORT 2008

38 NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 22. RELATED PARTY TRANSACTION (continued) Pursuant to the terms set out in the Investment Management Agreement (as defined in the Admission Document) dated 12 April 2007, the investment management fee comprises of i) base fee which is calculated at 2 per cent. of the amounts invested by the Group and certain adjustments, and ii) performance fee if the internal rate of return of projects disposed of exceeds 10 per cent. (ii) (iii) (iv) (v) During the period, the Group paid construction costs amounting to approximately USD3,869,000 (2007: Nil) to Shanghai Shui On Construction Co. Ltd., a subsidiary of SOCAM. The amount was capitalised under properties under development for sale. During the period, the Group paid project management fee amounting to approximately USD1,556,000 (2007: Nil), of which USD1,332,000 (2007: Nil) was capitalised under properties under development for sale and properties interests, to Beijing SOCAM Real Estate Consulting Company Limited, a subsidiary of SOCAM. During the period, the Group received interest income and paid interest expense amounting to approximately USD251,000 (2007: Nil) and USD695,000 (2007: USD28,000), respectively, in relation to back-to-back funding arrangements with a subsidiary of SOCAM and an unsecured loan from a jointly controlled entity of SOCAM. The net amount of interest paid was capitalised under properties under development. During the period, the Group made advances and repayments to related companies. Details of the balances and transactions with related parties are also disclosed in the condensed consolidated balance sheet and notes 10, 15, 19, 20 and 21. INTERIM REPORT 2008 CHINA CENTRAL PROPERTIES LIMITED 35

39 NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 23. DISPOSAL OF PROPERTies INTERESTS During the period ended 30 June 2008, the Group disposed of its interest in Beijing Huapu Centre through the disposal of 100% equity interest in Mountain Breeze (Barbados) SRL ( Mountain Breeze ), which has 100% interest in 北京中天宏業房地產諮詢有限公司 (Beijing Zhongtian Hongye Real Estate Consulting Company Limited). The net assets of Mountain Breeze and its subsidiary at the date of disposal were as follows: Net assets disposed of: Properties interests 220,811 Pledged bank deposits 43,066 Bank borrowings (130,332) Other payables (1,687) 131,858 Gain on disposal 42,686 Satisfied by: 174,544 Cash 116,461 Deferred consideration 15,017 Receivable upon release of pledged bank deposits 43, , EVENT AFTER THE BALANCE SHEET DATE On 30 July 2008, the Group entered into a sale and purchase agreement to dispose of a portion of Chengdu Central Point, classified as properties under development for sale, to a third party for a consideration of RMB223 million (approximately USD32.5 million). 25. APPROVAL OF INTERIM FINANCIAL STATEMENTS The interim financial statements were approved by the board of directors on 16 September CHINA CENTRAL PROPERTIES LIMITED INTERIM REPORT 2008