SUNAC CHINA HOLDINGS LIMITED

Transcription

1 THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult a licensed securities dealer, bank manager, solicitor, professional accountant or other professional adviser. If you have sold or transferred all your shares in Sunac China Holdings Limited, you should at once hand this circular to the purchaser or transferee or to the bank, the licensed securities dealer or registered institution or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee. Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this circular, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular. SUNAC CHINA HOLDINGS LIMITED (Incorporated in the Cayman Islands with limited liability) (Stock code: 1918) MAJOR TRANSACTION 19 October 2011

2 CONTENTS Page DEFINITIONS LETTER FROM THE BOARD APPENDIX I FINANCIAL INFORMATION OF THE GROUP I UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP APPENDIX IV VALUATION REPORT APPENDIX V GENERAL INFORMATION i

3 DEFINITIONS In this circular, unless the context otherwise requires, the following terms shall have the meanings as set out below: Acquisition the acquisition of the Equity Interest Beijing SASAC (State-owned Assets Supervision and Administration Commission of the People s Government of Beijing) Beijing Shougang (Beijing Shougang Real Estate Development Co., Ltd.*), a company established in the PRC Board the board of Directors Company Sunac China Holdings Limited ( ), a company incorporated under the laws of the Cayman Islands with limited liability and whose shares are listed on the Stock Exchange Completion completion of the Acquisition in accordance with the terms and conditions of the Equity Transfer Agreement Connected Person(s) has the meaning ascribed to it under the Listing Rules Directors the directors of the Company DTZ DTZ Debenham Tie Leung Limited, the independent property valuer of the Company Enlarged Group the Group as enlarged by the Acquisition Equity Interest 50% equity interest in Shougang Sunac held by Beijing Shougang Equity Transfer Agreement the equity transaction contract dated 27 September 2011 entered into between Sunac Zhidi as purchaser and Beijing Shougang as vendor in relation to the Acquisition GFA gross floor area Group the Company and its subsidiaries 1

4 DEFINITIONS HKFRSs Hong Kong Independent Third Parties Latest Practicable Date Listing Rules Mr. Sun Percentage Ratios PRC SFO Share(s) Shareholder(s) Hong Kong Financial Reporting Standards promulgated by the Hong Kong Institute of Certified Public Accountants the Hong Kong Special Administrative Region of the PRC persons who, as far as the Directors are aware after having made all reasonable enquiries, are not Connected Persons of the Company 17 October 2011, being the latest practicable date prior to the printing of this circular for ascertaining certain information contained in this circular the Rules Governing the Listing of Securities on the Stock Exchange Mr. Sun Hongbin, the chief executive officer of the Company and an executive Director any of the five ratios set out in Rule of the Listing Rules the People s Republic of China (excluding, for the purpose of this circular, the Hong Kong Special Administrative Region of the PRC, the Macao Special Administrative Region of the PRC and Taiwan) Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) ordinary share(s) of HK$0.10 each in the share capital of the Company holder(s) of the Shares Shouchi Yuda (Beijing Shouchi Yuda Real Estate Development Co., Ltd.*), a limited liability company established in the PRC and a whollyowned subsidiary of Shougang Sunac 2

5 DEFINITIONS Shougang Sunac or Target (Beijing Shougang Sunac Real Estate Development Co., Ltd.*), a limited company established under the laws of the PRC and an associated company of the Company owned as to 50% by Sunac Zhidi and 50% by Beijing Shougang as at the date of this circular sq.m. Stock Exchange Sunac East Fairyland Project square meter The Stock Exchange of Hong Kong Limited a residential and commercial development project in Beijing developed by Shouchi Yuda Sunac International Sunac International Investment Holdings Ltd, the controlling Shareholder which is interested in approximately 51.85% of the issued share capital of the Company as at the date of this circular Sunac West Chateau Project Sunac Zhidi Target Group Transaction HK$ RMB a residential and commercial development project in Beijing being developed by Shougang Sunac (Tianjin Sunac Zhidi Co, Ltd.*), a company established under the laws of the PRC, which is an indirect wholly-owned subsidiary of the Company Shougang Sunac and Shouchi Yuda the Acquisition and the transactions contemplated under the Equity Transfer Agreement Hong Kong dollars, the lawful currency of Hong Kong Renminbi, the lawful currency of the PRC % per cent. * for identification purpose only 3

6 LETTER FROM THE BOARD SUNAC CHINA HOLDINGS LIMITED (Incorporated in the Cayman Islands with limited liability) (Stock code: 1918) Executive Directors: Mr. SUN Hongbin (Chairman) Mr. LI Shaozhong Mr. WANG Mengde Mr. CHI Xun Mr. SHANG Yu Non-executive Directors: Ms. HU Xiaoling Mr. ZHU Jia Independent non-executive Directors: Mr. POON Chiu Kwok Mr. LI Qin Mr. MA Lishan Registered Office: Landmark Square 3rd Floor, 64 Earth Close P.O. Box Grand Cayman KY Cayman Islands Head Office: 3/F., Building A3 Magnetic Plaza Binshuixi Road Nankai District Tianjin PRC Principal Place of Business in Hong Kong: 8/F, Gloucester Tower The Landmark 15 Queen s Road Central Hong Kong 19 October 2011 To the Shareholders Dear Sir or Madam, MAJOR TRANSACTION INTRODUCTION Reference is made to the Company s announcements dated 23 September 2011 and 27 September 2011, respectively, in relation to the Acquisition through a listing-for-sale process. On 23 September 2011, Sunac Zhidi submitted an irrevocable bid in a listing-for-sale process administered by Beijing Equity Exchange for the acquisition of the Equity Interest. As Beijing Shougang is a state-owned enterprise, the acquisition of Equity Interest from Beijing 4

7 LETTER FROM THE BOARD Shougang is required under the PRC laws to go through the listing-for-sale process. As at the date of this circular, Shougang Sunac is an associated company of the Company, and in which Sunac Zhidi holds 50% equity interest and has a right to receive 35% of the net profits from the Sunac West Chateau Project. The remaining 50% equity interest in Shougang Sunac is held by Beijing Shougang with a right to receive 65% of the net profits from the Sunac West Chateau Project. Upon notification by the Beijing Equity Exchange that the bid submitted by Sunac Zhidi was accepted, Sunac Zhidi and Beijing Shougang entered into the Equity Transfer Agreement on 27 September 2011 pursuant to which Sunac Zhidi agreed to purchase, and Beijing Shougang agreed to sell, the Equity Interest for the cash consideration of RMB1.45 billion. Upon Completion, Sunac Zhidi, being the sole shareholder of Shougang Sunac, will have the right to receive all net profits from the Sunac West Chateau Project. The purpose of this circular is to provide you with, among other things, details of the Equity Transfer Agreement, the financial information of the Group, the financial information of Shougang Sunac, the unaudited pro forma financial information of the Enlarged Group, the valuation report on the property interest held by Shougang Sunac and other information as required under the Listing Rules. THE EQUITY TRANSFER AGREEMENT The parties entered into the Equity Transfer Agreement on 27 September 2011, the key terms of which are set out below: Parties: Seller : Beijing Shougang Purchaser : Sunac Zhidi To the best of the knowledge, information and belief of the Directors having made all reasonable enquiries, Beijing Shougang and its ultimate beneficial owners are, as at the date of this circular, third parties independent of the Company and its Connected Persons. Asset to be acquired: Sunac Zhidi would acquire the remaining 50% equity interest of Shougang Sunac from Beijing Shougang. Upon Completion, Shougang Sunac will be owned as to 100% by Sunac Zhidi and therefore will become a wholly-owned subsidiary of the Company. 5

8 LETTER FROM THE BOARD Consideration: The consideration for the Acquisition is RMB1.45 billion, which is equivalent to the base bidding price set upon by Beijing Equity Exchange for the Acquisition. To the best of the knowledge of the Company, the base bidding price was set by Beijing Shougang with reference to the assets fair value of the 50% equity interest in Shougang Sunac, which was entitled to 65% of the profits of the Sunac West Chateau Project, as at 30 April 2011 which amounted to approximately RMB1.45 billion, pursuant to a valuation report on Shougang Sunac prepared by an Independent Third Party. The Company believes that the consideration for the Acquisition (i.e. the base bidding price) reflected the assets fair value of the Equity Interest (taking into account the property valuation report prepared by DTZ as set out in Appendix IV), financial performance and the prospect of Shougang Sunac. The consideration of RMB1.45 billion shall be funded by internal resources of the Company or bank borrowings. The deposit of RMB400,000,000 which has been paid by Sunac Zhidi to the Beijing Equity Exchange for the Equity Interest will be applied as part payment of the consideration. Sunac Zhidi is required to settle the remaining balance of the consideration in the amount of RMB1.05 billion within 20 business days from the date of the Equity Transfer Agreement. Completion of the Acquisition: The Acquisition will be completed upon the completion of the relevant regulatory procedures for the transfer of the Equity Interest from Beijing Shougang to Sunac Zhidi. INFORMATION ON SHOUGANG SUNAC Shougang Sunac is a limited liability company established in the PRC on 2 June As at the date of this circular, Shougang Sunac is an associated company of the Company, owned as to 50% by Sunac Zhidi and 50% by Beijing Shougang. Shougang Sunac is principally engaged in the development of the Sunac West Chateau Project, and through its wholly-owned subsidiary, Shouchi Yuda, is also engaged in the development of the Sunac East Fairyland Project. The Sunac East Fairyland Project was completed in November All of the properties developed under the Sunac East Fairyland Project have been pre-sold during the period from December 2007 to April 2011 and delivered to the purchasers during the period from August 2009 to April 2011 in the ordinary course of business of Shouchi Yuda. As a consequence, revenue from sales of the properties of the Sunac East Fairyland Project had been all recognised before 30 April 2011 and Shouchi Yuda no longer has any property interest in the Sunac East Fairyland Project as at the date of Acquisition. The consideration for the Acquisition was determined based on the fair value of Shougang Sunac as at 30 April 2011 which should have reflected the impact of the completion of the sales of all properties of the Sunac East Fairyland Project. Pursuant to an agreement entered into between Beijing Shougang and Sunac Zhidi on 4 December 2008, each of Beijing Shougang and Sunac Zhidi has a right to receive 65% and 35% of the net profits from the Sunac West Chateau Project, respectively. Upon Completion, Sunac Zhidi, being the sole shareholder of Shougang Sunac, will have the right to receive all net profits from the Sunac West Chateau Project. 6

9 LETTER FROM THE BOARD According to the audited consolidated accounts of Shougang Sunac prepared in accordance with the HKFRSs, the net profits (both before and after taxation) of Shougang Sunac for the two financial years ended 31 December 2009 and 2010 and the net assets as at 30 June 2011 were as follows: For the financial year ended 31 December RMB 000 RMB 000 Net profits before taxation 634, ,938 Net profits after taxation 348, ,713 As at 30 June 2011 RMB 000 Net assets 30,873 Note: The above financial figures are the consolidated amounts of Shougang Sunac and its subsidiary, Shouchi Yuda. According to the valuation report prepared by DTZ, certain details of the Sunac West Chateau Project as at 31 August 2011 were set forth as follows: Project Location Types of property products Total capital value (note) Total site area (sq.m.) Aggregate GFA (sq.m.) Saleable/ rentable GFA (sq.m.) Project completion date Sunac West Chateau Project (property under development) Beijing Mid-rise apartments, retail properties and car parks RMB7,689,000, , , , Note: Total capital value of a project represents the total capital value as of 31 August 2011 of all unsold completed properties (held for sale or for investment), properties under development and properties held for future development for which we had obtained the land use right certificates as of 31 August 2011 in such project as a whole. The Sunac East Fairyland Project developed by Shouchi Yuda is located in Chaoyang District of Beijing. Further details regarding the above projects can be found in the Company s interim report for the six months ended 30 June

10 LETTER FROM THE BOARD REASONS FOR AND BENEFITS OF THE TRANSACTION The Group is principally engaged in the development and sale of high quality properties in key economic cities across the PRC. The Group has been participating in the development of the Sunac West Chateau Project and the Sunac East Fairyland Project through its 50% equity interest in Shougang Sunac. Although the Sunac East Fairyland Project was completed in November 2010 and all properties thereof have been sold and delivered before 30 April 2011, the Board considers that the Acquisition still represents a good opportunity for the Group to gain full control of the development of the Sunac West Chateau Project. Given that the acquisition of the remaining 50% equity interest in Shougang Sunac will allow the Group to receive the remaining 65% of the net profits from the Sunac West Chateau Project as discussed above, the Board believes that the Acquisition will generate a better return to the Group after taking into account the financial performance and prospects of Shougang Sunac, and the finance costs that may be involved in the Acquisition. Notwithstanding the tightening measures of the PRC government in respect of PRC property developers, the Directors believe that the Acquisition will still be beneficial to the Group and will enlarge the Group s market share in the property development market in the PRC. The Directors are of the view that the Equity Transfer Agreement was entered into in the normal and usual course of business of the Company, and the terms of the Transaction are fair and reasonable and are in the best interests of the Company and the Shareholders as a whole. INFORMATION ON THE PARTIES The Company The Company is an integrated residential and commercial property developer. Sunac Zhidi is a wholly-owned subsidiary of the Company principally engaged in property development. Beijing Shougang Beijing Shougang is a state-owned enterprise established in the PRC and is under the supervision of the Beijing SASAC. It is principally engaged in property development in the PRC. FINANCIAL EFFECTS OF THE ACQUISITION After Completion, Shougang Sunac would become a wholly-owned subsidiary of the Company and the consolidated financial statements of Shougang Sunac would be consolidated in the accounts of the Group. It is expected that the Sunac West Chateau Project will be completed in December The Company estimates that an additional amount of approximately RMB2,188 million will be required to complete the development of the project. The funding for the development of the 8

11 LETTER FROM THE BOARD Sunac West Chateau Project will be primarily financed from the pre-sale/sale of the properties of the project. The pre-sale of the Sunac West Chateau Project has commenced in July Up to 31 August 2011, 17% of the properties of the Sunac West Chateau Project in term of the GFA has been pre-sold and Shougang Sunac had received total pre-sale proceeds of RMB1,865 million. According to the estimated sales progress and the current market status, the directors of Shougang Sunac consider that the sales proceeds should be able to meet the funding requirement for the repayment of the liabilities and payments of future development costs. The consideration of RMB1.45 billion for the Acquisition will be paid in 2011 using the internal funds of the Group. As at 31 August 2011, the Group had sufficient cash balance for the payment of the consideration. Based on the current market status and the Group s working capital forecast up to 31 December 2012, the Group will be able to have sufficient funds from the proceeds of pre-sale/sale of the currently developed projects to pay the liabilities when they fall due. Therefore, the Directors are of the view that the Acquisition will not have any significant negative impact on the Group s operations and liquidity. Based on the unaudited pro forma financial information of the Enlarged Group as set out in Appendix III to this circular, the total assets of the Enlarged Group would increase by RMB5,977 million from RMB21,189 million to RMB27,166 million, and the total liabilities of the Enlarged Group would increase by RMB5,327 million from RMB15,870 million to RMB21,197 million. According to the HKFRSs, a gain of RMB651 million on the remeasurement of the previously held equity interest in Shougang Sunac would be recognised in the profit and loss of the Group and a goodwill of RMB488,000 would be recognised on the acquisition of the Equity Interest. The Directors consider that there are no material discrepancies between the fair values of the property interests held by Shougang Sunac as reflected in the property valuation report as at 30 June 2011 prepared by DTZ as referred to in the unaudited pro forma financial information of the Enlarged Group as set out in Appendix III to this circular and the property valuation report as at 31 August 2011 prepared by DTZ as set out in Appendix IV to this circular. The pro forma financial information of the Enlarged Group has been prepared for illustrative purpose only, based on the judgements and assumptions of the Directors, and, due to its hypothesis nature, it may not give a true picture of the financial position of the Enlarged Group as at the date of Completion or any future date. In the opinion of the Directors, the Acquisition will likely have a positive impact on the profits of the Company. LISTING RULES IMPLICATIONS As one or more of the applicable Percentage Ratio(s) for the Transaction exceed(s) 25% but none of them exceeds 100%, the Transaction constitutes a major transaction for the Company under Chapter 14 of the Listing Rules and is, therefore, subject to the approval of the Shareholders. As at the date of this circular, to the best of the knowledge, information and belief of the Directors having made all reasonable enquiries, no Shareholder has a material interest in the 9

12 LETTER FROM THE BOARD Transaction, and therefore no Shareholder would be required to abstain from voting if the Company were to convene a general meeting for the approval of the Transaction. Pursuant to Rule of the Listing Rules, the Company has obtained written approval for the Transaction from Sunac International, in lieu of holding a general meeting. Sunac International is, as at the date of this circular, interested in 1,555,578,451 Shares, representing approximately 51.85% of the issued share capital of the Company. GENERAL circular. Your attention is drawn to the additional information set out in the appendices to this Yours faithfully, For and on behalf of the Board Sunac China Holdings Limited Sun Hongbin Chairman 10

13 APPENDIX I FINANCIAL INFORMATION OF THE GROUP 1 FINANCIAL INFORMATION OF THE GROUP Financial information of the Group for each of the three years ended 31 December 2008, 2009 and 2010 and the six months ended 30 June 2011 are disclosed in the following documents which have been published on the websites of the Stock Exchange ( and the Company ( the Company s prospectus dated 24 September 2010 (pages I-4 to I-69); the Company s annual report for the year ended 31 December 2010 published on 21 March 2011 (pages 43 to 116); and the Company s interim report for the six months ended 30 June 2011 published on 19 September 2011 (pages 28 to 66). 2 INDEBTEDNESS At the close of business on 31 August 2011, the Group had total borrowings of RMB11,105 million, RMB10,341 million of which were secured or jointly secured by properties under development, certain equity interests of the Company s subsidiaries (including those legally transferred as collateral) and guarantee by a third party respectively. The Group s contingent liabilities at the close of business on 31 August 2011 are as follows (RMB 000): Guarantees in respect of mortgage facilities for certain purchasers of the group entities 929,037 Save as aforesaid, and apart from intra-group liabilities and normal trade payables in the normal course of business, as at the close of business on 31 August 2011, the Group did not have any debt securities, issued and outstanding or agreed to be issued, bank overdrafts, loans or other similar indebtedness, liabilities under acceptance (other than normal trade bills) or acceptance credits, debentures, mortgages, charges, hire purchase commitments, guarantees or other material contingent liabilities. The Directors have confirmed that there have been no material changes in the indebtedness and contingent liabilities of the Group since 31 August Working capital: Taking into account the expected completion of the Acquisition and the financial resources available to the Enlarged Group, including the internally generated funds and the available banking facilities, the Directors are of the opinion that the Enlarged Group has sufficient working capital for its present requirements, that is for at least the next 12 months from the date of this circular. 11

14 APPENDIX I FINANCIAL INFORMATION OF THE GROUP 3 FINANCIAL AND TRADING PROSPECTS OF THE GROUP The Group has been engaged in the property development and investment in the PRC with our core value Passion for Perfection and it will continue to focus on the high-end property strategy, insisting on a fast and steady pace of development with an objective of profit-making. The successful Acquisition allows the Group to have the right to receive 100% net profits of the Sunac West Chateau Project, which helps the Group to further expand its property development business in the PRC and help to consolidate the Group s leading position in the property development market in the PRC. Despite the consideration for the Acquisition is to be funded by internal resources or bank borrowings, the Directors expect that the Group s financial position shall remain solid. 4 RECENT ACQUISITION OF THE GROUP In January 2011, Sunac Zhidi, the wholly-owned subsidiary of the Group, acquired an additional 40% equity interest in Chongqing Sunac Yatai Shiye Real Estate Development Co., Ltd. ( Chongqing Yatai ) (formerly known as Chongqing Yuneng Sunac Real Estate Co., Ltd.) and a 40% equity interest in Chongqing Asia Pacific Enterprise Valley Property Management Co. Ltd. ( APEV Property Management ) from Chongqing Yuneng Real Estate (Group) Co. Ltd. ( Chongqing Yuneng Real Estate ), one of the third party shareholders of Chongqing Yatai. The considerations were RMB319,848,000 and RMB1.00 respectively. The Company has a 45% equity interest in the jointly controlled entity, Chongqing Yatai, as at 31 December Upon the completion of the above transaction, the Group obtained control of Chongqing Yatai and Chongqing Yatai became a 85% owned subsidiary of the Group and APEV Property Management became an associate of the Company. Reference is made to the Company s announcement dated 16 September 2011 in relation to the establishment of a joint venture on 7 September 2011, Sunac Zhidi and Poly (Tianjin) Estate Development Co., Ltd.* ( ( ) ) ( Poly Tianjin ) entered into a cooperation framework agreement pursuant to which Sunac Zhidi and Poly Tianjin have agreed to establish a joint venture company, which will be engaged in property development in Tianjin. The name of the joint venture company is (Tianjin Poly Sunac Investment Company Limited*). 5 MATERIAL ADVERSE CHANGE The Directors confirm that, as at the Latest Practicable Date, they are not aware of any material adverse change in the financial and trading position of the Group since 31 December 2010, being the date to which the latest published audited accounts of the Company were made up. 12

15 1 ACCOUNTANT S REPORT ON SHOUGANG SUNAC The following is the text of a report, prepared for the purpose of incorporation in this circular, received from the reporting accountant of the Company, on the financial information of Shougang Sunac. 19 October 2011 The Directors Sunac China Holdings Limited Dear Sirs, We report on the financial information of Beijing Shougang Sunac Real Estate Development Co., Ltd. (the Target ) and its subsidiary (together, the Target Group ), which comprises the consolidated balance sheets of the Target as at 31 December 2008, 2009 and 2010 and 30 June 2011, the balance sheets of the Target as at 31 December 2008, 2009 and 2010 and 30 June 2011, and the consolidated statements of comprehensive income, the consolidated statements of changes in equity and the consolidated statements of cash flows of the Target for each of the years ended 31 December 2008, 2009 and 2010 and the six month period ended 30 June 2011 (the Relevant Periods ) and a summary of significant accounting policies and other explanatory information. This financial information has been prepared by the directors of Sunac China Holdings Limited (the Company ) and is set out in Sections I to III below for inclusion in Appendix II to the circular of the Company dated 19 October 2011 (the Circular ) in connection with the proposed acquisition of the Target by the Company. The Target was incorporated, the People s Republic of China ( PRC ) on 2 June 2005 as a company with limited liability. As at the date of this report, the Target has direct interest in the subsidiary as set out in Note 1 of Section II below. 13

16 The directors of the Target have prepared the consolidated financial statements of the Target for the Relevant Periods, in accordance with the HKFRSs issued by the Hong Kong Institute of Certified Public Accountants (the HKICPA ) (the Underlying Financial Statements ). PricewaterhouseCoopers Zhong Tian CPAs Limited Company has audited the Underlying Financial Statements in accordance with the Hong Kong Standards on Auditing (the HKSA ) issued by the HKICPA. The directors of the Target are responsible for the preparation of the Underlying Financial Statements that give a true and fair view in accordance with HKFRSs, and for such internal control as the directors determine is necessary to enable the preparation of the Underlying Financial Statements that are free from material misstatement, whether due to fraud or error. The financial information has been prepared based on the Underlying Financial Statements, with no adjustment made thereon. Directors Responsibility for the Financial Information The directors of the Company are responsible for the preparation of the financial information that gives a true and fair view in accordance with HKFRSs and accounting policies adopted by the Company and its subsidiaries (together, the Group ) as set out in the annual report of the Company for the year ended 31 December Reporting Accountant s Responsibility Our responsibility is to express an opinion on the financial information and to report our opinion to you. We carried out our procedures in accordance with the Auditing Guideline Prospectuses and the Reporting Accountant issued by the HKICPA. Opinion In our opinion, the financial information gives, for the purpose of this report, a true and fair view of the state of affairs of the Target and of the Target Group as at 31 December 2008, 2009 and 2010 and 30 June 2011 and of the Target Group s results and cash flows for the Relevant Periods then ended. Review of stub period comparative financial information We have reviewed the stub period comparative financial information set out in Sections I to III below included in Appendix II to the Circular which comprises the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows of the Target for the six months ended 30 June 2010 and a summary of significant accounting policies and other explanatory information (the Stub Period Comparative Financial Information ). 14

17 The directors of the Company are responsible for the preparation and presentation of the Stub Period Comparative Financial Information in accordance with the accounting policies set out in Note 2 of Section II below and the accounting policies adopted by the Group as set out in the annual report of the Company for the year ended 31 December Our responsibility is to express a conclusion on the Stub Period Comparative Financial Information based on our 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 issued by the HKICPA. A review of Stub Period Comparative Financial Information consists of making inquiries, 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. Based on our review, nothing has come to our attention that causes us to believe that the Stub Period Comparative Financial Information, for the purpose of this report, is not prepared, in all material respects, in accordance with the accounting policies set out in Note 2 of Section II below. 15

18 I. FINANCIAL INFORMATION OF THE TARGET GROUP The following is the financial information of the Target and the Target Group prepared by the directors of the Company as at 31 December 2008, 2009 and 2010 and 30 June 2011 and for each of the years ended 31 December 2008, 2009 and 2010 and the six months ended 30 June 2010 and 2011 (the Financial Information ): Consolidated Balance Sheets of the Target As at 31 December As at 30 June Note RMB 000 RMB 000 RMB 000 RMB 000 ASSETS Non-current assets Property, plant and equipment 6 1,324 1,156 3,113 3,240 Deferred income tax assets 7 5,282 61, ,815 49,712 6,606 63, ,928 52,952 Current assets Properties under development 9 1,038,957 2,259,201 2,646,181 3,284,306 Completed properties held for sale 10 99,110 21,105 Other receivables ,951 47,570 8,648 6,157 Restricted cash 12 3,088 25,154 9,960 9,973 Cash and cash equivalents 13 56, ,641 33,556 81,711 1,466,774 3,167,676 2,719,450 3,382,147 Total assets 1,473,380 3,230,676 2,830,378 3,435,099 16

19 As at 31 December As at 30 June Note RMB 000 RMB 000 RMB 000 RMB 000 EQUITY Capital and reserves attributable to equity owner of the Target Paid up capital , , , ,000 Other reserves 15 10,000 10,000 60,000 (Accumulated losses)/retained earnings (76,627) 261, ,125 (129,127) Total equity 23, , ,125 30,873 LIABILITIES Non-current liabilities Borrowings , ,000 2,400,000 Current liabilities Trade and other payables 16, 31(d) 52, , , ,146 Advanced proceeds from customers 636, ,956 54,766 50,942 Borrowings 17, 31(b)(d) 730,000 1,647,240 1,461, ,770 Current income tax liabilities 31, , ,547 32,368 1,450,007 2,566,204 2,108,253 1,004,226 Total liabilities 1,450,007 2,859,264 2,308,253 3,404,226 Total equity and liabilities 1,473,380 3,230,676 2,830,378 3,435,099 Net current assets 16, , ,197 2,377,921 Total assets less current liabilities 23, , ,125 2,430,873 17

20 Balance Sheets of the Target As at 31 December As at 30 June Note RMB 000 RMB 000 RMB 000 RMB 000 ASSETS Non-current assets Property, plant and equipment ,434 3,240 Deferred income tax assets ,340 41,576 49,711 Investment in subsidiary 32 20,000 20,000 20,000 20,000 20,854 46,493 64,010 72,951 Current assets Properties under development 9 165,000 2,118,813 2,646,181 3,284,306 Other receivables , ,157 Cash and cash equivalents 13 2,220 21,823 8,513 55, ,220 2,140,642 2,654,704 3,345,787 Total assets 398,074 2,187,135 2,718,714 3,418,738 EQUITY Capital and reserves attributable to equity owner of the Target Paid-up capital , , , ,000 Other reserves 15 50,000 Accumulated losses (4,038) (80,792) (128,386) (89,932) Total equity 95,962 19,208 (28,386) 60,068 18

21 As at 31 December As at 30 June Note RMB 000 RMB 000 RMB 000 RMB 000 LIABILITIES Non-current liabilities Borrowings , ,000 2,400,000 Current liabilities Trade and other payables ,622 81, ,642 Advanced proceeds from customers 50,942 Borrowings 17 1,172,240 1,461, ,770 Current income tax liabilities 1,910 Amount due to subsidiary 302, ,005 1,004,547 30, ,112 1,874,867 2,547, ,670 Total liabilities 302,112 2,167,927 2,747,100 3,358,670 Total equity and liabilities 398,074 2,187,135 2,718,714 3,418,738 Net current assets 75, , ,604 2,387,117 Total assets less current liabilities 95, , ,614 2,460,068 19

22 Consolidated Statements of Comprehensive Income Year ended 31 December Six months ended 30 June Note RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 (unaudited) Revenue 18 1,938, , ,963 89,917 Cost of sales 19 (1,178,514) (338,639) (107,059) (26,285) Gross profit 759, , ,904 63,632 Selling and marketing costs 19 (20,177) (20,370) (23,650) (2,342) (19,209) Administrative expenses 19 (11,914) (15,006) (18,815) (6,782) (12,782) Other income 21 3,908 1,825 6,559 4,966 3,173 Operating profit (28,183) 726, , ,746 34,814 Finance costs, net 24 (1,516) (91,795) (27,738) (27,738) (6,264) Profit before income tax (29,699) 634, , ,008 28,550 Income tax expense 25 1,417 (286,198) (194,225) (82,409) (33,883) (Loss)/profit for the year/period (28,282) 348, ,713 50,599 (5,333) Total comprehensive income (28,282) 348, ,713 50,599 (5,333) Attributable to: Equity owners of the Target (28,282) 348, ,713 50,599 (5,333) Earnings per share for profit attributable to the equity owners of the Target Basic and diluted 26 N/A N/A N/A N/A N/A Dividends ,919 20

23 Consolidated Statements of Change in Equity Attributable to equity owners of the Target (Accumulated Capital Other reserves losses)/ retained earnings Total Noncontrolling interest Total equity RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 At 1 January ,000 (48,345) 51,655 4,800 56,455 Loss for the year (28,282) (28,282) (28,282) Acquisition of Non-controlling interests (Note 1 (b)) (4,800) (4,800) At 31 December ,000 (76,627) 23,373 23,373 Profit for the year 348, , ,039 Transfer (Note 15) 10,000 (10,000) At 31 December ,000 10, , , ,412 Profit for the year 150, , ,713 At 31 December ,000 10, , , ,125 Profit for the period (5,333) (5,333) (5,333) Transfer (Note 15) 50,000 (50,000) Dividends (485,919) (485,919) (485,919) At 30 June ,000 60,000 (129,127) 30,873 30,873 (Unaudited) At 31 December ,000 10, , , ,412 Profit for the period 50,599 50,599 50,599 At 30 June ,000 10, , , ,011 21

24 Consolidated Statements of Cash Flows Year ended 31 December Six months ended 30 June Note RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 (unaudited) Cash flows from operating activities Cash (used in)/generated from operations 29 (321,988) (336,433) (226,269) 29,574 (466,320) PRC income tax paid (17,364) (39,888) (96,866) (152,995) (373,409) Net cash used in operating activities (339,352) (376,321) (323,135) (123,421) (839,729) Cash flows from investing activities Purchase of property, plant and equipment 6 (691) (184) (2,407) (235) (826) Net cash used in investing activities (691) (184) (2,407) (235) (826) Cash flows from financing activities Proceeds from borrowings 450,000 1,915,300 1,200, ,060 2,200,000 Repayments of borrowings (705,000) (1,478,760) (712,060) (1,230,770) Provision/collection of guarantee deposits for borrowings (3,088) (22,066) 15,194 4,564 (13) Interests paid (52,644) (131,866) (113,977) (37,483) (80,507) Net cash generated from/(used in) financing activities 394,268 1,056,368 (377,543) (431,919) 888,710 Net (decrease)/increase in cash and equivalents 54, ,863 (703,085) (555,575) 48,155 Cash and cash equivalents at beginning of the year/period 2,553 56, , ,641 33,556 Cash and cash equivalents at end of the year/period 56, ,641 33, ,066 81,711 22

25 II. NOTES TO THE FINANCIAL INFORMATION 1 GENERAL INFORMATION AND GROUP REORGANISATION (a) General information Beijing Shougang Sunac Real Estate Development Co., Ltd. (hereafter the Target ) is a limited liability company established in Beijing, the People s Republic of China ( PRC ) on 2 June The address of its registered office is Room 608, 6th floor of Beike Building tower A, Zhongguan Town No.11th, Haidian District, Beijing, the PRC. The Target is principally engaged in property development business in Beijing, the PRC. As of 30 June 2011, the shareholders of the Target are Beijing Shougang Real Estate Development Co., Ltd. ( Beijing Shougang RE ) and Tianjin Sunac Zhidi Co., Ltd. ( Sunac Zhidi ). The ultimate holding party of the Target is Shougang General Company ( ). During the Relevant periods, the Target has only one subsidiary named Beijing Shouchi Yuda Real Estate Development Co., Ltd. ( Shouchi Yuda ), which was incorporated in Beijing, the PRC on 29 March The principal activity of Shouchi Yuda is also property development in Beijing, the PRC. The Target s direct interests in Shouchi Yuda during Relevant Periods are as follows: During the Relevant Periods, the Target has direct interest in Shouchi Yuda as follows: Registered capital Direct equity interest held As at 31 December As at 30 June Statutory auditor (note i) Name RMB million Shouchi Yuda % 100% 100% 100% NA NA NA Note i: The financial statements of Shouchi Yuda have not been audited by independent auditors as the local governmental authorities did not require it to present the audited financial statements for statutory reporting. Shouchi Yuda is a limited liability company and has adopted 31 December as its financial year end date. (b) History of the Target Group At the date of incorporation of the Target, Beijing Shougang RE and another third party shareholder held 50% equity interests of the Target respectively and Beijing Shougang RE had the control of the Target. On 28 August 2007, Sunac Zhidi, one of the wholly owned subsidiaries of the Company acquired a 50% equity interest of the Target from the third party shareholder of the Target. Then the Company and Beijing Shougang RE held 50% equity interest of the Target respectively. The two entities comprising the Target Group are treated associates of the Company because the other equity holder of the Target, Beijing Shougang RE, has the casting vote at board meetings in the event that the directors of the Target cannot reach a majority decision. On 1 January 2008, the Target held a 76% equity interest in Shouchi Yuda and the remaining 24% equity interest was held by a third party. In 2008, the Target had acquired the outstanding 24% equity interest of Shouchi Yuda from the third party shareholder of Shouchi Yuda for a total consideration of RMB4.8 million and Shouchi Yuda became a wholly owned subsidiary of the Target. Shouchi Yuda has one property project named East Fairyland which was located in Beijing, the PRC, and was developed from November As of 30 June 2011, the sales and delivery of the properties in East Fairyland project have been completed. The Target has one property development project named West Chateau which was also located in Beijing, the PRC, and was developed from December As at 30 June 2011, the project was still in construction stage and no revenue has been recognised. The pre-sale of the properties is scheduled to commence in the second half of the year ended 31 December

26 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies applied in the preparation of the consolidated financial statements of the Target are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated. 2.1 Basis of preparation The consolidated financial statements of the Target have been prepared in accordance with the HKFRSs effective in periods starting from 1 January 2011 and under the historical cost convention. The preparation of financial statements in conformity with the HKFRSs requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Target Group s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the Financial Information are disclosed in Note 4. These consolidated financial statements are presented in thousands of units of Chinese Renminbi (Chinese Yuan) unless otherwise stated. Up to the date of issue of this report, the following standards, amendments and interpretations which have been issued and are not yet effective have not been early adopted by the Target Group: HKFRS 7 (Amendment) HKFRS 9 HKAS 12 (Amendment) HKFRS 10 HKFRS 11 HKFRS 12 HKAS 27 (2011) HKAS 28 (2011) HKFRS 13 HKAS 1(Amendment) HKAS 19 (2011) Transfer of financial assets (effective from periods beginning on or after 1 July 2011) Financial instruments (effective from periods beginning on or after 1 January 2013) Deferred tax: Recovery of underlying assets (effective from periods beginning on or after 1 January 2012) Consolidated financial statements (effective from periods beginning on or after 1 January 2013) Joint Arrangements (effective from periods beginning on or after 1 January 2013) Disclosure of interests in other entities (effective from periods beginning on or after 1 January 2013) Separate financial statements (effective from periods beginning on or after 1 January 2013) Investments in Associates and Joint Ventures (effective from periods beginning on or after 1 January 2013) Fair value measurement (effective from periods beginning on or after 1 January 2013) Presentation of financial statements (effective from periods beginning on or after 1 January 2012) Employee benefits (effective from periods beginning on or after 1 January 2013) The Target Group is in the process of making an assessment of the impact of these standards, amendments and interpretations on the Financial Information of the Group upon their initial application. 2.2 Consolidation (a) Subsidiaries Subsidiaries are all entities (including special purpose entities) over which the Target Group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Target Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases. The Target Group uses the acquisition method of accounting to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair value of the assets transferred, the liabilities incurred and the equity interests issued by the Target Group. The consideration transferred includes the fair value of 24

27 any asset or liability resulting from contingent consideration arrangement. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair value at the acquisition date. On an acquisition-by-acquisition basis, the Group recognizes any non-controlling interest in the acquiree either at fair value or at the non-controlling interest s proportionate share of the acquiree s net assets. Investments in subsidiaries are accounted for at cost less impairment. Cost is adjusted to reflect changes in consideration arising from contingent consideration amendments. Cost also includes direct attributable costs of investment. The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over fair value of the Target Group s share of the identifiable net assets acquired is recorded as goodwill. If this is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised directly in the profit or loss. Intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated. Accounting policies of subsidiaries are changed where necessary to ensure consistency with the policies adopted by the Target Group. During the Relevant Periods, the Target Group had no business acquisitions. (b) Transaction with non-controlling interests The group treats transactions with non-controlling interests as transaction with equity owners of the group. For purchases from non-controlling interests, the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity. When the group ceases to have control or significant influence, any retained interest in the entity is remeasured to its fair value, with the change in carrying amount recognized in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss. 2.3 Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors that makes strategic decisions. 2.4 Foreign currency translation (a) Functional and presentation currency Items included in the financial statements of each of the companies now comprising the Target Group are measured using the currency of the primary economic environment in which the company operates (the functional currency ). Since the assets and operations of Target Group are all located in the PRC, the consolidated financial statements are presented in Renminbi ( RMB ), which is the Target s functional currency and the presentation currency of Target Group. (b) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the profit or loss. 25

28 2.5 Property, plant and equipment Property, plant and equipment are stated at historical cost less depreciation and any impairment losses. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset s carrying amount or recognised as a separate asset, only when it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the profit or loss during the reporting periods in which they are incurred. Depreciation on property, plant and equipment is calculated using the straight-line method to allocate their cost to their residual values over their estimated useful lives, as follows: Vehicles Furniture and office equipment 5 years 3-5 years date. The assets residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet An asset s carrying amount is written down immediately to its recoverable amount if the asset s carrying amount is greater than its estimated recoverable amount. Construction in progress represents the direct costs of construction incurred of property, plant and equipment less any impairment losses. No provision for depreciation is made on construction in progress until such time the relevant assets are completed and put into use. Construction in progress is reclassified to the appropriate category of property, plant and equipment when completed and ready for use. Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised as other income or other expenses in the profit or loss. 2.6 Land use rights All land in the PRC is state-owned and no individual land ownership right exists. The Target Group acquired the rights to use certain land and the premiums paid for such rights are recorded as land use rights. Land use rights which are held for self-use are stated at cost and amortised over the use terms of 40 to 70 years using the straight-line method. Land use rights which are held for development for sales are inventories and measured at lower of cost and net realisable value. Land use rights are transferred to properties under development upon the commencement of development. 2.7 Properties under development Properties under development are stated at the lower of cost and net realisable value. Net realisable value takes into account the price ultimately expected to be realised, less applicable variable selling expenses and anticipated cost to completion. Development cost of property comprises construction costs, land use rights cost, capitalised borrowing costs and professional fees incurred during the development period. On completion, the properties are transferred to completed properties held for sale. 2.8 Completed properties held for sale Completed properties remaining unsold at the end of each reporting period are stated at the lower of cost and net realisable value. Cost comprises development costs attributable to the unsold properties. Net realisable value is determined by reference to the sale proceeds of properties sold in the ordinary course of business, less applicable variable selling expenses, or by management estimates based on prevailing marketing conditions. 26