Chairman's Message

Dear fellow Shareholders,

On behalf of the Board of Directors, I present to you the annual report of the Company for the financial year ended 31 December 2010 ("FY2010").

Having emerged in early 2010 from the painstaking task of restructuring the off-shore debts of the Group, comprising the US$120 million syndicated term loan and the US$32 million convertible bond (the "Off-shore Debts Settlement"), the Group significantly relieved itself of the heavy financial burden from the offshore debts. The Offshore Debts Settlement, though accorded us with rooms to better map out our resource planning and development strategies, in meeting the obligations due therewith, a material amount of our properties were disposed and thereby resulted in a substantial amount of our reserves available for sale and future development being depleted.

Accordingly, our overall revenue for FY2010 decreased by RMB83.3 million or 25.7% from RMB324.4 million for the financial year ended 31 December 2009 ("FY2009") to RMB241.1 million for FY2010 while our profit attributable to the Shareholders decreased by RMB178.0 million or 87.3% from RMB203.9 million for FY2009 to RMB26.0 million for FY2010. Notwithstanding which, we registered a higher gross profit margin of 19.1% in FY2010 compared to that of 12.3% in FY2009 and reduced our net gearing (defined as total interest bearing borrowings expressed as percentage of total equity) from 7.3% as at 31 December 2009 to 3.4% as at 31 December 2010.

With regard to the Chinese property markets, the continued cooling-off measures introduced by the Chinese government in checking rising property prices and curbing speculation as well as restraining the Chinese banks from extending credits to property companies have made it increasingly difficult for property companies in China to procure bank loans to fund property developments. These measures and further ones, if any, are expected to last for the foreseeable future.

In the light of the above, the Group aims to enhance sustainability in its property development program to achieve a better return to Shareholders by focusing on the development of its current pool of property reserves at reduced development and operating costs. Despite the cooling-off measures, we seek to take advantage of the prevailing positive market response to the sale of our units for the Xinxiang Sunny Town Project (新乡阳光新城项目) (the "Xinxiang Project") and the Zhoukou Yangguang Peninsula City Project (周口阳光半岛城邦项目) (the "Zhoukou Project"); the positive sentiments were in part due to the resilient demands fuelled by the continued rapid urbanization of the Henan Province.

Barring unforeseen circumstances and further austerity measures as may be implemented by the Chinese authorities, the Xinxiang Project and the Zhoukou Project, both of which currently at mid-development stage, are expected to generate revenue beyond the self-sustaining and working capital needs of the Group, without further investment funding, for at least the next two years.

As regards the plot of land located in Haiko, Hainan Province (the "Hainan Project") held through Climbing Ace, the Group, towards the end of FY2010, disposed 11% of its 51% equity interest in Climbing Ace to an existing substantial shareholder of the Company, Glossmei Limited ("Glossmei"), with a view to conserve its limited resources for other development opportunities and on account that Glossmei is able to provide the substantial working capital needed to fund the development of the Hainan Project, the entire development cycle of which may last for the next three to four years.

Albeit the abovementioned challenging environment, the Group, while continue seeking for new property development opportunities, including the development of commercial property and tourism property, actively explores with relevant personnel and authorities to diversify into other ventures, including but not limited to resource related businesses, which feature short development cycles in generating revenue growth and for the attainment of better margins.

Acknowledgements

In closing, I would like to extend my utmost appreciation to the management and staff for their hard work and commitment to the Group as well as my sincere thanks to all our customers, investors, bankers, business associates and suppliers for their continuous support throughout the year.

I would also like to take this opportunity to thank our fellow Directors for their contributions and guidance in helping the Group to overcome the many challenges over the past year. Above all, I am once again extremely grateful to you, our Shareholders, for standing by us during the past year and showing your continued unrelenting support for the Group.

Guo Yinghui
Chairman and CEO