Xinyuan Real Estate Co., Ltd. Announces Second Quarter and First Half 2008 Results

Xinyuan Real Estate Co., Ltd. Announces Second Quarter and First Half 2008
Results
Second Quarter Revenues were US$87.7 Million;

BEIJING, Sept. 2 /Xinhua-PRNewswire/ -- Xinyuan Real Estate Co., Ltd.
(''Xinyuan'') (NYSE: XIN), a fast-growing residential real estate developer
with a focus on strategically selected Tier II cities in China, today
announced its unaudited financial results for the second quarter and six
months ended June 30, 2008.
-- Total revenues for the second quarter of 2008 increased 17.2% to
US$87.7 million from US$74.8 million for the same quarter in 2007.

-- Total revenues for the first half of 2008 increased 117.9% to US$212.9
million from US$97.7 million for the same period in 2007.

-- Net income for the second quarter of 2008 decreased 9.6% to US$13.2
million from US$14.6 million for the same quarter in 2007.

-- Net income for the first half of 2008 increased 115.2% to US$46.1
million from US$21.4 million for the same period in 2007.

-- Diluted earnings per share were US$0.08 for the second quarter of 2008,
equivalent to US$0.16 per American Depositary Share (''ADS''), compared
to US$0.12 diluted earnings per share or US$0.24 per ADS for the same
quarter in 2007.

-- Diluted earnings per share were US$0.22 for the first half of 2008,
equivalent to US$0.44 per ADS, compared to US$0.18 diluted earnings per
share or US$0.36 per ADS for the same period in 2007.

-- In the second quarter of 2008, the Company launched one new project
with total developable gross floor area (''GFA'') of 189,198 square
meters in Zhengzhou, and completed construction of total GFA of
approximately 53,600 square meters for one ongoing project in Suzhou.

-- As of June 30, 2008, the Company had land reserves representing
approximately 2.3 million square meters of developable gross floor
area, all of which is either under construction or in the planning
stage.
This represents future sales of 1.5 to 2 years of development activity,
and is consistent with the Company's business plan.

Three Three Six Six
months months months months
ended ended ended ended
6/30/07 6/30/08 6/30/07 6/30/08

Total revenue (US$000) 74,828 87,723 97,705 212,860
Net income (US$000) 14,568 13,172 21,435 46,124
Diluted earnings per
share (US$) 0.12 0.08 0.19 0.22

''The second quarter 2008 proved to be a challenging quarter most notably
due to weaker market conditions brought about by the tightened credit supply
and slowing buyer demand,'' said Yong Zhang, Xinyuan's chairman and chief
executive officer. ''As we expected, temporary policy changes to curb
inflation and cool a rapidly growing real estate market have decreased sales
volumes across the industry and slowed growth during the quarter. Although
current market conditions are presenting challenges to nearly every company in
the real estate industry, Xinyuan's overall growth rates so far in 2008 are
better than many of our peers.''
''Over the next several months, we will concentrate on improving our
capacity to execute our projects and mobilize the demand that is still unmet
in second-tier cities," continued Mr. Zhang. "We remain confident in the
prospects of the real estate sector in China. The significant improvement in
CPI and its outlook should pave the way for further easing of monetary and
fiscal policies later this year and next year. When the policies are relaxed
and markets do begin to improve, our quick asset turnover business model will
allow our strong and experienced professional team to rapidly take advantage
of new opportunities.''
Mr. Frank Ng, Xinyuan's chief financial officer also added, ''While the
uncertainty within the real estate market has contributed to slowed revenue
and net income growth rates for Xinyuan, we continue to seek opportunities to
improve our position within the industry. During the second quarter we
launched one project, Zhengzhou Xinyuan Colorful Garden, which has a total
developable gross floor area of over 189,198 square meters, and we completed
construction of approximately 53,600 square meters of gross floor area in our
Suzhou Lake Splendid project. We will continue to rely on our unique business
model, strong balance sheet and prudent financial management strategy as we
deal with the present challenges and future opportunities of China's real
estate market.''
Financial Results for the Second Quarter and First Half of 2008
Revenues
Total revenues were US$87.7 million for the second quarter of 2008,
compared to US$125.1 million and US$74.8 million for the first quarter of 2008
and second quarter of 2007, respectively, representing a decrease of 29.9% and
an increase of 17.2% from the first quarter of 2008 and second quarter of
2007, respectively.
Total GFA recognized for revenue was approximately 101.0 thousand square
meters for the second quarter of 2008, compared to 161.3 thousand square
meters and 135.8 thousand square meters for the first quarter of 2008 and
second quarter of 2007, respectively. The average selling price per square
meter recognized for revenue was approximately Renminbi (''RMB'')6,300 for the
second quarter of 2008, compared to RMB5,800 and RMB4,400 for the first
quarter of 2008 and second quarter of 2007, respectively.
The quarter-over-quarter decrease in revenue was primarily due to
decreased revenue of US$46.8 million from Suzhou Lake Splendid, Suzhou
Colorful Garden, Anhui Wangjiang Garden, Jinan Elegant Scenery and Jinan
International City Garden, among which the Suzhou Lake Splendid and Jinan
Elegant Scenery were near to the completion of sales and construction by the
end of the second quarter of 2008, compared to the first quarter of 2008, and
was partially offset by increased revenue of US$14.2 million from Suzhou
International City Garden and Zhengzhou Xinyuan Colorful Garden, which
launched the pre-sales in the second quarter of 2008.
The year-over-year increase in revenue was primarily attributable to
increased revenue of US$59.0 million from Suzhou Colorful Garden, Suzhou
International City Garden, Anhui Wangjiang Garden and Jinan International City
Garden, compared to the second quarter of 2007, and was partially offset by
reduced revenue of US$47.5 million from Suzhou Lake Splendid, Zhengzhou
Central Garden West and Zhengzhou Central Garden East.
For the first half of 2008, total revenues were US$212.9 million, an
increase of 117.9% from US$97.7 million for the same period in 2007. Total
GFA recognized for revenue was approximately 262.3 thousand square meters for
the first half of 2008, compared to 172.3 thousand square meters for the first
half of 2007. The average selling price per square meter recognized for
revenue was approximately RMB6,000 for the first half of 2008, compared to
RMB4,500 for the first half of 2007.

The geographic breakdown of revenues from real estate sales were as
follows:

Revenue (US$ '000)
City 2007Q2 2008Q1 2008Q2
amount % amount % amount %
Suzhou 19,708 27% 53,825 43% 31,664 36%
Zhengzhou 42,496 57% 8,492 7% 10,987 13%
Hefei -- 0% 16,868 14% 11,885 14%
Jinan 12,055 16% 44,975 36% 32,540 37%
74,259 100% 124,160 100% 87,076 100%

Gross Profit
Gross profit for the second quarter of 2008 was US$20.7 million, compared
to US$36.6 million and US$27.0 million for the first quarter of 2008 and
second quarter of 2007, respectively. For the first half of 2008, gross
profit was US$57.3 million, an increase of 44.5% from US$39.6 million for the
same period in 2007.
The gross margin percentage for the second quarter of 2008 was 23.6%,
compared to 29.2% and 36.1% for the first quarter of 2008 and second quarter
of 2007, respectively. The quarter-over-quarter decrease in gross margin
percentage was mainly attributed to the second quarter 2008 sale of newly
launched projects of Suzhou International City Garden and Zhengzhou Xinyuan
Colorful Garden which generated lower gross margins due to higher land
acquisition costs and construction costs. The year-over-year decrease in
gross margin percentage was attributed to the second quarter 2007 sale of
Zhengzhou Central Garden West and Zhengzhou Central Garden East which
generated higher gross margins due to lower land acquisition costs and
construction costs. Similarly, due to lower margins on newly launched
projects of Suzhou International City Garden and Zhengzhou Xinyuan Colorful
Garden for the first half of 2008, the gross margin percentage was 26.9%,
compared to 40.6% for the same period in 2007.
Selling, General and Administrative Expenses
Selling, general and administrative expenses were US$12.4 million for the
second quarter of 2008, compared to US$10.9 million and US$5.0 million for the
first quarter of 2008 and second quarter of 2007, respectively. As a
percentage of total revenue, the selling, general and administrative expenses
for the second quarter of 2008 were 14.2%, compared to 8.7% and 6.7% for the
first quarter of 2008 and second quarter of 2007, respectively. The quarter-
over-quarter increase in total selling, general and administrative expenses
was due to increased selling and marketing activities to promote new projects.
The year-over-year increase in total selling, general and administrative
expenses was due to increased selling and marketing activities to promote new
projects, salaries and other expenses associated with the addition of new
employees, stock-based compensation amortization, and professional fees
associated with maintenance as a listed company on the NYSE and under the
rules governing the SEC. Similarly, for the first half of 2008, selling,
general and administrative expenses were US$23.3 million, compared to US$7.9
million for the same period in 2007. As a percentage of total revenue, the
selling, general and administrative expenses for the first half of 2008 were
10.9%, compared to 8.1% for the same period in 2007.
Operating Margin
The operating margin percentage for the second quarter of 2008 was 9.4%,
compared to 20.5% and 29.3% for the first quarter of 2008 and second quarter
of 2007, respectively. For the first half of 2008, the operating margin
percentage was 16.0%, compared to 32.4% for the same period in 2007. The
quarter-over-quarter and year-over-year decrease in operating margin was due
to reduced gross margins of property developments for the second quarter of
2008 and increased selling and marketing activities to promote new projects,
salaries and other expenses associated with the addition of new employees,
stock-based compensation amortization, and professional fees. Excluding
share-based compensation expenses (non-GAAP), operating margin for the quarter
was 12.2%, compared to 23.1% and 29.3% in the first quarter of 2008 and second
quarter of 2007, respectively.
Share of Income in an Equity Investee and Exchange Gains
In the second quarter of 2008, the Company recognized income in the amount
of US$3.7 million from its equity investment in a 45% owned project company,
Zhengzhou Jiantou Xinyuan Real Estate Co., Ltd., compared to income in the
amount of US$3.6 million and US$3.6 million in the first quarter of 2008 and
second quarter of 2007, respectively. The slight increase was attributable to
increased net income of the project company in the second quarter of 2008.
Similarly, for the first half of 2008, the Company recognized net income in
the amount of US$7.3 million, compared to US$3.6 million for the same period
in 2007.
In addition, the Company recognized unrealized foreign exchange gain of
US$1.5 million in the second quarter of 2008, which resulted from the
appreciation of Renminbi against U.S. dollar, as the Company translated
certain U.S. dollar-denominated long-term debts into Renminbi for the second
quarter of 2008 using the exchange rate at June 30, 2008. A US$2.2 million
and US$0.7 million foreign exchange gain of the same nature was recognized in
the first quarter of 2008 and second quarter of 2007, respectively. For the
first half of 2008, the Company recognized unrealized foreign exchange gain of
US$3.8 million, compared to US$0.7 million for the same period in 2007.
Change in Fair Value of Derivative Liabilities
In the second quarter of 2008, the Company recognized a gain of US$2.8
million arising from a decrease in fair value of the warrants issued with
floating rate notes, compared to a gain of US$11.3 million arising from an
decrease in fair value of the warrants in the first quarter of 2008 and an
expense of US$4.8 million arising from an increase in fair value of the
warrants in the second quarter of 2007. For the first half of 2008, the
Company recognized a gain of US$14.1 million arising from a decrease in fair
value of the warrants, compared to an expense of US$4.3 million for the same
period in 2007.
Income Taxes
Income tax expense for the second quarter of 2008 was US$4.3 million,
compared to US$10.9 million and US$7.5 million for the first quarter of 2008
and second quarter of 2007, respectively. The quarter-over-quarter and year-
over-year decrease was primarily attributable to decreased gross profit
recognized and increased selling, general and administrative expenses charged
in the second quarter of 2008, as compared to the first quarter of 2008 and
second quarter of 2007. For the first half of 2008, the income tax expense
was US$15.2 million, compared to US$10.9 million for the same period in 2007.
Net Income
Net income for the second quarter of 2008 was US$13.2 million, compared to
US$33.0 million and US$14.6 million for the first quarter of 2008 and second
quarter of 2007, respectively. For the first half of 2008, net income was
US$46.1 million, compared to US$21.4 million for the same period in 2007. The
Company reported basic and diluted earnings per share of US$0.09 and US$0.08,
or earnings per ADS of US$0.18 and US$0.16 for the second quarter of 2008,
respectively. For the first half of 2008, basic and diluted earnings per
share were US$0.31 and US$0.22, respectively, or earnings per ADS of US$0.62
and US$0.44, respectively. Each ADS represents two common shares.
Outlook for Fiscal Year 2008
Based on current operations and Xinyuan's estimates of the market
conditions for the remainder of 2008, the Company expects its total revenues
for full year 2008 to be in the range of US$450 million to US$520 million,
representing year-over-year growth in the range of approximately 45% to 68%.
The revised total revenue estimate for full year 2008 reflects the Company's
updated expectation of possible delays in pre-sales resulting from potential
market uncertainties.
The Company maintains its full year net income estimate of US$60 million
to US$70 million, representing year-over-year growth of approximately 31% to
53%. The Company expects to achieve net income within its estimated guidance
range through increased gross profits margins on new projects, lower selling,
general and administrative expenses and interest expenses, and with the
recognition of unrealized foreign exchange gains and change in fair value of
warrants in the first half of 2008. In its estimation of net income figures
for full year 2008, the Company does not assume any future effects from
foreign currency translation and adjustments to the fair value of warrants.

The breakdown of saleable GFA in the future is as follows:

Total GFA Sold GFA as Saleable
of June 30, GFA in the
2008 future
City (sq.m) (sq.m) (sq.m)
Suzhou 481,789 232,197 249,592
Zhengzhou 534,826 70,708 464,118
Hefei 145,452 141,309 4,143
Jinan 348,424 230,614 117,810
Chengdu (*) 450,374 -- 450,374
Kunshan(*) 509,851 -- 509,851
2,470,716 674,828 1,795,888

* The Company targets to launch the pre-sales of projects in these
cities in the second half of 2008.

Non-GAAP Measures
This release contains non-GAAP financial measures, as such term is defined
by the U. S. Securities and Exchange Commission. These non-GAAP financial
measures, which are identified in this release, are used by management as
measures of the Company's performance, and should be considered in addition
to, not in isolation or as a substitute for, measures of the Company's
financial performance prepared in accordance with United States Generally
Accepted Accounting Principles (''GAAP''). The Company's non-GAAP financial
measures may be defined differently than similar terms used by other
companies. Accordingly, care should be exercised in understanding how the
Company defines its non-GAAP financial measures.
Reconciliations of the Company's non-GAAP measures to the nearest GAAP
measures are set forth in the section below titled ''Reconciliation of GAAP to
Non-GAAP Results." These non-GAAP measures include non-GAAP gross profit,
non-GAAP operating expenses, non-GAAP income from operations, and non-GAAP net
income.
The Company's management uses certain non-GAAP financial measures to gain
an understanding of the Company's comparative operating performance (when
comparing such results with previous periods or forecasts) and future
prospects. The Company's non-GAAP financial measures exclude certain items,
including stock-based compensation charges, unrealized foreign exchange gain
or loss, amortization of intangible assets, amortization of convertible debt
issuance cost and charges arising from changes in fair value of derivative
warrant liabilities, from its internal financial statements for purposes of
its internal budgets. Non-GAAP financial measures are used by the Company's
management in their financial and operating decision-making, because
management believes they reflect the Company's ongoing business in a manner
that allows meaningful period-to-period comparisons. The Company computes its
non-GAAP financial measures using the same consistent methods from quarter to
quarter. The Company's management believes that these non-GAAP financial
measures can provide useful information to investors and others in the
following ways: 1) in understanding and evaluating the Company's current
operating performance and future prospects in the same manner as management
does, if they so choose, and 2) in comparing in a consistent manner the
Company's current financial results with the Company's past financial results.
The Company's management further believes the non-GAAP financial measures can
provide useful information to both management and investors by excluding
certain expenses, gains and losses (i) that are not expected to result in
future cash settlement or (ii) that are non-recurring in nature or may not be
indicative of its core operating results and business outlook.
The Company's management believes excluding stock-based compensation from
its non-GAAP financial measures is useful for itself and investors as such
expense will not result in future cash payment and is otherwise unrelated to
the Company's core operating results. The Company's management believes
excluding the non-cash stock-based compensation charges, unrealized foreign
exchange gain, amortization expense of intangible assets and charges resulting
from changes in fair value of derivative warrant liabilities from its non-GAAP
financial measure of net income are useful for itself and investors because
they enable a more meaningful comparison of the Company's cash performance
between reporting periods. In addition, such charges will not result in cash
settlement in the future.
Conference Call Information
Xinyuan's management will host an earnings conference call on September 2,
2008 at 8 a.m. U.S. Eastern Daylight Time (8 p.m.Beijing/Hong Kong time).
Dial-in details for the earnings conference call are as follows:

US: +1-617-597-5308
Hong Kong: +852-3002-1672

Please dial-in 10 minutes before the call is scheduled to begin and
provide the passcode to join the call. The passcode is ''Xinyuan Earnings
Call.''
A replay of the conference call may be accessed by phone at the following
number until October 2, 2008:
International: +1-617-801-6888
Passcode: 39540569
Additionally, a live and archived webcast of the conference call will be
available at http://ir.xyre.com .
About Xinyuan Real Estate Co., Ltd.
Xinyuan Real Estate Co., Ltd. (''Xinyuan'') (NYSE: XIN) is a fast-growing
developer of large scale, high quality residential real estate projects aimed
at providing middle-income consumers with a comfortable and convenient
community lifestyle. Xinyuan focuses on China's Tier II cities, characterized
as larger, more developed urban areas with above average GDP and population
growth rates. Xinyuan has expanded its network to cover a total population of
over 34.5 million people in six strategically selected Tier II cities,
comprising Hefei, Jinan, Kunshan, Suzhou, Zhengzhou and Chengdu. Xinyuan is
the first real estate developer from China to be listed on the New York Stock
Exchange. For more information, please visit http://www.xyre.com .
Safe Harbor Statement
This press release contains forward-looking statements. These statements
are made under the ''safe harbour'' provisions of the U.S. Private Securities
Litigation Reform Act of 1995. These forward-looking statements can be
identified by terminology such as ''will,'' ''expects,'' ''anticipates,''
''future,'' ''intends,'' ''plans,'' ''believes,'' ''estimates,'' ''confident''
and similar statements. Statements that are not historical facts, including
statements concerning our beliefs, forecasts, estimates and expectations, are
forward-looking statements. Forward-looking statements involve inherent risks
and uncertainties that could cause actual results to differ materially from
those projected or anticipated, including risks related to: the risk that we
may be unable to complete our property developments on time or at all; the
risk that our results of operations may fluctuate from period to period; the
risk that the PRC government may adopt further measures to curtail the growth
in the property sector; the risk that we face intense competition from other
real estate developers; the risk that PRC economic, political and social
conditions, government policies as well as natural disaster can affect our
business and other risks outlined in our public filings with the Securities
and Exchange Commission, including our annual report on Form 20-F for the year
ended December 31, 2007. All information provided in this press release is as
of September 2, 2008. Except as required by law, we undertake no obligation
to update or revise publicly any forward-looking statements, whether as a
result of new information, future events or otherwise, after the date on which
the statements are made or to reflect the occurrence of unanticipated events.
Notes to Unaudited Financial Information
This release contains unaudited financial information which is subject to
adjustment. In addition, we are in the process of conducting further
evaluations of our internal control over financial reporting for compliance
with the requirements of Section 404 under the Sarbanes-Oxley Act. We make no
representation of management's assessment regarding internal control over
financial reporting or include an attestation report of the Company's
independent auditors due to a transition period established by rules of the
SEC for newly public companies.
Adjustments to the financial statements may be identified when the audit
work is completed, which could result in significant differences between our
audited financial statements and this unaudited financial information.

XINYUAN REAL ESTATE CO., LTD. AND ITS SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(All US$ amounts and number of shares data in thousands, except per share
data)

Three months ended
June 30, March 31, June 30,
2007 2008 2008

Revenue $74,828 $125,137 $87,723

Cost of revenue (47,833) (88,582) (66,997)

Gross profit 26,995 36,555 20,726

Selling and distribution
expenses (2,173) (1,853) (4,153)
General and administrative
expenses (2,865) (9,016) (8,285)

Operating income 21,957 25,686 8,288

Interest income 152 1,041 1,205
Interest expense 492 (3) 3
Share of income in an equity
investee 3,599 3,585 3,716
Exchange gains 724 2,232 1,522
Change in fair value of
warrant liabilities (4,822) 11,296 2,776

Income from operations before
income taxes 22,102 43,837 17,510

Income taxes (7,534) (10,885) (4,338)

Net Income 14,568 32,952 13,172

Accretion of Series A
convertible preference
shares (723) -- --

Net income attributable to
ordinary shareholders $13,845 $32,952 $13,172

Earnings (loss) per share:
Basic $0.13 $0.22 $0.09
Diluted(1) $0.12 $0.13 $0.08
Shares used in computation:
Basic 106,510 148,398 148,398
Diluted 115,749 161,373 160,467

Note (1) Diluted earnings per share for the three months ended June 30,
2007, March 31, 2008 and June 30, 2008.
The diluted earnings per share for the three months ended June 30, 2007,
March 31, 2008 and June 30, 2008 are calculated as follows:
(All US$ amounts and number of shares data in thousands, except per share
data)

Three Months Ended
June 30, March 31, June 30,
2007 2008 2008

Numerator:
Net income $14,568 $32,952 $13,172
Accretion of Series A convertible
redeemable preference shares (723)
Change in fair value of
warrant liabilities* -- (11,296) --
Net income attributable
to ordinary shareholders
- diluted 13,845 21,656 13,172

Denominator:
Number of shares
outstanding - basic 106,510 148,398 148,398
Incremental shares as if
warrants were exercised
at beginning of period* -- 61 --
Convertible subordinated
notes 8,317 9,597 9,597
Incremental shares of
Burnham warrant 922 -- --
Stock options - 3,317 2,472

Number of shares
outstanding - diluted 115,749 161,373 160,467

Diluted earnings per share $0.12 $0.13 $0.08

* The Company assumes the warrants embedded in the floating rate notes to
be exercised on January 1, 2008. This would have caused the Company not
to recognize the US$11.3 million gain arising from the change in fair
value of the warrants because there would be no change in the fair value
of the warrants during the three months ended March 31, 2008 if they
were exercised on January 1, 2008. For the three months ended June 30,
2007 and 2008, the potential dilutive effects of the warrants were
excluded from the computation of diluted earning per share because their
effects were anti-dilutive.

XINYUAN REAL ESTATE CO., LTD. AND ITS SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(All US$ amounts and number of shares data in thousands, except per share
data)

Six months ended
June 30, June 30,
2007 2008

Revenue $97,705 $212,860

Cost of revenue (58,059) (155,579)

Gross profit 39,646 57,281

Selling and distribution expenses (3,191) (6,006)
General and administrative expenses (4,758) (17,301)

Operating income 31,697 33,974

Interest income 317 2,246
Interest expense 318 --
Share of income in an equity investee 3,599 7,301
Exchange gains 724 3,754
Change in fair value of warrant liabilities (4,346) 14,072

Income from operations before income taxes 32,309 61,347

Income taxes (10,874) (15,223)

Net Income 21,435 46,124

Accretion of Series A convertible
preference shares (1,445) --

Net income attributable to ordinary
shareholders $19,990 $46,124

Earnings (loss) per share:
Basic 0.19 0.31
Diluted 0.18 0.22
Shares used in computation:
Basic 106,510 148,398
Diluted 111,372 160,920

XINYUAN REAL ESTATE CO., LTD. AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS DATA
(U.S. Dollars in thousands)

Audited Unaudited
December 31, 2007 June 30, 2008

ASSETS
Current assets
Cash and cash equivalents $309,315 $120,126
Restricted cash 48,267 72,868
Accounts receivable 257 2,172
Other receivables 4,750 1,695
Other deposits and prepayments 12,864 21,799
Advances to suppliers 3,052 12,164
Real estate property development completed 4,917 279
Real estate property under development 379,142 678,096
Other current assets 7,782 2,432
Total current assets 770,346 911,631

Real estate property under development 9,738 --
Real estate properties held for lease, net 6,811 12,865
Property and equipment, net 4,649 4,892
Other long-term investment 242 242
Interests in an equity investee 9,344 17,558
Other assets 6,065 5,991

TOTAL ASSETS $807,195 $953,179

Audited Unaudited
December 31, 2007 June 30, 2008

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $45,490 $62,987
Short-term bank loans 49,284 77,235
Customer deposits 25,261 35,019
Income tax payable 5,406 7,668
Deferred tax liabilities 7,532 14,009
Other payables and accrued liabilities 18,296 20,070
Payroll and welfare payable 3,105 1,599

Total current liabilities 154,374 218,587

Long-term bank loans 137,858 154,647
Warrant liabilities 16,592 2,520
Deferred tax liabilities 4,776 6,012
Unrecognized tax benefits 11,925 12,699
Other long-term debt 91,771 93,220

Total liabilities 417,296 487,685

Shareholders' equity
Common shares 15 15
Additional paid-in capital 490,361 496,182
Statutory reserves 12,145 12,145
Accumulated deficit(2) (123,704) (77,579)
Accumulated other comprehensive earnings 11,082 34,731
Total shareholders' equity 389,899 465,494

TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $807,195 $953,179

Note (2) On November 13, 2007, the holders of the Company's Series A
convertible preference shares agreed to waive the contingent conversion option
contained in the shares. The modification was deemed to be substantive and
was treated for accounting purpose as an extinguishment of the Series A
convertible preference shares. In connection with this, the Company
recognized a dividend of approximately US$182.2 million to the Series A
convertible preference shareholders, representing the difference between the
fair value of the convertible preference shares immediately after the
modification and the carrying value of the preference shares immediately prior
to the modification. This deemed dividend did not affect the Company's net
income or cash flows. However, it reduced the net income attributable to
ordinary shareholders and retained earnings for the year ended December 31,
2007 by the same amount.

XINYUAN REAL ESTATE CO., LTD. AND ITS SUBSIDIARIES
RECONCILIATION OF GAAP to NON-GAAP RESULTS
(U.S. Dollar in thousands, except per share data)

Three months ended
June 30, 2008
Non-GAAP
GAAP Adjustments Results

Gross profit 20,726 20,726

Operating expenses 12,438 (a) (2,441) 9,912
(b) (85)

Operating income 8,288 (a) 2,441 10,814
(b) 85

Net income 13,172 (a) 2,560 11,519
(b) 85
(c) (2,776)
(e) (1,522)

Three months ended
March 31, 2008
Non-GAAP
GAAP Adjustments Results
Gross profit 36,555 36,555

Operating expenses 10,869 (a) (3,175) 7,609
(b) (85)

Operating income 25,686 (a) 3,175 28,946
(b) 85

Net income 32,952 (a) 3,344 22,853
(b) 85
(c) (11,296)
(e) (2,232)

Three months ended
June 30, 2007
Non-GAAP
GAAP Adjustments Results

Gross profit 26,995 26,995

Operating expenses 5,038 (b) (85) 4,953

Operating income 21,957 (b) 85 22,042

Net income 14,568 (b) 85 19,122
(c) 4,822
(d) 371
(e) (724)

(a) To adjust stock-based compensation charges
(b) To adjust amortization of property management rights
(c) To adjust changes in fair value of derivative warrant liabilities
(d) To adjust amortization of convertible debt issuance cost
(e) To adjust unrealized exchange gain

XINYUAN REAL ESTATE CO., LTD. AND ITS SUBSIDIARIES
RECONCILIATION OF GAAP to NON-GAAP RESULTS
(U.S. Dollar in thousands, except per share data)

Six months ended
June 30, 2008
Non-GAAP
GAAP Adjustments Results

Gross profit 57,281 57,281

Operating expenses 23,307 (a) (5,616) 17,521
(b) (170)

Operating income 33,974 (a) 5,616 39,760
(b) 170
Net income 46,124 (a) 5,904 34,372
(b) 170
(c) (14,072)
(e) (3,754)

Six months ended
June 30, 2007
Non-GAAP
GAAP Adjustments Results

Gross profit 39,646 39,646

Operating expenses 7,949 (b) (170) 7,779

Operating income 31,697 (b) 170 31,867

Net income 21,435 (b) 170 26,074
(c) 4,822
(d) 371
(e) (724)

(a) To adjust stock-based compensation charges
(b) To adjust amortization of property management rights
(c) To adjust changes in fair value of derivative warrant liabilities
(d) To adjust amortization of convertible debt issuance cost
(e) To adjust unrealized exchange gain

For more information, please contact:

In China:

Ms. Lisa Wang
Director of Investor Relations
General Manager of Strategy, Investment and Financing Department
Tel: +86-10-6598-1626
Email: lisa.wang@xyre.com

Mr. Derek Mitchell
Ogilvy Financial, Beijing
Tel: +86-10-8520-6284
Email: derek.mitchell@ogilvy.com

In the United States:

Mr. Thomas Smith
Ogilvy Financial, New York
Tel: +1-212-880-5269
Email: thomas.smith@ogilvypr.com

SOURCE Xinyuan Real Estate Co., Ltd.

Ms. Lisa Wang, Director of Investor Relations, General Manager of Strategy,
Investment and Financing Department, +86-10-6598-1626, or lisa.wang@xyre.com;
Mr. Derek Mitchell, Ogilvy Financial, Beijing, +86-10-8520-6284, or
derek.mitchell@ogilvy.com; In the United States: Mr. Thomas Smith, Ogilvy
Financial, New York, +1-212-880-5269, or thomas.smith@ogilvypr.com