Guangzhou Investment 2005 profit surges by 8 times

Spin-off of investment properties substantially strengthened financial position
Paper business spin-off plan under studies
Further focus in property development and infrastructure

Financial Highlights

(Hong Kong, 25 April 2005) - Guangzhou Investment Company Limited ( GZI or the Group ; stock code: 0123), one of the ten largest integrated property developers in Guangzhou, is pleased to announce its annual results for the year ended 31 December 2005.
The Group has substantially improved its overall financial position by the spin off of approximately 160,000 square meters of investment properties including the White Horse Building on 21 December 2005 through the listing of GZI REIT. Apart from owning 31% of the Units, the Group received approximately HK$3.4 billion in cash, driving profit attributable to shareholders to increase by 628% to HK$2.527 billion. In return of the support of the shareholders, the board of directors proposed a final dividend of HK 2.0 cents per share and a special dividend of HK 5.0 cents per share. Together with the interim dividend of 1.0 cents per share, total dividend for the year amounted to HK 8.0 cents. (2004: Interim dividend HK 0.83 cents per share and final dividend HK 0.9 cents per share, total dividend for the year HK 1.73 cents per share).
The Group has implemented a policy of balanced development of residential and commercial properties , and expanded its commercial property portfolio. The listing of GZI REIT realised the true value of the Group s investment properties. Rental income of the Group also increased by 20% over last year to reach HK$520 million.
As a result of the changes in accounting policies in Hong Kong in 2005, the recognized sales of properties during the year reduced to a GFA of 129,200 square meters, representing a decrease of 58.5% while recognized sales reduced to HK$1.247 billion, representing a decline of 37.2%. However, taking into account the unrecognized pre-sold GFA and sales, as well as the sales to GZI REIT, actual GFA sold for the year amounted to 441,300 square meters and sales amounted to HK$6.491 billion, representing an increase of 41.7% and 222.67% respectively. In addition, the Group has won the tender for the development of the West Tower of the Mega Tower project in Pearl River New City, which is expected to be developed into the highest building in Guangzhou with a total GFA of approximately 400,000 square meters. Preparation work is being carried out for the project.
During the year under review, the Group s toll road operations realized a turnover of HK$425 million, representing an increase of 6.2% over last year. The attributable profit from associated companies amounted to HK$184 million, representing an increase of 20.9%. As a result of the outstanding performance of GSNR jointly controlled entity, profit generated from jointly controlled entities amounted to HK$40 million, representing an increase of 295.7% over last year. The GWSR project, in which the Group has a 35% stake, is expected to come into operation ahead of schedule by the end of 2006 and boost the Group s turnover.
During the year, sales of newsprint amounted to 275,000 tons. Although sales decreased slightly due to the increased production capacity in the country, profit from the operation still increased by 3.1% to HK$33.04 million, due to the increase in market price, effective internal control, improvement in production technology and cost control measures.
In 2005, Guangzhou Municipality s GDP reached RMB511.575 billion, an increase of 13% compared to the previous year. Economic development remained positive. Overall property price increased 10.7% over the previous year to reach RMB5,144 per square meter, exceeding the RMB5,000 cap for the first time since 2000. At the same time, a series of austerity measures were implemented by the Central Government to prevent the overheating of the property sector. The Group will adjust its growth strategy based on its proved business model and taken into consideration the market situation.
With an aim to achieve business specialization, the Group is considering spinning off the newsprint operation to allow a clear focus on property and infrastructure business. The formation of the independent platform is expected to benefit the development of the newsprint business. The project is now being evaluated by relevant intermediaries.
Capturing the favourable opportunities arising from the promising property market, the Group will optimally increase its GFA sales to approximately 550,000 square meters in 2006, mainly on residential and an appropriate portion of villas. The Group shall accelerate the development of commercial properties. Currently the properties under construction is approximately 1.1 million square meters. The Group expects its owned or completed investment properties including commercial properties and offices will amount to around 2 million square meters over the next few years. The Group will fully utilize the interaction of these properties with GZI REIT, to secure cash flow and profit for the Group as well as minimize possible market risks. Furthermore, in response to the market s strong demand for retail operations and others business, the Group will restructure some of its businesses with good potentials, to grow the business to strength, and at the appropriate time, realize its potential value.
As for toll roads and bridges, the Group will focus on the investment on expressways. The highway network in the Guangdong Province is expected to grow at high speed in the coming few years and infrastructure will be stepped up. As long as the return is desirable, the Group will actively seek to participate in such investments.
Commenting on the annual results, Mr Ou Bingchang, chairman of GZI, said, The Group s performance in the past year was very encouraging. Looking ahead, The Group will strive to streamline its corporate structure, enhance transparency, improve its competitive capabilities through effective business strategies. The Group will also increase operating efficiency, compress costs, seize market opportunities, and thereby bring better returns to shareholders.
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About Guangzhou Investment Company Limited

GZI was listed on The Stock Exchange of Hong Kong Limited in December 1992. The controlling shareholder of GZI, Yue Xiu Enterprises (Holdings) Limited, is the resident entity of the Guangzhou Municipal People s Government in Hong Kong. The Group has built up several businesses consisting of property, paper and toll road mainly located in Guangdong Province. These businesses all have substantial market share in Southern China. Regarding the property business, the Group has clarified its overall strategy to focus on the property market of Guangzhou, and to expand the development and operation of commercial properties in a timely fashion. The newsprint plant has annual production capacity of 300,000 tonnes. The toll road business is conducted through GZI Transport Limited, a subsidiary of the Company separately listed on the Stock Exchange in 1997. GZI Transport Limited is currently operating an attributable length of 317.8 km of toll road and bridge projects in Guangdong and other selective provinces of China. The Group spun off some investment properties and listed as Reit in December 2005.
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