Guangzhou Investment - Final Results

PRESS RELEASE FOR 2002 RESULTS

Results of 2002, Future Strategy and Prospects

2002 is a year of asset and business adjustment for the Group.

To facilitate the divestment of the non-property business and property projects in Hong Kong and Macau at appropriate times, the Group made an total provision of HK$1,055,891,000 on these assets. As a result, loss attributable to shareholders in 2002 amounted to HK$989,041,000 which compared with attributable profit of HK$39,782,000 in 2001. However, taking aside the non-recurrent provision, the adjusted profit amounted to HK$66,850,000 in 2002 compared with HK$83,403,000 in 2001.

The Group had completed acquisition of a controlling stake in Guangzhou Construction, a leading property developer in Guangzhou Municipality and disposed the non-core cement and high technology business. In the future the Group s property investment and development business will concentrate in Guangzhou Municipality. The toll road business will serve to provide recurrent income to support the property business while property business outside China and a pulp factory in Fujian Province will be scaled down and terminated at appropriate time. The newsprint business will also be reduced gradually through a proposed A-share listing of Guangzhou Paper. The above resuffling of various businesses has also reduced the Group s head count, streamlined its organization and consequently increased efficiency.

Upon completion of acquisition of Guangzhou Construction, the bulk of the Group s enlarged land bank is located in the urban area of Guangzhou Municipality and suburb Nansha District in the heart of the Pearl River Delta. The urban projects will offer immediate development potential while the development of Nansha District in the coming years will underpin medium term potentials. The Group s future market positioning is to concentrate primarily on the development of middle market residential properties in the urban area of Guangzhou Municipality to be supplemented by suburban projects with average selling price ranging between Rmb4,000 and Rmb6,000 per sq. meter. As a result of the People s Bank s prudent policy to avoid overheating, the other regional property markets in Eastern and Northern China may enter a period of consolidation in the next six to twelve months. The Guangzhou property market, which has no signs of overheat and has been developing steadily due to prudent local government land management policies, will not be adversely affected.

In 2002, Guangdong Province achieved GDP growth of 10.8 per cent. With its growing role as the World Factory, the Group believes that the economy of China, especially Southern China, will continue to remain robust. The Guangzhou property market may remain competitive but also have huge growth potential due to continuous economic development and an expanding population which amounts to over 10 million. As a leading enterprise in this business, the Group is optimistic on its future potential and performance.

Final Dividend

The Directors do not recommend the payment of final dividend for 2002 (2001: nil). There was no payment of interim dividend for the year (2001: nil).

Detailed Analysis of Profit and Loss Account

In 2002, the Group s turnover amounted to HK$3,225,473,000, representing a 4.4 per cent decrease compared with the same period of 2001.

Turnover of property sales in China increased by 59 per cent to HK$651,854,000 as the Group sold more residential units in Guangzhou and consolidated one month s property sales turnover from Guangzhou Construction & Development Holdings (China) Limited and its subsidiaries upon completion of its acquisition in December 2002. In spite of the downturn of the Hong Kong rental market, turnover from rental income increased by approximately 8 per cent to HK$153,133,000 due to rising rental income from the Group s investment properties in Guangzhou and consolidation of one month s rental turnover from Guangzhou Construction & Development Holdings (China) Limited and its subsidiaries. Inspite of higher sales volume, turnover of the cement business amounted to HK$915,830,000 and decreased by 10 per cent. This business was disposed in December 2002 and only contributed eleven month s turnover. Falling newsprint price globally affected the newsprint operation of the Group and turnover decreased by 14 per cent to HK$1,141,688,000. Turnover of the Group s toll road business declined by 15 per cent to HK$355,638,000 due to temporary factors including disposal of Xinfeng Highways and diversions of traffic volume in selective toll roads.

Other revenue decreased by 73 per cent to HK$19,110,000 due to disposal of certain highways by GZI Transport and less interest income caused by lower interest rate.

Total gross profits amounted to HK$1,033,548,000 and decreased slightly by 17 per cent due to similar reasons mentioned in paragraph two.

Total expenses including selling, distribution, administrative and other operating expenses decreased slightly by approximately 6 per cent to a total of HK$666,747,000.

As the Group is shifting its property focus to the Guangzhou market, a total provision of HK$891,736,000 had been made on the Group s remaining interests in certain Hong Kong development & investment properties and certain fixed asset of Guangzhou Paper Limited to reflect the intended divestment strategy at appropriate time. The above provision also included impairment on other investment of GZI Transport Limited of HK$33,462,000.

Finance costs decreased enormously by 27 per cent to HK$185,986,000 as a result of declining interest rate and net repayment of a total of HK$2,030,000,000 bank loans.

Provision for impairment of interest in jointly controlled entity and an associated company amounted to HK$164,155,000 million. This is to facilitate the intended divestment of a pulp plant in Fujian and property interests in Macau at appropriate time.

Minority interest decreased by 45 per cent to HK$170,633,000 million due to lower profits from the paper and toll road businesses.

For the twelve months ended 31st December 2002, the Group s loss attributable to shareholders amounted to HK$989,041,000, which compared with attributable profit of HK$39,782,000 in 2001. Taking aside the non-recurrent provision, the Group s results in 2002 amounted to HK$66,850,000 million which compared with HK$83,403,000 in 2001.

Contact: Sophia Yan, Executive Director (Tel: 2116 8022 ; Fax: 2598 7688)