'Yu min geng shi'
Books of Han, meaning starting afresh with the citizens

"The Group will reinforce its reputation and dominant position in the marketplace by setting high building standards and providing quality residential units."

Turnover and Profit

During the financial year under review, the turnover of the Company, together with its subsidiaries (collectively the "Group"), achieved HK$1,303.33 million, representing an increase of 170%. The audited profit attributable to shareholders totalled HK$310.68 million, with a record growth rate of 160%. Earnings per share based on a weighted average of 895,833,333 shares were HK$0.35.

Dividend

The board of directors has recommended the payment of a final dividend of HK$0.12 per share in respect of the year ended 31st December, 1998.

Market Overview

China's economy has been continuing to grow amid the financial woes that beset so much of Asia and achieved an economic growth rate of 7.8% in 1998. The economic development of Guangzhou City where the Group's business operations are located, stood at the forefront amongst China's major cities with a GDP growth rate of 13%.

During the period under review, property market in Guangzhou City has maintained its momentum. The pre-sale area of commodity properties increased by 36.58%, reaching 5,783,100 sq. m.. Growth in commodity properties' sales value was impressive, achieving RMB 34.692 billion, representing an increase of 24.34% over the previous year.

There were a number of positive factors contributing to the prosperity of the residential market in Guangzhou City. In March 1998, the central government announced that housing development would become the new area and driving force of the nation's economic growth. Private property ownership would be intensively promoted through housing reform policies. In line with such directives, the Guangzhou Municipal Government has put forward a number of proactive administrative measures in order to stimulate and stabilize property developments in the city. Such measures include acceleration of the city's infrastructure developments, regulation of land supply, reduction of development taxes and charges, revitalization of second-hand property market as well as relaxation of mortgage facilities.

During the period under review, the Company has outperformed the market in terms of growth in contracted sales.

Initial Public Offerings

In May 1998, the Company successfully launched an initial public offering of its shares on The Stock Exchange of Hong Kong Limited, which has laid an important foundation for the future development of the Company.

Financial Strengths

As a result of substantial cash inflow from presale of properties under development as well as the successful initial public offering during the year under review, the Group has maintained a liquid financial position.

As at 31st December, 1998, our cash on hand totalled HK$444 million and total borrowings were HK$193 million. The Group continues to adopt a prudent financing policy and has maintained a comfortable gearing level for financing its business operations.

Prospects

Residential property development has played an increasingly important role in the economic development of China, particularly in Guangdong Province, which has targeted housing reforms to be fully implemented starting from the beginning of 2000 with orderly implementation of corresponding policies and measures.

The positive support at all levels of government, together with steady domestic economic growth, rising purchasing power of home-buyers and increasing demand for quality residential units, should ensure the continued growth of the residential property market in Guangzhou City. It is anticipated that overall market improvements will attract more supplies on stream and hence market competition. The Group will reinforce its reputation and dominant position in the marketplace by setting high building standards and providing quality residential units.

In longer term of view, the outlook of the residential property market in Guangzhou City remains promising. The board and I are confident that the market will continue to develop steadily and healthily in the years ahead and we will firmly seize any valuable opportunities.

I would like to take this opportunity to express my gratitude to my fellow directors and all staff for their dedication and hard work. The Group has an excellent team of managerial and professional staff who can take on increasing responsibilities. I am confident that we can meet the challenges ahead and continue to grow in the coming years.

Chu Mang Yee
Chairman
Hong Kong, 22nd March, 1999

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