Financial Highlights

Six months ended 30th June, 1998

- Turnover increased 136% to HK$621,843,000

- Profit attributable to shareholders increased 97% to HK$143,372,000

- Earnings per share were HK$0.18

Interim Results

The Board of Directors of Hopson Development Holdings Limited (the "Company") is pleased to announce the unaudited consolidated results of the Company and its subsidiaries (collectively the "Group") for the six months ended 30th June, 1998 as set out below:

Notes:

1. Turnover

Turnover comprised (i) sale/pre-sale of properties under development for sale, which is recognised over the entire period of construction in respect of properties under development for sale, the pre-sale activities and construction work of which has progressed to a stage when the ultimate realisation of profit can be reasonably determined. The total estimated profit is apportioned over the entire period of construction to reflect the progress of the development. On this basis, profit recognised on the pre-sold portion of the properties is calculated by reference to the proportion of construction costs incurred at the end of the period to the estimated total construction costs on completion with due allowance for contingencies. The profit so recognised is restricted to the amount of instalments received and (ii) sale of property held for investment which is recognised upon completion of sale and purchase agreement.

2. Taxation

Taxation comprised (i) provisions for Hong Kong profits tax at the rate of 16% (1997: 16.5%) and overseas taxation at the applicable rates prevailing in the countries of operations on the profits of companies within the Group for financial reporting purposes, adjusted for income and expenses items which are not assessable or deductible for taxation purposes and (ii) provisions for deferred taxation, at the current tax rate, in respect of significant timing differences arising from the use of different bases of recognition of revenues and expenses for financial reporting and tax purposes.

3. Earnings per share

The calculation of earnings per share is based on the unaudited consolidated profit attributable to shareholders for the six months ended 30th June, 1998 of HK$143,372,000 (six months ended 30th June, 1997: HK$72,773,000) and the weighted average of 791,666,667 shares (1997: 750,000,000 deemed shares) in issue during the period.

Interim Dividend

The Board of Directors has resolved not to declare any interim dividend in respect of the six months ended 30th June, 1998.

Business Review

During the period under review, the Group's turnover and operating profits achieved encouraging growth. In the first six months ended 30th June, 1998, turnover of the Group amounted to HK$621,843,000, representing an increase of 136% over the same period last year. Profit attributable to shareholders was HK$143,372,000, representing an increase of 97% over the same period last year.

Market Overview

Starting from early 1997, there have been confirmed signs that the residential market in Guangzhou City has been regaining momentum. With the support of the government's proactive policies such as regulation of land supply, promotion of secondary market, relaxation of mortgage facilities and improvement of the City's infrastructure, together with steady economic growth, reducing interest rates, improving purchasing power of local residents and increasing demand for quality residential units, the renewed growth of the residential market in Guangzhou City has been much inspired.

According to the statistics of Guangzhou Real Estate Information Centre, in the first half of 1998, pre-sale floor areas and transaction value of commodity properties in Guangzhou City recorded a marked increase of 58.69% and 42.65% respectively over the same period of 1997.

The Group's Sales Performance

The Group outperformed the market by achieving property sales of approximately 174,000 sq. m., or approximately 1,570 units, in the first half of this year. With 6% market share, the Group has established itself as one of the top-selling developers in Guangzhou City.

The Group's performance was in line with its business plan. The substantial increase in sales activities was mainly attributable to the Group's ability to target the right market segments and to capture market opportunity by providing more quality projects for pre-sale.

The Group's Sales Performance

The breakdown of property sales for the period under review is as follows:

Sales of Residential Properties in Guangzhou City

Project Progress

During the period under review, the Group completed four high-rise blocks of Phase 5B of Huajing New City. Phase 2 of Jinan Garden was also in the final stage of completion. Construction works have been commenced for five other projects, namely, Phase1 and Phase 2 of Gallopade Park, Phase 1 of Fairview Garden, Grandview Place, Phases 6A and 6B of Huajing New City and Phase 1 of Regal Court, and all of the above projects are progressing satisfactorily. The total gross floor area ("GFA") currently under construction amounts to approximately 755,000 sq.m., which will be fully completed in one to three years' time.

Initial Public Offering

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

Prospects

Housing Reforms

Residential property development is playing an increasingly important role in the economic reforms in China. It has contributed not only towards intensifying the city growth but also towards improving the quality of life. As announced by Premier Zhu Rongji in March, 1998, housing development will be the new growth area and driving force of the nation's economy. Private home ownership will also be actively promoted.

Guangdong Province has targeted housing reforms to be completed by 1st January, 2001 with orderly implementation of corresponding policies and measures. It is expected that the latent purchasing power resulting from the housing reforms is yet to unleash and the overall positive effect will become more apparent in the coming one to two years. The Group should benefit in the wake of housing reforms because of its dominant position and reputation in the local market place.

Landbank Replenishment

Notwithstanding the impact of the recent Asian economic uncertainties, the demand for quality residential properties in Guangzhou City remains substantial. The Group's continued addition of quality and low-cost landbank in the most popular and fastest growing districts should help capture such opportunity.

Use of Proceeds of Share Offer

The Company issued 250,000,000 new shares in May 1998. The shares commenced trading on the Stock Exchange on 27th May, 1998.

As detailed in the Prospectus for its Placing and New Issue, the proceeds of the issue (after deducting expenses) amounted to approximately HK$643,000,000, of which HK$202,000,000 have been used to develop property development projects and to repay bank and other short-term borrowings.

Landbank Replenishment

The Group has recently signed up agreements to develop the following two projects

The Group's landbank is strategically and predominantly located in the popular and fastest growing areas in Guangzhou City.

Audit Committee

The Stock Exchange has recently revised the Code of Best Practice as set out in Appendix 14 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the "Code of Best Practice") requiring listed companies to establish an audit committee with written terms of reference which deal clearly with its authority and duties. Amongst the committee's principal duties will be to review and supervise the listed company's financial reporting process and internal controls. The Company is currently in the process of setting up the Audit Committee and preparing its written terms of reference in accordance with the requirements of the Stock Exchange.

Directors' Rights to Acquire Shares

Pursuant to the Company's share option scheme ("Share Option Scheme") adopted by the Company on 4th April, 1998 ("Effective Date"), the Directors may, at their discretion, invite any executive and/or employee of the Company and/or its subsidiaries to take up options to subscribe for shares in the Company. An option granted under the Share Option Scheme is exercisable in accordance with the terms of the Share Option Scheme at any time during the period commencing on the date of grant of the option and expiring at the close of business on the earlier of the business day preceding the fifth anniversary of the date of grant and the business day preceding the tenth anniversary of the Effective Date. As at 30th June, 1998, no option had been granted by the Company pursuant to the Share Option Scheme. Particulars of options granted by the Company to a Director pursuant to the Share Option Scheme after the six months ended 30th June, 1998 are as follows :

Save as disclosed herein, no right to subscribe for equity or debt securities of the Company has been granted by the Company to, nor has any such right been exercised by, any Director or chief executive of the Company or the spouse or children under 18 years of age of such Director or chief executive up to the date of this report.

Directors' Interests in Securities

As at 30th June, 1998, the interests of the Directors and their associates in the share capital of the Company and its associated corporations (within the meaning of the Securities (Disclosure of Interests) Ordinance (the "SDI Ordinance")) as recorded in the register required to be kept under section 29 of the SDI Ordinance were as follows:

Notes:

1. These shares are held by Sounda Properties Limited, the entire issued share capital of which is held by Mr. Chu Mang Yee.

2. These shares are held by Yield Plentiful Incorporated, the entire issued share capital of which is held by Mr. Au Wai Kin.

3. These shares are held by Ommaney Properties Limited which is owned as to 60% by Mr. Cheung Fong Wing and as to 20% by Ms. Luk Wai Kei. Accordingly, their interests are duplicated. Mr. Cheung Fong Wing and Ms. Luk Wai Kei are husband and wife.

Save as disclosed herein, as at 30th June, 1998, none of the Directors or the chief executive of the Company had any beneficial or non-beneficial interests in the share capital of the Company or its associated corporations (within the meaning of the SDI Ordinance) which were required to be notified to the Company and the Stock Exchange pursuant to section 28 of the SDI Ordinance (including interest which they were deemed or taken to have under section 31 or Part I of the schedule to the SDI Ordinance) or which were required to be entered in the register required to be kept under section 29 of the SDI Ordinance.

Substantial Shareholders

As at 30th June, 1998, the persons (not being a Director or chief executive of the Company) who were, directly or indirectly, interested in 10% or more of the nominal value of the share capital of the Company and the number of shares in which they were, and/ or were deemed to be, interested as recorded in the register kept by the Company under section 16(1) of the SDI Ordinance were as follows:

Note:

Sounda Properties Limited is wholly-owned by Mr. Chu Mang Yee. The shares held by Sounda Properties Limited are the same as the interests of Mr. Chu Mang Yee in the share capital of the Company disclosed above.

Save as disclosed herein, there is no person known to the Directors or chief executive of the Company who, as at 30th June, 1998, was, directly or indirectly, interested in 10% or more of the nominal value of the share capital of the Company.

Year 2000 Compliance

The Company is fully aware of the need to be Year 2000 compliant and has examined the potential impact of the issue. Being Year 2000 compliant is to ensure that no disruption will occur in the Group's operations during the turn of the Year 1999 to the Year 2000. The Company considers that there will not be any material adverse effect on the Group's operations at and after the turn of millennium. However, appropriate corrective measures will be made to ensure that the Group's operating systems will be Year 2000 compliant by the second quarter of 1999.

The Company does not expect the costs in achieving Year 2000 compliance to be material and is aiming at making detailed disclosure in the annual report for the year ending 31st December, 1998 on the progress of this programme.

Code of Best Practice

In the opinion of the Directors, the Company has, and has throughout the period under review, complied with the Code of Best Practice except that the non-executive directors were not appointed for a specific term. However, the non-executive directors are subject to retirement by rotation at Annual General Meetings of the Company in accordance with the Company's Bye-laws.

Purchase, Sale or Redemption of the Company's Listed Securities

During the period under review, neither the Company nor any of its subsidiaries purchased, sold or redeemed any of the Company's listed securities.

By Order of the Board
Chu Mang Yee
Chairman

Hong Kong, 16th September, 1998

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