The Group - Group News

Shui On Group Launches Flagship US$1 Billion Property Company

Hong Kong, 24 February 2004 - Shui On Group today announced the formation of Shui On Land Ltd (SOL), a US billion-dollar flagship property firm focused on the Chinese Mainland. A number of prestigious international and local new investors, together with Hong Kong-listed Shui On Construction & Materials Ltd (SOCAM - HKSE 0983), have committed to a US$400 million cash investment in SOL. Shui On Group will initially inject its prime Shanghai property developments -- including properties from SOCAM and Shui On Properties Ltd (SOP - the Group's private property arm) -- at a consideration (including share bonus consideration) of over US$500 million. No new mainland property development projects will be undertaken by the Shui On Group's privately held companies without being offered first to the flagship company.

"Today marks the realisation of my vision to found a world-class property development company with internationally renowned partners, a strong management team and unrivalled development projects," remarked Mr. Vincent H.S. Lo, Chairman and CEO of Shui On Group. "With a proven track record of successful property development, Shui On Land is ideally poised to capitalise on the vast opportunities in the Chinese Mainland's thriving property markets."

Shui On Construction and Materials (SOCAM)

SOCAM will inject its premier residential development, Rainbow City (Rui Hong Xin Cheng), which has a 30 June 2003 net asset value of US$81.9 million. This modern, integrated residential community is conveniently located in Shanghai's Hongkou district, a short journey away from the historic Bund area.

In return for its stake in Rainbow City, SOCAM will receive US$130 million worth of Ordinary shares and, if mutually agreed performance targets are achieved, an additional bonus of up to US$8.8 million worth of ordinary shares totalling US$138.8 million: a substantial premium over the property's net book value. Some US$14.5 million of development costs in Rainbow City since end-June 2003 will also be reimbursed to SOCAM as part of the deal.

In addition to Rainbow City, the directors of SOCAM have agreed to invest US$50 million in return for 50 million Junior Preference SOL shares. These shares carry a 7% fixed annual rate of dividend return and have priority status over Ordinary shares for dividend payments. Further, the Junior Preference shares are convertible into Ordinary Shares at a lower initial conversion price at the time of an IPO and have no limit on returns. When all Preference and Ordinary (including bonus) shares in SOL have been issued, SOCAM will own 20.66% of SOL. The total shareholding of all companies in the Shui On Group, including SOCAM, will give the Group a controlling 61.7%.

"As shareholders in SOL, SOCAM will benefit immediately from the substantial premium valuation of Rainbow City and they will retain an interest in Rainbow - a strictly residential development - while they avoid future funding needs for its ongoing development. They will also acquire benefits and a steadier income from the city core Taipingqiao mixed development as well as the larger, more diversified future SOL projects including the injection of our significant city core developments in Hangzhou and Chongqing subject to the approval of the new investors," noted Mr. Lo. "Further, their Junior Preference Shares will provide SOCAM with the opportunity for potentially higher capital gain when they are converted into Ordinary Shares at the time of a listing."

SOCAM shareholders will be invited to approve the Rainbow sale and the share subscription at a Special General Meeting (SGM) scheduled for late March and BNP Paribas Peregrine have been appointed to provide independent financial advice for SOCAM's independent directors and shareholders. Shui On Group and its associates as well as new investors Cheah Cheng Hye and Value Partners Ltd., a related partner of one of the new investors, will abstain, under the listing rules of the stock exchange, from voting at the SGM.

Shui On Properties (SOP)

Shui On's private property arm, SOP, will inject its premier Taipingqiao development into SOL. This multifaceted project includes the internationally acclaimed Shanghai Xintiandi, Corporate Avenue and luxury lakeside residential developments. Centrally located in the Luwan district of downtown Shanghai, the Taipingqiao properties have a net asset value of about US$206.8 million as of 30 June 2003.

In return for its contribution of the Taipingqiao development, SOP will receive 301 million Ordinary US$1.00 shares of SOL. Further, if mutually agreed performance targets are achieved, SOP will additionally receive a bonus of US$74 million in Ordinary shares for its participation.

Investors

International and local investors have collectively committed approximately US$350 million in exchange for 170 million Junior Preference Shares and 180 million Senior Preference Shares of SOL. Senior Preference Shares have a higher fixed preferential cumulative cash dividend of 7.5% per annum and a further fixed cumulative preferential cash dividend of 7.5% per annum payable on redemption or conversion. They are convertible into Ordinary Shares at a higher initial conversion price than Junior Preferred Shares at the time of an IPO. This reputable, independent group of global investors includes ERGO Tru Asia Limited, Metro Holdings Limited, Citigroup Venture Capital International, Ocean Equity Holdings Limited, Value Partners Funds, Standard Chartered Bank, Shanghai Hotel Investments Limited and Jebsen & Company Limited.

On behalf of the largest new investor, ERGO Trust's German-based Managing Director, Mr. Frank-Rainer Vaessen, commented, "We are extremely proud to participate in the formation of this premier property development company. SOL is the synthesis of China expertise and opportunity together with international financial partners, resulting in unrivalled strength and unlimited possibilities."

"We are very honoured to join forces with such an impressive group of international investors," commented Mr. Lo. "Their commitment to SOL is a strong endorsement of our company's vision and strategy and confirms that we meet -- and surpass -- some of the highest international business standards. Although there are no definite plans to list SOL at the moment, in the right market conditions the company would be well positioned for a successful listing on an international stock exchange."

Mr. Lo, Chairman and CEO of Shui On Group, will lead SOL's management team together with the Board of Directors, initially composed of 17 members.

It is expected that the deal will close following SOCAM's SGM at the end of March 2004.

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NOTES TO EDITORS

About Shui On Group

Shui On Group, the lead developer of Shanghai Xintiandi, was founded in Hong Kong in 1971 by Mr. Vincent H.S. Lo. Through the years he has built Shui On from a small construction company into a diversified group engaged in property development, construction and construction materials with interests in Hong Kong, the Chinese Mainland and North America.

About New Investors

	ERGO Tru Asia
	ERGO Tru Asia (ETA) is a regional real estate investment management group headquartered in Singapore. ETA is acting on behalf of an investor consortium which has to date invested more than €1.2 billion on real estate transactions in Asia. ETA offers expertise in a full range of real estate investment matters including acquisitions, divestments, development, marketing, asset allocation and portfolio management. ETA is an affiliate of ERGO Trust GmbH, a global real estate asset manager with more than €13.6 billion of real estate assets under management and is a 100% subsidiary of ERGO Versicherungsgruppe AG (ERGO Insurance Group), the second largest primary insurer in Germany.
	Metro Holdings Limited Metro Holdings Limited is a diversified business group, listed on the Main Board of the Singapore Exchange Limited, with core business in property and retail. The Group's property portfolio includes interests in 2.2 million square feet of prime retail and quality office space in Singapore, Shanghai and Guangzhou in China and in Penang, Malaysia. Metro also operates a chain of five Metro department stores in Singapore, where it is a familiar household name, as well as four stores in Jakarta and Bandung in Indonesia. The retail division has a strong brand presence in these communities as it offers a wide range of merchandise on display over 870,000 square feet of retail space.
	Citigroup Venture Capital International, Asia Pacific Citigroup Venture Capital International, Asia Pacific ("CVCI AP") is responsible for direct private equity investments on behalf of Citigroup - the world's largest financial institution - in the Asia Pacific region. CVCI AP invested in a broad spectrum of transactions ranging from pre-IPO financings, restructuring / recapitalization, spin-offs to mezzanine finance.
	Ocean Equity Holdings Limited Ocean Equity Holdings Limited's is a SPV set up by the original Interchina consortium to make follow on investments in Shui On Land. The consortium comprises of the Shun Hing Group, Hongkong Sales Group and the Edward Wong Group, all headquartered in Hong Kong. Collectively it has made investment with and worked closely with the Shui On Group on Interchina which developed the 1st phase commercial development (Lot 110) & 1st phase residential development (Lot 117, 114 & 113) of Taipingqiao.
	Value Partners Limited Value Partners Limited, a company incorporated in British Virgin Islands with limited liability whose principal business is investment management.
	Standard Chartered The history of Standard Chartered in Hong Kong dates back to 1859. It is currently one of the SAR's three note-issuing banks. Publicly listed on both the London Stock Exchange and the Stock Exchange of Hong Kong, Standard Chartered employs 30,000 people in over 500 offices in more than 50 countries. Well-established in growth markets, the Bank combines deep local knowledge with global capability and aims to be the right partner for its customers. It is trusted across its network for its standard of governance and its commitment to making a difference in the communities in which it operates.
	Shanghai Hotel Investments Limited Shanghai Hotel Investments Limited is a private investment company with main focus on direct investment projects in Shanghai. The company is currently developing two 5 star hotels next to Shanghai Xintiandi.
	Jebsen & Co. Ltd. Jebsen & Co. was initially established in Hong Kong in 1895 by two partners, Mr. Jacob Jebsen and Mr. Heinrich Jessen. The company's business quickly expanded to include import & export, trading and agencies in a wide spectrum of industrial and consumer products. In 1969, Jebsen & Co. was reorganized into a private limited company, Jebsen & Co. Ltd. The company enters its 2nd century as a modern marketing, distribution and services conglomerate, employing over 1,200 staff across its Hong Kong headquarters and offices in China. Core business areas for the company are in Consumer Products, Industrial Products, Motor Vehicles, Chemicals and Services. Jebsen's traditional agency business (representing companies such as Porsche, Pentax, San Pellegrino and Southcorp) has been supplemented by a range of owned brands (such as Blue Girl Beer) and proprietary trading activities. The company is also a strategic investor and JV partner in areas where it has business interests.

About Contributed Projects

Taipingqiao - A city core development project encompassing 52 hectares (128.5 acres) of mixed commercial and residential developments in the heart of Shanghai, blending together the architecture and charm of Old Shanghai with fully modern features and facilities. The main components of this project are:

	-	Shanghai Xintiandi - The internationally acclaimed restoration area of premium commercial buildings which house some of Shanghai's most popular restaurants, bars, shops and boutiques, covering a total gross floor area of 56,000 square metres (over 600,000 square feet).
	-	Corporate Avenue - This project features Grade A office buildings and a commercial and entertainment complex, covering a total gross floor area of 560,000 square metres (over 6 million square feet). The completed Towers I & II are inspired by the Art Deco style of Shanghai's architecture in the 1930s.
	-	Luxury Residential - An extensive lakeside luxury residential development, with a gross floor area of 614,000 square metres (over 6.6 million square feet). Phase 1, known as The Lakeville, recalls the style of Old Shanghai Shikumen courtyard houses and covers a gross floor area of 45,730 square metres (over 490,000 square feet).

Rainbow City (Rui Hong Xin Cheng) - An integrated residential development project targeting the fast growing middle-income segment of the Shanghai market. The project covers 40 hectares (119.5 acres) and is conveniently located in Hongkou District, a short journey away from the historic Bund. Rainbow City transforms existing neighbourhoods into a modern residential community complete with full amenities. The project is close to several leading universities and will soon be served by its own Metro station. Upon completion, it will comprise over 90 blocks of high-rise buildings containing some 15,000 units. Approximately 30% of the total site will be landscaped, open area. The total gross floor area of Rainbow City is 1,430,000 square metres (over 15,300,000 square feet).

About Projects in the Pipeline

Xihu Tiandi - A city core development project focused on entertainment and recreation and situated beside Hangzhou's celebrated West Lake, one of China's most famous and best-loved areas of natural beauty. Covering a total gross floor area of 58,000 square metres (over 624,000 square feet), Xihu Tiandi has restored and re-utilized historic buildings and extensively re-landscaped an adjoining lakeside public park, equipping it with new retail and dining facilities. The project will set both environmental and building standards that are only beginning to be adopted in some of the world's most advanced development projects.

Hualongqiao - A city core development project adjacent to the central business district in the Yuzhong District in Chongqing, the officially designated economic hub of Southwest China. The 1.3-million-square-metre Hualongqiao area is situated on the south bank of the Jialing River on the hillside. As the manufacturing support centre of Chongqing, Hualongqiao will comprise business service facilities including an exhibition and merchandise mart, luxury hotels, intelligent office buildings as well as residential clusters and dining, shopping and entertainment amenities.