HongKong Land Holdings Limited Preliminary Announcement Of Results For The Year Ended 31 Dec. '02

PERFORMANCE

Net rental income fell by 2% compared with 2001, as rents trended lower, while financing charges rose because of the higher levels of net debt following the repurchase of shares at the end of 2001. Underlying earnings for 2002 accordingly fell by 10% to US$192 million. Underlying earnings per share, based on the weighted average number of shares in issue during the year, fell by 3% to US¢8.64; the reduced decline reflecting the effect of the share repurchases.

The Group's investment property portfolio was valued by independent valuers at the end of the year. This led to a net valuation deficit of US$988 million, which is charged to the profit and loss account under the International Financial Reporting Standards used by the Group.

This movement was the main factor in the reduction of shareholders' funds of US$1,091 million to US$4,957 million, which led to the net asset value per share reducing by 18% to US$2.23.

With the timing of a recovery in demand in the Group's core market still uncertain, the Directors have concluded that it would be prudent to recommend a reduced final dividend of US¢4.00 per share for 2002, compared with US¢5.50 per share for 2001. Together with the interim dividend of US¢3.50, this gives a total dividend of US¢7.50 per share for the year.

STRATEGIC REVIEW

Despite the downturn in Hong Kong's office sector, the Group continues to invest in its core portfolio. Chater House was successfully completed in 2002 and the property's anchor tentants, both office and retail, were operating before the year end. The renovation of the Alexandra House retail podium is under way and will be completed and substantially let before the end of 2003. Preparations have also begun for a major renovation of the Landmark complex in the heart of Central. These projects, each of which adds incremental revenue to Hongkong Land, should enable the Group to maximize the value of its prime assets.

In Singapore, construction of the Group's joint-venture development, One Raffles Quay, is well under way, while its wholly-owned One Raffles Link remains fully let and commands a rental premium in difficult market conditions.

Investment also continues in the Group's residential property business where progress is being made in the construction of Phase I of Central Park in Beijing, which has achieved good presales, and of the Belcher's Street site in Hong Kong.

OUTLOOK

In conclusion, the Chairman, Simon Keswick said, "In the near term, rentals and values will continue to experience downward pressure. However, the medium-term outlook for the Group's core Hong Kong property portfolio remains favourable, with no significant supply in Central from 2004 onwards."

CHIEF EXECUTIVE'S REVIEW

STRATEGIC FOCUS

Through this cyclical downturn in our office market, we continue to focus on ensuring that the value of our core asset base is optimized and the strength of our customer relationships maintained. We do this through a combination of investment in our properties, and progressive enhancements to the level of services we provide to our tenants.

In this environment, our investment strategy will be to give priority to upgrading our core portfolio, with new ventures restricted to key strategic sites in markets with long term potential.

In view of the importance of focusing on our core property businesses, and recognizing the difficult operating environments which some of our infrastructure investments face, our strategy is selectively to dispose of assets in this sector over time.

COMMERCIAL PROPERTY

Central Portfolio

Net take-up of office space in Hong Kong's Central District remained negative in 2002. This led to weakening rentals throughout the year despite limited supply, with Chater House the only significant addition to stock. The market was more active than 2001, however, with a number of occupiers taking the opportunity of a competitive market to upgrade the location and quality of their premises and landlord.

We secured a significant percentage of these relocating tenants and signed over 40 new office tenants during the course of the year, representing 176,000 s.f. of lettable area. This encouraging performance enabled us to increase our market share of let space and to hold vacancy steady in our Central portfolio excluding Chater House. Including Chater House on its completion, our overall office vacancy in Central at year end rose to 11%.

Our retail portfolio saw a stronger performance. Not only was the retail component of Chater House 100% pre-let on completion and launched with great success in the second half of the year, but our retail portfolio as a whole completed the year fully let, with vacancy limited to the areas of Alexandra House now under renovation. This performance reflected the bettertrading conditions enjoyed by the international luxury brand sector, where our portfolio is focused.

The trading platform which we provide to our retail tenants has been enhanced over recent years with successive renovation and redevelopment programmes in Prince's Building, Chater House and now Alexandra House. The Group's ability to grow its retail revenue in the upturn and defend it in downturn is crucially dependent on our continuing to provide the highest quality environment within which those tenants can showcase their brands.

The next step in this programme of maximising the value of our core asset base in Central will be a major programme of renovation in the Landmark complex. This mixed-use scheme will add lettable space; bring a department store to the Landmark retail offering; create a unique luxury hotel in the heart of Central; and provide a new office tower at Landmark East.

This project will reinforce the Group's leading position in Central, and significantly enhance thee attraction of Central as a business and leisure destination.

Other Commercial Properties

The main contract for One Raffles Quay, our joint-venture project in Singapore, was let below budget and construction work has started on schedule. One Raffles Link, our existing investment in Singapore, remains fully let, with the retail component CityLink Mall performing well. Rents and capital values in the Singapore commercial office market remain under pressure, with uncertainty over the level of future supply.

In Vietnam, both of our Hanoi office buildings are fully let, with rents stable.

Gaysorn, the retail centre in Bangkok where we have participated in a major refurbishment, opened with great success in the second half of the year. The centre is now 95% let and is widely regarded as having set new standards in Bangkok's luxury retail sector.

RESIDENTIAL PROPERTY

Following the successful sales launch in April of the first phase of our joint-venture development in Beijing, Central Park, Phase II of the project is likely to commence in the second half of 2003. At our existing Beijing residential investment, Maple Place at BeijingRiviera, occupancy in the villas and town-houses is running at over 80%. A phased renovation project for the apartments is underway to improve the performance of those units.

Sales at Roxas Triangle, our luxury apartment joint-venture in Manila, improved over the course of the year. In aggregate, 60% have now been sold.

Grosvenor Land, our joint-venture residential property fund, was closed to new investors at the year end. Of its US$70 million of committed equity, some 70% has been invested. Eight of its nine current investments (one Japanese investment has been sold at a profit) are in Hong Kong. Future investments are likely to be outside Hong Kong to balance the proportion represented by Hong Kong in the fund.

Our small residential portfolio in Hong Kong remains fully let, in a very competitiveleasing market. To maintain the competitiveness of our town-houses development, Stanley Court in Island South, a renovation programme has been drawn up for implementation in 2003. Our development in Western District, €˜Ivy on Belcher's', is under construction, with the substructure work close to completion. The apartments are projected to be ready for occupation by mid-2004. Two further potential residential developments in Hong Kong, at Victoria Road in Western District and at Lai Sing Court in Tai Hang Road, Happy Valley, have both successfully obtained planning approval. Further legal and regulatory procedures need to be completed for both projects before work can begin.

INFRASTRUCTURE

With the emphasis we are now placing on investment leasing market. To in our core property business, the strategy for our infrastructure portfolio is one of extracting value from the existing portfolio, while minimizing further investment.

Against this background, we have decided not to proceed with the planned joint-ventures in Penang and Shanghai in the logistics sector. The logistics centre for Tradeport Hong Kong at Hong Kong International Airport was completed on schedule and within budget just before the year end. Marketing of this facility is now underway. In the port sector, construction continues at the CT 9 development at Kwai Chung in Hong Kong. The rapid improvement in activity in 2002 at the Hong Kong container port is encouraging for the value of this investment on its completion in 2004. Amongst our Mainland China investments, the China Water Company continues to progress well. Following the significant investment made in the business by Thames Water, a unit of the major European utilities group RWE, Hongkong Land's interest has been diluted to 25%. CWC's business is already benefiting from access to Thames Water's technical expertise.

We have been endeavouring for some time to extract value from our 36% interest in Central China Power. Higher coal prices, a competitive operating environment and weak electricity tariffs

tariffs have weakened the business's ability to service its debt for some time now. At the end of year, the business was placed in the hands of a provisional liquidator. With no certainty of realization of asset values in CCP and the remainder of our infrastructure investments, the carrying values of these investments have been provided for in our accounts.

CORPORATE DEVELOPMENTS

Although no major financings were undertaken in 2003, the Group has continued to make significant progress in extending the maturity of its committed debt facilities, diversifying its lending base, and moving away from its historical reliance on secured debt.

OUTLOOK

Our core market remains very competitive. In this difficult environment, the Group will focus on seeking to outperform in relative terms, and to maximise market share. Our strong customer base and our continuing investment in enhancing the quality of our portfolio will enable us to maintain our leading position in Hong Kong's Central District.

Nicholas Sallnow-Smith

Chief Executive

25th February 2003