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The context of LAT

Our first reaction to “Land appreciation tax” Joe Zhang, COO & Executive Director www.shenzheninvestment.com 25 January 2007 Disclaimers on final page. The context of LAT.

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The context of LAT

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  1. Our first reaction to “Land appreciation tax” Joe Zhang, COO & Executive Directorwww.shenzheninvestment.com25 January 2007Disclaimers on final page

  2. The context of LAT • We support all government policies. We also acknowledge that strict implementation of LAT would probably be a significant negative to the sector’s profit margins – other things being equal • It is a local tax. So the ultimate power on the implementation rests with local governments • Implementation of the policies announced in June-06 has been somewhat patchy so far • Local governments have not yet issued specific rules on LAT, and therefore we do not have definitive views on its impact SHENZHEN INVESTMENT

  3. The physical market will respond Property price • Given strong demand, LAT could give developers an excuse to push up property prices • Potentially, property supply curve will shift to the left, leading to higher “market-clearing” prices (due to delays in property completion, and the exit of marginal developers) Demand curve supply curves Higher price Lower price Quantity SHENZHEN INVESTMENT

  4. The sector’s reaction • Under-reporting of profit and accounting gimmicks could potentially become more of an issue • Potentially, more developers could become “fully-integrated” in order to engage in “transfer pricing”, and expand into architectural designs, construction, consultancy, and property agency. • More developers could shift focus to rental property that is exempt from the LAT • LAT could give impetus to sector consolidation – but fragmentation will remain a long-term feature SHENZHEN INVESTMENT

  5. Disclaimers • This presentation is prepared in good faith, based on audited financial data, publicly available information, and management’s outlook as of today. Macroeconomic parameters could change unexpectedly. The Company’s operating environment and thus strategies could change as a result and without notice. • This presentation does not constitute an offer or an invitation to make an offer for the sale or purchase of the share in the Company trade this or any other stock. Stocks can go down as well as up. Historical performance is no guarantee for the future. • The NAV estimates in this document are for reference only, and have nothing to do with our views of potential realizable values. • This presentation does not constitute any advice or recommendation to invest in the Company and is not intended to form the basis of any investment decision. • The presentation includes certain statements and estimates of the Company based on various assumptions that may or may not prove to be correct and involve various risks and uncertainties. Accordingly, there can be no assurance that such statements or estimates will be realized. SHENZHEN INVESTMENT

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