GZI Real Estate Investment Trust

IMPORTANT

If you are in any doubt about the contents of this Offering Circular, you should consult your stockbroker, bank manager, solicitor, App B B19(a) professional accountant or other independent professional adviser.

GZI Real Estate Investment Trust App B B1 (a Hong Kong collective investment scheme authorised under section 104 of the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)) Managed by GZI REIT Asset Management Limited GLOBAL OFFERING Number of Units under the Global Offering : 583,000,000 (subject to adjustment) Number of Units under the Hong Kong Public Offering : 60,000,000 (subject to adjustment and reallocation) Number of Units under the International Offering : 523,000,000 (subject to adjustment and reallocation) Maximum Offer Price : HK$3.075 per Unit payable in full on application in Hong Kong dollars, plus brokerage of 1.0%, Hong Kong Stock Exchange trading fee of 0.005% and SFC transaction levy of 0.005%, subject to refund Stock Code : 405 Joint Global Coordinators

The Hongkong and Shanghai Citigroup Global Markets Asia Limited DBS Bank Ltd. Banking Corporation Limited Listing Agent

The Hongkong and Shanghai Banking Corporation Limited

Financial Adviser to Guangzhou Investment Company Limited

DBS Bank Ltd.

The Securities and Futures Commission of Hong Kong, The Stock Exchange of Hong Kong Limited and Hong Kong Securities Clearing Company Limited take no responsibility for the contents of this Offering Circular, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this Offering Circular. The Offer Price is expected to be determined by agreement between the Joint Global Coordinators (on behalf of the Underwriters), GZI and the App B Manager on the Price Determination Date. The Price Determination Date is expected to be Thursday, 15 December 2005 and, in any event, not later B14(a) than Monday, 19 December 2005. The Offer Price will not be more than HK$3.075 and is currently expected to be not less than HK$2.850. Applicants for Hong Kong Public Offering Units are required to pay, on application, the Maximum Offer Price of HK$3.075 for each Hong Kong Public Offering Unit together with brokerage of 1.0%, Hong Kong Stock Exchange trading fee of 0.005% and SFC transaction levy of 0.005%, subject to refund if the Offer Price should be lower than the Maximum Offer Price. The Joint Global Coordinators (on behalf of the Underwriters, and with the consent of GZI and the Manager) may reduce the indicative Offer Price range below that stated in this Offering Circular (which is HK$2.850 to HK$3.075 per Unit) at any time prior to the morning of the last day for lodging applications under the Hong Kong Public Offering. In such a case, notices of the reduction in the indicative Offer Price range will be published in the South China Morning Post (in English) and the Hong Kong Economic Times (in Chinese) not later than the morning of the day which is the last day for lodging applications under the Hong Kong Public Offering. If applications for Hong Kong Public Offering Units have been submitted prior to the day which is the last day for lodging applications under the Hong Kong Public Offering, then even if the indicative Offer Price range is so reduced, such applications cannot be subsequently withdrawn. Further details are set forth in the sections headed “Structure of the Global Offering” and “How to apply for Hong Kong Public Offering Units” in this Offering Circular. If, for any reason, GZI, the Manager and the Joint Global Coordinators are not able to agree on the Offer Price on or before Monday, 19 December 2005, the Global Offering (including the Hong Kong Public Offering) will not proceed. The obligations of the Hong Kong Underwriters under the Hong Kong Underwriting Agreement to subscribe for, and to procure applications for the App B subscription of, the Hong Kong Public Offering Units, are subject to termination by the Joint Global Coordinators (on behalf of the Hong Kong B25 Underwriters) if certain grounds arise prior to 8:00 a.m. on the day that trading in the Units commences on the Hong Kong Stock Exchange. Such grounds are set forth in the section headed “Structure of the Global Offering — Conditions of the Hong Kong Public Offering” in this Offering Circular. It is important that you refer to that section for further details.

12 December 2005 KEY INVESTMENT INFORMATION AND HIGHLIGHTS EXPECTED TIMETABLE(1)

If there is any change in the following expected timetable, the Manager will issue an announcement in Hong Kong to be published in the South China Morning Post (in English) and the Hong Kong Economic Times (in Chinese).

Hong Kong Public Offering commences and Application Forms available from ...... 9:00 a.m. on Monday, 12 December 2005

Despatch of Election Forms to GZI Qualifying Shareholders ...... Monday, 12 December 2005

Application lists open(2) ...... 11:45 a.m. on Thursday, 15 December 2005

Latest time for GZI Qualifying Shareholders to lodge Election Forms ...... 12:00noon on Thursday, 15 December 2005

Latest time to lodge Application Forms ...... 12:00noon on Thursday, 15 December 2005

Latest time to give electronic application instructions to HKSCC(3) ...... 12:00 noon on Thursday, 15 December 2005

Application lists close ...... 12:00 noon on Thursday, 15 December 2005

Expected Price Determination Date(4) ...... Thursday, 15 December 2005

Announcement of the Offer Price, the level of indications of interest in the International Offering, the results of applications in the Hong Kong Public Offering (with successful applicants’ identification document numbers), the basis of allocations of the Hong Kong Public Offering Units and the final number of Hong Kong Public Offering Units comprised in the Hong Kong Public Offering, Pool A and Pool B, respectively, as well as the details of exercise, if any, of the GZI Qualifying Shareholders’ Option, to be published in the South China Morning Post (in English) and the Hong Kong Economic Times (in Chinese) on or before ...... Tuesday, 20 December 2005

Despatch of Unit certificates in respect of wholly or partially successful applications as well as to GZI Qualifying Shareholders who have elected to retain the Units distributed to them pursuant to the Special Dividend (either in whole or in part) on(5) ...... Tuesday, 20 December 2005

Despatch of refund cheques in respect of wholly or partially unsuccessful applications, on or before(6)(7) ...... Tuesday, 20 December 2005

Dealings in Units on the Hong Kong Stock Exchange to commence on ...... Wednesday, 21 December 2005

Despatch of cheques to GZI Qualifying Shareholders who file valid Election Forms and GZI Ineligible Overseas Shareholders on or about(8) ...... Thursday, 29 December 2005

i EXPECTED TIMETABLE(1)

Notes:

(1) All times refer to Hong Kong local time, except where otherwise stated. Details of the structure of the Global Offering, including conditions of the Hong Kong Public Offering, the Special Dividend and the GZI Qualifying Shareholders’ Option, are set out in the section headed “Structure of the Global Offering” in this Offering Circular.

(2) If there is a “black” rainstorm warning or a tropical cyclone warning signal number 8 or above in force in Hong Kong at any time between 9:00 a.m. and 12:00 noon on Thursday, 15 December 2005, the application lists will not open on that day. See the section headed “How to apply for Hong Kong Public Offering Units — When to apply for the Hong Kong Public Offering Units — Effect of bad weather conditions on the opening of the application lists” in this Offering Circular for further information.

(3) Applicants who apply by giving electronic application instructions to HKSCC should refer to the section headed “How to apply for Hong Kong Public Offering Units — How to apply by giving electronic application instructions to HKSCC” in this Offering Circular.

(4) The Price Determination Date for the purposes of the Global Offering is expected to be on or about Thursday, 15 December 2005. Notwithstanding that the Offer Price may be fixed at below the Maximum Offer Price, applicants who apply for Hong Kong Public Offering Units must pay on application the Maximum Offer Price of HK$3.075 per Unit together with the brokerage of 1.0%, Hong Kong Stock Exchange trading fee of 0.005% and SFC transaction levy of 0.005%. Such applicants will be refunded the surplus application monies, if any, in accordance with the section headed “Further Terms and Conditions of the Hong Kong Public Offering — Refund of Money — Additional Information” in this Offering Circular.

(5) Applicants who apply for 500,000 or more Hong Kong Public Offering Units and who have indicated in their Application Forms their wish to collect Unit certificates (where applicable) or refund cheques (where applicable) in person may do so from the Unit Registrar, Tricor Investor Services Limited, from 9:00 a.m. to 1:00 p.m. on Tuesday, 20 December 2005 in the case of collection of Unit certificates, or from 9:00 a.m. to 1:00 p.m. on Tuesday, 20 December 2005, in the case of collection of refund cheques, (or any other dates notified by the Manager in the South China Morning Post (in English) and the Hong Kong Economic Times (in Chinese) as the date of despatch and availability of Unit certificates and refund cheques). Applicants being individuals who opt for personal collection cannot authorise any other person to make collection on their behalf. Applicants being corporations who opt for personal collection must attend by personal authorised representatives each bearing a letter of authorisation from the corporation stamped with the corporation’s chop. Both individuals and authorised representatives (if applicable) must produce, at the time of collection, evidence of identity acceptable to the Unit Registrar. Uncollected Unit certificates and refund cheques will be despatched by ordinary post to the addresses specified in the relevant Application Forms at the applicants’ own risk. Details of the arrangements are set out in the section headed “How to apply for Hong Kong Public Offering Units” in this Offering Circular.

Unit certificates will be despatched to GZI Qualifying Shareholders who have elected to retain the Units conditionally distributed to them pursuant to the Special Dividend by ordinary post to the addresses specified in their respective Election Forms at their own risk.

(6) Refund cheques will be issued in respect of wholly or partially unsuccessful applications and in respect of successful applications if the Offer Price is less than the Maximum Offer Price.

(7) Part of the Hong Kong identity card number/passport number of an applicant, or, if there are joint applicants, part of the Hong Kong identity card number/passport number of the first-named applicant, provided by the respective applicant may be printed on the refund cheque, if any. Such data would also be transferred to a third party for refund purposes. The banker of the respective applicant may require verification of his/her Hong Kong identity card number/passport number before encashment of the refund cheque. Inaccurate completion of Hong Kong identity card number/passport number may lead to delay in encashment of or may invalidate the refund cheque.

ii EXPECTED TIMETABLE(1)

(8) Cheques for cash payments to GZI Qualifying Shareholders who file valid Election Forms will be despatched to such persons by ordinary post to the addresses specified in their respective Election Forms at their own risk. Cheques for cash payments to GZI Ineligible Overseas Shareholders will be despatched to such persons by ordinary post to their respective addresses as then shown on the register of members of GZI at their own risk.

Unit certificates are expected to be issued by Tuesday, 20 December 2005, but will only become valid at 8:00 a.m. on Wednesday, 21 December 2005, provided that (i) the Global Offering has become unconditional in all respects; and (ii) the right of termination as described in the section headed “Underwriting — Underwriting Arrangements and Expenses” in this Offering Circular has not been exercised.

Prospective investors of the Hong Kong Public Offering Units and the International Offering Units and GZI Shareholders should note that the Underwriters are entitled to terminate their obligations under the Underwriting Agreements by notice in writing to be given by the Joint Global Coordinators (acting on behalf of the Underwriters) upon the occurrence of any of the events set forth under “Grounds for Termination” in the section headed “Underwriting” in this Offering Circular at any time prior to 8:00 a.m. (Hong Kong time) on the Listing Date (the “Termination Time”). Such events include, but are not limited to, any act of God, military action, riot, public disorder, civil commotion, fire, flood, explosion, epidemic, terrorism, strike or lock-out. Accordingly, any unit certificate relating to the Hong Kong Public Offering Units and the International Offering Units issued by GZI REIT or deposited into CCASS prior to the Termination Time will not constitute evidence of title to any Hong Kong Public Offering Units or International Offering Units nor will the same constitute evidence of title to the Units conditionally distributed to GZI Qualifying Shareholders pursuant to the Special Dividend. Any person who trades the Units on the basis of publicly available allocation results or pursuant to the Special Dividend prior to the Termination Time will do so entirely at their own risk.

This Offering Circular is being distributed in electronic format on CD-ROM to the GZI Qualifying Shareholders only in their capacity as such. The CD-ROM may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published, in whole or in part, for any purpose.

iii EXPECTED TIMETABLE(1)

Neither the CD-ROM nor any of its contents is, in that context, an offer of securities for sale in any country or jurisdiction. Neither the CD-ROM nor any of its contents may be distributed in any jurisdiction outside Hong Kong (other than to GZI Qualifying Shareholders in Australia, Macau, Spain and the United Kingdom) or distributed, directly or indirectly, in any jurisdiction outside Hong Kong (other than to GZI Qualifying Shareholders in Australia, Macau, Spain and the United Kingdom), or distributed or redistributed in any jurisdiction outside Hong Kong or to any resident thereof (in each case other than to GZI Qualifying Shareholders in Australia, Macau, Spain and the United Kingdom). GZI Qualifying Shareholders may obtain a printed copy of this Offering Circular from any of the following locations during normal business hours (unless otherwise indicated):

• GZI’s share registrar, Abacus Share Registrars Limited, during business hours at Ground Floor, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong

• any of the designated branches of the Receiving Banks and at the times set out in the section headed “How to apply for Hong Kong Public Offering Units — Where to collect the Offering Circular and the Application Forms” in this Offering Circular

• the following offices of the Joint Global Coordinators:

The Hongkong and Shanghai Banking Corporation Limited 1 Queen’s Road Central Central Hong Kong

Citigroup Global Markets Asia Limited 50th Floor, Citibank Tower Citibank Plaza 3 Garden Road Central Hong Kong

DBS Bank Ltd. 22nd Floor, The Center 99 Queen’s Road Central Central Hong Kong

• the following two locations designated by Goldbond Capital (Asia) Limited:

3902B, 39th Floor Tower 1, Lippo Centre 89 Queensway Hong Kong

iv EXPECTED TIMETABLE(1)

Unit 2305-06, 23rd Floor City Landmark 1 68 Chung On Street Tsuen Wan New Territories Hong Kong

• GZI’s registered office located at 24th Floor, Yue Xiu Building, 160 Lockhart Road, Wanchai, Hong Kong

v CONTENTS

KEY INVESTMENT INFORMATION AND HIGHLIGHTS EXPECTED TIMETABLE ...... i CONTENTS ...... vi OFFERING CIRCULAR SUMMARY ...... 1 THE GLOBAL OFFERING ...... 29 INFORMATION ABOUT THIS OFFERING CIRCULAR AND THE GLOBAL OFFERING ...... 35 PARTIES INVOLVED IN THE GLOBAL OFFERING ...... 39 RISK FACTORS ...... 43 USE OF PROCEEDS ...... 66 OWNERSHIP OF UNITS ...... 67 DISTRIBUTION POLICY ...... 69 STRATEGY ...... 71

THE PROPERTIES AND THE REORGANISATION THE PROPERTIES AND BUSINESS ...... 77 THE REORGANISATION ...... 125

FINANCIAL INFORMATION AND FORECAST SELECTED FINANCIAL AND OPERATING INFORMATION ...... 127 MANAGER’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ...... 133 MANAGER’S DISCUSSION AND ANALYSIS OF FUTURE OPERATIONS ...... 167 PROFIT FORECAST ...... 173 UNAUDITED PRO FORMA BALANCE SHEETS OF GZI REIT ...... 188 STATEMENT OF DISTRIBUTIONS ...... 190

STRUCTURE, MANAGEMENT AND AGREEMENTS STRUCTURE AND ORGANISATION OF GZI REIT ...... 192 THE MANAGER ...... 193 THE LEASING AGENTS ...... 209 CORPORATE GOVERNANCE ...... 216 THE TRUST DEED ...... 224 MATERIAL AGREEMENTS AND OTHER DOCUMENTS RELATING TOGZIREIT ...... 237 CONNECTED PARTY TRANSACTIONS ...... 260 MODIFICATIONS, WAIVERS AND LICENSING CONDITIONS ...... 277

vi CONTENTS

OTHER INFORMATION TAXATION ...... 279 UNDERWRITING ...... 284 STRUCTURE OF THE GLOBAL OFFERING ...... 290 EXPERTS ...... 303 HOW TO APPLY FOR HONG KONG PUBLIC OFFERING UNITS ...... 304 FURTHER TERMS AND CONDITIONS OF THE HONG KONG PUBLIC OFFERING ...... 319

DEFINITIONS TECHNICAL TERMS ...... 336 GENERAL TERMS ...... 338

APPENDICES

APPENDIX I — AUDITED FINANCIAL STATEMENTS OF THE PROPERTIES ...... I-1

APPENDIX II — AUDITED FINANCIAL STATEMENTS OF THE BVI COMPANIES ...... II-1

APPENDIX III — UNAUDITED PRO FORMA BALANCE SHEET OF GZIREIT ...... III-1

APPENDIX IV — PROFIT FORECAST ...... IV-1

APPENDIX V — LETTER FROM THE INDEPENDENT PROPERTY VALUER IN RELATION TO RENTAL INCOME ...... V-1

APPENDIX VI — INDEPENDENT PROPERTY VALUATION REPORT ...... VI-1

APPENDIX VII — INDEPENDENT PROPERTY VALUER’S BUILDING CONDITION SURVEY SUMMARY REPORT ...... VII-1

APPENDIX VIII — INDEPENDENT MARKET RESEARCH REPORT IN RELATION TO THE GUANGZHOU COMMERCIAL PROPERTY MARKET ...... VIII-1

APPENDIX IX — OVERVIEW OF RELEVANT LAWS AND REGULATIONS IN THE PEOPLE’S REPUBLIC OF CHINA AND COMPARISION OF CERTAIN ASPECTS OF ITS PROPERTY LAWS WITH THE LAWS OF HONG KONG .... IX-1

APPENDIX X — DETAILS OF TENANCIES WITH CONNECTED PERSONS . . . X-1

APPENDIX XI — GENERAL INFORMATION ...... XI-1

vii OFFERING CIRCULAR SUMMARY

The following summary is derived from, and should be read in conjunction with, the full text of this Offering Circular.

Statements contained in this summary that are not historical facts may be forward looking statements. Such statements are based on certain assumptions. While the Manager and the Listing Agent consider such assumptions to be reasonable, there are certain risks and uncertainties which could cause actual results to differ materially from those projected. Under no circumstances should the inclusion of such information herein be regarded as a representation, warranty or prediction with respect to the accuracy of the underlying assumptions by the GZI Group, the Manager, GZI REIT, the Trustee, the Listing Agent, the Underwriters or any person involved in the Global Offering, or that these results will be achieved or are likely to be achieved. Capitalised terms not defined in this summary are defined in the section headed “Definitions” of this Offering Circular.

The Manager and the Directors collectively and individually accept full responsibility for the AppB B26 accuracy of the information contained in this Offering Circular and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief there are no other facts the omission of which would make any statement herein misleading.

In this Offering Circular, the most up to date operational data in respect of the Properties have been provided, unless otherwise stated, as at the latest practicable date for the compilation of such data, being 30 September 2005.

An investment in the Units involves risks. Investors’ attention is drawn to the section headed “Risk Factors” in this Offering Circular.

Description of a Real Estate Investment Trust

A real estate investment trust is a collective investment scheme constituted as a unit trust that invests primarily in income producing real estate assets and uses the income to provide returns to its unitholders. Purchasing a unit in a real estate investment trust allows investors to share the benefits and risks of owning the real estate assets held by the real estate investment trust. An investment in the units of a real estate investment trust in Hong Kong is governed primarily by the REIT Code and offers the following benefits:

• certainty as to business focus, as a real estate investment trust does not have the discretion to diversify outside of the real estate sector or to own significant non-real estate assets;

• a distribution which is required by the REIT Code to be at least 90.0% of the real estate investment trust’s audited net income after tax for each financial year (subject to adjustments allowed under the REIT Code and their trust deed);

• a conservative capital structure with the REIT Code limiting the borrowings of a real estate investment trust to 45.0% of the total gross asset value thereof;

1 OFFERING CIRCULAR SUMMARY

• enhanced liquidity in comparison to direct investments in real estate;

• a manager licensed and regulated on an ongoing basis by the SFC; and

• a statutory and regulatory corporate governance framework and an internal corporate governance framework overseen by an independent trustee.

Objectives of GZI REIT RC 7.1

The Manager’s key objective for GZI REIT is to provide Unitholders with stable distributions per Unit with the potential for sustainable long term growth of such distributions. The Manager intends to accomplish this objective through investing in income producing real estate which is primarily used for office, retail and other commercial purposes, initially in Guangdong province in the PRC.

Paragraph 7 of the Listing Agreement entered into pursuant to the Listing Rules provides that the Trustee and the Manager (as an operator of a collective investment scheme) undertake, so far as it lies within their respective powers, to procure that the investment strategy of GZI REIT, as stated in this Offering Circular, will be adhered to for three years from the date of this Offering Circular, unless otherwise exempted or approved by the SFC.

Investment Objective and Policy

The Manager’s investment objective for GZI REIT is to invest in properties in Guangdong province in the PRC. In pursuing its investment objective, the Manager will adopt the following policies:

• unless Unitholders approve otherwise by Special Resolution at a meeting convened by the Manager, investments will initially be in real estate in Guangdong province;

• investments will be in properties for the long term; and

• investments will be in a diverse portfolio of sustainable income producing properties which are used primarily for office, retail and other commercial purposes.

Key Investment Highlights

The Manager believes that an investment in GZI REIT presents Unitholders with an attractive investment proposition by virtue of:

• Being the first real estate investment trust offering exposure to Guangzhou’s economic growth:

GZI REIT is the first real estate investment trust which invests in Guangzhou. An investment in GZI REIT gives investors the opportunity to access the returns from a portfolio of commercial properties located in Guangzhou, with the additional benefit of liquidity associated with investing in a listed vehicle.

2 OFFERING CIRCULAR SUMMARY

Guangzhou is located along the Pearl River and is the capital city as well as the economic, scientific and cultural centre of Guangdong province. The Guangzhou economy is the PRC’s third largest city level economy and has a growth rate which consistently outperformed both Beijing and Shanghai over the past decade. The Guangzhou economy enjoyed double-digit growth in the past 15 years, averaging 15.3% per annum. In 2004, the city posted a 15.0% year-on-year increase in real term GDP. With continued buoyant fixed asset investment, solid domestic demand, robust trade activities and high inflows of foreign direct investments, the outlook of the economy remains positive.

Although the macroeconomic adjustment measures recently introduced by the PRC Government (such as stiffer rules for bank loans to industries considered to be overheated and, in relation to the PRC property market, a tax on all properties sold within two years of being purchased and occupied, limiting monthly mortgage payments to 50.0% of an individual borrower’s monthly income and limiting all debt service payments of an individual borrower to 55.0% of his monthly income) are likely to slow down the rate of expansion across all major cities in the PRC, the Guangzhou Municipal People’s Government has projected that the city will maintain its double-digit GDP growth rate for the next five years, with a 12.0% real term increase in 2005. (See Appendix VIII to this Offering Circular for more information about the economy of Guangzhou.)

These factors have combined to increase demand for commercial properties in Guangzhou and the Properties are well positioned to benefit from such demand. The Manager believes that in such an economic environment, GZI REIT has considerable potential for growth.

• A strategy to provide regular and stable distributions:

The Manager’s policy is to distribute to Unitholders as distributions an amount equal to 100.0% of GZI REIT’s Total Distributable Income for each of FY2006 to FY2008 and thereafter at least 90.0% of annual Total Distributable Income.

Under the Trust Deed, the Manager must, subject to applicable law, ensure that at least one distribution shall be made in respect of each Financial Year and paid no later than the date five calendar months following the end of the relevant Financial Year. The Manager’s initial distribution policy is that two distributions will be made in respect of each Financial Year, being distributions with respect to the six-month periods ending 30 June and 31 December. The Directors anticipate that the interim and final distributions will be paid in November and May, respectively. However, GZI REIT’s distribution for the period from the Listing Date to 31 December 2005 will be paid together with its distribution for the period from 1 January 2006 to 30 June 2006 on or before 30 November 2006.

3 OFFERING CIRCULAR SUMMARY

In respect of the Forecast Year 2006, Unitholders will be paid, in the absence of unforeseen circumstances, total distributions per Unit of not less than HK$0.201, representing a distribution yield of 6.54% based on the Maximum Offer Price (excluding other transaction costs) and 7.05% based on the Minimum Offer Price (excluding other transaction costs). Any shortfall in distributions will be disclosed in GZI REIT’s audited accounts for the Forecast Year 2006.

The forecast distribution yields above are calculated based on the Maximum Offer Price and the Minimum Offer Price, excluding other transaction costs. The yield obtained by investors who purchase Units in the secondary market at a market price that differs from such prices (excluding other transaction costs), calculated using such secondary market purchase price, will accordingly differ from the distribution yields stated above.

(See the sections headed “Distribution Policy” and “Statement of Distributions” in this Offering Circular.)

• The Manager’s and Leasing Agents’ experienced and professional teams:

The Manager believes that Unitholders will benefit from the experience of key staff members of the Manager in the Guangzhou commercial property market as well as the strengths and experience in leasing, marketing and tenancy management of the Leasing Agents.

The Manager is staffed by experienced professionals who have extensive experience in the real estate industry in Guangzhou. The Manager’s key staff members have in-depth real estate investment, asset management, research and equity securities market experience. Moreover, the Manager can tap on the expertise and experience of Jones Lang LaSalle Limited, the Property Adviser. The Property Adviser is a leading global provider of integrated real estate and money management services, with offices in more than 100 markets on five continents.

The Leasing Agents are also staffed by experienced professionals who have extensive experience in the leasing, marketing and tenancy management of commercial space in Guangzhou. Each of the Leasing Agents has a track record of more than seven years in the leasing, marketing and tenancy management business. Moreover, White Horse Property Management Company has been the dedicated leasing agent for White Horse Building since 1998 and was (and continues to be) instrumental in formulating the market positioning of the property. Its in-depth knowledge of White Horse Building as well as its tenants has been key to establishing the successful operations of the property.

4 OFFERING CIRCULAR SUMMARY

• Opportunities and a strategy for future growth through active asset management:

The Manager will endeavour to increase the property yield of GZI REIT’s property portfolio and, correspondingly, the NAV per Unit by actively managing the portfolio. The measures which the Manager intends to take include:

— optimising rental and occupancy rates through managing lease renewals effectively, diligently pursuing leasing opportunities and maximising tenant retention;

— strengthening the Properties’ competitive positions through:

— in the case of the White Horse Units, capitalising on and continuing to develop White Horse Building’s status as one of the premier garment wholesale and retail markets in the PRC; and

— developing cost synergies and exploiting economies of scale in the operations of the Properties to offer tenants and shoppers better services and facilities at lower costs;

— developing and promoting a sought after position for the Properties by leveraging on their prime locations as well as their good access to major roads and public transportation facilities; and

— capitalising on Guangzhou’s position as one of the economic centres of southern PRC to attract financial institutions, multi-national corporations and reputable PRC companies to set up offices and shops in the Properties.

5 OFFERING CIRCULAR SUMMARY

• Opportunities and a strategy for future growth through acquisitions:

The Manager will focus on properties which are primarily used for office, retail and other commercial purposes, initially in Guangdong province. It will seek to acquire properties that will provide attractive cash flows and yields together with opportunities for further revenue growth through operational optimisation. Portfolio growth opportunities for GZI REIT are underpinned by:

— the right of first refusal granted by GZI to GZI REIT, conditional on listing of the Units on the Hong Kong Stock Exchange, to acquire any completed Grade A office or commercial buildings in Guangzhou that (i) fulfils (or would reasonably be regarded as fulfilling) the investment criteria and property characteristics, and is consistent (or would reasonably be regarded as being consistent) with the investment strategy of the Manager, for property investments by GZI REIT (as stated in this Offering Circular); (ii) is owned or developed by the GZI Group and in which the GZI Group has an ownership interest of 95.0% or more (and, in circumstances in which GZI is able to negotiate and agree terms with the relevant joint venture party so as to extend the coverage of the right of first refusal granted by GZI to include the relevant property that is the subject of that joint venture, that relevant property); (iii) has a value of US$20.0 million or more (as determined by an independent property valuer); and (iv) GZI proposes to dispose of to a third party or parties. This right of first refusal will commence on the Listing Date and continue until the earliest of the following occurring: (a) the expiry of five years after the Listing Date; (b) the Units ceasing to be listed on the Hong Kong Stock Exchange; and (c) the entity which is the asset manager of GZI REIT ceasing for whatever reason to be a subsidiary of any member of the GZI Group or the Yue Xiu Group (see the section headed “Material Agreements and Other Documents Relating to GZI REIT — Deed of Right of First Refusal” in this Offering Circular”);

— the flexibility of GZI REIT to seek investment opportunities from property developers or vendors other than GZI; and

— the scale of the Manager’s existing network of relationships in Guangdong province, which helps it to identify and source acquisition targets.

6 OFFERING CIRCULAR SUMMARY

As at the Latest Practicable Date, the portfolio of properties which fall within the parameters of the right of first refusal granted by GZI include:

Expected Property Description(1) completion

Yue Xiu New Metropolis A commercial property of approximately 86,000 sq.m. 2006 being developed above the underground metro station on the No. 1 metro line in Guangzhou.

The two office tower blocks Victory Plaza is an integrated retail and office complex 2007 currently being constructed located at Ti Yu Xi Road in the Tian He District in above the Victory Plaza Guangzhou. The East tower will have an area of podium approximately 58,823 sq.m. and the West tower will have an area of approximately 30,772 sq.m. GZI is currently in negotiations with a prospective purchaser of the East tower. As such, the East tower will fall within the parameters of the right of first refusal only to the extent that it is not sold prior to the completion of its construction.

Asian-Pacific Century Plaza An integrated hotel and commercial property of 2008 approximately 223,900 sq.m. under development at Tian He North Road in Guangzhou. Only the commercial portion of this development falls within the parameters of the right of first refusal.

West tower of Mega-Twin An integrated office, retail and hotel complex of 2009-2010 Commercial Tower approximately 400,000 sq.m. to be developed in the Pearl River New City in Guangzhou near the No.3 metro line. Only the commercial portion of this development falls within the parameters of the right of first refusal.

Note:

(1) The descriptions of the properties are based on GZI’s current plans and are subject to finalisation in due course.

The acquisition of any of these properties pursuant to the right of first refusal is subject to the satisfaction of the terms and conditions thereunder and compliance with applicable requirements of the REIT Code at the relevant time (including, where relevant, the requirement for Unitholders’ approval).

7 OFFERING CIRCULAR SUMMARY

• Substantial alignment of the Manager’s interest with the interests of public Unitholders:

The fees payable to the Manager have an element which is designed to align the interests of the Manager with those of the public Unitholders, and which provides the Manager with an incentive to grow revenues and minimise operating costs. Under the Trust Deed, the Manager is entitled to receive, among others, a service fee of 3.0% per annum of Net Property Income. (See the sub-section headed “Certain Fees — Manager’s Fees” below.)

• Substantial alignment of GZI’s interests with the interests of public Unitholders:

On the Listing Date, GZI will hold approximately 40.0% of the Units in issue (or approximately 31.3% if the Over-allocation Option is exercised in full). GZI has agreed to a six-month lock-up period from and including the Listing Date in respect of the disposal of Units, subject to certain exceptions (see the sections headed “Ownership of Units” and “Underwriting — Lock-up Arrangements” in this Offering Circular). GZI has informed the Manager that GZI currently intends to be a long term investor in GZI REIT beyond the expiry of its lock-up period.

GZI’s interests are further aligned with the interests of public Unitholders given that GZI is the parent company of the Manager.

• A regulatory structure which requires GZI REIT:

— to invest primarily in real estate, with the aim of providing returns to Unitholders derived from the rental income from such real estate;

— to distribute at least 90.0% of its audited net income after tax for each Financial Year (subject to adjustments allowed under the REIT Code and the Trust Deed);

— to maintain a prudent capital structure with a ratio of aggregate borrowings to total gross assets not exceeding 45.0%;

— not to trade actively in real estate; and

— not to invest in vacant land or engage in property development. RC 7.2

See also the sections headed “Strategy”, “The Manager”, “The Leasing Agents” and “Corporate Governance” in this Offering Circular for further details of these key investment highlights.

8 OFFERING CIRCULAR SUMMARY

The Properties App B B2 (i)

White Horse Units(1) Address of White Horse Building ( ) Nos. 14, 16 and 18 Zhan Nan Road, Yue Xiu District, Guangzhou, the PRC ( 14, 16 18 ) Description The White Horse Building is a multi-storey commercial building with a total of eight levels above ground, a lower ground level and a basement comprising a car park.

The White Horse Units consist of nine strata units in part of the lower ground level as well as the 2nd to 9th storeys of the building, accounting, in aggregate, for 81.4% of the total Gross Floor Area of White Horse Building. Of the remaining Gross Floor Area, 9.2% (comprising the car park) is owned by White Horse JV (a subsidiary of GZI, and therefore a connected person of GZI REIT) and 9.4% (comprising the lower ground level) is owned by an unrelated third party.

Year of completion of original construction of 1990 (The building was renovated and expanded thereafter White Horse Building between 1995 and 1997 as well as between 1998 and 2000.)(2) Term of land use right 40 years (till 2045) or 50 years (till 2055), depending on the use to which each of the strata units is put(3). Occupancy - as at 30 September 2005 - Wholesale/retail 100.0% - Office/warehouse 100.0% - average for the nine months ended 30 September - Wholesale/retail 100.0% 2005 - Office/warehouse 100.0% Gross Rentable Area (as at 30 September 2005) - Wholesale/retail - 45,157.6 sq.m. - Office/warehouse - 3,849.6 sq.m. - Total - 49,007.2 sq.m. Number of tenants (as at 30 September 2005) 969 (with 1,311 leases) Top five tenants in terms of monthly base rent for (Xu Xin), (Chen Shuang Xia), (Xie Li Na), September 2005 (Yao Zhan Hao) and (Wu Hua Ying).(4)

Together, these tenants accounted for 3.4% of the total monthly base rent of the White Horse Units for September 2005. Appraised Value (as at 30 September 2005)(5) HK$2,541.5 million Gross Turnover - FY2004 - HK$104.7 million - Six months ended 30 June 2005 - HK$65.9 million

Notes:

(1) Unless otherwise indicated, information in this table relates to the White Horse Units rather than to White Horse Building as a whole.

(2) See the section headed “The Properties and Business — White Horse Units — Description” in this Offering Circular for further information of such renovation and expansion works.

(3) See the section headed “The Properties and Business — Terms of Land Use Rights” in this Offering Circular for a further explanation.

(4) None of these persons are connected persons of GZI REIT.

(5) As determined by the Independent Property Valuer in its valuation report dated 12 December 2005 (see Appendix VI to this Offering Circular).

9 OFFERING CIRCULAR SUMMARY

Fortune Plaza Units(1) Address of Fortune Plaza ( ) Nos. 114, 116 and 118 Ti Yu Dong Road, Tian He District, Guangzhou, the PRC ( 114, 116 118 ) Description Fortune Plaza Building is a mixed use Grade A commercial building with two tower blocks above a six-storey podium and two levels of underground car parks.

The Fortune Plaza Units comprise 35 strata units in the West tower, 43 strata units in the East tower and five strata units in the six-storey podium, together accounting for 50.2% of the total Gross Floor Area of Fortune Plaza. Of the remaining Gross Floor Area, 15.5% (comprising certain units in the podium(2) and the West tower, a clubhouse and the car park) is owned by GCCD (a subsidiary of GZI, and therefore a connected person of GZI REIT) and 34.3% is owned by unrelated third parties.

Year of completion of construction of Fortune Plaza 2003 Term of land use right 40 years (till 2042) or 50 years (till 2052), depending on the use to which each of the strata units is put(3). Occupancy - as at 30 September 2005 - Retail 14.9%(4) - Office 83.5% - average for the nine months ended 30 September - Retail 90.5% 2005 - Office 63.3% Gross Rentable Area (as at 30 September 2005) - Retail - 3,853.1 sq.m. - Office - 36,503.1 sq.m. - Total - 40,356.2 sq.m. Number of tenants (as at 30 September 2005) 48 (with 53 leases) Top five tenants in terms of monthly base rent for (HSBC Electronic Data September 2005 Processing (Guangdong) Limited), (Alibaba (China) Technology Co., Ltd.), (Nei Meng Gu Yi Lin Mu Ye Co., Ltd.), (China National Petroleum Co., Ltd.) and (Jia De Shi (China) Investment Co., Ltd.).(5) These tenants are located in the office component of the Fortune Plaza Units and together accounted for 43.0% of the total monthly base rent of the Fortune Plaza Units for September 2005. Appraised Value (as at 30 September 2005)(6) HK$545.0 million Gross Turnover - FY2004 - HK$9.0 million - Six months ended 30 June 2005 - HK$13.3 million

Notes: (1) Unless otherwise indicated, information in this table relates to the Fortune Plaza Units rather than to Fortune Plaza as a whole. (2) GCCD has signed a memorandum of understanding with a third party to sell these podium units (which account for 0.6% of the total Gross Floor Area of Fortune Plaza). (3) See the section headed “The Properties and Business — Terms of Land Use Rights” in this Offering Circular for a further explanation. (4) The occupancy rate as at 30 September 2005 was lower than the average occupancy rate for the nine months ended 30 September 2005 due to the early termination of a large lease in September 2005. As at 31 October 2005, the occupancy rate was 82.0% due to two new tenants taking up part of the vacated space. (5) Save for HSBC Electronic Data Processing (Guangdong) Limited, an associate of the Trustee, none of these persons are connected persons of GZI REIT. (6) As determined by the Independent Property Valuer in its valuation report dated 12 December 2005 (see Appendix VI to this Offering Circular).

10 OFFERING CIRCULAR SUMMARY

City Development Plaza Units(1) Address of City Development Plaza ( ) Nos. 185, 187 and 189, Ti Yu Xi Road, Tian He District, Guangzhou, the PRC ( 185, 187 189 ) Description City Development Plaza is a mixed used Grade A commercial building with a single tower block above a five-storey podium and two levels of underground car parks.

City Development Plaza Units comprise six strata units in the first three storeys of the podium as well as 159 strata units in the single tower block, together accounting for 57.3% of the total Gross Floor Area of City Development Plaza. Of the remaining Gross Floor Area, 36.8% (comprising space used for GCCD’s offices as well as a clubhouse, a restaurant and the car park) is owned by GCCD (a subsidiary of GZI, and therefore a connected person of GZI REIT) and 5.9% is owned by unrelated third parties. Year of completion of construction of 1997 City Development Plaza Term of land use right 40 years (till 2037) or 50 years (till 2047), depending on the use to which each of the strata units is put(2). Occupancy - as at 30 September 2005 - Retail 85.5% - Office 93.0% - average for the nine months ended 30 September - Retail 85.5% 2005 - Office 91.6% Gross Rentable Area (as at 30 September 2005) - Retail - 11,757.6 sq.m. - Office - 30,639.8 sq.m. - Total - 42,397.4 sq.m. Number of tenants (as at 30 September 2005) 60 (with 68 leases) Top five tenants in terms of monthly base rent for (Guangdong Mobile Communication September 2005 Co., Ltd.), (Efund Management Co. Ltd.), (Guangzhou Wisdom Valley Development Company Limited), (Cosco Guangzhou International Freight Co. Ltd.) and (Taikang Life Insurance Co. Ltd.).(3)

These tenants are located in the office component of the City Development Plaza Units and together accounted for 48.4% of the total monthly base rent of the City Development Plaza Units for September 2005. Appraised Value (as at 30 September 2005)(4) HK$385.5 million Gross Turnover - FY2004 - HK$33.9 million - Six months ended 30 June 2005 - HK$17.5 million

Notes:

(1) Unless otherwise indicated, information in this table relates to the City Development Plaza Units rather than to City Development Plaza as a whole.

(2) See the section headed “The Properties and Business — Terms of Land Use Rights” in this Offering Circular for a further explanation.

(3) None of these persons are connected persons of GZI REIT.

(4) As determined by the Independent Property Valuer in its valuation report dated 12 December 2005 (see Appendix VI to this Offering Circular).

11 OFFERING CIRCULAR SUMMARY

Victory Plaza Units(1) Address of Victory Plaza ( ) No. 101 Ti Yu Xi Road, Tian He District, Guangzhou, the PRC ( 101 ) Description Victory Plaza comprises a six-storey retail podium and four levels of underground car parks in the first phase of an integrated office and retail complex. Two tower blocks above the podium are currently under construction and are expected to be completed in 2007. Basement 1 of the building comprises partly car park space and partly retail space.

The Victory Plaza Units consist of nine strata units comprising the six levels above ground in the podium and the retail space in basement 1. They account for 52.7% of the combined Gross Floor Area of the podium and the four levels of underground car parks, and will account for approximately 19.5% of the total Gross Floor Area of the entire development when the two tower blocks are completed. The car park in Victory Plaza is owned by GCCD, a subsidiary of GZI and therefore a connected person of GZI REIT. Year of completion of construction of the 2003 Victory Plaza podium Term of land use right 40 years (till 2044)(2). Occupancy - as at 30 September 2005 - 100.0% (all retail) - average for the nine months ended 30 September - 85.2% (all retail) 2005 Gross Rentable Area (as at 30 September 2005) 27,262.3 sq.m. Number of tenants (as at 30 September 2005) 22 (with 24 leases) Top five tenants in terms of monthly base rent for (Guangzhou Xindaxin Co., Ltd.), September 2005 (Guangzhou GOME Electrical Appliances Co., Ltd.), (China Merchants Bank Guangzhou Branch), (Yum! Restaurants (Guangdong) Co., Ltd.) and (Guangzhou Qiao Mei Fa Zhan Company Limited).(3)

Together, these tenants accounted for 72.6% of the total monthly base rent of the Victory Plaza Units for September 2005. Appraised Value (as at 30 September 2005)(4) HK$533.0 million Gross Turnover - FY2004 - HK$24.4 million - Six months ended 30 June 2005 - HK$12.8 million

Notes:

(1) Unless otherwise indicated, information in this table relates to the Victory Plaza Units rather than to Victory Plaza as a whole.

(2) See the section headed “The Properties and Business — Terms of Land Use Rights” in this Offering Circular for a further explanation.

(3) None of these persons are connected persons of GZI REIT.

(4) As determined by the Independent Property Valuer in its valuation report dated 12 December 2005 (see Appendix VI to this Offering Circular).

12 OFFERING CIRCULAR SUMMARY

As at 30 September 2005, the Properties comprised 89,588.1 sq.m. of Gross Floor Area used for wholesale or retail activities and 71,062.9 sq.m. of Gross Floor Area used as office or warehouse space. Upon the expiry of the current leases on the 8th and 9th storeys of the White Horse Units on 31 December 2005, the Manager intends to renovate those two storeys for wholesale/retail use. This renovation is expected to cost HK$5.8 million (which will be funded from an aggregate amount of HK$26.7 million retained from the proceeds of the Global Offering, see the section headed “Material Agreements and Other Documents Relating to GZI REIT — The Reorganisation Deed” in this Offering Circular) and to be completed before May 2006. After the renovation, the Properties will have 93,508.1 sq.m. of Gross Floor Area used for wholesale or retail activities (i.e. an increase of 4.4%) as well as 67,142.9 sq.m. of Gross Floor Area used as office or warehouse space (i.e. a decrease of 5.5%).

For the nine months ended 30 September 2005, the wholesale/retail component of the Properties had an average occupancy rate of 93.1% while the office component had an average occupancy rate of 77.5%.

Competitive Strengths of the Properties

The Manager believes that the Properties enjoy the following competitive strengths: App B B2(d)

• Quality properties in prime locations — The White Horse Building is one of the top 10 centres of the garment wholesale and retail trades in the PRC (having been awarded the “10 Largest Garment Wholesale Market Award” in 2005 by the (Economic Daily News Group — Fashion Times), (China Centre for Commercial Information) and (the Professional Market Committee of the China Commerce Association)) and attracts tenants and visitors not just from Guangdong province but also from the rest of the PRC. A key success factor for wholesale markets is being located near superior transport systems. White Horse Building is situated in the Liu Hua commercial zone, next to the exhibition hall for the Guangzhou Trade Fair, and is in Guangzhou’s main garment wholesale district. It is a short walk from Guangzhou Huo Che Zhan underground metro station ( ) on the No. 2 metro line. White Horse Building is also located directly across from a bus station which operates both local and inter-provincial services. The Property is also in close proximity to the Guangzhou railway station, which facilitates long distance transportation of large quantities of clothing purchased by traders from other parts of the PRC who visit White Horse Building.

The Guangzhou Municipal People’s Government decided in the 1990’s to develop the Tian He area into Guangzhou’s CBD. Since then, many high quality commercial buildings (including Fortune Plaza, City Development Plaza and Victory Plaza) have been built in the Tian He area. Fortune Plaza and City Development Plaza are Grade A office buildings and the Victory Plaza podium is a new shopping centre.

The new underground metro system in Guangzhou has transformed the Tian He CBD into a central hub and an important interconnection point for the entire city. The Ti Yu

13 OFFERING CIRCULAR SUMMARY

Zhong Xin underground metro station ( ) on the No. 1 metro line exits directly to Fortune Plaza, while City Development Plaza and Victory Plaza are both within short walking distance of the Ti Yu Xi Road station ( ). When the No. 3 metro line is completed and commences operations (its first section is estimated to open by the end of 2005), shoppers travelling to the Tian He CBD on the No. 1 and No. 3 metro lines will enjoy direct underground access to basement 1 of Victory Plaza from the metro station and the Manager anticipates that human traffic through Victory Plaza will increase significantly as a result. These three Properties are also in close proximity to the East Station of Guangzhou Railway Station (which serves the railway line between Guangzhou and Hong Kong) and the future airport express line.

Over the years, White Horse Building and City Development Plaza have both received numerous awards in recognition of their excellence of construction and management.

• High occupancy — Both White Horse Building and City Development Plaza are well-established commercial properties. For the nine months ended 30 September 2005, the White Horse Units enjoyed full occupancy. As at 30 September 2005, 1,246 (95.3%) of the 1,307 leases (signed with 966 tenants) which are due to expire on 31 December 2005 have been renewed for four or five years until 31 December 2009 or 31 December 2010, as the case may be. In the same period, the City Development Plaza Units enjoyed an average occupancy rate of 89.9% and experienced a renewal rate (in terms of the total Gross Rentable Area covered by the expired leases) of 55.5%. The Manager believes that these two Properties will continue to enjoy high, consistent and stable occupancy rates.

Although Fortune Plaza is a relatively new property (having been opened in the second half of 2003), the Fortune Plaza Units have nevertheless achieved an average occupancy rate of 65.9% for the nine months ended 30 September 2005. Similarly, the Victory Plaza podium was opened only in the second half of 2003 but the Victory Plaza Units achieved an average occupancy rate of approximately 85.2% for the nine months ended 30 September 2005.

Valuation

The Properties have been valued by Colliers International (Hong Kong) Ltd, the Independent App B B20 (c) Property Valuer. As at 30 September 2005, the aggregate market value of the Properties was HK$4,005.0 million. These valuations were made by the Independent Property Valuer in accordance with the requirements contained in Chapter 6 of the REIT Code and the HKIS Valuation Standards on Properties (First Edition 2005) published by the Hong Kong Institute of Surveyors in January 2005. In carrying out its valuations, the Independent Property Valuer has also made reference to the International Valuation Standards (7th Edition) published by the International Valuation Standards Committee in 2005.

The Properties were valued using the income capitalisation approach, including discounted cash flow analysis. These values were cross checked with available market comparables using the sales comparison approach. For further details of the valuations of the Properties, see Appendix VI to this Offering Circular.

14 OFFERING CIRCULAR SUMMARY

Overview of GZI REIT Structure

The following diagram illustrates the primary structural and contractual relationships between, among others, the Manager, the Trustee and the Leasing Agents.

Unitholders

GZI - Public in Hong Kong - Institutional investors - GZI (holding through Dragon Yield) - Yue Xiu(1)

Investment in GZI REIT Distributions

100.0% Management services Trustee fees Manager Trustee (HSBC (GZI REIT Asset GZI REIT Institutional Management Limited) Trust Services Management Holds assets of (Asia) Limited) fees GZI REIT on Advisory Advisory trust for the Unitholders fees services 100.0% Property Adviser GZI REIT (Holding) (Jones Lang LaSalle (4) Limited) 2005 Company Limited (Hong Kong)

Leasing, Leasing Agents marketing (Guangzhou and tenancy White Horse management Property services 100.0% 100.0% 100.0% 100.0% Management (2) Co. Ltd. Partat Moon King Full Estates Keen Ocean and Guangzhou Investment Limited Investment Limited Yicheng Property Limited (BVI) Limited (BVI) Management Leasing, (BVI) (BVI) Ltd.(3)) marketing and tenancy management fees

City White Horse Fortune Plaza Development Victory Plaza Units Units Plaza Units Units

Notes:

(1) To the extent that Yue Xiu and its subsidiaries (other than the members of the GZI Group) receive Units by way of distribution in their capacity as GZI Qualifying Shareholders.

(2) White Horse Property Management Company, which is 96.8% owned by GZI (with the remaining 3.2% owned by GCCD Group), will provide leasing, marketing and tenancy management services to Partat in respect of the White Horse Units and will receive a fee from Partat.

(3) Yicheng, which is 85.7% owned by GZI (with the remaining 14.3% owned by GCCD Group), will provide leasing, marketing and tenancy management services to Moon King, Full Estates and Keen Ocean for the Fortune Plaza Units, the City Development Plaza Units and the Victory Plaza Units respectively, and will receive a fee from each of these BVI Companies.

(4) Currently known as King Profit Holdings Limited, which is in the process of changing its name to GZI REIT (Holding) 2005 Company Limited. The change of name is currently expected to be effected by 31 December 2005.

15 OFFERING CIRCULAR SUMMARY

The Manager

The Manager, GZI REIT Asset Management Limited, was incorporated in Hong Kong under the Companies Ordinance on 3 October 2005. As at the Latest Practicable Date, the Manager had paid-up share capital of HK$10,000,000. The Manager is licensed by the SFC to conduct the regulated activity of asset management. The Manager is responsible for GZI REIT’s investment and financing strategies, asset enhancement, acquisition and disposal policies and overall management of the Properties. See the section headed “The Manager” in this Offering Circular for further details about the Manager.

Corporate Governance

Detailed corporate governance policies and procedures have been established to promote the operation of GZI REIT in a transparent manner and with built-in checks and balances. The Manager has adopted a compliance manual which sets out the key processes, systems and measures the Manager will apply to ensure compliance with, among other things, the REIT Code and the Trust Deed. The Trustee and the Manager are functionally independent of each other, with their respective roles in relation to GZI REIT set out in the REIT Code and the Trust Deed. The Manager is required by the REIT Code to act in the best interests of the Unitholders, to whom both the Manager and the Trustee also owe fiduciary duties.

The Board comprises six members, three of whom are independent non-executive Directors. The Board has also established various committees to assist it in discharging its responsibilities and which operate under clear terms of reference.

Policies and procedures have been established for, among other things, monitoring and supervising dealings in Units by the Manager as well as the Directors and senior management of the Manager. For further details, see the section headed “Corporate Governance” in this Offering Circular.

The Trustee

The Trustee of GZI REIT is HSBC Institutional Trust Services (Asia) Limited, a wholly owned subsidiary of The Hongkong and Shanghai Banking Corporation Limited. The Trustee is a company incorporated in Hong Kong and registered as a trust company under section 77 of the Trustee Ordinance. The Trustee is qualified to act as a trustee for collective investment schemes authorised under the SFO. As at the Latest Practicable Date, the Trustee had a paid-up share capital of HK$50,000,000.

For details of the Trustee’s obligations under the Trust Deed and the REIT Code, see the section headed “The Trust Deed” in this Offering Circular.

16 OFFERING CIRCULAR SUMMARY

The Leasing Agents

The Leasing Agents will provide leasing, marketing and tenancy management services to GZI REIT on an exclusive basis.

Yicheng was incorporated in the PRC in 1997 and is 85.7% owned by GZI, with the remaining 14.3% owned by GCCD Group, which is a state owned enterprise in the PRC separate from the Yue Xiu Group and the GZI Group. As at 30 September 2005, Yicheng managed more than 470,000 sq.m. of commercial space in Guangzhou and was ISO9001:2000 certified in 2003. Yicheng has historically been managed and operated independently of the Guangzhou Municipal People’s Government and the Manager believes that it will continue to be so managed and operated.

White Horse Property Management Company was incorporated in the PRC in 1998 to provide dedicated leasing, marketing, tenancy management and property management services to White Horse Building and has been exclusively managing the property since 1998. It is 96.8% owned by GZI with remaining 3.2% owned by GCCD Group. White Horse Property Management Company was ISO9001:2000 certified in 2001.

The Property Adviser

The Property Adviser, Jones Lang LaSalle Limited, is a leading global provider of integrated real estate and money management services, with offices in more than 100 markets on five continents.

The Property Adviser has been engaged by the Manager to provide certain property consultancy services to the Manager for a three-year period commencing on 3 October 2005. When requested by the Manager, the Property Adviser will provide advice in relation to, among other things:

• identifying and evaluating, and assisting in the execution of, acquisitions and disposals of properties;

• training the Manager’s staff in relation to asset management and property management related matters; and

• development of the Manager’s IT capabilities and infrastructure.

The Property Adviser’s fees for such services will be borne by the Manager and not by GZI REIT.

17 OFFERING CIRCULAR SUMMARY

Summary Historical Financial Information

Audited Financial Statements of the Properties

Combined Income Statements

Period from 20 December Six months ended 2002(1) to 30 June 31 December 2004(2) 2002 FY2003 FY2004 (Unaudited) 2005

(HK$’000) (HK$’000) (HK$’000) (HK$’000) (HK$’000)

Turnover — Rental Income and property management fees 3,274 129,395 172,080 79,610 92,644(3) Other gains — net 203 11,731 9,481 4,406 5,863

Property management fees (27) (1,221) (5,700) (1,814) (3,597) Promotional and agency expense (195) (5,495) (5,160) (1,986) (3,436) Fitting out and maintenance expenses (14) (1,474) (2,116) (1,077) (1,204) Business tax and flood prevention fee (184) (8,632) (10,715) (4,972) (7,056) Bad debts — (430) (611) (167) (443) Employment benefit expense (440) (14,757) (17,488) (6,199) (7,153) Depreciation expenses (41) (1,664) (1,285) (688) (611) Miscellaneous expenses (212) (6,403) (7,935) (2,863) (3,547)

Direct outgoings (1,113) (40,076) (51,010) (19,766) (27,047)

Other operating expenses (30) (2,927) (2,799) (1,495) (2,446)

Operating Income 2,334 98,123 127,752 62,755 69,014(3)

Finance costs(4) ————— Fair value gains on investment properties —(5) 246,341 5,107 —(5) 612,044

Profit before taxation 2,334 344,464 132,859 62,755 681,058 Income tax expenses (770) (109,608) (44,273) (20,709) (214,650)

Profit for the period/year 1,564 234,856 88,586 42,046 466,408

Profit for the period/year before fair value gains on investment properties and related tax impact(6) 1,564 65,742 85,594 42,046 46,239

18 OFFERING CIRCULAR SUMMARY

Notes:

(1) Being the date on which the transfer of the Properties from GCCD Group to GCCD was completed (see the section headed “The Properties and Business — Past Transactions of the Properties” in this Offering Circular).

(2) The figures for the six months ended 30 June 2004 have only been reviewed and not audited.

(3) In order to present the Rental Income and Operating Income on a comparable basis and to reflect the historical performance of the Properties over the two and one-half years ended 30 June 2005, the non-recurring item in the financial statements for the six months ended 30 June 2005 (namely, the accelerated amortisation of deferred assets amounting to approximately HK$17.0 million (see the section headed “Manager’s Discussion and Analysis of Financial Condition and Results of Operations — Audited Financial Statements of the Properties — Key Items in the Combined Income Statements — Gross Turnover” in this Offering Circular for an explanation of the nature of this item)) has been excluded from the discussion in the section headed “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Offering Circular, and the adjusted turnover and operating income are as follows:

Six months ended 30 June 2005

(HK$’000)

Gross Turnover 109,595 Operating Income 85,965

(4) Interest charges incurred at the central treasury of GCCD are not reflected as a part of the basis of preparation of the Audited Financial Statements of the Properties as there were no direct bank borrowings in respect of the Fortune Plaza Units, the City Development Plaza Units and the Victory Plaza Units.

There were no finance costs incurred for the White Horse Units during the relevant period.

(5) No revaluation of the Properties was carried out during the six months ended 30 June 2004. There was no revaluation gain or loss during the period from 20 December 2002 to 31 December 2002.

(6) Assuming the direct application of enterprise income tax of 33.0% on Operating Income.

19 OFFERING CIRCULAR SUMMARY

Audited Financial Statements of the Properties

Combined Balance Sheets

As at As at 31 December 30 June 2002 2003 2004 2005 (HK$’000) (HK$’000) (HK$’000) (HK$’000)

ASSETS Non-current assets Property, plant and equipment 118,128 11,165 10,598 7,169 Land use rights 252,929 ——1,230(1) Investment properties(2) 1,576,633 2,437,384 2,444,859 3,114,286

1,947,690 2,448,549 2,455,457 3,122,685 ------Current assets Deferred assets 6,521 9,344 16,641 4,995 Prepayments, deposits and other receivables 3,653 4,350 5,400 6,093 Cash and cash equivalents 31,978 41,878 39,695 18,329

42,152 55,572 61,736 29,417 ------Total assets 1,989,842 2,504,121 2,517,193 3,152,102

LIABILITIES Non-current liabilities Deferred tax liabilities 387,269 467,640 473,536 669,736 Rental deposits, non-current portion 23,715 27,170 10,051 15,097

410,984 494,810 483,587 684,833 ------Current liabilities Rental deposits, accruals and other payables 10,291 18,758 43,841 43,873 Current tax payable 7,721 4,720 6,151 5,550

18,012 23,478 49,992 49,423 ------Total liabilities 428,996 518,288 533,579 734,256

Net assets 1,560,846 1,985,833 1,983,614 2,417,846

Financed by: Accounts with Subsidiaries of GZI - Arising from accumulated profits 1,564 236,420 325,006 791,414 - Others 1,559,282 1,749,413 1,658,608 1,626,432

1,560,846 1,985,833 1,983,614 2,417,846

Notes: (1) This amount represented pre-paid operating lease payments for the land use rights of the units in the White Horse Units used by White Horse Property Management Company as its on-site property management office (see the section headed “The Leasing Agents — Property Management Offices” in this Offering Circular) and was classified as investment properties when Partat became the beneficial owner of the White Horse Units. (2) Investment property is carried at fair value under the relevant accounting policies. The valuer appointed historically (Greater China Appraisal Limited) is different from the one appointed by the Manager for GZI REIT. In the past, Greater China Appraisal Limited had primarily relied on the income capitalisation approach in valuing the Properties.

20 OFFERING CIRCULAR SUMMARY

Audited Financial Statements of the Properties

Combined Cash Flow Statements

Period from Six months ended 20 December 30 June 2002(1) to 31 December 2004(2) 2002 FY2003 FY2004 (Unaudited) 2005

(HK$’000) (HK$’000) (HK$’000) (HK$’000) (HK$’000)

Cash flows from operating activities Net cash inflow generated from operations 8,966 107,919 128,009 51,042 88,047 PRC enterprise income tax — (32,238) (36,946) (18,153) (19,051)

Net cash inflow from operating activities 8,966 75,681 91,063 32,889 68,996

Net cash inflow/(outflow) from investing activities (1,536,270) (255,912) (2,441) 72 (58,186)

(1,527,304) (180,231) 88,622 32,961 10,810 Net advances from/(to) subsidiaries of GZI 1,559,282 190,131 (90,805) (34,210) (32,176)

Increase/(decrease) in the cash and cash equivalents(3) 31,978 9,900 (2,183) (1,249) (21,366)

Balances at beginning of year/period — Cash and cash equivalents(3) — 31,978 41,878 41,878 39,695 — Accounts with subsidiaries of GZI(4) — (1,559,282) (1,749,413) (1,749,413) (1,658,608)

Balances at end of year/period — Cash and cash equivalents(3) 31,978 41,878 39,695 40,629 18,329 — Accounts with subsidiaries of GZI(4) (1,559,282) (1,749,413) (1,658,608) (1,715,203) (1,626,432)

21 OFFERING CIRCULAR SUMMARY

Notes:

(2) The figures for the six months ended 30 June 2004 have only been reviewed and not audited.

(3) Changes in cash and cash equivalents are attributable to the operations of the White Horse Units.

(4) The treasury and cash disbursement functions of the GCCD Properties were centrally administered by GCCD. Cash flows such as receipt of rental income, settlement of expense payable and the acquisitions of assets were handled by GCCD centrally and therefore reflected herein.

22 OFFERING CIRCULAR SUMMARY

Profit Forecast for the Forecast Period 2005 and the Forecast Year 2006

The Manager forecasts that, in the absence of unforeseen circumstances and on the principal bases and assumptions set out in the section headed “Profit Forecast” in this Offering Circular, the net profit after tax of GZI REIT (reflecting the consolidated income statements of GZI REIT, comprising those of Holdco and the BVI Companies) will be not less than HK$1.6 million for the Forecast Period 2005 and not less than HK$201.0 million for the Forecast Year 2006.

Audited combined income Forecast consolidated statements of the Properties results of GZI REIT Period from 6 months the Listing Year ended ended Date to Year ending 31 December 30 June 31 December 31 December 2004(1) 2005(1) 2005 2006 (HK$’000) (HK$’000) (HK$’000) (HK$’000)

Rental Income 172,080 92,644 6,694 363,702 Other income 9,481 5,863 10 337 Total Gross Income 181,561 98,507 6,704 364,039

Leasing Agents’ fees (10,860) (7,033) (235) (12,125) Property related taxes (10,782) (7,100) (640) (28,678) Other property expenses (32,167) (15,360) (269) (7,045) Total property operating expenses (53,809) (29,493) (1,144) (47,848)

Net property income 127,752 69,014 5,560 316,191

Withholding tax ——(637) (34,705) Manager’s fees ——(538) (21,935) Trustee’s fees ——(37) (1,245) Other trust expenses ——(1,212) (7,904) Total non-property expenses ——(2,424) (65,789)

Fair value gains on investment properties(2) 5,107 612,044 ——

Net profit before finance costs, interest income and tax 132,859 681,058 3,136 250,402

Interest income ———2,743 Finance costs ——(1,542) (52,138)

Net profit before tax 132,859 681,058 1,594 201,007

Income tax expenses (44,273) (214,650) ——

Net profit after tax 88,586 466,408 1,594 201,007 Net profit after tax before fair value gains on investment properties and related tax impact(3) 85,594 46,239 1,594 201,007

23 OFFERING CIRCULAR SUMMARY

Year ending 31 December 2006

Maximum Minimum Offer Price of Offer Price of HK$3.075 HK$2.850

Total Distributable Income (HK$’000) 201,007 201,007 No. of Units in issue 1,000,000,000 1,000,000,000 Distribution per Unit(4) (HK$) 0.201 0.201 Distribution yield(4) 6.54% 7.05%

Notes:

(1) Historical numbers are extracted and reclassified from the Audited Financial Statements of the Properties set out in Appendix I to this Offering Circular.

(2) In accordance with HKAS 40 “Investment Property”, future changes in the valuation of the Properties will be reflected in GZI REIT’s consolidated income statement. However the extent of any changes in the valuation of the Properties in the future will be established by reference to the market at that time. The Manager has not made any assumption as to property valuation movements in arriving at the forecast consolidated net profit after tax for the period from the Listing Date to 31 December 2006. (See the section headed “Profit Forecast — Sensitivity Analysis” in this Offering Circular for certain illustrations of the potential sensitivity of the Manager’s profit forecast to movements in the fair value of the Properties.)

(3) Assuming the direct application of enterprise income tax of 33.0% on Operating Income.

(4) The distribution per Unit is equal to the Total Distributable Income divided by the total number of Units in issue. Given the short period comprised in the Forecast Period 2005, the Manager believes that the distribution per Unit and yield figures would not be representative of the future performance of GZI REIT. As such, the distribution yields disclosed above do not include distributions in respect of the Forecast Period 2005.

Certain Fees

The following is a summary of certain fees payable by GZI REIT in connection with the establishment and on-going management of GZI REIT:

Manager’s Fees Base fee App B B14 (b) & In each Financial Year, a base fee of 0.3% per annum of the B14 (c) RC 9.10 value of the Deposited Property, payable semi-annually in RC 9.11 arrears.

Service fee In each Financial year, a service fee of 3.0% per annum of Net Property Income payable monthly in arrears.

24 OFFERING CIRCULAR SUMMARY

Acquisition fee A transaction fee of 1.0% of the consideration for the acquisition of any real estate (which, for the avoidance of doubt, shall not include any taxes, withholdings, out-of- pocket expenses or deductions incurred by GZI REIT in connection with any such acquisition) to form part of the Deposited Property (except where the vendor of such real estate is the Manager or any of its connected persons, which would include property acquired under the right of first refusal granted by GZI to GZI REIT as described in the section headed “Material Agreements and Other Documents Relating to GZI REIT — Deed of Right of First Refusal” in this Offering Circular), which shall be paid as soon as practicable after the relevant acquisition.

Disposal fee A transaction fee of 0.5% of the gross sale price (which, for the avoidance of doubt, shall not include any taxes, withholdings, out-of-pocket expenses or deductions incurred by GZI REIT in connection with any such sale) of the disposal of any part of the Deposited Property comprising of real estate (except where the purchaser of such real estate is the Manager or any of its connected persons), which shall be paid as soon as practicable after the relevant sale of real estate.

Any increase in the base fee, service fee, acquisition fee and disposal fee over the percentages set out above or any change to the structure of the Manager’s remuneration will require Unitholders’ approval by Special Resolution.

(See the section headed “The Manager — Fees, Costs and Expenses of the Manager” in this Offering Circular for further details on the Manager’s remuneration.)

Trustee’s Fees Inception fee A one-off inception fee as agreed between the Trustee and the Manager of not more than HK$200,000.

Ongoing fee In each Financial Year, an ongoing fee of 0.03% per annum of the value of the Deposited Property (which may be increased to a maximum of 0.06% per annum of the value of the Deposited Property), subject to a minimum amount of HK$50,000 per month. Such remuneration of the Trustee shall be payable out of the Deposited Property semi- annually in arrears.

25 OFFERING CIRCULAR SUMMARY

Pursuant to the Trust Deed, the Trustee and the Manager may increase the rate of the Trustee’s ongoing fee up to and including 0.06% per annum of the value of the Deposited Property, subject to three months’ prior written notice being given to the Unitholders.

Any increase of the ongoing fee beyond 0.06% per annum or any change to the structure of the Trustee’s remuneration requires Unitholders’ approval by Special Resolution. (See the section headed “The Trust Deed — Trustee’s Fee” in this Offering Circular for further details on the Trustee’s remuneration.)

Leasing Agents’ Fees Leasing, marketing and tenancy management fees In the case of Yicheng, a monthly fee of 4.0% per annum of the gross revenue of each of the City Development Plaza Units, the Victory Plaza Units and the Fortune Plaza Units, calculated at the end of each month and payable monthly in arrears.

In the case of White Horse Property Management Company, a monthly fee of 3.0% per annum of the gross revenue of the White Horse Units.

(See the section headed “Material Agreements and Other Documents Relating to GZI REIT — Tenancy Services Agreements” in this Offering Circular for further details.)

Others Other expenses GZI REIT will also need to pay certain other ongoing fees and expenses for the daily operations of GZI REIT (including reimbursement of the Trustee’s and the Manager’s out-of-pocket expenses), such as interest expenses, annual listing fees, financial report printing fees, auditors fees, legal advisers fees, fees of its appointed independent property valuer and fees of other professional advisers, but excluding the Property Adviser’s fees (which will be borne by the Manager).

Acquisition Terms

The Properties were acquired by GZI REIT on 7 December 2005 pursuant to the Reorganisation Deed under which the BVI Company Shares were transferred from GCCD BVI to Holdco for an initial consideration of HK$4,014,180,000, which is subject to adjustments as described in the section headed “Material Agreements and Other Documents Relating to GZI REIT — Reorganisation Deed”.

26 OFFERING CIRCULAR SUMMARY

Assuming that the acquisition of the BVI Company Shares by Holdco and the issuance of Units in the Global Offering take place on the same day, the NTA per Unit on the Listing Date is expected to be HK$2.775. The Maximum Offer Price of HK$3.075 and the Minimum Offer Price of HK$2.850 respectively represent premiums of 10.8% and 2.7% to the NTA per Unit. Based on the Maximum Offer Price of HK$3.075, the final consideration will be adjusted to HK$4,089,416,000 taking into account an assumed adjustment of HK$75,236,000 in accordance with the Reorganisation Deed while based on the Minimum Offer Price of HK$2.850, the final consideration will be adjusted to HK$3,961,520,000 taking into account an assumed adjustment of HK$52,660,000. (See the section headed “Unaudited Pro Forma Balance Sheets of GZI REIT” in this Offering Circular for further details.)

Unaudited Pro Forma Balance Sheets of GZI REIT

The following table sets out the unaudited pro forma balance sheets of GZI REIT as at the date of the establishment of GZI REIT assuming that the acquisition of the BVI Companies by Holdco and the issuance of the Units in the Global Offering take place on the same day, and adjusted for the US$165.0 million to be drawn down on the Loan Facility. The table is based on the unaudited pro forma balance sheets of GZI REIT in Appendix III to this Offering Circular and should be read in conjunction with the basis of preparation, the pro forma adjustments and the letter from the Reporting Accountants therein, as well as the section headed “The Reorganisation” in this Offering Circular.

Unaudited Pro Forma Balance Sheets of GZI REIT

Based on Based on Maximum Offer Minimum Offer Price of Price of HK$3.075 HK$2.850

(HK$ million) (HK$ million)

Assets Investment properties(1) 4,005.0 4,005.0 Property, plant and equipment 3.0 3.0 Other assets(2) 6.0 6.0 Cash and cash equivalents(3) 88.0 88.0 Goodwill(4) 78.0 —

Liabilities Rental deposits, accruals and other payables (62.0) (62.0) Amount drawn down under the Loan Facility(5) (1,265.0) (1,265.0) 2,853.0 2,775.0

Unitholders’ equity Issued capital(6) 2,930.0 2,798.0 Retained earnings(4) — 51.0 Global Offering expenses(7) (77.0) (74.0) 2,853.0 2,775.0

27 OFFERING CIRCULAR SUMMARY

Notes:

(1) Investment properties are stated at market valuation based on the valuations performed by the Independent Property Valuer as at 30 September 2005. The Directors of the Manager and GZI consider that there is no material change in the fair value of the Properties in the period from 1 October 2005 to 31 October 2005.

(2) Other assets include deferred assets, trade receivables, other receivables and prepayments.

(3) Cash and cash equivalents represent cash and bank deposits of HK$12,653,000 acquired from the BVI Companies, additional cash of HK$47,146,000 injected by GZI into the BVI Companies before the Global Offering in accordance with the Reorganisation Deed (in order to reach a cash balance of HK$59,799,000 to match the amount of all current and all non-current liabilities, including rental deposits for all existing tenancies as of 31 October 2005 but excluding bank loans), cash of HK$26,700,000 retained from the proceeds of the Global Offering for proposed renovation works at the White Horse Units and cash of HK$2,085,600 (also retained from the proceeds of the Global Offering) for the Rental Income attributable to Partat for the period from the Listing Date to 31 December 2005 (both dates inclusive), as provided for in the Reorganisation Deed.

(4) Goodwill is the excess of the final consideration payable under the Reorganisation Deed (as described in the section headed “Material Agreements and Other Documents Relating to GZI REIT — Reorganisation Deed” in this Offering Circular) over the aggregate fair values of the assets and liabilities assumed in the acquisition of the BVI Companies.

Based on the Maximum Offer Price, the market value of the Properties as at 30 September 2005 (as determined by the Independent Property Valuer) and the amounts of assets and liabilities listed in the table above, there will be an estimated goodwill of HK$78.0 million.

Retained earnings represent the excess of the aggregate fair values of the assets and liabilities assumed in the acquisition of the BVI Company Shares (i.e. the Initial Consideration) over the final consideration payable under the Reorganisation Deed.

Based on the Minimum Offer Price, the market value of the Properties as at 30 September 2005 (as determined by the Independent Property Valuer) and the amounts of assets and liabilities listed in the table above, the excess of the aggregate fair values of the assets and liabilities assumed in the acquisition of the BVI Company Shares over the final consideration payable under the Reorganisation Deed amounted to HK$51.0 million, which is recognised in retained earnings.

(5) This refers to the amount of HK$1,287.0 million drawn down under the Loan Facility on the Listing Date, net of capitalised debt related expenses in respect of the Loan Facility of HK$21.6 million.

(6) This represents the issued capital arising from the issuance of 417,000,000 Units (amounting to HK$1,137,234,060) to GZI as partial consideration for the transfer of the BVI Company Shares to Holdco and the offering of 583,000,000 Units (amounting to HK$1,792,725,000 based on the Maximum Offer Price and HK$1,661,550,000 based on the Minimum Offer Price) under the Global Offering.

(7) This represents the expenses of the Global Offering (which includes, among other things, underwriting fees and commissions, professional fees and expenses as well as printing fees) of HK$77,158,000 based on the Maximum Offer Price and HK$73,879,000 based on the Minimum Offer Price.

28 THE GLOBAL OFFERING

GZI REIT GZI REIT is a collective investment scheme constituted as a unit trust by the Trust Deed and authorised under section 104 of the SFO subject to the applicable conditions imposed by the SFC from time to time.

The Manager GZI REIT Asset Management Limited

The Trustee HSBC Institutional Trust Services (Asia) Limited

The Global Offering A total initial offering of 583,000,000 Units consisting of the Hong Kong Public Offering and the International Offering (subject to adjustment and the exercise of the Over-allocation Option, and before taking account of the Sale Units).

The Hong Kong Public An initial offer of 60,000,000 Units to the public in Hong Offering Kong (subject to adjustment and reallocation).

The International Offering An initial offer of 523,000,000 Units to institutional, professional and other investors (subject to an increase of up to 17,000,000 additional Units under the Offer for Sale, which will comprise part of the International Offering).

The Offer for Sale Up to 17,000,000 Units (being the maximum aggregate number of Units representing: (i) the Units in respect of which the GZI Qualifying Shareholders may elect to exercise the GZI Qualifying Shareholders’ Option; and (ii) such number of Units which the GZI Ineligible Overseas Shareholders would otherwise have been entitled to receive under the Special Dividend) which will be offered for sale as part of, and under, the International Offering.

Reallocation of Units The Units to be offered in the Hong Kong Public Offering and the International Offering may, in certain circumstances, be reallocated between these offerings. (See the section headed “Structure of the Global Offering” in this Offering Circular.)

Structure The Units are being offered and sold outside the United States in reliance on Regulation S under the US Securities Act. The Units have not been and will not be registered under the Securities Act and, subject to certain exceptions, may not be offered or sold within the United States.

29 THE GLOBAL OFFERING

Offer Price Range The Offer Price of the Units (which will be denominated in Hong Kong dollars) will not be more than HK$3.075 and is currently expected to be not less than HK$2.850.

Charges Payable by Investors In addition to the Maximum Offer Price, investors applying for Units must pay brokerage of 1.0%, Hong Kong Stock Exchange trading fee of 0.005% and SFC transaction levy of 0.005%, subject to refund if the Offer Price should be lower than the Maximum Offer Price.

Over-allocation Option In connection with the Global Offering, the Joint Global Coordinators have been granted the Over-allocation Option by Dragon Yield, which is exercisable by the Stabilising Manager, in consultation with the other Joint Global Coordinators, in full or in part, on one occasion only, within 30 days after the last date for lodging Application Forms under the Hong Kong Public Offering, to purchase from Dragon Yield up to an aggregate of 87,450,000 Units at the Offer Price. The total number of Units in issue on the Listing Date will be 1,000,000,000 Units. The exercise of the Over-allocation Option will not increase this total number of Units in issue. The total number of Units subject to the Over-allocation Option will constitute up to 15.0% of the total number of Units initially available under the Global Offering.

Use of Proceeds See the section headed “Use of Proceeds” in this Offering Circular for details of how the proceeds from the Global Offering will be applied.

GZI REIT Lock-up Pursuant to the Underwriting Agreements, the Manager agrees that, except pursuant to the Global Offering or with the consent of the Joint Global Coordinators, neither GZI REIT nor any of the entities controlled by GZI REIT shall, during a period of six months following the Listing Date and whether conditionally or unconditionally:

• allot, issue, offer, sell, contract to sell, hedge, grant any option or right to subscribe or purchase over or in respect of, or otherwise dispose of, any Units or any securities exchangeable or convertible into Units or which carry rights to subscribe for or purchase Units; or

30 THE GLOBAL OFFERING

• deposit Units with a depositary in connection with the issue of depositary receipts; or

• enter into a transaction (including, without limitation, a swap or other derivative transaction) that transfers, in whole or in part, any economic consequence of ownership of any Units; or

• offer or agree or announce any intention to do any of the foregoing.

The GZI and Yue Xiu Lock-ups Pursuant to the Underwriting Agreements, GZI agrees App B B6 that, except with the consent of the Joint Global Coordinators or as described below, it will not, and will procure that its subsidiaries will not, during a period of six months following the Listing Date and whether conditionally or unconditionally:

• dispose of: (i) any Units or any direct or indirect interest therein (including, without limitation, by granting or creating any option, mortgage, pledge, charge or other security interest); or (ii) any securities exchangeable or convertible into any Units; or

• enter into any swap or other derivative transaction or other arrangement that transfers, in whole or in part, any economic consequence of ownership of any Units or, any securities exchangeable or convertible into any Units; or

• dispose of any direct or indirect interest in any company or entity holding any securities exchangeable or convertible into any Units; or

• offer or agree or announce any intention to do any of the foregoing.

31 THE GLOBAL OFFERING

These restrictions do not apply to a transfer of Units to a wholly owned subsidiary of GZI (provided such transferee enters into equivalent obligations), a transfer of Units pursuant to the exercise of the Over-allocation Option, the Unit Borrowing Agreement or the proposed distribution in specie of Units under the Special Dividend.

Yue Xiu, for itself and on behalf of its subsidiaries (other than the members of the GZI Group) has undertaken that, to the extent that Yue Xiu and its subsidiaries (other than the members of the GZI Group) receive Units by way of distribution in their capacity as GZI Qualifying Shareholders, any such Units will be subject to the same restrictions to which GZI is subject (as described above). Such restrictions will not apply to a transfer of Units to a wholly owned subsidiary of Yue Xiu.

Listing and Trading Prior to the Global Offering, there has been no market for the Units.

Preliminary approval has been granted by the Hong Kong Stock Exchange for the listing of, and permission to deal in, all the Units on the Main Board of the Hong Kong Stock Exchange. Dealings in Units on the Hong Kong Stock Exchange are expected to commence on 21 December 2005. If the Hong Kong Stock Exchange grants formal approval for the listing of, and permission to deal in, the Units on the Main Board of the Hong Kong Stock Exchange and GZI REIT complies with the stock admission requirements of HKSCC, the Units will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in CCASS, with effect from the date of commencement of dealings in the Units on the Hong Kong Stock Exchange or any other date that HKSCC chooses. Settlement of transactions between participants of the Hong Kong Stock Exchange is required to take place in CCASS on the second Hong Kong Stock Exchange business day after any trading day.

All activities under CCASS are subject to the General Rules of CCASS and CCASS Operational Procedures in effect from time to time.

All necessary arrangements have been made for the Units to be admitted into CCASS.

32 THE GLOBAL OFFERING

Stabilisation In connection with the Global Offering, the Stabilising Manager in consultation with the other Joint Global Coordinators may over-allocate or effect transactions with a view to supporting the market price of the Units at a level higher than that which might otherwise prevail for a period of 30 days after the last date for lodging Application Forms under the Hong Kong Public Offering. (See the section headed “Structure of the Global Offering — Stabilising Action” in this Offering Circular for further details of the stabilisation arrangements.)

No Redemption by Unitholders have no right to request the Manager to Unitholders redeem their Units. Listing of the Units on the Hong Kong Stock Exchange does not guarantee a liquid market for the Units.

Profit Forecast for the The Manager forecasts that, in the absence of Forecast Period 2005 and unforeseen circumstances and on the bases and the Forecast Year 2006 assumptions set out in the section headed “Profit Forecast” in this Offering Circular, the consolidated net profit after taxation but before extraordinary items of GZI REIT (reflecting the consolidated income statement of GZI REIT, Holdco and the BVI Companies) for the Forecast Period 2005 and the Forecast Year 2006 will be not less than HK$1.6 million and HK$201.0 million respectively. For further details, including the principal bases and assumptions on which the forecast is based, see the section headed “Profit Forecast” in this Offering Circular.

Distributions The Manager’s policy is to distribute to Unitholders as App B B2 (l) distributions an amount equivalent to 100.0% of GZI REIT’s Total Distributable Income for each of FY2006 to FY2008 and thereafter at least 90.0% of annual Total Distributable Income (subject to qualifications under the Trust Deed), as more fully described in the section headed “Distribution Policy” in this Offering Circular. Distributions will be declared in Hong Kong dollars.

GZI REIT’s distribution for the period from the Listing Date to 31 December 2005 will be paid together with its distribution for the period from 1 January 2006 to 30 June 2006 on or before 30 November 2006.

33 THE GLOBAL OFFERING

See the sections headed “Risk Factors” and “Distribution Policy” in this Offering Circular for a discussion of factors that may adversely affect the ability of GZI REIT to make distributions to Unitholders.

Statement of Distribution for For the Forecast Year 2006, Unitholders will be paid, in the Forecast Year 2006 the absence of unforeseen circumstances, total distributions per Unit of not less than HK$0.201 (which excludes distributions in respect of the period from the Listing Date to 31 December 2005), representing a distribution yield of 6.54% based on the Maximum Offer Price (excluding other transaction costs) and 7.05% based on the Minimum Offer Price (excluding other transaction costs). Any shortfall in distributions will be disclosed in GZI REIT’s audited financial statements for Forecast Year 2006.

Unitholders’ Meetings Each of the Trustee and the Manager may at any time, and the Manager shall (at the request in writing of not less than two Unitholders registered as together holding not less than 10.0% of the Units for the time being in issue and outstanding), convene a meeting of Unitholders and propose resolutions for consideration at such meeting.

Tax Considerations See the section headed “Taxation” in this Offering Circular for further information on the tax consequences of the purchase, ownership and disposal of the Units.

Governing Law The Trust Deed, pursuant to which GZI REIT is constituted, is governed by Hong Kong law.

Termination of GZI REIT GZI REIT may be terminated in the circumstances set out in the Trust Deed. See the section headed “The Trust Deed” in this Offering Circular for further information.

Risk Factors Prospective investors should carefully consider certain risks connected with an investment in the Units, as discussed under the section headed “Risk Factors” in this Offering Circular.

34 INFORMATION ABOUT THIS OFFERING CIRCULAR AND THE GLOBAL OFFERING App B B28

Manager’s Responsibility for the Contents of this Offering Circular App B B26 RC 5.2A The Manager and the Directors (whose names appear in the section headed “Parties Involved in the Global Offering” in this Offering Circular) collectively and individually accept full responsibility for the accuracy of the information contained in this Offering Circular and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief there are no other facts the omission of which would make any statement in this Offering Circular misleading.

SFC Authorisation

GZI REIT has been authorised by the SFC under section 104 of the SFO. The SFC does not take any responsibility for the financial soundness of GZI REIT or for the correctness of any statements made or opinions expressed in this Offering Circular and other documents relating to GZI REIT. Authorisation by the SFC does not imply official recommendation of GZI REIT.

Underwriting

This Offering Circular is published solely in connection with the Hong Kong Public Offering, which forms part of the Global Offering. For applicants under the Hong Kong Public Offering, this Offering Circular as well as the WHITE and YELLOW Application Forms contain the terms and conditions of the Hong Kong Public Offering.

The Global Offering is managed by the Joint Global Coordinators. Pursuant to the Hong Kong Underwriting Agreement, the Hong Kong Public Offering is underwritten by the Hong Kong Underwriters. If, for any reason, the Offer Price is not agreed among the Manager and the Joint Global Coordinators (on behalf of the Underwriters), the Global Offering will not proceed. Further details about the Underwriters and the underwriting arrangements are contained in the section headed “Underwriting” in this Offering Circular.

Distribution and Selling Restrictions

The Hong Kong Public Offering Units are offered solely on the basis of the information contained and representations made in this Offering Circular and the Application Forms and on the terms and subject to the conditions set out herein and therein. No person is authorised to give any information in connection with the Hong Kong Public Offering or to make any representation not contained in this Offering Circular, and any information or representation not contained herein must not be relied upon as having been authorised by the Manager, the Trustee, the Listing Agent, the Underwriters, any of their respective directors, agents, employees or advisers or any other parties involved in the Global Offering.

35 INFORMATION ABOUT THIS OFFERING CIRCULAR AND THE GLOBAL OFFERING

Save as disclosed in this Offering Circular, no action has been or will be taken in any jurisdiction that would permit a public offering of the Units or the possession, circulation or distribution of this Offering Circular or any other offering or publicity material relating to GZI REIT or the Units in any country or jurisdiction other than Hong Kong. The Units may not be offered or sold, directly or indirectly, and neither this Offering Circular nor any other offering material, circular, form of application or advertisement in connection with the Global Offering of the Units may be distributed or published in or from any country or jurisdiction except under circumstances that will result in compliance with any applicable rules and regulations of any such country or jurisdiction.

Each person acquiring Units will be required to confirm, or by the acquisition of Units will be deemed to have confirmed, that he is aware of the restrictions on offers of Units described in this Offering Circular.

Applicants for Units are recommended to consult their professional advisers if they are in any doubt as to the regulatory implications of subscribing for, purchasing, holding, disposing of or otherwise dealing in Units.

Application for Listing on the Hong Kong Stock Exchange

Prior to the Global Offering, there has been no market for the Units. Preliminary approval has been granted by the Hong Kong Stock Exchange for the listing of, and permission to deal in, the Units on the Main Board of the Hong Kong Stock Exchange. Dealings in the Units on the Hong Kong Stock Exchange are expected to commence on 21 December 2005.

Eligibility for Admission into CCASS

Subject to the granting of formal approval for the listing of, and permission to deal in, the Units on the Hong Kong Stock Exchange and compliance with the stock admission requirements of HKSCC, the Units will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in CCASS with effect from the date of commencement of dealings in the Units on the Hong Kong Stock Exchange or any other date that HKSCC chooses. Settlement of transactions between participants of the Hong Kong Stock Exchange is required to take place in CCASS on the second Hong Kong Stock Exchange business day after any trading day.

All activities under CCASS are subject to the General Rules of CCASS and CCASS Operational Procedures in effect from time to time.

All necessary arrangements have been made for the Units to be admitted into CCASS.

Stamp Duty

No Hong Kong stamp duty is payable in connection with the initial issue of Units to successful applicants under the Hong Kong Public Offering. All Sale Units sold by the Joint Global Coordinators will be subject to stamp duty at the rate of 0.1% of the Offer Price, which will be borne by GZI. Subsequent dealings in Units will also be subject to Hong Kong stamp duty.

36 INFORMATION ABOUT THIS OFFERING CIRCULAR AND THE GLOBAL OFFERING

Professional Tax Advice Recommended

Persons who are unsure about the taxation implications of the subscription, purchase, holding, disposal of, dealing in, or the exercise of any rights in relation to the Units should consult a professional adviser.

GZI REIT, the Manager, the Trustee, the Listing Agent, the Directors, the Underwriters and any other person involved in the Offering do not accept responsibility for any tax effects on or liabilities resulting from the subscription for, purchase, holding, disposal of, dealing in or the exercise of any rights in relation to the Units.

Offer Price

The Maximum Offer Price is HK$3.075 and the Offer Price is expected to be determined by agreement between GZI, the Manager and the Joint Global Coordinators (on behalf of the Underwriters) on the Price Determination Date. (See the section headed “Structure of The Global Offering” in this Offering Circular.)

All applicants are required to pay the Maximum Offer Price of HK$3.075 per Unit (plus brokerage of 1.0%, Hong Kong Stock Exchange trading fee of 0.005% and SFC transaction levy of 0.005%), subject to an appropriate refund if the Offer Price is less than the Maximum Offer Price. (See the sub-section headed “Procedures for Application for Hong Kong Public Offering Units” immediately below.)

Procedures for Application for Hong Kong Public Offering Units

The procedures for applying for the Hong Kong Public Offering Units are set out in the sections headed “How to Apply for Hong Kong Public Offering Units” and “Further Terms and Conditions of the Hong Kong Public Offering” in this Offering Circular and in the relevant Application Forms.

The Joint Global Coordinators will have full discretion to reject any application for Hong Kong Public Offering Units in full or in part.

Conditions of the Hong Kong Public Offering

Details of the conditions of the Hong Kong Public Offering are set out in the sections headed “Structure of The Global Offering — Conditions of the Hong Kong Public Offering” and “Further Terms and Conditions of the Hong Kong Public Offering” in this Offering Circular.

37 INFORMATION ABOUT THIS OFFERING CIRCULAR AND THE GLOBAL OFFERING

Structure of the Global Offering

Details of the structure of the Global Offering, including its conditions, are set out in the section headed “Structure of The Global Offering” in this Offering Circular.

Exchange Rates

Save for the section headed “Manager’s Discussion and Analysis of Financial Condition and Results of Operations” in this Offering Circular, relevant Renminbi amounts have been translated into, and presented as, Hong Kong dollar amounts based on an exchange rate of HK$1.00 = RMB1.04.

Tenants’ Names and Business Sectors

Certain tenants in the Properties do not have English names. Translations of the Chinese names of these tenants have been provided in this Offering Circular for the convenience of readers. Such translations have not been approved by the relevant tenants.

This Offering Circular contains certain information with respect to the business sub-sectors of certain tenants in the Properties. The Manager has determined the business sub-sectors in which these tenants are primarily involved based on the Manager’s general understanding of the business activities conducted by such tenants in the premises occupied by them. The Manager’s knowledge of the business activities of such tenants is necessarily limited and such tenants may conduct business activities that are in addition to, or different from, those indicated herein.

Terms and Conventions

References in this Offering Circular to monthly base rent for September 2005 are references to the monthly Rental Income from the Properties or relevant Property (as the case may be) as provided for in the leases which are effective as at 30 September 2005, exclusive of any rent free periods and rental escalations or discounts.

Unless otherwise stated, figures and amounts in this Offering Circular have been rounded to one decimal place.

38 PARTIES INVOLVED IN THE GLOBAL OFFERING

GZI REIT As constituted by the Trust Deed entered into on 7 App B B4 December 2005 in Hong Kong (a Hong Kong collective investment scheme authorised under section 104 of the SFO)

Manager GZI REIT Asset Management Limited App B B1 2102, Yue Xiu Building 160 Lockhart Road Wanchai Hong Kong

Directors

Executive Directors LIANG Ning Guang (Chairman) ( ) LIU Yong Jie ( )

Non-executive Director LIANG You Pan ( )

Independent non-executive Directors CHAN Chi On, Derek ( ) LEE Kwan Hung, Eddie ( ) CHAN Chi Fai, Brian ( )

Responsible Officers of the Manager LIANG Ning Guang ( ) LIU Yong Jie ( ) LAU Jin Tin, Don ( )

Vendor of the Properties Guangzhou Construction & Development Holdings (China) Limited Akara Building, 24 De Castro Street Wickhams Cay I Road Town, Tortola British Virgin Islands

Leasing Agents Guangzhou Yicheng Property Management Ltd. App B B4 (c) ( ) Nos. 19-21 Tian He Nan Second Road 7th Floor, Hong Fa Plaza Tian He District Guangzhou People’s Republic of China

Guangzhou White Horse Property Management Co. Ltd. ( ) No. 16 Zhan Nan Road Yue Xiu District Guangzhou People’s Republic of China

39 PARTIES INVOLVED IN THE GLOBAL OFFERING

Unit Registrar Tricor Investor Services Limited App B B4 (f) Ground Floor, Bank of East Asia Harbour View Centre 56 Gloucester Road Wanchai Hong Kong

Trustee HSBC Institutional Trust Services (Asia) Limited App B B1, B4 (b) 1 Queen’s Road Central Central Hong Kong

Joint Global Coordinators and The Hongkong and Shanghai Banking Joint Bookrunners Corporation Limited 1 Queen’s Road Central Central Hong Kong

Citigroup Global Markets Asia Limited 50th Floor, Citibank Tower Citibank Plaza 3 Garden Road Central Hong Kong

DBS Bank Ltd. 16th Floor Man Yee Building 68 Des Voeux Road Central Central Hong Kong

Listing Agent The Hongkong and Shanghai Banking Corporation Limited 1 Queen’s Road Central Central Hong Kong

Financial Adviser to GZI DBS Bank Ltd. 16th Floor Man Yee Building 68 Des Voeux Road Central Central Hong Kong

Auditors and Reporting Accountants PricewaterhouseCoopers App B B4 (e) Certified Public Accountants 22nd Floor, Prince’s Building Central Hong Kong

40 PARTIES INVOLVED IN THE GLOBAL OFFERING

Legal Advisers to the Manager As to Hong Kong and English law Paul, Hastings, Janofsky & Walker 22nd Floor, Bank of China Tower 1 Garden Road Central Hong Kong

As to PRC law Z & T Law Firm ( ) 21st Floor, Yuehai Building 472 Huanshi Road East Guangzhou People’s Republic of China

Legal Adviser to GZI As to Hong Kong law Baker & McKenzie 14th Floor, Hutchison House 10 Harcourt Road Central Hong Kong

Legal Advisers to the Joint Global As to Hong Kong and English law Coordinators Allen & Overy 9th Floor, Three Exchange Square Central Hong Kong

As to PRC law King & Wood ( ) 31st Floor, Tower A Jianwai SOHO 39 Dongsanhuan Zhonglu Chaoyang District Beijing 100022 People’s Republic of China

Legal Adviser to the Trustee As to Hong Kong and English law Simmons & Simmons 35th Floor, Cheung Kong Centre 2 Queen’s Road Central Hong Kong

Independent Property Valuer Colliers International (Hong Kong) Ltd App B B4 (d) Suite 5701, Central Plaza 18 Harbour Road Wanchai Hong Kong

41 PARTIES INVOLVED IN THE GLOBAL OFFERING

Independent Market Research Cushman & Wakefield (HK) Limited Consultant 6th Floor, Henley Building 5 Queen’s Road Central Hong Kong

Property Adviser Jones Lang LaSalle Limited 28th Floor, One Pacific Place 88 Queensway Hong Kong

Principal Bankers Citibank, N.A., Hong Kong Branch 50th Floor, Citibank Tower Citibank Plaza 3 Garden Road Central Hong Kong

The Hongkong and Shanghai Banking Corporation Limited 1 Queen’s Road Central Central Hong Kong

DBS Bank Ltd. 16th Floor Man Yee Building 68 Des Voeux Road Central Central Hong Kong

Receiving Bankers The Hongkong and Shanghai Banking Corporation Limited 1 Queen’s Road Central Central Hong Kong

Bank of China (Hong Kong) Limited 1 Garden Road Central Hong Kong

Bank of Communications Co., Ltd., Hong Kong Branch 23rd Floor, Bank of Communications Tower 20 Pedder Street Central Hong Kong

42 RISK FACTORS

App B An investment in the Units involves significant risks, including specific risks relating to overseas B2 (e) B3 property investments. Prospective investors should consider carefully, together with all other B21 information contained in this Offering Circular, the risk factors described below before deciding to invest in the Units.

The key objective of GZI REIT is to provide investors with stable distributions per Units with the potential for sustainable long term growth of such distributions. Accordingly, investors should not expect to obtain short term capital gains.

Investors should be aware that the price of units in a collective investment scheme, and the income from them, may rise or fall. Investors should note that they may not get back their original investments and that they may not receive any distributions.

Before deciding to invest in the Units, prospective investors should seek professional advice from their relevant advisers regarding their prospective investment in the context of their particular circumstances.

Risks Relating to GZI REIT’s Organisation and Operations

Neither GZI REIT nor the Manager, as newly established entities, has an established operating history for investors to rely on in making an investment decision.

The Manager was incorporated on 3 October 2005 and GZI REIT was established on 7 December 2005. While GZI previously owned and managed the Properties through various subsidiaries, GZI REIT only acquired the BVI Company Shares on 7 December 2005. As such, neither GZI REIT nor the Manager has a substantial operating history by which their past performance may be judged. This will make it more difficult for investors to assess their likely future performance. There can be no assurance that GZI REIT will be able to generate sufficient revenue from operations to make distributions to Unitholders or that such distributions will be in line with those set out in the section headed “Profit Forecast” in this Offering Circular.

The REIT Code has a limited history and the application and interpretation of its provisions may be uncertain.

The SFC is empowered under section 104(1) of the SFO to authorise collective investment schemes, subject to such conditions as it considers appropriate. The REIT Code, to which GZI REIT is subject, was published by the SFC in August 2003 and revised in June 2005. The REIT Code does not have the force of law and, due to its limited history, there may be uncertainties in relation to the interpretation and manner of enforcement of the provisions set out therein. The SFC may, after public consultation, amend the provisions set out in the REIT Code. The SFC reserves the right to review its authorisation of GZI REIT and may amend the conditions of such authorisation or withdraw such authorisation as it considers appropriate. Furthermore, no assurance can be given that future legislation, administrative rulings, court decisions or changes to the REIT Code will not adversely affect the financial condition and results of operations of GZI REIT or an investment by a Unitholder.

43 RISK FACTORS

The Manager’s operations are subject to regulation and its licensing conditions.

The Manager is required to be licensed under the SFO for the regulated activity of asset management. Although the Manager believes that it will be operated and managed in a manner so as to remain licensed, no guarantee can be given that it will be able to operate and manage itself in such a manner so as to remain licensed. For example, the departure of a Responsible Officer of the Manager may result in the loss of the Manager’s licence to act as the manager of GZI REIT. In the event that the Manager ceases to be licensed under the SFO, GZI REIT may need to appoint another management company, which may materially and adversely affect the financial condition and results of operations of GZI REIT. In the event no other management company duly qualified under the REIT Code and acceptable to the SFC is willing to take the place of the existing Manager within 60 Business Days of the removal or retirement of the Manager (or such longer period as the Trustee considers appropriate), the Trustee may terminate GZI REIT.

The Manager may not be able to achieve its objectives.

The Manager’s key objective for GZI REIT is to provide Unitholders with stable distributions per Unit with the potential for sustainable long term growth of such distributions. While the Manager has established clear plans and specific strategies to accomplish this objective, it would be difficult to offer any assurance that it will be able to implement successfully such plans or that it will be able to do so in a timely and cost effective manner. Some of the cost efficiencies and revenue enhancements that the Manager aims to achieve from such changes may therefore not be realisable within the expected time frame, if at all.

In respect of the Manager’s investment strategy of growing GZI REIT’s portfolio of properties initially in Guangdong province, there can be no assurance that the Manager will be able to implement this strategy successfully or that it will be able to expand GZI REIT’s portfolio at any specified rate, to any specified size or at all. GZI REIT may also be unable to make investments or acquisitions on favourable terms in a desired time frame. Although GZI has granted to GZI REIT a right of first refusal (subject to earlier termination in certain circumstances), conditional on listing of the Units on the Hong Kong Stock Exchange and subject to certain other conditions, to acquire certain properties in Guangzhou (see the section headed “Material Agreements and Other Documents Relating to GZI REIT — Deed of Right of First Refusal” in this Offering Circular), there is no certainty that a property offered to GZI REIT under this right of first refusal will eventually be acquired by GZI REIT because, for example, the results of the Manager’s due diligence on the property may be unsatisfactory. Moreover, this right of first refusal will terminate five years after the Listing Date, or earlier if the Units cease to be listed on the Hong Kong Stock Exchange or the entity which is the Manager of GZI REIT ceases to be a subsidiary of any member of the GZI Group or Yue Xiu and its subsidiaries.

GZI REIT will primarily rely on external sources of funding to expand its portfolio, which may not be available on favourable terms or at all. Even if GZI REIT were able to complete additional property investments successfully, there can be no assurance that GZI REIT will achieve its intended return on such investments. Since the amount of debt GZI REIT can incur to finance acquisitions is limited, such acquisitions will be dependent on GZI REIT’s ability to raise equity

44 RISK FACTORS capital, which may result in a dilution of Unitholders’ holdings. Potential vendors may also view negatively the timing and uncertainty of any proposal to raise equity capital to fund any such purchase and may prefer other potential purchasers. Furthermore, there may be significant competition for attractive investment opportunities from other property investors, including commercial property development companies and private investment funds. There can be no assurance that GZI REIT will be able to compete effectively against such entities.

In relation to the Manager’s aim of achieving an optimal capital structure for GZI REIT, its ability to do so will depend upon, among other things, whether GZI REIT will be subject to financial covenants under existing borrowings and other limitations on effecting further desired borrowings, whether GZI REIT will be able to raise any additional equity funding and whether such fund raising exercises can be effected on favourable terms.

Moreover, GZI REIT’s structure, strategies and investment policies are constrained by the REIT Code which, for instance, limits GZI REIT’s borrowings to no more than 45.0% of its total gross asset value and requires GZI REIT to distribute to Unitholders as distributions an amount no less than 90.0% of its audited net income after tax for each Financial Year. Such restrictions may affect the operations of GZI REIT and restrict its ability to achieve its strategies in a timely manner or at all.

If the Manager is unsuccessful in implementing its strategies, GZI REIT’s business, financial condition and results of operations could be materially and adversely affected, the price of Units could decrease and distributions could be constrained.

There are limitations on GZI REIT’s ability to leverage. GP 8

GZI REIT is expected to use leverage in connection with its investments. Borrowings by GZI RC 7.9 REIT are limited by the REIT Code to no more than 45.0% of its total gross asset value. There can be no assurance that GZI REIT’s borrowings will not exceed 45.0% of its gross asset value following any revaluation of its assets and/or liabilities. From time to time GZI REIT may need to draw down on its banking facilities and use overdrafts but may be unable to do so due to the 45.0% borrowing limit. GZI REIT may also face difficulties in securing timely and commercially favourable financing in asset-backed lending transactions secured by real estate.

In addition, the use of leverage may increase the exposure of GZI REIT to adverse economic factors such as rising interest rates and economic downturns. Generally, GZI REIT is subject to general risks associated with debt financing, including the risk of: (i) there being insufficient cash flow to meet loan repayments; and (ii) not being able to maintain debts at optimum levels in the future due to the lack of capacity in the lending market.

45 RISK FACTORS

GZI REIT faces risks associated with debt financing.

On the Listing Date, GZI REIT is expected to have aggregate external borrowings of US$165.0 million (HK$1,287.0 million), or approximately 32.1% of the Appraised Value of the Properties. The Loan Facility will be secured on, among other things, the Properties and the BVI Company Shares (see the section headed “Material Agreements and Other Documents Relating to GZI REIT — Facility Agreement” in this Offering Circular). GZI REIT may, from time to time, require additional debt financing to achieve the Manager’s investment strategies.

GZI REIT will be subject to risks normally associated with debt financing, including the risk that its cash flow may be insufficient to meet required payments of principal and interest under such financing at expected levels and to make distributions. If payments due under the Loan Facility cannot be made, the Lending Banks may declare a default and enforce any security provided in respect of such borrowings. Also, if certain financial covenants under the Facility Agreement are breached, the Lending Banks may declare an event of default, demand the immediate repayment of all outstanding loans and other sums under the Facility Agreement and enforce the security provided in respect of the Loan Facility. (See the section headed “Material Agreements and Other Documents Relating to GZI REIT — Facility Agreement” in this Offering Circular.)

GZI REIT will also be subject to the risk that it may not be able to refinance its existing borrowings or that the terms of such refinancing will not be as favourable as the terms of the existing borrowings. In addition, GZI REIT may be subject to certain covenants in connection with any future borrowings that may limit or otherwise adversely affect the operations of the BVI Companies. Such covenants may restrict GZI REIT’s ability to acquire properties, to declare distributions or to pay distributions (even where distributions have previously been declared, in which case such distributions shall be accrued), or the ability of Partat, Moon King, Full Estates and Keen Ocean to undertake capital expenditures, or may require them to set aside funds for maintenance or repayment of security deposits. Further, there is the risk of movements in short term interest rates adversely affecting floating rate borrowings by GZI REIT. There is also the risk that movements in the US dollar/Renminbi exchange rate may adversely affect repayments of US dollar borrowings by GZI REIT. As at the Listing Date, 100.0% of GZI REIT’s borrowings will be denominated in US dollars.

If principal amounts due for repayment at maturity cannot be refinanced, extended or paid with proceeds of other capital transactions such as new equity capital, GZI REIT will not be able to pay distributions at expected levels or to repay all maturing debt. Further, if prevailing interest rates or other factors at the time of refinancing (such as the possible reluctance of lenders to make commercial property loans) result in higher interest rates upon refinancing, the interest expense relating to such refinanced indebtedness would increase, thereby adversely affecting GZI REIT’s cash flow and the amount of funds available for distribution to Unitholders.

If a property is mortgaged to secure payment of GZI REIT’s indebtedness and interest or principal payments cannot be met, that property could be foreclosed by the lender or the lender could require a forced sale of the mortgaged property, which could have a material adverse effect on GZI REIT’s business and financial conditions and results of operations.

46 RISK FACTORS

The Manager may change GZI REIT’s investment strategies.

While the Manager has stated its intention to restrict GZI REIT’s investments to office, retail and other commercial property initially in Guangdong province, subject to the requirements of the REIT Code, the Trust Deed, the Listing Agreement and applicable law, the Manager has absolute discretion to determine the investment strategy of GZI REIT (although the investment objectives and policy may only be changed with Unitholders’ approval by Special Resolution). Furthermore, as with other investment decisions, there are risks and uncertainties with respect to the selection of investments and with respect to the investments themselves.

GZI REIT depends on certain key personnel of the Manager, and the loss of any such key personnel may adversely affect its business and financial conditions and results of operations.

GZI REIT’s success depends, in part, upon the continued service and performance of the Manager’s senior management team and certain other key personnel, including the Responsible Officers of the Manager (currently, Mr Liang Ning Guang, Mr Liu Yong Jie and Mr Lau Jin Tin, Don). These individuals may leave the Manager in the future and compete with GZI REIT. The loss of any of these individuals could have a material adverse effect on GZI REIT’s business and financial conditions and results of operations.

GZI REIT relies on Yicheng and White Horse Property Management Company to provide property management, leasing, marketing and tenancy management services.

Yicheng and White Horse Property Management Company provide property management, leasing, marketing and tenancy management services in respect of the Properties. Yicheng and White Horse Property Management Company may experience financial or other difficulties that may affect their ability to carry out the work for which they were contracted, thus affecting the condition and performance of the Properties or resulting in additional costs for GZI REIT. If GZI REIT loses the services provided by Yicheng and White Horse Property Management Company, it may not be able to secure such services from other service providers on comparable terms, or at all. If GZI REIT fails to secure services of a comparable quality, its financial condition and results of operations will be adversely affected.

Competition with GZI relating to property acquisitions and tenants.

GZI, its subsidiaries and associates are engaged in, among other things, investment in, and the development and management of, commercial properties. As a result, there may be circumstances where GZI REIT competes directly with GZI and/or its subsidiaries or associates for property acquisitions and tenants. Moreover, GZI may in the future invest in other real estate investment trusts which may compete directly with GZI REIT. Although GZI has initiated internal restructuring arrangements which will result in the leasing and marketing of GZI’s properties and GZI REIT’s properties being handled by different companies within the GZI Group, there can be no assurance that the interests of GZI REIT will not conflict with or be subordinated to those of GZI in such circumstances.

47 RISK FACTORS

GZI REIT will be more reliant on some of the Properties for a substantial portion of Rental App B B20 (a) Income and a decline in the contribution such Properties make to Rental Income will adversely affect GZI REIT.

While GZI REIT’s initial portfolio will comprise four properties, it will initially be dependent on the White Horse Units for a substantial portion of its Rental Income. For the six months ended 30 June 2005, the White Horse Units accounted for approximately 60.1% of Gross Turnover (before accelerated amortisation of deferred assets) generated by the Properties (see Appendix I to this Offering Circular); for the Forecast Year 2006, the White Horse Units will account for approximately 66.6% of GZI REIT’s Rental Income (see the section headed “Profit Forecast” in this Offering Circular).

Various factors, such as physical damage resulting from fire or other causes, a downturn in the garment wholesale industry or the loss of a significant number of tenants, may cause a significant disruption to the business and operations of the White Horse Units. In the event such disruption occurs at the White Horse Units and the resulting losses are not compensated or fully compensated by insurance proceeds (see the risk factor headed “GZI REIT may suffer material losses in excess of insurance proceeds” below), its contributions to GZI REIT’s Rental Income will be reduced and this will have an adverse effect on GZI REIT’s business and financial conditions and results of operations.

The high concentration of lease expiries in the White Horse Units exposes GZI REIT to a higher risk of vacancy following non-renewal, non-replacement or early termination of leases.

1,307 of the 1,311 current leases in the White Horse Units will terminate on 31 December 2005. These leases account for 99.9% of the total base rent of the White Horse Units for September 2005. 1,246 (95.3%) of these expiring leases have been renewed and 47.1% of the new leases will terminate on 31 December 2009 while the rest will terminate on 31 December 2010.

The typical tenancy agreement for the White Horse Units provides that if a tenant wishes to terminate its lease before the expiry of the lease term, the tenant must submit a written application to the landlord at least one month prior to the proposed termination date, and obtain the consent of the landlord for such termination. Such consent had, in the past, been granted on a case by case basis, particularly if the tenant was able to procure a replacement tenant to enter into a new lease for the same premises on the same terms and conditions (save that the duration of the new lease would be for the unexpired term of the original lease). In such cases, the departing tenant had to pay an administrative fee equivalent to 1.5 month’s rent. If the landlord does not consent to such early termination, the parties will resolve the issue by discussion. In the event that the landlord continues to withhold consent after such discussion and the tenant still departs, all or a portion of its security deposit will be forfeited without interest in accordance with the terms of the lease and the landlord retains a legal right to require settlement of all unpaid amounts. There is no assurance that any such unpaid amounts can be fully recovered or at all.

48 RISK FACTORS

The high concentration of lease expiries in the White Horse Units exposes GZI REIT to certain risks, including a higher risk of vacancies following non-renewal, non-replacement or early termination of leases, which may lead to reduced occupancy levels and, in turn, reduce GZI REIT’s Rental Income. If a large number of tenants in the White Horse Units do not renew their leases at the end of a lease cycle or a significant number of early terminations occur, and replacement tenants cannot be found, there is likely to be a material adverse effect on the White Horse Units, which could affect GZI REIT’s business and financial conditions and results of operations (see the section headed “The Properties and Business — White Horse Units — Expiries and Renewals” in the Offering Circular for further information about tenancy renewal rates in the White Horse Units).

The sharp increase in rental rates for the leases in the White Horse Units commencing on 1 January 2006 may not be replicated in future.

1,246 of the 1,307 leases in the White Horse Units which are expiring on 31 December 2005 have been renewed at rental rates which are on average 50.0% to 100.0% higher than the rental rates of the expiring leases. These increases were primarily attributable to the fact that, with 99.7% of the leases in the White Horse Units expiring on 31 December 2005, the Manager took the opportunity to bring the existing rental rates to the market level. There is no assurance that future renewals of such leases can achieve similar increases in rental rates.

GZI REIT is dependent on the performance of its tenants and its ability to make distributions may be adversely affected by the loss of its tenants or a downturn in the business of its tenants.

GZI REIT is dependent to a significant degree on a limited number of tenants. For example, the ten largest tenants in the Properties in terms of monthly base rent for September 2005 accounted for 19.6% of the monthly base rent of the Properties for September 2005. GZI REIT’s financial condition, results of operations and ability to make distributions may be adversely affected by the insolvency or downturn in the business of tenants whose rents make up a material proportion of the operating income of the Properties, including the decision by such tenants not to renew their leases or to terminate their leases before they expire (see the section headed “The Properties and Business — Tenancy Agreements” in this Offering Circular). In the event of defaults by tenants whose rents make up a material proportion of the operating income of the Properties, the BVI Companies are likely to experience costs in enforcing their rights as lessor. Generally, upon any failure by a tenant to pay rent, a lessor may bring an action against such tenant at the People’s Court in the PRC. Only in the event that the tenant fails to pay its rent for a total of six months, does the lessor have the right to terminate the tenancy agreement and repossess the property even though PRC law only permits lessors to demand a security deposit of not more than three months. Upon such termination, if the tenant refuses to pay rents or vacate the property, the lessor may apply to the court to enforce the civil judgement obtained. Also, if tenants in the Properties renew their leases but reduce their leased space, there could be a material adverse effect on the business and financial conditions and results of operations of GZI REIT.

49 RISK FACTORS

GZI REIT may not be able to pass certain critical decisions in the owners’ committees of Fortune Plaza and City Development Plaza.

The Fortune Plaza Units represent 50.2% of the total Gross Floor Area in respect of Fortune Plaza. The City Development Plaza Units represent 57.3% of the total Gross Floor Area in respect of City Development Plaza.

GCCD holds certain other portions of Fortune Plaza and City Development Plaza that do not generate significant levels of rental or other income, or are used for GCCD’s own purposes. These portions have not been injected into GZI REIT (see the sections headed “The Properties and Business — The Properties” in this Offering Circular). However, GCCD has irrevocably granted Moon King and Full Estates the right to attend meetings of the owners’ committees of, respectively, Fortune Plaza and City Development Plaza on its behalf and to exercise its voting rights at such meetings in any manner deemed fit by Moon King or, as the case may be, Full Estates. GCCD has also undertaken to Moon King and Full Estates that, if it transfers its portions of Fortune Plaza or City Development Plaza to a third party, on the basis that there is no material prejudice to the lawful rights and interests of GCCD, it shall use its best endeavours to secure an undertaking from the transferee in favour of Moon King or, as the case may be, Full Estates on similar terms. With these rights, Moon King will be able to exercise voting rights in respect of approximately 65.1% of the Gross Floor Area of Fortune Plaza and Full Estates will be able to exercise voting rights in respect of approximately 74.1% of the Gross Floor Area of City Development Plaza.

Notwithstanding the foregoing, there is no assurance that GCCD will be able to secure a similar undertaking from the person to whom it may sell its portion of Fortune Plaza. In any case, GZI REIT may not be able to pass certain critical decisions in meetings of the owners’ committee of Fortune Plaza where such decisions require the consent of the owners of at least two-thirds of the Gross Floor Area of the building, e.g. GZI REIT may not be able to terminate the services of Fortune Plaza’s property manager even if the property manager is not performing at the expected level if the other owners of the building decide against such termination.

Although, with the attendance and voting rights granted by GCCD to Full Estates as described above, GZI REIT will be able to exercise more than two-thirds of the voting rights in the owners’ committee of City Development Plaza, there is no assurance that GCCD will be able to secure a similar undertaking from the person to whom it may sell its portion of City Development Plaza. In such circumstances, Full Estates will lose its ability to carry decisions which require the consent of owners of at least two-thirds of the Gross Floor Area of City Development Plaza.

GZI REIT will be unable to carry any decisions in the owners’ committee of Victory Plaza.

The Victory Plaza Units will represent approximately 19.5% of the total Gross Floor Area in respect of Victory Plaza when the two office tower blocks are completed. Such completion is currently expected to take place in 2007.

50 RISK FACTORS

Although GCCD (as the developer of Victory Plaza) has agreed that Keen Ocean shall have (i) the exclusive right to use, and to enjoy all proceeds (comprising mainly advertising income) arising from the use of, the common area within the podium as well as the internal and external walls of the podium; and (ii) the exclusive right to decide on all other operational matters relating only to the podium, Keen Ocean will itself be unable to carry any decisions in the owners’ committee of Victory Plaza where such decisions relate to the building as a whole.

The full rate of withholding tax of 20.0% for foreign enterprises may be applied and/or the BVI Companies could be deemed as having permanent establishments in the PRC and be subject to income tax in the PRC based on their deemed profits, either of which could have a material adverse effect on GZI REIT’s income.

GZI REIT will primarily rely on dividend payments from the BVI Companies for its income. Each of the BVI Companies is currently charged a concessionary rate of 10.0% of its gross Rental Income (with no deductions for expenses or allowances except for business tax). The full rate of withholding tax (20.0%) for these BVI Companies may be applied instead of the current concessionary rate of 10.0%.

Further, each of the BVI Companies is currently treated as not having a permanent establishment in the PRC in respect of its property leasing activities. If the BVI Companies are subsequently deemed as having permanent establishments in the PRC, they may be subject to income tax in the PRC at the rate of 33.0% of their deemed profits (which may, at the determination of the relevant tax authority, range between 20.0% and 40.0% of their gross Rental Income).

Should any of these events occur, the level of after-tax profit or surplus of each of the BVI Companies available for distribution (by way of dividend payment) could be reduced substantially. There can be no assurance that the profits tax rate or the rate of withholding tax in the PRC will not change in a manner which may adversely affect GZI REIT’s income.

A sale by the BVI Companies of the Properties held by them will be subject to land appreciation tax and income tax.

If, in the future, any of the BVI Companies sells the Property which it holds at a price which is higher than the book value of such Property, the relevant BVI Company will be liable in the PRC for land appreciation tax and income tax in respect of the difference between the sale price of the relevant Property and its book value (see the section headed “Taxation” in this Offering Circular for further information about such taxes).

Risks Relating to Investing in Real Estate

There are general risks attached to investments in real estate.

Investments in real estate are subject to various risks, including: (i) adverse changes in national or economic conditions; (ii) adverse local market conditions; (iii) the financial conditions of tenants as well as buyers and sellers of properties; (iv) changes in availability of debt financing; (v) changes in interest rates and other operating expenses; (vi) changes in environmental laws

51 RISK FACTORS and regulations, zoning laws and other governmental rules and fiscal policies; (vii) environmental claims arising in respect of real estate acquired with undisclosed or unknown environmental problems, which are located on contaminated properties or as to which inadequate reserves had been established; (viii) changes in energy prices; (ix) changes in the relative popularity of property types and locations leading to an oversupply of space or a reduction in tenant demand for a particular type of property in a given market; (x) competition among property owners for tenants; (xi) insufficiency of insurance coverage; (xii) inability of the Manager to provide or procure the provision of adequate maintenance and other services; (xiii) illiquidity of real estate investments; (xiv) considerable dependence on cash flow for the maintenance of, and improvements to, the portfolio properties; (xv) risks and operating problems arising out of the presence of certain construction materials; (xvi) disruptions caused by municipal construction projects in the vicinity of such real estate; and (xvii) acts of God, uninsurable losses and other factors.

Many of these factors may cause fluctuations in occupancy rates, rent schedules or operating expenses, causing a negative effect on the value, rental rates and occupancy rates of property and income derived from property. The annual valuation of the Properties will reflect such factors and as a result may fluctuate upwards or downwards. The capital value of GZI REIT’s properties may be significantly diminished in the event of a sudden downturn in property prices or the economy in the cities or provinces where such properties are located.

Income from, and expenditures in relation to, the Properties may not be as expected, which App B B20 (a) may adversely affect the financial condition of GZI REIT.

Income from the Properties may be adversely affected by the general economic climate, local conditions such as over-supply of properties or reduction in demand for properties in the market in which GZI REIT operates, the attractiveness of GZI REIT’s properties to tenants, management style, competition from other available properties, untimely collection of rent, changes in laws and increased operating costs and expenses. In addition, income from real estate may be affected by such factors as the cost of regulatory compliance, interest rate levels and the availability of financing. GZI REIT’s income would be adversely affected if a significant number of tenants were unable to pay rent or its properties could not be rented out on favourable terms.

If the Properties do not generate revenues sufficient to meet operating expenses, including debt service and capital expenditure, GZI REIT’s ability to make distributions will be adversely affected. In terms of expenditure, capital expenditure and other expenses may be irregular since continuing repairs and maintenance involve significant, and potentially unpredictable, expenditure. Both the amount and timing of expenditure will have an impact on the cash flow of GZI REIT. Physical defects relating to the Properties may thus have an adverse effect on the financial condition of GZI REIT. Increases in certain significant expenditures associated with investments in real estate (such as insurance costs and operating and maintenance costs) may cause a reduction in income from a property, which could have an adverse effect on the financial condition and results of operations of GZI REIT.

52 RISK FACTORS

GZI REIT may be adversely affected by the illiquidity of real estate investments.

Real estate investments are relatively illiquid. Further, in accordance with the REIT Code, GZI REIT is prohibited from disposing of its properties for at least two years from the time they are acquired unless Unitholders have passed a Special Resolution consenting to the proposed divestment. Such illiquidity may affect GZI REIT’s ability to vary its investment portfolio or liquidate part of its assets in response to changes in economic, financial, real estate market or other conditions. Also, the eventual liquidity of all investments of GZI REIT will be dependent upon the success of the realisation strategy proposed for each investment, which could be adversely affected by a variety of factors. For instance, GZI REIT may be unable to liquidate its assets on short notice, or may be forced to give a substantial reduction in the price that may otherwise be sought for such assets to ensure a quick sale. These factors could have an adverse effect on GZI REIT’s financial condition and results of operations.

GZI REIT may suffer material losses in excess of insurance proceeds.

The Properties could suffer physical damage caused by fire or other causes, and GZI REIT, Holdco or the BVI Companies may suffer public liability claims, resulting in losses (including loss of rent) which may not be fully compensated by insurance proceeds. In addition, certain types of risks (such as war risk, risk of nuclear contamination, risk of terrorist attacks, risks of earthquakes, risks of epidemics and acts of God) may be uninsurable or the cost of insurance may be prohibitive when compared to the risk. Should an uninsured loss or a loss in excess of insured limits occur, GZI REIT could be required to pay compensation and/or lose capital invested in the affected property as well as anticipated future revenue from that property. GZI REIT would also remain liable for any debt or other financial obligation related to that property. No assurance can be given that material losses in excess of insurance proceeds will not occur in the future.

The Properties or parts thereof may be acquired compulsorily.

The PRC Government has the power to acquire compulsorily any land in the PRC pursuant to the provisions of applicable legislation. In the event of any compulsory acquisition of property in the PRC, the amount of compensation to be awarded is based on the open market value of a property and is assessed on the basis prescribed in the relevant law. If any of the Properties were acquired compulsorily by the PRC Government, the level of compensation paid to GZI REIT pursuant to this basis of calculation may be less than the price which GZI REIT paid for such Properties.

The Properties are all located in Guangzhou, which exposes GZI REIT to economic and App B B20 (b) property market conditions in Guangzhou and the PRC as a whole, as well as to economic measures implemented by the PRC Government to prevent overheating of the PRC property market.

The Properties are all situated in Guangzhou, which exposes GZI REIT to the risk of a downturn in economic and property market conditions in Guangzhou and the PRC as a whole. The value of the Properties may be adversely affected by a number of local property market conditions, such as oversupply, the performance of other competing commercial properties or reduced demand for commercial space.

53 RISK FACTORS

GZI REIT’s business and financial conditions and results of operations also depend, to a large extent, on the performance of the economy of Guangzhou and of the PRC as a whole. An economic downturn or a downturn in the property market in Guangzhou and/or the PRC as a whole could adversely affect GZI REIT. Recent measures introduced by the PRC Government to prevent overheating of the PRC property market (such as a tax on all properties sold within two years of being purchased and occupied, limiting monthly mortgage payments to 50.0% of an individual borrower’s monthly income and limiting all debt service payments of an individual borrower to 55.0% of his monthly income) could significantly depress the property market and, consequently, affect GZI REIT in the manner aforesaid.

There are also numerous shopping centres, office buildings and other types of commercial properties in Guangzhou, including properties owned by GZI, as well as those portions of White Horse Building, Fortune Plaza, City Development Plaza and Victory Plaza which are not owned by GZI REIT that compete with the Properties in attracting tenants and cause downward pressure on rental rates (see the section headed “The Properties and Business — Competition” of this Offering Circular). In January 2003, the Guangzhou Municipal People’s Government announced the “Review of Planning of Pearl River New City”, in which Pearl River New City in the Tian He District was positioned as the core area for future urban development within Guangzhou. The review highlighted a new urban development scheme for the CBD of Guangzhou, namely the “Guangzhou Central Business District of the 21st Century”. The main focus of this development scheme will be centred around the core area of Tian He District (i.e. the Tian He Sports Stadium area) and Pearl River New City.

Since 2001, with the improved economic environment in Guangzhou, a significant number of commercial projects are underway and land transactions are increasing. According to the city’s urban authority, the current land released in Pearl River New City could potentially provide substantial office space exceeding 5.0 million sq.m. to be developed in phases spanning up to fifteen years.

According to the “Independent Market Research Report in Relation to the Guangzhou Commercial Property Market” in Appendix VIII to this Offering Circular, there is a wave of new Grade A office development projects in the pipeline, totalling approximately 1.6 million sq.m., to be released between 2005 and 2009. This compares with a total of only 1.1 million sq.m. of office space completed in the past decade. Excluded from the figure for development projects in the pipeline are a few development schemes that are currently on hold (e.g. due to financial difficulties); resurrection of these projects may potentially add another 0.3 million sq.m. to the pipeline. An estimated 88.0% of the total new supply will be located in the Tian He District. Although this is a large amount of space to be released onto the district in the next few years, 70.0% of the new space will be in the Pearl River New City area of the Tian He District.

If, after the Global Offering, competing properties of a similar type are built in the areas where the Properties are located or similar properties in their vicinities are substantially upgraded and refurbished, the Rental Income from the Properties could be reduced, thereby adversely affecting GZI REIT’s cash flow and the amount of funds available for distribution to Unitholders.

54 RISK FACTORS

The PRC property market is volatile. App B B2 (e)

GZI REIT is subject to property market conditions in the PRC generally and Guangzhou in particular. Although there is a perception that economic growth in the PRC and the higher standard of living resulting from such growth will lead to a greater demand for commercial properties in the PRC, it is not possible to predict with certainty that such a correlation exists as many social, economic and other factors may affect the development of the property market.

The PRC property market is volatile and may experience oversupply and property price fluctuations. The central and local governments adjust monetary and other economic policies from time to time to prevent and curtail the overheating of the PRC and local economies, and such economic adjustments may affect the property market in Guangzhou and other parts of the PRC. The central and local governments also make policy adjustments and adopt new regulatory measures from time to time in a direct effort to control the over-development of the property market in the PRC. Such policies may lead to changes in market conditions, including price instability and imbalance of supply and demand, which may materially and adversely affect the business and financial conditions and the results of operations of GZI REIT. Moreover, there is no assurance that there will not be over-development in the property sector in the PRC in the future. Any future over-development in the property sector in the PRC may result in an oversupply of properties, including commercial properties, and a fall of property prices as well as rental rates, which could adversely affect the business and financial conditions and the results of operations of GZI REIT.

The valuation analysis may prove to be unrepresentative of an investment in GZI REIT.

The Independent Property Valuer adopted the income capitalisation approach, including discounted cash flow analysis, in valuing the Properties. These values were cross checked with available market comparables using the sales comparison approach.

The discounted cash flow method is based on assumed cash flows from a particular property over a certain holding period of time that comprise the periodic net operating income (estimated as gross income less operating expenses and other outgoings) during the holding period and the terminal value of such property as of the end of the holding period. The capitalisation method assumes a stable or normalised level of net operating income from a particular property and discounts the income with an expected rate of return or capitalisation rate.

The valuation is dependent on, among other things, expenditure forecasts based on building surveys. (See Appendix VII to this Offering Circular and the risk factor headed “The due diligence exercise on buildings and equipment may not have identified all material defects, breaches of laws and regulations and other deficiencies” below.)

While these forms of analysis allow investors to make an assessment of the long term return that is likely to be derived from the Properties through a combination of both rental and capital growth, there can be no assurance that the projected cash flows, the hypothetical terminal value of the Properties or any of the other assumptions which have been used for the purposes of the valuation will prove to be accurate or reliable, or that the discount rates adopted by the Independent Property Valuer will be representative of returns from comparable or alternative forms

55 RISK FACTORS of investment over the period or periods concerned. Accordingly, the Appraised Value of any of the Properties is not an indication of, and does not guarantee, that a Property could be sold by GZI REIT at that price currently or in the future. The price at which GZI REIT may sell a Property (if at all) may be lower than the purchase price of such Property to be paid by GZI REIT.

The due diligence exercise on buildings and equipment may not have identified all material App B B2 (f) defects, breaches of laws and regulations and other deficiencies.

The Independent Property Valuer had conducted a due diligence exercise on the physical condition of the Properties (see Appendix VII to this Offering Circular). The building defects which had been identified were either rectified or factored into the purchase price which GZI REIT paid for the BVI Company Shares under the Reorganisation Deed (see the section headed “Material Agreements and Other Documents Relating to GZI REIT — Reorganisation Deed” of this Offering Circular).

Nevertheless, the due diligence process with respect to the structural condition of the Properties has been limited as described in the results of the building survey report set out in Appendix VII to this Offering Circular. For example, the Independent Property Valuer only carried out an inspection of 20.0% of each of the Properties and did not perform any kind of tests on building fabrics and building services systems. The Independent Property Valuer also did not inspect areas which were inaccessible or covered up. There can be no assurance that such reviews, surveys or inspections have revealed all defects or deficiencies affecting the portfolio of Properties. In particular, there can be no assurance as to the absence of: (i) latent or undiscovered defects or deficiencies; or (ii) inaccuracies or deficiencies in such review, survey or inspection reports, any of which could have a material adverse impact on the operations of the Properties as well as GZI REIT’s financial condition and results of operations.

The risk of undisclosed defects, breaches and deficiencies is necessarily increased as a result of the time interval between completion of the review, survey and inspection process and the date of this Offering Circular.

Losses or liabilities from latent building or equipment defects may adversely affect earnings and cash flow.

Design, construction or other latent property or equipment defects in the Properties may require additional capital expenditure, special repair or maintenance expenses or the payment of damages or other obligations to third parties, other than those disclosed in this Offering Circular. Costs or liabilities arising from such property or equipment defects may involve significant and potentially unpredictable patterns and levels of expenditure which may have a material adverse effect on GZI REIT’s earnings and cash flows.

Statutory or contractual representations, warranties and indemnities given by any seller of real estate are unlikely to afford satisfactory protection from costs or liabilities arising from such property or equipment defects.

56 RISK FACTORS

Distributions to Unitholders will be subject to cash flow.

GZI REIT’s initial investments are held through Holdco and the BVI Companies, and GZI REIT will rely, directly or indirectly, on dividend payments and other distributions from Holdco and the BVI Companies for its income and cash flows. In addition, substantially all of the assets of GZI REIT consist of its shareholdings in Holdco. In order to meet its payment obligations and to pay distributions to Unitholders, GZI REIT will rely on the receipt of direct dividends, distributions, interest or advances from Holdco and, indirectly, the BVI Companies. The ability of Holdco and the BVI Companies to make such payments may be restricted by, among other things, their respective business and financial positions, the availability of distributable profits, the availability of foreign currency, applicable laws and regulations which may restrict the payment of dividends by Holdco and the BVI Companies, or the terms of agreements to which they are, or may become, a party.

There can be no assurance that Holdco and the BVI Companies will have sufficient distributable or realised profits or surplus in any future period to pay dividends, make distributions, pay interest, or make advances. The level of profit or surplus of Holdco and each BVI Company available for distribution may be affected by a number of factors including:

• operating losses incurred by the company in any Financial Year; and

• changes in accounting standards (including standards in respect of depreciation policies), taxation laws and regulations, laws and regulation in respect of foreign exchange repatriation of funds, corporation laws and regulations relating thereto, in the PRC and/or Hong Kong and/or the BVI.

The occurrence of these or other factors that affect the ability of Holdco and the BVI Companies to pay dividends or other distributions would adversely affect the level of distributions paid to Unitholders.

Moreover, non-cash losses are not reversed from the income statement of GZI REIT when the Manager calculates GZI REIT’s Total Distributable Income. As such, a downward revaluation of GZI REIT’s properties could reduce or eliminate the distributions paid to Unitholders.

Fortune Plaza and Victory Plaza have limited operating histories.

Fortune Plaza and Victory Plaza have limited operating histories with their first tenancies having commenced in the second half of 2003. As at 30 September 2005, the Fortune Plaza Units had an occupancy level of 76.9% and the Victory Plaza Units had an occupancy level of 100.0%. For the six months ended 30 June 2005, the Fortune Plaza Units generated Gross Turnover of HK$13.3 million and the Victory Plaza Units generated Gross Turnover of HK$12.8 million.

Given their limited operating histories, there can be no assurance that the Fortune Plaza Units and the Victory Plaza Units will be able to maintain or improve on their past performance.

57 RISK FACTORS

Risks Relating to the PRC

All of the Properties are located in the PRC. Accordingly, GZI REIT’s results of operations, App B B2 (e) financial position and prospects are subject to a significant degree to the economic and other developments of the PRC.

The PRC’s economic and other policies could affect GZI REIT’s business.

The economy of the PRC differs from the economies of most developed countries in many respects, including:

• structure;

• level of development;

• growth rate;

• control of foreign exchange; and

• allocation of resources.

For more than two decades, the PRC Government has implemented economic reform measures emphasising utilisation of market forces in the development of the PRC economy. Although the Manager believes these reforms will have a positive effect on its overall and long term development, it cannot predict whether changes in the PRC’s economic and other policies will have any adverse effect on GZI REIT’s current or future business and financial conditions and results of operations. For example, recent measures have been introduced by the PRC Government to prevent overheating of the PRC property market, including limiting the monthly mortgage payments to 50.0% of an individual borrower’s monthly income and limiting all debt service payments of an individual borrower to 55.0% of his monthly income.

There is uncertainty about the quantum of land grant premium which GZI REIT will have to pay and additional conditions which may be imposed if the Manager decides to seek an extension of the land use rights for the Properties.

The Properties are held by the BVI Companies under land use rights granted by the PRC Government. These rights are for 40 or 50-year terms (see the section headed “The Properties and Business — Terms of Land Use Rights” in this Offering Circular for the commencement date of the land use rights for each of the Properties) and, upon the expiration of such terms, the land use right as well as the ownership of the Properties will revert to the PRC Government unless the land user applies for an extension of the term of the land use right. If such an application is granted, the land user will be required, among other things, to pay a land grant premium. As none of the land use rights granted by the PRC Government thus far has run its full term, there is no precedent to provide an indication of the quantum of land grant premium which GZI REIT will have to pay and additional conditions which may be imposed if the Manager decides to seek an extension of the land use rights for the Properties upon the expiry thereof.

58 RISK FACTORS

Changes in foreign exchange regulations may adversely affect GZI REIT’s results of operations.

The BVI Companies receive all their revenue in Renminbi, which will have to be converted to US dollars to make repayments under the Loan Facility and to Hong Kong dollars for payment as distributions to Unitholders. Conversion of Renminbi is subject to strict government regulation in the PRC. Under the existing foreign exchange regulations in the PRC and the approvals already obtained in respect of the BVI Companies, rental received by the BVI Companies may be converted into foreign currency without the requirement for further approval from SAFE by complying with certain procedural requirements, subject to payment of the relevant PRC taxes by the said entities. There is no assurance that the government policies regarding conversion of Renminbi into foreign currencies will continue in the future.

Fluctuations in the value of the Renminbi could adversely affect the value of distributions paid in respect of the Units in Hong Kong dollars and/or the ability of GZI REIT to make repayments under the Loan Facility.

The BVI Companies receive all their revenue in Renminbi, which will have to be translated to HK dollars for accounting purposes and converted (i) to US dollars to make repayments under the Loan Facility (although this risk has been hedged through US dollar/Renminbi non-deliverable swap facilities, see the section headed “Manager’s Discussion and Analysis of Future Operations” in this Offering Circular) and (ii) to Hong Kong dollars for payment as distributions to Unitholders. The Government of the PRC introduced a limited floating currency system in July 2005 under which the Renminbi is pegged against a basket of currencies. The exchange rates between the Renminbi and each of the other currencies comprised in the basket may fluctuate to a significant extent and the Renminbi may also be revalued in the future. In addition, if the PRC converts to a fully floating currency system, the Renminbi may experience wide fluctuations as a result of market forces. Any decrease in the value of Renminbi may adversely affect accounting profit and will adversely affect the value of distributions paid in respect of Units in Hong Kong dollars and/or the ability of GZI REIT to make repayments under the Loan Facility.

Epidemic diseases in Asia and elsewhere may adversely affect GZI REIT’s operations.

Several countries in Asia, including the PRC, and elsewhere have suffered from outbreaks of diseases like SARS and avian flu over the past few years. A new and prolonged outbreak of such diseases may have a material adverse effect on GZI REIT’s business and financial conditions and results of operations. Although the long term effect of such diseases cannot currently be predicted, previous occurrences of SARS and avian flu had an adverse effect on the economies of those countries in which they were most prevalent. The occurrence of SARS in Guangdong province in 2003 was estimated by the Department of Statistics of Guangdong Province to have lowered the province’s GDP by 1.2%. The outbreak also had an adverse impact on the business in the White Horse Units.

59 RISK FACTORS

An outbreak of a communicable disease like SARS or avian flu in Guangzhou may affect GZI REIT in a number of ways, including, but not limited to, a decline in demand for consumer goods, a reduction in the number of visitors to the Properties, a decline in revenue of tenants of the Properties and increased costs of cleaning and maintaining the public facilities in the Properties. The impact of these factors on the operations of the Properties could materially and adversely affect the business and financial conditions and the results of operations of GZI REIT.

There is currently an outbreak of avian flu in various parts of the PRC and, as at the Latest Practicable Date, 11 fresh outbreaks of the disease have been reported in six provinces (Hubei, Xinjiang, Liaoning, Anhui, Hunan and Shanxi) and the Inner Mongolia autonomous region.

An irregular or inadequate supply of electricity may adversely affect GZI REIT’s operations.

The Properties rely on a regular and adequate supply of electricity for their daily operations. Although there had been no incidences of inadequate supply of electricity which affected the operations of the Properties since their acquisition by GZI, there is no assurance that such situations will not occur in the future at any of the Properties or that the generators in White Horse Building will be able to supplement any future shortfall in electricity supply, either of which could materially and adversely affect the business and financial conditions and the results of operations of GZI REIT.

Interpretation of PRC laws and regulations involves uncertainty.

As the Properties are all located in the PRC, their operations are governed principally by laws and regulations in the PRC. The PRC legal system is based on written statutes and prior court decisions may only be cited as reference. Since 1979, the PRC Government has promulgated laws and regulations in relation to economic matters such as foreign investment, corporate organisation and governance, commerce, taxation and trade, with a view to developing a comprehensive system of commercial law. However, as these laws and regulations are continually evolving in response to changing economic and other conditions, and because of the limited volume of published cases and their non-binding nature, any particular interpretation of PRC laws and regulations may not be definitive.

The land and real estate laws of the PRC, including laws relating to land title and building ownership regulations and laws applicable to landlords and tenants, are still under development and reform. In recent years, the Chinese People’s Congress, the State Council, the Ministry of Land and Resources and the Ministry of Construction have promulgated a number of laws and regulations and departmental rules relating to legal problems in respect of land and real estate. In addition, the local people’s congresses and local governmental authorities in many provinces and cities also promulgated various local regulations or local rules. There may be uncertainties in the interpretation and application of these laws, administrative regulations, departmental rules, local regulations and local rules.

60 RISK FACTORS

Risks Relating to an Investment in the Units

The Units have never been publicly traded and the Global Offering may not result in an active or liquid market for the Units. In addition, the real estate investment trust market in Hong Kong is relatively new.

Prior to the Global Offering, there has been no public market for the Units and an active public market for the Units may not develop or be sustained after the Global Offering. Although the Units will be listed on the Hong Kong Stock Exchange following completion of the Global Offering, this does not guarantee that a trading market for the Units will develop or, if a market does develop, the liquidity of that market.

As real estate investment trusts are a relatively new investment product in Hong Kong, there is presently no official or directly comparable benchmark against which GZI REIT’s performance can be measured. It is also unknown whether an active market for real estate investment trusts which invest in the PRC will develop in Hong Kong.

Unitholders have no right to require the redemption of their Units.

Unitholders have no right to request the Manager to redeem their Units. Therefore, there can be no assurance that a Unitholder will be able to dispose of its Units at the Offer Price or any price, or at all. Accordingly, Unitholders may only be able to liquidate or dispose of their Units through a sale of such Units to third parties on the secondary market.

The price of the Units may decline after the Global Offering.

The Offer Price of the Units will be determined by agreement among GZI, the Manager and the Joint Global Coordinators (on behalf of the Underwriters) and may not be indicative of the market price for the Units after the completion of the Global Offering. The Units may trade at prices significantly below the Offer Price or the future NTA per Unit. The price of the Units will depend on many factors, including:

• the perceived prospects of GZI REIT’s business and investments and the Guangzhou real estate market;

• differences between GZI REIT’s actual financial and operating results and those expected by investors and analysts;

• changes in GZI REIT’s revenues or earnings estimates or analysts’ recommendations or projections;

• changes in general economic or market conditions both domestically and internationally;

• the market value of GZI REIT’s assets;

61 RISK FACTORS

• changes in interest rates and the consequential impact on investments with interest rate sensitive returns;

• the perceived attractiveness of the Units against those of other equity securities, including those not relating to the real estate sector;

• the balance of buyers and sellers of the Units;

• the future size and liquidity of the Hong Kong real estate investment trust market;

• any future changes to the regulatory system, including the tax system, both generally and specifically in relation to Hong Kong real estate investment trusts;

• the ability on GZI REIT’s part to implement successfully its investment and growth strategies and to retain its key personnel;

• foreign exchange rates; and

• broad market fluctuations, including weakness of the equity market and increases in interest rates.

For these reasons, among others, Units may trade at prices that are higher or lower than the attributable NTA per Unit. To the extent that GZI REIT retains operating cash flow for investment purposes (subject to complying with requirements in the REIT Code and the Trust Deed relating to required levels of distribution by GZI REIT), working capital reserves or other purposes, these retained funds, while increasing the value of its underlying assets, may not correspondingly increase the market price of the Units. Any failure on GZI REIT’s part to meet market expectations with regard to future earnings and cash distributions may adversely affect the market price for the Units.

In addition, the Units are not capital-safe products and there is no guarantee that Unitholders can regain the amount invested. If GZI REIT is terminated or liquidated, it is possible that investors may lose all or a part of their investment in the Units.

The forward looking information in this Offering Circular may prove inaccurate.

This Offering Circular contains forward looking statements regarding, among other things, forecast distribution levels for the Forecast Period 2005 and the Forecast Year 2006. These forward looking statements are based on a number of assumptions which are subject to significant uncertainties and contingencies, many of which are outside of GZI REIT’s control (see the section headed “Profit Forecast — Bases and Assumptions” in this Offering Circular).

Moreover, GZI REIT’s revenue is dependent on a number of factors, including the receipt of dividends and distributions, directly or indirectly, from Holdco and the BVI Companies as well as rent from the Properties. Such rent, dividends and distributions may decrease for a number of

62 RISK FACTORS reasons, including the lowering of occupancy and rental rates, insolvency or delay or failure in rent payment by tenants, which may adversely affect GZI REIT’s ability to achieve the forecast distributions as some or all events and circumstances assumed may not occur as expected, or events and circumstances may arise which are not currently anticipated.

Actual results may be materially different from the forecast. There can be no assurance that the assumptions will be realised and the actual distributions will be as forecast.

Decreases in property values as a result of the annual revaluation of the Properties could result in decreases in the annual consolidated net profit of GZI REIT for that year and may also trigger certain adverse consequences under the Facility Agreement.

The Properties are subject to an annual revaluation. Under GZI REIT’s accounting policy, any decrease in the valuation of its investment properties could result in non-cash charges to the income statement, and may give rise to a substantial decline in annual consolidated net profit for the year. Such a decline could result in lower levels of Total Distributable Income and may significantly affect distributions to Unitholders. A 5.0% decrease in the fair value of the Properties may reduce the Total Distributable Income to nil (see the section headed “Profit Forecast — Sensitivity Analysis” in this Offering Circular). Under the Trust Deed, Total Distributable Income for a Financial Year is the consolidated audited profit after tax of GZI REIT and entities controlled by it for that Financial Year, adjusted to eliminate the effects of certain Adjustments (as defined in the section headed “Distribution Policy” in this Offering Circular) which have been recorded in the income statement for the relevant Financial Year. Unrealised property valuation losses are not an Adjustment for the purpose of calculating Total Distributable Income. While the Manager may (but is not obliged to) include in its annual distribution such amounts equivalent to any unrealised property revaluation losses and fair value losses on financial instruments, the Manager’s ability to do so is subject to, and may be constrained by, compliance with the gearing level prescribed by the REIT Code, which limits GZI REIT’s borrowings to no more than 45.0% of GZI REIT’s total gross asset value.

If, as a result of a property revaluation, GZI REIT’s total gross asset value falls such that GZI REIT’s borrowings are above 45.0% of its gross asset value, the Manager would be required to retain funds that would otherwise be distributable to Unitholders so as to increase GZI REIT’s total gross asset value.

Under the Facility Agreement, Holdco must maintain a security margin (being the ratio of the aggregate principal amount of all borrowings under the Facility Agreement to the aggregate value of the Properties as shown in the then latest annual valuation reports plus the aggregate amount of all cash in bank accounts held by the BVI Companies and Holdco) of no more than 50.0%. A decrease in the values of the Properties could cause the security margin to exceed 50.0%. Such an event will constitute an event of default under the Facility Agreement. In such an event, the Lending Banks may, among other things, enforce their mortgages over the Properties.

Property yield on real estate to be held by GZI REIT is not equivalent to yield on the Units. App B B19 (b)

Generally speaking, property yield depends on the amount of net property income and is calculated as the amount of revenue generated by the properties concerned, less the expenses

63 RISK FACTORS incurred in maintaining, operating, managing and leasing the properties compared against the current value of the properties. Yield on the Units, however, depends on the distributions payable on the Units as compared with the purchase price of the Units. While there may be some correlation between these two yields, they are not the same and will vary accordingly for investors who purchase Units in the secondary market at a market price that differs from the Offer Price.

The NAV of the Units will be diluted if further issues are priced below the NAV.

The Trust Deed contemplates that new issues of Units may occur, the Issue Price for which may be above, at or below the then current NAV of GZI REIT. Where new Units are issued at less than NAV, the NAV of existing Units will be diluted.

There may be risks associated with the future sales of Units.

No prediction can be made as to the effect, if any, that future sales of Units, or the availability of Units for future sale, will have on the market price of the Units. Upon completion of the Global Offering, it is expected that GZI (through Dragon Yield, its wholly owned subsidiary) and Yue Xiu (assuming that it elects to retain the Units it is entitled to receive under the Special Dividend) will respectively own approximately 31.3% and 0.8% of the then outstanding Units (assuming the Over-allocation Option is exercised in full). Although the Underwriting Agreements and the Reorganisation Deed contain restrictions on the disposal of Units held by GZI, and Yue Xiu has agreed to a similar lock-up in respect of any Units it elects to receive under the Special Dividend, there can be no assurance that sales of substantial amounts of Units by other parties will not occur or that GZI and Yue Xiu will not dispose of their Units upon the lapse or waiver of the relevant restrictions.

The Hong Kong Code on Takeovers and Mergers does not apply to Unit acquisitions and there may be limited information in relation to the interests held by significant holders and other connected persons of GZI REIT.

Unitholders’ rights differ from, and may be less protective in certain respects than, those granted to shareholders of public companies in Hong Kong. The Hong Kong Code on Takeovers and Mergers does not apply to acquisitions of units in real estate investment trusts, which means (among other things) that a person may acquire any number of Units without being required to make a general offer to acquire the Units held by other Unitholders. Accordingly, Unitholders may not benefit from a possible premium price and may not receive equal prices for Units sold.

In accordance with the REIT Code, interests in the Units held by connected persons of GZI REIT are required to be disclosed in the annual report of GZI REIT. Part XV of the SFO does not directly apply to the Units. Although the Trust Deed deems some of the provisions on disclosure of interests set out in Part XV of the SFO to apply to the Units, and contains provisions requiring Unitholders (among other persons) to disclose their interests in GZI REIT, the Manager may not be able to enforce these provisions at all times. Accordingly, the amount of publicly available information concerning holders of significant numbers of Units and connected persons of GZI REIT may be limited, and complete disclosure of the interests of such persons cannot be assured.

64 RISK FACTORS

The sale or possible sale of a substantial number of Units by GZI or Yue Xiu in the public market could adversely affect the price of the Units.

On the Listing Date, assuming that the Over-allocation Option is fully exercised, GZI REIT will have 1,000,000,000 Units outstanding, of which approximately 679,376,416 Units (67.9%) will be held by the public (through the Global Offering, the Offer for Sale and/or the Special Dividend), 312,550,000 Units (31.3%) will be held by Dragon Yield (a wholly owned subsidiary of GZI) and 8,073,584 Units (0.8%) will be held by Yue Xiu (assuming that Yue Xiu elects to retain the Units it is entitled to receive under the Special Dividend). If either of these entities sells or is perceived as intending to sell a substantial number of Units (following the lapse of any lock-up arrangement or pursuant to applicable waivers (see the section headed “Underwriting — Lock up Agreements” in this Offering Circular)), the market price for the Units could be adversely affected.

Certain rights in relation to Units in which a person has an interest or is deemed to have an interest may be suspended under the provisions of the Trust Deed.

The Trust Deed contains provisions that require relevant persons to disclose to the Trustee and the Manager information in relation to the acquisition or disposal of interests in the Units. If the Trustee or the Manager believes a person has not complied with such disclosure of interest provisions in the Trust Deed, irrespective of whether such person is a holder of Units, the Trustee or the Manager (as the case may be) may, in its absolute discretion, take certain actions in respect of all or a part of the Units in which such person holds or is deemed to hold an interest. Such actions may include suspending the voting rights of such Units, suspending the payment of distributions on such Units, suspending the transfer and registration of such Units and imposing a daily administrative fee payable in relation to each such Unit.

Accounting standards in the PRC and Hong Kong are subject to change.

Accounting standards in the PRC and Hong Kong are subject to change. As a result, the financial statements of GZI REIT, Holdco, the BVI Companies as well as any other entities which are controlled by GZI REIT and are subject to such accounting standards may be affected by the introduction of any such revised accounting standards.

The extent and timing of these changes in accounting standards are currently unknown and subject to confirmation by the relevant authorities. The Manager has not quantified the effects of these proposed changes and there can be no assurance that these changes will not have a significant impact on the presentation of GZI REIT’s financial statements or on its results of operations. In addition, such changes may adversely affect the ability of GZI REIT to make distributions to Unitholders.

The Units may be delisted from the Hong Kong Stock Exchange.

The Hong Kong Stock Exchange imposes certain requirements for the continued listing of securities, including the Units, on the Hong Kong Stock Exchange. There can be no assurance that GZI REIT will continue to meet the requirements necessary to maintain the listing of Units on the Hong Kong Stock Exchange or that the Hong Kong Stock Exchange will not change the listing requirements.

65 USE OF PROCEEDS

The Manager estimates that the total proceeds to GZI REIT from the Global Offering will be App B approximately HK$1,661.6 million based on the Minimum Offer Price and HK$1,792.7 million B2 (b) based on the Maximum Offer Price.

The net proceeds from the Units issued under the Global Offering (which, for the avoidance of doubt, excludes the proceeds from the Over-allocation Option and the Offer for Sale), together with the funds drawn down from the Loan Facility, will be used to make partial payment on the Promissory Note (see the section headed “Material Agreements and Other Documents Relating to GZI REIT — Reorganisation Deed” in this Offering Circular).

The following table sets out the sources of GZI REIT’s funds following completion of the Global Offering and the intended application of those funds.

Based on the Based on the Maximum Minimum Offer Price of Offer Price of HK$3.075 HK$2.850 (HK$ million) (HK$ million)

Sources 583,000,000 Units issued under the Global Offering 1,792.7 1,661.6

Loan Proceeds 1,287.0 1,287.0

Total 3,079.7 2,948.6

Use of Funds Payment on the Promissory Note(1) 2,952.1 2,824.3

Retention of funds due to GZI under the Promissory Note for proposed renovation works at the White Horse Units 26.7 26.7

Retention of funds due to GZI under the Promissory Note for payment of costs and expenses of the Global Offering and debt related costs(2) 98.8 95.5

Retention of funds in relation to Rental Income attributable to Partat in respect of the period from the Listing Date to 31 December 2005 (both dates inclusive)(3) 2.1 2.1

Total 3,079.7 2,948.6

Notes:

(1) Taking into account the initial adjustment to the Initial Consideration in accordance with the Reorganisation Deed (see the section headed “Material Agreements and Other Documents Relating to GZI REIT — Reorganisation Deed” in this Offering Circular).

(2) The portion of the expenses of the Global Offering that will be charged against the Unitholders’ equity of GZI REIT will be netted off from the proceeds of the Global Offering and thereby deducted from the final consideration to be paid to GZI under the Reorganisation Deed. All remaining expenses of the Global Offering will be borne by GZI.

(3) Under the current leases for the White Horse Units, rent and property management fees are paid in an undivided amount by the tenants in the White Horse Units to White Horse Property Management Company. The majority of these leases will expire on 31 December 2005. The funds retained represent the Rental Income from the current leases in the White Horse Units for the period from the Listing Date to 31 December 2005, which amounts are due to Partat.

66 OWNERSHIP OF UNITS

Significant Unitholders and Other Unitholders App B B5

Assuming No Exercise of the Over-allocation Option

Immediately following the completion of the Global Offering (assuming that the Over- allocation Option is not exercised and that Yue Xiu elects to retain the Units it is entitled to receive under the Special Dividend), so far as the Directors are aware, the only persons directly or indirectly interested in 10.0% or more of the Units in issue will be:

Name Units Percentage of issued Units

Direct interest Deemed interest Direct interest Deemed interest

Dragon Yield 400,000,000 — 40.0% — GZI(1) — 400,000,000 — 40.0% Yue Xiu(2) 8,073,584 400,000,000 0.8% 40.0% Public 591,926,416 — 59.2% —

Notes:

(1) Such Units represent the deemed interest of GZI under the Trust Deed in the Units held by Dragon Yield by virtue of GZI’s direct interest in the entire issued share capital of Dragon Yield.

(2) Such Units represent the Units which Yue Xiu is entitled to receive under the Special Dividend and the deemed interest of Yue Xiu in the Units held by Dragon Yield under the Trust Deed by virtue of its deemed interest in the entire issued share capital of Dragon Yield.

Assuming Full Exercise of the Over-allocation Option

Immediately following the completion of the Global Offering (assuming that the Over- allocation Option is exercised in full and that Yue Xiu elects to retain the Units it is entitled to receive under the Special Dividend), so far as the Directors are aware, the only persons directly or indirectly interested in 10.0% or more of the Units in issue will be:

Name Units Percentage of issued Units

Direct interest Deemed interest Direct interest Deemed interest

Dragon Yield 312,550,000 — 31.3% — GZI(1) — 312,550,000 — 31.3% Yue Xiu(2) 8,073,584 312,550,000 0.8% 31.3% Public 679,376,416 — 67.9% —

Notes:

(1) Such Units represent the deemed interest of GZI under the Trust Deed in the Units held by Dragon Yield by virtue of GZI’s direct interest in the entire issued share capital of Dragon Yield.

67 OWNERSHIP OF UNITS

Subscription by the Directors

The Directors and their associates do not intend to apply for Units under the Global Offering. However, certain of the Directors and/or their associates are GZI Qualifying Shareholders and will be entitled to receive Units under the Special Dividend. Any Units which these Directors and/or their associates elect to retain will be announced upon completion of the allotment of Units under the Global Offering. Save as described in the section headed “Corporate Governance — Interests of, and Dealings in Units by, the Manager as well as the Directors and Senior Management of the Manager” in this Offering Circular, there is no restriction on the Directors disposing or transferring all or any part of their unitholdings.

68 DISTRIBUTION POLICY

Distribution Policy

The Manager’s policy is to distribute to Unitholders 100.0% of GZI REIT’s Total Distributable App B B2 (l) Income for each of FY2006 to FY2008 and thereafter at least 90.0% of Total Distributable Income RC 7.12 in each Financial Year.

For these purposes, and under the terms of the Trust Deed, “Total Distributable Income” for a Financial Year means the amount calculated by the Manager as representing the consolidated audited profit after tax of GZI REIT and entities controlled by it for that Financial Year, as adjusted for accounting purposes to eliminate the effects of accounting adjustments which are charged or credited to the income statement for the relevant Financial Year (“Adjustments”), including: (i) the effects of unrealised property valuation gains, including reversals of impairment provisions; (ii) realised gains on the disposal of properties; (iii) fair value gains on financial instruments; (iv) deferred tax charges/credits in respect of property valuation movements; (v) other material non-cash gains; (vi) expenses paid out of the Deposited Property in connection with the issue of new Units; and (vii) any adjustments in accordance with HKFRS which increase those recorded under generally accepted accounting principles in the PRC on which the accounts of cash available for distribution is based (including reversal of depreciation charge on investment properties).

For the avoidance of doubt, non-cash losses such as property revaluation losses are not reversed from the income statement of GZI REIT and will therefore directly impact Total Distributable Income. The Manager may (but is not obliged to) distribute any cash freed up by non-cash losses (in which case, for FY2006 to FY2008, more than 100.0% of GZI REIT’s Total Distributable Income could be distributed) or utilise such cash to replenish GZI REIT’s asset base. In addition, GZI REIT does not have to distribute non-cash gains.

For a period determined by the Manager from time to time to be the period in respect of which distributions are to be made (“Distribution Period”) that is not a Financial Year, “Total Distributable Income” means the amount determined by the Manager in its discretion.

For any Distribution Period, the Manager may, in its absolute discretion, distribute to Unitholders more than the percentage of the Total Distributable Income required by the REIT Code (currently 90.0%) if the Manager considers that GZI REIT has funds surplus to its business requirements.

Under the Trust Deed, the Manager must, subject to applicable law, ensure that at least one distribution shall be made in respect of each Financial Year and paid no later than the date which is five calendar months following the end of the relevant Financial Year. However, GZI REIT’s distribution for the period from the Listing Date to 31 December 2005 will be paid together with the distribution for the period from 1 January 2006 to 30 June 2006 and is intended to be paid on or before 30 November 2006. The Manager’s initial distribution policy is that two distributions will be made in respect of each year, being distributions with respect to the six-month periods ending 30 App B B13 June and 31 December. The Directors anticipate that the interim and final distributions will be paid in November and May in each year, respectively.

69 DISTRIBUTION POLICY

Distributions to Unitholders will be declared and paid in Hong Kong dollars. The Manager may also adopt such rules as it considers appropriate for the reinvestment by Unitholders of any distributions to be made by GZI REIT in return for new Units but no Unitholder shall be obliged to receive Units in lieu of a cash distribution. Under current Hong Kong tax law, distributions may be made free of withholdings or deductions on account of Hong Kong tax. It is understood that, under the Inland Revenue Department’s current practice, no tax should be payable in Hong Kong in respect of distributions made by GZI REIT. Unitholders should take advice from their own professional advisers as to their particular tax position.

GZI REIT’s ability to make distributions is dependent on (among other things) GZI REIT having available sufficient cash to make the payments required (see the risk factor headed “Distributions to Unitholders will be subject to cash flow” in this Offering Circular). The REIT Code requires that each company used to hold real estate and other assets for GZI REIT for the time being shall distribute to GZI REIT all of such company’s income for each Financial Year insofar as permitted by the laws and regulations of its relevant jurisdiction of incorporation.

In respect of distributions to be made for the Forecast Year 2006, see the section headed “Statement of Distributions” in this Offering Circular.

70 STRATEGY

Investment Objective and Policy App B B2 (a), B2 (b) & B2 (o) The Manager’s investment objective for GZI REIT is to invest in properties in Guangdong province in the PRC. In pursuing its investment objective, the Manager will adhere to the following policies:

• unless Unitholders approve otherwise by Special Resolution at a meeting convened by the Manager, investments will initially be in real estate in Guangdong province;

• investments will be in properties for the long term; and

• investments will be in a diverse portfolio of sustainable income producing properties which are used primarily for office, retail and other commercial purposes.

Business Strategies

In pursuing its objectives, the Manager will follow a set of key business strategies, including:

1. Pro-active portfolio growth initially in Guangdong province App B B2 (c)

The Manager will focus on investing in properties, initially in Guangdong province, which are primarily used for office, retail and other commercial purposes. It will seek to acquire properties that will provide attractive cash flows and yields together with opportunities for further revenue growth through operational optimisation. Portfolio growth opportunities for GZI REIT are underpinned by:

• the right of first refusal granted by GZI to GZI REIT, conditional on listing of the Units on the Hong Kong Stock Exchange, to acquire any completed Grade A office or commercial buildings in Guangzhou that (i) fulfils (or would reasonably regarded as fulfilling) the investment criteria and property characteristics and is consistent (or would reasonably be regarded as being consistent) with the investment strategy of the Manager for property investments by GZI REIT (as stated in this Offering Circular); (ii) is owned or developed by the GZI Group and in which the GZI Group has an ownership interest of 95.0% or more (and, in circumstances in which GZI is able to negotiate and agree terms with the relevant joint venture party so as to extend the coverage of the right of first refusal granted by GZI to include the relevant property that is the subject of that joint venture, that relevant property); (iii) has a value of US$20.0 million or more (as determined by an independent property valuer); and (iv) GZI proposes to dispose of to a third party or parties. This right of first refusal will commence on the Listing Date and continue until the earliest of the following occurring: (a) the expiry of five years after Listing Date; (b) the Units ceasing to be listed on the Hong Kong Stock Exchange; or (c) the entity which is the asset manager of GZI REIT ceasing for whatever reason to be a subsidiary of any member of the GZI Group or the Yue Xiu Group (see the section headed “Material Agreements and Other Documents Relating to GZI REIT — Deed of Right of First Refusal” in this Offering Circular);

71 STRATEGY

• the flexibility of GZI REIT to seek investment opportunities from other property developers or vendors other than GZI; and

• the scale of the Manager’s existing network of relationships in Guangdong Province, which helps it identify and source acquisition targets.

2. Operational enhancements

2.1 Pro-actively managing and leasing properties

The Manager believes that there is considerable scope for improvement in the operational efficiency of GZI REIT to drive growth in net rental income and profitability over time. Such measures include:

• disciplined and efficient asset management and cost control;

• pro-active retail and commercial leasing;

• continual review and improvement in tenant mix and facility layout;

• delivery of high quality services to tenants and customers;

• active marketing and promotions; and

• pursuit of additional revenue opportunities.

2.2 Property and asset management expertise

The Manager seeks to ensure that high quality services are provided to the tenants and customers of the properties of GZI REIT. To this end, it will:

• provide continuous and appropriate professional training to its staff to build and sustain a high quality service culture with the necessary professionalism and personal competence;

• employ external consultants, advisers and service providers as and when it considers it appropriate and in the interests of Unitholders. In this regard, the Manager has appointed the Property Adviser at its own cost to provide advice and personnel support in relation to, among other things, identifying and evaluating, and assisting in the execution of, acquisitions and disposals properties (see the section headed “Material Agreements and Other Documents Relating to GZI REIT — Property Consultancy Agreement” in this Offering Circular);

• closely monitor and benchmark staff performance against international standards;

72 STRATEGY

• create a feedback mechanism for all staff; and

• educate staff on how their performance would affect the performance of GZI REIT.

3. Strategic initiatives

3.1 Expanding the portfolio of GZI REIT through selective acquisitions App B B2 (c)

The Manager intends to explore actively acquisition opportunities that would add value to GZI REIT’s portfolio and improve returns to Unitholders. Key criteria that the Manager will consider when evaluating acquisition opportunities include:

• consistency with the Manager’s investment strategy;

• accretion to distributions per Unit;

• attractiveness of the property’s acquisition price vis-a`-vis its cash flows, current performance and sustainable future potential;

• economic conditions and the market outlook;

• diversification or expansion of GZI REIT’s property portfolio enabling GZI REIT to access tenant and customer demand in new trade areas;

• ability of the property to complement the existing portfolio and strengthen GZI REIT’s market share vis-a`-vis competition in a trade area;

• opportunities to enhance the property to increase investment returns and create value;

• healthy occupancy rate and established tenants of good credit standing to minimise rental delinquency and turnover;

• potential to add value to GZI REIT’s portfolio through selective renovations or other enhancements;

• good quality specifications which are in compliance with legal and zoning regulations; and

• availability of appropriate and convenient access to necessary transportation amenities.

3.2 Increasing returns through asset enhancement

The Manager believes that there is usually scope for improvements that will create additional value for the properties of GZI REIT. The Manager will also seek advice

73 STRATEGY

from external consultants and advisers (including the Property Adviser) as and when it considers it appropriate and in the interests of Unitholders on any possible asset enhancement plan. Possible enhancement measures include:

• for retail properties, looking into centre positioning, marketing, trade mix and tenancy profile;

• subject to obtaining the relevant regulatory approvals and, if necessary, the approval of the other owners of the property in question, creating more lettable space, change or addition of use and increasing the connectivity and accessibility of the properties;

• reviewing the role and issues surrounding property management, in particular, the management of the common areas and how this can affect tenants and property yields. Attention will be given to the procedures, processes and systems currently undertaken and these will be compared with international standards;

• acquisition and/or control of loading/unloading areas and car parking spaces within the buildings; and

• reviewing and designing measures to manage risks arising from business operations.

GZI REIT’s ability to carry out asset enhancements at Fortune Plaza, City Development Plaza and Victory Plaza may be constrained in certain circumstances (see the risk factors headed “GZI REIT may not be able to pass certain critical decisions in the owners’ committees of Fortune Plaza and City Development Plaza” and “GZI REIT will be unable to carry any decisions in the owners’ committee of Victory Plaza” in this Offering Circular).

3.3 Optimising GZI REIT’s capital structure App B B2 (j)

The Manager will focus on optimising the capital structure of GZI REIT within the requirements of the REIT Code with the aim of maximising the returns from the portfolio and distributions to Unitholders, while adhering to appropriate levels of financial prudence. The ratio of total borrowings of GZI REIT against its total gross asset value will generally be maintained at between 30.0% and 40.0% in order to create a buffer for future capital expenditure, working capital needs and any adverse movements in market conditions. The Manager intends to use a combination of debt and equity financing to fund future acquisitions and asset enhancements and will implement a prudent financial and capital management policy. The Manager will, from time to time, review and optimise the fixed rate/floating rate profile of GZI REIT’s borrowings and evaluate refinancing options which may include long term bank borrowings, bonds, commercial mortgage backed securities and medium term notes.

74 STRATEGY

3.4 Prudent risk management

The Manager will aim to minimise the risks and exposures relating to interest rates and foreign exchange rates through the use of appropriate financial instruments.

3.5 International corporate governance standards

The Manager seeks to incorporate corporate governance best practices into its management and organisational structure. Detailed corporate governance policies and procedures have been established to promote the operation of GZI REIT in a transparent manner and with built in checks and balances.

3.6 Exit strategy App B B2 (n)

The Manager intends that properties acquired by GZI REIT shall be held on a long term basis. However, if the Manager considers that any property has reached a stage such that it offers only limited scope for growth, the Manager may consider selling the property (either in whole or in part) through either the disposal of GZI REIT’s interest in the property directly or the disposal of GZI REIT’s interest in the relevant special purpose vehicle, and using the proceeds for alternative investments in a property or properties which meet its investment criteria.

75 THE PROPERTIES AND THE REORGANISATION

76 THE PROPERTIES AND BUSINESS

The Properties

As at the date of this Offering Circular, GZI REIT’s property portfolio consists of the following App B commercial properties located in Guangzhou: B2 (i)

• White Horse Units — The White Horse Units consist of nine strata units in part of the lower ground level as well as the 2nd to 9th storeys of a multi-storey commercial building with eight levels above ground, a lower ground level and a basement comprising a car park. The White Horse Units account for 81.4% of the total Gross Floor Area of White Horse Building. Of the remaining Gross Floor Area, 9.2% (comprising the car park) is owned by White Horse JV (a subsidiary of GZI, and therefore a connected person of GZI REIT) and 9.4% is owned by an unrelated third party.

• Fortune Plaza Units — The Fortune Plaza Units comprise 35 strata units in the West tower, 43 strata units in the East tower and five strata units in the six-storey podium located in a mixed use Grade A commercial building consisting of a podium with two tower blocks and two levels of underground car parks. The Fortune Plaza Units account for 50.2% of the total Gross Floor Area of Fortune Plaza. Of the remaining Gross Floor Area, 15.5% (comprising certain units in the podium(1) and the West tower, a clubhouse and the car park) is owned by GCCD (a subsidiary of GZI, and therefore a connected person of GZI REIT) and the remaining 34.3% is owned by unrelated third parties.

• City Development Plaza Units — The City Development Plaza Units comprise six strata units in the first three storeys of a five-storey podium as well as 159 strata units in the single tower block of a 28-storey Grade A commercial building comprising the podium, the tower block and two levels of underground car parks. The City Development Plaza Units account for 57.3% of the total Gross Floor Area of City Development Plaza. Of the remaining Gross Floor Area, 36.8% (comprising space used for GCCD’s offices as well as a clubhouse, a restaurant and the car park) is owned by GCCD (a subsidiary of GZI, and therefore a connected person of GZI REIT) and the remaining 5.9% is owned by unrelated third parties.

• Victory Plaza Units — The Victory Plaza Units consist of nine strata units comprising the six levels above ground in the podium and the retail space in basement 1 in the first phase of an integrated office and retail complex with four levels of underground car parks. Two tower blocks above the podium are currently under construction and are expected to be completed in 2007. Basement 1 of the building comprises partly car park space and partly retail space. The tower blocks and car park are not part of the Victory Plaza Units. The Victory Plaza Units account for 52.7% of the combined Gross Floor Area of the podium and the four levels of underground car parks, and will account for approximately 19.5% of the total Gross Floor Area of the entire development when the two tower blocks are completed. The car park in Victory Plaza is owned by GCCD, a subsidiary of GZI and therefore a connected person of GZI REIT.

The portions in each Property which continue to be held by GZI (through either White Horse JV or GCCD) have not been injected into GZI REIT as they do not generate significant levels of rental or other income or are used for GZI’s own purposes.

(1) GCCD has signed a memorandum of understanding with a third party to sell these podium units (which account for 0.6% of the total Gross Floor Area of Fortune Plaza).

77 THE PROPERTIES AND BUSINESS

The Manager believes that the Properties benefit from their prime locations in their respective trade areas and their high levels of connectivity with public transportation that generate visitor traffic.

As at 30 September 2005, the Properties comprised 89,588.1 sq.m. of Gross Floor Area used for wholesale or retail activities and 71,062.9 sq.m. of Gross Floor Area used as office or warehouse space. The Manager proposes to renovate the 8th and 9th storeys of the White Horse Units for wholesale/retail use. Towards this end, the Manager has stopped renewing existing leases and signing new leases for these two floors. It expects GZI REIT to have vacant possession of these two floors by 1 January 2006. The proposed renovation is expected to cost HK$5.8 million (which will be funded from an aggregate amount of HK$26.7 million retained from the proceeds of the Global Offering, see the section headed “Material Agreements and Other Documents Relating to GZI REIT — The Reorganisation Deed” in this Offering Circular) and to be completed before May 2006. After the renovation, the Properties will have 93,508.1 sq.m. of Gross Floor Area used for wholesale or retail activities (i.e. an increase of 4.4%) as well as 67,142.9 sq.m. of Gross Floor Area used as office or warehouse space (i.e. a decrease of 5.5%).

For the nine months ended 30 September 2005, the wholesale/retail component of the Properties had an average occupancy rate of 93.1% while the office/warehouse component of the Properties had an average occupancy rate of 77.5%.

The Properties are held by Partat, Moon King, Full Estates and Keen Ocean under Building Ownership Certificates granted by the Guangzhou Land Bureau. Holdco acquired the Properties on 7 December 2005 via an acquisition of the BVI Company Shares. The aggregate Appraised Value of the Properties, as determined by the Independent Property Valuer, was HK$4,005.0 million as at 30 September 2005 (see the sub-section headed “Valuation” below).

Competitive Strengths

The Manager believes that the Properties enjoy the following competitive strengths: App B B2 (d)

• Quality properties in prime locations — The White Horse Building is one of the top 10 centres of the garment wholesale and retail trades in the PRC (having been awarded the “10 Largest Garment Wholesale Market Award” in 2005 by the (Economic Daily News Group — Fashion Times), (China Centre for Commercial Information) and (the Professional Market Committee of the China Commerce Association)) and attracts tenants and visitors not just from Guangdong province but also from the rest of the PRC. A key success factor for wholesale markets is being located near superior transport systems. White Horse Building is situated in the Liu Hua commercial zone, next to the exhibition hall for the Guangzhou Trade Fair, and is in Guangzhou’s main garment wholesale district. It is a short walk from Guangzhou Huo Che Zhan underground metro station ( ) on the No. 2 metro line. White Horse Building is also located directly across from a bus station which operates both local and inter-provincial services. The Property is also in close proximity to the Guangzhou railway station, which facilitates long distance transportation of the large quantities of clothing purchased by traders from other parts of the PRC who visit White Horse Building.

78 THE PROPERTIES AND BUSINESS

The new underground metro system in Guangzhou has transformed the Tian He CBD into a central hub and an important interconnection point for the entire city. The Ti Yu Zhong Xin underground metro station ( ) on the No. 1 metro line exits directly to Fortune Plaza, while City Development Plaza and Victory Plaza are both within short walking distance of the Ti Yu Xi Road station ( ). When the No. 3 metro line is completed and commences operations (its first section is estimated to open by the end of 2005), shoppers travelling to the Tian He CBD on the No. 1 and No. 3 metro lines will enjoy direct underground access to basement 1 of Victory Plaza from the metro station and the Manager anticipates that human traffic through Victory Plaza will increase significantly as a result. These three Properties are also in close proximity to the East Station of Guangzhou Railway Station (which serves the railway line between Guangzhou and Hong Kong) and the future airport express line.

Over the years, White Horse Building and City Development Plaza have received numerous awards in recognition of their excellence of construction and management.

Although Fortune Plaza is a relatively new property (having been opened in the second half of 2003), the Fortune Plaza Units have nevertheless achieved an average occupancy rate of 65.9% for the nine months ended 30 September 2005. Similarly, the Victory Plaza podium opened only in the second half of 2003 but the Victory Plaza Units achieved an average occupancy rate of approximately 85.2% for the nine months ended 30 September 2005.

Although both buildings opened at approximately the same time, the Fortune Plaza Units had a relatively lower occupancy rate as compared to the Victory Plaza Units because some of the Fortune Plaza Units were at that time earmarked for sale rather than lease, and were only later redesignated as units to be retained and leased out.

Size

The aggregate Gross Floor Area of a Property refers to the sum of the areas specified in the Building Ownership Certificates for the Property. The Gross Rentable Area of each unit in a Property refers to the area set out in the tenancy agreement for that unit, which includes a proportionate share of the common area in the Property allocated to that unit.

79 THE PROPERTIES AND BUSINESS

The occupancy rates of the Properties disclosed in this Offering Circular have been calculated by the Manager using the Gross Rentable Areas of the Properties.

The Portfolio

The following table sets out certain information with respect to each of the Properties as at 30 September 2005:

Year of Building Gross Percentage of Completion of Gross Internal Efficiency Rentable Total Gross Property Construction Floor Area Floor Area Ratio(1) Area Rentable Area (sq.m.) (sq.m.) (%) (sq.m.) (%)

White Horse Units 1990 - Wholesale/retail(2)(3) 46,279.3 44,322.4 95.8 45,157.6(4) 92.1 - Office/warehouse(2) 3,920.0 3,778.2 96.4 3,849.6(5) 7.9 50,199.3 48,100.6 95.8 49,007.2 100.0 Fortune Plaza Units 2003 - Retail(6) 3,853.1 3,244.7 84.2 3,853.1 9.5 - Office(6) 36,503.1 27,507.6 75.4 36,503.1 90.5 40,356.2 30,752.3 76.2 40,356.2 100.0 City Development Plaza 1997 Units - Retail 11,757.6 10,468.4 89.0 11,757.6(7) 27.7 - Office 30,639.8 22,186.5 72.4 30,639.8 72.3 42,397.4 32,654.9 77.0 42,397.4 100.0 Victory Plaza Units 2003 - Retail 27,698.1 22,847.9 82.5 27,262.3(8) 100.0

Total - Wholesale/retail 89,588.1 80,883.4 90.3 88,030.6 55.4 - Office/warehouse(2) 71,062.9 53,472.3 75.2 70,992.5 44.6 160,651.0 134,355.7 83.6 159,023.1 100.0

Notes:

(1) Refers to the ratio of Internal Floor Area to Gross Floor Area, both as stated in the relevant Building Ownership Certificates.

(2) The 8th and 9th storeys are currently leased for office/warehouse use. The Manager proposes to renovate these areas for wholesale/retail use. Such renovations will not change the Gross Floor Area or the Internal Floor Area of the White Horse Units as the renovation works do not involve addition or reduction of floor space.

(3) Currently, the 5th and 6th storeys and part of the 4th storey have been leased for wholesale use. These areas have been assumed to be wholesale space for the purposes of this Offering Circular. The relevant Building Ownership Certificates for these portions of the White Horse Units state that the space is designated for office use. The Manager has been advised by its PRC legal adviser that the use of these portions of the White Horse Units for wholesale use does not contravene the Building Ownership Certificates.

(4) Owing to the current design of the building, there is currently a total area of 1,121.7 sq.m. which cannot be rented out as it represents a stairway/corridor area and a storage area for equipment.

80 THE PROPERTIES AND BUSINESS

(5) In accordance with PRC regulations, White Horse Property Management Company (as property manager of White Horse Building) has on-site premises of 70.4 sq.m. for its use free of rent (see the section headed “The Leasing Agents — Property Management Offices” of this Offering Circular). This area has not been included in calculating the Gross Rentable Area.

(6) Currently, the 3rd to 5th storeys of the podium have been rented out for use as offices. These areas, amounting to 12,825.3 sq.m., have been assumed to be office space for the purposes of this Offering Circular. The relevant Building Ownership Certificates for these portions of the Fortune Plaza Units state that the space is designated for commercial use. The Manager has been advised by its PRC legal adviser that the use of these portions of the Fortune Plaza Units as offices does not contravene the Building Ownership Certificates.

(7) The Gross Rentable Area includes the area of 97.0 sq.m. leased to Yicheng for its use as a property management office for City Development Plaza at a nominal monthly rent of HK$5 per sq.m. (see the section headed “The Leasing Agents — Property Management Offices” of, and Appendix X to, this Offering Circular).

(8) Victory Plaza was rented out based on the preliminary Government approval granted based on the total Gross Floor Area as calculated by the then owner. The common area of the Victory Plaza Units was allocated to each of the tenancy agreements for the Victory Plaza Units based on such calculations. Upon receipt of the Building Ownership Certificates for the Property, it was discovered that the total Gross Floor Area was larger than the figure calculated by 435.8 sq.m. This additional area had not previously been allocated to the tenants. The Manager will allocate such common area to future leases by adopting the Gross Rentable Area as recorded in the relevant Building Ownership Certificates. Such common area does not currently form part of the Gross Rentable Area of the Victory Plaza Units but will do so once allocated.

Gross Turnover

The Gross Turnover generated by each of the Properties for each of FY2003, FY2004 and the six months ended 30 June 2005 are set out in the following table:

Six months ended Property FY2003 FY2004 30 June 2005

(HK$’000) (%) (HK$’000) (%) (HK$’000) (%)

White Horse Units 89,754 69.4 104,737 60.9 65,916 60.1 Fortune Plaza Units 150 0.1 9,042 5.2 13,334 12.2 City Development Plaza Units 31,911 24.7 33,904 19.7 17,499 16.0 Victory Plaza Units 7,580 5.8 24,397 14.2 12,846 11.7 Total 129,395 100.0 172,080 100.0 109,595 100.0

Valuation

The Appraised Value of each of the Properties as at 30 September 2005, as determined by the Independent Property Valuer, is set out in the following table:

Property Appraised Value

(HK$ million) (%)

White Horse Units 2,541.5 63.5 Fortune Plaza Units 545.0 13.6 City Development Plaza Units 385.5 9.6 Victory Plaza Units 533.0 13.3 Total 4,005.0 100.0

81 THE PROPERTIES AND BUSINESS

Occupancy Trends

The following table sets out information on the average occupancy rates of the Properties for FY2003, FY2004, the nine months ended 30 September 2005 and each of the six months ended 30 June 2004 and 30 June 2005, as well as the occupancy rates as at 30 September 2005:

Six Six Nine months months months ended ended ended As at 30 June 30 June 30 September 30 September Property FY2003 2004 FY2004 2005 2005 2005

(%) (%) (%) (%) (%) (%) White Horse Units — Wholesale/retail 100.0 100.0 100.0 100.0 100.0 100.0 — Office/warehouse 100.0 100.0 100.0 100.0 100.0 100.0 Combined 100.0 100.0 100.0 100.0 100.0 100.0

Fortune Plaza Units — Retail n.m.(1) 0.0 17.9 100.0 90.5 14.9(2) — Office n.m.(1) 10.5 21.3 55.7 63.3 83.5 Combined n.m.(1) 9.5 21.0 60.0 65.9 76.9

City Development Plaza Units — Retail 83.6 86.0 85.8 85.5 85.5 85.5 — Office 83.6 91.2 90.8 90.6 91.6 93.0 Combined 83.6 89.8 89.4 89.2 89.9 91.0

Victory Plaza Units — Retail n.m.(3) 87.1 81.8 77.7 85.2 100.0

Weighted average across the Properties(4) — Wholesale/retail n.m. 89.8 88.9 91.2 93.1 94.3 — Office/warehouse n.m. 50.2 55.6 73.2 77.5 88.5 n.m. 72.1 74.0 83.2 86.1 91.7

Notes:

(1) The first tenancy in the Fortune Plaza Units only commenced in September 2003.

(2) The occupancy rate as at 30 September 2005 was lower than the average occupancy rate for the nine months ended 30 September 2005 due to the early termination of a large lease in September 2005. As at 31 October 2005, the occupancy rate was 82.0% due to two new tenants taking up part of the vacated space.

(3) The first tenancy in the Victory Plaza Units only commenced in August 2003.

(4) Weighted based as the Gross Rentable Area of each of the Properties.

82 THE PROPERTIES AND BUSINESS

Tenant Profile

Given the nature of White Horse Building as a garment wholesale and retail market, the White Horse Units are mostly leased to tenants in the garment wholesale and retail trades. Major tenants of the Fortune Plaza Units include (HSBC Electronic Data Processing (Guangdong) Limited), (Jia De Shi (China) Investment Co., Ltd.) and (Alibaba (China) Technology Co., Ltd.). The major tenants in the City Development Plaza Units include (Guangdong Mobile Communications Co., Ltd.), (Yangcheng Sub-branch of Guangzhou branch, Shenzhen Development Bank), (Taikang Life Insurance Co. Ltd. Guangzhou Branch) and (Cosco Guangzhou International Freight Co. Ltd.). The Victory Plaza Units are mainly occupied by retail outlets offering brands such as Nike and Morgan, well known food outlets such as KFC and Ha¨ agen-Dazs as well as a variety of restaurants. The major tenants in the Victory Plaza Units include (Guangzhou GOME Electrical Appliances Co. Ltd.), (Chen Huiyi), (Yum! Restaurants (Guangdong) Co., Ltd.) (which operates a KFC outlet) and (Guangzhou Lao Xiang Diet Co. Ltd.).

The following table sets out information on the 10 largest tenants of the Properties in terms of the total monthly base rent for 30 September 2005:

Percentage Percentage Gross of total of total Rentable Gross monthly Tenant Business sector Property Expiry date Area(1) Rentable Area base rent(1) (sq.m.) (%) (%)

Department store Victory 31 Mar 2010 12,484.6 7.9 5.2 (Guangzhou Plaza Units Xindaxin Co., Ltd.)

Banking Fortune 31 Jan 2008 8,550.2 5.4 3.5 Plaza Units (HSBC Electronic Data Processing (Guangdong) Limited)

Communications City 30 Apr 2008 3,688.7 2.3 2.0 Development (Guangdong Mobile Plaza Units Communication Co., Ltd.)

Finance City 31 Aug 2006 1,844.3 1.2 0.9 Development and and and and (Efund Management Co. Plaza Units 16 Oct 2006 1,844.3 1.2 0.9 Ltd.)

83 THE PROPERTIES AND BUSINESS

Percentage Percentage Gross of total of total Rentable Gross monthly Tenant Business sector Property Expiry date Area(1) Rentable Area base rent(1) (sq.m.) (%) (%)

Services City Development 30 Jun 2010 7,830.0 4.9 1.5 Plaza Units (Guangzhou Wisdom Valley Development Company Limited)

Electrical Victory 31 May 2011 1,918.0 1.2 1.5 appliances Plaza Units (Guangzhou GOME Electrical Appliances Co. Ltd.)

Transportation City 31 Aug 2006 2,997.1 1.9 1.4 Development (Cosco Plaza Units Guangzhou International Freight Co. Ltd.)

Insurance City 31 Dec 2007 2,431.9 1.5 1.0 Development (Taikang Life Plaza Units Insurance Co. Ltd. Guangzhou Branch)

E-Commerce Fortune Plaza Units 31 Aug 2007 2,092.4 1.3 0.9 (Alibaba (China) Technology Co., Ltd.)

Banking City Development 31 Oct 2007 694.2 0.4 0.8 (Yangcheng Sub-branch of Plaza Units Guangzhou branch, Shenzhen Development Bank)

10 largest tenants by 46,375.7 29.2 19.6 total monthly base rent

Other tenants 99,489.8 62.5 80.4

Vacant space 13,157.6 8.3 — Total 159,023.1 100.0 100.0

Note: (1) As at 30 September 2005.

84 THE PROPERTIES AND BUSINESS

Save for HSBC Electronic Data Processing (Guangdong) Limited, an associate of the Trustee, none of the tenants listed above is a connected person of GZI REIT. (See Appendix X to this Offering Circular for a full list of tenancies in the Properties with connected persons.)

The following charts illustrate the percentage contribution of the 10 largest tenants to the monthly base rent of the Properties for September 2005, and the total Gross Rentable Area of the Properties as at 30 September 2005 occupied by these tenants:

Contribution of 10 largest Total Gross Rentable Area as tenants to monthly base rent occupied by the 10 largest tenants for September 2005(1)(2) 10 largest tenants 19.6% 10 largest tenants 29.2%

Vacant 8.3% Other tenants Other tenants 80.4% 62.5%

Notes:

(1) Income from the White Horse Units included property management fees.

(2) Calculated as a percentage of the monthly base rent of the Properties for September 2005.

These 10 tenants occupy 29.2% of the Gross Rentable Area of the Properties but account for only 19.6% of the monthly base rent of the Properties for September 2005. This apparent discrepancy exists because the leases in the White Horse Units command the highest rental rates among all four Properties and these 10 tenants occupy premises in the other three Properties where the rental rates are lower.

85 THE PROPERTIES AND BUSINESS

The following chart illustrates the percentage of total monthly base rent for September 2005 derived from the wholesale/retail portions of the Properties relative to the office/warehouse portions of the Properties.

Office/warehouse 27.7%

Wholesale/retail 72.3%

The following chart illustrates the percentage of the total Gross Rentable Area of the wholesale/retail portions of the Properties as at 30 September 2005 (83,046.3 sq.m.) occupied by tenants in each of the identified business sub-sectors and the percentage contribution of the tenants in these business sub-sectors to the monthly base rent for September 2005:

Gross Rentable Area occupied by Contribution of each business sub-sector to each business sub-sector monthly base rent(1)

Individual retail shops Banking Individual retail shops Banking 1.8% 2.1% 2.2% 2.8% Electrical appliances Electrical appliances Food and Food and 2.3% 2.1% beverages Beverages Department store Department store 4.9% 13.2% 14.7% Property agency 7.2% Services 2.5% Property agency 1.0% 1.8% Property Services management(2) 10.0% Beauty services 0.1% 0.3% Beauty services 0.4%

Garments Garments 53.5% 77.1%

Notes:

(1) Calculated as a percentage of the monthly base rent of the Properties for September 2005.

(2) Tenants in the property management business sub-sector contributed 0.003% to the monthly base rent for September 2005 and have not been included in the chart.

86 THE PROPERTIES AND BUSINESS

Expiries

Depending on factors such as the needs of tenants as well as how established and reputable a particular property is, the terms of lease agreements for the Properties mostly range from nine months to four years and typically include a right of first refusal permitting the existing tenant to renew the tenancy agreement upon the expiry of the original lease term, provided that the tenant is willing to match to the same terms and conditions (including rental rates) of a proposed lease with a prospective new tenant (see the sub-section headed “Tenancy Agreements” below). As at 30 September 2005, approximately 39.9% of lease agreements were for terms of at least three years. Shorter or longer lease terms may be contracted for on a case-by-case basis.

The table below sets out, for the periods indicated, details of expiries in respect of tenancies in the Properties as at 30 September 2005 (without taking into account the new leases for the White Horse Units commencing 1 January 2006):

Expiring leases/ Gross vacant space Total number Rentable Area as a percentage of leases of leases expiring/ of total Gross Period expiring vacant space Rentable Area

(%) (sq.m.) (%) (%)

1 October 2005 - 31 December 2005 1,320(1) 90.7 52,549.2 36.0 33.0 FY2006 60(2) 4.1 17,438.1 12.0 11.0 FY2007 45(2) 3.1 22,675.9 15.5 14.2 FY2008 15(2) 1.0 18,287.8 12.5 11.5 FY2009 5(2) 0.3 2,164.4 1.5 1.4 FY2010 and beyond 11(2) 0.8 32,750.1 22.5 20.6

Sub-total 1,456 100.0 145,865.5 100.0 91.7 Vacant space n.a. n.a. 13,157.6 n.a. 8.3

Total n.a. n.a. 159,023.1 n.a. 100.0

Notes:

(1) This does not take into consideration the new leases for the White Horse Units commencing on 1 January 2006.

(2) Assuming that the right of first refusal to enter into a further tenancy agreement for leases expiring in the earlier period(s) set out in the table is not exercised.

87 THE PROPERTIES AND BUSINESS

The table below sets out, for the periods indicated, details of expiries in respect of tenancies in the Properties as at 30 September 2005 (taking into account the new leases for the White Horse Units commencing 1 January 2006):

Expiring leases/vacant space as a Gross Rentable Area percentage of Total number of of leases expiring/ total Gross Period leases expiring vacant spacing Rentable Area(1)

(%) (sq.m.) (%) (%)

1 October 2005 - 31 December 2005 74 5.1 8,059.1 5.5 5.1 FY2006 60 4.1 17,438.1 12.0 11.0 FY2007 45 3.1 22,675.9 15.6 14.2 FY2008 15 1.0 18,287.8 12.5 11.5 FY2009 592 40.7 15,056.6 10.3 9.5 FY2010 and beyond 670 46.0 64,348.0 44.1 40.4

Sub-total 1,456 100.0 145,865.5 100.0 91.7 Vacant space n.a. n.a. 13,157.6 n.a. 8.3

Total n.a. n.a. 159,023.1 n.a. 100.0

Information Regarding the Title of the Properties

Each of the Properties is held under title documents in the form of Building Ownership Certificates issued by the Guangzhou Land Bureau. Each title document contains information in respect of, among other things, the following:

• the name of the title holder;

• location of the property;

• nature of the land use rights;

• Gross Floor Area; and

• the rights of other parties, for example, a mortgagee.

The holder of a title document is entitled to deal freely with the property by, for example, transferring or granting leases in respect of the property or part thereof, and charging or mortgaging the land use rights in the property as security for any borrowings.

88 THE PROPERTIES AND BUSINESS

White Horse Units

The White Horse Units are held by Partat under Building Ownership Certificates issued by the Guangzhou Land Bureau to Partat. The Building Ownership Certificates were issued on a per floor basis in respect of the White Horse Units.

Fortune Plaza Units

The Fortune Plaza Units are held by Moon King under Building Ownership Certificates issued by the Guangzhou Land Bureau to Moon King. The Building Ownership Certificates were issued on a per unit basis in respect of some of the Fortune Plaza Units and on a per floor basis in respect of the other units.

City Development Plaza Units

The City Development Plaza Units are held by Full Estates under Building Ownership Certificates issued by the Guangzhou Land Bureau to Full Estates. The Building Ownership Certificates were issued on a per unit basis in respect of some of the City Development Plaza Units and on a per floor basis in respect of the other units.

Victory Plaza Units

The Victory Plaza Units are held by Keen Ocean under Building Ownership Certificates issued by the Guangzhou Land Bureau to Keen Ocean. The Building Ownership Certificates were issued on a per floor basis in respect of the podium (excluding the 1st storey) and the retail space in basement 1 of Victory Plaza, and on a per unit basis in respect of the 1st storey of Victory Plaza.

Generally, Building Ownership Certificates were obtained on a per unit basis for properties intended for sale and on a per floor basis for properties intended to be held as investments.

Terms of Land Use Rights

There are two types of title registrations in the PRC, namely land registration and building registration. Land registration is effected by the issue of land use right certificate by the relevant authority to the land owner evidencing that the land owner has obtained land use rights which can be assigned, mortgaged or leased. The building registration is the issue of a building ownership certificate ( ) to the building owner evidencing that the building owner has obtained building ownership rights in respect of the building. According to the Land Registration Regulations ( ) promulgated by the State Land Administration Bureau on 18 November 1989 and amended on 18 December 1995 (the amendment became effective on 1 February 1996), and the Administration Rules on Regulations of Urban Real Estate Property ( ) promulgated by the Ministry of Construction on 27 October 1997, implemented on 1 January 1998 and revised subsequently on 15 August 2001, all land use rights and building ownership rights which are duly registered are protected by law.

89 THE PROPERTIES AND BUSINESS

The two different systems are commonly maintained separately in many cities in the PRC. However, in Shenzhen, Guangzhou, Shanghai and some other major cities, the two systems have been consolidated and a single composite real estate and land use right certificate ( ) will be issued to evidence the ownership of both land use rights and the buildings erected thereon. Such single composite real estate and land use right certificate is in compliance with the Law of the Administration of Urban Real Estate of the PRC ( ) and the Administration Rules on Regulations of Urban Real Estate Property ( ).

Under the Provisional Regulations of the PRC concerning the Grant and Assignment of the Right to Use State-Owned Land Use Rights in Urban Areas ( ) promulgated by the State Council of the PRC on 19 May 1990, the use of state land is dependent on the grant of a land use right by the PRC Government to a land user for a definite period subject to the payment of a land premium by the land user. The maximum term of such grants depends on the use of the land, as follows:

• up to 70 years for residential use;

• up to 50 years for industrial use or for public (e.g. educational, technology, cultural hygiene or sports) use;

• up to 40 years for commercial (which includes wholesale and retail), tourism and entertainment uses; and

• up to 50 years for all other uses (which include office and warehouse).

(See Appendix IX to this Offering Circular for further information.)

White Horse Units

The nine Building Ownership Certificates for the White Horse Units which are held in the name of Partat were issued by the Guangzhou Land Bureau on 19 October 2005 and grant Partat the right to use the White Horse Units for a period of 50 years commencing 7 June 2005 in respect of the stairway/corridor and storage area in the lower ground level, a portion of the 5th storey as well as 6th to 9th storeys, and for a period of 40 years commencing 7 June 2005 in respect of the 2nd to 4th storeys and a portion of the 5th storey.

90 THE PROPERTIES AND BUSINESS

The following table sets out the commencement date and the duration of each Building Ownership Certificate relating to the White Horse Units:

Building Ownership Certificate No. Storey(1) Commencement Date Duration (years)

C3895234 Stairway/corridor 7 June 2005 50 area and storage area in the lower ground level C3895233 2nd 7 June 2005 40 C3895232 3rd 7 June 2005 40 C3895231 4th 7 June 2005 40 C3895230 5th 7 June 2005 40 for 7,164.2 sq.m. and 50 for 531.36 sq.m.(2) C3895229 6th 7 June 2005 50 C3895228 7th 7 June 2005 50 C3895227 8th 7 June 2005 50 C3895226 9th 7 June 2005 50

Notes:

(1) The 2nd storey of White Horse Building is the first level above ground in the building and is directly accessible from the street.

(2) Pursuant to the relevant PRC regulations, the maximum term of the grant of land use right is 40 years and 50 years for commercial and integrated and other uses, respectively. The land use right certificate of the 5th storey of White Horse Building divides the relevant area into separate portions for commercial and integrated uses.

Fortune Plaza Units

The 83 Building Ownership Certificates for the Fortune Plaza Units which are held in the name of Moon King were issued by the Guangzhou Land Bureau on 10 September 2004 and 8 August 2005 and grant to Moon King the right to use the Fortune Plaza Units for a period of 40 years commencing 26 November 2002 in respect of strata units in the podium of Fortune Plaza, a period of 40 years commencing 26 November 2002 in respect of strata units in the 27th storey in the West tower and the 37th storey in the East tower, and 50 years commencing 26 November 2002 in respect of strata units in the two office tower blocks.

91 THE PROPERTIES AND BUSINESS

The following table sets out the commencement date and the duration of each Building Ownership Certificate relating to the Fortune Plaza Units:

Building Ownership Duration Certificate No. Storey Commencement Date (years)

C3897235 Podium, 1st storey 26 November 2002 40 C3097281 Podium, 2nd storey 26 November 2002 40 C3097280 Podium, 3rd storey 26 November 2002 40 C3097279 Podium, 4th storey 26 November 2002 40 C3097278 Podium, 5th storey 26 November 2002 40 C3098282 West tower, 8th storey 26 November 2002 50 C3097272, C3097273, East tower, 8th storey 26 November 2002 50 C3097274, C3097275, C3097276, C3097277 C3098281 West tower, 9th storey 26 November 2002 50 C3097268, C3097269, East tower, 9th storey 26 November 2002 50 C3097270, C3097271 C3098280 West tower, 10th storey 26 November 2002 50 C3897153, C3897154, West tower, 11th storey 26 November 2002 50 C3098277, C3098278, C3098279, C3897155 C3878363, C3878364, East tower, 11th storey 26 November 2002 50 C3878365 C3897152, C3897151, West tower, 12th storey 26 November 2002 50 C3897150, C3897149, C3897148, C3897147 C3878362, C3878361, East tower, 12th storey 26 November 2002 50 C3878360, C3878359, C3878358, C3878357 C3897146, C3897145, West tower, 13th storey 26 November 2002 50 C3897144, C3897156, C3897246, C3897245 C3878356, C3878355, East tower, 13th storey 26 November 2002 50 C3878354, C3878353, C3878352, C3878351 C3897244, C3897243, West tower, 14 storey 26 November 2002 50 C3897242 C3878350, C3878349, East tower, 14th storey 26 November 2002 50 C3878348, C3878347, C3878346, C3878345 C3098276 West tower, 15th storey 26 November 2002 50 C3098275 West tower, 16th storey 26 November 2002 50 C3098274 West tower, 17th storey 26 November 2002 50 C3098273 West tower, 18th storey 26 November 2002 50

92 THE PROPERTIES AND BUSINESS

Building Ownership Duration Certificate No. Storey Commencement Date (years)

C3897241, C3897240, West tower, 19th storey 26 November 2002 50 C3897239, C3897238 C3878344, C3097267, East tower, 19th storey 26 November 2002 50 C3097266, C3098286, C3098285, C3878343 C3098272 West tower, 24th and 26 November 2002 50 25th storeys C3098284 East tower, 25th and 26 November 2002 50 26th storeys C3897237 West tower, 26th storey 26 November 2002 50 C3897236 West tower, 27th storey 26 November 2002 40 C3878342 East tower, 27th storey 26 November 2002 50 C3878341 East tower, 28th storey 26 November 2002 50 C3878340 East tower, 34th storey 26 November 2002 50 C3098283 East tower, 35th and 36th 26 November 2002 50 storeys C3878339 East tower, 37th storey 26 November 2002 40

City Development Plaza Units

The 165 Building Ownership Certificates for the City Development Plaza Units which are held in the name of Full Estates were issued by the Guangzhou Land Bureau on 20, 21, 22 and 26 October 2004 and grant Full Estates the right to use the City Development Plaza Units for a period of 40 years commencing 27 January 1997 in respect of the 159 strata units in the first three storeys in the podium of City Development Plaza and for a period of 50 years commencing 27 January 1997 in respect of the six strata units in the 6th to 28th storeys in the tower block of City Development Plaza.

The following table sets out the commencement date and the duration of each Building Ownership Certificate relating to the City Development Plaza Units:

Building Ownership Duration Certificate No. Storey Commencement Date (years)

C3202136, C3202132, 1st 27 January 1997 40 C3202131 C3202158, C3202133 2nd 27 January 1997 40 C3202137 3rd 27 January 1997 40 C3202134, C3209181, 6th 27 January 1997 50 C3209182, C3209183, C3209184, C3209185, C3209186, C3209187

93 THE PROPERTIES AND BUSINESS

Building Ownership Duration Certificate No. Storey Commencement Date (years)

C3209188, C3209189, 7th 27 January 1997 50 C3209190, C3209191 C3209192, C3209193, 8th 27 January 1997 50 C3209194, C3209195, C3209196, C3209197 C3209198, C3209199, 9th 27 January 1997 50 C3209200, C3209201, C3209202 C3200787, C3200788, 10th 27 January 1997 50 C3200789, C3200790, C3200791, C3200792, C3200793, C3200794 C3200795, C3200796, 11th 27 January 1997 50 C3200797, C3200798, C3200799, C3200800, C3202001, C3202004, C3202002, C3202003 C3204076 16th 27 January 1997 50 C3204075, C3204074, 17th 27 January 1997 50 C3204073, C3204072, C3204071, C3204070, C3202135, C3204069, C3204068 C3204067, C3204066, 18th 27 January 1997 50 C3204065, C3204064, C3204063, C3204077, C3203079, C3203078, C3203077, C3203076 C3203075, C3203074, 19th 27 January 1997 50 C3203073, C3203072, C3203071, C3203070, C3203069, C3203068, C3203067, C3203066 C3209203, C3123855, 20th 27 January 1997 50 C3123854, C3123853, C3123852, C3123851, C3123850, C3123849, C3123848 C3123847, C3123846, 21st 27 January 1997 50 C3123845, C3123844, C3123843, C3123842, C3123841, C3123840, C3123839

94 THE PROPERTIES AND BUSINESS

Building Ownership Duration Certificate No. Storey Commencement Date (years)

C3123838, C3123837, 22nd 27 January 1997 50 C3123836, C3123835, C3123834, C3200765, C3200766, C3200767, C3200768, C3200769 C3200770, C3200771, 23rd 27 January 1997 50 C3200772, C3200773, C3200774, C3200776, C3200777, C3200778, C3200779, C3200780 C3200781, C3200782, 24th 27 January 1997 50 C3200783, C3200784, C3200785, C3200786, C3202138, C3202139, C3202140, C3202141 C3202142, C3202143, 25th 27 January 1997 50 C3202144, C3202145, C3202146, C3202147, C3202148, C3202149, C3202150, C3202151 C3202152, C3202153, 26th 27 January 1997 50 C3202154, C3202155, C3202156, C3202157, C3209179, C3209178, C3209177, C3209180 C3123833, C3123832, 27th 27 January 1997 50 C3123831, C3123830, C3123829, C3123828, C3123827, C3123826, C3123825, C3123824 C3123823, C3123822, 28th 27 January 1997 50 C3123821, C3123820, C3123819, C3123818, C3123817, C3123816, C3123815, C3123814

Victory Plaza Units

The nine Building Ownership Certificates for the Victory Plaza Units which are held in the name of Keen Ocean were issued by the Guangzhou Land Bureau on 6 July 2005 and 15 July 2005, and grant to Keen Ocean the right to use the Victory Plaza Units for a period of 40 years commencing 8 March 2004.

95 THE PROPERTIES AND BUSINESS

The following table sets out the commencement date and the duration of each Building Ownership Certificate relating to the Victory Plaza Units:

Building Ownership Duration Certificate No. Storey Commencement Date (years)

C3864888 Basement 8 March 2004 40 C3871824, C3871823, 1st 8 March 2004 40 C3871822 C3872315 2nd 8 March 2004 40 C3872314 3rd 8 March 2004 40 C3872313 4th 8 March 2004 40 C3872312 5th 8 March 2004 40 C3872311 6th 8 March 2004 40

Marketing and Leasing Activities

The Leasing Agents have marketing teams which identify suitable tenants in desired target groups for the Properties. The Properties are then marketed actively to such prospective tenants through advertisements in the print media, television advertisements, direct calls, flyers and property agents. In addition to advertising through more traditional media, White Horse Building also has its own website which provides a platform for promoting the property and the business carried out therein.

Property agents and prospective tenants are also updated regularly with the list of available office or retail units for rental. Viewings of the premises are conducted with prospective tenants. Promotional events are tailored for each of the Properties to raise their market profiles. For example, product fairs have been held at Victory Plaza while festivals and conferences for garment wholesalers and their industry associations have been conducted at White Horse Building.

Tenancy Agreements

The tenancy agreements entered into for each of the Properties are generally for terms ranging from nine months to four years, depending on factors such as the needs of tenants as well as how established and reputable a particular property is.

In the case of the White Horse Units, the typical tenancy agreements provide for annual rent revision (subject to negotiation) of up to 5.0% per annum in the second year of the lease term, and up to 8.0% per annum in the third year of the lease term. For the new leases commencing on 1 January 2006, annual rent revision (subject to negotiation) of between 5.0% and 8.0% commencing from 1 January 2008 have typically been provided.

96 THE PROPERTIES AND BUSINESS

In the case of the Victory Plaza Units, most tenants enjoyed a rental discount for the first two years of their leases. Initial discounts of 30.0% were granted when the Victory Plaza Units commenced operations in the second half of 2003 to induce potential tenants to take up space in the Property. In the second half of 2004, due to commencement of the construction of the two office towers above the Victory Plaza podium (which is expected to complete in 2007), most of the tenants were offered a further discount of 20.0% for the period up to the completion of the construction. As they were long term tenants in the Victory Plaza Units, three of the tenants were granted this 20.0% discount for an additional three or four-month period following the completion of such works. These three tenants accounted for 24.8% of the Rental Income of the Victory Plaza units in FY 2004.

Rental rates for the Properties are subject to review and renegotiation on renewal of leases. At the time of entering into a lease, tenants of the Properties generally pay a security deposit in cash of an amount equal to two or three months’ rent. Security deposits do not bear interest. Generally, tenants are required to pay their monthly rent in advance.

The typical tenancy agreement for the White Horse Units provides that if a tenant wishes to terminate its lease before the expiry of the lease term, the tenant must submit a written application to the landlord at least one month prior to the proposed termination date, and obtain the consent of the landlord for such termination. Such consent had, in the past, been granted on a case by case basis, particularly if the tenant was able to procure a replacement tenant to enter into a new lease for the same premises on the same terms and conditions (save that the duration of the new lease would be for the unexpired term of the original lease). In such cases, the departing tenant had to pay an administrative fee equivalent to 1.5 month’s rent. If the landlord does not consent to such early termination, the parties will resolve the issue by discussion. In the event that the landlord continues to withhold consent after such discussion and the tenant still departs, all or a portion of its security deposit shall be forfeited without interest in accordance with the terms of the lease and the landlord retains legal right to require settlement of all unpaid amounts. (See the section headed “Manager’s Discussion and Analysis of Financial Condition and Results of Operations — Audited Financial Statements of the Properties — Key Items in the Income Statements” of this Offering Circular for further information on lease transfers in the White Horse Units.)

The typical tenancy agreements for the City Development Plaza Units, the Fortune Plaza Units and the Victory Plaza Units do not expressly provide for any early termination mechanism by the tenants. As such, a tenant which unilaterally terminates its lease before expiry of the lease term will be liable for the contract amounts payable for the remaining term of the lease. For all the Properties, the landlord has the right to terminate a lease upon the occurrence of certain events, such as non-payment of rent for at least six months cumulatively or breach of covenants by the tenants.

Under the typical tenancy agreement for the Properties, provided that a tenant has not defaulted under its agreement, the tenant has a right of first refusal to renew the tenancy agreement upon the expiry of the original lease term if the existing tenant is willing to match the same lease terms (including rental rates) as a prospective new tenant, subject to the tenant giving the landlord prior notice to the landlord of its intention to renew.

97 THE PROPERTIES AND BUSINESS

Insurance App B B2 (m)

GZI REIT has insurance for the Properties that the Manager believes is consistent with industry practice in Guangzhou. These include comprehensive property insurance (including insurance against fire and flood) and public liability insurance. No significant or unusual excess or deductible amounts are required under such policies. There are, however, certain types of risks that are not covered by such insurance policies, including losses resulting from war, nuclear contamination, earthquakes, acts of terrorism, epidemics and acts of god.

The Manager believes that there are no significant differences between the extent of insurance coverage for the Properties and commercial properties in Hong Kong, and that there are no significant differences between the claims recovery processes in Guangzhou and Hong Kong.

Litigation

None of GZI REIT, the Manager, the Leasing Agents, Holdco and the BVI Companies is currently involved in any material litigation nor, to the best of the Manager’s knowledge, is any material litigation currently threatened against any of the foregoing.

Rental Growth Prospects

The Manager has commissioned Cushman & Wakefield (HK) Limited, the Independent Market Research Consultant, to prepare a report on the Guangzhou commercial property market. Among other things, the Independent Market Research Consultant analysed the 10-year rental growth prospects for the Properties and concluded as follows:

— The open market rental growth rate of the White Horse Units is expected to largely follow the growth pattern of the prime retail market of Guangzhou. However, the recent rental increases may limit the ability of GZI REIT to raise rents in the future.

— In respect of the Fortune Plaza Units, the open market rental growth rate of the office portion is expected to perform better than the overall Guangzhou Grade A office market because of its prime location within the Tian He CBD while the open market rental growth rate of the retail portion is projected to perform on par with the overall prime retail market in Guangzhou.

— As for the City Development Plaza Units, the open market rent for the office portion will follow the growth pattern in the overall Guangzhou Grade A office market whereas the open market rent for the retail portion will experience a slower rate of growth than the overall prime market owing to its small size and less eye-catching entrances compared with large-scale shopping centres in the vicinity.

— Similarly, the open market rent for the Victory Plaza Units are expected to largely follow the growth pattern of the overall Guangzhou prime retail market save for the next two years, where the construction of the two tower blocks over the podium is expected to negatively affect the growth rate.

The Manager has considered and reviewed such growth forecasts and believe that they are reasonable.

98 THE PROPERTIES AND BUSINESS

Competition App B B2 (d)

The commercial property sector in Guangzhou is a competitive market. The principal competitive factors include rental rates, quality and location of properties, supply of comparable commercial space and the changing needs of commercial space users.

Fortune Plaza, City Development Plaza and Victory Plaza are all located in the Tian He CBD and face competition from the other commercial properties in the area as well as from new properties which are still under development. Other Grade A commercial buildings in the Tian He CBD which compete with Fortune Plaza and City Development Plaza for office-space users include CITIC Tower ( ), Guangzhou Metro Plaza ( ) and Xin Chuang Ju Building ( ). Zhong Cheng Plaza ( ) and Guang Cheng Plaza ( ), which are currently under construction, will also compete with Fortune Plaza and City Development Plaza for tenants when completed. Within short walking distance of Victory Plaza is Teem Plaza ( ), one of the largest shopping malls in Guangzhou, and Grandview Plaza ( ). Further competition will be posed by the underground shopping arcade to be located in the proposed walkway between Victory Plaza and the metro station along the No. 3 metro line currently under construction.

While the other office and/or retail buildings in the Tian He CBD compete with Fortune Plaza, City Development Plaza and Victory Plaza for tenants and shoppers, their presence also enhances the district’s status as the prime office and retail location in Guangzhou, which ultimately benefits GZI REIT’s properties in that location in terms of creating greater overall demand for commercial space and possibly also increasing the value of the relevant Properties.

In January 2003, the Municipal Government of Guangzhou announced the Review of Planning of Pearl River New City, in which Pearl River New City in Tian He District was positioned as the core area for future development within Guangzhou. The review highlighted a new urban development scheme for the CBD of Guangzhou, namely Guangzhou Central Business District of the 21st Century. The main focus of this development scheme will be centered around the core area of Tian He (ie. Tian He Sports Stadium Area) and Pearl River New City.

Since 2001, with the improved economic environment in Guangzhou, a significant number of commercial projects are underway and land transactions are increasing. According to the city’s urban authority, the current land released in Pearl River New City could potentially provide office space exceeding 5.0 million sq.m. to be developed in phases spanning up to fifteen years.

99 THE PROPERTIES AND BUSINESS difficulties); resurrection of these projects may potentially add another 0.3 million sq.m. to the pipeline. An estimated 88.0% of the total new supply will be located in the Tian He District. Although this is a large amount of space to be released onto the district in the next few years, 70.0% of the new space will be in the Pearl River New City area of the Tian He District.

White Horse Building is located in a district with a concentration of properties which are positioned as centres for garment wholesale and retail trades, e.g. Sky Horse Garment Market and Hong Mian Garment Market. However, White Horse Building is able to capitalise on its reputation as one of the garment wholesale and retail centres in the PRC with a well established and successful operating history.

Risk of Competition with the GZI Group

GZI is a connected person of GZI REIT as it is the holding company of the Manager and the Leasing Agents, and is also expected to be a significant holder immediately after the Listing Date. GZI is actively engaged in, among other things, the provision of property management, leasing, marketing and tenancy management services to properties developed by the GZI Group or other properties in which it has an interest.

As at 30 September 2005, the GZI Group had approximately 600,000 sq.m. of land bank available for development in the Tian He CBD in Guangzhou, which has been earmarked for commercial development. The West tower of Mega-Twin Commercial Tower is currently under development on part of the land reserve. The commercial portions of the West tower fall with the parameters of the right of the first refusal granted by GZI (see the section headed “Offering Circular Summary — Key Investment Highlights” in this Offering Circular). With the transfer of the Properties to GZI REIT, the GZI Group has no other completed Grade A commercial buildings in its property portfolio.

Potential conflicts of interest may therefore arise in relation to leasing and marketing opportunities. Comprehensive measures have been adopted to address concerns about such potential conflicts of interest between the GZI Group and GZI REIT (see the section headed “The Manager — Conflicts of Interest” of this Offering Circular). With such measures in place, the Manager believes that the Leasing Agents are capable of performing, and shall perform, their duties to GZI REIT under the Tenancy Services Agreements independently of the GZI Group’s other leasing and marketing businesses, and in the best interests of GZI REIT and Unitholders.

While GZI has granted to GZI REIT a right of first refusal, conditional on listing of the Units on the Hong Kong Stock Exchange and subject to certain other conditions, to acquire certain properties in Guangzhou (see the section headed “Material Agreements and Other Documents Relating to GZI REIT — Deed of Right of First Refusal” in this Offering Circular”), the Manager currently has no plans for GZI REIT to acquire any other properties from the GZI Group. The Manager will make a public announcement if any such plans arise in the future.

Any acquisition pursuant to the right of first refusal is subject to the satisfaction of the terms and conditions thereunder and compliance with applicable requirements of the REIT Code at the relevant time (including, where relevant, the requirement for Unitholders’ approval).

100 THE PROPERTIES AND BUSINESS

WHITE HORSE UNITS

Description

The White Horse Units are owned by Partat, a company incorporated on 20 September 2001 in the BVI. Partat is a special purpose vehicle whose sole business activity is the ownership and operation of the White Horse Units.

The White Horse Building is a multi storey commercial building with a total of eight levels above ground, a lower ground level and a basement comprising a car park.

The White Horse Units consist of part of the lower ground level (comprising a stairway/corridor area and storage areas for equipment) as well as the 2nd to 9th storeys in White Horse Building. The building has a total of eight levels above ground, a lower ground level and a basement comprising a car park. The 1st storey (which is on the lower ground level) is owned and managed by the Guangzhou Xi Jiao Villagers’ Committee (which is unrelated to GZI) and is separately operated as the Xi Jiao Market, which similarly deals in fashion apparel. The 2nd to 7th storeys in the White Horse Building form a marketplace for wholesalers and retailers of fashion apparel and accessories but also include complementary businesses such as fast food outlets and a bank. A two-storey hall used to host events such as runway fashion shows is also located on the 2nd storey. The 8th and 9th storeys of White Horse Building are currently used as offices and warehouse facilities, mainly by the tenants in the 2nd to 7th storeys. The White Horse Units account for 81.4% of the total Gross Floor Area of White Horse Building. 9.2% of the total Gross Floor Area (comprising the car park) is owned by White Horse JV (a subsidiary of GZI and therefore a connected person of GZI) and the remaining 9.4% is owned by the Guangzhou Xi Jiao Villager’s Committee.

The Manager proposes to renovate the 8th and 9th storeys of the White Horse Units for wholesale/retail use. Towards this end, it has stopped renewing existing leases and signing new leases for these two floors. It expects GZI REIT to have vacant possession of these two floors by 1 January 2006. The estimated cost of such renovation works is approximately HK$5.8 million, which will be funded from an aggregate amount of HK$26.7 million retained from the proceeds of the Global Offering (see the section headed “Material Agreements and Other Documents Relating to GZI REIT — The Reorganisation Deed” in this Offering Circular). The renovation is expected to be completed before May 2006 and is expected to generate additional Rental Income of HK$2.2 million in FY2006 as compared to the Rental Income which could be achieved based on the existing usage of the two storeys.

With over 960 tenants in the garment wholesale and retail trades as at 30 September 2005 and a waiting list of persons seeking to rent space in the building, White Horse Building attracts a wide range of wholesalers/retailers and customers from both the PRC and overseas (including Russia and the Middle East), and is one of the centres of the garment wholesale and retail trades in the PRC. The business of the garment wholesalers and retailers in the building is enhanced by facilities such as well-positioned escalators which facilitate the flow of human traffic, dedicated cargo lifts for the transportation of bulky goods and a fire monitoring and security system which ensures the safety of tenants and shoppers.

101 THE PROPERTIES AND BUSINESS

White Horse Building’s location, which is directly opposite the Guangzhou train station and long distance bus station, as well as its proximity to the Guangzhou Huo Che Zhan underground metro station on the No. 2 Metro Line adds to its appeal because of the easy availability of long distance transportation for the bulk shipment of garments and other goods that customers purchase at White Horse Building. The new Bai Yun International Airport ( )in Guangzhou, which commenced operations in August 2004, has also boosted Guangzhou’s accessibility by air and White Horse Building is expected to benefit from an increased number of customers from afar.

White Horse Building twice underwent addition and alteration works, once between 1995 and 1997 and again between 1998 and 2000. Between 1995 and 1997, the open courtyard of the building was converted into an events hall used to accommodate a food court and to stage fashion events. Between 1998 and 2000, the north and west wings of the building were extended outwards between the 3rd and 7th storeys, and a further two storeys were added to the building to form the 8th and 9th storeys. The two addition and alteration projects added another 15,250 sq.m. to the building’s Gross Floor Area.

White Horse Building has been the recipient of numerous awards almost since it first commenced operations, including the Municipal Model Market Award ( ) in 1994, the Province Model Market Award ( ) in 1996, the State Market Award ( ) in 1995 and the 10 Largest Garment Wholesale Market Award in 2005. The building is also IS0 9001 certified for the quality of its management systems.

For each of FY2002, FY2003 and FY2004 as well as the nine months ended 30 September 2005, the White Horse Units enjoyed full occupancy.

Tenant Profile

The current leases of the tenants in the White Horse Units are generally for terms of one to App B B2 (i) three years while the new leases commencing on 1 January 2006 will be for terms of four to five years. Such leases grant the tenants a right of first refusal to enter into a further tenancy agreement upon the expiry of their original leases. (See the sub-section headed “Tenancy Agreements” above for other key terms of the tenancy agreements, including early termination provisions.)

In line with the positioning of White Horse Building as a garment wholesale and retail market, businesses and individuals engaged in the garment wholesale and retail trades were by far the largest contributors to the monthly base rent for September 2005, accounting for more than 98.7% of the aggregate monthly base rent for September 2005. The office/warehouse tenants and the complementary businesses in the building accounted for the remaining 1.3% of the monthly base rent for September 2005.

102 THE PROPERTIES AND BUSINESS

The table below sets out information on the 10 largest tenants of the White Horse Units in terms of total monthly base rent for September 2005:

Percentage Percentage Gross of total of total Rentable Gross monthly Tenant Business sector Expiry date Area(1) Rentable Area base rent (sq.m.) (%) (%)

(Xu Xin) Garment 31 Dec 2005(2) 216.4 0.4 0.8 wholesale/retail

(Chen Shuang Xia) Garment 31 Dec 2005(2) 334.5 0.7 0.7 wholesale/retail

(Xie Li Na) Garment 31 Dec 2005(2) 495.2 1.0 0.7 wholesale/retail

(Yao Zhan Hao) Garment 31 Dec 2005(2) 312.4 0.7 0.6 wholesale/retail

(Wu Huaying) Garment 31 Dec 2005(2) 285.0 0.6 0.6 wholesale/retail

Banking 31 Dec 2005 265.2 0.5 0.6 (Bank of Communications Guangzhou Branch)

Tenant WH1(3) Garment 31 Dec 2005(2) 538.7 1.1 0.6 wholesale/retail

Tenant WH2(3) Garment 31 Dec 2005(2) 192.1 0.4 0.5 wholesale/retail

(Xie Qiu Sheng) Garment 31 Dec 2005(2) 210.8 0.4 0.5 wholesale/retail

(Mou Zhi Yi) Garment 31 Dec 2005 472.5 1.0 0.5 wholesale/retail

10 largest tenants 3,322.8 6.8 6.1 by total monthly base rent

Other tenants 45,684.4 93.2 93.9

Vacant space —— —

Total 49,007.2 100.0 100.0

Notes:

(1) As at 30 September 2005.

(2) Renewed till 31 December 2009 or 31 December 2010.

(3) These tenants have not been identified as they have not consented to the disclosure of their names in this Offering Circular.

103 THE PROPERTIES AND BUSINESS

None of these tenants is a connected person of GZI REIT.

Expiries and Renewals

1,307 of the current leases in the White Horse Units will terminate on 31 December 2005. 1,246, or 95.3%, of these expiring leases have been renewed till 31 December 2009 or 31 December 2010.

The table below sets out, for the periods indicated, details of expiries in respect of tenancies in the White Horse Units as at 30 September 2005 (without taking into account the new leases for the White Horse Units commencing 1 January 2006):

Expiring leases as a Expiring leases percentage Total number Gross Rentable as a percentage of total of leases Area of leases of total Gross monthly Period expiring expiring Rentable Area base rent(1)

(%) (sq.m.) (%) (%) (%)

1 October 2005 - 31 December 2005 1,307(2) 99.7 48,573.0 99.1 99.1 99.9 FY2006 0(3) 0.0 0 0.0 0.0 0.0 FY2007 0(3) 0.0 0 0.0 0.0 0.0 FY2008 0(3) 0.0 0 0.0 0.0 0.0 FY2009 1(3) 0.1 129.8 0.3 0.3 0.07 FY2010 and beyond 3(3) 0.2 304.4 0.6 0.6 0.03

Total 1,311 100.0 49,007.2 100.0 100.0 100.0

Notes:

(1) Calculated as a percentage of the total monthly base rent of the White Horse Units for September 2005.

(2) Of these 1,307 leases, 1,246 (95.3%) have been renewed till 31 December 2009 or 31 December 2010.

(3) Assuming that the right of first refusal to enter into a further tenancy agreement for leases expiring in the earlier periods set out in the table is not exercised.

104 THE PROPERTIES AND BUSINESS

The table below sets out, for the periods indicated, details of expiries in respect of tenancies in the White Horse Units as at 30 September 2005 (taking into account the new leases for the White Horse Units commencing 1 January 2006):

Total number of Gross Rentable Area Period leases expiring of leases expiring

(%) (sq.m.) (%)

1 October 2005 - 31 December 2005 61 4.7 4,082.9 8.3 FY2006 0(1) 0.0 0 0.0 FY2007 0(1) 0.0 0 0.0 FY2008 0(1) 0.0 0 0.0 FY2009 588(1) 44.8 13,022.0 26.6 FY2010 and beyond 662(1) 50.5 31,902.3 65.1

Total 1,311 100.0 49,007.2 100.0

Note:

(1) Assuming that the right of first refusal to enter into a further tenancy agreement for leases expiring in the earlier periods set out in the table is not exercised.

105 THE PROPERTIES AND BUSINESS

FORTUNE PLAZA UNITS

Description

The Fortune Plaza Units are owned by Moon King, a company incorporated on 20 September 2001 in the BVI. Moon King is a special purpose company whose sole business activity is the ownership and operation of the Fortune Plaza Units.

Having only been completed in the second half of 2003, Fortune Plaza is one of the newest Grade A commercial buildings in Guangzhou’s Tian He CBD. The building is located on Ti Yu Dong Road ( ). It consists of two tower blocks above a 6-storey podium and two levels of underground car parks. The East tower rises from the 8th to 37th storeys above the podium and the West tower rises from the 8th to 28th storeys above the podium. As a modern commercial development, Fortune Plaza is equipped with an automated communication system which brings fixed line and mobile telecommunications and cable facilities and services to tenants in the building, an automated office system which combines a property management information system, a digital bulletin board system and a digital touch-screen search facility, as well as a modern fire monitoring and security system. The large floor-plate of the podium is suitable for the business space requirements of banks and other financial institutions. A basement car park serves the tenants of and visitors to Fortune Plaza.

Fortune Plaza stands directly above the Ti Yu Zhong Xin underground metro station ( ), which lies at the intersection of the existing No. 1 metro line and a branch of the No. 3 metro line that is currently under construction, the first section of which is scheduled to open by the end of 2005. Fortune Plaza is situated within walking distance of all the other commercial buildings around the Tian He Stadium.

The Fortune Plaza Units comprise 35 strata units in the West tower, 43 units in the East tower and five strata units in the podium of Fortune Plaza. The Fortune Plaza Units account for 50.2% of the building’s total Gross Floor Area of 80,419.1 sq.m., 15.5% of the total Gross Floor Area (comprising certain units in the podium(1), certain units in the West tower, a clubhouse and the car park) is owned by GCCD (a subsidiary of GZI and therefore a connected person of GZI REIT) and the remaining 34.3% is owned by unrelated third parties.

Tenant Profile

The 10 largest tenants (in terms of monthly base rent for September 2005) in the Fortune Plaza Units include (HSBC Electronic Data Processing (Guangdong) Limited), (Jia De Shi (China) Investment Co., Ltd.) and (Alibaba (China) Technology Co., Ltd.). A majority of the leases of the Fortune Plaza Units are for terms of between one and three years (the longest of which is for five years)

(1) GCCD has signed a memorandum of understanding with a third party to sell these podium units (which account for 0.6% of the total Gross Floor Area of Fortune Plaza).

106 THE PROPERTIES AND BUSINESS and grant the tenants a right of first refusal to renew their leases upon the expiry of their original leases. The typical lease for the Fortune Plaza Units does not expressly provide for any early termination mechanism by the tenants. (See the sub-section headed “Tenancy Agreements” above.)

Given that Fortune Plaza is primarily an office development, the office tenants in the Fortune Plaza Units account for 97.3% of the aggregate monthly base rent of the Fortune Plaza Units for September 2005 and the retail tenants account for 2.7% of the aggregate monthly base rent for September 2005.

The table below sets out information on the 10 largest tenants of the Fortune Plaza Units in terms of total monthly base rent for September 2005:

Percentage Percentage Gross of total of total Rentable Gross monthly Tenant Business sector Expiry date Area(1) Rentable Area base rent

(sq.m.) (%) (%)

Banking 31 Jan 2008 8,550.2 21.2 23.8 (HSBC Electronic Data Processing (Guangdong) Limited)

E-commerce 31 Aug 2007 2,092.4 5.1 6.3 (Alibaba (China) Technology Co., Ltd.)

Services 20 Jul 2007 2,000.0 4.9 5.0 (Nei Meng Gu Yi Lin Mu Ye Co., Ltd.)

Petroleum 11 Apr 2007 1,188.4 2.9 4.0

(China National Petroleum Co., Ltd.)

Petroleum 30 Sep 2008 997.7 2.5 3.9 (Jia De Shi (China) Investment Co., Ltd.)

Real Estate 7 Sep 2007 999.0 2.5 3.5 (Guangzhou Hai Yi Property Development Co., Ltd.)

Pharmaceutical 31 Mar 2007 997.7 2.5 3.5 (Astra Zeneca Pharmaceutical Co., Ltd.)

107 THE PROPERTIES AND BUSINESS

Percentage Percentage Gross of total of total Rentable Gross monthly Tenant Business sector Expiry date Area(1) Rentable Area base rent

(sq.m.) (%) (%)

Logistics 9 Aug 2008 999.0 2.5 3.5 (Guo Lu Yun Tong Hua Nan Airline Services Co., Ltd.)

Services 9 May 2009 997.6 2.5 3.3 (Glory Business Services Co., Ltd. Guangzhou Branch)

Logistics 30 Sep 2007 997.7 2.5 3.2 (Kuehne & Nagel Limited, Guangzhou Representative Office)

10 largest tenants 19,819.7 49.1 60.0 by total monthly base rent

Other tenants 11,216.9 27.8 40.0

Vacant space 9,319.6 23.1 —

Total 40,356.2 100.0 100.0

Note:

(1) As at 30 September 2005.

Save for HSBC Electronic Data Processing (Guangdong) Limited, an associate of the Trustee, none of these tenants is a connected person of GZI REIT. (See Appendix X to this Offering Circular for a full list of tenancies in the Properties with connected persons.)

108 THE PROPERTIES AND BUSINESS

Expiries and Renewals

The table below sets out, for the periods indicated, details of expiries in respect of tenancies at the Fortune Plaza Units as at 30 September 2005:

Expiring leases/vacant Expiring space as a leases as a Total number Gross Rentable percentage percentage of of leases Area of leases of total Gross total monthly Period expiring expiring/vacant space Rentable Area base rent(1)

(%) (sq.m.) (%) (%) (%)

1 October 2005 — 31 December 2005 2 3.8 350.2 1.1 0.9 1.3

FY2006 16(2) 30.2 3,066.5 9.9 7.6 10.4

FY2007 26(2) 49.0 14,034.0 45.2 34.8 46.9

FY2008 7(2) 13.2 12,092.3 39.0 30.0 36.5

FY2009 2(2) 3.8 1,493.6 4.8 3.7 4.9

FY2010 and beyond —— ——— —

Sub-total 53 100.0 31,036.6 100.0 77.0 100.0

Vacant space n.a. n.a. 9,319.6 n.a. 23.0 n.a.

Total n.a. n.a. 40,356.2 n.a. 100.0 n.a.

Notes:

(1) Calculated as a percentage of the total monthly base rent of the Fortune Plaza Units for September 2005.

(2) Assuming that the right of first refusal to enter into a further tenancy agreement for leases expiring in the earlier periods set out in the table is not exercised.

109 THE PROPERTIES AND BUSINESS

CITY DEVELOPMENT PLAZA UNITS

Description

The City Development Plaza Units are owned by Full Estates, a company incorporated on 20 September 2001 in the BVI. Full Estates is a special purpose vehicle whose sole business activity is the ownership and operation of the City Development Plaza Units.

City Development Plaza is a Grade A commercial building located in the heart of Guangzhou’s Tian He CBD. The 28-storey building has a glass fac¸ade and comprises a five-storey retail podium with a single office tower rising 23 storeys over the podium. The retail element in the podium is primarily positioned to serve the needs of office workers in the building and from other buildings in the vicinity. Contained within the podium are businesses such as beauty salons and food and beverage outlets. The building has an underground car park that does not form part of the City Development Plaza Units. City Development Plaza overlooks the Tian He Stadium ( ), which is the focal point of the Tian He CBD, and is fronted by a civic plaza which sets the building back from the road in front of it.

City Development Plaza is within walking distance of all the other commercial buildings around the Tian He Stadium as well as the Ti Yu Xi Road underground metro station, which lies at the intersection of the existing No. 1 metro line and the No. 3 metro line that is currently under construction, the first section of which is scheduled to open by the end of 2005. The accessibility of public transportation and the building’s central location within the Tian He CBD makes space in City Development Plaza attractive to businesses for the commuting convenience it offers to office workers.

In 1999, City Development Plaza was awarded the National Lu Ban Prize ( ) for construction excellence, the highest award granted by the Ministry of Construction ( ) and the China Construction Industry Association ( ). In 2000, the building was also awarded the National Prize for Excellence in Property Management ( )by the Ministry of Construction.

The City Development Plaza Units comprise 165 strata units in City Development Plaza (six in the podium and 159 in the tower block), which account for 57.3% of the building’s total Gross Floor Area of 74,049.2 sq.m. The space occupied by GCCD’s offices as well as a clubhouse, a restaurant and the car park (together accounting for 36.8% of the building’s total Gross Floor Area) has been retained by GCCD (a subsidiary of GZI and therefore a connected person of GZI REIT). The remaining 5.9% of the building’s total Gross Floor Area is owned by unrelated third parties.

The office element of the City Development Plaza Units accounts for 72.3% of the aggregate Gross Rentable Area of the City Development Plaza Units. For the nine months ended 30 September 2005, the City Development Plaza Units enjoyed an average occupancy rate of 89.9%.

110 THE PROPERTIES AND BUSINESS

Tenant Profile

The 10 largest tenants (in terms of monthly base rent for September 2005) in the City Development Plaza Units include (Guangdong Mobile Communications Co., Ltd.), (Taikang Life Insurance Co. Ltd. Guangzhou Branch), (Yangcheng Sub-branch of Guangzhou Branch, Shenzhen Development Bank) and (Cosco Guangzhou International Freight Co. Ltd.). The leases of these tenants range from terms of one year to nine years, and grant the tenants a right of first refusal to enter into a further tenancy agreement upon the expiry of their original leases. The typical lease for the City Development Plaza Units does not expressly provide for any early termination mechanism by the tenants. (See the sub-section headed “Tenancy Agreements” above.)

Reflecting City Development Plaza’s configuration as an office building with a supporting retail element, the office tenants were the most significant contributors to the monthly base rent of the City Development Plaza Units for September 2005, accounting for 81.1% of the aggregate monthly base rent for the Property, while the retail tenants accounted for the balance of 18.9%.

The table below sets out information on the 10 largest tenants of the City Development Plaza Units in terms of total monthly base rent for September 2005:

Percentage Percentage Gross of total of total Rentable Gross monthly Tenant Business sector Expiry date Area(1) Rentable Area base rent (sq.m.) (%) (%)

Communications 30 Apr 2008 3,688.7 8.7 12.3 (Guangdong Mobile Communications Co., Ltd.)

Finance 31 Aug 2006 1,844.3 4.4 5.9 (Efund Management Co. Ltd.) and and and and 16 Oct 2006 1,844.3 4.4 5.8

Services 30 Jun 2010 7,830.0 18.5 9.5 (Guangzhou Wisdom Valley Development Company Limited)

Transportation 31 Aug 2006 2,997.1 7.1 8.8 (Cosco Guangzhou International Freight Co. Ltd.)

Insurance 31 Dec 2007 2,431.9 5.7 6.1 (Taikang Life Insurance Co. Ltd. Guangzhou Branch)

111 THE PROPERTIES AND BUSINESS

Percentage Percentage Gross of total of total Rentable Gross monthly Tenant Business sector Expiry date Area(1) Rentable Area base rent (sq.m.) (%) (%)

Banking 31 Oct 2007 694.2 1.6 5.2 (Yangcheng Sub-branch of Guangzhou Branch, Shenzhen Development Bank)

Finance 19 Nov 2006 1,844.3 4.3 4.7 (Axa-Minmetals Assurance Co. Ltd. Guangzhou Branch)

Property agency 31 Dec 2005 1,528.8 3.6 4.6 (Guangzhou City Construction & Development Xingye Property Agent Ltd.)

Media 31 Dec 2006 334.6 0.8 0.9 (Guangzhou Ying Hai Wen Hua and and and and Broadcasting Co., Ltd.) 30 Sep 2007 818.1 1.9 2.2

Finance 31 Dec 2007 1,060.5 2.5 2.9 (Guangzhou Investment Company Limited)

10 largest tenants 26,916.8 63.5 68.9 by total monthly base rent

Other tenants 11,642.6 27.5 31.1

Vacant space 3,838.0 9.0 —

Total 42,397.4 100.0 100.0

Note:

(1) As at 30 September 2005.

Guangzhou City Construction & Development Xingye Property Agent Ltd. and Yue Xiu Investment Co., Ltd. are both connected persons of GZI REIT. (See Appendix X to this Offering Circular for a full list of tenancies in the Properties with connected persons.)

112 THE PROPERTIES AND BUSINESS

Expiries and Renewals

The following table sets out information on leases at the City Development Plaza Units that have expired and those that have been renewed by the existing tenants during the periods indicated:

Gross Total Rentable Number renewed Renewal rate Number of Area of of expired Gross by number Renewal rate leases expired leases Rentable of leases by expired expired leases renewed Area expired leased area

(sq.m.) (sq.m.) (%) (%)

FY2003 38 10,773.7 11 4,229.2 29.0 39.3 FY2004 37 10,864.3 18 6,410.5 48.6 59.0 Nine months ended 30 September 2005 32 10,850.2 13 6,016.5 40.6 55.5 Total/Average 107 32,488.2 42 16,656.2 39.3 51.3

The following table sets out, for the periods indicated, details of expiries in respect of tenancies at the City Development Plaza Units as at 30 September 2005:

Expiring leases/vacant Expiring Total space as a leases as a number Gross Rentable percentage of percentage of of leases Area of leases total Gross total monthly Period expiring expiring/vacant space Rentable Area base rent(1)

(%) (sq.m.) (%) (%) (%)

1 October 2005 to 31 December 2005 11 16.2 3,626.0 9.4 8.6 10.3 FY2006 36(2) 52.9 13,594.9 35.3 32.1 38.4 FY2007 17(2) 25.0 8,458.9 21.9 19.9 25.9 FY2008 3(2) 4.4 5,049.6 13.1 11.9 15.9 FY2009 0(2) 0.0 0.0 0.0 0.0 0.0 FY2010 and beyond 1(2) 1.5 7,830.0 20.3 18.5 9.5 Sub-total 68 100.0 38,559.4 100.0 91.0 100.0 Vacant space n.a. n.a. 3,838.0 n.a. 9.0 n.a. Total n.a. n.a. 42,397.4 n.a. 100.0 n.a.

Notes:

(1) Calculate as a percentage of total monthly base rent of the City Development Plaza Units for September 2005.

(2) Assuming the right of first refusal to enter into a further tenancy agreement for leases expiring in earlier periods set out in the table is not exercised.

113 THE PROPERTIES AND BUSINESS

VICTORY PLAZA UNITS

Description

The Victory Plaza Units are owned by Keen Ocean, a company incorporated on 20 September 2001 in the BVI. Keen Ocean is a special purpose vehicle whose sole business activity is the ownership and operation of the Victory Plaza Units.

Victory Plaza is designed to be an integrated retail and office complex in the heart of Guangzhou’s Tian He CBD. A six-storey podium was completed in 2003 together with four underground levels which accommodate an electronic appliance chain store (occupying part of basement 1) and a car park occupying basements 1 to 4. The Victory Plaza Units consist of the entire six-storey podium as well as that part of basement 1 which houses the electronic appliance chain store. The podium is occupied by retail outlets, fast food outlets and restaurants as well as leisure facilities. Work commenced on two tower blocks over the podium in September 2004. The two tower blocks do not form part of the Victory Plaza Units. They are expected to be completed by 2007 and will be for office use.

Victory Plaza features a six-storey glass atrium over its entrance and a paved pedestrian mall in front of the building. Victory Plaza is situated at the junction of Tian He Road ( ) and Ti Yu Xi Road ( ), two busy thoroughfares within the Tian He CBD. Located next to the Guangzhou Book Centre ( ) and within close proximity of Teem Plaza (one of the largest shopping malls in Guangzhou) and Grandview Plaza, Victory Plaza is positioned to take advantage of the crowds attracted by these other retail centres.

Situated among the numerous office buildings in the Tian He CBD, Victory Plaza has a natural and growing market consisting primarily of white-collar workers in the Tian He CBD. When the two tower blocks at the property are completed, the retail outlets, fast food outlets and restaurants as well as leisure facilities in Victory Plaza will also cater to office workers there. Additionally, Victory Plaza is within a short walk of the Ti Yu Xi Road underground metro station on the No. 1 metro line. When the No. 3 metro line that is currently under construction commences operations (the first section is scheduled to open by the end of 2005), shoppers travelling to the Tian He CBD on the No. 1 and No. 3 metro lines will enjoy direct underground access to basement 1 of Victory Plaza from the station. The Manager understands that this proposed walkway between the metro station and Victory Plaza will house an underground shopping arcade, and anticipates that shopper traffic through Victory Plaza will increase significantly when the walkway comes into operation.

114 THE PROPERTIES AND BUSINESS

Tenant Profile

The 10 largest tenants (in terms of monthly base rent for September 2005) in the Victory Plaza Units mainly comprise retail businesses as well as food and beverage businesses. A significant number of the leases of these tenants are for terms of at least two years (the longest of which is for 10 years) and grant the tenants a right of first refusal to enter into a further tenancy agreement upon the expiry of their original leases. The typical lease for the Victory Plaza Units does not expressly provide for any early termination mechanism by the tenants. (See the sub-section headed “Tenancy Agreements” above.)

Tenants in the food and beverage business and the retail business respectively accounted for approximately 26.1% and 67.7% of the monthly base rent of the Victory Plaza Units for September 2005.

The table below sets out information on the 10 largest tenants of the Victory Plaza Units in terms of total monthly base rent for September 2005:

Percentage Percentage Gross of total of total Rentable Gross monthly Tenant Business sector Expiry date Area(1) Rentable Area base rent

(sq.m.) (%) (%)

Department 31 Mar 2010 12,484.6 45.8 42.9 (Guangzhou Xindaxin Co., Ltd.) store

Electrical 31 May 2011 1,918.0 7.0 12.2 (Guangzhou GOME Electrical appliances Appliances Co. Ltd.)

Banking 17 Oct 2008 775.6 2.8 6.3 (China Merchants Bank Guangzhou Branch)

Food and 9 Dec 2013 840.0 3.1 5.8 (Yum! Restaurants beverage (Guangdong) Co., Ltd.)

Food and 9 Dec 2013 3,017.8 11.1 5.4 (Guangzhou Qiao Mei Fa Zhan beverage Company Limited)

(Chen Hui Yi) Food and 30 Apr 2014 2,773.2 10.2 5.2 beverage

115 THE PROPERTIES AND BUSINESS

Percentage Percentage Gross of total of total Rentable Gross monthly Tenant Business sector Expiry date Area(1) Rentable Area base rent

(sq.m.) (%) (%)

(Zhang Li Fen) Retail 17 Oct 2006 378.2 1.4 4.8

(Zhou Cai Xia) Retail/Food and 15 Oct 2008 77.0 0.3 0.6 beverage and and and and 30 Apr 2014 1,996.7 7.3 3.7

Food and 31 Aug 2009 318.2 1.2 3.2 (Shanghai Ha¨ agen-Dazs beverage Co., Ltd.)

Food and 17 May 2012 1,585.4 5.8 2.8 (Guangzhou Lao Xiang Diet beverage Co. Ltd.)

10 largest tenants 26,164.7 96.0 92.9 by total monthly base rent

Other tenants 1,097.6 4.0 7.1

Vacant space ———

Total 27,262.3 100.0 100.0

Note:

(1) As at 30 September 2005.

None of these tenants is a connected person of GZI REIT.

116 THE PROPERTIES AND BUSINESS

Expiries and Renewals

The table below sets out, for the periods indicated, details of expiries in respect of tenancies at the Victory Plaza Units as at 30 September 2005:

Expiring Expiring leases/vacant leases as a space as a percentage Total number Gross Rentable percentage of total of leases Area of leases of total Gross monthly Period expiring expiring/vacant space Rentable Area base rent(1)

(%) (sq.m.) (%) (%) (%)

1 October 2005 to 31 December 2005 0 0.0 0.0 0.0 0.0 0.0 FY2006 8(2) 33.3 776.7 2.8 2.8 7.8 FY2007 2(2) 8.3 183.0 0.7 0.7 1.5 FY2008 5(2) 20.9 1,145.9 4.2 4.2 8.7 FY2009 2(2) 8.3 541.1 2.0 2.0 4.0 FY2010 and beyond 7(2)(3) 29.2 24,615.6(3) 90.3 90.3(3) 78.0(3)

Sub-total 24 100.0 27,262.3 100.0 100.0 100.0 Vacant space n.a. n.a. — n.a. — n.a.

Total n.a. n.a. 27,262.3 n.a. 100.0 n.a.

Notes:

(1) Calculated as a percentage of total monthly base rent of the Victory Plaza Units for September 2005.

(2) Assuming that the right of first refusal to enter into a further tenancy agreement for leases expiring in the earlier periods set out in the table is not exercised.

(3) The majority of these leases are with tenants in the food and beverage business, who typically enter into longer lease terms due to higher expenditure on renovations of their premises. In addition, one of these leases is with Guangzhou Xindaxin Co., Ltd., an anchor tenant which occupies a Gross Rentable Area of 12,484.6 sq.m. under a lease expiring in March 2010.

117 THE PROPERTIES AND BUSINESS

Past Transactions of the Properties App B B2 (g)

Transactions involving transfers of title to the Properties for the last five years preceding the Latest Practicable Date are described below.

White Horse Units

In 2000, the White Horse Building was owned by GCCD Group. According to the Approval (2001) No. 1807 issued by the State Development and Planning Commission and the Approval (2001) No. 584 issued by the Ministry of Commerce (previously known as the Ministry of Foreign Trade and Economic Cooperation), the lower ground floor as well as the 2nd, 3rd, 4th, 6th, 7th, 8th and 9th storeys of White Horse Building were transferred from GCCD Group to White Horse JV in December 2002, and the 5th storey of White Horse Building was transferred from GCCD Group to Xingcheng on 21 November 2002. On 3 December 2002, White Horse JV obtained the Building Ownership Certificates for the 2nd, 3rd, 4th, 6th and 7th storeys of White Horse Building.

On 26 October 2004, the title to the 5th storey of White Horse Building was transferred from Xingcheng to White Horse JV pursuant to the Approval (2004) No. 198 issued by the Guangzhou Land Bureau and a Building Ownership Certificate for the 5th storey of White Horse Building was issued to White Horse JV.

On 15 July 2005, the Building Ownership Certificates for the lower ground floor as well as the 8th and 9th storeys of White Horse Building were issued to White Horse JV.

On 19 October 2005, in accordance with the Approval (2005) No. 1392 issued by the Guangzhou Land Bureau, the title to the lower ground floor as well as the 2nd, 3rd, 4th, 5th, 6th, 7th, 8th and 9th storeys of White Horse Building was transferred from White Horse JV to Partat and Partat obtained the Building Ownership Certificates in respect of all nine White Horse Units.

Fortune Plaza Units

In 2000, the Fortune Plaza was still under construction and was owned by GCCD Group. According to the Approval (2001) No. 1807 issued by the State Development and Planning Commission and the Approval (2001) No. 584 issued by the Ministry of Commerce (previously known as the Ministry of Foreign Trade and Economic Cooperation), the property then still under development was transferred from GCCD Group to GCCD in December 2002.

On 10 September 2004, in accordance with the Approval (2004) No. 198 issued by the Guangzhou Land Bureau, the title in respect of 31 strata units comprised in the Fortune Plaza Units were transferred from GCCD to Moon King.

118 THE PROPERTIES AND BUSINESS

On 8 August 2005, pursuant to the Approval (2005) No. 1392 issued by the Guangzhou Land Bureau, the title in respect of 52 strata units comprised in the Fortune Plaza Units were transferred from GCCD to Moon King.

As a result of the transfers on 10 September 2004 and 8 August 2005, Moon King obtained 83 Building Ownership Certificates for the Fortune Plaza Units.

City Development Plaza Units

In 2000, the City Development Plaza Units were held by GCCD Group, via 164 Building Ownership Certificates and one title confirmation document.

According to the Approval (2001) No. 1807 issued by the State Development and Planning Commission and the Approval (2001) No. 584 issued by the Ministry of Commerce (previously known as the Ministry of Foreign Trade and Economic Cooperation), the City Development Plaza Units were transferred from GCCD Group to GCCD in December 2002.

Pursuant to the Approval (2004) No.198 issued by the Guangzhou Land Bureau, the City Development Plaza Units were transferred from GCCD to Full Estates, and 165 Building Ownership Certificates were issued to Full Estates on 20, 21, 22 and 26 October 2004.

Victory Plaza Units

In 2000, the land on which Victory Plaza is located belonged to GCCD Group. According to the Approval (2001) No. 1807 issued by the State Development and Planning Commission and the Approval (2001) No. 584 issued by the Ministry of Commerce (previously known as the Ministry of Foreign Trade and Economic Cooperation), the property then still under development was transferred from GCCD Group to GCCD in December 2002.

On 6 July 2005 and 15 July 2005, pursuant to the Approval (2004) No.198 and the Approval (2005) No. 1392 issued by the Guangzhou Land Bureau, the title to Victory Plaza Units were transferred from GCCD to Keen Ocean and Keen Ocean obtained nine Building Ownership Certificates for the Victory Plaza Units.

All the transactions described above were effected for nil consideration.

Acquisition by GZI of a 95.0% Interest in GCCD in 2002

In 2000, the Properties were held by GCCD Group, which was established in 1983 and was a state owned enterprise in the PRC under the supervision of Guangzhou Construction Commission ( ). GCCD Group was one of the largest property developers in Guangzhou and held a substantial number of properties and development projects, including the Properties. Pursuant to the approval document Ji Wai Zi (2001) No. 1807 dated 25 September 2001 issued by the PRC State Development and Planning Commission (“SDPC”) ( ), a 95.0% interest in GCCD Group held by the Guangzhou Municipal

119 THE PROPERTIES AND BUSINESS

People’s Government was injected into Yue Xiu. The SDPC also approved Yue Xiu’s disposal of its interest in the reorganised GCCD Group to GZI. For the purposes of the acquisition by GZI, GCCD Group underwent an internal reorganisation in order to rationalise the business and shareholding structure of its various business interests before being injected into Yue Xiu.

Immediately following such reorganisation, new sino-foreign joint venture companies (including GCCD) were established. These were owned as to 95.0% by GCCD BVI and the remaining interest by GCCD Group. (See the charts on pages 122 and 123 in this Offering Circular for an illustration of the ownership structures of the Properties immediately before and after the above reorganisation.)

On 20 December 2002, GZI completed the acquisition of, among other things, a 100.0% interest in GCCD BVI from Yue Xiu for a total consideration which represented a discount of 40.0% to the appraised audited net asset value of the assets acquired. On completion of the acquisition, the total fair value of the Properties of HK$1,576.6 million was recorded in the financial statements of GZI.

For ease of reference, the following tables summarise the transactions described above:

White Horse Units

Mode of Transfer/ Date Transferor Transferee Relevant Floors/Units Applicable Document

December GCCD Group White Horse Lower ground floor, By way of internal reorganisation 2002 JV 2nd, 3rd, 4th, 6th, pursuant to the Approval (2001) 7th, 8th and 9th No. 1807 issued by the State storeys Development and Planning Commission and the Approval (2001) No. 584 issued by the Ministry of Commerce

21 November GCCD Group Xingcheng 5th storey By way of internal reorganisation 2002 pursuant to the Approval (2001) No. 1807 issued by the State Development and Planning Commission and the Approval (2001) No. 584 issued by the Ministry of Commerce

26 October Xingcheng White Horse 5th storey By way of internal reorganisation 2004 JV pursuant to the Approval (2004) No. 198 issued by the Guangzhou Land Bureau

120 THE PROPERTIES AND BUSINESS

Mode of Transfer/ Date Transferor Transferee Relevant Floors/Units Applicable Document

19 October White Horse Partat Lower ground floor, By way of internal reorganisation 2005 JV 2nd, 3rd, 4th, 5th, pursuant to the Approval (2005) 6th, 7th, 8th and 9th No. 1392 issued by the storeys Guangzhou Land Bureau

Fortune Plaza Units

Mode of Transfer/ Date Transferor Transferee Relevant Floors/Units Applicable Document

December GCCD Group GCCD Fortune Plaza (under By way of internal reorganisation 2002 development) pursuant to the Approval (2001) No. 1807 issued by the State Development and Planning Commission and the Approval (2001) No. 584 issued by the Ministry of Commerce

10 September GCCD Moon King 31 strata units By way of internal reorganisation 2004 pursuant to the Approval (2004) No. 198 issued by the Guangzhou Land Bureau

8 August 2005 GCCD Moon King 52 strata units By way of internal reorganisation pursuant to the Approval (2005) No. 1392 issued by the Guangzhou Land Bureau

City Development Plaza Units

Mode of Transfer/ Date Transferor Transferee Relevant Floors/Units Applicable Document

December GCCD Group GCCD All strata units By way of internal reorganisation 2002 pursuant to the Approval (2001) No. 1807 issued by the State Development and Planning Commission and the Approval (2001) No. 584 issued by the Ministry of Commerce

20, 21, 22 and GCCD Full Estates All strata units By way of internal reorganisation 26 October pursuant to the Approval (2004) 2004 No. 198 issued by the Guangzhou Land Bureau

121 THE PROPERTIES AND BUSINESS

Victory Plaza Units

Mode of Transfer/ Date Transferor Transferee Relevant Floors/Units Applicable Document

December GCCD Group GCCD Victory Plaza By way of internal reorganisation 2002 (under development) pursuant to the Approval (2001) No. 1807 issued by the State Development and Planning Commission and the Approval (2001) No. 584 issued by the Ministry of Commerce

6 and 15 July GCCD Keen Ocean All strata units By way of internal reorganisation 2005 pursuant to the Approval (2004) No.198 and the Approval (2005) No. 1392 issued by the Guangzhou Land Bureau

The following diagram illustrates the ownership structures of the Properties immediately before the transfers thereof to White Horse JV or GCCD (as the case may be)(1):

Guangzhou Municipal People's Government

GCCD Group(2) Yue Xiu

City Development GZI White Horse Units Fortune Plaza Victory Plaza Plaza units plus other plus other portions of (under (under portions of City White Horse Building development) development) Development Plaza

Notes:

(1) Not all the intermediate holding entities are included in the chart.

(2) A state owned enterprise in the PRC separate from the Yue Xiu Group and the GZI Group.

122 THE PROPERTIES AND BUSINESS

The following diagram illustrates the ownership structures of the Properties immediately before the transfers thereof to the BVI Companies:

Public Yue Xiu GCCD Group(2)

49.8%(1) 50.2%(1)

GZI

100.0%

GCCD BVI 5.0%

廣州華振科技投資 100.0% 有限公司 (Guangzhou Hua Zhen Technology Other property Superinvestor Acon Investment Ltd Investment Co., Ltd.)(4) investments and (BVI) (BVI) (PRC) developments 95.98% 95.0%

4.02% White Horse (3) (3) GCCD JV

City Development White Horse Units Fortune Plaza Plaza Units plus Victory Plaza Units plus other portions Units plus other other portions of plus other portions of White Horse portions of Fortune (8) (5) (6) City Development of Victory Plaza Building Plaza (7) Plaza

Notes:

(1) As at the Latest Practicable Date.

(2) A state owned enterprise in the PRC separate from the Yue Xiu Group and the GZI Group.

(3) A sino-foreign joint venture company.

(4) A PRC-incorporated company which is a wholly owned subsidiary of GZI.

(5) Comprising a car park.

(6) Comprising certain units in the podium, a clubhouse and a carpark.

(7) Comprising space used for GCCD’s offices, a clubhouse, a restaurant and a car park.

(8) Comprising a car park and two tower blocks currently under construction and which are expected to be completed in 2007.

123 THE PROPERTIES AND BUSINESS

The following diagram illustrates the ownership structures of the Properties upon completion of the transfers thereof to the BVI Companies as at the Latest Practicable Date:

Public Yue Xiu

(1) (1) 49.8% 50.2%

GZI

100.0%

GCCD BVI

100.0%

Partat Moon King Full Estates Keen Ocean

White Horse Fortune Plaza City Development Victory Plaza Units Units Plaza Units Units

Note:

(1) As at the Latest Practicable Date.

124 THE REORGANISATION

Reorganisation of the GZI Group

GZI REIT is a real estate investment trust established as part of an internal reorganisation of the GZI Group of part of its real estate portfolio. The reorganisation was effected in the manner described below.

GZI REIT was constituted by the Trust Deed entered into on 7 December 2005 between the Manager and the Trustee. Holdco is a wholly owned subsidiary of the Trustee (acting in its capacity as trustee of GZI REIT).

On 7 December 2005, Holdco, the Manager and the Trustee entered into the Reorganisation RC 8.4(b) App B Deed with GCCD BVI (as vendor) and GZI (as guarantor of GCCD BVI’s obligations under the B2 (f) Reorganisation Deed), pursuant to which Holdco agreed to acquire 100.0% of the issued capital of each of the BVI Companies. The Initial Consideration payable by Holdco under the Reorganisation Deed for the BVI Company Shares was HK$4,014,180,000 (but is subject to adjustment as described in the section headed “Material Agreements and Other Agreements Relating to GZI REIT — Reorganisation Deed” in this Offering Circular).

The Initial Consideration was calculated based on the combined NAV of the BVI Companies as at 31 October 2005 of HK$2,972,767,000 plus amounts due to fellow subsidiaries thereof as at 31 October 2005 of HK$994,267,000 as well as HK$47,146,000 to be injected by GZI into the BVI Companies before the closing of the Global Offering. This was satisfied through the issue of 417,000,000 Units to Dragon Yield and the delivery of the Promissory Note to GZI (see the section headed “Material Agreements and Other Documents Relating to GZI REIT — Reorganisation Deed” in this Offering Circular).

Completion of the transfer of the BVI Company Shares to Holdco took place on 7 December 2005. As at the Latest Practicable Date, all the Units in GZI REIT were indirectly owned by GZI.

125 FINANCIAL INFORMATION AND FORECAST

126 SELECTED FINANCIAL AND OPERATING INFORMATION

The following discussion and the selected financial and operating information set forth below should be read in conjunction with the Audited Financial Statements of the Properties and Audited Financial Statements of the BVI Companies set forth in Appendices I and II to this Offering Circular. The Audited Financial Statements of the Properties and Audited Financial Statements of the BVI Companies have been prepared in accordance with HKFRS.

The financial information of the Properties and the BVI Companies in this Offering Circular relate to the Properties and BVI Companies under their previous ownership and management. As the Properties formed part of the business operations of the subsidiaries of GZI and there were no separate books and records maintained for each of the Properties on a standalone basis, the Audited Financial Statement of Properties have been prepared for the period from 20 December 2002(1) to 31 December 2002, each of FY2003 and FY2004, as well as each of the six months ended 30 June 2004 and 30 June 2005 according to the basis of preparation and assumptions set out in Note 2 to the Audited Financial Statements of the Properties in Appendix I to this Offering Circular, which include two particular accounting treatments: (i) interest charges incurred at the central treasury of GCCD are not reflected in the combined financial statements as there were no direct bank borrowings for the GCCD Properties; and (ii) income tax expenses were reported to the relevant tax bureau on an entity basis by GCCD. As such, income tax expenses for the GCCD Properties are calculated based on the tax rate applicable to these Properties as if they were collectively a separate tax entity. As the Properties were not operated as a single standalone entity in the past, the Audited Financial Statements of the Properties may not give a true picture of the performance of the Properties as if they had been operated on a standalone basis.

Information contained here may not be an indication of the future operations of GZI REIT. The method of managing the Properties under GZI REIT has been designed to comply with the REIT Code and to meet general expectations in respect of a real estate investment trust’s property and financial management processes. Following the transfer of the Properties to GZI REIT, the management structure and the cost and capital structures of the Properties as well as the management philosophy and operational processes of the Manager are expected to differ from those previously adopted with respect to the Properties. These variations are expected to affect the future financial results of GZI REIT (see the sections headed “Manager’s Discussion of Future Operations” and “Profit Forecast” in this Offering Circular).

The Audited Financial Statements of the BVI Companies have been presented on a combined basis to represent the combined state of affairs as at 31 October 2005 as well as combined results and combined cash flows for the ten months ended 31 October 2005. (See Appendix II to this Offering Circular for the details of the Audited Financial Statements of the BVI Companies.)

127 SELECTED FINANCIAL AND OPERATING INFORMATION

Audited Financial Statements of the Properties

Combined Income Statements

Period from Six months ended 20 December 30 June 2002(1) to 31 December 2004(2) 2002 FY2003 FY2004 (Unaudited) 2005

(HK$’000) (HK$’000) (HK$’000) (HK$’000) (HK$’000)

Turnover — Rental Income and property management fees 3,274 129,395 172,080 79,610 92,644(3) Other gains — net 203 11,731 9,481 4,406 5,863

Direct outgoings (1,113) (40,076) (51,010) (19,766) (27,047)

Other operating expenses (30) (2,927) (2,799) (1,495) (2,446)

Operating Income 2,334 98,123 127,752 62,755 69,014(3)

Finance costs(4) ————— Fair value gains on investment properties —(5) 246,341 5,107 —(5) 612,044

Profit before taxation 2,334 344,464 132,859 62,755 681,058 Income tax expenses (770) (109,608) (44,273) (20,709) (214,650)

Profit for the period/year 1,564 234,856 88,586 42,046 466,408

Profit for the period/year before fair value gains on investment properties and related tax impact(6) 1,564 65,742 85,594 42,046 46,239

128 SELECTED FINANCIAL AND OPERATING INFORMATION

Notes:

(2) The figures for the six months ended 30 June 2004 have only been reviewed and not audited.

(3) In order to present the Rental Income and Operating Income on a comparable basis and to reflect the historical performance of the Properties over the two and one-half years ended 30 June 2005, the non-recurring item in the financial statements for the six months ended 30 June 2005 (namely, the accelerated amortisation of deferred assets amounting to approximately HK$17.0 million (see the section headed Manager’s Discussion and Analysis of Financial Condition and Results of Operation — Audited Financial Statements of the Properties — Key Items in the Combined Income Statements — Gross Turnover” in this Offering Circular for an explanation of the nature of this item)) has been excluded from the discussion in the section headed “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Offering Circular, and the adjusted turnover and operating income are as follows:

Six months ended 30 June 2005

(HK$’000)

Gross Turnover 109,595 Operating Income 85,965

There were no finance costs incurred for the White Horse Units during the relevant period.

(5) No revaluation of the Properties was carried out during the six months ended 30 June 2004. There was no revaluation gain or loss during the period from 20 December 2002 to 31 December 2002.

(6) Assuming the direct application of enterprise income tax of 33.0% on Operating Income.

129 SELECTED FINANCIAL AND OPERATING INFORMATION

Audited Financial Statements of the Properties Combined Balance Sheets

As at 31 December As at 30 June 2002 2003 2004 2005 (HK$’000) (HK$’000) (HK$’000) (HK$’000)

ASSETS Non-current assets Property, plant and equipment 118,128 11,165 10,598 7,169 Land use rights 252,929 ——1,230(1) Investment properties(2) 1,576,633 2,437,384 2,444,859 3,114,286

42,152 55,572 61,736 29,417 ------Total assets 1,989,842 2,504,121 2,517,193 3,152,102

LIABILITIES Non-current liabilities Deferred tax liabilities 387,269 467,640 473,536 669,736 Rental deposits, non-current portion 23,715 27,170 10,051 15,097

410,984 494,810 483,587 684,833 ------Current liabilities Rental deposits, accruals and other payables 10,291 18,758 43,841 43,873 Current tax payable 7,721 4,720 6,151 5,550

18,012 23,478 49,992 49,423 ------Total liabilities 428,996 518,288 533,579 734,256

Net assets 1,560,846 1,985,833 1,983,614 2,417,846 Financed by: Accounts with Subsidiaries of GZI - Arising from accumulated profits 1,564 236,420 325,006 791,414 - Others 1,559,282 1,749,413 1,658,608 1,626,432

1,560,846 1,985,833 1,983,614 2,417,846

130 SELECTED FINANCIAL AND OPERATING INFORMATION

Audited Financial Statements of the Properties

Combined Cash Flow Statements

Period from Six months ended 20 December 30 June 2002(1) to 31 December 2004(2) 2002 FY2003 FY2004 (Unaudited) 2005

(HK$’000) (HK$’000) (HK$’000) (HK$’000) (HK$’000)

Cash flows from operating activities Net cash inflow from operations 8,966 107,919 128,009 51,042 88,047 PRC enterprise income tax — (32,238) (36,946) (18,153) (19,051)

Net cash inflow from operating activities 8,966 75,681 91,063 32,889 68,996 ------

Cash flows from investing activities Acquisition of businesses by subsidiaries of GZI recognised in the accounts with subsidiaries of GZI (1,568,637) ———— Acquisition of businesses by subsidiaries of GZI, net of cash acquired 32,344 ———— Addition of property, plant and equipment — (253,028) (722) (191) (3,891) Proceeds from sale of property, plant and equipment —— — —617 Addition of investment properties — (3,154) (2,368) — (54,526) Addition of land use right —— — —(1,230) Interest received 23 270 649 263 844

Net cash inflow/(outflow) from investing activities (1,536,270) (255,912) (2,441) 72 (58,186) ------

(1,527,304) (180,231) 88,622 32,961 10,810

Net advances from/(to) subsidiaries of GZI 1,559,282 190,131 (90,805) (34,210) (32,176)

Increase/(decrease) in cash and cash equivalents(3) 31,978 9,900 (2,183) (1,249) (21,366)

131 SELECTED FINANCIAL AND OPERATING INFORMATION

Period from Six months ended 20 December 30 June 2002(1) to 31 December 2004(2) 2002 FY2003 FY2004 (Unaudited) 2005

(HK$’000) (HK$’000) (HK$’000) (HK$’000) (HK$’000)

Balances at beginning of year/period — Cash and cash equivalents(3) — 31,978 41,878 41,878 39,695 — Accounts with subsidiaries of GZI(4) — (1,559,282) (1,749,413) (1,749,413) (1,658,608)

Balances at end of year/period — Cash and cash equivalents(3) 31,978 41,878 39,695 40,629 18,329 — Accounts with subsidiaries of GZI(4) (1,559,282) (1,749,413) (1,658,608) (1,715,203) (1,626,432)

Notes:

(2) The figures for the six months ended 30 June 2004 have only been reviewed and not audited.

(3) Changes in cash and cash equivalents are attributable to the operations of the White Horse Units.

132 MANAGER’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and the selected financial and operating information set forth below should be read in conjunction with the Audited Financial Statements of the Properties and Audited Financial Statements of the BVI Companies in Appendices I and II to this Offering Circular respectively, which have been prepared in accordance with HKFRS.

Renminbi amounts herein have been translated into Hong Kong dollars based on the exchange rate of RMB1.07 = HK$1.00, which was the exchange rate applied in the Audited Financial Statements of the Properties for each of FY2003 and FY2004 as well as each of the six months ended 30 June 2004 and 30 June 2005. A different exchange rate of RMB1.04 = HK$1.00 was applied in the Audited Financial Statements of the BVI Companies. However, such translations should not be construed as representations that such Renminbi amounts have been, could have been or could be converted into Hong Kong dollars at that or any other rate.

Introduction

For the purposes of the Global Offering, the Manager has prepared the Audited Financial Statements of the Properties to present the results of the operations of the Properties for each of FY2003 and FY2004 as well as each of the six months ended 30 June 2004 and 30 June 2005.

As GZI’s acquisition of the Properties (see the section headed “The Properties and Business — Past Transactions of the Properties” in this Offering Circular) was only completed in December 2002, only 11 days of financial records for 2002 are available to the Manager. While the Audited Financial Statements of the Properties present the results of the operations of the Properties in December 2002, these results have not been included in the following discussion because they cannot be meaningfully discussed.

Moon King, Full Estates and Keen Ocean became the beneficial owners of the Fortune Plaza Units, the City Development Plaza Units and the Victory Plaza Units on 1 September 2005. Partat became the beneficial owner of the White Horse Units on 19 October 2005. (See the section headed “The Properties and Business — Past Transactions of the Properties” in this Offering Circular.) Since the financial results of the BVI Companies only represent operations of at most two months, no meaningful discussion and analysis can be presented herein.

The method of managing the Properties under GZI REIT has been designed to comply with the REIT Code and to meet general expectations in respect of a real estate investment trust’s property and financial management processes. Following the transfer of the Properties to GZI REIT, the management structure and the cost and capital structures of the Properties as well as the management philosophy and operational processes of the Manager are expected to differ from those previously adopted with respect to the Properties. These variations are expected to affect the future financial results of GZI REIT (see the sections headed “Manager’s Discussion of Future Operations” and “Profit Forecast” in this Offering Circular).

133 MANAGER’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The Audited Financial Statements of the Properties and the Audited Financial Statements of the BVI Companies as well as the discussion and analysis of financial condition and results of operations are set out herein for the purpose of providing investors with an indication of the past performance of the Properties while owned and managed by the GZI Group. As the Properties were not operated as a single standalone entity in the past, the Audited Financial Statements of the Properties and the Audited Financial Statements of the BVI Companies may not give a true picture of the performance of the Properties as if they had been operated on a standalone basis. In addition, this information should not be relied upon as an indication of the future performance of the Properties when operated under the Manager.

134 The Properties MANAGER As at 30 September 2005, the Properties comprised 70,992.5 sq.m. of Gross Rentable Area used as office/warehouse space and 88,030.6 sq.m. of Gross Rentable Area used for wholesale or retail activities.

Turnover Trends ’ ICSINADAAYI FFNNILCONDITION FINANCIAL OF ANALYSIS AND DISCUSSION S The following table sets out information on the leased Gross Rentable Area, Gross Turnover and Operating Income/(Loss) derived from each of the Properties as at and for the years ended 31 December 2003 and 31 December 2004 as well as Gross Turnover per square metre for the months ended 31 December 2003 and 2004: Gross Turnover OPERATIONS OF RESULTS AND Leased Gross per sq.m. Rentable Area for the month ended as at 31 December Gross Turnover Operating Income/(Loss) 31 December(4) Property 2003 2004 FY2003 FY2004 FY2003 FY2004 2003 2004 (sq.m.) (sq.m.) (HK$’000) (HK$’000) (HK$’000) (HK$’000) (HK$) (HK$)

White Horse Units 46,875.9 48,906.3(1) 89,754 104,737 69,112 77,500 159.6 178.5 135 Fortune Plaza Units 1,751.9 16,872.0 150(2) 9,042 (1,653) 1,969 72.1 103.7 City Development Plaza Units 37,643.8 37,890.1 31,911 33,904 28,128 29,635 77.1 75.3 Victory Plaza Units 19,059.7 19,046.4 7,580(3) 24,397 2,536 18,648 100.5 103.0 Total 105,331.3 122,714.8 129,395 172,080 98,123 127,752

Notes:

(1) The increase in the leased Gross Rentable Area was mainly attributable to the enhanced efficiency in usage of the area arising from the reformattingofthe floor space subsequent to the expiration and termination of two head leases. The reformatting of the area to smaller leasable units allowed the inclusion of previously unallocated common area on the respective floors to the Gross Rentable Area.

(2) The first tenancy in the Fortune Plaza Units only commenced in September 2003. Accordingly, Gross Turnover for 2003 is based on the four months from September 2003 to December 2003.

(3) The first tenancy in the Victory Plaza Units only commenced in August 2003. Accordingly, Gross Turnover for 2003 is based on the five months from August 2003 to December 2003.

(4) In view of the change in leased Gross Rentable Area over the periods set out in the table above and the commencement of certain leases only in the second half of 2003, Gross Turnover per square metre has not been calculated on a semi-annual or annual basis. Instead the Gross Turnover per square metre is computed as the Gross Turnover of the month and divided by the leased Gross Rentable Area as of the end of the month. The following table sets out information on the leased Gross Rentable Area, Gross Turnover and Operating Income/(Loss) derived from each of the Properties as at and for the six months ended 30 June 2004 and 30 June 2005 as well as Gross Turnover per square MANAGER metre for the months ended 30 June 2004 and 2005:

Gross Turnover Leased Gross Gross Turnover Operating Income/(Loss) per sq.m. ’ ICSINADAAYI FFNNILCONDITION FINANCIAL OF ANALYSIS AND DISCUSSION S Rentable Area for the six months for the six months for the month as at 30 June ended 30 June ended 30 June ended 30 June(1)

(Unaudited) (Unaudited) N EUT FOPERATIONS OF RESULTS AND Property 2004 2005 2004 2005 2004 2005 2004 2005

(sq.m.) (sq.m.) (HK$’000) (HK$’000) (HK$’000) (HK$’000) (HK$) (HK$)

White Horse Units 48,426.4 48,442.5 48,112 65,916 37,623 55,251 165.6 226.8 Fortune Plaza Units 6,865.5 28,967.4 1,917 13,334 (348) 7,889 88.7 89.2 City Development Plaza Units 38,313.0 38,998.1 17,084 17,499 15,125 14,127 74.6 76.5 136 Victory Plaza Units 17,155.6 26,470.6 12,497 12,846 10,355 8,698 93.6 109.0

Total 110,760.5 142,878.6 79,610 109,595 62,755 85,965

Note:

(1) In view of the change in leased Gross Rentable Area over the periods set out in the table above, Gross Turnover per square metre has not been calculated on a semi-annual or annual basis. Instead, the Gross Turnover per square metre is computed as the Gross Turnover of the month divided by the leased Gross Rentable Area at the end of the month. MANAGER’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Occupancy Trends

Six Six Nine months months months ended ended ended As at 30 June 30 June 30 September 30 September Property FY2003 2004 FY2004 2005 2005 2005

Fortune Plaza Units — Retail n.m.(1) 0.0 17.9 100.0 90.5 14.9(2) — Office n.m.(1) 10.5 21.3 55.7 63.3 83.5 Combined n.m.(1) 9.5 21.0 60.0 65.9 76.9

City Development Plaza Units — Retail 83.6 86.0 85.8 85.5 85.5 85.5 — Office 83.6 91.2 90.8 90.6 91.6 93.0 Combined 83.6 89.8 89.4 89.2 89.9 91.0

Victory Plaza Units — Retail n.m.(3) 87.1 81.8 77.7 85.2 100.0

Weighted average across the Properties(4) — Wholesale/retail n.m. 89.8 88.9 91.2 93.1 94.3 — Office/warehouse n.m. 50.2 55.6 73.2 77.5 88.5 n.m. 72.1 74.0 83.2 86.1 91.7

Notes:

(1) The first tenancy in the Fortune Plaza Units only commenced in September 2003.

(3) The first tenancy in the Victory Plaza Units only commenced in August 2003.

(4) Weighted based on the Gross Rentable Area of each of the Properties.

137 MANAGER’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

AUDITED FINANCIAL STATEMENTS OF THE PROPERTIES

Key Items in the Combined Income Statements

Gross Turnover

As per the accounting policy in relation to the Properties, Rental Income recorded in the Audited Financial Statements of the Properties is recognised on an accrual basis by averaging out the impact of rent-free periods, contracted rental escalations and discounts, and such other terms affecting the monthly cash received from Rental Income under each tenancy agreement. Thus, a fixed average monthly Rental Income is recognised for the entire lease term of each tenancy agreement, which effectively amortises the impact of rent-free periods, contracted rental escalations and discounts, and other relevant lease terms on the Rental Income over the relevant lease periods. The temporary difference in cash income and accounting income is reflected as deferred assets, being the Rental Income recognised but not yet received in cash.

The Fortune Plaza Units, the City Development Plaza Units and the Victory Plaza Units were transferred to the relevant BVI Companies between 10 September 2004 and 8 August 2005 but at the agreement of the parties the risks and rewards in relation to the Fortune Plaza Units, the City Development Plaza Units and the Victory Plaza Units were only passed to the relevant BVI Companies on 1 September 2005. The relevant parties agreed that the deferred assets originally recorded in the accounts of the transferor would not be transferred to the transferee of the GCCD Properties.

There was no change in accounting policy for the GCCD Properties. However, due to the fact that the tenancy agreements for the GCCD Properties were originally scheduled to expire beyond 1 September 2005, this post balance sheet event resulted in an accelerated amortisation of the deferred assets which significantly reduced the Rental Income and Operating Income for the GCCD Properties by HK$17.0 million (HK$3.0 million for the Fortune Plaza Units, HK$4.5 million for City Development Plaza Units and HK$9.5 million for the Victory Plaza Units) for the six months ended 30 June 2005. As there was no such non-recurring event for the two years ended 31 December 2004, in order to present the Rental Income and Operating Income of the GCCD Properties on a comparable basis, the discussion of Rental Income and Operating Income of the GCCD Properties for the six months ended 30 June 2005 in this section has excluded this accelerated amortisation of deferred assets.

Following the transfer of the Properties, the same accounting policy continued to be in effect. The Rental Income of the BVI Companies will be recognised after considering rental escalations or discounts and such other terms affecting the future income.

138 MANAGER’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

White Horse Units

Historically, rent and property management fees were paid in an undivided amount by the tenants in the White Horse Units to White Horse Property Management Company under their leases. Leases in the White Horse Units were signed by White Horse Property Management Company and, during the relevant periods, were typically for terms of three years. Such leases generally provided for annual rental revisions, subject to negotiation with the tenants, of up to 5.0% per annum in the second year of the lease term and up to 8.0% per annum in the third year of the lease term. Leases with terms of less than three years generally provided for a fixed monthly rent payable for the entire term of the lease. Rental rates for the White Horse Units are subject to review and renegotiation on renewal of the leases.

Gross Turnover in relation to the White Horse Units included property management fees paid by the tenants to White Horse Property Management Company.

The GCCD Properties

Rental Income consisted of rent paid by tenants in each of the GCCD Properties under their leases. Depending on factors such as the needs of tenants as well as how established and reputable a particular property is, the terms of such tenancy agreements generally ranged from one to three years.

The leases in the Fortune Plaza Units and the City Development Plaza Units did not offer any rental discounts during the relevant periods. Instead, more than 50.0% of the leases in the City Development Plaza Units included annual rent escalation provisions of between 5.0% and 8.0%. Rental rates for these three Properties are subject to review and renegotiation on renewal of the leases.

In the case of the Victory Plaza Units, most tenants enjoyed a rental discount for the first two years of their leases. Initial discounts of 30.0% were granted when the Victory Plaza Units commenced operations in the second half of 2003 to induce potential tenants to take up space in the Property. In the second half of 2004, due to commencement of the construction of the two office towers above the Victory Plaza podium, most of the tenants were offered a further discount of 20.0% for the period up to the completion of the construction (expected to be end of 2007). Three long term tenants were granted this 20.0% discount for an additional extension of three or four months following the completion of such works. These three tenants accounted for 24.8% of the Rental Income of the Victory Plaza Units in FY2004.

139 MANAGER’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Other gains — net

White Horse Units

For the White Horse Units, other gains — net consisted of the following items:

• Consultancy fees: Consultancy fees comprised fees charged by White Horse Property Management Company to third parties as well as to tenants for the provision of consultation services in relation to matters such as the operation of a garment market in Chengdu, for instance, and the organisation of garment fairs and exhibitions for tenants and third parties. The Manager understands that White Horse Property Management Company will continue to provide such services. However, GZI REIT will not enjoy such income as it does not provide these services;

• Labour charges: Labour charges consisted of the income derived by White Horse Property Management Company from the provision of additional or overtime labour, either at the request of tenants for urgent renovation works at the tenant’sunitorin conjunction with the provision of courier and transportation arrangement services for customers in the Property. The Manager understands that White Horse Property Management Company will continue to provide such services. However, GZI REIT will not enjoy such income as it does not provide such services;

• Surplus from electricity charges: Surplus from electricity charges comprised the surplus of receipts from the tenants in the White Horse Units after payment of the electricity bills for the White Horse Units. Tenants were charged on a cost plus basis to cover the electricity used for common areas in the Property and for the supply to them of electricity from the generators in White Horse Building. Improvements to the electricity transmission network capacity and equipment in 2005 increased the supply of electricity to White Horse Building. The operations of White Horse Building were not affected by any insufficiency or irregularity of electricity supply in the two years and six months ended 30 June 2005;

• Administrative fees for transfer of leases: Under the standard lease agreement for the White Horse Units, tenants in the White Horse Units were allowed to apply for early termination of their leases. Such early termination was subject to the landlord’s discretion. Consent for such early termination was granted on a case by case basis, particularly if the tenant were able to procure a replacement tenant to enter into a new lease for the same premises. In such cases, the departing tenant had to pay an administrative fee equivalent to 1.5 month’s rent. Each such tenant was then permitted to transfer its lease to the replacement tenant by way of cancellation of the existing lease and entry into a new lease with the replacement tenant on the same terms and conditions (save that the duration of the new lease would only have been for the unexpired term of the original lease). Such fees were levied in order to, among other things, cover the administrative costs incurred.

140 MANAGER’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The table below sets out the number of leases in the White Horse Units that were so transferred in FY2003, FY2004 and each of the six months ended 30 June 2004 and 30 June 2005:

Six months ended 30 June

FY2003 FY2004 2004 2005

Number of leases transferred 163 143 62 125 % of average number of leases 18.6% 14.4% 6.9% 9.7% Gross Rentable Area under the leases transferred (sq.m.) 6,415 5,671 2,492 4,387 % of total Gross Rentable Area as at end of the period 13.7% 11.6% 5.1% 9.1%

• Income from indoor illuminated billboards: Income from indoor illuminated billboards comprised charges paid by tenants for the use of illuminated billboards installed within White Horse Building to display advertisements. Contracts for such purpose were typically for a duration of two years;

• Ad hoc and other miscellaneous income: Ad hoc and other miscellaneous income consisted of income derived from the casual letting of the events hall as well as the meeting and conference rooms in White Horse Building, organisation of garment exhibitions and other events in the events hall, and other miscellaneous income; and

• Fair value gain: This reflects the accounting assessment of fair value gain in rental deposits under HKFRS.

141 MANAGER’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following table sets out the other gains — net of the White Horse Units for FY2003, FY2004 and each of the six months ended 30 June 2004 and 30 June 2005:

Six months ended 30 June

(Unaudited) FY2003 FY2004 2004 2005

(HK$’000) (HK$’000) (HK$’000) (HK$’000)

Consultancy fees 1,482 626 346 225 Labour charges 432 17 11 5 Surplus from electricity charges 4,495 3,684 1,197 845 Administrative fees for transfer of leases 1,914 1,685 727 1,973 Income from illuminated billboards 444 ——225 Ad hoc and other miscellaneous income 2,106 2,059 1,071 2,111 Fair value gains of rental deposits 281 1 310 1

Other gains — net 11,154 8,072 3,662 5,385

The GCCD Properties

Other gains — net from the operations of the Fortune Plaza Units, the City Development Plaza Units and the Victory Plaza Units comprised forfeitures of rental deposits pursuant to early termination of leases in these Properties and accounting assessment of fair value gain in rental deposits under HKFRS.

Forfeited amounts comprised the surplus of deposits over rents receivable from departing tenants. The following table sets out the income from forfeitures of rental deposits in each of the Fortune Plaza Units, the City Development Plaza Units and the Victory Plaza Units for FY2003, FY2004 and each of the six months ended 30 June 2004 and 30 June 2005:

Six months ended 30 June

(Unaudited) FY2003 FY2004 2004 2005

(HK$’000) (HK$’000) (HK$’000) (HK$’000)

Fortune Plaza Units — 155 7 — City Development Plaza Units 383 562 98 44 Victory Plaza Units — 427 392 35

383 1,144 497 79

142 MANAGER’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Direct outgoings

The direct outgoings of the Properties consisted of charges in respect of (i) property management fees; (ii) promotional and agency expenses; (iii) fitting out and maintenance expenses; (iv) depreciation expenses; (v) business tax and flood prevention fee; (vi) bad debts; and (vii) employment benefit expenses.

Property management fees

White Horse Units — As property management services were undertaken by White Horse Property Management Company, property management fees are not reflected in the Audited Financial Statements of the Properties.

GCCD Properties — Property management fees included fees for management of vacant units in the GCCD Properties paid to Yicheng. The tenants were liable for the property management fees for the units they occupied.

Starting from October 2004, Yicheng was also appointed to provide services for liaising with marketing agents to secure tenants for such vacant units and providing tenancy services to existing tenants in respect of City Development Units and Victory Plaza Units, for which it was paid a fee equivalent to 7.0% of actual Rental Income collected.

Promotional and agency expenses

White Horse Units — Promotional and agency expenses for the White Horse Units consisted of the expenses incurred in connection with advertisements for White Horse Building placed in various media, including the print and broadcast media, and other promotional materials such as brochures and flyers.

GCCD Properties — Promotional expenses comprised expenses incurred in relation to the promotion and marketing of Fortune Plaza, City Development Plaza and Victory Plaza, including advertisements in the print media and, in the case of Victory Plaza, trade fairs held at the property. Agency fees were paid to agents who successfully recommended tenants to take up space in the GCCD Properties. These fees comprised either one-half month’s or one full month’s rent under the new lease depending on the term of the lease, and was paid regardless of whether the agent was a company within the GZI Group or an unrelated third party.

Fitting out and maintenance expenses

Fitting out and maintenance expenses comprised expenses for fitting out vacant units for new tenants, where necessary, and the cost of parts replacement, as well as expenses incurred in cleaning and repairing premises vacated by outgoing tenants and, if necessary, renovating vacant premises in accordance with the requirements of incoming tenants.

143 MANAGER’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Depreciation expenses

Depreciation expenses consisted of the depreciation of property, plant and equipment calculated on a straight line basis over a period of five or ten years, depending on the nature of the relevant asset.

Business tax and flood prevention fee

Business tax of 5.0% and flood prevention fee of 0.09% were levied on the Rental Income and property management fees derived from the White Horse Units and on Rental Income derived from each of the GCCD Properties. With respect to the White Horse Units, such taxes were paid by each of White Horse JV, Xingcheng and White Horse Property Management Company.

Bad debts

Bad debts comprised defaulted payments of rent not covered by security deposits and provisions for bad debts for overdue rent which was potentially non-recoverable. The amount of bad debts for each of the Fortune Plaza Units and the City Development Plaza Units during the relevant periods was insignificant (as a percentage of Gross Turnover generated by the relevant Property). In the case of the Fortune Plaza Units, the ratio was 2.7% of Gross Turnover for the six months ended 30 June 2005 (there were no bad debts in the other periods under discussion) and, in the case of the City Development Plaza Units, the ratio was 1.3% of Gross Turnover for FY2003, 1.8% for FY2004, 1.0% for the six months ended 30 June 2004 and 0.5% for the six months ended 30 June 2005. Neither the White Horse Units nor the Victory Plaza Units incurred any bad debts during the relevant periods.

Employment benefit expenses

Employment benefit expenses comprised, among other things, the salaries and bonuses of the employees of White Horse JV, Xingcheng and White Horse Property Management Company (which were subject to adjustment from time to time based on the performance of White Horse Building), other benefits granted to such employees, contributions to certain employee provident funds, housing supplements for such employees and staff welfare expenses. As Yicheng bore the relevant staff related expenses in managing the Properties, these expenses are not reflected in the Audited Financial Statements of the Properties. Other employment benefits expenses were incurred at the central administration level of GCCD. Such costs have been allocated to the GCCD Properties and are reflected below in other operating expenses. None of these employment benefit expenses will be borne by GZI REIT going forward.

144 MANAGER’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Miscellaneous expenses

White Horse Units

Miscellaneous expenses of the White Horse Properties included general administrative expenses, consultancy fees paid to consultants such as building surveyors, insurance premiums and other miscellaneous expenses as well as, in relation to every lease for the White Horse Units, stamp duty of 0.1% of the aggregate contract sum of the lease but not including any further term under any option to renew and, in relation to other contracts entered into by White Horse Property Management Company, stamp duty of between 0.03% and 0.05% of the relevant contract value, depending on the nature of the contract. In addition, an annual land use fee was paid to the Ministry of Finance in the PRC based on a rate per square metre of Gross Floor Area as determined annually by the Ministry of Finance. Approximately HK$79,000 in land use fees (based on the White Horse Units’ Gross Floor Area of 50,199.3 sq. m.) were paid in each of FY2003 and FY2004. GZI REIT will not pay such land use fees in the future as White Horse JV had paid a land grant premium for the Property in June 2005. This land grant premium of approximately HK$53.0 million was capitalised and transferred to the BVI Companies.

Cleaning and landscaping expenses, expenses relating to fire safety systems at White Horse Building, security expenses and fuel costs relating to electricity generation were also included in this category of expenses.

The GCCD Properties

Miscellaneous expenses for the GCCD Properties comprised insurance premiums paid for comprehensive property insurance for the GCCD Properties whenever the relevant Property was used as security for bank borrowings taken by the GZI Group, expenses for office supplies, seasonal decorations at the relevant Properties and entertainment and travelling expenses incurred in the promotion of Fortune Plaza and Victory Plaza (both newly completed developments in 2003), as well as other miscellaneous or non-recurring expenses. Other operating expenses also comprised, in relation to every lease for the Fortune Plaza Units, the City Development Plaza Units or the Victory Plaza Units, stamp duty of 0.1% of the aggregate contract sum of the lease, but not including any further term under any option to renew.

Many of the miscellaneous expenses incurred by the White Horse Units were not incurred by the GCCD Properties as such costs were incurred at the GCCD administrative level and by the property managers of the GCCD Properties. Such costs have been allocated to the GCCD Properties and are reflected below in other operating expenses.

145 MANAGER’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Other operating expenses

Certain other operating expenses were incurred by the GZI Group (including GCCD) in relation to the ownership and operation of its property portfolio as a whole (including the Fortune Plaza Units, the City Development Plaza Units, the Victory Plaza Units and other properties that will not form part of GZI REIT) and could not be allocated directly to any of these three Properties. These expenses included, among other things, advertising and promotional expenses as well as general and administrative expenses that could not be directly attributed to specific properties within GZI’s portfolio.

The Manager has allocated these other operating expenses to each of these Properties using an allocation basis which the Manager considers to be reasonable. To this end, the staff costs of the leasing department and property development department of GCCD were extracted from GCCD’s income statements. All operating expenses, excluding the aforementioned staff costs, were then allocated to the leasing department and property development department based on a ratio calculated by dividing the staff costs of each department by the total staff costs of both departments. All operating expenses allocated to the leasing department were further allocated to the respective Properties based on a ratio calculated by dividing the carrying value of the relevant Properties by the total carrying value of all investment properties managed by the leasing department of GCCD for each of the relevant periods.

Movements in these other operating expenses over the relevant periods were due to the changes in the allocation basis described in the paragraph immediately above (including, but not limited to, GCCD’s total expenses not directly attributable to the GCCD Properties, the carrying value of the relevant Properties as well as the total carrying value of all investment properties managed by the leasing department of GCCD) and not to changes to the manner in which the Properties were operated or the actual costs of such operations.

The movements in other operating expenses have been historically driven by the relative movements in the carrying fair value of the Fortune Plaza Units, the City Development Units and the Victory Plaza Units vis-a-vis all investment properties of GCCD as well as the relative ratio of staff numbers between GCCD’s investment property division and property development division as well as the overall movements in operating expenses at the GCCD level.

Finance costs

Interest charges incurred at the central treasury of GCCD are not reflected in the Audited Financial Statements of the Properties as there were no direct bank borrowings in respect of the Fortune Plaza Units, the City Development Plaza Units and the Victory Plaza Units.

There were no finance costs incurred for the White Horse Units over the two years and six months ended 30 June 2005.

146 MANAGER’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Fair value gain on investment properties

According to the relevant accounting polices, investment properties are initially required to be stated at cost and are restated at their fair value at each balance sheet date thereafter. Changes in fair value were recognised in the income statements.

Income tax expenses

Income tax expenses were reported to the relevant tax bureau on an entity basis by GCCD, White Horse JV or Xingcheng, where applicable. As such, income tax expenses for the four Properties were calculated based on the tax rate applicable to them as if they were collectively a separate tax entity.

PRC enterprise income taxation was provided for in respect of the profits of the Properties in the PRC at 33.0% on assessable profit, in accordance with the Income Tax Law of the PRC for Enterprises with Foreign Investment and Foreign Enterprises. The actual taxation on the Properties’ profit before taxation, however, differed from the theoretical amount that would have arisen using the enterprise income tax rate (33.0%) of the PRC due to some tax exempt income and non-tax deductible expenses as shown below:

Six months ended 30 June

(Unaudited) FY2003 FY2004 2004(1) 2005

(HK$’000) (HK$’000) (HK$’000) (HK$’000)

Profit before taxation 344,464 132,859 62,755 681,058

Tax calculated at PRC enterprise income tax rate of 33.0% 113,673 43,843 20,709 224,749 Income not subject to taxation (4,065) (84) — (10,099) Expenses not deductible for taxation purpose — 514 ——

Income tax expenses 109,608 44,273 20,709 214,650

Note:

(1) The figures for the six months ended 30 June 2004 have only been reviewed and not audited.

Income not subject to taxation mainly relates to the portion of revaluation gain (business taxes) not subject to taxation. Expenses not deductible for taxation purpose mainly relate to staff costs (appropriation of staff welfare reserve) not deductible for taxation.

The enterprise income tax rate will not be applicable for the BVI Companies going forward. (See the sections headed “Manager’s Discussion and Analysis of Future Operations” and “Profit Forecast” in this Offering Circular.)

147 MANAGER’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Principal Accounting Policies

For the principal accounting policies in relation to each of the Properties, please refer to the Audited Financial Statements of the Properties set out in Appendix I to this Offering Circular.

Following the transfer of the Properties to GZI REIT, the management structure and the cost and capital structures of the Properties as well as the management philosophy and operational processes of the Manager are expected to differ from those previously adopted with respect to the Properties. These variations are expected to affect the future financial results of GZI REIT (see the sections headed “Manager’s Discussion and Analysis of Future Operations” and “Profit Forecast” in this Offering Circular).

Comparison of Results of Operations for the Six Months Ended 30 June 2005 with the Six Months Ended 30 June 2004

White Horse Units

An extract of the income statement of the White Horse Units for each of the six months ended 30 June 2004 and 30 June 2005 is set out below:

Six months ended 30 June

(Unaudited) 2004(1) 2005

(HK$’000) (HK$’000)

Gross Turnover 48,112 65,916 Other gains — net 3,662 5,385 Direct outgoings of the Property (14,151) (16,050) Promotional and agency expenses (505) (383) Fitting out and maintenance expenses (864) (929) Depreciation expenses (688) (611) Business tax and flood prevention fee (3,368) (4,833) Bad debts —— Employment benefit expenses (6,199) (7,153) Miscellaneous expenses (2,527) (2,141)

Operating Income 37,623 55,251

Note:

(1) The figures for the six months ended 30 June 2004 have only been reviewed and not audited.

148 MANAGER’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Gross Turnover

Gross Turnover increased by 37.0%, from HK$48.1 million for the six months ended 30 June 2004 to HK$65.9 million for the six months ended 30 June 2005 mainly due to a rental increase for the majority leases in the White House Units subsequent to negotiation with the tenants in the annual review. As a result of the expiration and termination of two head leases covering approximately 11,000 sq.m., approximately 200 new leases had been contracted with the user tenants during the third quarter of 2004 at starting rents which were approximately three times higher than the previous leases. These new leases are set to expire 31 December 2005.

Other gains — net — Other gains — net increased by 45.9%, from HK$3.7 million for the six months ended 30 June 2004 to HK$5.4 million for the six months ended 30 June 2005. The growth was mainly due to the increase in administrative fees for transfers of leases of HK$1.2 million from 125 leases transferred, which represented an increase of 63 leases compared to the six months ended 30 June 2004. It is considered that the variations in the number of leases transferred is ad hoc by nature and may not correspond to any particular reason.

Direct outgoings of the White Horse Units

Direct outgoings of the White Horse Units increased by 13.4%, from HK$14.2 million for the six months ended 30 June 2004 to HK$16.1 million for the six months ended 30 June 2005. The movement was mainly attributable to the increase in staff costs as well as business tax and flood prevention fee.

Promotional and agency expenses — Such expenses fell by 20.0%, from HK$0.5 million for the six months ended 30 June 2004 to HK$0.4 million for the six months ended 30 June 2005. Lower promotional expenses were incurred in the six months ended 30 June 2005 as White Horse Property Management Company focused on renewing the tenancy agreements of existing tenants instead of seeking new tenants.

Fitting out and maintenance expenses — Fitting out and maintenance expenses remained stable at approximately HK$0.9 million for both six months ended 30 June 2004 and 2005.

Depreciation expenses — Depreciation expenses decreased by 14.3%, from HK$0.7 million for the six months ended 30 June 2004 to HK$0.6 million for the six months ended 30 June 2005 because certain assets were fully depreciated in FY2004.

Business tax and flood prevention fee — Business tax and flood prevention fee increased by 41.2%, from HK$3.4 million for the six months ended 30 June 2004 to HK$4.8 million for the six months ended 30 June 2005, in line with the growth in Gross Turnover and property management fees derived from the White Horse Units.

149 MANAGER’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Bad debts — There were no bad debts in the six months ended 30 June 2004 and the six months ended 30 June 2005.

Employment benefit expenses — Employment benefit expenses rose by 16.1%, from HK$6.2 million for the six months ended 30 June 2004 to HK$7.2 million for the six months ended 30 June 2005 because of a higher headcount (from approximately 120 in the six months ended 30 June 2004 to approximately 130 in the six months ended 30 June 2005) and also because salaries and bonuses were adjusted upwards in the six months ended 30 June 2005 to reward employees for the improved performance of the White Horse Units.

Miscellaneous expenses — Miscellaneous expenses decreased by 16.0%, from HK$2.5 million for the six months ended 30 June 2004 to HK$2.1 million for the six months ended 30 June 2005. This decrease was primarily due to a fall in expenses for office supplies and lower fuel costs relating to electricity generation (of HK$0.4 million). The decrease was offset in part by an increase in cleaning and landscaping expenses in the six months ended 30 June 2005 necessitated by dust and dirt from public works along a road outside White Horse Buildings, as well as higher expenditures in the six months ended 30 June 2005 to improve the fire safety and security systems in the building.

Operating Income

As a result of the foregoing factors, Operating Income increased by HK$17.7 million, or 47.1%, from HK$37.6 million for the six months ended 30 June 2004 to HK$55.3 million for the six months ended 30 June 2005. The Operating Income margin improved from 78.2% for the six months ended 30 June 2004 to 83.8% for the six months ended 30 June 2005.

Fair value gain on investment properties

The revaluation of the White Horse Units as at 30 June 2005 resulted in an increase in fair value of HK$455.7 million. The significant increase in fair value was based on the fact that the majority of the tenancy agreements expiring on 31 December 2005 were renewed at much higher rental rates. There was no revaluation of the White Horse Units for six months ended 30 June 2004.

150 MANAGER’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Fortune Plaza Units

An extract of the income statement of the Fortune Plaza Units for each of the six months ended 30 June 2004 and 30 June 2005 is set out below:

Six months ended 30 June

(Unaudited) 2004(1) 2005

(HK$’000) (HK$’000)

Gross Turnover 1,917 13,334 Other gains — net 35 127 Direct outgoings of the Property (1,923) (4,546) Property management fees (1,301) (1,200) Promotional and agency expenses (457) (2,071) Fitting out and maintenance expenses (65) (73) Business tax and flood prevention fee (98) (679) Bad debts — (355) Miscellaneous expenses (2) (168) Other operating expenses (377) (1,026)

Operating Income (348) 7,889

Note:

(1) The figures for the six months ended 30 June 2004 have only been reviewed and not audited.

Gross Turnover — Gross Turnover increased by approximately 600.0%, from HK$1.9 million for the six months ended 30 June 2004 to HK$13.3 million for the six months ended 30 June 2005, reflecting the continuous increase in the occupancy rates of the Fortune Plaza Units since the completion of Fortune Plaza, from 9.5% for the six months ended 30 June 2004 to 60.0% for the six months ended 30 June 2005.

Other gains — net — Such other gains of approximately HK$35,000 were recorded for the six months ended 30 June 2004, as compared to HK$0.1 million for the six months ended 30 June 2005.

Direct outgoings

Direct outgoings of the Fortune Plaza Units increased by 136.8%, from HK$1.9 million for the six months ended 30 June 2004 to HK$4.5 million for the six months ended 30 June 2005.

151 MANAGER’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Property management fees — Property management fees decreased by 7.7%, from HK$1.3 million for the six months ended 30 June 2004 to HK$1.2 million for the six months ended 30 June 2005.

Promotional and agency expenses — Promotional and agency expenses increased by approximately 320.0%, from HK$0.5 million for the six months ended 30 June 2004 to HK$2.1 million for the six months ended 30 June 2005. The higher spending on promotional and agency expenses resulted from the higher promotional expenses expended to improve occupancy rates in the latter period as compared to the earlier period.

Fitting out and maintenance expenses — Fitting out and maintenance expenses were negligible in each of the six months ended 30 June 2004 (approximately HK$65,000) and 30 June 2005 (approximately HK$73,000) as Fortune Plaza was constructed only in 2003.

Business tax and flood prevention fee — Business tax and flood prevention fee in aggregate represented 5.09% of the Gross Turnover of the Fortune Plaza Units.

Bad debts — No bad debts were incurred for the six months ended 30 June 2004 but bad debts of approximately HK$355,000 arose for the six months ended 30 June 2005 as a result of a provision for potentially non-recoverable overdue rent from one tenant. The lease agreement with this tenant was terminated in September 2005.

Miscellaneous expenses — Miscellaneous expenses increased from approximately HK$2,000 for the six months ended 30 June 2004 to HK$0.2 million over for the six months ended 30 June 2005.

Operating Income

As a result of the foregoing factors and other operating expenses which were not directly attributable to the Fortune Plaza Units, Operating Income improved significantly from a loss of HK$0.3 million for the six months ended 30 June 2004 to a profit of HK$7.9 million for the six months ended 30 June 2005.

Fair value gain on investment properties

The revaluation of the Fortune Plaza Units as at 30 June 2005 resulted in an increase in fair value of HK$143.9 million to reflect the prevailing market conditions. There was no revaluation of the Fortune Plaza Units for the six months ended 30 June 2004.

152 MANAGER’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

City Development Plaza Units

An extract of the income statement of the City Development Plaza Units for each of the six months ended 30 June 2004 and 30 June 2005 is set out below:

Six months ended 30 June

(Unaudited) 2004(1) 2005

(HK$’000) (HK$’000)

Gross Turnover 17,084 17,499 Other gains — net 203 163 Direct outgoings of the Property (1,773) (2,787) Property management fees (192) (1,454) Promotional and agency expenses (239) (213) Fitting out and maintenance expenses (77) — Business tax and flood prevention fee (870) (891) Bad debts (167) (88) Miscellaneous Expenses (228) (141) Other operating expenses (389) (748)

Operating Income 15,125 14,127

Note:

(1) The figures for the six months ended 30 June 2004 have only been reviewed and not audited.

Gross Turnover — Gross Turnover increased by 2.3%, from HK$17.1 million for the six months ended 30 June 2004 to HK$17.5 million for the six months ended 30 June 2005.

Other gains — net — Such other gains remained constant at HK$0.2 million for each of the six months ended 30 June 2004 and 30 June 2005.

Direct outgoings

Direct outgoings of the City Development Plaza Units increased by 55.6% from HK$1.8 million for the six months ended 30 June 2004 to HK$2.8 million for the six months ended 30 June 2005.

153 MANAGER’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Property management fees — Property management fees increased by approximately 6.8 times, from HK$192,000 for the six months ended 30 June 2004 to HK$1.5 million for the six months ended 30 June 2005. The main reason for the increase was the appointment of Yicheng in October 2004 to provide services in liaising with marketing agents to secure tenants for vacant units and providing tenancy services to existing tenants, for which Yicheng was paid a liaison fee equivalent to 7.0% of actual Rental Income collected.

Promotional and agency expenses — Consistent with the stable occupancy rates of the City Development Plaza Units during the relevant periods, promotional and agency expenses remained relatively stable at approximately HK$239,000 for the six months ended 30 June 2004 and approximately HK$213,000 for the six months ended 30 June 2005.

Fitting out and maintenance expenses — Approximately HK$77,000 was spent on fitting out and maintenance for the six months ended 30 June 2004 while no such expenditures were incurred for the six months ended 30 June 2005. Such expenditures have been relatively low for the City Development Plaza Units because the Property has been well maintained over the years.

Business tax and flood prevention fee — Business tax and flood prevention fee in aggregate represented 5.09% of the Gross Turnover of the City Development Plaza Units.

Bad debts — Bad debts fell by 47.3%, from approximately HK$167,000 for the six months ended 30 June 2004 to approximately HK$88,000 for the six months ended 30 June 2005. These amounts represented 1.0% and 0.5% of Gross Turnover for the respective periods.

Miscellaneous expenses — Miscellaneous expenses were relatively low at HK$0.2 million for the six months ended 30 June 2004 and HK$0.1 million for the six months ended 30 June 2005.

Operating Income

As a result of the foregoing factors and other operating expenses which were not directly attributable to the City Development Plaza Units, Operating Income decreased by 6.6%, from HK$15.1 million for the six months ended 30 June 2004 to HK$14.1 million for the six months ended 30 June 2005. The margin of Operating Income fell from 88.5% for the six months ended 30 June 2004 to 80.7% for the six months ended 30 June 2005.

Fair value gain on investment properties

The revaluation of the City Development Plaza Units as at 30 June 2005 resulted in an increase in fair value of HK$12.4 million. There was no revaluation of the City Development Plaza Units for six months ended 30 June 2004.

154 MANAGER’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Victory Plaza Units

An extract of the income statement of the Victory Plaza Units for each of the six months ended 30 June 2004 and 30 June 2005 is set out below:

Six months ended 30 June

(Unaudited) 2004(1) 2005

(HK$’000) (HK$’000)

Gross Turnover 12,497 12,846 Other gains — net 506 188 Direct outgoings of the Property (1,919) (3,664) Property management fees (321) (943) Promotional and agency expenses (786) (769) Fitting out and maintenance expenses (71) (202) Business tax and flood prevention fee (636) (654) Bad debts —— Miscellaneous expenses (105) (1,096) Other operating expenses (729) (672)

Operating Income 10,355 8,698

Note:

(1) The figures for the six months ended 30 June 2004 have only been reviewed and not audited.

Gross Turnover — Gross Turnover increased by 2.4%, from HK$12.5 million for the six months ended 30 June 2004 to HK$12.8 million for the six months ended 30 June 2005.

Other gains — net — Such other gains fell from HK$0.5 million for the six months ended 30 June 2004 to HK$0.2 million for the six months ended 30 June 2005 as the tenant turnover rate, and hence forfeiture of rental deposits, in the Victory Plaza Units fell as Victory Plaza became more established.

Direct outgoings

Direct outgoings of the Victory Plaza Units increased by 94.7%, from HK$1.9 million for the six months ended 30 June 2004 to HK$3.7 million for the six months ended 30 June 2005.

155 MANAGER’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Property management fees — Property management fees increased by 200.0%, from HK$0.3 million for the six months ended 30 June 2004 to HK$0.9 million for the six months ended 30 June 2005. The main reason for the increase was the appointment of Yicheng in October 2004 to liaise with marketing agents to secure tenants for vacant units and to provide tenancy services to existing tenants in the Victory Plaza Units.

Promotional and agency expenses — Promotional and agency expenses remained at approximately HK$0.8 million for both the six months ended 30 June 2004 and 30 June 2005.

Fitting out and maintenance expenses — Fitting out and maintenance expenses increased by approximately 181.7%, from approximately HK$71,000 for the six months ended 30 June 2004 to HK$0.2 million for the six months ended 30 June 2005 due to the fitting out expenses incurred in preparation for Guangzhou GOME Electrical Appliances Co. Ltd.’s occupancy of basement 1 of the Property.

Business tax and flood prevention fee — Business tax and flood prevention fee in aggregate represented 5.09% of the Gross Turnover of the Victory Plaza Units.

Bad debts — No bad debts were incurred for the six months ended 30 June 2004 and the six months ended 30 June 2005.

Miscellaneous expenses — Miscellaneous expenses increased by approximately 10 times, from HK$0.1 million for the six months ended 30 June 2004 to HK$1.1 million for the six months ended 30 June 2005 due to compensation paid to the existing tenant in basement 1 of the Victory Plaza podium for early termination of its leases so that Guangzhou Gome Electrical Appliances Co. Ltd. could lease that space as a new tenant.

Operating Income

As a result of the foregoing factors and other operating expenses which were not directly attributable to the Victory Plaza Units, Operating Income declined from HK$10.4 million for the six months ended 30 June 2004 to HK$8.7 million for the six months ended 30 June 2005.

Fair value gain on investment properties

There were no revaluation gains or losses for the Victory Plaza Units for either of the six months ended 30 June 2004 or 30 June 2005.

156 MANAGER’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Comparison of Results of Operations for FY2004 with FY2003

White Horse Units

An extract of the income statement of the White Horse Units for each of FY2003 and FY2004 is set out below:

FY2003 FY2004

(HK$’000) (HK$’000)

Gross Turnover 89,754 104,737 Other gains — net 11,154 8,072 Direct outgoings of the Property (31,796) (35,309) Promotional and agency expenses (1,997) (644) Fitting out and maintenance expenses (1,458) (1,543) Depreciation expenses (1,664) (1,285) Business tax and flood prevention fee (6,615) (7,287) Bad debts —— Employment benefit expenses (14,757) (17,488) Miscellaneous expenses (5,305) (7,062)

Operating Income 69,112 77,500

Gross Turnover — Gross Turnover increased by 16.6%, from HK$89.8 million in FY2003 to HK$104.7 million in FY2004. This increase was mainly due to a rental increment in the majority of leases in the White Horse Units subsequent to negotiation with the tenants in the annual review. Another reason for the rise was due to an increase in the Property’s Gross Rentable Area by approximately 2,030 sq.m. in FY2004 which was attributable to the improved efficiency after reformatting the floor space. As a result of terminating two head-leases covering approximately 11,000 sq.m., approximately 200 new leases had been contracted with the user tenants around the third quarter of 2004 at starting rents which were approximately three times higher than the previous leases. These new leases will expire on 31 December 2005.

Other gains — net — Such other gains decreased by 27.7%, from HK$11.2 million in FY2003 to HK$8.1 million in FY2004, mainly due to decreases in consultancy fees, labour charges and administrative fees for transfers of leases (from 163 transfers in FY2003 to 143 transfers in FY2004).

Direct outgoings

Direct outgoings of the White Horse Units increased by 11.0%, from HK$31.8 million in FY2003 to HK$35.3 million in FY2004.

157 MANAGER’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Promotional and agency expenses — Promotional expenses fell by 70.0%, from HK$2.0 million in FY2003 to HK$0.6 million in FY2004. The significant decrease resulted because an advertising campaign on national television which was undertaken in FY2003 was not repeated in FY2004.

Fitting out and maintenance expenses — Fitting out and maintenance expenses remained stable at HK$1.5 million in both FY2003 and FY2004.

Depreciation expenses — Charges for depreciation decreased by 23.5%, from HK$1.7 million for FY2003 to HK$1.3 million for FY2004 as certain assets were fully depreciated in FY2003.

Business tax and flood prevention fee — Business tax and flood prevention fee increased by 10.6%, from HK$6.6 million for FY2003 to HK$7.3 million for FY2004, in line with the growth in Gross Turnover derived from the White Horse Units.

Bad debts — No bad debts were incurred in FY2003 or FY2004.

Employment benefit expenses — Employment benefit expenses rose by 18.2%, from HK$14.8 million in FY2003 to HK$17.5 million in FY2004. This increase was mainly due to a provision for a staff welfare reserve of approximately HK$1.5 million, which was not an annual recurring item. There was also a higher headcount in FY2004 and salaries and bonuses were adjusted upwards in that year to reward employees for the improved performance of the White Horse Units.

Miscellaneous expenses — Miscellaneous expenses increased by 34.0%, from HK$5.3 million in FY2003 to HK$7.1 million in FY2004. The growth was due to increases of HK$1.0 million of expenses incurred as a result of organising some events for tenants at White House Building. In addition, cleaning and landscaping costs and fuel costs increased by approximately HK$0.3 million and HK$0.4 million respectively.

Operating Income

As a result of the foregoing factors, Operating Income increased by 12.1%, from HK$69.1 million in FY2003 to HK$77.5 million in FY2004. The margin of Operating Income was maintained at 77.0% and 74.0% in FY2003 and FY 2004 respectively.

Fair value gain on investment properties

The revaluation of the White Horse Units as at 31 December 2004 resulted in an increase in fair value of HK$53.7 million, compared to a decrease in fair value of HK$3.2 million for FY2003, reflecting the then prevailing market conditions.

158 MANAGER’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Fortune Plaza Units

An extract of the income statement of the Fortune Plaza Units for each of FY2003 and FY2004 is set out below:

FY2003 FY2004

(HK$’000) (HK$’000)

Gross Turnover 150 9,042 Other gains — net 10 255 Direct outgoings of the Property (1,205) (6,623) Property management fees (188) (3,046) Promotional and agency expenses (775) (2,972) Fitting out and maintenance expenses — (135) Business tax and flood prevention fee (8) (460) Bad debts —— Miscellaneous expenses (234) (10) Other operating expenses (608) (705)

Operating Income (1,653) 1,969

Gross Turnover — Gross Turnover increased from HK$0.2 million in FY2003 to HK$9.0 million in FY2004. Gross Turnover in respect of the Fortune Plaza Units was only received from November 2003 onwards as Fortune Plaza was newly completed in FY2003. Gross Turnover improved in FY2004 when the Fortune Plaza Units achieved an average occupancy rate of 21.0%.

Other gains — net — Such other gains rose from approximately HK$10,000 in FY2003 to HK$0.3 million in FY2004.

Direct outgoings

Direct outgoings of the Fortune Plaza Units increased by 450.0%, from HK$1.2 million in FY2003 to HK$6.6 million in FY2004 as Gross Turnover was only received from November 2003 onwards.

Property management fees — Property management fees increased by approximately 14 times, from HK$0.2 million in FY2003 to HK$3.0 million in FY2004. The growth in property management fees was due to the fact that Fortune Plaza only came into operation in the second half of 2003, and thus no such fees were incurred for the first half of FY2003. Another cause for the increase was the fact that prior to September 2004, due to the low occupancy rates of the Fortune Plaza Units in the initial operating period of Fortune Plaza after construction was completed, Yicheng agreed to levy its fees on a cost plus basis with a low margin. From September 2004 onwards, however, such fees were charged in full in respect of unoccupied premises within the Fortune Plaza Units based on a rate of HK$12.50 per sq.m. per month for units in the office tower block and HK$17.50 per sq.m. per month for units in the retail podium.

159 MANAGER’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Promotional and agency expenses — Promotional and agency expenses increased by approximately 275.0%, from HK$0.8 million in FY2003 to HK$3.0 million in FY2004. The increase resulted from the fact that a large portion of the Fortune Plaza Units was originally earmarked for sale in FY2003 and only in FY2004 was the decision made to include those portions in the initial portfolio of GZI REIT. The decision to retain those units necessitated considerably greater amounts of advertising to secure tenants for the Fortune Plaza Units. Also, no agency fees were paid in FY2003, while agency fees of HK$0.7 million were paid in FY2004.

Fitting out and maintenance expenses — As Fortune Plaza was only completed in FY2003, there were no fitting out and maintenance expenses incurred that year, while a minor amount of approximately HK$135,000 was incurred for such expenses in FY2004.

Business tax and flood prevention fee — Business tax and flood prevention fee in aggregate represented 5.09% of the Gross Turnover of the Fortune Plaza Units.

Bad debts — There were no bad debts in FY2003 and FY2004.

Other expenses — Other expenses of approximately HK$234,000 were incurred in FY2003, mainly for seasonal decorations, while only approximately HK$10,000 was incurred for such expenses in FY2004.

Operating Income

As a result of the foregoing factors and other operating expenses which were not directly attributable to Fortune Plaza Units, Operating Income improved from a loss of HK$1.7 million in FY2003 to a profit of HK$2.0 million in FY 2004.

Fair value gain on investment properties

The revaluation of the Fortune Plaza Units as at 31 December 2004 resulted in an increase in fair value of HK$8.4 million, compared to an increase in fair value of HK$205.9 million for FY2003, reflecting the then prevailing market conditions.

160 MANAGER’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

City Development Plaza Units

An extract of the income statement of the City Development Plaza Units for each of FY2003 and FY2004 is set out below:

FY2003 FY2004

(HK$’000) (HK$’000)

Gross Turnover 31,911 33,904 Other gains — net 476 648 Direct outgoings of the Property (3,194) (4,187) Property management fees (563) (991) Promotional and agency expenses (358) (417) Fitting out and maintenance expenses (15) (77) Business tax and flood prevention fee (1,624) (1,726) Bad debts (430) (611) Miscellaneous expenses (204) (365) Other operating expenses (1,065) (730)

Operating Income 28,128 29,635

Gross Turnover — Gross Turnover increased by 6.3%, from HK$31.9 million in FY2003 to HK$33.9 million in FY2004, largely due to the increased occupancy rates of the City Development Plaza Units from 83.6% in FY2003 to 89.4% in FY2004.

Other gains — net — Such other gains increased by 20.0%, from HK$0.5 million in FY2003 to HK$0.6 million in FY2004 as a greater number of leases which were terminated early in FY2004.

Direct outgoings

Direct outgoings of the City Development Plaza Units increased by 31.3% from HK$3.2 million in FY2003 to HK$4.2 million in FY2004.

Property management fees — Property management fees rose by 66.7%, from HK$0.6 million in FY2003 to HK$1.0 million in FY2004. The main reason for the increase was the appointment of Yicheng in October 2004 to provide services for liaising with marketing agents to secure tenants for vacant units and to provide tenancy services to existing tenants.

161 MANAGER’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Promotional and agency expenses — Promotional and agency expenses remained stable at HK$0.4 million in both FY2004 and FY2005 as City Development Plaza was already a mature development with stable occupancy rates, and hence did not require extensive promotion.

Fitting out and maintenance expenses — Fitting out and maintenance expenses increased from approximately HK$15,000 in FY2003 to approximately HK$77,000 in FY2004.

Business tax and flood prevention fee — Business tax and flood prevention fee in aggregate represented 5.09% of the Gross Turnover of the City Development Plaza Units.

Bad debts — Bad debts increased by 42.1%, from approximately HK$430,000 in FY2003 to approximately HK$611,000 in FY2004. These amounts represented 1.3% and 1.8% of the Gross Turnover for the respective periods.

Miscellaneous expenses — Miscellaneous expenses rose by approximately 100.0%, from HK$0.2 million in FY2003 to HK$0.4 million in FY2004. The main reason for this significant increase was the fact that New Year and Christmas celebrations were organised in FY2004 whereas neither occasion was celebrated in FY2003.

Operating Income

As a result of the foregoing factors and other operating expenses which were not directly attributable to the City Development Plaza Units, Operating Income increased by 5.4%, from HK$28.1 million in FY2003 to HK$29.6 million in FY2004. The margins of Operating Income fell from 88.1% in FY2003 to 87.4% in FY2004.

Fair value gain on investment properties

The revaluation of the City Development Plaza Units as at 31 December 2004 resulted in a decrease in fair value of HK$119.6 million mainly due to a decrease in estimated Rental Income from the podium area, including the atrium for exhibition. Previously, the valuer projected sizeable income to be generated from the atrium which did not materialise in 2004.

162 MANAGER’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Victory Plaza Units

An extract of the income statement of the Victory Plaza Units for each of FY2003 and FY2004 is set out below:

FY2003 FY2004

(HK$’000) (HK$’000)

Gross Turnover 7,580 24,397 Other gains — net 91 506 Direct outgoings of the Property (3,881) (4,891) Property management fees (470) (1,663) Promotional and agency expenses (2,365) (1,127) Fitting out and maintenance expenses (1) (361) Business tax and flood prevention fee (386) (1,242) Bad debts —— Miscellaneous expenses (659) (498) Other operating expenses (1,254) (1,364)

Operating Income 2,536 18,648

Gross Turnover — Gross Turnover increased by 221.1%, from HK$7.6 million in FY2003 to HK$24.4 million in FY2004. Gross Turnover in respect of the Victory Plaza Units was only received from October 2003 onwards as the Victory Plaza podium was newly completed in FY2003. Gross Turnover improved in FY2004 as the Victory Plaza Units achieved an average occupancy rate of 81.8% in that year.

Other gains — net — Such other gains rose from approximately HK$91,000 in FY2003 to HK$0.5 million in FY2004, mainly due to the forfeiture of rental deposits of approximately HK$0.4 million in FY2004 whereas no such income was recorded in FY2003.

Direct outgoings

Direct outgoings of the Victory Plaza Units increased by 25.6%, from HK$3.9 million in FY2003 to HK$4.9 million in FY2004.

Property management fees — Property management fees increased by 240.0%, from HK$0.5 million in FY2003 to HK$1.7 million in FY2004. The increase in fees for management of vacant units and liaising with marketing agents resulted because the Victory Plaza podium only came into operation in the second half of 2003, which meant that no such fees were incurred for the first half of FY2003. The appointment of Yicheng in October 2004 to liaise with marketing agents and to provide tenancy services also contributed to the increase in these expenses. Yicheng was paid a fee equivalent to 7.0% of actual Rental Income collected.

163 MANAGER’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Promotional and agency expenses — Promotional and agency expenses fell by 54.2%, from HK$2.4 million in FY2003 to HK$1.1 million in FY2004 as the occupancy rate of the Victory Plaza Units improved in FY2004, thus necessitating lower spending on such expenses.

Fitting out and maintenance expenses — Expenditures for routine repair and maintenance in FY2003 totalled only approximately HK$1,000 as the Victory Plaza podium was newly completed that year while HK$0.4 million was incurred in FY2004. The increase in FY2004 resulted primarily from the conversion of basement 1 of the Victory Plaza podium, which had previously accommodated a supermarket, for use by Guangzhou Gome Electrical Appliances Co. Ltd., a retailer of electronic and electrical equipment. The increase was also due in part to the renovation in FY2004 of the 4th storey of the Victory Plaza podium, which had previously been set up as a specialty location for retailers of telecommunications equipment, to make it more suitable for general use.

Business tax and flood prevention fee — Business tax and flood prevention fee in aggregate represented 5.09% of the Gross Turnover of the Victory Plaza Units.

Bad debts — There were no bad debts in FY2003 or FY2004.

Miscellaneous expenses — Miscellaneous expenses fell by 28.6%, from HK$0.7 million in FY2003 to HK$0.5 million in FY2004, largely because greater expenses were incurred in FY2003 on a series of celebrations and other events organised to mark the opening of the Victory Plaza podium.

Operating Income

As a result of the foregoing factors and other operating expenses which were not directly attributable to Victory Plaza Units, Operating Income increased by approximately 644.0%, from HK$2.5 million in FY2003 to HK$18.6 million in FY2004.

Fair value gain on investment properties

The revaluation of the Victory Plaza Units as at 31 December 2004 resulted in an increase in fair value of HK$62.6 million, compared to an increase in fair value of HK$70.7 million for FY2003, reflecting the then prevailing market conditions.

164 MANAGER’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Liquidity and Capital Resources

The treasury and cash disbursement functions of the GCCD Properties were centrally administered by GCCD. As such, cash and cash equivalents, bank loans and payables were dealt with in the current account with subsidiaries of GZI as shown in the Audited Financial Statements of the Properties set out in the Appendix I to this Offering Circular.

The principal sources of funding for the original development as well as the subsequent expansions and renovations of the White Horse Units have historically been internally generated funds.

Capital Expenditures

White Horse Building underwent major addition and alteration works on two occasions, once between 1995 and 1997 and again between 1998 and 2000. Between 1995 and 1997, the open courtyard of the building was converted into an events hall used to accommodate a food court and to stage fashion events. In 2000, the north and west wings of the building were extended outwards between the 3rd and 7th storeys, and a further two storeys were added to the building to form the 8th and 9th storeys. The two addition and alteration projects added another 15,250 sq.m. to the building’s Gross Floor Area.

There were no material capital expenditures incurred by the GCCD Properties during the relevant periods.

Capital expenditures incurred by the Properties for FY2003 and FY2004 as well as for each of the six months ended 30 June 2004 and 30 June 2005, which comprise additions of fixed assets, land use right and investment properties, are set forth in the following table:

Six months ended 30 June

FY2003 FY2004 2004 2005

(HK$ million) (HK$ million) (HK$ million) (HK$ million) 256.2(1) 3.1 0.2 59.6(2)

Notes:

(1) This amount was mainly attributable to the construction costs of Fortune Plaza and Victory Plaza amounting to HK$247.7 million.

(2) Of this amount, approximately HK$53.0 million was payment of land grant premium and the relevant deed tax (3.0%) for the White Horse Units in June 2005.

165 MANAGER’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

INDEBTEDNESS

Borrowings

As at 30 June 2005, the Properties had no outstanding borrowings.

Contingent liabilities

As at 30 June 2005, the Properties had no significant contingent liabilities.

Capital commitments

As at 30 June 2005, the Properties had no significant capital commitments.

Collateral

As at 30 June 2005, certain of the Properties with an aggregate carrying value of approximately HK$887,245,000 were pledged for bank loans obtained by a subsidiary of GZI. The pledge was subsequently released as a result of partial repayment of the bank loans and substitution thereof by other assets.

NO MATERIAL ADVERSE CHANGE

Save as disclosed in this Offering Circular, the Directors confirm that there has been no material adverse change in the financial or trading position of the Properties since 30 June 2005 and of the BVI Companies since 31 October 2005, the respective dates to which the Audited Financial Statements of the Properties and the Audited Financial Statements of the BVI Companies were made up.

166 MANAGER’S DISCUSSION AND ANALYSIS OF FUTURE OPERATIONS

The following discussion has been prepared to assist investors’ evaluation of the Properties and the factors which may affect its future financial results. Such statements are subject to uncertainties and assumptions, and under no circumstances should the inclusion of such information herein be regarded as a representation, warranty or prediction with respect to the accuracy of the underlying assumptions by GZI Group, the Manager, GZI REIT, the Trustee, the Listing Agent, the Underwriters or any other person. Investors are cautioned not to place undue reliance on these forward-looking statements that speak only as of the date hereof.

Background

The Audited Financial Statements of the Properties and the Audited Financial Statements of the BVI Companies and other historical financial information have been prepared by the Manager based on the historical operations of the Properties. Following transfer of the Properties to GZI REIT, the management structure and the cost and capital structure of the Properties are expected to differ from those previously adopted with respect to the Properties. These variations are discussed below.

Total Gross Income

Total Gross Income in relation to the operation of the Properties in future shall comprise (i) Rental Income and (ii) other income.

Rental income

Rental Income comprises a combination of committed rentals and rentals from renewals and new lettings. In connection with the White Horse Units, no property management fee income will be included as White Horse Property Management Company does not form part of GZI REIT. For the new tenancies commencing 1 January 2006, separate tenancy and property management agreements have been signed between the tenants, GZI REIT and White Horse Property Management Company respectively. Therefore, property management fee income to be earned by White Horse Property Management Company will not form part of the income of GZI REIT. For the Forecast Period 2005, GZI REIT’s Rental Income from the White Horse Units will be derived via an adjustment to the consideration payable by Holdco under the Reorganisation Deed (see the section headed “Material Agreements and Other Documents Relating to GZI REIT — Reorganisation Deed — Adjustments” in this Offering Circular). Under the current leases for the White Horse Units, rent and property management fees are paid in an undivided amount by the tenants in the White Horse Units to White Horse Property Management Company. The majority of these leases will expire on 31 December 2005. The said adjustment will be an amount retained by GZI REIT from the proceeds of the Global Offering, representing the Rental Income from the current leases in the White Horse Units for the Forecast Period 2005.

167 MANAGER’S DISCUSSION AND ANALYSIS OF FUTURE OPERATIONS

Other income

For Forecast Period 2005 and Forecast Year 2006, the Manager assumes that other income will comprise only of income generated by advertising fees from the White Horse Units indoor illuminated billboards. Beyond Forecast Year 2006, other income in relation to the Properties may include, but not limited to, administrative fees for transfers of leases and forfeiture of rental income. The Manager does not anticipate to earn any surplus from electricity charges in the future.

Property operating expenses

Property operating expenses shall comprise (i) the Leasing Agents’ fees; (ii) property-related taxes and duties; and (iii) other property expenses.

Leasing Agents’ fees

For the services of leasing, marketing and tenancy management, Yicheng and White Horse Property Management Company have entered into the Tenancy Services Agreements with the Manager and the BVI Companies under which Yicheng is entitled to fee income of 4.0% per annum of the gross revenue of the Fortune Plaza Units, the City Development Plaza Units and the Victory Plaza Units while the White Horse Property Management Company is entitled to a fee of 3.0% per annum of the gross revenue of the White Horse Units. Yicheng and White Horse Property Management Company have agreed that such fees shall also satisfy the property management fees which they are entitled to receive from the relevant BVI Companies for any vacant units. The Leasing Agents are expected to bear all promotional and agency expenses incurred in relation to the promotion and marketing of the Properties including advertisements in print and broadcast media, promotional materials as well as promotional and marketing events. Therefore, such expenses will not be borne by GZI REIT going forward. (See the section headed “Material Agreements and other Documents Relating to GZI REIT — Tenancy Services Agreements” in this Offering Circular.)

The Leasing Agents have also entered into separate agreements with the owners’ committees or the owners of White Horse Building, Fortune Plaza, City Development Plaza and Victory Plaza to provide property management services for those buildings. In addition, the Leasing Agents have also entered into agreements with the tenants in the Properties to collect certain property management fees directly from the tenants. Such property management fees, which will not form part of the Total Gross Income received by GZI REIT, are applied by the Leasing Agents (who will be entitled to retain 10.0% of such fees) for payment of all costs and expenses incurred in the administration, management of the common areas and daily repairs and maintenance of the Properties. As such, GZI REIT is not liable to pay for any daily repairs and maintenance of the Properties. (See the descriptions of the various property management arrangements in the section headed “Material Agreements and other Documents Relating to GZI REIT” in this Offering Circular.)

In relation to any vacant units in the Properties, the BVI Companies are themselves liable for the property management fees. However, the Leasing Agents have agreed under the Tenancy Services Agreements that the fees which they receive under those agreements shall also satisfy the property management fees which they are entitled to receive from the relevant BVI Companies for any vacant units in the Properties.

168 MANAGER’S DISCUSSION AND ANALYSIS OF FUTURE OPERATIONS

Property taxes and duties

Certain taxes and duties shall be incurred in connection with the Properties. These shall comprise:

• urban real estate tax, which will be levied by reference to 70.0% of the original cost of the real estate at 1.2% per annum. For the self-constructed buildings, i.e. White Horse Building, City Development Plaza and Victory Plaza, the original cost refers to the construction cost of the building. For Fortune Plaza, the original cost refers to the purchase cost of the semi-completed building and the additional cost incurred to complete the construction. According to the relevant Guangzhou tax circular, Suidishuifa [2002] No. 235, subject to approval, the cost of land use right can be excluded when calculating the tax base for urban real estate tax purposes. Each of the BVI Companies is currently liable for urban real estate tax based on the original cost of the real estate. After the Listing Date, any fair value adjustments of the Properties in accordance with HKFRS will not change the tax base of the buildings for the calculation of urban real estate tax purposes.

• business tax at 5.0% of Total Gross Income and flood prevention fee of 0.09% of Total Gross Income; and

• stamp duty on leases, which will be levied at 0.1% of the aggregate Rental Income payable over the term of each lease (not including the further term under any option to renew). Such stamp duty may be amortised over the terms of the relevant leases.

Except for urban real estate tax (in respect of which a tax holiday had previously been granted), the above taxes and duties were also incurred in the past. Foreign enterprises are not entitled to the tax holiday for urban real estate tax. As such, the BVI Companies were liable to pay such tax commencing from 1 September 2005 when the risks and rewards of the Properties were transferred to the BVI Companies.

Other property expenses

Other property expenses comprise contributions to the owners’ building funds, depreciation, bad debts, insurance and annual valuation costs and other expenses for each of the Properties.

Contributions to owners’ building funds — Expenditures incurred for major renovation and maintenance works are expensed as contributions to owners’ building funds for the GCCD Properties. Where the owners’ committee of a building determines that certain renovation works should be undertaken and paid out of the owners’ building fund, approval from at least two-thirds of the owners of the building by Gross Floor Area will need to be obtained. Each owner is entitled to one vote for each square meter of Gross Floor Area it owns. Once approval is obtained to incur such expenditure, all the owners of the building are required to contribute to the proposed outlay an amount proportionate to their respective shares of the building. GZI REIT holds 50.2% and 57.3% of the total Gross Floor Area of Fortune Plaza and City Development Plaza respectively. Given the GCCD undertakings to Moon King and Full Estates described in the sections headed

169 MANAGER’S DISCUSSION AND ANALYSIS OF FUTURE OPERATIONS

“Material Agreements and other Documents Relating to GZI REIT — GCCD’s Appointment of Moon King as its Representative and its Irrevocable Undertaking to Moon King” and “Material Agreements and Other Documents Relating to GZI REIT — GCCD’s Appointment of Full Estates as its Representative and its Irrevocable Undertaking to Full Estates” in this Offering Circular, GZI REIT will be able to exercise a two-thirds majority vote at the owners’ committee meetings of Fortune Plaza and 65.1% of the votes at the owners’ committee meetings of City Development Plaza Units, just marginally short of 67.0%. GZI REIT owns 100.0% of the Victory Plaza podium and, when the two tower blocks are completed, GZI REIT’s share of Victory Plaza will be approximately 19.5% of the total Gross Floor Area.

No formal contributions to owners building funds were made in the past. For Fortune Plaza and Victory Plaza, whose constructions were completed in 2003, no requirement on major renovation works had been required in the past. Furthermore, the warranty period provided by the contractors on the major equipment do not expire until the first half of 2006. For City Development Plaza, GCCD had historically borne most of the expenditure as the majority owner of City Development Plaza. Going forward, such expenditure will be borne by the respective owners proportionate to their respective shares of the building.

For such contributions, since no tenants could claim ownership of any common areas and shared facilities, contributions to owners’ building funds will be treated as expenses on GZI REIT’s income statement when they arise.

As there is no owners’ building fund for White Horse Building, GZI REIT will not have to make any contributions in respect of the White Horse Units. For maintenance costs in respect of major renovation works, these will be borne proportionately by the respective owners of the building. The Manager anticipates capital expenditure of HK$26.7 million for the White Horse Units for the Forecast Period 2005 and Forecast Year 2006. Such capital expenditure includes improvement and replacement of the ventilation system, electrical appliances, fire emergency equipment and smoke detectors as well as maintenance capital expenditure and certain building improvements. As a result, the Manager estimates that any subsequent maintenance costs will be minimal for the White Horse Units.

Depreciation — Equipment, plant and machinery at the Properties, where they exist, shall be depreciated on a straight line basis over the remaining useful life of such equipment, plant and machinery.

Bad debts — Defaulted or doubtful payments of rent not covered by security deposits shall be treated as bad debt expense.

Insurance — Going forward, GZI REIT will pay for insurance coverage for the Properties. Specifically, pursuant to the terms of the Loan Facility, the Manager has obtained property all-risk, rental loss and third party liability insurance policies for the Properties.

Annual valuation costs — Historically, annual valuation costs were incurred by GZI in valuing its property portfolio (including the Properties). Going forward, such costs will also be incurred by GZI REIT to comply with the requirements of the REIT Code and HKFRS.

170 MANAGER’S DISCUSSION AND ANALYSIS OF FUTURE OPERATIONS

Others — Historically, there were other property-related expenses comprising directly and indirectly attributable costs and expenses allocated by GZI. These included expenses such as employee benefit expenses and miscellaneous expenses (see the section headed “Manager’s Discussion and Analysis of Financial Condition and Results of Operations — Miscellaneous expenses” in this Offering Circular) as well as fitting out and maintenance expenses. Apart from fitting out expenses (which shall be borne by GZI REIT), these expenses will not be applicable to GZI REIT going forward. Instead, such expenses will be borne either by the Manager or the Leasing Agents, as appropriate.

Trust expenses

GZI REIT will incur additional expenses which were historically not applicable when the Properties were owned and managed under GZI and GCCD. These expenses include the Manager’s fees, the Trustee’s fees and certain other expenses (see the section headed “Offering Circular Summary — Certain Fees” in this Offering Circular).

Finance costs

On 7 December 2005, the BVI Companies and the Lending Banks entered into the Facility Agreement. The Manager intends to draw down US$165.0 million (HK$1,287.0 million) on the Listing Date to fund part of the payment on the Promissory Note. The Manager intends to utilise other debt financing facilities or structured debt products to refinance the Loan Facility. As such, the Manager believes that borrowing in US dollars will increase its flexibility in terms of refinancing options.

With such borrowings, the gearing of GZI REIT on the Listing Date will be approximately 32.1% based on the Appraised Value of the Properties.

Under the Loan Facility, interest will be payable quarterly at a rate of 1.35% per annum above the three-month US dollar LIBOR rate and principal will be payable in one lump sum at the end of the three-year period commencing from the drawdown date. In providing this Loan Facility, the Lending Banks levied an upfront fee of 1.5% of the principal amount of the Loan Facility and a commitment fee of 0.25% per annum of the committed but undrawn amount of the Loan Facility under the two month availability period of the Loan Facility.

The BVI Companies entered into US$/RMB non-deliverable swap facilities with the Lending Banks (as swap providers) to swap the floating rate US dollar Loan Facility into a synthetic Renminbi liability (at the then prevailing US$/RMB exchange rate) with a series of fixed rate cash flows denominated in Renminbi, payable in US dollars and with a principal exchange at maturity also settled in US dollars for an aggregate notional principal amount of US$165.0 million, for a minimum tenor of three years. Pursuant to these arrangements, the interest rate under the Loan Facility has been fixed at approximately 3.2% per annum and at a US$/RMB exchange rate of 1/8.08 for the entire three-year tenure of the loan under the Loan Facility.

171 MANAGER’S DISCUSSION AND ANALYSIS OF FUTURE OPERATIONS

Interest income

Interest may also be earned on Holdco’s offshore Hong Kong dollar bank account at the prevailing rate and on security deposits held within the PRC.

Taxation

Withholding tax will be levied on each BVI Company with reference to 10.0% of its Total Gross Income less business tax incurred by the BVI Company. The Manager also expects that interest income from security deposits held in the PRC will be subject to a 10.0% tax (see the risk factor headed “The full rate of withholding tax of 20.0% for foreign enterprises may be applied and/or the BVI Companies could be deemed as having permanent establishments in the PRC and be subject to income tax in the PRC based on their deemed profits, either of which could have a material adverse effect on GZI REIT’s income” and the section headed “Profit Forecast — Sensitivity Analyses” in this Offering Circular).

Capital expenditures

Capital expenditures for major renovations and maintenance works will be capitalised in the case of the White Horse Units as no owners’ committee has been established for the Property. For the Fortune Plaza Units, the City Development Plaza Units and the Victory Plaza Units, any expenditure incurred for major renovation and maintenance works will be expensed as contributions to owners’ building funds, as described earlier in this section.

Indebtedness

On 7 December 2005, the BVI Companies and the Lending Banks entered into the Facility Agreement. It is assumed that US$165.0 million (HK$1,287.0 million) will be drawn down on the Listing Date as Loan Proceeds to make payment on the Promissory Note. The initial gearing GZI REIT is approximately 32.1% (based on the Appraised Value of the Properties as at 30 September 2005, as determined by the Independent Property Valuer) whereas the limit prescribed under the REIT Code is 45.0%. It is the Manager’s strategy to maintain the gearing at between 30.0% to 40.0%. (See the sub-section headed “Finance Costs” above and the section headed “Material Agreements and Other Documents Relating to GZI REIT — Facility Agreement” in this Offering Circular.)

Accounting Policies Applicable to GZI REIT

The accounting policies which will be adopted by GZI REIT will be the same set of the accounting policies adopted in preparing the Audited Financial Statements of the Properties and the Audited Financial Statements of the BVI Companies as set out in Note 3 of Appendix I and in Note 2 to Appendix II to this Offering Circular.

172 PROFIT FORECAST

Statements contained in this section that are not historical facts may be forward looking statements. Such statements are based on the principal assumptions set out herein and are subject to certain risks and uncertainties which could cause actual results to differ materially from those forecast. While the Manager considers such assumptions to be reasonable, under no circumstances should the inclusion of such information herein be regarded as a representation, warranty or prediction with respect to the accuracy of the underlying assumptions by the GZI Group, the Manager, GZI REIT, the Trustee, the Listing Agent, the Underwriters or any person involved in the Global Offering, nor that these results will be achieved or are likely to be achieved (see the section headed “Risk Factors” in this Offering Circular). None of the GZI Group, the Manager, the Trustee, the Listing Agent or the Underwriters guarantees the performance of GZI REIT or the payment of any (or any particular) return on the Units. Investors in the Units are cautioned not to place undue reliance on these forward looking statements which are made only as at the date of this Offering Circular.

The profit forecast, for which the Manager is responsible, has been approved by the Board. App B B18 The profit forecast has been prepared on the bases and assumptions set out below and in accordance with HKFRS, and is consistent in all material respects with those accounting policies adopted in the Audited Financial Statements of the Properties and the Audited Financial Statements of the BVI Companies as set out in the Appendices I and II to this Offering Circular.

The forecast income statements of GZI REIT herein have been prepared on a consolidated basis, reflecting the forecast consolidated income statements of GZI REIT, comprising Holdco and the BVI Companies, for the Forecast Period 2005 and the Forecast Year 2006.

Investors are cautioned that the profit forecast is prepared for the period from 21 December 2005 (the expected Listing Date) to 31 December 2006. The Audited Financial Statements of the Properties in Appendix I to this Offering Circular only cover the period from 20 December 2002 to 31 December 2002, FY2003, FY2004 and six months ended 30 June 2005. The Audited Financial Statements of the BVI Companies in Appendix II to this Offering Circular only cover the period from 1 January 2005 to 30 October 2005.

To the extent that the Manager has not identified events that have occurred or may occur in respect of the Properties or the BVI Companies during the period from 1 November 2005 to 21 December 2005, the impact of such events on the future results of GZI REIT have not been taken into account in this profit forecast.

Investors should note that the extent of any changes in the valuation of the Properties in the future will be established by reference to the market at the end of each Financial Year. The Manager has not made any assumption as to property valuation movements in arriving at the forecast net profit after tax of GZI REIT for the Forecast Period 2005 or the Forecast Year 2006. Should the valuation of the Properties as at 31 December 2005 or 31 December 2006 (as the case may be) drop below/rise above the market values of the Properties as at Completion (when valued as at the end of the Forecast Period 2005) or as at 31 December 2006 (when valued at the end of the Forecast Year 2006), the resulting gain or deficit less the effect of the related goodwill (if any) would be charged/credited to the income statement. If the valuation of the Properties drops

173 PROFIT FORECAST below/rises above the carrying values of the Properties, the resulting gain or deficit will be charged against/credited to the income statement. At the same time, any deficit of the value of the Properties might indicate that the goodwill recorded in the books of GZI REIT is impaired and as such, an impairment charge against the income statement may result.

Investors should also note that the format and individual line items in GZI REIT’s future financial reports and statements may differ from those used for the purposes of this profit forecast and such line items should not be viewed as individual forecasts but form part of the bases and assumptions used in arriving at the net profit after tax of HK$1.6 million for the Forecast Period 2005 and HK$201.0 million for the Forecast Year 2006. For the Forecast Period 2005, the profit forecast assumes that the Listing Date will be 21 December 2005 and will vary if the Listing Date is different. The profit forecast, for which the Directors are solely responsible, has been reviewed by the Reporting Accountants, the Listing Agent and the Independent Property Valuer. For the conclusions of their review, investors should refer to the letters from the Reporting Accountants, the report of the Listing Agent and the letter from the Independent Property Valuer set out in Appendices IV (Part B), IV (Part C) and V to this Offering Circular respectively, and the principal bases and assumptions set out below.

Investors should also note that GZI REIT was only established on 7 December 2005 and only acquired the BVI Company Shares on 7 December 2005. As such, GZI REIT does not have historical performance against which the profit forecast herein can be compared. The Audited Financial Statements of the Properties and the Audited Financial Statements of the BVI Companies set out in Appendices I and II to this Offering Circular respectively, as well as the discussion thereof in the section headed “Manager’s Discussion and Analysis of Financial Condition and Results of Operations” in this Offering Circular, relate to the historical performance of the individual Properties while owned by and managed under GZI. The management structure and the cost and capital structures of the Properties when owned by and managed under GZI REIT as well as the management philosophy and operational processes of the Manager are expected to differ from those previously adopted with respect to the Properties.

Moreover, the property management fee structures, certain taxes and certain other expenses previously applicable to the Properties are no longer applicable, and different property management fee structures and taxes now apply to the Properties while they are owned by GZI REIT. Also, GZI REIT incurs expenses at the trust level (such as the Manager’s fees, the Trustee’s fees and annual listing fees), which expenses were not incurred while the Properties were owned by and managed under the GZI Group. (See the section headed “Manager’s Discussion and Analysis of Future Operations” in this Offering Circular)

Having regard to the various factors noted above, investors should exercise caution in relying on this profit forecast generally and, in particular, (i) investors should exercise the highest caution in making any comparison, whether as to individual line items or overall financial performance, as between the Manager’s projected income statement appearing below and any historic financial results (whether in the Audited Financial Statements of the Properties as set out in Appendix I to this Offering Circular or in the Audited Financial Statements of the BVI Companies as set out in Appendix II to this Offering Circular), and (ii) investors should not treat any individual line item in the Manager’s projected income statement as a forecast in its own right.

174 PROFIT FORECAST

Profit Forecast for the Forecast Period 2005 and the Forecast Year 2006

The Manager forecasts that, in the absence of unforeseen circumstances and on the principal bases and assumptions set out below, the net profit after tax of GZI REIT (reflecting the consolidated income statements of GZI REIT, comprising those of Holdco and the BVI Companies) will be not less than HK$1.6 million for the Forecast Period 2005 and not less than HK$201.0 million for the Forecast Year 2006.

Rental Income 172,080 92,644 6,694 363,702 Other income 9,481 5,863 10 337 Total Gross Income 181,561 98,507 6,704 364,039

Net property income 127,752 69,014 5,560 316,191

Fair value gains on investment properties(2) 5,107 612,044 ——

Net profit before finance costs, interest income and tax 132,859 681,058 3,136 250,402

Interest income ———2,743 Finance costs ——(1,542) (52,138)

Net profit before tax 132,859 681,058 1,594 201,007

Income tax expenses (44,273) (214,650) ——

Net profit after tax 88,586 466,408 1,594 201,007 Net profit after tax before fair value gains on investment properties and related tax impact(3) 85,594 46,239 1,594 201,007

175 PROFIT FORECAST

Year ending 31 December 2006

Based on Based on Maximum Minimum Offer Price of Offer Price of HK$3.075 HK$2.850

Total Distributable Income (HK$’000) 201,007 201,007 No. of Units in issue 1,000,000,000 1,000,000,000 Distributions per Unit(4) (HK$) 0.201 0.201 Distribution yield(4) 6.54% 7.05%

Notes:

(1) Historical numbers are extracted and reclassified from the Audited Financial Statements of the Properties set out in Appendix I to this Offering Circular.

(2) In accordance with HKAS 40 “Investment Property”, future changes in the valuation of the Properties will be reflected in GZI REIT’s consolidated income statement. However the extent of any changes in the valuation of the Properties in the future will be established by reference to the market at that time. The Manager has not made any assumption as to property valuation movements in arriving at the forecast consolidated net profit after tax for the period from the Listing Date to 31 December 2006. (See the sub-section headed “Sensitivity Analysis” below for certain illustrations of the potential sensitivity of the Manager’s profit forecast to movements in the fair value of the Properties.)

(3) Assuming the direct application of enterprise income tax of 33.0% on Operating Income.

(4) The distribution per Unit is equal to the Total Distributable Income divided by the total number of Units in issue. Given the short period comprised in the Forecast Period 2005, the Manager believes that the distribution per Unit and yield figures would not be representative of the future performance of GZI REIT. As a result, the distribution yields disclosed above do not include distributions in respect of the Forecast Period 2005.

Bases and Assumptions

The profit forecast for the Forecast Period 2005 and Forecast Year 2006 has been made on the principal bases and assumptions set out below. The Manager considers these bases and assumptions to be appropriate and reasonable at the time of the issue of this Offering Circular. Investors should carefully consider these bases and assumptions when making an assessment of the future performance of GZI REIT based on the profit forecast presented herein.

Total Gross Income

Total Gross Income comprises Rental Income and other income earned from the Properties. A summary of the assumptions used to compile the forecast Total Gross Income for the purposes of the Manager’s projected income statement is set out below:

Rental Income

The Rental Income included in the projected income statement comprises a combination of committed rentals and rentals assumed from renewals and new lettings.

176 PROFIT FORECAST

Committed rental refers to rental from (i) leases in the Properties which were in place as at 1 September 2005 and which will not expire prior to 31 December 2005; and (ii) renewals or new leases for which binding commitments were in place as at 1 September 2005 and for terms which will not expire prior to 31 December 2006. For any leases which were in place as at 1 September 2005 but which will expire prior to 31 December 2006, rental up to the expiry date has been taken into account as committed rental. For the Forecast Period 2005 and Forecast Year 2006, over 98.5% and 91.7% of the respective projected Rental Income comprises committed rentals. The White Horse Units contribute 69.4% of the committed rental for Forecast Year 2006 based on new leases commencing on 1 January 2006 with rentals rates which are on average 50.0% to 100.0% higher than current leases.

For other leases which will expire prior to 31 December 2006 (and for which renewals have not yet been committed), the Manager has conducted a tenant-by-tenant analysis and assessed the likelihood of renewal of each such lease based on the historical operational performance of the relevant property units and the Manager’s ongoing dialogue with tenants. For leases which, in the Manager’s judgment are likely to be renewed, no rent free period has been assumed. For leases which the Manager considers not likely to be renewed, an average vacancy period of one to three months (inclusive of rent free periods) has been assumed.

For units in the Properties which were vacant as at 1 September 2005, the Manager has assumed, in general, a further vacancy period of at least three months (inclusive of a rent free periods) before such units are leased at rental rates which are assumed to be comparable to the rental rates of adjacent units. The Manager has analysed the particulars of the vacant units and considered their locations, Rental Income levels of comparable units and the likelihood of new leases being entered into in relation to those units.

As of 30 September 2005, the White Horse Units enjoyed a 100.0% occupancy rate. The reputation of the White Horse brand was built up over the past few years as a garment wholesale and retail trade centre. With its close proximity to nearby transportation hubs, there has historically been waiting lists of persons seeking to rent space in the building. As a result, the White Horse Units had enjoyed a consistent 100.0% average occupancy over the past three years. Although 99.7% of the leases (1,307 out of a total 1,311) in the White Horse Units will expire on 31 December 2005, 1,246 or 95.3% of these leases have been renewed with terms of four or five years at an average increase of 50.0% to 100.0% in rental rates. For the remaining leases (approximately 5.0%) that are yet to be renewed, the Manager has assumed renewal on 1 January 2006 at a rental rate increase of at least 50.0% over the rental rate of the existing leases, in line with the other new tenancy agreements. The average increase of 50.0% to 100.0% in rental rates is primarily attributable to the fact that with 99.7% of the leases in the White Horse Units expiring on 31 December 2005, the Manager has taken the opportunity to bring the existing rental rates to the market level.

Given the planned renovation of 8th and 9th storeys for wholesale/retail usage, the Manager has taken into consideration a four-month renovation period (from 1 January to 30 April 2006) and assumed that the units on the 8th and 9th storeys will be rented out immediately starting from 1 May 2006. No rent free period is assumed in accordance with the normal practice of White Horse Building and it is expected that the tenants will be signed up during the four-month renovation

177 PROFIT FORECAST period. Rental rates assumed are in line with the achievable market rate for the White Horse Units. Due to the renovation period, the average occupancy rate of the White Horse Units for the Forecast Period 2005 and Forecast Year 2006 shall be 100.0% and 98.0% respectively and the occupancy rate as at 31 December 2006 is expected to be 100.0%.

As at 30 September 2005, the Fortune Plaza Units’ occupancy rate was 76.9%. 0.9% and 7.6% of the leases are due to expire during the Forecast Period 2005 and the Forecast Year 2006 respectively. Fortune Plaza is a relatively new Grade A office building and the Manager expects the average occupancy rate of the Fortune Plaza Units to gradually increase to 81.5% and 96.5% for the Forecast Period 2005 and Forecast Year 2006 respectively. As of 31 October 2005, additional committed leases accounting for another 5.1% of Gross Rentable Area have already been secured for the Fortune Plaza Units. For the Forecast Period 2005 and the Forecast Year 2006, the Manager intends to increase marketing efforts to improve the occupancy rate at the Fortune Plaza Units.

As of 30 September 2005, the City Development Plaza Units’ occupancy rate was 91.0%. 8.6% and 32.1% of leases are due to expire during the Forecast Period 2005 and the Forecast Year 2006 respectively. The Manager’s projected income statement indicates that the average occupancy rate will be 92.5% and 91.9% for the Forecast Period 2005 and Forecast Year 2006 respectively.

As of 30 September 2005, the Victory Plaza Units enjoyed a 100.0% occupancy rate. There are no leases due to expire during the Forecast Period 2005 and less than 2.8% of the leases are due to expire during the Forecast Year 2006. The Manager expects that the space from these expiring leases will be taken up by the largest tenant in the Victory Plaza Units immediately when such space becomes available. This tenant has informed the Manager that it intends to increase its rented space in Victory Plaza and, has in the past, taken up space from expired leases. Therefore, the Manager has assumed that the average occupancy rate for the Victory Plaza Units will remain at 100.0% during the Forecast Period 2005 and will be 99.4% for the Forecast Year 2006.

The table below sets out the occupancy rates of the Properties resulting from the Manager’s projections in the profit forecast:

Average for nine Average for Average for months ended 30 Forecast Period Forecast Year As at Property September 2005 2005 2006 31 December 2006

(%) (%) (%) (%) White Horse Units 100.0 100.0 98.0 100.0 Fortune Plaza Units 65.9 81.5 96.5 94.7 City Development Plaza Units 89.9 92.5 91.9 92.3 Victory Plaza Units 85.2 100.0 99.4 97.2

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For any assumed renewal or new letting, the Manager assessed the rent prospectively achievable under each such renewal or new letting, taking into account matters such as the location of the unit within the relevant Property and the achievable market rent (which the Manager has determined based on rental rates transacted for units recently leased out in the Properties or units recently leased out in comparable properties nearby, with adjustments made to reflect the specific attributes of individual units). A rental increase on existing rent of between nil and 5.0% has been assumed for each assumed renewal or new letting in the Fortune Plaza Units, the City Development Plaza Units and the Victory Plaza Units. Notwithstanding the ongoing construction above the podium of Victory Plaza (as described in the section headed “The Properties and Business — Victory Plaza Units” in this Offering Circular), the Manager has not assumed further discounts on the rental rates of the Victory Plaza Units as it is already below the market rental rates of comparable properties nearby.

Other income

Other income represents advertising income from White Horse Units’ indoor billboards. The Manager has assumed that advertising income will remain at approximately the same level going forward as compared to recent historical performance.

Property operating expenses

Leasing agents’ fees

For the services of leasing, marketing and tenancy management, Yicheng is entitled to a fee of 4.0% per annum of the gross revenue of each of the Fortune Plaza Units, the City Development Plaza Units and the Victory Plaza Units while White Horse Property Management Company is entitled to a fee of 3.0% per annum of the gross revenue of the White Horse Units.

(See the section headed “Material Agreements and Other Documents Relating to GZI REIT — Tenancy Services Agreements” in this Offering Circular for further details of the Leasing Agents’ fees.)

Property related taxes and duties

Taxes and duties comprise urban real estate tax, business tax and flood prevention fee and stamp duty on leases.

It has been assumed that:

• urban real estate tax will be levied by reference to 70.0% of the original cost of the real estate at 1.2% per annum. For the self-constructed buildings, i.e. White Horse Building, City Development Plaza and Victory Plaza, the original cost refers to the construction cost of the building. For Fortune Plaza, the original cost refers to the purchase cost of the semi-completed building and the additional cost incurred to complete the construction. According to the relevant Guangzhou tax circular, Suidishuifa [2002] No. 235, subject to approval, the cost of land use right can be excluded when calculating the

179 PROFIT FORECAST

tax base for urban real estate tax purposes. Each of Moon King, Full Estates and Keen Ocean is currently liable for urban real estate tax based on the original cost of the real estate and an application is currently being made for Partat to be subject to the same tax treatment as the other BVI Companies. After the Listing Date, any fair value adjustments of the Properties in accordance with HKFRS will not change the tax base of the buildings for the calculation of urban real estate tax purposes.

• business tax will remain at 5.0% of Total Gross Income and flood prevention fee will remain at 0.09% of Total Gross Income; and

• stamp duty on leases will be levied at 0.1% of the aggregate Rental Income payable over the term of each lease (not including the further term under any option to renew). Such stamp duty has been amortised over the terms of the relevant leases for the purpose of the forecast.

Other property expenses

Other property expenses comprise contributions to the owners’ building funds, depreciation, bad debts, insurance, annual property valuation costs and other expenses for each of the Properties.

Contributions to the owners’ building funds include estimated contributions proportionate to the portions of Fortune Plaza, City Development Plaza and Victory Plaza held by the respective BVI Companies based on the Manager’s estimation of renovation and maintenance works anticipated to be carried out at these properties during the Forecast Period 2005 and Forecast Year 2006. GZI REIT holds 50.2% and 57.3% of Fortune Plaza and City Development Plaza respectively. GZI REIT owns 100.0% of the Victory Plaza podium and, when the East and West tower blocks are completed in 2007, GZI REIT’s share of Victory Plaza will be 19.5%. For the Forecast Year 2006, contributions to these owners’ building funds are forecast to be HK$961,000. No such contributions have been forecast for the Forecast Period 2005.

Depreciation of the equipment, plant and machinery for the White Horse Units has been included in the profit forecast on a straight-line basis over the remaining useful life of such equipment, plant and machinery.

Based on historical trends, bad debts for the Forecast Period 2005 and Forecast Year 2006 has been assumed, for the White Horse Units, to be 0.5% of the Rental Income for the said periods and, for the GCCD Properties, to be 1.0% of the Rental Income of each of the GCCD Properties for the said periods.

180 PROFIT FORECAST

Accounting policies require an individual assessment of insurance and annual valuation costs to be made for each of the Properties for the Forecast Period 2005 and Forecast Year 2006.

Non-property expenses

Withholding tax

It has been assumed that withholding tax will be levied on each BVI Company by reference to a rate of 10.0% of its Total Gross Income, net of business tax incurred by the relevant BVI Company. It has also been assumed that the interest income from cash and bank balances held in the PRC will be subject to a 10.0% withholding tax.

Manager’s fees

Pursuant to the Trust Deed, the Manager will receive:

• a base fee of 0.3% per annum of the value of the Deposited Property; and D11(b)

• a service fee of 3.0% per annum of Net Property Income.

It has been assumed that GZI REIT’s property portfolio remains unchanged and, accordingly, that the Manager will not be receiving acquisition fees or divestment fees during the Forecast Period 2005 and the Forecast Year 2006.

(See the section headed “The Manager — Fees, Costs and Expenses of the Manager” in this Offering Circular for further details of the Manager’s fees.)

Trustee’s fees

Pursuant to the Trust Deed, the Trustee is entitled to an inception fee of not more than HK$200,000 (as agreed between the Manager and the Trustee) and an ongoing fee of 0.03% per annum of the value of the Deposited Property, subject to a minimum amount of HK$50,000 per month.

(See the section headed “The Trust Deed — Trustee’s Fee” in this Offering Circular for further details of the Trustee’s fees.)

Other trust expenses

Other trust expenses comprise GZI REIT’s recurring operating expenses such as annual listing fees, the SFC’s fees, the Unit Registrar’s fees, audit and tax advisory fees, legal fees, costs associated with the preparation and distribution of reports to Unitholders, investor communication costs and other miscellaneous expenses.

181 PROFIT FORECAST

Other trust income and expenses

Interest income

Holdco’s Hong Kong dollar account is assumed to earn interest income at an average of 2.15% per annum based on a monthly deposit rate quoted by an international bank. Security deposits deposited at the BVI Companies’ Renminbi account are assumed to earn interest income at an average of 1.71% per annum based on a three-month deposit rate quoted by a local bank.

Finance costs

On 7 December 2005, the BVI Companies and the Lending Banks entered into the Facility App B B2 (j) & B2 (r) Agreement. It is assumed that US$165.0 million (HK$1,287.0 million) will be drawn down on the Listing Date as Loan Proceeds to make payment on the Promissory Note (see the sections headed “Use of Proceeds”, “The Reorganisation — The Reorganisation Deed — Initial Consideration” and “Material Agreements and Other Documents Relating to GZI REIT — Facility Agreement” in this Offering Circular for further details).

With such borrowings, the gearing of GZI REIT on the Listing Date will be approximately 32.1%, based on the gross amount of the loan proceeds divided by the Appraised value of the Properties as at 30 September 2005, as determined by the Independent Property Valuer.

Under the Loan Facility, interest will be payable quarterly at a rate of 1.35% per annum above the three-month US dollar LIBOR rate, and principal will be payable in one lump sum at the end of the three-year period commencing from the drawdown date. In providing this Loan Facility, the Lending Banks levied an upfront fee of 1.5% of the principal amount of the Loan Facility and a committment fee of 0.25% per annum of the committed but undrawn amount of the Loan Facility under the two month availability period of the Loan Facility.

The BVI Companies entered into US$/RMB non-deliverable swap facilities with the Lending Banks (as swap providers) to swap the floating rate US dollar Loan Facility into a synthetic Renminbi liability (at the then prevailing US$/RMB exchange rates) with a series of fixed rate cash flows denominated in Renminbi, payable in US dollars and with a principal exchange at maturity also settled in US dollars for an aggregate notional principal amount of US$165.0 million, for a minimum tenor of three years. Pursuant to these arrangements, the interest rate under the Loan Facility have been fixed at approximately 3.2% per annum and at a US$/RMB exchange rate of 1/8.08 for the entire three-year tenure of the loan under the Loan facility.

For the Forecast Period 2005 and Forecast Year 2006, finance costs in relation to the Loan Facility include interest expenses, upfront fees and other costs such as legal fees. However, for the purposes of the Manager’s profit forecast, the Manager has assumed interest expenses on the Loan Facility based on a fixed rate of 3.5% per annum. The upfront fees and other costs are amortised over the three-year tenure of the loan under the Loan Facility.

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Goodwill/impairment of goodwill charged

Goodwill is the difference between the final consideration payable under the Reorganisation Deed and the fair values of the assets and liabilities of the BVI Companies.

If the final consideration is greater than the fair values of the assets and liabilities of the BVI Companies, the goodwill will be recorded in the balance sheet of the BVI Companies. Goodwill arising from acquisition is tested annually for impairment and carried at cost less accumulated impairment losses. If the final consideration is less than the fair values of the assets and liabilities of the BVI Companies, a negative goodwill will arise and credited to the income statement of the BVI Companies.

Accounting policies applicable to GZI REIT

Liquidity and capital resources

Net cash received from operations, security deposits and interest income will be GZI REIT’s primary source of liquidity for funding distributions, servicing of debt and payment of non-property expenses.

Any future funding may be raised through issue of new Units or additional borrowings (subject to the 45.0% gearing limit under the REIT Code) or a combination of both.

The Manager is of the opinion that taking into account the financial resources available to GZI REIT, including internally generated funds, the available banking facilities and the estimated net proceeds of the offering of the Units, GZI REIT will have sufficient working capital to satisfy its operational requirements for the 12 calendar months following the Listing Date.

Capital expenditure

For the Forecast Period 2005 and Forecast Year 2006, the Manager anticipates capital App B B2 (h) expenditure of HK$26.7 million for the White Horse Units. Such capital expenditure includes HK$10.3 million of planned fixed assets related capital expenditure and HK$16.4 million of planned investment properties related capital expenditure. The fixed assets related capital expenditure includes improving or replacing the ventilation system, electrical appliances, fire emergency equipment and smoke detectors in the White Horse Units, which will be subject to depreciation under HKFRS. Such capital expenditure, which includes maintenance capital expenditure and certain building improvements, has been projected based on the Manager’s review of the capital expenditure requirements of the White Horse Units as well as the life cycle of the plant and equipment therein. Investment properties-related capital expenditure include the renovation of the 8th and 9th storeys of the White Horse Units for wholesale/retail use (which

183 PROFIT FORECAST renovation is estimated to cost approximately HK$5.8 million) and other capital expenditures of similar nature, which are not subject to depreciation under HKFRS. This amount of HK$26.7 million will be funded by cash retained from the proceeds of the Global Offering. (See the section headed “Material Agreements and Other Documents Relating to GZI REIT — Reorganisation Deed” in this Offering Circular.)

Expenditure for major renovation of and maintenance works for the GCCD Properties will be satisfied by their respective owners’ building funds which are contributed by all the owners of the three properties according to the percentage ownership of each owner by area. As these expenditure relates to common areas and shared facilities which no tenants could claim ownership, these expenditures are treated as expenses on the income statement when they arise. The item “contribution to the owners’ building fund” in the profit forecast reflects the proportional amount of GZI REIT’s contribution to the funds. GZI REIT’s shares of Fortune Plaza and City Development Plaza are 50.2% and 57.3% respectively. GZI REIT owns 100.0% of the Victory Plaza podium.

Indebtedness

The Manager has assumed that the BVI Companies will incur borrowings under the Loan Facility to fund part of the acquisition costs of the Properties. On 7 December 2005, GZI REIT and the Lending Banks entered into the Facility Agreement. It is assumed that US$165.0 million (HK$1,287.0 million) will be drawn down on the Listing Date as Loan Proceeds to make payment on the Promissory Note. The initial gearing of REIT is approximately 32.1% (based on the Appraised Value of the Properties as at 30 September 2005, as determined by the Independent Property Valuer) whereas the limit prescribed under the REIT Code is 45.0%. It is the Manager’s strategy to maintain the gearing at between 30.0% to 40.0%. (See the section headed “Material Agreements and Other Document Relating to GZI REIT — Facility Agreement” in this Offering Circular for further details in relation to the Loan Facility.)

Fair value of investment properties and derivatives

Movements in the valuation of investment properties and financial instruments will be reflected in GZI REIT’s income statement. However, the extent of any changes in the valuation of investment properties and financial instruments in the future will be established by reference to the market condition at that time. The Manager has not made any assumption as to movements in such valuations in arriving at the consolidated net profit after tax for the forecast period. (See the risk factor headed “Distributions to Unitholders will be subject to cash flow” in this Offering Circular.)

Other assumptions

Other assumptions made in preparing the profit forecast include:

• GZI REIT’s property portfolio, comprising the Properties, will remain unchanged;

• no distribution reinvestment scheme will be put in place;

184 PROFIT FORECAST

• no further equity capital will be raised by GZI REIT during the Forecast Period 2005 and Forecast Year 2006;

• all leases are enforceable and will be performed in accordance with their terms as amended from time to time;

• there will be no material change in existing political, legal, fiscal, market or economic conditions in the PRC;

• there will be no changes in legislation, regulations or rules in the PRC, BVI, or any other country or territory which materially affect the business of GZI REIT;

• the portion of the expenses of the Global Offering that will be charged against Unitholders’ equity of GZI REIT will be netted off from the proceeds of the Global Offering and deducted from the final consideration to be paid to GZI under the Reorganisation Deed. All remaining expenses of the Global Offering will be borne by GZI;

• the proceeds of the Global Offering will be used towards payment of the Promissory Note and no interest income will be earned by GZI REIT from the proceeds of the Global Offering; and

• the Renminbi/HK dollar exchange rate used throughout the forecast period is assumed to remain constant at RMB1.04 = HK$1.00.

Sensitivity Analysis

The profit forecasts and projected distributions included in this Offering Circular are based on a number of assumptions that have been outlined above. The profit forecasts and projected distributions are also subject to a number of risks as outlined in the section headed “Risk Factors” in this Offering Circular.

Investors should be aware that future events cannot be predicted with any certainty and deviations from the figures forecast or projected in this Offering Circular are to be expected. To assist investors in assessing the possible impact of some but not all of these assumptions on the distribution yield, certain information is set out below demonstrating the sensitivity of distribution yield to changes in certain assumptions. It should also be noted that distribution yield as discussed below assumes that the Manager will distribute to Unitholders 100.0% of GZI REIT’s forecast net profit after tax of not less than HK$201.0 million for FY2006. (See also the section headed “Distribution Policy” in this Offering Circular.) Accordingly, the sensitivity illustrations are based exclusively on movements in net profit resulting from the circumstances considered.

The sensitivity analysis is intended to be for reference only and variations in actual performance could exceed the ranges shown. Investors should be aware that the sensitivity analysis is not intended to be exhaustive and is limited in scope in that not all principal assumptions or other assumptions which are relevant to the figures forecast or projected in this

185 PROFIT FORECAST

Offering Circular have been examined or reviewed in this sensitivity analysis. The sensitivity analysis is in each case restricted to the relevant individual line item in the income statement. Changes and variations against projections may be caused by, or may result from, circumstances which further impact upon other line items. Movements in other variables may offset or compound the effect of a change in any variable beyond the extent shown. No attempt is made to identify the cause of any potential variation against projections, or to identify or quantify any consequential or related changes or variations in other line items. Investors should further note that the sensitivity analyses below only consider the potential impact of certain specific factors on the profit forecast for the Forecast Year 2006.

(1) Movements in fair value of the Properties

Distribution yield for FY2006

Maximum Minimum Offer Price of Offer Price of HK$3.075 HK$2.850

For FY2006 Current assumption(1) 6.54% 7.05% 2.5% decrease in the fair value of the Properties 3.21% 3.46% 5.0% decrease in the fair value of the Properties(2) —(2) —(2)

Notes:

(1) The Manager has not made any assumption as to movements in such valuations in arriving at the consolidated net profit after tax for the Forecast Year 2006 under its current assumption.

(2) A 5.0% decrease in the value of the Properties may reduce the Total Distributable Income to nil, which means that a distribution may not be made.

Where net profit is reduced in consequence of non-cash items such as property revaluation losses, cash flow for the period in question may potentially exceed Total Distributable Income. Investors should note that the Manager may (but is not obliged to) distribute any excess cash arising from non-cash expenditures such as those arising from a decline in the fair value of the Properties (in which case more than 100.0% of GZI REIT’s Total Distributable Income could be distributed). (See the section headed “Distribution Policy” in this Offering Circular for further information.)

186 PROFIT FORECAST

(2) Taxation rates

Distribution yield for FY2006

Maximum Minimum Offer Price of Offer Price of HK$3.075 HK$2.850

For FY2006 Current assumption (Withholding tax at 10.0%)(1) 6.54% 7.05% Withholding tax at 20.0%(1) 5.41% 5.84% Permanent establishment at deemed profit rate of 20.0%(2) 6.88% 7.42% Permanent establishment at deemed profit rate of 40.0%(2) 6.10% 6.58%

Notes:

(1) Analysis on withholding tax is calculated based on a rate of 10.0% (based on the tax circular Guofa [2000] No. 37, issued by the PRC State Council) and a rate of 20.0% (Article 19 of the Foreign Enterprise Income Tax (“FEIT”) Law).

The distribution yield based on withholding tax at 10.0% is calculated as follows:

(Profit before tax - Total Gross Income x (1 - business tax of 5.0%) x 10.0%)/1,000,000,000 Units/Maximum Offer Price or Minimum Offer Price

The distribution yield based on withholding tax at 20.0% is calculated as follows:

(Profit before tax - Total Gross Income x (1 - business tax of 5.0%) x 20.0%)/1,000,000,000 Units/Maximum Offer Price or Minimum Offer Price

(2) In the event that the BVI Companies are deemed to have created a permanent establishment (taxable presence) in the PRC, the BVI Companies will be subject to the foreign enterprise income tax based on:

Deemed profit multiplied by the standard foreign enterprise income tax rate of 33.0%, where deemed profit is the Total Gross Income of the entity multiplied by the deemed profit rate of between 20.0% and 40.0%. For the purpose of the above analysis, the Manager has presented two cases using the deemed profit rates of 20.0% and 40.0%

The distribution yield based on a permanent establishment at a deemed profit rate of 20.0% is calculated as follows:

(Profit before tax - Total Gross Income x 20.0% x 33.0%)/1,000,000,000 Units/Maximum Offer Price or Minimum Offer Price

The distribution yield based on a permanent establishment at a deemed profit rate of 40.0% is calculated as follows:

(Profit before tax - Total Gross Income x 40.0% x 33.0%)/1,000,000,000 Units/Maximum Offer Price or Minimum Offer Price

The analysis above does not consider the impact of changes in business and property-level taxes such as urban real estate tax, business and flood prevention tax and stamp duty on leases. (See the section headed “Taxation” in this Offering Circular for further information.)

187 UNAUDITED PRO FORMA BALANCE SHEETS OF GZI REIT

The following table sets out the unaudited pro forma balance sheets of GZI REIT as at the date of the establishment of GZI REIT assuming that the acquisition of the BVI Companies by Holdco and the issuance of the Units in the Global Offering take place on the same day, and adjusted for the US$165.0 million to be drawn down on the Loan Facility. The table is prepared based on the unaudited pro forma balance sheets of GZI REIT in Appendix III to this Offering Circular and should be read in conjunction with the basis of preparation, the pro forma adjustments and the letter from the Reporting Accountants therein, as well as the section headed “The Reorganisation” in this Offering Circular.

Based on Based on Maximum Minimum Offer Price of Offer Price of HK$3.075 HK$2.850

(HK$ million) (HK$ million)

Assets Investment Properties(1) 4,005.0 4,005.0 Property, plant and equipment 3.0 3.0 Other assets(2) 6.0 6.0 Cash and cash equivalents(3) 88.0 88.0 Goodwill(4) 78.0 —

Liabilities Rental deposits, accruals and other payables (62.0) (62.0) Amount drawn down under the Loan Facility(5) (1,265.0) (1,265.0)

2,853.0 2,775.0

Unitholders’ equity Issued capital(6) 2,930.0 2,798.0 Retained earnings(4) — 51.0 Global Offering expenses(7) (77.0) (74.0)

2,853.0 2,775.0

Notes:

(2) Other assets include deferred assets, trade receivables, other receivables and prepayments.

188 UNAUDITED PRO FORMA BALANCE SHEETS OF GZI REIT

loans), cash of HK$26,700,000 retained from the proceeds of the Global Offering for proposed renovation works at the White Horse Units and cash of HK$2,085,600 (also retained from the proceeds of the Global Offering) for the Rental Income attributable to Partat for the period from the Listing Date to 31 December 2005 (both dates inclusive), as provided for in the Reorganisation Deed.

(5) This refers to the amount of HK$1,287.0 million drawn down under the Loan Facility on the Listing Date, net of capitalised debt related expenses of HK$21.6 million in respect of the Loan Facility.

At the Maximum Offer Price and the Minimum Offer Price, the NTA per Unit remains at App B B10 HK$2.775, based on the assumptions set out above and on the 1,000,000,000 Units expected to be in issue immediately following completion of the Global Offering.

Excluding goodwill, the NTA per Unit is expected to be HK$2.775. The Maximum Offer Price of HK$3.075 and the Minimum Offer Price of HK$2.850 respectively represent a premium of 10.8% and 2.7% to the NTA per Unit. Based on the Maximum Offer Price of HK$3.075, the final consideration will be adjusted to HK$4,089,416,000 taking into account an assumed adjustment of HK$75,236,000 under the Reorganisation Deed while based on the Minimum Offer Price of HK$2.850, the final consideration will be adjusted to HK$3,961,520,000 taking into account an assumed adjustment of HK$52,660,000.

189 STATEMENT OF DISTRIBUTIONS

The forward looking statements in this section are based on the assumptions set out in the section headed “Profit Forecast — Bases and Assumptions” in this Offering Circular and are subject to certain risks and uncertainties which could cause actual results to differ materially from those forecast. While the Manager considers such assumptions to be reasonable, under no circumstances should the inclusion of such information herein be regarded as a representation, warranty or prediction with respect to the accuracy of the underlying assumptions by the GZI Group, the Manager, GZI REIT, the Trustee, the Underwriters or any person involved in the Global Offering, nor that these results will be achieved or are likely to be achieved (see the section headed “Risk Factors” in this Offering Circular). Investors in the Units are cautioned not to place undue reliance on these forward looking statements which are made only as at the date of this Offering Circular.

None of GZI REIT, the Manager, the Trustee or any of the Joint Global Coordinators guarantees the performance of GZI REIT or the payment of any (or any particular) return on the Units. See also the risk factor headed “Distributions to Unitholders will be subject to cash flow” in this Offering Circular.

Forecast Year 2006

Unitholders will be paid, in the absence of unforeseen circumstances, total distributions per App B B19 Unit of not less than HK$0.201 in respect of the Forecast Year 2006, representing a distribution yield of 6.54% based on the Maximum Offer Price (excluding other transaction costs) and 7.05% based on the Minimum Offer Price (excluding other transaction costs).

Units Purchased at Market Price

The market price of the Units may fluctuate. The yield obtained by investors who purchase Units in the secondary market at a market price that differs from the Maximum Offer Price or the Minimum Offer Price (excluding, in each case, other transaction costs), calculated using such secondary market purchase price, will accordingly differ from the distribution yields stated above.

190 STRUCTURE, MANAGEMENT AND AGREEMENTS

191 STRUCTURE AND ORGANISATION OF GZI REIT

The following diagram illustrates the primary structural and contractual relationships between, among others, the Manager, the Trustee and the Leasing Agents:

Unitholders

GZI - Public in Hong Kong - Institutional investors - GZI (holding through Dragon Yield) - Yue Xiu(1)

Investment in GZI REIT Distributions

City White Horse Fortune Plaza Development Victory Plaza Units Units Plaza Units Units

Notes:

(1) To the extent that Yue Xiu and its subsidiaries (other than the members of the GZI Group) receive Units by way of distribution in their capacity as GZI Qualifying Shareholders.

(2) White Horse Property Management Company, which is 96.8% owned by GZI (with the remaining 3.21% owned by GCCD Group), will provide leasing, marketing and tenancy management services to Partat in respect of the White Horse Units and will receive a fee from Partat.

192 THE MANAGER

Overview

GZI REIT must be organised and managed in a manner which is consistent with the provisions and requirements of the REIT Code, subject as described in the section headed “Modifications, Waivers and Authorisation Conditions” in this Offering Circular. The Manager is independent of the Trustee and possesses the skill and resources to discharge its functions in relation to GZI REIT effectively and responsibly. In discharging such functions, the Manager is required to observe high standards of corporate governance. For details of the corporate governance policies and procedures of the Manager, see the section headed “Corporate Governance” in this Offering Circular.

The Manager of GZI REIT

The Manager has responsibility for managing the assets of GZI REIT for the benefit of the Unitholders. The Manager will set the strategic direction and risk management policies of GZI REIT and manage such assets in accordance with the stated investment strategy of GZI REIT and in accordance with compliance procedures set forth herein. The Manager is licensed by the SFC to conduct the regulated activity of asset management, as required by the SFC. See also the section headed “Strategy” in this Offering Circular.

Ownership Structure of the Manager App 2 B4 (a)

The Manager is a wholly owned subsidiary of GZI, which is part of the Yue Xiu conglomerate. Yue Xiu is the flagship trading and investment vehicle of the Guangzhou Municipal People’s Government in Hong Kong and the conglomerate has interests in a wide range of businesses and industries, including property investment and development, toll roads and bridges, newsprint, cement and ready mix concrete, high technology businesses, dry cell battery manufacturing, financial, stock broking and insurance services as well as hotel operations.

GZI, Yue Xiu’s principal subsidiary, is listed on both the Hong Kong Stock Exchange and Singapore Exchange Securities Trading Limited. It is actively engaged in the development of commercial and residential properties primarily in Guangzhou and is also engaged in the provision of property management, lease management and marketing services to properties developed by the GZI Group or properties in which it has an interest.

193 THE MANAGER

Organisational Structure of the Manager

The Manager has separated its operational management functions into the following functional divisions: (i) asset management; (ii) development and project management; (iii) investment management; (iv) financial management; (v) investor relations; and (vi) corporate services, as shown in the organisational structure below:

Board of Directors

Executive Director Finance and Remuneration and and Chief Disclosures Audit Committee Investment Nomination Executive Officer Committee Committee Committee Mr Liu Yong Jie

Deputy Chief Deputy Chief Executive Officer Executive Officer and Compliance Mr Cai Xiao Ping Manager Mr Lau Jin Tin, Don

Financial Asset Development and Investment Management and Investor Corporate Management Project Management Chief Financial Relations Services Mr Cheng Jiu Management Mr Cai Xiao Ping Officer Mr Alex Shiu Mr Yu Tat Fung Zhou Mr Ip Wing Wah Ms Ko Yung Lai, Jackie

• Asset management team — This team is primarily responsible for the operational aspects of the Properties, including strategic asset planning, marketing and development, leasing, property and tenancy management and oversight of the Leasing Agents.

• Development and project management team — This team is primarily responsible for overseeing the property maintenance and the asset improvement aspects of the Properties and conducting property due diligence on properties proposed to be acquired by GZI REIT. It also plays a supporting role in formulating the asset enhancement strategies and plans of GZI REIT.

• Investment management team — This team is primarily responsible for formulating and implementing the Manager’s investment management plans (including acquisition and divestment strategies, financing strategies and overall management policies of GZI REIT). It is also responsible for human resources management, procurement, administrative support and for developing a research platform to support the investment management function.

194 THE MANAGER

• Financial management and compliance team — This team is primarily responsible for accounting, financial management and compliance as well as information technology.

• Investor relations team — This team is primarily responsible for communicating and liaising with Unitholders and other key stakeholders of GZI REIT as well as media and investor relations. It is responsible for the preparation and production of annual and half-yearly reports as well as roadshows, website and other marketing and promotional channels and materials for GZI REIT.

• Corporate services team — This team is primarily responsible for supporting the Manager’s core asset management and investment management functions through the provision of ancillary back office services such as legal and corporate secretarial support.

The Board

The Board is responsible for the overall governance of the Manager, including establishing goals for management and monitoring the achievement of these goals. The Board has established a framework for the management of GZI REIT, including a system of internal controls and business risk management processes.

The Board comprises six Directors, three of whom are independent non-executive Directors. The Chief Executive Officer is also a member of the Board. The Chairman and executive Director (Mr Liang Ning Guang), the Chief Executive Officer and executive Director (Mr Liu Yong Jie) as well as a Deputy Chief Executive Officer and compliance manager (Mr Don Lau) are currently licensed by the SFC as Responsible Officers for the purposes of the SFO.

(For further information on the Board and its committees, see the section headed “Corporate Governance” in this Offering Circular.)

Directors

The Directors are:

Name Age Position Mr LIANG Ning Guang ( ) 51 Chairman and Executive Director Mr LIU Yong Jie ( ) 48 Chief Executive Officer and Executive Director Mr LIANG You Pan ( ) 50 Non-Executive Director Mr CHAN Chi On, Derek ( ) 42 Independent Non-Executive Director Mr LEE Kwan Hung, Eddie ( ) 40 Independent Non-Executive Director Mr CHAN Chi Fai, Brian ( ) 50 Independent Non-Executive Director

195 THE MANAGER

Information on the business and working experience of the Directors is set out below:

Chairman

Mr LIANG Ning Guang App 2 B4 (a)

Mr Liang is the Chairman and an Executive Director of the Manager as well as one of the Manager’s Responsible Officers. Mr Liang is also currently the Vice Chairman of Yue Xiu, an Executive Director of GZI Transport Limited (a Hong Kong listed company) and a director of Yue Xiu Securities Co. Ltd. Mr Liang was formerly an Executive Director and Deputy General Manager of GZI but has resigned in order to dedicate more time to the Manager.

Prior to joining Yue Xiu in 1989, Mr Liang was a Deputy Commissioner of the Guangzhou Municipal Taxation Bureau.

Mr Liang graduated from the Television University (Guangzhou) in the PRC with a major in finance and holds a master’s degree in business administration from the Murdoch University of Australia. He is a Senior Accountant and a member of the Chinese Institute of Certified Public Accountants and is a Responsible Officer licensed under the SFO to carry on regulated activities types 1, 4, 6 and 9.

Executive Director

Mr LIU Yong Jie

Mr Liu is an Executive Director and Chief Executive Officer of the Manager as well as one of the Manager’s Responsible Officers. He is concurrently Deputy General Manager of Yue Xiu but is expected to spend 100.0% of his time in the management of GZI REIT.

Before joining Yue Xiu, Mr Liu was a Director and Deputy General Manager of GCCD, and was responsible for strategic planning in property development, property management and promotional campaigns, asset acquisition and asset enhancement. Mr Liu has more than 11 years of experience in property investment and management. Prior to joining the property department of GCCD, Mr Liu was an assistant to the director of, and a research fellow in economic studies in, the Economic Research Centre in Guangzhou.

Mr Liu graduated from the University of Hubei (formerly known as Wuhan Teachers’ College) in the PRC with a major in science; and obtained an Executive Master degree of Business Administration from Honolulu University.

Non-executive Director

Mr LIANG You Pan

Mr Liang is a non-executive Director of the Manager. He is currently also the Deputy General Manager of GZI.

196 THE MANAGER

Prior to joining GZI in 1998, Mr Liang was the Workshop Director of Guangzhou Wen Chong Shipyard Company Limited, which is a subsidiary of China State Shipbuilding Company. Between 1991 and 1998, Mr Liang was a unit head in the administrative supervisory division of the Guangzhou Municipality. Mr Liang has a wide range of experience in PRC corporate governance practices, particularly in the area of internal controls.

Mr Liang graduated in 1986 from Guangzhou Economics Management Cadre’s Institute in the PRC with a diploma in corporate governance.

Independent Non-executive Directors

Mr CHAN Chi On, Derek

Mr Chan is an independent non-executive Director of the Manager and is currently also the Managing Director of Tai Fook Capital Limited.

Mr Chan is an executive director of Tai Fook Securities Group Limited, a company listed on the Hong Kong Stock Exchange, and is in charge of its corporate finance division. He graduated from the Hong Kong University of Science & Technology with a master’s degree in business administration in 1994. Between 1989 and 1996, he had worked for the Hong Kong Stock Exchange. He is an adjunct professor in the School of Accounting and Finance of the Hong Kong Polytechnic University. Mr Chan has over 15 years of experience in the financial services industry.

Mr Chan is currently also a director of the following companies: Billion Venture Limited, Broadtrade Investments Limited, Champion Worldwide Development Limited, Cityscope Limited, Fergurson Hotel Holdings Limited, Golden Union Development Limited, Hotel Nikko Hong Kong Limited, King Choi Company Limited, Lipro Prosper Limited, Queensway Hotel Holdings Limited, Queensway Hotel Limited, Silver Regent Limited, Smart Express Investment Limited, Success International Investment Limited, Tai Fook Capital Limited, Tai Fook Management Consultancy Limited, Wiseson Investments Ltd, Besteam Limited, Chishore Enterprise Inc., Early Days Investments Limited, Fergurson Investment Corp., Fitmond Limited, GST Holdings Limited, Lucky Trio Ltd, New Unity Holdings Ltd, Tai Fook (BVI) Limited, Tai Fook Investment Consultancy (Shanghai) Company Limited, Tai Fook Securities Group Limited and Top Castle Group Limited.

Mr Chan believes that his directorships in the other companies listed above do not affect his abilities to perform his duties as an independent non-executive Director of the Manager.

Mr LEE Kwan Hung, Eddie

Mr Eddie Lee is a Partner and the Chief Representative of Woo, Kwan, Lee & Lo’s Beijing office.

Mr Lee received his LL.B (Honours) degree and Postgraduate Certificate in Laws from the University of Hong Kong in 1988 and 1989 respectively. He was then admitted as a solicitor in Hong Kong in 1991 and the United Kingdom in 1997. Mr Lee joined Woo, Kwan, Lee & Lo in 1989 and handled a number of listing projects in Hong Kong. In 1992, Mr Lee joined the Hong Kong Stock Exchange as a Manager in the Listing Division and was promoted to be a Senior Manager in 1993.

197 THE MANAGER

Mr Lee is currently also a director of the following companies: Mirabell International Holdings Limited, GST Holdings Limited, Innomaxx Biotechnology Group Ltd, Oriental Ruby Limited, Walcom Bio-Chemicals (Holdings) Limited, Warrina Limited and Polink International Limited.

Mr Lee believes that his directorships in the other companies listed above do not affect his abilities to perform his duties as an independent non-executive Director of the Manager.

Mr CHAN Chi Fai, Brian

Mr Chan is an independent non-executive Director of the Manager and is currently also the Chief Financial Officer of the Parkview Group, which comprises two listed companies and a group of other companies with total assets exceeding HK$10.0 billion.

Mr Chan has been heavily involved in the overall development of the Hong Kong Parkview Group since he joined the group in 1990. With projects and investment properties in Hong Kong, the PRC, Singapore and United Kingdom, Hong Kong Parkview Group is engaged in property development, hospitality, trading, ferry operation and shipbuilding.

Prior to joining the Parkview Group, Mr Chan worked in the banking sector from 1978 to 1989, the first seven years of which was with a reputable international bank. The last position Mr Chan held before leaving his banking career was as Group Financial Controller of IBI Asia (Holdings) Limited. During his 11 years in banking, Mr Chan was involved in international banking operations, mergers and acquisitions as well as financial and risk management.

Mr Chan has a higher diploma in business studies from the Hong Kong Polytechnic as well as professional accounting qualifications in Hong Kong. Mr Chan is currently also a director of the following companies: Bingo Trading Limited, Chyau Fwu (Shenzhen) Development Company Limited, Classic Assets Limited, Corwood Enterprises Inc., Dragon Spirit Limited, Fantasy Island Development Company Limited, FBM Marine International Limited, Gallaria Furnishings International Limited, Gembrook Developments Limited, Hertford Assets Limited, Hong Kong Parkview (China) Limited, Hong Kong Parkview (Finance) Limited, Hong Kong Parkview Estates Security Limited, Hong Kong Parkview Estates Management Limited, Hong Kong Parkview International Limited, Hong Kong Parkview International Management Limited, Hong Kong Parkview Treasury Limited, Jet Propelled Limited, Jiangsu Parkview Hotels & Resorts Limited, Keen Logistics Limited, Korean International Motors Limited, Market Asset Consultants Limited, Master Charm Holdings Limited, MV 2208 Limited, Naviera Universal Espanola, S.L., Newmeadow Limited, Panama Limited, Parkview Ferry Holdings Limited, Parkview Hotel Services Limited, Parkview International Trading Limited, Parkview Management Services Limited, Parkview Marine Holdings Limited, Parkview Property Development Limited, Parkview Treasury Limited, Perfect Lane Limited, Pollex Limited, Primeline International (Holdings) Inc., Primeline Energy Holding Inc., Primeline Energy China Limited, Primeline Energy Operations International Limited, Target Profits Limited, Total Force Investments Limited and Universal Boss Limited.

Mr Chan believes that his directorships in the other companies listed above do not affect his abilities to perform his duties as an independent non-executive Director of the Manager.

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Independence of Directors App B B2 (p)

In assessing the independence of a non-executive Director, the Board will take into account the following factors, none of which is necessarily conclusive. Independence is more likely to be questioned if the Director:

(i) holds more than 1.0% of the total issued Units or more than 1.0% of the total issued share capital of the Manager or GZI. Any candidate for appointment as an independent non-executive Director who holds an interest of more than 1.0% must satisfy the Board, prior to such appointment, that the candidate is independent. A candidate holding an interest of 5.0% or more will normally not be considered to be independent. When calculating the 1.0% limit, the Board must take into account the total number of Units or shares (as the case may be) held legally or beneficially by the Director, together with the total number of Units which may be issued to the Director or his nominee upon the exercise of any outstanding options, convertible securities and other rights (whether contractual or otherwise) to call for the issue of Units;

(ii) has received an interest in Units as a gift, or by means of other financial assistance, from a connected person or GZI REIT itself (however, subject to paragraph (i) above). The Director will still be considered independent if he receives Units as part of his Director’s fee or pursuant to any option schemes established by the Manager or GZI);

(iii) is a director, partner or principal of a professional adviser which currently provides (or has, within one year immediately prior to the date of his proposed appointment, provided) services, or is an employee of such professional adviser who is or has been involved in providing such services during the same period, to GZI REIT or any connected person of GZI REIT or the Manager or any person who was a significant holder or, where there was no such significant holder, any person who was the Chief Executive Officer or a Director (other than an independent non-executive Director) of the Manager or of any connected person of the Manager within one year immediately prior to the date of the proposed appointment, or any of their associates;

(iv) has a material interest in any principal business activity of, or is involved in any material business dealings with, GZI REIT or with any connected person of GZI REIT, the Manager or GZI;

(v) is on the Board specifically to protect the interests of an entity whose interests are not the same as those of the Unitholders as a whole;

(vi) is or was connected with a Director or the Chief Executive Officer of the Manager or with a significant holder (as defined in the REIT Code) of GZI REIT, within two years immediately prior to the date of his proposed appointment;

(vii) is, or has at any time during the two years immediately prior to the date of his proposed appointment been, an executive or Director (other than an independent non-executive Director) of the Manager or of any connected person of GZI REIT;

199 THE MANAGER

(viii) is financially dependent on GZI REIT or any connected person of GZI REIT; or

(ix) is closely related to either Yue Xiu and/or GZI.

For the purpose of this section, any reference to the Manager shall include the Manager’s direct and indirect holding companies and substantial shareholders.

The factors set out in this section are included for guidance only and are not intended to be exhaustive. The Board may take account of any factors relevant to a particular case in assessing independence.

Investors should refer to the full details of the assessment of the independence of non-executive Directors set out in the corporate governance policy of the Manager (a copy of which is available for inspection in accordance with Appendix XI to this Offering Circular).

Senior Executives App 2 B4 (a)

Information on the business and working experience of the senior executives of the Manager is set out below:

Mr LIU Yong Jie ( )

Mr Liu Yong Jie is the Chief Executive Officer and one of the Responsible Officers of the Manager. Information on his business and working experience have been set out in the subsection headed “Directors” above.

Mr LAU Jin Tin, Don ( )

Mr Lau is a Deputy Chief Executive Officer and one of the Responsible Officers of the Manager. He assists the Chief Executive Officer of the Manager to ensure that GZI REIT is operated in accordance with the stated investment strategy of GZI REIT. Mr Lau also serves as the Compliance Manager of the Manager and is responsible for ensuring that the compliance manual adopted by the Manager, the REIT Code, the Trust Deed and the Listing Rules are adhered to. Additionally, he is responsible for managing GZI REIT’s borrowings, cash flow, assets and liabilities and other financial matters. He will be invited to participate in the Manager’s Finance and Investment Committee to review and make recommendations on any financial matters as well as acquisitions and disposals of assets.

Prior to joining Yue Xiu in 1995, he was an executive officer of NatWest Markets for over 10 years and participated in various capital market and corporate finance transactions, including origination, advice and execution of a wide range of PRC project financing activities.

Mr Lau is concurrently the Deputy General Manager of the Finance and Accounts Department of both Yue Xiu and GZI. During the past 10 years with Yue Xiu and GZI, his main responsibilities

200 THE MANAGER included the active structuring, sourcing and management of equity and debt capital to finance the properties and other projects held by the two groups of companies. Mr Lau’s experience also included managing the risk exposures of the Yue Xiu group and the GZI Group as well as hedging their asset and liability portfolios.

Mr Lau obtained a masters degree in applied finance from the Macquarie University in Australia and is an Associate of the Chartered Institute of Bankers.

Mr CAI Xiao Ping ( )

Mr Cai is a Deputy Chief Executive Officer of the Manager, and also heads its investment management team.

Mr Cai joined GCCD in 1993 and, prior to joining the Manager, was the Deputy General Accountant of GCCD Group and a director of GCCD. He had previously assumed a number of roles in the GCCD Group, such as General Manager of the Finance and Accounting Department.

Prior to joining GCCD, Mr Cai worked in the 4th Harbour Engineering Bureau of the Ministry of Communications from 1969 to 1993 where he had been a section member, Head of Finance Section and Manager of Finance Department. During his employment with the bureau, he had been in charge of the financial and accounting management of numerous major projects undertaken by the bureau, which were some of the key national projects of the Ministry of Communications.

Mr Cai has over 20 years of experience in finance management as well as investment, development and operation of real estate and property management, specialising in restructuring, mergers and acquisitions, planning and use of capital, analysis and decision making in relation to major corporate business, finance organisation and implementation, credit plans and cash application, and exploring new financial resources and preservation and appreciation of guaranteed assets.

Mr Cai is a Senior Accountant and the Vice Chairman of the Real Estate Development Accounting Committee of the Construction Accounting Society of China and a member of the Guangzhou Senior Accountant Review Committee.

Mr CHENG Jiu Zhou ( )

Mr Cheng heads the asset management team of the Manager. He joined the GCCD group of companies in 1997 and worked in Guangzhou Grandcity Development Ltd. and Guangzhou Investment Property Holdings Limited.

In the past nine years, Mr Cheng has conducted extensive market research in the property industry, covering property appraisal, investment strategy planning, feasibility study, the marketing of the property industry, lease management and cost analysis. He has extensive management

201 THE MANAGER experience in the property market. He has also published a book about the property market and delivered 20 papers in various magazines. Mr Cheng has conducted feasibility studies and investment strategy planning for more than 20 real estate development projects such as Tianhe Grandcity Business Plaza, Huiya Garden, Galaxy City, Fortune Plaza and Victory Plaza.

Mr Cheng obtained a Bachelor of Arts in Law from Hubei University in the PRC in 1993 and a Master of Arts in Economics from Jinan University in the PRC in 1996. He is currently a member of the China Institute of Registered Appraisers.

Mr IP Wing Wah ( )

Mr Ip heads the Manager’s development and project management team and has over 20 years of experience in the building industry. He has worked for contractors where his main duty was to manage the staff and to ensure timely completion of building projects for clients such as government departments and private developers.

Mr Ip has also worked for a few property developers where his main duty was to work closely with the design teams, architects, engineers, quantity surveyors and solicitors to develop and build various properties. Projects he worked on were mainly residential, commercial and industrial developments.

Mr Ip obtained an Endorsement Certificate in Building Studies from Hong Kong Polytechnic in 1986 and is a member of Chartered Institute of Building as well as a member of the Hong Kong Institute of Construction Managers.

Ms KO Yung Lai, Jackie ( )

Ms Ko is the Chief Financial Officer of the Manager and is concurrently the Director and Financial Controller of Yue Xiu Securities Co. Ltd. She is expected to spend the majority of her time in the management of GZI REIT.

She has been the Deputy General Manager of the Finance and Accounts Department of GZI.

During her nine years with the Yue Xiu group, she has been mainly responsible for overseeing the group’s financial management functions and enhancement of management accounting systems that support strategic and operational requirements of the group.

Ms Ko is licensed by the SFC as a Responsible Officer of Yue Xiu Securities Co. Ltd. for regulated activities of both dealing and advising on securities under the SFO. She is registered with the Hong Kong Stock Exchange as a dealing director and is also a member of the Hong Kong Securities Institute.

202 THE MANAGER

Prior to joining the Yue Xiu group in 1997, Ms Ko worked for Arthur Andersen & Co., Certified Public Accountants for several years in their Hong Kong and Sydney offices.

She is a fellow member of both the Hong Kong Institute of Certified Public Accountants (formerly known as the Hong Kong Society of Accountants) and the Chartered Institute of Management Accountants (United Kingdom) and has obtained a Professional Diploma in Management Accountancy from the Hong Kong Polytechnic University.

Mr Alex SHIU ( )

Mr Shiu, who heads the Manager’s investor relations team, received his Bachelor in Business Administration from the Chinese University of Hong Kong (International Business Management) and further obtained a post graduate degree from Huate Etudes Commerciales of Paris (Finance) pursuant to a French Government scholarship. He has worked in the field of corporate finance for over 10 years, and is currently a Director and Responsible Officer for Corporate Finance of Yue Xiu Securities Co. Ltd. His experience covers a wide range of industry including property development in the PRC, and has previously worked at multinational corporations. Mr Shiu has been in charge of investor relations services at GZI since 2004.

Mr YU Tat Fung ( )

Mr Yu Tat Fung is the company secretary of the Manager. He is also the legal counsel of GZI and, from October 2004, the company secretary of both GZI and GZI Transport Limited. Mr Yu obtained a bachelor’s degree in Social Sciences from the University of Hong Kong in 1981. He attained the Solicitors Final Examination in England in 1983. He was admitted as a solicitor of the Supreme Court of Hong Kong in 1986. He was also admitted to the Bar of the Province of British Columbia in Canada in 1995. Prior to joining GZI in 1997, he was engaged in private practice with an emphasis on corporate and commercial law.

Compensation of Directors

The Directors who are also the Manager’s employees receive compensation in the form of salaries, allowances and benefits in kind, including the Manager’s contribution to the pension plans for its Directors. The non-executive Director and the independent non-executive Directors receive fees from the Manager. The Manager has entered into service contracts with its executive Directors. The fees and compensation of the Directors are borne by the Manager and not by GZI REIT.

203 THE MANAGER

Fees, Costs and Expenses of the Manager

The Manager’s remuneration shall, at the maximum, comprise:

(i) In each Financial Year, a base fee of 0.3% per annum of the value of the Deposited Property payable semi-annually in arrears on the first Business Day following the end of the relevant six month period and calculated as at the last day of each six-month period, during that Financial year as follows:

0.3% x VDPs SAF = ( 2 )

where:

SAF = semi-annual fees

VDPs = the value of the Deposited Property as per the published audited annual financial statements of GZI REIT for the immediately preceding Financial Year, provided that the value of VDPs for the first Financial Year shall be the value of consolidated gross assets of GZI REIT as disclosed in this Offering Circular.

The base fee calculated in accordance with the formula above is subject to adjustment as follows:

adjustment = 0.3% x VDPE - SSAF

where:

VDPE = the value of Deposited Property as per published audited annual financial statements of GZI REIT for the Financial Year; and

SSAF = the sum of the semi-annual base fees actually received by the Manager in respect of the relevant Financial Year.

Where the above adjustment is positive, GZI REIT shall pay the difference to the Manager following publication of the audited annual financial statements of GZI REIT. Where the above adjustment is negative, the Manager shall pay the difference to GZI REIT following publication of audited annual financial statements of GZI REIT for the relevant Financial Year.

(ii) In each Financial Year, a service fee of 3.0% per annum of Net Property Income as shown in the last published audited annual financial statements of GZI REIT, which shall accrue on a daily basis and be calculated as at the last day of a calendar month, and be payable monthly in arrears, subject to adjustment as follows:

adjustment = 3.0% x NPI - EMP

204 THE MANAGER

where:

NPI = net property income as per audited financial statements for the relevant Financial Year; and

EMP = sum of all monthly payments of service fee received by the Manager in that year.

Where the above adjustment is positive, GZI REIT shall pay the difference to the Manager following publication of audited financial statements for the relevant Financial Year. Where the above adjustment is negative, the Manager shall pay the difference to GZI REIT following publication of audited financial statements for the relevant Financial Year.

(iii) A transaction fee of 1.0% of the consideration for the acquisition of any real estate (which, for the avoidance of doubt, shall not include any taxes, withholdings, out-of- pocket expenses or deductions incurred by GZI REIT in connection with any such acquisition) to form part of Deposited Property (except where the vendor of such real estate is the Manager or any of its connected persons, which would include where property is acquired under the right of first refusal granted by GZI to GZI REIT as described in the section headed “Material Agreements and Other Documents Relating to GZI REIT — Deed of Right of First Refusal” in this Offering Circular), which shall be paid as soon as practicable after the relevant acquisition.

(iv) A transaction fee of 0.5% of the gross sale price (which, for the avoidance of doubt, shall not include any taxes, withholdings, out-of-pocket expenses or deductions incurred by GZI REIT in connection with any such sale) of the disposal of any part of Deposited Property comprising of real estate (except where the purchaser of such real estate is the Manager or any of its connected persons), which shall be paid as soon as practicable after the relevant sale of real estate.

The base fee and the service fee payable to the Manager for the first Financial Year shall be pro-rated according to the number of days between the Listing Date and 31 December 2005.

Manager’s Powers and Duties

The Trust Deed provides that the Manager is responsible for, and has the power to manage and operate GZI REIT, which includes managing and investing the Deposited Property. The Manager may (to the extent permitted by applicable regulatory requirements) delegate to any person as it thinks fit specific aspects (but not the whole) of the management and the administration of GZI REIT’s investments and any of the rights, trusts and discretions granted to

205 THE MANAGER the Manager by the Trust Deed. Notwithstanding the foregoing, the Manager shall be fully liable for all losses, liabilities, damages, costs and expenses suffered or incurred by GZI REIT as a result of the appointment of any such delegate or agent as if the relevant act or omission had been performed by the Manager itself.

The Manager shall, among other things, by itself or through its delegates:

• manage GZI REIT and the Deposited Property in accordance with the Trust Deed in the sole interests of Unitholders;

• fulfil its duties under applicable law;

• ensure that in managing GZI REIT, it has sufficient oversight of the daily operations and financial conditions of GZI REIT and the Deposited Property, and shall remain to be the key decision-maker of all material matters relating to the management of GZI REIT; and

• ensure that the financial and economic aspects of the Deposited Property are professionally managed in the sole interests of Unitholders in accordance with the Trust Deed.

Manager’s Right to Reimbursement

The Manager is, to the extent permitted by the REIT Code, entitled to apply, or to be reimbursed from, the assets of GZI REIT (at such times and over such periods as the Trustee and the Manager may determine in any particular case) for all liabilities, as agreed with the Trustee, that may be properly suffered or incurred by the Manager in the performance of its obligations or the exercise of its powers under, among other things, the Trust Deed.

Limitation of Manager’s Liability

The Manager shall not be under any liability except such liability as may be assumed by it under the Trust Deed, nor shall the Manager be liable for any act or omission of the Trustee, the Unit Registrar or the Approved Valuer. In the absence of fraud, negligence, wilful default or breach of, among other things, the Trust Deed, the REIT Code, applicable laws and regulations by the Manager (including its directors, employees, agents and delegates), it shall not incur any liability by reason of any error of judgment or any matter or thing done or suffered or omitted to be done by it in good faith under the Trust Deed.

Manager’s Right of Indemnity

The Manager and any director, employee and servant of the Manager shall be indemnified out of, and shall be entitled for the purpose of indemnity to have recourse to, the Deposited Property or any part thereof against any actions, costs, claims, damages, expenses or demands to which it may be put as Manager and as director, employee and servant of the Manager save

206 THE MANAGER where such action, cost, claim, damage, expense or demand is occasioned by the fraud, negligence, wilful default or breach of, among other things, the Trust Deed, the REIT Code and any applicable law by the Manager and any director, employee, servant, agent or delegate of the Manager.

In particular, the Trustee shall, on demand, indemnify in full and hold harmless the Manager out of, and shall be entitled for the purpose of indemnity to have recourse to, the Deposited Property or any part thereof, from and against all and any claims (whether or not successful, compromised or settled), actions, liabilities, demands, proceedings or judgments which may be instituted, made, threatened, alleged, asserted or established in any jurisdiction against or otherwise involving the Manager and from all losses, costs, damages, charges or expenses which the Manager may suffer or incur from time to time in any case arising out of, based upon or in connection with, whether directly or indirectly, any underwriting agreements in respect of an issue of Units (including the Global Offering) entered into by the Manager (in its capacity as manager of GZI REIT), provided that any such claims or expenses are not occasioned by fraud, negligence, wilful default or breach of, among other things, the Trust Deed, the REIT Code or the applicable law by the Manager or any director, employee, servant, agent or delegate of the Manager.

Retirement or Removal of the Manager

The Manager may retire as manager of GZI REIT at any time after giving 90 days’ written notice, or any other period of notice as agreed to by the Trustee, to the Trustee provided that, and subject to:

• the Manager selecting a new manager duly qualified under the REIT Code, licensed under the SFO and acceptable to the Trustee, the SFC and the Hong Kong Stock Exchange; and

• the requirement in the REIT Code that such retirement will not adversely affect the interests of the Unitholders in any material respect.

The Manager shall be subject to removal by prior notice in writing given by the Trustee in any of the following events:

— if the Manager fails, or neglects after reasonable notice from the Trustee, to carry out or satisfy any material obligation imposed on the Manager by this Deed provided that such removal shall not adversely affect the interests of the Unitholders in any material respect pursuant to this paragraph and that 30 days’ prior written notice is given to the Manager by the Trustee;

— if for good and sufficient reason(s), the Trustee is of the opinion, and so states in writing such reason and opinion, that a change of Manager is desirable in the interests of the Unitholders;

207 THE MANAGER

— if the Unitholders representing at least 75.0% in value of the Units issued and outstanding (excluding those held or deemed to be held by the Manager, as well as by any Unitholder who may have an interest in retaining the Manager) deliver to the Trustee a written request, or a Special Resolution is passed, to dismiss the Manager;

— if the Manager goes into liquidation becomes bankrupt or if a receiver is appointed over any of its assets or a judicial manager is appointed in respect of the Manager (or any such analogous process occurs or any analogous person is appointed in respect of the Manager);

— if the Manager ceases to carry on business;

— if the SFC revokes the Manager’s licence to conduct the regulated activity of asset management in respect of GZI REIT; or

— if the Manager is required by law or the REIT Code to retire.

208 THE LEASING AGENTS

The Leasing Agents

Yicheng was incorporated in the PRC in 1997 and is 85.7% owned by GZI, with the remaining 14.3% owned by GCCD Group, a state owned enterprise in the PRC separate from the Yue Xiu Group and the GZI Group. As at 30 September 2005, Yicheng managed more than 470,000 sq.m. of commercial space in Guangzhou and was ISO9001:2000 certified in 2003.

White Horse Property Management Company was incorporated in the PRC in 1998 to provide dedicated leasing, marketing, tenancy management and property management services to White Horse Building and has been exclusively managing the property since 1998. It is 96.8% owned by GZI with the remaining 3.2% owned by GCCD Group. White Horse Property Management Company was ISO9001:2000 certified in 2001.

Yicheng and White Horse Property Management Company have entered into separate agreements with the owners’ committees or owners of Fortune Plaza, City Development Plaza, Victory Plaza, or as the case may be, White Horse Building under which each of Yicheng and White Horse Property Management Company agreed to provide certain property management services in relation to the common property at the relevant building(s). Pursuant to these agreements, Yicheng and White Horse Property Management Company entered into agreements with the tenants in the buildings to collect certain property management fees directly from the tenants. In the past, tenants in the White Horse Units paid both their rent and property management fees to White Horse Property Management Company in an undivided amount. Going forward, tenants in the White Horse Units will pay their rents directly to Partat and their property management fees to White Horse Property Management Company. As such, property management fees will not form part of the property income received by the BVI Companies. In relation to vacant units in the Properties, the BVI Companies are themselves liable for the property management fees. However, Yicheng and White Horse Property Management Company have agreed under the Tenancy Services Agreements that the fees which they receive under those agreements shall also satisfy the property management fees which they are entitled to receive from the relevant BVI Companies for any vacant units (see the section headed “Material Agreements and Other Documents Relating to GZI REIT — Tenancy Services Agreement” in this Offering Circular).

Yicheng and White Horse Property Management Company are entitled under PRC law to retain 10.0% of the property management fees as their own remuneration and are required to apply the rest of the fees for payment of all costs and expenses incurred in the administration, maintenance and management of the common areas in the buildings. Any surpluses after satisfaction of such expenses are to be held by Yicheng and White Horse Property Management Company on trust and may be applied for the renovation, alteration, rebuilding, replacement, addition, alteration and improvement of the common areas in the buildings if the owners thereof (including the relevant Special Purpose Vehicles through which GZI REIT holds its properties) so agree.

209 THE LEASING AGENTS

The Manager and each of Full Estates, Moon King and Keen Ocean have also entered into a tenancy services agreement with Yicheng while the Manager and Partat have entered into a tenancy services agreement with White Horse Property Management Company, under which each of Yicheng and White Horse Property Management Company will provide, among others, the following services:

• leasing services, including advising on achievable rental rates based on current market assessment, reporting with recommendations on appropriate rental levels and lease incentive(s) relating to renewal of the existing tenancy agreements, initiating lease renewals and negotiation of terms with tenants to conclude such renewals, as well as preparing letters of offer, or invitation to renewal, to tenants, and ensuring proper execution of tenancy agreements;

• marketing services, including acting as a marketing agent for the marketing and letting out of the Properties, recommending and finalising marketing programs with the Manager, contracting for advertising and promotional programs and providing regular updates on the marketing programs as required; and

• lease management services, including reviewing and advising on tenants’ expansion requirements, administering collection of deposits, rent and other sums due from tenants, evaluating the assessment or re-assessment of government rates and taxes (including urban real estate tax) for the Properties, preparing the annual budget and three years’ budget forecast for each Property, as well as advising tenants on the procedures for setting up operations.

The leasing and marketing services described above will be provided to GZI REIT on an exclusive basis (see the section headed “Material Agreements and Other Documents Relating to GZI REIT — Tenancy Services Agreements” in this Offering Circular). However, the Tenancy Services Agreements do not preclude GZI REIT from also obtaining such services from other service providers.

Property Management Offices

In accordance with PRC regulations, White Horse Property Management Company (as the property manager of White Horse Building) had on-site premises of 70.4 sq.m. for its use in connection with its property management functions. White Horse Property Management Company enjoys the use of these premises free of rent.

Similarly, Yicheng (as the property manager of City Development Plaza) has on-site premises of 97.0 sq.m. for its use in connection with its property management functions. Yicheng pays a nominal monthly rent of HK$5 per square metre for these premises.

The space occupied by Yicheng in Fortune Plaza and Victory Plaza do not form part of the Fortune Plaza Units or the Victory Plaza Units.

210 THE LEASING AGENTS

Senior Executive of the Leasing Agents

Information on the business and working experience of the senior executives of Yicheng is set out below:

Mr MO Qing Hua ( )

Mr Mo is the General Manager of Yicheng and is responsible for overseeing and directing the day to day operations of Fortune Plaza, City Development Plaza and Victory Plaza.

Mr Mo has been with the GCCD group since 1993 and has held various senior positions in the property management department of the group. With more than 10 years of experience in property management, he has managed a wide range of commercial and residential properties, including White Horse Building and City Development Plaza. Mr Mo also actively contributed to the commencement of operations in Victory Plaza.

Mr Mo holds a degree in enterprise management from the Guangdong Business College.

Ms WANG Hai Ying ( )

Ms Wang is a Deputy General Manager of Yicheng. She has previously served as Deputy General Manager of Guangzhou Urban Construction Development & Property Management Co. Ltd and Guangzhou Urban Construction Development Investment Consulting Co. Ltd. Ms Wang has extensive managerial experience in the field of property management. She is also a director of Guangdong Property Management Association and Guangzhou Municipal Property Management Association.

Ms Wang graduated in 1997 from Guangdong Province Cadre’s Institute with a degree in economic management. In 1999, she obtained a certificate from the Ministry of Construction after having undergone training for the National Property Management Enterprises Manager.

Mr XIE Si Xin ( )

Mr Xie is a Deputy General Manager of Yicheng. He has over 15 years of experience in property investment planning and business solicitation. Mr Xie holds a Bachelor’s Degree in Economic Studies from Huazhong University of Science and Technology and a Master of Arts in World Economic Studies from Sun Yat-Sen University, both in the PRC. Mr Xie also holds the following certificates: Real Estate Economist (intermediate level), China Certified Real Estate Appraiser and Real Estate Brokerage Qualification, as well as an engagement certificate as a specialist in the project bidding and tendering team of Guangzhou Urban Construction Development Group.

Mr Xie has worked for the GCCD group since 1992 where he has been involved in market surveys, feasibility studies, valuations and planning for various projects and in the operations and management of numerous commercial buildings (such as part of White Horse Building, Fortune Plaza, City Development Plaza, Victory Plaza, Guangzhou Dong Zhan Commercial Building and Hong Fa Plaza). He has also held various managerial positions within the GCCD group.

211 THE LEASING AGENTS

Information on the business and working experience of the senior executives of White Horse Property Management Company is set out below:

Mr ZHANG Yu ( )

Mr Zhang Yu is the General Manager of White Horse Property Management Company and is responsible for overseeing and directing the operations of the company. He is also responsible for planning and maintaining White Horse Building’s competitive edge through targeted promotional events, developing and evaluating strategic business plans, marketing and mass communications, as well as property service operations.

Mr Zhang joined the GCCD group in 2003 and acted as the Deputy General Manager of White Horse Property Management Company in 2004. Prior to that, he held various senior positions with Beijing Centre for Defence Technology and Shenzhen Hua Wei Ji Shu Co. Ltd..

Mr Zhang holds a bachelor’s degree in enterprise management and a doctorate in economics from Renmin University of China. He is also Vice Chairman of the Guangdong Garment Industry Association and a mechanical and electrical engineer.

Mr XU Shu Sui ( )

Mr Xu is currently a Deputy General Manager of White Horse Property Management Company. Mr Xu graduated from South China University of Technology. He is an equipment administration engineer, one of the property management specialists of Guangzhou State Land and Housing Administration Bureau, a visiting instructor for the training sessions of Guangzhou Municipal Property Management Association and a bidding appraisal specialist for property management projects in the Guangzhou Tendering Center. Mr Xu has also been involved in compiling books in property management, such as Practice Guidance on Office Building Property Management and Practice Guidance on Mansion Property Management. He participated in the nationwide training program for managers of property management companies, and holds a working permit certificate.

Mr Xu has over 10 years of experience in the management of large commercial buildings, and property management. He joined GCCD Group in 1985 and held the positions of Deputy General Manager for Guangzhou City Construction Development & Property Management Company and the General Manager for Guangzhou Zhiwei Real Estate Company.

Mr LIU Yi Sheng ( )

Mr Liu was appointed Deputy General Manager of White Horse Property Management Company in August 2005. Prior to joining White Horse Property Management Company, he served as the deputy general manager of Guangzhou’s largest property company, Guangzhou City Property Management Group, for over six years. Over the same period, he was also president of a PRC-Hong Kong cooperative property company and chairman of a large cleaning services company.

212 THE LEASING AGENTS

He has also published on property management issues, including a book, Property Management Practice, and a research thesis, A Study of Labor Quality in Property Management Establishments.

Mr Liu holds a postgraduate diploma in linguistics.

Conflicts of Interests

As both the Leasing Agents are members of the GZI Group and GZI is actively engaged in the development of commercial and residential properties primarily in Guangzhou as well as in the provision of leasing, marketing, tenancy management and property management services to properties developed by the GZI Group or other properties in which it has an interest, potential conflicts of interest may arise in relation to leasing and marketing opportunities. In order to address such potential conflict of interests between GZI and GZI REIT, the following arrangements are being put into place:

Segregation of certain operational functions

The GZI Group is undergoing an internal restructuring which will result in the Leasing Agents only being solely responsible for providing leasing and marketing services to GZI REIT’s properties and another company within the GZI Group (the “GZI Property Manager”) being solely responsible for providing such services to properties not belonging to GZI REIT.

“Chinese Walls” App B B2(k)

“Chinese Wall” procedures are being put in place to ensure that there is segregation of information between the Leasing Agents and the GZI Property Manager. These will include having separate operating premises and IT systems, and separate reporting lines, for each of the Leasing Agents and the GZI Property Manager.

Contractual protection

Contractual provisions have been included in each of the Tenancy Services Agreements entered into between the Manager and Partat, Moon King, Full Estates or, as the case may be, Keen Ocean, and the relevant Leasing Agent to provide that:

(i) the Leasing Agents will at all times act in the best interests of GZI REIT and exercise a reasonable standard of care, skill, prudence and diligence under the circumstances then prevailing that a reputable leasing agent would use in providing similar services for comparable commercial properties in Guangzhou;

(ii) the Leasing Agents will adhere to the organisational charts and reporting lines agreed with the Manager and will act in accordance with the directions of the Manager;

213 THE LEASING AGENTS

(iii) the Leasing Agents will implement the annual business plan and budget approved by the Manager every year and use its best endeavours to achieve the revenue targets in such approved annual business plan and budget; and

(iv) if leasing or marketing opportunities in relation to any of the Properties become available to the Leasing Agents which the Leasing Agents, acting reasonably and in good faith, consider are or are likely to be in competition with the GZI Property Manager, the Leasing Agents will either:

• refer all such business proposals to the Manager for vetting and confirmation before the relevant Leasing Agent proceeds with such proposals or opportunities; or

• sub-contract to a third party leasing agent independent of the GZI Group, to devise and implement the relevant business proposal.

GZI, being the parent company of the Leasing Agents, has provided an undertaking to GZI REIT that it will procure that the Leasing Agents will comply with the relevant provisions set out in the Tenancy Management Agreements in this regard.

Transitional procedures

The GZI Group will have a transitional period of six months from 7 December 2005 (the date of the Tenancy Services Agreements) to complete the restructuring described above. The transitional period is required because:

• significant staff movement and re-allocation will be involved in the restructuring. Accordingly, a large number of employment contracts will have to be re-executed (and potentially re-negotiated) with those affected personnel; and

• it is also anticipated that various statutory employment-related provident funds would have to be re-allocated as a result of the significant staff movement, which will require substantial time to process.

It is also expected that as part of the restructuring, the business licence position for Yicheng and White Horse Property Management Company will need to be re-assessed to ensure that each of the Leasing Agents and the GZI Property Manager continues to hold all necessary licences for their respective property management functions, and where needed, further licensing applications may need to be made to the relevant PRC authorities.

As from the Listing Date, the “Chinese Wall” procedures will be put in place in relation to reporting lines/structures and operational information segregation. As soon as practicable thereafter, the personnel and IT systems of the Leasing Agents and the GZI Property Manager will also be physically segregated (i.e. separate office premises and systems). It is anticipated that such physical segregation will be achieved within two months after the Listing Date.

214 THE LEASING AGENTS

Notwithstanding that the Leasing Agents are both subsidiaries of GZI, which is also involved in the business of owning and investing in commercial properties in Guangzhou, the Leasing Agents have confirmed to the Manager that they are capable of performing, and shall perform, their duties to GZI REIT independently of GZI’s related businesses and in the best interest of GZI and the Unitholders.

215 CORPORATE GOVERNANCE

With the objective of establishing and maintaining high standards of corporate governance, certain policies and procedures have been put in place to promote the operation of GZI REIT in a transparent manner and with built-in checks and balances. Set out below is a summary of the key components of the corporate governance policies that have been adopted and are followed by the Manager and GZI REIT. Subject to the Trust Deed, the corporate governance policies may be amended from time to time without Unitholders’ approval.

Authorisation Structure App B B4(a)(ii)

GZI REIT is a unit trust authorised by the SFC under section 104 of the SFO and regulated by the provisions of the REIT Code. The Manager has been authorised by the SFC under section 116 of the SFO to conduct the regulated activity of asset management. The Manager has three persons who are approved as Responsible Officers pursuant to the requirements of section 125 of the SFO and Rule 5.4 of the REIT Code, and Mr Liang Ning Guang and Mr Liu Yong Jie are executive Directors of the Manager pursuant to the requirements of section 125 of the SFO.

The Trustee is registered as a trust company under section 77 of the Trustee Ordinance and is qualified to act as a trustee for authorised collective investment schemes under the SFO and the REIT Code.

Roles of the Trustee and Manager

The Trustee is responsible under the Trust Deed for, among other things, the safe custody of App B B4(a) the assets of GZI REIT held by it on behalf of Unitholders. The Manager’s role under the Trust B4(b) Deed is to manage GZI REIT in accordance with the Trust Deed and, in particular, to ensure that the financial and economic aspects of GZI REIT’s assets are professionally managed in the sole interests of the Unitholders.

Functions of the Board

The Board currently comprises six members, three of whom are independent non-executive Directors.

The Board principally oversees the day to day management of the Manager’s affairs and the conduct of its business and is responsible for the overall governance of the Manager. The Board function is largely separate from, and independent of, the executive management function. The Board leads and guides the Manager’s corporate strategy and direction. Day to day management functions and certain supervisory functions have been delegated to relevant committees of the Board and a schedule of matters specifically reserved to the Board has been formally adopted. The Board exercises its general powers within the limits defined by the Articles of Association, with a view to ensuring that management discharges its duties and is compensated appropriately, and that sound internal control policies and risk management systems are maintained. The Board will also review major financial decisions and the performance of the Manager. In accordance with the RElT Code, the Manager is required to act in the best interests of the Unitholders, to whom it owes a fiduciary duty.

216 CORPORATE GOVERNANCE

Roles of the Key Board Members

The roles of the key members of the Board are as follows:

• Chairman — responsible for the overall leadership of the Board and the Manager generally.

• Chief Executive Officer — responsible for the day to day operations of the Manager and supervises the Manager’s management team to ensure that GZI REIT is operated in accordance with its stated strategies, policies and regulations.

• Independent non-executive Directors — govern the Manager through the Board and their participation in Board committees.

See the section headed “The Manager — The Board” in this Offering Circular for further details of the composition of the Board.

Board Composition

The composition of the Board is determined using the following principles:

• the Board should comprise Directors with a broad range of commercial experience, including expertise in funds management and the property industry; and

• at least one-third of the Board (and, in any event, not less than three Directors) should comprise independent non-executive Directors. (See the section headed “The Manager — Independence of Directors” in this Offering Circular for the factors that will be taken into account in assessing the independence of a non-executive Director.)

The composition will be reviewed regularly to ensure that the Board has the appropriate mix of expertise and experience.

Board Committees

The Board has the power to delegate to committees consisting of such numbers of its body as it thinks fit. Various committees have been established to assist the Board in discharging its responsibilities. The committees of the Board have been set up with clear terms of reference to review specific issues or items and to then submit their findings and recommendations to the full Board for consideration and endorsement. Unless the decision making power has been vested in the relevant committee by the Board, the ultimate responsibility for making final decisions rests with the full Board and not the committees.

217 CORPORATE GOVERNANCE

The committees of the Board are as follows:

Finance and Investment Committee

The Finance and Investment Committee comprises four Directors, including the Chairman, the Chief Executive Officer and at least one independent non-executive Director. It is responsible for, among other matters, evaluating and making recommendations on proposed acquisitions and disposals of assets, approve budgets and review actual expenses on all key expenditures and reviewing the quarterly financial performance, forecasts and annual financial plan of the Manager and GZI REIT. The Finance and Investment Committee also reviews and recommends changes to financial authorities, policies or procedures in areas such as accounting, taxes, treasury, distribution payout, investment appraisal, management and statutory reporting.

Audit Committee

The Audit Committee comprises independent non-executive Directors only (at least one of whom must have appropriate professional qualifications or accounting or related financial management expertise) and has at least three members. Among other matters, it reviews the completeness, accuracy and fairness of GZI REIT’s financial statements and considers the scope, approach and nature of internal and external audit reviews, and is responsible for the overall risk management. The Audit Committee appoints external auditors, reviews their reports and guides management to take appropriate actions to remedy faults or deficiencies identified in internal control. The Audit Committee is also responsible for reviewing and monitoring connected party transactions (see the section headed “Connected Party Transactions” in this Offering Circular).

Remuneration and Nomination Committee

The Remuneration and Nomination Committee comprises the Chief Executive Officer and at least three other Directors, one of whom must be an independent non-executive director. Among other matters, it reviews the terms and conditions of employment of all staff and Directors (other than the members of the Remuneration Committee, whose remuneration is determined by the Board) and recommends the manpower deployment plan (including the succession plan for the management of the Manager and the Board), remuneration and retirement policies and packages. It ensures that no Director is involved in deciding his own remuneration. It is also responsible for reviewing the structure, size and composition of the Board and its committees on an ongoing basis and for nominating, and providing recommendations on, persons for appointment, re-appointment or removal as Directors. If a member of the Remuneration and Nomination Committee is subject to re-appointment or removal, then such Director will abstain from participating in such discussions.

218 CORPORATE GOVERNANCE

Disclosures Committee

The Disclosures Committee comprises the Chief Executive Officer and at least one independent non-executive Director. Among other matters, it is responsible for reviewing matters relating to the regular, urgent and forward looking disclosure of information to Unitholders and public announcements and circulars. The Disclosures Committee also oversees compliance with applicable legal requirements (including those relating to GZI REIT’s connected party transactions) and the continuity, accuracy, clarity, completeness and currency of information disseminated by the Manager and GZI REIT to the public and applicable regulatory agencies.

Board Meetings

Board meetings will normally be held at least four times a year at approximately quarterly intervals. To ensure that Directors will be given sufficient time to consider the issues to be tabled at the various Board meetings, details of the venue, time and length of the meeting are required to be given at least 10 clear days in advance of the meeting (except if there are exceptional circumstances or if the majority of Directors agree to a shorter period of notice).

No Board meeting, or any adjourned Board meeting, will be quorate unless a simple majority of Directors for the time being (excluding any Directors which the Manager has a right to exclude for that purpose, whether pursuant to a contract or otherwise) are present at the time when the relevant business is transacted. A Director who, whether directly or indirectly, has a material interest in a contract or proposed contract with the Manager, which is of significance to the Manager’s business, must declare the nature of his interest either at the earliest Board meeting or by giving a general notice to the Directors before the question of entering into the contract is taken into consideration on behalf of the Manager.

A Director who is prohibited from voting by reason of a conflict of interest will not be counted for the purposes of establishing the necessary quorum for the meeting.

Matters to be considered by the Board will be adopted on the basis of a simple majority of votes.

Appointment and Removal of Directors

Directors may be nominated for appointment by the Board following a recommendation made by the Remuneration and Nomination Committee. All Directors will be appointed for specific terms. One-fourth of the independent non-executive Directors who are subject to retirement by rotation (if necessary, rounded up to the nearest whole number) will retire at every annual general meeting from and including the first annual general meeting and the retiring Directors on each occasion will be those who have been longest in office since their last appointment or re-appointment, but as between persons who became Directors on the same day, those to retire shall (unless they otherwise agree among themselves) be determined by lot. Independent non-executive Directors will be eligible for re-appointment up to a maximum period in office of nine years. There is no maximum term for other Directors.

219 CORPORATE GOVERNANCE

The Chairman has been appointed for an initial term of three years. Upon the expiration of such initial term, he may be re-appointed up to a maximum period in office of six consecutive years (including the initial term).

A Director may also be removed from office if served with a notice of removal signed by all of the other Directors. An outgoing Director must abstain from voting in respect of a resolution proposed at a Board meeting in respect of the appointment of his successor or his re-appointment.

Pursuant to the Articles of Association, a Director will need to vacate his office in certain circumstances, such as in the event that he becomes bankrupt, is convicted of an indictable offence, has been absent from Directors meetings for six months or more without special leave of absence from the Board or fails to comply with the required standard set out in any code of conduct adopted by the Board and the Board resolves that he is thereby disqualified to continue as a Director.

General Meetings

GZI REIT will in each year hold a general meeting as its annual general meeting in addition to any other meetings in that year. The Trustee or the Manager may at any time convene a meeting of Unitholders. The Manager will also convene a meeting if requested in writing by not less than two Unitholders registered as together holding not less than 10.0% of the issued and outstanding Units. At least 21 days’ notice of the meeting will be given to the Unitholders and the notice will specify the time and place of the meeting and the resolutions to be proposed.

Two or more Unitholders present in person or by proxy registered as holding not less than 10.0% of the Units for the time being in issue will form a quorum for the transaction of all business, except for the purpose of passing a Special Resolution. The quorum for passing a Special Resolution will be two or more Unitholders present in person or by proxy registered as holding not less than 25.0% of the Units in issue. The quorum for an adjourned meeting shall be such number of Unitholders who are present in person or by proxy regardless of the number of Units held by them.

Reporting and Transparency

GZI REIT will prepare its financial statements in accordance with Hong Kong FRS with a App B B16 financial year-end of 31 December and a financial half-year of 30 June. In accordance with the B17 REIT Code, the annual report and financial statements for GZI REIT will be published and sent to Unitholders no later than four months following each financial year-end and the interim results no later than two months following each financial half-year. In addition, GZI REIT aims to provide Unitholders with relevant operational information, such as occupancy levels and utilisation rates of the properties that it holds, along with the publication of such financial results following each financial year-end and financial half-year.

220 CORPORATE GOVERNANCE

As required by the REIT Code, the Manager will ensure that public announcements of material information and developments with respect to GZI REIT will be made on a timely basis in order to keep Unitholders appraised of the position of GZI REIT. Announcements will be made either by publishing them in at least one leading Hong Kong English language and one Chinese language daily newspaper.

Distribution Payments

The Manager’s policy is to distribute to Unitholders on a semi-annual basis an amount equal to 100.0% of GZI REIT’s Total Distributable Income for each of FY2006 to FY2008 and thereafter at least 90.0% of GZI REIT’s annual Total Distributable Income, as more fully described in the section headed “Distribution Policy” in this Offering Circular.

(For further details of GZI REIT’s distribution policy, see the section headed “Distribution Policy” in this Offering Circular.)

Issues of Further Units Post-Listing

To minimise the possible material dilution of holdings of Unitholders, any further issue of Units will need to comply with the pre-emption provisions contained in the REIT Code. Such provisions require that further issues of Units be first offered on a pro rata pre-emptive basis to existing Unitholders except that Units may be issued: (i) free of such pre-emption rights; (ii) as consideration for the acquisition of additional real estate; and (iii) free of pre-emption rights in other circumstances provided that the approval of Unitholders by way of an Ordinary Resolution is obtained, provided that the number of Units issued under (i) and (ii) shall not exceed an aggregate maximum in any Financial Year of 20.0% of the number of Units in issue at the end of the previous Financial Year.

The Manager and GZI REIT may consider structuring an employee option scheme following completion of the Global Offering. The adoption of any such scheme will, however, be subject to approval by the Board and the Unitholders. Subject as set out in the section headed “Connected Party Transactions” in this Offering Circular, the Manager and GZI REIT will also observe the restrictions in the REIT Code which prevent issues of new Units to connected persons unless: (i) specifically approved by Unitholders by way of Ordinary Resolution at a general meeting; and (ii) an announcement, circular or notice is issued, in each case in accordance with the requirements set out in the REIT Code.

Interests of, and Dealings in Units by, the Manager as well as Directors and Senior Management of the Manager

To monitor and supervise any dealings of Units by Directors and their associates, the Manager has adopted a code containing rules on dealings by the Directors and associated parties equivalent to the Model Code for Securities Transactions by Directors of Listed Companies contained in the Listing Rules. Pursuant to this code, Directors wishing to deal in the Units must first have regard to Parts XIII and XIV of the SFO with respect to insider dealing and market misconduct as if these provisions of the SFO applied to the securities of GZI REIT. In addition,

221 CORPORATE GOVERNANCE there are occasions where Directors cannot deal in the Units even though the requirements of the SFO, if it applied, would not be contravened. In addition, a Director must not make any unauthorised disclosure of confidential information or make any use of such information for the advantage of himself or others. The Manager shall be subject to the same disclosure requirements as the Directors, mutatis mutandis.

Directors who are aware of or privy to any negotiations or agreements related to intended acquisitions or disposals which are significant transactions or connected party transactions under the REIT Code or any price-sensitive information must refrain from dealing in the Units as soon as they become aware of them or privy to them until proper disclosure of the information in accordance with the REIT Code and any applicable Listing Rules. Directors who are privy to relevant negotiations or agreements or any price-sensitive information should caution those Directors who are not so privy that there may be unpublished price-sensitive information and that they must not deal in GZI REIT’s securities for a similar period.

Interests held by Directors and their associates will be published in the annual and interim reports of GZI REIT. To facilitate this, the Manager has adopted a code containing rules on disclosure of interests by Directors. The Manager shall be subject to the same dealing requirements as the Directors, mutatis mutandis.

The above codes may also be extended to senior executives, officers and other employees of the Manager or GZI REIT as the Board may determine.

The Manager has also adopted procedures for monitoring of disclosure of interests by Directors, the chief executive of the Manager, and the Manager. The provisions of Part XV of the SFO are deemed by the Trust Deed to apply to, among other things, the Manager, the Directors and chief executive of the Manager and each Unitholder and all persons claiming through or under him.

Under the Trust Deed, Unitholders with a holding of 5.0% or more of the Units in issue will have a notifiable interest and will be required to notify the Hong Kong Stock Exchange, the Trustee and the Manager of their holdings in GZI REIT. The Manager shall keep a register for these purposes and it shall record in the register, against a person’s name, the particulars provided pursuant to the notification and the date of entry of such record. The said register shall be available for inspection by the public without charge during such hours as the register of Unitholders is available for inspection. In addition the Manager shall create a website prior to the Listing Date and maintain such website for the duration of GZI REIT. The Manager shall cause copies of all disclosure notices received to be promptly posted to its website. (See the section headed “The Trust Deed” in this Offering Circular for further details.) The allotment announcement relating to the Hong Kong Public Offering, currently expected to be made on 20 December 2005, will include the address of the website created by the Manager.

Further, the Manager shall publish a notice in one leading Hong Kong English language and one Chinese language daily newspaper whenever a disclosure notification is made which, in the opinion of the Manager, is or is likely to require a notice to be published in order to keep Unitholders and the public adequately informed of material price sensitive information relating to the ownership of Units.

222 CORPORATE GOVERNANCE

Matters to be Decided by Unitholders by Special Resolution

Pursuant to the Trust Deed, decisions with respect to certain matters require specific prior approval of Unitholders by way of Special Resolution. Such matters include, among other things, removing the Trustee, removing the Manager and approving the termination of GZI REIT (see the section headed “The Trust Deed — Meetings of Unitholders” in this Offering Circular).

223 THE TRUST DEED

The Trust Deed is a complex document and the following is a summary only. Investors should refer to the Trust Deed itself to confirm specific information or for a detailed understanding of GZI REIT. The Trust Deed is available for inspection at the registered office of the Manager at 2102, Yue Xiu Building, 160 Lockhart Road, Wanchai, Hong Kong.

The Trust Deed

GZI REIT is a Hong Kong real estate investment trust constituted by the Trust Deed and is App B B1 authorised by the SFC pursuant to the SFO.

The Trust Deed was entered into on 7 December 2005 between GZI REIT Asset Management App B B1 Limited as the manager of GZI REIT and HSBC Institutional Trust Services (Asia) Limited as the trustee of GZI REIT.

The terms and conditions of the Trust Deed and any supplemental deed are binding on the Trustee and the Manager, who are signatories thereto, as well as each Unitholder (and persons claiming through or under such Unitholder) as if such Unitholder had been a party to and had executed the Trust Deed and any supplemental deed and had thereby covenanted for such Unitholder and for all such persons to observe and be bound by the provisions of the Trust Deed and had thereby authorised and required the Trustee and the Manager, respectively, to do all such acts and things as the Trust Deed may require or authorise the Manager and the Trustee, respectively, to do.

The REIT Code requires the Trust Deed to include certain provisions that relate to the rights, duties and obligations of the Manager, the Trustee and the Unitholders.

The Units and Unitholders

The rights and interests of Unitholders are set out in the Trust Deed. Under the Trust Deed, the Trustee must exercise all due diligence and vigilance in carrying out its functions and duties and in protecting the rights and interests of Unitholders.

The beneficial interest in GZI REIT is divided into Units. However, a Unitholder is not entitled to the transfer to it of any asset (or any part thereof) or of any estate or interest in any asset (or any part thereof) of GZI REIT.

Core Requirements

Under the terms of the Trust Deed, the assets of GZI REIT may be invested in:

• real estate as permitted under the REIT Code;

• cash and cash equivalent items;

224 THE TRUST DEED

• shares in the issued share capital of any Special Purpose Vehicle established or to be established at the direction of the Manager and any goodwill and other intangible assets acquired in relation to the acquisition of Special Purpose Vehicles;

• any other assets or investments as permitted by the REIT Code from time to time; and

• arrangements for the purposes of enhancing the return on, or reducing the risks associated with the investments of GZI REIT, including investments in the form of derivative instruments for hedging purposes.

GZI REIT may not invest in vacant land or engage or participate in any property development activities. Further, GZI REIT may not acquire any asset which involves the assumption of unlimited liability unless where such liability arises from the use of derivative instruments for the purpose of hedging.

GZI REIT may not lend assume, guarantee, endorse or otherwise become directly or contingently liable for the obligation or indebtedness of any person nor shall it use any assets of GZI REIT to secure any obligations, liabilities or indebtedness without the prior written consent of the Trustee.

GZI REIT may legally and beneficially acquire and own the issued share capital of any company incorporated in or outside Hong Kong if the Manager considers it necessary or desirable for GZI REIT to incorporate or acquire an entity whose primary purpose is to hold or own real estate or arrange financing for GZI REIT or to hold other Special Purpose Vehicles provided that GZI REIT has majority ownership and control of the Special Purpose Vehicle and there are sufficient and proper safeguards in the relevant shareholders’ agreement relating to the Special Purpose Vehicle to address the risks arising from the non-wholly owned structure, and such investment is not in conflict with the Trust Deed, the REIT Code and applicable law.

As and to the extent required by the REIT Code, the Manager shall ensure that GZI REIT shall incorporate or acquire no more than two layers of Special Purpose Vehicles in respect of any investment and, in the case of two layers of Special Purpose Vehicles, the top layer Special Purpose Vehicle shall be incorporated solely for the purpose of holding the legal and beneficial interests in one or more other Special Purpose Vehicles established for the sole purpose of directly or indirectly holding real estate and/or arranging financing for GZI REIT.

The Manager shall ensure that neither the memorandum or articles of association or equivalent constitutional documents of the Special Purpose Vehicles nor the organisation, transactions or activities of such vehicles contravene any requirements of the REIT Code or the Trust Deed.

As and to the extent required by the REIT Code, the Manager shall have responsibility for the management of the assets held by any Special Purpose Vehicles. The Trustee shall appoint and remove directors of those Special Purpose Vehicles that it has a right to do so in accordance with

225 THE TRUST DEED the directions of the Manager. The Trustee is responsible for ensuring that each Special Purpose Vehicle appoints the same auditor and adopts the same accounting principles and policies as GZI REIT.

GZI REIT is required by the REIT Code to hold good marketable legal and beneficial title in all its real estate whether held directly or indirectly through Special Purpose Vehicles controlled by GZI REIT. The Manager is under an obligation to ensure that GZI REIT has a majority (more than 50.0%) ownership and control over each investment in real estate at all time. Any investment in real estate by GZI REIT is subject to a number of conditions including the Manager being able to demonstrate that the investment is in the interest of Unitholders, obtaining a legal opinion, undertaking proper due diligence, ensuring that any liability assumed does not exceed the percentage interest in the real estate being acquired and appropriate disclosures being made to Unitholders as specified in the REIT Code.

Deemed Application of Part XV of the Securities and Futures Ordinance

The Trust Deed deems the provisions of Part XV of the SFO, and all relevant guidelines and interpretation notes on Part XV of the SFO issued by the SFC from time to time, to have effect, mutatis mutandis, and binding on the Trustee, the Manager, the directors and chief executive of the Manager and on each Unitholder and all persons claiming through or under each such person (including, without limitation, each participant of CCASS to whose account any Units are for the time being credited by Hong Kong Securities Clearing Company Limited) as if:

(a) GZI REIT is a “listed corporation” for the purposes of Part XV of the SFO;

(b) the references in Part XV of the SFO to the “relevant share capital” of such listed corporation were references to:

(i) any of the issued and outstanding Units from time to time; and

(ii) any Units which the Manager has agreed to issue, either conditionally or unconditionally, from time to time;

(c) a Unit is a share comprised in the relevant share capital of such listed corporation and the Unitholder of a Unit is the holder of a share in the relevant share capital of such listed corporation;

(d) the Manager and the Directors and chief executive of the Manager shall be deemed to be the directors and chief executive respectively of such listed corporation;

(e) in addition and without prejudice to any notification required to be given to the Hong Kong Stock Exchange by virtue of the deemed application of Part XV of the SFO, any notification with respect to interests in Units required to be given to the listed corporation under the SFO shall be given by the relevant parties to the Trustee and the Manager; and

226 THE TRUST DEED

(f) the powers and duties of a “listed corporation” under Division 5 of Part XV of the SFO in relation to the Trust shall be exercisable or carried out by GZI REIT and the Manager provided that the relevant power shall primarily be exercised by or the primary duty shall be carried out by the Manager save where the interest or short position (or deemed interest or deemed short position) relates to Units held by or in which the Manager is interested or has a short position, in which case the relevant power shall primarily be exercised by or the duty shall be carried out by the Trustee to the exclusion of the Manager.

Part XV of the SFO (which is deemed to apply to the Units by the Trust Deed) contains provisions which clarify when a person (whether or not a Unitholder) will be deemed to have an interest in Units or a short position in Units for the purposes of determining whether or not an obligation to make disclosure has arisen.

If a person (whether or not a Unitholder) fails to comply with such notification requirements, the Trustee and the Manager may, in its absolute discretion, declare that the voting rights attached to any or all of the Units in which that person is or is deemed to be interested in (the “Affected Units”) be suspended, suspend the payment of any distributions in respect of such Units, impose an administrative fee of up to HK$0.10 per Affected Unit for each day of non-compliance (from the date on which disclosure is due to be made by the person) on such Units and/or suspend registration and/or decline to register any transfer of part or all of such Units. The Trustee or the Manager may require any person to give such information as may be required by the Manager to identify the information relevant to the day of disclosure as described above.

Investors are urged to familiarise themselves with the provisions in relation to their duty of disclosure in the Trust Deed and the deemed application of Part XV of the SFO. Notification of interests must be made in the form prescribed by the Manager.

Issue of Units and Issue Price

The Units will be listed and quoted in Hong Kong dollars. The following is a summary of the App B B8 provisions of the Trust Deed relating to the issue of Units.

The Manager has the exclusive right to effect for the account of GZI REIT, the creation and issue of Units. The issue of Units on the Listing Date for the purpose of the Global Offering shall be at an issue price determined on the basis disclosed in this Offering Circular.

No fractions of a Unit shall be issued. In issuing such number of Units as correspond to the relevant subscription proceeds, the Manager shall in respect of each Unitholder’s entitlement to Units truncate (but not round off) to the nearest whole Unit and any balance arising from such truncation shall be retained as part of the Deposited Property.

After the Listing Date, new Units may be offered on a pro rata basis to all existing Unitholders without the prior approval of Unitholders other than where any such issue increases the market capitalisation of GZI REIT by more than 50.0%, in which case such issue shall require the prior approval of Unitholders by Ordinary Resolution at a meeting to be convened by the Manager in accordance with the provisions of the Trust Deed.

227 THE TRUST DEED

Subject to restrictions on issues to connected persons, Units may be offered after the Listing Date, otherwise than on a pro rata basis to all existing Unitholders, without the approval of Unitholders if the issue of new Units during any Financial Year does not increase the total number of Units from the number of Units that were outstanding at the end of the previous Financial Year by more than 20.0% (or such other percentage of outstanding Units as may, from time to time, be prescribed by the SFC). An issue of new Units exceeding this threshold will require specific prior approval of Unitholders by Ordinary Resolution at a meeting to be convened by the Manager in accordance with the provisions of the Trust Deed.

After the Listing Date, and for so long as GZI REIT is listed on the Hong Kong Stock Exchange, the Manager may (with the approval of Unitholders, if required) effect the issue of Units on behalf of GZI REIT on any Business Day at an issue price that is equal to the Market Price or, in its discretion, at a discount of no more than 20.0% to the Market Price or at a premium to the Market Price. For this purpose, “Market Price” shall mean the price as determined by the Manager, being the higher of:

(a) the closing price of the Units on the Hong Kong Stock Exchange on the date of the relevant agreement for the proposed issue of Units; and

(b) the average closing price of the Units in the ten trading days of the Hong Kong Stock Exchange immediately prior to the earliest of:

(i) the date of announcement of the proposed issue of Units;

(ii) the date of the relevant agreement for the proposed issue of Units; and

(iii) the date on which the issue price is fixed, provided that, in relation to the issue of Units pursuant to an exercise of an option to subscribe for Units, the Market Price and issue price may be determined by the Manager either at the time of grant of the option or at the time of exercise of the option or such other date(s) as the Manager considers appropriate subject to the terms of the grant of such option. In relation to the issue of Units other than on exercise of an option, the Market Price and the issue price shall be determined by the Manager on such date(s) as the Manager considers appropriate.

Repurchase of Units by the Manager

Other than in respect of any stabilising activity, the Trust Deed does not permit the Manager to repurchase Units on behalf of GZI REIT until permitted to do so by the relevant codes and guidelines issued by the SFC from time to time.

228 THE TRUST DEED

Rights and Liabilities of Unitholders

The key rights of Unitholders include rights to:

(a) receive income and other distributions attributable to the Units held;

(b) receive the audited financial statements of GZI REIT; and

(c) participate in the distribution of assets on the termination of GZI REIT by receiving a share of all net cash proceeds derived from the sale or realisation of the assets of GZI REIT less any liabilities, in accordance with their proportionate interests in GZI REIT at the date of the termination of GZI REIT in accordance with the provisions of the Trust Deed.

The Trust Deed contains provisions that are designed to limit the liability of a Unitholder to the amount paid or payable for any Unit. The provisions seek to ensure that if the Issue Price of the Units held by a Unitholder has been fully paid, no such Unitholder, by reason alone of being a Unitholder, will be personally liable to indemnify the Trustee or the Manager or any creditor of GZI REIT in the event that the liabilities of GZI REIT exceed its assets.

The minimum number of Units of which a person may be a registered holder is one Unit.

Amendment of the Trust Deed

The Trustee and the Manager may, with the prior approval of the SFC (where required), amend the Trust Deed in such manner and to such extent as they may consider expedient for any purpose, provided that:

(a) unless the Trustee shall certify in writing that, in its opinion, such amendment:

(i) does not materially prejudice the interests of Unitholders, does not operate to release to any material extent the Trustee or the Manager from any responsibility to the Unitholders and does not increase the costs and charges payable from GZI REIT;

(ii) is necessary in order to comply with applicable fiscal, statutory or official requirements (whether or not having the force of law); or

(iii) is necessary to correct a manifest error,

no such amendment shall be made without Unitholders’ approval by Special Resolution; and

(b) no such amendment shall impose upon any Unitholder any obligation to make any further payments in respect of its Units or to accept any liability in respect thereof.

229 THE TRUST DEED

Meetings of Unitholders

Under applicable law and the provisions of the Trust Deed, the Manager will at least once in every calendar year convene a general meeting of Unitholders as the annual general meeting.

In addition, the Trustee or the Manager may respectively (and the Manager shall, at the request in writing of not less than two Unitholders registered as together holding not less than 10.0% of the Units for the time being in issue and outstanding) at any time convene a meeting of Unitholders at such time or place in Hong Kong in accordance with the provisions of the Trust Deed.

A meeting of Unitholders when convened may, by Special Resolution and in accordance with the Trust Deed:

(a) sanction any modification, alteration or addition to the Trust Deed which shall be agreed by the Trustee and the Manager as provided in the Trust Deed;

(b) remove the Trustee;

(d) approve the disposal of an investment within two years from the date of its acquisition;

(e) approve the termination of GZI REIT;

(f) approve the merger of GZI REIT;

(g) change the investment objective and policies of GZI REIT; and

(h) approve any change to the maximum fees under the Trust Deed which are payable to the Trustee or the Manager, or any change to the structure of the Trustee’s or Manager’s fees.

Any decision to be made by resolution of Unitholders other than the above shall be made by Ordinary Resolution, unless a Special Resolution is required by the REIT Code or the provisions of the Trust Deed.

Except as otherwise provided for in the Trust Deed, at least 21 days’ notice (exclusive of the day on which the notice is served or deemed to be served and of the day for which the notice is given) of every meeting shall be given to the Unitholders in the manner provided in the Trust Deed. Each notice shall specify the place, day and hour of the meeting, and the terms of the resolutions to be proposed. A copy of the notice shall be sent by post to the Trustee, unless the meeting is convened by the Trustee in which case a copy of the notice shall be sent by post to the Manager. The quorum at a meeting shall be two or more Unitholders present in person or by proxy registered

230 THE TRUST DEED as holding together not less than 10.0% of the Units for the time being in issue and outstanding except for the purpose of passing a Special Resolution, in which case, the quorum shall be two or more Unitholders present in person or by proxy registered as holding together not less than 25.0% of the Units for the time being in issue and outstanding.

Voting on resolutions at a meeting shall be by way of a poll. Every Unitholder has one vote for each Unit it owns provided such Unit is fully paid up. However, a Unitholder is prohibited from voting his/her own Unit(s) at, or being counted in the quorum for, a meeting at which he/she has a material interest in the business to be conducted and that interest is different from the interests of other Unitholders as determined by the Manager or the Trustee in accordance with the provisions of the Trust Deed. The Trust Deed does not contain any limitation on non-Hong Kong residents or foreign Unitholders holding Units or exercising the voting rights with respect to their unitholdings.

Trustee’s Powers and Duties

Under the Trust Deed, the powers and duties of the Trustee include:

• upon directions by the Manager, acquiring property on behalf of GZI REIT in accordance with the powers of investment contained in the Trust Deed;

• holding the Deposited Property on trust for the benefit of the Unitholders, and oversee the activities of the Manager for compliance with, among others, the Trust Deed; and

• ensuring that all the investment activities carried out by the Manager are in line with the investment objective and policy of GZI REIT, and are in the interests of the Unitholders.

The Trustee shall exercise all due diligence and vigilance in carrying out its functions and duties, and in protecting the rights and interests of Unitholders.

The Trustee may, upon the Manager’s direction, arrange and incur liabilities and obligations on behalf of GZI REIT (and so as to bind the Deposited Property), and to create and grant security of any form or nature for or in respect of such liabilities and obligations and to perform and discharge such liabilities and obligations from Deposited Property on behalf of GZI REIT, in all cases subject to the restrictions under applicable law and in the REIT Code and the Trust Deed.

The Trustee may also appoint an agent to exercise all or any of the trusts, powers and discretions vested in it by the Trust Deed and such delegation or appointment of an agent as may be made subject to any regulation and on terms and conditions (including power to sub-delegate) as the Trustee thinks fit provided that the Trustee may not make any such delegation or appointment of an agent without the prior written approval of the Manager.

Although the Trustee may, upon the Manager’s instructions, borrow or raise money for the purposes of GZI REIT, both on a secured and unsecured basis, the Manager must not direct the Trustee to incur a liability if upon the effecting of such borrowing or raising the amount thereof, together with the aggregated amount of all other raisings or borrowings made by the Trustee for

231 THE TRUST DEED the account of GZI REIT and still remaining to be repaid, would thereupon in the aggregate exceed 45.0% (or such other higher or lower percentage as may be permitted by the REIT Code or as may be specifically permitted by the relevant authorities) of the total gross asset value of the Deposited Property as set out in GZI REIT’s latest published audited financial statements immediately prior to such borrowing being effected (subject to adjustments contemplated by the Trust Deed).

Trustee’s Right to Reimbursement

The Trustee is entitled to apply, or to be reimbursed from, the Deposited Property (at such times and over such periods as the Trustee and the Manager may determine in any particular case) for all liabilities, as agreed with the Manager, that may be properly suffered or incurred by the Trustee in the performance of its obligations or the exercise of its powers under the Trust Deed, or otherwise arising out of or in connection with, among others, the Trust Deed.

Limitation of Trustee’s Liability

In the absence of fraud, negligence, wilful default, breach of, among other things, the Trust Deed, the REIT Code or any applicable law, the Trustee shall not be in any way responsible to GZI REIT, the Unitholders, the Manager or any person for any loss, costs, damage or inconvenience that may result from the exercise or non exercise of its powers.

The Trustee shall have no liability for any act or omission of the Manager, the Unit Registrar, any Approved Valuer or any Special Purpose Vehicle or any directors of the foregoing.

In the absence of fraud, negligence, wilful default or breach of, among other things, the Trust Deed, the REIT Code or any applicable law and regulation by the Trustee (including its directors, employees, agents and delegates) the liability of the Trustee shall not exceed the amount of the Deposited Property to which the Trustee shall have recourse to meet any such liability.

Trustee’s Right of Indemnity

The Trustee and any director, employee and servant of the Trustee shall be indemnified out of, and shall be entitled for the purpose of indemnity to have recourse to, the Deposited Property or any part thereof against any actions, costs, claims, damages, expenses or demands to which it may be put as Trustee and as director, employee and servant of the Trustee save where such action, cost, claim, damage, expense or demand is occasioned by the fraud, negligence, wilful default or breach of, trust, the Trust Deed (or other constitutive documents to which the Trustee is a party), the REIT Code or any applicable law by the Trustee and any director, employee, servant, agent or delegate of the Trustee.

232 THE TRUST DEED

Retirement and Replacement of Trustee

The Trustee may retire or be removed in the following circumstances:

(a) The Trustee may retire by giving written notice to the Manager, but only upon the appointment (with, for so long as GZI REIT is authorised by the SFC, the prior written consent of the SFC) of a new trustee (such appointment to be made in accordance with the provisions of the Trust Deed).

(b) The Trustee may be removed by prior notice in writing to the Trustee by the Manager:

(i) if the Trustee goes into liquidation (except a voluntary liquidation for the purpose of reconstruction or amalgamation upon terms previously approved in writing by the Manager) or if a receiver is appointed over any of its assets or if a judicial manager is appointed in respect of the Trustee (or any such analogous process occurs or any analogous person is appointed in respect of the Trustee);

(ii) if the Trustee ceases to carry on business;

(iii) if the Trustee fails, or neglects after reasonable notice from the Manager, to carry out or satisfy any material obligation imposed on the Trustee by the Trust Deed, in which case the removal of the Manager requires 30 days’ prior notice in writing to the Trustee by the Manager; or

(iv) if for good and sufficient reason(s), the Manager states in writing that a removal of the Trustee is in the best interests of Unitholders and the Unitholders consent to such removal by Special Resolution (excluding any Units held by any connected person of the Trustee or any other Unitholders who has an interest in retaining the Trustee (determined at the sole discretion of the Manager)).

Trustee’s Fee

GZI REIT will pay the Trustee a one-off inception fee of not more than HK$200,000 (as agreed between the Manager and the Trustee) and, in each Financial Year, an ongoing fee of 0.03% per annum of the value of the Deposited Property (which may be increased to a maximum of 0.06% per annum of the value of the Deposited Property), subject to a minimum amount of HK$50,000 per month. Such remuneration of the GZI REIT shall be payable out of the Deposited Property semi-annually in arrears on the first Business Day following the end of the relevant six month period and calculated as follows:

0.03% x VDPs SAF = ( 2 )

where:

SAF = semi-annual fee

233 THE TRUST DEED

VDPs = the value of the Deposited Property as per the published audited annual financial statements of GZI REIT for the immediately preceding Financial Year, provided that the value of VDPs for the first Financial Year shall be the value of the consolidated gross assets of GZI REIT as disclosed in this Offering Circular.

The ongoing fee calculated in accordance with the above formula is subject to adjustment as follows:

adjustment = 0.03% x VDPE - SSAF

where:

VDPE = the value of Deposited Property as per published audited annual financial statements of GZI REIT for the Financial Year; and

SSAF = the sum of the semi-annual ongoing fees received by the Trustee in respect of the relevant Financial Year.

Where the above adjustment is positive, GZI REIT shall pay the difference to the Trustee following publication of the audited annual financial statements of GZI REIT. Where the above adjustment is negative, the Trustee shall pay the difference to GZI REIT following publication of audited annual financial statements of GZI REIT for the relevant Financial Year. For the avoidance of doubt, the above adjustment shall not affect the minimum ongoing fee of HK$50,000 per month.

The ongoing fee of the Trustee for the first Financial Year shall be pro-rated according to the number of days between the Listing Date and 31 December 2005.

The Trustee and the Manager may, by giving not less than three months’ prior written notice to Unitholders, increase the rate of the ongoing fee up to and including the maximum percentage of 0.06% per annum of the value of the Deposited Property without obtaining Unitholders’ approval. Any increase in the maximum rate of the ongoing fee or any change to the structure of the Trustee’s remuneration may only be permitted by Special Resolution at a Unitholders’ meeting convened in accordance with the provisions of the Trust Deed.

Termination of GZI REIT

GZI REIT shall terminate without Unitholders’ approval in the event that the Units are not D17(a) App B listed on the Hong Kong Stock Exchange by 31 December 2005 (or such later date as may be B29 agreed in writing by the Manager and Trustee). Otherwise, GZI REIT shall continue until the expiration of eighty years less one day from the date of commencement of GZI REIT, being 7 December 2005, or until it is wound up by a court order or is terminated in the manner described below or as set out in the sub-section headed “Merger of GZI REIT” below.

Under the provisions of the Trust Deed, GZI REIT may be terminated by Special Resolution of the Unitholders in accordance with the provisions in the Trust Deed.

234 THE TRUST DEED

Where the proposal to terminate GZI REIT is recommended by the Manager, the Manager and its connected persons shall abstain from voting if they hold interests in the Units and if their interest (at the sole determination of the Trustee) in terminating GZI REIT is different from that of all other Unitholders, except where the Manager and its connected persons are the only Unitholders. The Trustee shall have no liability for any consequence arising out of such termination recommended by the Manager and approved by Special Resolution in the absence of fraud, bad faith, wilful default or negligence. The Manager shall inform Unitholders as soon as reasonably practicable of the intention to terminate GZI REIT by way of announcement.

The Manager shall serve on the Unitholders, within 21 days of the announcement referred to above, a circular convening an extraordinary general meeting containing the following information:

(a) the rationale for the termination of GZI REIT;

(b) the effective date of the termination;

(d) the procedures and timing for the distribution of the proceeds of the termination;

(e) a valuation report of GZI REIT prepared by the Approved Valuer (as defined in the Trust Deed);

(f) the estimated costs of the termination and the bearer of such costs; and

(g) such other material information that the Manager determines that the Unitholders should be informed of.

Upon approval of the termination of GZI REIT, the Trustee shall oversee the realisation of the assets of GZI REIT by the Manager. Following such disposal and the distribution of the proceeds (if any) thereof, GZI REIT shall terminate.

In the event that the Manager is removed or retires and no new manager duly qualified under the REIT code and acceptable to the SFC is willing to take the place of the existing Manager within 60 Business Days of the removal or retirement of the Manager (or such longer period the Trustee considers appropriate), the Trustee may terminate GZI REIT.

235 THE TRUST DEED

Merger of GZI REIT App B B30

GZI REIT can be merged subject to Unitholders’ approval by Special Resolution.

Where the proposal to merge GZI REIT is recommended by the Manager, the Manager and its connected persons shall abstain from voting if they hold interests in the Units and if their interest (at the sole determination of the Trustee) in merging GZI REIT is different from that of all other Unitholders. Where upon such merger the Trustee retires, any deed effecting the merger by which the Deposited Property and liabilities of GZI REIT are so merged shall include indemnification of the Trustee to its satisfaction. The Trustee shall cease to be liable for obligations and liabilities of GZI REIT subsisting at the time of merger to the extent such obligations and liabilities are subsequently discharged from and out of the merged entity, and shall have no other liability for the consequences arising out of any merger of GZI REIT recommended by the Manager and approved by Special Resolution (other than any liability arising from the fraud, wilful default, bad faith or negligence of the Trustee). The Manager shall inform Unitholders as soon as reasonably practicable of the intention to merge GZI REIT by way of announcement.

The Manager shall serve on the Unitholders within 21 days of the announcement referred to above, a circular convening an extraordinary general meeting containing the following information:

(a) the rationale for the merger of GZI REIT;

(b) the effective date of the merger;

(d) the procedures and timing for the issuance or exchange of new Units arising from the merger;

(e) a valuation report of GZI REIT prepared by an Approved Valuer (as defined in the Trust Deed) which is not dated more than three months before the date of the circular;

(f) the estimated costs of the merger and the bearer of such costs; and

(g) such other material information that the Manager determines that the Unitholders should be informed of.

Any merger pursuant to the provisions of the Trust Deed may only take effect upon the successor entity assuming responsibility for the performance and discharge of all obligations and liabilities of GZI REIT subsisting at the time of the merger.

236 MATERIAL AGREEMENTS AND OTHER DOCUMENTS RELATING TO GZI REIT

The agreements described in this section are complex documents and only a summary of the agreements is set out herein. Investors should refer to the agreements themselves to confirm specific information or for a detailed understanding of GZI REIT. The agreements are available for inspection at the registered office of the Manager at 2102, Yue Xiu Building, 160 Lockhart Road, Wanchai, Hong Kong during normal business hours until noon of 15 December 2005, which is the date on which the application lists close.

Reorganisation Deed App B B2 (f)

On 7 December 2005, Holdco, the Manager and the Trustee entered into the Reorganisation Deed with GCCD BVI (as vendor) and GZI (as guarantor of GCCD BVI’s obligations under the Reorganisation Deed), pursuant to which Holdco acquired 100.0% of the issued share capital of each of the BVI Companies.

Initial Consideration

The Initial Consideration payable by Holdco under the Reorganisation Deed for the BVI Company Shares was HK$4,014,180,000 (but is subject to adjustment as described in the subsection headed “Adjustments” below). The Initial Consideration was calculated based on the combined NAV of the BVI Companies as at 31 October 2005 of HK$2,972,767,000 plus amounts due to fellow subsidiaries thereof as at 31 October 2005 of HK$994,267,000 as well as HK$47,146,000 to be injected by GZI into the BVI Companies before the closing of the Global Offering.

Completion of the transfer of the BVI Company Shares to Holdco took place on 7 December 2005.

The Initial Consideration was satisfied in the following manner:

• as to HK$1,137,234,060, by the issue of 417,000,000 Units in GZI REIT to Dragon Yield, a wholly owned subsidiary of GZI, the party nominated by GCCD BVI to receive the Units, at an issue price of HK$2.72718 each; and

• as to HK$2,876,945,940, by the execution and delivery of the Promissory Note by Holdco to GZI.

Adjustments

Initial adjustment

The Initial Consideration is subject to an initial adjustment calculated and adjusted in the manner described below.

237 MATERIAL AGREEMENTS AND OTHER DOCUMENTS RELATING TO GZI REIT

The initial adjustment amount will be calculated as A - B:

where “A” is the sum of:

1. the IPO Proceeds (being the gross proceeds from the issue of Units under the Global Offering, which, for the avoidance of doubt, excludes proceeds from the Units comprised in the Over-allocation Option and the proceeds from the Sale Units);

2. HK$1,137,234,060 (being the portion of the Initial Consideration satisfied by the issue of Units to GCCD BVI or its nominee); and

3. the Loan Proceeds (less any costs relating to the Facility Agreement agreed between GCCD BVI and Holdco),

and “B” is the sum of:

1. the Initial Consideration;

2. the IPO Transaction Costs;

3. the aggregate amount to be collected by White Horse Property Management Company from the tenants of the White Horse Units under their tenancy agreements attributable to Partat in respect of the period from the Listing Date to 31 December 2005 (both dates inclusive) of HK$189,600 per day; and

4. HK$26,700,000, being an amount retained by Holdco for proposed renovation works at the White Horse Units.

The amount determined in accordance with the formula above shall be paid:

• by Holdco to GCCD BVI or its nominee on or about the Listing Date, if such amount is a positive figure; and

• by GCCD BVI to Holdco on the Listing Date, if such amount is a negative figure. Such payment by GCCD BVI to Holdco shall be effected by way of setting off the relevant amount against the principal amount of the Promissory Note so that the amount payable by Holdco to GZI pursuant to the terms of the Promissory Note shall be the amount representing the difference between the principal amount of the Promissory Note and the amount calculated in accordance with the above formula.

The main purpose of the initial adjustment amount is to ensure that the Initial Consideration reflects the value of the Properties implied by the Offer Price attributable to GCCD BVI.

238 MATERIAL AGREEMENTS AND OTHER DOCUMENTS RELATING TO GZI REIT

Combined net assets adjustment

The Initial Consideration is subject to a further adjustment in accordance with the increase or reduction in the combined net assets of the BVI Companies in the interval from the date of the Reorganisation Deed until the day immediately preceding the Listing Date, excluding (i) any fluctuations in the value of the Properties; (ii) any costs incurred in connection with the Global Offering and the Facility Agreement; and (iii) any other matter already taken into consideration in calculating the initial adjustment referred to above, and adopting the same accounting policies, principles, standards and practices.

Such change in the combined net assets of the BVI Companies will be determined based on the unaudited combined management accounts of the BVI Companies as at 7 December 2005 (being the date of the Reorganisation Deed) and the audited combined accounts of the BVI Companies as at the day immediately preceding the Listing Date.

If there is an increase in the combined net assets of the BVI Companies, the amount of the increase shall be paid by Holdco to GCCD BVI or its nominee within four months after the Listing Date. If there is a decrease in the combined net assets of the BVI Companies, the amount of the decrease shall be paid by GCCD BVI to Holdco within four months after the Listing Date.

Final consideration

The final consideration after the adjustments described above shall be announced by the Manager upon determination thereof, together with the quantum of the adjustment amounts.

Warranties, representations and undertakings

Under the Reorganisation Deed, Holdco, the Trustee and the Manager have the benefit of certain representations, warranties and undertakings (“Warranties”) given by GCCD BVI and guaranteed by GZI.

The Warranties give Holdco, the Trustee and the Manager a degree of comfort in relation to matters such as the assets and liabilities of the BVI Companies, the state of affairs of the business of the BVI Companies, title to the BVI Company Shares, title to the Properties, the absence of undisclosed liabilities attaching to the BVI Companies and certain other matters. All of the Warranties are given subject to the disclosures made by GCCD BVI or GZI to Holdco or the Manager (including, but not limited to those set out in this Offering Circular), are subject to certain limitations and will expire (i) six years after the Listing Date (in the case of Warranties relating to the BVI Company Shares, taxation, title to assets, the Properties and certain miscellaneous matters) and (ii) 24 months after the Listing Date in all other cases. The periods of the Warranties will be extended for an additional 12 months where there is a dispute being settled with a third party or where there is a contingent claim.

239 MATERIAL AGREEMENTS AND OTHER DOCUMENTS RELATING TO GZI REIT

After the expiry of such periods, none of Holdco, the Trustee and the Manager will have any further recourse against either GCCD BVI or GZI under the Reorganisation Deed and risks associated with the acquisition of the BVI Company Shares (including, without limitation, in relation to title to the Properties) will be solely for the account of GZI REIT.

Separately, the Trustee has the benefits of certain representations and warranties given by GZI in respect of the due incorporation and status of Holdco. The Reorganisation Deed also includes an undertaking by GZI that for so long as any Loan Proceeds remain unpaid, GZI shall hold, directly or indirectly, at least 15.0% of all Units in issue at any time.

The aggregate maximum liability of GCCD BVI and GZI in respect of all and any claims under the Warranties as well as any claims made by Holdco and/or the Manager under or in connection with the Deed of Indemnity shall in no event exceed the final consideration referred to above.

The adjustments to the Initial Consideration, GZI’s guarantee to Holdco, the Manager and the Trustee, as well as GCCD BVI’s Warranties are conditional on the Listing Date being on or before 21 December 2005 (or such other date as may be agreed in writing by Holdco, the Manager, GCCD BVI and GZI).

Deed of Indemnity

GCCD BVI and GZI executed the Deed of Indemnity in favour of Holdco (for itself and as trustee for each of the BVI Companies), the Manager and the Trustee under which GCCD BVI and GZI undertook jointly and severally to indemnify Holdco and each BVI Company against all or any depletion or reduction in the value of their respective assets, or increase in the liabilities, loss or deprivation of any relief from taxation, of Holdco or any of the BVI Companies, as a result of or in connection with any claim by any revenue, customs, fiscal, statutory, governmental or other authority of the PRC or in any other part of the world, including but not limited to:

• the amount of any and all taxation falling on Holdco or any of the BVI Companies or in respect of the Properties resulting from or by reference to any income, profits, gains, transactions, events, matters or things earned, accrued, received, effected on or before the Listing Date, whether alone or in conjunction with any other circumstances whenever occurring and whether or not such taxation is chargeable against or attributable to any other person, firm or company, including any and all taxation resulting from the receipt by Holdco or any of the BVI Companies of any amounts paid by GCCD BVI or GZI under the Deed of Indemnity;

• the amount of any and all fines or penalties imposed on Holdco or any of the BVI Companies by any revenue, customs, fiscal, statutory or governmental or other authority whatsoever in the PRC and any loss or damage suffered by Holdco or any of the BVI Companies resulting from:

— failure to stamp and/or register any tenancies in respect of the Properties;

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— any non-conformity of the Properties (or any part thereof) with applicable building regulations and/or any requirement to rectify any such non-conformities;

— any issues arising from or in connection with any pre-emptive rights of the tenants of the Properties in relation to the Properties;

— leasing the Properties for uses which are not in compliance with the permitted uses thereof under the relevant Building Ownership Certificates or deeds of mutual covenant;

— any issues in connection with any extension areas in the White Horse Building of which the White Horse Units form part;

— any issues arising from or in connection with the proposed renovation of the 8th and 9th storeys of White Horse Building to wholesale and retail use; or

— any non-conformity issues referred to in the Independent Property Valuer’s Building Condition Survey Summary Report set out in Appendix VII to this Offering Circular;

• the amount of any and all taxation, fines, penalties, losses and damages resulting from the transfer of the Properties to the BVI Companies or any transactions effected on or before the Listing Date; and

• all actions, claims, losses, damages, costs (including all legal costs), charges, expenses, interests, penalties or other liabilities which Holdco or any of the BVI Companies may reasonably and properly incur in connection with:

— the investigation, assessment or the contesting of any such claim;

— the settlement of any such claim;

— any legal proceedings in which Holdco or any of the BVI Companies claims under or in respect of the Deed of Indemnity and in which judgment is given in favour of Holdco or any of the BVI Companies; or

— the enforcement of any such settlement or judgment.

GCCD BVI and GZI also undertook jointly and severally with the Trustee, Holdco and each BVI Company to indemnify Holdco and each BVI Company and at all times keep the same indemnified against all actions, claims, losses, damages, costs (including all legal costs), charges, expenses, interests, penalties or other liabilities which Holdco or any of the BVI Companies may reasonably and properly incur (including, without limitation, any loss of rentals) in connection with:

• failure to stamp and/or register any tenancies in respect of the Properties;

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• any non-conformity of the Properties (or any part thereof) with applicable building regulations;

• any issues arising from or in connection with any pre-emptive rights of the tenants of the Properties in relation to the Properties;

• leasing the Properties for uses which are not in compliance with the permitted uses thereof under the relevant Building Ownership Certificates or deeds of mutual covenant;

• any issues in connection with any extension areas in the White Horse Building of which the White Horse Units form part;

• any issues arising from or in connection with the proposed renovation of the 8th and 9th storeys of White Horse Building to wholesale and retail use;

• any non-conformity issues referred to in the Independent Property Valuer’s Building Condition Survey Summary Report set out in Appendix VII to this Offering Circular;

• failure to receive any of the trade receivables and other receivables referred to in the audited combined accounts of the BVI Companies as at the date immediately preceding the Listing Date within three months after the Listing Date; and

• any issues arising in connection with any breach by GCCD BVI of its representations and warranties that among other things, each of the BVI Companies has carried on its business and operations so that there have been no material breaches of applicable law, all licences and approvals necessary for the carrying on of the businesses and operations of the BVI Companies, for the transfer of the relevant Property to the BVI Company, for the opening any Renminbi bank accounts in the PRC, for the leasing of the relevant Property in the PRC and for the conversion of all the income/profit derived from the relevant Property from Renminbi to Hong Kong dollars as well as the remittance thereof into Hong Kong have been obtained and are in full force and effect, and all necessary approvals from all applicable PRC governmental authorities required for the Global Offering and the listing of the Units on the Hong Kong Stock Exchange have been obtained and are in full force and effect.

The Deed of Indemnity does not cover any claim, and neither GCCD BVI nor GZI shall be liable thereunder, in respect of taxation or liability:

• to the extent that provision, reserve or allowance has been made for the relevant taxation or claim in the audited combined accounts of the BVI Companies as at the date immediately preceding the Listing Date, or to the extent that payment or discharge of such taxation or claim has been taken into account therein or in the calculation of the consideration under the Reorganisation Deed;

• to the extent that the relevant taxation or claim arises or is incurred as a result of the imposition of taxation or claims as a consequence of any retrospective change in the

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law, rules and regulation or the interpretation or practice thereof by the taxation authorities of the PRC, the British Virgin Islands or any other relevant authority coming into force after the Listing Date with retrospective effect or to the extent such taxation or claim arises or is increased by an increase in rates of taxation or claim after the Listing Date with retrospective effect;

• to the extent of any provision or reserve made for taxation in the audited combined accounts of the BVI Companies as at the date immediately preceding the Listing Date which is finally established to be an over-provision or an excessive reserve, in which case GCCD BVI’s and GZI’s liability (if any) in respect of taxation shall be reduced by an amount not exceeding such provision or reserve, provided that the amount of any such provision or reserve applied hereunder to reduce GCCD BVI’s and GZI’s liability in respect of taxation shall not be available in respect of any such liability arising thereafter; and

• to the extent that such claim arises or is incurred as a result of Holdco or any of the BVI Companies being in breach of or failing to fulfil or comply with the requirements or provisions of the Deed of Indemnity after the Listing Date, which breach or failure is not attributable to any default of GCCD BVI or GZI.

The maximum aggregate liability of GCCD BVI and GZI under the Deed of Indemnity and the Reorganisation Deed shall not exceed the total consideration for the transfer of the BVI Companies Shares pursuant to the Reorganisation Deed.

No claims may be brought against GCCD BVI or GZI after the expiry of six years from the Listing Date.

The Deed of Indemnity is only effective if the Listing Date occurs on or before 21 December 2005 (or such other date as Holdco, the Manager, GCCD BVI and GZI may agree in writing).

Deed of Right of First Refusal

GZI executed a deed (dated 8 December 2005) in favour of the Trustee and the Manager App B B2 (k) under which GZI REIT was granted, conditional on listing of the Units on the Hong Kong Stock Exchange, a right of first refusal on the following terms and conditions:

1. In the event that GZI proposes to dispose to a third party or parties any completed Grade A office building or any completed Grade A commercial building that:

(a) fulfils (or would reasonably be regarded as fulfilling) the investment criteria and property characteristics, and is consistent (or would reasonably be regarded as being consistent) with the investment strategy of the Manager, for property investments by GZI REIT, as stated in this Offering Circular (the “Relevant Property”); and

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(b) is owned or developed by the GZI Group and in which the GZI Group has an ownership interest of 95.0% or more (and, in the circumstances where GZI is able to negotiate and agree terms with the relevant joint venture party so as to extend the coverage of the right of first refusal granted by GZI to include the Relevant Property which is the subject of that joint venture, shall also include that Relevant Property),

and such building:

(i) is located in Guangzhou; and

(ii) has a value of US$20.0 million or more (as determined by an independent property valuer),

GZI REIT shall have the right of first refusal to acquire the Relevant Property on and subject to the terms and conditions set out below.

GZI will give written notice to the Manager and the Trustee of any proposed offer for sale of a Relevant Property to GZI REIT pursuant to the right of first refusal.

2. If GZI REIT elects to exercise the right of first refusal to acquire the Relevant Property, completion of the sale and purchase of the same shall be conditional upon:

(i) the attainment by GZI and/or the relevant member of the GZI Group (the “Relevant GZI Entity”) of all requisite approvals and consents required under the memorandum and articles of association of the Relevant GZI Entity, the Listing Rules and other relevant laws and regulations to which GZI and/or the Relevant GZI Entity and/or any other intermediate holding company of the Relevant GZI Entity is subject;

(ii) the attainment by the Manager of all requisite approvals and consents required under the REIT Code, the Trust Deed and all other relevant laws and regulations to which GZI REIT is subject;

(iii) satisfactory results on the completion of the due diligence review of the Relevant Property by the Manager; and

(iv) such other conditions as may be set out in the relevant sale and purchase agreement of the Relevant Property.

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In the event that, for any reason other than due to GZI’s default, the sale and purchase of the Relevant Property pursuant to an exercise of the right of first refusal is not completed within the pre-agreed period of time or the Manager (acting on behalf of GZI REIT) does not elect to exercise the right of first refusal within 30 business days after the date of the written notice given by GZI to the Manager and the Trustee mentioned above (the “Lapse Event”), GZI shall, at its election, have the right either:

(i) to sell the Relevant Property to any third party within 12 calendar months after the Lapse Event, at a price and on such terms as are no more favourable than those set out in the written notice given by GZI to the Manager and the Trustee mentioned above (from the perspective of GZI REIT); or

(ii) to retain the Relevant Property for investment purposes.

In the event that GZI elects to sell the Relevant Property to the prospective purchaser stated in the written notice given by GZI to the Manager and the Trustee mentioned above within 12 calendar months after the Lapse Event, GZI shall send to the Manager (acting on behalf of GZI REIT) a written notice (the “Sale Notice”) of the price and other principal terms on which the Relevant Property is proposed to be sold to the prospective purchaser, subject to any restrictions on disclosure of the same imposed thereon by the prospective purchaser by agreement or otherwise. In addition, in the event that the Relevant Property is proposed to be sold by GZI to that prospective purchaser on terms more favourable than those stated in the written notice given by GZI to the Manager and the Trustee mentioned above (from the perspective of GZI REIT), the right of first refusal shall apply afresh to that proposed disposal and GZI shall be required to comply with the procedures in the deed of right of first refusal accordingly. The Manager (acting on behalf of GZI REIT) shall have 10 business days within which to object to such proposed sale solely on the grounds that it is on terms more favourable than those set out in the written notice given by GZI to the Manager and Trustee mentioned above (from the perspective of GZI REIT). In the event that there is any dispute between the Manager (acting on behalf of GZI REIT) and GZI as to whether the terms on which GZI proposes to sell the Relevant Property to the prospective purchaser are more favourable than those set out in the written notice given by GZI to the Manager and Trustee mentioned above (from the perspective of GZI REIT), the matter shall be referred to an independent valuer or other property consultant selected by agreement between the Manager and GZI. Such an independent valuer or property consultant (as the case may be) shall be requested to settle any matter in dispute and the decision of that independent valuer or property consultant (as the case may be) as to the matter in dispute shall, in the absence of fraud or manifest error, be final and binding on the Manager (acting on behalf of GZI REIT) and GZI and such independent valuer or property consultant (as the case may be) shall be deemed to act as an expert and not as arbitrator. The costs of such an independent valuer or property consultant (as the case may be), if any, shall be borne by GZI REIT and GZI in equal shares.

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On the first occasion when GZI offers to GZI REIT a right of first refusal to acquire the entire building of the West tower of Victory Plaza, GZI also agrees to grant to GZI REIT a right of first refusal to acquire such number of car parks in Victory Plaza (the “Additional Car Parks”) which will, when aggregated with GZI REIT’s interests in the total construction area of the podium and the entire building of the West tower of Victory Plaza, enable GZI REIT to control more than 50.0% of the total construction area of Victory Plaza, provided that:

(i) the right of first refusal in respect of the Additional Car Parks is only exercisable if GZI REIT elects to acquire West tower of Victory Plaza to which such notice relates; and

(ii) completion of the sale and purchase of the Additional Car Parks shall take place simultaneously with, and conditional upon, the completion of the sale and purchase of West tower of Victory Plaza.

If the Manager (acting on behalf of GZI REIT) elects to exercise the right of first refusal to acquire the Additional Car Parks, the price for the acquisition of the Additional Car Parks shall be agreed between GZI and the Manager and determined by reference to an independent valuer’s valuation of the same in accordance with the REIT Code. The date of such valuation shall comply with the relevant requirements under the REIT Code. Save as otherwise provided in this paragraph, the terms for the acquisition of the Additional Car Parks shall be the same as those for the acquisition of the West tower of Victory Plaza.

If, for any reason other than due to GZI’s default, the sale and purchase of the Additional Car Parks is not completed within the pre-agreed period of time or the Manager (acting on behalf of GZI REIT) does not elect to exercise the right of first refusal to acquire the Additional Car Parks, there shall be no restrictions on GZI’s ability to deal with the Additional Car Parks.

The right of first refusal will commence on the Listing Date until the earliest of the following occurring:

(a) the expiry of five years after the Listing Date;

(b) the Units ceasing to be listed on the Hong Kong Stock Exchange; or

(c) the entity which is the asset manager of GZI REIT ceasing for whatever reason to be a subsidiary of any member of the GZI Group or the Yue Xiu Group.

Further, if GZI or any of its subsidiaries intends to enter into a joint venture in respect of a Relevant Property whereby GZI or, as the case may be, its subsidiary is to hold an ownership interest of more than 50.0% but less than 95.0%, and such Relevant Property is reasonably

246 MATERIAL AGREEMENTS AND OTHER DOCUMENTS RELATING TO GZI REIT expected to be completed during the term of the right of first refusal, GZI will use all reasonable commercial endeavours to negotiate with the relevant joint venture party or parties such that the terms of the joint venture will enable it to include such Relevant Property within the scope of the right of first refusal.

The portfolio of properties which fall within the parameters of the above right of first refusal is set out in the section headed “Offering Circular Summary” in this Offering Circular. As GZI is currently in negotiations with a prospective purchaser of the East tower of Victory Plaza, the East tower will fall within the parameters of the right of first refusal only to the extent it is not sold prior to the completion of its construction.

Facility Agreement

On 7 December 2005, the Lending Banks entered into the Facility Agreement with the BVI Companies (as borrowers) and Holdco (as guarantor) in connection with the Loan Facility, a US$165.0 million three-year floating rate term loan facility. It is intended that the BVI Companies will fully draw down on the Loan Facility on the Listing Date and onward lend the funds to Holdco for partial payment on the Promissory Note (see the section headed “Use of Proceeds” in this Offering Circular).

The Loan Facility is guaranteed on a joint and several basis by the Trustee (in its capacity as trustee of GZI REIT) and Holdco. The Trustee’s guarantee is subject to the proviso that its obligations as a guarantor will be limited to the aggregate amount of, and be paid from, the assets held by it for GZI REIT.

The availability of the Loan Facility on the Listing Date is conditional on certain conditions precedent being satisfied. Such conditions include, among others, the Global Offering becoming unconditional by no later than 21 December 2005 and the provision of documents evidencing the approval and authority of the BVI Companies and Holdco in entering into the Facility Agreement.

Interest under the Loan Facility is payable quarterly (or such other period as agreed by the BVI Companies and the facility agent acting on the instructions of the majority of the Lending Banks) at a rate of 1.35% per annum above the three-month US dollar LIBOR rate, and principal will be payable in one lump sum at the end of the three-year period commencing from the drawdown date.

The Facility Agreement contains certain covenants and undertakings to be provided by the BVI Companies and Holdco including (without limitation) negative pledges, provision of financial and operational information and valuation report(s) and maintenance of insurances. In particular, Holdco, on a consolidated basis, must maintain an aggregate interest coverage ratio of not less than two times. If the interest coverage ratio at any time falls below two times, it will constitute an event of default under the Facility Agreement.

Holdco must also maintain a security margin (being the ratio of the aggregate principal amount of all borrowings under the Facility Agreement to the aggregate value of the Properties as shown by the then latest annual valuation reports plus the aggregate amount of all cash in the bank accounts held by the BVI Companies and Holdco) of no more than 50.0%. In the event that such margin exceeds 50.0%, it will constitute an event of default under the Facility Agreement.

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It will also constitute an event of default under the Facility Agreement if GZI ceases to hold, directly or indirectly, at least 15.0% of all Units in issue at any time. GZI has undertaken to the Trustee, the Manager and Holdco that, for so long as any Loan Proceeds remain unpaid, GZI shall hold, directly or indirectly, at least 15.0% of all Units in issue at any time.

Other events of default under the Facility Agreement includes (without limitation) non- payment of any sum under the Facility Agreement or any security provided in respect of the Loan Facility, misrepresentation, cross default in relation to the financial indebtedness of the BVI Companies, Holdco or GZI REIT, breach of any financial covenants under the Facility Agreement, change of control of the BVI Companies or Holdco, suspension of trading of the Units on the Hong Kong Stock Exchange for more than a specified number of days, termination of listing of the Units on the Hong Kong Stock Exchange and the occurrence of any material adverse change to the BVI Companies or Holdco or the Trustee which is reasonably likely to adversely affect the ability of any of the BVI Companies, Holdco or the Trustee to perform any of their respective obligations under the Facility Agreement or any security provided in respect of the Loan Facility. If any event of default under the Facility Agreement occurs, the Lending Banks may declare a default and demand the immediate repayment of all outstanding loan and other sums under the Facility Agreement, and enforce the security provided in respect of the Loan Facility.

To secure, pari passu and pro rata, the BVI Companies’ obligations under the Loan Facility, a security package has been granted in favour of a security trustee to hold on behalf of each Lending Bank. The security package includes, among others, a registered mortgage over each Property, assignment of rental income and all other proceeds arising from each of the Properties and of all tenancy agreements relating to each of the Properties and a legal mortgage over the BVI Company Shares.

Swap Agreements

In conjunction with the Loan Facility, each of the BVI Companies has also entered into agreements with each of the Lending Banks for US$/RMB non-deliverable swap facilities covering the swap of a floating rate US dollar liability into a synthetic Renminbi liability with a series of fixed rate cash flows denominated in Renminbi, payable in US dollars, with a principal exchange at maturity also settled in US dollars for an aggregate notional principal amount of US$165 million for a minimum tenor of three years.

The BVI Companies’ obligations under the swap agreements are secured, pari passu and pro rata, on the security package described in the subsection headed “Facility Agreement” above.

The BVI Companies will also grant guarantees in favour of the Lending Banks (as swap providers) to secure their obligations under the swap agreements.

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Tenancy Services Agreements

The Manager and each of Full Estates, Moon King and Keen Ocean have entered into a Tenancy Services Agreement with Yicheng while the Manager and Partat have entered into a Tenancy Services Agreement with White Horse Property Management Company.

Leasing Agents’ fees

Each of the Tenancy Services Agreements relating to the Fortune Plaza Units, the City Development Plaza Units and the Victory Plaza Units provides for payment by the relevant BVI Company to Yicheng of a monthly fee of 4.0% per annum of the gross revenue of the relevant Property. The Tenancy Services Agreement relating to the White Horse Units provides for payment by Partat to White Horse Property Management Company of a monthly fee of 3.0% per annum of the gross revenue of the White Horse Units.

All such amounts paid to each Leasing Agent shall be reconciled by the Manager with the consolidated audited financial statements of GZI REIT for the relevant Financial Year within fourteen days of the completion of such audited financial statements (or such other period as may be agreed between the parties), and such reconciliation shall be reviewed by the auditor of GZI REIT. Any balance of the fees due and payable to the Leasing Agent or any refund due from the Leasing Agent shall be paid by the relevant BVI Company or the Leasing Agent (as the case may be) within fourteen days after completion of the said audited financial statements.

The Leasing Agents have agreed that, for so long as they are also the property managers of the relevant Properties, their fees as leasing agent under the Tenancy Services Agreements shall also satisfy the property management fees which they are entitled to receive from the relevant BVI Companies for any vacant units in the Properties under the various property management arrangements described in the section headed “The Leasing Agents — The Leasing Agents” of this Offering Circular as well as the subsections headed “White Horse Property Management Agreement — Property Management Fees” and “Victory Plaza Property Management Agreement — Property Management Fees” below.

Term of appointment

The initial term of appointment of the Leasing Agents is from 7 December 2005 till 6 December 2008 (unless earlier terminated in accordance with the provisions of the Tenancy Services Agreements). Six months prior to expiry of this term, each of the Leasing Agents may request to extend its appointment for a further three years on the same terms and conditions except that all fees payable to it shall be revised to the prevailing market rates and provided that such extension shall be subject to Unitholders’ approval.

The relevant BVI Company, on the recommendation of the Manager, will decide the prevailing market rates for the relevant Leasing Agent’s fees for the extension term and if the relevant Leasing Agent disagrees with the relevant BVI Company’s decision on the prevailing market rates, the matter will be referred to an independent expert whose determination of such rates shall be final and binding on the parties.

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Leasing Agents’ services

The services provided by each of the Leasing Agents include the following:

• tenancy management services, including reviewing and advising on tenants’ expansion requirements, administering collection of deposits, rent and other sums due from tenants, evaluating the assessment or re-assessment of government rates and taxes (including urban real estate tax) for the Properties, preparing the annual budget and three years’ budget forecast for each Property, as well as advising tenants on the procedures for setting up operations.

The leasing and marketing services described above will be provided to GZI REIT on an exclusive basis. However, the Tenancy Services Agreements do not preclude GZI REIT from also obtaining such services from other service providers.

Non-reimbursable expenses

Under the Tenancy Services Agreements, the Leasing Agents will not be reimbursed for the following expenses, which shall be fully borne by the Leasing Agents:

• costs and expenses under contracts entered into by the Leasing Agents with third party service providers, delegates and agents for the provision of, among other things, supervision, maintenance, marketing and other services for the Properties, where such services are not directly provided by employees of the Leasing Agents;

• costs and expenses for utilities, including but not limited to, water, gas and electricity supply to the Properties, save where such costs and expenses are borne by the tenants thereof; and

• marketing and leasing commissions of third party service providers for the leasing of the Properties.

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Termination

In respect of each Tenancy Services Agreement, the Manager or the relevant BVI Company may terminate the appointment of a Leasing Agent on the occurrence of certain specified events, which include the bankruptcy, insolvency or liquidation of the Leasing Agent, or if the Leasing Agent fails to remedy any breach of its obligations under the Tenancy Services Agreement within 90 days of receiving of written notice of such breach (where such breach is capable of remedy).

In the event of the sale of a Property by a BVI Company or the sale of a BVI Company by Holdco or GZI ceasing to be the holding company of a Leasing Agent, the Manager will be entitled to terminate the appointment of the Leasing Agent under the relevant Tenancy Services Agreement by not less than 60 days’ prior written notice to the Leasing Agent. Such termination shall not be treated as termination due to the default of any party under the Tenancy Services Agreement and the Leasing Agent shall not be entitled to damages or compensation in consequence of such termination.

In addition, the appointment of a Leasing Agent shall immediately terminate upon the Manager ceasing to be the manager of GZI REIT, or GZI REIT being merged, wound up or otherwise terminated. The relevant Leasing Agent will not be entitled to damages or compensation if its services are terminated in any such circumstances.

Upon termination of the appointment of the Leasing Agent under a Tenancy Services Agreement, the Manager shall as soon as practicable recommend to the relevant BVI Company the appointment of a replacement leasing agent and arrange for the entry into a tenancy services agreement with the replacement leasing agent. The outgoing Leasing Agent shall novate or assign all agreements entered into by the Leasing Agent for the collection of property management fees from tenants, novate or assign (if required by the Manager) the contracts entered into by the Leasing Agent with third party service providers, and, at the instruction of the Manager, do such other things as the Manager or the Property Company may consider necessary or desirable to ensure that there is no disruption to the continued proper management of the relevant Property until such time as a replacement leasing agent is appointed.

Novation

The Manager is entitled to novate its rights, benefits and obligations under each Tenancy Services Agreement to a new manager of GZI REIT appointed in accordance with the terms of the Trust Deed.

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Property Consultancy Agreement

By a letter of engagement letter dated 1 November 2005, the Property Adviser was appointed by the Manager to provide certain property consultancy services to the Manager as and when required for a three-year period commencing on 1 November 2005. The Manager has the option to extend the engagement of the Property Adviser for a further two years. When requested by the Manager, the Property Adviser will provide advice in relation to, among other things:

• operational matters of GZI REIT (such as preparation of business plans and budgets, monitoring of GZI REIT’s assets for compliance with budgets and monitoring the day to day management of GZI REIT);

• training the Manager’s staff in relation to asset management and property management related matters and performing property management audits; and

• development of the Manager’s IT capabilities and infrastructure.

The Property Adviser’s fees for such services will be borne by the Manager and not by GZI REIT.

Agreement to Appoint White Horse Property Management Company to Manage the Common Areas in White Horse Building

Partat, White Horse JV (the owner of the car park in White Horse Building), Guangzhou City Xi Jiao Villagers’ Committee (which owns and manages the Xi Jiao Market on the lower ground level of White Horse Building) and White Horse Property Management Company entered into an agreement on 7 December 2005 under which the three owners of White Horse Building appointed White Horse Property Management Company to manage the common areas in the Property.

In the agreement, Partat, White Horse JV, Guangzhou City Xi Jiao Villagers’ Committee also agreed not to establish an owners’ committee for White Horse Building.

White Horse Property Management Agreement

Further to the agreement between Partat, White Horse JV and Guangzhou City Xi Jiao Villagers’ Committee to appoint White Horse Property Management Company to manage the common areas in the Property, Partat and White Horse JV entered into a property management agreement with White Horse Property Management Company on 7 December 2005 to set out the terms and conditions for the provision of property management services in respect of the portions of White Horse Building owned by Partat and White Horse JV.

Property Management Fees

Under this agreement, White Horse Property Management Company is entitled to collect a monthly property management fee charged at the rate of RMB50 for every square metre of Gross Floor Area comprised in the portions of White Horse Building owned by Partat and White Horse JV.

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This fee is payable by Partat and White Horse JV (in respect of vacant units in the portions of White Horse Building owned by them) and by the tenants in all other cases. (See the sub-section headed “Tenancy Services Agreements — Leasing Agents’ Fees” above for separate arrangements agreed to by White Horse Property Management Company for its property management fees in respect of vacant units.)

Property management fees so collected are to be used for payment of, among other things, fitting out and maintenance expenses, cleaning and landscaping expenses, relevant taxes, reimbursement of White Horse Property Management Company’s staff costs, as well as White Horse Property Management Company’s remuneration (under PRC law, White Horse Property Management Company is entitled to retain 10.0% of the property management fees as its remuneration).

Term of Appointment

White Horse Property Management Company has been appointed to provide property management services in respect of the portions of White Horse Building owned by Partat and White Horse JV from 19 October 2005 to 18 October 2008.

White Horse Property Management Company’s Services

The services provided by White Horse Property Management Company under this agreement include, among other things, repair and maintenance services, cleaning and security services, drawing up a Handbook for Tenants (which is subject to the approvals of Partat and White Horse Clothing Market Limited) as well as producing annual property management plans and budgets and semi-annual property management accounts for approval or, as the case may be, review by Partat and White Horse JV.

White Horse Property Management Company may appoint specialised service providers to carry out specialised property management functions but may not delegate the whole of its property management responsibilities under this agreement to another person.

GCCD’s Appointment of Moon King as its Representative and Irrevocable Undertaking to Moon King

GCCD, as the legal owner of certain units in the West tower, the car park and the clubhouse (comprising 14.9% of the total Gross Floor Area of Fortune Plaza(1)), has, by a letter dated 7 December 2005, irrevocably appointed Moon King as its representative to attend and vote at all meetings of the owners’ committee of Fortune Plaza. Under this letter of appointment, GCCD also undertook to accept, adopt and ratify all actions carried out, and all documents signed, by Moon King as its representative.

(1) GCCD owns certain units in the podium which comprise a total of 0.6% of the Gross Floor Area of Fortune Plaza. The voting rights in respect of such units in the podium have not been accorded to Moon King as GCCD has signed a memorandum of understanding with a third party to sell those units.

253 MATERIAL AGREEMENTS AND OTHER DOCUMENTS RELATING TO GZI REIT

On the same date, GCCD has also given an irrevocable undertaking to permit Moon King to vote on GCCD’s behalf its voting rights in respect of certain units in the West tower, the car park and the clubhouse (which constitute 14.9% of the total voting rights at the owners’ general meetings of Fortune Plaza) at all meetings of the owners’ committee, howsoever Moon King deems appropriate. The undertaking further provides that if GCCD transfers its ownership in the car park and/or the clubhouse, on the basis that there is no material prejudice to the lawful rights and interests of GCCD, it shall also use its best endeavours to obtain a letter of appointment and an undertaking from the transferee in favour of Moon King on similar terms.

As a result of the above arrangement, GZI REIT will have effective control of 65.1% of the total voting rights at an owners’ general meeting of Fortune Plaza. Accordingly, GZI REIT will be the single largest owner of Fortune Plaza and will be able to carry the majority votes required for matters other than:

• amendment of the deed of mutual covenant for the building or the rules of proceedings for owners’ general meetings;

• appointment or dismissal of the property management company for the building; and

• any proposal to use or to raise special repair fund in respect of the building,

(collectively, “Reserved Matters”).

The above undertaking will automatically terminate if the proportion of Gross Floor Area held by Moon King in Fortune Plaza reaches 67.0%.

GCCD’s Appointment of Full Estates as its Representative and Irrevocable Undertaking to Full Estates

GCCD, as the legal owner of the car park in City Development Plaza, has, by a letter dated 7 December 2005, irrevocably appointed Full Estates as its representative to attend and vote at all meetings of the owners’ committee of City Development Plaza. Under this letter of appointment, GCCD also undertook to accept, adopt and ratify all actions carried out, and all documents signed, by Full Estates as its representative.

On the same date, GCCD, as the legal owner of the car park in City Development Plaza, has also given an irrevocable undertaking to permit Full Estates to vote on GCCD’s behalf, howsoever Full Estates deems appropriate, at all meetings of the owners’ committee of City Development Plaza. The undertaking further provides that if GCCD transfers its ownership of any of the relevant portions of City Development Plaza, on the basis that there is no material prejudice to the lawful rights and interests of GCCD, it shall also use its best endeavours to obtain a letter of appointment and an undertaking from the transferee in favour of Full Estates on similar terms.

With this undertaking, GZI REIT will have effective control of 74.1% of the total voting rights at an owners’ general meeting of City Development Plaza, and will be able to carry the majority votes required for all matters in respect of the Property, including Reserved Matters.

254 MATERIAL AGREEMENTS AND OTHER DOCUMENTS RELATING TO GZI REIT

The above undertaking will automatically terminate if the proportion of Gross Floor Area held by Full Estates in City Development Plaza reaches 67.0%.

Irrevocable Undertaking to Keen Ocean

GCCD, as the legal owner of the car park and part of basement 1 (other than the portion owned by Keen Ocean) of Victory Plaza and as the developer of the two office tower blocks above the Victory Plaza podium, has, by a letter dated 7 December 2005, given an irrevocable undertaking to Keen Ocean that so long as it is the owner of the two office tower blocks, it agrees with Keen Ocean that the owner of the podium will have exclusive right to use, and to all proceeds arising from the use of, the common area within the podium as well as the internal and external walls of the podium, and the exclusive right to decide on all operational matters relating only to the podium.

The undertaking further provides that if GCCD transfers its ownership in the office tower blocks other than to Keen Ocean, it will ensure that the transferee agrees to the foregoing undertakings in the relevant transfer agreement. In addition, a form of deed of mutual covenant which reflects the above mentioned undertakings will be attached to the relevant transfer agreement and the transferee will be required to agree that when an owners’ committee is set up for Victory Plaza and an owners’ meeting is convened to adopt a deed of mutual covenant, it will vote in favor of adopting a deed of mutual covenant in the form attached to such transfer agreement.

In addition, GCCD has agreed to convene a meeting of the owners of Victory Plaza within one year from the date of the undertaking to establish the owner’s committee and to vote for the adoption of the form of deed of mutual covenant attached to the undertaking at the same meeting.

Victory Plaza Property Management Agreement

Keen Ocean and GCCD (as the owner of the car park in Victory Plaza and the developer of the two office tower blocks above the Victory Plaza podium) entered into a property management agreement with Yicheng on 7 December 2005 to appoint Yicheng to manage the common areas in Victory Plaza.

Property Management Fees

Under this agreement, Yicheng is entitled to collect a monthly property management fee charged at the rate of RMB48 for every square metre of Victory Plaza’s Gross Floor Area. This fee is payable by Keen Ocean and GCCD (in respect of vacant units in Victory Plaza) and by the tenants in all other cases. (See the subsection headed “Tenancy Services Agreements — Leasing Agents’ Fees” above for separate arrangements agreed to by Yicheng for its property management fees in respect of vacant units.)

255 MATERIAL AGREEMENTS AND OTHER DOCUMENTS RELATING TO GZI REIT

Yicheng is entitled to retain 10.0% of the property management fees as its remuneration). Additionally, for every RMB48 in property management fees collected by Yicheng, RMB10 may only be used, subject to the approval of Keen Ocean and GCCD, for Victory Plaza’s promotional expenses.

Term of Appointment

Yicheng has been appointed to provide property management services in respect of Victory Plaza commencing from 7 December 2005. Yicheng’s appointment under this agreement will only terminate when the owners’ committee of Victory Plaza is established and the committee enters into a new property management agreement (which could either be Yicheng or another service provider), and such agreement comes into effect.

Yicheng’s Services

The services provided by Yicheng under this agreement include, among other things, repair and maintenance services, cleaning and security services, drawing up a Handbook for Tenants (which is subject to the approvals of Keen Ocean and GCCD) as well as producing annual property management plans and budgets and semi-annual property management accounts for approval or, as the case may be, review by Keen Ocean and GCCD.

Yicheng may appoint specialised service providers to carry out specialised property management functions but may not delegate the whole of its property management responsibilities under this agreement to another person.

Victory Plaza Supplemental Property Management Agreement

On 7 December 2005, Keen Ocean, GCCD and Yicheng entered into a supplemental property management agreement which provided that:

• Yicheng shall establish two property management offices(1) to manage the two different portions of Victory Plaza;

• the property management office for the Victory Plaza podium shall be responsible for managing the equipment and facilities (such as the shared generator room, the security system, the fire control system and the waste treatment system) which will eventually be shared by the podium and the office tower blocks;

• the expenses relating to the common equipment and facilities will be apportioned between the podium and the office tower blocks on the basis of their relative Gross Floor Areas;

(1) One property management office is in the Victory Plaza car park and the other in the office tower block (both of which do not form part of the Victory Plaza Units).

256 MATERIAL AGREEMENTS AND OTHER DOCUMENTS RELATING TO GZI REIT

• Keen Ocean has the exclusive right to use, and to all proceeds arising from the use of, the common area within the podium as well as the internal and external walls of the podium while the proceeds derived from other common areas in Victory Plaza shall be shared between the owners of Victory Plaza pro rata according to the Gross Floor Area owned by each of them; and

• Keen Ocean has the exclusive right to decide on all other operational matters relating only to the podium.

Fortune Plaza and City Development Plaza Property Management Agreements

The owners’ committees of Fortune Plaza and City Development Plaza (each acting for and on behalf of all the owners and tenants of Fortune Plaza and City Development Plaza respectively) have each entered into a property management agreement with Yicheng under which Yicheng was appointed as the property manager of Fortune Plaza and City Development Plaza. The agreement for Fortune Plaza was entered into on 1 July 2005 and is for a duration of three years from 1 July 2005 to 30 June 2008; the agreement relating to City Development Plaza was entered into on 15 July 2002 and is for a duration of five years from 19 July 2002 till 18 July 2007.

The property management agreements set out the services to be performed by Yicheng. Yicheng’s primary responsibility under each of these agreements includes the upkeep, repair and maintenance of the common areas and facilities in the subject property. In this respect, Yicheng is required to prepare an annual property management plan and budget for each of the subject properties, and must draw up its property management accounts for review by the relevant owners’ committee once every six months. Yicheng is also required, at the request of an owner or user of part of the property, to undertake the upkeep, repair and maintenance of that owner’sor user’s premises for a reasonable fee to be separately borne by that owner or user.

Under the property management agreements, the owners’ committees have the right to, among other things, review and approve Yicheng’s property management proposal as well as its annual property management plan and budget for the subject properties.

257 MATERIAL AGREEMENTS AND OTHER DOCUMENTS RELATING TO GZI REIT

For its property management services in respect of Fortune Plaza and City Development Plaza, Yicheng is entitled to collect from tenants a monthly property management fee charged at the following rates:

Fortune Plaza City Development Plaza

Office portions RMB25/sq.m./month RMB25/sq.m./month Retail portions RMB35/sq.m./month RMB33/sq.m./month Other portions n.a. RMB35/sq.m./month (for premises used for food and beverage operations)

Under PRC laws, Yicheng is entitled to retain 10.0% of the property management fees as its remuneration.

The respective owners of any vacant units in Fortune Plaza and City Development Plaza will have to pay the property management fees of Yicheng calculated based on 50.0% of the rates stated above. White Horse Property Management Company and Yicheng have each agreed that its fees under the relevant Tenancy Services Agreements shall also satisfy the property management fees which it is entitled to receive from the relevant BVI Company for any vacant units in the relevant Property. (See the sub-section headed “Tenancy Services Agreements — Leasing Agents’ Fees” above.)

White Horse Trademark Licences

By six licence agreements, each dated 7 December 2005, White Horse Property Management Company has granted Partat the exclusive right to use six of its registered trademarks of different classes in the PRC.

Under each licence agreement, Partat is required to pay a nominal fee of RMB1.00 upon the signing thereof. In return, Partat will have the exclusive right to use the relevant trademark from the effective date of the agreement to 31 December 2006 in accordance with the terms of the licence agreements. Each licence agreement provides that if White Horse Property Management Company extends the registration of the relevant trademark, it shall extend the term under the licence agreement correspondingly upon completion of the necessary registration procedures, and enter into a new licence agreement with Partat. So long as White Horse Property Management Company continues to be the sole legal owner of the trademark in the PRC, the extended term can be perpetual.

Without the consent of Partat, White Horse Property Management Company shall not sell, transfer or dispose of the subject trademarks or any interest therein to any third party, or otherwise deal with the trademarks or any interest therein.

Upon written notice to White Horse Management Company, Partat is entitled to assign the right to use the trademarks to any enterprise which it has invested. Subject to the aforesaid, Partat is not entitled to assign the right to any third party.

258 MATERIAL AGREEMENTS AND OTHER DOCUMENTS RELATING TO GZI REIT

Partat shall indemnify White Horse Management Company for any loss suffered due to the misuse of the trademarks by Partat. Under each of the licence agreements, White Horse Management Company is entitled to terminate the relevant agreement upon such misuse by Partat which causes material loss to White Horse Management Company. On the other hand, White Horse Management Company shall fully indemnify Partat for any loss suffered by Partat due to the breach of the licence agreement by White Horse Management Company.

Yue Xiu Trademark Licence

By a licence agreement dated 7 December 2005, in consideration of HK$1.00, Yue Xiu has granted the Manager (acting in its capacity as manager of GZI REIT) the right and licence to use and sub-licence certain “Yue Xiu” trademarks in connection with the business of GZI REIT in the PRC and Hong Kong.

The Manager is entitled to sub-license any of the rights granted under the licence agreement to any third parties for the purposes of, among other things, the business of GZI REIT. The right to such use by any sub-licencee shall be personal to such sub-licencee, who shall have no right to further sub-licence such right to any other third party, other than to Holdco, Partat, Moon King, Full Estates and Keen Ocean.

The term of the licence agreement shall commence on 21 December 2005 and shall continue in perpetuity without any limit in time, subject to earlier termination pursuant to the terms thereof.

The licence agreement shall automatically terminate forthwith if the Manager ceases to be the manager of GZI REIT or GZI ceases to be a shareholder of the Manager. Either party to the licence agreement may give notice in writing to the other party terminating the agreement with immediate effect if the other party commits any material breach of any of the terms of the agreement or (if such a breach is remediable) fails to remedy that breach within 60 days from the date of that party being notified of the breach.

On termination of the licence under the licence agreement, the Manager shall within six months of the date of termination cease using the “Yue Xiu” trademark.

Underwriting Agreements

The Hong Kong Underwriting Agreement was entered into on 11 December 2005 and the International Underwriting Agreement is expected to be entered into on or about 15 December 2005. For a summary of the key terms and provisions of the Hong Kong Underwriting Agreement, see the section headed “Underwriting” in this Offering Circular.

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Details of Connected Party Transactions App B B2(o) RC 8.3(a)(b)(c) Following completion of the Global Offering, there will be continuing transactions between GZI REIT and the following persons noted below, which will constitute connected party transactions of GZI REIT within the meaning of the REIT Code. Details of these transactions as well as the modifications or waivers sought by GZI REIT in relation to the relevant provisions in Chapter 8 of the REIT Code on connected party transactions are set out below.

Introduction

Following completion of the Global Offering there will be, and it is likely that there will continue to occur from time to time, a number of transactions between GZI REIT and the companies or entities held or controlled by GZI REIT (collectively, the “GZI REIT Group”) and parties which have a relationship or connection with GZI REIT.

The connected party transaction rules of the REIT Code govern transactions between the GZI REIT Group and connected persons thereof. Such transactions will constitute connected party transactions for the purposes of the REIT Code.

GZI REIT’s connected persons will include, among others: App B B5

• significant Unitholders;

• the Trustee and companies within the same group as well as associated companies of the Trustee, and the directors, senior executives and officers of the Trustee and their respective associates. As a result, GZI REIT’s connected persons will include HSBC Holdings plc and other members of its group since the Trustee is an indirect wholly owned subsidiary of HSBC Holdings plc;

• the Manager as well as controlling entities, holding companies, subsidiaries and associated companies of the Manager; and

• the Directors, senior executives and officers of the Manager and their respective associates. The associates of the Directors of the Manager include (among others) other companies of which they are directors.

The Manager has established an internal control system intended to ensure that connected party transactions between the GZI REIT Group and its connected persons are monitored and that these are undertaken on terms in compliance with the REIT Code. As required by the REIT Code, all connected party transactions must, among other things, be carried out at arm’s length, on normal commercial terms and in the best interests of Unitholders.

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Internal Controls App B B2(k) B4(a) As a general rule, the Manager must demonstrate to the Audit Committee that connected party transactions entered into by GZI REIT are, among other things, carried out at arm’s length, on normal commercial terms and in the best interests of Unitholders, which may entail (where practicable) obtaining quotations from parties unrelated to the Manager, or obtaining one or more valuations from independent professional valuers.

The Manager shall investigate and monitor all transactions by the GZI REIT Group in order to determine whether such transactions are connected party transactions. Such investigation should be carried out, if practicable, before such transactions are entered into by the GZI REIT Group.

Where practicable, each counterparty to a transaction with the GZI REIT Group shall be required to confirm to the Manager whether the counterparty is a connected person. Such confirmation should be obtained, if practicable, before such transactions are entered into by the GZI REIT Group.

The Manager will maintain a register to record all connected party transactions which are entered into by members of the GZI REIT Group and the bases, including any quotations from unrelated parties and independent valuations obtained to support such bases, on which they are entered into. The Manager will also incorporate into its internal audit plan a review of all connected party transactions entered into by members of the GZI REIT Group. The Audit Committee shall review the internal audit reports to ascertain that the guidelines and procedures established to monitor connected party transactions have been complied with, and among others, whether the transactions are fair and reasonable. In addition, the Trustee will also have the right to review such audit reports to ascertain that the REIT Code has been complied with.

Under the Trust Deed, a Unitholder is prohibited from voting his Units at, or being part of a quorum for, any meeting of Unitholders convened to approve any matter in which the Unitholder has a material interest in the business to be conducted and that interest is different from the interests of other Unitholders.

It is also provided in the Trust Deed that as and to the extent required by the REIT Code or any conditions of waivers and exemptions from the operation of the REIT Code granted by the SFC from time to time, upon request in writing by the Manager, the Trustee shall take actions or commence proceedings on behalf of GZI REIT as necessary, including against any connected persons of the Trustee in relation to breach of any transaction or agreements entered into by the Trustee for and on behalf of GZI REIT with such persons. Notwithstanding the foregoing, the Manager shall inform the Trustee as soon as it becomes aware of any breach of any agreement entered into by any member of the GZI REIT Group (or by the Trustee or the Manager for and on behalf of GZI REIT) with a connected person of the Trustee and the Manager may take such action as it deems necessary to protect the rights of Unitholders and/or which is in the interests of

261 CONNECTED PARTY TRANSACTIONS

Unitholders. Any decision by the Trustee not to take action against a connected person of the Trustee shall not constitute a waiver of the right of any member of the GZI REIT Group to take such action as it deems fit against such connected person unless the Manager may approve the waiver in accordance with the above positions.

Notwithstanding the measures in the internal control procedures described above, the Manager will have to ensure compliance with the REIT Code requirements on connected party transactions.

Waivers from Strict Compliance with Certain Provisions in Chapter 8 of the REIT Code

1. Waivers of Requirements with Respect to Certain Transactions

The Manager has applied for, and the SFC has granted, a waiver from strict compliance with the disclosure requirements, and the requirements for the approval of Unitholders, under Chapter 8 of the REIT Code in respect of the following connected party transactions between the GZI REIT Group and entities which are connected persons of GZI REIT as a result of their connection with the Manager (the “Manager Group”):

Leasing transactions

Certain portions of the Properties have been leased to persons in the Manager Group (see Appendix X to this Offering Circular for details of these leases and leases with other connected persons of GZI REIT). These leases were entered into in the ordinary and usual course of business of GZI REIT, on normal commercial terms and were based on market pricing.

Property management arrangements

Partat, White Horse JV and Guangzhou City Xi Jiao Villagers’ Committee have appointed White Horse Property Management Company to manage the common areas in White Horse Building (see the sections headed “Material Agreements and Other Documents Relating to GZI REIT — Agreement to Appoint White Horse Property Management Company to Manage the Common Areas in White Horse Building” and “Material Agreements and Other Documents Relating to GZI REIT — White Horse Property Management Agreement” in this Offering Circular for further details).

Keen Ocean and GCCD have appointed Yicheng to manage the common areas in Victory Plaza (see the sections headed “Material Agreements and Other Documents Relating to GZI REIT — Victory Plaza Property Management Agreement” and “Material Agreements and Other Documents Relating to GZI REIT — Victory Plaza Supplemental Property Management Agreement” in this Offering Circular for further details).

262 CONNECTED PARTY TRANSACTIONS

The owners’ committees of Fortune Plaza and City Development Plaza (each acting for and on behalf of all the owners and tenants of Fortune Plaza and City Development Plaza respectively) have appointed Yicheng to manage the common areas in Fortune Plaza and City Development Plaza respectively (see the section headed “Material Agreements and Other Documents Relating to GZI REIT — Fortune Plaza and City Development Plaza Property Management Agreements” in this Offering Circular for further details).

The property management agreements described above were entered into in the ordinary and usual course of business of GZI REIT, on normal commercial terms and were based on market pricing.

Tenancy Services Agreements

The Manager and each of Full Estates, Moon King, Keen Ocean have entered into Tenancy Services Agreements with Yicheng, and the Manager and Partat have entered into a Tenancy Services Agreement with White Horse Property Management Company, under which Yicheng and White Horse Property Management Company have agreed to provide leasing, marketing and tenancy management services in respect of the Properties (see the section headed “Material Agreements and Other Documents Relating to GZI REIT — Tenancy Services Agreements” in this Offering Circular for further details).

The Tenancy Services Agreements were entered into in the ordinary and usual course of business of GZI REIT, on normal commercial terms and were based on market pricing.

Trademark licence agreements

Six licence agreements have been entered into between Partat and White Horse Property Management Company under which White Horse Property Management Company granted to Partat the right to certain “White Horse” trademarks for a nominal fee of RMB1.00 in each case (see the section headed “Material Agreements and Other Documents Relating to GZI REIT — White Horse Trademark Licences” in this Offering Circular for further details).

A licence agreement has also been entered into between Yue Xiu and the Manager under which Yue Xiu granted to the Manager (as manager of GZI REIT) the right to use and sub-licence certain “Yue Xiu” trademarks for a nominal fee of HK$1.00 (see the section headed “Material Agreements and Other Documents Relating to GZI REIT — Yue Xiu Trademark Licence” in this Offering Circular for further details).

For the various categories of connected party transactions listed above, the Manager has also applied for, and the SFC has granted, waivers from strict compliance with:

(a) paragraph 8.1(f) of the REIT Code, such that, other than in respect of employees of the Manager itself, those persons falling within the scope of employees in paragraphs (c) and (k) of the definition in Schedule 1 of the SFO (namely, in respect of any employee of the relevant connected person and, where the relevant connected person is a

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corporation, each employee of any of its related corporations, etc) be excluded as connected persons of the Manager Group, but such exclusion does not exempt such persons from other categories of connected persons as defined in the REIT Code; and

(b) paragraph 8.1(g) of the REIT Code, such that the Guangzhou Municipal People’s Government (the 100.0% beneficial owner of Yue Xiu) will not be regarded as a controlling entity or holding company of the Manager or GZI in so far as the provisions of Chapter 8 of the REIT Code are concerned, in respect of connected party transactions falling within the categories set out above but not otherwise.

Conditions of waiver

Pursuant to such waivers, the connected party transactions falling within the categories listed above are exempt from strict compliance with the disclosure requirements as connected party transactions and are not subject to Unitholders’ approval under Chapter 8 of the REIT Code, subject to the terms and conditions stated below:

(i) Extension or Modification

The waivers for the connected party transactions listed above will be for an initial duration commencing from the Listing Date and ending on 31 December 2008 (the “Initial Waiver Period”). The waivers may be extended beyond the Initial Waiver Period, and/or the conditions of the waiver may be modified from time to time, provided that:

(a) the approval of Unitholders other than those who have a material interest in the relevant transactions within the meaning of Paragraph 8.11 of the REIT Code (“Independent Unitholders”) is obtained by way of an ordinary resolution passed in a general meeting of Unitholders;

(b) disclosure of details of the proposed extension and/or modification (as the case may be) shall be made by way of an announcement by the Manager of such proposal, and a circular and notice shall be issued to Unitholders in accordance with Chapter 10 of the REIT Code; and

(c) any extension of the period of the waiver shall, on each occasion of such extension, be for a period which shall expire not later than the third full financial year-end date after the date on which the approval referred to in paragraph (a) above is obtained.

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(ii) Annual caps

In any relevant Financial Year, the annual value of the leasing transactions and the Tenancy Services Agreement described above shall not exceed the respective annual cap amounts set out below:

(a) Leasing transactions: In respect of the relevant leasing transactions:

• an independent valuation shall be conducted for each such leasing transaction except where it is conducted on standard or published rates; and

• the aggregate annual amounts of rent payable to GZI REIT thereunder for the period from the Listing Date to 31 December 2005, FY2006, FY2007 and FY2008 shall not exceed the respective cap amounts set out below:

Listing Date to 31 December 2005 FY2006 FY2007 FY2008

HK$94,000 HK$3,684,000 HK$3,868,000 HK$4,061,000

The above caps have been determined with general reference to the historical data for the last three years, and based on the anticipated aggregate value of such transactions during the period from the Listing Date to 31 December 2005, FY2006, FY2007 and FY2008, with an appropriate buffer for contingencies such as: (i) changes in rental or other market conditions; and/or (ii) differences in pricing or other relevant practices or policies of GZI REIT compared with those applicable when the Properties were controlled by GZI REIT’s predecessors.

(b) Tenancy Services Agreements: In respect of the Tenancy Services Agreements, the aggregate annual amounts of fees payable by GZI REIT to Yicheng and White Horse Property Management Company for the period from the Listing Date to 31 December 2005, FY2006, FY2007 and FY2008 shall not exceed the respective cap amounts set out below:

Listing Date to 31 December 2005 FY2006 FY2007 FY2008

HK$257,000 HK$15,278,000 HK$16,005,200 HK$17,606,000

The above caps have been determined with general reference to the historical data for the last three years, and based on the anticipated aggregate value of such transactions during the period from the Listing Date to 31 December 2005, FY2006, FY2007 and FY2008, with an appropriate buffer for contingencies such as: (i) changes in market conditions; and/or (ii) differences in pricing or other relevant practices or policies of GZI REIT compared with those with those applicable when the Properties were controlled by GZI REIT’s predecessors.

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As the tenants in the Properties (and not the BVI Companies) pay the property management fees of Yicheng and White Horse Property Management Company as property managers of the Properties (see the section headed “The Leasing Agents — The Leasing Agents” in this Offering Circular), no caps are required in respect of such property management fees.

As the trademark licences described above are for nominal consideration, no caps are required in respect of the licence fees.

(iii) Disclosure in semi-annual and annual reports

Details of the above connected party transactions shall be disclosed in GZI REIT’s semi-annual and annual reports, as required under paragraph 8.14 of the REIT Code.

(iv) Auditors’ review procedures

In respect of each relevant financial period, the Manager will engage and agree with the auditors of GZI REIT to perform certain review procedures on connected party transactions. The auditors will then report to the Manager on the factual findings based on the work performed by them (and a copy of such report shall be provided to the SFC), confirming whether all such connected party transactions:

(a) have received the approval of the Board (including the independent non-executive Directors);

(b) are in accordance with the pricing policies of GZI REIT;

(d) the total value in respect of which has not exceeded the relevant cap amount (where applicable).

(v) Annual review by the Audit Committee and the independent non-executive Directors

The Audit Committee and the independent non-executive Directors shall review the relevant connected party transactions annually and confirm in GZI REIT’s annual report for the relevant Financial Year that such transactions have been entered into:

(a) in the ordinary and usual course of business of GZI REIT;

(b) on normal commercial terms (to the extent that there are comparable transactions) or, where there are not sufficient comparable transactions to judge whether they are on normal commercial terms, on terms no less favourable to GZI REIT than terms readily available to or from (as appropriate) independent third parties; and

266 CONNECTED PARTY TRANSACTIONS

(c) in accordance with the relevant agreements and the Manager’s internal procedures governing them (if any) on terms that are fair and reasonable and in the interests of the Unitholders as a whole.

(vi) Notification to the SFC

The Manager shall promptly notify the SFC and publish an announcement if it knows or has reason to believe that the auditors of GZI REIT and/or the Audit Committee will not be able to confirm the matters set out in, respectively, the sub-sections headed “Auditor’s review procedures” and “Annual review by the Audit Committee” above.

(vii) Auditors’ access to books and records

The Manager shall allow, and shall procure the counterparty to the relevant connected party transaction to allow, the auditors of GZI REIT sufficient access to their records for the purposes of reporting on the transactions.

(viii) Subsequent increases in annual caps with Independent Unitholders’ approval

The Manager may from time to time seek to increase one or more of the annual caps set out above, for example, when GZI REIT acquires additional properties and increases the scale of its operations or when there are changes in market or operating conditions, provided that:

(a) the Manager obtains the approval of Independent Unitholders by way of an ordinary resolution passed in a general meeting of Unitholders;

(b) the Manager discloses details of the proposal to increase the cap amounts by way of an announcement such proposal, and issue a circular and notice to Unitholders in accordance with Chapter 10 of the REIT Code; and

(c) the requirements set out in paragraphs (ii) to (vii) above shall continue to apply to the relevant transactions, save that the increased annual cap amounts shall apply.

(ix) Paragraph 8.14 of the REIT Code

The Manager shall comply with all requirements under paragraph 8.14 of the REIT Code where there is any material change to the terms of the relevant connected party transactions or where there is any subsequent changes to the REIT Code which may impose stricter requirements in respect of disclosure and/or Unitholders’ approval.

267 CONNECTED PARTY TRANSACTIONS

Details of the connected party transactions will be disclosed in the semi-annual and annual report of GZI REIT as required under paragraph 8.14 of the REIT Code. The Audit Committee and the other independent non-executive Directors will review the connected party transactions annually and confirm whether such transactions are carried out in the ordinary and usual course of business of GZI REIT based on normal commercial terms and in accordance with the relevant agreement governing them on terms that are fair and reasonable and in the interests of the Unitholders.

Opinion of the Board

Each of the Directors (including the independent non-executive Directors) confirms that:

(a) in his opinion, the cap amounts stated above, and the basis for such cap amounts, are fair and reasonable having regard to the interests of the Unitholders as a whole;

(b) in his opinion, for those continuing connected party transactions (“Continuing CPTs”)in respect of which waiver has been sought from the SFC (as described above) which will be subsisting as at the Listing Date, each of such Continuing CPT has been entered into: (i) in the ordinary and usual course of business of GZI REIT; and (ii) on normal commercial terms and are fair and reasonable and in the interests of the Unitholders as a whole; and

(c) for Continuing CPTs which are entered into after the Listing Date, each of such Continuing CPT shall be entered into: (i) in the ordinary and usual course of business of GZI REIT; and (ii) on terms which are normal commercial terms and are fair and reasonable and in the interests of the Unitholders as a whole.

Opinion of the Joint Global Coordinators

The Joint Global Coordinators confirm that, in their opinion, the Continuing CPTs subsisting as at the Listing Date are conducted in the usual and ordinary course of business of GZI REIT and are on normal commercial terms and are fair and reasonable and in the interests of the Unitholders as a whole.

Opinion of the Independent Property Valuer

The Independent Property Valuer has confirmed that the rents payable under the leasing transactions described above (save for the lease by Yicheng of space in the City Development Plaza Units for its on-site property management office(1)) were at the prevailing market levels when the leases were entered into and that the other commercial terms are normal commercial terms.

(1) In accordance with PRC regulations, Yicheng is entitled to premises for its use free of rent in connection with its property management functions at City Development Plaza. Yicheng pays a nominal monthly rent of HK$5.00 per square metre for these premises.

268 CONNECTED PARTY TRANSACTIONS

2. Waivers in Relation to Trustee Connected Persons

Additionally, the SFC has waived certain rules in Chapter 8 of the REIT Code in relation to connected persons of HSBC Institutional Trust Services (Asia) Limited in its capacity as the trustee of GZI REIT. The waivers and the conditions thereof are set out below.

For the purposes of this section:

(i) “HSBC Group” means The Hongkong and Shanghai Banking Corporation Limited and its subsidiaries and, unless otherwise expressly stated herein, excludes the Trustee and its proprietary subsidiaries (being the subsidiaries of the Trustee but excluding those subsidiaries formed in its capacity as the trustee of GZI REIT); and

(ii) “Trustee Connected Persons” include a director, a senior executive or an officer of any of the Trustee, and a controlling entity, holding company, subsidiary or associated company of the Trustee.

In support of the application for the above waivers, the Manager has undertaken with the SFC to meet certain conditions, including the following general conditions (“General Conditions”)onan on-going basis:

(i) the connected party transactions are carried out at arm’s length, on normal commercial terms and in the interests of the Unitholders as a whole;

(ii) the Manager must implement internal controls and compliance procedures to ensure that the connected party transactions are monitored and undertaken on terms in compliance with the REIT Code;

(iii) the Manager is satisfied with the Trustee’s internal controls and compliance procedures, such as “Chinese Walls”, to ensure that the operation of the Trustee is independent of other banking, financial services and other business functions and operations of the HSBC Group; and

(iv) the Manager incorporates provisions in the Trust Deed that require the Trustee to take actions or commence proceedings on behalf of GZI REIT, as the Manager deems necessary to protect the interest of Unitholders, including against the Trustee Connected Persons in relation to any transaction or agreement entered into by the Trustee for and on behalf of GZI REIT with such Trustee Connected Persons.

Separately and for the purpose of this waiver, each of the Trustee and The Hongkong and Shanghai Banking Corporation Limited (on behalf of itself and its subsidiaries) has given an undertaking to the SFC that it will act independently of one another in its dealings with GZI REIT. The Trustee undertakes to the SFC that it will not be involved in the making of any decisions on behalf of GZI REIT to enter into any transactions with the Trustee Connected Persons, subject only to the Trustee’s duties of oversight under the REIT Code and the Trust Deed.

269 CONNECTED PARTY TRANSACTIONS

The waivers are given on the premise that they only apply to connected party transactions involving the Trustee Connected Persons solely as a result of and for so long as the Trustee is in office as the trustee for GZI REIT. If connected party transactions arise as a result of other circumstances, these will be governed by Chapter 8 of the REIT Code.

Notwithstanding the foregoing, the SFC reserves the right to review or revise any of the terms and conditions of any of the waivers if there is any subsequent change of circumstances that affect any of them. In the event of future amendments to the REIT Code imposing more stringent requirements than those applicable at the date of the waivers granted by the SFC on transactions of the kind to which the transactions belong (including, but not limited to, a requirement that such transaction be made conditional on approval by the independent Unitholders), the Manager shall take immediate steps to ensure compliance with such requirements within a reasonable period of time.

Ordinary Banking and Financial Services with Trustee Connected Persons

As a general rule, the Manager must demonstrate to the Audit Committee that such transactions satisfy the General Conditions, which may entail (where practicable) obtaining quotations from parties unrelated to the Trustee. For example, for non-daily “corporate finance transactions”, there should be procedures to ensure (a) competitive “best pricing” (having regard to the nature of the services being sought and market conditions) and (b) the Trustee should not be involved in the selection of the parties to the transactions. All connected party transactions are to be reviewed by the independent non-executive directors of the Manager of GZI REIT to ensure that they are conducted in the best interests of the Unitholders as a whole.

Based on the controls summarised above, the Manager intends to adopt and observe certain policies with respect to transactions between GZI REIT Group and the HSBC Group. Further, the Manager may engage HSBC Group to provide “ordinary banking and financial services” to GZI REIT Group from time to time and will not be subject to any requirements for announcement or Unitholders’ approvals under Chapter 8 of the REIT Code. In addition, the disclosure and reporting requirements under Chapter 8 of the REIT Code with respect to such transactions shall be modified as described below. For this purpose, “ordinary banking and financial services” means:

(i) deposits and other “banking business” (as defined in the Banking Ordinance) with an HSBC Group member which is a “licensed corporation” or “registered institution” (as defined in the Securities and Futures Ordinance) or overseas equivalent (together “HSBC Group intermediaries”) and conducted on arm’s length commercial terms;

(ii) loans extended by an HSBC Group intermediary being a transaction in the ordinary course of business of the GZI REIT Group and provided to, or arranged for, the GZI REIT Group on arm’s length commercial terms; and

(iii) related financial services constituting regulated activities (as defined in the Securities and Futures Ordinance) and other banking or financial services required in the ordinary and usual course of business by the GZI REIT Group (including insurance, ORSO retirement benefit schemes, Mandatory Provident Fund Schemes, credit cards, asset management and other such services).

270 CONNECTED PARTY TRANSACTIONS

For the avoidance of doubt, “ordinary banking and financial services” as described herein does not include “corporate finance transactions” which are defined in the “Corporate Finance Transactions” waiver set out below.

Notwithstanding the above, a summary disclosure of “ordinary banking and financial services” related transactions provided by the HSBC Group to the GZI REIT Group in each financial year has to be disclosed in the annual report of GZI REIT. Such information shall include the nature of the transactions, types of transactions or services and identities of the connected persons of the same transactions. The independent non-executive Directors shall confirm in the annual report that they have reviewed the terms of any such transactions and are satisfied that these transactions have been entered into:

(i) in the ordinary and usual course of business of GZI REIT;

(ii) on normal commercial terms (to extent that there are comparable transactions) or, where there are not sufficient comparable transactions to judge whether they are on normal commercial terms, on terms no less favourable to GZI REIT than terms available to or from (as appropriate) independent third parties; and

(iii) in accordance with the relevant agreement governing them on terms that are fair and reasonable and in the interests of the Unitholders as a whole.

In addition, the auditors of GZI REIT shall be engaged to perform certain agreed upon review procedures on and report (“Auditors’ Report”) to the Manager (and a copy of such report shall be provided to the SFC) confirming that all such transactions (a) are in accordance with the terms disclosed in the offering document; (b) have received the approval of the Board (including the independent non-executive Directors); (c) are in accordance with the pricing policies of GZI REIT; (d) have been entered into in accordance with the terms of the agreements governing the transactions; and (e) the total value in respect of which has not exceeded the respective cap amount (where applicable).

Excluded Transactions

The following transactions will not be deemed connected party transactions of GZI REIT for the purposes of Chapter 8 of the REIT Code:

(i) where the HBSC Group acts for a third party as nominee, custodian, agent or trustee and conducts “agency transactions” with GZI REIT Group;

(ii) where a collective investment scheme (including another real estate investment trust) transacts with the GZI REIT Group, and a company within the HSBC Group acts as the manager or trustee of such collective investment scheme but the transaction is not a proprietary transaction of the HSBC Group; and

271 CONNECTED PARTY TRANSACTIONS

(iii) where a member of the HSBC Group (other than the Trustee except where the Trustee is the trustee of another collective investment scheme and is acting in that capacity) acquires, purchases, subscribes, sells or disposes of Units on terms which are the same as available to the public or other Unitholders as a whole, and where applicable, are subject to the application and allocation rules set out in the Listing Rules of the Hong Kong Stock Exchange. For the avoidance of doubt, any dealing by the HSBC Group in Units on the Stock Exchange of Hong Kong will not be a connected party transaction.

Waiver for Lease or License Transactions with the HSBC Group

The SFC has granted a waiver from strict compliance with the requirement to make announcements and to seek Unitholders’ prior approval as set out in Rule 8.9 and 8.11 of the REIT Code in respect of any lease or license transactions entered into with GZI REIT Group where any member of the HSBC Group is a lessee or licensee and the disclosure and reporting requirements under Chapter 8 of the REIT Code shall be modified as described in paragraphs (iii), (iv) and (v) below. As a result of this waiver, the Manager is not required to make announcements or seek Unitholders’ approval regarding lease transactions between the GZI REIT Group and any member of the HSBC Group and the disclosure and reporting requirements under Chapter 8 of the REIT Code that will apply in respect of any lease or license transactions entered into with the GZI REIT Group where any member of the HSBC Group is a lessee or licensee shall be modified as described in paragraphs (iii), (iv) and (v) below.

The above waiver is granted on condition that:

(i) the grant of the lease is negotiated and determined by the Manager and/or the Manager’s delegate on behalf of the GZI REIT Group;

(ii) an independent valuation is conducted for each of the lease transactions except where they are conducted on standard or published rates;

(iii) the aggregate amount of annual rent paid by the HSBC Group to the GZI REIT Group during a financial year, together with the material terms of any lease with any member of the HSBC Group under which the annual rent (per lease) exceeds HK$1.0 million), is disclosed in the annual report of GZI REIT in accordance with Rule 8.15 of the REIT Code;

(iv) a statement is disclosed in the annual report by the independent non-executive Directors that they have reviewed the terms of such transactions and that they are satisfied that they have been entered into:

(a) in the ordinary and usual course of business of GZI REIT;

(b) on normal commercial terms (to extent that there are comparable transactions) or, where there are not sufficient comparable transactions to judge whether they are on normal commercial terms, on terms no less favourable to GZI REIT than terms available to or from (as appropriate) independent third parties; and

272 CONNECTED PARTY TRANSACTIONS

(c) in accordance with the relevant agreement governing them on terms that are fair and reasonable and in the interests of the Unitholders as a whole; and

(v) the Auditors’ Report shall cover all the relevant lease and license transactions.

Waiver for Corporate Finance Transactions with the HSBC Group

The SFC has granted a waiver from strict compliance with the requirement under Rule 8.9 and 8.11 of the REIT Code to seek Unitholders’ prior approval and to make announcements and circulars (in accordance with Chapter 10 of the REIT Code) in respect of certain “corporate finance transactions” between the GZI REIT Group and the HSBC Group. In addition, the disclosure and reporting requirements under Chapter 8 of the REIT Code with respect to such transactions shall be modified as described in conditions (A) to (F) below. For the purpose of this waiver, “corporate finance transactions” means:

(i) underwriting, securitisation, issue of debt instruments or other securities, or other related arrangements where the HSBC Group is involved in an underwriting or arranging capacity or acts as listing agent and/or financial adviser and/or global coordinator to GZI REIT, provided that these transactions are carried out at arm’s length, on normal commercial terms, the primary objective of which is the offering or distribution of securities to parties outside of the HSBC Group;

(ii) lending and borrowing of funds or other related arrangements in connection with any facility agreement by which the GZI REIT Group will finance the acquisition of real estate; and

(iii) “corporate advisory transactions”, namely the provision of corporate finance advice to GZI REIT Group and excludes transactions set out in (i) and (ii) above, provided that the aggregate fees that the HSBC Group derived from all “corporate advisory transactions” conducted for the GZI REIT Group during a financial year shall be capped at 1.0% of the latest published NAV of GZI REIT.

For the avoidance of doubt, “corporate finance advice” means advice concerning:

(1) compliance with or in respect of the Listing Rules, The Rules Governing the Listing of Growth Enterprise Market of the Stock Exchange of Hong Kong, The Hong Kong Code on Share Repurchases or The Hong Kong Code on Takeovers and Mergers;

(2) (a) any offer to dispose of securities to the public, (b) any offer to acquire securities from the public, or (c) acceptance of any offer referred to in (a) or (b), but only in so far as the advice is generally given to holders of securities or a class or securities; or

(3) corporate restructuring in respect of securities (including the issue, cancellation or variation of any rights attaching to any securities).

273 CONNECTED PARTY TRANSACTIONS

The above waiver is granted on condition that:

(A) the offering document and any circular for GZI REIT includes upfront disclosure of this waiver and, with respect to those corporate finance transactions under (i) and (ii) of this waiver, full disclosure of the material terms of the relevant agreements;

(B) the annual report includes disclosure of the aggregate fees paid to the HSBC Group in respect of the corporate finance transactions conducted for GZI REIT Group in the financial year;

(C) the annual report includes disclosure in respect of any corporate finance transaction whose fees exceed HK$1.0 million: (a) the occurrence and nature of the transaction; (b) the parties to the transaction and (c) the date of the transaction;

(D) the annual report discloses a statement made by each of the Manager and the Trustee to confirm that the corporate finance transactions described in (i), (ii) and (iii) have complied with the general conditions of the waiver and that the Trustee has not been involved in the making of any decision to enter into any corporate finance transaction on behalf of GZI REIT (subject to the Trustee’s duties of oversight under the REIT Code and the Trust Deed) including the selection of the financial adviser of the transaction;

(E) the annual report includes a statement by the independent non-executive Directors that they have reviewed the terms of such transactions and are satisfied that they have been entered into:

(a) in the ordinary and usual course of business of GZI REIT;

(c) in accordance with the relevant agreement governing them on terms that are fair and reasonable and in the interests of the Unitholders as a whole; and

(F) the Auditors’ Report shall cover all the relevant corporate finance transactions.

Notwithstanding the above waiver, in the case where the aggregate fees that the HSBC Group generates from all “corporate advisory transactions” conducted for the GZI REIT Group during the financial year exceed 1.0% of the latest NAV of GZI REIT as disclosed in the latest published audited accounts of GZI REIT, the requirements in respect of connected party transactions as set out in Chapter 8 of the REIT Code shall apply. Further, for the avoidance of doubt, where by virtue of the nature of the transaction, other than the involvement of the HSBC Group in its capacity as described above under “corporate finance transactions”,an

274 CONNECTED PARTY TRANSACTIONS announcement has to be made pursuant to the REIT Code (and is not exempted by any waivers from announcements under the REIT Code granted by the SFC) such announcement shall disclose the role of HSBC Group and the relevant terms of engagement in accordance with the relevant provisions of the REIT Code.

Based on the above, the Board is of the view that:

(i) the waivers are in the interests of the Unitholders as a whole;

(ii) it is satisfied with the internal control procedures of the Trustee with respect to the independence of the Trustee’s operation vis-a-vis the other banking function/operation of the HSBC Group;

(iii) the cap amount and the basis of the cap amount, in relation to the aggregate fees of the HSBC Group generated from all “corporate advisory transactions” between the HSBC Group and GZI REIT conducted during the relevant financial year, is fair and reasonable having regard to the interests of the Unitholders as a whole; and

(iv) each connected party transaction shall be entered into in the ordinary course of business of GZI REIT, on normal commercial terms and in the interests of the Unitholders as a whole.

Notwithstanding any of the foregoing, the SFC reserves the right to review or revise any of the conditions relating to the waivers if there are any subsequent change of circumstances that affect any of them. In the event of future amendments to the REIT Code imposing more stringent requirements than those applicable at the date of the waivers granted by the SFC on transactions of the kind to which the transactions belong (including, but not limited to, a requirement that such transaction be made conditional on approval by the independent Unitholders), the Manager shall take immediate steps to ensure compliance with such requirements within a reasonable period.

The various categories of transaction which are the subject of the waivers set out above are supplementary to any and all applicable exemptions and permissions under the REIT Code and are independent of each other so that none is in any way limited by or by reference to any of the others and if more than one category is relevant in any particular circumstance or situation, any relevant category may apply.

Unitholders’ Mandate

The Manager may at any time in future seek a general annual mandate from the Unitholders in relation to other waivers from, or confirmations in relation to, the connected party transaction rules. Such mandates may include continuations or extensions of existing waivers (including those set out above).

In seeking any such general mandate, the Audit Committee and any other independent non-executive Directors will render an opinion as to whether the methods or procedures for determining the transaction prices or other relevant terms of the transaction contemplated under

275 CONNECTED PARTY TRANSACTIONS the general mandate are sufficient to ensure that such transactions will be carried out on arm’s length basis and on normal commercial terms, will not be prejudicial to the interests of GZI REIT and the Unitholders and that the terms and conditions of such transactions will be fair and reasonable.

Role of the Audit Committee and the Independent Non-executive Directors for Connected Party Transactions

The Audit Committee (comprising at all times of independent non-executive Directors only) and any other independent non-executive Directors will periodically review (and the executive Directors or operating units in GZI REIT will periodically produce reports to the Audit Committee and any other independent non-executive Directors for review of) all connected party transactions to ensure compliance with the Manager’s internal control system and with the relevant provisions of the REIT Code. The review will include the examination of the nature of the transaction and its supporting documents or such other data deemed necessary by the Audit Committee or any other independent non-executive Directors.

If a member of the Audit Committee or any other independent non-executive Directors has an interest in a transaction, he or she is to abstain from participating in the review and approval process in relation to that transaction.

Announcements and Reporting

Save as described above, connected party transactions will be reviewed by GZI REIT’s auditors and will be subject to disclosure in GZI REIT’s annual report and accounts.

The Global Offering

A number of transactions have been and will be entered into in connection with the Global Offering with the HSBC Group, including the Underwriting Agreements, the appointment and role of the Stabilising Manager. The connected party transaction rules under the REIT Code apply following the Listing of Units on the Hong Kong Stock Exchange and do not apply to these arrangements.

Other Continuing Transactions

A number of transactions have been entered into between GZI REIT and members of the GZI Group. Details of such transactions are disclosed in the section headed “Material Agreements and Other Documents Relating to GZI REIT” of this Offering Circular and Appendix X to this Offering Circular. Save as otherwise disclosed in this section or as otherwise excepted under the REIT Code, such transactions will be subject to the connected party transaction rules of the REIT Code after the Listing Date.

Other than as disclosed above, there are no connected party transactions of which the Directors are aware of which may continue after the completion of the Global Offering.

276 MODIFICATIONS, WAIVERS AND LICENSING CONDITIONS

In connection with the authorisation of GZI REIT by the SFC, the Manager has applied to, and has received approval from, the SFC in relation to the modifications of, and waivers, from strict compliance with certain requirements of the REIT Code. A summary of such modifications and waivers is set out below.

Connected Party Transactions — Chapter 8 of the REIT Code

GZI REIT has applied to the SFC for, and has received, waivers from strict compliance with certain provisions in Chapter 8 of the REIT Code. Details of these waivers are set out in the sections headed “Connected Party Transactions — Waivers from Strict Compliance with Certain Provisions in Chapter 8 of the REIT Code” in this Offering Circular.

Licensing Conditions for the Manager

In addition to the statutory conditions set out in the SFO, the SFC has imposed the following licensing conditions upon the Manager:

• the Manager’s licence shall lapse and cease to have effect as and when:

(i) GZI REIT is de-authorised; or

(ii) the Manager ceases to act as the management company of GZI REIT; and

• the Manager shall only engage in managing GZI REIT.

277 OTHER INFORMATION

278 TAXATION App B B15

The following statements are by way of a general guide to investors only and do not constitute tax advice. Investors are therefore advised to consult their professional advisers concerning possible taxation or other consequences of purchasing, holding, selling or otherwise disposing of the Units under the laws of their country of incorporation, establishment, citizenship, residence or domicile.

This section has covered all types of taxes currently applicable to GZI REIT in the PRC, Hong Kong and BVI.

Investors should note that the following statements on taxation are based on advice received by the Manager regarding the law and practice in force as at the date of this Offering Circular. As is the case with any investment, there can be no guarantee that the tax position prevailing at the time an investment is made by GZI REIT will continue indefinitely.

GZI REIT

Profits tax

GZI REIT is exempt from Hong Kong profits tax but Holdco and the BVI Companies will individually be subject to Hong Kong profits tax. Distributions made by GZI REIT to Unitholders are not subject to any withholding tax in Hong Kong.

Holdco is chargeable to Hong Kong profits tax in respect of any profits arising in or derived from Hong Kong (excluding profits arising from the sale of capital assets) from the carrying on of a trade, profession or business in Hong Kong. Dividend income derived by Holdco from the BVI Companies is exempt from Hong Kong profits tax.

The BVI Companies are chargeable to Hong Kong profits tax in respect of any profits arising in or derived from Hong Kong from the carrying on of a trade, profession or business in Hong Kong. Rental income derived from real estate located outside Hong Kong is generally regarded as income arising in or derived from outside Hong Kong and hence are exempt from Hong Kong profits tax. Any gain arising from the disposal of real estate located outside is generally regarded as income arising in or derived form outside Hong Kong and hence exempt from Hong Kong profits tax. Besides, capital gains are generally exempt from Hong Kong profits tax.

The current Hong Kong profits tax rate is 17.5%.

Stamp duty

No Hong Kong stamp duty is payable by GZI REIT on the issue of new Units.

279 TAXATION

PRC Taxation of the BVI Companies

Withholding tax

The BVI Companies are subject to Foreign Enterprise Income Tax under the Income Tax Law of the PRC for Enterprises with Foreign Investment and Foreign Enterprises. In general, the BVI Companies, as foreign enterprises without permanent establishments in the PRC, are subject to PRC withholding tax at a rate of 10.0%(1) on their rental income (with no deductions for expenses or allowances except for business tax).

For gains on disposal of property, the BVI Companies are subject to the PRC withholding tax at the current prevailing rate of 10.0%. The gain refers to the remaining balance after the original cost of acquisition of property is deducted from the sale proceeds received from the transfer. The buyer of a Property has the obligation to withhold the related withholding tax before making payments to the relevant BVI Company.

Business tax

According to the Provisional Regulations on Business Tax of the PRC, rental income and proceeds from the sale of property is subject to business tax at 5.0%.

For the business tax incurred on rental income, the BVI Companies can deduct such a business tax from their gross rental income when calculating their withholding tax liability.

For the disposal of property, business tax is calculated based on the net selling price(2).

The tax is collected by way of withholding. The PRC rental collection agents or the buyers of the Properties have the obligation to withhold the related business tax before making payments to the BVI Companies.

Flood prevention fee

According to the relevant Flood Prevention Fee Regulations in Guangzhou, the BVI Companies are required to pay flood prevention fee at 0.09% based on rental income received and any proceeds from sale of property.

(1) Under Article 19 of the Income Tax Law of the PRC for Enterprises with Foreign Investment and Foreign Enterprises, the PRC statutory withholding tax rate on rental income, gain on disposal of real properties and interest derived by foreign enterprises is 20.0%. The 10.0% rate noted above is a reduced rate pursuant to the tax circular, Guofa [2000] No. 37, issued by the State Council.

(2) Net selling price = selling price - original purchase cost of the building.

280 TAXATION

Land appreciation tax

Under the Provisional Regulations of the PRC on Land Appreciation Tax, the BVI Companies are subject to land appreciation tax on the taxable gain on sale of property. The taxable gain is determined based on the sales proceeds after having deducted the “allowable deductions” for the building. These allowable deductions include the following items:

• acquisition cost of the land use right;

• assessed value of the building; and

• taxes incurred in connection with the transfer of the building.

The land appreciation tax rate is progressive from 30.0% to 60.0% of the taxable gain, depending on the appreciation value as compared with the above-mentioned “allowable deductions”.

Appreciation value Tax rates

(%)

For the portion: - not exceeding 50.0% of the allowable deductions 30.0 - over 50.0% but not more than 100.0% of the allowable deductions 40.0 - over 100.0% but not more than 200.0% of the allowable deductions 50.0 - over 200.0% of the allowable deductions 60.0

Urban real estate tax

According to the Provisional Regulations of the PRC on Urban Real Estate Tax, landlords are subject to urban real estate tax. In Guangzhou, urban real estate tax is generally imposed with reference to 70.0% of the original cost of the real estate at a rate of 1.2% per annum (the “cost method”). For the self-constructed buildings, the original cost refers to the construction cost of the building. For acquired buildings, the original cost refers to the purchase cost of the building and any additional cost incurred to complete the construction. According to the relevant Guangzhou tax circular, Suidishuifa [2002] No. 235, subject to approval, the cost of land use right can be excluded when calculating the tax base for urban real estate tax purposes.

There are however few exceptions in other PRC cities under which foreign enterprises may be required to pay urban real estate tax based on their rental income at 12.0% to 18.0% (the “rental method”). The latter basis applies if the tax authorities disagree with the original cost of the real estate adopted by the taxpayer in their tax filings. Currently, the BVI Companies are paying

281 TAXATION their urban real estate tax liabilities using the cost method. Urban real estate tax is generally collected on a monthly or semi-annual basis depending on local practice. After the Listing Date, any fair value adjustments of the Properties in accordance will not change the tax base of the buildings for the calculation of urban real estate tax purposes.

Stamp duty

Tenancy agreements and property transfer contracts are subject to stamp duty at 0.1% and 0.05% of the total contract sum respectively, payable by both parties to the contracts.

Deed tax

According to the Provisional Rules of the People’s Republic of China on Deed Tax, deed tax is levied on transfer of land use rights and/or buildings. The tax rate ranges from 3.0% to 5.0% depending on the location where the land use right or building is located. The taxpayer is the transferee of the land use right and/or building. In Guangzhou, the deed tax rate is 3.0%

Save as set out above, as at the latest practicable date, the BVI Companies are not subject to any other form of taxation in the PRC.

BVI Taxation of the BVI Companies

The BVI Companies are not subject to BVI taxation. There is no withholding tax imposed on dividend distributions to GZI REIT.

Investors

Profits tax

It is understood that, under the Inland Revenue Department’s current practice, Hong Kong profits tax will not be payable by any investor on the distributions made by GZI REIT. Unitholders should take advice from their own professional advisers as to their particular tax position.

Hong Kong profits tax will not be payable to any investor (other than an investor carrying on a trade, profession or business in Hong Kong and holding the Units for trading purposes) on any capital gain made on the sale or other disposal of the Units.

Stamp duty

No Hong Kong stamp duty is payable by an investor in relation to the issue of Units to him by GZI REIT.

282 TAXATION

The sale and purchase of Units by an investor will attract Hong Kong stamp duty at the current rate of 0.2% of the price of the Units being sold or purchased, whether or not the sale or purchase is on or off the Hong Kong Stock Exchange. The investor selling the Units and the purchaser will each be liable for one-half of the amount of the Hong Kong stamp duty payable upon such transfer. In addition, a fixed duty of HK$5 is currently payable on any instrument of transfer of Units.

Estate duty

Units will form part of the Hong Kong estate of a deceased investor for the purpose of Hong Kong estate duty.

The Legislative Council passed the Revenue (Abolition of Estate Duty) Bill 2005 on 2 November 2005 and the relevant ordinance will commence operation three months from its publication in the gazette. The Hong Kong estate of an investor who passes away on or after the commencement date of such ordinance will not be subject to estate duty. The estate duty chargeable in respect of deaths occurring on or after 15 July 2005 but before the commencement date of such ordinance would be reduced with retrospective effect to a nominal duty of HK$100 for estates of assessed value exceeding HK$7.5 million.

283 UNDERWRITING

Hong Kong Underwriters (in alphabetical order)

Joint Global Coordinators and Joint Lead Managers

Citigroup Global Markets Asia Limited

DBS Bank Ltd.

The Hongkong and Shanghai Banking Corporation Limited

Co-Lead Manager

BOCI Asia Limited

First Shanghai Securities Limited

Co-Managers

BCOM Securities Company Limited

Goldbond Securities Limited

Kim Eng Securities (Hong Kong) Limited

Tai Fook Securities Company Limited

Underwriting Arrangements

Underwriting Agreements

The Hong Kong Public Offering is fully underwritten by the Hong Kong Underwriters and the International Offering (including the Offer for Sale) is expected to be fully underwritten by the International Underwriters, in each case on a several basis and subject as stated below. The Hong Kong Underwriting Agreement was entered into on 11 December 2005 and, subject to an agreement being reached on the Offer Price between GZI, the Manager and the Joint Global Coordinators (on behalf of the Underwriters), the International Underwriting Agreement is expected to be entered into on or around the Price Determination Date. The Hong Kong Underwriting Agreement is conditional upon (among other things) the International Underwriting Agreement being entered into and having become effective, and the respective Underwriting Agreements are expected to be inter-conditional. (See the section headed “Structure of the Global Offering — Conditions of the Hong Kong Public Offering” in this Offering Circular.)

284 UNDERWRITING

Grounds for termination by the Hong Kong Underwriters

The Joint Global Coordinators (on behalf of themselves and the Hong Kong Underwriters) may in their absolute discretion terminate the Hong Kong Underwriting Agreement with immediate effect upon giving written notice to GZI and the Manager at any time at or prior to 8:00 a.m. on the Listing Date if:

(a) any of the following shall have come to the notice of any of the Joint Global Coordinators or the Hong Kong Underwriters after the date of the Hong Kong Underwriting Agreement

(i) that any statement contained in this Offering Circular or the Application Forms (collectively, the “Hong Kong Offering Documents”) and/or any amendments or supplements thereto was or has become untrue, incorrect or misleading in any material respect, the effect of which, in the reasonable judgment of the Joint Global Coordinators, would jeopardise the successful completion of the Hong Kong Public Offering and/or the Global Offering; or

(ii) any matter which would, if the Hong Kong Offering Documents and/or any amendments or supplements thereto were issued at that time, constitute a material omission therefrom; or

(iii) that any of the warranties given by GCCD BVI, GZI, the Manager or GZI REIT in the Hong Kong Underwriting Agreement is (or would if repeated at that time be) untrue or breached in any material respect, the effect of which, in the reasonable judgment of the Joint Global Coordinators, would jeopardise the successful completion of the Hong Kong Public Offering and/or the Global Offering; or

(iv) any material breach of any of the obligations of any party (other than the Joint Global Coordinators or the Hong Kong Underwriters) to the Hong Kong Underwriting Agreement; or

(v) any material adverse change, or any development involving a prospective material adverse change, in the condition (financial or otherwise) or in the earnings, business, operations or trading position or prospects of the Properties, GZI REIT or the Manager, or any change in capital stock or long term debt of GZI REIT or any of its subsidiaries, or any loss or interference with the Properties from fire, explosion, flood or other calamity (whether or not covered by insurance) or from any labour dispute or court or governmental action, order or decree, which (in any such case) is not set forth or contemplated in this Offering Circular and the effect of which is, in the reasonable judgement of the Joint Global Coordinators, so material and adverse as to make it impracticable or inadvisable to proceed with the Hong Kong Public Offering and/or the Global Offering; or

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(vi) that (A) the Trustee or the Manager seeks to retire, or is removed, as the responsible entity of GZI REIT, (B) any certificate given by the Trustee or the Manager or any of their respective officers to any of the Joint Global Coordinators under or in connection with the Hong Kong Underwriting Agreement or the Global Offering is false or misleading in any material respect, (C) the Trustee or the Manager or any of their respective directors or officers is prosecuted for a criminal offence or (D) any of the Trustee or the Manager is subject to any insolvency or analogous event or circumstance referred to in the Hong Kong Underwriting Agreement; or

(vii) any of the tax rulings on stamp duty or other tax matters obtained by GZI REIT, the Manager, GCCD BVI, GZI, Holdco or the BVI Companies in connection with the Global Offering and/or the reorganisation arrangements under the Reorganisation Deed is revoked or varied the effect of which is, in the reasonable judgment of the Joint Global Coordinators, likely to have an adverse effect on the success of the Hong Kong Public Offering and/or the Global Offering; or

(viii) any person (other than any of the Hong Kong Underwriters) has withdrawn or sought to withdraw its consent to being named in the Hong Kong Offering Documents, or to the issue of the Hong Kong Offering Documents; or

(b) there develops, occurs, or is introduced or comes into force:

(i) any calamity or crisis or any change in financial, political or economic conditions or currency exchange rates or controls;

(ii) any new law or regulation or any change in existing law or regulation, or any change in the interpretation or application thereof by any court or other competent authority in or affecting Hong Kong, the PRC, the United States, the United Kingdom, Singapore, Australia, France, Germany, Ireland, Italy, the Netherlands, Sweden, Switzerland or the UAE (collectively, the “Relevant Jurisdictions”); or

(iii) any event or series of events in the nature of force majeure (including without limitation, acts of government, strikes, lock-outs, fire, explosion, flooding, civil commotion, acts of war, acts of God, epidemic, accident or interruption or delay in transportation) in or affecting any of the Relevant Jurisdictions; or

(iv) without limiting the foregoing, any local, national, regional or international outbreak or escalation of hostilities (whether or not war is or has been declared), act of terrorism or any other state of emergency or calamity or crisis; or

(v) any tax law or other change or development involving a change or prospective change in taxation in or affecting any of the Relevant Jurisdictions having a material adverse effect, or prospective material adverse effect, on the Hong Kong Public Offering and/or the Global Offering, GZI REIT or the Units (or the transfer of any Units) or an investment in the Units; or

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(vi) any downgrading or the issue or giving of any notice of any intended or potential downgrading in the sovereign rating accorded to Hong Kong by any of Standard & Poor’s, Moody’s Investors Service, or Fitch IBCA or Duff & Phelps, or the MSCI Real Estate Sub-Index falls by more than 15.0% below the relevant index between 5:00 p.m. on the Business Day immediately before the date of the Hong Kong Underwriting Agreement and 5:00 p.m. on the Business Day immediately preceding the Listing Date; or

(vii) the imposition or declaration of (A) any suspension or limitation on trading in shares or securities generally on the Stock Exchange, the New York Stock Exchange or the London Stock Exchange or (B) any moratorium on banking activities or foreign exchange trading or securities settlement or clearing services in or affecting any of the Relevant Jurisdictions (as defined below),

and which in the sole opinion of the Joint Global Coordinators, (A) is, will or may be materially adverse to, or materially and prejudicially affect, the business or financial or trading position or prospects of GZI REIT or GZI REIT and its subsidiaries as a whole, or potential Unitholders, or (B) make or is likely to make it impracticable or inadvisable to proceed with the Hong Kong Public Offering and/or the Global Offering or the delivery of Units on the Listing Date or (C) has or will or may have a material adverse effect on the success of the Global Offering and/or make it impracticable or inadvisable for any material part of the Hong Kong Underwriting Agreement, the Hong Kong Public Offering or the Global Offering to be performed or implemented as envisaged.

Undertakings

GZI REIT

Pursuant to the Underwriting Agreements, the Manager agrees that, except pursuant to the Global Offering or with the consent of the Joint Global Coordinators, neither GZI REIT nor any of the other members of the GZI REIT Group shall, during a period of six months following the Listing Date, and whether conditionally or unconditionally:

(i) allot, issue, offer, sell, contract to sell, hedge, grant any option or right to subscribe or purchase over or in respect of, or otherwise dispose of any Units or any securities exchangeable or convertible into Units or which carry rights to subscribe for or purchase Units; or

(ii) deposit Units with a depositary in connection with the issue of depositary receipts; or

(iii) enter into a transaction (including, without limitation, a swap or other derivative transaction) that transfers, in whole or in part, any economic consequence of ownership of any Units; or

(iv) offer or agree or announce any intention to do any of the foregoing.

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GZI, GCCD BVI and Yue Xiu

Pursuant to the Underwriting Agreements, each of GZI and GCCD BVI agrees that, except with the consent of the Joint Global Coordinators or as described below, it will not, and will procure that its subsidiaries will not, during a period of six months following the Listing Date, and whether conditionally or unconditionally:

(i) dispose of: (A) any Units or any direct or indirect interest therein (including, without limitation, by granting or creating any option, mortgage, pledge, charge or other security interest); or (B) any securities exchangeable or convertible into any Units; or

(ii) enter into any swap or other derivative transaction or other arrangement that transfers, in whole or in part, any economic consequence of ownership of any Units or any securities exchangeable or convertible into any Units; or

(iii) dispose of any direct or indirect interest in any company or entity holding any Units or any securities exchangeable or convertible into any Units; or

(iv) offer or agree or announce any intention to do any of the foregoing.

These restrictions do not apply to: (i) a transfer of Units to a wholly owned subsidiary of GZI (provided such transferee enters into equivalent obligations); (ii) the exercise of the Over- allocation Option; (iii) the distribution of up to 17,000,000 Units by GZI to GZI Qualifying Shareholders or the sale of some or all of these 17,000,000 Units by GZI (on behalf of GZI Qualifying Shareholders exercising the GZI Qualifying Shareholders’ Option or GZI Ineligible Overseas Shareholders) through the International Underwriters as part of the International Offering; or (iv) the transfer of Units pursuant to the Unit Borrowing Agreement.

Yue Xiu, for itself and on behalf of its subsidiaries (other than the members of the GZI Group) has undertaken that the Units which it and/or its subsidiaries (other than the members of the GZI Group) receive by way of distribution in their capacity as GZI Qualifying Shareholders will be subject to the same restrictions to which GZI is subject (as described above). Such restrictions do not apply to a transfer of Units to a wholly owned subsidiary of Yue Xiu.

Commission, expenses and indemnity

Under the terms and conditions of the Underwriting Agreements, the fees and commissions to which the Underwriters are entitled will comprise a gross underwriting commission of 2.5% on the Offer Price (which excludes brokerage, Hong Kong Stock Exchange trading fee and SFC transaction levy). GZI and the Manager (on behalf of GZI REIT) have agreed that the expenses of the Global Offering, including underwriting fees and expenses, consulting fees and expenses, legal and other professional fees and expenses, printing costs and the one time inception fee payable to the Trustee, will be paid by deduction from the final consideration to be paid to GZI under the Reorganisation Deed. (See the section headed “Use of Proceeds” in this Offering Circular.)

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Under the terms and conditions of the Underwriting Agreements, GZI, GCCD BVI, the Manager and GZI REIT have agreed (or will agree) to indemnify the Underwriters for certain losses which they may suffer, including losses incurred as a result of Underwriters’ performance of their obligations under the Underwriting Agreements or as a result of any breach of the representations and warranties given to the Underwriters under the Underwriting Agreements and any breach by GZI, GCCD BVI, the Manager or GZI REIT of the Underwriting Agreements.

Underwriters’ interest in GZI REIT

Save for its obligations under the relevant Underwriting Agreement(s) or as otherwise disclosed in this Offering Circular, none of the Underwriters owns any Units or has any shareholding interest or other ownership interest in GZI REIT, the Trustee or the Manager or any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for Units or securities in GZI REIT, the Trustee or the Manager.

289 STRUCTURE OF THE GLOBAL OFFERING

The Global Offering

The Global Offering comprises the Hong Kong Public Offering and the International Offering. A total of 583,000,000 Units will initially be made available under the Global Offering (without taking account Units that may be made available under the Offer for Sale and the Over-allocation Option). A total of 523,000,000 Units will initially be available to investors in the International Offering (without taking into account the Units that are subject to the Over-allocation Option and those that may be offered for sale pursuant to the Offer for Sale of up to 17,000,000 Units, being the maximum aggregate number of Units representing: (i) the Units in respect of which the GZI Qualifying Shareholders may elect to exercise the GZI Qualifying Shareholders’ Option and (ii) such number of Units which the GZI Ineligible Overseas Shareholders would otherwise have been entitled to receive under the Special Dividend) and the remaining 60,000,000 Units will initially be offered to the public under the Hong Kong Public Offering (subject, in each case, to reallocation described below under the sub-heading “The Hong Kong Public Offering”).

Investors may apply for Units under the Hong Kong Public Offering or indicate an interest for Units under the International Offering, but not under both. Investors may only receive Units under either the International Offering or the Hong Kong Public Offering, but not under both. The Hong Kong Public Offering is open to members of the public in Hong Kong as well as to institutional and professional investors. The International Offering will involve the selective marketing of Units to institutional and professional investors and other investors anticipated to have a sizeable demand for such Units. Professional investors generally include brokers, dealers, companies (including fund managers) whose ordinary business involves dealing in shares, units and other securities, and corporate entities which regularly invest in shares, units and other securities.

As part of the International Offering process, prospective professional, institutional and other investors will be required to specify the number of Units they would be prepared to acquire under the International Offering either at different prices or at a particular price. This process, known as “book-building”, is expected to continue up to, and to cease on or about, Thursday, 15 December 2005.

Allocation of the Units pursuant to the International Offering will be determined by the Joint Global Coordinators and will be based on a number of factors including the level and timing of demand, total size of the relevant investor’s invested assets or equity assets in the relevant sector and whether or not it is expected that the relevant investors are likely to buy further, and/or hold or sell, their Units after the listing of the Units on the Hong Kong Stock Exchange. Such allocation is intended to result in a distribution of the International Offering Units on a basis which would lead to the establishment of a solid unitholder base to the benefit of GZI REIT and the Unitholders as a whole.

Allocation of Units to applicants under the Hong Kong Public Offering will be based solely on the level of valid applications received under the Hong Kong Public Offering. The basis of allocation may vary, depending on the number of Hong Kong Public Offering Units validly applied for, but, subject to that (and in accordance with the allocation of Hong Kong Public Offering Units in Pool A and Pool B described below under the sub-section headed “The Hong Kong Public Offering”), will be made on an equitable basis although the allocation of Hong Kong Public Offering

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Units could, where appropriate, consist of balloting, which would mean that some applicants may receive a higher allocation than others who have applied for the same number of the Hong Kong Public Offering Units, and those applicants who are not successful in the ballot may not receive any Hong Kong Public Offering Units.

Offer Price under the Hong Kong Public Offering

The Offer Price for the purposes of the Hong Kong Public Offering is expected to be determined by agreement between the Joint Global Coordinators (on behalf of the Underwriters), GZI and the Manager, following completion of the bookbuilding process for the International Offering and after assessment of the level of market demand for the Global Offering. The bookbuilding process is expected to continue up to, and cease on or about, Thursday, 15 December 2005.

Price Payable on Application

The Offer Price will not be more than HK$3.075 and is currently expected to be not less than HK$2.850. Applicants for Hong Kong Public Offering Units are required to pay, on application, the Maximum Offer Price of HK$3.075 per Hong Kong Public Offering Unit together with brokerage of 1.0%, Hong Kong Stock Exchange trading fee of 0.005% and SFC transaction levy of 0.005% amounting to a total of HK$3,106.05 per board lot of 1,000 Units.

If the Offer Price, as finally determined in the manner described below, is lower than the Maximum Offer Price, appropriate refund payments (including the brokerage, Hong Kong Stock Exchange trading fee and SFC transaction levy attributable to the surplus application monies) will be made to applicants, without interest. Further details are set out in the sections headed “How to apply for Hong Kong Public Offering Units” and “Further Terms and Conditions of the Hong Kong Public Offering” in this Offering Circular.

Determining the Offer Price

The Offer Price is expected to be determined by agreement between the Joint Global Coordinators (on behalf of the Underwriters), GZI and the Manager on the Price Determination Date, when market demand for the Units will be determined. The Price Determination Date is expected to be on or around Thursday, 15 December 2005.

The Offer Price will fall within the Offer Price range as stated in this Offering Circular unless otherwise announced, as further explained below, at any time prior to the morning of the last day for lodging applications under the Hong Kong Public Offering. The Joint Global Coordinators, on behalf of the Underwriters, may, where considered appropriate, based on the level of interest expressed by prospective professional, institutional and other investors during a book-building process, and with the consent of GZI and the Manager, reduce the indicative Offer Price range below that stated in this Offering Circular at any time prior to the morning of the last day for lodging applications under the Hong Kong Public Offering. In such a case, notices of the reduction in the indicative Offer Price range will be published in the South China Morning Post (in English) and the Hong Kong Economic Times (in Chinese) not later than the morning of the day which is the last

291 STRUCTURE OF THE GLOBAL OFFERING day for lodging applications under the Hong Kong Public Offering. Upon issue of such a notice, the revised Offer Price range will be final and conclusive and the Offer Price, if agreed upon by the Joint Global Coordinators with GZI and the Manager, will be fixed within such revised Offer Price range. Such notice will also include confirmation or revision, as appropriate, of the offer statistics as currently set out in the section headed “Offering Circular Summary” in this Offering Circular, and any other financial information which may change as a result of such reduction. If applications for Hong Kong Public Offering Units have been submitted prior to the day which is the last day for lodging applications under the Hong Kong Public Offering, then if the indicative Offer Price range is so reduced, such applications cannot be subsequently withdrawn. In the absence of any notice being published in the South China Morning Post (in English) and the Hong Kong Economic Times (in Chinese) of a reduction in the indicative Offer Price range stated in this Offering Circular on or before the morning of the last day for lodging applications under the Hong Kong Public Offering, the Offer Price, if agreed upon by the Joint Global Coordinators with GZI and the Manager, will under no circumstances be set outside the Offer Price range as stated in this Offering Circular.

If the Joint Global Coordinators (on behalf of the Underwriters), GZI and the Manager are unable to reach agreement on the Offer Price, the Global Offering will not become unconditional and will lapse.

An announcement of the Offer Price, the level of indications of interest in the International Offering, the results of applications in the Hong Kong Public Offering, the basis of allocations of the Hong Kong Public Offering Units and the final number of Hong Kong Public Offering Units comprised in the Hong Kong Public Offering, Pool A and Pool B, respectively, and the Hong Kong identify card/passport/Hong Kong business registration numbers of successful applicants under the Hong Kong Public Offering, as well as the details of exercise, if any, of the GZI Qualifying Shareholders’ Option, is expected to be published on or before Tuesday, 20 December 2005 in the South China Morning Post (in English) and the Hong Kong Economic Times (in Chinese).

Conditions of the Hong Kong Public Offering

All acceptances of applications for the Hong Kong Public Offering Units in the Hong Kong Public Offering are conditional upon:

(a) Listing

The Hong Kong Stock Exchange granting listing of, and permission to deal in, the Units to be issued as mentioned herein (including any Units which may be offered or sold pursuant to the exercise of the Over-allocation Option);

(b) Pricing

The Offer Price having been duly determined, and the International Underwriting Agreement having been duly entered into, on or about the Price Determination Date;

292 STRUCTURE OF THE GLOBAL OFFERING

The Facility Agreement having become and remaining unconditional in accordance with its terms, and the Loan Facility having been unconditionally made available to be drawn down in the amount of approximately US$165.0 million; and

(d) Underwriting Agreements Unconditional

The obligations of the Underwriters under the Underwriting Agreements becoming and remaining unconditional (including, if relevant, as a result of the waiver of any condition(s) by the Joint Global Coordinators for and on behalf of the Underwriters) and neither Underwriting Agreement being terminated in accordance with its terms or otherwise; in the case of each of (a) to (d) above, on or before the dates and times specified in the Underwriting Agreements (unless and to the extent such conditions are validly waived on or before such dates and times) and in any event not later than 11 January 2006.

The consummation of each of the International Offering and the Hong Kong Public Offering is conditional upon, among other things, the other becoming unconditional and not having been terminated in accordance with its terms.

If the above conditions are not fulfilled or waived prior to the times and dates specified, the Global Offering will lapse and the SFC and the Hong Kong Stock Exchange will be notified immediately. Notice of the lapse of the Global Offering will be caused to be published by the Manager in the South China Morning Post (in English) and the Hong Kong Economic Times (in Chinese) on the Business Day next following such lapse.

In the above situation, all application monies will be returned to applicants, without interest and on the terms set out in the section headed “How to apply for Hong Kong Public Offering Units” in this Offering Circular. In the meantime, all application monies will be held in a separate bank account or separate bank accounts with a receiving banker or other bank(s) licensed under the Banking Ordinance (Chapter 155 of the Laws of Hong Kong).

Unit certificates are expected to be issued by Tuesday, 20 December 2005 but will only App B B9 become valid at 8:00 a.m. on Wednesday, 21 December 2005, provided that: (i) the Global Offering has become unconditional in all respects; and (ii) the right of termination as described in the section headed “Underwriting — Grounds For Termination by the Hong Kong Underwriters” in this Offering Circular has not been exercised.

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The Hong Kong Public Offering

The Hong Kong Public Offering is a fully underwritten public offer (subject to agreement as to pricing and satisfaction or waiver of the other conditions described in the sub-section above headed “Conditions of the Hong Kong Public Offering”) for the subscription in Hong Kong of, initially, 60,000,000 Units (representing approximately 10.0% of the total number of Units initially available under the Global Offering and assuming that the 17,000,000 Sale Units that may be offered for sale pursuant to the Offer for Sale (being the maximum aggregate number of Units representing: (i) the Units in respect of which the GZI Qualifying Shareholders may elect to exercise the GZI Qualifying Shareholders’ Option; and (ii) such number of Units which the GZI Ineligible Overseas Shareholders would otherwise have been entitled to receive under the Special Dividend) are included in the International Offering).

The total number of Hong Kong Public Offering Units available under the Hong Kong Public Offering will initially be divided equally into two pools for allocation purposes: Pool A and Pool B. All valid applications that have been received for Hong Kong Public Offering Units with a total subscription amount (excluding brokerage, Hong Kong Stock Exchange trading fee and SFC transaction levy payable thereon) of HK$5 million or below will fall into Pool A and all valid applications that have been received for Hong Kong Public Offering Units with a total subscription amount (excluding brokerage, Hong Kong Stock Exchange trading fee and SFC transaction levy payable thereon) of more than HK$5 million will fall into Pool B.

The number of Hong Kong Public Offering Units comprised in Pool A and Pool B will not be determined until after applications have been made. The Manager and the Joint Global Coordinators shall have discretion in determining the number of Hong Kong Public Offering Units which shall comprise each of Pool A and Pool B. The number of Hong Kong Public Offering Units comprised in each of Pool A and Pool B will initially be divided equally between the two pools. However, if demand for Hong Kong Public Offering Units falling within Pool A is significant or otherwise justified, and irrespective of whether Pool B is undersubscribed or not, it is expected that the number of Hong Kong Public Offering Units comprising Pool A will be increased in order to increase the allocation ratio of Pool A, with a view to allowing more Pool A applicants to receive allocations of Hong Kong Public Offering Units. Hong Kong Public Offering Units in each of Pool A and Pool B will be allocated on an equitable basis to applicants falling within each pool.

Applicants should be aware that applications in Pool B are likely to receive different allocation ratios than applications in Pool A. Where either of the pools is undersubscribed, the surplus Hong Kong Public Offering Units will be transferred to satisfy demand in the other pool and be allocated accordingly. Applicants can only receive an allocation of Hong Kong Public Offering Units from Pool A or Pool B but not from both pools. Multiple or suspected multiple applications and any application for more than 50% of the Hong Kong Public Offering Units initially available under the Hong Kong Public Offering (that is, 30,000,000 Hong Kong Public Offering Units) will be rejected. Each applicant under the Hong Kong Public Offering will also be required to give an undertaking and confirmation in the Application Form submitted by him/her/it that he/she/it and any person(s)

294 STRUCTURE OF THE GLOBAL OFFERING for whose benefit he/she/it is making the application have not indicated an interest for or taken up and will not indicate an interest for or take up any International Offering Units under the International Offering, and such applicant’s application will be rejected if the said undertaking and/or confirmation is breached and/or untrue (as the case may be).

In addition, the number of Hong Kong Public Offering Units comprised in Pool A and Pool B will not be determined until after applications have been made. Following such determination, applications in excess of the number of Hong Kong Public Offering Units finally determined to be comprised in Pool B (but not more than the maximum number initially permitted) will be deemed to have been made at the number of Hong Kong Public Offering Units finally determined to be in Pool B.

The final number of Hong Kong Public Offering Units comprised in the Hong Kong Public Offering, Pool A and Pool B respectively, will, following the determination by the Manager and the Joint Global Coordinators, be published in the South China Morning Post (in English) and the Hong Kong Economic Times (in Chinese) with the announcement of the Offer Price, the level of indications of interest in the International Offering, the results of applications in the Hong Kong Public Offering, the basis of allocations of the Hong Kong Public Offering Units and the final number of Hong Kong Public offering units comprised in the Hong Kong Public Offering, Pool A and Pool B, respectively, as well as the details of exercise, if any, of the GZI Qualifying Shareholder’s Option. This announcement is expected to be published on Tuesday, 20 December 2005.

The allocation of Units between the Hong Kong Public Offering and the International Offering is subject to adjustment by the Joint Global Coordinators. The number of Units initially available under the Hong Kong Public Offering represents approximately 10.0% of the total number of Units initially available under the Global Offering, before taking into account any exercise of the Over-allocation Option and assuming that the 17,000,000 Sale Units that may be offered for sale pursuant to the Offer for Sale (being the maximum aggregate number of Units representing: (i) the Units in respect of which the GZI Qualifying Shareholders may elect to exercise the GZI Qualifying Shareholders’ Option; and (ii) such number of Units which the GZI Ineligible Overseas Shareholders would otherwise have been entitled to receive under the Special Dividend) are included in the International Offering.

If the number of the Units validly applied for under the Hong Kong Public Offering represents 15 times or more but less than 50 times the number of the Units initially available under the Hong Kong Public Offering, then Units will be reallocated to the Hong Kong Public Offering from the International Offering, so that the total number of Units available under the Hong Kong Public Offering will be at least 180,000,000 Units (representing approximately 30.0% of the Units initially available under the Global Offering and assuming that the 17,000,000 Sale Units are included in the International Offering). If the number of Units validly applied for under the Hong Kong Public Offering represents 50 times or more but less than 100 times the number of Units initially available under the Hong Kong Public Offering, then the number of Units to be reallocated to the Hong Kong Public Offering from the International Offering will be increased so that the total number of Units available under the Hong Kong Public Offering will be at least 240,000,000 Units (representing

295 STRUCTURE OF THE GLOBAL OFFERING approximately 40% of the Units initially available under the Global Offering and assuming that the 17,000,000 Sale Units are included in the International Offering). If the number of Units validly applied for under the Hong Kong Public Offering represents 100 times or more the number of Units initially available under the Hong Kong Public Offering, then the number of Units to be reallocated to the Hong Kong Public Offering from the International Offering will be increased, so that the total number of Units available under the Hong Kong Public Offering will be at least 300,000,000 Units (representing approximately 50% of the Units initially available under the Global Offering and assuming that the 17,000,000 Sale Units are included in the International Offering).

In addition, in the event of an under-subscription in the Hong Kong Public Offering, the Joint Global Coordinators will have the discretion to reallocate to the International Offering such numbers of unsubscribed Hong Kong Public Offering Units as they may deem appropriate.

The International Offering (including the Offer for Sale)

A total of 523,000,000 Units will initially be available to investors under the International Offering, without taking into account the Units that may be offered for sale pursuant to the Offer for Sale of up to 17,000,000 Units (being the maximum aggregate number of Units representing: (i) the Units in respect of which the GZI Qualifying Shareholders may elect to exercise the GZI Qualifying Shareholders’ Option; and (ii) such number of Units which the GZI Ineligible Overseas Shareholders would otherwise have been entitled to receive under the Special Dividend). These 523,000,000 Units represent approximately 89.7% of the Units initially available under the Global Offering (before taking into account any exercise of the Over-allocation Option and without taking into account the Units that may be offered for sale pursuant to the Offer for Sale of up to 17,000,000 Units (being the maximum aggregate number of Units representing: (i) the Units in respect of which the GZI Qualifying Shareholders may elect to exercise the GZI Qualifying Shareholders’ Option; and (ii) such number of Units which the GZI Ineligible Overseas Shareholders would otherwise have been entitled to receive under the Special Dividend)). The Sale Units will also comprise part of the International Offering Units. Accordingly, if all such Units were to be included in the International Offering, the total number of International Offering Units would be 540,000,000 Units (assuming that the Over-allocation Option is not exercised) and 627,450,000 Units (assuming that the Over-allocation Option is exercised in full). Pursuant to the International Offering, the International Offering Units (including the Sale Units) will be offered to institutional, professional and other investors by the International Underwriters or through selling agents appointed by them. International Offering Units will be offered to and placed with professional and institutional investors and other investors anticipated to have a sizeable demand for the International Offering Units in Hong Kong and other jurisdictions outside the United States in offshore transactions in reliance on Regulation S.

In addition, International Offering Units (but not the Sale Units) may be reallocated to the Hong Kong Public Offering in the case of over-subscription under the Hong Kong Public Offering as set out in the sub-section headed “The Hong Kong Public Offering” above.

296 STRUCTURE OF THE GLOBAL OFFERING

Special Dividend

On 23 November 2005, the board of directors of GZI conditionally declared a special dividend to GZI Shareholders whose names appear on the register of members of GZI as at the close of business on 9 December 2005. Based on the total number of 583,000,000 Units initially made available under the Global Offering, the Special Dividend conditionally declared by the board of directors of GZI on the basis of one Unit for every whole multiple of 400 GZI Shares will represent approximately 2.9% of the total number of Units initially made available under the Global Offering (without taking into account any exercise of the Over-allocation Option or the Sale Units) and approximately 1.7% of the total number of issued Units of GZI REIT immediately following the completion of the Global Offering. The Special Dividend will be satisfied:

• with respect to GZI Qualifying Shareholders, by the transfer to the GZI Qualifying Shareholders (subject to the GZI Qualifying Shareholders’ Option described below) of such number of Units in the proportion of one Unit for every whole multiple of 400 GZI Shares held by them as at the close of business on 9 December 2005, provided that fractional entitlements will be disregarded and will not be transferred to such GZI Qualifying Shareholders. All costs due in respect of the transfer of such Units to GZI Qualifying Shareholders shall be borne by GZI; and

• with respect to the GZI Ineligible Overseas Shareholders, by cash payment to the GZI Ineligible Overseas Shareholders on the basis of the number of Units to which they would otherwise have been entitled to receive under the Special Dividend at the Offer Price less applicable stamp duty (being 0.1% of the Offer Price representing half of the amount of Hong Kong stamp duty payable on the transfer of a Sale Unit (GZI will bear the other half of the applicable stamp duty being 0.1% of the Offer Price) and applicable taxes, if any).

The Units proposed to be transferred to GZI Qualifying Shareholders pursuant to the Special Dividend may not represent a multiple of a board lot of 1,000 Units, and dealings in odd lot Units may be at a price below their prevailing market price. Entitlements to Units pursuant to the Special Dividend are not transferable and there will be no trading in nil-paid entitlements on the Hong Kong Stock Exchange.

GZI Qualifying Shareholders are recommended to consult their stockbroker, other registered dealer in securities, bank manager, solicitor, professional accountant or other professional adviser if they are in any doubt as to any aspect of the Special Dividend and the GZI Qualifying Shareholders’ Option described below.

GZI will grant to each of the GZI Qualifying Shareholders an option (the “GZI Qualifying Shareholders’ Option”) whereby such GZI Shareholder may elect to receive a cash payment in lieu of the Units proposed to be transferred to him/her/it pursuant to the Special Dividend, provided that the GZI Qualifying Shareholders’ Option is not granted to GZI Ineligible Overseas Shareholders. Thus, the exercise of the GZI Qualifying Shareholders’ Option pursuant to the Election Form is conditional upon GZI being satisfied that the exercising GZI Shareholder(s) are not Shareholder(s) whom the directors of GZI, after reasonable enquiries, consider it necessary or expedient to

297 STRUCTURE OF THE GLOBAL OFFERING exclude, whether due to the legal restrictions under the laws of his/her/its jurisdiction of residence or the requirements of the relevant body or stock exchange in such jurisdiction. Accordingly, if you are a GZI Ineligible Overseas Shareholder and you return an Election Form, your Election Form will be treated as null and void.

It is the responsibility of anyone outside Hong Kong wishing to exercise the GZI Qualifying Shareholders’ Option to satisfy himself/herself/itself, before so exercising the option, as to the observance of the laws and regulations of all relevant territories, including the obtaining of any governmental or other consents and to pay any taxes and duties required to be paid in such territory in connection therewith. GZI reserves the right to refuse to accept an Election Form if it believes that the exercise of the GZI Qualifying Shareholders’ Option by the relevant GZI Shareholder would violate the applicable securities or other laws or regulations of any jurisdiction.

GZI’s decision in relation to whether all of the conditions of the exercise of the GZI Qualifying Shareholders’ Option have been fulfilled will be conclusive. If, in the sole discretion of GZI, an Election Form does not satisfy all of the conditions of exercise of the GZI Qualifying Shareholders’ Option, then the return of the Election Form and the Election Form shall be treated as null and void and the relevant GZI Shareholder will be deemed not to have elected to exercise the GZI Qualifying Shareholders’ Option.

GZI Qualifying Shareholders may exercise the GZI Qualifying Shareholders’ Option either in whole or in part. It is expected that the cash payment payable to GZI Qualifying Shareholders who exercise the GZI Qualifying Shareholders’ Option as calculated on a per Unit basis will be approximately equal to the Offer Price less applicable stamp duty (being 0.1% of the Offer Price representing half of the amount of Hong Kong stamp duty payable by a GZI Qualifying Shareholder who elects to exercise the GZI Qualifying Shareholders’ Option on the transfer of the Units that would otherwise have been transferred to the relevant GZI Qualifying Shareholder pursuant to the Special Dividend (GZI will bear the other half of the applicable stamp duty being 0.1% of the Offer Price)) and applicable taxes (if any). GZI has decided to provide the GZI Qualifying Shareholders’ Option to GZI Qualifying Shareholders so as to provide them with a cash alternative in respect of their dividend entitlement, whilst allowing GZI to comply with applicable laws with respect to the effecting of the Special Dividend.

All of the Units in respect of which the GZI Qualifying Shareholders’ Option is exercised will be offered for sale by GZI (on behalf of those GZI Qualifying Shareholders who exercise the GZI Qualifying Shareholders’ Option) through the Joint Global Coordinators under the Offer for Sale which constitutes part of the International Offering. For GZI Ineligible Overseas Shareholders, who will not be transferred any Units under the Special Dividend, the Units which such GZI Shareholders would have otherwise been entitled to receive will be offered for sale by GZI (on behalf of those GZI Ineligible Overseas Shareholders) through the Joint Global Coordinators under the Offer for Sale which constitutes part of the International Offering. The GZI Ineligible Overseas Shareholders will receive a cash payment on the basis of the number of Units which the relevant GZI Ineligible Overseas Shareholder would otherwise have been entitled to receive

298 STRUCTURE OF THE GLOBAL OFFERING pursuant to the Special Dividend at the Offer Price. It is expected that the cash payment payable to GZI Ineligible Overseas Shareholders as calculated on a per Unit basis will be approximately equal to the Offer Price less applicable stamp duty (being 0.1% of the Offer Price representing half of the amount of Hong Kong stamp duty payable on the transfer of a Sale Unit) (GZI will bear the other half of the applicable stamp duty being 0.1% of the Offer Price) and applicable taxes (if any). The net proceeds of the sale of such Sale Units received by the Joint Global Coordinators, after deducting applicable taxes (if any) and applicable stamp duty (being 0.1% of the Offer Price representing half of the amount of Hong Kong stamp duty payable on the transfer of a Sale Unit), will be used to fund the cash payment by GZI to the GZI Qualifying Shareholders who validly exercise the GZI Qualifying Shareholders’ Option and the GZI Ineligible Overseas Shareholders. The Special Dividend is subject to the conditions set out in the paragraph headed “Special Dividend” above.

An Election Form is being despatched to each GZI Qualifying Shareholder, together with an electronic copy of this Offering Circular on CD ROM. GZI Qualifying Shareholders who wish to exercise the GZI Qualifying Shareholders’ Option must return their Election Forms to GZI’s share registrar, Abacus Share Registrars Limited at Ground Floor, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong or Tricor Group Processing Centre, at Workshop 14, 10th Floor, Honour Industrial Centre, 6 Sun Yip Street, Chai Wan, Hong Kong, so as not to arrive later than 12:00 noon on Thursday, 15 December 2005. Units (if any) in respect of which the GZI Qualifying Shareholders elect not to receive pursuant to the exercise of the GZI Qualifying Shareholders’ Option and Units which the GZI Ineligible Overseas Shareholders would otherwise have been entitled to receive under the Special Dividend will be allocated to the Offer for Sale under the International Offering. It is expected that the Joint Global Coordinators will underwrite the Offer for Sale and procure subscribers for the Sale Units pursuant to the International Underwriting Agreement. Provided that the conditions of the Global Offering are satisfied and the Global Offering is not terminated, the distribution by GZI of the Units to which GZI Qualifying Shareholders are entitled to receive pursuant the Special Dividend (other than the Units (if any) which such persons have elected not to receive pursuant to the exercise of the GZI Qualifying Shareholders’ Option) will be made. The Units to which GZI Qualifying Shareholders who validly exercise the GZI Qualifying Shareholders’ Option and any Units which the GZI Ineligible Overseas Shareholders would otherwise have been entitled to receive pursuant to the Special Dividend will be offered for sale by GZI (on behalf of such GZI Shareholders) through the Joint Global Coordinators pursuant to the aforesaid underwriting arrangement and the Joint Global Coordinators will procure purchasers for the Sale Units subject to the terms and conditions of the International Underwriting Agreement.

The Offer for Sale comprises the offer by GZI through the Joint Global Coordinators of an aggregate of up to 17,000,000 Units (being the maximum aggregate number of Units representing: (i) the Units in respect of which the GZI Qualifying Shareholders may elect to exercise the GZI Qualifying Shareholders’ Option; and (ii) such number of Units which the GZI Ineligible Overseas Shareholders would otherwise have been entitled to receive under the Special Dividend) for sale to investors under the International Offering and will be underwritten by the Joint Global Coordinators, in their capacity as the Sale Units Underwriters subject to the terms and conditions

299 STRUCTURE OF THE GLOBAL OFFERING of the International Underwriting Agreement. The Sale Units will represent a maximum of approximately 1.7% of the total number of issued Units of GZI REIT immediately following completion of the Global Offering. The Offer for Sale is part of the International Offering and is subject to the same conditions as those mentioned in the section headed “The International Offering” above. The net proceeds from the Offer for Sale, after deduction of applicable taxes (if any), applicable stamp duty (being 0.1% of the Offer Price representing half of the amount of Hong Kong stamp duty payable on the transfer of a Sale Unit) will be applied towards the cash payment by GZI to the GZI Qualifying Shareholders who validly exercise the GZI Qualifying Shareholders’ Option and the GZI Ineligible Overseas Shareholders.

GZI Qualifying Shareholders will be entitled to apply for Units under the Global Offering. GZI Qualifying Shareholders will receive no preference as to entitlement or allocation in respect of applications for the Units being offered pursuant to the Hong Kong Public Offering made on WHITE or YELLOW Application Forms or by giving electronic application instructions to HKSCC via CCASS. GZI Qualifying Shareholders should refer to this Offering Circular, the formal notice issued by GZI REIT in respect of the Global Offering and the Application Forms for further details on the application for the Units being offered pursuant to the Hong Kong Public Offering.

This Offering Circular and the Election Form to be issued to the GZI Qualifying Shareholders in connection with the GZI Qualifying Shareholders’ Option will not be registered under any applicable securities legislation of any country or jurisdiction outside Hong Kong. No GZI Qualifying Shareholders’ Option is being offered to GZI Ineligible Overseas Shareholders and no Election Forms will be sent to such persons.

Over-allocation Option and Stabilisation

The Over-allocation Option

In connection with the Global Offering and in connection with over-allocations in the International Offering, if any, and other stabilising action in respect of the Units, GZI (through Dragon Yield) is expected to grant to the Joint Global Coordinators the Over-allocation Option, which will be exercisable at any time from the date of the International Underwriting Agreement up to (and including) the date which is the 30th day after the last date for lodging Application Forms under the Hong Kong Public Offering. Pursuant to the Over-allocation Option, GZI may be required to make available up to 87,450,000 Units, representing approximately 15.0% of the total number of Units initially available under the Global Offering (excluding the maximum number of 17,000,000 Sale Units which may be offered for sale by GZI (on behalf of the GZI Qualifying Shareholders who exercise the GZI Qualifying Shareholders’ Option and the GZI Ineligible Overseas Shareholders) through the Joint Global Coordinators under the Offer for Sale), to be offered to investors as part of the International Offering. Any exercise of the Over-allocation Option will not affect the total number of Units in issue. In the event that the Over-allocation Option is exercised, an announcement will be published in the South China Morning Post (in English) and the Hong Kong Economic Times (in Chinese).

300 STRUCTURE OF THE GLOBAL OFFERING

Stabilising Action

In connection with the Global Offering, the Stabilising Manager on behalf of the International Underwriters, in consultation with the Joint Global Coordinators, may over-allocate or effect transactions with a view to supporting the market price of the Units at a level higher than that which might otherwise prevail for a period of 30 days after the last day for lodging Application Forms under the Hong Kong Public Offering. Such transactions, if commenced, may be discontinued at any time. The Stabilising Manager has been or will be appointed as stabilising manager for the purposes of the Global Offering and will conduct any stabilising activities (if any) on a basis equivalent to that required under the Securities and Futures (Price Stabilising) Rules made under the SFO and, should stabilising transactions be effected in connection with the Global Offering, this will be at the absolute discretion of the Stabilising Manager in consultation with the Joint Global Coordinators.

Following any over-allocation of Units in connection with the Global Offering, the Stabilising Manager or any person acting for it may cover such over-allocation by (among other methods) making purchases in the secondary market for a period of 30 days after the last day for lodging applications under the Hong Kong Public Offering, exercising the Over-allocation Option in full or in part, or by any combination of purchases and exercise of the Over-allocation Option. Any such purchases will be made in compliance with all applicable laws and regulatory requirements and on a basis consistent with the Securities and Futures (Price Stabilising) Rules made under the SFO as if those rules were directly applicable. The number of Units which can be over-allocated will not exceed the number of Units which are the subject of the Over-allocation Option, being 87,450,000 Units representing approximately 15.0% of the Units initially available under the Global Offering (excluding the Sale Units).

In order to facilitate the settlement of over-allocations in connection with the Global Offering, the Stabilising Manager (or its affiliate(s)) may choose to borrow Units from GZI REIT Unitholders under unit borrowing arrangements, or acquire Units from other sources, including pending exercise of Over-allocation Option. Such unit borrowing arrangements may include arrangements agreed in principle between the Stabilising Manager and Dragon Yield, a wholly owned subsidiary of GZI, under which Dragon Yield has agreed in principle to lend to the Stabilising Manager up to 87,450,000 Units for a period ending no later than three Business Days after the earlier of (i) the last date for exercising the Over-allocation Option and (ii) the date on which the Over-allocation Option is exercised in full. To the extent the Over-allocation Option is not exercised, a corresponding number of Units will be returned to Dragon Yield.

The possible stabilising action which may be taken by the Stabilising Manager in connection with the Global Offering may involve (among other things): (i) over-allocation of Units; (ii) purchases of Units; (iii) establishing, hedging and liquidating positions in Units; (iv) exercising the Over-allocation Option in whole or in part; and/or (v) offering or attempting to do any of the foregoing.

301 STRUCTURE OF THE GLOBAL OFFERING

Specifically, prospective applicants for and investors in Units should note that:

• the Stabilising Manager may, in connection with the stabilising action, maintain a long position in the Units. There is no certainty regarding the extent to which and the time period for which the Stabilising Manager will maintain such a position;

• liquidation of any such long position by the Stabilising Manager may have an adverse impact on the market price of the Units;

• no Stabilising Action will be taken to support the price of the Units for longer than the stabilising period which will begin on the Listing Date, and is expected to expire at the end of 14 January 2006, being the day which is expected to be the 30th day after the last day for lodging Application Forms under the Hong Kong Public Offering. After this date, when no further action may be taken to support the price of the Units, demand for the Units, and therefore the price of the Units, could fall;

• the price of any security (including the Units) cannot be assured to stay at or above its offer price by taking any stabilising action; and

• stabilising bids may be made or transactions effected in the course of the stabilising action at any price at or below the Offer Price, which means that stabilising bids may be made or transactions effected at a price below the price paid by applicants for, or investors in, the Units.

The Manager will ensure or procure that a public announcement, on a basis consistent with the Securities and Futures (Price Stabilising) Rules as if those rules were directly applicable, will be made within seven days of the expiration of the stabilising period.

302 EXPERTS

PricewaterhouseCoopers, Colliers International (Hong Kong) Ltd, Cushman & Wakefield (HK) App B B22 Limited and each of the Joint Global Coordinators have each given and have not withdrawn their respective written consents to the issue of this Offering Circular with the inclusion of their reports and/or opinions and/or memorandum and/or valuation certificates and/or summary thereof (as the case may be) and/or references to their names included herein in the form and context in which they are respectively included.

PricewaterhouseCoopers is a firm of certified public accountants.

Colliers International (Hong Kong) Ltd was responsible for (i) conducting a survey and valuation of the Properties; (ii) producing detailed and summary reports in relation to the findings thereof; and (iii) reviewing the forecast of Rental Income for the Properties and the underlying assumptions used by the Manager for the purpose of the profit forecast set out in the section headed “Profit Forecast” in this Offering Circular.

Cushman & Wakefield (HK) Limited was responsible for (i) carrying out a comprehensive study of the commercial property market in Guangzhou; and (ii) producing a comprehensive report in relation to the findings thereof.

The Hongkong and Shanghai Banking Corporation Ltd is a deemed licensed corporation under the SFO to carry on regulated activity types 1, 4, 6, 7 and 9 as defined under the SFO and a licensed bank under the Banking Ordinance.

Citigroup Global Markets Asia Limited is a deemed licensed corporation under the SFO for regulated activity types 1, 4 and 6 as defined under the SFO.

DBS Bank Ltd. is a deemed registered institution under the SFO for regulated activity types 1, 4 and 6 as defined under the SFO and a licensed bank under the Banking Ordinance.

303 HOW TO APPLY FOR HONG KONG PUBLIC OFFERING UNITS

1. Who can apply for the Hong Kong Public Offering Units App B B11

If the applicant, or any person(s) for whose benefit the applicant is applying, is an individual, the applicant can apply for Hong Kong Public Offering Units if he/she/they:

• is/are 18 years of age or older;

• has/have a Hong Kong address; and

• is/are not a US Person.

If the applicant is a firm, the application must be in the names of the individual members, not the firm’s name. If the applicant is a body corporate, the Application Form must be signed by a duly authorised officer, who must state his or her representative capacity.

The Directors and their associates do not intend to apply for Hong Kong Public Offering Units. However, certain Directors and/or their associates are GZI Qualifying Shareholders and will be entitled to receive Units under the Special Dividend.

Directors’ holdings will be disclosed by way of an announcement (published in the South China Morning Post (in English) and the Hong Kong Economic Times (in Chinese)) prior to the day on which dealings in Units commence on the Hong Kong Stock Exchange.

If an application is made by a person duly authorised under a valid power of attorney, the Joint Global Coordinators (or their respective agents or nominees) may accept it at their discretion, and subject to any conditions they think fit, including production of evidence of the authority of the attorney.

The number of joint applicants may not exceed two.

2. Methods to apply for Hong Kong Public Offering Units

An applicant may apply for Hong Kong Public Offering Units by using one of the following methods:

• using a WHITE or YELLOW Application Form; or

• electronically instructing HKSCC via CCASS to cause HKSCC Nominees to apply for Hong Kong Public Offering Units on the applicant’s behalf.

Multiple or suspected multiple applications are liable to be rejected. Please see subsection headed “How many applications can be made” below for further details.

304 HOW TO APPLY FOR HONG KONG PUBLIC OFFERING UNITS

3. Which application method to use

Please choose the correct application method carefully. If an applicant does not use the correct application method to apply for the Hong Kong Public Offering Units, his/her/its application is liable to be rejected.

(a) WHITE Application Forms

Use a WHITE Application Form if an applicant wants the Hong Kong Public Offering Units to be registered in his/her/its own name. An applicant may apply for the Hong Kong Public Offering Units with one other joint applicant. Use a WHITE Application Form if an applicant applies on behalf of another person and wants the Hong Kong Public Offering Units to be registered in his/her/its own name as nominee.

(b) YELLOW Application Forms

Use a YELLOW Application Form if an applicant wants the Hong Kong Public Offering Units to be registered in the name of HKSCC Nominees and deposited directly into CCASS for credit to the applicant’s CCASS Investor Participant stock account or the applicant’s designated CCASS Participant’s stock account. An applicant may apply for Hong Kong Public Offering Units with one other joint applicant.

Instead of using a YELLOW Application Form, an applicant may electronically instruct HKSCC via CCASS to cause HKSCC Nominees to apply for the Hong Kong Public Offering Units on the applicant’s behalf. Any Hong Kong Public Offering Units allocated to the applicant will be registered in the name of HKSCC Nominees and deposited directly into CCASS for credit to the applicant’s CCASS Investor Participant stock account or the applicant’s designated CCASS Participant’s stock account.

4. Where to collect the Offering Circular and the Application Forms

(a) Applicants can collect this Offering Circular during normal business hours from 9:00 a.m. on Monday, 12 December 2005 until 12:00 noon on Thursday, 15 December 2005 from:

Any participant of the Hong Kong Stock Exchange

The Hongkong and Shanghai Banking 1 Queen’s Road Central, Central, Hong Corporation Limited Kong

Citigroup Global Markets Asia Limited 50th Floor, Citibank Tower, Citibank Plaza, 3 Garden Road, Central, Hong Kong

305 HOW TO APPLY FOR HONG KONG PUBLIC OFFERING UNITS

DBS Bank Ltd. 22nd Floor, The Center, 99 Queen’s Road Central, Central, Hong Kong

BOCI Asia Limited 26th Floor, Bank of China Tower, 1 Garden Road, Central, Hong Kong

First Shanghai Securities Limited 19th Floor, Wing On House, Des Voeux Road Central, Hong Kong

BCOM Securities Company Limited 3rd Floor, Far East Consortium Building, 121 Des Voeux Road Central, Hong Kong

Goldbond Securities Limited 3901B, 39th Floor, Tower 1, Lippo Centre, 89 Queensway, Hong Kong

Kim Eng Securities (Hong Kong) Room 1901, Bank of America Tower, 12 Limited Harcourt Road, Central, Hong Kong

Tai Fook Securities Company Limited 25th Floor, New World Tower, 16-18 Queen’s Road Central, Hong Kong

Applicants can also collect this Offering Circular during normal business hours from 9:00 am on Monday, 12 December 2005 until 4:30 p.m. on Wednesday, 14 December 2005 and from 9:00 am until 12:00 noon on Thursday, 15 December 2005 from any of the following branches of:

The Hongkong and Shanghai Banking Corporation Limited Hong Kong Island Aberdeen Centre Branch Shop 2 G/F Site I, Aberdeen Centre, Aberdeen, Hong Kong Cityplaza Branch Unit 065, Cityplaza I, Taikoo Shing, Hong Kong Des Voeux Road West Branch Western Centre, 40-50 Des Voeux Road West, Hong Kong Happy Valley Branch G/F, Sun & Moon Building, 45 Sing Woo Road, Happy Valley, Hong Kong Hopewell Centre Branch Shop No.1-2, G/F, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong Pacific Place Branch Shop 401, Pacific Place, 88 Queensway, Hong Kong

306 HOW TO APPLY FOR HONG KONG PUBLIC OFFERING UNITS

Kowloon Festival Walk Branch Shop LG1-37, Festival Walk, 80 Tat Chee Avenue, Kowloon Tong, Kowloon Kwun Tong Branch 1 Yue Man Square, Kwun Tong, Kowloon Peninsula Centre Branch Peninsula Centre, 67 Mody Road, Tsim Sha Tsui East, Kowloon Pioneer Centre Branch Shop 115, 1/F, Pioneer Centre, 750 Nathan Road, Kowloon

New Territories Citylink Plaza Branch Shops 38-46, Citylink Plaza, Shatin Station Circuit, Shatin, New Territories Tuen Mun Town Plaza Branch Shop 1, UG/F, Shopping Arcade Phase II, Tuen Mun Town Plaza, New Territories

Bank of China (Hong Kong) Limited Hong Kong Island Bank of China Tower Branch 3/F, 1 Garden Road, Central, Hong Kong Central District (Wing On House) 71 Des Voeux Road Central, Hong Branch Kong Shek Tong Tsui Branch 534 Queen’s Road West, Shek Tong Tsui, Hong Kong Taikoo Shing Branch Shop G1006-7, Hoi Sing Mansion, Taikoo Shing, Hong Kong North Point (Kiu Fai Mansion) Branch 413-415 King’s Road North Point, Hong Kong

Kowloon Kwun Tong Branch 20-24 Yue Man Square, Kwun Tong, Kowloon Mong Kok (President Commercial 608 Nathan Road, Mong Kok, Centre) Branch Kowloon Mei Foo Mount Sterling Mall Branch Shop N47-49 Mount Sterling Mall, Mei Foo Sun Chuen, Kowloon Diamond Hill Branch G107, Plaza Hollywood, Diamond Hill, Kowloon Tsim Sha Tsui East Branch Shop G02-03, Inter-Continental Plaza, 94 Granville Road, Tsim Sha Tsui, Kowloon

307 HOW TO APPLY FOR HONG KONG PUBLIC OFFERING UNITS

New Territories Castle Peak Road (Tsuen Wan) 167 Castle Peak Road, Tsuen Wan, Wealth Management Centre New Territories Lucky Plaza Branch Lucky Plaza, Wang Pok Street, Shatin, New Territories

Bank of Communications Co., Ltd., Hong Kong Branch Hong Kong Island Hong Kong Branch 20 Pedder Street, Central, Hong Kong Central District Sub-Branch 125A Des Voeux Road, Central, Hong Kong King’s Road Sub-Branch 67-71 King’s Road, North Point, Hong Kong

Kowloon Kowloon Sub-Branch 563 Nathan Road, Kowloon Cheung Sha Wan Plaza Sub-Branch Unit G04, Cheung Sha Wan Plaza, 833 Cheung Sha Wan Road, Kowloon Hunghom Sub-Branch 1-3A Tak Man Street, Whampoa Estate, Hunghom, Kowloon Ngau Tau Kok Sub-Branch Shop G1, G/F., Phase I, Amoy Plaza, 77 Ngau Tau Kok Road, Kowloon Wong Tai Sin Sub-Branch Shops 127-129, 1/F Lung Cheung Mall, 136 Lung Cheung Road, Wong Tai Sin, Kowloon

New Territories Tseung Kwan O Sub-Branch Shops 253-255, Metro City Shopping Arcade, Phase I, Tseung Kwan O, New Territories Tsuen Wan Sub-Branch Shop G10-11, Pacific Commercial Plaza, Bo Shek Mansion, 328 Sha Tsui Road, Tsuen Wan, New Territories Shatin Sub-Branch Shop No. 193, Level 3, Lucky Plaza, 1-15 Wang Pok Street, Shatin, New Territories Sheung Shui Sub-Branch Shops 10-14, G/F., Sheung Shui Centre Shopping Arcade, Sheung Shui, New Territories

308 HOW TO APPLY FOR HONG KONG PUBLIC OFFERING UNITS

(b) Applicants can collect a WHITE Application Form and this Offering Circular during the following times at any of the places set out in sub-paragraph (a) above:

Monday, 12 December 2005 — 9:00 a.m. to 4:30 p.m. Tuesday, 13 December 2005 — 9:00 a.m. to 4:30 p.m. Wednesday, 14 December 2005 — 9:00 a.m. to 4:30 p.m. Thursday, 15 December 2005 — 9:00 a.m. to 12:00 noon

(c) Applicants can collect a YELLOW Application Form and this Offering Circular during normal business hours from 9:00 a.m. on Monday, 12 December 2005 until 12:00 noon on Thursday, 15 December 2005 from:

(i) the Depository Counter of HKSCC at 2nd Floor, Vicwood Plaza, 199 Des Voeux Road Central, Hong Kong; or

(ii) the Customer Service Centre of HKSCC at Upper Ground Floor, V-Heun Building, 128-140 Queen’s Road Central, Hong Kong.

(d) Applicants’ brokers may have the Application Forms available.

5 How to apply using a WHITE or YELLOW Application Form

(a) Obtain a WHITE or YELLOW Application Form as appropriate.

(b) Applicants should read the instructions in this Offering Circular and the relevant Application Form carefully. If an applicant does not follow the instructions, his/her/its application is liable to be rejected and returned by ordinary post together with the accompanying cheque or banker’s cashier order to the applicant (or the first-named applicant in the case of joint applicants) at the applicant’s own risk to the address stated on the applicant’s Application Form.

(c) Complete the Application Form in English (save as otherwise indicated) and sign it. Only written signatures will be accepted. Applications made by corporations, whether on their own behalf, or on behalf of other persons, must be stamped with the company chop (bearing the company name) and signed by a duly authorised officer, whose representative capacity must be stated. If an applicant is applying for the benefit of someone else, the applicant, rather than that person, must sign the Application Form. If it is a joint application, all applicants must sign it. If an application is made through a duly authorised attorney, the Joint Global Coordinators (or their agents or nominees) may accept it at their discretion, and subject to any conditions they think fit, including production of evidence of the authority of the attorney.

309 HOW TO APPLY FOR HONG KONG PUBLIC OFFERING UNITS

(d) Each Application Form must be accompanied by either one cheque or one banker’s cashier order, which must be stapled to the top left-hand corner of the Application Form.

If payment is made by cheque, the cheque must:

— be in Hong Kong dollars;

— be drawn on a Hong Kong dollar bank account in Hong Kong;

— show the applicant’s account name, which must either be pre-printed on the cheque, or be endorsed on the back by a person authorised by the bank. This account name must be the same as the name in the Application Form. If the application is a joint application, the account name must be the same as the name of the first-named applicant;

— be made payable to “HSBC Nominees (Hong Kong) Limited — GZI REIT Public Offer” or “ — ”;

— be crossed “Account Payee Only”; and

— not be post-dated.

An application is liable to be rejected if the cheque does not meet all these requirements or is dishonoured on its first presentation.

If payment is made by banker’s cashier order, the banker’s cashier order must:

— be in Hong Kong dollars;

— be issued by a licensed bank in Hong Kong and have the applicant’s name certified on the back by a person authorised by the bank on which it is drawn. The name on the back of the banker’s cashier order and the name on the Application Form must be the same. If the application is a joint application, the name on the back of the banker’s cashier order must be the same as the name of the first-named joint applicant;

— be made payable to “HSBC Nominees (Hong Kong) Limited — GZI REIT Public Offer” or “ — ”;

— be crossed “Account Payee Only”; and

— not be post-dated.

An application is liable to be rejected if the banker’s cashier order does not meet all these requirements.

No money shall be paid to any intermediary in Hong Kong who is not licensed or App B B12 registered to carry on Type 1 regulated activity under Part V of the SFO.

310 HOW TO APPLY FOR HONG KONG PUBLIC OFFERING UNITS

(e) Lodge the Application Form in one of the collection boxes by the time and at one of the locations, as respectively referred to in paragraph (a) of the sub-section headed “When to apply for the Hong Kong Public Offering Units” above.

(f) Multiple or suspected multiple applications are liable to be rejected. Please see the sub-section headed “How many applications can be made” below.

(g) In order for an application made on the YELLOW Application Form to be valid:

— If an applicant is applying through a designated CCASS Participant (other than a CCASS Investor Participant):

— the designated CCASS Participant or its authorised signatories must sign in the appropriate box; and

— the designated CCASS Participant must endorse the form with its company chop (bearing its company name) and insert its participant I.D. in the appropriate box.

— If an applicant is applying as an individual CCASS Investor Participant:

— the applicant must fill in the applicant’s full name and Hong Kong Identity Card number; and

— the applicant must insert the applicant’s participant I.D. and sign in the appropriate box.

— If an applicant is applying as a joint individual CCASS Investor Participant:

— the applicant must insert all joint CCASS Investor Participants’ names and the Hong Kong Identity Card numbers of all joint CCASS Investor Participants; and

— the applicant must insert the applicant’s participant I.D. and the authorised signatory(ies) of the CCASS Investor Participant’s stock account must sign in the appropriate box.

— if an applicant is applying as a corporate CCASS Investor Participant:

— the applicant must insert the applicant’s company name and the company’s Hong Kong business registration number; and

— the applicant must fill in the applicant’s participant I.D. and stamp the applicant’s company chop (bearing the company’s name) endorsed by the authorised signatory(ies) of the CCASS Investor Participant’s stock account, in the appropriate box.

311 HOW TO APPLY FOR HONG KONG PUBLIC OFFERING UNITS

The signature(s), number of signatories and form of chop, where appropriate, in each YELLOW Application Form should match the records kept by HKSCC. Incorrect or incomplete details of the CCASS Participant or the omission or inadequacy of authorised signatory or signatories (if applicable), CCASS Participant I.D. or other similar matters may render the application invalid.

(h) Nominees who wish to submit separate applications in their names on behalf of different beneficial owners are requested to designate on each Application Form in the box marked “For nominees” an account number or other identification code for each beneficial owner or, in the case of joint beneficial owners, for each such beneficial owner. Failure to provide the account number(s) or other identification code(s) for the beneficial owner(s) will result in the application being deemed to be submitted for the benefit of the nominee(s) in question. The attention of nominees is also drawn to the sub-section headed “How many applications can be made” below.

6 How to apply by giving electronic application instructions to HKSCC

(a) General

CCASS Participants may give electronic application instructions to HKSCC via CCASS to apply for Hong Kong Public Offering Units and to arrange payment of the money due on application and payment of refunds. This will be in accordance with their participant agreements with HKSCC and the General Rules of CCASS and the CCASS Operational Procedures.

If an applicant is a CCASS Investor Participant, the applicant may give electronic application instructions through the CCASS Phone System by calling 2979 7888 or CCASS Internet System at https://ip.ccass.com (using the procedures contained in HKSCC’s “An Operating Guide for Investor Participants” in effect from time to time). HKSCC can also input electronic application instructions for an applicant if the applicant goes to:

HKSCC’s Customer Service Centre Upper Ground Floor, V-Heun Building, 128-140 Queen’s Road Central, Hong Kong

and complete an input request form.

Offering Circulars are available for collection from the above address.

If an applicant is not a CCASS Investor Participant, the applicant may instruct his/her/its broker or custodian who is a CCASS Broker Participant or a CCASS Custodian Participant to give electronic application instructions via CCASS terminals to apply for the Hong Kong Public Offering Units.

312 HOW TO APPLY FOR HONG KONG PUBLIC OFFERING UNITS

Applicants are deemed to have authorised HKSCC and/or HKSCC Nominees to transfer the details of their applications whether submitted by themselves or through their brokers or custodians to the Manager, the Trustee, the Joint Global Coordinators and the Unit Registrar.

(b) Application by HKSCC Nominees

Where a WHITE Application Form is signed by HKSCC Nominees on behalf of persons who have given electronic application instructions to apply for the Hong Kong Public Offering Units:

(i) HKSCC Nominees is only acting as nominee for those persons and shall not be liable for any breach of the terms and conditions of the WHITE Application Form or this Offering Circular; and

(ii) HKSCC Nominees does all the things on behalf of each of such persons as stated in sub-paragraphs (a) and (c) in the section headed “Further Terms and Conditions of the Hong Kong Public Offering — Effect of making any application” in this Offering Circular.

An applicant may give electronic application instructions in respect of a minimum of 1,000 Hong Kong Public Offering Units. Each electronic application instruction in respect of more than 1,000 Hong Kong Public Offering Units must be in one of the numbers set out in the table in the Application Form.

(d) Multiple applications

If an applicant is suspected of having made multiple applications or if more than one application is made for the applicant’s benefit, the number of Hong Kong Public Offering Units applied for by HKSCC Nominees will be automatically reduced by the number of Hong Kong Public Offering Units in respect of which the applicant has given such electronic application instruction and/or in respect of which such electronic application instruction have been given for the applicant’s benefit. Any electronic instructions to make an application for Hong Kong Public Offering Units given by the applicant or for the applicant’s benefit to HKSCC shall be deemed to be an actual application.

(e) Allocation of the Hong Kong Public Offering Units

For the purpose of allocating the Hong Kong Public Offering Units, HKSCC Nominees shall not be treated as an applicant. Instead, each CCASS Participant who gives electronic application instructions or each person for whose benefit each such instruction is given shall be treated as an applicant.

313 HOW TO APPLY FOR HONG KONG PUBLIC OFFERING UNITS

Warning

Application for Hong Kong Public Offering Units by giving electronic application instructions to HKSCC is only a facility provided to CCASS Participants. The Manager, the Joint Global Coordinators and any parties involved in the Hong Kong Public Offering take no responsibility for the application and provide no assurance that any CCASS Participant will be allotted any Hong Kong Public Offering Units.

To ensure that CCASS Investor Participants can give their electronic application instructions to HKSCC through the CCASS Phone System or CCASS Internet System, CCASS Investor Participants are advised not to wait until the last minute to input instructions. If CCASS Investor Participants have problems in connecting to the CCASS Phone System or CCASS Internet System for submission of electronic application instructions, they should either:

(a) submit the WHITE or YELLOW Application Form (as appropriate); or

(b) go to HKSCC’s Customer Service Centre to complete an application instruction input request form before 12:00 noon on Thursday, 15 December 2005 or such later time as described under the paragraph headed “Effect of bad weather conditions on the opening of the application lists” in the sub-section headed “When to apply for the Hong Kong Public Offering Units” below.

7 When to apply for the Hong Kong Public Offering Units

(a) WHITE or YELLOW Application Forms

Completed WHITE or YELLOW Application Forms, with a cheque or banker’s cashier order attached, must be lodged by 12:00 noon on Thursday, 15 December 2005, or, if the application lists are not open on that day, by the time and date stated in the paragraph headed “Effect of bad weather conditions on the opening of the application lists” below.

Completed WHITE or YELLOW Application Forms, with one cheque or one banker’s cashier order attached, should be deposited in the special collection boxes provided at any of the branches of The Hongkong and Shanghai Banking Corporation Limited, Bank of China (Hong Kong) Limited and Bank of Communications Co., Ltd. Hong Kong Branch stated above at the following times:

314 HOW TO APPLY FOR HONG KONG PUBLIC OFFERING UNITS

Completed WHITE and YELLOW Application Forms, with one cheque or one banker’s cashier order attached, may also be submitted to the applicant’s broker allowing sufficient time for the broker to deliver the Application Form to any of the branches of The Hongkong and Shanghai Banking Corporation Limited, Bank of China (Hong Kong) Limited and Bank of Communications Co., Ltd. Hong Kong Branch stated above by 12:00 noon on Thursday, 15 December 2005. However, if the broker fails to deliver the applicant’s Application Form to any of the abovementioned branches by 12:00 noon on Thursday, 15 December 2005, the relevant application will not be accepted and neither GZI REIT nor anyone else connected with the Hong Kong Public Offering will be responsible for any loss incurred thereby.

(b) Electronic application instructions to HKSCC via CCASS

CCASS Broker/Custodian Participants should input electronic application instructions at the following times:

Monday, 12 December 2005 — 9:00 a.m. to 8:30 p.m.(1) Tuesday, 13 December 2005 — 9:00 a.m. to 8:30 p.m.(1) Wednesday, 14 December 2005 — 9:00 a.m. to 8:30 p.m.(1) Thursday, 15 December 2005 — 9:00 a.m.(1) to 12:00 noon

Note 1: These times are subject to change as HKSCC may determine from time to time with prior notification to CCASS Broker/Custodian Participants.

CCASS Investor Participants can input electronic application instructions from 9:00 a.m. on Monday, 12 December 2005 until 12:00 noon on Thursday, 15 December 2005 (24 hours daily, except the last application day).

The latest time for inputting electronic application instructions via CCASS (if the applicant is a CCASS Participant) is 12:00 noon on Thursday, 15 December 2005 or if the application lists are not open on that day, by the time and date stated in the paragraph headed “Effect of bad weather conditions on the opening of the application lists” below.

The application lists will be open from 11:45 a.m. to 12:00 noon on Thursday, 15 December 2005, except as provided in the paragraph headed “Effect of bad weather conditions on the opening of the application lists” below. Applicants should note that cheques or banker’s cashier orders will not be presented for payment before the closing of the application lists but may be presented at any time thereafter.

315 HOW TO APPLY FOR HONG KONG PUBLIC OFFERING UNITS

(d) Effect of bad weather conditions on the opening of the application lists

The application lists will be open between 11:45 a.m. and 12:00 noon on Thursday, 15 December 2005, subject to weather conditions. The application lists will not be open in relation to the Hong Kong Public Offering if there is:

— a tropical cyclone warning signal number 8 or above; or

— a “black” rainstorm warning signal,

in force in Hong Kong at any time between 9:00 a.m. and 12:00 noon on Thursday, 15 December 2005. Instead, the application lists will be open between 11:45 a.m. and 12:00 noon on the next Business Day.

8 How many applications can be made

Multiple or suspected multiple applications are liable to be rejected.

(a) Applicants may make more than one application for the Hong Kong Public Offering Units if and only if the applicant is a nominee, in which case the applicant may make an application as a nominee by: (i) giving electronic application instructions to HKSCC (if the applicant is a CCASS Participant); and (ii) lodging more than one application in the applicant’s own name on behalf of different beneficial owners. In the box on the Application Form marked “For nominees” the applicant must include:

— an account number; or

— some other identification number,

for each beneficial owner or, in the case of joint beneficial owners, for each such beneficial owner. If the applicant does not include this information, the application will be treated as being for the applicant’s benefit.

Otherwise, multiple applications are liable to be rejected.

(b) Save as referred to above, all of the applications of an applicant under the Hong Kong Public Offering are liable to be rejected as multiple applications if the applicant, or the applicant and any other joint applicant together:

— makes more than one application (whether individually or jointly with others) on a WHITE or YELLOW Application Form or by giving electronic application instructions to HKSCC; or

316 HOW TO APPLY FOR HONG KONG PUBLIC OFFERING UNITS

— applies on one WHITE or YELLOW Application Form (whether individually or jointly with others) or by giving electronic application instructions to HKSCC to apply for more than 30,000,000 Units, being 50% of the Hong Kong Public Offering Units initially made available for subscription under the Hong Kong Public Offering; or

— has indicated an interest for, or has received or will receive, any International Offering Units in the International Offering.

(c) All of the applications of an applicant are also liable to be rejected as multiple applications if more than one application is made for the applicant’s benefit (including the part of the application made by HKSCC Nominees acting on electronic application instructions). If an application is made by an unlisted company and: (i) the only business of that company is dealing in securities; and (ii) the applicant exercises statutory control over that company, then the application will be treated as being for the applicant’s benefit. Unlisted company means a company with no equity securities listed on the Hong Kong Stock Exchange. Statutory control in relation to a company means the applicant: (i) controls the composition of the board of directors of that company; or (ii) controls more than half of the voting power of that company; or (iii) holds more than half of the issued share capital of that company (not counting any part of it which carries no right to participate beyond a specified amount in a distribution of either profits or capital).

9 How much to pay for the Hong Kong Public Offering Units

Applicants must pay the Maximum Offer Price of HK$3.075 per Hong Kong Public Offering App B B14 (a) Unit, plus brokerage of 1%, Hong Kong Stock Exchange trading fee of 0.005% and SFC transaction levy of 0.005% in full, when they apply for the Hong Kong Public Offering Units. The Application Forms have tables showing the exact amount payable for the numbers of Units applied for up to 30,000,000 Units.

If an application is successful, brokerage is paid to participants of the Hong Kong Stock Exchange, the Hong Kong Stock Exchange trading fee is paid to the Hong Kong Stock Exchange, and the SFC transaction levy is paid to the SFC.

Appropriate refund payments representing the difference (if any) between the Offer Price and the Maximum Offer Price (including brokerage, Hong Kong Stock Exchange trading fee, SFC transaction levy attributable to the surplus application monies) will be made to successful applicants without interest.

317 HOW TO APPLY FOR HONG KONG PUBLIC OFFERING UNITS

10 Publication of results

The Manager expects to announce the Offer Price, the level of indications of interest in the International Offering, the results of applications in the Hong Kong Public Offering, the basis of allocations of the Hong Kong Public Offering Units, the final number of Hong Kong Public Offering Units comprised in the Hong Kong Public Offering, Pool A and Pool B, respectively, and the Hong Kong identity card/passport/Hong Kong business registration numbers of successful applicants under the Hong Kong Public Offering, as well as the details of exercise, if any, of the GZI Qualifying Shareholders’ Option, on or before Tuesday, 20 December 2005 in the South China Morning Post (in English) and the Hong Kong Economic Times (in Chinese).

11 Dispatch/collection of Unit certificates and refund of application monies

For details please refer to the sub-sections headed “If an application for the Hong Kong Public Offering Units is successful (in whole or in part)” and “Refund of money — additional information” in the section headed “Further Terms and Conditions of the Hong Kong Public Offering” in this Offering Circular.

Wholly or partly successful applicants will receive one Unit certificate for all the Hong Kong Public Offer Units issued to them except pursuant to applications made on YELLOW application form or by giving electronic application instructions to HKSCC where the Unit certificates will be deposited into CCASS.

12 Commencement of dealings in the Units on the Hong Kong Stock Exchange

Dealings in the Units on the Hong Kong Stock Exchange are expected to commence on Wednesday, 21 December 2005. Units will be traded on the Hong Kong Stock Exchange in board lots of 1,000 Units each.

318 FURTHER TERMS AND CONDITIONS OF THE HONG KONG PUBLIC OFFERING

1 General

(a) If an applicant applies for Hong Kong Public Offering Units in the Hong Kong Public Offering, the applicant will be agreeing with the Manager and the Joint Global Coordinators (on behalf of the Hong Kong Underwriters) as set out below.

(b) If an applicant electronically instructs HKSCC via CCASS to cause HKSCC Nominees to apply for the Hong Kong Public Offering Units on the applicant’s behalf, the applicant will have authorised HKSCC Nominees to apply on the terms and conditions set out below, as supplemented and amended by the terms and conditions applicable to the relevant application method.

(c) In this section, references to “applicants”, “joint applicants” and other like references shall, if the context so permits, include references to both nominees and principals on whose behalf HKSCC Nominees is applying for the Hong Kong Public Offering Units; and references to the making of an application shall, if the context so permits, include references to making applications electronically by giving instructions to HKSCC.

(d) Applicants should read this Offering Circular carefully, including other terms and conditions of the Hong Kong Public Offering, and the terms and conditions set out in the sections headed “Structure of the Global Offering” and “How to apply for Hong Kong Public Offering Units” in this Offering Circular, and the relevant Application Form or imposed by HKSCC prior to making an application.

2 Offer to acquire the Hong Kong Public Offering Units

(a) Applicants offer to subscribe for at the Offer Price the number of the Hong Kong Public Offering Units indicated in their Application Forms or in their applications inputted via CCASS electronically as the case may be (or any smaller number in respect of which the application is accepted) on the terms and conditions set out in this Offering Circular and the relevant Application Form.

(b) For applicants using Application Forms, where applicable, a refund cheque in respect of the surplus application monies (if any) representing the Hong Kong Public Offering Units applied for but not allocated to them and representing the difference (if any) between the Offer Price and the Maximum Offer Price (including, in each case, the brokerage, Hong Kong Stock Exchange trading fee and SFC transaction levy attributable thereto), is expected to be sent to them at their own risk to the address stated on their Application Forms on or before Tuesday, 20 December 2005.

Details of the procedure for refunds relating to each of the Hong Kong Public Offering methods are contained below in the sub-sections headed “If an application for the Hong Kong Public Offering Units is successful (in whole or in part)” and “Refund of money — additional information” in this section.

319 FURTHER TERMS AND CONDITIONS OF THE HONG KONG PUBLIC OFFERING

(d) Applicants under the Hong Kong Public Offering should note that in no circumstances can applications be withdrawn once submitted.

(e) The total number of Hong Kong Public Offering Units available under the Hong Kong Public Offering will initially be divided equally into two pools for allocation purposes: Pool A and Pool B. All valid applications that have been received for Hong Kong Public Offering Units with a total subscription amount (excluding brokerage, Hong Kong Stock Exchange trading fee and SFC transaction levy payable thereon) of HK$5,000,000 or below will fall into Pool A and all valid applications that have been received for Hong Kong Public Offering Units with a total subscription amount (excluding brokerage, Hong Kong Stock Exchange trading fee and SFC transaction levy payable thereon) of more than HK$5,000,000 will fall into Pool B.

320 FURTHER TERMS AND CONDITIONS OF THE HONG KONG PUBLIC OFFERING

In addition, the number of Hong Kong Public Offering Units comprised in Pool A and Pool B will not be determined until after applications have been made. Following such determination, applications in excess of the number of Hong Kong Public Offering Units finally determined to be comprised in Pool B (but not more than the initial maximum number) will be deemed to have been made at the number of Hong Kong Public Offering Units finally determined to be in Pool B.

Further information is set out in the section headed “Structure of the Global Offering — The Hong Kong Public Offering” in this Offering Circular.

3 Acceptance of applicants’ offer

(a) The Hong Kong Public Offering Units will be allocated after the application lists close. The Manager expects to announce the Offer Price , the level of indications of interest in the International Offering, the level of applications in the Hong Kong Public Offering, the basis of allocations of the Hong Kong Public Offering Units and the final number of the Hong Kong Public Offering Units comprised in the Hong Kong Public Offering, Pool A and Pool B, and the Hong Kong identity card/passport/Hong Kong business registration numbers of successful applicants under the Hong Kong Public Offering respectively in the South China Morning Post (in English) and the Hong Kong Economic Times (in Chinese) on Tuesday, 20 December 2005.

(b) The Manager may accept an applicant’s offer to subscribe (if the application is received, valid, processed and not rejected) by announcing the basis of allocations and/or making available the results of allocations publicly.

(c) If the Manager accepts an applicant’s offer to subscribe (in whole or in part), there will be a binding contract under which the applicant will be required to subscribe for the Hong Kong Public Offering Units in respect of which the applicant’s offer has been accepted if the conditions of the Global Offering are satisfied or the Global Offering is not otherwise terminated. Further details are contained in the section headed “Structure of the Global Offering” in this Offering Circular.

(d) Applicants will not be entitled to exercise any remedy of rescission for innocent misrepresentation at any time after acceptance of their application. This does not affect any other right they may have.

4 Effect of making any application

(a) By making any application, the applicant (and if the application is made by joint applicants, each of the joint applicants jointly and severally) for himself/herself/itself or as agent or nominee and on behalf of each person for whom the applicant acts as agent or nominee:

— instructs and authorises the Manager, the Trustee and/or the Joint Global Coordinators (or their respective agents or nominees) to execute any documents

321 FURTHER TERMS AND CONDITIONS OF THE HONG KONG PUBLIC OFFERING

on the applicant’s behalf and to do on the applicant’s behalf all other things necessary to effect the registration of any Hong Kong Public Offering Units allocated to the applicant in the applicant’s name(s) or HKSCC Nominees, as the case may be, as required by the Trust Deed and otherwise to give effect to the arrangements described in this Offering Circular and the relevant Application Form;

— undertakes to sign all documents and to do all things necessary to enable the applicant or HKSCC Nominees, as the case may be, to be registered as the holder of the Hong Kong Public Offering Units allocated to the applicant, and as required by the Trust Deed;

— represents and warrants that he/she/it understands that the Units have not been and will not be registered under the US Securities Act and the applicant is outside the United States when completing the Application Form and is not a US Person;

— confirms that the applicant has received a copy of this Offering Circular and has only relied on the information and representations contained in this Offering Circular in making the application, and not on any other information or representation concerning GZI REIT and agrees that none of the Manager, the Trustee or the Joint Global Coordinators or the Underwriters nor any of their respective directors, officers, employees, partners, agents or advisers will have any liability for any such other information or representations;

— agrees that (without prejudice to any other rights which the applicant may have) once the application has been accepted, the applicant may not rescind it because of an innocent misrepresentation;

— (if the application is made for the applicant’s own benefit) warrants that the application is the only application which will be made for the applicant’s benefit on a WHITE or YELLOW Application Form or by giving electronic application instructions to HKSCC via CCASS;

— (if the application is by an agent on the applicant’s behalf) warrants that the applicant has validly and irrevocably conferred on the agent all necessary power and authority to make the application;

— (if the applicant is an agent for another person) warrants that reasonable enquiries have been made of that other person that the application is the only application which will be made for the benefit of that other person on a WHITE or YELLOW Application Form or by giving electronic application instructions to HKSCC via CCASS, and that the applicant is duly authorised to sign the Application Form or to give electronic application instruction as that other person’s agent;

322 FURTHER TERMS AND CONDITIONS OF THE HONG KONG PUBLIC OFFERING

— undertakes and confirms that the applicant (if the application is made for the applicant’s benefit) or the person(s) for whose benefit the application is made has not applied for or taken up or indicated an interest in or received or been placed or allocated (including conditionally and/or provisionally) and will not apply for or take up or indicate any interest in any International Offering Units in the International Offering, nor otherwise participate in the International Offering;

— warrants the truth and accuracy of the information contained in the application;

— agrees to disclose to the Manager, the Trustee, the Joint Global Coordinators and their respective agents any personal data and information about the applicant which they require or the person(s) for whose benefit the applicant has made the application;

— agrees that the application, any acceptance of it and the resulting contract will be governed by and construed in accordance with the laws of Hong Kong;

— undertakes and agrees to accept the Hong Kong Public Offering Units applied for, or any lesser number allocated to the applicant under the application;

— authorises the Manager and the Trustee to place the applicant(s)’ name(s) or HKSCC Nominees, as the case may be, on the register of Unitholders of GZI REIT as the holder(s) of any Hong Kong Public Offering Units allocated to the applicant, and the Manager, the Trustee and/or and their respective agents to send any Unit certificate(s) (where applicable) and/or any refund cheque (where applicable) to the applicant or (in case of joint applicants) the first-named applicant in the Application Form by ordinary post at the applicant’s own risk to the address stated on the applicant’s Application Form (except that if an applicant has applied for 500,000 Hong Kong Public Offering Units or more and has indicated in the Application Form that the applicant will collect the Unit certificate(s) (where applicable) and refund cheque (where applicable) in person, the applicant may do so from the Unit Registrar from 9:00 a.m. to 1:00 p.m. on Tuesday, 20 December 2005 (or any other dates notified by the Manager in the South China Morning Post (in English) and the Hong Kong Economic Times (in Chinese) as the dates of despatch and availability of Unit certificates and refund cheques);

— understands that these declarations and representations will be relied upon by the Manager and the Joint Global Coordinators in deciding whether or not to allocate any Hong Kong Public Offering Units in response to the applicant’s application; and

323 FURTHER TERMS AND CONDITIONS OF THE HONG KONG PUBLIC OFFERING

— if the laws of any place outside Hong Kong are applicable to an applicant’s application, the applicant agrees and warrants that he/she/it has complied with all such laws and none of the Manager, the Trustee or the Joint Global Coordinators or the Underwriters nor any of their respective directors, employees, partners, agents, officers or advisers will infringe any laws outside Hong Kong as a result of the acceptance of the applicant’s offer to acquire, or any actions arising from the applicant’s rights and obligations under the terms and conditions contained in this Offering Circular.

(b) If an applicant applies for the Hong Kong Public Offering Units using a YELLOW Application Form, in addition to the confirmations and agreements referred to in (a) above, the applicant (and in the case of joint applicants, each of the joint applicants jointly and severally) agrees that:

— any Hong Kong Public Offering Units allocated to the applicant shall be registered in the name of HKSCC Nominees and deposited directly into CCASS for credit to the applicant’s CCASS Investor Participant stock account or the stock account of the applicant’s designated CCASS Participant, in accordance with the applicant’s election on the Application Form;

— each of HKSCC and HKSCC Nominees reserves the right at its absolute discretion: (i) not to accept any or part of the Hong Kong Public Offering Units allocated to the applicant in the name of HKSCC Nominees or not to accept such allocated Hong Kong Public Offering Units for deposit into CCASS; (ii) to cause such allocated Hong Kong Public Offering Units to be withdrawn from CCASS and transferred into the applicant’s name (or, in the case of joint applicants, to the name of the first-named applicant) at the applicant’s own risk and costs; and (iii) to cause such allocated Hong Kong Public Offering Units to be issued in the applicant’s name (or, in the case of joint applicants, to the first-named applicant) and in such a case, to post the Unit certificates for such allocated Hong Kong Public Offering Units at the applicant’s own risk to the address on the applicant’s Application Form by ordinary post or to make available the same for the applicant’s collection;

— each of HKSCC and HKSCC Nominees may adjust the number of the Hong Kong Public Offering Units issued in the name of HKSCC Nominees;

— neither HKSCC nor HKSCC Nominees shall have any liability for the information and representations not so contained in this Offering Circular and the Application Form; and

— neither HKSCC nor HKSCC Nominees shall be liable to the applicant in any way.

324 FURTHER TERMS AND CONDITIONS OF THE HONG KONG PUBLIC OFFERING

(c) In addition, by giving electronic application instructions to HKSCC or instructing a broker or custodian who is a CCASS Broker Participant or a CCASS Custodian Participant to give such instructions to HKSCC via CCASS, an applicant (and in the case of joint applicants, each of the joint applicants jointly and severally) is deemed to do the following additional things and neither HKSCC nor HKSCC Nominees will be liable to the Manager nor any other person in respect of such things:

— instruct and authorise HKSCC to cause HKSCC Nominees (acting as nominee for the CCASS Participants) to apply for the Hong Kong Public Offering Units on the applicant’s behalf;

— instruct and authorise HKSCC to arrange payment of the Maximum Offer Price, brokerage, the Hong Kong Stock Exchange trading fee and the SFC transaction levy by debiting the applicant’s designated bank account and, in the case of wholly or partly unsuccessful applications and/or if the Offer Price is less than the Maximum Offer Price, refund the appropriate portion of the application money by crediting the applicant’s designated bank account; and

— (in addition to the confirmations and agreements set out in paragraph (a) above) instruct and authorise HKSCC to cause HKSCC Nominees to do on the applicant’s behalf the following and any other thing which it is stated to do on the applicant’s behalf in the WHITE Application Form:

— agree that the Hong Kong Public Offering Units to be allocated shall be registered in the name of HKSCC Nominees and deposited directly into CCASS for credit to the applicant’s CCASS Investor Participant stock account or the stock account of the CCASS Participant who has inputted electronic application instructions on the applicant’s behalf;

— undertake and agree to accept the Hong Kong Public Offering Units in respect of which the applicant has given electronic application instructions or any lesser number;

— undertake and confirm that the applicant has not applied for or taken up any International Offering Units under the International Offering nor otherwise participated in the International Offering;

— (if the electronic application instructions are given for the applicant’s own benefit) declare that only one set of electronic application instructions has been given for the applicant’s benefit;

— (if the applicant is an agent for another person) declare that the applicant has given only one set of electronic application instructions for the benefit of that other person, and that the applicant is duly authorised to give those instructions as that other person’s agent;

325 FURTHER TERMS AND CONDITIONS OF THE HONG KONG PUBLIC OFFERING

— understand that the above declaration will be relied upon by the Manager and the Joint Global Coordinators in deciding whether or not to make any allocation of the Hong Kong Public Offering Units in respect of the electronic application instructions given by the applicant and that the applicant may be prosecuted if the applicant makes a false declaration;

— authorise the Manager and the Trustee to place the name of HKSCC Nominees on the register of unitholders of GZI REIT as the holder of the Hong Kong Public Offering Units allocated in respect of the applicant’s electronic application instructions and to send Unit certificates and/or refund monies in accordance with arrangements separately agreed between the Manager or the Trustee and HKSCC;

— confirm that the applicant has read the terms and conditions and application procedures set out in this Offering Circular and agrees to be bound by them;

— confirm that the applicant has only relied on the information and representations in this Offering Circular in giving the applicant’s electronic application instructions or instructing the applicant’s broker/custodian to give electronic application instructions on the applicant’s behalf;

— agree that the Manager, the Trustee, the Joint Global Coordinators, the Underwriters and any other parties involved in the Hong Kong Public Offering are liable only for the information and representations contained in this Offering Circular;

— agree without prejudice to any other rights which the applicant may have) that once the application of HKSCC Nominees has been accepted, the application cannot be rescinded for innocent misrepresentation;

— agree to disclose the applicant’s personal data to the Manager, the Trustee, the Joint Global Coordinators, the Unit Registrar, the receiving banker(s), their respective agents and advisers together with any information about the applicant which they require;

— agree that the applicant cannot revoke electronic application instructions, such agreement to take effect as a collateral contract with the Manager and to become binding when the applicant gives the instructions and such collateral contract to be in consideration of the Manager agreeing that it will not offer any Hong Kong Public Offering Units to any person except by means of one of the procedures referred to in this Offering Circular;

— agree that once the application of HKSCC Nominees is accepted, neither that application nor the applicant’s electronic application instructions can be revoked and that acceptance of that application will be evidenced by the results of the Hong Kong Public Offering made available by the Manager; and

326 FURTHER TERMS AND CONDITIONS OF THE HONG KONG PUBLIC OFFERING

— agree to the arrangements, undertakings and warranties specified in the participant agreement between the applicant and HKSCC, read with the General Rules of CCASS and the CCASS Operational Procedures, in respect of the giving of electronic application instructions relating to the Hong Kong Public Offering Units.

(d) The Manager, the Trustee, the Joint Global Coordinators, the Underwriters, any other parties involved in the Hong Kong Public Offering and their respective directors, officers, employees, partners, agents and advisers are entitled to rely on any warranty, representation or declaration made by the applicants in their applications.

(e) All the warranties, representations, declarations and obligations expressed to be made given or assumed by or imposed on the joint applicants shall be deemed to have been made, given or assumed by or imposed on the applicants jointly and severally.

5 Circumstances in which applicants may not be allocated Hong Kong Public Offering Units

Details of the circumstances in which applicants may not be allocated any Hong Kong Public Offering Units under the Hong Kong Public Offering are set out in the notes attached to the Application Forms, and should be read carefully. The Joint Global Coordinators and their agents or nominees have full discretion to reject or accept any application, or to accept only part of any application, without having to give any reasons for any rejection or acceptance. Applicants should note in particular the following situations in which Hong Kong Public Offering Units will not be allocated to them or their applications are liable to be rejected or satisfied only in part (as applicable):

(a) If the conditions of the Hong Kong Public Offering set out in the section headed “Structure of the Global Offering — Conditions of the Hong Kong Public Offering” in this Offering Circular remain unfulfilled by Wednesday, 11 January 2006.

(b) If the Joint Global Coordinators or their agents or nominees exercise their discretion to reject or to accept only part of an application.

— the application is a multiple or a suspected multiple application; or

— the application is made with more than one other joint applicant; or

— the Application Form is not completed correctly; or

— the payment is not made correctly or payment by cheque or banker’s cashier order and the cheque or banker’s cashier order is dishonoured on its first presentation; or

327 FURTHER TERMS AND CONDITIONS OF THE HONG KONG PUBLIC OFFERING

— the applicant or the person for whose benefit the applicant is applying has applied for and/or received or will receive Units under the International Offering; or

— either of the Underwriting Agreements does not become unconditional or it is terminated in accordance with the terms thereof; or

— the applicant applies for more than 30,000,000 Units, representing 50% of the Hong Kong Public Offering Units initially made available for subscription under the Hong Kong Public Offering; or

— the application for Units is not in one of the numbers or multiples set out in the table in the Application Form.

(d) If an applicant is giving electronic application instructions to HKSCC to apply for Hong Kong Public Offering Units on his/her/its behalf, the applicant will also not be allocated any Hong Kong Public Offering Units if the relevant HKSCC Nominees’ application is not accepted.

6 If an application for the Hong Kong Public Offering Units is successful (in whole or in part)

(a) If applicants are applying using a WHITE Application Form and the applicants elect to receive any Unit certificate(s) in their names:

— For those applicants who apply for less than 500,000 Units, their Unit certificates and/or refund cheques are expected to be sent on or before Tuesday, 20 December 2005 to the address as stated in their Application Forms by ordinary post and at their own risk. Applicants should note that there is no guarantee when he/she/it will receive his/her/its Unit certificates by post. Therefore if such applicant sells his/her/its Units in the first few days after the Units commence trading on the Hong Kong Stock Exchange, he/she/it may not receive his/her/its Unit certificates in time for settlement.

— Applicants who apply on WHITE Application Forms for 500,000 Units or more under the Hong Kong Public Offering and have indicated in their Application Forms that they wish to collect Unit certificates and (where applicable) refund cheques in person may do so from the Unit Registrar from 9:00 a.m. to 1:00 p.m. on Tuesday, 20 December 2005 (or any other dates notified by the Manager in the South China Morning Post (in English) and the Hong Kong Economic Times (in Chinese) as the dates of despatch and availability of Unit certificates and refund cheques).

328 FURTHER TERMS AND CONDITIONS OF THE HONG KONG PUBLIC OFFERING

— Applicants being individuals who opt for personal collection cannot authorize any other person to make collection on their behalf. Applicants being corporations who opt for personal collection must attend by personal authorised representatives each bearing a letter of summarization from the corporation stamped with the corporation’s chop. Both individuals and authorised representatives (if applicable) must produce, at the time of collection, evidence of identity acceptable to the Unit Registrar.

— Uncollected Unit certificates and refund cheques will be despatched by ordinary post to the addresses specified in the relevant Application Forms at the applicants’ own risk.

(b) If: (i) applicants are applying on a YELLOW Application Form; or (ii) applicants are giving electronic application instructions to HKSCC, and in each case the applicants elect to have allocated Hong Kong Public Offering Units deposited directly into CCASS:

If an application is wholly or partly successful, the Unit certificate(s) will be issued in the name of HKSCC Nominees and deposited into CCASS for credit to the applicant’s CCASS Investor Participant stock account or the stock account of the applicant’s designated CCASS Participant as instructed by the applicant (on the Application Form or electronically, as the case may be), at the close of business on Tuesday, 20 December 2005 or, under contingent situation, on any other date HKSCC or HKSCC Nominees chooses.

— If an applicant is applying through a designated CCASS Participant (other than a CCASS Investor Participant) on a YELLOW Application Form:

For Hong Kong Public Offering Units credited to the stock account of the applicant’s designated CCASS Participant (other than a CCASS Investor Participant), the applicant can check the number of Hong Kong Public Offering Units allocated to him/her/it with that CCASS Participant.

— If an applicant is applying as a CCASS Investor Participant on a YELLOW Application Form:

The Manager is expected to make available the results of the Hong Kong Public Offering, including the results of CCASS Investor Participants’ applications, in the manner described in the sub-section headed “How to apply for Hong Kong Public Offering Units — Publication of results” above, on Tuesday, 20 December 2005. Applicants should check the results made available by the Manager and report any discrepancies to HKSCC before 5:00 p.m. on Tuesday, 20 December 2005 or such other date HKSCC or HKSCC Nominees chooses. Immediately after the credit of the Hong Kong Public Offering Units to the applicants’ stock accounts, applicants can check their new account balance via the CCASS Phone System by calling 2979 7888 or CCASS Internet System at https://ip.ccass.com (using the

329 FURTHER TERMS AND CONDITIONS OF THE HONG KONG PUBLIC OFFERING

procedures contained in HKSCC’s “An Operating Guide for Investor Participants” in effect from time to time). HKSCC will also make available to the applicants an activity statement showing the number of Hong Kong Public Offering Units credited to their stock accounts.

— If an applicant has given electronic application instructions to HKSCC:

The Manager is expected to make available the application results of the Hong Kong Public Offering, including the results of applications made electronically by CCASS Participants (and in the case of CCASS Broker Participants and CCASS Custodian Participants, the Manager shall include information relating to the beneficial owner, if supplied), the applicant’s Hong Kong identity card/ passport/Hong Kong business registration number or other identification code (as appropriate) in the manner described in the sub-section headed “How to apply for Hong Kong Public Offering Units — Publication of results” above, on Tuesday, 20 December 2005. Applicants should check the results made available by the Manager and report any discrepancies to HKSCC before 5:00 p.m. on Tuesday, 20 December 2005 or on any other date HKSCC or HKSCC Nominees chooses.

— If an applicant is instructing a CCASS Broker Participant or CCASS Custodian Participant to give electronic application instructions to HKSCC on the applicant’s behalf:

Applicants can also check the number of Hong Kong Public Offering Units allocated to them and the amount of refund (if any) payable to them with that CCASS Broker Participant or CCASS Custodian Participant.

— If an applicant is applying as a CCASS Investor Participant by giving electronic instruction to HKSCC:

Applicants can also check the number of the Hong Kong Public Offering Units allocated to them and the amount of refund (if any) payable to them via the CCASS Phone System by calling 2979 7888 or CCASS Internet System at https://ip.ccass.com (using the procedures contained in HKSCC’s “An Operating Guide for Investor Participants” in effect from time to time) on Tuesday, 20 December 2005. On the next day following the credit of the Hong Kong Public Offering Units to their stock accounts and the refunds to their bank accounts, HKSCC will also make available to them an activity statement showing the number of the Hong Kong Public Offering Units credited to their stock accounts and the amount of refund (if applicable) credited to their designated bank accounts.

No receipt will be issued for application monies paid. The Manager will not issue temporary documents of title.

330 FURTHER TERMS AND CONDITIONS OF THE HONG KONG PUBLIC OFFERING

7 Refund of money — additional information

(a) An applicant will be entitled to a refund if:

— the application is not successful or the conditions of the Hong Kong Public Offering are not fulfilled in accordance with the section headed “Structure of the Global Offering — Conditions of the Hong Kong Public Offering” in this Offering Circular, in which case the Manager will refund the application money together with the brokerage, Hong Kong Stock Exchange trading fee and SFC transaction levy to the applicant, without interest;

— the application is accepted only in part, in which case the Manager will refund the appropriate portion of the application money together with related brokerage, the Hong Kong Stock Exchange trading fee and the SFC transaction levy, without interest; and

— the Offer Price (as finally determined) is less than the price per Unit initially paid by the applicant on application, in which case the Manager will refund the surplus application money together with the appropriate portion of brokerage, the Hong Kong Stock Exchange trading fee and the SFC transaction levy, without interest.

(b) If an applicant applies on a YELLOW Application Form for 500,000 Units or more under the Hong Kong Public Offering and has indicated in the Application Form that the applicant wishes to collect refund cheques (if applicable) in person from the Unit Registrar, the applicant may collect the refund cheque (if any) in person from the Unit Registrar on Tuesday, 20 December 2005. The procedure for collection of refund cheques for YELLOW Application Form applicants is the same as that for WHITE Application Form applicants set out in sub-paragraph (a) of the sub-section headed “If an application for the Hong Kong Public Offering Units is successful (in whole or in part)” in this section.

(c) If an applicant applies for 500,000 Units or more and has not indicated in the applicant’s Application Form that it will collect its refund cheque in person or applies for less than 500,000 Units, the applicant’s refund cheque will be sent to the address on the applicant’s Application Form on Tuesday, 20 December 2005 by ordinary post at the applicant’s own risk.

(d) If an applicant is applying by giving electronic instructions to HKSCC to cause HKSCC Nominees to apply on the applicant’s behalf, all refunds are expected to be credited to the applicant’s designated bank account (if the applicant is applying as a CCASS Investor Participant) or the designated bank account of the applicant’s broker or custodian (if the applicant is applying through a CCASS Broker/Custodian Participant) on Tuesday, 20 December 2005.

331 FURTHER TERMS AND CONDITIONS OF THE HONG KONG PUBLIC OFFERING

(e) All refunds by cheque will be crossed “Account Payee Only”, and made out to the applicants, or if the applicants are joint applicants, to the first-named applicant on the Application Form. Part of the applicant’s Hong Kong Identity Card number/passport number, or, if the applicants are joint applicants, part of the Hong Kong Identity Card number/passport number of the first-named applicant, provided by the applicant may be printed on the refund cheque, if any. Such data would also be transferred to a third party for refund purpose. A banker may require verification of the applicant’s Hong Kong Identity Card number/passport number before encashment of the applicant’s refund cheque. Inaccurate completion of the applicant’s Hong Kong Identity Card number/passport number may lead to delay in encashment of or may invalidate the applicant’s refund cheque.

Refund cheques are expected to be despatched on Tuesday, 20 December 2005. It is intended that when processing applications, special efforts will be made to avoid delays in refunding application monies due.

8 Personal Data

Personal information collection statement

The main provisions of the Personal Data (Privacy) Ordinance (the “Ordinance”) came into effect in Hong Kong on 20 December 1996. This Personal Information Collection Statement informs the applicant for and holder of Hong Kong Public Offering Units of the policies and practices of the Trustee, the Manager and the Unit Registrar in relation to personal data and the Ordinance.

(a) Reasons for the collection of your personal data

From time to time it is necessary for applicants for Units or registered holders of Units to supply their latest correct personal data to the Trustee, the Manager and the Unit Registrar when applying for Units or transferring Units into or out of their names or in procuring the services of the Unit Registrar.

Failure to supply the requested data may result in an applicant’s application for Units being delayed or an applicant’s application may not be considered. It may also prevent or delay registration or transfer of the Units which an applicant has successfully applied for and/or the despatch of Unit certificate(s), and/or the despatch or encashment of refund cheque(s) to which an applicant is entitled.

It is important that applicants inform the Trustee, the Manager and the Unit Registrar immediately of any inaccuracies in the data supplied.

332 FURTHER TERMS AND CONDITIONS OF THE HONG KONG PUBLIC OFFERING

(b) Purposes

The personal data of the applicants may be used, held and/or stored (by whatever means) for the following purposes:

• processing of an applicant’s application and refund cheque, where applicable, and verification of compliance with the terms and application procedures set out in this Offering Circular and the Application Forms and announcing results of allocations of Hong Kong Public Offering Units;

• registering new issues or transfers into or out of the name of holders of Units including, where applicable, HKSCC Nominees;

• maintaining or updating the register of unitholders of GZI REIT;

• conducting or assisting to conduct signature verifications, any verification or exchange of information;

• establishing entitlements of holders of Units of GZI REIT, such as distributions and notices;

• distributing communications from or on behalf of the Trustee or the Manager in relation to GZI REIT;

• compiling statistical information and investor profiles;

• enabling compliance with all applicable laws, rules and regulations (whether statutory or otherwise) in Hong Kong or elsewhere;

• disclosing relevant information to facilitate claims on entitlements; and

• any other incidental or associated purposes relating to the above and/or enable the Trustee, the Manager and the Unit Registrar to discharge their obligations to holders of Units and/or regulators and/or any other purposes to which the holders of Units may from time to time agree.

333 FURTHER TERMS AND CONDITIONS OF THE HONG KONG PUBLIC OFFERING

Personal data (including Hong Kong Identity Card details) held by the Trustee, the Manager and the Unit Registrar relating to the applicants and the holders of Units will be kept confidential but the Trustee, the Manager and the Unit Registrar may, to the extent necessary for achieving the above purposes or any of them, make such enquiries as they consider necessary to confirm the accuracy of the personal data and in particular, they may disclose, obtain or transfer (whether within or outside Hong Kong) the personal data of the applicants and the holders of Unit to, from or with any and all of the following persons and entities:

• the Trustee, the Manager or its appointed agents such as financial advisers, receiving bankers;

• where applicants for Units request deposit into CCASS, to HKSCC and HKSCC Nominees, who will use the personal data for the purposes of operating CCASS;

• any broker whose company chop or other identification number has been placed on the Application Form;

• any agents, contractors or third-party service providers who offer administrative, telecommunications, computer, payment or other services to the Trustee, the Manager or the Unit Registrar in connection with the operation of their respective businesses;

• the Hong Kong Stock Exchange, the SFC and any other statutory, regulatory or governmental bodies in Hong Kong or elsewhere; and

• any other persons or institutions with which the holders of Units have or propose to have dealings, such as their bankers, solicitors, accountants or stockbrokers.

(d) Access to and correction of personal data

The Ordinance provides applicants with rights to ascertain whether the Trustee, the Manager or the Unit Registrar holds their personal data, to obtain a copy of that data, and to correct any data that is inaccurate. In accordance with the Ordinance, the Trustee, the Manager and the Unit Registrar have the right to charge a reasonable fee for the processing of any data access request. All requests for access to data or correction of data or for information regarding policies and practices and kinds of data held should be addressed to the Trustee, the Manager, or the Unit Registrar for the attention of the privacy compliance officer.

334 DEFINITIONS

335 TECHNICAL TERMS

In this Offering Circular, unless the context otherwise requires, the following terms shall have the meanings set out below:

GDP means gross domestic product.

Gross Floor Area means, in relation to an entire Property, the sum of the areas specified in the Building Ownership Certificates for the Property.

Gross Rentable Area means, in relation to each unit in a Property, the area set out in the tenancy agreement for that unit, which includes a proportionate share of the common area allocated to that unit.

Gross Turnover means Turnover plus accelerated amortisation of deferred assets recorded in respect of the Fortune Plaza Units (HK$3.0 million), the City Development Units (HK$4.5 million) and the Victory Plaza Units (HK$9.5 million) for the six months ended 30 June 2005.

Internal Floor Area means the internal area available for the exclusive use of the occupier(s) of a building but excluding all common or service areas used in common for the building as a whole. lease means a tenancy agreement or licence in respect of premises at the Properties entered into with a tenant or licensee (as the case may be) and “leased” shall be construed accordingly.

NAV means net asset value, which is calculated as total assets minus total liabilities.

Net Property Income means, at any time, GZI REIT’s income (including all rents, interest, dividends, distributions, licence fees, service charges, turnover rentals, advertising revenue and such other receipts considered by the Manager after consulting the auditors of GZI REIT to be in the nature of income in accordance with HKFRS) less direct property related expenses (including, without limitation, property management fees, property insurance expenses, taxes related to real estate, expenses related to repairs and maintenance and bad debt expenses in relation to GZI REIT’s income.

NTA means net tangible assets, which is calculated as NAV minus intangible assets (including goodwill).

336 TECHNICAL TERMS

Operating Income means Turnover less all operating expenses before finance costs, fair value (losses)/gains on investment properties and taxation and before the accelerated amortisation of deferred assets incurred for the six months ended 30 June 2005.

Rental Income means the rental income derived from leases of the Properties. sq.m. means square metre(s). strata unit means an undivided share of a building conferring exclusive use and possession of a unit within the building. tenant means a lessee, tenant or licensee (as the case may be) under a lease.

Total Distributable Income has the meaning given to it in the section headed “Distribution Policy” in this Offering Circular.

Total Gross Income means Rental Income and other income earned from the Properties.

Turnover means Rental Income and, in the case of the White Horse Units, Rental Income and property management fees.

337 GENERAL TERMS

In this Offering Circular, unless the context otherwise requires, the following terms shall have the meanings set out below:

Adjustment has the meaning ascribed to it in the section headed “Distribution Policy” of this Offering Circular.

Application Form(s) means the WHITE application form(s) and the YELLOW application form(s), or where the context so requires, either of them.

Appraised Value means the value of a particular Property, as at 30 September 2005, as appraised by the Independent Property Valuer.

Approved Valuer means a company or firm appointed in writing by the Trustee on behalf of GZI REIT to provide a valuation of any authorised investment of GZI REIT in accordance with the provisions of the Trust Deed.

Articles of Association means the articles of association of the Manager. associated company has the meaning ascribed to it under the REIT Code. associate has the meaning ascribed to it under the REIT Code.

Audit Committee means the audit committee of the Manager.

Audited Financial Statements means the audited combined financial statements in of the BVI Companies respect of the BVI Companies set out in Appendix II to this Offering Circular.

Audited Financial Statements means the audited combined financial statements in of the Properties respect of the Properties set out in Appendix I to this Offering Circular.

Auditors’ Report has the meaning ascribed to it in the section headed “Connected Party Transactions — Waivers in Relation to Trustee Connected Persons — Ordinary Banking and Financial Services with Trustee Connected Persons” of this Offering Circular.

Banking Ordinance means the Banking Ordinance (Chapter 155 of the Laws of Hong Kong) as amended, supplemented or otherwise modified for the time being.

Board means the board of directors of the Manager.

338 GENERAL TERMS

Building Ownership Certificate means the composite real estate and land use right certificate ( ) issued by the Guangzhou Land Bureau to evidence the ownership of both land use rights and the buildings erected thereon.

Business Day means a day (excluding Sundays, public holidays and days on which a tropical cyclone warning no. 8 or above or a “black” rainstorm warning signal is hoisted in Hong Kong at any time between the hours of 9:00 a.m. and 5:00 p.m. on weekdays and 9:00 a.m. and 12:00 noon on Saturdays) on which licensed banks are open for general business in Hong Kong.

BVI means the British Virgin Islands.

BVI Companies means Partat, Moon King, Full Estates and Keen Ocean, being the respective owners of the White Horse Units, the Fortune Plaza Units, the City Development Plaza Units and the Victory Plaza Units, and “BVI Company” means any one of them.

BVI Company Shares means shares in the entire issued share capital of the BVI Companies.

CBD means central business district.

CCASS means the Central Clearing and Settlement System established and operated by HKSCC.

CCASS Broker Participant means a person admitted to participate in CCASS as a broker participant.

CCASS Custodian Participant means a person admitted to participate in CCASS as a custodian participant.

CCASS Investor Participant means a person admitted to participate in CCASS as an investor participant who may be an individual or joint individuals or a corporation.

CCASS Participant means a CCASS Broker Participant or a CCASS Custodian Participant or a CCASS Investor Participant.

339 GENERAL TERMS

City Development Plaza Units means 165 strata units in City Development Plaza (located at Nos. 185, 187 and 189, Ti Yu Xi Road, Tian He District, Guangzhou, the PRC) represented by Title Certificate C3123814, C3123815, C3123816, C3123817, C3123818, C3123819, C3123820, C3123821, C3123822, C3123823, C3123824, C3123825, C3123826, C3123827, C3123828, C3123829, C3123830, C3123831, C3123832, C3123833, C3123834, C3123835, C3123836, C3123837, C3123838, C3123839, C3123840, C3123841, C3123842, C3123843, C3123844, C3123845, C3123846, C3123847, C3123848, C3123849, C3123850, C3123851, C3123852, C3123853, C3123854, C3123855, C3200765, C3200766, C3200767, C3200768, C3200769, C3200770, C3200771, C3200772, C3200773, C3200774, C3200776, C3200777, C3200778, C3200779, C3200780, C3200781, C3200782, C3200783, C3200784, C3200785, C3200786, C3200787, C3200788, C3200789, C3200790, C3200791, C3200792, C3200793, C3200794, C3200795, C3200796, C3200797, C3200798, C3200799, C3200800, C3202001, C3202002, C3202003, C3202004, C3202131, C3202132, C3202133, C3202134, C3202135, C3202136, C3202137, C3202138, C3202139, C3202140, C3202141, C3202142, C3202143, C3202144, C3202145, C3202146, C3202147, C3202148, C3202149, C3202150, C3202151, C3202152, C3202153, C3202154, C3202155, C3202156, C3202157, C3202158, C3203066, C3203067, C3203068, C3203069, C3203070, C3203071, C3203072, C3203073, C3203074, C3203075, C3203076, C3203077, C3203078, C3203079, C3204063, C3204064, C3204065, C3204066, C3204067, C3204068, C3204069, C3204070, C3204071, C3204072, C3204073, C3204074, C3204075, C3204076, C3204077, C3209177, C3209178, C3209179, C3209180, C3209181, C3209182, C3209183, C3209184, C3209185, C3209186, C3209187, C3209188, C3209189, C3209190, C3209191, C3209192, C3209193, C3209194, C3209195, C3209196, C3209197, C3209198, C3209199, C3209200, C3209201, C3209202, C3209203.

Companies Ordinance means the Companies Ordinance (Chapter 32 of the Laws of Hong Kong) as amended, supplemented or otherwise modified for the time being.

Company Law means the Company Law of the PRC adopted by the Standing Committee of the 8th National People’s Congress on 29 December 1993.

340 GENERAL TERMS

Completion means the completion of the sale and purchase of the BVI Company Shares pursuant to the Reorganisation Deed. connected party transaction has the meaning ascribed to it in the REIT Code. connected person has the meaning ascribed to it in the REIT Code.

Continuing CPT has the meaning ascribed to it in the section headed “Connected Party Transactions — Waivers form Strict Compliance with Certain Provisions in Chapter 8 of the REIT Code” in this Offering Circular.

Deed of Indemnity means the deed among Holdco, the Trustee, the Manager, GCCD BVI and GZI, entered into on Completion in respect of the indemnity by GCCD BVI and GZI in favour of the Manager, the Trustee and Holdco (for itself and as trustee of each of the BVI Companies).

Deposited Property means all the assets of GZI REIT.

Directors means the directors of the Manager.

Dragon Yield means Dragon Yield Holding Limited, a company incorporated in the BVI and a wholly owned subsidiary of GZI.

Election Form(s) means form(s) of election despatched or to be despatched to the GZI Qualifying Shareholders in order to enable them to exercise the GZI Qualifying Shareholders’ Option, if they so wish.

Facility Agreement means the facility agreement dated 7 December 2005 entered into between the BVI Companies, Holdco and the Lending Banks in respect of the Loan Facility.

Financial Year or FY means: App B B16

(i) for the first Financial Year, the period from and including the date of establishment of GZI REIT to 31 December 2005;

(ii) for the last Financial Year, the period from and including the most recent 1 January before the date GZI REIT terminates to and including the date GZI REIT terminates; and

(iii) in all other circumstances, the 12-month period ending on 31 December in each year.

341 GENERAL TERMS

Forecast Period 2005 means the period from 21 December 2005 (the expected Listing Date) to 31 December 2005.

Forecast Year 2006 means the year ending 31 December 2006.

Fortune Plaza Units 83 strata units in Fortune Plaza (located at 114,116,118 Ti Yu Dong Road, Guangzhou, the PRC) represented by Title Certificate numbers C3097281, C3097280, C3097279, C3097278, C3098282, C3098281, C3098280, C3098279, C3098278, C3098277, C3098276, C3098275, C3098274, C3098273, C3098272, C3097277, C3097276, C3097275, C3097274, C3097273, C3097272, C3097271, C3097270, C3097269, C3097268, C3097267, C3097266, C3098286, C3098285, C3098284, C3098283, C3897235, C3897155, C3897154, C3897153, C3897152, C3897151, C3897150, C3897149, C3897148, C3897147, C3897146, C3897145, C3897144, C3897156, C3897246, C3897245, C3897244, C3897243, C3897242, C3897241, C3897240, C3897239, C3897238, C3897237, C3897236, C3878365, C3878364, C3878363, C3878362, C3878361, C3878360, C3878359, C3878358, C3878357, C3878356, C3878355, C3878354, C3878352, C3878351, C3878350, C3878349, C3878348, C3878347, C3878346, C3878345, C3878344, C3878343, C3878342, C3878341, C3878340, C3878339, C3878353.

Full Estates means Full Estates Investment Limited ( ), a company incorporated in the BVI and a wholly owned subsidiary of the Trustee (acting in its capacity as trustee of GZI REIT).

GCCD means Guangzhou City Construction & Development Co. Ltd. ( ), a company incorporated in the PRC and a subsidiary of GZI.

GCCD BVI means Guangzhou Construction & Development Holdings (China) Limited ( ), a company incorporated in the BVI and a wholly owned subsidiary of GZI.

GCCD Group means Guangzhou City Construction & Development Group Co. Ltd. ( ) (previously known as Guangzhou City Construction & Development Holding Co. Ltd ( )), a state owned enterprise in the PRC separate from the Yue Xiu Group and the GZI Group.

342 GENERAL TERMS

GCCD Properties means the Fortune Plaza Units, the City Development Units and the Victory Plaza Units, and “GCCD Property” means any one of them.

General Conditions has the meaning ascribed to it in the section headed “Connected Party Transactions — Waivers for Certain Transactions — In Relation to Trustee Connected Persons” of this Offering Circular.

Global Offering means the Hong Kong Public Offering and the International Offering.

GZI means Guangzhou Investment Company Limited, a company incorporated in Hong Kong with limited liability, whose shares are listed on the Hong Kong Stock Exchange and Singapore Exchange Securities Trading Limited.

GZI Group means GZI and its subsidiaries.

GZI Ineligible Overseas means GZI Shareholders whose addresses on the register Shareholders of members of GZI were outside Hong Kong on 9 December, 2005 and have to be excluded from the Special Dividend and the GZI Qualifying Shareholders’ Option on the account either of the legal restrictions under the laws of the relevant place or the requirements of the relevant regulatory body or stock exchange in that place which the directors of GZI, after reasonable enquiries, consider such exclusion to be necessary or expedient.

GZI Qualifying Shareholders means GZI Shareholders (other than GZI Ineligible Overseas Shareholders) whose names appear on the register of members of GZI as at the close of business on 9 December 2005.

GZI Qualifying Shareholders’ means an option to be granted by GZI to, and exercisable Option by, each of the GZI Qualifying Shareholders to elect to receive a cash payment in lieu of the whole of or part of the Units proposed to be transferred to him/her/it pursuant to the Special Dividend, on and subject to the terms and conditions set out in the section headed “Structure of the Global Offering — Special Dividend” in this Offering Circular and the terms and conditions in the Election Form.

GZI REIT means GZI Real Estate Investment Trust, a collective investment scheme constituted as a unit trust and authorised under section 104 of the SFO.

343 GENERAL TERMS

GZI REIT Group has the meaning given to it in the section headed “Connected Party Transactions — Introduction” in this Offering Circular.

GZI Shareholder(s) means shareholder(s) of GZI.

GZI Shares means shares of HK$0.10 each in the share capital of GZI.

HK$ and HK dollars means Hong Kong dollars, the lawful currency of Hong Kong.

HKFRS means Hong Kong Financial Reporting Standards promulgated by the Hong Kong Institute of Certified Public Accountants, as amended, supplemented or otherwise modified for the time being.

HKICPA means the Hong Kong Institute of Certified Public Accountants (previously named as the Hong Kong Society of Accountants).

HKSCC means Hong Kong Securities Clearing Company Limited.

HKSCC Nominees means HKSCC Nominees Limited.

Holdco means King Profit Holdings Limited, which is in the process of changing its name to GZI REIT (Holding) 2005 Company Limited, a company incorporated in the Hong Kong and a wholly owned subsidiary of the Trustee (acting in its capacity as trustee of GZI REIT).

Hong Kong means The Hong Kong Special Administrative Region of the PRC.

Hong Kong Public Offering means the offer of Hong Kong Public Offering Units to the public in Hong Kong for cash at the Offer Price, on and subject to the terms and conditions described in this Offering Circular and the Application Forms.

Hong Kong Public Offering means the 60,000,000 Units initially being offered pursuant Units to the Hong Kong Public Offering (subject to adjustment and reallocation as described in the section headed “Structure of the Global Offering” in this Offering Circular).

Hong Kong Stock Exchange means The Stock Exchange of Hong Kong Limited or any successor thereto.

344 GENERAL TERMS

Hong Kong Underwriters means the underwriters of the Hong Kong Public Offering whose names are set out in the section headed “Underwriting — Hong Kong Underwriters” in this Offering Circular.

Hong Kong Underwriting means the underwriting agreement dated 11 December Agreement 2005 relating to the Hong Kong Public Offering entered into between GZI, GCCD BVI, the Manager, the Joint Global Coordinators and the Hong Kong Underwriters, as further described in the section headed “Underwriting” in this Offering Circular.

HSBC Group means The Hongkong and Shanghai Banking Corporation Limited and its subsidiaries and, unless otherwise expressly stated herein, excludes the Trustee and its proprietary subsidiaries (being the subsidiaries of the Trustee but excluding those subsidiaries formed in its capacity as the trustee of GZI REIT).

HSBC Group intermediaries has the meaning ascribed to it in the section headed “Connected Party Transactions — Waivers for Certain Transactions — In Relation to Trustee Connected Persons — Ordinary Banking and Financial Services with Trustee Connected Persons” of this Offering Circular.

Independent Market Research means Cushman & Wakefield (HK) Limited. Consultant

Independent Property Valuer means Colliers International (Hong Kong) Ltd.

Initial Consideration means the initial consideration payable by Holdco for the BVI Company Shares under the Reorganisation Deed, being HK$4,014,180,000.

Inland Revenue Ordinance means the Inland Revenue Ordinance (Chapter 112 of the Laws of Hong Kong) as amended, supplemented or otherwise modified for the time being.

International Offering means the offer of International Offering Units for cash at the Offer Price to institutional, professional and other investors as further described in the section headed “Structure of the Global Offering” in this Offering Circular.

345 GENERAL TERMS

International Offering Units means the 523,000,000 Units (subject to adjustment and reallocation) initially available to investors in the International Offering and up to an additional 87,450,000 Units which are the subject of the Over-allocation Option and the Sale Units.

International Underwriters means the group of underwriters of the International Offering, led by the Joint Global Coordinators.

International Underwriting means the underwriting agreement relating to the Agreement International Offering expected to be entered into on or about 15 December 2005 between, among others, GZI, GCCD BVI, Dragon Yield, the Manager, the Joint Global Coordinators and the International Underwriters, as further described in the section headed “Underwriting” in this Offering Circular.

IPO means the initial public offering of the Units in Hong Kong.

IPO Proceeds means the gross proceeds of the issue of Units under the Global Offering, being equal to the number of Units issued under the Global Offering multiplied by the Offer Price (excluding the proceeds from the Units comprised in the Over-allocation Option and the proceeds from the Sale Units).

IPO Transaction Costs means all the costs and expenses incurred by the Manager or the Trustee for the account of GZI REIT in connection with the Global Offering.

Issue Price means the price at which new Units may be issued pursuant to the Trust Deed.

IT means information technology.

Joint Global Coordinators means The Hongkong and Shanghai Banking Corporation Limited, Citigroup Global Markets Asia Limited and DBS Bank Ltd..

Keen Ocean means Keen Ocean Limited ( ), a company incorporated in the BVI and a wholly owned subsidiary of the Trustee (acting in its capacity as trustee of GZI REIT).

346 GENERAL TERMS

Land Bureau means (Bureau of Land Resources and Housing Management of the PRC).

Latest Practicable Date means 6 December 2005, being the latest practicable date for the purposes of ascertaining certain information contained in this Offering Circular.

Leasing Agents means White Horse Property Management Company and Yicheng.

Lending Banks means Citibank, N.A., Hong Kong Branch, The Hongkong and Shanghai Banking Corporation Limited and DBS Bank Ltd., Hong Kong Branch.

Listing Agent means The Hongkong and Shanghai Banking Corporation Limited.

Listing Agreement means the agreement entered into between the Trustee, the Manager (as an operator of a collective investment scheme) and the Hong Kong Stock Exchange in relation to the post-regulatory regime applicable to GZI REIT.

Listing Date means the date, expected to be on 21 December 2005, on which the Units are first listed and from which dealings therein are permitted to take place on the Hong Kong Stock Exchange.

Listing Rules means the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (for the time being).

Loan Facility means the US$165.0 million three-year floating rate term loan facility granted to the BVI Companies by the Lending Banks.

Loan Proceeds means the gross amount borrowed by BVI Companies under the Loan Facility.

Manager means GZI REIT Asset Management Limited.

Maximum Offer Price means the maximum price of HK$3.075 per Unit under the Global Offering (exclusive of applicable brokerage, Hong Kong Stock Exchange trading fee and SFC transaction levy).

Minimum Offer Price means the currently expected minimum price of HK$2.850 per Unit under the Global Offering (exclusive of applicable brokerage, Hong Kong Stock Exchange trading fee and SFC transaction levy).

347 GENERAL TERMS n.a. means “not applicable”. n.m. means “not meaningful”.

Moon King means Moon King Limited ( ), a company incorporated in the BVI and a wholly owned subsidiary of the Trustee (acting in its capacity as trustee of GZI REIT).

Offer for Sale means the offer for sale of the Sale Units for cash by GZI at the Offer Price as part of the International Offering, on and subject to the terms and conditions contained in this Offering Circular, details of which are described in the subsection headed “International Offering” under the section headed “Structure of the Global Offering” in this Offering Circular.

Offer Price means the final Hong Kong dollar price per Unit (exclusive of brokerage of 1.0%, Hong Kong Stock Exchange trading fee of 0.005% and SFC transaction levy of 0.005%) at which the Units are to be issued and allotted pursuant to the Global Offering, to be determined as further described in the section headed “Structure of the Global Offering” in this Offering Circular.

Ordinary Resolution means a resolution of Unitholders proposed and passed by a simple majority of the votes of those present and entitled to vote, but with a quorum of two or more Unitholders holding 10.0% of Units in issue.

Over-allocation Option means the option to be granted by GZI to the Joint Global Coordinators pursuant to the International Underwriting Agreement to require Dragon Yield to make available up to 87,450,000 Units, to be offered to investors as part of the International Offering.

Partat means Partat Investment Limited ( ), a company incorporated in the BVI and a wholly owned subsidiary of the Trustee (acting in its capacity as trustee of GZI REIT).

PBOC means People’s Bank of China.

PRC or China means the People’s Republic of China. Except where the context requires, references in this Offering Circular to the PRC or China do not apply to Hong Kong, the Macau Special Administrative Region or Taiwan.

348 GENERAL TERMS

Price Determination Date means the date, expected to be on or about Thursday, 15 December 2005 on which the Offer Price is determined for the purposes of the Global Offering.

Promissory Note has the meaning ascribed to it in the section headed “The Reorganisation — Reorganisation of the GZI Group — Initial Consideration” in this Offering Circular.

Properties means the White Horse Units, the Fortune Plaza Units, the City Development Plaza Units and the Victory Plaza Units and “Property” means any one of them.

Property Adviser means Jones Lang LaSalle Limited.

Receiving Banks means The Hongkong and Shanghai Banking Corporation Limited, Bank of China (Hong Kong) Limited and Bank of Communications Co., Ltd., Hong Kong Branch.

Regulation S means Regulation S under the US Securities Act.

REIT Code means the Code on Real Estate Investment Trusts published by SFO as amended, supplemented or otherwise modified for the time being.

Reorganisation Deed means the reorganisation deed dated 7 December 2005 and entered into among Holdco, the Trustee, the Manager, GCCD BVI and GZI more particularly described in the section headed “Material Agreements and Other Documents Relating to GZI REIT — Reorganisation Deed” in this Offering Circular.

Reporting Accountants means PricewaterhouseCoopers.

Reserved Matters has the meaning ascribed to it in the section headed “Material Agreements and Other Documents Relating to GZI REIT — GCCD’s Appointment of Moon King as its Representative and Irrevocable Undertaking to Moon King” in this Offering Circular.

Responsible Officer means a responsible officer of the Manager appointed pursuant to section 125 of the SFO.

RMB and Renminbi means Renminbi, being the lawful currency of the People’s Republic of China.

SAFE means State Administration of Foreign Exchange of the PRC.

349 GENERAL TERMS

SAIC means State Administration of Industry and Commerce of the PRC.

Sale Units means an aggregate of up to 17,000,000 Units (being the maximum aggregate number of Units representing: (i) the Units in respect of which the GZI Qualifying Shareholders may elect to exercise the GZI Qualifying Shareholders’ Option; and (ii) such number of Units which the GZI Ineligible Overseas Shareholders would otherwise have been entitled to receive under the Special Dividend).

Sale Units Underwriters means the Joint Global Coordinators.

SARS means Severe Acute Respiratory Syndrome.

SFC means the Securities and Futures Commission of Hong Kong.

SFO means the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) as amended, supplemented or otherwise modified for the time being. significant holder has the meaning ascribed to it in the REIT Code.

Special Dividend means the special dividend conditionally declared by the board of directors of GZI on 23 November 2005 to GZI Shareholders whose names appear on the register of members of GZI as at the close of business on 9 December 2005, details of which are set out in the subsection headed “Special Dividend” under the section headed “Structure of the Global Offering” in this Offering Circular.

Special Purpose Vehicle means any company or corporation whose primary purpose is to hold or own Real Estate (including shares in other Special Purpose Vehicles) or arranging financing for GZI REIT. As at the Listing Date, Holdco and the BVI Companies are the only Special Purpose Vehicles.

Special Resolution means a resolution of Unitholders proposed and passed by a majority consisting of 75.0% or more of the votes of those present and entitled to vote in person or by proxy, but with a quorum of two or more Unitholders holding not less than 25.0% of Units in issue.

Stabilising Manager Citigroup Global Markets Asia Limited.

350 GENERAL TERMS

Stamp Duty Ordinance means the Stamp Duty Ordinance (Chapter 117 of the Laws of Hong Kong) as amended, supplemented or otherwise modified for the time being.

Superinvestor means Superinvestor Limited ( ), a company incorporated in the BVI.

Tenancy Services Agreements means the tenancy services agreements entered into by the Manager and each of Full Estates, Moon King and Keen Ocean with Yicheng, and by the Manager and Partat with White Horse Property Management Company, and “Tenancy Services Agreement” means any one of them.

Total Distributable Income has the meaning given to it in the section headed “Distribution Policy” in this Offering Circular.

Trust Deed means the trust deed dated 7 December 2005 between the Trustee and the Manager constituting GZI REIT (as amended by any supplemental deed).

Trustee means HSBC Institutional Trust Services (Asia) Limited, the trustee of GZI REIT.

Trustee Connected Person means a director, a senior executive or an officer of any of the Trustee, and a controlling entity, holding company, subsidiary or associated company of the Trustee.

Trustee Ordinance means the Trustee Ordinance (Chapter 29 of the Laws of Hong Kong) as amended, supplemented or otherwise modified for the time being.

Underwriters means the Hong Kong Underwriters, the International Underwriters and the Sale Units Underwriters.

Underwriting Agreements means the Hong Kong Underwriting Agreement and the International Underwriting Agreement.

Unit means a unit of GZI REIT.

Unit Borrowing Agreement means the unit borrowing agreement to be entered into on or about 15 December 2005 among GZI, Dragon Yield and the Stabilising Manager.

Unit Registrar means Tricor Investor Services Limited of Ground Floor, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong or such person which may from time to time be appointed as the unit registrar of GZI REIT.

351 GENERAL TERMS

United States or US means the United States of America.

Unitholder(s) means the registered holder for the time being of a Unit including persons so registered as joint holders.

Urban Land Regulations means the Provisional Regulations of the PRC concerning the Grant and Assignment of the Right of Use State Land in Urban Areas ( ) promulgated in May 1990.

US$ and US dollars means United States dollars, the lawful currency of the United States.

US Person has the meaning given to it in Regulation S.

US Securities Act means the United States Securities Act of 1933, as amended.

Valuation Reports means the valuation reports produced by the Independent Property Valuer, a summary of which is set out in Appendix VI to this Offering Circular.

Victory Plaza Units Nine strata units in Victory Plaza (located at No. 101 Ti Yu Xi Road, Tian He District, Guangzhou, the PRC) represented by Title Certificate numbers C3864888, C3871824, C3871823, C3872315, C3872314, C3872313, C3872312, C3872311 and C3871822.

White Horse JV means Guangzhou White Horse Clothings Market Ltd. ( ), a sino-foreign joint venture incorporated in the PRC and a subsidiary of GZI.

White Horse Property means Guangzhou White Horse Property Management Co. Management Company Ltd. ( ) a company incorporated in the PRC and a subsidiary of GZI.

White Horse Units means nine strata units in White Horse Building located at No.16 Zhan Nan Road, Li Wan District, Guangzhou, the PRC, represented by Title Certificate number C3895226, and located at Nos. 14, 16 and 18 Zhan Nan Road, Yue Xiu District, Guangzhou, the PRC, represented by Title Certificate numbers C3895227, C3895228, C3895229, C3895230, C3895231, C3895232, C3895233 and C3895234.

352 GENERAL TERMS

Xingcheng means Guangzhou Xingcheng Enterprise Development Ltd. ( ), a company incorporated in the PRC and a subsidiary of GZI.

Yicheng means Guangzhou Yicheng Property Management Ltd. ( ), a company incorporated in the PRC and a subsidiary of GZI.

Yue Xiu means Yue Xiu Enterprises (Holdings) Limited ( ), a company incorporated in Hong Kong and the controlling shareholder of GZI.

Yue Xiu Group means Yue Xiu and its subsidiaries.

353 APPENDICES

354 APPENDIX I AUDITED FINANCIAL STATEMENTS OF THE PROPERTIES

App B B31(a) AUDITORS’ REPORT TO GZI REIT ASSET MANAGEMENT LIMITED COMBINED FINANCIAL STATEMENTS OF THE PROPERTIES

We have audited the combined financial statements of the Properties (defined in note 1 to the combined financial statements) as at 31 December 2002, 2003 and 2004 and 30 June 2005 and for the years/periods then ended and reviewed the combined financial statements of the Properties for the six months ended 30 June 2004, as set out on pages I-3 to I-47.

These combined financial statements are prepared for the purpose of injection of the Properties into GZI Real Estate Investment Trust and in accordance with accounting principles generally accepted in Hong Kong. The combined financial statements, which include income statements, balance sheets, cash flow statements and notes, were prepared based on the accounting books and records of the subsidiaries of Guangzhou Investment Company Limited (“GZI”) which owned and managed the Properties immediately prior to the divestment since the Properties were transferred to GZI on 20 December 2002. As there were no separate books and records maintained for each of the Properties on a stand alone basis, the combined financial statements have been prepared according to the basis of preparation and assumptions set out in note 2 to the combined financial statements, which include the following particular accounting treatments:

(1) Interest charges incurred at the central treasury of the Guangzhou City Construction & Development Co. Ltd (“GCCD”) are not reflected in the combined financial statements as there were no direct bank borrowings for the GCCD Properties (defined in note 1); and

(2) Income tax expenses are reported to the relevant tax bureau on an entity basis by GCCD. As such, income tax expenses for GCCD Properties are calculated based on the tax rate applicable to the GCCD Properties as if they are a separate tax entity.

Respective responsibilities of directors of GZI and auditors

The directors of GZI are responsible for the preparation of the combined financial statements which give a true and fair view. In preparing combined financial statements which give a true and fair view it is fundamental that appropriate accounting policies are selected and applied consistently.

It is our responsibility to form an independent opinion, based on our audit, on those combined financial statements and to report our opinion to you.

I-1 APPENDIX I AUDITED FINANCIAL STATEMENTS OF THE PROPERTIES

Basis of opinion

We conducted our audit for the period from 20 December 2002 to 31 December 2002, each of the two years ended 31 December 2003 and 2004 and the six months ended 30 June 2005 in accordance with Statements of Auditing Standards issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”). An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the combined financial statements. It also includes an assessment of the significant estimates and judgements made by the directors of GZI in the preparation of the combined financial statements, and of whether the accounting policies are appropriate to the circumstances of the Properties, consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance as to whether the combined financial statements are free from material misstatement. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the combined financial statements. We believe that our audit provides a reasonable basis for our opinion.

We have reviewed the combined financial statements for the six months ended 30 June 2004 in accordance with SAS 700 “Engagements to review interim financial reports” issued by the HKICPA. A review consists principally of making enquiries of the directors of GZI and applying analytical procedures to the financial information and based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit and therefore provides a lower level of assurance than an audit. Accordingly we do not express an audit opinion on the combined financial statements for the six months ended 30 June 2004.

Opinion

In our opinion the combined financial statements of the Properties give a true and fair view, on the basis as set out in note 2 to the combined financial statements, of the state of affairs of the Properties as at 31 December 2002, 2003 and 2004 and 30 June 2005 and the results and cash flows of the Properties for the period from 20 December 2002 to 31 December 2002, each of the two years ended 31 December 2003 and 2004 and for the six months ended 30 June 2005.

Based on our review, which does not constitute an audit, we are not aware of any material modifications that should be made to the combined financial statements for the six months ended 30 June 2004.

PricewaterhouseCoopers Certified Public Accountants

Hong Kong, 12 December 2005

I-2 APPENDIX I AUDITED FINANCIAL STATEMENTS OF THE PROPERTIES

Combined balance sheets As at As at 31 December 30 June Note 2002 2003 2004 2005 HK$’000 HK$’000 HK$’000 HK$’000

ASSETS Non-current assets Property, plant and equipment 6 118,128 11,165 10,598 7,169 Land use rights 7 252,929 ——1,230 Investment properties 8 1,576,633 2,437,384 2,444,859 3,114,286

------1,947,690 ------2,448,549 ------2,455,457 ------3,122,685 Current assets Deferred assets 9 6,521 9,344 16,641 4,995 Prepayments, deposits and other receivables 10 3,653 4,350 5,400 6,093 Cash and cash equivalents 11 31,978 41,878 39,695 18,329

42,152 55,572 61,736 29,417 ------Total assets 1,989,842 2,504,121 2,517,193 3,152,102

LIABILITIES Non-current liabilities Deferred tax liabilities 13 387,269 467,640 473,536 669,736 Rental deposits, non-current portion 12 23,715 27,170 10,051 15,097

------410,984 ------494,810 ------483,587 ------684,833 Current liabilities Rental deposits, accruals and other payables 12 10,291 18,758 43,841 43,873 Current tax payable 7,721 4,720 6,151 5,550

18,012 23,478 49,992 49,423 ------Total liabilities 428,996 518,288 533,579 734,256 ------Net assets 1,560,846 1,985,833 1,983,614 2,417,846

Financed by: Accounts with Subsidiaries of GZI - Arising from accumulated profits 1,564 236,420 325,006 791,414 - Others 1,559,282 1,749,413 1,658,608 1,626,432

1,560,846 1,985,833 1,983,614 2,417,846

On behalf of the Board

Ou Bingchang Chen Guangsong Director Director

I-3 APPENDIX I AUDITED FINANCIAL STATEMENTS OF THE PROPERTIES

Combined income statements

Period from 20 December 2002 to 31 Year ended Six months December 31 December ended 30 June Note 2002 2003 2004 2004 2005 (Unaudited) HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Turnover — rental income and management fee income 3,274 129,395 172,080 79,610 92,644

Other gains — net 14 203 11,731 9,481 4,406 5,863 Direct outgoings 15 (1,113) (40,076) (51,010) (19,766) (27,047) Other operating expenses (30) (2,927) (2,799) (1,495) (2,446)

Fair value gains on investment properties 8 — 246,341 5,107 — 612,044

Profit before taxation 2,334 344,464 132,859 62,755 681,058 Income tax expenses 17 (770) (109,608) (44,273) (20,709) (214,650)

Profit for the year/period 1,564 234,856 88,586 42,046 466,408

I-4 APPENDIX I AUDITED FINANCIAL STATEMENTS OF THE PROPERTIES

Combined statements of changes in net assets

Accounts with Subsidiaries of GZI Arising from accumulated profits Others Total HK$’000 HK$’000 HK$’000

At 20 December 2002 ——— Acquisition of businesses by Subsidiaries of GZI — 1,568,637 1,568,637 Profit for the period 1,564 — 1,564 Net advance to Subsidiaries of GZI — (9,355) (9,355)

At 31 December 2002 and 1 January 2003 1,564 1,559,282 1,560,846 Profit for the year 234,856 — 234,856 Net advance from Subsidiaries of GZI — 190,131 190,131

At 31 December 2003 and 1 January 2004 236,420 1,749,413 1,985,833 Profit for the year 88,586 — 88,586 Net advance to Subsidiaries of GZI — (90,805) (90,805)

At 31 December 2004 and 1 January 2005 325,006 1,658,608 1,983,614 Profit for the period 466,408 — 466,408 Net advance to Subsidiaries of GZI — (32,176) (32,176)

At 30 June 2005 791,414 1,626,432 2,417,846

At 1 January 2004 236,420 1,749,413 1,985,833 Profit for the period (Unaudited) 42,046 — 42,046 Net advance to Subsidiaries of GZI (Unaudited) — (34,210) (34,210)

At 30 June 2004 (Unaudited) 278,466 1,715,203 1,993,669

I-5 APPENDIX I AUDITED FINANCIAL STATEMENTS OF THE PROPERTIES

Combined cash flow statements

Period from 20 December 2002 to Year ended Six months ended 31 December 31 December 30 June Note 2002 2003 2004 2004 2005 (Unaudited) HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Cash flows from operating activities Net cash inflow from operations 19(a) 8,966 107,919 128,009 51,042 88,047 China enterprise income tax paid by White Horse JV, White Horse Property Management Company and Xingcheng — (22,117) (20,911) (9,744) (14,250) China enterprise income tax paid by GCCD — (10,121) (16,035) (8,409) (4,801) Net cash inflow from operating activities 8,966 75,681 91,063 32,889 68,996 ------Cash flows from investing activities Acquisition of businesses by Subsidiaries of GZI, recognised in the Accounts with Subsidiaries of GZI 19(b) (1,568,637) —— —— Acquisition of businesses by Subsidiaries of GZI, net of cash acquired 19(b) 32,344 —— —— Addition of property, plant and equipment — (253,028) (722) (191) (3,891) Proceeds from sale of property, plant and equipment ——— —617 Addition of investment properties — (3,154) (2,368) — (54,526) Addition of land use right ——— —(1,230) Interest received 23 270 649 263 844 Net cash inflow/(outflow) from investing activities (1,536,270) (255,912) (2,441) 72 (58,186) ------(1,527,304) (180,231) 88,622 32,961 10,810 Net advances from/(to) Subsidiaries of GZI 1,559,282 190,131 (90,805) (34,210) (32,176)

Increase/(decrease) in cash and cash equivalents 11 31,978 9,900 (2,183) (1,249) (21,366)

I-6 APPENDIX I AUDITED FINANCIAL STATEMENTS OF THE PROPERTIES

Period from 20 December 2002 to Year ended Six months ended 31 December 31 December 30 June Note 2002 2003 2004 2004 2005 (Unaudited) HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Balances at beginning of year/period — Cash and cash equivalents — 31,978 41,878 41,878 39,695 — Accounts with Subsidiaries of GZI — (1,559,282) (1,749,413) (1,749,413) (1,658,608)

Balances at end of year/period — Cash and cash equivalents 31,978 41,878 39,695 40,629 18,329 — Accounts with Subsidiaries of GZI (1,559,282) (1,749,413) (1,658,608) (1,715,203) (1,626,432)

I-7 APPENDIX I AUDITED FINANCIAL STATEMENTS OF THE PROPERTIES

COMBINED FINANCIAL STATEMENTS OF THE PROPERTIES

NOTES TO THE COMBINED FINANCIAL STATEMENTS

1 General information

GZI Real Estate Investment Trust (“GZI REIT”) was established by Guangzhou Investment Company Limited (“GZI”) for the purposes of divesting the commercial property operations comprising certain units in White Horse Building, Fortune Plaza, City Development Plaza and Victory Plaza located in Guangzhou, Guangdong Province, Mainland China (hereinafter collectively referred to as the “Properties”) (the “Divestment”) and for the purposes of the listing on The Stock Exchange of Hong Kong Limited pursuant to the Code on Real Estate Investment Trusts. These combined financial statements have been prepared by the directors of GZI to present the results and cash flows of the Properties for the period from 20 December 2002 to 31 December 2002, each of the two years ended 31 December 2003 and 2004 and for the six months ended 30 June 2004 and 2005 (the “Relevant Periods”) and their financial position as at 31 December 2002, 2003 and 2004 and 30 June 2005. Details of the basis of and assumptions used for the combined financial statements of the Properties have been set out in note 2 below.

During the Relevant Periods, Fortune Plaza, City Development Plaza and Victory Plaza were owned and managed by Guangzhou City Construction & Development Co. Ltd. (“GCCD”). These properties are collectively referred to as “GCCD Properties”. The White Horse Building consists of nine strata units (a lower ground level and 2nd to 9th storeys) and a basement comprising a car park. Before 30 June 2005, certain portion of the lower ground level, the 2nd to 4th and the 6th to 9th storeys were owned by Guangzhou White Horse Clothings Market Ltd. (“White Horse JV”) and the 5th storey and the car park were owned by Guangzhou Xingcheng Enterprise Development Ltd. (“Xingcheng”). On 30 June 2005, White Horse JV acquired the 5th storey and the cark park from Xingcheng and as a result, certain portion of the lower ground level, the 2nd to 9th storeys and the car park of White Horse Building was owned by White Horse JV and the land use rights in respect of the 5th storey and car park were transferred to White Horse JV on 15 July 2005. For the purposes of the Divestment, certain portion of the lower ground level, the 2nd to 9th storeys will be injected into GZI REIT. During the Relevant Periods, the White Horse Building was managed by Guangzhou White Horse Property Management Co Ltd. (“White Horse Property Management Company”). GCCD, White Horse JV, White Horse Property Management Company and Xingcheng are Subsidiaries of GZI and are collectively referred to as “Subsidiaries of GZI”. Before 20 December 2002, the Properties were owned by state-owned enterprises and the operations and the ownership of the Properties were transferred to GZI on 20 December 2002.

The following transactions took place in connection with the Divestment pursuant to various agreements between the relevant parties as mentioned below:

(i) Four special purpose vehicles, incorporated in the British Virgin Islands and established on 20 September 2001, namely Partat Investment Limited, Moon King Limited, Full Estates Investment Limited and Keen Ocean Limited (collectively referred to as the “BVI Companies”) acquired the Properties for the purposes of Divestment. Moon King Limited, Full Estates Investment Limited and Keen Ocean Limited have become the beneficial owners of certain units of Fortune Plaza, City Development Plaza and Victory

I-8 APPENDIX I AUDITED FINANCIAL STATEMENTS OF THE PROPERTIES

Plaza, respectively, since 1 September 2005; while Partat Investment Limited has become the beneficial owner of certain units of White Horse Building since 19 October 2005. Assets or liabilities transferred to the BVI Companies comprises certain of the property, plant and equipment, investment properties and rental deposits;

(ii) King Profit Holdings Limited (which is in the process of changing its name to GZI REIT (Holdings) 2005 Company Limited) (the “Holdco”) was set up on 11 November 2005 which was in turn a wholly owned subsidiary of GZI REIT;

(iii) On 7 December 2005, the shares of the BVI Companies were transferred by GZI to GZI REIT. Holdco and GZI REIT have since become the immediate holding company and the ultimate holding company, respectively, of the BVI Companies.

2 Basis of preparation and assumptions

No separate books and records were maintained for each of the Properties, as they formed part of the business operations of the Subsidiaries of GZI. These combined financial statements, which include income statements, balance sheets, cash flow statements and the notes, were prepared based on the accounting books and records of the Subsidiaries of GZI which owned and managed the Properties immediately prior to the Divestment since the Properties were transferred to GZI on 20 December 2002. These combined financial statements of the Properties have been prepared on the following basis and assumptions in order to present the results of operations and financial position of the Properties as if they were operated on a stand alone basis at the beginning of the earliest period presented:

The GCCD Properties formed part of the business operations of GCCD. Only account balances directly attributable to these properties are included in the combined financial statements. These account balances include investment properties, deferred assets, accounts receivable, deposits received from tenants, receipts in advance, rental income, management fee income and other directly attributable expenses.

The treasury and cash disbursement functions of the GCCD Properties were centrally administered by GCCD. As such, cash and cash equivalents, bank loans and payables are dealt with in the current account with GCCD. Interest charges incurred at the central treasury of the GCCD are not reflected in the combined financial statements as there were no direct bank borrowings for the GCCD Properties. Income tax expenses are reported to the relevant tax bureau on an entity basis by GCCD. As such, income tax expenses for GCCD Properties are calculated based on the tax rate applicable to the GCCD Properties as if they are a separate tax entity.

The business operations of White Horse JV, White Horse Property Management Company and Xingcheng are the ownership and management of White Horse Building and investment holding. All the account balances of these companies attributable to certain units of White Horse Building are included in the combined financial statements. Other account balances of these companies which are not directly attributable to White Horse Building are captured in the net current account balances with White Horse JV, White Horse Property Management Company and Xingcheng.

I-9 APPENDIX I AUDITED FINANCIAL STATEMENTS OF THE PROPERTIES

The treasury and cash disbursement functions of the GCCD Properties are centrally administered by GCCD. Cash flows including receipt of rental income, settlement of expense payable and the acquisition of assets are handled by GCCD centrally and therefore shown as movements in the net current account balance with GCCD in the combined financial statements.

3 Summary of significant accounting policies

The principal accounting policies applied in the preparation of the combined financial statements are set out below. These policies have been consistently applied to all the years/periods presented, unless otherwise stated.

The combined financial statements have been prepared in accordance with Hong Kong Financial Reporting Standards (HKFRS). HKFRS 1, “First-time Adoption of the Hong Kong Institute of Certified Public Accountants”, has been applied in preparing these combined financial statements. The combined financial statements are the first set of financial statements prepared in accordance with HKFRS. No combined financial statements of the Properties have been prepared with accounting principles generally accepted in other jurisdictions.

In preparing these combined financial statements in accordance with HKFRS 1, the Properties has applied all the mandatory exceptions but has not applied any of the optional exemptions from full retrospective application of HKFRS.

The combined financial statements have been prepared under the historical cost convention, as modified by the revaluation of investment properties, which are carried at fair value. In preparing the combined financial statements in conformity with HKFRS, the directors of GZI have adopted all the new and revised HKFRS with effective date from 1 January 2005, which are relevant to its operation with effect from 20 December 2002.

The Properties have not early adopted the following standards and interpretations which have been issued but are not yet effective but the Properties will adopt these new HKFRS once they become effective:

(i) HKAS 1 Amendment, Presentation of financial statements - capital disclosures;

(ii) HKFRS 7, Financial instruments: disclosures;

(iii) HKAS 39 Amendment, Cash flow hedge accounting of forecast intragroup transactions;

(iv) HKAS 39 Amendment, The fair value option;

(v) HKAS 39 and HKFRS 4 Amendments, Financial guarantee contracts;

(vi) HKFRS 1 and HKFRS 6 Amendments, First-time adoption of Hong Kong Financial Reporting Standards and Exploration for and evaluation of mineral resources;

(vii) HKFRS 6, Exploration for and evaluation of mineral resources;

I-10 APPENDIX I AUDITED FINANCIAL STATEMENTS OF THE PROPERTIES

(viii) HKFRS-Int 4, Determining whether an arrangement contains a lease;

(ix) HKFRS-Int 5, Rights to interests arising from decommissioning, restoration and environmental rehabilitation funds;

(x) HK(IFRIC)-Int 6, Liabilities arising from participating in a specific market - waste electrical and electronic equipment; and

(xi) HKAS 19 Amendment, Employee benefits - Actuarial gains and losses, group plans and disclosures.

The adoption of such Standards or Interpretations will not result in substantial changes to the Properties’ accounting policies.

The preparation of the combined financial statements in conformity with HKFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Properties’ accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the combined financial statements, are disclosed in Note 5.

(a) Property, plant and equipment

(i) Construction in progress

Construction in progress are properties on which construction work and development have not been completed. These properties are carried at cost which comprises costs of construction, amounts capitalised in respect of amortisation of land use rights and other direct costs attributable to the development during the construction period and up to the date of completion of construction less any accumulated impairment losses. On completion, the properties are transferred to investment properties at fair value. Any difference between the fair value of the investment property and its carrying amount at the date of transfer is recognised in the combined income statements.

(ii) Other property, plant and equipment

Other property, plant and equipment, comprising other completed properties, leasehold improvements, furniture, fixtures and office equipment and motor vehicles are stated at historical cost less depreciation and impairment losses. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Cost may also include transfers from equity of any gains/losses on qualifying cash flow hedges of foreign currency purchases of property, plant and equipment.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Properties and the cost of the item can be measured reliably. All other repairs and maintenance are expensed in the combined income statement during the financial period in which they are incurred.

I-11 APPENDIX I AUDITED FINANCIAL STATEMENTS OF THE PROPERTIES

Depreciation of property, plant and equipment is calculated using the straight-line method to allocate cost to their residual values over their estimated useful lives, as follows:

Other properties 30 years Leasehold improvements, furniture, fixtures and office equipment 5 to 10 years Motor vehicles 5 years

The asset’s residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.

(b) Translation of foreign currencies

Transactions in foreign currencies are translated into Renminbi, the functional currency of each of the Properties, at exchange rates prevailing at the transaction dates. Monetary assets and liabilities expressed in foreign currencies at the balance sheet date are translated to Renminbi, at rates of exchange ruling at the balance sheet date. Exchange differences arising in these cases are dealt with in the combined income statement.

The combined financial statements are presented in Hong Kong dollars for the convenience of the financial statement readers. For the purpose of translating the combined financial statements from Renminbi to Hong Kong dollars, all assets and liabilities of the Properties are translated into Hong Kong dollars at the applicable rates of exchange in effect at the balance sheet date, and all income and expense items at the average applicable rates during the period. All resulting exchange differences are dealt with as movements of reserves.

Property that is held for long-term rental yields or for capital appreciation or both, and that is not occupied by the Properties, is classified as investment property.

Investment property comprises land held under operating leases and buildings held under finance leases.

Land held under operating leases are classified and accounted for as investment property when the rest of the definition of investment property is met. The operating lease is accounted for as if it were a finance lease.

Investment property is measured initially at its cost, including related transaction costs.

I-12 APPENDIX I AUDITED FINANCIAL STATEMENTS OF THE PROPERTIES methods such as recent prices on less active markets or discounted cash flow projections. These valuations are performed in accordance with the guidance issued by the International Valuation Standards Committee. These valuations are reviewed annually by external valuers. Investment property that is being redeveloped for continuing use as investment property, or for which the market has become less active, continues to be measured at fair value.

The fair value of investment property reflects, among other things, rental income from current leases and assumptions about rental income from future leases in the light of current market conditions.

The fair value also reflects, on a similar basis, any cash outflows that could be expected in respect of the property. Some of those outflows are recognised as a liability, including finance lease liabilities in respect of land classified as investment property; others, including contingent rent payments, are not recognised in the combined financial statements.

Subsequent expenditure is charged to the asset’s carrying amount only when it is probable that future economic benefits associated with the item will flow to the Properties and the cost of the item can be measured reliably. All other repairs and maintenance costs are expensed in the combined income statement during the financial period in which they are incurred.

Changes in fair values are recognised in the combined income statement.

(d) Impairment of assets

Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units).

(e) Trade and other receivables

Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. A provision for impairment of trade and other receivables is established when there is objective evidence that the Properties will not be able to collect all amounts due according to the original terms of receivables. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. The amount of the provision is recognised in the combined income statement.

(f) Cash and cash equivalents

Cash and cash equivalents include cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts.

I-13 APPENDIX I AUDITED FINANCIAL STATEMENTS OF THE PROPERTIES

(g) Deferred income tax

Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the combined financial statements. However, if the deferred income tax arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss, it is not accounted for. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

(h) Employee benefits

(i) Pension obligations

The Properties’ contributions to the defined contribution retirement schemes are expensed as incurred and reduced by contributions forfeited by those employees who leave the scheme prior to vesting fully in the contributions. The assets of the scheme are held separately from those of the Properties in an independently administered fund.

(ii) Medical benefits

The Properties’ contributions to defined contribution medical benefit scheme are expensed as incurred.

(i) Provisions

Provisions for environmental restoration and restructuring costs are recognised when: the Properties have a present legal or constructive obligation as a result of past events; it is more likely than not that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Provisions are not recognised for future operating losses.

Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.

(j) Rental deposits

Rental deposits are financial liabilities with fixed or determinable repayments. They arise when the Properties enter into lease agreement directly with tenants. They are included in current liabilities, except for maturities greater than twelve months after the balance sheet date. These are classified as non-current liabilities.

I-14 APPENDIX I AUDITED FINANCIAL STATEMENTS OF THE PROPERTIES

Rental deposits are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. At initial recognition, the difference between the carrying amount of the financial liability and the actual consideration received are treated as initial premiums and recognised as rental income over the lease term, on a straight-line basis.

(k) Revenue recognition

Revenue comprises the fair value for the receipt of rental income. Revenue is recognised as follows:

(i) Operating lease rental income is recognised on a straight-line basis over lease period of the lease. When the Properties provide incentives to its tenants, the cost of incentives will be recognised over the lease term, on a straight-line basis, as a reduction of rental income. The difference between the gross receipt of rental and the operating lease rental recognised over the lease term is recognised as deferred assets.

(ii) Revenue from property management is recognised in the period in which the services are rendered.

(iii) Interest income is recognised on a time-proportion basis using the effective interest method. When a receivable is impaired, the Properties reduce the carrying amount to its recoverable amount, being the estimated future cash flow discounted at original effective interest rate of the instrument, and continue unwinding the discount as interest income. Interest income on impaired loans is recognised either as cash is collected or on a cost-recovery basis as conditions warrant.

(l) Operating leases

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are expensed in the combined income statement on a straight-line basis over the period of the lease.

Prepayments of land use rights are classified as land use rights under non-current assets. Amortisation of the prepaid land use rights over the lease terms is recognised in the combined income statements if there is no development on the land. Amortisation of the prepaid land use rights over the lease terms is capitalised in construction in progress if the land is under development. On completion, property interest held under an operating lease is classified as an investment property.

(m) Segment reporting

A business segment is an individual investment property engaged in earning rental income and management fee income that are subject to risks and returns that are different from those of other business segments.

I-15 APPENDIX I AUDITED FINANCIAL STATEMENTS OF THE PROPERTIES

Segment assets comprise of property, plant and equipment, land use rights, investment properties, deferred assets, prepayment, deposits and other receivables and operating cash and cash equivalents.

Segment liabilities comprise of rental deposits, accruals and other payables, current tax payable and deferred tax liabilities.

4 Financial risk management

(a) Financial risk factors

The Properties’ activities expose it to a variety of financial risks: price risk, credit risk and liquidity risk. The Properties’ overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Properties’ financial performance.

(i) Price risk

The Properties are exposed to property price and market rental risk because investment properties are carried at fair value. Any change in fair values is recognised in the combined income statements.

(ii) Credit risk

The Properties have no significant concentrations of credit risk. The carrying amount of trade receivables included in the combined balance sheets represents the Properties’ maximum exposure to credit risk in relation to its financial assets. The Properties have policies in place to ensure that receipt of rental income from customers with an appropriate credit history and the Properties perform periodic credit evaluations of its customers. The directors of GZI are of the opinion that adequate provision for uncollectible trade receivables has been made in the accounts, based on the Properties’ historical experience in collection of trade receivables.

(iii) Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions. Due to the dynamic nature of the underlying businesses, the treasury function of the Properties aims to maintain flexibility in funding by keeping committed credit lines available.

(b) Fair value estimation

The carrying amounts of the Properties’ financial assets including cash and cash equivalents, deferred assets, prepayments, deposits and other receivables and financial liabilities including accruals and other payables approximate their fair values due to their short maturities.

I-16 APPENDIX I AUDITED FINANCIAL STATEMENTS OF THE PROPERTIES

The nominal value less any estimated credit adjustments of financial assets and liabilities with a maturity of less than one year, if any, are approximate their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate available to the Properties for similar financial instruments.

5 Critical accounting estimates

Estimates are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

The directors of GZI make estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

Estimate of fair value of investment properties

The best evidence of fair value is current prices in an active market for similar lease and other contracts. In the absence of such information, the directors of GZI determine the amount within a range of reasonable fair value estimates. In making its judgement, the directors of GZI considers information from a variety of sources including:

i) current prices in an active market for properties of different nature, condition or location (or subject to different lease or other contracts), adjusted to reflect those differences.

ii) recent prices of similar properties in less active markets, with adjustments to reflect any changes in economic conditions since the date of the transactions that occurred at those prices; and

iii) discounted cash flow projections based on reliable estimates of future cash flows, derived from the terms of any existing lease and other contracts, and (where possible) from external evidence such as current market rents for similar properties in the same location and condition, and using discount rates that reflect current market assessments of the uncertainty in the amount and timing of the cash flows.

If information on current or recent prices of investment properties is not available, the fair values of investment properties are determined using discounted cash flow valuation techniques. The directors of GZI uses assumptions that are mainly based on market conditions existing at each balance date.

The principal assumptions underlying management’s estimation of fair value are those related to: the receipt of contractual rentals; expected future market rentals; void periods; maintenance requirements; and appropriate discount rates. These valuations are regularly compared to actual market yield data, and actual transactions by the directors of GZI and those reported by the market.

The expected future market rentals are determined on the basis of current market rentals for similar properties in the same location and condition.

I-17 APPENDIX I AUDITED FINANCIAL STATEMENTS OF THE PROPERTIES

6 Property, plant and equipment

Leasehold improvements, furniture, fixtures Construction Other and office Motor in progress properties equipment vehicles Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Period from 20 December 2002 to 31 December 2002 Acquisition of businesses by Subsidiaries of GZI 110,467 1,871 5,402 274 118,014 Amortisation of land use rights 155 ———155 Depreciation — (3) (33) (5) (41)

Closing net book amount 110,622 1,868 5,369 269 118,128

At 31 December 2002 Cost 110,622 1,871 5,402 274 118,169 Accumulated depreciation — (3) (33) (5) (41)

Net book amount 110,622 1,868 5,369 269 118,128

Year ended 31 December 2003 Opening net book amount 110,622 1,868 5,369 269 118,128 Additions 247,705 — 4,940 383 253,028 Amortisation of land use rights 3,476 ———3,476 Depreciation — (93) (1,399) (172) (1,664) Transfers to investment properties upon completion (361,803) ———(361,803)

Closing net book amount — 1,775 8,910 480 11,165

At 31 December 2003 Cost — 1,871 10,342 657 12,870 Accumulated depreciation — (96) (1,432) (177) (1,705)

Net book amount — 1,775 8,910 480 11,165

I-18 APPENDIX I AUDITED FINANCIAL STATEMENTS OF THE PROPERTIES

Leasehold improvements, furniture, fixtures Other and office Motor properties equipment vehicles Total HK$’000 HK$’000 HK$’000 HK$’000

Year ended 31 December 2004 Opening net book amount 1,775 8,910 480 11,165 Additions — 722 — 722 Disposals — (4) — (4) Depreciation (93) (1,064) (128) (1,285)

Closing net book amount 1,682 8,564 352 10,598

At 31 December 2004 Cost 1,871 11,060 657 13,588 Accumulated depreciation (189) (2,496) (305) (2,990)

Net book amount 1,682 8,564 352 10,598

Six months ended 30 June 2005 Opening net book amount 1,682 8,564 352 10,598 Additions — 3,573 318 3,891 Disposals — (3,348) (317) (3,665) Transfers to investment properties — (2,857) — (2,857) Depreciation (47) (529) (35) (611) Provision for impairment — (187) — (187)

Closing net book amount 1,635 5,216 318 7,169

At 30 June 2005 Cost 1,871 8,428 658 10,957 Accumulated depreciation (236) (3,025) (340) (3,601) Provision for impairment — (187) — (187)

Net book amount 1,635 5,216 318 7,169

I-19 APPENDIX I AUDITED FINANCIAL STATEMENTS OF THE PROPERTIES

Leasehold improvements, furniture, fixtures Other and office Motor properties equipment vehicles Total HK$’000 HK$’000 HK$’000 HK$’000

Six months ended 30 June 2004 (Unaudited) Opening net book amount 1,775 8,910 480 11,165 Additions (Unaudited) — 191 — 191 Disposals (Unaudited) — (2,033) — (2,033) Depreciation (Unaudited) (47) (577) (64) (688)

Closing net book amount (Unaudited) 1,728 6,491 416 8,635

At 30 June 2004 (Unaudited) Cost (Unaudited) 1,871 8,500 657 11,028 Accumulated depreciation (Unaudited) (143) (2,009) (241) (2,393)

Net book amount (Unaudited) 1,728 6,491 416 8,635

7 Land use rights

The Properties’ interests in land use rights represent prepaid operating lease payments and their net book values are analysed as follows:

As at As at 31 December 30 June 2002 2003 2004 2005 HK$’000 HK$’000 HK$’000 HK$’000

In Mainland China, held on: Leases of 40 and 50 years, expiring from 2047 through 2055 252,929 ——1,230

I-20 APPENDIX I AUDITED FINANCIAL STATEMENTS OF THE PROPERTIES

Period from 20 December 2002 to Year ended Six months ended 31 December 31 December 30 June 2002 2003 2004 2004 2005 (Unaudited) HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Beginning of the year/period — 252,929 ——— Acquisition of businesses by Subsidiaries of GZI 253,084 ———— Additions ————1,230 Amortisations (155) (3,476) ——— Transfers to investment properties upon completion — (249,453) ———

End of the year/period 252,929 ———1,230

As at 31 December 2002, the balance represents prepaid operating lease payments for the land use rights of City Development Plaza and Victory Plaza included in construction in progress under property, plant and equipment. The amortisation during 2002 and 2003 were captialised in the construction in progress under property, plant and equipment. Upon completion of the construction work in 2003, the prepaid operating lease payments for the land use rights were transferred to investment properties.

As at 30 June 2005, the balance represents prepaid operating lease payments for the land use rights of certain units of White Horse Buildings included in other properties under property, plant and equipment. Before 7 June 2005, the land held for White Horse Building was a state-owned land use right, of which the owners of White Horse Building, White Horse JV and Xingcheng were required to pay a land use fee annually for the use of the state-owned land. On 7 June 2005, the state-owned land became a transferable land use right upon payment of land use rights premium by White Horse JV of HK$52,983,000. The prepaid operating leases attributable to the portion of other properties are included in the prepaid lease payments while the prepaid operating leases in respect of the investment properties are accounted for as investment properties.

I-21 APPENDIX I AUDITED FINANCIAL STATEMENTS OF THE PROPERTIES

8 Investment properties

As at As at 31 December 30 June 2002 2003 2004 2005 HK$’000 HK$’000 HK$’000 HK$’000

Beginning of the year/period — 1,576,633 2,437,384 2,444,859 Acquisition of businesses by Subsidiaries of GZI 1,576,633 ——— Additions — 3,154 2,368 54,526 Transfer from property, plant and equipment and land use rights — 611,256 — 2,857 Fair value gains on investment properties — 246,341 5,107 612,044

End of the year/period 1,576,633 2,437,384 2,444,859 3,114,286

The investment properties were revalued at 31 December 2002, 2003, 2004 and 30 June 2005 by independent, professionally qualified valuers, Greater China Appraisal Limited. Valuations were performed using discounted cash flow projections based on estimates of future cash flows, derived from the terms of any existing lease and other contracts, and from external evidence such as current market rents for similar properties in the same location and condition, and using discount rates that reflect current market assessments of the uncertainty in the amount and timing of the cash flows.

The investment properties were located in Mainland China under land use rights of 40 years to 50 years, expiring from 2047 through 2055.

In the combined income statement, direct operating expenses include approximately HK$7,400, HK$2,407,640, HK$5,573,570, HK$2,061,240 and HK$1,523,710, respectively, for the period from 20 December 2002 to 31 December 2002, years ended 31 December 2003 and 2004 and the six months ended June 2004 and 2005, relating to investment properties that were vacant.

At 31 December 2002, 2003 and 2004 and 30 June 2005, investments properties of approximately HK$1,339,617,000, HK$1,362,704,000, HK$1,852,774,000 and HK$877,245,000, respectively, were pledged as collateral for bank loans borrowed by a subsidiary of GZI.

9 Deferred assets

Rental income is recognised on an accrual basis by averaging out the impact of rent-free periods, contracted rental escalations and such other terms affecting the monthly cash received from rental income under each tenancy agreement. Thus, monthly rental income is recognised on a straight-line basis for the entire lease term of each tenancy agreement, which effectively

I-22 APPENDIX I AUDITED FINANCIAL STATEMENTS OF THE PROPERTIES amortises the impact of rent-free periods, contracted rental escalations and other relevant terms on the rental income over the relevant lease periods. The temporary difference between the monthly rental income as set out in the lease agreements and accounting monthly rental income is reflected as deferred assets.

The GCCD Properties were subsequently transferred to the relevant BVI Companies on 1 September 2005. This has resulted in a change in the estimated useful life of the deferred assets to eight months in 2005 so that the deferred assets can be fully amortised upon the early termination date of the tenancy agreements. The change in the estimate useful life of deferred assets has been applied prospectively from 1 January 2005. The change has no effect for the period from 20 September 2002 to 31 December 2002, each of the two years ended 31 December 2003 and 2004. The effect is to decrease the rental income for the six months ended 30 June 2005 by HK$16,951,000. The deferred assets will be fully amortised on 31 August 2005.

10 Prepayments, deposits and other receivables

As at As at 31 December 30 June 2002 2003 2004 2005 HK$’000 HK$’000 HK$’000 HK$’000

Rental receivables 1,439 2,849 2,985 2,830 Advance to suppliers — 104 167 — Advance to employees ——187 1,019 Prepaid tax 366 1,153 1,677 1,852 Deposit for construction works 1,604 —— 7 Others 244 244 384 385

3,653 4,350 5,400 6,093

The carrying amounts of prepayments, deposits and other receivables approximate their fair value.

11 Cash and cash equivalents

As at 31 December 2002, 2003 and 2004, and 30 June 2005, all cash and cash equivalents were denominated in Renminbi, which is not a freely convertible currency in the international market and its exchange rate is determined by the People’s Bank of China. The remittance of these funds out of the Mainland China is subject to the exchange control restrictions imposed by the Chinese government.

All cash and cash equivalents are attributable to the operations of White Horse Building.

I-23 APPENDIX I AUDITED FINANCIAL STATEMENTS OF THE PROPERTIES

12 Rental deposits, accruals and other payables

As at As at 31 December 30 June 2002 2003 2004 2005 HK$’000 HK$’000 HK$’000 HK$’000

Rental receipt in advance 1,117 1,954 739 1,467 Accrued bonus 986 920 183 — Rental deposits - current portion 4,116 9,846 36,327 32,527 Accrued welfare expenses 1,874 3,117 3,971 3,896 Other taxes payable 327 774 1,383 1,543 Others 1,871 2,147 1,238 4,440

10,291 18,758 43,841 43,873

The carrying amounts of rental deposits, accruals and other payables approximate their fair value.

Non-current rental deposits were HK$23,715,000, HK$27,170,000, HK$10,051,000 and HK$15,097,000 as at 31 December 2002, 2003 and 2004 and 30 June 2005, respectively.

13 Deferred taxation

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes relate to the same fiscal authority. The offset amounts are as follows:

As at As at 31 December 30 June 2002 2003 2004 2005 HK$’000 HK$’000 HK$’000 HK$’000

Deferred tax liabilities 387,588 468,508 473,536 670,163 Deferred tax assets (319) (868) — (427)

387,269 467,640 473,536 669,736

I-24 APPENDIX I AUDITED FINANCIAL STATEMENTS OF THE PROPERTIES

The movement on the deferred income tax account is as follows:

Period from 20 December 2002 to Year ended Six months ended 31 December 31 December 30 June 2002 2003 2004 2004 2005 (Unaudited) HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Beginning of the year/period — 387,269 467,640 467,640 473,536 Acquisition of businesses by Subsidiaries of GZI (Note) 387,269 ———— Recognised in the combined income statements (Note 17) — 80,371 5,896 1,754 196,200

End of the year/period 387,269 467,640 473,536 469,394 669,736

Note: Deferred taxation resulting from the acquisition of businesses by Subsidiaries of GZI (see Note 19 (b)) mainly represents the temporary difference arising between the fair value and the carrying value of the investment properties at acquisition date. The excess of fair value over the acquisition cost is recognised as negative goodwill on consolidation level of GZI. The deferred taxation directly attributable to the Properties is included in the combined financial statements.

I-25 APPENDIX I AUDITED FINANCIAL STATEMENTS OF THE PROPERTIES

The movement in deferred tax assets and liabilities during the year/period, without taking into consideration the offsetting of balances within the same tax jurisdiction, is as follows:

Deferred tax liabilities

Accelerated Revaluation depreciation of investment of investment properties properties Total HK$’000 HK$’000 HK$’000

At 20 December 2002 ——— Acquisition of businesses by Subsidiaries of GZI 386,177 1,411 387,588

At 31 December 2002 386,177 1,411 387,588 Recognised in the combined income statements 77,227 3,693 80,920

At 31 December 2003 463,404 5,104 468,508 Recognised in the combined income statements 1,601 3,427 5,028

At 31 December 2004 465,005 8,531 473,536 Recognised in the combined income statements 191,876 4,751 196,627

At 30 June 2005 656,881 13,282 670,163

At 1 January 2004 463,404 5,104 468,508 Recognised in the combined income statements (Unaudited) — 1,559 1,559

At 30 June 2004 (Unaudited) 463,404 6,663 470,067

I-26 APPENDIX I AUDITED FINANCIAL STATEMENTS OF THE PROPERTIES

Deferred tax assets

Tax losses Total HK$’000 HK$’000

At 20 December 2002 —— Acquisition of businesses by Subsidiaries of GZI (319) (319)

At 31 December 2002 (319) (319) Recognised in the combined income statements (549) (549)

At 31 December 2003 (868) (868) Recognised in the combined income statements 868 868

At 31 December 2004 —— Recognised in the combined income statements (427) (427)

At 30 June 2005 (427) (427)

As at 1 January 2004 (868) (868) Recognised in the combined income statements (Unaudited) 195 195

As at 30 June 2004 (Unaudited) (673) (673)

All deferred tax (assets)/liabilities are to be recovered/settled after more than 12 months.

I-27 APPENDIX I AUDITED FINANCIAL STATEMENTS OF THE PROPERTIES

14 Other gains - net

Period from 20 December 2002 to Year ended Six months ended 31 December 31 December 30 June 2002 2003 2004 2004 2005 (Unaudited) HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Interest income from bank deposits 23 270 649 263 844 Property related income — consultancy fee — 1,482 626 346 225 — direct labour costs — 432 17 11 5 — electricity charges 127 4,495 3,684 1,197 845 — administrative fees for transfer of leases 29 1,914 1,685 727 1,973 — other property related income — 2,289 1,710 811 1,124 Forfeiture of rental deposits — 383 1,144 497 79 Fair value gains on rental deposits, non current portion — 475 266 557 401 Others 24 (9) (300) (3) 367

203 11,731 9,481 4,406 5,863

I-28 APPENDIX I AUDITED FINANCIAL STATEMENTS OF THE PROPERTIES

15 Expenses by nature

Expenses included in direct outgoings are analysed as follows:

Period from 20 December 2002 to Year ended Six months ended 31 December 31 December 30 June 2002 2003 2004 2004 2005 (Unaudited) HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Property management fee 27 1,221 5,700 1,814 3,597 Promotional and agency expense 195 5,495 5,160 1,986 3,436 Fitting out and maintenance expenses 14 1,474 2,116 1,077 1,204 Business tax and flood prevention fee 184 8,632 10,715 4,972 7,056 Bad debt — 430 611 167 443 Employment benefit expense (Note 16) 440 14,757 17,488 6,199 7,153 Depreciation expenses 41 1,664 1,285 688 611 Land use fees — 79 79 5 —

I-29 APPENDIX I AUDITED FINANCIAL STATEMENTS OF THE PROPERTIES

16 Employee benefit expense

Period from 20 December 2002 to Year ended Six months ended 31 December 31 December 30 June 2002 2003 2004 2004 2005 (Unaudited) HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Salaries and wages 301 10,128 10,202 3,884 4,609 Staff welfare 66 2,540 5,016 1,239 944 Pension and other insurance costs — defined contribution plans 73 2,089 2,270 1,076 1,600

440 14,757 17,488 6,199 7,153

As stipulated by rules and regulations in Mainland China, the Properties contribute to a state-sponsored retirement plan for its employees in Mainland China, which is a defined contribution plan. For the period from 20 December 2002 to 31 December 2002, 2003 and 2004 and the six months ended 30 June 2004 and 2005, the Properties and their employees contribute approximately 17% to 20% and 8%, respectively, of the employee’s salary as specified by the local government, and the Properties have no further obligations for the actual payment of pensions or post-retirement benefits beyond the annual contributions. The state-sponsored retirement plan is responsible for the entire pension obligations payable to retired employees.

I-30 APPENDIX I AUDITED FINANCIAL STATEMENTS OF THE PROPERTIES

17 Taxation

China enterprise income taxation is provided on the profits of the Properties in Mainland China in accordance with the Income Tax Law of China for Enterprises with Foreign Investment and Foreign Enterprises (“China Tax Law”) at 33 per cent. The amount of taxation charged to the combined income statements represents:

Period from 20 December 2002 to Year ended Six months ended 31 December 31 December 30 June 2002 2003 2004 2004 2005 (Unaudited) HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Current income tax — China enterprise income tax 770 29,237 38,377 18,955 18,450 Deferred income tax (Note 13) — 80,371 5,896 1,754 196,200

770 109,608 44,273 20,709 214,650

The taxation on the Properties’ profit before taxation differs from the theoretical amount that would arise using the enterprise income tax rate of Mainland China, the home country of the Properties as follows:

Period from 20 December 2002 to Year ended Six months ended 31 December 31 December 30 June 2002 2003 2004 2004 2005 (Unaudited) HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Profit before taxation 2,334 344,464 132,859 62,755 681,058

Tax calculated at Mainland China enterprise income tax rate of 33 per cent 770 113,673 43,843 20,709 224,749 Income not subject to taxation — (4,065) (84) — (10,099) Expenses not deductible for taxation purpose ——514 ——

Income tax expenses 770 109,608 44,273 20,709 214,650

I-31 APPENDIX I AUDITED FINANCIAL STATEMENTS OF THE PROPERTIES

18 Segment information

At 31 December 2002, 2003, 2004 and 30 June 2004 and 2005, the operations of the Properties are separated into four business segments:

(1) White Horse Units

(2) Fortune Plaza Units

(3) City Development Plaza Units

(4) Victory Plaza Units

As all investment properties are located in Mainland China, there is no geographic segment for the Properties.

Segment results for the period from 20 December 2002 to 31 December 2002 are as follows:

City White Fortune Development Victory Horse Plaza Plaza Plaza Units Units Units Units Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Turnover — rental income and management fee income — Retail 2,338 — 179 — 2,517 — Office 39 — 718 — 757

2,377 — 897 — 3,274

Other gains — net 203 ———203 Direct outgoings (1,039) — (74) — (1,113) Other operating expenses —— (30) — (30)

Profit before taxation 1,541 — 793 — 2,334 Income tax expenses (770)

Profit for the period 1,564

I-32 APPENDIX I AUDITED FINANCIAL STATEMENTS OF THE PROPERTIES

Other segment terms included in the combined financial statements are as follows:

City White Fortune Development Victory Horse Plaza Plaza Plaza Units Units Units Units Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Depreciation 41 ———41 Non-cash expenses other than depreciation —— ———

Segment assets and liabilities at 31 December 2002 and other information for the period then ended are as follows:

City White Fortune Development Victory Horse Plaza Plaza Plaza Units Units Units Units Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Total assets 1,042,630 185,046 583,661 178,505 1,989,842

Total liabilities 301,751 10,120 111,777 5,348 428,996

Other information Capital expenditure — Property, plant and equipment (Note 6) 7,547 48,598 — 61,869 118,014 — Land use rights (Note 7) — 136,448 — 116,636 253,084 — Investment properties (Note 8) 1,000,932 — 575,701 — 1,576,633

I-33 APPENDIX I AUDITED FINANCIAL STATEMENTS OF THE PROPERTIES

Segment results for the year ended 31 December 2003 are as follows:

City White Fortune Development Victory Horse Plaza Plaza Plaza Units Units Units Units Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Turnover — rental income and management fee income — Retail 88,263 — 6,754 7,580 102,597 — Office 1,491 150 25,157 — 26,798

89,754 150 31,911 7,580 129,395

Other gains — net 11,154 10 476 91 11,731 Direct outgoings (31,796) (1,205) (3,194) (3,881) (40,076) Other operating expenses — (608) (1,065) (1,254) (2,927) Fair value gains/(losses) on investment properties (3,154) 205,914 (27,103) 70,684 246,341

Profit before taxation 65,958 204,261 1,025 73,220 344,464 Income tax expenses (109,608)

Profit for the year 234,856

Other segment terms included in the combined financial statements are as follows.

City White Fortune Development Victory Horse Plaza Plaza Plaza Units Units Units Units Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Depreciation 1,664 ———1,664 Non-cash expenses other than depreciation —— ———

I-34 APPENDIX I AUDITED FINANCIAL STATEMENTS OF THE PROPERTIES

Segment assets and liabilities at 31 December 2003 and other information for the period then ended are as follows:

City White Fortune Development Victory Horse Plaza Plaza Plaza Units Units Units Units Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Total assets 1,055,476 527,227 556,883 364,535 2,504,121

Total liabilities 304,308 74,729 104,224 35,027 518,288

Other information Capital expenditure — Property, plant and equipment (Note 6) 5,323 136,146 — 111,559 253,028 — Land use rights (Note 7) —— ——— — Investment properties (Note 8) 3,154 ———3,154

8,477 136,146 — 111,559 256,182

I-35 APPENDIX I AUDITED FINANCIAL STATEMENTS OF THE PROPERTIES

Segment results for the year ended 31 December 2004 are as follows:

City White Fortune Development Victory Horse Plaza Plaza Plaza Units Units Units Units Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Turnover — rental income and management fee income — Retail 103,175 979 6,977 24,397 135,528 — Office 1,562 8,063 26,927 — 36,552

104,737 9,042 33,904 24,397 172,080

Other gains — net 8,072 255 648 506 9,481 Direct outgoings (35,309) (6,623) (4,187) (4,891) (51,010) Other operating expenses — (705) (730) (1,364) (2,799) Fair value gains/(losses) on investment properties 53,705 8,411 (119,626) 62,617 5,107

Profit before taxation 131,205 10,380 (89,991) 81,265 132,859 Income tax expenses (44,273)

Profit for the year 88,586

Other segment terms included in the combined financial statements are as follows.

City White Fortune Development Victory Horse Plaza Plaza Plaza Units Units Units Units Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Depreciation 1,285 ———1,285 Non-cash expenses other than depreciation —— ———

I-36 APPENDIX I AUDITED FINANCIAL STATEMENTS OF THE PROPERTIES

Segment assets and liabilities at 31 December 2004 and other information for the year then ended are as follows:

City White Fortune Development Victory Horse Plaza Plaza Plaza Units Units Units Units Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Total assets 1,109,713 538,169 437,336 431,975 2,517,193

Total liabilities 334,590 81,718 65,449 51,822 533,579

Other information Capital expenditure — Property, plant and equipment (Note 6) 722 ———722 — Land use rights (Note 7) —— ——— — Investment properties (Note 8) 2,368 ———2,368

3,090 ———3,090

I-37 APPENDIX I AUDITED FINANCIAL STATEMENTS OF THE PROPERTIES

Segment results for the six months ended 30 June 2004 (Unaudited) are as follows:

City White Fortune Development Victory Horse Plaza Plaza Plaza Units Units Units Units Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Turnover — rental income and management fee income — Retail 47,329 — 3,489 12,497 63,315 — Office 783 1,917 13,595 — 16,295

48,112 1,917 17,084 12,497 79,610

Other gains — net 3,662 35 203 506 4,406 Direct outgoings (14,151) (1,923) (1,773) (1,919) (19,766) Other operating expenses — (377) (389) (729) (1,495)

Profit before taxation 37,623 (348) 15,125 10,355 62,755 Income tax expenses (20,709)

Profit for the period 42,046

I-38 APPENDIX I AUDITED FINANCIAL STATEMENTS OF THE PROPERTIES

Other segment terms included in the combined financial statements are as follows:

City White Fortune Development Victory Horse Plaza Plaza Plaza Units Units Units Units Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Depreciation 688 ———688 Non-cash expenses other than depreciation —— ———

Other information Capital expenditure — Property, plant and equipment (Note 6) 191 ———191 — Land use rights (Note 7) —— ——— — Investment properties (Note 8) —— ———

191 ———191

I-39 APPENDIX I AUDITED FINANCIAL STATEMENTS OF THE PROPERTIES

Segment results for the six months ended 30 June 2005 are as follows:

City White Fortune Development Victory Horse Plaza Plaza Plaza Units Units Units Units Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Turnover — gross rental income and management fee income — Retail 65,105 5,350 3,317 12,846 86,618 — Office 811 7,984 14,182 — 22,977

65,916 13,334 17,499 12,846 109,595

Accelerated amortision of deferred assets (Note) — (3,014) (4,454) (9,483) (16,951)

Turnover — rental income and management fee income 65,916 10,320 13,045 3,363 92,644 Other gains — net 5,385 127 163 188 5,863 Direct outgoings (16,050) (4,546) (2,787) (3,664) (27,047) Other operating expenses — (1,026) (748) (672) (2,446) Fair value gains on investment properties 455,701 143,899 12,444 — 612,044

Profit before taxation 510,952 148,774 22,117 (785) 681,058 Income tax expenses (214,650)

Profit for the period 466,408

Note: This represents the accelerated amortisation of deferred assets as a result of change in the estimated useful life of deferred assets as explained in Note 9.

I-40 APPENDIX I AUDITED FINANCIAL STATEMENTS OF THE PROPERTIES

Other segment terms included in the combined financial statements are as follows:

City White Fortune Development Victory Horse Plaza Plaza Plaza Units Units Units Units Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Depreciation 611 ———611 Non-cash expenses other than depreciation —— ———

Segment assets and liabilities at 30 June 2005 and other information for the period then ended are as follows:

City White Fortune Development Victory Horse Plaza Plaza Plaza Units Units Units Units Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Total assets 1,600,080 681,371 444,602 426,049 3,152,102

Total liabilities 483,845 128,026 69,710 52,675 734,256

Other information Capital expenditure — Property, plant and equipment (Note 6) 3,891 ———3,891 — Land use rights (Note 7) 1,230 ———1,230 — Investment properties (Note 8) 54,526 ———54,526

59,647 ———59,647

I-41 APPENDIX I AUDITED FINANCIAL STATEMENTS OF THE PROPERTIES

19 Notes to the cash flow statements

(a) Net cash inflow from operations

Period from 20 December 2002 to Year ended Six months ended 31 December 31 December 30 June 2002 2003 2004 2004 2005 (Unaudited) HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Profit before taxation 2,334 344,464 132,859 62,755 681,058 Depreciation charges of property, plant and equipment 41 1,664 1,285 688 611 Impairment loss of property, plant and equipment ——— —187 Interest income (23) (270) (649) (263) (844) Fair value gains on investment properties — (246,341) (5,107) — (612,044) Loss on disposal of property, plant and equipment —— 4 2,033 3,048 Decrease/(increase) in deferred assets, prepayments, deposits and other receivables 1,317 (3,520) (8,347) (5,708) 10,953 Increase/(decrease) in rental deposits, accruals and other payables 5,297 11,922 7,964 (8,463) 5,078

Net cash inflow from operations 8,966 107,919 128,009 51,042 88,047

I-42 APPENDIX I AUDITED FINANCIAL STATEMENTS OF THE PROPERTIES

(b) Acquisition of businesses by Subsidiaries of GZI

On 20 December 2002, Subsidiaries of GZI acquired the investment properties and the related businesses from state-controlled entities (see note 1). The acquired businesses contributed all the revenues of the Properties for the period from 20 December 2002 to 31 December 2002, each of the two years ended 31 December 2003 and 2004 and each of the six months ended 30 June 2004 and 2005.

The assets and liabilities arising from the acquisition are as follows:

HK$’000

Details of net assets acquired by Subsidiaries of GZI are as follows: Property, plant and equipment 118,014 Land use rights 253,084 Investment properties 1,576,633 Deferred assets, prepayments, deposits and other receivables 11,491 Cash and cash equivalents 32,344 Deferred tax liabilities (387,269) Rental deposits, accruals and other payables (28,709) Current tax payable (6,951)

Total net assets acquired 1,568,637

Recognised in Accounts with Subsidiaries of GZI 1,568,637

Cash and cash equivalents in businesses acquired, representing cash inflow on acquisition 32,344

There were no acquisitions for each of the two years ended 31 December 2003 and 2004 and each of the six months ended 30 June 2004 and 2005.

I-43 APPENDIX I AUDITED FINANCIAL STATEMENTS OF THE PROPERTIES

20 Related-party transactions

(a) Related parties

The Properties are controlled by the Subsidiaries of GZI. The ultimate parent of the Subsidiaries of GZI is Yue Xiu Enterprises (Holdings) Limited (“Yue Xiu”), a company incorporated in Hong Kong.

The table set forth below summarised the names of significant parties and nature of relationship with the Properties as at 30 June 2005.

Significant related party Relationship

Guangzhou City Construction & Development A subsidiary of GZI Co. Ltd. Guangzhou City Construction & Development A subsidiary of GZI Decoration Ltd. Guangzhou Xingcheng Enterprise Development A subsidiary of GZI Ltd. Guangzhou Grandcity Automobile Services Co. A subsidiary of GZI Guangzhou Yicheng Property Management Ltd. A subsidiary of GZI Guangzhou City Construction and Development A subsidiary of GZI Xingye Property Agent Ltd. Guangzhou City Construction & Development A subsidiary of GZI Homecity Supermarket Ltd. State-controlled enterprises (see (c) below) Related parties of the Properties

(b) Transactions with related parties other than state-controlled enterprises

Period from 20 December 2002 to Year ended Six months ended 31 December 31 December 30 June 2002 2003 2004 2004 2005 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Rental income received from subsidiaries of GZI 43 2,990 3,122 1,559 1,534

I-44 APPENDIX I AUDITED FINANCIAL STATEMENTS OF THE PROPERTIES

Period from 20 December 2002 to Year ended Six months ended 31 December 31 December 30 June 2002 2003 2004 2004 2005 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Property management fee to subsidiaries of GZI 27 1,211 5,700 1,814 3,597 Agency fee paid to subsidiaries of GZI — 345 344 105 574 Compensation to a subsidiary of GZI ————1,009

Note: All related party transactions were carried out at the terms agreed by the relevant parties.

At 31 December 2002, 2003 and 2004 and 30 June 2005, certain investments properties with an aggregate carrying amount of approximately HK$1,339,617,000, HK$1,362,704,000, HK$1,852,774,000 and HK$877,245,000, respectively, were pledged as collateral for bank loans borrowed by a subsidiary of GZI.

Under HKAS 24, business transactions between state-controlled enterprises controlled by Chinese government are within the scope related party transactions. Yue Xiu, the ultimate holding company of the subsidiaries controlling the Properties, is a state-controlled enterprise. There are no key business transactions with the state-controlled enterprises besides the following.

As at 31 December 2002, 2003 and 2004 and 30 June 2005, over 98 per cent, 94 per cent, 92 per cent and 68 per cent, respectively, of bank balances were with state-controlled banks.

For the period from 20 December 2002 to 31 December 2002, each of the two years ended 31 December 2003, 2004 and the six months ended 30 June 2004 and 2005, approximately 98 per cent, 96 per cent, 93 per cent, 96 per cent and 80 per cent, respectively, of the bank interest income were from state-controlled banks; approximately 1 per cent, 0.7 per cent, 0.4 per cent, 0.4 per cent and 0.4 per cent, respectively, of the rental income were from state-controlled enterprises.

(d) Key management compensation

There was no key management compensation for the period from 20 December 2002 to 31 December 2002, two years ended 31 December 2003 and 2004 and the six months ended 30 June 2004 and 2005.

I-45 APPENDIX I AUDITED FINANCIAL STATEMENTS OF THE PROPERTIES

21 Future minimum rental payments receivable

At 31 December 2002, 2003 and 2004 and 30 June 2005, the Properties had future minimum rental payments receivable under non-cancellable leases as follows:

As at As at 31 December 30 June 2002 2003 2004 2005 HK$’000 HK$’000 HK$’000 HK$’000

Not later than one year 114,360 140,078 193,248 163,120 Later than one year and not later than five years 230,930 182,313 131,023 212,063 Later than five years 8,989 26,921 44,074 37,905

354,279 349,312 368,345 413,088

22 Subsequent events

(a) Cost, management and financing structure

Pursuant to the Reorganisation Deed, the equity interests in BVI Companies were transferred to Holdco, a wholly owned subsidiary of GZI REIT in December 2005. GZI REIT has entered into Property Management Agreements with GZI REIT Asset Management Limited (the “Manager”). Pursuant to these agreements, the Properties are to be managed by the Manager. In addition, on 7 December 2005, the BVI Companies, Holdco, Citibank, N.A., Hong Kong Branch, the Hong Kong and Shanghai Banking Corporation Limited and DBS Bank Ltd. have entered into a Facility Agreement in connection with a loan facility of US$165,000,000 with a maturity period of 3 years for the financing of the investment in the properties.

Subsequent to the completion of these agreements, the management, cost, financing and capital structures of the Properties as well as the management philosophy and operational processes of the Manager are expected to differ from those previously adopted by subsidiaries of GZI in managing the Properties. Upon the completion of the Divestment, certain costs which were not previously incurred in the combined financial statements, including insurance expenses, management’s fees, trustee’s fees and interest expenses will be incurred.

I-46 APPENDIX I AUDITED FINANCIAL STATEMENTS OF THE PROPERTIES

(b) Release of pledge of investment properties

The pledge of certain investment properties with an aggregate carrying amount of approximately HK$877,245,000 for bank loans borrowed by a subsidiary of GZI as at 30 June 2005 was subsequently released as a result of repayment of bank loans and replacement of pledge by other assets.

As at 30 September 2005, a valuation in relation to the investment properties was performed by Colliers International (Hong Kong) Ltd, an independent property valuer, amounting to HK$4,005,000,000.

(d) Taxation status

The Properties were transferred into the BVI Companies subsequent to 30 June 2005 as mentioned in Note 1. Upon acquisition of the Properties, the BVI Companies are subject to Mainland China withholding tax at the current rate of 10 per cent on gross rental income net of business taxes.

23 Approval of combined financial statements

The combined financial statements were approved by the directors of GZI on 12 December 2005.

I-47 APPENDIX II AUDITED FINANCIAL STATEMENTS OF THE BVI COMPANIES

AUDITORS’ REPORT TO THE DIRECTORS OF GZI REIT ASSET MANAGEMENT LIMITED COMBINED FINANCIAL STATEMENTS OF PARTAT INVESTMENT LIMITED MOON KING LIMITED FULL ESTATES INVESTMENT LIMITED KEEN OCEAN LIMITED (companies incorporated in the British Virgin Islands with limited liability)

We have audited the combined financial statements of Partat Investment Limited, Moon King Limited, Full Estates Investment Limited and Keen Ocean Limited (hereinafter collectively referred to as “the BVI Companies”) as at 31 October 2005 and for the ten months ended 31 October 2005 on pages II-3 to II-24 which have been prepared in accordance with accounting principles generally accepted in Hong Kong.

Respective responsibilities of directors of Guangzhou Investment Company Limited (“GZI”) and auditors

The directors of GZI are responsible for the preparation of combined financial statements which give a true and fair view. In preparing combined financial statements which give a true and fair view it is fundamental that appropriate accounting policies are selected and applied consistently.

It is our responsibility to form an independent opinion, based on our audit, on those combined financial statements and to report our opinion to you.

Basis of opinion

We conducted our audit for the ten months ended 31 October 2005 in accordance with Statements of Auditing Standards issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”). An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the combined financial statements. It also includes an assessment of the significant estimates and judgements made by the directors of GZI in the preparation of the combined financial statements, and of whether the accounting policies are appropriate to the circumstances of the BVI Companies, consistently applied and adequately disclosed.

II-1 APPENDIX II AUDITED FINANCIAL STATEMENTS OF THE BVI COMPANIES

Opinion

In our opinion the combined financial statements give a true and fair view of the state of affairs of the BVI Companies as at 31 October 2005 and of the BVI Companies’ profit and cash flows for the ten months ended 31 October 2005.

PricewaterhouseCoopers Certified Public Accountants

Hong Kong, 12 December 2005

II-2 APPENDIX II AUDITED FINANCIAL STATEMENTS OF THE BVI COMPANIES

COMBINED BALANCE SHEETS AS AT 31 OCTOBER 2005 31 October 31 December 2005 2004 Note HK$’000 HK$’000

ASSETS Non-current assets Property, plant and equipment 5 3,453 — Investment properties 6 4,005,000 — Deferred assets 9 3,031 —

4,011,484 — ------Current assets Trade receivables 1,586 — Prepayments, deposits and other receivables 1,110 — Cash and cash equivalents 7 12,653 —

15,349 — ------Total assets 4,026,833 —

EQUITY Capital and reserves attributable to the shareholder of the BVI Companies Share capital 8 —— Reserves 2,972,767 (70)

Total equity 2,972,767 (70) ------LIABILITIES Non-current liabilities Rental deposits, non-current portion 10 14,359 — ------Current liabilities Rental deposits, accruals and other payables 10 45,440 — Due to fellow subsidiaries 15 994,267 70

1,039,707 70 ------Total liabilities 1,054,066 70 ------

Total equity and liabilities 4,026,833 —

On behalf of the Board

Ou Bingchang Chen Guangsong Director Director

II-3 APPENDIX II AUDITED FINANCIAL STATEMENTS OF THE BVI COMPANIES

COMBINED INCOME STATEMENTS FOR THE TEN MONTHS ENDED 31 OCTOBER 2005

For the period from 20 September 2001 Ten months (date of incorporation ended of the BVI Companies) 31 October to 31 December 2005 2004 Note HK$’000 HK$’000

Turnover — rental income 22,455 — Interest income 1 — General and administrative expenses 11 (6,256) (70)

Profit/(loss) before taxation 16,200 (70) Income tax expenses 12 ——

Profit/(loss) for the period 16,200 (70)

II-4 APPENDIX II AUDITED FINANCIAL STATEMENTS OF THE BVI COMPANIES

COMBINED STATEMENTS OF CHANGES IN EQUITY FOR THE TEN MONTHS ENDED 31 OCTOBER 2005

Attributable to shareholder of the BVI Companies (Accumulated Share Shareholder’s loss)/retained capital contribution earnings Total Note HK$’000 HK$’000 HK$’000 HK$’000

Issue of share ———— Loss for the period ——(70) (70)

At 31 December 2004 ——(70) (70) Shareholder’s contribution 14 — 2,956,637 — 2,956,637 Profit for the period ——16,200 16,200

At 31 October 2005 — 2,956,637 16,130 2,972,767

II-5 APPENDIX II AUDITED FINANCIAL STATEMENTS OF THE BVI COMPANIES

COMBINED CASH FLOW STATEMENTS FOR THE TEN MONTHS ENDED 31 OCTOBER 2005

For the period from 20 September 2001 Ten months (date of incorporation ended of the BVI Companies) 31 October to 31 December 2005 2004 Note HK$’000 HK$’000

Cash flows from operations Net cash inflow generated from operations 13 12,652 — Interest received 1 —

Net cash inflow from operating activities 12,653 — ------Increase in cash and cash equivalents, representing cash and cash equivalents at period end date 12,653 —

II-6 APPENDIX II AUDITED FINANCIAL STATEMENTS OF THE BVI COMPANIES

NOTES TO THE COMBINED FINANCIAL STATEMENTS

1 Basis of preparation

GZI Real Estate Investment Trust (“GZI REIT”) was established by GZI for the purposes of divesting the commercial property operations comprising certain units (the “Divestment”) in White Horse Building, Fortune Plaza, City Development Plaza and Victory Plaza located in Guangzhou, Guangdong Province, Mainland China (hereinafter collectively referred to as the “Properties”) and for the purposes of the listing on The Stock Exchange of Hong Kong Limited pursuant to the Code on Real Estate Investment Trusts.

Full Estates Investment Limited, Keen Ocean Limited and Moon King Limited have become the beneficial owners of certain units of City Development Plaza, Victory Plaza and Fortune Plaza, respectively, since 1 September 2005; while Partat Investment Limited has become the beneficial owner of certain units of White Horse Building since 19 October 2005. The operations of the Properties were transferred from certain subsidiaries of GZI to the BVI Companies on the dates of transfer.

King Profit Holdings Limited (which is in the process of changing its name to GZI REIT (Holdings) 2005 Company Limited) (the “Holdco”) has acquired the BVI Companies on 7 December 2005. Upon completion of the Divestment, Holdco became a wholly owned subsidiary of GZI REIT.

The combined financial statements of the BVI Companies have been presented on a combined basis to represent the combined state of affairs as at 31 October 2005, combined results and combined cash flows for the ten months ended 31 October 2005.

Details of the BVI Companies as at 31 October 2005 are as follows:

Shareholding Place and date of Paid-in by the Principal Name incorporation capital Holdco activities

Partat Investment British Virgin Islands US$1 100% Leasing of Limited 20 September 2001 commercial properties

Moon King Limited British Virgin Islands US$1 100% Leasing of 20 September 2001 commercial properties

Full Estates British Virgin Islands US$1 100% Leasing of Investment Limited 20 September 2001 commercial properties

II-7 APPENDIX II AUDITED FINANCIAL STATEMENTS OF THE BVI COMPANIES

Shareholding Place and date of Paid-in by the Principal Name incorporation capital Holdco activities

Keen Ocean Limited British Virgin Islands US$1 100% Leasing of 20 September 2001 commercial properties

As at the date of approval of these combined financial statements, the Holdco had direct interests in the above subsidiaries, all of which have substantially the same characteristics as Hong Kong incorporated private limited liability companies. The BVI Companies had been inactive since the date of incorporation until they acquired the investments properties from certain subsidiaries of GZI.

The combined financial statements of the BVI Companies have been prepared in accordance with Hong Kong Financial Reporting Standards (HKFRS). HKFRS 1, “First-time Adoption of the Hong Kong Institute of Certified Public Accountants”, has been applied in preparing these combined financial statements. The combined financial statements are the first set of financial statements prepared in accordance with HKFRS. No combined financial statements of the BVI Companies have been prepared with accounting principles generally accepted in other jurisdictions.

In preparing these combined financial statements in accordance with HKFRS 1, the BVI Companies has applied all the mandatory exceptions but has not applied any of the optional exemptions from full retrospective application of HKFRS.

The BVI Companies have not early adopted the following standards and interpretations which have been issued but are not yet effective but the BVI Companies will adopt these new HKFRS once they become effective:

(i) HKAS 1 Amendment, Presentation of financial statements — capital disclosures;

(ii) HKFRS 7, Financial instruments: disclosures;

(iii) HKAS 39 Amendment, Cash flow hedge accounting of forecast intragroup transactions;

(iv) HKAS 39 Amendment, The fair value option;

(v) HKAS 39 and HKFRS 4 Amendments, Financial guarantee contracts;

II-8 APPENDIX II AUDITED FINANCIAL STATEMENTS OF THE BVI COMPANIES

(vi) HKFRS 1 and HKFRS 6 Amendments, First-time adoption of Hong Kong Financial Reporting Standards and Exploration for and evaluation of mineral resources;

(vii) HKFRS 6, Exploration for and evaluation of mineral resources;

(viii) HKFRS-Int 4, Determining whether an arrangement contains a lease;

(ix) HKFRS-Int 5, Rights to interests arising from decommissioning, restoration and environmental rehabilitation funds;

(x) HK (IFRIC)-Int 6, Liabilities arising from participating in a specific market — waste electrical and electronic equipment; and

(xi) HKAS 19 Amendment, Employee benefits — Actuarial gains and losses, group plans and disclosures.

The adoption of such Standards or Interpretations will not result in substantial changes to the BVI Companies’ accounting policies.

The preparation of the combined financial statements in conformity with HKFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the BVI Companies’ accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the combined financial statements, are disclosed in Note 4.

At 31 October 2005, there were net current liabilities of the BVI Companies of HK$1,024,358,000. GZI, the intermediate holding company, has confirmed its intention to provide continuing financial support to the BVI Companies so as to enable the BVI Companies to meet its liabilities as and when they fall due and continue their operations for the foreseeable future. Consequently, the directors of GZI have prepared the combined financial statements on a going concern basis.

2 Summary of significant accounting policies

The principal accounting policies applied in the preparation of the combined financial statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated.

(a) Basis of combination

The combined financial statements included the financial statements of the BVI Companies. All significant intercompany transactions and balances between the BVI Companies are eliminated on combination.

II-9 APPENDIX II AUDITED FINANCIAL STATEMENTS OF THE BVI COMPANIES

(b) Business acquisition

The purchase method of accounting is used to account for the acquisition of business operation by the BVI Companies. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair value at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the BVI Companies’ share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the business operation acquired, the difference is recognised in the combined income statements.

Transactions in foreign currencies are translated into Renminbi, the function currency of each of the BVI Companies, at exchange rates prevailing at the transaction dates. Monetary assets and liabilities expressed in foreign currencies at the balance sheet date are translated to Renminbi, at rates of exchange ruling at the balance sheet date. Exchange differences arising in these cases are dealt with in the combined income statements.

The combined financial statements are presented in Hong Kong dollars for the convenience of the financial statement readers. For the purpose of translating the combined financial statements from Renminbi to Hong Kong dollars, all assets and liabilities of the BVI Companies are translated into Hong Kong dollars at the applicable rates of exchange in effect at the balance sheet date, and all income and expense items at the average applicable rates during the period. All resulting exchange differences are dealt with as movements of reserves.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.

(d) Property, plant and equipment

Property, plant and equipment are stated at historical cost less depreciation and impairment losses. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Cost may also include transfers from equity of any gains/losses on qualifying cash flow hedges of foreign currency purchases of property, plant and equipment.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the BVI Companies and the cost of the item can be measured reliably. All other repairs and maintenance are expensed in the combined income statements during the financial period in which they are incurred.

II-10 APPENDIX II AUDITED FINANCIAL STATEMENTS OF THE BVI COMPANIES

Depreciation of property, plant and equipment is calculated using the straight-line method to allocate cost to their residual values over their estimated useful lives, as follows:

Machinery and tools 5 years

The asset’s residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.

(e) Investment properties

Property that is held for long-term rental yields or for capital appreciation or both, and that is not occupied by the BVI Companies, is classified as investment property.

Investment property comprises land held under operating leases and buildings held under finance leases.

Investment property is measured initially at its cost, including related transaction costs.

After initial recognition, investment property is carried at fair value. Fair value is based on active market prices, adjusted, if necessary, for any difference in the nature, location or condition of the specific asset. If this information is not available, the BVI Companies use alternative valuation methods such as recent prices on less active markets or discounted cash flow projections. These valuations are performed in accordance with the guidance issued by the International Valuation Standards Committee. These valuations are reviewed annually by external valuers. Investment property that is being redeveloped for continuing use as investment property, or for which the market has become less active, continues to be measured at fair value.

The fair value of investment property reflects, among other things, rental income from current leases and assumptions about rental income from future leases in the light of current market conditions.

II-11 APPENDIX II AUDITED FINANCIAL STATEMENTS OF THE BVI COMPANIES

Subsequent expenditure is charged to the asset’s carrying amount only when it is probable that future economic benefits associated with the item will flow to the BVI Companies and the cost of the item can be measured reliably. All other repairs and maintenance costs are expensed in the combined income statements during the financial period in which they are incurred.

Changes in fair values are recognised in the combined income statements.

(f) Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the BVI Companies’ share of the net identifiable assets of the acquired business operations at the date of acquisition. Goodwill on acquisitions of business operation is included in intangible assets. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Gains and losses on the disposal of the operation include the carrying amount of the goodwill relating to the operation sold.

(g) Impairment of assets

Assets that have an indefinite useful life are not subject to amortization, which are at least tested for impairment and are revised for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units).

(h) Trade and other receivables

Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. A provision for impairment of trade and other receivables is established when there is objective evidence that the BVI Companies will not be able to collect all amounts due according to the original terms of receivables. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. The amount of the provision is recognised in the combined income statements.

II-12 APPENDIX II AUDITED FINANCIAL STATEMENTS OF THE BVI COMPANIES

(i) Rental deposits

(j) Cash and cash equivalents

Cash and cash equivalents include cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the combined balance sheets.

(k) Provisions

Provisions for environmental restoration, restructuring costs and legal claims are recognised when: the BVI Companies have a present legal or constructive obligation as a result of past events; it is more likely than not that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Restructuring provisions comprise lease termination penalties and employee termination payments. Provisions are not recognised for future operating losses.

(l) Borrowings

Borrowings are recognized initially at fair value, net of transaction costs incurred. Transaction costs are incremental costs that are directly attributable to the acquisition, issue or disposal of a financial asset or financial liability, including fees and commissions paid to agents, advisers, brokers and dealers, levies by regulatory agencies and securities exchanges, and transfer taxes and duties. Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognized in the combined income statement over the period of the borrowings using the effective interest method.

II-13 APPENDIX II AUDITED FINANCIAL STATEMENTS OF THE BVI COMPANIES

(m) Revenue recognition

Revenue comprises the fair value for the receipt of rental income. Revenue is recognised as follows:

(i) Operating lease rental income is recognised on a straight-line basis over lease period of the lease. When the BVI Companies provide incentives to its tenants, the cost of incentives will be recognized over the lease term, on a straight-line basis, as a reduction of rental income. The difference between the gross receipt of rental and operating lease rental recognised over the lease term is recognised as deferred assets.

(ii) Interest income is recognised on a time-proportion basis using the effective interest method. When a receivable is impaired, the BVI Companies reduce the carrying amount to its recoverable amount, being the estimated future cash flow discounted at original effective interest rate of the instrument, and continues unwinding the discount as interest income. Interest income on impaired loans is recognised either as cash is collected or on a cost-recovery basis as conditions warrant.

3 Financial risk management

(a) Financial risk factors

The BVI Companies’ activities expose it to a variety of financial risks: price risk, foreign exchange risk and credit risk. The BVI Companies’ overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the BVI Companies’ financial performance.

(i) Price risk

The BVI Companies are exposed to property price and market rental risk because investment properties are carried at fair value. Any change in fair values is recognized in the combined income statements.

(ii) Foreign exchange risk

The BVI Companies operate in Mainland China (“China”) with most of the transactions denominated in Renminbi. The BVI Companies are exposed to foreign exchange risk arising from the exposure of Renminbi against Hong Kong dollars as certain of the general and administrative expenses are settled in Hong Kong dollars. It has not hedged its foreign exchange rate risk.

In addition, the conversion of Renminbi into foreign currencies is subject to the rules and regulations of the foreign exchange control promulgated by the China government.

II-14 APPENDIX II AUDITED FINANCIAL STATEMENTS OF THE BVI COMPANIES

(iii) Credit risk

The BVI Companies have no significant concentrations of credit risk. The carrying amount of trade receivables included in the combined balance sheets represents the BVI Companies’ maximum exposure to credit risk in relation to its financial assets. The BVI Companies have policies in place to ensure that receipt of rental income from customers with an appropriate credit history and the BVI Companies perform periodic credit evaluations of its customers. The directors of GZI are of the opinion that adequate provision for uncollectible trade receivables has been made in the combined financial statements, based on the BVI Companies’ historical experience in collection of trade receivables.

(b) Accounting for derivative financial instruments and hedging activities

Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are subsequently remeasured at their fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The BVI Companies designates certain derivatives as hedges of highly probable forecast transactions (cash flow hedges).

The BVI Companies documents at the inception of the transaction the relationship between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. The BVI Companies also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items.

(i) Cash flow hedge

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges are recognized in equity. The gain or loss relating to the ineffective portion is recognized immediately in the combined income statement.

Amounts accumulated in equity are recycled in the combined income statement in the periods when the hedged item will affect profit or loss (for instance when the forecast sale that is hedged takes place). However, when the forecast transaction that is hedged results in the recognition of a non-financial asset or a liability, the gains and losses previously deferred in equity are transferred from equity and included in the initial measurement of the cost of the asset or liability.

When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognized when the forecast transaction is ultimately recognized in the combined income statements. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the combined income statements.

II-15 APPENDIX II AUDITED FINANCIAL STATEMENTS OF THE BVI COMPANIES

During the period, the BVI Companies did not enter into derivative contract as cash flow hedge.

(ii) Derivatives that do not qualify for hedge accounting

Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of any derivative instruments that do not qualify for hedge accounting are recognized immediately in the combined income statements.

The carrying amounts of the BVI Companies’ financial assets including cash and cash equivalents, trade and other receivables and amounts due from fellow subsidiaries and financial liabilities including accruals and other payables and amounts due to fellow subsidiaries approximate their fair values due to their short maturities.

4 Critical accounting estimates

Estimates are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

Estimate of fair value of investment properties

a) current prices in an active market for properties of different nature, condition or location (or subject to different lease or other contracts), adjusted to reflect those differences.

b) recent prices of similar properties in less active markets, with adjustments to reflect any changes in economic conditions since the date of the transactions that occurred at those prices; and

II-16 APPENDIX II AUDITED FINANCIAL STATEMENTS OF THE BVI COMPANIES

c) discounted cash flow projections based on reliable estimates of future cash flows, derived from the terms of any existing lease and other contracts, and (where possible) from external evidence such as current market rents for similar properties in the same location and condition, and using discount rates that reflect current market assessments of the uncertainty in the amount and timing of the cash flows.

If information on current or recent prices of investment properties is not available, the fair values of investment properties are determined using discounted cash flow valuation techniques. The directors of GZI use assumptions that are mainly based on market conditions existing at each balance date.

The principal assumptions underlying management’s estimation of fair value are those related to: the receipt of contractual rentals; expected future market rentals; maintenance requirements; and appropriate discount rates. These valuations are regularly compared to actual market yield data, and actual transactions by the directors of GZI and those reported by the market.

The expected future market rentals are determined on the basis of current market rentals for similar properties in the same location and condition.

5 Property, plant and equipment

Machinery and tools HK$’000

Ten months ended 31 October 2005 Opening net book amount — Addition 3,512 Depreciation (59)

Closing net book amount 3,453

At 31 October 2005 Cost 3,512 Accumulated depreciation (59)

Net book amount 3,453

II-17 APPENDIX II AUDITED FINANCIAL STATEMENTS OF THE BVI COMPANIES

6 Investment properties

31 October 2005 HK$’000

Beginning of the period — Addition 4,005,000

End of the period 4,005,000

The investment properties were located in China held on land use rights of 40 years to 50 years, expiring from 2047 through 2055.

The investment properties were revalued at 30 September 2005 by independent, professionally qualified valuers, Colliers International (Hong Kong) Ltd. Valuations were performed using discounted cash flow projections based on estimates of future cash flows, derived from the terms of any existing lease and other contracts, and from external evidence such as current market rents for similar properties in the same location and condition, and using discount rates that reflect current market assessments of the uncertainty in the amount and timing of the cash flows. Directors of GZI consider that there is no material change in the fair value of these investment properties between 1 October 2005 and 31 October 2005.

In the combined income statements, direct operating expenses include HK$436,000 (2004: Nil) relating to investment properties that were vacant.

7 Cash and cash equivalents

As at 31 October 2005, all the cash and cash equivalents of the BVI Companies were denominated in Renminbi, which is not a freely convertible currency in the international market and its exchange rate is determined by the People’s Bank of China. The remittance of these funds out of the China is subject to exchange control restrictions imposed by the Chinese government.

8 Share capital

The combined share capital of the BVI Companies as at 31 October 2005 represented the aggregate amount of the issued and paid up capital of the BVI Companies at that date.

9 Deferred assets

II-18 APPENDIX II AUDITED FINANCIAL STATEMENTS OF THE BVI COMPANIES on the rental income over the relevant lease periods. The temporary difference between the monthly rental income as set in the lease agreements and accounting monthly rental income is reflected as deferred assets.

10 Rental deposits, accruals and other payables

31October 31 December 2005 2004 HK$’000 HK$’000

Rental deposits, current portion 40,161 — Receipt in advance 1,736 — Provision for withholding tax 1,863 — Provision for business tax and flood prevention fee 833 — Others 847 —

45,440 —

The carrying amounts of rental deposits, accruals and other payables approximate their fair value.

Non-current rental deposits were HK$14,359,000 (2004: Nil) as at 31 October 2005.

11 Expenses by nature

Expenses included in general and administrative expenses are analyzed as follows:

For the period from 20 September 2001 Ten months (date of incorporation ended of the BVI Companies) 31 October to 31 December 2005 2004 HK$’000 HK$’000

Property management fee 860 — Urban real estate tax 1,439 — Business tax and flood prevention fee 1,143 — Withholding tax (Note) 2,133 — Depreciation expenses 59 —

Note: Withholding tax of China is calculated based on the rental income (net of business tax paid) and interest income at a rate of 10 per cent.

II-19 APPENDIX II AUDITED FINANCIAL STATEMENTS OF THE BVI COMPANIES

12 Income tax expenses

No China enterprise income tax has been provided as the BVI companies have no assessable profit in China.

No Hong Kong profits tax has been provided as the BVI Companies have no assessable profit in Hong Kong.

There is no material unprovided deferred taxation as at 31 October 2005.

13 Notes to the cash flow statements

Net cash inflow from operations

For the period from 20 September 2001 Ten months (date of incorporation ended of the BVI Companies) 31 October to 31 December 2005 2004 HK$’000 HK$’000

Profit/(loss) before taxation 16,200 (70) Depreciation expenses 59 — Interest income (1) — Increase in deferred assets (3,031) — Increase in trade receivables, prepayments, deposits and other receivables (2,696) — Increase in rental deposits, accruals and other payables, including amounts due to fellow subsidiaries 2,121 70

Net cash inflow from operations 12,652 —

II-20 APPENDIX II AUDITED FINANCIAL STATEMENTS OF THE BVI COMPANIES

14 Acquisition of businesses

On 1 September 2005 and 19 October 2005, the BVI Companies acquired the investment properties and the related businesses from certain subsidiaries of GZI (see note 1). The acquired business contributed all the revenues of the BVI Companies for the ten months ended 31 October 2005.

Details of net assets acquired and shareholder’s contribution are as follows:

HK$’000

Purchase consideration Current accounts with fellow subsidiaries 997,705 Fair value of net assets acquired — shown as below (3,954,342)

Shareholder’s contribution (2,956,637)

The fair value of assets and liabilities arising from the acquisition are as follows:

HK$’000

Property, plant and equipment 3,512 Investment properties (Note) 4,005,000 Rental deposits (54,170)

Net assets acquired 3,954,342

Note: The investment properties were revalued at 30 September 2005 by independent, professional qualified valuers, Colliers International (Hong Kong) Ltd. Directors of GZI consider that there is no material change in the fair value of these investment properties between the acquisition dates and the valuation date.

There were no acquisitions for the period from 20 September 2001 (date of incorporation of the BVI Companies) to 31 December 2004.

II-21 APPENDIX II AUDITED FINANCIAL STATEMENTS OF THE BVI COMPANIES

15 Related-party transactions

The BVI Companies are wholly owned subsidiaries of GZI. The ultimate parent of the BVI Companies is Yue Xiu Enterprises (Holdings) Limited (“Yue Xiu”), a company incorporated in Hong Kong.

The table set forth below summarized the names of significant parties and nature of relationship with the BVI Companies as at 31 October 2005.

Significant related party Relationship with the BVI Companies

Guangzhou City Construction & Development Ltd. (“GCCD”) A fellow subsidiary

Guangzhou White Horse Clothings Market Ltd. A fellow subsidiary (“White Horse JV”)

Guangzhou Yicheng Property Management Ltd. (“Yicheng”) A fellow subsidiary

State-controlled enterprises (see (d) below) Related parties of the BVI Companies

The following transactions and balances were carried out with related parties:

(a) Transaction with related parties other than state-controlled enterprises

For the period from 20 September 2001 Ten months (date of incorporation ended of the BVI Companies) 31 October to 31 December 2005 2004 HK$’000 HK$’000

Management fee paid to Yicheng 860 —

Note: All related party transactions were carried out at the terms as agreed by the relevant parties.

II-22 APPENDIX II AUDITED FINANCIAL STATEMENTS OF THE BVI COMPANIES

(b) Balances with related parties other than state-controlled enterprises

31 October 31 December 2005 2004 HK$’000 HK$’000

Balance with GCCD Amount due to GCCD 811,228 52

Balance with White Horse JV Amount due to White Horse JV 181,910 18

Balance with Yicheng Amount due to Yicheng 1,129 —

Note: All balances with related parties are unsecured, interest-free and repayable on demand.

There was no key management compensation for the ten months ended 31 October 2005 (For the period from 20 September 2001 (date of incorporation of the BVI Companies) to 31 December 2004: Nil).

(d) Transactions with state-controlled enterprises

Under HKAS 24, business transactions between state-controlled enterprises controlled by Chinese government are within the scope of related party transactions. Yue Xiu, the ultimate holding company of the BVI Companies, is a state-controlled enterprise. The BVI Companies’ key business transactions with other state-controlled enterprises are primarily related to banking activities. The related party transactions with other state-controlled enterprises were conducted in the ordinary course of business.

As at 31 October 2005, all the bank balances were with state-controlled banks (2004: Nil).

For the ten months ended 31 October 2005, all the bank interest income was from state-controlled banks (For the period from 20 September 2001 (date of incorporation of the BVI Companies) to 31 December 2004: Nil).

II-23 APPENDIX II AUDITED FINANCIAL STATEMENTS OF THE BVI COMPANIES

16 Future minimum rental payments receivable

At 31 October 2005, the BVI Companies had future minimum rental payments receivable under non-cancellable leases as follows:

31 October 31 December 2005 2004 HK’000 HK$’000

Not later than one year 128,719 — Later than one year and not later than five years 206,493 — Later than five years 36,374 —

371,586 —

17 Events after balance sheet date

(a) Bank borrowing and swap agreement

On 7 December 2005, the BVI Companies, Holdco and Citibank, N.A., Hong Kong Branch, The Hongkong and Shanghai Banking Corporation Limited and DBS Bank Ltd. (collectively “Lending Banks”) entered into a Facility Agreement in connection with a loan facility of US$165,000,000 with a maturity period of 3 years for the financing of the investment in the Properties. The BVI Companies also entered into a US$/RMB non-deliverable swap facility with the Lending Banks. Pursuant to this arrangement, the interest rate under the above loan facility is fixed at approximately 3.2% per annum for the entire three year tenure of the loan under the facility.

(b) Business combination

On 7 December 2005, the BVI Companies were acquired by Holdco. Upon completion of the Divestment, the BVI Companies became wholly owned subsidiaries of GZI REIT.

Pursuant to the Reorganisation Deed entered between Holdco, GZI REIT Asset Management Limited and GZI, the amount due to fellow subsidiaries are subsequently released by these fellow subsidiaries.

18 Approval of combined financial statements

The combined financial statements were approved by the directors of GZI on 12 December 2005.

II-24 APPENDIX III UNAUDITED PRO FORMA BALANCE SHEETS OF THE REIT

UNAUDITED PRO FORMA BALANCE SHEETS OF THE REIT

For illustrative purposes only, set out below is the unaudited pro forma balance sheets of the REIT as at 7 December 2005, the date of establishment of GZI Real Estate Investment Trust (“GZI REIT”), to show the effect of the acquisition of the Partat Investment Limited, Moon King Limited, Full Estates Investment Limited and Keen Ocean Limited (the “BVI Companies”) by GZI REIT (the “Acquisition”) and the settlement of the consideration of the Acquisition by the offering of units of GZI REIT and the drawdown of the loans of US$165,000,000 on the consolidated balance sheet of GZI REIT and King Profit Holdings Limited (which is in the process of changing its name to GZI REIT (Holdings) 2005 Company Limited), a wholly owned subsidiary of GZI REIT (the “Holdco”) (collectively referred to as the “REIT”), as if they had taken place on 7 December 2005.

The pro forma balance sheets have been prepared for illustrative purposes only and because of their nature, they may not give a true picture of the financial position of the REIT following the acquisition of the BVI Companies, offering of units and the drawdown of the loans. The offer price represents the Hong Kong dollar per unit of GZI REIT at which the Units are to be issued and allotted pursuant to the offering (the “Offer Price”). Pursuant to the agreement between the JGCs, GZI and the Manager, the Offer Price is not expected to be more than HK$3.075 (the “Maximum Offer Price”), and is not less than HK$2.85 (the “Minimum Offer Price”). Accordingly, two unaudited pro forma balance sheets have been prepared based on the Maximum and the Minimum Offer Price.

III-1 APPENDIX III UNAUDITED PRO FORMA BALANCE SHEETS OF THE REIT

The following unaudited pro forma balance sheets of the REIT are based on the unaudited consolidated balance sheet of GZI REIT and the Holdco and as adjusted as described below:

A. Unaudited Pro Forma Balance Sheet of the REIT (Based on Maximum Offer Price of HK$3.075)

Pro forma adjustments Acquisition The REIT of the BVI as at Companies as Pro forma 7 December at 31 October Other balance of 2005 2005 adjustments the REIT (Unaudited) (Audited) (Unaudited) Notes (Unaudited) (Note 1) (Note 2) HK$’000 HK$’000 HK$’000 HK$’000

Non-current assets Property, plant and equipment — 3,453 3,453 Investment properties — 4,005,000 4,005,000 Goodwill ——77,322 (4)(v) 77,322 Deferred assets — 3,031 3,031

— 4,011,484 4,088,806 ------

Current assets Trade receivables — 1,586 1,586 Prepayments, deposits and other receivables — 1,110 1,110 Cash and cash equivalents — 12,653 47,146 (3)(i) 88,585 1,792,725 (4)(i) 1,287,000 (4)(ii) (77,158) (4)(iii) (21,599) (4)(iv) (2,952,182) (4)(v)

— 15,349 91,281 ------

III-2 APPENDIX III UNAUDITED PRO FORMA BALANCE SHEETS OF THE REIT

Pro forma adjustments Acquisition The REIT of the BVI as at Companies as Pro forma 7 December at 31 October Other balance of 2005 2005 adjustments the REIT (Unaudited) (Audited) (Note 1) (Note 2) (Unaudited) Notes (Unaudited) HK$’000 HK$’000 HK$’000 HK$’000

Current liabilities Rental deposits, accruals and other payables — 45,440 2,086 (4)(v) 47,526 Due to fellow subsidiaries — 994,267 (994,267) (3)(ii) — Due to GZI ——(2,876,946) (3)(iii) — (75,236) (4)(v) 2,952,182 (4)(v)

— 1,039,707 47,526 ------Net current (liabilities)/ assets — (1,024,358) 43,755 ------Total assets less current liabilities — 2,987,126 4,132,561 ------Non-current liabilities Rental deposits, non-current portion — 14,359 14,359 Bank borrowings ——1,287,000 (4)(ii) 1,265,401 (21,599) (4)(iv)

— 14,359 1,279,760 ------Net assets — 2,972,767 2,852,801

Equity Issued Capital ——1,137,234 (3)(iii) 2,852,801 1,792,725 (4)(i) (77,158) (4)(iii) Shareholder’s contribution — 2,956,637 47,146 (3)(i) — 994,267 (3)(ii) 16,130 (3)(iii) (4,014,180) (3)(iii)

Retained earnings — 16,130 (16,130) (3)(iii) —

— 2,972,767 2,852,801

III-3 APPENDIX III UNAUDITED PRO FORMA BALANCE SHEETS OF THE REIT

B. Unaudited Pro Forma Balance Sheet of the REIT (Based on Minimum Offer Price of HK$2.85)

Non-current assets Property, plant and equipment — 3,453 3,453 Investment properties — 4,005,000 4,005,000 Deferred assets — 3,031 3,031

— 4,011,484 4,011,484 ------Current assets Trade receivables — 1,586 1,586 Prepayment, deposits and other receivables — 1,110 1,110 Cash and cash equivalents — 12,653 47,146 (3)(i) 88,585 1,661,550 (4)(i) 1,287,000 (4)(ii) (73,879) (4)(iii) (21,599) (4)(iv) (2,824,286) (4)(v)

— 15,349 91,281 ------

III-4 APPENDIX III UNAUDITED PRO FORMA BALANCE SHEETS OF THE REIT

— 1,039,707 47,526 ------Net current (liabilities)/ assets — (1,024,358) 43,755 ------Total assets less current liabilities — 2,987,126 4,055,239 ------Non-current liabilities Rental deposits, non-current portion — 14,359 14,359 Bank borrowings ——1,287,000 (4)(ii) 1,265,401 (21,599) (4)(iv)

— 14,359 1,279,760 ------Net assets — 2,972,767 2,775,479 Equity Issued Capital ——1,137,234 (3)(iii) 2,724,905 1,661,550 (4)(i) (73,879) (4)(iii)

Shareholder’s contribution — 2,956,637 47,146 (3)(i) — 994,267 (3)(ii) 16,130 (3)(iii) (4,014,180) (3)(iii)

Retained earnings — 16,130 (16,130) (3)(iii) 50,574 50,574 (4)(v)

— 2,972,767 2,775,479

III-5 APPENDIX III UNAUDITED PRO FORMA BALANCE SHEETS OF THE REIT

Notes to the unaudited pro forma balance sheets:

(1) The balances are extracted from the unaudited consolidated balance sheet of the REIT as at 7 December 2005, the date of establishment of GZI REIT.

(2) The balances are extracted from the audited combined balance sheet of the BVI Companies as at 31 October 2005 as set out in Appendix II of the offering circular of GZI REIT.

The identifiable assets and liabilities of the BVI Companies to be acquired by the REIT will be accounted for in the consolidated financial statements of the REIT at fair value under the purchase method of accounting. Given the short time gap between 31 October 2005, the date of audited combined balance sheets of the BVI Companies and 7 December 2005, the date of establishment of GZI REIT, and there was no material change in operations of the BVI Companies and the related market conditions during the intervening period, the Directors of the Manager consider the net book value of the identifiable assets and liabilities as at 31 October 2005 approximates their fair value as at 7 December 2005, the date of establishment of GZI REIT.

Since the fair value of the units of GZI REIT and the actual payment date of the purchase consideration may be different from the assumptions used in the preparation of the unaudited pro forma consolidated balance sheets presented above, the actual financial position arising from the Acquisition may be different from the financial position shown in this Appendix.

(3) Pursuant to the Reorganisation Deed entered into by Holdco, GZI REIT Asset Management Limited (the “Manager”) and GZI on 7 December 2005, Holdco will acquire the equity interests in the BVI Companies (the “Acquisition”)as at the date of the completion of the Acquisition and the Holdco will procure the Manager to issue (i) a promissory note of HK$2,876,945,940; and (ii) 417,000,000 units of GZI REIT of HK$2.72718 each, amounting to HK$1,137,234,060, as the initial consideration of the Acquisition.

The adjustments reflect the Acquisition by Holdco and issuance of units to GZI:

(i) Additional cash of HK$47,146,000 will be injected by GZI to the BVI Companies subsequent to 31 October 2005 as part of the Acquisition (the “Additional Cash Contribution”).

(ii) This represents the release of amounts due to Subsidiaries of GZI in the combined financial statements of the BVI Companies as at 31 October 2005 by the Subsidiaries of GZI pursuant to the Deed of Release included in the Reorganisation Deed.

(iii) The initial consideration of the Acquisition pursuant to the Reorganisation Deed is HK$4,014,180,000, which is calculated based on the combined net asset value of the BVI Companies as at 31 October 2005 of HK$2,972,767,000 plus amounts due to fellow subsidiaries as at 31 October 2005 of HK$994,267,000 as well as HK$47,146,000 to be injected by GZI into the BVI Companies as stated in note 3(i) above, which will be satisfied by the issuance of 417,000,000 units of GZI REIT of HK$2.72718 each and of promissory note of HK$2,876,945,940. At the same time, the pre-acquisition reserves (including shareholders’ contribution and retained earnings) of the BVI Companies will be eliminated.

(4) The adjustments represent issuance of units to the public, drawdown of the loan facility and settlement of promissory note:

(i) Offering of 583,000,000 units of HK$3.075/HK$2.850 to the public.

Based on Maximum Based on Minimum Offer Price of HK$3.075 Offer Price of HK$2.850

Offer of units to the public HK$1,792,725,000 HK$1,661,550,000

III-6 APPENDIX III UNAUDITED PRO FORMA BALANCE SHEETS OF THE REIT

(ii) Estimated drawdown of a loan facility by the BVI Companies of US$165,000,000 (equivalent to approximately HK$1,287,000,000);

(iii) Payment of the underwriting fees and other listing expenses. No account has been taken of the unit which may fall to be issued upon the exercise of Over-allocation Option.

Based on Maximum Based on Minimum Offer Price of HK$3.075 Offer Price of HK$2.850

Underwriting fees and other listing expenses HK$77,158,000 HK$73,879,000

(iv) Payment of debt related expenses of HK$21,599,000.

(v) Pursuant to the Reorganisation Deed, the final consideration of the Acquisition will be adjusted according to the terms as stated in the Reorganisation Deed, namely the proceeds from the issuance of units to the public, the underwriting fees and other listing expenses and an amount of HK$26,700,000 retained for proposed renovation works at certain units of White Horse Building and the rental income attributable to Partat Investment Limited from 21 December 2005, the date of listing, to 31 December 2005 (both dates inclusive) of HK$2,085,600 (“White Horse Adjustment”). If the final consideration exceeds the initial consideration of HK$4,014,180,000, then Holdco will pay GZI the excess by adjusting the settlement amount of the promisory note which will be recognised as goodwill in the consolidated balance sheet of the REIT (not taking into account White Horse Adjustment of HK$2,085,600 as this amount will be recognised as deferred income of the REIT); if the final consideration is less than the initial consideration of HK$4,014,180,000, then GZI will pay Holdco the shortfall by adjusting the settlement amount of the promisory note which will be recognised immediately in the consolidated income statement of the REIT (not taking into account White Horse Adjustment of HK$2,085,600 as this amount will be recognised as deferred income of the REIT). The pro forma adjustments based on the Maximum Offer Price and the Minimum Offer Price are as follows:

Based on Maximum Based on Minimum Offer Price of HK$3.075 Offer Price of HK$2.850

Adjustment amounts — Excess HK$75,236,000 — Adjustment amounts — Shortfall — HK$52,660,000

Settlement of promissory note after setting off the adjustment amount as stated above against the principal amount of the promissory note of HK$2,876,945,940.

Based on Maximum Based on Minimum Offer Price of HK$3.075 Offer Price of HK$2.850

Settlement of promissory note HK$2,952,182,000 HK$2,824,286,000

Since the fair values of the assets and liabilities of the BVI Companies as at the date of the completion of the Acquisition may be different from their fair values used in the preparation of the unaudited pro forma balance sheet presented above, the actual excess of the net assets of the BVI Companies over the purchase consideration, or goodwill arising from the Acquisition, if any, may be different from the estimated amount shown in this Appendix.

III-7 APPENDIX III UNAUDITED PRO FORMA BALANCE SHEETS OF THE REIT

The following is the text of a report received from the reporting accountants, PricewaterhouseCoopers, Certified Public Accountants, Hong Kong for the purpose of incorporation in this Offering Circular.

12 December 2005

The Board of Directors GZI REIT Asset Management Limited 2102, Yue Xiu Building, 160-174 Lockhart Road, Wanchai Hong Kong

Dear Sirs

We report on the unaudited pro forma balance sheets of GZI Real Estate Investment Trust (“GZI REIT”) and its subsidiary (collectively referred to as the “REIT”) set out on pages III-1 to III-7 under the heading of “Unaudited pro forma balance sheets of the REIT” set out in Appendix III of GZI REIT’s offering circular dated 12 December 2005 in connection with acquisition of Partat Investment Limited, Moon King Limited, Full Estates Investment Limited and Keen Ocean Limited and the offering of the units of GZI REIT on the Main Board of The Stock Exchange of Hong Kong Limited and the drawdown of the loan of US$165,000,000 by the REIT. The unaudited pro forma balance sheets have been prepared by the Directors of GZI REIT Asset Management Limited (the “Manager”), for illustrative purposes only, to provide information about how the acquisition of the BVI Companies, the offering of units and the drawdown of the loan might have affected the balance sheet of the REIT as at 7 December 2005, the date of establishment of GZI REIT.

Responsibilities

It is the responsibility solely of the Directors of the Manager to prepare the unaudited pro forma balance sheets of the REIT.

It is our responsibility to form an opinion on the unaudited pro forma balance sheets and to report our opinion to you. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the unaudited pro forma balance sheets beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

III-8 APPENDIX III UNAUDITED PRO FORMA BALANCE SHEETS OF THE REIT

Basis of opinion

We conducted our work with reference to the Statements of Investment Circular Reporting Standards and Bulletin 1998/8 “Reporting on pro forma financial information pursuant to the Listing Rules” issued by the Auditing Practices Board in the United Kingdom, where applicable. Our work, which involved no independent examination of any of the underlying financial information, consisted primarily of comparing the unadjusted financial information with the source documents, considering the evidence supporting the adjustments and discussing the unaudited pro forma balance sheets with the Directors of the Manager.

Our work does not constitute an audit or review in accordance with Statements of Auditing Standards issued by the Hong Kong Institute of Certified Public Accountants, and accordingly, we do not express any such assurance on the unaudited pro forma balance sheets.

The unaudited pro forma balance sheets have been prepared on the bases set out on pages III-1 to III-7 of Appendix III to the circular for illustrative purposes only and, because of their nature, they may not be indicative of the financial position of the REIT as at 7 December 2005, or at any future date.

Opinion

In our opinion:

(a) the unaudited pro forma balance sheets have been properly compiled by the Directors of the Manager on the basis stated;

(b) such basis is consistent with the accounting policies of the REIT, and

(i) clearly shown and explained;

(ii) directly attributable to the transaction concerned and not relating to future events or decisions; and

(iii) factually supportable.

Yours faithfully,

PricewaterhouseCoopers Certified Public Accountants Hong Kong

III-9 APPENDIX IV PROFIT FORECAST

PART A Report of the Manager

The following is the text of the report from GZI REIT Asset Management Limited, the manager of GZI REIT, in relation to the forecast consolidated net profit after tax of GZI REIT (reflecting the consolidated net profit after tax of GZI REIT, Holdco and the BVI Companies) for the period from 21 December 2005 to 31 December 2006 as set out in the section headed “Profit Forecast” in this Offering Circular.

12 December 2005

Dear Sirs

The Manager’s forecast of the consolidated net profit after tax of GZI REIT for the period from 21 December 2005 to 31 December 2006, including the principal bases and assumptions on which such profit forecast is made, is set out in the section headed “Profit Forecast” in this Offering Circular. The Manager considers these bases and assumptions to be appropriate and reasonable at the time of the issue of this Offering Circular and it has satisfied itself that the forecast has been stated after due and careful inquiry. Investors should carefully consider these bases and assumptions when making an assessment of the future performance of GZI REIT based on the profit forecast presented in the section headed “Profit Forecast” in this Offering Circular.

Yours faithfully GZI REIT Asset Management Limited

IV-1 APPENDIX IV PROFIT FORECAST

The following is the text of the letter received from PricewaterhouseCoopers, the reporting accountants of GZI REIT in relation to the forecast consolidated net profit after tax of GZI REIT (reflecting the consolidated net profit after tax of GZI REIT, Holdco and the BVI Companies) for the period from 21 December 2005 to 31 December 2005 and for the year ending 31 December 2006 as set out in the section headed “Profit Forecast” in this Offering Circular.

Part B Letter from PricewaterhouseCoopers

12 December 2005

The Directors GZI REIT Asset Management Limited

The Hongkong and Shanghai Banking Corporation Limited Citigroup Global Markets Asia Limited DBS Bank Ltd.

Dear Sirs

We have reviewed the calculations of and accounting policies adopted in arriving at the forecast of the consolidated net profit after tax of GZI Real Estate Investment Trust (“GZI REIT”) and its controlled entities for the period from 21 December 2005 to 31 December 2005 and for the year ending 31 December 2006 (the “Profit Forecast”) as set out in the section headed “Profit Forecast” in the offering circular of GZI REIT dated 12 December 2005 (the “Offering Circular”).

We conducted our work in accordance with the Auditing Guideline 3.341 on “Accountants’ report on profit forecasts” issued by the Hong Kong Institute of Certified Public Accountants.

The Profit Forecast, for which GZI REIT Asset Management Limited (the “Manager”) are solely responsible, has been prepared by the Manager based on a forecast of the consolidated results of GZI REIT and its controlled entities (hereinafter collectively referred to as “the Group”) for the period from 21 December 2005 to 31 December 2005 and for the year ending 31 December 2006.

IV-2 APPENDIX IV PROFIT FORECAST

In our opinion, the Profit Forecast, so far as the calculations and accounting policies are concerned, has been properly compiled in accordance with the bases and assumptions made by the Manager as set out under the subsection headed “Profit Forecast — Bases and Assumptions” of the Offering Circular, and is presented on a basis consistent in all material respects with the accounting policies of the BVI Companies, as set out in Appendix II to the Offering Circular. However, we note that there is an omission of an assumption which is set out in the following paragraph.

The Manager has stated in the section headed “Profit Forecast” in the Offering Circular that in preparing the Profit Forecast for the period from 21 December 2005 to 31 December 2005 and for the year ending 31 December 2006, the Manager has not included the impact of the movements in future valuations of the Properties as required by Hong Kong Financial Reporting Standards (“HKFRS”) since the Manager does not believe there is any reasonable basis to make such forecast valuations.

We note the omission of this assumption in preparing the Profit Forecast since any adjustment on revaluation of the Properties would need to be reflected in the income statement in accordance with HKFRS, which will be used in preparing the Audited Financial Statements of the Group for the period from 21 December 2005 to 31 December 2005 and for the year ending 31 December 2006. Any movements on the revaluation of the Properties would have the effect of increasing or reducing the consolidated net profit after tax for the period from 21 December 2005 to 31 December 2005 and for the year ending 31 December 2006.

Yours faithfully,

PricewaterhouseCoopers Certified Public Accountants Hong Kong

IV-3 APPENDIX IV PROFIT FORECAST

PART C Report of the Listing Agent

12 December 2005

The Directors GZI REIT Asset Mangement Limited

Dear Sirs

GZI Real Estate Investment Trust — Profit Forecast

We refer to the proposed initial public offering (the Offering) of units in a real estate investment trust (namely, GZI Real Estate Investment Trust (GZI REIT)), the units of which are proposed to be listed on The Stock Exchange of Hong Kong Limited. In particular, we refer to the forecast of the consolidated net profit after tax of GZI REIT for the period from 21 December 2005 to 31 December 2006 (the Profit Forecast), as contained in the offering circular dated 12 December 2005 in relation to the Offering.

We have discussed the bases and assumptions upon which the Profit Forecast (as set out in the section headed “Profit Forecast” in the offering circular in connection with the Offering) has been made with the directors of GZI REIT Asset Management Limited (the Manager) and have considered the letter dated 12 December 2005 from PricewaterhouseCoopers addressed to the directors of the Manager and ourselves regarding the accounting policies and calculations upon which the Profit Forecast has been made.

On the basis of the information comprising the Profit Forecast and on the basis of the accounting policies of GZI REIT and calculations adopted by the Manager, and reviewed by PricewaterhouseCoopers, we are of the opinion that the Profit Forecast, for which the directors of the Manager are solely responsible, has been made after due and careful enquiry.

Yours faithfully For and on behalf of The Hongkong and Shanghai Banking Corporation Limited

Paul WT Lai Managing Director

IV-4 APPENDIX V LETTER FROM THE INDEPENDENT PROPERTY VALUER IN RELATION TO RENTAL INCOME

12 December 2005

GZI REIT Asset Management Limited (the “Manager”) 2102, Yue Xiu Building 160-174 Lockhart Road Wanchai, Hong Kong

HSBC Institutional Trust Services (Asia) Limited (“Trustee”) 1 Queen’s Road Central Central, Hong Kong

The Hongkong and Shanghai Banking Corporation Limited (“HSBC”) 1 Queen’s Road Central Central, Hong Kong

Citigroup Global Markets Asia Limited (“Citigroup”) 50th Floor, Citibank Tower Citibank Plaza, 3 Garden Road Central, Hong Kong

DBS Bank Ltd. (together with HSBC and Citigroup, the “Joint Global Coordinators”) 16th Floor, Man Yee Building 68 Des Voeux Road Central Central, Hong Kong

V-1 APPENDIX V LETTER FROM THE INDEPENDENT PROPERTY VALUER IN RELATION TO RENTAL INCOME

Dear Sirs,

Rental Income Forecast of various units in White Horse Building, Fortune Plaza, City Development Plaza and Victory Plaza, Guangzhou, Guangdong, the People’s Republic of China (collectively, “GZI REIT Properties”) for GZI Real Estate Investment Trust (“GZI REIT”)

As required by Appendix F (Preparation and Presentation of Forecast) of the Code on Real Estate Investment Trusts issued by the Securities and Futures Commission in August 2003 and amended in June 2005, we have reviewed the forecasts of rental income for GZI REIT Properties and the related assumptions used by the Manager for the purpose of the profit forecast (the “Profit Forecast”) for the period from 21 December 2005 to 31 December 2005 and the period from 1 January 2006 to 31 December 2006 as set out under the section headed “Profit Forecast” in the offering circular issued in connection with the proposed global offering of units in GZI REIT.

For the purposes of our review, we have examined:

• the assessments and calculations of the Manager in respect of the rental income forecasts; and

• the assumptions adopted by the Manager in making such assessments and calculations.

The Directors of the Manager are solely responsible for the Profit Forecast. We are of the opinion that the assumptions used in the rental income forecasts for the Profit Forecast are reasonable and the rental income forecasts have been compiled in accordance with the assumptions made.

Yours faithfully, For and on behalf of Colliers International (Hong Kong) Ltd David Faulkner BSc (Hon) FRICS FHKIS RPS(GP) MAE Regional Director Valuation and Advisory

Notes: David Faulkner is a Chartered Surveyor who has 17 years experience in the valuation of properties in the PRC and 21 years of property valuation experience in Hong Kong and the Asia-Pacific region.

V-2 APPENDIX VI INDEPENDENT PROPERTY VALUATION REPORT

App B B 2(q) B 31(c) RC 8.4(a)

12 December 2005

GZI REIT Asset Management Limited (the “Manager”) 2102, Yue Xiu Building 160-174 Lockhart Road Wanchai, Hong Kong

HSBC Institutional Trust Services (Asia) Limited (“Trustee”) 1 Queen’s Road Central Central, Hong Kong

The Hongkong and Shanghai Banking Corporation Limited (“HSBC”) 1 Queen’s Road Central Central, Hong Kong

Citigroup Global Markets Asia Limited (“Citigroup”) 50th Floor, Citibank Tower Citibank Plaza, 3 Garden Road Central, Hong Kong

DBS Bank Ltd. (together with HSBC and Citigroup, the “Joint Global Coordinators”) 16th Floor, Man Yee Building 68 Des Voeux Road Central Central, Hong Kong

VI-1 APPENDIX VI INDEPENDENT PROPERTY VALUATION REPORT

Dear Sirs,

Re: Valuations of various units of the property (the “Subject Properties”) to be acquired by Ch. 6.8(c)(i) GZI Real Estate Investment Trust (“GZI REIT”) located in White Horse Building, Fortune Plaza, City Development Plaza and Victory Plaza, Guangzhou, Guangdong, The People’s Republic of China (the “PRC”)

With reference to the instruction of the Manager on behalf of GZI REIT, we have prepared a report setting out our opinion of the value of the Subject Properties as detailed in Appendix VI-A, VI-B, VI-C and VI-D of the offering circular issued in connection with the proposed global offering of units in GZI REIT (the “Global Offering”).

We confirm that our valuation report is prepared on a fair and unbiased basis and we have carried out external and internal inspections, made relevant enquiries and obtained such further information as we consider necessary to allow us to provide you with our opinion of values of the Subject Properties as at 30 September 2005 (the “date of valuation”).

This report is for the use of the above addressee and the potential subscribers of units in GZI REIT and for the purposes indicated and no liability to any third party can be accepted for the whole or any part of the contents of the document. Neither the whole nor any part of this valuation report nor any reference thereto may be included in any other published documents, circular or statement, nor published in any way whatsoever without prior written approval of Colliers International (Hong Kong) Ltd as to the form and context in which it may appear.

We hereby confirm that:

i) We have no present or prospective interest in the Subject Properties and are not a related corporation of nor have a relationship with the Manager, the Trustee, the Joint Global Coordinators or any other party or parties whom GZI REIT is contracting with;

ii) We are authorised to practice as a valuer and have the necessary expertise and experience in valuing similar types of properties;

iii) We have not previously valued the Subject Properties;

iv) The valuations have been prepared on fair and unbiased basis; and

v) The valuer is acting as an Independent Valuer as defined in the HKIS Valuation Standards on Properties (First Edition 2005) published by the Hong Kong Institute of Surveyors (“HKIS”).

VI-2 APPENDIX VI INDEPENDENT PROPERTY VALUATION REPORT

We hereby certify that the valuer undertaking these valuations is authorised to practice as a valuer.

Yours faithfully, For and on behalf of Colliers International (Hong Kong) Ltd David Faulkner BSc (Hons) FRICS FHKIS RPS (GP) MAE Regional Director Valuation and Advisory

Note: David Faulkner is a Chartered Surveyor who has 17 years experience in the valuation of properties in the PRC and 21 years of property valuation experience in Hong Kong and the Asia Pacific region.

VI-3 APPENDIX VI INDEPENDENT PROPERTY VALUATION REPORT

1. EXECUTIVE SUMMARY

1.1 Qualification of the Valuers PN 25 (a)

The valuations have been prepared by David Faulkner who is a Fellow of the Royal Institution of Chartered Surveyors, a Fellow of the Hong Kong Institute of Surveyors and a Registered Professional Surveyor under the Surveyors Registration Ordinance (Cap. 417) in Hong Kong Special Administrative Region (“Hong Kong”).

He is suitably qualified to carry out the valuation and has over 25 years experience in the valuation of properties of this magnitude and nature, and over 17 years experience in the PRC.

He has been assisted by Patrick Lee and Thomas Lam who are Members of the Royal Institution of Chartered Surveyors, Members of the Hong Kong Institute of Surveyors and Registered Professional Surveyors under the Surveyors Registration Ordinance (Cap. 417).

We have no pecuniary interest that could reasonably be regarded as being capable of affecting our ability to give a fair and an unbiased opinion of the values or that could conflict with a proper valuation of the Subject Properties.

1.2 Information Sources

All investigations have been conducted independently and without influence from any third parties in any way. The information provided in this report has been obtained from GZI REIT Asset Management Limited (the “Manager”), Z & T Law Firm (the “PRC legal adviser”), relevant bureaux, the People’s Government of Guangzhou and other public sources.

1.3 Instructions

We accepted instructions to conduct valuations of the Subject Properties as at the date of valuation from the Manager on behalf of GZI REIT for the Global Offering.

Our valuations have been carried out in accordance with Chapter 6 of the Code on Real Estate Investment Trusts (“REITs”) issued by the Securities and Futures Commission (“SFC”) in August 2003 and amended in June 2005 and the HKIS Valuation Standards on Properties (First Edition 2005) published by the HKIS. We have also made reference to the International Valuation Standards (7th Edition) published by the International Valuation Standards Committee in 2005.

Inspections of the Subject Properties were carried out in June, July and September 2005. We confirm that we have made relevant enquiries and obtained such information as we consider necessary to conduct the valuations.

VI-4 APPENDIX VI INDEPENDENT PROPERTY VALUATION REPORT

2. BASIS OF VALUATION

Market Value

The valuations have been carried out in accordance with the HKIS Valuation Standards on Properties (First Edition 2005) published by the HKIS.

Our valuations are made on the basis of Market Value which we would define as intended to mean “the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion”.

We have valued the Subject Properties in their existing state based on the opinion of the PRC legal adviser, Z & T Law Firm, dated 7 December 2005 (the “PRC Legal Opinion”) that the Subject Properties can be freely transferred, mortgaged and let in the market and all proper title certificates have been obtained and land premiums have been fully settled.

3. VALUATION RATIONALE

In our valuations, we have valued the Subject Properties for which the areas are based on the proper title documents and the PRC Legal Opinion. In arriving at our opinion of values, we have considered prevailing market conditions, especially those related to the office, wholesale and retail property market sectors. We have also looked at lease reversionary potential such as future rent renewal rate, lease cycle duration and lease expiry profile. The primary valuation method adopted to arrive at our opinion of value is the Income Capitalisation Approach including Discounted Cash Flow Analysis. We have also cross-checked the values with available market comparables by the Sales Comparison Approach.

The Income Capitalisation Approach reflects the specific characteristics of the Subject Properties such as lease expiry profile, existing tenant covenants and level of passing and reversionary rents. We therefore consider that this method is particularly relevant for REIT based purchasers.

The Discounted Cash Flow Analysis reflects additional property specific characteristics of the Subject Properties such as leases duration and potential rental income growth, renewed rates, vacancy rates and all outgoings.

In relation to the Sales Comparison Approach, we have obtained market comparables to undertake our calculations and consider that this approach reflects the market values of the Subject Properties. In valuing the Subject Properties, this approach has limitations in reflecting specific factors such as lease expiry profile, quality of existing tenant covenants and vacancy rate. In this approach, all these factors must be reflected in the unit rate per square metre.

In valuing the Subject Properties, we have used an average of the values derived using the Income Capitalisation Approach and the Discounted Cash Flow Analysis. The Sales Comparison Approach has been used as a check.

VI-5 APPENDIX VI INDEPENDENT PROPERTY VALUATION REPORT

3.1 Income Capitalisation Approach

Income Capitalisation Approach estimates the values of the properties on an open market basis by capitalising net rental income on a fully leased basis having regard to the current passing rental income from existing tenancies and potential future reversionary income at the market level. In calculating the net rental income, no deduction has been made from the net passing rental income which is exclusive of property management fee.

In this valuation method, the total rental income is divided into a current passing rental income over the existing lease term (the term income) and a potential future reversionary rental income over the residual land use term (the reversionary income). The term value involves the capitalisation of the current passing rental income over the existing lease term. The reversionary value is taken to be current market rental income upon the expiry of the lease over the residual land use rights term and is capitalised on a fully leased basis. It is then discounted back to the date of valuation.

In this approach, we have considered the term yield and reversionary yield. The term yield is used for capitalisation of the current passing rental income as at the date of valuation whilst the reversionary yield is used to convert reversionary rental income.

3.2 Discounted Cash Flow Analysis

This is defined in the International Valuation Standards (7th Edition) as a financial modeling technique based on explicit assumptions regarding the prospective cash flow to properties. This analysis involves the projection of a series of periodic cash flows to an operating property. To this projected cash flow series, an appropriate discount rate is applied to establish an indication of the present value of the income stream associated with the properties. In the operating real properties, periodic cash flow is typically estimated as gross income less vacancy and operating expenses and other outgoings. The series of periodic net operating incomes, along with an estimate of the terminal value, anticipated at the end of the projection period, is then discounted at the discount rate, being a cost of capital or a rate of return used to convert a monetary sum, payable or receivable in the future, into present value.

We have undertaken a discounted cash flow analysis on a monthly basis over a 10-year investment horizon. The net income in the Year 11 is capitalised at an appropriate yield for the remainder of the ownership term. This analysis allows an investor or owner to make an assessment of the long term return that is likely to be derived from a property with a combination of both rental income and capital growth over an assumed investment horizon. This analysis is generally used in valuing income producing properties.

In our calculation, we have not deducted any acquisition costs and disposal costs. We are of the opinion that these issues would be taken into account by a prospective purchaser.

VI-6 APPENDIX VI INDEPENDENT PROPERTY VALUATION REPORT

In our assessment, we have assumed the Subject Properties are sold at the end of year 10 at a price based upon the forecast year 11 income, and capitalised by the terminal capitalisation rate for the remaining property lease term. The analysis is based on the assumption of a cash purchase. No allowance for interest and other funding costs have been incurred.

3.3 Sales Comparison Approach

This approach estimates the values of the properties by comparing recent sales of similar interests in the building or buildings located in the surrounding area.

By analysing sales which qualify as ‘arms-length’ transactions, between willing buyers and sellers, adjustments can be made for size, location, time, amenities and other relevant factors when comparing such sales against the properties. This approach is commonly used to value standard properties when reliable sales evidence is available.

4. TITLE PARTICULARS

4.1 Title Investigation

We have been provided with extracts from title documents relating to the Subject Properties. We have not, however, searched the original documents to verify ownership or to verify the existence of any lease amendments which do not appear on the copies handed to us. We have relied on the PRC Legal Opinion, concerning the validity of the titles to the Subject Properties held by Full Estates Investment Limited, Partat Investment Limited, Moon King Limited and Keen Ocean Limited in the PRC.

4.2 The PRC Legal Opinion Ch. 6.8 (c)(xv) (xvi) In our valuations, we have relied on the PRC Legal Opinion on the validity of the Subject Properties’ title.

We have valued the Subject Properties in their existing state based on the PRC Legal Opinion that the Subject Properties can be freely transferred, mortgaged and let in the market and all proper title certificates have been obtained and land premiums have been fully settled.

No allowance has been made in our report for any charges, mortgages or amounts owing on the Subject Properties. Unless otherwise stated, it is assumed that the Subject Properties are free from encumbrances, restrictions and outgoings of an onerous nature, which could affect their values.

VI-7 APPENDIX VI INDEPENDENT PROPERTY VALUATION REPORT

5. EXCHANGE RATE

Unless otherwise stated, all monetary amounts stated in this report are in Hong Kong Dollars. The exchange rate used in valuing the Subject Properties as at the date of valuation was HK$1 = RMB1.043. There has been no significant fluctuation in exchange rate between the date of valuation and the date of this letter.

6. CAVEATS AND ASSUMPTIONS

The valuations are subject to the following caveats and assumptions.

(a) We have inspected the exterior and interior of the Subject Properties. No tests were carried out on any of the services. However, reference can be made to a separate Building Condition Survey Report.

(b) Based on the PRC Legal Opinion, we have assumed that the Subject Properties are free from and clear of any and all charges, liens and encumbrances of an onerous nature likely to affect their values, whether existing or otherwise, unless otherwise stated. We assume no responsibility for matters legal in nature nor do we render any opinion as to the title which is assumed to be good and marketable. We are not aware of any easements or rights of way affecting the Subject Properties and our valuation assumes that none exists.

(c) We have assumed that the Subject Properties have been constructed, occupied and used in full compliance with, and without contravention of, all ordinances, except only where otherwise stated. We have further assumed that, for any use of the Subject Properties upon which this report is based, any and all required licences, permits, certificates, and authorisations have been obtained, except only where otherwise stated.

(d) Our valuations have been made on the assumption that the owners sell the Subject Properties on the open market without the benefit of deferred terms contracts, leasebacks, joint ventures, management agreements or any similar arrangements which would serve to affect the values of Subject Properties. In addition, no forced sale situation in any manner is assumed in our valuations.

(e) No allowance has been made in our valuations for any charges, mortgages or amounts owing on the Subject Properties nor for any expenses or taxation which may be incurred in effecting a sale. Unless otherwise stated, it is assumed that the Subject Properties are free from encumbrances including material building defects, restrictions and outgoings of an onerous nature which could affect their values.

VI-8 APPENDIX VI INDEPENDENT PROPERTY VALUATION REPORT

(f) We have relied to a very considerable extent on the information provided by the relevant parties:

— property information, including rent roll, floor plans, property particulars, etc. by the Manager; and

— the PRC legal adviser.

(g) We have not carried out detailed site measurements to verify the correctness of the site and floor areas in respect of the Subject Properties but have assumed that the site and floor areas shown on the documents and official site plans handed to us are correct. We have measured a sample of units from the plans on both the commercial podium floors and the office floors to confirm the correctness of this analysis. Based on our experience of valuation of similar properties in the PRC, we consider the assumptions so made to be reasonable. All documents and contracts have been used as reference only and all dimensions, measurements and areas are approximations. No on-site measurement has been taken.

(h) We have had no reason to doubt the truth and accuracy of the information provided to us by the Manager and the PRC legal adviser. We have sought confirmation from the Manager that no material factors have been omitted from the information supplied. We take no responsibility for inaccurate data provided by the Manager and the PRC legal adviser and subsequent conclusions derived from such data and information.

(i) The study of possible alternative development options and the related economics are not within the scope of this report.

VI-9 APPENDIX VI-A INDEPENDENT PROPERTY VALUATION REPORT

Valuation of various units of the property (the “Subject Property”) to be acquired by GZI Real Estate Investment Trust (the “GZI REIT”) located in White Horse Building, Nos. 14, 16 and 18 Zhan Nan Road, Yue Xiu District, Guangzhou, Guangdong, the People’s Republic of China (the “PRC”)

1. SUMMARY OF THE SUBJECT PROPERTY Ch. 6.8 (c)(iv)

According to the PRC Legal Opinion, 9 Building Ownership Certificates have been issued in respect of the Subject Property. The details of the Subject Property are summarised as follows:

1. Current Registered : Partat Investment Limited Owner ( )

2. Type of Land Use : Granted Right

3. Town Plan Zoning : According to the State-owned Land Use Right Grant Contract dated 28th June, 2005, the zoning of the underlying land of White Horse Building is described as “commercial/office”.

4. Interest Valued : Leasehold interest of the Subject Property.

5. Property Description : The Subject Property forms a portion of a 10-storey wholesale garment shopping centre, including eight levels above ground, a lower ground level and a basement accommodating a car park. (See Section 3.5 for details)

6. Gross Floor Area : Total - 50,199.3 sq.m. (“GFA”) of the Subject Retail - 46,279.3 sq.m. Property Office - 3,920.0 sq.m.

Lower Ground Level - 1,121.7 sq.m. Level 1 - 7,667.0 sq.m. Level 2 - 7,199.8 sq.m. Level 3 - 7,684.9 sq.m. Level 4 - 7,695.6 sq.m. Level 5 - 7,466.4 sq.m. Level 6 - 7,443.9 sq.m. Level 7 - 2,003.5 sq.m. Level 8 - 1,916.5 sq.m.

Levels 1, 2, 3, 4, 5, 6, 7, 8 correspond to 2nd, 3rd, 4th, 5th, 6th, 7th, 8th and 9th storeys in White Horse Building respectively.

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7. Lease Term Lower Ground Level - 50 years from 7 June 2005 Level 1 - 40 years from 7 June 2005 Level 2 - 40 years from 7 June 2005 Level 3 - 40 years from 7 June 2005 Level 4 - 7,164.2 sq.m. - 40 years from 7 June 2005 Level 4 - 531.4 sq.m. - 50 years from 7 June 2005 Level 5 - 50 years from 7 June 2005 Level 6 - 50 years from 7 June 2005 Level 7 - 50 years from 7 June 2005 Level 8 - 50 years from 7 June 2005

8. Usage Lower Ground Level - Storage Level 1 - Commercial Level 2 - Commercial Level 3 - Commercial Level 4 - Commercial/Office Level 5 - Office Level 6 - Office Level 7 - Office Level 8 - Office

9. Internal Floor Area of : 48,100.6 sq.m. the Subject Property

10. Gross Rentable Area : 49,007.2 sq.m. of the Subject Property

11. Construction : 1990 with extension and renovation thereafter Completion Date of between 1995 and 1997 as well as between 1998 and White Horse Building 2000

12. Valuation Approach : Income Capitalisation Approach including Discounted Cash Flow Analysis, cross-checked by the Sales Comparison Approach

13. Date of Valuation : 30 September 2005

14. Market Value in : HK$2,541,500,000 existing state as at the date of valuation

15. Unit Value on Gross : HK$50,628 per sq.m. Floor Area

16. Net Passing Income : RMB117,055,044 per annum as at the Date of Valuation

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17. Fully Leased Net : RMB117,055,044 per annum Income as at the Date of Valuation

18. Estimated Current : RMB254,124,912 per annum Market Rental Income as at the Date of Valuation

19. Discount Rate :11% adopted for Discounted Cash Flow Analysis only

20. Exchange Rate as at : HK$1 = RMB1.043 the Date of Valuation

21. Term Yield : 8%

22. Reversionary Yield : 9.5%

23. Occupancy Rate as at : 100% the Date of Valuation

24. Vacancy Allowance : 1%

25. Market Comment : We consider the marketability of the Subject Property to be reasonable in view of its location and accessibility.

Note: The usage is based on the Building Ownership Certificates and the PRC Legal Opinion.

2. TITLE INVESTIGATION

According to the PRC Legal Opinion, there is a Gongan Building erected on the south side of White Horse Building with a gross floor area of 2,700 sq.m. There was an agreement signed on 7 February 1994 between Guangzhou City Construction & Development Group Co. Ltd. ( ) and Guangzhou City Gongan Bureau ( ). Guangzhou City Construction & Development Group Co. Ltd. was responsible for the design, obtaining approval and construction of the Gongan Building. Guangzhou City Gongan Bureau was responsible for paying the construction cost as well as land premium of RMB950,000 to Guangzhou City Construction & Development Group. Guangzhou City Gongan Bureau could use the Gongan Building for the residual land use rights term. The PRC legal adviser is of the opinion that the owner of the Subject Property does not have the right to use and the title ownership of Gongan Building but this will not affect Partat Investment Limited’s title to the Subject Property.

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3. THE SUBJECT PROPERTY

3.1 Situation, Locality and Zoning

White Horse Building, a 10-storey commercial wholesale centre for garment, including eight levels above ground, a lower ground level and a basement accommodating a car park, is located at No. 14, 16 and 18 Zhan Nan Road, Yue Xiu District, Guangzhou, Guangdong, the PRC. It is close to the Guangzhou Railway station and bus terminal.

The Subject Property is located in Yue Xiu District and its accessibility is considered to be good. The main garment wholesale area of Guangzhou is situated around Zhan Nan Road, Yue Xiu District. The area is very popular among wholesalers because of its location (close to the Guangzhou Railway Station and major expressways).

According to the State-owned Land Use Rights Grant Contract signed on 28th June, 2005 and the PRC Legal Opinion, the zoning of the underlying land of White Horse Building is described as “commercial/office”.

3.2 Surrounding Development and Environmental Issues

The Subject Property is located in Yue Xiu District. Developments in the area comprise mainly commercial buildings and retail shopping and wholesale centres, interspersed with some older medium-rise residential buildings.

The pedestrian traffic flow along that section of Zhannan Road West is heavy as it is opposite to the bus terminal and close to the Guangzhou Railway Station.

We have no knowledge of any environmental concerns or contamination of the subject site and surrounding sites. Due to the land registration system in the PRC, we cannot trace any information regarding to the previous development erected upon the subject site, therefore, we cannot comment on the likelihood of contamination and its effect on value nor ascertain the past use of the site.

3.3 Availability of and Access to Public Transport

General accessibility of White Horse Building is considered good as public transportation such as taxis and buses are available along Zhan Nan Road. Bus stops are located at 2 minutes walking distance from White Horse Building.

3.4 Car Accessibility and Road Frontage

White Horse Building is directly accessible from Zhan Nan Road. A pedestrian footbridge adjacent to the Subject Property allows access to the Guangzhou Railway Station. The Guangzhou Railway Station is also connected to No. 2 metro line.

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Travelling time to major areas of the City through driving:

Guangzhou Railway Station 2 minutes Baiyun International Airport 40 minutes Teem Plaza 20 minutes Guangzhou East Train Station 25 minutes

3.5 Description of the Development Ch. 6.8 (c)(iv)

White Horse Building, a 10-storey commercial wholesale centre for garment, including eight levels above ground, a lower ground level and a basement accommodating a car park, is located at No. 14, 16 and 18 Zhan Nan Road, Yue Xiu District, Guangzhou’s traditional wholesale business area. According to the information provided by the Manager, the development has a total gross floor area of 61,703.0 sq.m.

The area breakdown of White Horse Building is summarized as below:

Level Usage Gross Floor Area Ch. 6.8 (c)(iii) (sq.m.)

Basement 1 Carpark, Machinery Room 5,690.9 Lower Ground Level Storage 6,934.5 Level 1 Commercial 7,667.0 Level 2 Commercial 7,199.8 Level 3 Commercial 7,684.9 Level 4 Commercial/office 7,695.6 Level 5 Office 7,466.4 Level 6 Office 7,443.9 Level 7 Office 2,003.5 Level 8 Office 1,916.5

Total: 61,703.0

The site of the wholesale centre comprises a regular and level plot having its main frontage onto Zhan Nan Road. White Horse Building was first completed in about 1990 and then extended into two separate phases in between 1995 and 1997 as well as between 1998 and 2000.

General accessibility of White Horse Building is considered good as public transportation such as buses and taxis are available along Zhan Nan Road.

Car parking facilities are accommodated within basement level 1.

The layout and design of White Horse Building is reasonable in comparison with other wholesale centres in the locality.

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3.6 Portion of Interest to be Acquired by GZI REIT Ch. 6.8 (c)(iv)

GZI REIT is acquiring a portion of the development and the details of the interest to be acquired are listed below:

Gross Internal Ch. 6.8 (c)(iii) Level Usage Floor Area Floor Area (sq.m.) (sq.m.)

Lower Ground Level Storage 1,121.7 1,081.1 Level 1 Commercial 7,667.0 7,342.6 Level 2 Commercial 7,199.8 6,892.2 Level 3 Commercial 7,684.9 7,359.8 Level 4 Commercial/office 7,695.6 7,370.0 Level 5 Office 7,466.4 7,149.2 Level 6 Office 7,443.9 7,127.5 Level 7 Office 2,003.5 1,931.0 Level 8 Office 1,916.5 1,847.2

Total: 50,199.3 48,100.6

Note: The breakdown of the gross floor area and the usage is based on the Building Ownership Certificates and the PRC Legal Opinion.

Upon our site inspection, we noted that Levels 1 to 6 were occupied as retail shops, Levels 7 and 8 were occupied as warehouse and office respectively. As advised by the Manager, Lower Ground Level comprises mainly common area including staircases and storage area, which is regarded as non-lettable area.

As advised by the Manager, Level 7 and Level 8 will be converted into retail use commencing from May 2006 after renovation upon the expiry of the current tenancies.

3.7 Specification, Services and Finishes of the Development Ch. 6.8 (c)(iv)

White Horse Building is constructed of reinforced concrete with part glazed and part mosaic tiling to the exterior elevations and is decorated with marble or granite wall and floor tiles at the main lobby. Main services comprise electricity, water and telecommunications.

The building is subdivided into various units on all levels and is served by 8 passenger lifts and 2 cargo lifts serving Levels 1 to 6, 1 passenger lift and 1 cargo lift serving Levels 7 to 8, 2 pairs of escalators serving Levels 1 to 4 and 17 staircases serving Levels 1 to 8.

The standard of services and finishes within the development is considered to be reasonable, commensurating to other wholesale centres in the neighbourhood.

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The building is maintained in a reasonable condition commensurate to its age. The building is managed by Guangzhou White Horse Property Management Co. Ltd. and it is responsible for collection of all management fees from the tenants and dealing with the day to day operations and outgoings relevant to the development.

The fire safety measures include the installation of automatic sprinkler heads, smoke detectors, fire alarm system, fire extinguishers etc throughout the building. For further information on building condition, reference should be made to the Building Condition Survey Report.

3.8 Building Condition of the development

According to the Building Condition Survey Report, the building is maintained in a reasonable condition. White Horse Building and its vehicular access are generally in compliance with the record plans furnished by Guangzhou City Construction & Development Co. Ltd.

For the non-conformity items, some minor deviations such as missing air-conditioning plant room and existence of new small green house, were found by the building surveyor.

For further information of the building condition, reference should be made to the Building Condition Survey Report.

We are of the opinion that the non-conformity items have no material impact on the value of the Subject Property.

3.9 Current Rental Income Ch. 6.8 (c)(xi)(xiv)

As at the date of valuation, the Subject Property was fully leased.

According to the supplied rent roll as at the date of valuation, for which a sample of 20% of leases (which is equivalent to about 20% of the total passing rental income) were checked by us and were found to be in order, the existing net monthly rental income and equivalent annual net rental income was as follows:

Monthly Gross Passing Rental Gross Income (inclusive of Monthly Net Annual Net Floor Area Management Fee) Rental Income Rental Income (sq.m.) (RMB) (RMB) (RMB)

50,199.3 11,811,843 9,754,587 117,055,044

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As at the date of valuation, the Subject Property was leased to 969 tenants.

According to the supplied information, we understand that the current passing rental income (based on existing leases) is inclusive of property management fee. As advised by the Manager, we have deducted a monthly property management fee of RMB45 per sq.m. in order to assess the net rental income.

According to the renewed tenancy agreements commencing from January 2006, we understand that the renewed rental income is exclusive of property management fee and other outgoings such as water, electricity, town gas, telephone and air-conditioning charges.

Different types of rental income for the Subject Property are listed as follows:

Rental Income Per Month

Total current gross passing rental income RMB11,811,843 (inclusive of property management fee) Total current net rental income calculated RMB9,754,587 (exclusive of property management fee) Total current estimated market rental income RMB21,177,076 (exclusive of property management fee)

The total current net passing rental income was 44% and 46% lower than the total net estimated market rental income. However, the agreed renewed rental income is in line with the market level of prime retail developments after excluding property management fee from both rentals.

According to the information provided by the Manager, more than 95% of the existing tenancies of the Subject Property have been renewed and will commence from 1 January 2006 at significantly higher rentals than the current passing rentals. Having cross referenced with the current monthly market rental income as at the date of valuation, which is exclusive of property management fee, in the market, we consider that the renewed monthly rental income for the new tenancies, which is exclusive of property management fee, has no material difference from the estimated monthly market rental income, exclusive of property management fee.

As advised by the Manager, there were no related parties lettings in the Subject Property as at the date of valuation.

The Subject Property comprises various tenants and mainly occupied for garment wholesale centre and ancillary office.

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The details of tenants mix are as follows:

Gross Industry Floor Area Percentage (sq.m.) (%)

Garment 44,600.1 88.8 Bank 329.6 0.7 Others 12.2 0.0 Food & Restaurants 1,337.4 2.7 Office & Storage 3,920.0 7.8

Total area under GZI REIT 50,199.3 100.0

According to the PRC Legal Opinion, there are no sub-leases or tenancies in the Subject Property.

We are not aware of any material options or rights of pre-emption which may affect the value of the Subject Property.

3.10 Occupancy Rate Ch. 6.8 (c)(vi)

According to the PRC Legal Opinion, the majority of the Subject Property with a total floor area of approximately 49,007.2 sq.m. was leased to various tenants as at the date of valuation. This equates to an occupancy rate of 100% of the Subject Property to be acquired by GZI REIT. The Subject Property is occupied by various tenants such as Bank of Communication, Guangzhou Branch and various individuals’ tenants.

3.11 Lease Cycle Duration and Expiry Profile Ch. 6.8 (c)(vii)(viii)

In general, the typical lease term of the wholesales tenancies vary between 1 and 5 years and on normal local commercial terms with existing passing rentals, inclusive of property management fee, generally ranging between RMB113 per sq.m. and RMB437 per sq.m. with an overall average unit monthly net rental income of RMB241 per sq.m. for all the existing tenancies.

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The details of the lease term duration are shown as follows:

Lease term less than or By Gross Lease term greater than equal to By Number Floor Area (year) (year) (%) (%)

016.34.2 1 2 31.6 28.9 2 3 11.7 12.2 3 4 50.2 54.4 450.20.3

100.0 100.0

We understand that over 99% of the leases will expire on 31 December 2005.

In general, as advised by the Manager, the typical lease terms of the signed new tenancies commencing on 1 January 2006 vary between 4 and 5 years and are on normal local commercial terms. The agreed average net monthly rentals of the signed new tenancies in 2006 for Levels 1 to 6 are generally ranging between RMB190 per sq.m. and RMB599 per sq.m. and projected net new monthly rentals for Levels 7 and 8 (assuming renovation for retail use) in 2006 are generally ranging between RMB131 per sq.m. and RMB160 per sq.m. The abovementioned rentals are exclusive of property management fee, with an average unit monthly net rental income of RMB473 per sq.m.

According to the renewed leases, the details of the lease expiry profile are shown as follows:

By Gross % of tenancies due to expire in each year By Number Floor Area (%) (%)

2005 4.7 8.3 2009 44.8 26.6 2010 50.5 65.1

Total 100.0 100.0

VI-19 APPENDIX VI-A INDEPENDENT PROPERTY VALUATION REPORT

3.12 Summary of Material Rent Review Provisions Ch. 6.8 (c)(v)(ix)(xiii)

We understand that the Subject Property has no major material rent review provisions. We note that over 99% of the leases will expire on 31 December 2005. According to the supplied documents and tenancy agreements, over 95% of the leases have been renewed commencing from 1 January 2006 and the lease terms vary between 4 to 5 years. The projected net rental income in 2006 is approximately RMB252,626,168 which is exclusive of property management fee. In our valuations, the renewed rentals have been taken into account.

We are not aware of any sub-leases or tenancies and any material options or rights of pre-emption which may affect the value of the Subject Property and we have considered the renovation of Levels 7 and 8 for retail use commencing from May 2006, as advised by the Manager and we have considered this in our valuation in determining the reversionary rental income in Income Capitalisation Approach and the rental income projection of Discounted Cashflow Analysis.

3.13 Historic Outgoings

As advised by the Manager, the current monthly property management fee paid by the tenants is RMB45 per sq.m. and the total property management income covers the total property management expenses.

We are of the opinion that the current property management fee is higher than the market level of similar developments in the locality. (See Section 3.14.2)

3.14 Property Management

3.14.1 Tenancy Services Agreement

A tenancy services agreement was entered into between the Manager, Partat Investment Limited ( ) (the “Property Company”) and White Horse Property Management Co. Ltd. (the “Leasing Agent”) on 7 December 2005 for an initial term of three years. Under this agreement the Leasing Agent (who is also the property manager of White Horse Building) will be paid a remuneration of 3.0% per annum of the gross revenue (“Service Fees”) receivable by the Property Company from the operation of the Subject Property. The Leasing Agent, as the property manager of the building is entitled to retain 10% of any contributions made by the tenants towards the operating expenses of the building. The Leasing Agent agrees that, for so long as it is the property manager of White Horse Building, the Service Fees paid to the Leasing Agent shall also be in satisfaction of the property management fees which it is entitled to receive from the Property Company for any vacant units of the Subject Property under the property management agreement.

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3.14.2 Property Management Fee

As advised by the Manager, the current monthly management fees paid by the tenants is RMB45 per sq.m. and the monthly management fees payable by the tenants commencing from 1 January 2006 will be RMB50 per sq.m., which is higher than the market level of similar developments in the locality.

Monthly Name of Building Management fee (RMB/sq.m.)

Xin Da Di Fashion Plaza ( )35 Jinbao Building of Foreign Clothing Trade 30 ( ) Guangzhou Clothing Display Centre ( )30 Guangan Knitting & Woolen Costume Market ( )30

4. VALUATION

4.1 Income Capitalisation Approach

This approach converts the actual and anticipated net income from the property into a value through the process of capitalization. The most common method of converting net income into value is by the “term and reversion” method.

This approach estimates the value of the Subject Property on an open market basis by capitalising net rental income on a fully leased basis having regard to the current passing rental income and potential future income from existing vacancies.

In this valuation approach, the total rental income is divided into the term income and the reversionary income. The term value involves the capitalisation of the current passing rental income over the existing lease term. The reversionary value is taken to be current market rental income upon the expiry of the lease over the residual land use rights term and is capitalised on a fully leased basis. It is then brought back to the date of valuation.

To bring the reversionary value back to the current date, we have used a present value rate which is the same as the reversionary yield for the particular component of the Subject Property. The present value is the current monetary value of future cash flows and reflects the opportunity cost of an investment in a similar asset which would be expected to return a similar remunerative return as the Subject Property.

In preparing our valuations, we have had regard to asking or transacted rental income comparables within similar retail/wholesale developments in the locality.

VI-21 APPENDIX VI-A INDEPENDENT PROPERTY VALUATION REPORT

For the Subject Property, the typical net monthly rental income and the projected rental income as at the date of valuation for Level 1 to Level 8 are as follows:

New Average Unit Monthly Passing Average Rental Income Current Unit of Tenancy Gross Passing Average Unit Agreements/ Monthly Net Monthly Projected New Rental Income Rental Income Rental Income Inclusive (exclusive in 2006, Compare (b) with (c) of Property of Property Both Exclusive Between (Below or Management Management of Property Above Market Level Fees Fees) Management Fees Rental Income) (RMB/sq.m.) (RMB/sq.m.) (RMB/sq.m.) (a) (b) (c)

Level 1 384 340 599 (b) is lower than (c) Level 2 373 359 572 (b) is lower than (c) Level 3 323 278 524 (b) is lower than (c) Level 4 203 158 366 (b) is lower than (c) Level 5 155 110 361 (b) is lower than (c) Level 6 140 95 190 (b) is lower than (c) Level 7 63 18 160 (Projection) (b) is lower than (c) Level 8 97 52 131 (Projection) (b) is lower than (c)

We understand from the Manager that Levels 7 and 8 (originally occupied as warehouse and office) of the Subject Property will be converted into retail use commencing from May 2006.

The current average unit net monthly rental income is generally 37% to 70% lower than the new average unit monthly passing rental income of each level for Levels 1 to 6. The current average unit net monthly rentals of Levels 7 and 8 are 89% and 60% lower than the new average unit monthly projected rental income since the two levels are currently occupied as warehouse and office respectively.

VI-22 APPENDIX VI-A INDEPENDENT PROPERTY VALUATION REPORT

The details of the rental income comparables are as follows:

Retail Rental Income Comparables:

Comparable 1 Comparable 2 Comparable 3 Comparable 4

Address Beijing Road Beijing Road Beijing Road Beijing Road ( ) ( ) ( ) ( ) District Yue Xiu District Yue Xiu District Yue Xiu District Yue Xiu District ( ) ( ) ( ) ( ) Date of Transaction Oct-05 Oct-05 Oct-05 Sep-05 Unit B202 B51 B123, B125, B126, 101 B142, B143 & B145 Level 1111 Gross Floor Area (sq.m.) 14.0 13.3 80.0 81.5 Date of Completion 2005 2005 2005 2005 Efficiency Ratio 45% 45% 45% 50% Nature of Transaction Transacted Transacted Asking Transacted Lease Term (year) 2 2 2 to 3 2 Lease Commencement Date End of 2005 End of 2005 N/A Sep-05 Lease Expiry Date End of 2007 End of 2007 N/A Sep-07 Net Rental Income on GFA (RMB) 11,200 11,970 64,000 48,900 Net Rental Income on GFA 800 900 800 600 (RMB/sq.m.) Adjusted Net Rental Income on 711 799 675 559 GFA (RMB/sq.m.)

Comparable 5 Comparable 6 Comparable 7 Comparable 8

Address Beijing Road Beijing Road Beijing Road Beijing Road ( ) ( ) ( ) ( ) District Yue Xiu District Yue Xiu District Yue Xiu District Yue Xiu District ( ) ( ) ( ) ( ) Date of Transaction Oct-05 Sep-05 Oct-05 Oct-05 Unit 141 105 145 125 Level 1111 Gross Floor Area (sq.m.) 81.4 55 25 35 Date of Completion 2005 2004 2004 2000 Efficiency Ratio 50% 65% 65% 55% Nature of Transaction Asking Transacted Asking Asking Lease Term (year) 2 to 3 2 2 to 3 2 to 3 Lease Commencement Date N/A Aug-05 N/A N/A Lease Expiry Date N/A Aug-07 N/A N/A Net Rental Income on GFA (RMB) 56,966 33,000 15,000 24,500 Net Rental Income on GFA 700 600 600 700 (RMB/sq.m.) Adjusted Net Rental Income on 620 533 566 537 GFA (RMB/sq.m.)

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Comparable 9 Comparable 10 Comparable 11 Comparable 12

Address Beijing Road Zhan Nan Road Zhan Nan Road Zhan Nan Road ( ) ( ) ( ) ( ) District Yue Xiu District Yue Xiu District Yue Xiu District Yue Xiu District ( ) ( ) ( ) ( ) Date of Transaction Oct-05 Jul-05 Jul-05 Jul-05 Unit 123 1102 1203 1301 Level 1111 Gross Floor Area (sq.m.) 57.2 71.3 57.1 87.6 Date of Completion 2004 1990 1990 1990 Efficiency Ratio 55% 60% 60% 60% Nature of Transaction Asking Transacted Transacted Transacted Lease Term (year) 2555 Lease Commencement Date N/A 01-Jan-06 01-Jan-06 01-Jan-06 Lease Expiry Date N/A 31-Dec-10 31-Dec-10 31-Dec-10 Net Rental Income on GFA (RMB) 45,760 45,418 38,630 59,305 Net Rental Income on GFA 800 637 677 677 (RMB/sq.m.) Adjusted Net Rental Income on 614 637 677 677 GFA (RMB/sq.m.)

Comparable 13 Comparable 14 Comparable 15 Comparable 16

Address Zhan Nan Road Zhan Nan Road Huan Shi Xi Road Zhan Nan Road ( ) ( ) ( ) ( ) District Yue Xiu District Yue Xiu District Yue Xiu District Yue Xiu District ( ) ( ) ( ) ( ) Date of Transaction Jul-05 Jul-05 Oct-05 Oct-05 Unit 1321 1419 116 1079 Level 1111 Gross Floor Area (sq.m.) 81.5 76.5 14 20 Date of Completion 1990 1990 1990’s 2004 Efficiency Ratio 60% 60% 60% 60% Nature of Transaction Transacted Transacted Asking Transacted Lease Term (year) 5512 Lease Commencement Date 01-Jan-06 01-Jan-06 N/A Mid-2005 Lease Expiry Date 31-Dec-10 31-Dec-10 N/A Mid-2007 Net Rental Income on GFA (RMB) 55,155 51,818 9,100 13,000 Net Rental Income on GFA 677 677 650 650 (RMB/sq.m.) Adjusted Net Rental Income on 677 677 713 675 GFA (RMB/sq.m.)

We have had regard to sixteen comparables in deriving the rental income value of Level 1 of the Subject Property. Adjustments have been made for time, location, building quality, size, pedestrian flow and etc. The adjusted unit rental income values of these comparables range from RMB533/sq.m. to RMB799/sq.m. Taking the average of all the sixteen comparables will give a monthly unit rental income of approximately RMB650/sq.m. for Level

VI-24 APPENDIX VI-A INDEPENDENT PROPERTY VALUATION REPORT

1 of the Subject Property. This rental income level supports the average rental income level of RMB599 per sq.m. for Level 1 of the Subject Property for the new tenancies commencing on January 2006 and therefore we have adopted the average rental income level for new tenancies of each level in our valuation.

New Rental Income of Tenancy Agreements/ Projected New Rental Income, Both Exclusive of Level Property Management Fees (RMB/sq.m.)

Level 1 599 Level 2 572 Level 3 524 Level 4 366 Level 5 361 Level 6 190 Level 7 160 Level 8 131

By allowing different percentage of discount for different levels, the unit market rental income is shown below:-

Discount Unit Market Allowed Rental Level (%) (RMB/sq.m.)

Level 1 0% 650 Level 2 5% 618 Level 3 15% 553 Level 4 40% 390 Level 5 45% 358 Level 6 70% 195 Level 7 75% 163 Level 8 80% 130

The existing monthly net rental income as at the date of valuation was RMB9,754,587 and it is anticipated that the development will maintain the current occupancy level of 100%, which is higher than the occupancy rate of similar type of buildings in the market.

In our assessment, the term yield adopted is 8% and reversionary yield is 9.5%. The term yield adopted is lower than the market yield derived below because the current passing rental income of the Subject Property is lower than the estimated current market rental income.

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The term yield is used for capitalisation of the current passing rental income as at the date of valuation whilst the reversionary yield is used to convert reversionary rental income. This approach is generally used in valuing income producing properties.

The reversionary yields are based on an analysis of the unit market rental income and Ch. 6.8 (c)(xii) the unit market value of the comparables collected for the Subject Property. From the previous analysis, the unit market rental income for Level 1 of the retail podium is RMB650/sq.m. In Section 4.3, the unit market value for Level 1 is RMB73,000/sq.m. The market yield is approximately 10.5%. After the further deduction of 1% to reflect the fact that the majority of the new leases for the reversionary term have already been signed which means a more security of income, we have adopted 9.5% as the reversionary yield for the retail component of the Subject Property which is within the range of the market comparable transactions as follows:

Retail market:

Estimated Unit Annual Market Net Rental Occupancy Gross Actual Income as at Status as at Floor Date of Transaction Sale Price the Date of the date of Market Unit Address Area Transaction Price per sq.m. Transaction Transaction Yield (sq.m.) (RMB) (RMB/sq.m.) (RMB/sq.m.) (Note 2) (Note 1)

Whole Confidential 35,000 End of 2004 265,000,000 7,571 796 20 years 10.5% Sale and Leaseback Whole Ti Yu Xi Road 1,147 Sept-04 51,608,075 44,994 4,752 Vacant 10.6% B205 Confidential 15.6 Sept-05 1,244,800 79,795 9,600 Vacant 12.0% B107 Confidential 16.5 Sept-05 1,405,050 85,155 10,260 Vacant 12.0% Three shop units Ti Yu Dong 463 Sept-04 10,645,780 22,993 2,688 Vacant 11.7% Road

Notes:

1) The estimated market net rental income is based on our analysis of recent lettings of comparable properties.

2) The market yield is the estimated market net rental income per annum divided by the actual transaction price.

The comparables were sourced from the Colliers International database and were calculated based on the comparable general location. Due to the limited number of whole building sales, sales of smaller units in the locality were also used.

We have valued the Subject Property at a value of HK$2,503,000,000.

VI-26 APPENDIX VI-A INDEPENDENT PROPERTY VALUATION REPORT

The summary is as follows:

Unit Rate Reversionary on Gross Property Term Yield Yield Value Floor Area (HK$) (HK$/sq.m.)

White Horse Building 8% 9.5% 2,503,000,000 49,861

4.2 Discounted Cash Flow Analysis

This is defined in the International Valuation Standards Committee (7th Edition), as a financial modeling technique based on explicit assumptions regarding the prospective cash flow to operating real properties. This analysis involves the projection of a series of periodic cash flows to an operating property. To this projected cash flow series, an appropriate discount rate is applied to establish an indication of the present value of the rental income stream associated with the properties. In the case of operating real properties, periodic cash flow is typically estimated as gross rental income less vacancy, bad debts, impact of taxes (stamp duty, urban real estate tax, flood prevention fee and business tax), property management fees (for existing tenancies but not for new tenancies or projected rental income commencing from January 2006), service fees and other operating expenses. The series of periodic net operating incomes, along with an estimate of the terminal value, anticipated at the end of the projection period, is then discounted at the discount rate, being a cost of capital or a rate of return used to convert a monetary sum, payable or receivable in the future, into present value.

We have undertaken a discounted cash flow analysis on a monthly basis over a 10-year investment horizon. The net income in the year 11 is capitalised at an appropriate yield for the remainder of the ownership term. This analysis allows an investor or owner to make an assessment of the long term return that is likely to be derived from a property with a combination of both rental income and capital growth over an assumed investment horizon. This analysis is generally used in valuing investment income producing properties.

For the Subject Property, the terminal capitalisation rate within our calculation is 9%. This is based on our analysis of the term yields applicable in the marketplace as set out in Section 4.1 with a discount to allow for the fact that we are capitalising a net rental income in year 11. The discount reflects the difference between the rental income stream before deductions and the net rental income together with an allowance for the security that a net rental income provides over the rental income before deduction.

VI-27 APPENDIX VI-A INDEPENDENT PROPERTY VALUATION REPORT

and office buildings. Based on the above, we consider that the market expectations are around 10% to 12% for both wholesale and retail properties. We note that the yield of 10-year Exchange Fund Notes issued by the Hong Kong Monetary Authority as at 30 September 2005 is in the order of 4.17%, indicating a risk premium of between 5.83% and 7.83%. Based on our analysis of comparable sales in the international market, the higher premium reflects the inherent investment risks associated with the PRC and the property risk. We consider that Hong Kong is the closest mature market to the PRC and it is more appropriate to adopt the Hong Kong risk free rate for the PRC property investment.

In arriving at the periodic cash flow prepared by us, we have considered the annual rental income growth rate to assess the projected rental income, which is applied to the cash flow upon the expiry of the leases. The adopted rental income growth rates are in line with the forecasts as detailed in the Independent Market Research Report prepared by Cushman & Wakefield (HK) Limited.

We have estimated the rental income growth per annum during next 10 years for the Subject Property. Rental income growth patterns for each tenancy reflect the rent review provisions of each lease, including staged rent increase where applicable. We have assumed that upon expiry of the tenancies, we will follow the terms of the renewed tenancies which are typically of four or five years. Upon expiry of such tenancies new leases will be granted or renewed on three years terms at the then existing market rentals.

An annual vacancy allowance and allowance for bad debts have been considered within the portfolio. An annual vacancy allowance is about 1% for the Subject Property, which is estimated based on the current vacancy. With reference to the historical bad debts ratios, we consider that the bad debts allowance should be 0.5% of the net rent received. In the case of the White Horse Building units, there were no bad debts for the six months ended 30 June 2005.

We have made reference to the Building Condition Survey Report, which states that no immediate capital expenditure will be incurred as the Subject Property is maintained in a reasonable condition commensurate with its age. According to the Manager, no large scale repair and maintenance from 2006 to 2015 is considered necessary. No deduction has been made for the expected repair and maintenance costs as we understand from the Manager that the repair and maintenance costs, for maintaining the current condition of the Subject Property, are covered by the management fee paid by tenants. As advised by the Manager, any costs incurred in non-conformities will be settled by Guangzhou Investment Company Limited (“GZI”).

As advised by the Manager, Levels 7 and 8 (originally occupied as warehouse and office) of the Subject Property will be converted into retail use commencing from May 2006. According to the information provided by the Manager, the cost of such renovation is around HK$5.8 million and will be borne by GZI, therefore, we have not allowed any cost of renovation in our valuation.

VI-28 APPENDIX VI-A INDEPENDENT PROPERTY VALUATION REPORT

We have also deducted amounts for business tax, stamp duty, urban real estate tax, flood prevention fee, insurance, property management fees (for existing tenancies but not for new tenancies or projected rental income commencing from January 2006) and service fees.

In our calculation, we have not deducted any acquisition costs and disposal costs. We are of the opinion that these issues would be taken into account by a prospective purchaser.

In preparing our valuations for the Subject Property, we have had regard to asking or transacted rental income comparables within similar prime retail developments in the locality. For details, reference should be made to Section 4.1 of this report.

In our assessment, we have valued the Subject Property using the following assumptions:

Items Percent

Terminal Capitalisation Rate 9% Discount Rate 11% Growth Rate — Year 1 2% Growth Rate — Year 2 2% Growth Rate — Year 3 2% Growth Rate — Year 4 7% Growth Rate — Year 5 7% Growth Rate — Years 6 to 10 5% Vacancy Loss 1% Bad Debts 0.5%

The growth rates are based on our local market research. We have also made reference to the Independent Market Research Report prepared by Cushman & Wakefield (HK) Limited.

Vacancy loss is based on our view on the supply and demand and our local market knowledge of the relevant property market in Guangzhou.

VI-29 APPENDIX VI-A INDEPENDENT PROPERTY VALUATION REPORT

In our Discounted Cash Flow Analysis, based on the information provided by the Manager, we have projected the following outgoings to be expended for the next 10 years on the building at the following amount:

Projected Outgoings Items Projected Outgoings PN 25 (b)

Service Fees based on the tenancy 3.0% of gross rental income services agreement Cost of Large Scale Repair and None Maintenance as advised by the Manager Sundry Expenses 0.5% of rental income Insurance Fixed Amount Business Tax 5.0% of rental income Flood Prevention Fee 0.09% of rental income Urban Real Estate Tax original value of building x 70% x 1.2% Stamp Duty 0.1% of gross rental income

No immediate capital expenditure is included as a projected outgoings item with reference to the Building Condition Survey Report.

Based on the above, we have valued the Subject Property at a value of HK$2,580,000,000 taking account of the outgoings, taxes and other cost items.

The summary is as follows:

Unit Rate Capitalisation Discount on Gross Property Rate Rate Value Floor Area (HK$) (HK$/sq.m.)

White Horse Building 9% 11% 2,580,000,000 51,395

4.3 Sales Comparison Approach

In the Sales Comparison Approach, we have considered the sales of similar properties and related market data and established a value by adjustment of the comparables. In general, the Subject Property is compared with sales of similar properties that have been transacted in the open market.

In preparing our valuations of the Subject Property, we have had regard to asking or transacted comparables within similar retail/wholesale developments in the locality.

VI-30 APPENDIX VI-A INDEPENDENT PROPERTY VALUATION REPORT

Adjustments have been made for various factors to the evidence such as location, efficiency and time. The details are as follows.

Comparable 1 Comparable 2 Comparable 3

Address Beijing Road Beijing Road Beijing Road ( ) ( ) ( ) District Yue Xiu District Yue Xiu District Yue Xiu District ( ) ( ) ( ) Date of Transaction Sep-05 Sep-05 Oct-05 Unit B205 B107 B93, B95, B108 & B109 Level 1 1 1 Gross Floor Area (sq.m.) 15.6 16.5 90.7 Date of Completion 2005 2005 2005 Efficiency Ratio 45% 45% 45% Nature of Transaction Transacted Transacted Asking Asking/Transacted Price on GFA (RMB) 1,244,800 1,405,050 8,163,000 Asking/Transacted Price on GFA (RMB/sq.m.) 79,795 85,155 90,000 Adjusted Unit Rate on GFA (RMB/sq.m.) 71,200 75,650 75,600

Comparable 4 Comparable 5 Comparable 6

Address Beijing Road Shang Xia Jiu Road Beijing Road ( ) ( ) ( ) District Yue Xiu District Li Wan District Yue Xiu District ( ) ( ) ( ) Date of Transaction Oct-05 Jul-04 Dec-04 Unit B123, B125, N/A Front shop B126, B142, B143 & B145 Level 1 1 1 Gross Floor Area (sq.m.) 80.0 350 313 Date of Completion 2005 2000’s 1990’s Efficiency Ratio 45% 65% 85% Nature of Transaction Asking Transacted Transacted Asking/Transacted Price on GFA (RMB) 7,200,000 32,508,000 45,385,000 Asking/Transacted Price on GFA (RMB/sq.m.) 90,000 92,880 145,000 Adjusted Unit Rate on GFA (RMB/sq.m.) 75,600 62,230 78,300

VI-31 APPENDIX VI-A INDEPENDENT PROPERTY VALUATION REPORT

Adjustments have been made based on our own judgment and knowledge of the market. We have had regard to six comparables in deriving the market value of Level 1 of the Subject Property. Adjustments have been made for time, location, building quality, size, pedestrian flow and etc. The adjusted unit market values of these comparables range from RMB62,230/sq.m. to RMB78,300/sq.m. Taking the average of all the six comparables will give a unit market value of approximately RMB73,000/sq.m. for Level 1 of the podium of the Subject Property.

By allowing different percentage of discount for different levels, the unit market value for different levels is shown below:

Discount Unit Level Allowed Market Value (%) (RMB/sq.m.)

Level 1 0% 73,000 Level 2 5% 69,350 Level 3 15% 62,050 Level 4 40% 43,800 Level 5 45% 40,150 Level 6 70% 21,900 Level 7 75% 18,250 Level 8 80% 14,600

Based on the above, we have valued the Subject Property at a value of HK$2,303,000,000 taking no account of outgoings on the structure, taxes and other landlords costs.

The summary is as follows:

Unit Rate on Gross Property Value Floor Area (HK$) (HK$/sq.m.)

White Horse Building 2,303,000,000 45,877

VI-32 APPENDIX VI-A INDEPENDENT PROPERTY VALUATION REPORT

4.4 Valuation Comment

We have noted that for a certain portion of the Subject Property the existing usage is different from the usage as mentioned in Building Ownership Certificates according to the PRC Legal Opinion. The details and their respective valuation bases are listed in the table below. For the purposes of our valuation, we have valued the Subject Property on this basis:

Usage in Valuation Valuation Building Basis for Basis After Ownership Existing Existing Expiry of Unit Certificate Usage Tenancy Tenancy

Level 8 Office Office Office Retail Level 7 Office Warehouse Warehouse Retail Level 6 Office Retail Retail Retail Level 5 Office Retail Retail Retail Level 4 Portion as office Retail Retail Retail and the remaining portion as commercial Levels 1-3 Commercial Retail Retail Retail Lower Ground Level Storage Common Area Not Applicable Not Applicable

As advised by the Manager, the Lower Ground Level (comprising mainly common area, including staircases) as well as an area of 70.1 sq.m. on Level 8 (occupied by White Horse Property Management Company as property manager of the Subject Property) are regarded as non-lettable area. Therefore, we have not attributed any value to the Lower Ground Level and the area of 70.1 sq.m. on Level 8 of the Subject Property.

VI-33 APPENDIX VI-A INDEPENDENT PROPERTY VALUATION REPORT

5 VALUATION SUMMARY

We have summarised the calculation results of each approach in the table below: Ch. 6.8 (c)(x) Valuation Method Value (HK$)

Income Capitalisation 2,503,000,000 Discounted Cash Flow 2,580,000,000 Sales Comparison 2,303,000,000

Based on our primary valuation method of Income Capitalisation Approach including Discounted Cash Flow Analysis, we are of the opinion that the Market Value of the Subject Property (the property interest to be acquired by GZI REIT) in its existing state as at the date of valuation was HONG KONG DOLLARS TWO THOUSAND FIVE HUNDRED FORTY-ONE MILLION AND FIVE HUNDRED THOUSAND ONLY (HK$2,541,500,000) assuming it is available for sale in the market with the benefit of existing tenants and the property title are free from all material encumbrances or defects. The Market Value of the Subject Property is an average of values derived using by the Income Capitalisation Approach and Discounted Cash Flow Analysis.

VI-34 APPENDIX VI-B INDEPENDENT PROPERTY VALUATION REPORT

Valuation of various units of the Subject Property (the “Subject Property”) to be acquired by GZI Real Estate Investment Trust (the “GZI REIT”) located in Fortune Plaza, Nos. 114, 116 and 118 Ti Yu Dong Road, Tian He District, Guangzhou, Guangdong, The People’s Republic of China (the “PRC”)

1. SUMMARY OF THE SUBJECT PROPERTY Ch. 6.8 (c)(iv)

According to the PRC Legal Opinion, 83 Building Ownership Certificates have been issued in respect of the Subject Property. The details of the Subject Property are summarised as follows:

1. Current Registered : Moon King Limited Owner ( )

2. Type of Land Use : Granted Right

3. Town Plan Zoning : The zoning of the underlying land of Fortune Plaza was described as “commercial/office”.

4. Interest Valued : Leasehold interest of the Subject Property.

5. Property Description : The Subject Property comprises a portion of a 6-storey commercial podium and two office towers erected above it. (See Section 2.5 below)

6. Gross Floor Area : Total - 40,356.2 sq.m. (“GFA”) of the Subject Office - 36,503.1 sq.m. Property Retail - 3,853.1 sq.m.

7. Lease Term : Levels 1-5, Level 37 of East Tower and Level 27 of West Tower — 40 years from 26 November 2002 Levels 8-9, 11-14, 19, 25-28, 34-36 of East Tower and Levels 8-19, 24-26 of West Tower — 50 years from 26 November 2002

8. Usage : Levels 1-5, Level 37 of East Tower and Level 27 of West Tower — Commercial Levels 8-9, 11-14, 19, 25-28, 34-36 of East Tower and Levels 8-19, 24-26 of West Tower — Office

9. Internal Floor Area of : 30,752.3 sq.m. the Subject Property

10. Gross Rentable Area : 40,356.2 sq.m. of the Subject Property

11. Construction : 2003 Completion Date of Fortune Plaza

VI-35 APPENDIX VI-B INDEPENDENT PROPERTY VALUATION REPORT

12. Valuation Approach : Income Capitalisation Approach including Discounted Cash Flow Analysis, cross-checked by the Sales Comparison Approach

13. Date of Valuation : 30 September 2005

14. Market Value in : HK$545,000,000 existing state as at the Date of Valuation

15. Unit Value on Gross : HK$13,505 per sq.m. Floor Area

16. Net Passing Income : RMB34,884,540 per annum as at the Date of Valuation

17. Fully Leased Net : RMB49,234,404 per annum Income as at the Date of Valuation

18. Estimated Market : RMB54,835,620 per annum Rental Income as at the Date of Valuation

19. Discount Rate :11% adopted for Discounted Cash Flow Analysis only

20. Exchange Rate as at : HK$1 = RMB1.043 the Date of Valuation

21. Term Yield : Office: 7.0% Retail: 9.5%

22. Reversionary Yield : Office: 9.0% Retail: 11.5%

23. Occupancy Rate as at : Office: 83.5% the Date of Valuation Retail: 14.9%

24. Vacancy Allowance : Office: 5% Retail: 1%

25. Market Comment : We consider the marketability of the Subject Property to be reasonable in view of its location and accessibility.

Note: The usage is based on the Building Ownership Certificates and the PRC Legal Opinion.

VI-36 APPENDIX VI-B INDEPENDENT PROPERTY VALUATION REPORT

2. THE SUBJECT PROPERTY

2.1 Situation and Locality

Fortune Plaza is located at Nos. 114, 116 and 118 Ti Yu Dong Road, Tian He District, Guangzhou, Guangdong, the PRC. It is close to the Guangzhou East Train Station and metro station.

Tian He District is a rapidly developing area and is the present focus of new Grade A office development. Located on the eastern side of Guangzhou, the majority of major developments in the area are situated around and overlook the Tian He stadium. This district has emerged as the new CBD of Guangzhou within the last few years and its increasing popularity with the business community has led to rapid development of commercial buildings around the stadium area initially and later has gradually expanded outwards from this central square.

2.2 Surrounding Development and Environmental Issues

The Subject Property is located in Tian He District. Developments in the area comprise mainly modern high-rise commercial buildings and low-rise retail shopping centres, interspersed with older medium-rise residential buildings.

The pedestrian traffic flow along that section of Ti Yu Dong Road is heavy as it is located at the busier side of the Tian He stadium.

2.3 Availability of and Access to Public Transport

General accessibility of Fortune Plaza is considered good as public transportation such as taxis and buses are available along Ti Yu Dong Road. Bus stops and metro station are located adjacent to Fortune Plaza.

Fortune Plaza is located in approximately 5 minutes driving distance from the Guangzhou East Train Station.

VI-37 APPENDIX VI-B INDEPENDENT PROPERTY VALUATION REPORT

2.4 Car Accessibility and Road Frontage

Fortune Plaza is directly accessible from Ti Yu Dong Road. A pedestrian subway adjacent to the Subject Property allows access to Guangzhou Tian He Stadium.

Travelling time to major areas of the City through driving:

Baiyun International Airport 45 minutes Teem Plaza 1 minutes Guangzhou East Train Station 5 minutes

2.5 Description of the Development Ch. 6.8 (c)(iv)

Fortune Plaza, a Grade A commercial complex, is located at Nos. 114, 116 and 118 Ti Yu Dong Road, Tian He District, in Guangzhou’s prime business area. According to the information provided by the Manager, the development has a total gross floor area of 80,419.1 sq.m.

The area breakdown of Fortune Plaza is summarized as below:

Level Usage Gross Floor Area Ch. 6.8 (c)(iii) (sq.m.)

Basement Carpark and Machinery Plant Room 8,561.6

Podium - Level 1 to 6 Podium: Level 1 to 6 — Commercial 23,993.0 Level 7 Level 7 — Machinery Plant Room

East Tower Level 8-36 — Office 28,900.3 Level 37 — Commercial

West Tower Level 8-26 — Office 18,964.2 Level 27-28 — Commercial

Total: 80,419.1

The site of the building comprises a regular and level plot having its main frontage onto Ti Yu Dong Road upon which a 6-storey commercial podium with two office towers has been erected and was completed in 2003. The East Tower is above the podium from the 8th to 37th storey and the West Tower from the 8th to 28th storey.

VI-38 APPENDIX VI-B INDEPENDENT PROPERTY VALUATION REPORT

The main entrance of Fortune Plaza is onto Ti Yu Dong Road. General accessibility of Fortune Plaza is considered good as public transportation such as metro system, buses and taxis are available along Ti Yu Dong Road.

Car parking facilities are provided within 2 basement levels while a platform garden, a club and other ancillary facilities are located on Level 7.

The layout and design of Fortune Plaza is reasonable in comparison with the other office buildings in the locality.

2.6 Portion of Interest to be Acquired by GZI REIT Ch. 6.8 (c)(iv)

GZI REIT is acquiring a portion of the development and the details of the interest to be acquired are listed below:

Gross Internal No. Property Usage Floor Area Floor Area Ch. 6.8 (c)(iii) (sq.m.) (sq.m.)

Podium, Ti Yu Dong Road 1. No. 118, Unit 109 Commercial 1,007.4 968.9 2. No. 118, Level 2 Commercial 2,845.7 2,275.8 3. No. 118, Level 3 Commercial 4,275.1 3,593.0 (See Note 1) 4. No. 118, Level 4 Commercial 4,275.1 3,593.0 (See Note 1) 5. No. 118, Level 5 Commercial 4,275.1 3,593.0 (See Note 1)

East Tower, Ti Yu Dong Road 6. No. 116, Unit 801 Office 180.2 115.0 7. No. 116, Unit 802 Office 124.7 79.5 8. No. 116, Unit 803 Office 188.8 120.5 9. No. 116, Unit 805 Office 191.7 122.3 10. No. 116, Unit 806 Office 124.8 79.6 11. No. 116, Unit 808 Office 188.8 120.5 12. No. 116, Unit 903 Office 188.8 120.5 13. No. 116, Unit 905 Office 191.7 122.3 14. No. 116, Unit 906 Office 124.8 79.6 15. No. 116, Unit 908 Office 188.8 120.5 16. No. 116, Unit 1101 Office 180.2 115.0 17. No. 116, Unit 1102 Office 124.7 79.6 18. No. 116, Unit 1108 Office 188.8 120.5 19. No. 116, Unit 1201 Office 179.7 115.2

VI-39 APPENDIX VI-B INDEPENDENT PROPERTY VALUATION REPORT

Gross Internal No. Property Usage Floor Area Floor Area Ch. 6.8 (c)(iii) (sq.m.) (sq.m.)

20. No. 116, Unit 1202 Office 125.0 80.2 21. No. 116, Unit 1203 Office 188.7 121.0 22. No. 116, Unit 1205 Office 191.7 122.9 23. No. 116, Unit 1206 Office 125.1 80.2 24. No. 116, Unit 1208 Office 188.7 121.0 25. No. 116, Unit 1301 Office 179.7 115.2 26. No. 116, Unit 1302 Office 125.0 80.2 27. No. 116, Unit 1303 Office 188.7 121.0 28. No. 116, Unit 1305 Office 191.7 122.9 29. No. 116, Unit 1306 Office 125.1 80.2 30. No. 116, Unit 1308 Office 188.7 121.0 31. No. 116, Unit 1401 Office 179.7 115.2 32. No. 116, Unit 1402 Office 125.0 80.2 33. No. 116, Unit 1403 Office 188.7 121.0 34. No. 116, Unit 1405 Office 191.7 122.9 35. No. 116, Unit 1406 Office 125.1 80.2 36. No. 116, Unit 1408 Office 188.7 121.0 37. No. 116, Unit 1901 Office 180.2 115.0 38. No. 116, Unit 1902 Office 124.7 79.5 39. No. 116, Unit 1903 Office 188.8 120.5 40. No. 116, Unit 1905 Office 191.7 122.3 41. No. 116, Unit 1906 Office 124.8 79.6 42. No. 116, Unit 1908 Office 188.8 120.5 43. No. 116, Units 2501 & 2601 Office 1,586.4 1,240.8 44. No. 116, Unit 2705 Office 188.7 121.8 45. No. 116, Unit 2801 Office 180.3 115.4 46. No. 116, Unit 3401 Office 180.4 115.0 47. No. 116, Units 3501 & 3601 Office 1,392.2 1,029.3 48. No. 116, Level 37 Commercial 302.2 181.0 (See Note 2)

West Tower, Ti Yu Dong Road 49. No. 114, Level 8 Office 997.7 779.6 50. No. 114, Level 9 Office 997.7 779.6 51. No. 114, Level 10 Office 997.7 779.6 52. No. 114, Unit 1101 Office 189.3 120.5 53. No. 114, Unit 1102 Office 125.0 79.5 54. No. 114, Unit 1103 Office 179.7 114.4 55. No. 114, Unit 1105 Office 189.3 120.5

VI-40 APPENDIX VI-B INDEPENDENT PROPERTY VALUATION REPORT

Gross Internal No. Property Usage Floor Area Floor Area Ch. 6.8 (c)(iii) (sq.m.) (sq.m.)

56. No. 114, Unit 1106 Office 125.0 79.6 57. No. 114, Unit 1108 Office 189.3 120.5 58. No. 114, Unit 1201 Office 189.0 122.0 59. No. 114, Unit 1202 Office 125.7 81.1 60. No. 114, Unit 1203 Office 179.4 115.8 61. No. 114, Unit 1205 Office 189.0 122.0 62. No. 114, Unit 1206 Office 125.7 81.1 63. No. 114, Unit 1208 Office 189.0 122.0 64. No. 114, Unit 1301 Office 189.0 122.0 65. No. 114, Unit 1302 Office 125.7 81.1 66. No. 114, Unit 1303 Office 179.4 115.8 67. No. 114, Unit 1305 Office 189.0 122.0 68. No. 114, Unit 1306 Office 125.7 81.1 69. No. 114, Unit 1308 Office 189.0 122.0 70. No. 114, Unit 1401 Office 189.0 122.0 71. No. 114, Unit 1402 Office 125.7 81.1 72. No. 114, Unit 1403 Office 179.4 115.8 73. No. 114, Level 15 Office 997.7 779.6 74. No. 114, Level 16 Office 997.7 779.6 75. No. 114, Level 17 Office 997.7 779.6 76. No. 114, Level 18 Office 997.7 779.6 77. No. 114, Unit 1902 Office 125.9 81.6 78. No. 114, Unit 1903 Office 179.3 116.2 79. No. 114, Unit 1905 Office 188.8 122.4 80. No. 114, Unit 1906 Office 125.9 81.6 81. No. 114, Units 2401 & 2501 Office 1,591.4 1,243.6 82. No. 114, Level 26 Office 646.8 446.0 83. No. 114, Level 27 Commercial 335.8 180.4 (See Note 2)

Total: 40,356.2 30,752.3

Note 1: The breakdown of the gross floor area and the usage of the Subject Property is based on the Building Ownership Certificates and the PRC Legal Opinion. According to the Manager, level 3, 4 and 5 are used as office.

Note 2: According to the Manager, Level 37 of East Tower and Level 27 of West Tower are used as offices.

VI-41 APPENDIX VI-B INDEPENDENT PROPERTY VALUATION REPORT

2.7 Specification, Services and Finishes of the Development Ch. 6.8 (c)(iv)

Fortune Plaza is constructed of reinforced concrete with glazed tiling to the exterior elevations and is decorated with marble or granite wall and floor tiles at the main lobby. The specification of the building includes central air-conditioning system. Main services comprising electricity, water and telecommunications are connected to the building.

The building is subdivided into various units on all levels and is served by 8 passenger lifts and 2 cargo lifts serving all levels.

The standard of services and finishes within the development is considered to be reasonable commensurate to other office buildings in the neighbourhood.

The building is maintained in a reasonable condition commensurate to its age. The building is managed by Guangzhou Yicheng Property Management Ltd. and it is responsible for collection of all management fees from the tenants and dealing with the day to day operations and outgoings relevant to the development.

The fire safety measures include the installation of automatic sprinkler heads, smoke detectors, fire alarm system and fire extinguishers throughout the building. For further information on building condition, reference should be made to the Building Condition Survey Report.

2.8 Building Condition of the Development

According to the Building Condition Survey Report, the building is maintained in a reasonable condition. There are minor defects noted and the condition is generally in line with the building age. No structural defects have been observed and there is no major non-conformity at the time of inspection in September 2005. For further information of the building condition, reference should be made to the Building Condition Survey Report.

2.9 Current Rental Income Ch. 6.8 (c)(xi) (xiv) As at the date of valuation, approximately 85% or 3,280.6 sq.m. of retail portion were vacant and approximately 17% or 6,038.7 sq.m. of the office portion of the Subject Property were vacant.

VI-42 APPENDIX VI-B INDEPENDENT PROPERTY VALUATION REPORT

According to the supplied rent roll as at the date of valuation, for which a sample of 20% of leases (which is equivalent to about 25% of the total passing rental income) were checked by us and were found to be in order, the existing net monthly rental income and equivalent annual net rental income was as follows:

Monthly Net Annual Net Gross Rental Rental Portion Floor Area Income Income (sq.m.) (RMB) (RMB)

Retail Portion 572.5 79,710 956,520 Office Portion 30,464.4 2,827,335 33,928,020

As at the date of valuation, for the retail portion, the retail units were leased to 1 tenant. For office portion, the office units were leased to 47 tenants.

According to the supplied information, we understand that rental income is exclusive of property management fee and other outgoings such as water, electricity, town gas, telephone, air-conditioning charges and etc.

The total current monthly net passing rental income received and the total estimated monthly market rental income as at the date of valuation were RMB2,907,045 and RMB4,569,635 respectively. The total current net passing rental income was 36% lower than the total estimated market rental income. The estimated unit net monthly rental income is based on the unit market rental income of different levels for retail and office portions of the Subject Property in Section 3.1.

As advised by the Manager, there were related parties lettings in the Subject Property as at the date of valuation individing levels 4 and 5 of which the tenancies are as follows:

Estimated %of Net Unit Net Unit Net Current Monthly Monthly Monthly Monthly Lease Term Gross Rental Rental Rental Net Rental Unit Tenant Floor Area Income Income Income Income From To (RMB/ (RMB/ (sq.m.) (RMB) sq.m.) sq.m.)

118, Level 4 4,275.1 354,833 83 100 12.2% 5/1/2005 1/31/2008

118, Level 5 4,275.1 354,833 83 100 12.2% 2/16/2005 1/31/2008

VI-43 APPENDIX VI-B INDEPENDENT PROPERTY VALUATION REPORT

The Subject Property comprises various tenants from various industries such as banking/finance, property agency, information technology, manufacturing/engineering, transportation, shipping and etc.

2.10 Occupancy Rate Ch. 6.8 (c)(vi)

According to the PRC Legal Opinion, the majority of the Subject Property with a total floor area of approximately 31,036.6 sq.m. was leased to various tenants as at the date of valuation. This equates to an occupancy rate of about 76.9% of the Subject Property to be acquired by GZI REIT. Existing tenants include DBS Bank, HSBC Bank, and Alibaba (China) Technology Co., Ltd.

2.11 Lease Cycle Duration and Expiry Profile Ch. 6.8 (c)(vii) (viii) In general, the typical lease terms of all tenancies vary between 2 and 6 years and are on normal local commercial terms with agreed net monthly rentals generally ranging between RMB40 per sq.m. and RMB140 per sq.m. with an average unit monthly net rental income of RMB139 per sq.m. and RMB93 per sq.m. for the retail and office portions respectively.

The details of the lease term duration are shown as follows:

Lease term less than or By Gross Lease term greater than equal to By Number Floor Area (year) (year) (%) (%)

011.80.3 1 2 45.5 22.0 2 3 40.0 44.2 347.35.6 455.44.7 Vacant n.a. 23.0

Total 100.0 100.0

VI-44 APPENDIX VI-B INDEPENDENT PROPERTY VALUATION REPORT

The details of the lease expiry profile are shown as follows:

By Gross No. of tenancies due to expire in each year By Number Floor Area (%) (%)

2005 3.8 0.9 2006 30.2 7.6 2007 49.0 34.8 2008 13.2 30.0 2009 3.8 3.7 Vacant n.a. 23.0

Total 100.0 100.0

For Level 1 of retail portion, Unit 109 was vacant as at the date of valuation.

For Level 2 of retail portion, the occupied unit had a lease term for 2 years and 10 months, on normal local commercial terms with agreed net monthly rental income at RMB139 per sq.m., whilst the other units were vacant as at the date of valuation.

For Levels 3 to 5 of the retail portion, they are occupied as offices and as advised by the Manager, these levels will be leased as offices in the long run. The typical lease terms of the tenancies varied between 2 and 3 years and were on normal local commercial terms. The agreed net monthly rentals of Level 3 was RMB75 per sq.m. whereas for Levels 4 and 5 was approximately RMB83 per sq.m.

For office portion, the typical lease terms of the tenancies varied between 2 and 6 years and were on normal local commercial terms with agreed net monthly rentals as at the date of valuation generally ranging between RMB40 per sq.m. and RMB140 per sq.m., with an average of RMB93 per sq.m.

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2.12 Summary of Material Rent Review Provisions Ch. 6.8 (c)(v)(ix) (xiii) The Subject Property has the following material rent review provisions:-

Gross Net Monthly Lease Term Level Floor Area Rental Income From To (sq.m.) (RMB)

Unit on Level 16 997.7 94,778 5/12/2004 4/11/2005 99,766 4/12/2005 4/11/2006 104,754 4/12/2006 4/11/2007

Unit on Level 12 999.0 Rent Free 8/10/2005 10/9/2005 102,898 10/10/2005 8/9/2007 108,043 8/10/2007 8/9/2008

According to the PRC Legal Opinion, there are no sub-leases or tenancies in the Subject Property except for the lease of Level 15 of West Tower. We consider that this sub-lease does not affect the value of the Subject Property.

We are not aware of any material options or rights of pre-emption which may affect the value of the Subject Property. We have considered the right to renew in our valuation.

2.13 Historic Outgoings

As advised by the Manager, the current monthly property management fees paid by the tenants for the retail and office portions are RMB35 per sq.m. and RMB25 per sq.m. respectively and the property management income covers all the total property management expenses.

We are of the opinion that the current property management fee is in line with the office market level of similar developments in the locality. (See Section 2.14.3)

2.14 Property Management

2.14.1 Tenancy Services Agreement

A tenancy services agreement was entered into between the Manager, Moon King Limited ( )(the“Property Company”) and Guangzhou Yicheng Property Management Ltd. (the “Leasing Agent”) on 7 December 2005 for an initial term of three years. Under this agreement the Leasing Agent (who is also the property manager of Fortune Plaza) will be paid a remuneration of 4% per annum of the gross revenue (“Service Fees”) receivable by the Property Company from the operation of the Subject Property.

VI-46 APPENDIX VI-B INDEPENDENT PROPERTY VALUATION REPORT

The Leasing Agent, as the property manager of the building is entitled to retain 10% of any contributions made by the tenants towards the operating expenses of the building. The Leasing Agent agrees that, for so long as it is the property manager of Fortune Plaza, the Service Fees paid to the Leasing Agent shall also be in satisfaction of the property management fees which it is entitled to receive from the Property Company for any vacant units of the Subject Property under the property management agreement.

2.14.2 Deed of Mutual Covenant ( )

According to the PRC Legal Opinion, the Deed of Mutual Covenant was passed in a resolution of the owners’ meeting of Fortune Plaza on 23rd June, 2005. The Deed of Mutual Covenant comprises provisions relating to the rights and obligations of the individual owners, treatments for non-compliance of certain provisions and other issues. The Deed of Mutual Covenant is legally binding, valid and enforceable.

2.14.3 Property Management Fee

As advised by the Manager, the current monthly property management fees paid by the tenants for the retail and office portions are RMB35 per sq.m. and RMB25 per sq.m. respectively which is in line with the market level of similar developments in the locality.

Management Management fee for Retail fee for Office Name of Building Portion Portion (RMB/sq.m.) (RMB/sq.m.)

Gao Sheng Building ( ) Not Applicable 27 Times Square ( )3626 Goldlion Building ( )3329 Pingan Insurance Building ( )3627

3. VALUATION

3.1 Income Capitalisation Approach

This approach converts the actual and anticipated net income from the Subject Property into a value through the process of capitalization. The most common method of converting net income into value is by the “term and reversion” method.

This approach estimates the values of the Subject Property on an open market basis by capitalising net rental income on a fully leased basis having regard to the current passing rental income and potential future income from existing vacancies.

VI-47 APPENDIX VI-B INDEPENDENT PROPERTY VALUATION REPORT

We have applied individual yields to the retail and office components of the Subject Property, with a higher yield for the retail components to reflect the perceived higher levels of risk associated with the retail property market which is less mature and more volatile compared to the office market in Guangzhou (i.e. the retail yield is higher than office yield).

In preparing our valuations, we have had regard to asking or transacted rental income comparables within similar prime office and retail developments in the locality.

For Level 1 of retail portion, we are of the opinion that the market rental income level was RMB290 per sq.m. as at the date of valuation.

For Level 2 of retail portion, Unit 202 was vacant and the net monthly passing rental income of Unit 201 as at the date of valuation was RMB139 per sq.m. We are of the opinion that the current passing rental income was slightly lower than the market level of RMB145 per sq.m. as at the date of valuation.

Levels 3 to 5 of the retail portion are occupied as offices and as advised by the Manager, these levels will be leased as offices in the long run and therefore, we have valued them in their existing usage as offices. The average net monthly passing rental income for Level 3 is RMB75 per sq.m. whereas for Levels 4 and 5 is RMB83 per sq.m. We are of the opinion that the current passing rentals of Levels 3,4&5were lower than the average market level of RMB116 per sq.m.

For office portion, the typical net monthly passing rentals generally ranging between RMB40 per sq.m. and RMB140 per sq.m. and the average is RMB93 per sq.m. We are of the opinion that the current passing rentals were slightly lower than the average market level of RMB110 per sq.m. as at the date of valuation.

For the purposes of market comparables compositions, we have identified a number of comparables from our own database (which is based on the most recent data available to us). Due to the limited number of actual transaction available to us, we have analysed transactions from a variety of similar type of buildings in the locality in 2004 and we consider the comparables are sufficient to derive the market value of the Subject Property.

VI-48 APPENDIX VI-B INDEPENDENT PROPERTY VALUATION REPORT

The details of the rentals comparables are as follows:

Retail Rental Income Comparables

Comparable1 Comparable 2 Comparable 3 Comparable 4 Comparable 5

Address Lin He Xi Road Lin He Xi Road Ti Yu East Road Tian He Road Tian He Road District Tian He District Tian He District Tian He District Tian He District Tian He District ( ) ( ) ( ) ( ) ( ) Date of Transaction Dec-04 Dec-04 Nov-04 May-04 Apr-04 Unit A shop unit A shop unit A shop unit A shop unit A shop unit Level 1 1 Podium 1 1 Gross Floor Area (sq.m.) 505.0 223.8 Around 1,000 30.0 45.5 Date of Completion 2004 2004 2003 1995 1995 Nature of Transaction Transacted Transacted Transacted Transacted Transacted Lease Term (year) 5.00 6.00 6.00 6.00 6.00 Lease Commencement 1-Nov-04 16-Oct-04 15-Nov-04 26-May-04 Jun-04 Date Lease Expiry Date 31-Oct-09 15-Oct-10 14-Oct-10 25-May-10 Jun-10 Net Monthly Rental 75,750 31,329 282,080 37,800 45,500 Income on GFA (RMB) Net Monthly Rental 150 140 282 1,260 1,000 Income on GFA (RMB/sq.m.) Adjusted Net Monthly 162 128 294 474 376 Rental Income on GFA (RMB/sq.m.)

We have had regard to five comparables in deriving the rental income of Level 1 of podium of the Subject Property. Adjustments have been made for time, location, building quality, size, pedestrian flow and etc. The adjusted unit rental income of these comparables range from approximately RMB128/sq.m. to RMB474/sq.m. Taking the average of all the five comparables will give a monthly unit rental income of RMB290/sq.m. By allowing 50% discount to reflect the floor level difference for Level 2, the monthly unit rental income is RMB145/sq.m.

VI-49 APPENDIX VI-B INDEPENDENT PROPERTY VALUATION REPORT

Office Rental Income Comparables

Comparable 1 Comparable 2 Comparable 3 Comparable 4 Comparable 5 Comparable 6

Address Ti Yu Dong Road Ti Yu Dong Road Ti Yu Dong Road Ti Yu Dong Road Ti Yu Dong Road Ti Yu Dong Road District Tian He District Tian He District Tian He District Tian He District Tian He District Tian He District ( ) ( ) ( ) ( ) ( ) ( ) Date of Transaction Aug-05 Aug-05 Sep-05 Sep-05 Aug-05 Aug-05 Unit Two office units An office unit An office unit An office unit An office unit An office unit Level 11 12 12 13 14 28 Gross Floor Area 234.3 999.0 997.7 997.7 999.0 180.4 (sq.m.) Date of Completion 2003 2003 2003 2003 2003 2003 Efficiency Ratio 71% 71% 71% 71% 71% 71% Nature of Transaction Transacted Transacted Transacted Transacted Transacted Transacted Lease Term (year) 2.02 3.00 2.00 3.03 2.00 2.00 Lease Commencement 25-Aug-05 10-Aug-05 01-Sep-05 20-Sep-05 08-Sep-05 01-Aug-05 Date Lease Expiry Date 31-Aug-07 09-Aug-08 31-Aug-07 30-Sep-08 07-Sep-07 31-Jul-07 Net Rental Income on 25,771 102,898 104,754 117,724 104,896 19,832 GFA (RMB) Net Rental Income on 110 103 105 118 105 110 GFA (RMB/sq.m.) Adjusted Net Rental 110 103 105 118 105 110 Income on GFA (RMB/sq.m.)

All the Comparables 1 to 6 are situated within Fortune Plaza and were transacted recently. Taking the average of the adjusted unit rate of Comparables 1 to 6, the unit rental income is approximately RMB110/sq.m. By allowing an upward adjustment of 5% to reflect the floor level difference for levels 3, 4 and 5, the monthly unit rental income is RMB116/sq.m.

The existing monthly net rental income as at the date of valuation was RMB2,907,045 and it is anticipated that the Subject Property will maintain the current occupancy level of around 77% which is in line with the occupancy rate of similar type of buildings in the market.

In our assessment, the term yields adopted are 9.5% for the retail component and 7.0% for the office component. The term yields adopted are lower than the market yields derived below because the current passing rental income of the Subject Property is lower than the estimated current market rental income. The reversionary yields adopted are 11.5% for the retail component and 9.0% for the office component. We have applied individual yields to the

VI-50 APPENDIX VI-B INDEPENDENT PROPERTY VALUATION REPORT

retail and office components of the Subject Property, with a higher yield for the retail component to reflect the perceived higher levels of risk associated with the retail property market which is less mature and more volatile compared to the office market in Guangzhou.

The term yield is used for capitalisation of the current passing rental income as at the date of valuation whilst the reversionary yield is used to convert reversionary rental income.

This approach is generally used in valuing income producing properties.

The reversionary yields are based on an analysis of the unit market rental income and the unit market value of the comparables collected for the Subject Property. From the previous analysis, the unit market rental income for Level 1 of the retail podium is RMB290/sq.m. In Section 3.3, the unit market value for Level 1 is RMB30,000/sq.m. The market yield is 11.6%. We have adopted 11.5% as the reversionary yield for the retail component of the Subject Property which is in line with the market comparable transactions as follows:

Retail market:

Notes:

1) The estimated market net rental income is based on our analysis of recent lettings of comparable properties.

2) The market yield is the estimated market net rental income per annum divided by the actual transaction price.

VI-51 APPENDIX VI-B INDEPENDENT PROPERTY VALUATION REPORT

From the previous analysis, the unit market rental income for office portion is Ch. 6.8 (c)(xii) RMB110/sq.m. In Section 3.3, the unit market value for office portion is RMB14,000/sq.m. The market yield is 9.4%. We have adopted 9.0% as the reversionary yield for the office component which is in line with the market comparable transactions as follows:

Office market:

Whole Ti Yu Xi road 1,450.8 Sept-04 14,508,043 10,000 1,080 Vacant 10.8% An office unit Ti Yu Dong Road 188.8 Nov-04 2,529,920 13,400 1,128 Vacant 8.4% An office unit Ti Yu Dong Road 191.7 Nov-04 2,454,272 12,803 1,128 Vacant 8.8% An office unit Ti Yu Dong Road 189.5 Dec-04 2,822,805 14,896 1,260 Vacant 8.5% An office unit Lin He Xi Road 229.3 Aug-05 2,866,125 12,499 1,512 Vacant 12.1%

Notes:

1) The estimated market net rental income is based on our analysis of recent lettings of comparable properties.

2) The market yield is the estimated market net rental income per annum divided by the actual transaction price.

For retail and office markets, the comparables were sourced from the Colliers International database and were calculated based on the comparable general location. Due to the limited number of whole building sales, sales of smaller units in the locality were also used.

We have valued the Subject Property at a value of HK$559,000,000.

VI-52 APPENDIX VI-B INDEPENDENT PROPERTY VALUATION REPORT

The summary is as follows:

Unit Rate Reversionary on Gross Property Term Yield Yield Value Floor Area (HK$) (HK$/sq.m.)

Retail portion 9.5% 11.5% 62,000,000 16,091 Office portion 7.0% 9.0% 497,000,000 13,615

Total: 559,000,000 13,852

3.2 Discounted Cash Flow Analysis

This is defined in the International Valuation Standards Committee (7th Edition), as a financial modeling technique based on explicit assumptions regarding the prospective cash flow to operating real properties. This analysis involves the projection of a series of periodic cash flows to an operating property. To this projected cash flow series, an appropriate discount rate is applied to establish an indication of the present value of the rental income stream associated with the properties. In the case of operating real properties, periodic cash flow is typically estimated as gross rental income less vacancy, bad debts, impact of taxes (stamp duty, urban real estate tax, flood preventation works maintenance fee and business tax), service fees and other operating expenses. The series of periodic net operating incomes, along with an estimate of the terminal value, anticipated at the end of the projection period, is then discounted at the discount rate, being a cost of capital or a rate of return used to convert a monetary sum, payable or receivable in the future, into present value.

For the Subject Property, the terminal capitalisation rate for office portion within our calculation is 7.5% and the terminal capitalisation rate for retail portion is 9.5%. This is based on our analysis of the term yields applicable in the marketplace as set out in Section 3.1 with a discount to allow for the fact that we are capitalising a net rental income in year 11. The discount reflects the difference between the rental income stream before deductions and the net rental income together with an allowance for the security that a net rental income provides over the rental income before deduction.

VI-53 APPENDIX VI-B INDEPENDENT PROPERTY VALUATION REPORT

In our calculation, we have adopted the discount rate of 11% for the Subject Property. The discount rate is a rate of return used to convert a monetary sum, payable or receivable in the future, into present value. Theoretically it reflects the opportunity cost of capital. In arriving at the discount rate, we have studied the current market situation for an investment return over a 10-year period from a commercial property. We have also investigated the return required by active property investors in the market as purchasers of shopping centres and office buildings. Based on the above, we consider that the market expectations are around 10% to 12% for both office and retail properties. We note that the yield of 10-year Exchange Fund Notes issued by the Hong Kong Monetary Authority as at 30 September 2005 is in the order of 4.17%, indicating a risk premium of between 5.83% and 7.83%. Based on our analysis of comparable sales in the international market, the higher premium reflects the inherent investment risks associated with the PRC and the property risk. We consider that Hong Kong is the closest mature market to the PRC and it is more appropriate to adopt the Hong Kong risk free rate for the PRC property investment.

In arriving at the periodic cash flow provided by us, we have considered the annual rental income growth rate to assess the projected rental income, which is applied to the cash flow upon the expiry of the leases. The adopted rental income growth rates are in line with the forecasts as detailed in the Independent Market Research Report prepared by Cushman & Wakefield (HK) Limited.

We have estimated that the rental income growth per annum during next 10 years for the Subject Property. Rental income growth patterns for each tenancy reflect the rent review provisions of each lease, including staged rent increase where applicable. We have assumed that upon expiry of the tenancies, typically new or existing two to five years leases will be granted or renewed on the basis of three years leases and the then prevailing market rentals.

An annual vacancy allowance and allowance for bad debts have been considered within the portfolio. An annual vacancy allowance is about 1% and 5% for retail and office components respectively, which is made reference to the current vacancy. With reference to the historical bad debts ratios, we consider that the bad debts allowance should be 1% of the net rent received. In the case of the Fortune Plaza units, the bad debt ratio was 2.7% for the six months ended 30 June 2005. There were no bad debt in the other periods.

We have made reference to the Building Condition Survey Report, which states that no immediate capital expenditure will be incurred as the Subject Property is maintained in a reasonable condition commensurate with its age. We have adopted the forecast of the cost for large scale repair and maintenance from 2006 to 2015 provided by the Manager. No deduction has been made for the expected cost for small scale, routine repair and maintenance as we understand from the Manager that the small scale, routine repair and maintenance costs, for maintaining the current condition of the Subject Property, are covered by the management fee paid by tenants. As advised by the Manager, any costs incurred in non-conformities will be settled by Guangzhou Investment Company Limited (“GZI”).

VI-54 APPENDIX VI-B INDEPENDENT PROPERTY VALUATION REPORT

We have also deducted amounts for business tax, stamp duty, urban real estate tax, flood prevention fee, insurance, cost for large scale repair and maintenance, and service fees.

In our calculation, we have not deducted any acquisition costs and disposal costs. We are of the opinion that these issues would be taken into account by a prospective purchaser.

In preparing our valuations for the Subject Property, we have had regard to asking or transacted rental income comparables within similar prime office and retail developments in the locality. For details, reference should be made to Section 3.1 of this report.

In our assessment, we have valued the Subject Property using the following assumptions:

Property Office Portion Retail Portion

Terminal Capitalisation Rate 7.5% 9.5% Discount Rate 11% 11% Growth Rate — Year 1 8% 10% Growth Rate — Year 2 2% 12% Growth Rate — Year 3 0% 16% Growth Rate — Year 4 0% 10% Growth Rate — Year 5 2% 10% Growth Rate — Years 6 to 10 6% 5% Vacancy Loss 5% 1% Bad Debts 1% 1%

The growth rates are based on our local market research. We have also made reference to the Independent Market Research Report prepared by Cushman & Wakefield (HK) Limited.

Vacancy loss is based on our view on the supply and demand and our local market knowledge of the relevant property market in Guangzhou.

VI-55 APPENDIX VI-B INDEPENDENT PROPERTY VALUATION REPORT

Projected Outgoings Items Projected Outgoings

Service Fees based on the 4% of gross rental income tenancy services agreement Cost for Large Scale Repair & Nil in 2005 Maintenance as advised by the Manager Nil in 2006 RMB75,300 in 2007 RMB256,000 in 2008 RMB366,400 in 2009 RMB85,300 in 2010 RMB125,500 in 2011 RMB145,600 in 2012 RMB145,600 in 2013 RMB376,400 in 2014 RMB291,000 in 2015 Sundry Expenses 0.2% of rental income Insurance Fixed Amount Business Tax 5.0% of rental income PN 25 (b) Flood Prevention Fee 0.09% of rental income Urban Real Estate Tax original value of building x 70% x 1.2% Stamp Duty 0.1% of gross rental income

No immediate capital expenditure is included as a projected outgoings item with reference to the Building Condition Survey Report.

Based on the above, we have valued the Subject Property at a value of HK$531,000,000 taking account of outgoings on the taxes and cost items.

The summary is as follows:

Unit Rate on Capitalisation Discount Gross Floor Property Rate Rate Value Area (HK$) (HK$/sq.m.)

Retail portion 9.5% 11% 92,000,000 23,877 Office portion 7.5% 11% 439,000,000 12,026

Total: 531,000,000 13,158

VI-56 APPENDIX VI-B INDEPENDENT PROPERTY VALUATION REPORT

3.3 Sales Comparison Approach

In preparing our valuations of the Subject Property, we have had regard to asking or transacted comparables within similar prime office developments in the locality.

For the purposes of market comparables compositions, we have identified a number of comparables from our own database (which is based on the most recent data available to us). Due to the limited number of actual transaction available to us, we have analysed lettings from a variety of similar type of buildings in the locality in 2004 and we consider the comparables are sufficient to derive the market value of the Subject Porperty.

Adjustments have been made for various factors to the evidence such as location, building age, efficiency and time. The details are as follows.

Retail Sales Comparables

Comparable 1 Comparable 2 Comparable 3 Comparable 4 Comparable 5 Comparable 6 Comparable 7

Address Ti Yu Dong Road Ti Yu Dong Road Ti Yu Dong Road Ti Yu Dong Road Ti Yu Dong Road Ti Yu Dong Road Ti Yu Dong Road District Tian He District Tian He District Tian He District Tian He District Tian He District Tian He District Tian He District ( ) ( ) ( ) ( ) ( ) ( ) ( ) Date of Transaction May-04 Jul-04 Jul-04 Sep-04 Sep-04 Sep-04 Sep-04 Unit A shop unit A shop unit A shop unit A shop unit A shop unit A shop unit A shop unit Level 1111111 Gross Floor Area (sq.m.) 105.2 83.6 65.3 59.7 59.7 343.4 1,147.0 Date of Completion 2003 2003 2003 2003 2003 2003 2004 Nature of Transaction Transacted Transacted Transacted Transacted Transacted Transacted Transacted Transacted Price on GFA 7,150,880 4,920,955 4,041,651 1,374,020 1,374,020 7,897,740 51,608,075 (RMB) Unit Price on GFA 67,974 58,863 61,894 23,015 23,015 22,999 44,994 (RMB/sq.m.) Adjusted Unit Price on 39,984 34,595 36,416 20,286 20,286 20,286 38,272 GFA (RMB/sq.m.)

VI-57 APPENDIX VI-B INDEPENDENT PROPERTY VALUATION REPORT

comparables range from RMB20,286 to 39,984/sq.m. Taking the average of all the seven comparables will give a unit rate of approximately RMB30,000/sq.m. for Level 1 of the podium of the Subject Property. By allowing 50% discount to reflect the floor level difference for Level 2, the unit market value is RMB15,000 sq.m.

For the purposes of market comparables compositions, we have identified a number of comparables from our own database (which is based on the most recent data available to us). Due to the limited number of actual transaction available to us, we have analysed lettings from a variety of similar type of buildings in the locality in 2004 and we consider the comparables are sufficient to derive the market value of the Subject Porperty.

Office Sales Comparables

Comparable 1 Comparable 2 Comparable 3 Comparable 4 Comparable 5 Comparable 6

Address Ti Yu Dong Road Ti Yu Dong Road Ti Yu Dong Road Ti Yu Dong Road Ti Yu Dong Road Ti Yu Dong Road District Tian He District Tian He District Tian He District Tian He District Tian He District Tian He District ( ) ( ) ( ) ( ) ( ) ( ) Date of Transaction Dec-04 Dec-04 Dec-04 Nov-04 Nov-04 Nov-04 Unit An office unit, An office unit, An office unit, An office unit, An office unit, An office unit, West Tower West Tower West Tower East Tower East Tower East Tower Level 14 14 14 11 27 11 Gross Floor Area 189.5 125.8 189.5 191.7 125.5 188.8 (sq.m.) Date of Completion 2003 2003 2003 2003 2003 2003 Efficiency Ratio 71% 71% 71% 71% 71% 71% Nature of Transaction Transacted Transacted Transacted Transacted Transacted Transacted Transacted Price on 2,822,805 1,874,569 2,822,805 2,454,272 1,756,720 2,529,920 GFA (RMB) Transacted Price on 14,896 14,901 14,896 12,803 13,998 13,400 GFA (RMB/sq.m.) Adjusted Unit Price on 14,751 14,751 14,751 12,672 13,860 13,266 GFA (RMB/sq.m.)

Adjustments have been made based on our own judgement and knowledge of market. We had regard to six comparables in deriving the unit market value of the office portion of the Subject Property. All comparables are located in the same building where the Subject Property is located. Adjustments have been made for time, location, building quality, size and etc.. The adjusted unit rates of these comparables range from RMB12,672 to 14,751/sq.m. Taking the average of Comparable 1 to 6 will give a unit rate of approximately RMB14,000/sq.m.

Based on the above, we have valued the Subject Property at a value of HK$535,000,000.

VI-58 APPENDIX VI-B INDEPENDENT PROPERTY VALUATION REPORT

The summary is as follows:

Unit Rate on Gross Property Value Floor Area (HK$) (RMB/sq.m.)

Retail portion 63,000,000 16,350 Office portion 472,000,000 12,930

Total 535,000,000 13,257

3.4 Valuation Comment

Usage in Valuation Valuation Building Basis for Basis After Ownership Existing Existing Expiry of Unit Tower Certificate Usage Tenancy Tenancy

Levels 1 to 2 Podium Commercial Retail/Office Retail Retail Levels 3 to 5 Podium Commercial Office Office Office Level 27 West Tower Commercial Office Office Office (114 Ti Yu Dong Road) Level 37 East Tower Commercial Office Office Office (116 Ti Yu Dong Road) Other units on or East Tower and Office Office Office Office above Level 8 West Tower

VI-59 APPENDIX VI-B INDEPENDENT PROPERTY VALUATION REPORT

4. VALUATION SUMMARY

We have summarised the calculation results of each approach in the table below: Ch. 6.8 (c)(x) Valuation Method Value (HK$)

Income Capitalisation 559,000,000 Discounted Cash Flow 531,000,000 Sales Comparison 535,000,000

Based on our primary valuation method of Income Capitalisation Approach including Discounted Cash Flow Analysis, we are of the opinion that the Market Value of the Subject Property (the property interest to be acquired by GZI REIT) in its existing state as at the date of valuation was HONG KONG DOLLARS FIVE HUNDRED AND FORTY-FIVE MILLION ONLY (HK$545,000,000) assuming it is available for sale in the market with the benefit of existing tenants and the property title are free from all material encumbrances or defects. The Market Value of the Subject Property is an average of the values derived using the Income Capitalisation Approach and Discounted Cash Flow Analysis.

VI-60 APPENDIX VI-C INDEPENDENT PROPERTY VALUATION REPORT

Valuation of various units of the property (the “Subject Property”) to be acquired by GZI Real Estate Investment Trust (the “GZI REIT”) located in City Development Plaza, Nos. 185, 187 and 189, Ti Yu Xi Road, Tian He District, Guangzhou, Guangdong, The People’s Republic of China (the “PRC”)

1 SUMMARY OF THE SUBJECT PROPERTY Ch. 6.8 (c)(iv)

According to the PRC Legal Opinion, 165 Building Ownership Certificates have been issued in respect of the Subject Property. The details of the Subject Property are summarised as follows:

1. Current Registered : Full Estates Investment Limited Owner ( )

2. Type of Land Use : Granted Right

3. Town Plan Zoning : The zoning of the underlying land of City Development Plaza was described as “commercial/residential”.

4. Interest Valued : Leasehold interest of the Subject Property

5. Property Description : The Subject Property forms a portion of a 28-storey Grade A commercial building. (See Section 2.5 for details)

6. Gross Floor Area : Total: 42,397.4 sq.m. (“GFA”) of the Subject Office: 30,639.8 sq.m. Property Retail: 11,757.6 sq.m.

7. Lease Term : Levels 1-3: 40 years from 27 January 1997 Levels 6-11, 16-28: 50 years from 27 January 1997

8. Usage : Levels 1-3: Commercial Levels 6-11,16-28: Office

9. Internal Floor Area of : 32,654.9 sq.m. the Subject Property

10. Gross Rentable Area : 42,397.4 sq.m. of the Subject Property

11. Construction : 1997 Completion Date of City Development Plaza

VI-61 APPENDIX VI-C INDEPENDENT PROPERTY VALUATION REPORT

12. Valuation Approach : Income Capitalisation Approach including Discounted Cash Flow Analysis, cross-checked by the Sales Comparison Approach

13. Date of Valuation : 30 September 2005

14. Market Value in : HK$385,500,000 existing state as at the Date of Valuation

15. Unit Value on Gross : HK$9,093 per sq.m. Floor Area

16. Net Passing Income : RMB39,582,540 per annum as at the Date of Valuation

17. Fully Leased Net : RMB41,887,560 per annum Income as at the Date of Valuation

18. Estimated Market : RMB45,207,768 per annum Rental Income as at the Date of Valuation

19. Discount Rate :11% adopted for Discounted Cash Flow Analysis only

20. Exchange Rate as at : HK$1 = RMB1.043 the Date of Valuation

21. Term Yield : Office: 8.5% Retail: 11.0%

22. Reversionary Yield : Office: 9.5% Retail: 12.0%

23. Occupancy Rate as at : Office: 93% the Date of Valuation Retail: 85.5%

24. Vacancy Allowance : Office: 4% Retail: 2%

25. Market Comment : We consider the marketability of the Subject Property to be reasonable in view of its location and accessibility.

Note: The usage is based on the Building Ownership Certificates and the PRC Legal Opinion.

VI-62 APPENDIX VI-C INDEPENDENT PROPERTY VALUATION REPORT

2. THE SUBJECT PROPERTY Ch. 6.8(c)(xv)(xvi)

2.1 Situation and Locality

City Development Plaza is situated on the western side of Ti Yu Xi Road in Tian He District, Guangzhou, Guangdong, the PRC. Ti Yu Xi Road forms one axis of the square surrounding the Tian He Stadium and has become one of the main CBDs in Guangzhou.

2.2 Surrounding Development and Environmental Issues

The pedestrian traffic flow along that section of Ti Yu Xi Road is moderate as it is located at the less busier side of the Tian He stadium.

2.3 Availability of and Access to Public Transport

General accessibility of City Development Plaza is considered good as public transportation such as taxis and buses are available along Ti Yu Xi Road. Bus stops are located at 2 minutes walk from City Development Plaza.

City Development Plaza is located at an approximately 10 minutes walk from Ti Yu Xi Station on No. 1 metro line.

VI-63 APPENDIX VI-C INDEPENDENT PROPERTY VALUATION REPORT

2.4 Car Accessibility and Road Frontage

City Development Plaza is directly accessible from Ti Yu Xi Road.

Travelling time to major areas of the City through driving:

Baiyun International Airport 45 minutes Teem Plaza 1 minute Guangzhou East Train Station 5 minutes

2.5 Description of the Development Ch. 6.8(c)(iv)

City Development Plaza, a 28-storey Grade A commercial building plus a 2-storey basement carpark, is located at Nos. 185, 187 and 189 Ti Yu Xi Road, Tian He District, in Guangzhou’s prime business area. The building comprises a 5-storey commercial podium and office floors from Levels 6 to 28. According to the information provided by the Manager, the development has a total gross floor area of 74,049.2 sq.m.

The area breakdown of City Development Plaza is summarized as below:

Gross Level Usage Floor Area (sq.m.)

Basement 1 and Basement 2 Carpark, 12,500.6 Ch. 6.8 (c)(iii) Machinery Room Level 1-3 Commercial 11,757.5 Level 4 Restaurant 4,639.3 Level 5 Club House 1,724.5 Level 6-28 Office 43,427.3

Total: 74,049.2

The commercial portion is situated behind the main entrance lobby serving the office levels, and is divided into separate retail units arranged around an atrium. The ground level of the atrium is used for exhibition purposes.

The site of the building comprises a regular and level plot having its main frontage onto Ti Yu Xi Road on which a 5-storey commercial portion with an office tower (rising from the 6th to 28th storey) has been built. The building was completed in 1997.

The building facilities include an exclusive clubhouse, restaurants, a conference centre and car parking spaces.

VI-64 APPENDIX VI-C INDEPENDENT PROPERTY VALUATION REPORT

The layout and design of the Subject Property is square in shape.

2.6 Interest to be Acquired by GZI REIT

GZI REIT is acquiring a portion of the development and the details of the interest to be Ch. 6.8(c)(iv) acquired are listed below:

Gross Floor Usage Floor Area Remarks Ch. 6.8 (c)(iii) (sq.m.)

Portion of Level 1 Commercial 1,580.2 Including management office Portion of Level 1 Commercial 1,707.4 This portion is the atrium of Level 1 which is a not retail unit and not for permanent lease. The whole of Level 2 Commercial 3,977.0 The whole of Level 3 Commercial 4,493.0 Portion of Level 6 Office 1,487.3 Portion of Level 7 Office 818.1 Portion of Level 8 Office 922.2 Portion of Level 9 Office 795.7 Portion of Level 10 Office 1,383.3 The whole of Level 11 Office 1,844.3 The whole of Level 16 Office 1,844.3 Portion of Level 17 Office 1,717.9 The whole of Levels 18 and 19 Office 3,688.7 1,844.34 sq.m. for each level Portion of Level 20 Office 1,613.8 Portion of Level 21 Office 1,613.8 The whole of Levels 22 to 28 Office 12,910.4 1,844.34 sq.m. for each level

Total: 42,397.4

Note: The breakdown of the gross floor area and the usage is based on the Building Ownership Certificates and the PRC Legal Opinion.

VI-65 APPENDIX VI-C INDEPENDENT PROPERTY VALUATION REPORT

2.7 Specification, Services and Finishes of the Development Ch. 6.8(c)(iv)

City Development Plaza is constructed of reinforced concrete and is decorated with marble or granite wall and floor tiles at the main lobby and with gypsum false ceiling. The specification of the building includes central air-conditioning system. Main services comprising electricity, water and telecommunications are provided to the building.

The office portion is generally decorated with carpet floor or homogenous floor tile, wallpaper and false ceiling.

The retail podium is served by 2 passenger lifts, 4 pairs of escalators and 4 staircases. The office lifts serve all floors.

The office portion is served by 6 passenger lifts, 2 service lifts and 2 staircases.

2.8 Building Condition of the Development

According to the Building Condition Survey report, the building is maintained in a reasonable condition. City Development Plaza and its vehicular access are generally in compliance with the record plans furnished by Guangzhou City Construction & Development Co. Ltd.

For the non-conformity items, some minor deviations such as additional store rooms were found by the building surveyor.

For further information of the building condition, reference should be made to the Building Condition Survey report.

We are of the opinion that the non-conformity items have no material impact on the value of the Subject Property.

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2.9 Current Rental Income Ch. 6.8(c)(xi)(xiv)

As at the date of valuation, 14.5% or 1,711.4 sq.m. of the retail portion and 7.0% or 2,126.5 sq.m. of the office portion of the Subject Property were vacant.

According to the supplied rent roll as at the date of valuation, for which a sample of 20% of leases (which is equivalent to about 30% of the total passing rental income) were checked by us and were found to be in order, the existing net monthly rental income and equivalent annual net rental income was as follows:

Monthly Net Annual Net Gross Rental Rental Portion Floor Area Income Income (sq.m.) (RMB) (RMB)

Retail Portion 10,046.2 623,194 7,478,328 Office Portion 28,513.3 2,675,351 32,104,212

As at the date of valuation, for the retail portion, the retail units were leased to 5 tenants. For office portion, the office units were leased to over 50 tenants.

According to the supplied information, we understand that rental income is exclusive of property management fee and other outgoings such as water, electricity, gas, telephone, air-conditioning charges.

The total current net passing rental income received and the total estimated market rental income as at the date of valuation were RMB3,298,545 and RMB3,767,314 respectively. The total current net passing rental income is 12% lower than the total estimated market rental income. The estimated net monthly market rental income is based on the unit market rental income of different levels of the retail and office portions of the Subject Property in Section 3.1.

VI-67 APPENDIX VI-C INDEPENDENT PROPERTY VALUATION REPORT

As at the date of valuation, according to the information provided by the Manager, there were related parties lettings in the Subject Property including Unit 101 and Portion of Level 2( ), Portion of Unit 103 ( ) and part of Level 16 of which the tenancies are as follows:

Market Rental Net Unit Net Income as Gross Monthly Monthly at the Floor Rental Rental date of Lease Term Unit Tenant Area Income Income valuation From To (sq.m.) (RMB) (RMB/ (RMB/ sq.m.) sq.m.)

Unit 101 , a subsidiary of 881.3 110,144 125 200 9/15/2002 12/31/2005 Guangzhou Investment Company Limited (“GZI”) Portion of , a subsidiary of GZI 639.9 42,095 66 140 11/1/2003 12/31/2005 Level 2 Portion of 97.0 485 5 200 5/1/2004 4/30/2006 Unit 103 Guangzhou Yicheng Property Management Ltd, a subsidiary of GZI Portion of 922.2 82,995 90 90 1/1/2005 12/31/2007 Level 16 Portion of , 46.1 4,153 90 90 1/1/2005 12/31/2007 Level 16 a parent company of GZI Portion of 138.3 12,449 90 90 1/1/2005 12/31/2007 Level 16

As advised by the Manager, as at the date of valuation, we understand that the tenancy of Portion of Unit 103 for the related party — Guangzhou Yicheng Property Management Ltd., will continue to be renewed at the same rental income level as the existing tenancy and the tenancies of Unit 101 and a Portion of Level 2 for the related party will be renewed at the then market rental income and we have considered this in our valuation.

The property is occupied by various tenants from various industries such as finance/insurance, property, information technology, telecommunications, manufacturing/ engineering, shipping, etc.

2.10 Occupancy Rate Ch. 6.8(c)(vi)

According to the PRC Legal Opinion, the majority of the Subject Property with a total floor area of approximately 38,559.4 sq.m. was leased to various tenants as at the date of valuation. This equates to an occupancy rate of about 91% of the Subject Property to be acquired by GZI REIT. The Subject Property is occupied by various tenants such as Guangzhou Wisdom Valley Development Co. Ltd., Cosco Guangzhou International Freight Co. Ltd., Taikang Life Insurance Co. Ltd., Shenzhen Development Bank, AXA-Minmetals Assurance Co. Ltd. Guangzhou Branch and Guangdong Mobile Communication Co., Ltd..

VI-68 APPENDIX VI-C INDEPENDENT PROPERTY VALUATION REPORT

2.11 Lease Cycle Duration and Expiry Profile Ch. 6.8(c)(vii)(viii)

In general, the typical lease terms of all tenancies vary between 1 and 6 years and are on normal local commercial terms with agreed net monthly rentals generally ranging between RMB40 per sq.m. and RMB503 per sq.m. with an average unit monthly net rental income of RMB62 per sq.m. and RMB94 per sq.m. for the retail and office portions respectively.

The details of the lease term duration are shown as follows:

Lease term less than or By Gross Lease term greater than equal to By Number Floor Area (year) (year) (%) (%)

0 1 24.7 18.9 1 2 26.0 11.0 2 3 36.3 31.9 346.59.6 455.21.8 5 6 1.3 17.6 vacant area n.a. 9.0

100.0 100.0

The details of the lease expiry profile are shown as follows:

By Gross % of tenancies due to expire in each year By Number Floor Area (%) (%)

2005 16.2 8.6 2006 52.9 32.1 2007 25.0 19.9 2008 4.4 11.9 2009 0.0 0.0 2010 and beyond 1.5 18.5 Vacant n.a. 9.0

Total 100.0 100.0

VI-69 APPENDIX VI-C INDEPENDENT PROPERTY VALUATION REPORT

For Level 1 of retail portion, save for the tenancies entered into with related parties, the typical lease terms of the tenancies varied between 2 and 5 years and were on normal local commercial terms with agreed net monthly rentals as at the date of valuation generally ranging between RMB107 per sq.m. and RMB503 per sq.m.

For Levels 2 and 3 of retail portion, save for the tenancy entered into with a related party on Level 2, the lease terms of the tenancies were 2 and 6 years and were on normal local commercial terms with agreed net monthly rentals as at the date of valuation at RMB75 per sq.m. and RMB40 per sq.m. respectively.

For office portion, the typical lease terms of the tenancies varied between 1 and 3 years and were on normal local commercial terms with agreed net monthly rentals as at the date of valuation generally ranging between RMB80 per sq.m. and RMB115 per sq.m.

2.12 Summary of Material Rent Review Provisions Ch. 6.8(c)(v)(ix)(xiii)

The Subject Property has the following material rent review provisions:

Gross Net Monthly Lease Term Level Floor Area Rental Income From To (sq.m.) (RMB)

Unit on Level 1 234.4 117,850 1 November 2002 31 October 2005 123,743 1 November 2005 31 October 2007 Portion of Level 2 and 7,830.1 313,203 1 January 2003 30 June 2006 Unit on Level 3 344,523 1 July 2006 30 June 2007 396,201 1 July 2007 30 June 2010 Unit on Level 26 1,844.3 Rent Free 1 September 2001 30 November 2001 151,236 1 December 2001 31 August 2003 160,310 September 2003 31 August 2004 169,929 1 September 2004 31 August 2005 180,125 1 September 2005 31 August 2006 Unit on Level 27 1,844.3 Rent Free 17 October 2001 31 December 2001 175,212 1 January 2002 16 October 2003 182,220 17 October 2003 16 October 2004 189,509 17 October 2004 16 October 2005 197,089 17 October 2005 16 October 2006

According to the PRC Legal Opinion, there are no sub-leases or tenancies in the Subject Property except for the leases of Units 202 and 301. We consider that this sub-lease does not affect the value of the Subject Property.

We are not aware of any material options or rights of pre-emption which may affect the value of the Subject Property. We have considered the right to renew in our valuation.

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2.13 Historic Outgoings

As advised by the Manager, the current monthly property management fees paid by the tenants for the retail and office portions are RMB33 per sq.m. and RMB25 per sq.m. respectively and the total property management income covers the total property management expenses.

We are of the opinion that the current property management fee is in line with the office market level of similar developments in the locality. (See Section 2.14.3)

2.14 Property Management

2.14.1Tenancy Services Agreement

A tenancy services agreement was entered into between the Manager, Full Estates Investment Limited ( ) (the “Property Company”) and Guangzhou Yicheng Property Management Co., Ltd. (the “Leasing Agent”) on 7 December 2005 for an initial term of three years. Under this agreement the Leasing Agent (who is also the property manager of City Development Plaza) will be paid a remuneration of 4% per annum of the gross revenue (“Service Fees”) receivable by the Leasing Agent from the operation of the Subject Property. The Leasing Agent agrees that, for so long as it is the property manager of City Development Plaza, the Service Fees paid to the Leasing Agent shall also be in satisfaction of the property management fees which it is entitled to receive from the Property Company for any vacant units of the Subject Property under the property management agreement.

2.14.2 Deed of Mutual Covenant ( )

The Deed of Mutual Covenant was passed in a resolution of the Owners’ Meeting of City Development Plaza dated 27 June 2005. It comprises provisions relating to definitions of common areas, common facilities and other terms, the beneficial interest and obligations of the individual owners, rights of the property developer, general, financial and other issues of management, management fees and other charges, rights and duties of property manager, owners’ meeting and owners’ committee and other related issues.

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2.14.3 Property Management Fee

As advised by the Manager, the monthly management fees paid by the tenants for the retail and office portions are RMB33 per sq.m. and RMB25 per sq.m. respectively which is at the market level of similar developments in the locality.

Management Management fee for Retail fee for Office Name of Building Portion Portion (RMB/sq.m.) (RMB/sq.m.)

Gao Sheng Building ( ) Not Applicable 27 Times Square ( )3626 Goldlion Building ( )3329 Pingan Insurance Building ( )3627

3. VALUATION

3.1 Income Capitalisation Approach

We have applied individual yields to the retail and office components of the Subject Property, with a higher yield for the retail component to reflect the perceived higher levels of risk associated with the retail property market which is less mature and more volatile compared to the office market in Guangzhou (i.e. the retail yield is higher than office yield)

VI-72 APPENDIX VI-C INDEPENDENT PROPERTY VALUATION REPORT

In preparing our valuations, we have had regard to asking or transacted rental income comparables within similar prime office and retail developments in the locality.

For Level 1 of retail portion, the typical net monthly passing rentals as at the date of valuation generally range between RMB107 per sq.m. and RMB503 per sq.m. and the average was RMB170 per sq.m. For Levels 2 and 3 of retail portion, the net monthly passing rental income is RMB75 per sq.m. and RMB40 per sq.m. respectively. We are of the opinion that the current passing rentals were generally below the market level of RMB200 per sq.m., RMB140 per sq.m. and RMB100 per sq.m. for Levels 1, 2 and 3 respectively as at the date of valuation.

For office portion, the typical net monthly passing rentals generally ranging between RMB80 per sq.m. and RMB115 per sq.m. and the average is RMB94 per sq.m. We are of the opinion that the current passing rentals were slightly higher than the average market level of RMB90 per sq.m. as at the date of valuation.

For the purposes of market comparables compositions, we have identified a number of comparables from our own database (which is based on the most recent data available to us). Due to the limited number of actual transaction available to us, we have analysed lettings from a variety of similar type of buildings in the locality in 2004 and we consider the comparables are sufficient to derive the market rental of the Subject Property.

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The details of the rentals comparables are as follows:

Retail Rental Income Comparables:

Comparable1 Comparable 2 Comparable 3 Comparable 4 Comparable 5

Address Lin He Xi Road Lin He Xi Road Ti Yu Dong Road Tian He Road Tian He Road District Tian He District Tian He District Tian He District Tian He District Tian He District ( ) ( ) ( ) ( ) ( ) Date of Transaction Dec-04 Dec-04 Nov-04 May-04 Apr-04 Unit A shop unit A shop unit A shop unit A shop unit A shop unit Level 1 1 Podium 1 1 Gross Floor Area (sq.m.) 505 223.8 Around 1,000 30 45.5 Date of Completion 2004 2004 2003 1995 1995 Nature of Transaction Transacted Transacted Transacted Transacted Transacted Lease Term (year) 5.00 6.00 6.00 6.00 6.00 Lease Commencement 1-Nov-04 16-Oct-04 15-Nov-04 26-May-04 Jun-04 Date Lease Expiry Date 31-Oct-09 15-Oct-10 14-Oct-10 25-May-10 Jun-10 Net Monthly Rental 75,750 31,329 282,080 37,800 45,500 Income on GFA (RMB) Net Monthly Rental 150 140 282 1,260 1,000 Income on GFA (RMB/sq.m.) Adjusted Net Monthly 121 101 277 278 221 Rental Income on GFA (RMB/sq.m.)

We have had regard to five comparables in deriving the rental income of the podium level of the Subject Property. Adjustments have been made for time, location, building quality, size, pedestrian flow and etc. The adjusted unit rentals of these comparables range from RMB101/sq.m. to RMB278/sq.m. Taking the average of all the five comparables will give a monthly unit rental income of approximately RMB200/sq.m. for Level 1 of the podium of the Subject Property. By allowing 30% and 50% discount to reflect the floor level difference for Levels 2 and 3, the monthly unit rental income is RMB140/sq.m. and RMB100/sq.m. respectively.

VI-74 APPENDIX VI-C INDEPENDENT PROPERTY VALUATION REPORT

Office Rental Income Comparables:

Comparable 1 Comparable 2 Comparable 3 Comparable 4 Comparable 5 Comparable 6 Comparable 7 Comparable 8

Address Ti Yu Xi Road Ti Yu Xi Road Ti Yu Xi Road Ti Yu Xi Road Ti Yu Xi Road Ti Yu Xi Road Ti Yu Xi Road Ti Yu Xi Road District Tian He District Tian He District Tian He District Tian He District Tian He District Tian He District Tian He District Tian He District ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) Date of Transaction Sept-05 Sep-05 Sep-05 Sep-05 Sept-05 Aug-05 Aug-05 Aug-05 Unit An office unit An office unit An office unit An office unit An office unit An office unit 10C An office unit Level 19 10 19 24 19 9 10 17 Gross Floor Area 208.2 230.5 126.5 818.1 126.5 104.1 126.5 208.2 (sq.m.) Date of Completion 1997 1997 1997 1997 1997 1997 1997 1997 Efficiency Ratio 72% 72% 72% 72% 72% 72% 72% 72% Nature of Transaction Transacted Transacted Transacted Transacted Transacted Transacted Transacted Transacted Lease Term (year) 2.00 2.00 0.99 2.06 1.00 0.58 2.00 0.42 Lease Commencement 01-Sep-05 01-Sep-05 01-Sep-05 09-Sep-05 01-Sep-05 01-Aug-05 01-Aug-05 01-Aug-05 Date Lease Expiry Date 31-Aug-07 31-Aug-07 30-Aug-06 30-Sep-07 31-Aug-06 28-Feb-06 31-Jul-07 31-Dec-05 Net Monthly Rental 18,737 20,749 11,760 73,626 11,381 9,161 11,381 19,571 Income on GFA (RMB) Net Monthly Rental 90 90 93 90 90 88 90 94 Income on GFA (RMB/sq.m.) Adjusted Net Monthly 90 90 93 90 90 88 90 94 Rental Income on GFA (RMB/sq.m.)

Based on the analysis of Comparables 1 to 8 which are situated within City Development Plaza and were transacted recently, the average of the adjusted unit rate is approximately RMB90/sq.m. We have cross checked with comparables of other buildings which are listed in the table below and we are of the opinion that RMB90/sq.m. is reasonable.

VI-75 APPENDIX VI-C INDEPENDENT PROPERTY VALUATION REPORT

Office Rental Income Comparables:

Comparable 9 Comparable 10 Comparable 11 Comparable 12 Comparable 13 Comparable 14

Address Huang Pu Xi Ti Yu Xi Road Tian He Bei Road Tian He Bei Road Lin He Xi Road Lin He Xi Road Avenue District Tian He District Tian He District Tian He District Tian He District Tian He District Tian He District ( ) ( ) ( ) ( ) ( ) ( ) Date of Transaction Mar-05 Nov-04 Apr-05 Mar-05 Aug-05 Jul-05 Unit whole whole 5201, 5204-06 5301, 5308 1405 3401, 3402, 3408, 3409 Level 24 23 52 53 14 34 Gross Floor Area 1345.8 1,222.6 1108.5 648.6 161.5 1,623.3 (sq.m.) Date of Completion 2000 2003 1997 1997 2004 2004 Efficiency Ratio 70% 70% 65% 65% 70% 70% Nature of Transaction Transacted Transacted Transacted Transacted Transacted Transacted Lease Term (year) 2.92 3.00 1.69 1.92 2.00 5.00 Lease Commencement 11-Apr-05 01-Nov-04 24-Apr-05 21-May-05 10-Aug-05 01-Aug-05 Date Lease Expiry Date 10-Mar-08 31-Oct-07 31-Dec-06 20-Apr-07 09-Aug-07 31-Jul-10 Net Monthly Rental 100,935 110,036 146,428 97,286 21,485 202,909 Income on GFA (RMB) Net Monthly Rental 75 90 132 150 133 125 Income on GFA (RMB/sq.m.) Ajusted Net Monthly 85 94 113 125 116 112 Rental Income on GFA (RMB/sq.m.)

The existing monthly net rental income as at the date of valuation was RMB3,298,545 and it is anticipated that the development will maintain the current occupancy level of around 91% which is in line with the occupancy rate of similar type of buildings in the market.

In our assessment, the term yields adopted are 11% for the retail component and 8.5% for the office component. The term yields adopted are lower than the market yields derived below because the current passing rental income of the Subject Property is lower than the estimated current market rental income. The reversionary yields adopted are 12% for the retail component and 9.5% for the office component. We have applied individual yields to the retail and office components of the Subject Property, with a higher yield for the retail components to reflect the perceived higher levels of risk associated with the retail property market which is less mature and more volatile compared to the office market in Guangzhou.

VI-76 APPENDIX VI-C INDEPENDENT PROPERTY VALUATION REPORT

The reversionary yields are based on an analysis of the unit market rental income and the unit market value of the comparables collected for the Subject Property. From the previous analysis, the unit market rental income for Level 1 of the retail podium is RMB200/sq.m. In Section 3.3, the unit market value for Level 1 is RMB20,500/sq.m. The market yield is 11.7%. We have adopted 12% as the reversionary yield for the retail component of the Subject Property which is within the range of the market comparable transactions as follows:

Retail market:

Estimated Unit Annual Market Net Rental Occupancy Gross Actual Income as at Status as at Floor Date of Transaction Sale Price the Date of the date of Market Unit Building Address Area Transaction Price per sq.m. Transaction Transaction Yield (sq.m.) (RMB) (RMB/sq.m.) (RMB/sq.m.) (Note 2) (Note 1)

Whole Confidential Confidential 35,000 End of 2004 265,000,000 7,571 796 20 years 10.5% Sale and Leaseback Whole Confidential Ti Yu Xi Road 1,147 Sept-04 51,608,075 44,994 4,752 Vacant 10.6% B205 Confidential Confidential 15.6 Sept-05 1,244,800 79,795 9,600 Vacant 12.0% B107 Confidential Confidential 16.5 Sept-05 1,405,050 85,155 10,260 Vacant 12.0% Three shop units Ti Yu Dong 463 Sept-04 10,645,780 22,993 2,688 Vacant 11.7% Road

Notes:

1) The estimated market net rental income is based on our analysis of recent lettings of comparable properties.

2) The market yield is the estimated market net rental income per annum divided by the actual transaction price.

VI-77 APPENDIX VI-C INDEPENDENT PROPERTY VALUATION REPORT

From the previous analysis, the unit market rental income for office portion is Ch. 6.8 (c)(xii) RMB90/sq.m. In Section 3.3, the unit market value for office portion is RMB10,800/sq.m. The market yield is 10%. We have adopted 9.5% as the reversionary yield for the office component based on the average of the market yield of comparable transactions as follows:

Office market:

An office unit Ti Yu Xi Road 1,450.8 Sept-04 14,508,043 10,000 1,080 Vacant 10.8% An office unit Ti Yu Dong Road 188.8 Nov-04 2,529,920 13,400 1,128 Vacant 8.4% An office unit Ti Yu Dong Road 191.7 Nov-04 2,454,272 12,796 1,128 Vacant 8.8% An office unit Ti Yu Dong Road 189.5 Dec-04 2,822,805 14,896 1,260 Vacant 8.5% An office unit Lin He Xi Road 229.3 Aug-05 2,866,125 12,449 1,512 Vacant 12.1%

Notes:

1) The estimated market net rental income is based on our analysis of recent lettings of comparable properties.

2) The market yield is the estimated market net rental income per annum divided by the actual transaction price.

We have valued the Subject Property at a value of HK$411,000,000.

The summary is as follows:

Unit Rate Reversionary on Gross Property Term Yield Yield Value Floor Area (HK$) (HK$/sq.m.)

Retail portion 11% 12% 86,000,000 7,314 Office portion 8.5% 9.5% 325,000,000 10,607

Total: 411,000,000 9,694

VI-78 APPENDIX VI-C INDEPENDENT PROPERTY VALUATION REPORT

3.2 Discounted Cash Flow Analysis

This is defined in the International Valuation Standards Committee (7th Edition), as a financial modeling technique based on explicit assumptions regarding the prospective cash flow to operating real properties. This analysis involves the projection of a series of periodic cash flows to an operating property. To this projected cash flow series, an appropriate discount rate is applied to establish an indication of the present value of the rental income stream associated with the properties. In the case of operating real properties, periodic cash flow is typically estimated as gross rental income less vacancy, bad debts, impact of taxes (stamp duty, urban real estate tax, flood prevention fee and business tax), service fees and other operating expenses. The series of periodic net operating incomes, along with an estimate of the terminal value, anticipated at the end of the projection period, is then discounted at the discount rate, being a cost of capital or a rate of return used to convert a monetary sum, payable or receivable in the future, into present value.

For the Subject Property, the terminal capitalisation rate for office portion within our calculation is 8% and the terminal capitalisation rate for retail portion is 10%. This is based on our analysis of the term yields applicable in the marketplace as set out in Section 3.1 with a discount to allow for the fact that we are capitalising a net rental income in year 11. The discount reflects the difference between the rental income stream before deductions and the net rental income together with an allowance for the security that a net rental income provides over the rental income before deduction.

VI-79 APPENDIX VI-C INDEPENDENT PROPERTY VALUATION REPORT

We have estimated that the rental income growth per annum during next 10 years for the Subject Property. Rental income growth patterns for each tenancies reflect the rent review provisions of each lease, including staged rent increase where applicable. We have assumed that upon expiry of the tenancies, typically new or existing two to five years leases will be granted or renewed on the basis of three years leases at the then prevailing market rentals.

An annual vacancy allowance and allowance for bad debts have been considered within the portfolio. An annual vacancy allowance is about 2% and 4% for retail and office components respectively, which is made reference to the current vacancy. With reference to the historical bad debts ratios, we consider that the bad debts allowance should be 1% of the net rent received. In case of the City Development Plaza units, the bad debt ratio was 1.3% for 2003, 1.8% for 2004 and 0.5% for the six months ended 30 June 2005.

We have made reference to the Building Condition Survey Report, which states that no immediate capital expenditure will be incurred as the Subject Property is maintained in a reasonable condition commensurate with its age. We have adopted the forecast of the cost for large scale repair and maintenance from 2006 to 2015 provided by the Manager. No deduction has been made for the expected cost for small scale, routine repair and maintenance as we understand from the Manager that the small scale, routine repair and maintenance costs, for maintaining the current condition of the Subject Property, are covered by the management fee paid by tenants. As advised by the Manager, any costs incurred in non-conformities will be settled by Guangzhou Investment Company Limited (“GZI”).

We have also deducted amounts for business tax, stamp duty, urban real estate tax, flood prevention fee, insurance, cost for large scale repair and maintenance, and service fees.

In our calculation, we have not deducted any acquisition costs and disposal costs. We are of the opinion that these issues would be taken into account by a prospective purchaser.

VI-80 APPENDIX VI-C INDEPENDENT PROPERTY VALUATION REPORT

In our assessment, we have valued the Subject Property using the following assumptions:

Property Office Portion Retail Portion

Terminal Capitalisation Rate 8% 10% Discount Rate 11% 11% Growth Rate — Year 1 5% 5% Growth Rate — Year 2 -2% 6% Growth Rate — Year 3 -4.5% 8% Growth Rate — Year 4 -4.5% 5.5% Growth Rate — Year 5 -2% 5.5% Growth Rate — Years 6 to 10 6% 5% Vacancy Loss 4% 2% Bad Debts 1% 1%

According to our local market research, a substantial new office supply will come onto the market in the next few years. We believe that this will have an adverse impact on the office market rental income growth rate and we expect negative growth rate for the short to medium term for City Development Plaza. This is expected to be temporary and the office market rental income rate is expected to revert to positive growth thereafter. We have made reference to the Independent Market Research Report prepared by Cushman & Wakefield (HK) Limited.

Vacancy loss is based on our view on the supply and demand and our local market knowledge of the relevant property market in Guangzhou.

VI-81 APPENDIX VI-C INDEPENDENT PROPERTY VALUATION REPORT

Projected Outgoings Items Projected Outgoings

Service Fees based on the tenancy 4% of gross rental income services agreement Cost for Large Scale Repair & RMB349,500 in 2006 Maintenance as advised by the Manager RMB250,800 in 2007 RMB1,065,900 in 2008 RMB461,700 in 2009 RMB666,900 in 2010 RMB148,200 in 2011 RMB399,000 in 2012 RMB159,600 in 2013 RMB79,800 in 2014 RMB210,900 in 2015 Sundry Expenses 0.2% of net rental income Insurance Fixed Amount

Business Tax 5.0% of rental income PN 25 (b) Flood Prevention Fee 0.09% of rental income Urban Real Estate Tax Original cost of property x 70% x 1.2% Stamp Duty 0.1% of gross rental income

No immediate capital expenditure is included as a projected outgoings item with reference to the Building Condition Survey Report.

Based on the above, we have valued the Subject Property at a value of HK$360,000,000 taking account of outgoings on the taxes and cost items.

The summary is as follows:

Unit Rate Capitalisation Discount on Gross Property Rate Rate Value Floor Area (HK$) (HK$/sq.m.)

Retail portion 10% 11% 105,000,000 8,930 Office portion 8% 11% 255,000,000 8,323

Total: 360,000,000 8,491

VI-82 APPENDIX VI-C INDEPENDENT PROPERTY VALUATION REPORT

3.3 Sales Comparison Approach

In preparing our valuations of the Subject Property, we have had regard to asking or transacted comparables within similar prime office and developments in the locality.

Adjustments have been made for various factors such as location, building age, efficiency and time. The details are as follows.

Retail Sales Comparables:

Comparable 1 Comparable 2 Comparable 3 Comparable 4 Comparable 5 Comparable 6 Comparable 7

Address Ti Yu Dong Road Ti Yu Dong Road Ti Yu Dong Road Ti Yu Dong Road Ti Yu Dong Road Ti Yu Dong Road Ti Yu Xi Road District Tian He District Tian He District Tian He District Tian He District Tian He District Tian He District Tian He District ( ) ( ) ( ) ( ) ( ) ( ) ( ) Date of Transaction May-04 Jul-04 Jul-04 Sep-04 Sep-04 Sep-04 Sep-04 Unit A shop unit A shop unit A shop unit A shop unit A shop unit A shop unit A shop unit Level 1111111 Gross Floor Area (sq.m.) 105.2 83.6 65.3 59.3 59.7 343.4 1,147.0 Date of Completion 2003 2003 2003 2003 2003 2003 2004 Nature of Transaction Transacted Transacted Transacted Transacted Transacted Transacted Transacted Transacted Price on GFA 7,150,880 4,920,955 4,041,651 1,374,020 1,374,020 7,897,740 51,608,075 (RMB) Transacted Price on GFA 67,974 58,863 61,894 23,015 23,015 22,999 44,994 (RMB/sq.m.) Adjusted Unit Price on 24,419 21,128 22,240 13,421 13,421 13,421 35,343 GFA (RMB/sq.m.)

VI-83 APPENDIX VI-C INDEPENDENT PROPERTY VALUATION REPORT

Adjustments have been made based on our own judgement and knowledge of market. We have had regard to seven comparables in deriving the unit market value of the podium level of the Subject Property. Comparable 1 to 6 are located in one building whereas Comparable 7 is close to the Subject Property. Adjustments have been made time, location, building quality, size, and pedestrian flow. The adjusted unit rates of these comparables range from RMB13,421 to 35,343/sq.m. Taking the average of all the seven comparables will give a unit rate of approximately RMB20,500/sq.m. for Level 1 of the podium of the Subject Property. By allowing 30% and 50% discounts to reflect the floor level difference for Levels 2 and 3, the unit rate is RMB14,350/sq.m. and RMB10,250/sq.m. respectively.

For the purposes of market comparables compositions, we have identified a number of comparables from our own database (which is based on the most recent data available to us). Due to the limited number of actual transaction available to us, we have analysed lettings from a variety of similar type of buildings in the locality in 2004 and we consider the comparables are sufficient to derive the market value of the Subject Property.

Office Sales Comparables:

Comparable 1 Comparable 2 Comparable 3 Comparable 4 Comparable 5 Comparable 6 Comparable 7

Address Ti Yu Dong Road Ti Yu Dong Road Ti Yu Dong Road Ti Yu Dong Road Ti Yu Dong Road Ti Yu Dong Road Ti Yu Xi Road District Tian He District Tian He District Tian He District Tian He District Tian He District Tian He District Tian He District ( ) ( ) ( ) ( ) ( ) ( ) ( ) Date of Transaction Dec-04 Dec-04 Dec-04 Nov-04 Nov-04 Nov-04 Sep-04 Unit AnofficeUnit AnofficeUnit AnofficeUnit AnofficeUnit AnofficeUnit AnofficeUnit Anofficeunit Level 14 14 14 11 27 11 5 Gross Floor Area (sq.m.) 189.5 125.8 189.5 191.7 125.5 188.8 1,450.8 Date of Completion 2003 2003 2003 2003 2003 2003 2004 Efficiency Ratio 77% 77% 77% 77% 77% 77% 75% Nature of Transaction Transacted Transacted Transacted Transacted Transacted Transacted Transacted Transacted Price on GFA 2,822,805 1,874,569 2,822,805 2,454,272 1,756,720 2,529,920 14,508,043 (RMB) Transacted Price on GFA 14,896 14,901 14,896 12,803 13,998 13,400 10,000 (RMB/sq.m.) Adjusted Unit Price on 11,590 11,590 11,590 9,956 10,890 10,423 9,840 GFA (RMB/sq.m.)

VI-84 APPENDIX VI-C INDEPENDENT PROPERTY VALUATION REPORT

Adjustments have been made based on our own judgement and knowledge of market. We have had regard to eleven comparables in deriving the unit market value of the office portion of the Subject Property. Comparable 1 to 6 are located in one building whereas Comparable 7 is close to the Subject Property. Adjustments have been made for time, location, building quality, and size. The adjusted unit rate of these comparables range from RMB9,840 to 11,590/sq.m. Taking the average of Comparables 1 to 7 will give a unit rate of approximately RMB10,800/sq.m. We have cross checked with comparables of other buildings which are listed in the table below and we are of the opinion that RMB10,800/sq.m. is reasonable.

Office Sales Comparables:

Comparable 8 Comparable 9 Comparable 10 Comparable 11

Address Lin He Xi Road Lin He Xi Road Lin He Xi Road Lin He Xi Road District Tian He District Tian He District Tian He District Tian He District ( ) ( ) ( ) ( )

Date of Transaction Aug-05 Jul-05 Jul-05 May-05 Unit 1806 1808, 1809 1807 2007 Level 18 18 18 20 Gross Floor Area (sq.m.) 229.3 295.2 96.2 96.2 Date of Completion 2004 2004 2004 2004 Efficiency Ratio 70% 70% 70% 70% Nature of Transaction Transacted Transacted Transacted Transacted Asking/Transacted Price 2,866,125 3,654,081 1,201,875 1,153,800 on GFA (RMB) Asking/Transacted Price 12,499 12,378 12,494 11,994 on GFA (RMB/sq.m.) Adjusted/Transacted Price 9,771 9,677 9,771 9,380 on GFA (RMB/sq.m.)

Based on the above, we have valued the Subject Property at a value of HK$418,000,000.

The summary is as follows:

Unit Rate on Gross Property Value Floor Area (HK$) (HK$/sq.m.)

Retail portion 105,000,000 8,930 Office portion 313,000,000 10,215

Total 418,000,000 9,859

VI-85 APPENDIX VI-C INDEPENDENT PROPERTY VALUATION REPORT

4. VALUATION SUMMARY

We have summarised the calculation results of each approach in the table below: Ch. 6.8 (c)(x) Valuation Approach/Analysis Value (HK$)

Income Capitalisation 411,000,000 Discounted Cash Flow 360,000,000 Sales Comparison 418,000,000

Based on our primary valuation method of Income Capitalisation Approach including Discounted Cash Flow Analysis, we are of the opinion that the Market Value of the Subject Property (the property interest to be acquired by GZI REIT) in its existing state as at the date of valuation was HONG KONG DOLLARS THREE HUNDRED EIGHTY-FIVE MILLION AND FIVE HUNDRED THOUSAND ONLY (HK$385,500,000) assuming it is available for sale in the market with the benefit of existing tenants and the property title are free from all material encumbrances or defects. The Market Value of the Subject Property is an average of values derived using the Income Capitalisation Approach and Discounted Cash Flow Analysis.

VI-86 APPENDIX VI-D INDEPENDENT PROPERTY VALUATION REPORT

Valuation of various units of the property (the “Subject Property”) to be acquired by GZI Real Estate Investment Trust (“GZI REIT”) located in Victory Plaza, Nos. 101 Ti Yu Xi Road, Tian He District, Guangzhou, Guangdong, The People’s Republic of China (the “PRC”).

1. SUMMARY OF THE SUBJECT PROPERTY Ch. 6.8(c)(iv)

According to the PRC Legal Opinion, 9 Building Ownership Certificates have been issued in respect of the Subject Property.

The details of the Subject Property are summarised as follows:

1. Current Registered : Keen Ocean Limited ( ) Owner

2. Type of Land Use : Granted Right

3. Town Plan Zoning : According to the State-owned Land Use Rights Grant Contract dated 27th January, 1997, the zoning of the underlying land of Victory Plaza was described as “commercial/tourism”.

4. Interest Valued : Leasehold interest of the Subject Property.

5. Property Description : The Subject Property comprises a portion of a 6-storey retail shopping centre with 1 basement level. (See Section 2.5 for details)

6. Gross Floor Area : 27,698.1 sq.m. (“GFA”) of the Subject Property

7. Lease Term :

Basement Level 1 40 years from 8 March 2004 Unit 101 40 years from 8 March 2004 Unit 102 40 years from 8 March 2004 Level 1 ( ) 40 years from 8 March 2004 Level 2 40 years from 8 March 2004 Level 3 40 years from 8 March 2004 Level 4 40 years from 8 March 2004 Level 5 40 years from 8 March 2004 Level 6 40 years from 8 March 2004

VI-87 APPENDIX VI-D INDEPENDENT PROPERTY VALUATION REPORT

8. Usage :

Basement Level 1 — Non-residential/Commercial Unit 101 — Non-residential Unit 102 — Non-residential Level 1 ( ) — Non-residential Level 2 — Non-residential Level 3 — Non-residential Level 4 — Non-residential Level 5 — Non-residential Level 6 — Non-residential

9. Internal Floor Area of : 22,847.9 sq.m. the Subject Property

10. Gross Rentable Area : 27,262.3 sq.m. of the Subject Property

11. Construction : 2003 Completion Date of Victory Plaza

12. Valuation Approach : Income Capitalisation Approach including Discounted Cash Flow Analysis, cross-checked by the Sales Comparison Approach

13. Date of Valuation : 30 September 2005

14. Market Value in : HK$533,000,000 existing state as at the Date of Valuation

15. Unit Value on Gross : HK$19,243 per sq.m. Floor Area

16. Net Passing Income : RMB30,902,628 per annum as at the Date of Valuation

17. Fully Leased Net : RMB30,902,628 per annum Income as at the Date of Valuation

18. Estimated Market : RMB61,529,964 per annum Rental Income as at the Date of Valuation

VI-88 APPENDIX VI-D INDEPENDENT PROPERTY VALUATION REPORT

19. Discount Rate :11% adopted for Discounted Cash Flow Analysis Only

20. Exchange Rate as at : HK$1 = RMB1.043 the Date of Valuation

21. Term Yield : 8.5%

22. Reversionary Yield : 10.5%

23. Occupancy Rate as at : 100% the Date of Valuation

24. Vacancy Allowance : 1%

25. Market Comment : We consider the marketability of the Subject Property to be reasonable in view of its location and accessibility.

Note: The usage is based on the Building Ownership Certificates and the PRC Legal Opinion.

2. THE SUBJECT PROPERTY

2.1 Situation and Locality

Victory Plaza, a 6-storey commercial retail centre with 4 basement levels, is located at No. 101 Ti Yu Xi Road, Tian He District, Guangzhou, Guangdong, the PRC. Victory Plaza features a 6-storey glass atrium over its entrance and a paved pedestrian mall in front of the building. As at the time of inspection, there are two office towers being constructed on top of the retail centre. As advised by the Manager, the two office towers with 52 and 36 storeys high will be completed in 2007.

Victory Plaza is located at the junction of Tian He Road and Ti Yu Xi Road. It is next to Guangzhou Book Centre and within close proximity of Teem Plaza. Ti Yu Xi Road forms one axis of the square surrounding the Tian He Stadium and has become one of the main CBDs in Guangzhou.

2.2 Surrounding Development and Environmental Issues

The pedestrian traffic flow along that section of Ti Yu Xi Road is moderate as it is located at the less busier side of the Tian He stadium.

VI-89 APPENDIX VI-D INDEPENDENT PROPERTY VALUATION REPORT

2.3 Availability of and Access to Public Transport

General accessibility of Victory Plaza is considered good as public transportation such as taxis and buses are available along Ti Yu Xi Road. Bus stops are located at 2 minutes walk from Victory Plaza.

Victory Plaza is located at an approximately 10 minutes walk from Ti Yu Xi Road Station on No. 1 metro line. The No. 3 metro line is currently under construction and the first section is scheduled to be completed by the end of 2005. The No. 1 and No. 3 metro lines are planned to build a direct underground access to the basement level 1 of Victory Plaza, which will enhance the accessibility of Victory Plaza upon its completion.

2.4 Car Accessibility and Road Frontage

Victory Plaza, situated at the junction of Tian He Road and Ti Yu Xi Road, is directly accessible from Ti Yu Xi Road.

Travelling time to major areas of the City through driving:

Baiyun International Airport 45 minutes Teem Plaza 1 minute Guangzhou East Train Station 5 minutes

2.5 Description of the Development Ch. 6.8(c)(iv)

Victory Plaza, a 6-storey commercial and retail centre and 4 levels of basement, is located at No. 101 Ti Yu Xi Road, Tian He District, in Guangzhou’s prime business area. According to the information provided by the Manager, the development has a total gross floor area of 52,568.6 sq.m.

VI-90 APPENDIX VI-D INDEPENDENT PROPERTY VALUATION REPORT

The area breakdown of Victory Plaza is summarised as below:

Level Current Usage Gross Floor Area Ch. 6.8 (c)(iii) (c)(iii) (sq.m.)

Basement 1 to 4 Car park 24,870.5 Basement 1 Commercial 1,809.2 Level 1 Commercial 3,033.5 (includes ) Level 2 Commercial 3,968.9 Level 3 Commercial 4,756.7 Level 4 Commercial 4,756.7 Level 5 Commercial 4,769.9 Level 6 Commercial 4,603.2

Total: 52,568.6

As at the time of inspection, there were two office towers being constructed on top of the retail centre. As advised by the Manager, the two office towers with 52 and 36 storeys high will be completed by 2007. The two office towers are East and West Towers with an estimated floor area of 58,823.0 sq.m. and 30,772.0 sq.m. respectively upon completion.

The site area of Victory Plaza is approximately 10,477.0 sq.m. The site of the shopping centre comprises a regular and level plot having its main frontage onto Ti Yu Xi Road on which a 6-storey commercial retail centre with 4 basement levels has been erected and was completed in 2003.

The main entrance of Victory Plaza is onto Ti Yu Xi Road. General accessibility of Victory Plaza is considered good as public transportation such as buses and taxis are available along Ti Yu Xi Road.

The layout and design of Victory Plaza is reasonable in comparison with the other shopping centres in the locality.

VI-91 APPENDIX VI-D INDEPENDENT PROPERTY VALUATION REPORT

2.6 Interest to be Acquired by GZI REIT Ch. 6.8(c)(iv)

GZI REIT is acquiring a portion of the development and the details of the interest to be acquired are listed below:

Gross Internal Ch. 6.8 (c)(iii) Level Usage Floor Area Floor Area Ch. 6.8 (c)(iii) (sq.m.) (sq.m.)

Part of Basement 1 Commercial 1,809.2 1,503.6 Level 1 (101) Commercial 473.7 442.3 Level 1 (102) Commercial 1,553.5 1,451.0 Level 1 Commercial ( ) 1,006.3 978.2 Level 2 Commercial 3,968.9 3,058.1 Level 3 Commercial 4,756.7 3,833.0 Level 4 Commercial 4,756.7 3,833.0 Level 5 Commercial 4,769.9 3,875.8 Level 6 Commercial 4,603.2 3,872.9

Total: 27,698.1 22,847.9

Note: The breakdown of the gross floor area is based on the Building Ownership Certificates and the PRC Legal Opinion.

2.7 Specification, Services and Finishes of the Development Ch. 6.8(c)(iv)

Victory Plaza is constructed of reinforced concrete structures. The common parts from Levels 1 to 4 are finished with granite homogenous floor and wall tiles and on Levels 5 to 6 with granite floor tiles and plastic or painted and wallpapered walls. Main services comprising electricity, water and telecommunications are provided to the building.

The building is subdivided into various units on all levels and is served by 4 passenger lifts, 2 pairs of escalators serving the basement to Level 4 and by 6 staircases.

The standard of services and finishes within the development is considered to be reasonable, commensurately to other shopping centres in the neighbourhood.

VI-92 APPENDIX VI-D INDEPENDENT PROPERTY VALUATION REPORT

2.8 Building Condition of the Development

For the non-conformity items, some minor deviations such as addition of spiral stair and ceiling staircase opening not being consistent with record drawings, were found by the building surveyor.

For further information of the building condition, reference should be made to the Building Condition Survey Report.

We are of the opinion that the non-conformity items have no material impact on the value of the Subject Property.

2.9 Current Rental Income Ch. 6.8(c)(xi)(xiv)

As at the date of valuation, the Subject Property was fully leased. According to the supplied rent roll as at the date of valuation, for which a sample of 50% of leases (which is equivalent to about 60% of the total passing rental income) were checked by us and were found to be in order, the existing net monthly rental income and equivalent annual net rental income was as follows:

Gross Monthly Net Annual Net Floor Area Rental Income Rental Income (sq.m.) (RMB) (RMB)

27,698.1 2,575,219 30,902,628

As at the date of valuation, the Subject Property was leased to 22 tenants.

VI-93 APPENDIX VI-D INDEPENDENT PROPERTY VALUATION REPORT

The total current net passing rental income received and the total estimated market rental income as at the date of valuation was RMB2,575,219 and RMB5,127,497 respectively. The total current net passing income was 50% lower than the total estimated market rental income. The estimated unit net monthly rental income is based on the unit market rental income of different levels of the Subject Property in Section 3.1.

As advised by the Manager, there were no related parties lettings in the Subject Property as at the date of valuation.

The details of the tenant mix are as follows:

Gross Industry Floor Area Percentage (sq.m.) (%)

Food & Beverages 10,757.4 38.8 Department Store 11,109.9 40.1 Electricity 1,809.2 6.5 Bank 872.1 3.2 Retail Shops 3,149.5 11.4

Total area under REIT 27,698.1 100.0

2.10 Occupancy Rate Ch. 6.8(c)(vi)

According to the PRC Legal Opinion, the majority of the Subject Property with a total floor area of approximately 27,262.3 sq.m. was leased to various tenants as at the date of valuation. This equates to an occupancy rate of 100% of the Subject Property to be acquired by GZI REIT. The Subject Property is occupied by various tenants such as Guangzhou Xin Da Xin Company ( ), Guangzhou Qiao Mei Fa Zhan Company Limited ( ), Guangzhou Laoxiang Diet Co. Ltd. ( ), Yum! Restaurants (Guangdong) Co., Ltd. ( ) and China Merchants Bank Guangzhou Branch ( ).

2.11 Lease Cycle Duration and Expiry Profile Ch. 6.8(c)(vii)(viii)

In general, the typical lease terms of all tenancies vary between around 2 and 10 years and are on normal local commercial terms with agreed net monthly rentals generally ranging between RMB45 per sq.m. and RMB414 per sq.m. with an average unit monthly net rental income of RMB93 per sq.m. The latest expiry date of the leases is April 2014.

Most tenants enjoyed a rental discount for the first two years of their leases. Initial discounts of 30.0% were granted when the Subject Property commenced operations in the second half of 2003 to induce potential tenants to take up space in Victory Plaza. In the second half of 2004, due to commencement of the construction of the two office towers above

VI-94 APPENDIX VI-D INDEPENDENT PROPERTY VALUATION REPORT

the Victory Plaza podium, most of the tenants were offered a further discount of 20.0% for the period up to the completion of the construction. As they were long term tenants in the Subject Property, three of the tenants were granted this 20.0% discount for an additional three or four-month period following the completion of such works.

The details of the lease term duration are shown as follows:

Lease Term less than or By Gross Lease Term Greater than equal to By Number Floor Area (year) (year) (%) (%)

1 2 7.4 27.7 2 3 26.0 1.5 3 4 18.5 3.0 4 5 11.1 18.3 5 6 14.8 5.8 673.76.5 780.00.0 893.75.7 9100.00.0 10 11 14.8 31.5

100.0 100.0

The details of the lease expiry profile are shown as follows:

By Gross % of tenancies due to expire in each year By Number Floor Area (%) (%)

2005 0.0 0.0 2006 33.3 2.8 2007 8.3 0.7 2008 20.9 4.2 2009 8.3 2.0 2010 and beyond 29.2 90.3 Vacant n.a. 0.0

Total 100.0 100.0

VI-95 APPENDIX VI-D INDEPENDENT PROPERTY VALUATION REPORT

For the basement and Levels 1 to 6 of the Subject Property, the typical lease terms of the tenancies varies on each level and were on normal local commercial terms with agreed net monthly rentals as at the date of valuation shown as follows:

Range of the Agreed Lease Term Net Monthly Rentals Level of Tenancies From To Average (year) (RMB/sq.m.)

Basement 6 170 170 170 Level 1 from 3 to 10 84 414 180 Level 2 5 90 90 90 Level 3 from 2 to 5 78 172 94 Level 4 5 80 128 81 Level 5 10 47 47 47 Level 6 from 8 to 10 45 56 52

2.12 Summary of Material Rent Review Provisions Ch. 6.8 (c)(v)(ix)(xiii) The Subject Property has the following material rent review provisions:

Gross Net Monthly Lease Term Level Floor Area Rental Income From To (sq.m.) (RMB)

Unit on Basement 1,918.0 306,877 1/4/2005 30/4/2007 Rent Free 1/5/2007 31/5/2007 331,427 1/6/2007 31/5/2009 357,941 1/6/2009 31/5/2011 Unit on Level 1 840.0 145,000 10/12/2003 9/12/2005 153,700 10/12/2005 9/12/2007 162,922 10/12/2007 9/12/2009 172,697 10/12/2009 9/12/2011 183,059 10/12/2011 9/12/2013 Unit on Level 1 775.6 156,669 10/12/2003 31/3/2005 152,121 1/4/2005 30/4/2005 156,669 1/5/2005 9/12/2005 162,874 10/12/2005 9/12/2006 169,079 10/12/2006 9/12/2007 176,059 10/12/2007 17/10/2008 Unit on Level 1 3,373.4 953,620 1/7/2005 31/3/2006 1,001,301 1/4/2006 31/3/2007 1,051,399 1/4/2007 31/3/2008 1,777,503 1/4/2008 31/3/2009 1,777,503 1/4/2009 31/3/2010

According to the PRC Legal Opinion, there are no sub-leases or tenancies in the Subject Property.

VI-96 APPENDIX VI-D INDEPENDENT PROPERTY VALUATION REPORT

We are not aware of any material options or rights of pre-emption which may affect the value of the Subject Property. We have considered the right to renew in our valuation.

2.13 Historic Outgoings

As advised by the Manager, the current monthly property management fee paid by the tenants for the Subject Property is RMB48 per sq.m. and the total property management income covers the total property management expenses.

We are of the opinion that the current property management fee is in line with the market level of similar developments in the locality. (See Section 2.14.2)

2.14 Property Management

2.14.1 Tenancy Services Agreement

A tenancy services agreement was entered into between between the Manager, Keen Ocean Limited ( )(the“Property Company”) and Guangzhou Yicheng Property Management Co., Ltd. (the “Leasing Agent”) on 7 December 2005, for an initial term of three years. Under this agreement the Leasing Agent (who is also the property manager of Victory Plaza) will be paid a remuneration of 4% per annum of the gross revenue (“Service Fees”) receivable by the Property Company from the operation of the Subject Property. The Leasing Agent, as the property manager of the building is entitled to retain 10% of any contributions made by the tenants towards the operating expenses of the building. The Leasing Agent agrees that, for so long as it is the property manager of Victory Plaza, the Service Fees paid to the Leasing Agent shall also be in satisfaction of the property management fees which it is entitled to receive from the Property Company for any vacant units of the Subject Property under the property management agreement.

2.14.2 Property Management Fee

As advised by the Manager, the monthly management fee paid by the tenants for the Subject Property is RMB48 per sq.m. which is at the market level of similar developments in the locality.

Monthly Name of Building Management fee (RMB/sq.m.)

Teemall ( )58 Center Plaza ( )45 Grand View Mall ( )58 Time Square ( )46

VI-97 APPENDIX VI-D INDEPENDENT PROPERTY VALUATION REPORT

3. VALUATION

3.1 Income Capitalisation Approach

To bring the reversionary value back to the current date, we have used a present value rate which is the same as the reversionary yield for the Subject Property. The present value is the current monetary value of future cash flows and reflects the opportunity cost of an investment in a similar asset which would be expected to return a similar remunerative return as the Subject Property.

In preparing our valuations, we have had regard to asking or transacted rental income comparables within similar prime retail developments in the locality.

For the Subject Property, the typical net monthly rentals as at the date of valuation for Basement to Level 6 were as follows:

Comparison Current (Below or Market Above Range of the Typical Rental Market Net Monthly Rental Income Income Rental Level From To Average Level Income) (RMB/sq.m.) (RMB/sq.m.)

Basement 170 170 170 216 Below Level 1 84 414 180 360 Below Level 2 90 90 90 288 Below Level 3 78 172 94 252 Below Level 4 80 128 81 216 Below Level 5 47 47 47 198 Below Level 6 45 56 52 180 Below

VI-98 APPENDIX VI-D INDEPENDENT PROPERTY VALUATION REPORT

We are of the opinion that the current passing rentals were generally below the market level for each level of the Subject Property as at the date of valuation.

For the purposes of market comparables compositions, we have identified a number of comparables from our own database (which is based on the most recent data available to us). Due to the limited number of actual transaction available to us, we have analysed lettings from a variety of similar type of buildings in the locality in 2004 and we consider the comparables are sufficient to derive the market rental of the Subject Property.

The details of the rentals comparables are as follows:

Comparable 1 Comparable 2 Comparable 3 Comparable 4

Address Lin He Xi Road Lin He Xi Road Tian He Road Tian He Road District Tian He District Tian He District Tian He District Tian He District ( ) ( ) ( ) ( ) Date of Transaction Dec-04 Dec-04 May-04 Apr-04 Unit A shop unit A shop unit A shop unit A shop unit Level 1 1 1 1 Gross Floor Area (sq.m.) 505.0 223.8 30.0 45.5 Date of Completion 2004 2004 1995 1995 Nature of Transaction Transacted Transacted Transacted Transacted Lease Term (year) 5.00 6.00 6.00 6.00 Lease Commencement Date 1-Nov-04 16-Oct-04 26-May-04 Jun-04 Lease Expiry Date 31-Oct-09 15-Oct-10 25-May-10 Jun-10 Net Monthly Rental Income 75,750 31,329 37,800 45,500 on GFA (RMB) Net Monthly Rental Income 150 140 1,260 1,000 on GFA (RMB/sq.m.) Adjusted Net Monthly Rental 191 162 607 482 Income on GFA (RMB/sq.m.)

VI-99 APPENDIX VI-D INDEPENDENT PROPERTY VALUATION REPORT

We have had regard to four comparables in deriving the rental income of the podium level of the Subject Property. Adjustments have been made for time, location, building quality, size and pedestrian flow. The adjusted rental income of these comparables range from RMB162/sq.m. to RMB607/sq.m. Taking the average of all the four comparables will give a monthly unit rental income of approximately RMB360/sq.m. for Level 1 of the podium of the Subject Property. By allowing different percentage of discount for different levels, the monthly unit market rental income for different levels is shown below:

Unit Monthly Discount Market Rental Level Allowed Income (%) (RMB/sq.m.)

Basement 40% 216 Level 1 0% 360 Level 2 20% 288 Level 3 30% 252 Level 4 40% 216 Level 5 45% 198 Level 6 50% 180

The existing monthly net rental income as at the date of valuation was RMB2,575,219 and it is anticipated that the development will maintain the current occupancy level of 100% which is higher than the occupancy rate of similar type of buildings in the market.

In our assessment, the term yield and reversionary yield adopted are 8.5% and 10.5% respectively. The term yield adopted is lower than the market yield derived below because the current passing rental income of the Subject Property is lower than the estimated current market rental income. The term yield is used for capitalisation of the current passing rental income as at the date of valuation whilst the reversionary yield is used to convert reversionary rental income. This approach is generally used in valuing income producing properties.

VI-100 APPENDIX VI-D INDEPENDENT PROPERTY VALUATION REPORT

The reversionary yields are based on an analysis of the unit market rental income and Ch. 6.8 (c)(xii) the unit market value of the comparables collected for the Subject Property. From the previous analysis, the unit market rental income for Level 1 of the retail podium is RMB360/sq.m. In Section 3.3, the unit market value for Level 1 is RMB40,300/sq.m. The market yield is 10.7%. We have adopted 10.5% as the reversionary yield for the retail component of the Subject Property which is in line with the market comparable transactions as follows:

Retail market:

Estimated Unit Annual Market Net Rental Occupancy Gross Actual Income as at Status as at Floor Date of Transaction Sale Price the Date of the date of Market Unit Level Address Area Transaction Price per sq.m. Transaction Transaction Yield (sq.m.) (RMB) (RMB/sq.m.) (RMB/sq.m.) (Note 2) (Note 1)

Whole 1, 2 & Confidential 35,000 End of 2004 265,000,000 7,571 796 20 years 10.5% B1 Sale and Leaseback Whole 1 Ti Yu Xi Road 1,147 Sept-04 51,608,075 44,994 4,752 Vacant 10.6% B205 1 Confidential 15.6 Sept-05 1,244,800 79,795 9,600 Vacant 12.0% B107 1 Confidential 16.5 Sept-05 1,405,050 85,155 10,260 Vacant 12.0% Three shop units 1 Ti Yu Dong 463 Sept-04 10,645,780 22,993 2,688 Vacant 11.7% Road

Notes:

1) The estimated market net rental income is based on our analysis of recent lettings of comparable properties.

2) The market yield is the estimated market net rental income per annum divided by the actual transaction price.

We have valued the Subject Property at a value of HK$475,000,000.

The summary is as follows:

Unit Rate Reversionary on Gross Property Term Yield Yield Value Floor Area (HK$) (HK$/sq.m.)

Victory Plaza 8.5% 10.5% 475,000,000 17,149

VI-101 APPENDIX VI-D INDEPENDENT PROPERTY VALUATION REPORT

3.2 Discounted Cash Flow Analysis

This is defined in the International Valuation Standards Committee (7th Edition), as a financial modeling technique based on explicit assumptions regarding the prospective cash flow to operating real properties. This analysis involves the projection of a series of periodic cash flows to an operating property. To this projected cash flow series, an appropriate discount rate is applied to establish an indication of the present value of the rental income stream associated with the properties. In the case of operating real properties, periodic cash flow is typically estimated as gross rental income less vacancy, bad debts, impact of taxes (stamp duty, urban real estate tax, flood prevention fee and business tax), service fees and other operating expenses. The series of periodic net operating incomes, along with an estimate of the terminal value, anticipated at the end of the projection period, is then discounted at discount rate, being a cost of capital or a rate of return used to convert a monetary sum, payable or receivable in the future, into present value.

We have undertaken a discounted cash flow analysis on a monthly basis over a 10-year investment horizon. The net income in the year 11 is capitalised at an appropriate yield for the reminder of the ownership term. This analysis allows an investor or owner to make an assessment of the long term return that is likely to be derived from a property with a combination of both rental income and capital growth over an assumed investment horizon. This analysis is generally used in valuing investment income producing properties.

For the Subject Property, the terminal capitalisation rate adopted within our calculation is 9%. This is based on our analysis of the term yields applicable in the marketplace as set out in Section 3.1 with a discount to allow for the fact that we are capitalising a net rental income in year 11. The discount reflects the difference between the rental income stream before deductions and the net rental income together with an allowance for the security that a net rental income provides over the rental income before deduction.

In our calculation, we have adopted the discount rate of 11% for the Subject Property. The discount rate is a rate of return used to convert a monetary sum, payable or receivable in the future, into present value. Theoretically it reflects the opportunity cost of capital. In arriving at the discount rate, we have studied the current market situation for an investment return over a 10-year period from a commercial property. We have also investigated the return required by active property investors in the market as purchasers of shopping centres and office buildings. Based on the above, we consider that the market expectations are around 10% to 12% for retail properties. We note that the yield of 10-year Exchange Fund Notes issued by the Hong Kong Monetary Authority as at 30 September 2005 is in the order of 4.17%, indicating a risk premium of between 5.83% and 7.83%. Based on our analysis of comparable sales in the international market, the higher premium reflects the inherent investment risks associated with the PRC and the property risk. We consider that Hong Kong is the closest mature market to the PRC and it is more appropriate to adopt the Hong Kong risk free rate for the PRC property investment.

VI-102 APPENDIX VI-D INDEPENDENT PROPERTY VALUATION REPORT

We have estimated that the rental income growth per annum during next 10 years for the Subject Property. Rental income growth patterns for each tenancy reflect the rent review provisions of each lease, including staged rent increase where applicable. We have assumed that upon expiry of the tenancies, typically new or existing three to ten leases will be granted or renewed on the basis of three years leases and the then existing market rentals so that for the existing long leases, the rental income projections after expiry will be similar to the escalating step rentals existed in the long leases.

An annual vacancy allowance and allowance for bad debts have been considered within the portfolio. An annual vacancy allowance is about 1%, which is made reference to the current vacancy. With reference to the historical bad debts ratios, we consider that the bad debts allowance should be 1% of the net rent received. In the case of the Victory Plaza units, there were no bad debts during the relevant periods.

We have made reference to the Building Condition Survey Report, which states that no immediate capital expenditure will be incurred as the Subject Property is maintained in a reasonable condition commensurate with its age. We have adopted the forecast of the cost for large scale repair and maintenance from 2006 to 2015 provide by the Manager. No deduction has been made for the expected cost for small scale, routine repair and maintenance as we understand from the Manager that the small scale, routine repair and maintenance costs, for maintaining the current condition of the Subject Property, are covered by the management fee paid by tenants. As advised by the Manager, any costs incurred in non-conformities will be settled by Guangzhou Investment Company Limited (“GZI”).

We have also deducted amounts for business tax, stamp duty, urban real estate tax, flood prevention fee, insurance, cost for large scale repair and maintenance, and service fees.

In our calculation, we have not deducted any acquisition costs and disposal costs. We are of the opinion that these issues would be taken into account buy a prospective purchaser.

In preparing our valuations for the Subject Property, we have had regard to asking or transacted rental income comparables within similar retail developments in the locality. For details, reference should be made to Section 3.1 of this report.

VI-103 APPENDIX VI-D INDEPENDENT PROPERTY VALUATION REPORT

In our assessment, we have valued the property using the following assumptions:

Items Percent

Terminal Capitalisation Rate 9% Discount Rate 11% Growth Rate — Year 1 5% Growth Rate — Year 2 6% Growth Rate — Year 3 8% Growth Rate — Year 4 10% Growth Rate — Year 5 10% Growth Rate — Years 6 to 10 6% Vacancy Loss 1% Bad Debts 1%

The growth rates are based on our local market research. We have also made reference to the Independent Market Research Report prepared by Cushman & Wakefield (HK) Limited.

Vacancy loss is based on our view on the supply and demand and our local market knowledge of the relevant property market in Guangzhou.

VI-104 APPENDIX VI-D INDEPENDENT PROPERTY VALUATION REPORT

Projected Outgoings Items Projected Outgoings

Service Fees based on the tenancy 4% of gross rental income services agreement Cost for Large Scale Repair and Nil in 2005 Maintenance as advised by RMB410,000 in 2006 the Manager RMB1,040,000 in 2007 RMB427,600 in 2008 RMB410,000 in 2009 RMB380,000 in 2010 RMB230,000 in 2011 RMB820,000 in 2012 RMB181,000 in 2013 RMB598,000 in 2014 RMB1,221,900 in 2015 Sundry Expenses 0.2% of rental income Insurance Fixed Amount

Business Tax 5.0% of rental income PN 25 (b) Flood Prevention Fee 0.09% of rental income Urban Real Estate Tax original cost of property x 70% x 1.2% Stamp Duty 0.1% of gross rental income

No immediate capital expenditure is included as a projected outgoings item with reference to the Building Condition Survey Report.

Based on the above, we have valued the Subject Property at a value of HK$591,000,000 taking account of outgoings on the taxes and cost items.

The summary is as follows:

Unit Rate Capitalisation Discount on Gross Property Rate Rate Value Floor Area (HK$) (HK$/sq.m.)

Victory Plaza 9% 11% 591,000,000 21,337

VI-105 APPENDIX VI-D INDEPENDENT PROPERTY VALUATION REPORT

3.3 Sales Comparison Approach

In preparing our valuations of the Subject Property, we have had regard to asking or transacted comparables within similar prime retail developments in the locality.

Adjustments have been made for various factors such as location, building age, efficiency and time. The details are as follows:

Comparable 1 Comparable 2 Comparable 3 Comparable 4 Comparable 5 Comparable 6 Comparable 7

Address Tiyu Dong Tiyu Dong Tiyu Dong Tiyu Dong Tiyu Dong Tiyu Dong Ti Yu Xi Road Road Road Road Road Road Road District Tian He Tian He Tian He Tian He Tian He Tian He Tian He District District District District District District District ( ) ( ) ( ) ( ) ( ) ( ) ( ) Date of Transaction May-04 Jul-04 Jul-04 Sep-04 Sep-04 Sep-04 Sep-04 Unit A Shop Unit A Shop Unit A Shop Unit A Shop Unit A Shop Unit A Shop Unit A Shop Unit Level 1111111 Gross Floor Area 105.2 83.6 65.3 59.7 59.7 343.4 1,146.9 (sq.m.) Date of Completion 2003 2003 2003 2003 2003 2003 2003 Nature of Transaction Transacted Transacted Transacted Transacted Transacted Transacted Transacted Transacted Price on 7,150,880 4,920,955 4,041,651 1,374,020 1,374,020 7,897,740 51,608,075 GFA (RMB) Transacted Price on 67,974 58,863 61,893 23,015 23,015 22,999 44,998 GFA (RMB/sq.m.) Adjusted Transacted 57,727 49,946 52,575 27,893 27,893 27,893 38,201 Price on GFA (RMB/sq.m.)

Adjustments have been made based on our own judgement and knowledge of market. We have had regard to seven comparables in deriving the unit market value of Level 1 retail shop of the Subject Property. Comparable 1 to 6 are located in one building whereas Comparable 7 is close to the Subject Property. Adjustments have been made for time, location, building quality, size and etc. The adjusted unit rates of these comparables range from RMB27,893 to 57,727/sq.m. Taking the average of Comparable 1 to 7 will give a unit rate of approximately RMB40,300/sq.m. and we are of the opinion that it is a reasonable unit rate for retail shop on Level 1 of the Subject Property.

VI-106 APPENDIX VI-D INDEPENDENT PROPERTY VALUATION REPORT

By allowing different percentage of discount for different levels, the unit market value for different levels is shown below:

Discount Unit Market Level Allowed Value (%) (RMB/sq.m.)

Basement 40% 24,180 Level 1 0% 40,300 Level 2 20% 32,240 Level 3 30% 28,210 Level 4 40% 24,180 Level 5 45% 22,165 Level 6 50% 20,150

Based on the above, we have valued the Subject Property at a value of HK$558,000,000.

The summary is as follows:

Unit Rate on Gross Property Value Floor Area (HK$) (HK$/sq.m.)

Victory Plaza 558,000,000 20,146

4. VALUATION SUMMARY

We have summarised the calculation results of each approach in the table below: Ch. 6.8 (c)(x) Valuation Method Value (HK$)

Income Capitalisation 475,000,000 Discounted Cash Flow 591,000,000 Sales Comparison 558,000,000

Based on our primary valuation method of Income Capitalisation Approach including Discounted Cash Flow Analysis, we are of the opinion that the Market Value of the Subject Property (the property interest to be acquired by GZI REIT) in its existing state as at the date of valuation was HONG KONG DOLLARS FIVE HUNDRED AND THIRTY-THREE MILLION ONLY (HK$533,000,000) assuming it is available for sale in the market with the benefit of existing tenants and the property title are free from all material encumbrances or defects. The Market Value of the Subject Property is an average of values derived using by the Income Capitalisation Approach and Discounted Cash Flow Analysis.

VI-107 APPENDIX VII INDEPENDENT PROPERTY VALUER’S BUILDING CONDITION SURVEY SUMMARY REPORT

12 December 2005

GZI REIT Asset Management Limited (“Manager”) 2102, Yue Xiu Building 160-174 Lockhart Road Wanchai, Hong Kong

HSBC Institutional Trust Services (Asia) Limited (“Trustee”) 1 Queen’s Road Central Central, Hong Kong

The Hongkong and Shanghai Banking Corporation Limited (“HSBC”) 1 Queen’s Road Central Central, Hong Kong

Citigroup Global Markets Asia Limited (“Citigroup”) 50th Floor, Citibank Tower Citibank Plaza, 3 Garden Road Central, Hong Kong

DBS Bank Ltd. (together with HSBC and Citigroup, the “Joint Global Coordinators”) 16th Floor, Man Yee Building 68 Des Voeux Road Central Central, Hong Kong

VII-1 APPENDIX VII INDEPENDENT PROPERTY VALUER’S BUILDING CONDITION SURVEY SUMMARY REPORT

Dear Sirs,

Building Condition Survey Summary

1. Introduction

Colliers International (Hong Kong) Ltd was appointed as the Building Condition Survey Consultant to conduct a building condition survey of the properties to be acquired by GZI Real Estate Investment Trust (“GZI REIT”). This letter provides a summary of our approach and findings. In our role as the Building Condition Survey Consultant, we:

a. conducted comprehensive building condition surveys on each of the four properties to be acquired by GZI REIT, namely, White Horse Building, Fortune Plaza, City Development Plaza and Victory Plaza located in Guangzhou, Guangdong, The People’s Republic of China (hereinafter called the “Properties”)to:-

(i) confirm the structural integrity of each of the Properties;

(ii) identify and recommend works required to rectify any existing defects in each of the Properties;

(iii) record the conditions of each of the Properties;

(iv) identify areas in each of the Properties which deviate from the record floor plans supplied by Guangzhou Investment Company Limited;

(v) verify the use of each floor of each of the Properties against their approved usage; and

(vi) review statutory certificate for completion of each of the Properties; and

b. compiled a 10-year forecast of repair and maintenance expenditure for each of the Properties.

Our inspection is limited only to the area to be acquired by GZI REIT and the Gross Floor Area of each of the Properties are as follows:

GZI REIT Area (Gross Floor Area) Name of Building Retail Office (sq.m.) (sq.m.)

White House Building 46,279.3 3,920.0 Fortune Plaza 3,853.1 36,503.1 City Development Plaza 11,757.6 30,639.8 Victory Plaza 27,698.1 —

Note: The breakdown between retail and office is as determined by the Manager.

VII-2 APPENDIX VII INDEPENDENT PROPERTY VALUER’S BUILDING CONDITION SURVEY SUMMARY REPORT

2. Surveys and Evaluations Conducted

The comprehensive building condition surveys carried out to the Properties were headed by a Registered Professional Surveyor (Building Surveying). The scope of works included visual inspection of the building fabric, structure and the building services system, sampling check of electrical circuit as well as verification and record of their existing conditions.

The inspection included the visual inspection of (i) internal common areas, accessible tenant area, all accessible area which are to be acquired by GZI REIT together with common area required to access GZI REIT areas; and (ii) the building structural element such as external walls and roofs, The defects noted were minor in nature and included cracks, sign of dampness, spalling concrete, cracked and damaged wall/ floor tiles. All such defects identified were recorded in the full building condition survey report. All such defects can be rectified and the estimated cost of rectification of the defects has been included in our forecast. Further investigation is required in some electrical and mechanical system as listed in our full building condition survey report.

3. 10-Year Forecast of Repair and Maintenance Expenditure

We have prepared a forecast of the repair and maintenance expenditure for the Properties for the 10 years ending 2014. These include the estimated costs of maintaining the Properties and associated building services installations.

The following methodologies were used in preparing the forecasts:

a. estimated repair and maintenance costs which comprise existing defects and annual maintenance costs.

b. estimated costs were also based on normal repair method for the defective works for the defects found and the methods of repair have been stipulated in full building condition survey report.

c. estimated costs were based on current market rates with a 5% inflation rate being used to project expenditure over the next 10 years.

d. estimated costs were based on the management of the four Properties maintaining the building in their existing state and with sufficient resource being provided by the property manager and work being carried out as per the construction market’s common practice.

For our forecast period, no capital expenses were given as those expenses would be borne by the special repair fund of the Properties.

VII-3 APPENDIX VII INDEPENDENT PROPERTY VALUER’S BUILDING CONDITION SURVEY SUMMARY REPORT

The 10 years repair and maintenance costs for the Properties are as follows:

City White Horse Fortune Development Victory 2005 Building Plaza Plaza Plaza (RMB) (RMB) (RMB) (RMB)

Repair & Maintenance Builder works 150,000 8,000 10,000 10,000 Cost Structural items 40,000 N/A 30,000 85,000** E/M(1) works 107,000 87,000 57,000 27,000 Investigation Fee(2) 60,000 N/A 20,000 60,000 Total 357,000 95,000 117,000 182,000

** This repair cost includes the immediate cost required for the painting of a rusty metal frame of a signage at Victory Plaza.

City White Horse Fortune Development Victory 2006 Building Plaza Plaza Plaza (RMB) (RMB) (RMB) (RMB)

Repair & Maintenance Builder works 157,500 8,400 10,500 10,500 Cost Structural items 42,000 N/A 31,500 21,000 E/M(1) works 307,400 187,400 187,400 157,400 Investigation Fee(2) N/A N/A N/A N/A Total 506,900 195,800 229,400 188,900

City White Horse Fortune Development Victory 2007 Building Plaza Plaza Plaza (RMB) (RMB) (RMB) (RMB) Repair & Maintenance Builder works 165,400 8,800 11,000 11,000 Cost Structural items 44,100 N/A 33,000 22,000 E/M(1) works 322,800 197,700 197,700 165,300 Investigation Fee(2) N/A N/A N/A N/A Total 532,300 206,500 241,700 198,300

VII-4 APPENDIX VII INDEPENDENT PROPERTY VALUER’S BUILDING CONDITION SURVEY SUMMARY REPORT

City White Horse Fortune Development Victory 2008 Building Plaza Plaza Plaza (RMB) (RMB) (RMB) (RMB)

Repair & Maintenance Builder works 173,700 9,200 11,600 11,600 Cost Structural items 46,300 N/A 34,700 23,000 E/M(1) works 338,900 207,600 207,600 173,600 Investigation Fee(2) N/A N/A N/A N/A Total 558,900 216,800 253,900 208,200

City White Horse Fortune Development Victory 2009 Building Plaza Plaza Plaza (RMB) (RMB) (RMB) (RMB)

Repair & Maintenance Builder works 182,400 9,700 12,200 12,200 Cost Structural items 48,600 N/A 36,400 24,200 E/M(1) works 355,800 218,000 218,000 182,300 Investigation Fee(2) N/A N/A N/A N/A Total 586,800 227,700 266,600 218,700

City White Horse Fortune Development Victory 2010 Building Plaza Plaza Plaza (RMB) (RMB) (RMB) (RMB)

Repair & Maintenance Builder works 191,500 10,200 12,800 12,800 Cost Structural items 51,000 N/A 38,200 25,400 E/M(1) works 373,600 228,900 228,900 191,400 Investigation Fee(2) N/A N/A N/A N/A Total 616,100 239,100 279,900 229,600

VII-5 APPENDIX VII INDEPENDENT PROPERTY VALUER’S BUILDING CONDITION SURVEY SUMMARY REPORT

City White Horse Fortune Development Victory 2011 Building Plaza Plaza Plaza (RMB) (RMB) (RMB) (RMB)

Repair & Maintenance Builder works 201,100 10,700 13,400 13,400 Cost Structural items 53,600 N/A 40,100 26,700 E/M(1) works 392,300 240,300 240,300 201,000 Investigation Fee(2) N/A N/A N/A N/A Total 647,000 251,000 293,800 241,100

City White Horse Fortune Development Victory 2012 Building Plaza Plaza Plaza (RMB) (RMB) (RMB) (RMB)

Repair & Maintenance Builder works 211,200 11,200 14,100 14,100 Cost Structural items 56,300 N/A 42,100 28,000 E/M(1) works 411,900 252,300 252,300 211,100 Investigation Fee(2) N/A N/A N/A N/A Total 679,400 263,500 308,500 253,200

City White Horse Fortune Development Victory 2013 Building Plaza Plaza Plaza (RMB) (RMB) (RMB) (RMB)

Repair & Maintenance Builder works 221,800 11,800 14,800 14,800 Cost Structural items 59,100 N/A 44,200 29,400 E/M(1) works 432,500 264,900 264,900 221,700 Investigation Fee(2) N/A N/A N/A N/A Total 713,400 276,700 323,900 265,900

VII-6 APPENDIX VII INDEPENDENT PROPERTY VALUER’S BUILDING CONDITION SURVEY SUMMARY REPORT

White City Horse Fortune Development Victory 2014 Building Plaza Plaza Plaza (RMB) (RMB) (RMB) (RMB)

Repair & Maintenance Builder works 232,900 12,400 15,500 15,500 Cost Structural items 62,100 N/A 46,400 30,900 E/M(1) works 511,400 341,400 361,400 361,400 Investigation Fee(2) N/A N/A N/A N/A Total 806,400 353,800 423,300 407,800

Notes:-

(1) E/M works mean the electrical and mechanical works.

(2) Investigation Fee is the independent consultant fee required for the further investigation in some of the electrical and mechanical system.

A summary of rectification works which corresponds to the repair costs for the following four buildings tabulated above is as follows:

a. White Horse Building

The summary for builder works are mainly the repair of the hair line cracks, replacement of broken floor and wall tiles both internally and externally, rectification of the window leakage and the sign of dampness, replacement of damaged door frame, replacement of rusty sliding gate, door and metal fencing, replacement of nosing tiling and granite at staircases. The repair cost includes normal wear and tear maintenance costs.

The summary for the structural items are mainly the rectification work for the spalled concrete and plaster.

The summary for the building services works are mainly replacement of damaged cable trucking, replacement of rusty galvanized iron conduit, enclosure for the live conductors in distribution boards of low voltage supply system, replacement of rusty gate valves for the ventilation and air conditioning system.

b. Fortune Plaza

The summary for builder works mainly include the repair of loosen door closer. The repair cost also includes normal wear and tear maintenance costs.

The summary for structural works does not reveal any structural irregularities.

VII-7 APPENDIX VII INDEPENDENT PROPERTY VALUER’S BUILDING CONDITION SURVEY SUMMARY REPORT

The summary for building services works mainly include the repair of fixing the busbar at switch rooms, underground rain water extraction pump, replacement of emergency lighting and exit signs and refixing of fire detectors and replacement of gate valves of the ventilation and air conditioning system.

c. City Development Plaza

The summary for builder works mainly include normal wear and tear maintenance costs.

The summary for structural items mainly includes the repair of spalled concrete and plaster.

The summary for building services works mainly include the replacement of cable trucking, replacement of rusty galvanised iron conduit and rectification of water leakage of waste-water stack pipe, replacement of emergency light bulb and exit sign, replacement of gate valves of ventilation and air conditioning system.

d. Victory Plaza

The summary for builder works mainly include the repair of hair-line cracks, rectification of dampness, replacement of balustrade, replacement of floor tiles and replacement of curb tiles. The repair cost includes normal wear and tear maintenance costs.

The summary for structural items mainly includes the repainting of sign board structure with rust resistant protection paint and repair of cracks.

The summary for building services works mainly include the rectification of insulation joints for ventilation and air conditioning system, and rectification of water leakage at ceiling.

4. Reports Delivered

A full report was prepared for the four Properties for which comprehensive building condition surveys were conducted and included:

— Introduction

— Background information of the four Properties

— Detailed description of the findings on defects

— Location descriptions with photographs of typical defects

— Assessment of the structural condition of the relevant Properties

— Comments / Recommendation of the repair methods to remedy the defects noted

VII-8 APPENDIX VII INDEPENDENT PROPERTY VALUER’S BUILDING CONDITION SURVEY SUMMARY REPORT

— Conclusion

— Findings on non-conformity items

— Structural Survey Report with photograph for particular locations inspected and defects found

— Building Service Inspection Report on the E/M system

— Estimated 10-year forecast of repair and maintenance expenditure for each of the Properties

5. Conclusion

5.1 Condition of the Properties

The condition of the four properties was generally fair/good at the time of inspection. The condition is generally in line with the buildings of similar age and grade. No material defects have been noted except for minor defects such as cracks, signed of dampness, cracked wall and floor tiles, spalling concrete. Given the age and structural form of the Properties, our inspection was confined to some 20% of the building structural elements as we consider this to be a sufficiently representative sample of the general structural condition of the Properties Concerned. There was no sign of distress observed at any of the buildings and thus it is not necessary to carry out further testing or investigation on the structural strength of the materials for the Properties at the time of inspection. Except for the non-conformity items mentioned below, there are no material structural defects noted in the building structure which would affect the transfer of the Properties.

The Properties are generally constructed according to the approved usage except that there were certain non-conformity items and these have been included in the full building condition survey report. These non-conformities comprise deviations from the record drawings such as the relocation of exit doors and plant rooms from their approved location, additional shop, spiral staircases, new small green house, store rooms and plant rooms, office area used as dormitory, and missing air-conditioning plant rooms.

5.2 Building Regulation Compliance

The Statutory Certificates of Completion for White Horse Building dated 30 December, 1990 and City Development Plaza dated 18 November, 1997 were received. The Certificates for the Victory Plaza filed on 5 July, 2004 and the Fortune Plaza filed on 16 October, 2003 were also received. A statutory certificate of completion for the alteration and additional works for White Horse Building dated 25 September, 2000 was also received.

VII-9 APPENDIX VII INDEPENDENT PROPERTY VALUER’S BUILDING CONDITION SURVEY SUMMARY REPORT

Victory Plaza and Fortune Plaza were completed recently according to the above Statutory Certificates of Completion. No major irregularities have been observed on site. Regarding City Development Plaza, the building has been completed for around 8 years. Recent inspection has shown that the construction is in compliance with the record plan supplied by Manager and no major irregularities were found on site. Therefore, the above three buildings generally complied with the local building regulations at the time of completion. For the White Horse Building, except for the non-conformity items noted, we conclude that the building was constructed in compliance with the local regulations at the time of inspection.

6. Limiting Conditions

In preparing the report, we have relied on the information supplied by the Manager such as the copy of record plans, statutory certificates of completion, and the areas to be acquired by GZI REIT. Where necessary, we have made relevant enquiries and obtained such further information as we consider necessary to allow us to provide you with this report. We have also conducted site inspections and meetings with the staff from the management companies. We have carried out our inspection purely on a visual basis, without testing of any kind to the building fabric and building services system. Parts of the building structure that were not visible without removal of wall finishes or building fabric have not been inspected and no destructive testing has been carried out and we have not inspected the areas which are inaccessible or covered up and we cannot accept any responsibility for the inaccessible areas, concealed parts of the buildings and building services system. However, our visual inspection of the accessible areas of the Properties did not reveal any defects that would lead us to require an immediate inspection of the inaccessible or covered areas at the time of inspection.

Yours faithfully, For and on behalf of Colliers International (Hong Kong) Ltd K.C. Lee MHKIS MRICS RPS (BS) Building Consultant

VII-10 APPENDIX VIII INDEPENDENT MARKET RESEARCH REPORT IN RELATION TO THE GUANGZHOU COMMERCIAL PROPERTY MARKET

Cushman & Wakefield (HK) Limited

Company Licence No. C-002429

6/F, Henley Building 5 Queen's Road Central, Hong Kong Tel: (852) 2956 3888 Fax: (852) 2956 2323 Web: www.cushwakeasia.com 12 December 2005

GZI REIT Asset Management Limited For itself and on behalf of GZI Real Estate Investment Trust The Hongkong and Shanghai Banking Corporation Limited Citigroup Global Markets Asia Limited DBS Bank Ltd.

Dear Sirs,

Guangzhou Commercial Property Market Review

We have prepared a report reviewing the commercial property market in Guangzhou for GZI Real Estate Investment Trust (GZI REIT) for the purposes of the proposed global offering of units in GZI REIT (Global Offering).

Section 1 Introduction

1.1 Background

Guangzhou Investment Company Limited (GZI) is to set up a Real Estate Investment Trust (REIT) for listing on the Hong Kong Stock Exchange. GZI REIT Asset Management Company Limited commissioned Cushman & Wakefield HK Limited (C&W) to conduct a research study on the commercial property market of Guangzhou and in particular, the Grade ‘A’ office market and the retail market. The report will be included in the offering circular to be issued in connection with the Global Offering.

1.2 Content of Report

This report provides a general overview on two segments of the property market:

i) Office market in Guangzhou; and

ii) Retail market in Guangzhou.

VIII-1 APPENDIX VIII INDEPENDENT MARKET RESEARCH REPORT IN RELATION TO THE GUANGZHOU COMMERCIAL PROPERTY MARKET

The aims are to highlight major trends in the past and identify any emerging trends that may influence the market condition in the future. As part of the study, an independent review of the four properties to be included in GZI REIT was conducted by benchmarking both their rental trends and occupancy rates against the overall market. The properties are:

White Horse Building ( ) — A popular wholesale centre for garments in Guangzhou. The building was completed in 1990 and extended throughout the 1990s. It is situated along Zhan Nan Road in Yue Xiu District.

Fortune Plaza ( ) — The building was completed in 2003. It is a Grade ‘A’ office building with commercial podium situated along Ti Yu Dong Road in Tian He District.

City Development Plaza ( ) — The building was completed in 1997. It is a Grade ‘A’ office building with commercial podium situated along Ti Yu Xi Road in Tian He District.

Victory Plaza ( ) — A prime shopping centre completed in 2003 in Tian He District. It is situated along Ti Yu Xi Road beside the junction with Tian He Road.

1.3 Source of Information

This document contains a significant volume of information that has been directly derived from other sources, including:

• National Statistics Bureau of China;

• Guangzhou Statistics Bureau;

• Shenzhen Statistics Bureau;

• Beijing Statistics Bureau;

• Shanghai Statistics Bureau; and

• Census and Statistics Department of the Hong Kong Special Administrative Region.

Such information is not adopted by C&W as our own, even where it is used in this report. Whilst every care is given to ensure its accuracy and authenticity, C&W does not warrant or represent that such information is free from errors. The report is based on data available to us as at 30th September 2005.

VIII-2 APPENDIX VIII INDEPENDENT MARKET RESEARCH REPORT IN RELATION TO THE GUANGZHOU COMMERCIAL PROPERTY MARKET

1.4 Assumptions

Assumptions are considered a crucial part of this report. C&W adopts assumptions because some information is not available, or falls outside the scope of our expertise. While these assumptions are made with careful consideration of factors known to C&W at the date of this document, the risk of inaccurate assumptions or changed conditions beyond the current time of this report, should be taken into account. C&W does not warrant or represent that the assumptions on which this report is based are accurate or correct.

1.5 Limitations on Report

To the extent that this document includes any statement relating to future matters, that statement is provided as an estimate or an opinion based on the information known to C&W at the date of this document. The process of making forecasts involves assumptions about a considerable number of variables, which are very sensitive to changing conditions. Variations of any one may significantly affect outcomes. C&W therefore can give no assurance that the forecasts outlined in this report will be achieved or that such forecasts and forward looking statements will prove to have been correct and you are cautioned not to place undue reliance on them. C&W undertakes no obligation to publicly update or revise any forward looking statements contained in this report, whether as a result of new information, future events or otherwise, except as required by law and all forward looking statements contained in this report are qualified by reference to this cautionary statement.

This report is prepared for information only and should not be regarded as a comprehensive or formal opinion or audit concerning any matter contained in it. Whilst reasonable care has been exercised in preparing the report, it is subject to change and therefore does not constitute, nor constitute part of, an offer or contract. Interested parties should not rely on the statements or representations of fact but must satisfy themselves by inspection or otherwise as to the accuracy. No representation, warranty or covenant, expressed or implied, is given and no undertaking as to accuracy, reasonableness or completeness of the information is contained in this report.

VIII-3 APPENDIX VIII INDEPENDENT MARKET RESEARCH REPORT IN RELATION TO THE GUANGZHOU COMMERCIAL PROPERTY MARKET

Section 2 General Economic Overview

2.1 The Guangzhou Economy

2.1.1 General Situation

Guangzhou is located along the Pearl River and is the capital city as well as the economic, scientific and cultural centre of Guangdong Province. It is a fast-growing entrepreneurial business centre in Southern China. The city’s population totalled around 7.4 million in 2004. It has an area of 7,434 sq km and is one of the most popular destinations within China in attracting foreign direct investment (FDI). The Guangzhou economy has grown considerably for the last two decades and is now the nation’s fourth largest city level economy, after Hong Kong, Shanghai and Beijing. Shenzhen, another key city in the Guangdong Province, ranks fifth in terms of its size.

Source: Cushman & Wakefield

Gross Domestic Product (GDP) 2004: Top 5 Cities in China

City Local Currency US Dollars

Hong Kong HK$1,269 billion US$163 billion Shanghai RMB745 billion US$90 billion Beijing RMB428 billion US$51 billion Guangzhou RMB412 billion US$50 billion Shenzhen RMB342 billion US$41 billion

Source: Shanghai, Beijing, Guangzhou, Shenzhen Statistics Bureaus and Hong Kong Census & Statistics Department

VIII-4 APPENDIX VIII INDEPENDENT MARKET RESEARCH REPORT IN RELATION TO THE GUANGZHOU COMMERCIAL PROPERTY MARKET

2.1.2 GDP Growth

Guangzhou is a key city within the Pearl River Delta (PRD) region that consists of ten other cities, namely, Hong Kong, Shenzhen, Huizhou, Dongguan, Zhaoqing, Foshan, Jiangmen, Zhongshan, Zhuhai and Macau. The size of the Guangzhou economy is second only to Hong Kong within the region with a growth rate that has consistently outperformed both Beijing and Shanghai over the past decade. In fact, the local economy has enjoyed double-digit growth in the past 15 years. In 2004, the city posted a 15% y-o-y real term growth in GDP and with continued buoyant fixed asset investment, solid domestic demand, robust trade activities and high inflows of FDI, the outlook of the economy remains positive despite a lower growth rate projected for this year due to the China’s macroeconomic adjustment policies. Although the measures are likely to slow down the rate of expansion across all major cities in the Mainland, the municipal government of Guangzhou has projected the city to achieve a 12% real term increase in GDP this year.

Guangzhou GDP and GDP Growth

Nominal GDP Real GDP (Billion RMB) Growth 500 20%

400 15%

300 10%

200

5% 100

0 0% 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005F GDP (Bn RMB) GDP Growth

Source: Guangzhou Statistics Bureau

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GDP Growth Inter-City Comparison

Real GDP Growth 20%

15%

10%

0% 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005F

Guangzhou Shanghai Beijing Shenzhen

Source: Guangzhou, Beijing, Shanghai, Shenzhen Statistics Bureaus

2.1.3 Personal Disposable Income

Per Capita Disposable Income Inter-City Comparison

Disposable Income Per Capita (RMB/yr) 30,000

25,000

20,000

15,000

10,000

5,000

0 1996 1997 1998 1999 2000 2001 2002 2003 2004 Guangzhou Shanghai Beijing Shenzhen

Note: The decline in 2002 Guangzhou data was caused by a change in the basis of data collection.

Source: Guangzhou, Beijing, Shanghai, Shenzhen Statistics Bureaus

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The annual per capita disposable income for Guangzhou urban households was RMB16,884 in 2004. The level was 79.2% higher than the national average and is very similar to the levels attained by Shanghai and Beijing. With further opening of the Mainland China market to foreign businesses, Guangzhou will continue to demand high quality labour and wage rates are projected to rise further. This will in turn push up the per capita disposable income for the city.

2.1.4 Consumer Prices

The Consumer Price Index (CPI) has remained reasonably stable in Guangzhou over the past eight years. In 2004, the index rose by 1.7%, with the largest increase coming from the food, cigarette and beverage category. It is expected that the city’s living standard will continue to improve on the back of rising wages and the increasing sophistication of the general public in their demand for goods and services. As a result, prices are likely to edge up gradually.

Growth in Guangzhou Urban Consumer Price Index

10%

0% 1996 1997 1998 1999 2000 2001 2002 2003 2004

-5%

Source: Guangzhou Statistics Bureau

2.1.5 Foreign Direct Investment

Mainland China attracted a total of US$60.6 billion FDI last year. Of which, approximately 3.96% (or US$2.4 billion) was attributed to Guangzhou. The city has successfully secured more than US$26 billion in FDI over the last decade. Following a slowdown in investment activities due to the Asian financial crisis in 1997, the degree of foreign interest rebounded quickly in recent years with an increasing amount of investment coming from the high-tech, information technology, infrastructure development and real estate sectors.

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Guangzhou continues to attract attention from multinational corporations (MNCs) eyeing the Mainland market. The main attractions come from its strategic geographical location similar to Hong Kong being at the heart of China and Southeast Asia, the size of its local economy within Mainland China, and its political status as the capital city of the Guangdong Province. These factors have made the city among one of the most targeted locations for FDI in China.

At the end of 2004, over one-quarter of the world’s top 500 corporations had established a presence in Guangzhou. There were a total of 7,933 enterprises and over 2,000 representative offices from over 70 foreign locations situated in the city. Given China’s World Trade Organisation (WTO) commitment to further liberalise its service sector, an increasing share of FDI is expected to go into this sector in the coming years, boosting the demand for prime offices. Furthermore, Guangzhou will continue to grow in international stature, particularly with hosting the Asian Games in 2010.

2.1.6 Financial Services Sector

Guangdong province ranks among the most developed economies in Mainland China in terms of the number of financial institutions, quality of workforce and number of listed companies. It also has a sizable securities market. Foreign participation in the financial sector in Guangzhou has accelerated since China’s entry into the WTO in November 2001. The latest figure shows that there were over 2,400 financial institutions operating in the city last year, of which 28 were of foreign origin. Although this remains a relatively small part of the local market, China’s WTO commitments to continue opening up other business sectors shall have a positive knock-on effect on the financial sector in Guangzhou.

2.1.7 Retail Sales

Retail sales of consumer goods in Guangzhou have increased from RMB2.9 billion in 1980 to RMB167.5 billion in 2004, putting it in third place behind Shanghai and Beijing. The outbreak of Severe Acute Respiratory Syndrome (SARS) in Spring 2003 did not seem to significantly affect the sales performance in Guangzhou. Retail sales showed a strong growth of 12.1% last year and 14% y-o-y in the first half of 2005. Guangzhou is viewed as one of the first-tier Chinese cities among major international retailers and is often seen as one of the initial entry locations to Mainland China, given its geographical proximity to Hong Kong. The local population shares the same spoken dialect (ie. Cantonese) and shoppers have similar tastes of its neighbour. The wide variety of brands from different origins and the comprehensive range of products in Guangzhou have attracted many shoppers from the surrounding cities within the Guangdong Province.

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In the short to medium term, expansion of businesses to Guangzhou by Hong Kong companies, MNCs and large-scale domestic Chinese enterprises from other provinces will ensure the local economy continues to thrive. As a result, the working population in the city will increase and resident disposable income will rise. Retail sales in Guangzhou are therefore expected to remain active with sustainable growth due to strong domestic demand as the general public seeks a better quality of life.

Retail Sales Inter-City Comparison

Retail Sales (Billion RMB) 300

250

200

150

100

0 1996 1997 1998 1999 2000 2001 2002 2003 2004 Guangzhou Shanghai Beijing Shenzhen

Source: Guangzhou, Beijing, Shanghai, Shenzhen Statistics Bureaus

2.1.8 Tourism Sector

The tourism sector recovered strongly in 2004 after a significant drop in the tourist arrival numbers due to the SARS outbreak. The revival brought a total of 26,747,000 overnight tourists to Guangzhou last year and among them, the number of tourists from overseas (including Hong Kong, Macau and Taiwan) rose by 20.6% to 4,372,000. In terms of the amount of income generated, the city benefited from a total of RMB54.7 billion in tourist spending last year, an annual growth of 20.2%.

Looking ahead, the tourism sector is expected to strengthen even further. The opening of Hong Kong Disneyland in September this year and plans to further expand the Individual Traveller Scheme (ITS) allowing more mainlanders to visit Hong Kong more freely will add an additional source of tourism income to Guangzhou. The close geographical proximity of Guangzhou along with its provincial capital status means many visitors travelling to Hong Kong may choose to also stopover in the city.

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Guangzhou Overnight Tourist Arrivals

Tourist Arrivals (million) 30

0 1996 1997 1998 1999 2000 2001 2002 2003 2004

Overseas Domestic

Source: Guangzhou Statistics Bureau

2.1.9 Wholesale Sector

Guangzhou is a major distribution centre in China with a turnover of wholesale trade that grew 25.5% and reached RMB381.54 billion last year. This accounted for 73.6% of the turnover for all commercial goods in the city.

A typical wholesale market in Guangzhou occupies approximately 13,500 sq m with many merchants specialising in the trade of clothes and fabric, consumer electronics, decoration materials, IT products, watches and foods. In particular, the clothing manufacturing industry is very popular among local and foreign traders, with an annual output valued at over RMB112 billion.

Commodity trading markets continued to grow in Guangzhou as 94 of the 1,108 markets achieved an annual turnover exceeding RMB100 million in 2004. The aggregate sales value of these large markets increased 20% during the year to reach RMB52.2 billion. The top three growing segments were Metals, Electrical & Mechanical and Clothes & Fabric, with a growth rate of 45.6%, 35.8% and 32.1%, respectively.

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2.1.10 Wholesale Sector Outlook — Zhan Nan Road Area

Unlike a shopping mall, the key ingredients for a successful wholesale centre are good transportation accessibility and choice of goods. The main garment wholesale area of Guangzhou is located around the Zhan Nan Road area in Yue Xiu district where there are also a number of centres similar to our subject property (White Horse Building). The area is very popular among wholesalers because of its close proximity to the Guangzhou Railway Station (more commonly known as the “Old Station”) and good linkages to major expressways connecting to the rest of Guangdong and other parts of the country.

The new Guangzhou railway station is scheduled for completion in 2008. It will be located in Pan Yu District, approximately 14 km from the Guangzhou city centre. While there is no plan to shut down the existing station located in Yue Xiu, the new station will focus on handling passenger traffic and should alleviate some of the pressure on the old station. This is likely to free up capacity and allow the existing station to focus on the logistics of commercial items, and therefore strengthen the position of Zhan Nan Road as a wholesale centre location.

2.1.11 Economic Outlook

The outlook of the Guangzhou economy remains largely stable with first half GDP recording a real growth rate of 11.1%. Although the Central Government’s nation-wide macroeconomic adjustment measures are still underway to tighten speculative activities, the municipal government expects the economy to maintain its double-digit growth in 2005 at 12%, with fixed-asset investment and export trade both increasing by 10%. Personal incomes are also projected to rise with urban residents’ per capita disposable income increasing by an average of 6%.

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2.2 Guangzhou Office Sector

2.2.1 Office Development Trends

Source: Cushman & Wakefield

Prior to 1980, there was virtually no high quality purpose-built office building in Guangzhou. However, the influx of overseas companies following the implementation of China’s “open door” policy in the late 1970s stimulated the development of a large number of new office projects. Consequently, the office market began to boom, fuelled by strong interests from foreign businesses wanting to set up their operations in the city. Office sales and rental prices reached their peaks in the mid 1990s only to become dampened by stricter domestic economic control in 1996 and the regional economic turmoil in 1997, which led to sharp falls in rentals and occupancy rates. Nevertheless, the market began to rebound after 2001 due to the tightening of government policy on construction approvals and a gradual recovery in the global economy.

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The commercial area of Guangzhou initially emerged in Haizhu Square, Yue Xiu District in the late 1970s and gradually shifted northeast into the area by Huanshi East Road within former Dong Shan District (now part of Yue Xiu District). However, in the 1990s, the government decided to develop Tian He District as the Central Business District of Guangzhou, resulting in massive changes with a large number of high quality office buildings completed in the area over the past decade.

Going forward, the plan is to continue enlarging Tian He’s commercial area, particularly in the southern side of the district called Pearl River New City. The recent change in district administrative structure (see 3.3.2) and the planned new Metro Lines currently under construction (see 3.3.4) will place Tian He in the centre of Guangzhou geographically and make the district into a major transportation hub within the city.

2.2.2 Demand for Grade ‘A’ Office Space

The demand for Grade ‘A’ office space in Guangzhou tends to move in line with the city’s economic growth and the increase in FDI. During the period 1991 to 1996, both GDP and FDI rose rapidly averaging 19% per annum and 52% per annum, respectively. This created a strong demand for Grade ‘A’ office space and the market witnessed a high level of absorption. In contrast, the Asian economic turmoil between 1997 to 2000 caused a significant slowdown in both economic and FDI growth, averaging markedly lower rates of 13.4% per annum and 6.4% per annum, respectively, leading to a much weaker take up of office space.

The office market has largely been on a cyclical upswing since the new millennium, supported by the recovery of global economic conditions and a rebound of foreign investment in Guangzhou. We believe over the next two years or so, demand for Grade ‘A’ office space will rise at a much faster pace because of further liberalisation in the finance and telecommunications sectors which will attract more foreign companies to set up or expand operations in Guangzhou.

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2.2.3 Competitiveness of Guangzhou as an Office Location

Prime Office Occupancy Cost in Major Asian Cities (June 2005)

City US$/sq m/mth

Tokyo 107.45 Hong Kong 96.21 Seoul 58.20 Mumbai 44.52 New Delhi 40.07 Shanghai 38.29 Taipei 32.74 Singapore 28.47 Beijing 26.61 Guangzhou 19.23 Bangalore 18.06 Shenzhen 17.24 Chennai 15.33 Manila 14.78 Jakarta 12.72 Bangkok 12.33 Kuala Lumpur 11.81 Hyderabad 11.00

Source: Cushman & Wakefield

According to the latest annual survey conducted by C&W on effective office occupancy costs measuring on net area basis (ie. rents after deducting incentives but adding on service charges and taxes where appropriate) across major cities in Asia in June 2005, Grade ‘A’ office occupancy costs in Guangzhou ranked third in Mainland China behind Beijing and Shanghai. On a regional basis, Guangzhou ranked tenth among the major cities in Asia.

2.2.4 Emerging Trends

• In Pursuit of Grade ‘A’ Standard

An office building of Grade ‘A’ standard is normally defined as one which is located in prime commercial area, built aesthetically and efficiently to an international standard, and has high levels of management and excellent security systems. In this context, a large portion of the existing office buildings in Guangzhou may not strictly satisfy all the requirements. However, developers in Guangzhou are becoming increasingly aware of the importance of enhancing the quality and standards of their office developments and

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its significance in influencing the decision-making process of potential tenants, particularly that of MNCs. As a result, developers are now paying more attention to potential projects in core business areas with close proximity to Metro lines, ensuring that higher standards of design, security and safety features are incorporated.

• Impact of CEPA on Office Demand

The Closer Economic Partnership Agreement (CEPA) implemented by the Municipal Government of Guangzhou in 2003 provided certain incentives, such as zero tariff for a list of Hong Kong merchandises to qualified Hong Kong enterprises. This has resulted in additional demand for office space in Guangzhou. Although the take-up may not entirely be on Grade ‘A’ space, it has nonetheless lowered the overall availability in the market and hence has had a positive knock-on impact on the Grade ‘A’ market segment. Furthermore, CEPA is expected to help the city to develop its service industry and boost the significance of Guangzhou as a regional commercial centre.

• WTO Opening Up More Industries

In line with China’s entry into the WTO, a total of seven industries covering insurance, banking, tourism, legal services, basic and value-added telecommunication services and retail have gradually opened up to foreign enterprises over the past few years. The liberalisation process is particularly noticeable in the banking sector where shortly after the signing of the WTO agreement, the restriction of managing and operating businesses in Renminbi by foreign banks was removed. In the coming three years, the number of investing entities and projects are forecasted to increase considerably as the market continues to open up. This will generate a substantial demand for office space in the near future.

• “9Plus2” Scheme

Initially announced in July 2003, and comprising nine provinces (Guangdong, Guangxi, Fujian, Jiangxi, Hunan, Guizhou, Yunnan, Hainan and Sichuan) and two special administrative regions (Hong Kong and Macau), the Pan-Pearl River Delta Regional Co-operation and Development Scheme (“9plus2” Scheme) is set to facilitate economic cooperation and generate greater revenues among the different provinces, Hong Kong and Macau in the near future.

The Pearl River Delta (PRD) region is one of China’s two major economic locomotives, the other being the Yangtze River Delta Region. As the second largest economy in the “9plus2” Scheme, Guangzhou is taking the lead in raising the economic co-operation between the different provinces. As a result, more companies will be attracted, from both domestic cities and overseas to establish their offices in Guangzhou.

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2.3 Guangzhou Retail Sector

2.3.1 Retail Development Trends

Historically, Guangzhou has been one of the most important commercial hubs in southern China. In the 1970s, shopping mostly took place in department stores and street-level shops. Although these types of retail facilities still retain an important position in the city, the number of new modern shopping centres integrating food & beverage (F&B), entertainment, supermarket, department store and shops has continued to grow over the past decade. The opening of the city’s Metro Line 1 in 1999 brought significant changes to the retail landscape and boosted the fortunes of some shopping malls in the city. Apart from large-scale centres, supermarkets and hypermarkets have also thrived in the city and have become the main grocery shopping destinations for urban residents.

2.3.2 Competitiveness of Guangzhou as a Retail Location

Comparison of Prime Retail Rents in Major Asian Cities (June 2005)

City US$/sq m/mth

Hong Kong 971 Tokyo 465 Seoul 314 Singapore 217 Shanghai 180 Kuala Lumpur 142 Beijing 110 Guangzhou 108 Bangkok 58

Source: Cushman & Wakefield

According to the latest annual survey conducted by C&W in 2005, the above table shows the prime retail rents across major cities in Asia as at the end of June 2005. Among the three Mainland cities surveyed, Guangzhou came third behind Shanghai and Beijing in terms of rental.

2.3.3 Retail Sales and Growth

The retail sales value in Guangzhou has been growing at an average annual growth rate of 18.9% over the past 14 years. Buoyant domestic demand, growing population and increasing disposable income are the key drivers behind the strong performance. In 2004, the retail sales of consumer goods in Guangzhou reached RMB167.5 billion, ranked third place among the major Mainland cities in China. On a per capita basis, the city has come top since 2000.

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Per Capita Retail Sales Inter-City Comparison (1995-2004)

Retail Sales Per Capita (RMB) 25,000

20,000

15,000

10,000

5,000

0 1995 2000 2004

Guangzhou Shanghai Beijing Shenzhen

Source: Guangzhou, Beijing, Shanghai, Shenzhen Statistics Bureaus and Cushman & Wakefield estimates

2.3.4 Income and Spending of Local Residents

In 2004, the annual disposable income per capita in Guangzhou was RMB16,884, representing a y-o-y increase of 12.5%. This ranked third among the major cities in China, behind Shenzhen and Shanghai. The relatively high income level is partly due to the strong domestic economic growth, and partly due to the fact that there were increasing numbers of residents working in the private business sector.

The annual consumption expenditure per capita in Guangzhou increased 13.4% to RMB13,121 in 2004, of which, 64.5% of the consumption was on non-service related items. Given Guangzhou’s provincial capital status, consumer spending also comes from visitors from other cities within Guangdong Province (eg. Dongguan, Foshan, Huizhou). While the majority of shoppers are from within Guangzhou, outlying locations also provide a good source of income for retailers in the city.

Reflecting the degree of affluence of a city, the Engel Index for Guangzhou’s urban households in 2001 was 40%, achieving for the first time the grade of “well-off” set by the United Nations Food and Agricultural Organization*. Guangzhou’s Engel Index has continued to decrease over the past few years, reaching 38.3% and affluent status in 2004. In particular, ownership of durable goods and luxury items rose sharply, indicating that the living standard of Guangzhou’s residents continued to improve.

(Note: *Above 60% is poor, 50-60% is normal, 40-50% is well-off, and below 40% is affluent)

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Guangzhou: Ownership per 100 Urban Households

2004 2003 % Growth

Private Car 4 2.3 73.9% Personal Computer 84 76.7 9.5% Air Conditioners 192.3 175.3 9.7% Mobile Phones 197.3 176.3 11.9%

Source: Guangzhou Statistics Bureau

2.3.5 Emerging Trends

• Influx of Foreign Retailers

Over the last five years, the lifting of restrictions under the WTO agreement has led to an influx of foreign retailers into China. Moreover, the implementation of CEPA with Hong Kong since 2003 has also encouraged growth in the retail sector as it provides certain incentives, such as zero tariff for Hong Kong merchandise to qualified Hong Kong enterprises. Furthermore, as from 2005, foreign retailers are no longer required to jointly own their businesses with a local party. We believe all these factors will increase the demand for retail space gradually in the next few years.

• Shopping Centres

The popularity of developing large-scale shopping centres will continue to be a significant trend in Guangzhou’s retail market. Most centres range from 80,000 sq m to 300,000 sq m while there is also 0.64 million sq m of shopping centre space to be completed in the city during 2005-2008. The majority of the new supply will be concentrated in Tian He District.

• Impact of Transportation Improvement

The Metro system of Guangzhou began operation in mid-1999 and has greatly impacted the retail market by accelerating traffic flow and widening the effective coverage of existing shopping destinations. Convenient access or proximity to a Metro station has become a crucial factor for the success of a shopping centre. Almost all the successful shopping centres in Guangzhou command direct access to Metro stations. According to the Guangzhou Metro Company, a total of 7 lines measuring 206 kilometres are planned for the city’s Metro system. In addition to the 2 lines already in operation, an additional 5 lines measuring 129 kilometres are to be completed by 2011. The Metro system is expected to play an even more important role in the Guangzhou retail market over the next decade.

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Section 3 Impact of Government Policies, Incentives, Urban and Infrastructure Developments

3.1 Macroeconomic Adjustment Measures

The Central Government is keen to ensure that the current economic expansion in China is not just based on speculative activities. By restricting bank loans and credit growth, the policy is expected to have the greatest impact on speculators in residential properties and Small and Medium Enterprises (SMEs), and far less impact on large businesses, MNCs and international retailers. This policy also aims to eliminate unregulated and unprofessional property developers from the market, therefore providing more opportunities for reputable enterprises with the necessary financial strengths.

In July 2005, the Chinese Central government ended months of speculation by appreciating the Renminbi by 2% and allowing a greater fluctuation with the US dollar. Although some analysts believe further revaluation of the currency is expected later this year, the moves are likely to help reduce the amount of activities among investors looking for quick gains in the property market.

3.2 Incentive Schemes to Attract Foreign Investment

Recent incentive schemes to attract foreign investment include:

• Under the implementation of CEPA, Hong Kong enterprises can enjoy zero tariff preferential treatment and Hong Kong permanent residents with Chinese citizenship can operate individually owned businesses within Guangdong Province. It is anticipated that there will be an increasing number of SMEs setting up their operations in Guangdong, generating a substantial demand for both office and retail space.

• There are currently a total of 18 Mainland cities where foreign banks can conduct Renminbi business. Guangzhou is among the second batch of mainland cities that gained approval on 1 December 2002, almost a year behind Shanghai, Shenzhen, Tianjin and Dalian. The policy is expected to encourage more overseas banks to establish their presence in Guangzhou, as it is the provincial capital and one of the most developed commercial centres in Southern Mainland China.

• The state-level economic development zones in Guangzhou may grant preferential treatments covering land-use, electricity, loans, training, and foreign exchange for auto manufacturing and auto import projects. The policy is devised to promote further development of the auto industry in Guangzhou.

All of the above policies should help sustain the strong economic growth in Guangzhou. This should in turn generate a higher demand for both office and retail properties for the city.

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3.3 Planned Urban and Infrastructure Developments

3.3.1 Guangzhou Central Business District of the 21st Century

TIAN HE CBD

Ersha Island

Source: Cushman & Wakefield

In January 2003, the Municipal Government of Guangzhou announced the Review of Planning of Pearl River New City (PRNC), in which PRNC in Tian He District was positioned as the core area for future development within Guangzhou. The review highlighted a new urban development scheme for the CBD of Guangzhou, namely GCBD21 (Guangzhou Central Business District of the 21st Century). The scheme aims to extend the current business area of Tian He, and create a more vibrant business hub. The main focus of the GCBD21 will be centred around the core area of Tian He (ie. Tian He Sports Stadium Area) and Pearl River New City. The scheme also extends to Guangzhou Main Road and to Tian He Dong Road.

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GCBD21 is intended to distinguish Guangzhou as an international metropolis. In addition, the area is expected to offer a more sophisticated business environment to attract more financial institutions, multinational corporations and major domestic enterprises, which would post a positive impact on both the retail and office property markets in Tian He.

The planning and development of PRNC started in the early 1990s but was put on hold due to the decline in the office market in 1997. Given the improved economic environment since late 2000, the development of the area resumed in 2001. As a result, a significant number of commercial projects are underway and land transactions are picking up more activity. According to the city’s urban authority, the current land released in PRNC could potentially provide substantial office space exceeding 5 million sq m. However, as the whole area is planned to be developed in phases spanning up to fifteen years, PRNC is unlikely to be a threat to the core area of Tian He for at least another five years.

3.3.2 Changing of Administrative District in Guangzhou

The Guangzhou government restructured the administrative districts in the city earlier this year, to create a greater growth capacity for the city. The government added Nan Sha District and Luo Gang District, and abolished Dong Shan District and Fang Cun District. According to the plan, the former Dong Shan District and the former Fang Cun District will now be under the jurisdiction of Yue Xiu District and Li Wan District, respectively. The change has geographically placed Tian He District at the centre of Guangzhou. This coupled with the planned infrastructure developments in the city (eg. Metro Lines) will improve the attractiveness of the district as a commercial location of Guangzhou.

3.3.3 New Guangzhou Railway Station

The new Guangzhou Railway Station will be located in Pan Yu and is due to open in 2008. The new railway line will have interchange stations with Metro Line 2 and the planned Metro Line 7. It will serve mainly as a passenger station and hence allowing the existing station located in Yue Xiu to focus on servicing the commercial market, such as the wholesale market in Zhan Nan Road area of Yue Xiu.

3.3.4 Guangzhou Metro system

The Metro system is one of the largest infrastructure developments in Guangzhou, aimed at developing a comprehensive and sophisticated network comprising of a total of nine lines. Its service area will spread throughout the urban area and extend to the fringe areas. Rail linkages to neighbouring cities such as Foshan, Jiangmen and Zhuhai will also be established.

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The Metro Line 1 and Line 2 have been in operation since 1999 and 2003 respectively and are already playing an important role in the daily life of the general public. Significant changes in retail structure and shopping profile have been witnessed since the opening of the Metro as the improved accessibility and popularity of the Metro has contributed to the success of a number of shopping malls adjacent to Metro stations. In particular, the massive passenger flow brought by the Metro has turned Tian He into a prime shopping destination.

Source: Guangzhou Metro and Cushman & Wakefield

3.3.5 Guangzhou Baiyun Airport Extension

The new international airport of Guangzhou (Baiyun International Airport) opened in June 2004, replacing the old airport that was relatively small and overcrowded. The new airport has been constructed with the aim to more effectively and efficiently meet the increasing demand of air passenger traffic through Guangzhou.

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The new airport covers an area of 1,500 hectares and is located in the Hua Du District, about 28 km to the north of the centre of Guangzhou. With an investment of RMB19.8 billion, the new airport is capable of handling 27 million passengers and 1 million tons of cargo each year, which is much higher than the old airport. An extension plan is already in place to expand the new airport, which includes adding a waiting lounge and an arrival hall for domestic flight passengers. The project will cost RMB998 million and is scheduled for completion in 2007.

Apart from handling passengers from all over the world, the new airport aims to significantly increase Guangzhou’s logistics capability and further enhance its competitiveness with Hong Kong.

3.3.6 Asian Games 2010

The Asian Games 2010 to be held in Guangzhou is expected to bring a large number of visitors to the city. The local retail market is expected to benefit enormously from regional publicity, corporate sponsors and visitor flows. The city is committed to spend a sum of well over RMB10 billion on making environmental improvements. In addition, infrastructure improvements are also underway, with RMB25.6 billion set aside for expressways, metro lines, utility networks, power grids, a new opera house, library and museum.

The aim of these improvements, according to the Municipal Government, is not only to improve the city for the games, but also to strengthen the city’s competitiveness among other large and medium-sized mainland cities. The Asian Games will uplift Guangzhou’s image and bring a significant economic benefit to the city.

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Section 4 Property Market Review

4.1 Guangzhou Office Market

4.1.1 Lease Structure

The typical lease term for office space in Guangzhou is two or three years. A break clause may be negotiated between the landlord and the tenant and included in the lease. At the current market condition, a break option would typically require either party to give a notice period of 3 to 6 months to the other party. However, the length of the notice period may vary depending on each party’s negotiation position. In the case of a longer tenure, rental escalations are widely applied at 3%-5% every three to five years. It is common for tenants to pay a deposit equivalent to 2-3 months’ rent to the landlord. Rental payments are made on a monthly basis. Rent-free periods are common but at today’s market conditions, it tends to be for the purpose of fit-out and lasts normally for around 1-3 months depending on the size of take up.

4.1.2 Grade ‘A’ Office Stock

Guangzhou Grade ‘A’ Office Stock 2004

Total Stock 1.24 million Sq M

Dong Shan (Now Part of Yue Xiu) 27% Tian He 45%

Yue Xiu 28%

Source: Cushman & Wakefield

The major office locations in Guangzhou are in Tian He and Huanshi Dong Road of Yue Xiu District (formerly within the Dong Shan District before the recent administrative restructure of the city). The total Grade ‘A’ office stock in Guangzhou totalled 1.24 million sq m, accounting for approximately 54% of all office stock (ie. both Grade ‘A’ and non Grade ‘A’) in Guangzhou. Although Yue Xiu currently accounts for over 55% of the total Grade ‘A’ stock, Tian He is developing at a rapid pace and is anticipated to strengthen its position as the new Central Business District of Guangzhou within the next 10 years.

VIII-24 APPENDIX VIII INDEPENDENT MARKET RESEARCH REPORT IN RELATION TO THE GUANGZHOU COMMERCIAL PROPERTY MARKET

Source: Cushman & Wakefield

4.1.3 Demand, Supply and Vacancy

Since the signing of the WTO agreement, the demand for Grade ‘A’ office space in Guangzhou has been largely driven by an increasing number of requirements from MNCs, particularly in the insurance, finance and hi-tech industries. Moreover, the continual interest by foreign enterprises in China coupled with domestic policy measures aimed at strengthening the regional economy within the PRD region should bolster demand for good quality office space in Guangzhou. In addition, large domestic companies are also expected to become a key user of Grade ‘A’ office space. Due to the limited number of new development schemes and rising demand in the early 2000s, the Grade ‘A’ office vacancy rate has rapidly declined, reaching a historical low of 8.5% at the end of 2004.

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However, there is a wave of new Grade ‘A’ office development projects in the pipeline, totalling approximately 1.64 million sq m to be released between 2005 and 2009. This compares with a total of only 1.1 million sq m of office space completed in the past decade. It is worth noting that excluded from the figure are a few development schemes that are currently on-hold (eg. due to financial difficulties). Resurrection of these projects may potentially add another 0.29 million sq m onto the market.

An estimated 88% of the total new supply will be located in Tian He. Although this is a huge amount of space to be released onto the district in the next few years, 70% of the new space in Tian He will be in the PRNC area. We believe the impact on prime buildings within the core Tian He area (ie. surrounding Tian He Sports Stadium) will be far less as this is the preferred location among most MNCs whereas the PRNC is a new location that may take several years to become mature.

Projected Guangzhou Grade ‘A’ Office Stock 2009

Total Stock 2.87 million Sq M

Tian He (Pearl River New City) Tian He (Core) 36% 34%

Dong Shan (Now Part of Yue Xiu) Yue Xiu 18% 12%

Source: Cushman & Wakefield

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Over the past nine months, expansionary and upgrading activities from financial institutions and consumer product companies have kept the vacancy rate fairly stable by absorbing most of the newly completed space. However, the overwhelmingly high level of new supply will more than meet the strong demand in the market in the medium term. Therefore, we project the vacancy rate to rise steadily from late 2005, reaching just below 20% by 2009.

Guangzhou Grade ‘A’ Office Demand, Supply and Vacancy

Forecast 600,000 35%

30%

25%

400,000 Rate Vacancy

20% Sq M

15%

200,000 10%

0 0% 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005F 2006F 2007F 2008F 2009F

Supply Absorption Vacancy Rate

Source: Cushman & Wakefield

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Major Office Development Schemes (2005-2009)

Estimated Expected Development District Size Completion (sq m)

Telecom Tower Yue Xiu 80,000 2005 C C Tower Tian He 59,000 2005 Development Centre Tian He 80,000 2005 R&F Telecommunications Building Tian He 43,000 2006 China Plaza Phase 2 Yue Xiu 119,000 2006 Teem Mall (East Tower) Tian He 115,000 2006 Tianyu International Commercial Centre Tian He 42,000 2006 R&F Centre Building Tian He 120,000 2006 He Jing Project Tian He 95,000 2006 R&F Ying Long Plaza Tian He 90,000 2007 Victory Plaza Office Tower Tian He 90,000 2007 Metro Plaza Phase 2 Tian He 67,000 2007 Taikoo Hui Tian He 120,000 2008 Guangdong Communication Group Information Control Building Tian He 150,000 2008 Twin Tower (West Tower) Tian He 200,000 2009 Chinese Tobacco Tian He 170,000 2009

Source: Cushman & Wakefield

4.1.4 Rents and Values

Both Grade ‘A’ office rents and values have been increasing since the end of 1999. Whilst declining vacancy due to limited new supply and rising demand were the main reasons behind the rental growth in the leasing market, speculators and end-users were keen to snatch up good quality units after values dropped by 25% following the Asian financial crisis. As at the end of September 2005, the average achievable rent (excluding management fee) for Grade ‘A’ offices and achievable value stood at RMB118/sq m/month and RMB13,224/sq m, respectively.

On a sub market level, the Tian He District currently commands the highest average rent, reflecting the relatively newer and better quality buildings in the location.

VIII-28 APPENDIX VIII INDEPENDENT MARKET RESEARCH REPORT IN RELATION TO THE GUANGZHOU COMMERCIAL PROPERTY MARKET

Guangzhou Grade ‘A’ Office Rents and Values by Districts (September 2005)

Achievable Rent Achievable Value RMB/Sq m/Month RMB/Sq m

Tian He 90-150 10,000-15,500 Dong Shan (Now Part of Yue Xiu) 80-150 9,000-16,000 Yue Xiu 70-126 8,000-14,000

Note: Achievable rents and values are derived from a basket of properties selected by C&W to track the general movement in the market. These figures represent our view of the market and do not represent the actual achieved rent and value for any particular building.

Source: Cushman & Wakefield

Looking ahead, we believe that the leasing market will continue to favour landlords in the short term given the currently low-level of vacancy. MNCs and large domestic companies wanting to expand or upgrade are faced with limited options and the situation is unlikely to change until 2006. We forecast rents will therefore rise further this year before falling by a total of 13.3% (compounded) during 2006-2009 as supply will significantly exceed demand. However, good quality buildings within prime locations (eg. Core Tian He District) with convenient transportation accessibility shall be less impacted. At the time of writing this report, there is no indication that new supply will remain high beyond 2009. We have therefore projected that rents will revert to growth from 2010.

In the sales market, the Central Government’s macroeconomic adjustment measures and the recent interest rate hike have kept the growth in values at a much slower pace than rents over the past couple of years. We foresee this trend to continue for the remainder of this year before the high level of new supply sets in next year. Given that the majority of upcoming new space is of high quality and targeted for mainly large foreign companies that generally prefer leasing to owner occupation, the impact of high supply on the sales market should be far less than on the rental market. We therefore forecast a much milder reduction in values of 6.9% during 2006-2009.

Guangzhou Grade ‘A’ Office Market Forecasts (2005-2009)

2005F 2006F 2007F 2008F 2009F

Rental Growth (%) 5.0% -2.0% -5.0% -5.0% -2.0% Capital Values (%) 2.0% 0.0% -2.0% -5.0% 0.0%

Note: Forecasts for 2005-2009 are based on an assessment of the projected future demand, supply and vacancy conditions in the market.

Source: Cushman & Wakefield

VIII-29 APPENDIX VIII INDEPENDENT MARKET RESEARCH REPORT IN RELATION TO THE GUANGZHOU COMMERCIAL PROPERTY MARKET

The long-term forecasts presented below are based on an analysis of the historical patterns of key market indicators, overlaid with our subjective view of the market:

Guangzhou Grade ‘A’ Office Market Forecasts (2010-2014)

Average per annum 2010-2014

Rental Growth (%) 5.5% Capital Values (%) 1.3%

Note: Forecasts for 2010-2014 for rents and values are based on the assumption that rental growth will revert to the long-term trend.

Source: Cushman & Wakefield

4.1.5 Management Fees

The management fee for Grade ‘A’ office buildings in Guangzhou averaged around RMB20-RMB30/sq m/month as at the end of September 2005. The management fee typically includes services and maintenance provision to the common area of the building (eg. cleaning, electricity, security system, water, elevators and landscaping).

4.1.6 Market Outlook

Both the rental and capital values for prime office space are expected to grow in 2005 before experiencing some downward pressure due to a significant amount of new supply. However, the longer-term prospect of the Guangzhou office market remains positive as it is supported by strong economic growth driven by rapidly rising FDI. The Tian He District in particular, is expected to become the most important commercial area in Guangzhou and the top choice among most large multinational businesses that want to be in Guangzhou.

4.2 Guangzhou Retail Market

4.2.1 Lease Structure

Although it may vary dramatically from case to case, the typical lease term for retail space in Guangzhou is two years or three years. A break clause may be negotiated between the landlord and the tenant and included in the lease. At the current market condition, a break option would typically require either party to give a notice period of 3 to 6 months to the other party. However, the length of the notice period may vary depending on each party’s negotiation position. In terms of rental payment, three different methods are applied:

• Fixed Rate

• Percentage of Turnover

• Minimum Base Rental plus Turnover Percentage

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All of the three methods have similar popularity in actual practice. In the case of long lease tenure, rental escalations are widely applied at 3%-10% every three to five years. Rent-free periods are common but in today’s market conditions, it tends to be for the purpose of fit-out and lasts normally around 1-3 months depending on the size of take up.

4.2.2 Shopper Profile in Guangzhou

Population 7.4 million in 2004 Number of Households Estimated at approximately 2.2 million Age Profile of Population According to the latest national population survey conducted in 2000, the population in Guangzhou has: 16.4% (age 0-14); 77.5% (age 15-64); and 6.1% (age 65 and over). Urban Population Per Capita RMB16,884 in 2004 Disposable Income Urban Population Per Capita RMB13,121 in 2004 Spending Tourist Spending The city attracted a total of 26.7 million overnight visitors in 2004. Of which, 4.372 million were from overseas, including Hong Kong, Macau, and Taiwan. The recorded tourism spending for last year was RMB54.7 billion. Consumer Spending Behaviour Consumption of daily necessity items forms the largest portion of an urban household’s expenditure. However, ownerships of luxury durable goods have been on the rise in recent years (eg. private vehicles, air conditioners, cameras, mobile phones, personal computers, and audio-visual equipment.) (See 2.3.4) Others The average temperature in Guangzhou is generally between 18.4˚C and 26.2˚C. The relatively warmer weather means demand for winter clothing is less than the northern cities (eg. Beijing). However, the comfortable shopping environment provided by large-scale retail centres has become increasingly attractive to local residents and shopping is becoming more popular as a pastime. Metro system and buses are the most common forms of transportation among the general public. Future plans to improve the accessibility of the city centre to other parts of Guangzhou and Guangdong Province will help to bring more visitors into the city.

Source: Cushman & Wakefield, Worldclimate.com and Guangzhou Statistics Bureau

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4.2.3 Retail Stock

Source: Cushman & Wakefield

As at the end of 2004, the total retail stock in Guangzhou amounted to approximately 2.48 million sq m. Major prime shopping areas are located in the Li Wan District, Yue Xiu District (including the former Dong Shan District) and Tian He District. These three areas accounted for 77% of the total stock (or 1.91 million sq m) in the city, of which, almost half of the space is found in Tian He.

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Guangzhou Retail Stock by Major Retail Districts

Total Stock 1.91 million Sq M

Li Wan 21% Tian He 49%

Dong Shan (Now Part of Yue Xiu) 21% Yue Xiu 9%

Source: Cushman & Wakefield

Guangzhou Retail Stock by Types

Total Stock 2.48 million Sq M

Street Shops Hyper/Supermarkets 4% 18%

Department Stores 6%

Shopping Centres 72%

Source: Cushman & Wakefield

The majority of existing retail establishments in Guangzhou are in the form of shopping centres, accounting for 72% of the total stock. Over the past decade, the rapid growth in the development of large-scale “one-stop concept” shopping centres and hyper/supermarkets has significantly reduced the popularity of stand-alone department stores. In fact, many department store operators nowadays choose to lease space inside a shopping centre, hoping to benefit from the high visitor traffic. Similarly, shopping centre owners also benefit from an anchor tenant that is able to offer a wide variety of merchandises and better trade clustering.

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4.2.4 Demand, Supply and Vacancy

Strong retail sales have attracted many retailers to establish and expand their presence in Guangzhou. Given the increasing demand for daily necessity goods, I.T. related products, and consumer electronics items; space requirements have been strong among retail operators in these segments.

Another area of growth is the rising popularity of supermarkets and hypermarkets. The growth of these types of facilities began in 1996 and has since taken up over 0.45 million sq m of retail space across the city. Meanwhile, chained convenience store and personal care product operators have also expanded aggressively over the past seven years.

Local consumers are increasingly more aware of foreign brands and their tastes are becoming more sophisticated. Consequently, shoppers now look for key shopping ingredients such as entertainment attractions and F&B outlets. With the complete opening of the country’s retail market from the beginning of this year, many more retailers are expected to enter the market and create great demand for good quality space. While the number of large-scale shopping centres has grown rapidly by 11 times since 1995, stand-alone department stores have not been as active with the amount of space only rising by 84% during the same period.

Despite years of burgeoning growth in the size of the retail property market, the city has plans to develop more large-scale shopping centres to cater for the projected strong demand from retailers. According to our list of development schedules, the Tian He District will be the primary focus. Many developers and retailers believe the planned improvements to the Metro system, particularly Line 3 that will interchange with the existing Line 1 at Tiyuxilu Station in Tian He District, will greatly enhance the accessibility of the district and hence boost the people traffic in the area.

Guangzhou Retail Demand, Supply and Vacancy

Forecast 600,000 45% 40% 35% aac Rate Vacancy 400,000 30% 25%

Sq M 20% 200,000 15% 10% 5% 0 0% 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005F 2006F 2007F 2008F 2009F

Supply Absorption Vacancy Rate

Note: Figures for 2009F for both absorption and supply are equivalent to their annual averages between 1995 and 2008. Source: Cushman & Wakefield

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Major Retail Development Schemes (2005-2008)

Estimated Expected Development District Size Completion (sq m)

May Flower Plaza Yue Xiu 43,000 2005 Up Plaza Li Wan 12,000 2005 Cyber Mart Li Wan 10,000 2005 Metro Mall Yue Xiu 60,000 2005 Shi Pu Ming Du Li Wan 10,000 2005 Trend Station Tian He 11,000 2005 Ming Sing Plaza Yue Xiu 60,000 2005 Gong Yuan Qian Guang Chang Yue Xiu 25,000 2006 Beijing Road Underground Pedestrian Street Yue Xiu 12,000 2006 Guangzhou Hua Hua Shi Jie Shopping Centre 1a Tian He 150,000 2006 Guangzhou Hua Hua Shi Jie Shopping Centre 1b Tian He 150,000 2007 Taikoo Hui Tian He 100,000 2008

Note: The above table shows only the schemes located within the major retail locations in Guangzhou and excludes schemes that may be developed in other locations of the city.

Source: Cushman & Wakefield

The overall vacancy rate for the major retail locations in Guangzhou averaged 20.1% as at the end of September 2005. Going forward, we project vacancy will fall quickly to a historical low by 2009 as demand is anticipated to significantly exceed supply.

4.2.5 Rents and Values

The average achievable ground floor rental for prime shopping centres in Guangzhou reached RMB913/sq m/month (gross excluding management fee and promotion fee) as at the end of September 2005. The rental decline in 2004 was due to a high level of new supply amounting to 0.44 million sq m. We believe the projected reduction in vacant space will exert further upward pressure on rents over the next five years, with growth averaging around 11.6% per annum between 2005 and 2008.

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Guangzhou Prime Retail Rents by Districts (September 2005)

Achievable Rent Achievable Value RMB/Sq m/Month RMB/Sq m

Dong Shan (Now Part of Yue Xiu) 470-1,500 26,500-84,000 Tian He 300-1,500 20,000-85,000 Yue Xiu 625-910 52,500-76,500 Li Wan 415-990 31,500-75,000

Source: Cushman & Wakefield

On a sub market level, prime retail rents in both former Dong Shan and Tian He districts recorded a higher average than the overall market. The best space in the two districts can currently fetch a rent as high as RMB1,500/sq m/month.

The average achievable ground floor value for prime shopping centres in Guangzhou was RMB81,175/sq m as at the end of September 2005. Upward pressure on capital values was less compared with rents over the years because the majority of retailers needing shopping centre space, particularly those of foreign origin, preferred leasing to owner occupation. As a result, rental growth has outpaced the appreciation in values. This trend is expected to continue and we therefore project the average annual growth in values to be at 10.1% for the period.

Guangzhou Retail Market Forecasts (2005-2009)

2005F 2006F 2007F 2008F 2009F

Rental Growth (%) 10.0% 12.0% 16.0% 10.0% 10.0% Capital Values (%) 10.0% 11.0% 10.5% 9.4% 9.8%

Note: Forecasts for 2005-2009 are based on an assessment of the projected future demand, supply and vacancy conditions in the market.

Source: Cushman & Wakefield

VIII-36 APPENDIX VIII INDEPENDENT MARKET RESEARCH REPORT IN RELATION TO THE GUANGZHOU COMMERCIAL PROPERTY MARKET

The long-term forecasts presented below are based on an analysis of the historical patterns of key market indicators, overlaid with our subjective view of the market:

Guangzhou Retail Market Forecasts (2010-2014)

Average per annum 2010-2014

Rental Growth (%) 6.0% Capital Values (%) 4.0%

Note: Forecasts for 2010-2014 for rents and values are based on the assumption that rental growth will revert to the long-term trend.

Source: Cushman & Wakefield

4.2.6 Management Fees

The management fee for prime retail shopping centres in Guangzhou averaged around RMB35-RMB45/sq m/month as at the end of September 2005. The management fee typically includes services and maintenance provision to the common area of the building (eg. cleaning, electricity, security system, water, elevators and landscaping and provision of air conditioning).

4.2.7 Market Outlook

The location and the status of Guangzhou attract visitors and business travellers from the rest of Guangdong province. In particular, shoppers from outside the city are an important source to the city’s retail sales.

The opening of the retail market to foreign retailers, the introduction of CEPA and the Municipal Government of Guangzhou’s efforts to attract visitors for meetings, conventions, exhibitions and trade fairs, will continue to stimulate the retail market.

We believe demand for retail space in Guangzhou will strengthen further in the short to medium term while at the same time new supply will average approximately 0.16 million sq m per annum between 2005-2008, which is broadly on par with the average annual new supply of 0.17 million sq m over the past 10 years. As a result, we project both rents and values to continue with the rising trend.

VIII-37 APPENDIX VIII INDEPENDENT MARKET RESEARCH REPORT IN RELATION TO THE GUANGZHOU COMMERCIAL PROPERTY MARKET

Section 5 Analysis of Subject Properties

5.1 White Horse Building ( )

5.1.1 Description

White Horse Building is situated on Zhan Nan Road in Yue Xiu district. It is a landmark building in the area, renowned as the most popular wholesale centre for garments in Guangzhou. The building was first completed in 1990 and then later extended in two phases from 1995-1997 and from 1998-2000. It is now a commercial retail centre with eight levels above ground, one lower ground floor and one basement level. The top two floors are currently used as office/warehouse premises by companies engaged in the wholesale trade. The nearby area is surrounded by other low to medium-rise commercial buildings also engaged in the wholesale business.

5.1.2 Facilities and Accessibility

The standard of services and facilities within White Horse Building is considered to be reasonable and comparable to other wholesale centres in the neighbourhood. Typically, the standard of a wholesale centre is of a lower quality compared to prime retail shopping centres. A pedestrian footbridge adjacent to the development allows easy access to the existing Guangzhou Railway Station, a main transportation hub to other provinces. The Railway Station is also connected to Line 2 of the Metro system. There is also a bus terminal nearby. Car parking for the development is situated in the basement level and with a total of 94 car parking spaces. However, it should be noted that the car park is not included in the REIT.

5.1.3 Analysis of Pedestrian Traffic Flow

The analysis of pedestrian flow was conducted with visitor counts taken at the main entrance of White Horse Building during:

1) lunch hours (12:30-13:30)

2) in the afternoon (15:30-16:30)

on both the 14th June 2005 (Tuesday) and the 19th June 2005 (Sunday).

Weekday Weekend

Lunch Hours 1,361 1,391 Afternoon 1,073 1,546

Note: The figures above represent visitors going in or coming out of the building through the main front entrance. Our numbers are likely to be significantly lower than the total number of visitors that are in the centre during the survey periods, given that some visitors would have entered the building before we started our count and some visitors would have entered the building via other entrances.

Source: Cushman & Wakefield

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Unlike other typical retail centres, White Horse Building maintains high shopper traffic throughout the week. The high footfall is attributed to the good accessibility to nearby transportation hubs such as the Guangzhou Railway Station and bus terminals.

5.1.4 Catchment

White Horse Building has the reputation of being the most popular wholesale centre for garments in Guangzhou. It is a specialised facility that attracts shoppers and local retailers from both within Guangzhou, Guangdong and other provinces including Zhejiang, Fujian, Hunan and Liaoning.

5.1.5 Tenancy Profile

The retail area within White Horse Building is subdivided into small units with an average net area of 22 sq m. By the end of September 2005, there were approximately 1,300 leases with garment retailers/wholesalers leasing 98% of the total retail area of the building.

According to a survey conducted by the management of White Horse Building in May 2005, over 40% of the tenants came from within the Guangdong Province, 11% from Zhejiang Province and 10% from Fujian Province.

White Horse Building Trade Mix Measured by Area

Non Fashion 2%

Fashion 98%

Source: Cushman & Wakefield

VIII-39 APPENDIX VIII INDEPENDENT MARKET RESEARCH REPORT IN RELATION TO THE GUANGZHOU COMMERCIAL PROPERTY MARKET

White Horse Building Lease Expiries Measured by Area

100%

80%

60%

40%

20%

0% 2005 2006 2007 2008 2009 2010 & Vacant beyond

Source: Cushman & Wakefield

We have been informed by the management of White Horse Building that over 95% of the leases to be expired by the end of 2005 have already been renewed for a tenure between four and five years.

5.1.6 Rental and Occupancy Rate

For the area to be listed in the REIT and using 30th September 2005 as the reference date, the following table shows how rents (based on what is achievable according to C&W’s opinion) and occupancy rates in the White Horse Building compare with the overall market in Zhan Nan Road area.

Achievable Open Occupancy Market Rental Rate Ground Floor

White Horse Building 100% RMB599/sq m/mth Zhan Nan Road Area Average *81% छRMB500/sq m/mth

* Because we do not collect occupancy rate data for the wholesale centres in Zhan Nan Road, we have made an estimate for Zhan Nan Road based on the figure for the retail market in surrounding vicinities.

छ The achievable open market rental is based on a basket of properties selected by C&W to track the general movement in the market and does not represent the actual achieved rent for any particular building. Furthermore, the market average quoted for Zhan Nan Road is an average weighted by size of each centre in C&W’s basket of selected properties.

Source: Cushman & Wakefield

VIII-40 APPENDIX VIII INDEPENDENT MARKET RESEARCH REPORT IN RELATION TO THE GUANGZHOU COMMERCIAL PROPERTY MARKET

5.1.7 Rental Growth and Occupancy Projections

Open Market Rental Growth and Occupancy Rate Projections

2005F 2006F 2007F 2008F 2009F

Rental Growth *2.0% 2.0% 2.0% 7.0% 7.0% Occupancy Rate 100% 100% 100% 100% 100%

2010F-2014F Rental Growth 5.0% per annum on average Occupancy Rate 100% on average

* The rental growth rate indicated is the forecast year-on-year growth rate in the achievable open market rent of White Horse Building. We understand that the achievable open market rent for White Horse Building was significantly below the overall achievable open market average prior to the restructuring of leases with existing tenants that took place in the third quarter of 2005. The owner has informed C&W that over 95% of the tenants have already renewed their leases for another 4 to 5 years, with a new rental rate due to commence from 1st January 2006. We are of the view that the new rental rate is a reflection of the achievable open market rent and it was approximately 20% higher than the overall market average as at 30th September 2005 (see table in 5.1.6).

Note: Rental forecasts for 2006-2009 are based on an assessment of the projected future demand, supply and vacancy conditions in the market. Forecasts for 2010-2014 are based on the assumption that rental growth will revert to the long-term trend. The percentage growth represents the change in open market rent (ie. a new lease) over a 1-year period, and does not represent the projected rental reversion of leases upon lease renewal.

Source: Cushman & Wakefield

We believe White Horse Building will largely follow the growth pattern of the prime retail market of Guangzhou. However, the rental growth has been lowered to reflect the recent action of the owner to restructure the leases with existing tenants. In terms of the occupancy rate, we project the REIT portion of the building to maintain 100% occupancy over the next 10 years.

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5.2 Fortune Plaza ( )

5.2.1 Description

Fortune Plaza is a modern commercial development situated on the eastern side of Ti Yu Dong Road in Tian He district. It was completed in 2003 with a 6-storey commercial podium and two office towers of Grade ‘A’ standard. The East Tower provides office accommodation from the 8/F to 37/F and the West Tower from the 8/F to 28/F. Developments in the surrounding area comprise mainly of modern high-rise office developments above retail podiums as well as low-rise retail centres, interspersed with some medium to high-rise residential buildings.

5.2.2 Facilities and Accessibility

The standard of services and facilities within Fortune Plaza is considered to be good and at the top end of existing Grade ‘A’ office developments in Guangzhou. Car parking for the development (note: not included in the REIT) is situated in the 2 basement levels providing a total of 157 parking spaces. A platform garden, open-air bar and club are located on the 7/F.

Fortune Plaza is within a 5-minute walk to Tiyuzhongxin Station on Line 1 of the Metro system. In addition, the Guangzhou East Station (terminus for the hi-speed Guangzhou- Hongkong rail link) is about 10 minutes away by car.

5.2.3 Tenancy Profile

Compared with other Grade ‘A’ office buildings in Guangzhou, Fortune Plaza has a relatively high concentration of tenants who are MNCs. As at the end of September 2005, MNCs occupied around 59% of the development. In terms of trade mix, 29% of the space was taken up by financial/investment institutions. Major tenants include HSBC, Caltex, Alibaba (China) Technology Co., Ltd. (e-commerce), AstraZeneca and PetroChina.

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In terms of lease expiry, the majority of the existing leases (c. 92%) will expire before the end of 2008.

Fortune Plaza Lease Expiries Measured by Area

50%

40%

30%

20%

10%

0% 2005 2006 2007 2008 2009 2010 & Vacant beyond

Source: Cushman & Wakefield

5.2.4 Rental and Occupancy Rate Benchmarks

For the area of the building to be listed in the REIT and using 30th September 2005 as the reference date, the following table shows how rents (based on what is achievable according to C&W’s opinion) and occupancy rates in Fortune Plaza compare with the overall Tian He market.

Grade ‘A’ Office Retail Portion (including 2nd and above (Ground & 1st Floors Floors of Podium) of Podium) Achievable Open Occupancy Achievable Open Occupancy Market Rental Rate Market Rental Rate Ground Floor

Fortune Plaza 83% RMB110 15% RMB290 /sq m/month /sq m/month Tian He Average 88% छRMB120 81% *छRMB958 /sq m/month /sq m/month

* Figure refers to the average prime retail shopping centre rent in Tian He.

छ The achievable open market rental is based on a basket of properties selected by C&W to track the general movement in the market and does not represent the actual achieved rent for any particular building. Furthermore, the market average quoted is an average weighted by size of each building in C&W’s basket of selected properties.

Source: Cushman & Wakefield

VIII-43 APPENDIX VIII INDEPENDENT MARKET RESEARCH REPORT IN RELATION TO THE GUANGZHOU COMMERCIAL PROPERTY MARKET

5.2.5 Rental Growth and Occupancy Projections

We project the office portion to perform better than the overall Guangzhou Grade ‘A’ office market because of its prime location within Tian He District. We also project the retail portion to perform on par with the overall prime retail market in Guangzhou. In terms of the occupancy rate, we project the office portion will fluctuate between 88% and 97% over the next 10 years and rents to continue increasing moderately before stabilising in 2008 and 2009. Office rents are projected to resume an upward trend from 2009 onwards. For the retail portion, we project the occupancy rate to gradually pick up from 2006 to reach 90% in 2007. The occupancy rate is forecasted to fluctuate between 94% and 96% thereafter until 2014.

Open Market Rental Growth and Occupancy Rate Projections

Office Portion 2005F 2006F 2007F 2008F 2009F

Rental Growth 8.0% 2.0% 0.0% 0.0% 2.0% Occupancy Rate 88% 97% 95% 97% 97%

2010F-2014F Rental Growth 7.0% per annum on average Occupancy Rate 97% on average

Retail Portion 2005F 2006F 2007F 2008F 2009F

Rental Growth 10.0% 12.0% 16.0% 10.0% 10.0% Occupancy Rate 15% 75% 90% 96% 94%

2010F-2014F Rental Growth 6.0% per annum on average Occupancy Rate 95% on average

Note: Rental forecasts for 2005-2009 are based on an assessment of the projected future demand, supply and vacancy conditions in the market. Forecasts for 2010-2014 are based on the assumption that rental growth will revert to the long-term trend. The percentage growth represents the change in open market rent (ie. a new lease) over a 1-year period, and does not represent the projected rental reversion of leases upon lease renewal.

Source: Cushman & Wakefield

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5.3 City Development Plaza ( )

5.3.1 Description

City Development Plaza is a 28-storey strata-title commercial building completed in 1997. It is situated on the western side of Ti Yu Xi Road in Tian He District. The building consists of a Grade ‘A’ office tower and a commercial podium. The surrounding area comprises mainly of modern high-rise office buildings and low-rise retail centres, interspersed with some older residential blocks.

5.3.2 Facilities and Accessibility

The commercial podium’s retail area is situated in the rear portion of the development, behind the main entrance lobby serving the office levels. Shops are arranged around an atrium, while a clubhouse and a conference centre are located on the 5/F for tenant use. The basement is a car park with 240 spaces but it is worth noting that the car park is not included in the REIT.

It is approximately a 15-minute walk to the nearest metro station, Tiyuxilu Station on Line 1 of the Metro system. After the completion of Line 3 (Phase 1) in late 2005, Tiyuxilu Station will be the interchange station of Lines 1 & 3. Furthermore, the development is only a 10-minute drive from the Guangzhou East Station (terminus for the hi-speed Guangzhou- Hongkong rail link).

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5.3.3 Tenancy Profile

The building has a relatively high concentration of Chinese enterprises, especially in the finance/insurance, telecommunication and trading industries (eg. Taikang Life Insurance and Guangdong Mobile Communications Corporation). It is also the headquarters for the developer, Guangzhou City Construction & Development.

City Development Plaza Lease Expiries Measured by Area

50%

40%

30%

20%

10%

0% 2005 2006 2007 2008 2009 2010 & Vacant beyond

Source: Cushman & Wakefield

VIII-46 APPENDIX VIII INDEPENDENT MARKET RESEARCH REPORT IN RELATION TO THE GUANGZHOU COMMERCIAL PROPERTY MARKET

In terms of lease expiries, the majority of the existing leases (c. 80%) will expire before the end of 2008. A high proportion of around 35% will expire next year.

Tenant Mix of City Development Plaza Retail Podium by Area

Finance/Insurance 2% Others Vacant 1% 15%

Services 16%

Retail 66%

Source: Cushman & Wakefield

For the retail podium, 66% of the space is leased to retailers. The “others” category is the space occupied by the management office of the building.

5.3.4 Rental and Occupancy Rate Benchmarks

For the area to be listed in the REIT and using 30th September 2005 as the reference date, the following table shows how rents (based on what is achievable according to C&W’s opinion) and occupancy rates in the City Development Plaza compare with the overall Tian He market.

Office Portion Retail Podium Portion Achievable Open Occupancy Achievable Open Occupancy Market Rental Rate Market Rental Rate Ground Floor

City Development 93% RMB90 86% RMB200 Plaza /sq m/month /sq m/month Tian He Average 88% छRMB120 81% *छRMB958 /sq m/month /sq m/month

* Figure refers to the average prime retail shopping centre rent in Tian He.

छ The achievable open market rental is based on a basket of properties selected by C&W to track the general movement in the market and does not represent the actual achieved rent for any particular building. Furthermore, the market average quoted is an average weighted by size of each building in C&W’s basket of selected properties.

Source: Cushman & Wakefield

VIII-47 APPENDIX VIII INDEPENDENT MARKET RESEARCH REPORT IN RELATION TO THE GUANGZHOU COMMERCIAL PROPERTY MARKET

5.3.5 Rental Growth and Occupancy Projections

We project the open market rent for the office portion will follow the growth pattern in the overall Guangzhou Grade ‘A’ office market whereas the rental for the retail portion will experience a slower rate of growth than the overall prime market because of its small size and less eye-catching entrances compared with large-scale shopping centres in the area. However, one should also note that this provides an excellent opportunity for the new asset manager of the REIT to improve the operational efficiency of the retail portion to achieve higher rental income and profitability over time. We project the occupancy rate for the REIT portion of the building to fluctuate between 91% and 95% for the office portion, and between 86% and 98% for the retail portion, over the next 10 years.

Open Market Rental Growth and Occupancy Rate Projections

Office Portion 2005F 2006F 2007F 2008F 2009F

Rental Growth 5.0% -2.0% -5.0% -5.0% -2.0% Occupancy Rate 95% 93% 95% 95% 91%

2010F-2014F Rental Growth 5.5% per annum on average Occupancy Rate 93% on average

Retail Portion 2005F 2006F 2007F 2008F 2009F

Rental Growth 5.0% 6.0% 8.0% 5.0% 5.0% Occupancy Rate 86% 90% 94% 95% 98%

2010F-2014F Rental Growth 4.5% per annum on average Occupancy Rate 94% on average

Source: Cushman & Wakefield

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5.4 Victory Plaza ( )

5.4.1 Description

Victory Plaza is one of the prime shopping centres in Tian He district. It is situated on the western side of Ti Yu Xi Road beside the junction with Tian He Road. It is a 6-storey commercial retail centre with 4 basement levels completed in 2003. Construction recently commenced to erect two office towers of 36 and 52 storeys above this centre and the work is scheduled for completion in 2007. There are currently a number of high-rise office developments along Ti Yu Xi Road and also two large retail centres (Teemall and Grandview Plaza) located on the other side of Tian He Road.

5.4.2 Facilities and Accessibility

The standard of services and facilities within Victory Plaza is considered to be at the top end of the market in Guangzhou. In terms of accessibility, it is approximately a 5-minute walk to Tiyuxilu Station on Line 1 of the Metro system. There are 438 car parking spaces located at the basement levels of the development.

5.4.3 Analysis of Pedestrian Traffic Flow

An analysis of pedestrian flow was conducted with visitor counts taken at the main front entrance of Victory Plaza during:

1) lunch hours (12:30-13:30)

2) in the afternoon (15:30-16:30)

on both the 14th June 2005 (Tuesday) and the 19th June 2005 (Sunday).

Weekday Weekend

Lunch Hours 1,099 2,031 Afternoon 720 1,681

Source: Cushman & Wakefield

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It is clear that pedestrian flow increases significantly during lunch hours on both weekdays and weekends. This may be due to the fact that Victory Plaza has a relatively high concentration of F&B outlets, accounting for more than 39% of the total retail space of the development.

Shopper traffic during weekends is doubled when compared to weekdays, reflecting the popularity of Tian He district as a destination for weekend shopping in Guangzhou.

5.4.4 Catchment

Source: Cushman & Wakefield

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The primary and secondary catchment areas of Victory Plaza cover Tian He district and extends to the formerly Dong Shan district (now part of Yue Xiu) area.

Catchment Coverage Area (sq km) Population

Primary 11 administrative communities 55.06 676,000 in Tian He Secondary 10 administrative communities 112.56 863,000 in Tian He and Dong Shan (now part of Yue Xiu)

Note: Primary Catchment is estimated based on a 15-minute drive time from Victory Plaza and Secondary Catchment is estimated based on a drive time of between 16-30 minutes.

Source: Cushman & Wakefield

Victory Plaza is located in the core retail area in Tian He district together with Teemall and Grandview Plaza. The area attracts mainly the working population and residents in the surrounding area but is also a popular shopping destination among the rest of the Guangzhou population, including the suburban areas.

With the Guangzhou urban area gradually extending eastward, the population in the primary and secondary catchment areas combined is expected to grow steadily in the coming few years. In addition, prime shopping centres in Tian He will benefit from the completion of Line 3 of the Metro system, as Tiyuxilu Station will be the interchange station of Line 1 and Line 3.

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5.4.5 Tenancy Profile

Floor Trade Mix Anchor Tenants

6/F F&B • Wuguojie Restaurant • Laoxianglou Restaurant 5/F F&B • Xinchaoliu Restaurant • Shitailang Restaurant 4/F Department store (men’s wear, shoes & accessories, bedroom items) 3/F Department store (casual wear, • Xindaxin Department Store children wear, sportswear); 2/F Department store (cosmetics, jewellery, fashion) 1/F F&B, Fashion • KFC • Haagen Dazs LG Home electrical appliances • Gome

Source: Cushman & Wakefield

Because of the relatively small size in comparison to other prime retail centres in the district, Victory Plaza positions itself as a themed shopping centre targeting “white-collars” aged between 25 and 35. As at the end of September 2005, approximately 46% of the space was occupied by Xindaxin Department Store, 6% by fashion retailers, and 39% by F&B outlets.

Victory Plaza Trade Mix Measured by Area

Services Vacant Fashion 3% 0% 6% Department Store 45% F&B 39%

Electrical 7%

Source: Cushman & Wakefield

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Victory Plaza Lease Expiries Measured by Area

100%

80%

60%

40%

20%

0% 2005 2006 2007 2008 2009 2010 & Vacant beyond

Source: Cushman & Wakefield

In terms of lease expiry, approximately 90% of the space has a lease expiry date in 2010 and beyond. This largely reflects the long lease terms secured with a few of the anchor tenants such as Xindaxin Department Store, Gome and a few large restaurants.

5.4.6 Rental and Occupancy Rate Benchmarks

For the area of the building to be listed in the REIT and using 30th September 2005 as the reference date, the following table shows how rents (based on what is achievable according to C&W’s opinion) and occupancy rates in the Victory Plaza compare with the overall Tian He retail market.

Achievable Open Market Occupancy Rate Rental Ground Floor

Victory Plaza 100% RMB360 /sq m/mth Tian He Average 81% *छRMB958/sq m/mth

* Figure refers to the average prime retail shopping centre rent in Tian He.

छ The achievable open market rental is based on a basket of properties selected by C&W to track the general movement in the market and does not represent the actual achieved rent for any particular building. Furthermore, the market average quoted is an average weighted by size of each building in C&W’s basket of selected properties.

Source: Cushman & Wakefield

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5.4.7 Rental Growth and Occupancy Projections

Open Market Rental Growth and Occupancy Rate Projections

2005F 2006F 2007F 2008F 2009F

Rental Growth 5.0% 6.0% 8.0% 10.0% 10.0% Occupancy Rate 100% 98% 99% 99% 99%

2010F-2014F Rental Growth 6.0% per annum on average Occupancy Rate 99% on average

Source: Cushman & Wakefield

We project the open market rent for the building to largely follow the growth pattern of the overall Guangzhou prime retail market. However, the rental growth for the first three years has been lowered to reflect the potential negative impact on the building during the office construction period. We project the occupancy rate for the REIT portion of the building to fluctuate between 98%-100% over the next 10 years.

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Section 6 Conclusion

All four of the subject properties are located in Guangdong, one of the most affluent provinces in Mainland China. The city of Guangzhou has been the dominant force behind the province’s economic successes over the past decade. The outlook of the local economy remains positive on the back of increasing FDI and rising disposable income.

Looking ahead, the local government is dedicated to strengthen Tian He district as the new CBD of Guangzhou. Apart from commercial real estate developments in the area, large transportation infrastructure projects are also currently underway to improve the accessibility of Tian He. All of these efforts will greatly enhance the attractiveness of the district, particularly to foreign businesses and will therefore stimulate stronger demand for both office and retail space. As a result, the three subject properties in Tian He (ie. Fortune Plaza, City Development Plaza and Victory Plaza) stand to benefit enormously. However, our view is that the office market is projected to perform less well than the retail market because of the anticipated high level of new supply in the coming few years. Moderate rental reductions are forecasted in between 2006 and 2009, before reverting to growth in 2010. On a district level, rentals for Grade ‘A’ office buildings in prime locations (ie. areas surrounding Tian He Sports Stadium) are likely to perform better compared with the rest of Guangzhou.

The other subject property located in Guangzhou is White Horse Building. This is a well-known wholesale centre with very good accessibility to the rest of the country via expressways and railways. It is recognised as the leader for garment wholesale businesses within the city. We are not aware of any major real estate, urban and infrastructure development plans that will seriously damage its current market position going forward.

Yours faithfully, Cushman & Wakefield (HK) Limited John Su Director Research & Advisory Consultancy

VIII-55 APPENDIX IX OVERVIEW OF RELEVANT LAWS AND REGULATIONS IN THE PEOPLE’S REPUBLIC OF CHINA AND COMPARISION OF CERTAIN ASPECTS OF ITS PROPERTY LAWS WITH THE LAWS OF HONG KONG

Set out below is a summary of certain aspects of PRC law and regulations which are relevant to GZI REIT’s operations. These include laws relating to land, disposal of property, property management, foreign exchange control, company law and equity joint venture law in the PRC. Certain laws and regulations relating to taxation in the PRC are discussed in the section headed “Taxation” of this Offering Circular.

The Land and Property System of the PRC

The land system

PRC law distinguishes between the ownership of land and the right to use land.

According to the Constitution of the PRC, all land in the cities is owned by the State while land in the rural and suburban areas, unless otherwise specified by law, is owned by collectives. Houses sites ( ), privately farmed crop land ( ) and hilly land ( ) are also owned by collectives. The State may expropriate or take over land and pay compensation in accordance with law if such land is required for public benefit.

Under the Interim Regulations on Grant and Transfer of Urban Land Use Rights (the “Urban Land Regulations”), a system for the grant and transfer of state land in urban areas was implemented. Pursuant to this system, all local and foreign companies, enterprises and other organisations and individuals in the PRC are permitted to acquire land use rights and to develop and operate property in accordance with law.

Under the Urban Land Regulations, the grant for use of State land refers to the grant of a land use right by the State to a land user for a definite period subject to the payment of a land premium by the land user. The maximum term of the grant depends on the type of use of the land. Such term is generally as follows:

• up to 70 years for residential use;

• up to 50 years for industrial use or for public (e.g. educational, technology, cultural, hygiene or sports) use;

• up to 40 years for commercial (which includes wholesale and retail), tourism and entertainment uses; and

• up to 50 years for all other uses (which include office and warehouse).

Upon expiration of the term of grant, it is possible for a land user to renew such term subject to the execution of a new land grant contract and payment of a land grant premium. If the term of the grant is not renewed, the land use right of the land and ownership of any building thereon will revert to the State without compensation.

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Grant of land use rights

Land use rights may be granted by agreement, public auction, tender or bidding.

The Law of the Administration of Urban Real Estate of the PRC ( ) provides that: “land for commercial use, tourism, entertainment and construction of luxury flats shall be sold by public auction wherever it is feasible, and may be sold by mutual agreement if sale by public auction or competitive bidding is not feasible”. On 30 April 2001, the State Council promulgated a Notice on Strengthening the Administration of State-owned Land ( ) which stipulates that the supply of State-owned land shall be announced to the public unless there are concerns regarding State security or confidentiality issues. If, after a scheduled supply of land for commercial development and other use is announced, there are two or more prospective investors who intend to develop the same land parcel, the relevant land parcel shall be made available to the market by the Government at the municipal or county levels through competitive bidding or public auction. However, in the absence of clear provisions on the scope and procedures for organizing and implementing competitive bidding, public auction and public tender, it was still common for property developers to obtain State-owned land use rights for property development by agreement.

On 9 May 2002, the State Bureau of Land Resources of the People’s Republic of China promulgated the Regulations on the Grant of State-owned Land Use Rights through Competitive Bidding, Public Auction and Public Tender ( ). Pursuant to these regulations, land for operational use (including commercial use, tourism, entertainment and commodity housing development) will be granted by competitive bidding, public auction or public tender and, in the case of land for use other than commercial use, tourism, entertainment and commodity housing development, if there are two or more prospective purchasers after the announcement of the relevant land supply schedule, then the grant of the land shall be by competitive bidding, public auction or public tender.

On 11 June 2003, the Ministry of Land and Resource of the PRC promulgated the Regulation on Transfer of State Owned Land Use Rights by Agreement ( ). According to this regulation, land use rights may be granted by way of agreement if it is not required under applicable laws and regulations that the land be granted by public auction, tender or bidding.

Upon signing of the contract for the grant of land use right, the grantee is required to pay the land grant premium in accordance with the terms of the contract. Once the land grant premium is paid in full, the contract may be submitted to the relevant local bureau for the issue of a land use right certificate evidencing the grant of land use right.

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Transfer of land use rights

Subject to any restrictions imposed, the party to which the land use right is granted may transfer such land use right. The transfer may be by way of sale, exchange or gift. The term of land use right for the transferred land is the original term granted under the contract of grant of land use right less the term which has already been enjoyed by the original grantee.

A transfer of land use right must be evidenced by a written contract. Upon such transfer, all rights and obligations contained in the original contract for the grant of land use right by the State are deemed to be simultaneously transferred to the transferee, together with any buildings and other fixtures on the land. The transfer must be duly registered at the relevant local land bureau and a new certificate of land use right will be issued and the original land certificate of land use right will be suspended.

Under Article 38 of the Law of the Administration of Urban Real Estate of the PRC ( ), in relation to a transfer of land for which land use rights were acquired by way of grant, the following conditions must be met:

the land grant premium for the grant of land use rights must have been paid in full in accordance with the land grant contract and a certificate of land use right ( ) must have been obtained;

investment in or development of such land must have been made or carried out in accordance with the terms of the land grant contract;

if the investment or development involves the construction of building on the land, more than 25.0% of the total amount of investment or development must have been made or completed; and

where the investment or development involves a large tract of land, conditions for the use of the land for industrial or other construction purposes must have been met.

Termination of land use right

A land use right will terminate upon the expiration of the term of the grant specified in the relevant land grant contract. Land use right may also terminate upon withdrawal of the land use rights by the State or by loss of the land etc.

The State generally will not withdraw a land use right prior to the expiration of its term of grant under the land grant contract. In exceptional circumstances, and if it is in the public interest, the State has the right to assume the land use right in accordance with law and offer compensation to the land user, having regard to the period for which the land user has already enjoyed in respect of the land and the actual circumstance relating to the use and development of the land.

IX-3 APPENDIX IX OVERVIEW OF RELEVANT LAWS AND REGULATIONS IN THE PEOPLE’S REPUBLIC OF CHINA AND COMPARISION OF CERTAIN ASPECTS OF ITS PROPERTY LAWS WITH THE LAWS OF HONG KONG

Upon expiry of the term of grant under the land grant contract, the land use right of the land and ownership of the buildings and fixtures erected thereon will revert to the State without compensation unless renewal application is granted. The land user will have to take steps to surrender the land use right certificate and cancel the registration of the certificate in accordance with relevant regulations.

A land user may apply for renewal of the term of the land use right and such application will be granted unless for public benefit the land needs to be taken back, if the application is granted, the land user is required to enter into a new land grant contract, pay a land grant premium and effect the necessary registration of the renewed right.

Documents of title

Mortgage

The grant of mortgages in the PRC is governed by the Security Law of the PRC ( ) and by relevant laws regulating real estate. Under this law, any mortgage agreement must be in writing. For mortgages of urban real properties, buildings newly erected on a piece of land after a mortgage contract has been entered into will not be subject to the mortgage.

IX-4 APPENDIX IX OVERVIEW OF RELEVANT LAWS AND REGULATIONS IN THE PEOPLE’S REPUBLIC OF CHINA AND COMPARISION OF CERTAIN ASPECTS OF ITS PROPERTY LAWS WITH THE LAWS OF HONG KONG

The validity of a mortgage depends on the validity of the mortgage contract, possession of the real estate and land use right certificate and/or land use rights certificate by the mortgagor and registration of the mortgage with appropriate authorities. If the loan in respect of which the mortgage was given is not duly repaid, a mortgagee has the following options to enforce the mortgaged properties:

with the consent of the mortgagee, the mortgagor may sell the mortgaged property to the mortgagee at a discount to satisfy the outstanding debt, or sell the mortgaged property to a third party and the mortgagee enjoys the first priority to be repaid;

after delivering written notice to the mortgagor, the mortgagee may appoint an auction agency to auction the mortgaged property; and/or

the mortgagee may commence litigation procedures at PRC courts.

Lease

The Urban Land Regulations, the Law of the Administration of Urban Real Estate of the PRC ( ) and Measures for Administration of Leasing of Urban Buildings ( ) permit leasing of land use rights and properties constructed on land obtained by way of grant. Under Article 9 of these measures, the lease shall be in writing and shall be registered with the relevant real property administrative authority within 30 days of execution. Article 27 of these measures stipulates a tenant has the right to sub-let the property with the prior consent of the landlord.

In Guangdong province and Guangzhou city, according to the Rules for Administration of Leasing of Property in Guangdong Province ( ), a tenant enjoys a right of first refusal to lease the property on similar terms if the landlord offers to lease the property to a third party. The landlord could take a security deposit from the tenant, which amount shall not exceed three months’ rent pursuant to the contract. Refund of the security deposit is to be stipulated in the lease contract.

Tenancy Laws

Chapter thirteen of the Contract Law of the People’s Republic of China ( ) provides that the lease agreement shall be in writing if its term is over six months, and the term of any lease agreement shall not exceed twenty years; that any change of ownership to the leased property does not affect the valid leasing contract; that the tenant may sub-let the leased property if it is agreed by the landlord and the lease agreement between the landlord and the tenant is still valid and binding; and that when the landlord is to sell a dwelling unit under a lease, it shall give the tenant a reasonable advance notice before the sale, and the tenant has the right of first refusal to renew such lease if the tenant is willing to match the same lease terms (including rental rates) as a prospective new tenant, subject to the tenant giving the landlord prior notice of his intention to renew.

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The tenant must pay rent on time in accordance with the lease contract. In the event of default of rental payment without reasonable cause, the landlord may ask the tenant to pay within a reasonable period of time, or otherwise terminate the lease with a default fine.

Except as mentioned below, if the landlord wishes to terminate the lease before its expiry date, prior consent shall be obtained from the tenants who are entitled to be indemnified for any resulting loss.

The landlord has the right to terminate the lease and take back the property if the tenant commits any of the following:

1) sub-let the property without prior consent from the landlord;

2) transfer, lend or swap the property without prior consent from the landlord;

3) restructure or convert uses of the property without prior consent from the landlord;

4) default in rental payment for six consecutive months;

5) leave a state-owned dwelling unit vacant for more than six months without reasonable causes;

6) use the property for illegal operations;

7) damage the property deliberately; and

8) other situations allowing the landlord to take back the property under relevant laws regulations.

If a tenant defaults in rental payment, apart from the right to terminate the lease as stated above, the landlord may bring an action against such tenant at the People’s Court in the PRC to recover any overdue and unpaid rental.

Sale and transfer of property

The PRC Government has issued a series of laws, rules and regulations in relation to property transactions, for example, the Law of the Administration of Urban Real Estate of the PRC ( ), Administrative Rules for Property Sale in Guangzhou City ( ), etc. The Ministry of Construction promulgated the Provisions on Administration of Transfer of Urban Real Estate PRC ( ) in August 2001. Pursuant to such rules and regulations, the property owner has the right in accordance with law to dispose of a property by way of sale, gift, or other forms of transfer and to mortgage the property. The right to ownership of a building and the land use right to the land on which the building is constructed must be transferred or mortgaged at the same time.

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The parties to a transfer must enter into a real estate transfer contract in writing and register the transfer with the real estate administration authority having jurisdiction over the location of the real estate within 90 days of the execution of transfer.

In Guangdong province and Guangzhou city, according to the Rules for Property Transfer in Guangdong Province ( ), the Administrative Rules for Property Sale in Guangzhou, the Measures for Administration of Leasing of Property in Guangzhou and the Rules for Administration of Leasing of Property in Guangdong Province, a joint holder of the property interest, a mortgagee, a lessee and other person enjoying priority right under law has a right of first refusal to purchase the property on the same terms.

In Guangzhou, in relation to a property designated for sale, the developer has to apply to the relevant property authority to confirm the property title of such property within 30 days after the property development is completed. A confirmation of title certificate will be issued to the developer for unsold property and a building ownership certificate will be issued to the developer on behalf of the purchaser for sold property.

Property Management Rules in the PRC

The State Council promulgated the Property Management Rules ( ) on 8 June 2003, which came into effect on 1 September 2003. The rules stipulate that property owners have the right to appoint and dismiss property management enterprises and implemented a qualification system to regulate property management enterprises which are involved in property management. The Department of Construction promulgated a Notice on Administrative Rules Regarding Property Owners’ Committee ( ) on 26 March 2003 which stipulated that the property owners’ meeting is only valid with the attendance of owners representing more than 50.0% of all the voting rights. A resolution passed by the property owners’ committee is only effective with the consents of owners representing over 50.0% of all voting rights of the owners attending such meeting. However, for important resolution, for example, amendment of a deed of mutual covenants, appointment or dismissal of property managers, a special resolution passed by owners representing at least two-thirds of all voting rights of the owners attending such meeting is required. According to the Property Management Rules ( ), each province has the authority to enact rules specifying how the voting rights is measured. In Guangdong province, according to Notice on Issues Relating to the Implementation of the Property Management Rules ( ) prescribed by the Guangdong Construction Bureau, the voting right attached to a property is measured by reference to the construction area of such property and each square meter of construction area is entitled to one voting right. The owners’ committee has the right to sign the property management contract and make any substantial decision affecting the rights of all property owners. The owners’ committee must act in the interest of all the property owners in the building and protect the legal rights of all the property owners in the building. The owners’ committee appoints the property manager by tender or other methods and signs the property management contract on behalf of all the property owners in the building with the consent of the owners’ committee.

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Under the Measures for the Administration of Qualifications of Property Management Enterprises ( ) promulgated by the Ministry of Construction on 17 March 2004, effective from 1 May 2004, a property management enterprise shall apply for examination of its qualification by the qualification approval authority according to the said measures. A property management enterprise which has passed such examination will be issued with a Qualification Certificate evidencing the qualification classification by the relevant authority. No enterprise may engage in property management without undertaking a qualification examination conducted by the authority and obtaining a Qualification Certificate.

The Property Management Rules in Guangdong Province ( ) were implemented on 1 October 1998. The Administrative Rules for Property Management in Guangzhou City were promulgated on 23 March 2001 ( ). Both rules contain stipulations on the property management rights of the owners, the appointment of property managers, the use and maintenance of the property, property management fees and other legal liabilities of owners in Guangzhou province and Guangzhou city. According to the Property Management Rules in Guangdong Province, the property owners must hold a first owners’ general meeting and form an property owners’ committee when (a) more than 50.0% of the construction area of the building has been used or (b) more than 30.0% but less than 50.0% of the construction area of the building has been used and the building has been used for more than one year.

Property management fees comprise the property management cost, statutory tax and property managers’ remuneration. Property management fees for residential properties are regulated by the recommended price stipulated by the Government. The property management fee for other properties is subject to market price adjustment. The exact amount of property management fees payable to a property management enterprise as remuneration may be agreed by the contracting parties by reference to the two methods. According to the Rules on Property Management Service Fees ( ) jointly promulgated by the National Development and Reform Commission and the Ministry of Construction on 13 November 2003, the exact amount of property management fees payable to a property management enterprise as remuneration may be agreed by the contracting parties by reference to a fixed management fee ( ) or a percentage basis management fee ( ). The property management enterprise may collect a fixed management fees from the property owners which covers all the operating cost incurred for property management, the property management enterprise itself shall account for any shortfall and retain any surplus. The property management enterprise may also charge its management fees by reference to a fixed percentage of the total management fees collected, the balance of the total management fees collected will be used for covering the operating cost incurred for property management, the property owners shall account for any shortfall and retain any surplus.

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Foreign Exchange Controls

The lawful currency of the PRC is the Renminbi, which is subject to foreign exchange controls and is not at the current time freely convertible into foreign currency. The SAFE, under the authority of People’s Bank of China (“PBOC”), is empowered with the functions of administering all matters relating to foreign exchange, including the enforcement of foreign exchange control regulations.

On 28 December 1993, the PBOC, under the authority of the State Council, promulgated the Notice of the People’s Bank of China Concerning Further Reform of Foreign Currency Control System ( ), effective from 1 January, 1994. This notice announced the abolition of the system of foreign exchange quotas, the implementation of conditional convertibility of Renminbi in current account items, the establishment of the system of settlement and payment of foreign exchange by banks, and the unification of the official Renminbi exchange rate and the market rate for Renminbi established at swap centres.

On 29 January 1996, the State Council promulgated new Regulations of the POBC for the Control of Foreign Exchange ( ) which became effective from 1 April 1996. These regulations classify all international payments and transfers into current account items and capital account items. Current account items are no longer subject to SAFE approval while capital account items still are. These regulations were subsequently amended on 14 January 1997. The latest amendment affirmatively states that the State shall not restrict international current account payments and transfers.

On 20 June 1996, the PBOC promulgated the Regulations for Administration of Settlement, Sale and Payment of Foreign Exchange ( ) (the “Settlement Regulation”) which became effective on 1 July 1996. The Settlement Regulations superseded the Provisional Regulations for the Administration of Settlement, Sale and Payment of Foreign Exchange ( ) and abolished the remaining restrictions on convertibility of foreign exchange in respect of current account items while retaining the existing restrictions on foreign exchange transactions in respect of capital account items. On the basis of the Settlement Regulations, the PBOC also published the Announcement on the Implementation of Foreign Exchange Settlement and Sale at Banks by Foreign-invested Enterprise ( ). This announcement permits foreign-invested enterprises to open, on the basis of their needs, foreign exchange settlement accounts for current account receipts and payments of foreign exchange along with specialised accounts for capital account receipts and payments at designated foreign exchange banks.

On 25 October 1998, the PBOC and the SAFE promulgated the Notice Concerning the Discontinuance of Foreign Exchange Swapping Business ( ) pursuant to which and with effect from 1 December 1998, all foreign exchange swapping business in the PRC for foreign-invested enterprises shall be discontinued, while the trading of foreign exchange by foreign-invested enterprise shall come under the banking system for the settlement and sale of foreign exchange.

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On 1 January 1994, the former dual exchange rate system for Renminbi was abolished and replaced by a managed floating exchange rate system, which is determined by demand and supply. The PBOC sets and publishes daily the Renminbi/US dollar base exchange rate. This exchange rate is determined with reference to the transaction price for Renminbi/US dollar in the inter-bank foreign exchange market on the previous day. The PBOC will also, with reference to exchange rates in the international foreign exchange market, announce the exchange rates of Renminbi against other major currencies. In foreign exchange transactions, designated foreign exchange banks may, within a specified range, freely determine the applicable exchange rate in accordance with the exchange rate announced by the PBOC. The PBOC recently announced that with approval from the State Council, and beginning from 21 July 2005, China will implement a regulated, managed floating exchange rate system based on market supply and demand and in reference to a package of currencies.

Save for foreign-invested enterprises or other enterprises which are specially exempted by relevant regulations, all entities in the PRC (except for some foreign trading companies and production enterprises having import and export rights, which are entitled to retain part of foreign exchange income generated from their current account transactions and to make payments using such retained foreign exchanges in their current account transactions or approved capital account transactions) must sell their foreign exchange income to designated foreign exchange banks. Foreign exchange income from loans issued by organisations outside the territory or from the issuance of bonds and shares is not required to be sold to designated foreign exchange banks, but may be deposited in foreign exchange accounts at the designated foreign exchange banks.

Chinese enterprises (including foreign-invested enterprises) which require foreign exchange for transactions relating to current account items may, without the approval of SAFE, effect payment from their foreign exchange accounts or convert and pay at the designated foreign exchange banks, based on valid receipts and proof. Foreign-invested enterprises which need foreign exchange for the distribution of profits to their shareholders, and Chinese enterprises which in accordance with regulations are required to pay dividends to shareholders in foreign exchange may, after passing the necessary board resolutions on the distribution of profits, effect payment from their foreign exchange account or convert and pay at the designated foreign exchange banks.

Convertibility of foreign exchange in respect of capital account items, like direct investment and capital contribution, is still subject to restriction, and prior approval from SAFE and the relevant branch must be sought.

Rules and regulations relating to owners’ general meeting and owners’ committee

Pursuant to the Administrative Rules for Property Management in Guangzhou City ( ) promulgated on 23 March 2001, an owner’s general meeting is required to be held to elect an owners’ committee when:

• 50% of the total construction area of the property has been handed over for use; or

IX-10 APPENDIX IX OVERVIEW OF RELEVANT LAWS AND REGULATIONS IN THE PEOPLE’S REPUBLIC OF CHINA AND COMPARISION OF CERTAIN ASPECTS OF ITS PROPERTY LAWS WITH THE LAWS OF HONG KONG

• 30%-50% of the construction area of the property has been handed over for use and the property has been in use for more than one year; or

• in the case of development by phases of a large residential housing estate, upon application by the owners representing a majority of the voting rights of the property which has been handed over for use and approval of the local property authority, a temporary owners’ general meeting may be held to set up a temporary owner’s committee during the period of development by phases.

Pursuant to the Property Management Rules ( ) promulgated by the State Council on 8 June 2003 (which came into effect on 1 September 2003) and the Property Management Rules in Guangdong Province ( ) implemented on 1 October 1998, if there is only one owner, or if there are very few owners, all owners can together agree not to set up an owners’ committee and exercise all relevant powers of the owners’ general meeting and owners’ committee by themselves.

According to the Property Management Rules ( ) and the Notice on Issues Relating to the Implementation of the Property Management Rules ( ), for properties located in Guangdong, the voting right attached to a property is measured by reference to the construction area of such property and each square meter of constrctuion area is entitled to one voting right.

The Property Management Rules ( ) requires that the quorum for an owners’ general meeting is owners representing more than 1/2 of all voting rights in respect of the property.

The following matters shall be passed by owners holding over 2/3 of all voting rights in respect of the property:

• amending the deed of mutual convent or rules of proceedings of the owners’ general meeting; or

• appointment or dismissal of the property management company; or

• proposals to use and continuously raise special repair fund.

Other resolutions may be passed by owners representing more than 1/2 of all voting rights in respect of the property.

Both the Administrative Rules for Property Management in Guangzhou City ( ) and the Property Management Rules in Guangdong Province ( ) stipulate that the quorum for a meeting of the owners’ committee is a majority of the members of the owners’ committee. All resolutions shall be passed by a majority of the members of the owners’ committee.

IX-11 APPENDIX IX OVERVIEW OF RELEVANT LAWS AND REGULATIONS IN THE PEOPLE’S REPUBLIC OF CHINA AND COMPARISION OF CERTAIN ASPECTS OF ITS PROPERTY LAWS WITH THE LAWS OF HONG KONG

Comparison of Certain Aspects of PRC and Hong Kong Property Law

The following is a general comparison of the legal protection of proprietary rights over real estate conferred by the legal systems of PRC and Hong Kong:

PRC Hong Kong

General General

Under Article 5 of the Law of the administration The legal system of Hong Kong upholds the of Urban Real Estate of the PRC principle of the rule of law and the ( ), the legitimate independence of the judiciary. Under the rights and interests of the owners over real concept of “one country, two systems”, Hong estate shall be protected by the law of PRC, on Kong enjoys a high degree of autonomy and its which no person may unlawfully infringe. legal system is fundamentally separate from that of the People’s Republic of China. In general, the legitimate rights and interests of the owners over real estate in PRC are Under Article 6 of the Basic Law of the Hong protected under PRC law. Kong Special Administrative Region, which is Hong Kong’s constitution, the Hong Kong Special Administrative Region shall protect the right of private ownership of property in accordance with law.

In general, proprietary rights of land owners over real estate in Hong Kong are protected under Hong Kong law which consists of both the Hong Kong legislations and common law decisions.

IX-12 APPENDIX IX OVERVIEW OF RELEVANT LAWS AND REGULATIONS IN THE PEOPLE’S REPUBLIC OF CHINA AND COMPARISION OF CERTAIN ASPECTS OF ITS PROPERTY LAWS WITH THE LAWS OF HONG KONG

PRC Hong Kong

Land System in the PRC System of Land Holding in Hong Kong

PRC law distinguishes between the ownership All land title in Hong Kong is leasehold held of land and the right to use land. According to under land grants from the government save the Constitution of the PRC, unless specified by and except the St. John’s Catheral which is law, all land in the cities is owned by the State theonly freehold property in Hong Kong. while land in the rural and suburban areas, unless otherwise specified by law, is owned by The terms of the government grant vary from collectives. Houses sites ( ), privately short term leases or licences to leases of up to farmed crop land ( ) and hilly land ( ) 999 years. Old leases will continue until they are also owned by collectives. The State may expire and may be renewed. Most new leases expropriate or take over land and pay tend to be granted for terms of 50 years compensation in accordance with law if such although occasionally they are longer. Leases land is required for public benefit. in various parts of Hong Kong which were due to expire prior to 1997 have been automatically Under the Interim Regulations on Grant and extended through to 30 June 2047 without the Transfer of Urban Land Use Rights (the “Urban requirement for any additional premium paid to Land Regulations”), a system for the grant and the government. In the past, rent payable under transfer of state land in urban areas was government grant has ordinarily been nominal implemented. Pursuant to this system, all local but for leases granted after 1 July 1997 the and foreign companies, enterprises and other government rent is calculated at a rate of 3% of organisations and individuals in the PRC are the ratable value of the property concerned. permitted to acquire land use rights and to develop and operate property in accordance with law.

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PRC Hong Kong

Under the Urban Land Regulations, the grant Older government grant tended to contain fewer for use of State land refers to the grant of a land restrictions whereas newer grants usually use right by the State to a land user for a incorporate extensive development definite period subject to the payment of a land requirements, restrictions and obligations. If a premium by the land user. The maximum term grantee pays the required premium, of the grant depends on the type of use of the government rent and complies with the land land. Such term is generally as follows: grant conditions, he is entitled to peaceful enjoyment of the land and the government will • up to 70 years for residential use; not exercise its right of re-entry without a valid cause. Although certain government leases • up to 50 years for industrial use or for may contain government’s right of land public use (e.g. educational, cultural or resumption for public interest, it is only in very recreational) use; exceptional circumstances that privately owned property will be compulsorily acquired by the • up to 40 years for commercial, tourism and government (such as for the Mass Transit entertainment uses; and Railway development). In all such cases, compensation will be paid to the affected • up to 50 years for all other uses. owners.

Upon expiration of the term of grant, it is There are no restrictions in Hong Kong over possible for a land user to renew such term ownership of land. Property in Hong Kong can subject to the execution of a new land grant be owned by any legal entity, whether an contract and payment of a land grant premium. individual or a local or overseas corporation. If the term of the grant is not renewed, the land Property transactions in Hong Kong are, use right of the land and ownership of any however, subject to local tax and stamp duty building thereon will revert to the State without payment. compensation.

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PRC Hong Kong

Land use rights may be granted by agreement, public auction, tender or bidding. The Law of the Administration of Urban Real Estate of the PRC ( ) provides that: “land for commercial use, tourism, entertainment and construction of luxury flats shall be sold by public auction wherever it is feasible, and may be sold by mutual agreement if sale by public auction or competitive bidding is not feasible”. On 30 April 2001, the State Council promulgated a Notice on Strengthening the Administration of State-owned Land ( ) which stipulates that the supply of State-owned land shall be announced to the public unless there are concerns regarding State security or confidentiality issues. If, after a scheduled supply of land for commercial development and other use is announced, there are two or more prospective investors who intend to develop the same land parcel, the relevant land parcel shall be made available to the market by the government at the municipal or county levels through competitive bidding or public auction. However, in the absence of clear provisions on the scope and procedures for organizing and implementing competitive bidding, public auction and public tender, it was still common for property developers to obtain State-owned land use rights for property development by agreement.

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PRC Hong Kong development) will be granted by competitive bidding, public auction or public tender and, in the case of land for use other than commercial use, tourism, entertainment and commodity housing development, if there are two or more prospective purchasers after the announcement of the relevant land supply schedule, then the grant of the land shall be by competitive bidding, public auction or public tender.

IX-16 APPENDIX IX OVERVIEW OF RELEVANT LAWS AND REGULATIONS IN THE PEOPLE’S REPUBLIC OF CHINA AND COMPARISION OF CERTAIN ASPECTS OF ITS PROPERTY LAWS WITH THE LAWS OF HONG KONG

PRC Hong Kong

• the land grant premium for the grant of land use rights must have been paid in full in accordance with the land grant contract and a certificate of land use right ( ) must have been obtained;

• investment in or development of such land must have been made or carried out in accordance with the terms of the land grant contract;

• if the investment or development involves the construction of building on the land, more than 25.0% of the total amount of investment or development must have been made or completed; and

• where the investment or development involves a large tract of land, conditions for the use of the land for industrial or other construction purposes must have been met.

IX-17 APPENDIX IX OVERVIEW OF RELEVANT LAWS AND REGULATIONS IN THE PEOPLE’S REPUBLIC OF CHINA AND COMPARISION OF CERTAIN ASPECTS OF ITS PROPERTY LAWS WITH THE LAWS OF HONG KONG

PRC Hong Kong

Property Owners’ Committee Strata Title Ownership

Pursuant to the Administrative Rules for Apart from single leasehold ownership of land Property Management in Guangzhou City were granted by the government, it is more common promulgated on 23 March 2001 to find strata-title ownership in Hong Kong’s ( ), an owner’s general multi-storeys buildings. Such strata-title meeting is required to be held to elect an ownership is structured by way of each owner of owners’ committee when: a unit holding a certain number of notional undivided shares out of a total number of • 50% of the total construction area of the undivided shares attributable to the whole property has been handed over for use; or development together with the exclusive right to own and use a particular specified unit • 30%-50% of the construction area of the (residential flat or other type of unit) in the property has been handed over for use development. These undivided shares are and the property has been in use for more frequently allocated by the relevant architect of than one year; or the project and ownership is regulated by the terms of what is called a Deed of Mutual • in the case of development by phases of a Covenant (“DMC”). This is the master document large residential housing estate, upon which governs the rights and obligations of application by the owners representing a co-owners of units in a particular development majority of the voting rights of the property and is registered against each unit in the which has been handed over for use and development at the Land Registry. The DMC approval of the local property authority, a also provides for other co-ownership matters temporary owners’ general meeting may such as the rights of way through the common be held to set up a temporary owner’s parts, the delineation of the common areas, the committee during the period of management of the building by the relevant development by phases. management company, the payment of management fees, meetings of the owners etc. Pursuant to the State Council promulgated the The DMC is usually drawn up according to the Property Management Rules ( )on guidelines laid down by the government and 8 June 2003, which came into effect on 1 rules laid down by The Law Society of Hong September 2003, and the Property Kong. In recent years, the Building Management Rules in Guangdong Province Management Ordinance (Cap.344) was ( ) were implemented on 1 enacted to deal with unfair terms in the DMC October 1998. and it also regulates arrangements between co-owners and managers regarding the • If there is only one owner, or if there are management of multi-storey buildings in Hong very few owners, all owners can together Kong. agree not to set up an owners’ committee and exercise all relevant powers through the owners’ general meeting.

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PRC Hong Kong

• The basis of determination of voting rights of the owners at an owners’ general meeting varies depending on the type of property. For industrial or commercial property, voting rights are measured by the construction areas respectively held by the owners of such property.

• The quorum for an owners’ general meeting is owners representing more than 1/2 of all voting rights in respect of the property.

The Department of Construction promulgated a Notice on Administrative Rules Regarding Property Owners’ Committee ( ) on 26 March 2003 which stipulated that the following matters shall be passed by owners holding over 2/3 of all voting rights in respect of the property:

• amending the deed of mutual convent or rules of proceedings of the owners’ general meeting; or

• appointment or dismissal of the property management company; or

• proposals to use and continuously raise special repair fund.

Other resolutions may be passed by owners representing more than 1/2 of all voting rights in respect of the property.

Both the Administrative Rules for Property Management in Guangzhou City ( ) and the Property Management Rules in Guangdong Province ( ) stipulated that the quorum for a meeting of the owners’ committee is a majority of the members of the owners’ committee. All resolutions shall be passed by a majority of the members of the owners’ committee.

IX-19 APPENDIX IX OVERVIEW OF RELEVANT LAWS AND REGULATIONS IN THE PEOPLE’S REPUBLIC OF CHINA AND COMPARISION OF CERTAIN ASPECTS OF ITS PROPERTY LAWS WITH THE LAWS OF HONG KONG

PRC Hong Kong

Documents of Title Land Registration

There are two types of title registrations in the The ownership of property in Hong Kong is PRC, namely land registration and building registered at the Land Registry. Such registration. Land registration is effected by the registration is not a title registration system but issue of land use right certificate by the relevant the Land Registration Ordinance (Cap.128) authority to the land owner evidencing that the provides that all documents affecting or land owner has obtained land use rights which creating interests in land duly registered will can be assigned, mortgaged or leased. The rank in priority of interest against each other. building registration is the issue of a building Each piece of land or property or a unit or a flat ownership certificate ( )tothein a development will have its own register building owner evidencing that the building opened against it at the Land Registry. A record owner has obtained building ownership rights in of all transactions affecting the property respect of the building. According to the Land concerned starting from the original Registration Regulations ( ) government grant under which the lease of the promulgated by the State Land Administration property is held to subsequent dealings of the Bureau on 18 November 1989 and amended on property, such as agreements for sale and 18 December 1995 (the amendment became purchase, assignments, mortgages, releases, effective on 1 February 1996), and the government orders, the DMC or other Administration Rules on Regulations of Urban encumbrances affecting the property etc are Real Estate Property ( ) registered at the Land Registry. As such, any promulgated by the Ministry of Construction on land owner’s proprietary right over Hong Kong 27 October 1997, implemented on 1 January property can be ascertained by a search at the 1998 and revised subsequently on 15 August Hong Kong Land Registry. 2001, all land use rights and building ownership rights which are duly registered are protected In July 2004, the Land Title Ordinance was by law. passed by the Hong Kong government which will allow title to property to be established by The two different systems are commonly reference to a title register. This will give maintained separately in many cities in the greater security to property interest and will PRC. However, in Shenzhen, Guangzhou, also simplify conveyancing procedures in Hong Shanghai and some other major cities, the two Kong. system have been consolidated and a single composite real estate and land use right certificate ( ) will be issued to evidence the ownership of both land use rights and the buildings erected thereon. Such single composite real estate and land use right certificate is in compliance with the Law of the Administration of Urban Real Estate of the PRC ( ) and the Administration Rules on Regulations of Urban Real Estate Property ( ).

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PRC Hong Kong

Proving Title to Property

As the proposed land title registration system will only come into effect after a 12 years “incubation period”, title to property in Hong Kong still needs to be proved by investigation of the physical title deeds to ensure that the title is validly held by an owner through proper devolution of title and that it is unencumbered.

The main law governing real estate and property transaction in Hong Kong is the Conveyancing and Property Ordinance (Cap.219) (“CPO”). The CPO is adopted from English statutes and it is also assisted by common law. It simplifies and codifies most areas of Hong Kong land laws and conveyancing matters. Real estate transactions in Hong Kong are made more certain and efficient by the operation of the CPO.

Leases/Tenancies in PRC Leases/Tenancies in Hong Kong

The Urban Land Regulations, the Law of the Land owner is usually free to let out property Administration of Urban Real Estate of the PRC (whether it is a piece of land or a unit) to a ( ) and Measures tenant by means of a lease (for a term of over for Administration of Leasing of Urban Buildings three years) or a tenancy agreement (for a term ( ) permit leasing of land use of less than three years) although occasionally rights and properties constructed on land there may be restrictions in the relevant obtained by way of grant. Under Article 9 of government grant, mortgages or DMC on these measures, the lease must be in writing letting. Lease and tenancy are subject to stamp and must be registered with the relevant real duty and for leases over a term of three years, property administrative authority within 30 days they should be registered at the Land Registry of execution. Article 27 of these measures in order to obtain priority against third party stipulates a tenant has the right to sub-let the interest. property with the prior consent of the landlord. The main area of law governing lease or In Guangdong province and Guangzhou city, tenancy matter in Hong Kong is the Landlord according to the Rules for Administration of and Tenant (Consolidation) Ordinance (Cap.7) Leasing of Property in Guangdong Province (“Ordinance”). Prior to July 2004, tenants in ( ), a tenant enjoys a Hong Kong were generally protected under the right of first refusal to renew a lease of the Ordinance. property if the tenant is willing to match the same lease terms (including rental rates) as a prospective new tenant, subject to the tenant giving the landlord prior notice of his intention to renew.

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PRC Hong Kong

Chapter 13 of the Contract Law of the People’s With the commencement of the Landlord and Republic of China ( ) Tenant (Consolidation) (Amendment) provides that the lease agreement shall be in Ordinance 2004 on 9 July 2004, the security of writing if its term is over six months, and the tenure enjoyed by domestic tenant under Part term of any lease agreement shall not exceed IV of the Ordinance was removed while the twenty years; that any change of ownership to fixed term non-domestic tenancy will now end the leased property does not affect the valid upon expiry of its term and the landlord is no leasing contract; that the tenant may sub-let the longer required to give the 6 months statutory leased property if it is agreed by the landlord notice to quit under Part V of the Ordinance in and the lease agreement between the landlord order to end the tenancy. This change in law and the tenant is still valid and binding; and that allows for free operation of the private rental when the landlord is to sell a dwelling unit under market and reduces government intervention in a lease, it shall give tenant reasonable advance private tenancy matters. notice before the sale, and the tenant has the right of first refusal to renew such lease if the Under Hong Kong law, land owners are free to tenant is willing to match the same lease terms negotiate the terms of the tenancy agreement (including rental rates) as a prospective new with its tenant so long as it does not breach the tenant, subject to the tenant giving the landlord terms and conditions of the government grant, prior notice of his intention to renew. the DMC and other governing ordinances or regulations. It is very common in Hong Kong for landlord to impose extensive obligations upon the tenant whilst the landlord retains most of the rights. Typically, the landlord’s obligations are limited to the giving of “quiet enjoyment” (which is a legal concept involving the non-interference with the tenant’s legal rights under the lease), payment of government rent and a qualified repairing obligation. The tenant’s obligations, on the other hand, usually include covenants to pay rent, management charges, rates and other outgoings, to keep the interior of the property in repair, to observe the terms of the DMC and the government grant, not to contravene any ordinances or government regulations, not to assign or underlet and only to use the property for approved purposes etc.

If disputes arise (such as non-payment of rent or breach of major terms of the lease or tenancy), they may be settled through legal proceedings in either the Lands Tribunal or at different levels of the courts in Hong Kong according to their judicial powers.

IX-22 APPENDIX X DETAILS OF TENANCIES WITH CONNECTED PERSONS

Gross Gross Lease Monthly Rent Location Floor Rentable commencement Monthly rent per free Property Tenant of unit Area Area date rent sq.m. period Term (sq.m.) (sq.m.) (HK$) (HK$) (Days) (Years)

City Development 1st storey 97.0 97.0 1 May 2004 485 5 0 2 Plaza Units 1st storey 881.2 881.2 15 Sep 2003 110,144 125 0 2.25 2nd storey 647.6 647.6 1 Nov 2003 42,095 65 0 2 16th storey 1,060.5 1,060.5 1 Jan 2005 95,444 90 0 3 16th storey 46.1 46.1 1 Jan 2005 4,150 90 0 3

Fortune Plaza 4th storey 4,275.1 4,275.1 16 Feb 2005 354,833 83 60 3 Units 5th storey 4,275.1 4,275.1 1 May 2005 354,833 83 90 2.25

X-1 APPENDIX XI GENERAL INFORMATION

1. DOCUMENTS AVAILABLE FOR INSPECTION App B B24

Copies of the following documents will be available for inspection free of charge at the registered office of the Manager at 2102, Yue Xiu Building, 160 Lockhart Road, Wanchai, Hong Kong during normal business hours until noon of 15 December 2005, which is the date when the application lists close:

(a) Audited Financial Statements of the Properties, the text of which is set out in Appendix I to this Offering Circular;

(b) Audited Financial Statements of the BVI Companies, the text of which is set out in Appendix II to this Offering Circular;

(c) Unaudited Pro Forma Balance Sheet of GZI REIT and the Reporting Accountants’ letter in relatoin thereto, the text of which is set out in Appendix III to this Offering Circular;

(d) the report of the Manager on the profit forecast, the letter of PricewaterhouseCoopers on the profit forecast and the report of Listing Agent on the profit forecast, the text of which are set out in Appendix IV to this Offering Circular;

(e) letter from the Independent Property Valuer in relation to Rental Income, the text of which is set out in Appendix V to this Offering Circular;

(f) Independent Property Valuation Report, the text of which is set out in Appendix VI to this Offering Circular;

(g) Independent Property Valuer’s Building Survey Summary Report, the text of which is set out in Appendix VII to this Offering Circular;

(h) Independent Market Research Report in Relation to the Guangzhou Commercial Property Market, the text of which is set out in Appendix VIII to this Offering Circular; and

(i) Corporate governance policy adopted by the Manager on 7 December 2005;

(j) Each of the agreements referred to in the section headed “Material Agreements and Other Documents Relating to GZI REIT” in this Offering Circular;

(k) written consents referred to in the section headed “Experts” in this Offering Circular;

(l) the Trustee’s letters appointing the directors of each of the BVI Companies and Holdco; and

(m) the security documents relating to the Loan Facility.

In addition, a copy of the Trust Deed will be available for inspection free of charge at the above registered office of the Manager during normal business hours as long as the Units are listed on the Hong Kong Stock Exchange.

XI-1 APPENDIX XI GENERAL INFORMATION

2. QUALIFICATION AND CONSENTS OF EXPERTS

The qualifications of the experts who have given opinions in this Offering Circular are as follows:

Name Qualification

The Hongkong and Shanghai Banking A deemed licensed corporation under the Corporation Limited SFO to carry on types 1, 4, 6, 7 and 9 regulated activities as defined under the SFO and a licensed bank under the Banking Ordinance

Citigroup Global Markets Asia Limited A deemed licensed corporation under the SFO for types 1, 4 and 6 regulated activities as defined under the SFO

DBS Bank Ltd. A deemed registered institution under the SFO for types 1,4 and 6 regulated activities as defined under the SFO and a licensed bank under the Banking Ordinance

PricewaterhouseCoopers Certified public accountants

Colliers International (Hong Kong) Ltd Chartered valuers and surveyors

Cushman & Wakefield (HK) Limited Real estate consultants and chartered surveyors

Each of the entities listed above has given and has not withdrawn its written consent to the issue of this Offering Circular with the inclusion of its report and/or opinion and/or memorandum and/or valuation certificate and/or summary thereof (as the case may be) and/or references to its name included herein in the form and context in which it is included.

3. MISCELLANEOUS

Save as disclosed in this Offering Circular, as at the Latest Practicable Date:

(a) none of the Directors nor any of the parties listed in paragraph 2 of this Appendix is interested in any of the Properties;

(b) none of the Directors nor any of the parties listed in paragraph 2 of this Appendix is materially interested in any contract or arrangement subsisting at the date of this Offering Circular which is significant in relation to the Properties;

XI-2 APPENDIX XI GENERAL INFORMATION

(c) save in connection with the Hong Kong Underwriting Agreement and International Underwriting Agreement, none of the parties listed in paragraph 2 of this Appendix:

(i) is interested legally or beneficially in any of the Units; or

(ii) has any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for the Units;

(d) none of the Directors or their respective associates has any interest in the properties leased to the 10 largest tenants of the Properties in terms of the total Rental Income for the month ended 30 September 2005;

(e) there are no outstanding loans or guarantees granted or provided by GZI REIT, Holdco or the BVI Companies to, or for the benefit of, any of the Directors;

(f) no Director has or has had any interest in any transaction which is or was unusual in its nature or conditions or is or was significant to the Properties and which was effected by GZI REIT, Holdco or the BVI Companies in its current or immediately preceding financial year or which was effected during an earlier financial year and remains in any respect outstanding or unperformed;

(g) no Unit is under option or is agreed conditionally or unconditionally to be put under option;

(h) none of the Units is listed or dealt with in any other stock exchange nor is any listing or permission to deal being or proposed to be sought; and

(i) there have been no interruption in any principal business activity or the Properties which may have or have had a significant effect on the financial position of GZI REIT in the last 12 months.

XI-3