S E A Holdings Limited — Earnings Release 2001

Mar 19, 2002

THE HONG KONG BUILDING AND LOAN AGENCY LIMITED

香港建屋貸款有限公司

(Incorporated in Hong Kong with limited liability)

FINAL RESULTS

FOR THE YEAR ENDED 31ST DECEMBER, 2001

FINAL RESULTS

The Directors of The Hong Kong Building and Loan Agency Limited (the "Company") announce that the audited consolidated final results of the Company and its subsidiaries (together, the "Group") for the year ended 31st December, 2001 together with the comparative figures for the corresponding period in 2000 are as follows:

2001 2000

Note HK$'000 HK$'000

Turnover 2 74,154 91,070

Cost of sales (62,601 ) -

Gross profit 11,553 91,070

Other revenue 529 2,807

Administrative expenses (2,855 ) (6,718 )

Other operating expenses (1,785 ) (19,100 )

Unrealised holding loss on other

investments in securities (37,530 ) (11,105 )

Provision for impairment in value

for investment securities (3,120 ) -

Loss on disposal of mortgage loan assets - (42,086 )

Profit/(Loss) from operating activities 3 (33,208 ) 14,868

Finance costs - (39,567 )

Loss before tax 2 (33,208 ) (24,699 )

Tax 4 1,092 386

Net loss from ordinary activities

attributable to shareholders (32,116 ) (24,313 )

HK cents HK cents

Loss per share 5

Basic 14.3 10.8

Diluted N/A N/A

Note:

1. Significant impact of new/revised Statements of Standard Accounting Practice ("SSAPs")

Following the adoption of the new and revised SSAPs issued by the Hong Kong Society of Accountants which are effective for the first time for the current year's financial statements, certain accounting policies and disclosure practices have been changed with details of the significant impact described as follows:

In accordance with the SSAP 9 (Revised) "Events after the balance sheet date", the Group no longer recognises dividends proposed or declared after the balance sheet date as a liability at the balance sheet date. This change in accounting policy has been applied retrospectively so that the proposed final and special dividends for the year ended 31st December, 2000 totalling HK$45 million previously recorded as a current liability as at 31st December, 2000 has been restated and shown under reserves.

In accordance with the new SSAP 26 "Segment reporting", the Group presents the financial information by segment. The Group's operating businesses are structured and managed separately, according to the nature of their operations. The Group's business segments represent different strategic business units which are subject to risks and returns that are different from other business segments. Description of the business segments are as follows:

(a) mortgage finance segment engages in the provision of mortgage finance and other related service; and

(b) treasury investment segment includes securities trading and interest income on bank deposits and held-to-maturity securities.

Segment information is presented by way of business segment as the primary segment and is set out in Note 2 below. No analysis of geographical segment which is regarded as the secondary segment is presented as the Group's revenue and results are based in Hong Kong.

1. Turnover and segment information

Turnover represents interest income on mortgage loans and gross income on treasury investments which includes sales proceeds from securities trading and interest income on bank deposits and held-to-maturity securities.

An analysis of the Group's turnover and results by business segment is as follows:

Mortgage Treasury Mortgage Treasury

finance investments Total finance investments Total

2001 2001 2001 2000 2000 2000

HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000

Turnover 3,493 70,661 74,154 83,144 7,926 91,070

Other revenue 529 - 529 857 446 1,303

4,022 70,661 74,683 84,001 8,372 92,373

Segment results 3,814 (32,953 ) (29,139 ) (8,142 ) (2,733 ) (10,875 )

Unallocated other revenue - 1,504

Unallocated corporate expenses (4,069 ) (15,328 )

Loss before tax (33,208 ) (24,699 )

During the year and the prior year, there were no inter-segment transactions.

1. Profit/(Loss) from operating activities

Profit/(Loss) from operating activities is arrived at after crediting/(charging):

Group

2001 2000

HK$'000 HK$'000

Depreciation (62 ) (299 )

Net realised gain/(loss) on disposal of

other investments in securities

• listed (318 ) 434

Interest on held-to-maturity securities 1,024 -

Other investment income 211 -

1. Tax

Group

2001 2000

HK$'000 HK$'000

Overprovision for prior years 1,092 -

Deferred tax written back - 386

Tax credit for the year 1,092 386

No provision for Hong Kong profits tax has been made as the Group had applied tax loss brought forward from the prior year to off-set the estimated assessable profits earned during the year. In the prior year, no provision for Hong Kong profits tax had been made as the Group had no assessable profits for that year.

No provision for deferred tax has been made because the net effect of timing differences is not material (2000 -Nil). The deferred tax liability brought forward from 1999 of HK$386,000 was credited to the consolidated profit and loss account in the prior year.

1. Loss per share

(a) Basic loss per share

Basic loss per share is calculated based on (i) the net loss from ordinary activities attributable to shareholders of HK$32,116,000 (2000 - HK$24,313,000); and (ii) the number of 225,000,000 shares (2000 - 225,000,000 shares) in issue during the year.

(b) Diluted loss per share

No diluted loss per share is presented for the years ended 31st December, 2001 and 2000 as there were no dilutive potential ordinary shares.

MANAGEMENT DISCUSSION AND ANALYSIS

After experiencing a slight recovery in 2000, the local economy deteriorated in 2001 with underlying weakness revealed, reflected in falling property and consumer prices and high unemployment rate. While the slowdown accelerated in the third quarter, the repercussions of the terrorist attack of 11th September drove down the global economic activities even further. Against this difficult environment, the Group recorded a net loss attributable to shareholders for the year of HK$32.1 million, increasing 32 per cent. from last year's HK$24.3 million.

Results for the year

The Group's total turnover amounted to HK$74.2 million (2000 - HK$91.1 million), representing a decrease of 19 per cent. Mortgage finance and treasury investments (which includes securities investment and other treasury activities) remained principal businesses of the Group. Due to the disposal of a significant portion of its mortgage loan assets in a total of HK$945 million (net of provisions) in the second half of 2000 (the "Disposal", details of which had been disclosed in the Company's circular to its shareholders dated 15th June, 2000), the continued sluggish loan demand throughout the year and the intense competition in the mortgage loan sector, turnover generated from mortgage finance dropped significantly.

The Disposal generated proceeds to repay all its outstanding bank loan and hence no finance costs (2000 - HK$39.6 million) were incurred during the year. However, with poor market sentiment in the stock markets, the Group incurred an unrealised holding loss on other investments in securities of HK$37.5 million (2000 - HK$11.1 million). When excluding the unrealised holding loss, the Group achieved an operating profit of HK$4.3 million (2000 - HK$28.5 million, after excluding the aforesaid unrealised holding loss and the loss on the Disposal).

Liquidity position and financial resources

As at year end, the Group still maintained a very strong liquidity position with held-to-maturity securities and other investments in securities amounted to HK$63.1 million (2000 - HK$17.8 million) and total cash and bank balances amounted to HK$140.0 million (2000 - HK$218.0 million). Assets held by the Group were mostly denominated in Hong Kong dollars. Only a small portion was denominated in United States dollars and Japanese yen and the exposure to exchange rate risk is minimal.

Currently, the Group is totally debt-free. Apart from a HK$1.4 million operating lease commitment, the Group had no material commitment outstanding as at 31st December, 2001.

Changes in accounting policies

Following the adoption of the new and revised accounting standards issued by the Hong Kong Society of Accountants, certain accounting policies of the Group were changed with details as set out in Note 1 to the section headed "Final Results". There were no material impact on the profit and loss account nor the balance sheet of the Group except the restatement of the Group's reserves at the balance sheet date to include any dividends for the year proposed or declared after the balance sheet date.

Staff and remuneration

The Group employed 13 employees as at 31st December, 2001. Total staff costs incurred during the year dropped significantly by 78 per cent. to HK$1.2 million (2000 - HK$5.7 million). The Group offers competitive remuneration packages to its employees where no share option scheme for employees was implemented.

Outlook

Recent evidence increasingly supports the view that the recovery of the US economy is underway and this should lead to an upturn in the global economy. Given the Group's strong liquidity, it will continue to take a cautious approach in seeking investment opportunities with attractive long-term returns.

DIVIDENDS

The Directors have resolved not to recommend payment of any final dividend (2000 - 2 cents per share, totalling HK$4,500,000) nor special dividend (2000 - 18 cents per share, totalling HK$40,500,000) for the year ended 31st December, 2001. No interim dividend was declared for the year (2000 - Nil).

REVIEW OF OPERATIONS

2001 was a difficult year. The three global economic locomotives, that is, US, Europe and Japan, all ran out of steam. Export driven economies across the globe were hard hit during the year. The global economic downturn, volatile stock markets and high unemployment rates adversely affected the Asian economy. The downturn of the global economy was further aggravated by the repercussions of the terrorist attack of 11th September. This incident greatly reduced the short-term visibility of the global economy and stock markets.

During the year, Hong Kong was affected by the global economic downturn and experienced a tough and adverse operational environment. The local stock market had a volatile year. Property prices continued to fall whilst the property market remained generally sluggish. Despite several interest rate cuts, the poor investment sentiment and weak residential loan demand have led to keen competition in the mortgage loan sector.

The Group recorded a total turnover of HK$74.2 million for the year. Following the disposal of a significant portion of mortgage loan portfolio in the second half of year 2000 and with the continued sluggish loan demand, turnover for the year generated from mortgage finance decreased significantly. Amid the volatile stock markets, the Group incurred an unrealised holding loss on other investments in securities of HK$37.5 million. The Group achieved an operating profit of HK$4.3 million before accounting for the above unrealised holding loss and recorded loss attributable to shareholders of HK$32.1 million when such loss was included. Even in the face of difficult economic environment, the Group is still debt-free and continues to maintain a very strong liquidity position with total cash and bank balances amounted to HK$140 million at the year end.

PROSPECTS

Soaring unemployment rate and weak consumer demand will continue to put pressure on the local economy. With the anticipated gradual recovery of the US economy, it is expected that the local economic environment will improve but such improvement will largely depend on the pace of recovery in the US. The Group is cautiously optimistic as to the long-term prospects of the local economy. With its strong financial position, the Group is able to meet the challenges and difficulties ahead and will continue to seize opportunities for growth in a cautious and prudent manner.

PURCHASE, SALE OR REDEMPTION OF SECURITIES

During the year ended 31st December, 2001, there was no purchase, sale or redemption of securities of the Company by the Company or any of its subsidiaries.

ANNUAL REPORT

The annual report of the Company for the year ended 31st December, 2001 containing all the information required by paragraphs 45(1) to 45(3) of Appendix 16 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the "Stock Exchange") will be published on the Stock Exchange's website in due course.

By Order of the Board

The Hong Kong Building and Loan Agency Limited

David Yeh

Director

Hong Kong, 18th March, 2002

"Please also refer to the published version of this announcement in the Hong Kong i-mail"