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To: Bill Harmond who wrote (40092)	2/14/1999 7:21:00 PM
From: Glenn D. Rudolph	Respond to of 164684

February 15, 1999 Liquidation of China's Gitic Threatens Goldman Sachs Stake in Shenzhen Firm By HENNY SENDER Staff Reporter of THE WALL STREET JOURNAL HONG KONG -- The bankruptcy of Guangdong International Trust & Investment Corp. is causing an unexpected headache for Goldman, Sachs & Co. The U.S. investment bank's stake in a Shenzhen insurance company, with an estimated value of at least $50 million, is in a trust administered by Gitic and there's a chance the shares will be counted among Gitic's assets and then liquidated, say lawyers familiar with the issue. Goldman says it isn't worried, but the issue underscores just how uncertain and underdeveloped Chinese law is. Gitic administers a trust created for shares that Goldman acquired in Ping An Insurance Co. several years ago. Trusts are standard contractual fare under Western common law, but aren't mentioned in Chinese law. Without a trust law, Goldman has no legal protection against seeing its shares in Ping An distributed to Gitic's creditors. Gray Areas But Goldman says it's protected in other ways. "We have received assurance from Beijing," says Henry Cornell, the partner in Hong Kong in charge of Goldman's private-investment business. "We have no problems with Gitic or Gitic's estate," he adds. In China's shifting legal environment, however, it is hard to know how much such an assurance is worth, say lawyers familiar with the issue; legal decisions are often a matter of administrative fiat rather than black-and-white rules. "If the party to the trust arrangement goes down the tubes, then what happens?" asks one lawyer, adding that Goldman does "have some risk." Neither China's securities laws nor its bankruptcy rules touch upon such technical issues. There are further complications as well. Until last November, the People's Bank of China was in charge of insurance matters and it was the bank that signed off on Goldman's original arrangement with Gitic. But now, a new, untried entity, the China Insurance Regulatory Commission, oversees this sector. Goldman acquired its stake in Ping An as part of a joint investment with Morgan Stanley Dean Witter; each took about 5%, valued at about $25 million each. Today, Goldman's stake may be valued at between $50 million and $60 million, according to estimates from other investors, because of some adjustments and a huge expansion in the insurer's business. Goldman declines to comment on this. Muddied Waters Since foreign firms weren't normally permitted to directly invest in insurance companies, Goldman and Morgan Stanley each had to come up with special arrangements. And they had to get government approval for what was then regarded as an exceptional case; at the time, other countries were pressing China to open more of its financial sector to foreigners. Goldman decided to set up the trust with Gitic; Morgan Stanley opted for a more complicated legal structure that didn't involve a trust, according to Paul Thiel, who was in charge of Morgan Stanley Capital Partners in Hong Kong and responsible for the firm's investment in Ping An. Further muddying the waters is Goldman's selection in December as the financial adviser to another troubled entity in Guangdong, Guangdong Enterprises (Holdings) Ltd. Goldman was chosen by Guangdong's executive vice governor, Wang Qishan, an admirer of the firm since it handled the listing of China Telecom (Hong Kong) Ltd. in October 1997. But several of Goldman's competitors, as well as Gitic creditors, question whether Goldman's involvement with Guangdong Enterprises represents a conflict of interest because Goldman is advising one arm of the Guangdong government while working to safeguard its Ping An shares held by another arm. On the other hand, Gitic and Guangdong Enterprises are separate legal entities. Goldman couldn't be reached for comment on this issue.

To: Bill Harmond who wrote (40092)	2/14/1999 9:53:00 PM
From: Glenn D. Rudolph	Respond to of 164684

QTR Mar-99 QTR Jun-99 FY Dec-99 FY Dec-00 CURRENT MEAN EPS ESTIMATE -0.27 -0.24 -0.81 -0.23 Number of Brokers 14 15 18 12 Year Ago EPS -0.07 -0.11 -0.50 -0.81 Report Date 4/27/1999 7/22/1999 1/26/2000 1/26/2001 Current High Estimate -0.15 -0.15 -0.52 0.10 Current Low Estimate -0.31 -0.29 -1.01 -0.60 Standard Deviation 0.048 0.048 0.163 0.200 QTR Dec-98 QTR Sep-98 QTR Jun-98 QTR Mar-98 Previous Quarters' Estimates -0.18 -0.19 -0.14 -0.08 Previous Quarters' Actual EPS -0.14 -0.16 -0.11 -0.07 % Difference 22.22 14.21 21.43 16.25 EARNINGS ESTIMATE REVISIONS AND TRENDS QTR Mar-99 QTR Jun-99 FY Dec-99 FY Dec-00 Current Mean -0.27 -0.24 -0.81 -0.23 7-days ago Mean -0.23 -0.24 -0.80 -0.23 30-days ago Mean -0.16 -0.15 -0.57 -0.08 60-days ago Mean -0.17 -0.15 -0.57 -0.06 90-days ago Mean -0.16 -0.15 -0.56 -0.23 Up Revisions last 7 days 0 0 0 0 Up Revisions last 30 days 0 0 0 2 Down Revisions last 7 days 0 0 0 0 Down Revisions last 30 days 12 12 13 3