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Chairman’s Statement

Citibank Plaza

Income from Champion REIT

As mentioned at the beginning of this Managements Discussion and Analysis, due to the reclassification of our investment in Champion REIT as an associate company from 23 July 2010, the share of results from Champion REIT from 23 July 2010 were included in the Groups statutory profit. In addition, given this is a transitional year, distributions received over the second half of 2009 and first half of 2010 were also included. However, to provide the same basis for comparison, the Groups core profit is based on dividend received from Champion REIT, which is consistent with past practices.

Due to the Groups accounting policy of recognizing distribution income from Champion REIT at the date of payment of the distribution, the income statement of the Group for a six-month period reflects the distribution declared by the Champion REIT for the immediately preceding six-month period. Therefore the income statement for 2010 recognised the distributions made by Champion REIT for the second half of 2009 and the first half of 2010. On that basis, distribution income from Champion REIT increased by 3.1% year-on-year to HK$597.0 million.

Great Eagle Holdings Limited

On the other hand, management fee income from Champion REIT decreased 2.7% year-on-year from HK$269.3 million in 2009 to HK$261.9 million in 2010, reflecting a decline in asset management fee in line with the lower net property income at Citibank Plaza.

Citibank Plaza

There was a recovery in the office leasing market in Central in 2010 as financial institutions gradually reversed their trend of downsizing. The arrival of a significant number of fund management companies to capitalize on China investment opportunities, together with the supporting legal trade, generated substantial demand. However, occupancy rate at Citibank Plaza decreased from 87.6% at the beginning of the year to 81.5% as at the end of 2010, because of earlier competition from some other landlords who offered long- term fixed-rate leases at relatively low rents. Passing rental rates (the average rental rate of existing contracted tenancies) at Citibank Plaza weakened in the first half of 2010 but stabilized at the HK$84-85 per sq. ft. level for the second half.

Langham Place Office Tower

Leasing conditions for the offices at Langham Place have been stable. The Office Tower had a slightly higher occupancy rate of 99.4% as of 31 December 2010, as compared to 98.5% a year ago. This was notwithstanding the expiry of 35% of leases by floor area during the year and the strong price competition from new supply in the peripheral districts in Kowloon East. Langham Places MTR location and the outstanding quality of the building have been important factors in retaining tenants and maintaining a high occupancy. For 2010, passing rents were stable and continued to remain within a narrow range centered around HK$26.50 per sq. ft.

Langham Place Mall

Despite the opening of a few new shopping malls in nearby Tsim Sha Tsui, the convenient location of the Langham Place Mall, its attractive shop offerings and its well conceived and executed marketing programmes ensured its status as one of the most popular shopping malls in Kowloon, among local shoppers and tourists alike. The Mall enjoyed very high levels of foot traffic and remained virtually fully let throughout 2010. Driven by a constantly improving mix of quality retailers and a robust retail market, the average sales per sq. ft. of the shops in the Mall improved by 18% year on year. The surge in spending by Mainland tourists, who now consider Langham Place one of their favourite destinations, on cosmetics and fashion has also been a major factor behind the growth. The average passing rent rate increased from HK$88.61 per sq. ft. at the beginning of 2010 to HK$97.48 at year-end.

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