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Chairman’s Statement

Investment Properties

Great Eagle Centre

The lack of new supply in the Wanchai area, the relocation of cost-sensitive tenants from Central, coupled with strong demand from the service sector and Mainland Chinese companies have kept the office portion of Great Eagle Centre at close to full occupancy throughout 2010. With the strong occupancy, we were able to progressively raise spot rents through 2010 from the high HK$40s per sq. ft. at the beginning of the year to high HK$50s towards the end of 2010.

As the leases due for renewal in 2010 had been written during the last peaks of 2007 and 2008, when market rents were higher than those of 2010, there was therefore a small amount of negative rent rate reversion in 2010. Average passing rent at Great Eagle Centre at the end of December 2010 was 2% lower than that achieved at the beginning of the year. However, gross rental income increased by 4.2% year-on-year to HK$105.5 million in 2010 due to the higher average occupancy, as well as full year rental income contribution from an anchor tenant whose lease was renewed at a higher rental rate than its previous lease in the second quarter of 2009.

Net rental income rose 13.9% year-on-year to HK$102.2 million due to lower vacancy costs and a lower base for comparison, as net rental income in 2009 was impacted by booking of additional expenses related to the relocation and upgrading of the cooling water pumping facilities.

Eaton Serviced Apartments

The Eaton serviced apartments have benefitted from increased business activities and inflow of expatriates to Hong Kong in 2010 with generally higher occupancy. Rental rates achieved in the second half of 2010 at the Wanchai Gap Road and Village Road properties posted year-on-year growth in 2010. Occupancy also rose at the Blue Pool Road property, but the average rental rate achieved in the second half of 2010 was still lower than that achieved over the prior year, although the year-on-year decline in rental rates has been narrowing.

Great Eagle Holdings Limited

Eaton House

Overall, average occupancy rate at the three properties rose 22 percentage points year-on-year to 78.5% in 2010, whereas rental rates achieved dropped by 12% year-on- year to HK$33.6 per sq. ft over 2010. Gross rental income increased 20.9% year-on-year to HK$34.9 million, whereas net rental income increased 37.3% year-on-year to HK$23.9 million on the back of aggressive cost control.

United States Properties

All of our three properties in the U.S. have maintained their high occupancy levels throughout 2010 through renewal and new lettings, despite the sluggish demand for office space from the corporate sector in the area. Overall occupancy for the portfolio stood at 90% as at the end of 2010, whereas average rent rate achieved came in steady at US$36.4 per sq. ft for 2010. With full year rental income contribution from tenants secured in 2009 and higher occupancy at the Sacramento property, gross rental income for our U.S. properties increased by 3.1% year-on-year to HK$117.7 million in 2010. However, due to increased tenant inducement costs associated with the new lettings at 500 Ygnacio and 2700 Ygnacio, net rental income declined by 7.8% year-on-year to HK$46.7 million in 2010.

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