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Chairman’s Statement

Financial Review

Debt

Gross debts denominated in HK dollars amounted to HK$1,316 million as of 31 December 2010. Our foreign currency gross debts as of 31 December 2010 amounted to the equivalent of HK$2,168 million, of which the equivalent of HK$499 million, or 23.0% of our foreign currency debts, was on fixed-rate basis. Net of cash and bank deposits that matures within 3 months totalling the equivalent of HK$1,553 million, our consolidated net debt outstanding as of 31 December 2010 was HK$1,931 million, an decrease of HK$661 million from that of HK$2,592 million as of 31 December 2009.

Because of the persistent low interest rate environment and in order to enhance return to shareholders, as a normal treasury function the Group has been prudently investing in quality short-term bonds which are intended to be held to maturity, and full principal protected structured deposits and notes with reputable banks and financial institutions as counter-parties. As at 31 December 2010, investment in these bonds, structured deposits and notes amounted to HK$308 million. Should this amount be taken into account, the consolidated net borrowing of the Group would be reduced to HK$1,623 million.

Equity Attributable to Shareholders, based on professional valuation of the Groups investment properties as of 31 December 2010 and the depreciated costs of the Groups hotel properties, amounted to HK$28,764 million as of 31 December 2010. The net assets value at 31 December 2010 represents an increase of HK$6,447 million compared to the value of HK$22,317 million as of 31 December 2009, mainly attributable to the profit for the year, and the equity account for the Groups investment in Champion REIT units with effect from 23 July 2010. Based on the consolidated net debt of HK$1,931 million, the resulting gearing ratio at 31 December 2010 was 7%. Should the investment in bonds, structured deposits and notes mentioned above be recognized in the calculation, the gearing ratio will be reduced to 6%.

Finance Cost

During the year, market interest rate has remained at an extremely low level. Coupled with the high interest income from the Groups investment in Champion REIT convertible

Great Eagle Holdings Limited

bonds, the Group has earned a net interest income of HK$52 million for the year. Consequently, there is no applicable interest cover ratio as at the balance sheet dates.

Liquidity and Debt Maturity Profile

As of 31 December 2010, our cash, bank deposits and committed but undrawn loan facilities amounted to a total of HK$3,197 million. The majority of our loan facilities is short or medium term in nature and is secured by properties with sufficient value to loan coverage. The following is a profile of the maturity of our outstanding debts as of 31 December 2010:

Within 1 y

1-2 years

ear

    • 22.9

      %

    • 73.5

      %

3-5 years

3.6%

Pledge of Assets

At 31 December 2010, properties of the Group with a total carrying value of approximately HK$9,615 million (31 December 2009: HK$9,895 million), were mortgaged or pledged to secure credit facilities granted to its subsidiaries.

Commitments and Contingent Liabilities

As at 31 December 2010, the Group has authorised capital expenditures not provided for in these financial statements amounting to approximately HK$74 million (31 December 2009: HK$309 million) of which approximately HK$70 million (31 December 2009: HK$309 million) was contracted for.

As at 31 December 2010, the Group has outstanding financial commitment of RMB180 million (equivalent to HK$211 million) for capital injection to a jointly controlled entity, and commitment of RMB233 million (equivalent to HK$275 million) for construction cost to complete a hotel property owned by an associate.

In addition to the above, as at 31 December 2010 the Group has provided a several corporate guarantee and a charge over its interest in the share capital of an associate to a bank in respect of its share, i.e US$19.5 million of total banking facility of US$117 million granted to an associate.

Other than set out above, the Group did not have any significant commitments and contingent liabilities as at 31 December 2010.

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