Dear Shareholders,

In 2009, industries from all over the world underwent a most challenging year in the aftermath of the global financial crisis. The resolute economic stimulus measures introduced by the Central Government have been effective. A stabilized economy of China, as the world's third largest economic regime, is instrumental to global economic recovery.

Robust earnings growth
During the period under review, KWIH achieved a sound performance in its core business on the back of stringent risk management and prudent strategic planning, amid the speedy recovery of the real estate market driven by effective stimulus measures of China. Turnover and profit attributable to its equity holders increased substantially to HK$2.7 billion and HK$916 million, respectively.

Improved cost efficiency
The Group's Shanghai Westwood II delivered outstanding sales and has been well received by the market since its launch in late 2008. Shanghai K. Wah Centre continued to generate stable rental income, which further strengthened our financial resources. Moreover, the Group reported significant improvements in gross and net profit margins thanks to stronger efforts in project management, risk management and cost control, as it endeavoured to optimise operational efficiency during the year.

Active land replenishment
With ample financial resources at our disposal, we made opportune moves to replenish our land reserve. Between late 2009 and early 2010, the Group acquired four prime sites or projects in Hong Kong and Shanghai through sole proprietorship or joint venture, while increasing its stake in Shanghai K. Wah Centre to approximately 70%. The Group's sustainable development and growth in future years will be fueled by its property portfolio including land reserve with an attributable gross floor area of close to 2.3 million square metres.

Sustainable momentum
In 2010, the Group plans to launch a number of large-scale luxury residential projects in Hong Kong, Shanghai and Guangzhou, the construction of which are progressing well. The Shanghai projects include two high-end offerings located at prime sites on Jianguo West Road in Xuhui District and Yanjiazhai in Jing'an District, respectively, while the No. 6 Shiu Fai Terrace project in the mid-levels of Hong Kong Island East will be our focus at home. Scarce in the market with innovation, sophistication and uniqueness in architectural designs and layouts, these projects are set to draw tremendous attention upon launch. Meanwhile, the Group's first five-star hotel project in the CBD of Huadu District, Guangzhou, will commence operation during the year.

Positive outlook
The business environment is currently improving following gradual stabilization of the global economy. It is believed that the PRC government will adhere to proactive fiscal policies and moderately relaxed monetary measures to support further economic recovery. A steady growth of Mainland China will continue to benefit Hong Kong's economy. With full confidence in the fundamentals of the Mainland and Hong Kong, the Group holds an optimistic view on the property markets on both sides in the long run. Nonetheless, we will stay alert of any policy changes and remain prudent in our operations, with a view to enhancing our resilience to market volatility.

Progressive yet prudent strategy
KWIH will continue to seek expansion in a progressive yet prudent manner in tandem with China's general policy of accelerating urbanization. With a focus on the Greater China region, the Group will explore investment opportunities that offer immense potential in the Yangtze River Delta Region and Pearl River Delta Region. On the back of our sound financials and flexible strategies, we are confident of delivering stronger returns for shareholders.

Strengthened corporate governance
Independent oversight of the Group and its execution of strategy is the responsibility of our Board, the members of which are made up of veterans with profound management experience and professional knowledge. Over the past year, KWIH had appointed Professor Poon Chung Kwong, the former president of the Hong Kong Polytechnic University; and Dr. Moses Cheng Mo Chi, the founder of The Hong Kong Institute of Directors, as its Independent Non-executive Director and Non-executive Director respectively. I believe the appointment of these prominent leaders will bring in further insights in a strategic and international perspective. Furthermore, Mr. Alexander Lui Yiu Wah, the Group's Managing Director – Hong Kong Properties; and Ms. Claudia Cheung Man Wan, Director of Corporate Affairs and Human Resources; were appointed as Executive Directors of KWIH on 12 April 2010. These senior executives are expected to contribute their stewardship further to the Group upon their appointments.

Last but not least, on behalf of the Board, I would like to express my heartfelt appreciation to all staff for their commitment and dedication during the past year, and I look forward to delivering sound results through concerted efforts in the years to come.