Dear Shareholders,

In 2010, China witnessed a strong GDP growth of 10.3%, making it the world's second largest economy. Meanwhile, Hong Kong staged a recovery with unemployment rate dropping to the pre-financial tsunami level. On the back of thriving economic development with rising per capita income and accelerating pace of urbanization, we see huge demand for quality homes in Mainland China. On the other hand, luxury residences in Hong Kong continued to be much sought after by local and overseas buyers due to high liquidity against a low-interest rate backdrop. While our development of niche residential projects seems to offer the perfect answer to such demands in both Mainland China and Hong Kong, we had to face with short-term uncertainties, as both the Central Government and the Hong Kong SAR Government have introduced regulatory measures to curb speculation in the property markets.

Solid business development backed by stringent operation
In response to various tightening measures including additional stamp duties and tightened mortgage requirements for luxury residences in Hong Kong and interest rate hikes, purchase quotas, loan quotas and new property taxes in Mainland China, the Group swiftly adjusted its sales and fiscal strategies in a prudent manner. During the period under review, we launched two completed projects, The Great Hill in Hong Kong and Shanghai Westwood II, as well as The Legend, Shanghai Westwood III which was under development. The Group sustained stable performance in its core businesses for the full year despite changes in market sentiments, reporting turnover and profit of HK$900 million and HK$200 million respectively. Our income for the year was mainly derived from sales revenue from the aforesaid completed projects, while Shanghai K. Wah Centre was also making stronger contributions to rental income as a result of an increase in its stake to approximately 70% in early 2010 that broadened the base of recurrent income of the Group. For the RMB1.6 billion contracted sales recorded for The Legend, which was launched towards the end of last year, they would be recognized upon its completion.

Brand excellence complemented by shrewd strategies
The Group is committed to building excellence which is well appraised in the property markets of both Mainland China and Hong Kong. We provide buyers with exquisite homes that command added value with strong potential for long-term growth, drawing on the wealth of our experience and our brand reputation. Strong market recognition for our brand name and the quality of property projects is underpinned by the honours and awards garnered by Shanghai Westwood II during the year under review, including the Gold Award in International Quality of The Most Popular Property Awards in Shanghai, following strong sales in 2009. Sales of The Legend were equally impressive, with close to half of the offered units sold on the very first day of market launch late last year, credit to the Group's flexibility to capture the robust demand for medium- to high-end residences. Such encouraging sales have further bolstered our financial resources to withstand market turbulence.

Launching prime developments at opportune timing
In the coming years, we will continue to launch different types of high-end developments in Hong Kong, Shanghai and Guangzhou at the right timing to ensure stable growth in sales revenue and profit. These will include Chantilly on Stubbs Road, a super luxury development on the Hong Kong Island which commands a panoramic view of the Happy Valley racecourse, as well as a large-scale luxurious residential project near the Aberdeen Marina Club in Sham Wan. In Shanghai, our new offerings will feature The Palace in Xuhui District, Grand Summit in Jingan District and Upstream Park in Minhang District, in addition to The Legend, Shanghai Westwood III. In Guangzhou, we are anticipating the grand opening of our first five-star hotel in Huadu midway through the year, while Le Palais on Jianshebei Road, a high-end residential complex, is also scheduled for completion within the year. After the successful hosting of the World Expo and the Asian Games respectively, Shanghai and Guangzhou are enjoying significantly improved infrastructure and amenities in surrounding regions, much to the benefit of the Group's project developments. Furthermore, all sites under planning, including the Zhujiajiao plot in Shanghai acquired early last year by way of sole proprietorship, will suffice the Group's development for at least the coming five years.

Flexibility amidst reinforced fundamentals
In the year ahead, uncertainties remain with the possibility of the Mainland and the Hong Kong governments resorting to further regulatory measures in order to contain inflation and prevent asset bubbles. For Hong Kong, there will be the additional risk of interest rates and capital flow taking a reverse direction. Nonetheless, the Group remains cautiously optimistic about the prospects of both markets in the medium- to long-term. In addition to sound economic fundamentals and resurgence in the external economic environment, Hong Kong will also benefit from the increasing influx of potential buyers from the Mainland, as governments on both sides of the border are vigorously driving regional economic integration with strengthened transport links. Meanwhile, the increase in land supply announced by the Government to alleviate the shortage problem will also present more opportunities to property developers. In the Mainland, long-term growth of the property market is backed by the enormous demand for home ownership, including first-time purchases and trade-ups, driven by ongoing economic expansion, faster pace in urbanization and old-district renovation.

In the meantime, the Group will stay alert to any changes in adherence to prudent financial and risk management, with a view to enhancing our resilience to market volatility. Looking ahead, we will continue to explore prime investment opportunities in Hong Kong, Yangtze River Delta and Pearl River Delta, to fuel future growth and deliver stronger returns to shareholders.

Enhancing corporate governance
While high-calibre talents provide the driving force behind the Group's development, sound corporate governance gives a solid backing for protecting and enhancing shareholders' interests. The Board of Directors and the management of the Group play important roles in these two aspects. I am delighted that the membership of our Board, charged with the important responsibilities of independent supervision and strategic planning, is assumed by leaders in various professions and social sectors. In this connection, our profound gratitude goes to Sir David Akers-Jones and Mr. Michael Leung, who resigned as Independent Non-executive Director and Non-executive Director respectively, on 30 September 2010 and 1 March 2011, for their invaluable contributions to the Group. We also mourn in deep sympathy the passing away of Dr. The Hon. Leo Lee, a former Independent Non-executive Director of the Group, whose contributions will long be remembered.

On top of the duties of policy implementation, supervision and accountability to the Board, the Group's management also play an important role in imparting the culture and values of the Group, working hand in hand with staff members to embrace the challenge of each day. On behalf of all members of the Board, I would like to express sincere appreciation to all staff for their dedication and commitment during the past year, and I look forward to delivering sound results through concerted efforts in the years to come.