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Letter from the Chairman

With local economic slowdown in 2015 continuing into this year, and under the external impacts from global political and economic changes, the economic condition in Hong Kong and Macau during the first half of 2016 was less than satisfactory. Notwithstanding, going into the third quarter, as impacts from external factors were gradually digested by the market, market sentiments started to pick up. The number of visitors to Hong Kong and Macau saw a gradual increase and local spending started to rebound, while the overall performance of the retail segment also improved. Benefited from the foregoing changes, economies of both Hong Kang and Macau started to stabilize, even achieving a slight growth during the year.

As stated in the 2016 interim report, under the shadow of the overall economic condition and weak consumption sentiments, performance of the Group's businesses continued to dwindle from the second half of 2015, among which the property investment operation (being the core business of the Group) was hit hard. Termination or request for lower rents by tenants resulted in significant decrease in the Group's rental income. Although the Group's performance improved during the second quarter with rental income reverting to positive growth due to our constant efforts, the overall annual financial results of the Group still declined as compared to the previous year due to the substantial rental reduction carried forward as well as long vacant periods for certain properties.

Looking forward to 2017, the global economy will be constantly influenced and challenged by political changes and market uncertainties. As the global political and economic situation undergoes dynamic changes, including the negotiation between the United Kingdom and the European Union in relation to Brexit, policy implementation of the newly elected president of the United States, the unpredictable impact which would be caused by the election and transition in several European countries, interest hike by the United States, slowdown of the economy of Mainland China and the fluctuation of exchange rate of Renminbi, the global market is faced with increasing uncertainties. The global economy may hover at a low growth level and the International Monetary Fund has lowered its estimation of the global economic growth. With a highly externally oriented economy, Hong Kong and Macau are bound to be affected by such foreign influences. Nevertheless, both places are currently stabilising with a sound foundation. Low unemployment rate reflects a healthy labour market with recovering public consumption sentiment. Tourism has been improving constantly as the decreasing trend in number of tourists since the third quarter of 2015 ended with a rebound in the middle of last year. In particular, the decrease of Mainland visitors has also been narrowing. As an integral part of the master plan of the Central People's Government under several initiatives for foreign development, such as "Go Global" and "the Belt and Road", Hong Kong and Macau definitely receive preferential treatment and are blessed with new development opportunities. Thus, even though the global economy is still facing challenges, the economy of Hong Kong and Macau is expected to stabilise in the short term with moderate growth.

The Group is cautiously optimistic about the economic development in the coming year, and will adhere to our established operation strategy by formulating financial plan and management scheme with due care in a prudent and progressive manner in order to deal with various changes and challenges from the market. We will also actively promote the business development of the Group by seeking any suitable and promising investment opportunities in the market and optimising the Group's investment portfolio so as to create the best value to the shareholders and stakeholders.

An integral part of the Group's core values covers corporate citizen responsibility, giving back to the society and contribution to sustainable development of the society. In the last year, the Group remained committed to the principle of social care and allocated resources to the cooperation with various partners in executing several social service projects, with a view to supporting the disadvantaged. During the period, the Group also made strenuous efforts in implementing and promoting emission reduction, energy saving and recycling in order to fulfil the social responsibility of a corporate citizen in respect of environmental protection. For details on the Group's efforts on corporate social responsibility during the year, please refer to the corporate social responsibility report of the Group to be posted on the Company's website later.

Finally, I would like to take this opportunity to express my heartfelt thanks to the management and all staff for their contributions in different aspects to the Group in the last year, and I would also like to express my greatest gratitude to our shareholders, customers, business partners and stakeholders for their long-lasting support and trust. In the future, we will strive to create better prospects for the Group and society.

Executive Chairman

Hong Kong
31 March 2017