Chairman’s Statement
GROUP PERFORMANCE

For the full year ended 31 December 2010, the Group continued its sterling performance and posted a profit after tax and non-controlling interests of $749.0 million (2009: $593.4 million). The basic earnings per share increased by 26.8% to 80.9 cents (2009: 63.8 cents).

For the fourth quarter under review, the Group achieved an after-tax profit attributable to shareholders of $249.2 million, an increase of 41.1% as compared to $176.7 million in Q4 2009. This is backed by the significant increase in profit contribution from the rental properties segment due to gain recognised primarily from the sale of the Group’s remaining strata-units in Chinatown Point.

At the pre-tax level, profit contribution from the rental properties segment had surpassed the other business segments to be the lead contributor, accounting for 75.4% and 40.9% of the Group’s profit before tax for Q4 2010 and full year 2010 respectively. During the year, the Group timely unlocked the value of some of its non-core and secondary assets which contributed significantly to the performance of the rental properties segment. In addition, some of the pre-tax gain of $25.5 million recognised in Q3 2010 on the dilution of investment in CDL Hospitality Trusts (CDLHT) also attributed to the increase to this segment for full year 2010.

Despite the strong take-up rate for residential sales launched by the Group during the year, the Group was not able to recognise profit from some of its launched projects as construction had either not commenced or construction has not reached the recognition stage yet. Accordingly, the performance of the property development segment was lower in Q4 2010 and full year 2010 as compared to the corresponding periods in 2009.

The Group’s balance sheets continue to be healthy. As at 31 December 2010, net gearing ratio had reduced to 29.0% (as at 31 December 2009: 40.0%). This did not take into consideration any fair value gains on investment properties as the Group adopted the conservative policy of stating investment properties (including those held under joint ventures and associates such as CDLHT) at cost less accumulated depreciation and impairment losses. Interest cover had also improved to 20.7 times for 2010 (2009: 14.5 times).

In view of the strong performance achieved, the Board is pleased to recommend the payment of a special ordinary dividend of 10.0 cents per share in addition to the ordinary dividend of 8.0 cents per share.

Property

The Singapore economy expanded by 3.9% quarter-on-quarter in Q4 2010 compared to the contraction of 16.7% in the previous quarter. Taking into consideration the two consecutive quarters of strong pace of expansion in 1H 2010, the economy grew by 14.5% for the whole of 2010. Growth was driven to a large extent by the biomedical manufacturing cluster and the manufacturing sector. However, the construction sector declined by 2.0% on a year-on-year basis in Q4 2010, compared to 6.7% growth in Q3 2010, mainly due to the completion of a number of major private sector projects.

The service sector continued to grow in Q4 2010. It posted an increase of 8.8% year-on-year, following growth of 10.2% in the preceding quarter. Growth was supported mainly by the financial services sector, which saw increased activities for commercial banking and foreign exchange trading. The tourism-related services sectors were also bolstered by strong visitor arrivals.

The buoyant residential market sentiment in Q4 2010 went against the more usual seasonal slowdown as evidenced in previous year-end periods. Based on statistics released by Urban Redevelopment Authority (URA), a total of 4,522 uncompleted private residential units were launched for sale by developers in Q4 2010, compared with 3,501 units in Q3 2010. Demand for new homes reached 4,241 units in Q4 2010. This is compared to the 3,638, 4,033 and 4,380 units sold in Q3, Q2 and Q1 respectively.

For the whole of 2010, developers sold a total of 16,292 units in the primary market outstripping the 14,688 units sold in 2009 as well as the previous record of 14,811 units sold in 2007.

According to URA, the Residential Property Price Index surpassed the previous record set in Q3 2010. Overall prices of private residential properties increased by 2.7% quarter-on-quarter in Q4 2010, compared with the 2.9% quarter-on-quarter increase in the previous quarter. For the whole of 2010, prices had increased by 17.6% year-on-year, compared with the 1.8% rise in 2009, and exceeded the previous peaks in 1996 and 2008 by 7.4% and 9.7% respectively.

In late October 2010, the Group launched the 150-unit The Glyndebourne, a condominium redevelopment of the existing Copthorne Orchid Hotel Singapore site at Dunearn Road. The Group, which has a 54% interest in this property that is owned by its subsidiary, Millennium & Copthorne Hotels plc (M&C), managed the marketing for the project on M&C’s behalf. To date, over 93% of the project has been sold.

NV Residences, which was launched in Q2 2010, continued to attract buyers and so far, more than 500 units out of a total of 642 units have been sold.

For the year 2010, the Group, along with its joint-venture associates, sold a total of 1,560 units with sales value of $2.115 billion. This compares favourably with 2009, in which 1,508 units with total sales value of $1.868 billion were sold.

For Q4 2010, profits were booked in from Cliveden at Grange, One Shenton, The Residences at W Singapore Sentosa Cove, Shelford Suites, Volari and Wilkie Studio. Profits were also booked in from joint-venture projects namely, Livia and The Gale.

However, no profit was booked in from several projects which were sold out or substantially sold namely, the 396-unit Hundred Trees at West Coast, the 157-unit condominium at 368 Thomson, the 177-unit Cube 8 and the 429-unit Tree House condominium at Chestnut Avenue. These projects are still in their early stages of construction and profits will be progressively booked in during 2011 and beyond. Likewise, no profit was booked in from NV Residences and The Glyndebourne.

The Group has, as part of its selective land replenishment strategy, successfully won the tender for an Executive Condominium (EC) site at Segar Road in Bukit Panjang in December 2010. The Group paid approximately $182 million for the 224,258 sq ft site.

In line with the Group’s ongoing strategy of reviewing its existing asset portfolio with a view to unlock shareholders’ value at the opportune time, the Group has in 2010 sold or contracted to sell 8 non-core commercial/industrial assets worth a total of about $967 million of which the Group’s share is approximately $800 million. These include Chinatown Point, four strata units of GB Building, Pantech 21 and the joint-venture project at New Tech Park which were completed in Q4 2010. Another 2 properties, namely The Corporate Office and The Corporate Building are due for sales completion in Q1 and Q2 of 2011 respectively. The sale of another strata unit of GB Building will be completed in 1H 2011.

The Group’s flagship retail property, City Square Mall, which is almost fully leased now would be celebrating the first anniversary of its official opening soon. Footfalls have been steady and improving and the mall business is expected to continue to remain healthy. Moving forward, the Group will continue to review and enhance the trade-mix and rentals.

The Singapore office property market continued on the upward trend during Q4 2010. According to URA statistics, overall rentals for office space increased by 4.7% quarter-on-quarter in Q4 2010 compared with a 6.0% increase in the previous quarter. For the whole of 2010, rentals of office space rebounded by 12.6%. However it is noted that the current rental is still about 45% below the 2008 peak. In fact, since as early as beginning of last year, many analysts presented a rather discouraging outlook for the office market, predicting an oversupply crunch in 2011 to 2013. However with the tremendous GDP growth, the office market has turned around unexpectedly with a sterling performance in 2010 and is poised for further growth. Anecdotal evidence showed that there was positive occupier demand as more companies either retained or expanded into new space. The island wide office occupancy rate improved in Q4 2010 to 87.9% as compared to 87.0% in Q3 2010. The Group’s office portfolio continued to fare well with occupancy rate of 94% as at end 2010.

Total potential supply of office space in the pipeline is about 1.06 million sq m GFA as at the end of December 2010. About 553,000 sq m or 52% of the total pipeline supply of office space is expected to be completed by 2012. According to research by a reputable international property consultant, although the estimated 3.1 million sq ft of office space slated for completion in 2011 may appear daunting, almost half of this has already been pre-committed.

To ensure a steady supply of office space to support the growth of the financial and business service sector, the Ministry of National Development has announced the inclusion of 2 commercial sites in the Confirmed List of the 1H 2011 Government Land Sales (GLS) Programme.

The contract for the construction of the diaphragm wall and piling was awarded last year for the South Beach project, in which the Group holds a one-third share, and actual site work will commence in early March 2011. Evaluation of the main construction contract is in progress and expected to be finalised around middle of 2011. The project is now expected to be completed in 2015. The Group feels that such a well-located mixed-use development project with a scale of this magnitude is difficult to come by and is an investment with immense potential from the longer term perspective.

As announced in August 2010, CDL China Limited, the Group’s wholly-owned subsidiary, had been allocated initial investment funds amounting to approximately $300 million to establish CDL’s presence and implement the Company’s real estate strategy in various cities throughout China. Despite stiff competition, CDL China Limited, through its wholly-owned Hong Kong subsidiary China Venture Investments Limited, acquired its first development site in Chongqing, China for RMB232 million at a closed government land auction on 15 December 2010.

Chongqing has emerged as one of the three fastest-growing cities in China and a key city in China’s western region. The municipality, which has an estimated population of 33 million, presents a highly-attractive investment opportunity given its rapid GDP growth estimated at 17% in 2010. The awarded landmark residential site located on top of the historic Eling Hill in Yuzhong District of Chongqing municipality consists of two adjacent plots of land totalling 27,200 sq m and has a permissible GFA of 43,020 sq m. Strategically located within close proximity to the city centre’s landmark monument, Jie Fang Bei, and boasting panoramic views of the Yangtze River, this rare site will be developed into possibly Chongqing’s – and even the whole of Western China – most prestigious development with approximately 150 ultra luxurious low-rise villas, duplexes and townhouses. Construction of the project is expected to commence in 2011.

Hotels

M&C, in which the Group holds a 54% interest, performed well in 2010, delivering a strong operating result and made good progress on its asset management initiatives. Changes that have been introduced at the operating level have enabled M&C to find ways to increase revenues whilst continuing to control costs.

M&C’s management focused on driving increases in revenue per available room (RevPAR) across all regions. This was due to 2 key factors: first, the location of M&C’s highest revenue-generating hotels in gateway destinations that were quickest to respond to recovery; and second, a revitalised management structure, enabling its hotel leadership teams to optimise the balance between room rate and occupancy.

M&C’s management also succeeded in maintaining strict cost discipline throughout the year, enabling a high proportion of increased revenue to feed through to profits. M&C’s core strategy of owning as well as managing most of its hotels gives it a considerable degree of flexibility when managing direct costs.

With this cost-focused strategy in place, 2010 was a successful year for M&C, with net profit after tax and minority interests increasing by 37.2% to £96.2 million (2009: £70.1 million).

At constant rates of exchange, average RevPAR for the year was £61.06, an increase of 10.7% over 2009. Amongst the gateway cities the strongest RevPAR improvements were in Singapore, which enjoyed a strong V-shaped recovery over the year (up 29.3%). London (up 7.9%) was more stable over the past two years, having experienced only a small drop (2.5%) in RevPAR during 2009. New York was up 8.8%, compared to 2009.

General economic recovery played a key role in M&C’s improved performance. However it was also driven by a dynamic combination of local rate and occupancy strategies that varied throughout the year according to general economic conditions and local factors. On a consolidated basis, occupancy contributed 46.7% of RevPAR growth whilst rate produced 53.3%. In constant currency terms revenue increased by 10.0% to £743.7 million.

A high proportion of the cost savings achieved by M&C in anticipation of the severe downturn in 2009 was maintained during 2010, although variable costs increased as a result of greater customer demand for food and hospitality services and in rental charges in Singapore. Operating costs, including hotel fixed charges, non-hotel expenses, central costs, and excluding redundancy costs and impairment, in constant currency terms rose by 5.9% over the year to £628.7 million.

As early as a few years back, even before the financial crisis, M&C anticipated that the market may not be sustainable and could face credit constraint and it has taken the precautionary measure to pursue a debt reduction strategy which has been proven right and is well received. M&C’s low gearing lends itself to a strong and flexible position to meet future challenges and take advantage of opportunities.

At 31 December 2010, M&C had cash reserves of £251.9 million (2009: £135.5 million) and total undrawn committed bank facilities of £152.4 million, most of which are unsecured. The average duration of M&C’s debt is 24 months (2009: 27 months).

M&C exercised its option to increase its equity ownership in the Grand Millennium Beijing Hotel, from 30.0% to 70.0%. The acquisition was in keeping with its strategy to make selective acquisitions when favourable opportunities arise. This resulted in its net debt increasing by £75.0 million. Overall, net debt reduced over the year to £165.7 million (2009: £202.5 million). Gearing improved to 8.5% (2009: 11.6%). Net interest expense for the year was £5.9 million (2009: £7.3 million). The net book value of the Group’s unencumbered assets at 31 December 2010 was £2,088.6 million (2009: £1,891.6 million) representing 88.7% (2009: 87.8%) of all fixed assets and investment properties.

M&C’s asset management strategy is focused on enhancing the performance of each of its individual property assets and assessing which asset management options will deliver best value for shareholders. The focus of M&C’s management is concentrated on the 20% or so of properties in the Group’s portfolio that generate 80% or more of Group earnings, with a view to developing a structured and phased investment programme to enhance returns on certain prime-location assets in the portfolio.

In line with this strategy, M&C has commenced execution of detailed refurbishment plans at the Millennium Seoul Hilton and The Grand Hyatt Taipei and is drawing up plans for refurbishment of The Millennium UN Plaza. Plans are underway to re-position the Millennium Mayfair after the London Olympics in 2012. Additional projects are being considered. In each case, M&C is establishing optimal timing of refurbishment work to minimise revenue impact and capex costs. The locations of these properties are such that it expects each to attract a higher proportion of premium rate customers following refurbishment, thereby increasing hotel earnings and profitability.

As previously reported in Q3 2010, M&C entered into an agreement to sell a parcel of land adjacent to the Grand Millennium Kuala Lumpur for a consideration of RM210 million (£44.2 million). The sale is contingent on the Malaysian authorities’ approval of changes to the land title on such terms and conditions that are acceptable to CDL Hotels (Malaysia) Sdn. Bhd.. The purchaser has paid CDL Hotels (Malaysia) Sdn. Bhd. a deposit amounting to 10% of the consideration price and has agreed to pay certain amounts on specified future dates with the remainder payable on completion, which is expected to occur before the end of the second quarter of 2012. M&C’s carrying value of the land is RM42.8 million (£9.0 million). Based on this value, the sale is expected to result in a pre-tax profit on completion of RM164.1 million (£34.5 million) after transaction costs. Until completion, M&C’s interest in the land will be held on the balance sheet at book value.

In 1H 2010, M&C had also announced the signing of a collective sales agreement (“CSA”) with other unit-holders in Tanglin Shopping Centre, a shopping-cum-office development, in which it has a 34% interest in the total strata area. The CSA requirement for 80% of unit-holders to agree for the sale process to proceed was attained. However, the first open tender which carried a very high reserve price for the collective sale of the property did not receive any bids. The sales committee will assess the situation and decide the next course of action.

The launch of M&C’s new Studio M brand during 2010 got off to a strong start with the first branded hotel in Singapore achieving good levels of occupancy following its official opening on 17 June 2010. The hotel was EBIDTA-positive within the first three months of operation, which is unusual for a new property in the hospitality industry. Not a typical cookie-cutter hotel, Studio M is a unique mid-range urban-inspired designer hotel with a twist that meets the needs of the modern traveller. This distinctively hip and minimalist brand concept is designed to appeal to the technologically-savvy younger generation and professionals who value contemporary accommodation with connectivity but at an affordable price tag. Since its soft-opening in March 2010, the first Studio M Hotel in Singapore has met with tremendous success and more Studio M projects are being considered.

This includes the development of a 144-room mid-range Studio M hotel in Chennai, India. The construction of the hotel has resumed during the course of the year, after plans were suspended in the wake of the 2009 recession, and the hotel is scheduled for completion in 2013. This will mark a small but significant extension of M&C’s activities, being its first hotel on the fast-growing Indian sub-continent.

The China hospitality market represents a significant strategic development opportunity for M&C. M&C’s first managed hotel in China, the Millennium Hongqiao in Shanghai, opened in 2006, and today M&C has 6 hotels with 2,295 rooms in the country, 5 of which are managed/franchised. The single owned hotel is the award-winning Grand Millennium Beijing, in which M&C exercised an option to increase its equity holding from 30% to 70% in November 2010 at a purchase price of £26.2 million comprising £18.4 million of cash and £7.8 million of deferred consideration.

In addition to its owned, managed and franchised hotels in China, M&C has a 41.2% effective interest in First Sponsor Capital Limited (“FSCL”). FSCL is a majority shareholder in Idea Valley Investment Holdings Ltd (“IVIHL”) which conducts property and hospitality-related business in the China provinces of Guangdong and Sichuan. M&C regards FSCL as an effective and capital-efficient platform to grow its hospitality interests in China.

Development of the Cityspring project in Chengdu, Sichuan Province is progressing well. As at 27 January 2011, 5 out of 6 residential blocks had been formally launched. 569 sale and purchase agreements totalling in excess of US$80 million and 25 option agreements were signed. This represents a sale rate of approximately 98% of the 608 units formally launched. This project is expected to make significant contributions with revenue and profit recognition expected by the end of 2011. The Group, which holds an effective interest of 22% in this associated company, will similarly benefit positively. The Cityspring project is a mixed development totalling more than 80,000 sq m and includes a 124-room mid-scale hotel that is intended to be managed by M&C. The development is scheduled for completion in 2012.

For the year ended 2010, M&C’s effective share of FSCL’s net profit after tax and minority interest was £0.3 million.

As announced on 5 January 2011, the dispute with the former shareholder Cheung was resolved through a settlement agreement signed on 31 December 2010. Under the terms of the settlement agreement, the joint-venture agreement with Cheung would be terminated and all legal actions commenced by all parties withdrawn. The joint-venture agreement has been terminated and the parties are in the process of withdrawing all legal actions. FSCL has to date bought out Cheung’s entire stake in IVIHL, thereby increasing its stake to 95.0% and regained control of 2 remaining companies previously under his control. Recovery of the Hainan hotel and another small business will not be pursued. M&C and the Board of Millennium & Copthorne Hotels New Zealand Limited consider the settlement to be a favourable outcome and in the best interests of shareholders. Most of the transactions under the settlement have been completed and those transactions to be accounted for in the 2011 financial year do not have any material adverse impact on profit and loss.

The settlement of the dispute enables FSCL to renew its focus on value creation through mixed development opportunities in China. These include the proposed acquisition of additional land in Chengdu, for which it is raising US$100.0 million of fresh capital financing.

During the year, M&C together with its New Zealand subsidiary provided US$25.0 million of new financing, primarily for the purchase of the Chengdu land, and plans to invest a further US$25.0 million. As M&C funded the portion of the cash call that the New Zealand subsidiary did not take up, M&C’s effective interest in FSCL has increased from 39.8% to 41.2%.

As previously reported in 1H 2010, CDLHT, M&C’s real estate investment trust associate, announced the issue of 116.96 million stapled securities, priced at $1.71 each, through a private placement, and raising new capital of $196.7 million ($200.0 million gross). As a result of this issuance, M&C’s interest in CDLHT was diluted from 39.0% to 34.8% in 2010. M&C’s share of net proceeds was greater than its share of net tangible assets diluted by the issue, resulting in a non-cash accounting gain of £7.2 million. As at 31 December 2010, M&C’s interest in CDLHT was 34.9%.

CDLHT’s revenue surged 33.3% in 2010 compared to a year ago due to a strong 20.2% rise in visitor arrivals in Singapore and the successful acquisition of its Australia hotels in February 2010. As a result, CDLHT achieved a record high income available for distribution per Stapled Security of 11.18 cents in 2010.

Going forward, CDLHT expects to see continued growth as it is a prime beneficiary of the structural boost in accommodation demand in Singapore driven by the opening of yet more attractions at the Marina Bay Sands and Resorts World Sentosa and the completion of the International Cruise Terminal in 2011. In addition, it will continue to actively look for opportunities to grow through acquisitions by leveraging on the extensive hospitality network of CDL and M&C, and their portfolio of quality hospitality assets. In view of the current favourable financing environment and CDLHT’s current low gearing of 20.4% as at 31 December 2010, it is well positioned to facilitate the Group’s expansion in the growing hospitality sector in Asia in 2011.

M&C has signed 4 management contracts in the Middle East this year. The new hotels – in Jordan, Oman, Qatar and the United Arab Emirates – will offer 993 rooms on completion between 2011 and 2012. This will bring M&C’s worldwide pipeline to 25 hotels offering 7,006 rooms, which are mainly management contracts.

CURRENT YEAR PROSPECTS

Property

While 2009 would be remembered for the depth of the global downturn as well as the magnitude of the fiscal and monetary policy responses needed in the United States (US) and Europe to contain the fall-out, the year 2010 would be remembered for a stellar 14.5% surge in GDP growth rate in Singapore. While not totally unexpected given the low base in 2009, the unprecedented expansion in 1H 2010 had exceeded initial expectations. During the year, the Ministry of Trade and Industry had in fact raised its annual growth forecast a total of 3 times.

According to a Monetary Authority of Singapore (MAS) report in December 2010, the recovery of the global economy remained uneven. In numerous economies, including Asia, growth had moderated as the effects of the stimulus measures faded and exports slowed. Nonetheless, growth in Asia was forecasted to remain stronger compared to the US and Europe. Singapore’s growth is forecasted to be between 4.0% and 6.0% in 2011.

Among the key growth drivers in 2011 are services linked to regional demand, such as the tourism related sectors. The Integrated Resorts and strong Asian economic growth have contributed significantly to the growth and helped Singapore set an unprecedented record of 11.6 million visitors in 2010, an increase of 20.0% from the year before. The growth is also expected to be supported by the domestic manufacturing sector.

Amidst still strong growth and tight resource utilisation, inflation pressures remain a key concern for policymakers in 2011. Singapore’s inflation hit 5.5% year-on-year in January 2011, the highest since December 2008. According to MAS, the inflation forecast for 2011 is 3.0% to 4.0%.

The Government had on 13 January 2011 introduced another set of property cooling measures which were more severe. They include raising the Seller’s Stamp Duty rates to 16.0%, 12.0%, 8.0% and 4.0% for properties bought on or after 14 January 2011 and sold in the first, second, third and fourth year of purchase respectively as well as reducing the loan-to-value ratio from 70.0% to 60.0% for those with an existing property loan. Previous Government measures had to some extent moderated the market, but sentiments remained buoyant. With signs of a possible bubble brewing in view of the tremendous volume of residential property transactions, the Government was prudent to introduce these new measures as a precaution.

In view of the current low interest rates environment as well as high liquidity in the financial system, the Government has signalled that it wishes to encourage greater financial prudence among property purchasers to ensure a stable and sustainable property market.

Going forward, homebuyers, sellers and developers will take time to review the impact of the latest property measures. Prices are likely to remain steady but sales volume will fall in the short term, which may be attributed partly by the seasonal slowdown during the Lunar New Year. Selectively, new projects which are well-located and with good access will still see reasonable response with the right pricing.

The URA price indices shows that the index for new projects (uncompleted) in Outside Central Region had surpassed the peak in Q2 2008 by 19.1% in Q4 2010 whereas the index for Core Central Region was still 7.1% below the peak in Q1 2008. As the drivers of Singapore’s economic growth are likely to remain intact, and with employment outlook continuing to be positive, residential activity is expected to be distributed between the low to high-end sectors.

Riverside living at H20 Residences, which was awarded the ABC (Active, Beautiful, Clean) Waters certification by PUB.

The Group is planning to launch its 521-unit new riverfront condominium at Sengkang/Fernvale. This 23-storey stunning condominium is located along the Punggol River with good waterfront views and adjoining Layar LRT station connecting the Sengkang MRT station. Awarded the Active, Beautiful and Clean (ABC) Waters certification by PUB, H2O Residences is the first private development to integrate with the surrounding water bodies and park. It comprises a wide range of design ranging from 1 to 4-bedroom types and penthouses, capturing panoramic views of the river and the vast project landscape.

The next is at Buckley Road, located at the site of former Buckley Mansion. Strategically located at prestigious District 11, this 5-storey boutique development is just minutes from the Newton and Novena MRT stations, as well as a host of shopping and entertainment options at Novena Square and United Square. The development comprises 64 units of 2 to 4-bedroom types and comes with large expansive balconies. The highlight of conserving and restoring the existing bungalow with a classical contemporary design and converting it to house the new clubhouse presents a unique selling feature for this project.

The Group is also planning to launch the joint-venture project at 18 Anderson Road opposite the Shangri-La Hotel, Singapore. Designed by Prizker prize winner, French architect Jean Nouvel, this exclusive 156-unit, 36-storey twin-tower development contains a good mix of 2+Study, 3, 4-bedroom apartments and penthouses. Nestled along Anderson Road in the prestigious enclave of District 10, the residences is in close proximity to Orchard Road – Singapore’s famous shopping belt as well as renowned institutions such as Raffles Girls’ Primary School and Singapore Chinese Girls’ School. Distinctly modernist, the stunning and iconic architecture presents 8 sky terraces that form a series of thematic lifestyle gardens. Construction has begun earlier and it has reached the 10th storey already.

The Group has also earmarked the EC site it acquired at Segar Road in December 2010 for launch in mid 2011. Comprising an estimated 602 units, the EC development at Bukit Panjang is conveniently located beside the Segar LRT station and near expressways connecting to the rest of the island. This project offers a breathtaking and panoramic view of the surrounding expansive greeneries in Bukit Timah Hill and is expected to be well-received.

Also in the pipeline to be launched later in the year are the development of the existing Futura and Lucky Tower sites which are well located in the sought-after Grange Road residential enclave. The third parcel at Pasir Ris, next to NV Residences and Livia is also being prepared for launch at the appropriate time.

The bumper number of 31 GLS sites for residential use being sold in 2010, including those with a stipulated minimum residential component, is likely to result in a series of residential launches in both mature and non-mature estates as the developer of a typical private residential site is stipulated a timeframe of 60 to 72 months for completion. If the economy keeps on track with the Government’s 2011 growth forecast and the strong fundamentals help to bring the return of market confidence within the short to mid term, the high-end segment which is generally less affected by the recent measures, could see increased activity as current prices are still below the previous peak.

The Government had also placed 17 sites on the Confirmed List of the 1H 2011 GLS Programme. It estimated that these sites can yield about 8,100 residential units in total, comparable to the supply from the Confirmed List in 2H 2010 GLS Programme – the highest supply since the Confirmed List / Reserve List system was introduced in 2H 2001. Overall, the 1H 2011 GLS Programme has a total of 30 sites for residential development, which can generate about 14,300 private residential units.

The office sector is likely to continue to ride on its cyclical recovery which commenced from Q1 2010. The high liquidity inflows is expected to result in office rental demand remaining stable and healthy amidst the supply pressure expected in 2011 with about 3.7 million sq ft of new supply coming on-stream. Much of this space had already been pre-committed while the market will also see a number of older office buildings being taken out for redevelopment into residential use. On a medium to long-term outlook, developers will anticipate the launch for sale of commercial land sites in the vicinity of the Marina Bay area as the Government releases more land parcels to allow the seamless expansion of the CBD, in tandem with the on-going infrastructure works in the Marina Bay area, including the construction of the Downtown Line and Marina Coastal Expressway.

Hotels

The current year will present both challenges and opportunities for the hospitality sector. Though the economic outlook is more favourable than this time last year, some uncertainty remains.

However, M&C’s strong balance sheet, focused management and effective owner/operator business model make it well placed to take advantage of expansion opportunities worldwide and to meet the competitive challenges of 2011.

While it is too early to predict trading performance for the current year, the opening weeks have been encouraging. In the first five weeks of trading this year, M&C’s RevPAR increased by 4.5% like-for-like in spite of some significant seasonal factors adversely affecting the period.

On the management front, Richard Hartman will retire from his current role as M&C’s Chief Executive Officer in 2011 upon the appointment of his successor. Thereafter, Mr Hartman will remain on the Board of M&C as a non-executive director.

GROUP PROSPECTS

Singapore’s strong economic growth for 2010 is expected to continue, albeit at a more moderate pace in 2011. The positive sentiments, supported by strong regional growth, will augur well for all of the Group’s business segments comprising mainly property development, hotel operations and rental properties.

Bolstered by the strength of Singapore’s GDP growth coupled with the low interest rate environment and high liquidity in the financial system, private residential property prices rebounded robustly in 2010. This was a cause of much concern to the Government, who throughout the course of the year introduced several targeted series of measures progressively, which were aimed at ensuring a stable and sustainable property market where prices moved in tandem with economic fundamentals in the longer term perspective.

The latest set of property cooling measures, introduced in January 2011, saw the imposition of more stringent measures to further moderate the buoyant market sentiments. As the Group has always been a firm advocate that property investments should be viewed with a medium to long-term perspective, it believes that these new measures will foster greater financial prudence amongst homebuyers and investors, and moderate private residential prices to levels that are consistent with economic fundamentals. Although Asia has become immensely attractive to investors who hope to ride on the strong economic rebound in this region, a conservative approach may be more prudent given that the global outlook remains largely uncertain with troubles in the Middle East and slow economic recovery in Europe and US. Ultimately, the Government’s measures would augur well to ensure stability and sustainability for the property market in the longer term. Even then, developers maintain a positive outlook in the medium to long-term, resulting in aggressive bids in recent tenders as they acted to replenish diminishing land banks.

Although homebuyers and investors are likely to adopt a more cautious approach following the implementation of the latest set of measures, the Group remains confident that new projects that are well-located in established towns and equipped with good amenities will remain sought-after by genuine buyers. With the rapid build-up in sales volume in 2010 that were the precursors to escalating prices, many buyers were hesitant and did not enter the property market. The latest measures introduced by the Government will moderate the increase in prices and place them within reach of this group of genuine buyers.

For the hospitality sector, improvements are evident across most geographical locations. Singapore has been transformed into an even more exciting and vibrant destination with the opening of the two Integrated Resorts which has increased the city’s attraction, particularly amongst regional travellers. The city’s success in hosting the inaugural Youth Olympic Games and the third night race as part of the Formula One Grand Prix has also boosted Singapore’s image as a global city on the world stage.

According to data from the Singapore Tourism Board, hotel room revenue rose 22.0% to $1.9 billion in 2010 from a year earlier. With the number of tourist arrivals in Singapore expected to continue to grow in 2011, the Group anticipates that its Singapore hotels, with its broad range of accommodation offerings, will be well poised to benefit from the increase in leisure and business travellers.

Although the recovery of the global economy remains largely uneven, growth in advanced economies is expected to continue and hover at a moderate pace in 2011. Nonetheless, the global business climate has improved and will be supported by strong growth in the Asian region.

It is significant to note that the Government’s proactive approach has ensured that Singapore remains highly sought-after as an ideal place for investments, and fluctuations in property transaction volumes are likely to be temporary and are inevitable.

The Group remains optimistic that the positive sentiments riding on a dynamic GDP growth of between 4.0% and 6.0% this year will bolster sentiment and increase confidence across all business segments. The Group is expected to remain profitable over the next 12 months.

APPRECIATION

On behalf of the Board of Directors, I would like to express our heartfelt appreciation to our stakeholders, including our shareholders, customers and business associates, for their continued support of the Group. My appreciation also goes out to my fellow Directors for their invaluable counsel and contributions and to the Management and staff for their unwavering dedication and commitment in the past year.


KWEK LENG BENG

Executive Chairman

24 February 2011