In 2009, we emerged from the global financial crisis with a remarkable recovery in the performance of our funds, a much better profit for our group and new management initiatives to strengthen the business. Value Partners Group's net profit for 2009 came to HK$318.8 million (earnings per share: HK19.9 cents), 378.7% higher than the HK$66.6 million recorded in 2008. We are pleased to propose a final dividend of HK8.0 cents per share.

The key factor for us, as always, was the performance of our funds under management. In 2009, our flagship Value Partners Classic Fund, for example, gained a net 82.9%^, one of its best-ever calendar-year performances. The fund's gain was well ahead of the overall market (for comparison, the Hang Seng and MSCI China indices rose 56.6% and 62.3%, respectively, in 2009.) In the 10 years ended 2009, the fund has returned an average of 23.7% per annum (net)^, compounded, compared to returns of 4.6% and 9.0% per annum recorded by the Hang Seng and MSCI China indices, respectively, over this period.

That's the key to the business: leadership in investment research and funds' performance. Our declared corporate objective is for Value Partners to be a "Temple of Value Investing" for the Asia-Pacific region and in 2009, further progress was achieved, including the opening of a new research office in Shanghai. As always, we concentrated on original, bottom-up research to obtain quality investment ideas, and in 2009, our Investment Team carried out more than 2,500 company visits (this total excludes phone interviews) across China and elsewhere in the Asia-Pacific region.

With growing recognition of our brand comes the credibility to enable Value Partners to launch new products. Thus, in 2009, we introduced our first exchange-traded fund (ETF), named the "Value China ETF," listed successfully on the Hong Kong Stock Exchange in December 2009 (stock code: 3046). This ETF is now managed by a 50:50 joint venture with our strategic partner, Ping An of China. We believe Value China ETF represents the first-ever application of the "fundamental indexing" concept to China-related stocks; the ETF follows an index, designed by Value Partners Index Services Limited∆ and maintained by FTSE Group, that filters out the numerous China-related stocks listed in Hong Kong, to pick out those offering high quality value.

We aim to expand our menu of innovative ETFs, carrying out this line of business under its own brand ("Sensible Asset Management") to differentiate it from our core "Value Partners" brand.

The Greater China area has remained our focus, though we now have investments under management across the Asia-Pacific region. In our view, China's outlook is positive — but fragile. The Beijing government had responded to the global financial crisis with a massive fiscal stimulus program that must now be gradually withdrawn if China is to avoid a dangerous bubble. In 2010, investors need to worry over whether the government will mess up its exit strategy (our guess is that it won't, but we can't be sure). Another risk, simply, is that the global economy could suffer a "double dip," which would hurt China as well as other countries.

Our experience with China is that observers and the media tend to over-dramatize the situation, whether positively or negatively. Almost all the time, the eventual outcome is somewhere between the more extreme expectations or interpretations. Investors with overly sensational viewpoints have missed out on numerous bread-and-butter opportunities, and we intend to stay well-invested in the China story, though with heightened caution for the time being.

Mr. Jimmy Chan Sheung Lai joins Value Partners as a Managing Director from January 2010. He assumes a leadership role in the corporate and business affairs of Value Partners Group, following the departure of Mr. Franco Ngan Wai Wah, our Chief Executive Officer in the past several years. An accountant by training, Mr. Chan has more than 20 years of experience in business management, corporate finance and investment work. He was previously Chief Executive (Beijing and North China) of KaiLong REI Investment, which was involved in real-estate investment in China, with funds raised from overseas institutions. Before that, he was a partner of Deloitte Touche Tohmatsu, China.

Furthermore, Mr. William Chow Wai Chiu joins us as a Managing Director from February 2010. With more than 10 years experience in ETFs and portfolio management, he holds a leadership role in Value Partners Group's ETF activities, including the development and management of ETFs and the infrastructure. He was previously a Senior Portfolio Manager at Blackrock North Asia Ltd, participating in iShares – ETFs product development. He was also the lead portfolio manager of a number of ETFs established under iShares. Prior to joining iShares, he spent four years at State Street Global Advisors Asia Ltd (SSgA), where he was a portfolio manager for various institutional equity index, asset allocation and currency hedging strategies, as well as managing ETFs including the Tracker Fund of Hong Kong. Before SSgA, William worked for UBS AG.

In another development, we welcome Affiliated Managers Group Inc ("AMG") of the United States as a new strategic partner. AMG, which is listed in New York and holds strategic stakes in a diverse group of asset-management firms, took a 5.05% shareholding in Value Partners Group in November 2009 and has started working with us on joint product development and strategic distribution opportunities.

Separately, Value Partners has been named one of the three leading fund management firms in the region in the prestigious Thomson Reuters Extel Asia-Pacific Survey 2009. The survey, published in December 2009, analyses the industry in terms of depth of knowledge and quality of work. Value Partners' overall ranking as one of the top three in the category of "Best Overall Fund Management Firm - Asia" puts us ahead of many other firms larger than us.

Finally, we again express our deepest gratitude and appreciation to clients, employees and shareholders.

CHEAH Cheng Hye
Chairman & Co-Chief Investment Officer
11 March 2010