The year 2007 marked the entry of the Lucio Tan Group of Companies into the property development sector. Through our flagship real estate firm Eton Properties Philippines, Inc., the Lucio Tan Group is now a major player in the country's booming property sector.

From being a virtual "unknown" and considered by many as an industry "latecomer", Eton jumped to prominence as one of the country's most aggressive property development companies having launched 10 projects in 1 year. This feat takes remarkable vision, courage and effort. The fact that Eton has now become a buzzword in the industry in just one year says it all about our company.

Our entry into the property development sector comes at an opportune time in our country's economic history. With a bullish real estate industry, Eton is riding the crest of renewed vigor in the property sector.

The real property sector posted a hefty 22.7 percent growth in real terms in the last quarter of 2007 compared to 16% in 2004 and 2005. This was driven largely by an increase in OFW remittances and a surge in BPO office space demands against a backdrop of low interest rates which has made housing finance much more accessible.

Brisk growth in the property sector could be around for a while - which is good news for the Philippine economy and Eton investors in particular. Amidst this backdrop, Eton is slowly, but surely helping reshape the Philippine landscape through extraordinary and quality projects.

I am pleased to announce that your company exceeded its sales target and posted an impressive P937 Million in assets, up by 153% as of December 31, 2007. The remarkable performance is due to the brisk take-up of our projects, two of which - The Eton Residences Greenbelt and Eton Baypark Manila - have been sold-out two months from launching.

Like its sister companies in the Lucio Tan Group, Eton is committed to provide the best value for money to the Filipino customer. We stand behind every Filipino's dream of home ownership. Our pleasure lies in providing the best property investment and quality world-class residences to our clients. The real prize is in seeing the smiles of our clients. Delighted with their good investment in an Eton home, they enthusiastically endorse our projects to family and friends. They are, ultimately, our best marketers and the secret behind Eton's remarkable transformation as one of the fastest-growing real estate companies in the country today.

On behalf of the shareholders, officers and staff of Eton Properties Philippines, Inc., I thank you all for your unwavering support.

Mabuhay!

Dr. Lucio C. Tan
Chairman

Dear Shareholders,

The entry of Eton Properties Philippines, Inc. in property development at the beginning of 2007 comes at a time when investors are enjoying the fruits of much improved financial and economic environment.Overseas, Eton is an established brand in Hong Kong and Mainland China with world-class projects under its name.Being a local counterpart, your Company made headway in making its presence known by focusing on four primary goals in 2007:

• To organize the company and build the Eton brand name;
• To prioritize areas for development from the extensive landbank of the Lucio Tan Group of Companies;
• To launch 7 priority projects with an initial P10 Billion capital expenditure;
• To become one of the leading full range property developers in the country in five years' time.

During our early months of operation with only a handful of employees, we set out the task of recruiting the best professionals in the real estate industry.We built momentum and our initial 300-sqm office was quickly transformed into a dynamic place filled with senior personnel in Business Development, Sales, Finance, Treasury, Marketing, Human Resources and Operations.

Our first year as a property developer initially focused on business planning and organization. We began by conducting feasibility studies on the best use of our vast landbank keeping in mind unique concepts for residential and township projects.The outcome was a list of residential projects in key areas in Makati, Quezon City, Manila and Laguna.

The development of premier and mid-income residential condominiums is one area of expertise your Company has been nurturing in less than a year from the time of its inception.Its residential projects are all masterpiece developments that put together in one address a prime location, first-rate amenities, innovative designs and the best in modern living.Though a new player in the property sector, your Company promptly earned the reputation as the fastest growing real estate developer in the country.We are pleased to report that we were able to launch ten projects - an achievement that is unprecedented for a new company on its first year.

Your Company debuted in the Philippine real estate sector with the all-loft The Eton Residences Greenbelt.The project was launched in Guam in March and in the local market in April.Two months thereafter, the project was sold-out.

In June, we launched our second project, Eton Baypark Manila.The combined appeal of the majestic views of Manila Bay and Rizal Park and "Move-In ready" units enabled us to sell-out within a few months from launch date.

In July, we launched our third project, the twin-tower all-loft condominium Eton Emerald Lofts in Ortigas.

Due to the brisk take-up of our initial Makati project, we launched Belton Place in Pasong Tamo in November.Located within an expansive 1-hectare fully-integrated township called Belton Square, this 3-tower residential project provides excellent investment opportunities.In the same month, we launched One Archers Place in Manila amidst favorable market perception.

In December, we launched the first island lot development in the country.Inspired by the world-famous Foster City in San Francisco and Jumeirah, The Palm, and The World in Dubai, Eton City is your Company's biggest township project covering almost 1,000 hectares.

Next, we addressed the increasing demand for BPO office developments through the campus-type Eton Cyberpod Centris, part of a 12-hectare, fully-integrated community in EDSA corner Quezon Avenue that is masterplanned to include a commercial center, residential condominiums and a businessman's hotel.

As a follow-up to the success of The Eton Residences Greenbelt, we added the 33-storey residential condominium Eton Parkview Greenbelt in our roster of landmark developments that offers a lifestyle close to premier shopping and commercial areas.

In a move to capitalize on the middle-income market segment, we organized Belton Communities, Inc., a wholly-owned company that will set new standards in affordable living.The maiden project was the 13.8-hectare North Belton Communities. The overwhelming market response shows that demand for affordable housing is strong and sustainable.

Finally, we launched our tenth project, the three-tower BPO office Eton Cyberpod Corinthian in EDSA corner Ortigas Avenue.

Your one-year old company exhibited a good active year with the impressive take-up of The Eton Residences Greenbelt and Eton Baypark Manila as well as brisk sales of Eton Emerald Lofts in Ortigas, Belton Place and Eton Parkview Greenbelt in Makati and One Archers Place in Manila. The company posted an impressive P937 Million in assets, up by 153% as of December 31, 2007. This resulted to the increase in cash and cash equivalents by P395.1 Million or 324% from end of April 30, 2007.

Its remarkable growth trend is punctuated with an increase in customer deposits by P622.2 Million or 2,136% from end of April 30, 2007.

Despite the high reservation sales we have booked, your company posted a loss since we have adopted the percentage-of-completion in our accounting method in compliance with International Accounting Standards (IAS).Under this method, revenue can only be realized if there has been progress on construction and the stage of completion can be reasonably estimated.By end of fiscal year in 2007, the Company recognized net loss amounting to P146.7 Million due to the absence of revenues since significant construction works have yet to be completed.We expect to start realizing revenues from sale of the units beginning 2008 with several of our projects scheduled for construction.Among the projects, we have commenced construction of Eton Baypark Manila in December 2007.Construction of The Eton Residences Greenbelt, Eton Emerald Lofts and One Archers Place is expected to start in 2008 as scheduled.
Guided by our Chairman Dr. Lucio C. Tan's vision of providing the best property investment opportunities through Eton, we are pleased to report our accomplishments:

• As of end-December 2007, we have established a fully-operational company, completely-staffed in all areas of the organization.
• We have successfully built the Eton brand name as manifested by an increase in awareness of our name among customers and competitors.
• We launched 10 projects in 1 year. With this milestone achievement, we are on our way to meet our goal of becoming one of the leading full-range property developers in five years' time.

FACTORS FOR SUCCESS

The year under review saw Eton Properties Philippines, Inc. being built from scratch and making headway in Philippine property development. Your Company's achievements on its first year were the outcome of several factors that allowed us to deliver more than what we have envisioned.

1. For our Clients, there is pride in owning a Lucio Tan residential project. Clients are assured of high quality residences that match Eton's projects abroad.Our motto rings true to this day- "Building with Pride" ultimately means a commitment to excellence and a passion to provide the best property investment opportunities to Clients.
2. Our synergy with our sister companies provided more value with every Eton home. Among the companies of the Lucio Tan Group, Philippine Airlines fulfilled the combined dream of owning a home and traveling for free through a Mabuhay Miles mileage promotion.With Allied Bank and Philippine National Bank, we introduced Home 838, a home financing plan that offers an unbeatable fixed interest rate of 8.38% for 10 years.
3. Another key factor in our success is our vast landbank in very strategic locations that allows us to become responsive to market trends and deliver projects that impact the lives of our homebuyers.
4. Your Company was able to attract he best real estate professionals in the industry because they had trust and confidence with our Chairman, Dr. Lucio C. Tan.His proven track-record and contributions in the fields of banking, finance, airlines, tobacco, alcohol as well as in real estate in other Asian markets are an inspiration for many.As such, your company is now composed of talented professionals who are united in their passion for excellence, integrity and teamwork. We continue to invest in people as they remain your Company's best assets.

OUTLOOK FOR 2008

The impending U.S. economic recession will have a devastating effect on the global economy particularly in the Philippines.Analysts predict a slowdown in GDP growth to 6.1% as consumption could be hurt by increasing prices of commodities.Despite these real challenges, we are confident that the property market will remain bullish in the course of 2008 as a result of increased remittances from OFWs, low interest rates, an increase in tourism arrivals, and an upsurge in BPO office requirements.

Commercial Projects

We will aggressively develop our commercial projects as part of our self-integrated masterplanned communities.We are in active negotiations with merchants and tenants to partner with us in ambitious retail and shopping complexes that will bring new life to the Filipino's shopping experience.
International Marketing
The steady flow of remittances from Overseas Filipino Workers (OFW) continues to encourage demand for housing.We will continue to address this need by allocating resources in diverse geographic locations such as Australia, Asia and Canada while strengthening our presence in Europe.With our swift move to new territories, the current U.S. subprime crisis had minimal effect on our company financials.
New Projects

Our ten projects provide sufficient inventory amounting to P10-Billion, most of which are expected to be substantially sold-out within 2 years' time.We are ready to launch more residential projects in strategic areas as needed once our current inventory is substantially sold-out.

We will develop more end-user type residential developments that answer the growing demand for affordable housing.We see tremendous opportunities in the middle income market through Belton Communities, Inc. and we intend to launch more projects under its name.

We also plan to go into leisure-type developments for a niche market.Our initial studies point out that these types of developments offer significant growth potential as a result of a robust tourism market averaging 3.4 million tourist arrivals in the first quarter of 2007, growing as much as 20% in the same period in 2006.

EXPRESSION OF GRATITUDE

We thank the Board for their support and hard work in 2007, the fruits of which have propelled your Company to where it is today.We also thank our shareholders for their steadfast confidence; the management and staff for their dedication; and our sister companies for their invaluable contributions to Eton's success.And finally, we would like to express our gratitude to our Clients for trusting a new company such as Eton.

Thank you.

DANILO E. IGNACIO
President and COO

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