1983 — Page 6

Chairman's Statement cont'd

and swimming pools on Lantau Island.

HYFCO Development Co., Ltd. owns the 10 houses at Leyburn Villas, Cheung Sha.

The Hong Kong Shipyard Ltd. continued to maintain your Company's fleet and built the triple deck and the double deck passenger ferries which entered service in 1983. It successfully built and delivered seven launches during the year to parties outside the Group.

HYFCO Trading Services Co., Ltd. opened a new mini-supermarket at Castle Peak Road in Lai Chi Kok during the year and operates a total of six mini-supermarkets.

HYFCO Ferries, Ltd. increased its investment in Sealink Ferries Ltd. from 12.5% to 41.6% during the year. The Company was awarded the general management contract to manage the day to day operations of Sealink's hoverferry service between Macau and Kowloon.

Associated Companies

Authian Estates Ltd. jointly owned by your Company and the Hongkong Land Co., Ltd. is still awaiting a reply from Government for the development of its beach front property at Silvermine Bay, Lantau Island.

Sealink Ferries Ltd., in which your Company's wholly owned subsidiary HYFCO Ferries, Ltd. has an interest, was licensed to operate a hoverferry service between Macau and Sham Shui Po Ferry Pier in Kowloon and has a fleet of the first four HM5 sidewall hoverferries built by Vosper Hovermarine Ltd. of Southampton. The ferry service commenced operations on the 1st September 1983.

Outlook

Ferry Services

The outlook for ferry services is not encouraging. Ferry traffic is continually being eroded by competition from the Mass Transit Railway, cross harbour buses and from the Cross Harbour Road Tunnel. Although a number of loss making ferry routes had been terminated during the year, yet the opening of the East Island Corridor and of the MTR Island Line in the near future is expected to adversely affect ferry traffic. However, the Financial Secretary in his recent budget proposals to levy a tax on some cross harbour tunnel users may result in diversion of cross harbour vehicle traffic back to your ferries including the new vehicular ferry route between Sai Wan Ho and Kwun Tong

scheduled to open shortly.

The new ferry franchise is expected to be signed shortly. Your Directors hope that the spirit of goodwill which existed between Government and your Company for the past 60 years will be carried forward to the new franchise.

China Ferry Services

These routes are also facing competition from ferries operated by the Chinese authorities, but we expect some growth in traffic.

Shipyard

The Shipyard would increasingly have to look for more work outside the Group of Companies and utilise the expertise it has gained in building, repairing and modifying your Company's fleet.

Property Development

Although your Directors plan to erect a fourth factory block at Tai Kok Tsui, no decision will be made to proceed until they have assessed the market demand for factory premises in the vicinity.

Government had in principle agreed to your Company redeveloping Jubilee Street Ferry Pier, but the detailed terms are still under negotiation.

Trading Services

The application to open a mini- supermarket at North Point West Ferry Pier in 1983 was held up due to delay in signing the ferry franchise and is now expected to be processed in 1984.

Kowloon - Macau Ferry Service

All four sidewall hoverferries have been delivered and are operating the above service. Night vision equipment is expected to be approved by the Marine Department by mid year 1984 after which night sailings can

commence.

Appreciation

Finally, I would extend the appreciation of the Company to all staff in your Group of Companies who have contributed to the results of the past year.

Lau Chan Kwok Chairman

Hong Kong, 6th March, 1984.