1985 — Page 6

Chairman's Statement cont'd

HYFCO Trading Services Co., Ltd. During the year, two new supermarkets were opened at Un Chau Street and Mongkok Road, Kowloon replacing two less favourable locations which were closed. A new super- market was opened at Chatham Road in February 1986. The Company now operates a total of eleven supermarkets and a duty free shop at Tai Kok Tsui Ferry Pier.

In November, the Company introduced an express courier service between Hong Kong and Guangzhou for swift transmission of documents and small parcels.

HYFCO Ferries, Ltd. continued to manage the day to day operations of Sealink's hoverferry service between Macau and Kowloon.

HYFCO Travel Agency Ltd. continued to channel tours to ferry routes operated by your Company.

Associated Companies

Authian Estates Ltd. Development of its land at Silvermine Bay had been held in abeyance.

Sealink Ferries Ltd. Traffic had been improved. However, the Group's share of losses of this associate for 1985 had increased from $518,000 in 1984 to $13,223,000 which included an unrealised loss on exchange of $4,314,000 arising from foreign currency borrowings for the purchase of the HM5 hoverferries (1984

unrealised gain $4,792,000). Please refer to Note 3 on the accounts for further details.

Outlook

Ferry Services

Ferry services face increasing pressures. The May 1986 extension of the MTR Island Line to Sheung Wan and the proposed Eastern Harbour Crossing due to be completed in 1989 will have significant adverse effect on ferry services. Applications had been made

terminate the Chai Wan/Kwun Tong ferry service and to operate a new hoverferry service between Central District, Hong Kong and Tsim Sha Tsui East, Kowloon as from 1st April 1986.

China Ferry Services

Competition from other China ferry services operators are expected to continue.

Shipyard

The Shipyard was successful in tendering and was awarded the contract for the construction of two "Royal Hong Kong Police Divisional Command Vessels" for Government. Efforts will continue to be made to obtain more business outside the Group during the coming year.

Property Development

Your company will commence building Block IV of HYFCO Industrial Building during 1986.

Trading Services

Efforts will be made to expand the Express Courier Service, and to open supermarkets at suitable locations.

Travel Agency

HYFCO Travel Agency Ltd. was granted a Travel Agents Licence in February 1986 and plans to extend its operations during the coming year.

Sealink Ferries Ltd.

In 1986, continuous efforts will be made to improve the operational results.

Appreciation

On behalf of members, I wish to extend our appreciation to all the staff in your Group of Companies for their loyalty and hard work during the past year.

Lau Chan Kwok Chairman

Hong Kong, 11th March, 1986