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For Cafˆm de Coral, the year was one of changes and challenges. We faced trials on many fronts, primarily from short-term challenges on rising material, labour and rental costs, but in the same year, we also engaged in long-term investments towards our future. As we set our sights on expansion into the Mainland China market, we were also challenged to remain competitive in Hong Kong. Our central strategy was not a quick fix, but to provide a solid foundation for sustainable growth down the road. We formulated strategies to address these issues, to improve on employee morale in the short term, to stabilise our raw material supply chain in the intermediate term, and to enhance our productivity and operational efficiencies over the long run.

To that end, I am pleased to announce the development of the two new central food processing plants in Guangzhou Development District, China, and Tai Po Industrial Estate, Hong Kong. These plants will hone our competitive edge by improving the logistics of our food processing system, saving time and freeing up valuable retail space on the front end.

Also high among our priorities has been ensuring a steady stream of capable and talented individuals to meet tomorrow's complex corporate needs. Our internal human resources program, via a vigorous recruitment and screening process, identifies high potential employees for the greater corporate good and sees to it that we have a sustainable pool of management talent to take us into the future in Hong Kong and in China.

After more than 40 years in business, we have found that the challenge lies not in the obstacles put before us, but to rise to the occasion to take on each and every one of these challenges. This year we built a solid foundation for the next phase of growth, which focuses on expansion and diversification.

In order to achieve a much more balanced revenue stream and to improve on the competitive position of the Group as a whole, we continued with our multi-brand strategy. We also further explored new opportunities for mergers and acquisitions as they arise in order to augment this strategy and build on our Group's strengths. At the same time, we continued to focus our attention on Mainland China, with plans to scale up our development pace in the South China market and proactively explore ways to fine-tune our Eastern China business model.

The future is rapidly changing before our eyes. Given the current challenging employment dynamics, the unceasing cost inflation, and the competitive leasing landscape, the rules of the game for business operation will never be the same. The challenges we faced this year alerted management to re-examine the way we run our business here in Hong Kong. It strengthened our resolve to further improve on our central production and operational efficiency in order to become more cost effective and price competitive. In the process, we recognise that our profit margin will inevitably be impacted in the short term.

However, in the longer view, we remain optimistic and confident about our future. I believe that the breadth of our management calibre and the depth of our operational experience will give us the edge to rise above any adversity and come out stronger and more resilient than ever.

Under this charted course, the Group has now reached a size and scale that require a new organisational structure in order to sustain organic growth and territorial expansion. I have managed Cafˆm de Coral Group from a homegrown enterprise to a multinational corporation with a market capitalisation increased well over 20 times since its public listing some 25 years ago. It is time, in my view, to hand over my role as Chief Executive Officer. It goes without saying that I will sadly miss the comradeship of the colleagues and partners who have joined me in this exciting journey in building the Group to what it is today. While counting the blessings of past years, I also look forward to my ongoing role as Chairman of the Company, to lead an effective Board on strategic direction and to ensure that the Group operates to a desired standard of corporate governance.

As a seasoned veteran of the Company for the last 29 years, Mr. Sunny Lo assumed the role of Chief Executive Officer of the Company. He has been my life-long partner in overseeing the great growth and expansion of the Group in the past and has accumulated a tremendous wealth of experience over the years. I strongly believe that these well-planned succession arrangements will allow for a more effective management of our diverse and fast-growing business, and pave the way for a more promising future for the Group in the years to come.

Chan Yue Kwong, Michael
Chairman

Hong Kong, 26th June, 2012