These are important steps forward for Utah Construction & Mining Co. and cause us to feel optimistic about the future. Let us now turn to a more detailed discussion of our principal operations. CONSTRUCTION Let's start with construction, an industry in which the remarkable growth in the volume of work available has been accompanied by an even greater growth in the size and number of contractors and their capacity to perform work. This has resulted in increasingly intense competition and has made construction a low profit endeavor. The trends within the industry show a rising rate of failures and a lower rate of earnings by the surviving companies, both in the percentage of profits on the volume of work performed and the rate of return on investment. The construction operations of our company have not been immune to these trends within the industry. During the last five years as a whole, our construction earnings would have covered overhead charges but left little return on our investment. Unsatisfactory as the situation in the construction industry is today, we believe that it must in time correct itself and that capacity will be brought into better adjustment with volume. The basic tools for construction have a relatively short life and the industry does not have the rigidity of capacity that characterizes manufacturing plants. I cannot conceive that contractors, their bonding companies, or their banks will tolerate for much longer the present rate of return on investment in construction assets. In this situation we have endeavored to main- 8 tain our volume, been more selective in our bidding, and kept intact a good organization that will provide the nucleus for expansion when better times return to the industry. We have 43 projects under way in 10 countries and a backlog in excess of $100 million. Compared to other companies engaged in construction, Utah is much less dependent upon this activity for its livelihood. We can afford to be selective and we can afford to be patient. LAND DEVELOPMENT In its land development activities Utah has acquired a modest portfolio of income-producing properties when it could see an opportunity to do so at a profit. These are largely properties leased to a single tenant and we have avoided building speculative rental space except as an aid to marketing programs for acreage that we had under development. The larger part of our land development program has been the acquisition of acreage which could be developed and sold as building sites for industrial or residential purposes. In the past three years we have recorded good progress in the development and sale of land from the projects which we had under way at Alameda, Moraga, Vandenberg, Richmond, and our South San Francisco Industrial Park. We have been delayed in our plans to develop the Pauma Valley project near Escondido, California, by litigation which we hope and expect will soon be resolved in our favor. Meanwhile, we have added to our portfolio 196 acres of industrial property at El Segundo and 200 acres of land in Torrance. Sales of property for residential use at Torrance are going particularly well, and a 9