Group - Hongkong and Yaumati Ferry Profile HONG KONG FERRY 2 Hotel Management Property Investment...

Group Profile

HONG KONG FERRY 22222

HotelManagement

PropertyInvestment andManagement

FerryOperations Shipyard Trading Travel

Hong Kong Ferry (Holdings)Company Limited

Galaxy HotelManagement

CompanyLimited

Fine TimeDevelopment

Limited

The Hongkongand Yaumati

Ferry CompanyLimited

The Hong KongShipyardLimited

HYFCOTrading andInvestmentsCompanyLimited

HYFCO TravelAgency Limited

HYFCODevelopment

CompanyLimited

HYFCOProperties

Limited

Genius StarDevelopment

Limited

HYFCOEstate

Management& AgencyLimited

Corporate Information

HONG KONG FERRY33333

Board of DirectorsMr. Lau Chan Kwok (Honorary Chairman)

* Mr. Colin K. Y. Lam (Chairman)Sir Kenneth P. F. FungMr. Norman H. C. HoMr. Michael Y. L. KanMr. Edmond T. C. LauMr. Eddie Y. C. LauDr. Lee Shau KeeMr. Leung Hay Man

* Mr. Li NingMr. Peter M. K. WongDr. Alex S. C. Wu

Company SecretaryMr. Richard C. W. Law

AuditorsKPMG

Principal BankersBanque Nationale de ParisThe Dai-Ichi Kangyo Bank, LimitedDao Heng Bank LimitedThe Fuji Bank, LimitedThe Hongkong and Shanghai Banking Corporation LimitedING Bank, N.V.The Sanwa Bank LimitedThe Sumitomo Bank, Limited

Registered OfficeLow BlockUnit D, 2/FHYFCO Industrial Building III22 Fuk Lee StreetTai Kok TsuiKowloonHong Kong

RegistrarsStandard Registrars Limited5/F, Wing On Centre111 Connaught Road CentralHong Kong

* Executive Director

Directors’ & Senior Management’s Profile


DirectorsThe current Directors of the Company are as follows : -

Mr. Lau Chan Kwok (Honorary Chairman)

Mr. Colin K. Y. Lam (Chairman)

Sir Kenneth P. F. Fung

Mr. Norman H. C. Ho

Mr. Michael Y. L. Kan

Mr. Edmond T. C. Lau

Mr. Eddie Y. C. Lau

Dr. Lee Shau Kee

Mr. Leung Hay Man

Mr. Li Ning

Mr. Peter M. K. Wong

Dr. Alex S. C. Wu

The details of the Directors are as follows : -

Directors’ Profile

Mr. Lau Chan Kwok (Honorary Chairman)Mr. Lau Chan Kwok, OBE, JP, aged 88, appointed on 11 April 1953,

is now Honorary Chairman and a Non-Executive Director of the

Company. Mr. Lau has served the Company for over 52 years and is

the father of Mr. Lau Ting Chung, Edmond, and father-in-law of

Mr. Kan Yuet Loong, Michael, both are Directors of the Company.

Mr. Lam Ko Yin, Colin (Chairman)Mr. Lam Ko Yin, Colin, BSc(Hon), ACIB, MBIM, FCIT, aged 47,

appointed on 1 July 1986, is the Chairman of the Company. Mr.

Lam has over 25 years’ experience in banking and property

development. He is also the Vice-Chairman of Henderson Land

Development Company Limited (“Henderson Land”) and Henderson

Investment Limited (“Henderson Investment”), an Executive Director

of Henderson China Holdings Limited as well as a Director of The

Hong Kong and China Gas Company Limited, Miramar Hotel and

Investment Company, Limited, Wiselin Investment Limited

(“Wiselin”), Max-mercan Investment Limited (“Max-mercan”),

Henderson Development Limited (“Henderson Development”),

Hopkins (Cayman) Limited (“Hopkins”) and Rimmer (Cayman)

Limited (“Rimmer”). Henderson Land, Henderson Investment,

Wiselin, Max-mercan, Henderson Development, Hopkins and

Rimmer have discloseable interests under the provisions of Part II of

the Securities (Disclosure of Interests) Ordinance in the Company.



Sir Fung Ping Fan, KennethSir Fung Ping Fan, Kenneth, CBE, JP, LLD, DSocSc, KStJ, aged 87,

appointed on 12 April 1975, is an Independent Non-Executive

Director of the Company. Sir Kenneth Fung has been appointed by

the State as a Senior Consultant for External Economy of People’s

Government of Chongqing, Sichuan Province in China since 1985.

Sir Kenneth Fung is the Chairman of Dransfield Holdings Limited

and Vice-Chairman of Wong’s International (Holdings) Limited. He

is the brother-in-law of Mr. Kan Yuet Loong, Michael, a Director of

the Company.

Mr. Ho Hau Chong, NormanMr. Ho Hau Chong, Norman, BA, ACA, FHKSA, aged 43, appointed

on 28 March 1995, is an Independent Non-Executive Director of

the Company. Mr. Ho is an Executive Director of Honorway

Investments Limited and Tak Hung (Holdings) Company Limited and

has over 17 years of experience in management and property

development. He is also a Director of Lee Hing Development

Company Limited, CITIC Pacific Limited and a few other listed

companies.

Mr. Kan Yuet Loong, MichaelMr. Kan Yuet Loong, Michael, JP, BSc, MBA, aged 64, appointed

on 6 April 1974, is an Independent Non-Executive Director of the

Company. He has over 32 years’ experience in banking and

investment. Mr. Kan is the son-in-law of Mr. Lau Chan Kwok,

Honorary Chairman and Director of the Company and brother-in-

law of Mr. Lau Ting Chung, Edmond and Sir Fung Ping Fan, Kenneth,

both are Directors of the Company.



Mr. Lau Ting Chung, EdmondMr. Lau Ting Chung, Edmond, JP, BA, MBA, FCIT, ARINA, aged 59,

appointed on 5 April 1972, is now a Non-Executive Director of the

Company. Mr. Lau has worked over 32 years with the Company

and is the son of Mr. Lau Chan Kwok, Honorary Chairman and

Director of the Company and brother-in-law of Mr. Kan Yuet Loong,

Michael, a Director of the Company. He was appointed as a Hong

Kong Affairs Advisor to the State in 1993. He is also a Director of

the Kowloon-Canton Railway Corporation.

Mr. Lau Yum Chuen, EddieMr. Lau Yum Chuen, Eddie, aged 52, appointed on 5 May 1988, is

a Non-Executive Director of the Company. He has over 27 years of

experience in banking, finance and investment. He is an Executive

Director of Henderson Land Development Company Limited

(“Henderson Land”) and Henderson Investment Limited

(“Henderson Investment”) and a Director of Miramar Hotel and

Investment Company, Limited. Both Henderson Land and Henderson

Investment have discloseable interests under the provisions of Part

II of the Securities (Disclosure of Interests) Ordinance in the Company.

Dr. Lee Shau KeeDr. Lee Shau Kee, DBA(Hon), DSocSc(Hon), LLD(Hon), aged 71,

appointed on 15 December 1981, is a Non-Executive Director of

the Company. He has been engaged in property development in

Hong Kong for more than 40 years. He is the founder, Chairman

and Managing Director of Henderson Land Development Company

Limited (“Henderson Land”) and Henderson Investment Limited

(“Henderson Investment”). He is also Chairman of Henderson China

Holdings Limited and The Hong Kong and China Gas Company

Limited, Vice-Chairman of Sun Hung Kai Properties Limited, a

Director of Miramar Hotel and Investment Company, Limited, The

Bank of East Asia, Limited, Pataca Enterprises Limited (“Pataca”),

Wiselin Investment Limited (“Wiselin”), Max-mercan Investment

Limited (“Max-mercan”), Kingslee S.A. (“Kingslee”), Henderson

Development Limited (“Henderson Development”). Henderson

Land, Henderson Investment, Pataca, Wiselin, Max-mercan, Kingslee

and Henderson Development have discloseable interests under the

provisions of Part II of the Securities (Disclosure of Interests)

Ordinance in the Company. Dr. Lee is the father-in-law of Mr. Li

Ning, a Director of the Company.



Mr. Leung Hay ManMr. Leung Hay Man, FRICS, FHKIS, FCIArb., MCIT, aged 64,

appointed on 15 December 1981, is now a Non-Executive Director

of the Company. Mr. Leung is also a Director of Henderson Land

Development Company Limited (“Henderson Land”), Henderson

Investment Limited (“Henderson Investment”) and The Hong Kong

and China Gas Company Limited. Both Henderson Land and

Henderson Investment have discloseable interests under the

provisions of Part II of the Securities (Disclosure of Interests)

Ordinance in the Company.

Mr. Li NingMr. Li Ning, BSc, MBA, aged 42, appointed on 20 October 1989, is

now an Executive Director of the Company. He is also an Executive

Director of Henderson Land Development Company Limited

(“Henderson Land”) and Henderson Investment Limited

(“Henderson Investment”). Both Henderson Land and Henderson

Investment have discloseable interests under the provisions of Part

II of the Securities (Disclosure of Interests) Ordinance in the Company.

Mr. Li is the son-in-law of Dr. Lee Shau Kee, a Director of the

Company.

Mr. Wong Man Kong, PeterMr. Wong Man Kong, Peter, JP, BSc, FCIT, MRINA, aged 50, Director

of the Company from 9 March 1992. Mr. Wong was President &

Chief Executive Officer of the Company from 1 January 1992 to 31

December 1995. Mr. Wong has over 25 years of industrial,

commercial and public service experience, having served as

Managing Director of Chung Wah Shipbuilding & Engineering

(Holdings) Company Limited, Director of First Pacific Bank and

Kowloon-Canton Railway Corporation and member in Hong Kong

Government’s Transport Advisory Board, Industry Development

Board and Trade Advisory Board. He is currently serving as a deputy

to the State’s 9th National People’s Congress, a Member of the

Hong Kong Special Administrative Region Preparatory Committee,

a member in Provisional Urban Council Estate Agents Authority and

Task Force on Employment in the HK SAR Government. Currently

he holds Directorship of Glorious Sun Enterprises Limited and China

Travel International Investment H.K. Ltd.



Dr. Wu Shu Chih, AlexDr. Wu Shu Chih, Alex, CBE, LLD, JP, aged 78, appointed on 24

April 1976, is an Independent Non-Executive Director of the

Company. He is a former member of the Legislative Council, and

formerly the Vice-Chairman of the Hong Kong Stock Exchange. He

is now the Chairman of Fidelity Management Limited and Vice-

Chairman of Dai Nippon Printing Company (Hong Kong) Limited.

Dr. Wu is a Non-Executive Director of a number of listed companies

including Hong Kong Aircraft Engineering Company Limited,

National Electronics (Holdings) Limited, Parliburg Holdings Limited

and Hung Hing Printing Group Limited. He is also Life Honorary

President of Hong Kong Printers Association and a member of the

Advisory Committee of The Securities and Futures Commission. Dr.

Wu was appointed a Hong Kong Affairs Adviser in April 1995 and

a member of The Selection Committee for the First Government of

the Hong Kong Special Administrative Region in November 1996.



Senior ManagementThe Senior Management of the Company is as follows :–

Mr. Ho Chi Shing, David Group General Manager and General Manager - Ferry OperationsMs. Ho Yin Shan, Brenda General Manager - TradingMr. Lai Yu Hung, Francis General Manager - TravelMr. Lau Mo Kaye, Francis General Manager - PropertyMr. Law Cho Wa, Richard Company Secretary and Group Accounting ManagerMr. Law Fuk Chuen, Ford Internal Audit ManagerMs. Leung Chui Ying, Nancy Corporate Communications ManagerMr. Ling Chen Shen, Peter General Manager - Shipyard and General Manager -

Planning & MarketingMr. Tam Kam Mau, Edward Corporate Administration & Information OfficerMr. Tse Chuen Chi, Pollux Chief Financial OfficerMr. Wong Kam On, Frandie General Manager - HotelMr. Yu Chung Ki Group Safety Auditor & Legal Advisor

Senior Management’s ProfileMr. Ho Chi Shing, David, MBA, FCIT, MRAPI, MIHT, ACIArb, aged 42, joined the Company in

1981 and has been the Group General Manager since 1996. He has over 18 years of experience

in ferry operations. Mr. Ho was appointed as a member of the Provisional Local Vessel Advisory

Committee in 1991, representing the ferry industry. He was also Chairman of the Chartered

Institute of Transport in Hong Kong for 1995 - 1996 and 1996 - 1997. Mr. Ho is a member of the

Hong Kong Port Operations Committee. Besides, he is a member of the Safety Committee of

Hong Kong Outward Bound School and a member of the Transport and Physical Distribution

Training Board of The Vocational Training Council.

Ms. Ho Yin Shan, Brenda, MAQAB, PDBS, aged 33, joined the Company in 1989 and has been

the General Manager of the Trading Division since 1996. She has over 10 years of experience in

trading, wholesaling and retailing businesses.

Mr. Lai Yu Hung, Francis, aged 40, joined the Company in 1977 and has been the General

Manager of the Travel Division since 1993. He has more than 22 years of experience in travel

business. Mr. Lai is an immediate past Chairman of the Hong Kong Association of Registered

Tour Co-ordinators and a Honorary Secretary of Hong Kong Outbound Tour Operators’ Association

Limited. He is also an Executive Committee member of the International Chinese Tourist

Association, Hong Kong Association of Travel Agents Limited and The Federation of Hong Kong

Chinese Travel Agents Limited and a Membership Committee member of the Travel Industry

Council of Hong Kong.

Mr. Lau Mo Kaye, Francis, MBA, CPA(Aust.), FHKSA, ACIArb, aged 56, joined the Company in

1989 and has been the General Manager and Director of the Property Division since 1990. Mr. Lau

has over 20 years of working experience in the property and construction industries. He was the

General Manager of a listed company before he joined the Company. Mr. Lau is an unofficial


HONG KONG FERRY 1 01 01 01 01 0

member of the Interdepartment Working Group of the Hong Kong Government for setting up the

Building Management Resources Centres in Hong Kong and a serving Panel Member of the

Assessment Review Board - Clearance of Kowloon Walled City of the Hong Kong Housing Authority.

He is an Executive Accountant Ambassador, a member of the Organising Committee for the 2002

World Congress of Accountants and a member of the Communication Committee and the Public

Sector Committee of Hong Kong Society of Accountants. He is also a council member of the Hong

Kong Association of Property Management Companies and a member of the Course and Examining

Committee of Property Management of the City University of Hong Kong.

Mr. Law Cho Wa, Richard, MBA, FCCA, FHKSA, ACS, ACIS, aged 34, has been the Secretary of

the Company since 1997. He joined the Company in 1992 and has over 11 years of experience in

accounting, auditing, corporate advisory services and company secretarial practice. He is also the

Group Accounting Manager of the Company.

Mr. Law Fuk Chuen, Ford, FCCA, FHKSA, aged 38, is the Internal Audit Manager of the Company.

He joined the Company in 1989.

Ms. Leung Chui Ying, Nancy, PgD(BA), DMS, aged 38, has been the Corporate Communications

Manager of the Company since 1997. She had over 20 years of extensive experience in marketing,

administration, general management and interactive communications.

Mr. Ling Chen Shen, Peter, BSc, ACIB, aged 48, joined the Company in 1995. He has been the

General Manager of the Planning & Marketing Department, and the Director and General Manager

of the Shipyard Division since 1996. He has over 25 years of experience in banking, finance,

China trade, ship repairs and maintenance and general management.

Mr. Tam Kam Mau, Edward, MBA, MSc, MBCS, CEng, aged 40, is the Corporate Administration

& Information Officer of the Company. He re-joined the Company in 1995. Before joining the

Company, he worked in the computer and management fields for 16 years. Previously, he had

also served in this Company for more than 10 years as EDP Manager and Assistant General

Manager of Ferry Operations Division.

Mr. Tse Chuen Chi, Pollux, MBA, aged 45, has been the Chief Financial Officer of the Company

since 1992. He has over 18 years of experience in accounting, corporate finance and corporate

development in Hong Kong and overseas.

Mr. Wong Kam On, Frandie, CHA, CRDE, MBIM, MIMGT, MHCIMA aged 45, joined the Company

in 1993. He has been the General Manager of the Hotel Operation since 1996. He has over 26

years of extensive experience in hotel management.

Mr. Yu Chung Ki, MIOSH, MASSE, MIIRSM, MBIM, aged 63, is the Group Safety Auditor and

Legal Advisor of the Company. He joined the Company in 1992 and has over 32 years of experience

in personnel, administration, industrial safety and general management work. Mr. Yu is a serving

member of the Maritime Services Training Board of The Vocational Training Council.

Financial Highlights

HONG KONG FERRY1 11 11 11 11 1

1998 1997 Variance

Turnover $M 964 1,094 -11.9%

(Loss)/profit attributable

to shareholders $M (275) 152 -280.9%

Dividends $M 100 132 -24.3%

Shareholders’ funds $M 4,362* 6,109* -28.6%

Basic (loss)/earnings per share Cents (77.2) 42.7 -280.9%

Dividend per share Cents 28.0 37.0 -24.3%

Dividend cover Times — 1.2 —

(Loss)/return on equity % (6.3)* 2.5* -352.0%

Net assets per share $ 12.2* 17.1* -28.6%

* These items have been affected by property revaluation.

1993

1994

1995

1996

1997

1998

200 400 600 800 1000 1200 14000

964

1,094

1,280

1,173

1,125

1,035 1993

1994

1995

1996

1997

1998

-200 -100 0 100 200 300 400-300

(275)

152

151

130

100

356

$Million $Million

Group TurnoverGroup Turnover Group (Loss)/ProfitAfter TaxationGroup (Loss)/ProfitAfter Taxation

YearYear

Commentary on Financial Results


The following comments should be read in conjunction with the Audited Consolidated Financial

Statements of Hong Kong Ferry (Holdings) Company Limited and the related notes on the accounts.

Results of OperationsTotal turnover of the Group amounted to HK$963.6 million, showing a decrease of 11.9% as

compared to that recorded in the previous year, which was mainly due to the shrinkage of the

ferry business. Operating profit amounted to HK$133.7 million, representing a decrease of 29.7%

as compared to that recorded in the previous year. Net loss of the Group, after taking into

account exceptional items and taxation, amounted to HK$275.2 million in this year, representing

a decrease of 281% as compared to that recorded in the previous year. The exceptional loss of

HK$391.4 million represented the write-off of expenditures incurred in relation to the proposed

Central Ferry Piers Development and assets written-off and provision for expenditures as a result

of the termination of the ferry franchise.

Improved land transport further took away passengers from the ferry services. A number of

economically not viable franchised and licensed ferry routes were suspended during the year.

Patronage of local ferry services decreased by 22.6% from 29.2 million in 1997 to 22.6 million in

this year. As a result, fare and freight revenue for the year decreased by 14.5% to HK$60.7

million as compared to that of last year. Charter hire income dropped substantially by 29.1% to

HK$68.9 million as a result of the cessation of the charter hire service from the Airport Authority

upon completion of the New Airport. Following the failure to reach an agreement with Government

on the terms of the proposed Central Ferry Piers Development due mainly to the disagreement

on the premium payable, negotiation on the renewal of the ferry franchise stopped and

Government gazetted in September and October 1998 to invite application for ferry licenses to

operate ferry services under the existing ferry franchise. The Group had applied for ferry licenses

to operate 12 ferry routes under the tender exercises and was awarded licenses to operate 8 ferry

routes.

The shrinkage of the core ferry operations has brought about corresponding decrease in the

turnover of related businesses, such as the shipyard operation and fuel oil business of the Trading

Division. As a result operating profits of the Shipyard Operation and the Trading Division decreased

by 75% and 46% respectively as compared to that recorded in the previous year. On the other

hand, the decline in the number of incoming tourists and the weakened local consumer spending

led to a decrease in the operating profit of the Travel Operation by 12% as compared to that of

previous year, and also caused the Hotel Operation to record a loss of HK$1.8 million. In addition,

rental income from the industrial buildings in Tai Kok Tsui recorded a decrease of 24% from that

recorded in last year due to the proposed redevelopment of the site and a decrease in tenant

occupancy.

Commentary on Financial Results


Liquidity and Financial Resources

As of 31 December 1998, shareholders’ funds of the Group showed a decrease of 28.6% from

that recorded in 1997 and amounted to HK$4,362 million which was attributed primarily to the

exceptional loss and deficit arising from the revaluation of the properties of the Group.

Funding for the Group’s activities in the year under review was mainly generated from rental

income on investment properties, and interest income on deposits which stood at HK$1,390

million as at 31 December 1998. Short term unsecured bank borrowings as at 31 December

1998 stood at HK$251 million.

Current assets of the Group were recorded at HK$1,563 million as compared to the Group’s

current liabilities of HK$493 million as of 31 December 1998. Current ratio of the Group showed

a slight improvement from 3.0 as of 31 December 1997 to 3.2 as of 31 December 1998.

Chairman’s Statement


I present to the shareholders my report on the operations of the Group.

ProfitThe Group’s consolidated operating profit for the year ended 31 December 1998 amounted to

HK$133.7 million, a decrease of 30% when compared to last year, but, after taken into account

an exceptional loss of HK$391.4 million and taxation, the consolidated net loss after taxation

amounted to HK$275.2 million. The loss per share was 77.2 cents for the year while earnings per

share were 42.7 cents in the previous year.

DividendsThe Board of Directors recommended a final dividend of 20 cents per share. This dividend, together

with the interim dividend of 8 cents per share already paid, will make a total distribution of 28

cents for the full year.

Business ReviewAs anticipated, the local economy had undergone a recession in the year 1998. The difficult

business environment led to a reduction in the Group’s operating profit. In addition, as a result of

the major write-off during the period under review (see Exceptional Items below), a net loss was

recorded.

Ferry OperationsDuring the period under review, the franchised ferry services recorded an operating loss of HK$75.8

million, whereas non-franchised ferry services recorded an operating profit of HK$63.0 million.

Operating loss of the overall ferry operations, before taken into account of the exceptional items,

decreased from HK$44.2 million in 1997 to HK$12.8 million, mainly due to the suspension of the

loss-making franchised ferry routes such as Central - Jordan Road passenger ferry service in

February 1998 and Central - Tsuen Wan/Tsing Yi passenger ferry service in September 1998.

The opening of the Lantau Link and Route 3 has brought about a decline in the patronage of

Central - Mui Wo ferry route and Central - Tuen Mun ferry route to the extent of over 30% and

45% respectively when compared with last year. Total patronage decreased by 22% from 30.2

million in 1997 to 23.6 million. On the other hand, as a result of the reduction in the number of

staff and vessels employed, and other cost-saving measures, total expenses decreased by 22%.

Expiry of the Ferry Franchise and the Award of New Ferry Services LicensesGovernment gazetted in September and October 1998 to invite application for ferry licenses to

operate ferry services after the existing ferry franchise of the Company expires on 31 March

1999. The Group was awarded the licenses to operate the following two packages of the outlying

islands ferry routes and one package of the inner harbour ferry routes:–

Package 1 of the Outlying Islands Ferry Routes

Central - Cheung Chau

Kowloon (Tsimshatsui) - Cheung Chau

Inter-Islands (Peng Chau - Mui Wo - Chi Ma Wan - Cheung Chau)



Business Review (continued)

Expiry of the Ferry Franchise and the Award of New Ferry Services Licenses (continued)

Package 2 of the Outlying Islands Ferry Routes

Central - Mui Wo

Central - Peng Chau

Kowloon (Tsimshatsui) - Mui Wo

Package E of the Inner Harbour Ferry Routes

North Point - Hung Hom

North Point - Kowloon City

The above three packages of ferry routes had generated operating profits for the Group in previous

years and it has been the Group’s strategy to forgo loss-making routes but retain economically

viable ones.

The new ferry services licenses, which will last for 3 years, will commence on 1 April 1999. To

meet with the new challenges, the Company has been implementing plans to acquire two high-

speed catamarans, scrap a number of old vessels, improve pier facilities, strengthen staff training

and renew the Company’s image.

Property InvestmentThe downturn of the local economy has brought about adverse effects on the property market.

In addition, due to the possible redevelopment of the industrial buildings in Tai Kok Tsui, the

Group could only grant short-term tenancies. As a result, gross rental income decreased by 21%

from HK$106.1 million in 1997 to HK$83.8 million for the year.

Shipyard OperationOperating profit of the Shipyard Operation decreased by 75% to HK$9.1 million from HK$35.9

million in 1997, mainly due to the decrease in turnover.

Other Businesses

Travel OperationDespite the decline in tourists visiting Hong Kong and the weakened local consumer spending,

the Travel Division had successfully launched several strategic promotional campaigns. Turnover

increased by 15% to HK$88.8 million, but the tightened margin resulted in a decrease in operating

profit of 12% from HK$3.4 million in 1997 to HK$3.0 million.

Hotel OperationTurnover of the Silvermine Beach Hotel decreased by 23% from HK$19.5 million in 1997 to

HK$15.0 million. Operating loss for the year was HK$1.8 million, as compared to the operating

profit of HK$0.4 million in 1997.



Business Review (continued)

Trading OperationDue to the decrease in turnover of the Trading Division, operating profit slumped by 46% to

HK$7.5 million from HK$13.9 million in 1997.

Interest IncomeNet interest income on bank deposits was HK$96.6 million during the year under review.

Exceptional ItemsIn August 1998, the Company failed to reach an agreement with Government on the terms of

the Central Ferry Piers Development. The major reason, inter alia, was the substantial difference

in the assessable premium which in turn was mainly attributed to the especially high construction

cost involved due to the great number of site constraints. The entire amount of HK$257.3 million

spent on the piling foundation of the piers and other expenditures was fully written off this year

as a result of the abortion of the proposed development. The Company had proposed to

Government that in the event of a future tender or auction being carried out on the Development

site, the successful bidder should be required to reimburse the Company on the piling expenditure

already incurred. Up to today, Government’s concurrence has not yet been forthcoming.

On the other hand, since certain ferry routes will be terminated upon the expiry of the ferry

franchise, write-off was also made to a number of ferry vessels and related assets. Taking into

account the provisions for severance and other expenditures in relation to the termination of the

ferry franchise, a total of HK$134.1 million was written off.

Redevelopment of Tai Kok Tsui Property(201 Tai Kok Tsui Road)

In January 1999, the Company received a land premium offer in the sum of approximately HK$3.2

billion from the Lands Department. Since the offer was considered unfairly high as compared to

the market price, the Company has declined the offer and appealed for a reassessment. It is

hoped that some progress on the issue can be achieved soon.

Year 2000 ProblemThe Year 2000 Problem is the result of computer programs using 2 digits rather 4 digits to

represent the year of a date. When “00” is being stored to present “2000”, computers may

consider that it is “1900” and operations may be affected. As defined by The British Standards

Institution committee BDD/1/-/3 in the definition PD2000-1, “Year 2000 conformity shall mean

that neither performance nor functionality is affected by dates prior to, during and after the year

2000.”

The Company was aware of the Year 2000 Problem in 1996. An impact analysis indicated that

about 30% of the computer programs and hardware currently used by the Company needed to

be modified or replaced. Modification work is making satisfactory progress and 75% of the

rectification works have been completed. Suppliers of equipment were also being contacted to

ensure that the equipment is Year 2000 compliant.



Year 2000 Problem (continued)

The Company anticipates that most rectification works will be completed by the end of June

1999. The total costs for the project are estimated to be HK$5 million. Labour costs will be

charged to the financial year in which they are incurred and the amount charged in the financial

year under review was immaterial. There are no commitments at the year end for the Year 2000

compliance project. While we do not anticipate any major interruptions to our business arising

from Year 2000 Problem, contingency plans are being prepared so as to maintain business

continuity.

ProspectsUpon the expiry of the ferry franchise at the end of this month, the Group will continue to

operate a new combination of viable ferry routes on a smaller scale and place its main financial

resources on the redevelopment of the Tai Kok Tsui Property.

The local economy is still adversely affected by the high unemployment rate and the poor confidence

in consumption. It is anticipated that the businesses of the Group will continue to regress in

1999. However, the Group has abundant financial resources to meet with the current difficult

business conditions.

AcknowledgementOn behalf of the shareholders and the Board, I would like to take this opportunity to express my

thanks and appreciation to all our staff for their dedication and hard work during the past year.

Colin K.Y. LamChairman

Hong Kong, 18 March 1999

Report of the Directors


The directors have pleasure in submitting their report and audited accounts for the year ended 31

December 1998.

Principal ActivitiesThe principal activities of the Group are ferry operations and related businesses, property

investment, trading and services, travel business and hotel operations. The turnover and

contribution to operating profit of the principal activities of the Group are as follows:–

Contribution toGroup turnover operating profit

1998 1997 1998 1997

HK$ million HK$ million HK$ million HK$ million

Ferry operations and

related businesses 601.0 737.5 (12.5) (6.4)

Property investment 83.8 106.1 54.9 85.4

Trading and services 151.8 138.6 4.2 14.2

Travel and others 127.0 111.5 (9.5) 18.6

Net interest income — — 96.6 78.5

963.6 1,093.7 133.7 190.3

No geographical analysis is shown as less than 10% of the Group’s turnover and operating profit

are derived from activities outside Hong Kong.

Major Suppliers and CustomersNo analysis in respect of the Group’s major suppliers and customers is shown as the percentages

of turnover attributable to the Group’s five largest customers and purchases attributable to the

Group’s five largest suppliers are less than 30%.

SubsidiariesDetails of the principal subsidiary companies at 31 December 1998 are set out in note 13 on the

accounts.

Accounts and DividendsThe results of the Group for the year ended 31 December 1998, the state of affairs of the

Company and of the Group at that date and the related notes are set out in the accounts on

pages 24 to 48.

An interim dividend of 8 cents per share was paid on 13 October 1998. The directors now

recommend a final dividend of 20 cents per share to shareholders whose names appear in the

Register of Members on 20 April 1999.



Charitable DonationsThe Group’s charitable donations paid during the year amounted to HK$63,760 (1997:

HK$72,590).

Fixed AssetsMovements in fixed assets are set out in note 10 on the accounts.

Substantial ShareholdersAt 31 December 1998, the following interests in shares in the Company were recorded in the

register required to be kept under Section 16(1) of the Securities (Disclosure of Interests) Ordinance

(“SDI Ordinance”):–

No. of sharesName of company in which interested

Henderson Investment Limited (Note 1) 108,588,090

Pataca Enterprises Limited (Note 1) 70,200,000

Wiselin Investment Limited (Note 2) 38,388,090

Max-mercan Investment Limited (Note 2) 38,388,090

Henderson Development Limited (Note 3) 108,588,090

Henderson Land Development Company Limited (Note 3) 108,588,090

Kingslee S.A. (Note 3) 108,588,090

Hopkins (Cayman) Limited (Note 4) 108,588,090

Rimmer (Cayman) Limited (Note 4) 108,588,090

Notes:–

The interests of 108,588,090 shares described below relate to the same parcel of shares.

1 The 108,588,090 shares are beneficially owned by some of the subsidiaries of Henderson Investment Limited

(“HI”). Some of the subsidiaries of Pataca Enterprises Limited (a subsidiary of HI) beneficially own 70,200,000

shares out of 108,588,090 shares.

2 Wiselin Investment Limited, a subsidiary of Max-mercan Investment Limited which is a subsidiary of HI, beneficially

owns 38,388,090 shares out of 108,588,090 shares.

3 These 108,588,090 shares are duplicated in the interests described in Notes 1 and 2. Henderson Development

Limited (“HD”) beneficially owns more than one third of the issued share capital in Henderson Land Development

Company Limited (“HL”) which is the holding company of Kingslee S.A.. Kingslee S.A. has a controlling

interest in HI.

4 These 108,588,090 shares are duplicated in the interests described in Notes 1, 2 and 3. Rimmer (Cayman)

Limited as trustee of a discretionary trust holds a majority of units in a unit trust (“Unit Trust”). Hopkins

(Cayman) Limited as trustee of the Unit Trust owns all the issued ordinary shares which carry the voting rights

in the share capital of HD.

5 Dr. Lee Shau Kee beneficially owns all the issued share capital of Rimmer (Cayman) Limited and Hopkins

(Cayman) Limited. By virtue of the SDI Ordinance, Dr. Lee Shau Kee is taken to be interested in these 108,588,090

shares which include the shares described in Notes 1, 2, 3 and 4.



DirectorsThe directors during the financial year were:–

Mr. Lau Chan Kwok (Honorary Chairman)

Mr. Colin K.Y. Lam (Chairman)

Sir Kenneth P.F. Fung

Mr. Norman H.C. Ho

Mr. Michael Y.L. Kan

Mr. Edmond T.C. Lau

Mr. Eddie Y.C. Lau

Dr. Lee Shau Kee

Mr. Leung Hay Man

Mr. Li Ning

Mr. Peter M.K. Wong

Dr. Alex S.C. Wu

In accordance with Article 103(A) of the Company’s Articles of Association, Mr. Lau Chan Kwok,

Sir Kenneth P.F. Fung, Mr. Michael Y.L. Kan and Mr. Eddie Y.C. Lau retire by rotation and are

eligible for re-election. However, Mr. Lau Chan Kwok declines to seek re-election at the forthcoming

Annual General Meeting.

The non-executive directors have not been appointed for a specific term and they are subject to

retirement by rotation and re-election at the Annual General Meeting of the Company in

accordance with the Company’s Articles of Association.

Directors’ Interests in SharesAt 31 December 1998, the interests of the directors in securities of the Company as recorded in

the register maintained under section 29 of the SDI Ordinance were as follows:–

Personal interests Corporate interestsNumber of shares Number of shares

Mr. Lau Chan Kwok 20,000 —

Mr. Colin K.Y. Lam 150,000 —

Sir Kenneth P.F. Fung 3,950 —

Mr. Norman H.C. Ho 3,313,950 —

Mr. Michael Y.L. Kan 22,965 —

Mr. Edmond T.C. Lau 1,000 —

Mr. Eddie Y.C. Lau — —

Dr. Lee Shau Kee 7,799,220 108,588,090

Mr. Leung Hay Man 2,250 —

Mr. Li Ning — —

Mr. Peter M.K. Wong 1,151,000 —

Dr. Alex S.C. Wu 186,030 —



Directors’ Interests in Shares (continued)

Other than as stated above, no director or chief executive held any interest, whether beneficial or

non-beneficial, in the share capital of the Company or any of its associated corporations (within

the meaning of the SDI Ordinance).

Interests in ContractsExcept for the connected transaction as disclosed in this Report, no other contract of significance,

to which the Company or any of its subsidiaries was a party and in which a director of the

Company had a material interest, subsisted at the end of the year or at any time during the year.

None of the directors proposed for re-election at the forthcoming Annual General Meeting has a

service contract with the Company which is not determinable by the Company or any of its

subsidiaries within one year without payment other than statutory compensation.

ReservesMovements in reserves of the Company and of the Group during the year are set out in note 19

on the accounts.

Purchase, Sale or Redemption of the Company’s Listed SecuritiesDuring the year, neither the Company nor any of its subsidiaries has purchased, sold or redeemed

any of the Company’s listed securities.

Arrangement to Purchase Shares, Warrants, Options or DebenturesAt no time during the year was the Company or any of its subsidiaries a party to any arrangement

to enable the directors or chief executive or any of their spouses or children under eighteen years

of age to acquire benefits by means of acquisition of shares, options, debentures or warrants of

the Company or any other body corporate.

Bank Loans and OverdraftsThe Group’s bank loans and overdrafts as at 31 December 1998 are shown in note 16 on the

accounts. There was no interest capitalised by the Group during the year.

Financial SummariesThe five years’ summary of assets and liabilities and ten years’ financial summary of the Group are

set out on pages 49 and 50.

Group PropertiesA summary of the Group’s properties is set out on page 52.

Use of ProceedsThe Group continued to place the remaining proceeds from the rights issue in October 1994 of

HK$970 million on short term bank deposits. Following the abortion of the proposed Central

Ferry Piers Development, the Group will utilise the balance towards expanding the investment

property portfolio of the Group and/or financing other potential property development projects

as stated in the rights issue document.



Connected TransactionIt was announced on 22 July 1998 that two wholly-owned subsidiaries of the Company entered

into a project management agreement with a subsidiary of HL, Henderson Real Estate Agency

Limited (“HREAL”), a connected person under the Listing Rules, to appoint HREAL as the project

manager of the proposed redevelopment of the Tai Kok Tsui Property. Details of the transaction

were set out in a circular of 12 August 1998 already sent to shareholders. No fees have been paid

by the Group to HREAL during the year. Dr. Lee Shau Kee, a director of the Company, is taken to

be interested in HL, as more fully described in “Substantial Shareholders” of this Report, and in

the above agreement.

Compliance with the Code of Best PracticeThe Company has complied throughout the year with paragraphs 1 to 13 of the Code of Best

Practice as set out by the Stock Exchange of Hong Kong Limited in Appendix 14 to the Listing

Rules.

AuditorsOn 19 November 1998 our auditors changed the name under which they practise to KPMG and,

accordingly, have signed their report in their new name. A resolution for the re-appointment of

KPMG as auditors of the Company is to be proposed at the forthcoming Annual General Meeting.

On behalf of the board

Colin K. Y. Lam Li NingChairman Director


Report of the Auditors


Auditors’ report to the shareholders of Hong Kong Ferry (Holdings) Company Limited(Incorporated in Hong Kong with limited liability)

We have audited the accounts on pages 24 to 48 which have been prepared in accordance with

accounting principles generally accepted in Hong Kong.

Respective Responsibilities of Directors and AuditorsThe Companies Ordinance requires the directors to prepare accounts which give a true and fair

view. In preparing accounts which give a true and fair view it is fundamental that appropriate

accounting policies are selected and applied consistently, that judgements and estimates are

made which are prudent and reasonable and that the reasons for any significant departure from

applicable accounting standards are stated.

It is our responsibility to form an independent opinion, based on our audit, on those accounts

and to report our opinion to you.

Basis of OpinionWe conducted our audit in accordance with Statements of Auditing Standards issued by the

Hong Kong Society of Accountants. An audit includes examination, on a test basis, of evidence

relevant to the amounts and disclosures in the accounts. It also includes an assessment of the

significant estimates and judgements made by the directors in the preparation of the accounts,

and of whether the accounting policies are appropriate to the Company’s and the Group’s

circumstances, consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the information and explanations which

we considered necessary in order to provide us with sufficient evidence to give reasonable assurance

as to whether the accounts are free from material misstatement. In forming our opinion we also

evaluated the overall adequacy of the presentation of information in the accounts. We believe

that our audit provides a reasonable basis for our opinion.

OpinionIn our opinion, the accounts give a true and fair view, in all material respects, of the state of the

Company’s and the Group’s affairs as at 31 December 1998 and of the Group’s loss and cash

flows for the year then ended and have been properly prepared in accordance with the Companies

Ordinance.

KPMGCertified Public Accountants


Consolidated Profit and Loss Account


For the year ended 31 December 1998

Note 1998 1997

HK$’000 HK$’000

Turnover 2 963,593 1,093,698

Operating profit 3 133,677 190,254

Exceptional items 4 (391,360) —

(Loss)/profit from ordinary activitiesbefore taxation (257,683) 190,254

Taxation 6(a) (17,457) (37,957)

(Loss)/profit after taxation 7 (275,140) 152,297

Retained profits at 1 January 716,560 696,085

441,420 848,382

Dividends 8 (99,757) (131,822)

Retained profits at 31 December 19 341,663 716,560

Basic (loss)/earnings per share (cents) 9 (77.2) 42.7

The notes on pages 28 to 48 form part of these accounts.


Balance SheetsAt 31 December 1998

Group Company

Note 1998 1997 1998 1997

HK$’000 HK$’000 HK$’000 HK$’000

Assets employed:-

Fixed assets 10 3,239,531 4,810,012 464,344 4,336,032

Properties pendingtransfer to subsidiaries 11 — — 2,420,000 —

Central pier and otherdevelopment costs 12 — 257,838 — —

Interest in subsidiaries 13 — — 816,476 1,078,954

Investments 14 73,580 119,665 7,396 14,867

3,313,111 5,187,515 3,708,216 5,429,853

Current assets 15 1,563,305 1,408,500 1,298,830 1,077,398

Current liabilities 16 (493,174) (471,599) (325,234) (144,269)

Net current assets 1,070,131 936,901 973,596 933,129

Deferred taxation 17 (21,500) (15,500) (21,000) (15,500)

4,361,742 6,108,916 4,660,812 6,347,482

Financed by:-

Share capital 18 356,274 356,274 356,274 356,274

Reserves 19 4,005,468 5,752,642 4,304,538 5,991,208

Shareholders’ funds 4,361,742 6,108,916 4,660,812 6,347,482

The notes on pages 28 to 48 form part of these accounts.

Approved by the board of directors on 18 March 1999.

Colin K.Y.Lam Li NingChairman Director

Consolidated Cash Flow Statement


Note 1998 1997HK$’000 HK$’000 HK$’000 HK$’000

Net cash inflow fromoperating activities (a) 180,364 177,915

Returns on investments andservicing of finance

Interest received 117,734 104,654Interest paid (25,624) (24,021)Dividends received 2,458 346Dividends paid (131,822) (131,822)

Net cash outflow from returnson investments andservicing of finance (37,254) (50,843)

Taxation

Profits tax paid (13,429) (51,419)

Investing activities

Acquisition of unlistedinvestments (27) —

Purchase of listed investments — (125,640)Payments for purchase of

fixed assets (23,511) (15,126)Payments for Central pier

development costs (1,062) (8,008)Decrease/(increase) in advances

to investee companies 8,729 (8,719)Receipts from sale of

fixed assets 2,274 81Receipts from sale of listed

investments 35,499 25,056

Net cash inflow/(outflow)from investing activities 21,902 (132,356)

Increase/(decrease) in cashand cash equivalents 151,583 (56,703)

Cash and cash equivalentsat 1 January 1,010,333 1,067,036

Cash and cash equivalentsat 31 December 1,161,916 1,010,333



Consolidated Cash Flow Statement

1998 1997HK$’000 HK$’000

Analysis of the balances ofcash and cash equivalents

Cash at bank and in hand 23,754 23,153Short term deposits 1,389,626 1,176,076Bank overdrafts and loans

repayable within three months (251,464) (188,896)

1,161,916 1,010,333

Note:–

(a) Reconciliation of the operating profit to net cash inflow from operating activities

1998 1997HK$’000 HK$’000

Operating profit 133,677 190,254Depreciation 123,111 122,972Loss on sale of fixed assets 1,859 753Profit on sale of fixed assets (523) —Provision for diminution in value of listed investments 5,377 —Interest income (121,967) (102,888)Interest expense 24,750 23,699Dividend income (2,458) (346)Realisation of inter-company profits (1,445) (1,480)Profit on sale of listed investments (3,493) (2,478)Write-off of other development costs — 207Decrease in inventories 9,785 11,759Decrease/(increase) in debtors and prepayments 50,191 (10,697)Decrease in creditors and accrued charges (38,500) (53,840)

Net cash inflow from operating activities 180,364 177,915


Notes on the Accounts


1 Principal Accounting Policies

These accounts have been prepared in accordance with Statements of Standard Accounting

Practice issued by the Hong Kong Society of Accountants, accounting principles generally

accepted in Hong Kong and the requirements of the Hong Kong Companies Ordinance. A

summary of the significant accounting policies adopted by the Group is set out below.

(a) Basis of consolidationThe consolidated accounts include the accounts of the Company and of its subsidiaries

made up to 31 December each year. All material inter-company transactions and balances

are eliminated on consolidation.

Goodwill arising on consolidation, representing the excess of the cost over the Group’s

share of the fair value of the separable net assets of the subsidiaries at the respective

acquisition dates, is written off directly to capital reserves in the year in which it arises.

The excess of the Group’s share of the fair value of the separable net assets of subsidiaries

acquired over the cost of investments in these companies is credited to capital reserves.

(b) Revenue recognition

(i) Ferry operations and related services

Revenue relating to the ferry operations is recognised when the relevant ferry services

are provided.

(ii) Sale of goods

Revenue is recognised when goods are delivered to customers. This is taken to be the

point in time when the customers have accepted the goods and the related risks and

rewards of ownership.

(iii) Rental income

Rental in respect of properties is recognised on an accrual basis evenly over the periods

of the respective tenancies.

(iv) Travel business

Revenue arising from the travel business is recognised on the completion date of the

tours or when the relevant services are provided.

(v) Interest income

Interest income from bank deposits is accrued on a time-apportioned basis on the

principal outstanding and at the rate applicable.

(vi) Dividends

Dividend income from listed investments is recognised when the share price goes ex-

dividend.



1 Principal Accounting Policies (continued)

(c) Investment propertiesInvestment properties are stated in the balance sheet at their open market value which is

assessed annually by qualified valuers. Surpluses arising on revaluation are credited to the

investment property revaluation reserve; deficits arising on revaluation are firstly set off

against any previous revaluation surpluses and thereafter taken to the profit and loss

account. The related portion of surpluses or deficits previously taken to the investment

property revaluation reserve is dealt with in the profit and loss account on disposal.

No depreciation is provided in respect of investment properties with an unexpired lease

term of over 20 years since the valuation takes into account the state of each property at

the date of valuation.

(d) Properties held for developmentProperties held for development for investment purposes are carried at professional

valuation. Surpluses arising on revaluation are credited to “other property revaluation

reserve’’; deficits arising on revaluation are firstly set off against any previous revaluation

surpluses and thereafter taken to the profit and loss account. These properties are

reclassified as investment properties on the granting of an occupation permit and any

revaluation surplus relating thereto transferred to the investment property revaluation

reserve.

(e) Hotel propertiesIn accordance with normal practice in the hotel industry, no depreciation is provided on

hotel properties held on leases with more than 20 years to run at the balance sheet date.

It is the Group’s policy to maintain the hotel properties in such condition that their value

is not diminished by the passage of time so that any element of depreciation would be

immaterial. Routine maintenance expenditure is charged to the profit and loss account in

the year in which it is incurred. In addition, an annual provision based on the projected

maintenance cost for the next five years under the planned maintenance scheme is charged

to the profit and loss account.

(f) Fixed assets and depreciation(i) Fixed assets other than investment properties, properties held for development and

hotel properties are stated in the balance sheet at cost less accumulated depreciation.

(ii) The carrying amounts of fixed assets carried at depreciated cost are reviewed

periodically to determine whether they are in excess of their recoverable amounts. If

the carrying amount exceeds the recoverable amount, the asset is written down to

the recoverable amount. In assessing the recoverable amount, the expected cash

flows generated by the fixed assets are not discounted to their present value.




(f) Fixed assets and depreciation (continued)

(iii) Depreciation is provided at rates calculated to write off the cost of fixed assets, other

than investment properties, properties held for development and hotel properties,

over their estimated useful lives on a straight line basis as follows:–

Land Over the unexpired terms of the leases

Buildings 40 years or over the unexpired terms of

the leases, if shorter

Ferry vessels and other crafts

(Note 10(f)) 8 to 15 years

Machinery, furniture and other fixed assets

- Dry dock 40 years

- Others 4 to 10 years

(g) InventoriesInventories principally include trading stocks, and spare parts and consumables.

(i) Trading stocks are stated at the lower of cost and net realisable value. Cost includes

the cost of materials computed using the weighted average method. Net realisable

value is the estimated selling price in the ordinary course of business less the estimated

costs necessary to make the sale.

(ii) Spare parts and consumables are stated at cost, computed using the weighted average

method, less provision for obsolescence.

(h) InvestmentsInvestments held on a long-term basis are stated at cost, less provision for permanent

diminution in value estimated by the directors.

(i) Translation of foreign currenciesForeign currency transactions during the year are translated into Hong Kong dollars at the

exchange rates ruling at the transaction dates. Monetary assets and liabilities in foreign

currencies are translated into Hong Kong dollars at the exchange rates ruling at the balance

sheet date. Exchange gains and losses on foreign currency translation are dealt with in

the profit and loss account.

(j) Deferred taxationDeferred taxation is calculated under the liability method in respect of the taxation effect

arising from all material timing differences between the accounting and tax treatment of

income and expenditure, which are expected with reasonable probability to crystallise in

the foreseeable future.

Future deferred tax benefits are not recognised unless their realisation is assured beyond

reasonable doubt.




(k) Operating leasesPayments under operating leases are charged to the profit and loss account on a straight

line basis over the periods of the respective leases.

(l) Related partiesFor the purposes of these accounts, parties are considered to be related to the Group if

the Group has the ability, directly or indirectly, to control the party or exercise significant

influence over the party in making financial and operating decisions, or vice versa, or

where the Group and the party are subject to common control or common significant

influence. Related parties may be individuals or entities.

2 Turnover

Group turnover represents gross income from sales and services provided to third parties,

analysed as follows:–

1998 1997

HK$’000 HK$’000

Ferry operations and related businesses 600,967 737,537

Property investment 83,825 106,111

Trading and services 151,796 138,598

Travel and others 127,005 111,452

963,593 1,093,698



3 Operating Profit

Group

1998 1997

HK$’000 HK$’000

This is arrived at after charging:–

Interest on bank loans and overdrafts and other

loans repayable within 5 years 24,750 23,699

Depreciation 123,111 122,972

Auditors’ remuneration 1,794 1,763

Loss on sale of fixed assets 1,859 753

Operating lease charges in respect of

- premises 2,649 5,399

- vessels 19,284 2,995

Provision for diminution in value of listed investments 5,377 —

Cost of inventories 209,200 239,775

and after crediting:–

Interest income 121,967 102,888

Rental receivable from investment properties net of

outgoings of HK$13,801,000 (1997: HK$14,483,000) 64,747 88,985

Other rental income less outgoings 25,414 21,852

Profit on sale of listed investments 3,493 2,478

Dividend income from listed investments 2,401 346

Profit on sale of fixed assets 523 —

Dividend income from unlisted investment 57 —



4 Exceptional Items

Following the failure to proceed with the Central pier development project as stated in note

12, the negotiation with the Government of the Hong Kong Special Administrative Region

(“the Government”) on the Group’s existing ferry franchise expiring on 31 March 1999 ceased.

The Government then invited interested parties to submit tenders to operate various routes

by licence. Subsequently, the Group has been granted the licence to operate certain of its

existing routes. The directors have evaluated the impact of the new arrangement on the

estimated useful lives and the recoverable amounts of its ferry vessels and other related assets,

and on other costs that will be incurred as a result of the reduction in scale of its ferry operations.

The resulting loss from the above events are treated as exceptional items, analysed as follows:–

1998HK$’000

Write-off of costs relating to Central pier development project 257,298Write-down in value of vessels and other related assets, and

associated costs relating to the expiry of ferry franchise 134,062

391,360

5 Remuneration

(a) DirectorsDirectors’ remuneration disclosed pursuant to section 161 of the Companies Ordinance is

as follows:–

1998 1997

HK$’000 HK$’000

Fees:–

- Executive directors 150 150

- Independent non-executive directors 200 200

- Other non-executive directors 350 350

Other emoluments:–

Salaries, allowances and benefits in kind

- Executive directors — —

- Independent non-executive directors — —

- Other non-executive directors — 850

700 1,550

The remuneration of each of the twelve directors falls within the band of below

HK$1,000,000.



5 Remuneration (continued)

(b) Five highest paid employeesOf the five highest paid employees, none of them is a director of the Company. The

emoluments of the five highest paid employees are as follows:–

1998 1997

HK$’000 HK$’000

Salaries, allowances and benefits in kind 7,126 6,700

Contributions to retirement schemes 1,024 1,159

8,150 7,859

Emoluments of the five highest paid employees fall within the following bands:–

1998 1997

Number of Number of

HK$ HK$ employees employees

1,000,001 — 1,500,000 4 4

2,000,001 — 2,500,000 1 1

6 Taxation

(a) Taxation in the consolidated profit and loss account represents:–

1998 1997

HK$’000 HK$’000

Provision for Hong Kong profits tax for the year 7,689 35,485

Under/(over) provision in respect of prior years 3,532 (8,749)

11,221 26,736

Overseas taxation 236 —

Deferred taxation (Note 17(a)) 6,000 11,221

17,457 37,957

The provision for Hong Kong profits tax is based on an estimate of the assessable profits

for the year ended 31 December 1998 less relief for available tax loss where applicable at

16% (1997: 16.5%).



6 Taxation (continued)

(b) Tax payable in the consolidated balance sheet represents:–

1998 1997

HK$’000 HK$’000

Provision for Hong Kong profits tax for the year 5,589 3,026

Provisional profits tax paid (1,261) (691)

4,328 2,335

Provision for overseas tax 235 —

4,563 2,335

(c) Tax recoverable in the balance sheets represents:–

Group Company

1998 1997 1998 1997

HK$’000 HK$’000 HK$’000 HK$’000

Provision for

Hong Kong

profits tax for

the year 2,100 32,459 — 25,909

Provisional profits

tax paid (1,975) (25,652) — (20,359)

125 6,807 — 5,550

Balance of profits

tax recoverable

relating to

prior year (27,878) (30,360) (21,886) (22,650)

(27,753) (23,553) (21,886) (17,100)

7 (Loss)/Profit after Taxation

The Group’s (loss)/profit after taxation includes a loss of HK$254,201,000 (1997: a profit of

HK$188,423,000) which has been dealt with in the accounts of the Company.



8 Dividends

1998 1997

HK$’000 HK$’000

Interim dividend paid of 8 cents per share

(1997: 8 cents) 28,503 28,503

Proposed final dividend of 20 cents per share

(1997: 29 cents) 71,254 103,319

99,757 131,822

9 Basic (Loss)/Earnings per Share

The calculation of basic (loss)/earnings per share is based on a loss of HK$275,140,000 (1997:

a profit of HK$152,297,000) and the weighted average of 356,273,883 (1997: 356,273,883)

ordinary shares in issue during the year.



10 Fixed Assets

Machinery,Properties Leasehold Ferry furniture

Investment held for Hotel land and vessels and and otherproperties development properties buildings other crafts fixed assets Total

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Group

Cost or valuation:–

At 1 January

1998 1,903,500 2,062,500 63,761 301,780 956,799 307,619 5,595,959

Additions — 5,608 — 3,724 8,411 5,768 23,511

Disposals — — — (287 ) (18,236 ) (3,009 ) (21,532 )

Revaluation

deficits (627,500 ) (737,108 ) — — — — (1,364,608 )

At 31 December

1998 1,276,000 1,331,000 63,761 305,217 946,974 310,378 4,233,330

Representing:–

Cost — — 63,761 305,217 946,974 310,378 1,626,330

1998 valuation 1,276,000 1,331,000 — — — — 2,607,000

1,276,000 1,331,000 63,761 305,217 946,974 310,378 4,233,330

Aggregate

depreciation:–

At 1 January 1998 — — — 46,660 646,646 92,641 785,947

Charge for the year — — — 15,069 172,019 38,686 225,774

Written back

on disposal — — — (119 ) (15,805 ) (1,998 ) (17,922 )

At 31 December

1998 — — — 61,610 802,860 129,329 993,799

Net book value:–

At 31 December1998 1,276,000 1,331,000 63,761 243,607 144,114 181,049 3,239,531

At 31 December

1997 1,903,500 2,062,500 63,761 255,120 310,153 214,978 4,810,012



10 Fixed Assets (continued)

Machinery,Properties Leasehold Ferry furniture

Investment held for land and vessels and and otherproperties development buildings other crafts fixed assets Total

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Company

Cost or valuation:–

At 1 January 1998 1,687,500 2,062,500 221,721 667,299 198,267 4,837,287

Additions — 2,712 — — 227 2,939

Disposals — — — (10,535 ) (3 ) (10,538 )

Revaluation deficits (598,500 ) (734,212 ) — — — (1,332,712 )

Transfer to properties

pending transfer to

subsidiaries (1,089,000 ) (1,331,000 ) — — — (2,420,000 )

At 31 December 1998 — — 221,721 656,764 198,491 1,076,976

Representing:–

Cost — — 221,721 656,764 198,491 1,076,976

1998 valuation — — — — — —

— — 221,721 656,764 198,491 1,076,976

Aggregate depreciation:–

At 1 January 1998 — — 18,824 452,843 29,588 501,255

Charge for the year — — 4,788 105,408 11,154 121,350

Written back on disposal — — — (9,973 ) — (9,973 )

At 31 December 1998 — — 23,612 548,278 40,742 612,632

Net book value:–

At 31 December 1998 — — 198,109 108,486 157,749 464,344

At 31 December 1997 1,687,500 2,062,500 202,897 214,456 168,679 4,336,032



10 Fixed Assets (continued)

(a) Investment properties and properties held for development of the Group, at Tai Kok Tsui,

have been revalued by C.Y. Leung & Company Limited at HK$2,420 million as at 31

December 1998, on the basis of redevelopment of the two portions of the property as a

single and combined site. The apportioned values do not represent the open market

value of either portion of the property if each portion was developed or disposed of on its

own separately and independently. The redevelopment plan will not be finalised until the

land premium is agreed with the Government.

(b) Other investment properties held by the Group have been revalued by C.Y. Leung &

Company Limited at HK$187 million as at 31 December 1998 on an open market value

basis, having regard to net rental income and reversionary income potential.

(c) The carrying amount of properties held for development by the Group would have

amounted to HK$37,014,000 had the assets been carried at cost.

(d) The cumulative revaluation surplus arising on the valuation of investment and other

properties is not subject to deferred taxation as the disposal of these assets at their carrying

value would result in capital gains which are not subject to any tax liability.

(e) The analysis of the net book value of leasehold properties, which are all held in Hong

Kong, is as follows:–

Group Company

1998 1997 1998 1997

HK$’000 HK$’000 HK$’000 HK$’000

Medium term lease 2,882,254 4,252,955 198,109 3,952,897

Short term lease 32,114 31,926 — —

2,914,368 4,284,881 198,109 3,952,897

(f) The depreciation charge of the Group and the Company for the year includes the

exceptional write-down in value of $102,663,000 and $58,515,000 respectively, which

resulted from the event as referred to in note 4.

11 Properties Pending Transfer to Subsidiaries

These represent properties to be transferred to subsidiaries of the Company subject to the

fulfilment of certain conditions and are stated at the same value as attributable to the Group

in note 10(a).



12 Central Pier and Other Development Costs

Group

1998 1997

HK$’000 HK$’000

At 1 January 257,838 250,037

Additions 1,062 8,008

258,900 258,045

Write-off (Note) (258,900) (207)

At 31 December — 257,838

Represented by:–

Central pier development costs (Note) — 256,246

Others — 1,592

— 257,838

Note:–

Central pier development costs represented costs reimbursed to the Government for additional works carried

out and the associated professional fees on the Central Reclamation at the request of the Group to cater for the

commercial and residential property development above the re-provided ferry piers in anticipation of the

satisfactory outcome of negotiations with the Government.

However, in August 1998, the Group failed to reach an agreement with the Government on the land premium

and other terms of the proposed project. Accordingly, all the costs incurred, amounting to HK$257,298,000

were written off in the consolidated profit and loss account during the year and disclosed as an exceptional

item in note 4.

Following the termination of the project and pursuant to various agreements with the Government in connection

with the project, the Government lodged a claim against the Group in respect of certain outstanding work to

be carried out at the related piers. The cost of such outstanding work is estimated by the Group to be in the

region of HK$100 million. However, after seeking external legal advice, it is the Group’s view that the liability

under these agreements, if any, would be minimal. Accordingly, no provision has been made in the accounts in

this regard.



13 Interest in Subsidiaries

Company

1998 1997

HK$’000 HK$’000

Unlisted shares, at cost 167,278 166,778

Amounts due from subsidiaries 1,963,638 1,095,738

Provision for diminution in value (373,734) (40,000)

1,757,182 1,222,516

Amounts due to subsidiaries (706) (143,562)

Deposits received from subsidiaries in

respect of properties pending transfer (940,000) —

816,476 1,078,954

Details of principal subsidiaries, which materially affect the results or assets of the Group,

are as follows:–

Ordinary share capital% held % held

Issued by the by a Principal(HK$) Company subsidiary activities

HYFCO Development 12,000,030 100 — Property

Company Limited investment

The Hong Kong Shipyard 17,000,000 100 — Shipbuilding

Limited and repairs

HYFCO Trading and 2 100 — Trading

Investments Company

Limited

HYFCO Estate 25,000,000 100 — Property

Management & Agency management

Limited

HYFCO Properties 21,700,000 100 — Hotel

Limited investment

HYFCO Travel Agency 3,500,000 100 — Travel

Limited business



13 Interest in Subsidiaries (continued)

Ordinary share capital% held % held

Issued by the by a Principal(HK$) Company subsidiary activities

The Hongkong and 100,000,000 100 — Ferry

Yaumati Ferry Company operations

Limited

Fine Time Development Limited 2 100 — Property

investment

Galaxy Hotel Management 1,350,000 — 100 Hotel

Company Limited management

World Fame Shipping Limited 2 100 — Ship

management

Genius Star Development Limited 2 100 — Godown

business

Hong Kong Ferry 2 100 — Group

Finance Company Limited financing

Pico International Limited 6,000,000 100 — Investment

holding

Thommen Limited 20 100 — Investment

holding

Lenfield Limited 2 100 — Property

development

HKF Property Investment 2 100 — Property

Limited development

All the above subsidiaries are incorporated and operate in Hong Kong.



14 Investments

Group Company

1998 1997 1998 1997

HK$’000 HK$’000 HK$’000 HK$’000

Unlisted investments,

at cost 16,261 16,234 16,256 16,229

Advances to investee

companies 18,289 27,018 17,789 25,287

34,550 43,252 34,045 41,516

Provision for diminution

in value (26,649) (26,649) (26,649) (26,649)

7,901 16,603 7,396 14,867

Listed shares

- in Hong Kong 69,752 101,758 — —

- outside Hong Kong 1,304 1,304 — —

71,056 103,062 — —

Provision for diminution

in value (5,377) — — —

65,679 103,062 — —

Total investments 73,580 119,665 7,396 14,867

Market value of

listed shares at

31 December 49,545 89,859 — —

Included in unlisted investments are interests in two companies, namely, Authian Estates

Limited and Celelight Company Limited, both incorporated in Hong Kong, in which the Group

respectively holds 50% and 331/3 % of equity interest. The equity method of accounting for

these companies is not adopted as the results and net assets of these companies are not

material to the Group.



15 Current Assets

Group Company

1998 1997 1998 1997

HK$’000 HK$’000 HK$’000 HK$’000

Inventories

- Trading stocks 17,641 12,972 — —

- Spare parts and

consumables (Note) 20,838 36,343 — —

- Work in progress 1,254 8,006 — —

Tax recoverable

(Note 6(c)) 27,753 23,553 21,886 17,100

Debtors and

prepayments 82,439 128,397 10,630 13,718

Dividends receivable

from subsidiaries — — 35,400 41,510

Short term deposits 1,389,626 1,176,076 1,226,637 996,076

Cash at bank and

in hand 23,754 23,153 4,277 8,994

1,563,305 1,408,500 1,298,830 1,077,398

Note: The amount of spare parts and consumables carried at cost less provision is HK$5,808,000 (1997:

HK$21,411,000).

16 Current Liabilities

Group Company

1998 1997 1998 1997

HK$’000 HK$’000 HK$’000 HK$’000

Unsecured bank loans

and overdrafts 251,464 188,896 200,000 —

Creditors and

accrued charges 165,893 177,049 53,980 40,950

Tax payable (Note 6(b)) 4,563 2,335 — —

Proposed final dividend 71,254 103,319 71,254 103,319

493,174 471,599 325,234 144,269



17 Deferred Taxation

(a) Movement on deferred taxation is as follows:–

Group Company

1998 1997 1998 1997

HK$’000 HK$’000 HK$’000 HK$’000

Balance at 1 January 15,500 4,279 15,500 —

Transfer from

the profit and

loss account 6,000 11,221 5,500 15,500

Balance

at 31 December 21,500 15,500 21,000 15,500

(b) Major components of deferred tax of the Group and the Company are set out below:–

Group

1998 1997

Potential Potential

liabilities liabilities

Provided unprovided Provided unprovided

HK$’000 HK$’000 HK$’000 HK$’000

Depreciation

allowances in

excess of related

depreciation 25,526 32,715 15,500 78,782

Future benefit

of tax losses (4,026) (42,354) — (43,247)

21,500 (9,639) 15,500 35,535



17 Deferred Taxation (continued)

(b) Major components of deferred tax of the Group and the Company are set out below: –

(continued)

Company

1998 1997

Potential Potential

liabilities liabilities

Provided unprovided Provided unprovided

HK$’000 HK$’000 HK$’000 HK$’000

Depreciation

allowances in

excess of related

depreciation 25,026 31,725 15,500 64,610

Future benefit

of tax losses (4,026) — — —

21,000 31,725 15,500 64,610

18 Share Capital

Number of shares Nominal value

1998 1997 1998 1997

HK$’000 HK$’000

Authorised:

Ordinary shares

of HK$1 each 550,000,000 550,000,000 550,000 550,000

Issued and fully paid:

Ordinary shares

of HK$1 each 356,273,883 356,273,883 356,274 356,274

During the year, there was no movement in share capital.



19 Reserves

Investment Otherproperty property Other

Share revaluation revaluation capital Retainedpremium reserve reserve reserves profits TotalHK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Group

At 1 January 1998 1,398,527 1,590,325 2,031,094 16,136 716,560 5,752,642

Revaluation deficits — (627,500) (737,108) — — (1,364,608)

Realisation of inter-

company profits — — — (7,669) — (7,669)

Loss for the year — — — — (275,140 ) (275,140)

Dividends — — — — (99,757 ) (99,757)

At 31 December 1998 1,398,527 962,825 1,293,986 8,467 341,663 4,005,468

Company

At 1 January 1998 1,398,527 1,569,518 2,031,094 — 992,069 5,991,208

Revaluation deficits — (598,500) (734,212) — — (1,332,712)

Reclassification — (971,018) 971,018 — — —

Loss for the year — — — — (254,201 ) (254,201)

Dividends — — — — (99,757 ) (99,757)

At 31 December 1998 1,398,527 — 2,267,900 — 638,111 4,304,538

The distributable reserves of the Company at 31 December 1998 amounted to HK$638,111,000

(1997: HK$992,069,000), representing its retained profits at that date. The Company’s other

reserves are not distributable.

20 Capital and Other Commitments

(a) Capital commitments outstanding at 31 December 1998 not provided for in the accounts

were as follows:–

Group

1998 1997

HK$’000 HK$’000

Contracted for 52,598 6,538

Authorised but not contracted for 7,500 10,502



20 Capital and Other Commitments (continued)

(b) At the year end the Group had commitments under operating leases to make payments

in the next year as follows:–

Group

1998 1997

Properties Vessels Properties Vessels

HK$’000 HK$’000 HK$’000 HK$’000

Leases expiring

within 1 year 618 480 1,927 —

Leases expiring

after 1 year

but within 5 years 948 16,006 1,661 15,833

1,566 16,486 3,588 15,833

21 Retirement Schemes

The Group operates defined benefit schemes covering substantially all permanent staff. The

schemes are administered by independent trustees with assets held separately from those of

the Group. The principal schemes operated by the Group are Outdoor Staff Retirement Fund

and Office Staff Retirement Fund.

Contributions to the defined benefit schemes are made in accordance with recommendations

of independent actuaries who value the schemes at regular intervals, and are charged to the

profit and loss account. Retirement costs for the year were HK$14,682,000 (1997:

HK$15,590,000).

The latest actuarial valuation on the Outdoor Staff Retirement Fund was as at 31 December

1998. The market value of its assets was HK$96.2 million, representing 108% of the scheme’s

vested liabilities at that date.

The latest actuarial valuation on the Office Staff Retirement Fund was as at 31 December

1997. The market value of its assets was HK$58.1 million, representing 131% of the scheme’s

vested liabilities at that date.

There was no significant difference between the aggregate past service liabilities and the

market value of assets of the above schemes as at the above valuation dates.

Both actuarial valuations were prepared by qualified staff of Watson Wyatt Hong Kong Limited,

who are members of recognised actuarial bodies, using the Attained Age Method. The actuarial

bases used included investment yield, salary escalation, expected retirement age, withdrawal

rates and mortality rates.

Summary of Assets and Liabilities of the Group


Year 1994 1995 1996 1997 1998HK$Million HK$Million HK$Million HK$Million HK$Million

Fixed assets 4,035* 3,685* 4,693* 4,810* 3,240*

Central pier & other

development costs 138 235 250 258 —

Investments 13 — 8 120 74

Current assets 1,549 1,704 1,546 1,409 1,563

Total assets 5,735 5,624 6,497 6,597 4,877

Liabilities 402 863 633 488 515

Net assets employed 5,333 4,761 5,864 6,109 4,362


Ten Years’ Financial Summary


Year 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998

Turnover $M 730 830 891 920 1,035 1,125 1,173 1,280 1,094 964

Profit/(loss)attributable toshareholders $M 71# 102 134 88 100 130 356# 151 152 ( 275 )#

Dividends $M 51 55 62 75 81 122 132 132 132 100

Shareholders’ funds $M 1,183* 1,258* 1,352* 1,593* 1,992* 5,333* 4,761* 5,864* 6,109* 4,362 *

Basic earnings/

(loss) per share @(Adjusted) Cents 29.3# 42.1 55.3 36.5 41.2 47.2 99.9# 42.3 42.7 ( 77.2 )#

Dividend per

share @ (Adjusted) Cents 21.2 22.7 25.7 30.9 31.8 37.0 37.0 37.0 37.0 28.0

Dividend cover Times 1.4# 1.9 2.1 1.2 1.2 1.1 2.7# 1.1 1.2 —

Return/(loss) on equity % 6.0# * 8.1* 9.9* 5.5* 5.0* 2.4* 7.5#* 2.6* 2.5* ( 6.3 )#*

Net assets pershare @ (Adjusted) $ 7.6* 5.2* 5.6* 6.6* 8.3* 15.0* 13.4* 16.5* 17.1* 12.2 *


# These items have been affected by exceptional item.

@ These items have been adjusted for the rights issue of shares in 1994.


Ten Years’ Financial Summary

20 40 60 80 100 120 1400

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

55

62

75

81

122

132

132

100

132

51

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

353025 4020151050

28.0

37.0

37.0

37.0

37.0

31.8

30.9

25.7

22.7

21.2

1,000 2,000 3,000 4,000 5,000 6,000 7,0000

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

161412108640

12.2

17.1

16.5

13.4

15.0

8.3

6.6

5.6

5.2

7.6

2 18

4,362

6,109

5,864

4,761

5,333

1,992

1,593

1,352

1,258

1,183

$Million

DividendsDividends

Cent

Dividend Per Share (Adjusted)Dividend Per Share (Adjusted)

$Million

Shareholders’ FundsShareholders’ Funds

Dollar

Net Assets Per Share (Adjusted)Net Assets Per Share (Adjusted)

Year

Year

Year

Year

Group Properties


Lease Floor area Site areaLocation Lot No. expiry (sq. m.) (sq. m.) Equity Description

Kowloon

222 Tai Kok Tsui KIL 6698 2033 14,730 3,250 100% Staff

Road quarters

Fuk Lee Street, KIL 11109 * 2047 98,260 21,237 100% Industrial

Tai Kok Tsui buildings

Cho Yuen Street, Yau Tong Inland 2047 22,967 2,330 100% Industrial

Yau Tong Lot No.38 * buildings

71 Hing Wah West Kowloon 1999# 2,862 4,730 100% Emergency

Street West Reclamation Area, repair depot

Lai Chi Kok Lot No.S.S.P.

Misc.58 (KX1850)

New Territories

20 Tin Dai Yan Road, Lot Nos.3039A, 2047 1,912 3,059 100% Godown

Chung Uk Tsuen, 3039RP & 3042

Hung Shui Kiu in DD124 Hung

Shui Kiu

Ngau Kok Wan Tsing Yi Town 2047 5,619 19,740 100% Shipyard

North Tsing Yi Lot No.102

Lantau Island

Cheung Sha DD332 2047 1,320 — 100% 10 villa

Lot No.695 * houses

Mui Wo DD2 2047 5,467 7,544 100% Hotel

Lot No.648

Mui Wo DD2 2047 — 28,617 50% Agricultural

Lot Nos.431-487, land

569 and 635-637

* The Cheung Sha, Yau Tong and Block I, II, III and IV of the Fuk Lee Street properties are held for investment

purposes.

# An application for the extension of this tenancy has been lodged by the Company.


Ferry Operations’ Results

Year 1994 1995 1996 1997 1998HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Franchised Ferry ServicesLoss before exceptional

items and taxation (35,085) (93,392) (102,419) (118,957) (75,832)Exceptional items — 19,683 — — (413,904)

(35,085) (73,709) (102,419) (118,957) (489,736)Non-franchised Ferry Services

(Loss)/profit before taxation (19,430) (26,220) 29,215 74,773 63,056

Loss before taxation (54,515) (99,929) (73,204) (44,184) (426,680)

Less : Taxation — — — — —

Loss after taxation (54,515) (99,929) (73,204) (44,184) (426,680)

Average net assetsemployed 516,311 560,794 553,424 466,206 308,831

Return on average net assets employed -10.56% -17.82% -13.23% -9.48% -138.16%

1994

1995

1996

1997

1998

-500 -400 -300 -200 -100 0 100

-489.7

-119.0

-102.4

-73.7

-35.1 1994

1995

1996

1997

1998

-20 0 20 40 80-40

63.1

74.8

29.2

-26.2

-19.4

60$Million

Franchised Ferry ServicesLoss Before TaxationFranchised Ferry ServicesLoss Before Taxation

Year

Non-franchised Ferry ServicesProfit/(Loss) Before TaxationNon-franchised Ferry ServicesProfit/(Loss) Before Taxation

Year

$Million

Notice of Annual General Meeting


NOTICE IS HEREBY GIVEN that the Annual General Meeting of the members of the Company will

be held on board the Bauhinia at the New Wanchai Pier, Wanchai, Hong Kong on Wednesday, 5

May 1999 at 12:00 noon for the following purposes:-

(1) To receive and consider the audited accounts and reports of the Directors and Auditors for the

year ended 31 December 1998.

(2) To declare a final dividend.

(3) To re-elect Directors.

(4) To re-appoint KPMG as Auditors and to authorize the Directors to fix their remuneration.

As special business, to consider and, if thought fit, pass with or without amendments, the following

resolutions as ordinary resolutions:-

(5) “ THAT: –

(a) subject to paragraph (c) and pursuant to section 57B of the Companies Ordinance (Chapter

32 of the Laws of Hong Kong), the exercise by the Directors of the Company during the

Relevant Period of all the powers of the Company to allot, issue and deal with additional

shares of HK$1.00 each in the capital of the Company and to make or grant offers, agreements

and options which would or might require the exercise of such powers be and is hereby

generally and unconditionally approved;

(b) the approval in paragraph (a) shall authorize the Directors of the Company during the Relevant

Period to make or grant offers, agreements and options which might require the exercise of

such powers after the end of the Relevant Period;

(c) the aggregate nominal amount of share capital allotted or agreed conditionally or

unconditionally to be allotted (whether pursuant to an option or otherwise) by the Directors

of the Company pursuant to the approval in paragraph (a), otherwise than pursuant to (i) a

Rights Issue, or (ii) an issue of shares in the Company upon the exercise of the subscription

rights under any securities which are convertible into shares of the Company, or (iii) any

scrip dividend or similar arrangement providing for the allotment of shares in lieu of the

whole or part of a dividend on shares of the Company in accordance with the Articles of

Association of the Company, shall not exceed 20% of the aggregate nominal amount of the

share capital of the Company in issue at the date of passing this Resolution and the said

approval shall be limited accordingly; and



(d) for the purposes of this Resolution:-

“Relevant Period” means the period from the passing of the Resolution until whichever is

the earliest of:-

(i) the conclusion of the next Annual General Meeting of the Company;

(ii) the expiration of the period within which the next Annual General Meeting of the

Company is required by the Companies Ordinance (Chapter 32 of the Laws of Hong

Kong) to be held; and

(iii) the date upon which the authority set out in this Resolution is revoked or varied by way

of ordinary resolution in any general meeting of the Company; and

“Rights Issue” means an offer of shares in the capital of the Company open for a period

fixed by the Directors of the Company to holders of shares of the Company whose names

appear on the register of members of the Company on a fixed record date in proportion to

their then holdings of such shares as at that date (subject to such exclusions or other

arrangements as the Directors of the Company may deem necessary or expedient in relation

to fractional entitlements or having regard to any restrictions or obligations under the laws

of, or the requirements of any recognised regulatory body or any stock exchange in any

territory outside Hong Kong).”

(6) “THAT: –

(a) subject to paragraphs (b) below, the exercise by the Directors of the Company during the

Relevant Period of all the powers of the Company to purchase its own securities subject to

the conditions set out in the Rules Governing the Listing of Securities on The Stock Exchange

of Hong Kong Limited, be and is hereby approved generally and unconditionally;

(b) the aggregate nominal amount of share capital which may be purchased by the Directors of

the Company pursuant to the approval in paragraph (a) shall not exceed 10% of the aggregate

nominal amount of the issued share capital of the Company at the date of passing this

Resolution and the said approval shall be limited accordingly; and



(c) for the purposes of this Resolution:-

“Relevant Period” means the period from the passing of the Resolution until whichever is

the earliest of:-

(i) the conclusion of the next Annual General Meeting of the Company;

(ii) the expiration of the period within which the next Annual General Meeting of the

Company is required by the Companies Ordinance (Chapter 32 of the Laws of Hong

Kong) to be held; and

(iii) the date upon which the authority set out in this Resolution is revoked or varied by way

of ordinary resolution in any general meeting of the Company.”

(7) “THAT conditional upon the passing of Ordinary Resolutions numbered (5) and (6) as set out in

the notice of this meeting of which this Resolution forms part, the aggregate nominal amount of

the share capital of the Company which shall have been purchased by the Company after the

date hereof pursuant to and in accordance with the said Ordinary Resolution numbered (6) shall

be added to the aggregate nominal amount of share capital that may be allotted or agreed

conditionally or unconditionally to be allotted by the Directors of the Company pursuant to the

general mandate to allot, issue and deal with additional shares granted to the Directors of the

Company by the said Ordinary Resolution numbered (5).”

By Order of the Board

Richard C.W. Law

Company Secretary




Notes: –

1. The register of members will be closed from Thursday, 15 April 1999 to Tuesday, 20 April 1999, both days

inclusive during which period no transfer of shares will be registered. In order to qualify for the final dividend, all

transfers accompanied by the relevant share certificates and transfer forms must be lodged with the Company’s

Registrars, Standard Registrars Limited at 5th Floor, Wing On Centre, 111 Connaught Road Central, Hong Kong

not later that 4:00 p.m. on Wednesday, 14 April 1999.

2. A member entitled to attend and vote at the meeting is entitled to appoint proxies to attend and, on a poll, vote

for him. A proxy need not be a member of the Company. Proxy forms together with the power of attorney (if any)

or other authority (if any) under which it is signed or a notarially certified copy of that power of attorney or

authority must be deposited with the Company’s Registrars, Standard Registrars Limited at 5th Floor, Wing On

Centre, 111 Connaught Road Central, Hong Kong not less than 48 hours before the time appointed for holding

the meeting or any adjournment thereof.

3. With respect to items (5) and (6) above, the Directors wish to state that they have no immediate plans to issue any

new shares of the Company or to repurchase any existing shares of the Company.

4. An explanatory statement containing further details regarding items (5) to (7) above will be sent to members

together with the 1998 Annual Report.

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