CMB_1998 — Page 14

Chairman's Statement

GROUP RESULTS AND DIVIDENDS

The Board of Directors announces that the audited consolidated profit of the Group for the year ended 30th June, 1998 amounted to HK$177.30 million, which included exceptional losses of HK$98.23 million, compared with HK$2,721.35 million, which included exceptional gains of HK$339.20 million, for the previous year.

The Directors will recommend to shareholders at the forthcoming Ordinary Yearly Meeting to be held on 17th December, 1998 the payment of a final dividend of HK$0.20 per share. The Directors will also recommend to the shareholders the payment of a special dividend of HK$1.20 per share in order to pass on to shareholders the dividend of a similar amount received from a subsidiary company. These two dividends, together with the first interim dividend of HK$0.10 per share, a special dividend of HK$1.80 per share, a second interim dividend of HK$1.10 per share already paid, will make a total dividend for the year of HK$4.40 per share, compared with HK$5.81 per share for the previous year.

RESULT OF BUS OPERATIONS

Fare revenue from bus operations for the year ended 30th June, 1998 increased by HK$29.84 million compared with the previous year. This increase was primarily due to the revision of bus fares on Hong Kong Island and Cross-Harbour services in December 1997.

TRAFFIC ACTIVITIES AND BUS FLEET

The number of passengers carried during the year under review decreased by 6.3% from 177.5 million to 166.4 million. The main reason for this reduction was increased competition from other modes of transport.

The kilometers operated amounted to 46.4 million compared with 45.5 million in the previous year. The increase was primarily due to the introduction of new routes and other service improvements which the Company implemented as part of the continuing effort to improve service for

new passengers. Twenty-four three-axle, air-conditioned double-decked buses entered service during the year. After the withdrawal of 91 older buses, the Company's fleet at the year end stood at 774 buses with a total carrying capacity of 97,862. Of these, 209 were air-conditioned buses representing 27% of the total fleet.

EXPIRY OF BUS FRANCHISE

Although the Company made strenuous efforts to negotiate fair and reasonable terms with Government in respect of the renewal of the franchise of the Company which expired on 31st August, 1998, Government decided in February 1998 not to renew the franchise and put a package of bus routes for public tender. The Company expended considerable time and effort negotiating with a major international bus operator with whom the Company jointly applied for the new franchise in accordance with the terms of the tender but which application was unsuccessful. On 1st September, 1998, the Company sold most of the buses and certain plant, machinery and equipment to New World First Bus Services Limited for a consideration of HK$335 million.

Upon the expiry of the franchise, the term of years granted to the Company in respect of the Company's bus depot at Aberdeen Inland Lot No. 401 (No. 45, Heung Yip Road, Aberdeen) automatically terminated in accordance with the conditions of grant. Negotiation is in progress with Government regarding the compensation payable by Government to the Company.

Upon the expiry of the franchise, the majority of the staff in connection with the Company's bus operations were made redundant. At the end of October 1998, all severance payments due to such staff have been paid.

Mrs. Fanny Law Fan Chiu-Fun, and Miss Linda Lai Wai-Ming, who were appointed by virtue of Section 9(1) of the Public Bus Services Ordinance (Cap. 230) as Government appointed directors ceased to be directors at the expiry of the franchise and have left the Board of the Company on 1st September, 1998.

NON-FRANCHISE BUS SERVICES

Upon the expiry of the franchise, the Company retained some air-conditioned buses to explore the opportunities in non-franchised bus services in Hong Kong. As from 1st November, 1998, the Company began to operate a shuttle bus service between North Point Government Offices and Island Place in North Point.

PROPERTY INVESTMENT

In March 1998, the Company, through its wholly-owned subsidiaries, purchased two floors of Island Place Tower, each with a gross floor area of 21,186 sq. ft., and six residential units of Two Island Place for investment purposes. As at November 1998, over two-thirds of these properties have been leased.

10