1985 — Page 5

Chairman's Statement

Operating Results

The Group's consolidated net profit after tax for 1985 was $39.3 million as compared with $41.2 million for 1984, a decrease of 4.6% over the previous year. As explained more fully under the section of Associated Companies in this statement, the increase in the share of losses of associates in 1985 is the main factor which accounts for the above-mentioned decrease in Group profit for 1985.

The contribution to Group profit from the different sectors of your Group of Companies' activities is set out in page 21 of this Annual Report.

Your Directors have recommended a final dividend of 10 cents per share which together with the interim dividend paid, make a total distribution of 15 cents per share, the same as for 1984. However, as the capital of the Company had been increased in 1985 by a Bonus Issue of one bonus share for every five shares held, the total dividend payment for 1985 is 20% over that of 1984.

Members registered in the Company's Register of Members on the 1st April 1986 will be entitled to the above distribution. The earnings per share was 23.6 cents as compared with 24.7 cents per share for 1984, as adjusted.

Traffic

Traffic carried on your ferries during 1985 compared with 1984 was as follows:- Cross Harbour Routes

49.5 million passengers, a decrease of 10.7%.

4.5 million vehicles, an increase of 0.9%. Outlying Districts Routes

17 million passengers, a decrease of 0.2%. The general decrease in cross harbour passenger traffic was mostly attributed to the opening of the Island Line of the Mass Transit Railway. The previous year's substantial increase in vehicular ferry traffic due to imposition of a tax on tunnel users had now stabilised.

The return on net assets from local ferry operations for 1985 was 6.7% (1984 - 6.0%).

Fleet

As at the 31st December 1985, your fleet in service numbered 83 vessels.

During the year, one new triple deck ferry "Man Kwong", one new double deck vehicular ferry "Man Kai" and one HM5 hoverferry "Sado" entered service. Seven ferries were sold. 14 laid up ferries await disposal.

Ferry Services

On the 9th August 1985, the North Point/ Tsuen Wan via Central hoverferry service was suspended and a new North Point/Tsim Sha Tsui East hoverferry service commenced.

The North Point/Kwun Tong vehicular ferry service was terminated on 16th December 1985

1985 and simultaneously the double deck vehicular ramp at Sai Wan Ho ferry berth was commissioned to provide increased carrying capacity and frequency to the Sai Wan Ho/Kwun Tong vehicular ferry service.

China Ferry Services

Three hoverferry services maintained operations to China from Tai Kok Tsui Ferry Pier in Kowloon, namely to Zhoutoujui in Guangzhou, to Whampoa and to Shekou.

The hoverferry service between Shatin and Meisha on Mirs Bay resumed on 1st June 1985 and was temporarily suspended on 28th October 1985 due to seasonal monsoon conditions.

Property

HYFCO Industrial Building Blocks 1, and III were almost fully let.

Subsidiary Companies

The Registrar of Companies had approved the change of name of Crestbridge Estates Ltd. to HYFCO Properties Ltd.

HYFCO Properties Ltd.'s Silvermine Beach. Hotel operated by Silvermine Enterprises Ltd. was a popular holiday resort to holidaymakers and tourists, and as a venue for seminars.

HYFCO Development Co., Ltd. Five of the ten houses at Leyburn Villas, Cheung Sha, Lantau Island, were let.

The Hong Kong Shipyard Ltd. The Hong Kong Shipyard Ltd. continued to maintain your Company's fleet and also undertook maintenance of the HM5 hoverferries for Sealink Ferries Ltd. as well as other craft including army and naval vessels.

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