GROUP PROFILE The Kowloon Motor Bus Holdings Limited ("the Company" and, together with its subsidiaries, "the Group") is Hong Kong's largest public transport company, in terms of passenger volume, serving over three million passenger trips daily. The Group comprises six divisions: Franchised Public Bus Operations, Non-Franchised Transport Operations, Mainland Operations, Media Sales Business, Property Holdings and Internal Financial Services. The Group's wholly owned flagship, The Kowloon Motor Bus Company (1933) Limited ("KMB"), was founded 69 years ago to provide franchised public bus services in Hong Kong. KMB's fleet of over 4,300 buses serves some 400 routes covering Kowloon, the New Territories and, through the cross-harbour tunnels, Hong Kong Island. Another wholly owned subsidiary, Long Win Bus Company Limited ("LWB") was established in 1996. With a fleet of 160 buses, LWB operates 15 routes plying between the New Territories and the Hong Kong International Airport and North Lantau. Of the Group's some 14,000 staff at the end of 2001, about 8,800 and 2,500 are bus captains and maintenance staff respectively. KMB is the first public bus company and the fourth corporation in Hong Kong that is ISO certified throughout its entire organisation. Through its wholly own subsidiary, Sun Bus Holdings Limited ("SBH"), the Group operates non-franchised bus services in Hong Kong. The Group also has two co-operative joint ventures in the Mainland that provide public bus services in Dalian and Tianjin. In striving to become a leading multi-media provider in the out-of-home media market, RoadShow Holdings Limited ("RoadShow") was established by the Group in 2000. RoadShow is principally engaged in media sales services, media sales management and administrative services, and the merchandising businesses in Hong Kong. It has been separately listed on the Main Board of The Stock Exchange of Hong Kong Limited since 28 June 2001. The Group's corporate culture is one of service excellence and total customer satisfaction. CONTENTS 4 Financial and Operational Highlights 6 Corporate Milestones 8 Chairman's Statement 14 Managing Director's Report 23 Operational Review 54 Financial Review 66 Directors' Profiles 72 Senior Executives 74 Report of the Directors Financial Statements 81 Auditors' Report 82 Consolidated Profit and Loss Account 83 Consolidated Statement of Recognised Gains and Losses 84 Consolidated Balance Sheet 86 Balance Sheet 87 Consolidated Cash Flow Statement 88 Notes on the Financial Statements 113 Corporate Directory OUR MISSION OUR POLICY IS TO DO ALL WE CAN TO PROVIDE AN EFFICIENT, RELIABLE AND USER-FRIENDLY BUS SERVICE TO ALL PUBLIC TRANSPORT USERS TRAVELLING WITHIN OUR OPERATING AREA. OUR OBJECTIVE IS TO MAKE OUR BUSES THE MODE OF PUBLIC TRANSPORT PREFERRED BY MOST PUBLIC TRANSPORT USERS MOST OF THE TIME; TO MAXIMISE SIMULTANEOUSLY THE VALUE FOR MONEY GIVEN TO OUR CUSTOMERS AND THE PROFIT EARNED BY THE GROUP; AND TO CONTRIBUTE TO THE ECONOMIC AND SOCIAL DEVELOPMENT OF HONG KONG. WE WILL ENDEAVOUR CONTINUOUSLY TO IMPROVE THE QUALITY OF OUR SERVICE TO MEET THE NEEDS AND EXPECTATIONS OF PUBLIC TRANSPORT USERS WITHIN OUR OPERATING AREA AS A WHOLE. 2001 ANNUAL REPORT LOCATIONS OF KMB'S AND LWB'S TERMINI AND DEPOTS Average number of passenger trips per day MAINLAND by mode of transport in 2001 Thousand of passenger trips per day KCRC 1,176 Citybus 593 NWFB 553 Others 421 Ferries 152 Tin Shui Wai Yuen Long Group 3,096 MTRC 2,103 Minibus 1,632 Taxi 1,307 Tuen Mun The Group transported more people than any other public transport services in Hong Kong The Group's headquarters The depots of The Kowloon Motor Bus Company (1933) Limited ("KMB") The depots of Long Win Bus Company Limited ("LWB") Bus termini of KMB and LWB Hong Kong International Railways Airport Tung Chung LANTAU ISLAND page>02 The aerial photo reproduced with permission of The Director of Lands. © Government with permission of The Director of Hong Kong SAR. Licence No. 08/2002 The aerial photo reproduced Sheung Shui Fanling Tai Po NEW TERRITORIES Ma On Shan Sha Tin Sai Kung Tsuen Wan Kwai Chung KOWLOON Tseung Kwan O HONG KONG ISLAND THE KOWLOON MOTOR BUS HOLDINGS LIMITED 2001 ANNUAL REPORT FINANCIAL AND OPERATIONAL HIGHLIGHTS FOR THE YEAR ENDED 31 DECEMBER UNITS 2001 2000 Financial Highlights Turnover HK$ Million 6,861.8 6,323.4 Profit from ordinary activities before taxation HK$ Million 1,814.3 936.5 Profit attributable to shareholders HK$ Million 1,595.5 854.7 Earnings per share HK$ 3.95 2.12 Dividends per share HK$ 1.86 1.58 Shareholders' funds HK$ Million 4,799.1 2,744.0 Total assets HK$ Million 8,752.0 7,955.0 Net borrowings HK$ Million 225.8 502.4 Net finance charges HK$ Million 23.8 41.6 Net cash inflow from operating activities HK$ Million 2,194.2 1,816.5 Financial Ratios Profit margin 23.3% 13.5% Return on shareholders' funds 33.2% 31.1% Net gearing (ratio of net borrowings to shareholders' funds) 0.05 0.18 Interest cover (ratio of profit from ordinary activities before taxation to net finance charges) 76.1 22.5 Dividend cover (ratio of profit attributable to shareholders to total dividends paid and proposed for the year) 2.13 1.34 Franchised Public Bus Operational Highlights Average number of passenger trips per day Million trips 3.10 3.02 Number of licensed buses at year-end 4,544 4,406 Number of staff at year-end 13,689 13,404 Average number of staff per licensed bus 3.01 3.04 Non-franchised Bus Operational Highlights Number of licensed buses at year-end 210 182 Number of staff at year-end 385 337 Average number of staff per licensed bus 1.83 1.85 page>04 Profit attributable to shareholders Earnings per share for 2001 for 2001 was HK$1,595.5 million, was HK$3.95, compared with up 86.7% from 2000 HK$2.12 for 2000 Number of passenger trips The closing share price of the Company at was 1.13 billion in 2001, 31 December 2001 was HK$33.2 per share, up 2.1% from 2000 up 81.4% from 2000 year-end page>05 THE KOWLOON MOTOR BUS HOLDINGS LIMITED 2001 ANNUAL REPORT CORPORATE MILESTONES JANUARY JUNE Multi-media bus terminus unveiled KMB unveiled Hong Kong's first multi-media Customer Service Centre at Sha Tin Central Bus Terminus, the nucleus of Sha Tin's transport services. Conversion to Ultra Low Sulphur Diesel All the buses of KMB, LWB and SBH began to use ultra low sulphur diesel. This was a milestone of the Group in operating the largest bus fleet powered by a green fuel in Asia-Pacific. Listing of RoadShow Holdings Limited RoadShow Holdings Limited was separately listed on the Main Board of APRIL The Stock Exchange of Hong Kong Limited by the Group on 28 June 2001. Fulfilment of tender commitments In accordance with the implementation programme, KMB successfully launched all new bus routes encompassed in its successful tender for the Tin Shui Wai (North) region. MAY Bus and ferry services for Ma Wan Island Park Island Transport Company Limited, a 65% owned subsidiary of the Group, entered an agreement with Sun Hung Kai (Ma Wan) Transport Excellence in quality management Company Limited for the provision of bus and ferry services to Ma Wan The Hong Kong Management Association presented its 2001 Quality Award Island in late 2002. to KMB for its "enormous commitment to Total Quality Management". JULY KMB's 8,888th bus since 1933 Continuing its bus fleet upgrade programme, KMB placed its 8,888th bus since 1933 into service. Launch of Hong Kong's first EURO III bus The first bus equipped with EURO III engine in Hong Kong was deployed by KMB. A total of eight such buses joined the KMB fleet during 2001. All newly acquired buses will have this type of environment friendly bus engines. New air-conditioning system came on board A new state-of-the-art air conditioning system incorporating various new design features to ensure passenger comfort was launched. Such system will be standard equipment of KMB's new buses. page>06 AUGUST NOVEMBER First Green Bus launched with Euro III engines 2000 Annual Report of the Group gained local and The KMB Green Bus equipped with the Euro III environment friendly engine international recognition and a special metallic green coloured livery to promote environmental The Group's 2000 Annual Report won a Bronze Prize in the "General" protection was introduced. category of the 2001 HKMA Best Annual Reports Awards organised by the Hong Kong Management Association and a Gold Winner Award in the "Gas Distribution, Transport & Transmission" category of the World's Best OCTOBER Annual Report Awards of 2001 International ARC AWARDS. Sha Tin Depot achieved ISO 14001 certification In upholding KMB's commitment to adhere to the highest possible standards of quality and environmental management, the Sha Tin Depot was ISO 14001 certified. First air-conditioned bus waiting lounge All KMB bus-stops named and coded for KMB announced plans for providing two air-conditioned bus waiting areas customer convenience to enhance passenger comfort at the Lam Tin MTR Station Bus Terminus, Each of KMB's 4,000 bus-stops was given Chinese and English names to the first such facility in Hong Kong. make it easier for passengers to identify boarding and alighting locations. DECEMBER NOVEMBER KMB's productivity improvement received KMB chosen as one of the best employers in Hong Kong highest official recognition KMB was selected as one of the "Best Ten Employers in Hong Kong" in a KMB won the "2001 Hong Kong Awards for Services: Productivity (Grand study sponsored by the Asian Wall Street Journal, the Far Eastern Award)", organised by the Hong Kong Productivity Council.