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 of Hong Kong SAR. Licence No. 08/2002 with permission of The Director of Lands. © Government
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. Economic Review and Hewitt Associates.
Route T1 launched to serve both tourists and local travellers KMB introduced a Sight-seeing Circular Route, T1, for tourists and local travellers to take a tour around Kowloon's famous spots, experiencing Chinese culture, as well as enjoying glorious shopping opportunities along the way.
Introduction of four more bus-bus interchange packages and enhancement of three existing packages KMB recognised by the Government for its excellence in With these packages covering 55 KMB bus routes, passengers from urban human resources management Kowloon, Tai Po, North District, Tseung Kwan O, Sha Tin, Tuen Mun, Kwai KMB received the "Good People Management Award 2001" from the Tsing and Tsuen Wan may enjoy a maximum discount of up to 50 per cent Labour Department of the HKSAR Government in recognition for the on bus fares. Company's excellence in human resources management and harmonious labour relations.
Two Awards won by KMB's website KMB's website was named as one of the "10 Healthy Websites" by the HKSAR Government's TV and Entertainment Licensing Authority; it also won the Hi-Tech Web Awards 2001.
page>07 THE KOWLOON MOTOR BUS HOLDINGS LIMITED CHAIRMAN'S STATEMENT
The Group's core competence and past achievements place us in a very good position to further enhance the quality of our service and explore new growth opportunities
The Hon Sir S. Y. CHUNG
The Group achieved strong growth during 2001 despite poor economic conditions. This performance can be attributed to the flexibility of The Kowloon Motor Bus Company (1933) Limited ("KMB"), where we can redeploy our resources quickly and efficiently to adjust to market conditions, and the benefits we realise from our economies of scale. The driving forces to these advantages are our quality management systems and practices which enable us to perform well in both strong and weak economic environments.
We know that many people turn to bus transportation when the economy slows down primarily because of cost considerations. We work hard to retain these new customers, as well as our existing ones, by ensuring that they are totally satisfied with our services. When people change modes of transport by force of circumstances, they must like what they experience if they are to remain loyal to KMB. We are very sensitive to this fact.
By retaining and attracting customers, we avoid the need for fare increases. This is the philosophy that underpins our entire strategy and one that is in accord with the popular sentiment to economise in all sectors during difficult market conditions.
page>08 Because of our stringent cost control measures, we have been successful in avoiding fare increases for the past four years. However, over the four years since 1998, oil prices and the salaries of our staff have increased by some 98% and 8%, respectively, and tunnel tolls have also increased by about 20%. In addition, the continual upgrade of our bus fleet and environmental protection measures represents significant capital investments. Hence, KMB will continue to emphasise increased productivity and improved bus services so that our customers can enjoy safe, comfortable and reliable bus journeys at a reasonable cost.
RESULTS FOR THE YEAR The Group's profit attributable to shareholders for the year ended 31 December 2001 was HK$1,595.5 million, representing an increase of 86.7% over the HK$854.7 million for the previous year. Earnings per share for the year were HK$3.95 compared with HK$2.12 for 2000.
The significant increase in the Group's profit after taxation before minority interests for 2001 was due mainly to the deemed profit of HK$349.6 million arising from the spin-off of the shares of Roadshow Holdings Limited ("RoadShow") which is of a non-recurrent nature and the profit contribution before minority interests of HK$175.1 million from Roadshow to the Group during the year.
The profit from KMB for 2001 was HK$1,056.4 million, an increase of 24.4% over the HK$849.3 million for 2000. The loss of Long Win Bus Company Limited ("LWB") for the year decreased to HK$0.5 million from HK$22.3 million for the previous year.
DIVIDENDS At the forthcoming Annual General Meeting, the Directors will recommend the payment of a final dividend of HK$1.46 per share for the year ended 31 December 2001. This compares with HK$1.25 per share for 2000. Together with the interim dividend of 40 cents per share paid on 9 October 2001 (2000: 33 cents per share), dividends for the year will amount to HK$1.86 per share as compared with HK$1.58 for the previous year, an increase of 17.7%. The total dividend payout for the year will amount to HK$750.8 million as compared with HK$637.8 million for 2000.
OUTLOOK There will be both challenges and opportunities over the next decade, but much room for business and profit growth. The future of the Group is very promising, as is the future of the public bus industry in general, although there certainly will be increasing competition as the Government's rail development strategy is implemented. The Mass Transit Railway ("MTR") Tseung Kwan O Extension is scheduled to begin operation in the second half of 2002. The Kowloon-Canton Railway ("KCR") West Rail is expected to come into service at the end of 2003. And, in 2004, there will be the KCR Ma On Shan Rail and the eventual extension of the KCR East Rail to Tsim Sha Tsui.
Whilst these developments will mean intensified competition for KMB and the bus transport industry in general, we are also presented with new opportunities. Over the long term, the development of new towns made possible by the new rail lines will create new demand for bus services. History has shown that any diversion of passengers from buses to rail will have relatively short-term consequences.
page>09 THE KOWLOON MOTOR BUS HOLDINGS LIMITED 2001 ANNUAL REPORT CHAIRMAN'S STATEMENT
An important factor in helping us plan for the future is our involvement in Government studies commissioned by the Transport Department to co-ordinate public transport services with new rail services. KMB is one of the active participants with the Transport Department, other government bodies and the railway corporations in various working committees of these planning projects.
By being a part of this process, and because of KMB's operational flexibility, we can adjust our own strategy for the future in a smooth and efficient manner. We have ample time to plan any redeployment of resources that is required, such as personnel adjustments, and initiate changes in services where necessary, such as re-routing buses, with minimum impact on passengers and staff. We will know well in advance, for example, if we need fewer human resources in a particular area of our operations and thus can attend to this through natural attrition.
We will remain an integral part of the planning process to ensure that the interests of KMB coincide with those of the public.
Our planning work with the Government and other transport operators and our bus-bus interchange schemes, where we develop co-operative arrangements, result in a more integrated public transportation network. Our passengers can transfer between KMB buses, between KMB buses and buses of other companies, and between these buses and the railways. In developing these co- operative arrangements, we are also making improvements to the environment as these measures ease congestion and reduce pollution along urban routes because fewer buses are required.
LONG TERM STRATEGY Our past achievements place us in a very good position to further enhance the quality of our service. We are also able to explore new growth opportunities in the market to diversify our business while adhering to our corporate strategy that requires any new activities to be anchored in our core competencies. Any diversification in products and markets is mostly related to the transportation business.
The creation of RoadShow is a fine example of this approach and illustrates the type of activity that we will be exploring. The Group established RoadShow in December 2000 to diversify into the out-of- home media sales business. A major accomplishment during 2001 was the successful listing of RoadShow on the Main Board of The Stock Exchange of Hong Kong Limited (the "Stock Exchange").
Another example of bringing new activities into the Group's core business is our move into the property business through the redevelopment of our Lai Chi Kok Depot site. After relocating our existing depot operations to our new West Kowloon Depot in May 2002, we will be redeveloping our Lai Chi Kok Depot site into a residential complex with a total gross floor area of over one million square feet. Scheduled for completion by 2005, this redevelopment project is expected to generate further income for the Group and create a new population centre close to our major terminus at Mei Foo as a source of new customers for KMB.
page>10 KMB's fleet of over 4,300 buses serves more than three million passengers daily
Our non-franchised bus operations under Sun Bus Holdings Limited and its subsidiaries are expected to grow in meeting the increasing demand for residential, commercial, employee and school bus services in areas with no public transport service. We will further strengthen and develop our non- franchised bus business in Hong Kong.
Through our two co-operative joint ventures, we have been providing public bus services in Dalian and Tianjin since August 1997 and January 2001 respectively. The Group continues to explore business opportunities on the Mainland.
The Group has maintained a very good record in profit growth and dividend payouts to shareholders over the past years. As our business results demonstrate, we are a recession resistant business much less subject to the vicissitudes of the economic climate. We can benefit from both up and down periods of growth in the business cycle.
page>11 THE KOWLOON MOTOR BUS HOLDINGS LIMITED 2001 ANNUAL REPORT CHAIRMAN'S STATEMENT
A very satisfactory development during 2001 was the independent affirmation and endorsement of our management systems and practices by external parties who bestowed various awards on KMB in recognition of our excellent performance in a number of areas. These included our efforts in quality management, our high level of productivity, good human resources management practices and effective and creative marketing and advertising programmes. The Group's strategy to remain the leader in the public transport sector in Hong Kong is based on our eagerness to set high industry standards and to respond quickly to change.
CORPORATE GOVERNANCE The Group places a high priority on corporate governance and transparency. We are sensitive to the fact that we must provide ready access to information about the Group to a host of audiences while adhering to the rules and regulations of the Stock Exchange regarding the release of such information. We have established numerous channels of communications to achieve these ends. We are very pleased to see that these efforts were recognised in 2001 in the form of awards for the KMB website and the Group's 2000 Annual Report.
The Audit Committee and the Internal Audit Department of the Group play vital roles in assuring sound corporate governance. The Audit Committee, with the assistance of the Group's external auditor and Internal Audit Department, reviews the Group's financial reporting process and internal control systems. Our Internal Audit Department carries out comprehensive audits and reviews on the financial and operational procedures and practices of the Group on both a regular and an as-needed basis. The Head of Internal Audit Department is responsible to the Audit Committee and the Managing Director.
SOCIAL RESPONSIBILITY We know that we must continue to offer the best quality service possible at reasonable fares and take measures to protect the environment in order to continue to earn the right to retain our franchise to serve the community. In this regard, major events during the year included the complete changeover to ultra low sulphur diesel (with a sulphur content of only 0.005%) and the introduction of Hong Kong's first Euro III air-conditioned double-deck bus. As a responsible corporate citizen, we are committed to doing our very best to improve our vehicles and depot operations for the protection of our environment.
OUR PEOPLE The skills, dedication, discipline and service culture of our employees have created a winning team, second to none in the bus transportation industry. It is our people who are responsible for the high level of performance and achievements of the Group. The Board sincerely thanks all our employees for their invaluable contributions to the business during the year and we look forward to their dedicated and continued support in the future.
page>12 DIRECTORS Under the Public Bus Services Ordinance (Cap. 230), the Commissioner for Transport and the Deputy Secretary for Transport are appointed by the Chief Executive of the HKSAR Government to sit on the Boards of KMB and LWB. During 2001, the incumbents of the Commissioner for Transport and the Deputy Secretary for Transport posts were Mr Robert Footman, JP and Mr Arthur Ho, JP respectively. I would like to express my sincere appreciation for the valuable contributions made by both Mr Footman and Mr Ho as Board members.
Mr Lui Pochiu and Mr Edmond Ho Tat Man were appointed Directors of the Company, KMB and LWB with effect from 1 January 2001.
Mr Sham Yat Wah was appointed as Alternate Director to Mr Raymond Kwok Ping Luen in place of Mr Tsim Tak Po on 9 August 2001. I would like to welcome Mr Sham to the Board and thank Mr Tsim for his past service as a Board member.
My thanks also go to the Group's Audit Committee, chaired by Mr George Chien Yuan Hwei with Dr James Kung Ziang Mien, OBE and the Honourable Eric Li Ka Cheung, JP as members, for their painstaking and professional work during the year.
Lastly, I want to thank all my fellow Directors, in particular our Managing Director, Mr John Chan, GBS, JP, and our dedicated staff, for their contributions towards the outstanding performance of the Group in 2001.
S.Y. CHUNG Chairman
11 March 2002
page>13 THE KOWLOON MOTOR BUS HOLDINGS LIMITED MANAGING DIRECTOR'S REPORT
The Kowloon Motor Bus Holdings Limited
Franchised Non-Franchised Property Mainland Internal Media Sales Public Bus Transport Holdings Operations Financial Services Business Operations Operations
The Kowloon Long Win Bus Sun Bus RoadShow Motor Bus Company Company Limited Holdings Limited Holdings Limited (1933) Limited
Management team sets high industry standards and responds to changing customer expectations
THE KOWLOON MOTOR BUS COMPANY (1933) LIMITED ("KMB") In 2001, the daily ridership of KMB increased by 2.0% compared with 2000. A total of 1,111.2 million passenger trips was made on KMB buses in 2001 compared with 1,089.2 million passenger trips in 2000. This represents an average daily ridership of 3.04 million for 2001 compared with 2.98 million for 2000. Such passenger volume growth was primarily attributable to several factors: our strategy to attract and retain customers by providing quality service, the population growth of new towns in the New Territories and new customers seeking value for money public transport service during a period of economic slowdown.
The actual distance operated by the Company's buses totalled 349.1 million kilometres (2000: 329.6 million kilometres). The increase in distance travelled was primarily due to the introduction of additional routes as well as improved frequencies on certain routes.
page>14 from left to right: Mr Peter MAK, Commercial Director; Miss Winnie J NG, Executive Director; Mr LUI Pochiu, Operations Director; Mr Edmond HO, Deputy Managing Director and Finance and Administration Director; Mr John CHAN Cho Chak, Managing Director 2001 ANNUAL REPORT MANAGING DIRECTOR'S REPORT
LONG WIN BUS COMPANY LIMITED ("LWB") Demand for LWB's services increased with the growth in tourist numbers and the continued development of Tung Chung New Town and North Lantau. The total ridership of LWB for 2001 was 19.0 million passenger trips (a daily average of 52,052). This represents an increase of 10.1% over that of 2000. Total mileage operated in 2001 was 22.8 million kilometres, up 0.9% from 2000.
With the population growing in Tung Chung Area 30/31, our ridership is expected to continue to increase. LWB's bus network will remain the preferred means of public transport between the New Territories and North Lantau because of its competitive pricing and direct routing. Due to its continued commitment to providing safe, efficient, comfortable and high quality service, LWB is well placed to cater to the increasing travel demand.
NON-FRANCHISED BUS SERVICE The overall average monthly turnover of the non-franchised bus business reached a record high of HK$11.9 million in 2001 compared with HK$8.6 million in the previous year.
Our non-franchised business under Sun Bus Holdings Limited and its subsidiaries, launched in early 1998 to provide bus services to large residential estates in the New Territories, has quickly become one of the leading operators in this market sector. The customer base has expanded to cover urban and suburban areas where our bus services cater for large residential estates, shopping malls, major employers and schools. We expect that our non-franchised business will grow as it meets the increased demand for residential, commercial, employee and school bus services in areas with no public transport service. New Hong Kong Bus Company Limited ("NHKB"), the Group's wholly owned subsidiary, jointly operates with its Shenzhen counterpart the cross-boundary shuttle bus service between Lok Ma Chau in Hong Kong and Huanggang in Shenzhen. This service has been well received by customers.
In May 2001, Park Island Transport Company Limited, a 65% owned subsidiary of the Group, entered into an agreement with Sun Hung Kai (Ma Wan) Transport Company Limited, a subsidiary of Sun Hung Kai Properties Limited and a substantial shareholder of the Company, for the provision of bus and ferry services to and from Ma Wan Island. These services are expected to begin in the last quarter of 2002.
MAINLAND OPERATIONS The Group's two co-operative joint ventures on the Mainland performed satisfactorily in 2001. Our joint venture in Dalian entered into its fifth year of operation and its public bus service has been well received by local commuters. Commencing operation in January 2001, the joint venture in Tianjin has been building up its customer base and will step up its marketing efforts to increase patronage.
AWARD WINNING COMPANY KMB adheres to the highest quality standards and commitment to public bus service. We persist in our avid pursuit of new ideas for continuous improvement in our operations. Thus, we are delighted to have our commitment to world class standards of excellence recognised by various sectors of the Hong Kong community during the year.
page>16 KMB was one of the three overall winners of the HKMA Quality Award 2001 organised by the Hong Kong Management Association ("HKMA"). According to HKMA: "This award aims not only to bring public recognition to those who have achieved outstanding standards of quality and made a lasting commitment to the process of quality management, but also to help improve quality and productivity." KMB was honoured to have received this prestigious stamp of approval for quality management that is based on the same criteria as the Malcolm Baldrige National Quality Award in the U.S.
The Hong Kong Productivity Council ("HKPC") presented KMB with the 2001 Hong Kong Award for Services: Productivity (Grand Award). The HKPC citation stated: "This award is the highest official recognition for excellent performance in productivity improvement on a company basis".
KMB also received the 2001 Environmental Performance Award organised by the Business Environment Council ("BEC"). The BEC is a non-profit-making organisation that assists business and industry in achieving environmental excellence and to raise the environmental awareness of the community as a whole. In addition, KMB's Sha Tin Depot was certified for ISO 14001 in November 2001.
These Awards provide KMB with the opportunity to compare its practices and standards with those of other quality performance-oriented companies and to benefit from the recommendations and comments provided by the relevant assessment teams.
To win any one of these prestigious awards is a great honour. To be presented with three in the same year is particularly gratifying. Our management team and staff should be especially proud of their performance in making KMB an award-winning pacesetter for our industry.
Other awards presented to KMB during 2001 are discussed in other sections of this report.
Average number of passenger trips per day Total service improvement items (Franchised public bus operations) (Franchised public bus operations)
Thousand of passenger trips per day Number of items 3,200 200
3,000 150
2,800 100 2,600
50 2,400
2,200 0 97 98 99 00 01 97 98 99 00 01
KMB KMB LWB Including frequency and capacity improvements and operating periods
page>17 THE KOWLOON MOTOR BUS HOLDINGS LIMITED 2001 ANNUAL REPORT MANAGING DIRECTOR'S REPORT
Total fleet capacity at 31 December Number of new buses introduced to the fleet (Franchised public bus operations)
Thousand of passengers Number of buses 600 700
600 550
500 500 400
450 300
400 200 97 98 99 00 01 97 98 99 00 01
KMB KMB LWB LWB Non-franchised bus services
HONG KONG'S FIRST EURO III BUS KMB launched Hong Kong's first Euro III environment friendly bus into service in May 2001, making it the flagship of our environment friendly bus fleet. The Euro III engine reduces emissions of nitrogen oxides and particulates further by 28% and 33% respectively when compared to the Euro II engine. A total of eight Euro III buses were acquired in 2001. This new bus type gives excellent fuel economy and a smoother and quieter ride. It also provides computerised driving records which facilitate the maintenance process. Its air-conditioning system is equipped with an ambient sensor for adjusting the temperature in the bus compartment relative to outside conditions, together with an electrostatic filter for maintaining clean airflow. The new air-conditioning system and the Euro III engine are standard specifications for all new buses to be purchased by KMB.
ENVIRONMENT FRIENDLY BUS DEPOT As a further commitment to provide passengers with quality bus service, KMB has invested about HK$400 million to construct a new bus depot in West Kowloon to replace the existing depot at Lai Chi Kok. The new depot will provide maintenance for some 1,000 buses which serve about 120 routes in the West Kowloon and South-West New Territories regions as well as a large number of our cross- harbour tunnel routes. With a total gross floor area of 44,374 square metres, this new depot will comprise a three-storey building for repair, maintenance and parking of buses and a six-storey administration building for providing logistic and support services. A full range of facilities and systems for environmental protection will be installed in the new depot to enhance our efforts to maintain the efficiency and reliability of the bus fleet. This new facility is scheduled to be operational in April 2002.
page>18 OCTOPUS BUS-BUS INTERCHANGE In December 2001, we implemented four new Octopus bus-bus interchange ("BBI") packages and enhanced three existing BBI packages covering a total of 55 KMB bus routes throughout Kowloon and the New Territories as the first phase of launching seven new and six enhanced BBI packages. The scheme improves the efficiency of the bus network and offers discounts of up to 50% for the total bus fares. The second phase, comprising three new and three enhanced BBI packages, has been introduced since January 2002. With the launching of these new and enhanced packages, KMB has a total of 22 BBI packages in operation by January 2002. Since the inception of the first package, the BBI concept has been well received by our customers.
"INFOTAINMENT" FOR BUS PASSENGERS Hong Kong's first Multi-media on-board ("MMOB") bus infotainment system, introduced in December 2000, has been well received by our customers, according to our quarterly customer satisfaction surveys. At 2001 year-end, the number of buses and minibuses equipped with MMOB systems totalled 2,600. We believe that we are possibly the first public bus company in the world to provide this service on such a large scale.
The MMOB buses, equipped with liquid crystal display ("LCD") monitors, offer bus service information and entertainment. We plan to offer real time news and traffic information when we eventually install the global positioning system ("GPS") on our MMOB buses and cyber bus-stops. With a maximum of 12 minutes every hour of advertising, the majority of the MMOB programming consists of public service announcements, educational material, English and Putonghua language lessons, travelogues, public health advisories and investment commentary.
RoadShow Holdings Limited ("RoadShow"), which was established by the Group to manage the media sales services, media sales management and administrative services and the merchandising businesses, was separately listed on the Main Board of The Stock Exchange of Hong Kong Limited in June 2001. The initial public offering in Hong Kong and the international placing in June 2001, together with the over-allotment option exercised by the underwriters in July 2001, raised about HK$588.8 million, before issuing expenses, for RoadShow. The Group maintains an interest of about 73.3% in RoadShow. The Board believes that the separate listing will provide RoadShow with a more diversified funding source to finance the existing operations and future expansion.
MULTI-MEDIA BUS TERMINUS In early 2001, KMB unveiled Hong Kong's first innovative multi-media bus terminus that provides digital information and multi-media customer services at the Sha Tin Central Bus Terminus. In addition to a closed circuit television system that monitors traffic flow, the terminus is equipped with large digital projection screens and a multi-media customer service centre. The terminus serves a total of 39 bus routes and is the bus transport hub of Sha Tin.
The multi-media Customer Service Centre is equipped with kiosks where passengers can access bus route information via the point-to-point route search function of the KMB website. Moreover, a 40-inch plasma screen displays up-to-date KMB news broadcasts.
page>19 THE KOWLOON MOTOR BUS HOLDINGS LIMITED 2001 ANNUAL REPORT MANAGING DIRECTOR'S REPORT
NEW BUS ROUTES In April 2001, KMB launched all of the new bus routes obtained through its successful tender in November 1999 for Tin Shui Wai (North). This extended the scope of our services in the northern part of the New Territories. These new routes provide links and reduce travel time between the northern New Territories and urban Kowloon and they mark the full operation of KMB's bus services in Tin Shui Wai (North).
For promoting tourism in Hong Kong, KMB launched a sightseeing circular route no. T1 serving 15 famous tourist spots in Kowloon. With a valid day pass, a passenger can enjoy the convenience of unlimited rides on this route throughout a specific day.
SAFETY AND COMFORT FIRST The Group has always emphasised operational and passenger safety. We strive to enhance safety through staff training, adhering to the highest maintenance standards, and continuous upgrading of our bus fleet and facilities. With a fleet of over 4,300 buses transporting more than three million passengers a day, KMB has managed to keep its accident rates to a low level.
In this regard, the driving skills of our bus captains are a critical factor. In addition to providing comprehensive training to new bus captains, we conduct remedial and refresher training for serving bus captains on a regular basis. To reward bus captains who have excellent driving records, and to encourage a 'safety first' culture, KMB has implemented safety bonus and award schemes.
Also contributing to accident prevention is the high mechanical reliability of KMB buses. This reached a record high during the year with an average of 2,618 trips operated before a bus had one mechanical breakdown on the road with passengers on board. To enhance safety inside the buses, interiors have been modified with the installation of handrails and the placing of safety belts on seats that do not have a frontal barrier.
Number of licensed buses at 31 December
Number of buses 5,000
4,500
4,000
3,500 97 98 99 00 01
KMB LWB Non-franchised bus services
page>20 LISTENING TO CUSTOMERS In order to provide the best service possible, we always listen to our customers. We want to know their needs and expectations so we can retain their continued patronage of our service and attract new riders. A number of methods has been used to meet those needs including our redesigned and award winning website and enquiry hotline service, our multi-media bus terminus, and cyber bus- stops that provide bus information. We also continue to host community meetings and organise passenger liaison groups to discuss public transport issues.
Providing information to customers, as well as the general community, is part of our total commitment to openness and transparency.
APPRECIATION Our dedicated professional workforce and management team make us a strong, progressive, award winning corporation committed to constant improvement in our operations. Our people who eagerly participate in training and development programmes contribute their value added performance. The recognition bestowed upon the Group in numerous areas during 2001 is a true affirmation of our employees' dedication to top quality service.
Our winning team looks forward to the Group's continued success. We will continue to adhere to the highest quality standards and commitment to public service and seek new ideas that will continuously improve our performance. I wish to thank all our people for their contribution to the Group's success in 2001.
John CHAN Cho Chak Managing Director
11 March 2002
page>21 THE KOWLOON MOTOR BUS HOLDINGS LIMITED KMB's ubiquitous service brings people to work, study and play OPERATIONAL REVIEW
FRANCHISED PUBLIC BUS OPERATIONS DIVISION THE KOWLOON MOTOR BUS COMPANY (1933) LIMITED ("KMB")
OPERATIONAL EXCELLENCE
INTERNATIONAL ORGANISATION FOR STANDARDISATION ("ISO") CERTIFICATION Following the attainment of ISO 9001 certification on a corporate-wide basis in November 1999, KMB obtained ISO 14001 certification for its Sha Tin Depot in November 2001. Our Sha Tin Depot is the first entity in the local bus industry to have achieved this coveted recognition.
The ISO 14001 standard "Environmental Management Systems - Specifications with Guidance for Use" is the framework for an effective environmental management system ("EMS"). The EMS systematically deals with all environmental aspects pertaining to the Depot's operation. Implementation of EMS assures that we comply with environmental regulations; improve environmental performance including that of our contractors and suppliers; meet customers' expectations; improve and maintain good public and community relations; improve cost control by conserving materials and energy; reduce liability incidents; and raise environmental awareness.
The EMS is discussed, reviewed, evaluated, continuously improved and adjusted, as necessary, in regular management review, steering group and training meetings. Training needs are identified to ensure that our staff are equipped to carry out their responsibilities. A regular internal audit programme ensures that the EMS is properly implemented and maintained.
PERFORMANCE PLEDGE The Performance Pledge on mechanical reliability and operational capability, the two core competencies in bus operation, reflects our commitment to provide passengers with high quality and reliable services.
From left to right > 2001 Hong Kong Grand Award for Services : Productivity > 2001 Overall Winner of HKMA Quality Awards
page>23 THE KOWLOON MOTOR BUS HOLDINGS LIMITED 2001 ANNUAL REPORT OPERATIONAL REVIEW
Mechanical reliability Operational capability
Number of trips Percentage (%) 3,000 110
2,500 100
2,000 90
1,500 80
1,000 70 97 98 99 00 01 97 98 99 00 01
KMB KMB Average number of trips operated before a bus has one Percentage of actual number of bus departures to mechanical breakdown while passengers are on board scheduled number of bus departures during morning peak hours (7am-9am) in the peak direction
Achievement of schedule Fleet utilisation
Percentage (%) Percentage (%) 102 90
101 85
100 80
99 75
98 70 97 98 99 00 01 9797 98 99 00 01
KMB KMB Percentage of actual number of buses operated on Percentage of actual number of buses the road to scheduled bus allocation operated on the road to licensed bus fleet
Mechanical reliability is defined as the average number of trips operated by a bus before it experiences one mechanical breakdown on the road with passengers on board. Operational capability is the ratio of actual to scheduled departures in the peak direction during the peak hours of 7:00 a.m. to 9:00 a.m. across the overall bus network.
As recorded in the Performance Pledge Report 2000/2001 (for the 12-month period ended 30 June 2001), our performance was 2,618:1 for mechanical reliability and 100.18% for operational capability against the targets of 1,800:1 and 100% respectively.
page>24 DEPOTS Modern maintenance facilities are fundamental to ensuring top performance in bus services. We continuously assess the capability of our depots and forecast our future requirements to ensure that the working environment is conducive to a high level of productivity and quality service. During 2001, several major projects were either started or completed to accomplish this objective.
West Kowloon Depot> The construction of the new West Kowloon Depot proceeds at full speed and is scheduled for completion in early 2002 to replace the existing Lai Chi Kok Depot. The new depot will provide 400 parking spaces and maintenance service to 1,000 buses serving the West Kowloon and South-West New Territories regions. It will be well equipped with a wide range of environmental protection measures. These include an energy saving lighting system, a bus washing system with a built-in water recycling facility and a state-of-the-art waste water treatment system, as well as environment friendly fire service and air-conditioning and ventilation systems.
Temporary Depots> For the Tin Shui Wai (North) route package, two temporary depot sites at Tin Shui Wai Area 13 and the Yuen Long Tung Tau Industrial Area were granted to KMB by the HKSAR Government. The depot at the former site for accommodating 28 buses was commissioned in January 2001. Construction work at the new Tung Tau Depot commenced in December 2001. Upon completion in early 2002, the New Tung Tau Depot will provide servicing and parking for 44 KMB buses.
It is expected that KMB's temporary depot site at Sheung Shui Area 30A will need to be handed back to the Government in mid-2002. The replacement depots in the Tai Po Area 33 (Phase I) and Sheung Shui Shek Wu Hui were duly completed in July 2001 and January 2001 respectively.
FLEET UPGRADE The quality of our buses directly affects the value of the services we provide. Continual upgrade of new buses purchased and replacement of old buses is one of the main operational strategies of KMB. From manifest stylish exterior to tiny underframe mechanical parts, we carefully select the right specifications to cater for the customers' demand and the expectations of the community.
From left to right > 2001 HKMA Best Annual Reports Awards Bronze Prize > 2001 International ARC Awards World's Best Annual Reports Gold Winner
page>25 THE KOWLOON MOTOR BUS HOLDINGS LIMITED 2001 ANNUAL REPORT OPERATIONAL REVIEW
Euro III Green Buses win flagship status in KMB's environment friendly fleet
Air-conditioned Buses> During the year, KMB continued to improve service quality by adding 311 new air-conditioned double-deck buses to its fleet. The total number of air-conditioned buses increased from 2,653 to 2,963, comprising 2,714 double-deck and 249 single-deck buses.
At 2001 year-end, KMB had a total fleet size of 4,384 buses, of which air-conditioned buses represented 68%. A further 208 new buses have been ordered for delivery in 2002. To further improve bus saloon air quality and comfort, KMB introduced new generation bus air-conditioning systems for evaluation in 2001. Such systems are equipped with electrostatic air filters and sophisticated temperature control mechanisms, which can effectively filter 80% more dust particles and provide a better saloon environment in terms of temperature, humidity and air flow rate. These systems will be a standard feature in all new buses to be delivered in 2002.
Super-low Floor Easy Access Buses> KMB's super-low floor buses and electronic bus- stop announcement systems received awards from the Hong Kong Physically Handicapped and Able- Bodied (PHAB) Association and the Hong Kong Blind Union for services to disabled passengers.
A total of 311 super-low floor double-deck buses was introduced in 2001. At the end of 2001, there were 899 double-deck and 12 single-deck easy access buses deployed on 96 routes. With super-low floor design and wheelchair access, these buses provide better accessibility to the disabled, the elderly and young travellers.
page>26 Bus Tracking Capability> The trials of bus tracking systems continued during 2001. The objective is to identify and quantify the benefits, costs and constraints of such systems in actual operation. KMB aims to install a suitable system that will enable our operations staff to accurately and cost effectively track the locations of buses for better fleet management and advise passengers of the estimated arrival time of the next bus at the en route bus-stops.
As an essential part of the bus tracking system, a two-way messaging system providing real-time communications between individual bus captains and the KMB control centre personnel will enable faster and more effective responses to traffic incidents.
Electronic Tachograph> Also undergoing tests is an electronic tachograph that records a number of bus performance indicators, such as speed, for monitoring of bus captain driving skills. During 2001, these devices were installed on 300 buses that operated primarily on highway routes.
NEW ROUTES AND SERVICE EXPANSION A total of nine new routes was launched in 2001 with seven intended to meet the demand generated by the development of the new towns in the New Territories, notably Tin Shui Wai. Three of these seven routes were the new routes specified in the tender package for Tin Shui Wai (North) won by KMB.
To help promote tourism in Hong Kong, KMB introduced a convenient hop-on-hop-off sightseeing bus route no. T1 - "Kowloon Circle" - in December 2001. This route serves 15 major tourist attractions in Tsim Sha Tsui, Nathan Road, Mongkok, Kowloon City, Wong Tai Sin and Hung Hom. Day passes for unlimited rides on this route on a specific day are being sold at KMB Customer Service Centres, the Hong Kong Tourism Board and designated ticket sales agents.
Another route introduced in 2001 was for an overnight bus service between Hong Kong Island and Sha Tin.
Bus kilometres operated Number of bus routes operated at 31 December (Franchised public bus operations) (Franchised public bus operations)
Million kilometres Number of bus routes 400 420
350 400
300 380 250
360 200
150 340 97 98 99 00 01 97 98 99 00 01
KMB KMB LWB LWB
page>27 THE KOWLOON MOTOR BUS HOLDINGS LIMITED KMB wins patronage via its extensive network providing door to door service CUSTOMER SERVICE
THE "OCTOPUS" SMART CARD The entire KMB fleet has been equipped with Octopus card readers since late 2000. On average, about 69% of KMB's passengers use Octopus cards for fare payment during 2001, up from 57% in 2000. This indicates a strong vote of acceptance for this convenient payment method. The reduction in the coin volume has enabled KMB to save costs on coin collection and processing. KMB's bus-bus interchange schemes have also made use of the Octopus system to offer fare discounts to passengers on the second legs of their bus journeys.
KMB was one of the founders of the consortium that started the Octopus smart card system, the world's largest and most sophisticated fare payment system of its kind. Today, we have the largest number of Octopus card readers among Hong Kong's public transport operators.
Bus-bus Interchange Schemes ("BBI")> KMB led the bus industry in pioneering BBI when it introduced the schemes for the Shing Mun Tunnel in 1991. This was expanded in 1999 when KMB initiated the first Octopus BBI scheme. KMB also participated in the development of inter-modal Octopus BBI software that is used by other operators for the inter-modal Octopus BBI schemes.
In 2001, KMB operated four inter-modal bus-bus and bus-rail interchange schemes with other operators, namely:
INTER-MODAL NO. OF KMB BBI SCHEMES ROUTES INVOLVED OPERATORS INVOLVED
Overnight Cross Harbour Route 2 KMB and NWFB East Rail Feeders 7 KMB and KCRC's East Rail Tin Shui Wai (North) 1 KMB, LWB, KCRC's Light Rail Transit and Citybus Eastern Harbour Crossing 3 KMB and Citybus
In the long term, the Octopus BBI schemes will bring about a win-win situation for passengers, the community and KMB. We are further exploring other possible inter-modal schemes that would be extended to different modes of transport. This would improve network coverage, maximise utilisation of resources and minimise road congestion in busy corridors.
page>29 THE KOWLOON MOTOR BUS HOLDINGS LIMITED 2001 ANNUAL REPORT OPERATIONAL REVIEW
BUS-STOP ANNOUNCEMENT SYSTEM 749 buses were equipped with the bus-stop announcement system during the year, bringing the total number of buses with the system to 1,352 at 31 December 2001. The system not only makes voice announcements but also shows the next bus-stop on light emitting diode ("LED") displays. This has been introduced progressively since 1998.
KMB CUSTOMER SERVICE CENTRES KMB's customer service centres, located at the bus termini in Sha Tin, Tsuen Wan and Tuen Mun, offer a direct, one-stop channel for customers to enquire about bus service information, purchase KMB souvenirs and use Octopus card services. These centres are equipped with multi-media kiosks for customers to access bus route information via the KMB website's point-to-point route search function. They are also designed to enable easy access by disabled people. To further enhance service, KMB has scheduled to open four new customer service centres in 2002 which will be situated in Tsim Sha Tsui, Mei Foo, Lam Tin and the Hung Hom Cross-Harbour Tunnel.
WAITING SHELTERS To improve the waiting environment for passengers, KMB continued to refurbish waiting shelters. With 146 new shelters built during the year, KMB had a total of 2,002 waiting shelters at the end of 2001.
BUS TERMINUS UPGRADING Following the upgrading project at the Sha Tin Town Centre (New Town Plaza) Bus Terminus in 2000, another major upgrading project began at Sceneway Garden, Lam Tin at the end of 2001 and is scheduled for completion in mid-2002. The new project includes the installation of Hong Kong's first air-conditioned bus shelter, refurbishment of paving, improvement of the lighting on the queuing platforms and the provision of a new customer service centre. The air-conditioned bus shelter will enable passengers to wait for buses in a quiet, clean and comfortable environment. Comfortable seats, KMB website browsing facilities and bus departure time displays will be provided inside the bus shelter.
During 2001, KMB also refurbished 12 bus termini located at Whampoa Garden, Sham Shui Po (Yen Chow Street), Tsuen Wan Ferry, Shun Lee, Lok Wah, Kwun Tong Ferry, Yiu On, Heng On, Lek Yuen, Sheung Shui Landmark, Choi Yuen and Long Ping. The refurbishment programme covering more termini will continue in 2002.
page>30 More Customer Service Centres are being built to facilitate access to bus service information
INTEGRATED BUS SERVICE INFORMATION DISPLAY SYSTEM In addition to the integrated bus service information display systems operating at the Star Ferry, Tsuen Wan MTR, Tuen Mun Town Centre and Sha Tin Town Centre (New Town Plaza) bus termini, new systems were installed at the Po Lam Bus Terminus in Tseung Kwan O, Fu Heng Bus Terminus in Tai Po and two termini in Tin Shui Wai during the year. At the major termini, large LED or plasma display panels are positioned at the central part of the termini to provide information on bus route destinations, departure times and fares. Emergency messages such as major traffic disruptions can also be shown. The public address system and closed circuit television system installed in each of these termini allow monitoring of the traffic and operating conditions at the regulator's office at the terminus and at the control room at KMB headquarters. KMB plans to install these systems at six additional termini in 2002 and eventually at all major termini.
page>31 THE KOWLOON MOTOR BUS HOLDINGS LIMITED 2001 ANNUAL REPORT OPERATIONAL REVIEW
Hong Kong's first air-conditioned bus shelter planned for Lam Tin District
MARKETING AND ADVERTISING Marketing Programmes> Programmes implementing KMB's marketing strategy to reinforce its leadership position in the public transport industry received a number of recognitions during 2001.
KMB won the "Citation for the Outstanding TV Campaign" in the HKMA / TVB Award for Marketing Excellence 2001 for its environmental protection campaign "Giving Buses the Green Light", featuring the television commercial "Born Free". The award, organised by the HKMA and sponsored by TVB, is one of the most prestigious marketing awards in Hong Kong.
KMB also won the Merit Award for "Most Creative Sports Sponsorship" at the 4th Excellence in Sports Marketing Awards. This was organised by the Hong Kong Sports Development Board and supported by the Chartered Institute of Marketing and the Hong Kong Public Relations Professionals' Association.
Understanding Customer Needs> To help understand customer needs and to ensure the highest quality of service, 15 research studies were commissioned during 2001 to gauge the general public's travel patterns and their opinions and expectations of KMB's services. Eleven of these studies are conducted on a continuous basis to aid service planning and delivery.
page>32 The research reflected that KMB's performance had improved overall as well as in specific areas of service. KMB is increasingly perceived as a progressive company that cares for the needs of its passengers, actively communicates with them and cares about the society and charity. Its core strengths were seen to be its extensive coverage and ever-improving services and value for money.
These studies also indicated the growing preference for more informative and entertaining bus journeys, which have been delivered through technological advancements.
Advertising Awards> The advertising initiatives of KMB gained accolades in various award programmes.
KMB's television advertisement "Popularity" was voted one of "The 10 Most Popular TV Commercials" in the 7th Annual Most Popular TV Commercial Awards, organised by Asia Television Limited. It also received the "SPIKE Award - Corporate / Institutional / Utilities" in the Asian Advertising Awards 2000, organised by MEDIA magazine.
KMB's television advertisement, "I Love Nature", received the Gold Award, and "Everywhere", "Staff Commitment" and "Popularity", the Silver Award, in the Public Service Category of the 8th Times International Chinese Advertising Awards. "Staff Commitment" was also a finalist in the Cannes Lions Award 2001 held in France.
KMB's television advertisement "I Love Nature", print advertisement "Astronaut" and bus-stop decorations "Wedding", "Rice Dumplings" and "Windmill" received a total of six awards in the 2001 4As Creative Awards.
MEDIA EVENTS In 2001, KMB organised 31 press events to publicise a variety of developments and activities to showcase its commitment to serve the public and address social issues.
At the local level, the "KMB Tuen Mun Fun Day" strengthened the Company's communications with our customers in the North-West New Territories. At the community level, KMB was active in support of charitable causes, such as the "Care and Share, Everywhere" campaign and the "Back-Friendly School Bag Donation Programme", both of which generated funds for those in need.
From left to right > One of Hong Kong's Ten Healthy Websites from The Television And Entertainment Licensing Authority in 2001 > 2001 Top Corporate Hi-Tech Website from Commercial Radio, Ming Pao Daily And The Webmasters (Hong Kong) Association
page>33 THE KOWLOON MOTOR BUS HOLDINGS LIMITED 2001 ANNUAL REPORT OPERATIONAL REVIEW
As part of its commitment to a cleaner environment, KMB celebrated the introduction of its new buses powered by Euro III engines by organising the "Euro III E-Friendly Bus Painting Competition" in tandem with the Environmental Campaign Committee which was set up by the Government. The launch of the competition coincided with a three-day Environmental Initiatives Exhibition that was held at the New Town Plaza in Sha Tin.
CUSTOMER SERVICE HOTLINE "2745 4466" KMB's Customer Service Hotline received 4.1 million calls in 2001, representing an average of 341,000 calls per month or over 11,000 per day. The 24-hour hotline system operating in Cantonese, Putonghua and English offers assistance in bus information enquiries and provides fax-on-demand services and voice mail recording.
The Hotline won the "2001 Customer Service Excellence Function Award - Hotline Service", which was organised by the Hong Kong Association for Customer Service Excellence (HKACE). Also, our Customer Service Hotline Representative, Ms Joyce Lau, was chosen as the Champion of the "2001 Customer Service Excellence Staff Award - Hotline Service". Twelve companies entered the competition and the service standards were assessed by the Hong Kong Productivity Council by means of mystery shopper appraisals, interviews and site inspections.
From left to right, upper to lower > 2000 8th Times International Chinese Advertising Awards Gold Awards (TVC - I Love Nature) > 2000 8th Times International Chinese Advertising Awards Silver Awards (TVC - Everywhere / Staff Commitment / I Love Bus) > Asia Pacific Advertising Festival Bronze Award > 2000 Asian Advertising Awards for Best Television Advertisement > 2001 Hong Kong 4As Creative Awards (Best Single TV / Cinema Commercial Silver Award - I Love Nature)
page>34 In line with our goal of continuous service enhancement, the operator service hours of the Hotline were extended in January 2001 to cover a 16-hour period from 7:00 a.m. to 11:00 p.m. daily throughout the year. Our customers have been very pleased with the extended operator service hours as indicated by the increased number of commendations on the Hotline services.
KMB plans to launch a new Hotline Passenger Enquiry System utilising advanced geographic information technology in mid-2002. The new technology will enable Hotline operators to handle customers' enquiries more efficiently.
KMB WEBSITE "http://www.kmb.com.hk" The KMB website won the Hi-Tech Web Awards 2001 (Corporate Websites category) in a contest co- organised by Commercial Radio, Ming Pao Daily and the Webmasters (Hong Kong) Association. The site was also selected as one of the "Ten Healthy Websites" in a competition organised by the Television and Entertainment Licensing Authority.
The website was redesigned at the end of 2001 to provide users with easier access to more information. New sections in the website include "Company", which introduces the history, policies and future development of KMB, and "Real Time Finance" that provides quotes for KMB and RoadShow shares, as well as the current Hang Seng Index. The "Leisure" section provides passengers with recommendations on a variety of interesting destinations served by the KMB network.
The most popular function on the KMB website remains to be the "Point to Point Route Search". This powerful search engine enables users to obtain detailed information about their journey by entering their starting point and desired destination. Where no direct route is available, the search function provides bus-bus interchange information. As a further aid to passengers for familiarising with boarding and alighting points, photographs of KMB's bus-stops are being uploaded in stages to the website. The uploading of the photographs of all 4,000 KMB bus-stops on some 400 routes is expected to be completed by mid-2002. At 31 December 2001, the popularity of the revamped website was reflected in an average daily hit rate of 700,637 and in the registration of 14,522 Net Fans.
PEOPLE
KMB AMONG BEST TEN EMPLOYERS IN HONG KONG "Caring for People" is our policy as we promote teamwork across the whole organisation, create a sense of belonging to KMB and instill a culture of quality service.
KMB was chosen as one of the "Best Ten Employers in Hong Kong" in the Best Employers in Asia Study 2001, jointly sponsored by the Asian Wall Street Journal, the Far Eastern Economic Review and Hewitt Associates. KMB was measured against large local companies as well as multinationals.
page>35 THE KOWLOON MOTOR BUS HOLDINGS LIMITED KMB family is dedicated to service excellence and continuous improvement The Labour Department of the HKSAR Government presented KMB with the "Good People Management Award 2001", citing the company's excellence in human resources management and harmonious labour relations. This award recognised our efforts to maintain a pleasant working environment and foster excellent relationships between all staff members and the management.
KMB pays full attention to any grievances voiced by its employees and adheres to the principle of equal opportunities. Our principal focus is on safety and health concerns, staff welfare, continual improvement of skills, rewarding exemplary performance and maintaining effective communications channels.
OUTSTANDING EMPLOYER AWARD In December 2001, KMB was presented an "Outstanding Employer Award" by the Vocational Training Council in recognition of the special efforts KMB made in employing trainees with disabilities.
STAFF COMMUNICATIONS Joint Consultative Committees> The Joint Consultative Committees provide a formal channel for management and employee representatives to discuss matters affecting the daily operation of the depots and workers. Monthly committee meetings are held to discuss such matters as improvements in the working environment, safety, working procedures and staff welfare.
Staff web-site http://www.kmb.org.hk> KMB launched a homepage exclusively for KMB and LWB staff. It provides up-to-date information and announcements from the companies, details of upcoming and past events involving staff participation, a corner to recognise outstanding staff, and a list of shops offering special discounts to our staff.
Staff Communication VCD and Magazine> As for the previous year, a video compact disc (VCD) entitled "Staff Canteen 900" was produced and distributed by KMB to all staff during the year to keep them abreast of the latest developments of the company. This was a supplement to the monthly staff magazine, "KMB Today".
From left to right > The Best Employers In Asia 2001 (Hong Kong Country Winner) > 2001 Good People Management Award from The Labour Department Of The HKSAR Government citing excellence in human resources management and labour relations
page>37 THE KOWLOON MOTOR BUS HOLDINGS LIMITED 2001 ANNUAL REPORT OPERATIONAL REVIEW
Number of staff in the Group at 31 December Staff turnover rate (Franchised public bus operations)
Number of staff Percentage (%) 15,000 20
15 10,000
10
5,000 5
0 0 97 98 99 00 01 97 98 99 00 01
Bus Captain KMB Other traffic staff LWB Service staff Hong Kong market turnover rate* Others *Source: Hong Kong Institute of Human Resource Management
> Apprentice of the year Award 2001 (Vehicle Electrician)
STAFF RETIREMENT SCHEMES The Group operates two non-contributory defined benefit retirement schemes , the KMB Monthly Rated Employees Provident Fund Scheme and the KMB Daily Rated Employees Retirement Fund Schemes, both registered under the Occupational Retirement Schemes Ordinance. The Group is also a participant in the SHKP MPF Employer Sponsored Scheme, a defined contribution retirement scheme co-sponsored by Sun Hung Kai Properties Limited and Standard Chartered Bank and registered under the Mandatory Provident Fund Scheme Ordinance.
BUS CAPTAIN OF THE YEAR COMPETITION The Bus Captain of the Year Competition is an annual festive event which gives KMB bus captains the opportunity to demonstrate their driving skills and provides recreational activities for our employees and the public including bus displays and game booths.
Out of more than 8,500 bus captains, 39 were selected as the finalists in the contest of the year 2001 according to their work performance, driving skills and knowledge of passenger safety and traffic regulations. The "Bus Captain of the Year" prize was presented to the overall winner.
page>38 Comprehensive training is the key to enhancing safety
STAFF PERFORMANCE During 2001, KMB presented the following staff with awards in appreciation of their dedication and contribution to the company:
Good Service Annual Bonus> 6,422 bus captains were eligible for this award.
Safe Driving Annual Bonus> 4,009 bus captains were eligible for this award.
Safe Driving Award> 85 bus captains were eligible for the 15-year accident free award, 164 for the 10-year accident free award and 417 for the five-year accident free award.
Good Service Award> 488 regulators / assistant regulators were entitled to this award.
Attendance Award> 221 regulators / assistant regulators were entitled to this award.
Loyal Service Award> 234 employees received this award for 30 years of service with KMB.
TRAINING Technical Training> The KMB Technical Training School, which was established in 1973, has provided comprehensive training to our maintenance staff for the latest bus transportation technology. The current curricula include the diagnosis of ZF five and six-speed transmissions and the Voith four-
page>39 THE KOWLOON MOTOR BUS HOLDINGS LIMITED Care for our environment is fundamental to everything we do speed transmission, the on-board computer diagnosis system for bus bodies and the chassis of Super Volvo buses. During 2001, a total of 29 in-house training sessions was held for 465 skilled workers and another 39 sessions were organised for engineers, supervisors and foremen in conjunction with our vehicle manufacturers.
Apprentice Training> The KMB Technical Training School runs a four-year apprentice-training scheme for young school leavers. The scheme has been designed to provide job opportunities and training to youngsters whilst ensuring an adequate supply of skilled maintenance staff for KMB. A total of 86 apprentices graduated from the School in 2001, bringing the total number of graduates since 1973 to 1,998. At 2001 year-end, there were 86 apprentices in training.
As for the past years, the high standards of KMB's apprentice training were again recognised during the year. Our apprentices won all prizes in both the automobile mechanical trade and electrical trade categories of the 2001 Best Apprentice Competition organised by the Vocational Training Council. The six winners were invited to visit the Toyota Plant in Japan.
STAFF WELFARE AND RECREATIONAL ACTIVITIES Employee welfare is a high priority at KMB. A variety of internal and external staff recreational activities was organised to promote teamwork. These included long distance running, badminton, soccer, dragon boat racing and basketball. Also, tours were sponsored to Po Toi Island and Ocean Park.
Externally, our employees participated in the Standard Chartered Hong Kong Marathon 2001, the Community Chest Corporate Challenge 10Km Run, various dragon boat races, and the Corporate Games 2001 organised by the Leisure and Cultural Services Department of the Government.
CONCERN FOR THE ENVIRONMENT
KMB has maintained a longstanding commitment to conduct its business in a manner that is compatible with the environment. In this regard, the company has implemented many procedures in its depot and fleet operations in the interest of environmental protection. In addition, our staff are encouraged to take part in various environmental activities such as tree planting.
In recognition of our efforts, KMB received the 2001 Environmental Performance Award organised by the Business Environment Council, which assists business and industry in achieving environmental excellence and raises the environmental awareness of the community as a whole.
page>41 THE KOWLOON MOTOR BUS HOLDINGS LIMITED 2001 ANNUAL REPORT OPERATIONAL REVIEW
ENVIRONMENT FRIENDLY BUS FLEET Ultra Low Sulphur Diesel ("ULSD")> KMB's entire fleet has been using ULSD since 1 January 2001 following the successful testing of this fuel in five Volvo Olympian buses since 1 August 2000. ULSD improves emission levels significantly as it has a sulphur content of only 0.005%, one-tenth that of ordinary low sulphur diesel. This results in the significant reduction of exhaust emission levels of sulphur oxides and nitrous oxides as well as particulates.
Euro Engines> A total of 303 buses equipped with engines of Euro II standard was introduced in 2001. At 2001 year-end, KMB had 1,621 buses equipped with Euro II engines.
In May 2001, the company took delivery of Hong Kong's first Euro III E-Friendly Bus. The Euro III engine reduces emissions of nitrogen oxides and particulates further by 28% and 33% respectively, compared to the Euro II engine. A total of eight of these buses comprising four Volvo Super Olympian, two Neoplan Centroliner, and two Dennis Trident, all equipped with engines of Euro III standard, were purchased during 2001 and henceforth all newly acquired buses will be equipped with Euro III bus engines.
Catalytic Converter> All of our 1,706 pre-Euro I engined vehicles were equipped with exhaust catalytic converters in 2001. In addition, a total of 671 Euro I engined vehicles was so equipped. The remaining 297 Euro I engined vehicles will have the catalytic converters installed by early 2002. With the installation of the catalytic converters, the exhaust emission of the pre-Euro I and Euro I engined vehicles will meet the standards of the Euro I and Euro II engines respectively in terms of particulate matter.
Continuous Regeneration Trap ("CRT")> Taking advantage of ULSD, a CRT has been tested on one Volvo Olympian equipped with a Euro II engine since August 2000. The test showed that particulate matter was reduced by 80-90% and smoke level lowered to zero. The exhaust emission quality was comparable to that of a natural gas fuelled vehicle. Given the promising performance of the CRT after one year in service, two new Dennis Trident were equipped with CRT in September 2001 for further evaluation.
Engelhard DPX Soot Filter> Two Engelhard DPX soot filters were evaluated during 2001 on a Volvo Olympian and a Dennis Trident. Both of these buses were equipped with Euro II engines and the test results were similar to those of the CRT trials.
> 2001 Business Environment Council's Environmental Performance Award Hong Kong Awards for Industry BEC Environmental Performace
page>42 Mileage-based Engine Oil Change> A successful trial was conducted in 2000 of a mileage- based engine oil change scheme which was evaluated by computer aided programming. A 10% reduction in engine oil consumption was achieved in the test.
Synthetic Transmission Oil> KMB conducted a number of tests on using synthetic oil in bus gearboxes following its introduction in March 2000. The oil drain interval was extended from 30,000 km to 120,000 km, resulting in a 75% reduction in waste oil.
WASTE TREATMENT Waste Water> Waste water produced from our operations is treated to regulatory standards before discharging to the public sewer. In 2001, KMB maintained 11 automatic waste water treatment systems for its fleet and depots with a total daily treatment quantity of 1,000 cubic metres. Compared to the previous year, there was a 3% reduction in the quantity of waste water produced per bus.
Waste Oil> In 2001, about 1.1 million litres of used oil were delivered to a registered waste oil recycling agent for treatment. This was an 11% reduction from the previous year in the quantity of waste oil produced.
Chemical Waste> Solid chemical waste is stored according to type in a specially designated area of each bus depot and disposed of by a registered chemical waste collector.
COMMUNITY OUTREACH
PASSENGER LIAISON KMB organised six Passenger Liaison Group meetings in 2001 to collect the opinions of customers regarding bus services. These sessions were very effective in generating ideas for improving service quality. Meeting participants were recruited from throughout Hong Kong while university lecturers were invited to serve as moderators and representatives from the Transport Department of the Government acted as observers.
PASSENGER OPINION CABIN During 2001, our Passenger Opinion Cabin, a modified single-deck bus, made 24 visits to different areas to collect passengers' opinions on KMB's bus services. Around 352 comments and suggestions were received. The Chairmen of the Traffic and Transport Committees of the relevant District Councils were also invited to share their views with KMB senior management during such visits.
page>43 THE KOWLOON MOTOR BUS HOLDINGS LIMITED 2001 ANNUAL REPORT OPERATIONAL REVIEW
"HEALTHY CITY AND SAFE COMMUNITY" KMB participated in the Kwai Tsing "Healthy City and Safe Community" programme. This effort recognises major health and safety issues and increases awareness of the importance of health and safety through promotional, educational and research activities. The programme also worked with the World Health Organisation and other international bodies to advance the goals of healthy cities and safe communities.
FRIENDS OF KMB FRIENDS of KMB, the company's passenger club, continues to promote the "Helping Others" spirit and KMB's image as a socially responsible company. The club regularly invites its 1,400 members to participate in various social service, community building, civic, educational and environmental protection activities.
FRIENDS of KMB was awarded a "Gold Award for Volunteer Service" by the Social Welfare Department of the Government. This was the third time that FRIENDS of KMB was acknowledged for its voluntary work that amounted to 3,100 hours and involved more than 1,050 members in 2001.
THE COMMUNITY CHEST AND OTHER NON-PROFIT ORGANISATIONS KMB was awarded the President's Award of Excellence by The Community Chest in recognition of the company's efforts in raising over HK$1,800,000 in various fund-raising programmes for the year 2000/2001. The programmes included the Corporate and Employee Contribution Programme, Community for the Chest, Dress Casual Day, The Community Chest Police Open Day and the Christmas Greetings for the Chest Campaign.
KMB also supported many other charitable bodies and community activities through sponsoring various campaigns organised by the Government, professional bodies and charitable organisations. These included sponsorship of the Hong Kong Awards for Industry, the Hong Kong Awards for Services, the Hong Kong Management Association Quality Award, the Hong Kong Arts Festival and the World Environment Day 2001.
INTERNATIONAL DAY OF DISABLED PERSONS KMB and LWB offered free rides to disabled persons and their escorts on 9 December 2001 in support of the International Day of Disabled Persons.
DISTRICT COUNCILS AND COMMUNITY GROUPS Effective communication between KMB senior management and the various District Councils, political groups and environmental organisations is essential for the Company to formulate and implement its operational policies. To this end, 18 visits were arranged with these groups during 2001 to brief their representatives on KMB's operational and environmental protection efforts and bus service development plans.
page>44 FRANCHISED PUBLIC BUS OPERATIONS DIVISION LONG WIN BUS COMPANY LIMITED ("LWB")
OPERATIONS
The market environment for North Lantau and the Airport began to improve during the year as a result of the ongoing development of the Tung Chung New Town. Service enhancements were made to Airbus route no. A43, which plies between Fanling in the Northern New Territories and the Hong Kong International Airport, to cater for the increased demand from cross-border travellers. Two bus routes, namely E31 and S64, were extended with improved frequencies to terminate at Yat Tung Estate in Tung Chung. To meet the travel demand arising from the increased population intake in this housing estate, the extension of these routes provides LWB with a strong foothold in the new North Lantau market that is expected to remain the driving force for the company's future growth in the area.
The total ridership of LWB for 2001 was 19 million passenger trips, a daily average of 52,052. This represents an increase of 10.1% over the previous year. The rise was mainly attributable to the population growth in Tung Chung. Total mileage operated for 2001 was 22.8 million kilometres, up 0.9% from last year.
LWB's performance on the two core competencies in bus operations was 1,823 : 1 on mechanical reliability and 100% on operational capability. This compared with the previous year's performance of 1,567 : 1 and 100% respectively.
FLEET AND DEPOT
FLEET SIZE AND DESIGN At the end of 2001, LWB had 150 air-conditioned double-deck buses and 10 air-conditioned single- deck buses serving 15 routes between the New Territories and North Lantau Island and the Hong Kong International Airport. All double-deck buses are super-low floor buses with wheelchair access and equipped with many of the features recommended by the United Kingdom Disabled Persons Public Transport Advisory Committee. Apart from providing better accessibility to passengers with disabilities, these buses are more convenient for boarding and alighting by the elderly and passengers with luggage. In addition, LWB continued its participation in the exchange forum with groups representing the disabled to facilitate the use of public transport.
page>45 THE KOWLOON MOTOR BUS HOLDINGS LIMITED 2001 ANNUAL REPORT OPERATIONAL REVIEW
LWB provides world class bus service to and from the Hong Kong International Airport
FLEET AND THE ENVIRONMENT LWB has always been adhering to high environmental protection standards. All air-conditioned double-deck buses of LWB are equipped with environment friendly Euro II engines. The Euro II engines comply with the exhaust emission level standards issued by the European Council of Environmental Ministers. Catalytic converters were also retrofitted to the single-deck air-conditioned buses equipped with pre-Euro engines in order to reduce the exhaust emission.
ULTRA LOW SULPHUR DIESEL ("ULSD") LWB's entire fleet has been using ULSD with effect from January 2001.
page>46 DEPOT AND THE ENVIRONMENT The bus servicing site at Tung Chung Town Centre and the depot at Siu Ho Wan provide such support services as refuelling, coin collection, bus washing, routine maintenance and fleet parking. The Siu Ho Wan Depot is equipped with a waste water treatment system that treats waste water before discharging into the public drainage system and ensures compliance with regulatory requirements.
CUSTOMER SERVICE
OCTOPUS SMART CARD The growing popularity of the Octopus Smart Card System, a fleet-wide feature, is reflected in the continued growth in the usage rate. On average, about 69% of our passengers use Octopus card for fare payment in 2001, up from the previous year's figure of about 60%.
JOINT-OPERATOR BUS-BUS INTERCHANGE SCHEME LWB participated in a joint-operator bus-bus interchange scheme for its route no. E34 serving the Tin Shui Wai Town Centre and KCR Light Rail feeder bus route no. 659 offering a discounted fare. Since its inception in December 2000, the number of interchanging passengers increased in tandem with the population growth of Tin Shui Wai (North).
ELECTRONIC BUS-STOP ANNOUNCEMENT SYSTEM The electronic bus announcement system with light emitting diode displays and voice announcements was installed on a total of 60 double-deck buses, up from 25 at 2000 year-end, for operation on all the Airbus routes and three external routes (viz. route nos. E33, E34 and E42). The system has been well received by passengers, especially the disabled. LWB's plan is to extend this feature to all its double-deck buses in 2002.
CUSTOMER OUTREACH Dedicated to providing an efficient, safe and customer-oriented bus service, LWB instituted a variety of two-way communications channels with customers to seek their views on how LWB's service can be improved. These included the Customer Service Centre at the Airport, Passenger Liaison Group meetings and the Hotline / Hotfax, all designed to strengthen our ties with passengers.
CUSTOMER SERVICE CENTRE LWB's Customer Service Centre at the Arrivals Hall and the ticketing booth at the Ground Transportation Centre of the Hong Kong International Airport's passenger terminal building provide passenger information, coin change and ticket sales services. During 2001, over 140,000 passenger enquiries and ticket sales were handled at these two outlets.
page>47 THE KOWLOON MOTOR BUS HOLDINGS LIMITED 2001 ANNUAL REPORT OPERATIONAL REVIEW
UNDERSTANDING CUSTOMER NEEDS To help understand the needs and opinions of passengers towards airport transportation, a survey was conducted in March 2001 to assess LWB's bus services. The study showed that the overall service of LWB had met passengers' expectations and that LWB had provided convenient and comfortable services that give good value for money.
PASSENGER LIAISON GROUPS ("PLGs") The PLGs provide an effective communication channel between LWB management and passengers. Six sessions were held during the year and the response from the general public was very satisfactory. There were useful discussions and exchanges on the main theme, "passengers' expectations on the future bus services in the Airport and Tung Chung and LWB's role in this future development". Other topics included service standards, bus service between the Airport and North Lantau, bus captain performance, vehicle design and operational issues.
CUSTOMER HELPLINE "2261 2791 / 2261 2792" The operator-assisted Helpline, manned by courteous customer services representatives at the LWB Customer Service Centre in the Airport, received over 23,000 calls during 2001, representing an average of 1,989 calls per month, an increase of 24.7% over the previous year. In addition to answering enquiries, our representatives also receive customer opinions and handle lost and found.
ROUTE INFORMATION Bus route information materials were provided to the public to facilitate the use of LWB services. 62,000 copies of the pamphlet "LWB Bus Services for North Lantau and the Airport" were issued. The "Airbus Card", with detailed routing and departure information, was most popular with the time- conscious air-bound passengers with a total of 66,000 copies distributed.
> Road Safety Award 2001
page>48 PEOPLE
LWB had a staff force of 408 at the end of 2001, up from 405 at 31 December 2000. Of this total number, 359 and 49 are traffic operations staff and service support staff respectively. In upholding the Group's human resources policy of "Caring for People", LWB continued to train, motivate and reward its staff and upgrade their skills to provide quality service to customers.
STAFF PERFORMANCE During 2001, the company presented the following awards to its staff as an appreciation for their dedication to work and contribution to the company:
Good Service Annual Bonus> 259 bus captains were eligible for this award.
Safe Driving Annual Bonus> 181 bus captains were eligible for this award.
Safe Driving Award> Three bus captains were eligible for the 10-year accident free award and four for the 5-year accident free award.
Good Service Award> 19 customer service assistants were entitled to this award.
Attendance Award> Two customer service assistants were entitled to this award.
Loyal Service Award> 16 employees received this award.
STAFF COMMUNICATION LWB has set up a Joint Consultative Committee as a communication channel between the management and employee representatives for discussing matters in relation to the daily operation of the depot and the workers. The Committee meets bi-monthly to discuss such topics as working environment improvements, safety and working procedures and welfare.
BUS CAPTAIN OF THE YEAR AWARD AND COMPETITION LWB participated and achieved good results in the annual KMB Bus Captain of the Year Award event. LWB won the team competition and came first and third in the individual competition category of double-deck bus.
page>49 THE KOWLOON MOTOR BUS HOLDINGS LIMITED 2001 ANNUAL REPORT OPERATIONAL REVIEW
NON-FRANCHISED TRANSPORT OPERATIONS DIVISION
2001 was a satisfactory year for the non-franchised transport operations division of the Group. Average monthly turnover reached a record high of about HK$11.9 million for 2001, compared with that of about HK$8.6 million for 2000.
SUN BUS HOLDINGS LIMITED AND ITS SUBSIDIARIES ("SBH")
The Group began to provide non-franchised bus service in 1998. At present, SBH comprises six business units with Sun Bus Limited being the flagship, providing bus services to large residential estates, shopping malls, major employers and schools. These business units were established or acquired during the past four years to serve the various market segments that require different modes of operation and bus types. While their operations may differ, some major costs such as fuel, spare parts and administration overheads are pooled to benefit from the economies of scale.
SBH categories its services into two main areas: prestige premium services for clients seeking high quality; and popular services for the general public where value for money is the major aim.
SBH continued to expand to meet market demand for non-franchised services. Its fleet size grew to 205 buses at the end of 2001, compared with 177 at the year-end of 2000. To meet customer needs in different market segments, new models of buses manufactured in Europe and Japan were procured and put into service. In line with the Group's commitment to environmental protection, a pilot test of a battery-powered 24-seater bus was launched. Together with our introduction of new buses using the Euro III emission standard, more than 95% of SBH's bus fleet is equipped with environment friendly engines.
SBH's average monthly turnover experienced significant growth as compared with 2000 particularly with residential, student and commercial services. Turnover remained stable for the employee, tour and contract hiring services.
Whilst SBH expanded its business operation, its staff to bus ratio improved to 1.81 : 1 as of 31 December 2001 from 1.84 : 1 for the year earlier. To enhance its competitive edge, SBH will continue to leverage on the enhanced economies of scale.
page>50 Sun Bus Limited tailors service to meet customer needs
SBH is well positioned as one of the largest operators in the non-franchised bus industry in Hong Kong. Although faced with more intensified competition, we have confidence that our service culture and responsiveness to market needs will enable us to continue to provide quality service to our clients.
page>51 THE KOWLOON MOTOR BUS HOLDINGS LIMITED 2001 ANNUAL REPORT OPERATIONAL REVIEW
New 'Yellow Buses' are introduced to enhance service and meet rising demand
NEW HONG KONG BUS COMPANY LIMITED ("NHKB")
NHKB jointly operates the popular cross-boundary shuttle bus service, called the 'Yellow Bus' service, with its Shenzhen counterpart.
Plying between Lok Ma Chau in Hong Kong and Huanggang in Shenzhen, this shuttle bus service provides a direct and economical alternative cross-boundary transportation choice for the general public.
To meet rising demand, particularly during weekends and public holidays, five new super-low floor single-deck air-conditioned buses with larger carrying capacity were introduced in October 2001. At present, at total of 17 buses are deployed for this shuttle service.
page>52 MAINLAND OPERATIONS DIVISION
DALIAN PROJECT
A co-operative joint venture (the "CJV"), established in 1997 between a 60% owned subsidiary of the Company and Dalian City No.1 Bus Company in Liaoning Province, continued to make steady progress during 2001. The CJV operates three bus routes in Dalian City deploying 46 double-deck and 40 single-deck buses. In addition, the CJV also became a minority shareholder in an organisation that issues smart cards in Dalian, similar to the Octopus cards in Hong Kong.
TIANJIN PROJECT
This is a co-operative joint venture (the "CJV") between a 50% owned associate of the Group and Tianjin City Public Transport Holding Company. This CJV was established in January 2000. Since then, it has been operating seven public bus routes deploying a total of 109 single-deck buses in Tianjin City.
MEDIA SALES BUSINESS DIVISION ROADSHOW HOLDINGS LIMITED ("ROADSHOW")
The Group established a new subsidiary, RoadShow, to launch multi-media services in December 2000. In June 2001, RoadShow was separately listed on the Main Board of The Stock Exchange of Hong Kong Limited. Its initial public offering in June 2001, together with the over-allotment option in July 2001, raised HK$588.8 million (before issuing expenses) for RoadShow. Currently, the Group has a 73.3% interest in RoadShow.
RoadShow is principally engaged in out-of-home media sales for marketing advertising spaces on the exterior and interior of transit vehicles and also in a merchandising business of selling commemorative items in Hong Kong.
MULTI-MEDIA ON-BOARD ("MMOB") The number of buses installed with MMOB systems increased significantly during the year. As of 31 December 2001, a total of 2,600 transit vehicles (including 2,400 KMB's and Citybus Limited's buses, and 200 minibuses) in Hong Kong was installed with MMOB equipment. With a daily viewership of approximately two million passengers, MMOB is perceived as an effective advertising medium that gives RoadShow a significant competitive advantage over traditional media channels.
page>53 THE KOWLOON MOTOR BUS HOLDINGS LIMITED FINANCIAL REVIEW
PERFORMANCE OF THE GROUP
CONSOLIDATED RESULTS FOR THE YEAR The Group's profit attributable to shareholders for the year ended 31 December 2001 was HK$1,595.5 million (2000: HK$854.7 million), representing an increase of 86.7% over the previous year. Earnings per share for the year amounted to HK$3.95 per share (2000: HK$2.12 per share).
DIVIDENDS The total dividend for the year was HK$1.86 (2000: HK$1.58) per share, an increase of 17.7% over 2000. This represents dividend cover of 2.13 times (2000: 1.34 times).
TURNOVER The Group's turnover for the year was HK$6,861.8 million (2000: HK$6,323.4 million), comprising the following:
2001 2000
HK$ MILLION HK$ MILLION
Fare revenue from franchised bus services 6,389.8 6,129.7 Revenue from non-franchised bus services 143.3 102.7 Media sales revenue 328.7 91.0
Total turnover 6,861.8 6,323.4
Segment information on the main businesses of the Group is shown in note 13 on the financial statements on pages 97 to 98 of this Annual Report.
TAXATION Taxation for the year was HK$180.7 million (2000: HK$81.4 million), representing an effective tax rate of 10.0% of profits (2000: 8.7%). The Group's tax charge will always be sensitive to its bus purchase programme as deferred taxation may need to be provided for when the numbers of new buses to be purchased are expected to decrease in the following few years. At 31 December 2001, the Directors considered that certain potential deferred tax liabilities might crystallise in the foreseeable future. As a result, an additional provision of HK$30 million was made, bringing the total deferred tax provision to HK$65 million (2000: HK$35 million). The major components of the deferred taxation are set out in note 26 on the financial statements on page 107 of this Annual Report.
page>54 Dividends per share Group Turnover
HK$ HK$ Million 2.0 7,000
1.5 6,000
1.0 5,000
0.5 4,000
0 3,000 97 98 99 00 01 97 98 99 00 01
Debt maturity profile at 31 December Shareholders' fund at 31 December
Percentage (%) HK$ Million 100 5,000
4,000 75
3,000 50 2,000
25 1,000
0 0 97 98 99 00 01 97 98 99 00 01
Within 1 year Between 1 and 2 years Between 2 and 5 years Over 5 years
CASH FLOW In 2001, the net cash inflow from operating activities of the Group was HK$2,194.2 million (2000: HK$1,816.5 million). Cash outflow in respect of the total dividend payments to the shareholders during the year amounted to HK$666.0 million (2000: HK$565.1 million). Payment for capital expenditure and repayment of bank loans amounted to HK$1,268.5 million (2000: HK$970.8 million) and HK$723.9 million (2000: HK$771.0 million) respectively. The consolidated cash flow statement of the Group for the year ended 31 December 2001 is set out on page 87 of this Annual Report.
LIQUIDITY AND FINANCIAL RESOURCES The Group's policy is to maintain a healthy financial position that net cash inflow from operating activities together with undrawn committed banking facilities should meet the requirements of loan repayments and capital expenditure. Further, a sufficient amount of cash is maintained to meet potential business expansion and development. The Group was mainly financed by shareholders' funds, bank loans and overdrafts in 2001.
page>55 THE KOWLOON MOTOR BUS HOLDINGS LIMITED 2001 ANNUAL REPORT FINANCIAL REVIEW
The gearing ratio, representing the ratio of net borrowings to the total share capital and reserves of the Group; and the liquidity ratio, given by the ratio of the current assets to the current liabilities, are shown below:
2001 2000
Gearing ratio at year-end 0.05 0.18 Liquidity ratio at year-end 1.56 1.57
Net borrowings> At 31 December 2001, the Group's net borrowings (i.e. total borrowings less cash and deposits at banks) amounted to HK$225.8 million (2000: HK$502.4 million), representing a decrease of HK$276.6 million as compared with 2000. An analysis of the Group's net borrowings by currency at 31 December 2001 is shown below:
2001 2000
NET BORROWINGS/(CASH) NET BORROWINGS/ NET BORROWINGS/(CASH) NET BORROWINGS/ IN FOREIGN CURRENCY (CASH) IN FOREIGN CURRENCY (CASH) CURRENCY MILLION HK$ MILLION MILLION HK$ MILLION
Hong Kong Dollar 739.1 499.6 United States Dollar (43.1) (336.1) 22.7 176.6 British Pound Sterling (15.7) (177.2) (14.9) (173.8)
Total 225.8 502.4
Bank loans and overdrafts> Bank loans and overdrafts at year-end amounted to HK$2,345.7 million (2000: HK$2,744.1 million).
All bank loans and overdrafts were unsecured at 31 December 2001 and 31 December 2000.
The maturity profile of the bank loans and overdrafts of the Group is set out in note 24 on the financial statements on page 106 of this Annual Report.
Banking facilities> At 31 December 2001, the Group had stand-by banking facilities totalling HK$381.5 million (2000: HK$15.0 million).
Finance costs and interest cover> Due mainly to the reduction in interest rates and the average amount of borrowings during 2001, the total finance cost incurred by the Group reduced from HK$180.2 million in 2000 to HK$114.0 million in 2001. Interest cover, representing the ratio of profit from ordinary activities before taxation to net finance charges (total finance costs including amount being capitalised less interest income) increased from 22.5 times in 2000 to 76.1 times in 2001.
page>56 Funding and Treasury Policies> The major operating companies of the Group, The Kowloon Motor Bus Company (1933) Limited ("KMB"), Long Win Bus Company Limited ("LWB") and RoadShow Holdings Limited ("RoadShow"), arrange their own financing to meet specific requirements. Financing for the other subsidiaries of the Group is mainly provided by the holding company from its capital base. Adequate stand-by banking facilities and overdrafts are maintained to facilitate routine treasury operations.
The Group's major revenue sources are fare receipts from the franchised bus services, revenue from non-franchised transport operations and the media sales business, all denominated in Hong Kong Dollar. Financing in Hong Kong Dollar provides a natural currency hedge for the Group. At 31 December 2001, the Group's total borrowings were substantially denominated in Hong Kong Dollar and on a floating rate basis. This had enabled the Group to take full advantage of the interest rate cuts in 2001. However, it is the Group's policy to review its interest rate hedging strategy in light of the prevailing market conditions from time to time.
Foreign currency exposure did not pose significant risk for the Group as the levels of foreign currency assets and liabilities at the end of the year were relatively low when compared to its total asset base. The Group's bus purchases made up a substantial portion of its capital expenditure and capital commitments in 2001 and were mainly paid in British Pound Sterling and Euro. As these two foreign currencies have generally weakened against the Hong Kong Dollar since early 2001, the Group has not entered into any hedging arrangements. However, the Group continues to closely monitor foreign exchange movements in formulating its hedging strategy on an ongoing basis.
Cash and deposits at banks> At 31 December 2001, the Group's cash and deposits at banks amounted to HK$2,119.8 million (2000: HK$2,241.7 million), and they were mainly denominated in Hong Kong Dollar, US Dollar and British Pound Sterling.
Return on average fixed asset employed Total assets at 31 December
HK$ Million Percentage (%) HK$ Million 6,000 30 9,000
8,000 5,000 20
7,000
4,000 10 6,000
3,000 0 5,000 97 98 99 00 01 97 98 99 00 01
Average fixed asset (HK$ Million) Return on average fixed asset (Percentage)
page>57 THE KOWLOON MOTOR BUS HOLDINGS LIMITED 2001 ANNUAL REPORT FINANCIAL REVIEW
Staff cost and staff per bus Capital expenditure (Franchised public bus operations)
HK$ Million Number of staff HK$ Million 3,500 3.3 1,600
3,000 3.2 1,200
2,500 3.1 800
2,000 3.0 400
1,500 2.9 0 97 98 99 00 01 97 98 99 00 01
Staff costs (HK$ Million) Buses, other motor vehicles and vessels Staff per bus Buildings Others
SPIN-OFF OF ROADSHOW RoadShow was separately listed on the Main Board of The Stock Exchange of Hong Kong Limited on 28 June 2001. During 2001, a deemed profit of HK$349.6 million resulting from the spin-off of about 26.7% of the shares of RoadShow was recorded by the Group. The initial public offering in Hong Kong and the international placing in June 2001, together with the over-allotment option exercised by the underwriters in July 2001, raised approximately HK$588.8 million (before issuing expenses) for RoadShow. At 31 December 2001, the Company had an equity interest of 73.3% in RoadShow.
CAPITAL EXPENDITURE AND CAPITAL COMMITMENT Capital expenditure incurred by the Group during 2001 amounted to HK$1,337.5 million (2000: HK$1,047.2 million). The breakdown of the capital expenditure incurred is shown in note 14 on the financial statements on pages 99 to 100 of this Annual Report.
Capital commitments outstanding and not provided for in the financial statements of the Group at 31 December 2001 amounted to HK$790.6 million (2000: HK$1,163.0 million). Of these, HK$296.8 million (2000: HK$670.2 million) was for the purchase of buses and other motor vehicles, HK$221.6 million (2000: HK$376.3 million) was for the construction of new depots, project management and the improvement of depot facilities and HK$272.2 million (2000: HK$116.5 million) was for the purchase of other fixed assets. The commitments are to be financed by borrowings and the working capital of the Group.
At 31 December 2001, the Group had 208 (2000: 260) air-conditioned double-deck buses on order for delivery in 2002, of which 70 (2000: 89) were in various stages of construction.
page>58 Capital commitment
HK$ Million 1,200
1,000
800
600
400
200
0 97 98 99 00 01
ACCOUNTING STANDARDS AND POLICIES The financial statements set out on pages 82 to 112 have been prepared in accordance with all applicable Statements of Standard Accounting Practice ("SSAP") and Interpretations issued by the Hong Kong Society of Accountants ("HKSA") and the accounting principles generally accepted in Hong Kong. Certain new SSAPs became effective during the year and those affecting the Group are highlighted below. The details of their impact on the Group have been set out in note 12 on the financial statements on pages 96 to 97 of this Annual Report.
SSAP 9 (revised): Events after the balance sheet date
SSAP 28: Provisions, contingent liabilities and contingent assets
SSAP 30: Business combinations
SSAP 32: Consolidated financial statements and accounting for investment in subsidiaries
EMPLOYEES The provision of both franchised and non-franchised bus services is a labour intensive business. Staff costs represent a substantial portion of the Group's bus operating costs. The Group closely monitors the number and remuneration of its employees against productivity and market trends. The number and remuneration of employees of the Group over the past five years are tabulated below:
2001 2000 1999 1998 1997
Number of employees 14,144 13,773 13,421 13,437 12,599 Total remuneration (in HK$ Million) 3,301 3,129 3,049 3,108 2,670 Remuneration as percentage of total operating costs (%) 61 58 61 65 62
page>59 THE KOWLOON MOTOR BUS HOLDINGS LIMITED 2001 ANNUAL REPORT FINANCIAL REVIEW
PERFORMANCE OF INDIVIDUAL BUSINESS UNITS
FRANCHISED PUBLIC BUS DIVISION
The Kowloon Motor Bus Company (1933) Limited ("KMB")
RESULTS UNITS IN 2001 2000
Total revenue, including media sales revenue HK$ Million 6,367.4 6,142.5 Total operating and finance costs HK$ Million (5,147.8) (5,215.3) Profit from franchised bus operations before taxation HK$ Million 1,219.6 927.2 Taxation HK$ Million (163.3) (77.9) Profit from franchised bus operations after taxation HK$ Million 1,056.3 849.3 Net profit margin 16.6% 13.8% Passenger volume Million passenger trips 1,111.2 1,089.2 Kilometres travelled Million km 349.1 329.6 Staff number at year-end No. of staff 13,281 12,999 Fleet size at year-end No. of buses 4,384 4,249
The profit from the franchised bus operations after taxation of KMB for the year amounted to HK$1,056.3 million (2000: HK$849.3 million), representing an increase of 24.4% over the previous year.
KMB recorded 1,111.2 million passenger trips during 2001 (2000: 1,089.2 million). The average daily number of passenger trips in 2001 was 3.04 million (2000: 2.98 million). This represents an increase of 2.0% in the total number of passenger trips as compared with the previous year. The actual distance travelled by KMB's buses totalled 349.1 million kilometres during the year (2000: 329.6 million kilometres). The increase was primarily due to the launch of new bus routes and improved frequencies on certain bus routes.
Revenue related to KMB's franchised bus operations for 2001 have increased by 3.6% while operating costs have been decreased by 1.3% as compared with the previous year. The increase in revenue was mainly due to the increase in passenger volume, the introduction of more air-conditioned buses and new bus routes. The decrease in operating costs was mainly due to the strengthening of cost control over the year.
KMB's media sales revenue amounted to HK$71.2 million (2000: HK$70.1 million) in 2001, an increase of 1.6% over 2000. The growth in media sales revenue was mainly attributed to the marketing effort in promoting the effectiveness of bus body advertising and the installation of additional advertising panels at bus waiting shelters.
KMB was assigned a single "A" corporate rating by Standard & Poor's on 14 January 2002. The rating reflects KMB's stable business, efficient operations, flexible capital expenditure and very strong financial operations. The rating also reflects the capacity of KMB's business to withstand recession, a supportive regulatory environment and a market base dependent on public transport.
page>60 Long Win Bus Company Limited ("LWB")
RESULTS UNITS IN 2001 2000
Total revenue, including media sales revenue HK$ Million 239.3 218.3 Total operating and finance costs HK$ Million (239.8) (240.6) Loss from franchised bus operations before taxation HK$ Million (0.5) (22.3) Taxation HK$ Million - - Loss from franchised bus operations after taxation HK$ Million (0.5) (22.3) Passenger volume Million passenger trips 19.0 17.3 Kilometres travelled Million km 22.8 22.6 Staff number at year-end No. of staff 408 405 Fleet size at year-end No. of buses 160 159
The total ridership of LWB for 2001 was 19.0 million (2000: 17.3 million) passenger trips or an average daily of 52,052 (2000: 47,135) passenger trips. This represents an increase of 10.1% over 2000. The increase was primarily due to the growth in the population in Tung Chung New Town and the number of tourists visiting Hong Kong during the year. Total mileage operated for the year was 22.8 million (2000: 22.6 million) kilometres.
LWB's loss substantially reduced from HK$22.3 million in 2000 to HK$0.5 million in 2001. Capital expenditure incurred by LWB during 2001 amounted to HK$7.4 million (2000: HK$7.0 million).
The advertising revenue of LWB for 2001 slightly decreased from HK$2.4 million in 2000 to HK$2.3 million in 2001, due mainly to the slowdown in the air travel related businesses in the last quarter of 2001.
NON-FRANCHISED TRANSPORT OPERATIONS DIVISION
The Group's Non-Franchised Transport Operations Division reported a profit of HK$9.3 million (2000: HK$8.6 million) for the year 2001, representing an increase of 8.1% compared to that for the previous year. Turnover saw significant growth to HK$143.0 million in 2001 from HK$103.0 million in 2000 due primarily to the increase in fleet size. On the other hand, the total operating costs in 2001 also increased considerably over the previous year due mainly to the costs incurred to upgrade service to meet keen market competition.
With Sun Bus Limited as the flagship, Sun Bus Holdings Limited and its subsidiaries had a fleet of 205 buses at the end of 2001 (2000: 177 buses) with a total net book value of HK$69.2 million (2000: HK$82.3 million), which provides various types of non-franchised bus services mainly for residential estates, commercial clients, employees, tourists, students and contract-hire customers. During the year, 31 buses (2000: 90 buses) were purchased.
Through New Hong Kong Bus Company Limited, the Division jointly operates a cross-boundary shuttle bus service between Lok Ma Chau in Hong Kong and Huanggang in Shenzhen, together with its Shenzhen counterpart. This bus service has been well received by both regular cross-boundary commuters and holiday travellers. At present, the service deploys 17 air-conditioned single-deck buses.
page>61 THE KOWLOON MOTOR BUS HOLDINGS LIMITED 2001 ANNUAL REPORT FINANCIAL REVIEW
In May 2001, Park Island Transport Company Limited, a 65% owned subsidiary of the Group, entered into an agreement with Sun Hung Kai (Ma Wan) Transport Company Limited ("SHKMW") for the provision of bus and ferry services to and from Ma Wan Island. SHKMW is a subsidiary of Sun Hung Kai Properties Limited, a substantial shareholder of the Company. The bus and ferry services are expected to begin in the last quarter of 2002.
MEDIA SALES BUSINESS DIVISION
RoadShow Holdings Limited and its subsidiaries (the "RoadShow Group")
RESULTS UNITS IN 2001 2000
Total revenue HK$ Million 301.3 53.3 Total operating and finance costs HK$ Million (99.5) (16.8) Profit from ordinary activities before taxation HK$ Million 201.8 36.5 Taxation HK$ Million (16.8) (5.5) Profit from ordinary activities after taxation HK$ Million 185.0 31.0 Minority interests HK$ Million (9.9) (0.3) Profit from ordinary activities after taxation HK$ Million 175.1 30.7 and minority interests Net profit margin 58.1% 57.6%
The RoadShow Group reported total operating revenue of HK$301.3 million (2000: HK$53.3 million) and profit attributable to shareholders of HK$175.1 million (2000: HK$30.7 million) for the year ended 31 December 2001, both representing increases of approximately 4.7 times over 2000. The RoadShow Group's revenue was derived principally from its media sales services, media sales management and administrative services and merchandising businesses, with each accounting for approximately 86.8% (2000: 49.8%), 6.6% (2000: 33.7%) and 2.6% (2000: 15.4%) respectively of the RoadShow Group's total operating revenue for 2001.
The RoadShow Group's strong performance during 2001 was due mainly to the expansion of the multi-media on-board system installation on bus fleet from 100 franchised buses at the end of 2000 to 2,400 franchised buses and 200 public light buses at the end of 2001 and the installation of additional advertising spaces in bus waiting shelters. Its merchandising business of selling commemorative items also performed well during 2001.
Further information relating to the RoadShow Group is available in its 2001 annual report.
Mainland Operations Division> At 31 December 2001, the Group's total interest in associates and jointly controlled entity amounted to HK$6.3 million (2000: HK$9.9 million). The investments were in respect of the operation of passenger bus services in Dalian and Tianjin. The co- operative joint venture ("CJV") in Dalian, established in 1997 between a 60% owned subsidiary of the Group and Dalian City No.1 Bus Company in Liaoning Province continued to make steady progress during 2001. The other CJV in Tianjin formed between a 50% owned associate of the Group and Tianjin City Public Transport Holding Company Limited in Tianjin began operation in January 2001. This CJV made satisfactory progress during its initial year of operation. The contributions from these bus operations on the Mainland to the Group were insignificant in 2001.
page>62 CORPORATE GOVERNANCE
The Group continued to maintain high standards of corporate governance to ensure that its corporate decision-making process, internal audit and control, disclosure of information and communication with shareholders are conducted according to sound management practices and in full compliance with the regulatory standards.
BOARD OF DIRECTORS The Company's Board of Directors comprises 16 Directors, four of whom are Independent Non- executive Directors, including the Chairman. Board meetings are normally held on a monthly basis to discuss and decide major corporate and strategic issues.
AUDIT COMMITTEE The Group's Audit Committee (the "Committee") comprises three Non-executive Directors, two of whom are Independent Non-executive Directors. It meets every six months to review with senior management the accounting principles and practices adopted by the Group; the accuracy and fairness of the financial statements; and the scope of both internal and external audit work. The Committee also ensures that effective internal control procedures and practices are in place. Two Committee meetings were held during 2001. After each meeting, the Chairman of the Committee submitted a report to the Board of Directors and briefed them on significant issues.
INTERNAL AUDIT The Internal Audit Department of the Group is under the supervision of the Head of Internal Audit Department, who reports directly to the Managing Director and the Audit Committee. Its key responsibilities include carrying out comprehensive audits and reviews on the financial and operational procedures and practices of the Group on both a regular and an as-needed basis.
ENHANCED SHAREHOLDER VALUE The Group firmly believes that high standards of corporate governance enhance the corporate decision-making process in a decent, open and systematic manner. By securing investors' votes of confidence in the Group's management and internal controls, the value of the Group to the shareholders should be enhanced.
page>63 THE KOWLOON MOTOR BUS HOLDINGS LIMITED 2001 ANNUAL REPORT FINANCIAL SUMMARY FOR THE YEAR ENDED 31 DECEMBER
2001 2000 1999 HK$'M HK$'M HK$'M (RESTATED) (RESTATED)
Profit and loss account Turnover 6,862 6,323 5,871
Profit before exceptional item 1,814 936 893 Exceptional item - -- Profit from ordinary activities before taxation 1,814 936 893 Taxation 181 81 154 Profit from ordinary activities after taxation 1,633 855 739 Transfer from/(to) development fund - - - Profit attributable to shareholders 1,633 855 739
Balance sheet Fixed assets 6,047 5,381 4,952 Goodwill 21 22 4 Investment securities 15 1- Interest in subsidiaries - -- Interest in associates 1 -(5) Interest in jointly controlled entity 6 10 13 Net current assets/(liabilities) 951 926 881 Employment of funds 7,041 6,340 5,845
Financed by: Share capital 404 404 404 Reserves 4,395 2,341 2,052 Shareholders' funds 4,799 2,745 2,456 Contingency provision - insurance 202 298 305 Development fund - -- Minority interests 232 46 Long term bank loans 1,743 2,176 1,961 Other liabilities 65 1,117 1,117 Funds employed 7,041 6,340 5,845
Earnings per share $3.95 $2.12 $1.83
Dividends per share $1.86 $1.58 $1.35
Special cash bonuses per share - --
page>64 1998 1997 1996 1995 1994 1993 1992 HK$'M HK$'M HK$'M HK$'M HK$'M HK$'M HK$'M (RESTATED) (RESTATED) (RESTATED) (RESTATED) (RESTATED) (RESTATED) (RESTATED)
5,510 4,863 4,451 3,973 3,500 2,998 2,775
679 555 588 540 490 384 389 ----1,711 - - 679 555 588 540 2,201 384 389 9346277846260 586 551 526 463 2,117 322 329 --2(2)-301 586 551 528 461 2,117 352 330
4,882 4,441 3,342 2,777 2,479 2,241 2,049 ------24--- (5)(2)----- 1720----- 374 (156) (60) 40 36 (115) (53) 5,268 4,303 3,282 2,841 2,515 2,126 1,996
404 404 404 404 404 404 404 1,782 1,637 1,514 1,362 1,231 935 846 2,186 2,041 1,918 1,766 1,635 1,339 1,250 299 273 288 175 175 146 140 ---2--30 66----- 1,694 1,116 346 303 229 358 370 1,083 867 730 595 476 283 206 5,268 4,303 3,282 2,841 2,515 2,126 1,996
$1.45 $1.36 $1.31 $ 1.14 $ 5.24 $ 0.87 $ 0.82
$1.15 $1.08 $1.04 $ 0.91 $ 0.80 $ 0.68 $ 0.64
----$ 3.81 - -
page>65 THE KOWLOON MOTOR BUS HOLDINGS LIMITED 2001 ANNUAL REPORT DIRECTORS' PROFILES
The Hon Sir Sze-yuen CHUNG* GBM, GBE, PhD, FREng, JP
Chairman, aged 84. Appointed Chairman and Non-Executive Director of The Kowloon Motor Bus Holdings Limited, The Kowloon Motor Bus Company (1933) Limited and Long Win Bus Company Limited since 12 August 1999. He is also Director of CLP Holdings Limited, Sun Hung Kai Properties Limited and Wheelock & Company Limited; and Pro-Chancellor of the Hong Kong University of Science & Technology. He has contributed significantly in Hong Kong's political, industrial and tertiary education fields for over four decades. He was Senior Member of Hong Kong Legislative Council (1974-78), Executive Council (1980-88), and again Convenor of HKSAR Executive Council (1997-99). He was Chairman of Federation of Hong Kong Industries (1966-70), and Hong Kong Productivity Council (1974-78); and President of Engineering Society of Hong Kong (1960-61) and Hong Kong Academy of Engineering Sciences (1994-97). He established Hong Kong Polytechnic in 1972, City Polytechnic in 1984, Hong Kong University of Science & Technology in 1991 and Hospital Authority in 1990. He was deeply involved in the Sino-British Negotiation on Hong Kong's future (1982-85) and the establishment of the Hong Kong Special Administrative Region (1994-97).
Norman LEUNG Nai Pang GBS, JP, BA
Deputy Chairman, aged 61. Director of The Kowloon Motor Bus Holdings Limited, The Kowloon Motor Bus Company (1933) Limited and Long Win Bus Company Limited since 18 March 2000 and appointed as Deputy Chairman of RoadShow Holdings Limited on 15 January 2001. Chairman of Silver Systems Limited, Chairman of Sun Hung Kai Super Logistics Limited, Chairman of E-Supply Chain Management Limited, Chairman of Hong Kong Business Aviation Centre Limited and Deputy Chairman of Airport Freight Forwarding Centre Company Limited. As for public service, he is Chairman of the Broadcasting Authority, Chairman of the Council of City University of Hong Kong, Commissioner of Civil Aid Service, Member of the Electoral Affairs Commission, Member of the Disaster Relief Fund Advisory Committee and Member of the Hong Kong Logistics Development Council. As regards charities, he is a Council Member of The Hong Kong Digestive Foundation and a Council Member of the Save the Children Hong Kong.
Dr the Hon WOO Pak Chuen* JP, LLD(Hon), LLB, PhD
Director, aged 92. Director of The Kowloon Motor Bus Company (1933) Limited and Long Win Bus Company Limited since 26 May 1969 and 8 May 1997 respectively. Director of The Kowloon Motor Bus Holdings Limited ("the Company") since 4 September 1997. Solicitor and Notary Public, Messrs. P C Woo & Co, Solicitors. Also Chairman of Hong Kong Yakult Co Limited and Director of Liu Chong Hing Investment Limited. Former Member of the Hong Kong Legislative Council (1964-73) and Executive Council (1972-76) (Permitted by Her Majesty the Queen to retain the title "Honourable" after leaving the Executive Council). Life Member of the Court of the University of Hong Kong and of the Council of The Chinese University of Hong Kong. Father of Miss Lana Woo who holds the position of Company Secretary in the Company.
page>66 Raymond KWOK Ping Luen MA(Cantab), MBA, Hon DBA
Director, aged 48. Director of The Kowloon Motor Bus Company (1933) Limited and Long Win Bus Company Limited since 1 September 1981 and 8 May 1997 respectively. Director of The Kowloon Motor Bus Holdings Limited ("the Company") since 4 September 1997. Mr Kwok holds a Master of Arts degree in Law from Cambridge University, a Master's degree in Business Administration from Harvard University and an Honorary Doctorate in Business Administration from The Open University of Hong Kong. He is Vice Chairman and Managing Director of Sun Hung Kai Properties Limited, a substantial shareholder of the Company as defined in the Securities (Disclosure of Interests) Ordinance. He is also Chairman and Chief Executive Officer of SUNeVision Holdings Limited, Chairman of SmarTone Telecommunications Holdings Limited, a Director of Route 3 (CPS) Company Limited and Airport Freight Forwarding Centre Company Limited. In civic activities, Mr Kwok is a Non-Executive Director of the Securities and Futures Commission, a Director of The Real Estate Developers Association of Hong Kong, a Member of the General Committee of The Hong Kong General Chamber of Commerce, a Member of the Hong Kong Port and Maritime Board and Vice-Chairman of the Council of The Chinese University of Hong Kong. He is also a Member of the Advisory Council of One Country Two Systems Research Institute Limited and Chairman of the Management Committees of the Police Children's Education Trust and the Police Education and Welfare Trust. Mr Kwok is also a Member of the Ninth Chinese People's Political Consultative Conference Beijing Committee. Mr Kwok is the younger brother of Mr Walter Kwok Ping Sheung who is a Director of the Company.
Walter KWOK Ping Sheung JP, MSc(Lond), DIC, MICE
Director, aged 51. Director of The Kowloon Motor Bus Company (1933) Limited and Long Win Bus Company Limited since 15 November 1990 and 8 May 1997 respectively. Director of The Kowloon Motor Bus Holdings Limited ("the Company") since 4 September 1997. Chairman and Chief Executive of Sun Hung Kai Properties Limited, a substantial shareholder of the Company as defined in the Securities (Disclosure of Interests) Ordinance. Director of SUNeVision Holdings Limited, Wilson Parking (HK) Limited and Hung Cheong Import & Export Co Limited. Director of the Real Estate Developers Association of Hong Kong, Honorary Treasurer of the Federation of Hong Kong Hotel Owners, a member of the National Committee of the Chinese People's Political Consultative Conference, a Vice Chairman of the All-China Federation of Industry and Commerce. Chairman of the Former Directors Committee of The Community Chest of Hong Kong, a Board Member of the Lord Wilson Heritage Trust and Founding Court Member of The Hong Kong Polytechnic University. Brother of Mr Raymond Kwok Ping Luen who is a Director of the Company.
(* Independent Non-Executive Director)
page>67 THE KOWLOON MOTOR BUS HOLDINGS LIMITED 2001 ANNUAL REPORT DIRECTORS' PROFILES
YU Shu Chuen
Honorary Executive Director, aged 89. Director of The Kowloon Motor Bus Company (1933) Limited ("KMB") and Long Win Bus Company Limited since 1 September 1961 and 8 May 1997 respectively. Director of The Kowloon Motor Bus Holdings Limited since 4 September 1997. Mr Yu is director of several private property investment companies. Advisor to the Hong Kong Taishan Chamber of Commerce. Active in community services. Made significant financial and personal contribution in 1984 towards establishing the Wu Xi Secondary School in Taishan, his hometown, and elected Chairman of its Board in 1994. The school has won numerous prizes both in the province and the city. Awarded a "Gold Plate for the Contribution to the Development of Taishan" by the People's Government of Taishan City in 1992 and also awarded a "Certificate for Devotion to Children" by the People's Government of Jiangmen City in 1993. In 1997, Mr Yu was recognised as an Honorary Citizen by the People's Government of Taishan City. Mr Yu had worked in KMB for over 50 years before his retirement in 1984 as Personnel Manager.
NG Siu Chan
Director, aged 71. Director of The Kowloon Motor Bus Company (1933) Limited ("KMB") and Long Win Bus Company Limited ("LWB") since 3 March 1983 and 8 May 1997 respectively. Director of The Kowloon Motor Bus Holdings Limited ("the Company") since 4 September 1997. Also Director of Century City International Holdings Limited, Paliburg Holdings Limited and Wing Lung Bank Limited. Father of Miss Winnie J Ng who is a Director and Executive Director of the Company, KMB and LWB, and Group Managing Director of RoadShow Holdings Limited.
William LOUEY Lai Kuen BSc(Econ)
Director, aged 42. Director of The Kowloon Motor Bus Company (1933) Limited and Long Win Bus Company Limited since 14 January 1993 and 8 May 1997 respectively. Director of The Kowloon Motor Bus Holdings Limited since 4 September 1997. Previously worked for an international merchant bank in the United Kingdom for five years and an international accounting firm in the United Kingdom for three years. In 1995, he set up the William S D Louey Educational Foundation in memory of his grandfather, Mr William S D Louey, to finance outstanding students from China and Hong Kong to further their education abroad. Having aware of the success of the Foundation, Mr Louey was invited to become a committee member of the Hong Kong Oxford Scholarship Fund in 1999.
page>68 John CHAN Cho Chak GBS, JP, DBA(Hon), BA, DipMS, MIMgt, FCILT, FHKIoD
Managing Director, aged 58. Appointed Managing Director of The Kowloon Motor Bus Company (1933) Limited and Long Win Bus Company Limited with effect from 1 November 1993 and 8 May 1997 respectively. Managing Director of The Kowloon Motor Bus Holdings Limited since 4 September 1997. Also Chairman and Non- Executive Director of RoadShow Holdings Limited. Independent Non-Executive Director of Hang Seng Bank Limited, AXA General Insurance Hong Kong Limited, Hong Kong Exchanges and Clearing Limited and Guangdong Investment Limited. Former member of the Hong Kong Civil Service, 1964-78 and 1980-93. Key posts held in Government included Private Secretary to the Governor, Deputy Secretary (General Duties), Director of Information Services, Deputy Chief Secretary, Secretary for Trade and Industry and Secretary for Education and Manpower. Also former Executive Director and General Manager of Sun Hung Kai Finance Company Limited, 1978-80. Steward of the Hong Kong Jockey Club, First Vice President and Executive Committee Chairman of The Community Chest and member of the Council of the University of Hong Kong. In December 2000, Mr Chan won the Executive Award in the DHL/SCMP HK Business Awards 2000 and received an Honorary University Fellowship from the University of Hong Kong.
Charles LUI Chung Yuen M.H., BEc, AASA, FCILT
Executive Director, aged 67. Director of The Kowloon Motor Bus Company (1933) Limited ("KMB") and Long Win Bus Company Limited since 17 September 1993 and 24 August 1994 respectively. Director of The Kowloon Motor Bus Holdings Limited since 4 September 1997. Joined KMB in 1960 as Accountant and promoted to Chief Accountant, Assistant General Manager and appointed as General Manager on 1 March 1989. Retired as General Manager on 21 July 1999 on reaching the retirement age of 65 years.
Winnie J NG BA, MBA(Chicago)
Executive Director, aged 38. Director of The Kowloon Motor Bus Company (1933) Limited ("KMB") and Long Win Bus Company Limited ("LWB") since 12 October 1995 and 8 May 1997 respectively. Director of The Kowloon Motor Bus Holdings Limited ("the Company") since 4 September 1997. Also Group Managing Director of RoadShow Holdings Limited. Joined KMB in 1990 and appointed Commercial Director in 1999. Appointed as Executive Director of the Company, KMB and LWB in 2001. Active in community services, she is Board Member of Agency for Volunteer Service, Public Relations Committee Member of The Community Chest, Member of Zonta Club of Hong Kong East, Council Member of the Hong Kong Digestive Foundation, and also President of Little Chair Foundation. Daughter of Mr Ng Siu Chan who is a Director of the Company.
(*Independent Non-Executive Director)
page>69 THE KOWLOON MOTOR BUS HOLDINGS LIMITED 2001 ANNUAL REPORT DIRECTORS' PROFILES
Dr KUNG Ziang Mien, James* OBE
Director, aged 71. Director of The Kowloon Motor Bus Holdings Limited, The Kowloon Motor Bus Company (1933) Limited and Long Win Bus Company Limited since 16 July 1998. Financing and banking industry executive. Chairman and Chief Manager of Chekiang First Bank Ltd. Graduated from the Soochow University Law School LLB in 1950. Conferred by The Chinese University of Hong Kong, Doctor of Law, LLD (honoris causa) in 1990. DBA, Doctor of Business Administration (honoris causa) by Hong Kong Polytechnic in 1991. Doctor of Laws Honoris causa conferred by the University of Hong Kong in 2000. Awarded OBE by Her Majesty the Queen in 1994. Diplomatic Service: 1989-present Honorary Consul of Luxembourg. Other awards include Grand Officer of Order of Merit of the Grand Duchy of Luxembourg in 1994, Chevalier dans l'Ordre National de la Légion d'Honneur of France in 1996 and Commander in the Order of Leopold II of Belgium in 1997, Officer dans l'Ordre National de la Légion d'Honneur of France in 2000. Dr Kung is also Chairman of Chekiang First Bank (Luxembourg) SA and Vice Chairman of Bank Consortium Holding Ltd. Dr Kung is Chairman of the Hong Kong Digestive Foundation, Chairman of the Finance Committee of the Hong Kong Liver Foundation, Member of the Exchange Fund Advisory Committee and the Land Fund Advisory Committee, Member of Advisor Council, One Country Two Systems Research Institute, Chairman of the HKU-Pasteur Research Centre Ltd, and Trustee of the University of Hong Kong's Staff Terminal Benefits Scheme (1988), Staff Provident Fund and Terms of Services III Staff Retirement Scheme.
George CHIEN Yuan Hwei MSc(Lond), BSc(Eng), DIC, FICE, CEng, PEng, MITE
Director, aged 64. Director of The Kowloon Motor Bus Holdings Limited ("the Company"), The Kowloon Motor Bus Company (1933) Limited and Long Win Bus Company Limited since 16 July 1998. Alternate Director to Mr Walter Kwok Ping Sheung during the period 8 June 1995 to 13 October 1998 inclusive. Appointed Chairman of the Audit Committee of the Company on 11 February 1999. Holder of "Transportation Advisor" post in the Sun Hung Kai Properties Limited, a substantial shareholder of the Company as defined in the Securities (Disclosure of Interests) Ordinance. Previously worked for the Toronto Transit Commission in Canada for more than 10 years and in the ex-Public Works Department of the Hong Kong Government for about 24 years.
The Hon Eric LI Ka Cheung* JP, LLD, DSocSc, BA(Econ) Hon, FHKSA, Hon HKAT, FCA, FCIS, OBE
Director, aged 48. Director of The Kowloon Motor Bus Holdings Limited, The Kowloon Motor Bus Company (1933) Limited and Long Win Bus Company Limited since 10 December 1998. Senior Partner of Li, Tang, Chen & Co., Certified Public Accountants and an independent non-executive director of SmarTone Telecommunications Holdings Limited, Wong's International (Holdings) Limited, CATIC International Holdings Limited, SIIC Medical Science & Technology (Group) Limited and Hang Seng Bank Limited. Mr Li is a member of the Legislative Council of the Hong Kong Special Administrative Region and serves as Chairman of its Public Accounts Committee. He was also a past president of the Hong Kong Society of Accountants.
page>70 LUI Pochiu MCILT
Director, aged 59. Appointed as Director of The Kowloon Motor Bus Holdings Limited, The Kowloon Motor Bus Company (1933) Limited ("KMB") and Long Win Bus Company Limited effective 1 January 2001. Mr Lui has been Operations Director of KMB since 1999. In his capacity, Mr Lui manages the Planning and Development Department, Service Department and Traffic Department, looking after the overall planning, co-ordination and implementation of operations policies as well as practices. Mr Lui first joined KMB in November 1970 as Assistant Accountant. In the subsequent 30 years, Mr Lui had served in various different departments, taking up such roles as Stores Controller, Depot Manager and Traffic Manager. Mr Lui was educated in Australia and became a member of the Chartered Institute of Logistics & Transport in Hong Kong (formerly, Chartered Institute of Transport) in 1985.
Edmond HO Tat Man MA(Cantab), MBA, MCILT, MHKIoD
Deputy Managing Director, aged 40. Appointed as Director of The Kowloon Motor Bus Holdings Limited, The Kowloon Motor Bus Company (1933) Limited ("KMB") and Long Win Bus Company Limited ("LWB") effective 1 January 2001. Joined KMB in September 1998 and was appointed to the position as Finance and Administration Director since 1 January 1999. Appointed as Deputy Managing Director of the Company, KMB and LWB with effect from 10 January 2002. Posts previously held included Investment Director of a merchant bank and executive director of a number of transport infrastructure management and investment companies in Hong Kong and the Mainland. Also former director of four Sino-foreign joint venture companies of an international leading soft drink brand.
(* Independent Non-Executive Director)
page>71 THE KOWLOON MOTOR BUS HOLDINGS LIMITED 2001 ANNUAL REPORT SENIOR EXECUTIVES
NAME POSITION HELD IN THE GROUP YEAR JOINED THE GROUP
THE KOWLOON MOTOR BUS HOLDINGS LIMITED
John C C CHAN, GBS, JP, DBA(Hon), BA, DipMS, MIMgt, FCILT, FHKIoD Managing Director 1993
Charles LUI Chung Yuen, M.H., BEc, AASA, FCILT Executive Director 1960
# Winnie J NG, BA, MBA(Chicago) Executive Director 1990
Edmond T M HO, MA(Cantab), MBA, MCILT, MHKIoD Deputy Managing Director 1998
* Lana WOO, BA, AAT, CGA, ACIS, MIFC, CFC Alternate Director and Company Secretary 1984
THE KOWLOON MOTOR BUS COMPANY (1933) LIMITED
John C C CHAN, GBS, JP, DBA(Hon), BA, DipMS, MIMgt, FCILT, FHKIoD Managing Director 1993
# Winnie J NG, BA, MBA(Chicago) Executive Director 1990
LUI Pochiu, MCILT Operations Director 1970
Edmond T M HO, MA(Cantab), MBA, MCILT, MHKIoD Deputy Managing Director and Finance and Administration Director 1998 Peter C K MAK Commercial Director 1994
* Lana WOO, BA, AAT, CGA, ACIS, MIFC, CFC Alternate Director and Company Secretary 1984
Peter S H MACK, MBA, MSc(Finance), LLB(Peking), FCCA, AHKSA, ACIS Head of Accounts Department 1986 Susanne HO Head of Corporate Communications Department 2000
CHAN Pik Yin, BA Head of Customer Service Department 1993
Thomas T M TONG, MSc, CEng, MIStructE, MHKIE, RPE, AP, RSE Head of Facilities Management Department 1997
Doris K K LAU, FCCA, AHKSA Head of Financial Planning and Costing Department 1985
James C LOUEY, BSc Head of Human Resources Department 1990
Tommy H T LEUNG, BSc, DMS Head of Information Technology Department 1979
Alice LUK, BBA, AAZIIF(Snr Assoc), MCIArb Head of Insurance Department 1981
Thomas M L LEUNG, BSc(Hons), FCCA, AHKSA, CGA Head of Internal Audit Department 1987
Queenie L M YAU, BBA Head of Office Administration Department 1972
Mark LEUNG, BBA, MIM, MCILT Head of Planning and Development Department 1992
Lisa L M NG, BA Head of Purchasing Department 1979
LEUNG Kin Wang, BSc, MIMechE, CEng Head of Service Department 1980
SHUM Yuet Hung, BSc(Eng), MSc(Eng), MBA, MIRTE, MIMechE, CEng, MHKIE, ACGI, MSOE Principal Engineer, Bus Engineering 1981
Tim IP, BSocSc, MSc, DIC, MCILT Head of Traffic Department 1994 TSANG Lap Chung Head of Treasury Department 1968
WAN Kin Tim, BSc General Manager (Kowloon Bay Depot) 1981 LUI Yuk Fan General Manager (Lai Chi Kok Depot) 1979
HO Chi Man, MCILT General Manager (Shatin Depot) 1981 WOO Kin Keung General Manager (Tuen Mun Depot) 1974
page>72 NAME POSITION HELD IN THE GROUP YEAR JOINED THE GROUP
LONG WIN BUS COMPANY LIMITED
John C C CHAN, GBS, JP, DBA(Hon), BA, DipMS, MIMgt, FCILT, FHKIoD Managing Director 1993
# Winnie J NG, BA, MBA(Chicago) Executive Director 1990
Edmond T M HO, MA(Cantab), MBA, MCILT, MHKIoD Deputy Managing Director 1998
Kenrick FOK, MCILT General Manager 1988
* Lana WOO, BA, AAT, CGA, ACIS, MIFC, CFC Alternate Director and Company Secretary 1984
SUN BUS HOLDINGS LIMITED, NEW HONG KONG BUS COMPANY LIMITED
Simon TU, MCILT General Manager 1997
KMB (CHINA) HOLDINGS LIMITED
Charles LUI Chung Yuen, MH, BEc, AASA, FCILT Deputy Managing Director 1960
Simon TU, MCILT General Manager 1997
ROADSHOW HOLDINGS LIMITED
# Winnie J NG, BA, MBA(Chicago) Group Managing Director 1990 + Amanda LUI Yee Fai Director and Chief Operations Officer 1992 Eric YEUNG Chun Yiu Chief Programme Officer 2000 Nancy NG Lai Fan Chief Corporate Marketing Officer 1998 YIP CHUNG Tam Ling Rossetti Chief Marketing and Sales Officer 2001 Thomas MAK Hing Keung Chief Financial Officer and Company Secretary 2001
# Miss Winnie J NG is the daughter of Mr NG Siu Chan, who is a Director of the Company. * Miss Lana WOO is the daughter of Dr the Hon WOO Pak Chuen, who is a Director of the Company. + Miss Amanda LUI Yee Fai is the daughter of Mr LUI Pochiu, who is a Director of the Company.
page>73 THE KOWLOON MOTOR BUS HOLDINGS LIMITED 2001 ANNUAL REPORT REPORT OF THE DIRECTORS
The Directors have pleasure in submitting their Annual Report together with the audited financial statements for the year ended 31 December 2001.
PRINCIPAL ACTIVITIES The principal activity of the Company is investment holding and the principal activities of the principal subsidiaries are the operation of both franchised and non-franchised public buses as well as the provision of media sales services in Hong Kong. Particulars of the Company's subsidiaries are set out in note 16 on the financial statements.
The Group's turnover and profit are almost entirely attributable to bus operations and media sales business. The analysis of the principal activities and geographical locations of the operations of the Group during the financial year are set out in note 13 on the financial statements. Turnover and contribution to the Group's profit from non-Hong Kong activities are insignificant.
FINANCIAL STATEMENTS The profit of the Group for the year ended 31 December 2001 and the state of the Company's and the Group's affairs as at that date are set out in the financial statements on pages 88 to 112 of this Annual Report.
An analysis of the results and financial position of the Group is set out on pages 54 to 65 of this Annual Report.
DIVIDENDS An interim dividend of 40 cents per share was paid to the shareholders on 9 October 2001. The Directors now recommend that a final dividend of HK$1.46 per share in respect of the year ended 31 December 2001 be paid to the shareholders on 17 May 2002.
CHARITABLE DONATIONS Charitable donations made by the Group during the year amounted to HK$14,921,850 (2000: HK$2,597,000).
FIXED ASSETS During the year, major additions of the Group were buses and vessels under construction with a total cost of HK$647,520,000 (2000: HK$698,678,000). During the year, buses under construction with a total cost of HK$665,211,000 (2000: HK$698,189,000) were licensed and transferred to buses.
Details of other movements in fixed assets during the year are set out in note 14 on the financial statements.
DIRECTORS The Directors during the financial year and up to the date of this report were:
The Hon Sir Sze-yuen Chung, GBM, GBE, PhD, FREng, JP* (Chairman) Norman Leung Nai Pang, GBS, JP (Deputy Chairman) Dr the Hon Woo Pak Chuen, JP* Raymond Kwok Ping Luen Walter Kwok Ping Sheung, JP Yu Shu Chuen Ng Siu Chan William Louey Lai Kuen John Chan Cho Chak, GBS, JP (Managing Director) Charles Lui Chung Yuen, M.H. Winnie J Ng Dr James Kung Ziang Mien, OBE* George Chien Yuan Hwei The Hon Eric Li Ka Cheung, OBE, JP* Lui Pochiu (appointed on 1 January 2001) Edmond Ho Tat Man (appointed on 1 January 2001) Lana Woo (Alternate Director to Dr the Hon Woo Pak Chuen, JP) Patrick Chan Kai Lung (Alternate Director to Mr Walter Kwok Ping Sheung, JP) Sham Yat Wah (Alternate Director to Mr Raymond Kwok Ping Luen and appointed on 9 August 2001) Tsim Tak Po (Alternate Director to Mr Raymond Kwok Ping Luen and resigned on 9 August 2001) (* Independent Non-executive Director)
page>74 DIRECTORS (continued) In accordance with Bye-Law 87, Messrs. Norman Leung Nai Pang, Walter Kwok Ping Sheung, Ng Siu Chan and William Louey Lai Kuen retire from the Board by rotation and, being eligible, offer themselves for re-election.
Brief biographical details of the Directors of the Company are set out on pages 66 to 71 of this Annual Report.
DIRECTORS' INTERESTS IN SHARES At 31 December 2001, the Directors had the following interests in the issued share capital of the Company and its subsidiary company, RoadShow Holdings Limited ("RoadShow"), as recorded in the register of Directors' interests in shares:
(a) The Company
SHARES OF HK$1 EACH
PERSONAL FAMILY CORPORATE OTHER INTERESTS INTERESTS INTERESTS INTERESTS
The Hon Sir Sze-yuen Chung, GBM, GBE, PhD, FREng, JP 18,821 - - - Norman Leung Nai Pang, GBS, JP ---- Dr the Hon Woo Pak Chuen, JP 210,047 - - - Raymond Kwok Ping Luen 393,350 - - - Walter Kwok Ping Sheung, JP 61,522 - - - Yu Shu Chuen 2,943 70,803 - 6,909,481 (Note 1) Ng Siu Chan - 19,226,233 - - William Louey Lai Kuen 1,463,826 4,475 - - John Chan Cho Chak, GBS, JP 2,000 - - - Charles Lui Chung Yuen, M.H. 12,427 - - 2,651,750 (Note 2) Winnie J Ng 25,200 - - 19,226,233 (Note 3) Dr James Kung Ziang Mien, OBE ---- George Chien Yuan Hwei 2,000 - - - The Hon Eric Li Ka Cheung, OBE, JP ---- Lui Pochiu 452,113 - - - Edmond Ho Tat Man ---- Lana Woo (Alternate Director to Dr the Hon Woo Pak Chuen, JP) 9,475 - - - Patrick Chan Kai Lung (Alternate Director to Mr Walter Kwok Ping Sheung, JP) ---- Sham Yat Wah (Alternate Director to Mr Raymond Kwok Ping Luen) ----
page>75 THE KOWLOON MOTOR BUS HOLDINGS LIMITED 2001 ANNUAL REPORT REPORT OF THE DIRECTORS
DIRECTORS' INTERESTS IN SHARES (continued) (b) RoadShow
SHARES OF HK$0.10 EACH
PERSONAL FAMILY CORPORATE OTHER INTERESTS INTERESTS INTERESTS INTERESTS
The Hon Sir Sze-yuen Chung, GBM, GBE, PhD, FREng, JP 4,000 - - - Norman Leung Nai Pang, GBS, JP ---- Dr the Hon Woo Pak Chuen, JP 17,503 - - - Raymond Kwok Ping Luen 34,000 - - - Walter Kwok Ping Sheung, JP 6,000 - - - Yu Shu Chuen 30,000 5,900 - 480,690 (Note 1) Ng Siu Chan ---- William Louey Lai Kuen 89,371 - - - John Chan Cho Chak, GBS, JP ---- Charles Lui Chung Yuen, M.H. - - - 198,298 (Note 2) Winnie J Ng ---- Dr James Kung Ziang Mien, OBE ---- George Chien Yuan Hwei 167 - - - The Hon Eric Li Ka Cheung, OBE, JP ---- Lui Pochiu 22,552 - - - Edmond Ho Tat Man ---- Lana Woo (Alternate Director to Dr the Hon Woo Pak Chuen, JP) 2,000 - - - Patrick Chan Kai Lung (Alternate Director to Mr Walter Kwok Ping Sheung, JP) ---- Sham Yat Wah (Alternate Director to Mr Raymond Kwok Ping Luen) ----
Notes:
1 HSBC International Trustee Ltd held 6,909,481 and 480,690 shares in the Company and RoadShow respectively as trustee of a discretionary trust. Mr Yu Shu Chuen is deemed to have an interest in the discretionary trust. 2 Mr Charles Lui Chung Yuen and members of his family together have interests in certain private trusts which beneficially held 2,651,750 and 198,298 shares in the Company and RoadShow respectively. 3 Miss Winnie J Ng has interest in certain private trusts which beneficially held 19,226,233 shares in the Company.
As at 31 December 2001, none of the Directors had any non-beneficial interest in the share capital of the Company.
Except as stated herein, at no time during the year was the Company or any of its subsidiaries a party to any arrangement to enable the Directors or any of their spouses or children under eighteen years of age to acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate.
page>76 DIRECTORS' RIGHT TO ACQUIRE SHARES Under a Pre-Listing Share Option Scheme (the "Option Scheme") of RoadShow, options have been granted to certain Directors and employees of the Company and/or RoadShow or its subsidiary companies to subscribe for shares in RoadShow. The following Directors of the Company have personal interests in share options to subscribe for shares in RoadShow as follows:
NUMBER OF SHARE OPTIONS OUTSTANDING AT 31 DECEMBER 2001
Norman Leung Nai Pang, GBS, JP 2,380,000 Raymond Kwok Ping Luen 338,000 Ng Siu Chan 338,000 John Chan Cho Chak, GBS, JP 2,380,000 Charles Lui Chung Yuen, M.H. 338,000 Winnie J Ng 3,380,000 George Chien Yuan Hwei 168,000 Lui Pochiu 188,000 Edmond Ho Tat Man 188,000 Lana Woo (Alternate Director to Dr the Hon Woo Pak Chuen, JP) 168,000 Patrick Chan Kai Lung (Alternate Director to Mr Walter Kwok Ping Sheung, JP) 168,000
As at 31 December 2001, the above options were conditionally granted to the above Directors to subscribe for shares of RoadShow at an exercise price of HK$1.80 per share. The exercise period for the above Directors who have been granted options under the Option Scheme shall be two years commencing six months from 28 June 2001 except that for Directors who shall be granted 1,000,000 or more options to subscribe for the shares of RoadShow under the Option Scheme, they could
(a) during the period from the beginning of the seventh month up to the end of the twelfth month from 28 June 2001 exercise up to 50% of the number of options that they have been granted under the Option Scheme; and
(b) exercise the remaining unexercised options after the end of the twelfth month from 28 June 2001 up to the end of the exercise period.
No options were exercised, cancelled or lapsed during the year from the date of grant to 31 December 2001.
The option granted are not recognised in the financial statements until they are exercised. According to the Black-Scholes model (Note), the total value of the options granted to the above Directors under the Option Scheme was estimated at approximately HK$6,972,000 with the following variables and assumptions:
(i) Risk free rate : 4.98%, being the approximate yield of 5-year Exchange Fund Note traded on 31 December 2001.
(ii) Expected volatility: 50.67%, being the annualised volatility of the closing price of the shares of RoadShow from 28 June 2001 to 31 December 2001.
(iii) Expected dividend yield: 1.85%, being 2001 prospective dividend yield of the shares of RoadShow.
(iv) Expected life of the share options: 2 years
(v) Number of outstanding options under the Option Scheme: 10,034,000
Note: The Black-Scholes model ("Model") is developed to estimate the fair value of publicly trade options that have no vesting restriction and are fully transferable. The Model is only one of the commonly used models to estimate the fair value of an option. The value of an option varies with different variables of certain subjective assumptions. Any change in the variables so adopted may materially affect the estimation of the fair value of an option, the Model does not necessarily provide a reliable measure of the fair value of the options.
page>77 THE KOWLOON MOTOR BUS HOLDINGS LIMITED 2001 ANNUAL REPORT REPORT OF THE DIRECTORS
DIRECTORS' SERVICE CONTRACTS No Director proposed for re-election at the forthcoming Annual General Meeting has an unexpired service contract which is not determinable by the Company or any of its subsidiaries within one year without payment of compensation, other than normal statutory obligations.
DIRECTORS' INTERESTS IN CONTRACTS No 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.
SUBSTANTIAL INTERESTS IN THE SHARE CAPITAL OF THE COMPANY The Company has been notified of the following interests in the Company's issued shares at 31 December 2001 amounting to 10% or more of the shares in issue:
PERCENTAGE OF SHARES HELD TOTAL ISSUED SHARES
Sun Hung Kai Properties Limited (Note 1) 133,271,012 33.02% Arklake Limited (Note 1) 68,600,352 17.00% Austral International Limited 46,899,015 11.62% HSBC Holdings plc (Note 2) 169,721,854 42.05%
Notes:
1 The register of substantial shareholders indicates that the interest disclosed by Sun Hung Kai Properties Limited ("SHKP") includes the 68,600,352 shares disclosed by Arklake Limited. 2 For the purposes of the Securities (Disclosure of Interests) Ordinance, HSBC Holdings plc and certain of its subsidiaries ("HSBC Holdings plc Group") are deemed to be interested in the 133,271,012 shares held by SHKP in the Company. In addition, certain subsidiaries of HSBC Holdings plc are the trustees of various trusts which have interest amounting to 36,450,842 shares in the Company. Accordingly, HSBC Holdings plc Group has a deemed interest in a total of 169,721,854 shares in the Company.
PURCHASE, SALE OR REDEMPTION OF THE COMPANY'S SHARES During the year, neither the Company nor any of its subsidiaries purchased, sold or redeemed any of the Company's own shares.
SENIOR EXECUTIVES Brief particulars of the senior executives of the Group are set out on pages 72 to 73 of this Annual Report.
STAFF RETIREMENT SCHEMES The Group operates two separate non-contributory defined benefit retirement schemes, namely "The Kowloon Motor Bus Company (1933) Limited Monthly Rated Employees Provident Fund Scheme" and "The Kowloon Motor Bus Company (1933) Limited Daily Rated Employees Retirement Fund Scheme", and participates in a defined contribution retirement scheme, namely "SHKP MPF Employer Sponsored Scheme".
Defined benefit retirement schemes
The assets of the defined benefit retirement schemes are held separately from those of the Group. Both schemes are formally established under trust and are registered under the Occupational Retirement Schemes Ordinance. The members' benefits are determined based on the employees' final remuneration and length of service. Contributions to the defined benefit schemes are made in accordance with the recommendations of independent actuaries who value the retirement schemes at regular intervals, usually triennially, and are charged to the profit and loss account.
The most recent actuarial valuations of the two schemes were at 31 December 2000 which showed that there were sufficient assets in the schemes to cover both the solvency and ongoing liabilities of the schemes. Other relevant information extracted from the valuation pertaining to the two schemes is set out below:
page>78 STAFF RETIREMENT SCHEMES (continued) Defined benefit retirement schemes (continued)
The KMB Monthly Rated Employees Provident Fund Scheme i) The scheme was established with effect from 15 February 1978. ii) The actuary of the scheme is Mr Aaron Wong, Fellow of the Canadian Institute of Actuaries and Fellow of the Society of Actuaries. In the actuarial valuation, the attained age valuation method was used. Other major assumptions used in the valuation were: Investment Return and Salary Escalation at 8% per annum; Mortality Rates 1991 Hong Kong Life Tables; Nil Withdrawal Rate; and Normal Retirement Age 65. iii) The market value of the scheme assets at 31 December 2000 was HK$764.8 million. iv) The minimum level of funding commencing from 1 January 2001 recommended by the actuary is 10.1% of pay. v) The ongoing funding surplus in the scheme was HK$157.0 million and the solvency surplus was HK$218.1 million at 31 December 2000.
The KMB Daily Rated Employees Retirement Fund Scheme i) The scheme was established with effect from 1 July 1983. ii) The actuary of the scheme is Mr Aaron Wong, Fellow of the Canadian Institute of Actuaries and Fellow of the Society of Actuaries. In the actuarial valuation, the attained age valuation method was used. Other major assumptions used in the valuation were: Investment Return and Salary Escalation at 8% per annum; Mortality Rates 1991 Hong Kong Life Tables; Nil Withdrawal Rate; and Normal Retirement Age 60. iii) The market value of the scheme assets at 31 December 2000 was HK$1,947.9 million. iv) The minimum level of funding commencing from 1 January 2001 recommended by the actuary is 6.8% of pay. v) The ongoing funding surplus in the scheme was HK$280.2 million and the solvency surplus was HK$770.3 million at 31 December 2000.
Defined contribution retirement scheme
SHKP MPF Employer Sponsored Scheme (the "SHKP Scheme") The Group is also a participating member of the defined contribution retirement scheme. For those employees who do not participate in the defined benefit retirement schemes, they are covered by the SHKP Scheme which is administered by an independent trustee. The assets of the SHKP Scheme are held separately from those of the Group in independently administered funds. The Group is required to make contributions to the SHKP Scheme at rates ranging from 5% to 12% of the relevant employees' salaries, depending on their length of service with the Group. The employees are required to make contribution to the SHKP Scheme at 5% of the employees' relevant income as defined by the Hong Kong Mandatory Provident Fund Scheme Ordinance, subject to a cap of monthly relevant income of HK$20,000. Contributions to the SHKP Scheme during the year are charged to the profit and loss account. For forfeited amount due to resignation prior to the vesting of the benefits, the amount will be used to reduce the Group's contribution made in that corresponding financial year.
BANK LOANS AND OVERDRAFTS Particulars of bank loans and overdrafts of the Company and the Group as at 31 December 2001 are set out in note 24 on the financial statements.
MAJOR CUSTOMERS AND SUPPLIERS Income attributable to the five largest customers of the Group accounted for less than 30% of the total income of the Group for the year.
Purchases attributable to the five largest suppliers of the Group accounted for less than 30% of the value of the Group's total purchases for the year.
page>79 THE KOWLOON MOTOR BUS HOLDINGS LIMITED 2001 ANNUAL REPORT REPORT OF THE DIRECTORS
FINANCIAL SUMMARY A summary of the results and of the assets and liabilities of the Group for the last ten financial years is set out on pages 64 and 65 of this Annual Report.
COMPLIANCE WITH THE CODE OF BEST PRACTICE The Company has complied throughout the year with the Code of Best Practice as set out by The Stock Exchange of Hong Kong Limited in Appendix 14 to the Listing Rules, except that the independent Non-executive Directors of the Company are not appointed for a specific term but are subject to retirement by rotation and re-election at the Annual General Meeting in accordance with the Bye-Laws of the Company.
AUDIT COMMITTEE The audit committee comprises one Non-executive Director and two Independent Non-executive Directors and reports to the Board of Directors. The audit committee meets with Group's senior management and external auditors regularly to review the effectiveness of the internal control systems and the interim and annual reports of the Group.
AUDITORS KPMG retire and, being eligible, offer themselves for reappointment. A resolution for the reappointment of KPMG as auditors of the Company is to be proposed at the forthcoming Annual General Meeting.
By Order of the Board
S.Y. CHUNG Chairman
Hong Kong, 11 March 2002
page>80 AUDITORS' REPORT TO THE SHAREHOLDERS OF THE KOWLOON MOTOR BUS HOLDINGS LIMITED (Incorporated in Bermuda with limited liability)
We have audited the financial statements on pages 82 to 112 which have been prepared in accordance with accounting principles generally accepted in Hong Kong.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS The Company's Directors are responsible for the preparation of financial statements which give a true and fair view. In preparing financial statements 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 financial statements and to report our opinion to you.
BASIS OF OPINION We 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 financial statements. It also includes an assessment of the significant estimates and judgements made by the Directors in the preparation of the financial statements, 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 financial statements are free from material misstatement. In forming our opinion, we also evaluated the overall adequacy of the presentation of information in the financial statements. We believe that our audit provides a reasonable basis for our opinion.
OPINION In our opinion, the financial statements give a true and fair view of the state of affairs of the Company and of the Group as at 31 December 2001 and of the Group's profit and cash flows for the year then ended and have been properly prepared in accordance with the disclosure requirements of the Hong Kong Companies Ordinance.
KPMG Certified Public Accountants
Hong Kong, 11 March 2002
page>81 THE KOWLOON MOTOR BUS HOLDINGS LIMITED 2001 ANNUAL REPORT CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 DECEMBER 2001
NOTE 2001 2000
HK$'000 HK$'000
Turnover 2 6,861,809 6,323,392 Other revenue 3 141,817 171,851 Other net income 3 10,059 2,832 Staff costs (3,300,791) (3,128,689) Depreciation (666,746) (600,370) Spare parts, stores and fuel oil consumed (669,554) (830,579) Other operating expenses (797,234) (822,008)
Profit from operations 1,579,360 1,116,429 Deemed profit on partial disposal of a subsidiary 4 349,569 - Finance cost 5 (113,984) (180,236) Share of profit of associates - - Share of (loss)/profit of jointly controlled entity (682) 286
Profit from ordinary activities before taxation 5 1,814,263 936,479 Taxation 6(a) (180,658) (81,379)
Profit from ordinary activities after taxation 1,633,605 855,100 Minority interests (38,063) (446)
Profit attributable to shareholders 9 & 28(c) 1,595,542 854,654
Dividends attributable to the year: 10 & 28(c) Interim dividend paid of HK$0.40 per share (2000: HK$0.33 per share) 161,456 133,201 Proposed final dividend of HK$1.46 per share (2000: HK$1.25 per share) 589,314 504,549
750,770 637,750
Earnings per share 11 $3.95 $2.12
The notes on pages 88 to 112 form part of these financial statements.
page>82 CONSOLIDATED STATEMENT OF RECOGNISED GAINS AND LOSSES FOR THE YEAR ENDED 31 DECEMBER 2001
NOTE 2001 2000
HK$'000 HK$'000
Net profit for the year 1,595,542 854,654
Total recognised gains and losses 1,595,542 854,654
Prior period adjustments arising from change in accounting policies pursuant to the adoption of Statement of Standard Accounting Practice ("SSAP") 28 and SSAP 30
- Adjustment against the retained profits as at 1 January 2001 12(c) 1,125,070 -
- Adjustment against the retained profits as at 1 January 2000 12(a) - 21,774
The notes on pages 88 to 112 form part of these financial statements.
page>83 THE KOWLOON MOTOR BUS HOLDINGS LIMITED 2001 ANNUAL REPORT CONSOLIDATED BALANCE SHEET AT 31 DECEMBER 2001
NOTE 2001 2000
HK$'000 HK$'000 RESTATED
Non-current assets Fixed assets 14(a) 6,047,260 5,380,867 Goodwill 15 20,615 21,774 Interest in associates 17 637 137 Interest in jointly controlled entity 18 5,646 9,802 Investment securities 19 15,355 1,260
6,089,513 5,413,840
Current assets Other investments 20 86,237 6,080 Spare parts and stores 83,080 112,515 Accounts receivable 21 349,409 166,851 Deposits and prepayments 23,915 14,706 Deposits with banks - 150,500 Cash and cash equivalents 22 2,119,845 2,091,210
2,662,486 2,541,862
Current liabilities Accounts payable and accruals 23 804,934 797,831 Third party claims payable 223,295 232,620 Bank loans and overdrafts 24 602,919 568,429 Taxation 6(b) 79,650 16,495
1,710,798 1,615,375
Net current assets 951,688 926,487
Total assets less current liabilities 7,041,201 6,340,327
Non-current liabilities Bank loans 24 1,742,741 2,175,714 Contingency provision - insurance 12(c) & 25 201,980 298,053 Deferred taxation 26(a) 65,000 35,000 Staff retirement fund 12(c) - 1,082,600
2,009,721 3,591,367
Minority interests 232,334 4,421
2,242,055 3,595,788 NET ASSETS 4,799,146 2,744,539
page>84 CONSOLIDATED BALANCE SHEET AT 31 DECEMBER 2001 (continued)
NOTE 2001 2000
HK$'000 HK$'000 RESTATED
CAPITAL AND RESERVES
Share capital 27 403,639 403,639
Reserves 28 4,395,507 2,340,900
4,799,146 2,744,539
Approved and authorised for issue by the Board of Directors on 11 March 2002
S.Y. CHUNG Chairman
John CHAN Cho Chak Managing Director
The notes on pages 88 to 112 form part of these financial statements.
page>85 THE KOWLOON MOTOR BUS HOLDINGS LIMITED 2001 ANNUAL REPORT BALANCE SHEET AT 31 DECEMBER 2001
NOTE 2001 2000
HK$'000 HK$'000 RESTATED
Non-current assets Fixed assets 14(b) 133 167 Interest in subsidiaries 16 2,584,377 1,937,438
2,584,510 1,937,605
Current assets Deposits and prepayments 286 338 Tax recoverable 6(b) 199 2,692 Cash and cash equivalents 22 6,076 4,208
6,561 7,238
Current liability Accounts payable and accruals 23 12,582 5,929
Net current (liability)/assets (6,021) 1,309
NET ASSETS 2,578,489 1,938,914
CAPITAL AND RESERVES
Share capital 27 403,639 403,639
Reserves 28 2,174,850 1,535,275
2,578,489 1,938,914
Approved and authorised for issue by the Board of Directors on 11 March 2002
S.Y. CHUNG Chairman
John CHAN Cho Chak Managing Director
The notes on pages 88 to 112 form part of these financial statements.
page>86 CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2001
NOTE 2001 2000
HK$'000 HK$'000
Net cash inflow from operating activities 29(a) 2,194,180 1,816,516
Returns on investments and servicing of finance Interest received 110,556 122,519 Interest paid (116,954) (185,048) Dividends received from investment in securities 1,047 - Dividends paid (666,005) (565,095)
Net cash outflow from returns on investments and servicing of finance (671,356) (627,624)
Taxation Hong Kong Profits Tax paid (87,503) (90,614)
Investing activities Payment for purchase of fixed assets (1,268,470) (970,827) Proceeds from disposal of fixed assets 16,217 2,913 Payment for purchase of investment in securities (116,980) (6,960) Proceeds from sale of investment in securities 16,646 100,920 Decrease in deposits with banks 150,500 103,500 Capital repayment from jointly controlled entity 4,062 4,071 Payment for purchase of subsidiaries 29(c) - (29,952)
Net cash outflow from investing activities (1,198,025) (796,335)
Net cash inflow before financing 237,296 301,943
Financing New bank loans 29(d) 313,500 1,055,415 Repayment of bank loans 29(d) (723,873) (771,036) Contributions by/(repayment to) minority shareholders 29(d) 189,850 (2,399)
Net cash (outflow)/inflow from financing (220,523) 281,980
Increase in cash and cash equivalents 16,773 583,923
Cash and cash equivalents at 1 January 2,069,605 1,485,793
Effect of foreign exchange rates (28) (111)
Cash and cash equivalents at 31 December 29(e) 2,086,350 2,069,605
The notes on pages 88 to 112 form part of these financial statements.
page>87 THE KOWLOON MOTOR BUS HOLDINGS LIMITED 2001 ANNUAL REPORT NOTES ON THE FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES (a) Statement of compliance These financial statements have been prepared in accordance with all applicable Statements of Standard Accounting Practice and Interpretations issued by the Hong Kong Society of Accountants (the "HKSA"), accounting principles generally accepted in Hong Kong and the disclosure requirements of the Hong Kong Companies Ordinance. These financial statements also comply with the applicable disclosure provisions of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the "Stock Exchange"). A summary of the significant accounting policies adopted by the Group is set out below.
(b) Basis of preparation of the financial statements The measurement basis used in the preparation of the financial statements is historical cost modified by the marking to market of certain investments in securities as explained in the accounting policies set out below.
(c) Subsidiaries A subsidiary is an enterprise controlled by the Group. Control exists when the Group has the power, directly or indirectly, to govern the financial and operating policies of an enterprise so as to obtain benefits from its activities.
An investment in a subsidiary is consolidated into the consolidated financial statements, unless it is acquired and held exclusively with a view to subsequent disposal in the near future or operates under severe long-term restrictions which significantly impair its ability to transfer funds to the Group, in which case, it is stated in the consolidated balance sheet at fair value with changes in fair value recognised in the consolidated profit and loss account as they arise.
Intra-group balances and transactions, and any unrealised profits arising from intra-group transactions, are eliminated in full in preparing the consolidated financial statements. Unrealised losses resulting from intra-group transactions are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.
In the Company's balance sheet, an investment in a subsidiary is stated at cost less any impairment losses (note 1(i)), unless it is acquired and held exclusively with a view to subsequent disposal in the near future or operates under severe long-term restrictions which significantly impair its ability to transfer funds to the Company, in which case, it is stated at fair value with changes in fair value recognised in the profit and loss account as they arise.
(d) Associates and jointly controlled entity An associate is a company in which the Group or Company has significant influence, but not control or joint control, over its management, including participation in the financial and operating policy decisions.
A jointly controlled entity is an entity which operates under a contractual arrangement between the Group or Company and other parties, where the contractual arrangement establishes that the Group or Company and one or more of the other parties share joint control over the economic activity of the entity.
An investment in an associate or a jointly controlled entity is accounted for in the consolidated financial statements under the equity method and is initially recorded at cost and adjusted thereafter for the post-acquisition change in the Group's share of the associate's or the jointly controlled entity's net assets, unless it is acquired and held exclusively with a view to subsequent disposal in the near future or operates under severe long-term restrictions that significantly impair its ability to transfer funds to the investor or venturer, in which case it is stated at fair value with changes in fair value recognised in the consolidated profit and loss account as they arise. The consolidated profit and loss account reflects the Group's share of the post-acquisition results of the associates and jointly controlled entity for the year.
Unrealised profits and losses resulting from transactions between the Group and its associates and jointly controlled entity are eliminated to the extent of the Group's interest in the associates or jointly controlled entity, except where unrealised losses provide evidence of an impairment of the asset transferred, in which case they are recognised immediately in the profit and loss account.
(e) Goodwill Positive goodwill arising on consolidation represents the excess of the cost of the acquisition over the Group's share of the fair value of the identifiable assets and liabilities acquired.
page>88 1. SIGNIFICANT ACCOUNTING POLICIES (continued) (e) Goodwill (continued) Positive goodwill is amortised to the consolidated profit and loss account on a straight-line basis over its estimated useful life of 20 years. Positive goodwill is stated in the consolidated balance sheet at cost less any accumulated amortisation and any impairment losses (note 1(i)).
On disposal of a controlled subsidiary during the year, any attributable amount of purchased goodwill not previously amortised through the consolidated profit and loss account is included in the calculation of the profit or loss on disposal.
(f) Investments in securities The Group's and the Company's policies for investments in securities other than interest in subsidiaries, associates and jointly controlled entity are as follows:
(i) Investments held on a continuing basis for an identified long-term purpose are classified as "investment securities". Investment securities are stated in the balance sheet at cost less any provisions for diminution in value. Provisions are made when the fair values have declined below the carrying amounts, unless there is evidence that the decline is temporary, and are recognised as an expense in the profit and loss account.
(ii) All other securities (whether held for trading or otherwise) are stated in the balance sheet at fair value. Changes in fair value are recognised in the profit and loss account as they arise. Securities are presented as trading securities when they were acquired principally for the purpose of generating a profit from short term fluctuations in price or dealer's margin.
(iii) Profits or losses on disposal of investments in securities are determined as the difference between the estimated net disposal proceeds and the carrying amount of the investments and are accounted for in the profit and loss account as they arise.
(g) Fixed assets Fixed assets are stated in the balance sheet at cost or valuation less accumulated depreciation (note 1(h)) and impairment losses (note 1(i)).
Subsequent expenditure relating to a fixed asset that has already been recognised is added to the carrying amount of the asset when it is probable that future economic benefits, in excess of the originally assessed standard of performance of the existing asset, will flow to the enterprise. All other subsequent expenditure is recognised as an expense in the period in which it is incurred.
Gains or losses arising from the retirement or disposal of a fixed asset are determined as the difference between the estimated net disposal proceeds and the carrying amount of the asset and are recognised in the profit and loss account on the date of retirement or disposal.
(h) Depreciation Depreciation is calculated to write off the cost of tools at a rate of 50% per annum on a reducing balance basis, and the cost or valuation of other fixed assets on a straight-line basis over their estimated useful lives as follows:
Leasehold land - Over the remaining terms of the leases Buildings - Over the shorter of 40 years and the unexpired terms of the leases including extensions or renewal periods New buses - 14 years Light duty coaches and other motor vehicles - 6 years Plant and machinery, fixtures and others - 2 to 7 years
(i) Impairment of assets Internal and external sources of information are reviewed at each balance sheet date to identify indications that the following assets may be impaired or an impairment loss previously recognised no longer exists or may have decreased: - fixed assets (other than properties carried at revalued amount); - investments in subsidiaries, associates and jointly controlled entity (except for those accounted for at fair value under notes1(c) and (d)); and - positive goodwill.
page>89 THE KOWLOON MOTOR BUS HOLDINGS LIMITED 2001 ANNUAL REPORT NOTES ON THE FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES (continued) (i) Impairment of assets (continued) If any such indication exists, the asset's recoverable amount is estimated. For goodwill that is amortised over 20 years from initial recognition, the recoverable amount is estimated at each balance sheet date. An impairment loss is recognised whenever the carrying amount of an asset exceeds its recoverable amount.
(i) Calculation of recoverable amount The recoverable amount of an asset is the greater of its net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of time value of money and the risks specific to the asset. Where an asset does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the smallest group of assets that generates cash inflows independently (i.e. a cash-generating unit).
(ii) Reversals of impairment losses In respect of assets other than goodwill, an impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss in respect of goodwill is reversed only if the loss was caused by a specific external event of an exceptional nature that is not expected to recur, and the increase in recoverable amount relates clearly to the reversal of the effect of that specific event. A reversal of impairment losses is limited to the asset's carrying amount that would have been determined had no impairment loss been recognised in prior years. Reversals of impairment losses are credited to the profit and loss account in the year in which the reversals are recognised.
(j) Revenue recognition Provided it is probable that the economic benefits will flow to the Group and the revenue and costs, if applicable, can be measured reliably, revenue is recognised in the profit and loss account as follows:
(i) Fare revenue is recognised when the related bus services are provided.
(ii) Media sales revenue is recognised when the related advertisement or commercial appears before the public.
(iii) Interest income from bank deposits and debt securities held as other investments is accrued on a time-apportioned basis by reference to the principal outstanding and the rate applicable.
(iv) Dividend income from listed investments is recognised when the share price of the investment goes ex-dividend.
(v) When goods or services are exchanged or swapped for dissimilar goods or services, the exchange is regarded as a transaction which generates revenue. Such revenue, together with the relevant expenses are measured at the fair value of the goods or services received, adjusted by the amount of any cash or cash equivalents transferred. When the fair value of the goods or services received cannot be measured reliably, such revenue and expenses are measured at the fair value of the goods or services given up, adjusted by the amount of any cash or cash equivalents transferred.
(k) Spare parts and stores Spare parts and stores are included within current assets and stated at cost, using the first-in-first-out method. Provision is made for obsolescence where appropriate.
(l) Deferred taxation Deferred taxation is provided using 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.
(m) Translation of foreign currencies Foreign currency transactions during the year are translated into Hong Kong dollars at the exchange rates ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated into Hong Kong dollars at the exchange rates ruling at the balance sheet date. Exchange gains and losses are dealt with in the profit and loss account.
page>90 1. SIGNIFICANT ACCOUNTING POLICIES (continued) (n) Operating leases Leases of assets under which the lessor has not transferred all the risks and benefits of ownership are classified as operating leases.
Where the Group has the use of assets under operating leases, payments made under the leases are charged to the profit and loss account in equal instalments over the accounting periods covered by the lease term, except where an alternative basis is more representative of the pattern of benefits to be derived from the leased asset. Lease incentives received are recognised in the profit and loss account as an integral part of the aggregate net lease payments made. Contingent rentals are charged to the profit and loss account in the accounting period in which they are incurred.
(o) Retirement costs The Group operates two separate non-contributory defined benefit retirement schemes and participates in a defined contribution retirement scheme. Annual contributions to the defined benefit retirement schemes are made in accordance with the recommendations of independent actuaries based on triennial actuarial valuations. Contributions to all these schemes during the year are charged to the profit and loss account.
(p) Borrowing costs Borrowing costs are expensed in the profit and loss account in the period in which they are incurred, except to the extent that they are capitalised as being directly attributable to the acquisition or construction of buses which necessarily takes a substantial period of time to get ready for its intended use.
The capitalisation of borrowing cost as part of the cost of buses commences when expenditures for the buses are being incurred, borrowing costs are being incurred and activities that are necessary to prepare the buses for its intended use are in progress. Capitalisation of borrowing costs is suspended or ceases when substantially all the activities necessary to prepare the buses for its intended use are interrupted or complete.
(q) Provisions Provisions are recognised for liabilities of uncertain timing or amount when the Company or Group has a legal or constructive obligation arising as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made. Where the time value of money is material, provisions are stated at present value of the expenditures expected to settle the obligation.
Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events are also disclosed as contingent liabilities unless the probability of outflow is remote.
(r) Related parties For the purposes of these financial statements, 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 other entities.
(s) Cash equivalents Cash equivalents are short-term, highly liquid investments which are readily convertible into known amounts of cash without notice and which were within three months of maturity when acquired. For the purposes of the cash flow statement, cash equivalents would also include bank overdrafts and advances from banks repayable within three months from the date of the advance.
(t) Segment reporting A segment is a distinguishable component of the Group that is engaged either in providing products or services (business segment), or in providing products or services within a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those of other segments.
In accordance with the Group's internal financial reporting, the Group has chosen business segment information as the primary reporting format.
page>91 THE KOWLOON MOTOR BUS HOLDINGS LIMITED 2001 ANNUAL REPORT NOTES ON THE FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES (continued) (t) Segment reporting (continued) Segment revenue, expenses, results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis to that segment. For example, segment assets may include inventories, trade receivables and property, plant and equipment. Segment revenue, expenses, assets and liabilities are determined before intra- group balances and intra-group transactions are eliminated as part of the consolidated process, except to the extent that such intra-group balances and transactions are between group enterprises within a single segment. Inter-segment pricing is based on similar terms as those available to other external parties.
Segment capital expenditure is the total cost incurred during the period to acquire segment assets (both tangible and intangible) that are expected to be used for more than one period.
Unallocated items mainly comprise financial and corporate assets, interest-bearing loans, borrowings, corporate and financing expenses and minority interests.
2. TURNOVER The principal activity of the Company is investment holding. The principal activities of the subsidiaries are set out in note 16 on the financial statements.
Turnover comprises fare revenue from the operation of franchised and non-franchised bus services and media sales revenue. The amount of each significant category of revenue recognised in turnover during the year is as follows:
2001 2000
HK$'000 HK$'000
Fare revenue from franchised bus services 6,389,853 6,129,661 Revenue from non-franchised bus services 143,290 102,677 Media sales revenue 328,666 91,054
6,861,809 6,323,392
3. INCOME
Other revenue 2001 2000
HK$'000 HK$'000
Interest income from bank deposits 89,990 138,842 Insurance claims received 34,995 25,963 Dividend income from listed securities 1,047 - Interest income from unlisted debt securities 154 - Interest income from listed debt securities - 263 Sundry revenue 15,631 6,783
141,817 171,851
Other net income 2001 2000
HK$'000 HK$'000
Gain/(loss) on disposal of fixed assets 10,735 (3,821) Realised and unrealised (loss)/gain on investments in securities carried at fair value (6,082) 420 Net miscellaneous business receipts 5,406 6,233
10,059 2,832
page>92 4. DEEMED PROFIT ON PARTIAL DISPOSAL OF A SUBSIDIARY Deemed profit on partial disposal of a subsidiary represents profit arising from the spin-off of the RoadShow Holdings Limited ("RoadShow") from the Group on 28 June 2001 by issuing new shares to third parties, pursuant to RoadShow's listing on The Hong Kong Stock Exchange and International Placing. As a result, the Group's shareholding in RoadShow reduced from 100% of the issued share capital before the spin-off to 75% of the issued share capital as enlarged by the issue of new shares to third parties.
Subsequently, the underwriters of the Global Offering in RoadShow exercised an over-allotment option for the issuance of additional 21,694,000 shares at an issue price of HK$2.25 per share on 18 July 2001 in accordance with the International Placing Agreement dated 18 June 2001. The over-allotment shares represent approximately 2.26% of the issued share capital of RoadShow before the over-allotment. Consequently, the Group's shareholding in RoadShow further reduced, by way of dilution, from 75% to approximately 73.3% immediately after the issue of the over-allotment shares.
5. PROFIT FROM ORDINARY ACTIVITIES BEFORE TAXATION Profit from ordinary activities before taxation is arrived at after charging/(crediting):
2001 2000
HK$'000 HK$'000
(a) Finance cost: Interest on bank loans and overdrafts 113,984 180,719 Less: Interest capitalised into buses under construction - (483)
113,984 180,236
(b) Other items: Retirement costs included in staff costs - annual contributions to retirement schemes 178,689 164,418 Auditors' remuneration 3,594 1,654 Operating lease charges on temporary bus depots and terminal shelters 2,240 1,357 Amortisation of positive goodwill included in depreciation 1,159 -
6. TAXATION (a) Taxation in the consolidated profit and loss account represents:
2001 2000
HK$'000 HK$'000
Provision for Hong Kong Profits Tax at 16% of the estimated assessable profits for the year 146,445 88,429 Underprovision/(overprovision) in respect of prior years 4,213 (7,050)
150,658 81,379 Deferred taxation (note 26(a)) 30,000 -
180,658 81,379
page>93 THE KOWLOON MOTOR BUS HOLDINGS LIMITED 2001 ANNUAL REPORT NOTES ON THE FINANCIAL STATEMENTS
6. TAXATION (continued) (b) Taxation in the balance sheets represents:
THE GROUP THE COMPANY 2001 2000 2001 2000
HK$'000 HK$'000 HK$'000 HK$'000
Provision for Hong Kong Profits Tax for the year 146,445 88,429 198 57 Provisional Profits Tax (paid)/refunded (65,084) (73,134) 2,295 (3,890)
81,361 15,295 2,493 (3,833)
Balance of Profits Tax (recoverable)/payable relating to prior year (1,711) 16,993 (2,692) 1,141
Less: Tax Reserve Certificate purchased under order of the Commissioner of Inland Revenue (Note) - (15,793) - -
79,650 16,495 (199) (2,692)
Note: A query has been raised by the Inland Revenue Department in 2000 in respect of the deductibility of certain depreciation allowances claimed by a subsidiary company. The subsidiary has objected to the assessment during the year. However, the above issue has not yet been resolved up to the date of this Annual Report.
7. DIRECTORS' REMUNERATION Directors' remuneration disclosed pursuant to Section 161 of the Hong Kong Companies Ordinance is as follows:
2001 2000
HK$'000 HK$'000
Fees 1,080 784 Salaries and allowances 13,327 7,469 Discretionary and performance related bonuses 24,106 10,677 Retirement fund contributions 1,839 1,351
40,352 20,281
Included in the directors' remuneration were fees and other emoluments of HK$1,309,200 (2000: HK$1,119,200) paid to the Independent Non-executive Directors during the year.
The remuneration of the Directors is within the following bands:
2001 2000
NUMBER OF DIRECTORS
HK$Nil – HK$1,000,000 13 14 HK$1,000,001 – HK$1,500,000 2 1 HK$3,000,001 – HK$3,500,000 - 1 HK$3,500,001 – HK$4,000,000 3 - HK$12,500,001 – HK$13,000,000 - 1 HK$23,000,001 – HK$23,500,000 1 -
page>94 8. INDIVIDUALS WITH HIGHEST EMOLUMENTS Of the five individuals with the highest emoluments, four (2000: two) are Directors whose emoluments are disclosed in note 7. The aggregate of the emoluments in respect of the other one (2000: three) individual is as follows:
2001 2000
HK$'000 HK$'000
Salaries and allowances 1,881 5,893 Discretionary and performance related bonuses 406 1,546 Retirement fund contributions 153 569
2,440 8,008
The emoluments of the one (2000: three) individual with the highest emoluments is within the following bands:
2001 2000
NUMBER OF INDIVIDUALS
HK$2,000,001 – HK$2,500,000 1 1 HK$2,500,001 – HK$3,000,000 - 1 HK$3,000,001 – HK$3,500,000 - 1
9. PROFIT ATTRIBUTABLE TO SHAREHOLDERS The profit attributable to shareholders includes a profit of HK$869,649,000 (2000: (restated) HK$285,602,000) which has been dealt with in the financial statements of the Company.
Reconciliation of the above amount to the Company's profit for the year:
2001 2000
HK$'000 HK$'000
Amount of consolidated profit attributable to shareholders dealt with in the Company's financial statements 869,649 285,602
Final dividends from subsidiaries attributable to the profits of the previous financial year, approved and paid during the year 435,931 431,894
1,305,580 717,496
page>95 THE KOWLOON MOTOR BUS HOLDINGS LIMITED 2001 ANNUAL REPORT NOTES ON THE FINANCIAL STATEMENTS
10. DIVIDENDS (a) Dividends attributable to current year:
2001 2000
HK$'000 HK$'000
Interim dividend declared and paid of HK$0.4 per share (2000: HK$0.33 per share) 161,456 133,201
Final dividend proposed after the balance sheet date of HK$1.46 per share (2000: HK$1.25 per share) 589,314 504,549
750,770 637,750
The final dividend proposed after the balance sheet date has not been recognised as a liability at the balance sheet date.
(b) Dividends attributable to previous financial year, approved and paid during the current year:
2001 2000
HK$'000 HK$'000
Final dividend in respect of previous financial year of HK$1.25 per share (2000: HK$1.07 per share) 504,549 431,894
11. EARNINGS PER SHARE The calculation of earnings per share is based on the profit attributable to shareholders of HK$1,595,542,000 (2000: HK$854,654,000) and 403,639,413 shares in issue during the two years.
12. CHANGES IN ACCOUNTING POLICIES (a) Goodwill In prior years, goodwill arising on the acquisition of subsidiaries, being the excess of the cost of investments in these companies over the fair value of the Group's share of the separable net assets acquired, was charged to revenue reserves in the year in which it arose. With effect from 1 January 2001, the Group adopted the new policy of stating the positive goodwill at cost less any accumulated amortisation and any impairment losses in order to comply with the SSAP 30 "Business Combinations" issued by the HKSA. Amortisation of positive goodwill is on a straight-line basis over an estimated useful life of 20 years.
As a result of the adoption of this new accounting policy, the profit for the year has been decreased by HK$1,159,000 (2000: HK$Nil) and the net assets have been increased by HK$20,615,000 (2000: HK$21,774,000). The new accounting policy has been adopted retrospectively, with the opening balance of retained profits and reserves and the comparative information adjusted for the amounts relating to prior years.
(b) Dividends In prior years, dividends proposed or declared were recognised as a liability in the accounting period to which they related. With effect from 1 January 2001, in order to comply with SSAP 9 (revised) "Events after the balance sheet date", issued by the HKSA, the Group recognises dividends proposed or declared as a liability in the accounting period in which they are declared by directors (in case of interim dividends) or approved by the shareholders (in the case of final dividends). Consequently, dividend income from subsidiary is recognised as income in the Company's profit and loss account in the accounting period in which they are declared.
As a result of this new accounting policy, the Group's net assets at 31 December 2001 have been increased by HK$589,314,000 (2000: HK$504,549,000). There is no impact on the Group's profit attributable to shareholders for the years presented. This new accounting policy has been adopted retrospectively, with the opening balance of retained profits and the comparative information adjusted for the amounts relating to prior years.
page>96 12. CHANGES IN ACCOUNTING POLICIES (continued) (c) Provisions In previous years, the Group maintained provisions for loss in bus fire damage and for the staff retirement funds. With effect from 1 January 2001, the Group adopted SSAP 28 "Provisions, contingent liabilities and contingent assets" issued by the HKSA.
As a result, the Group's net assets at 31 December 2001 have been increased by HK$1,125,070,000 (2000: HK$Nil). The effect of adopting this new statement has been adjusted to the opening balance of retained profits for the year. No restatement of other comparative information has been made.
13. SEGMENT REPORTING Segment information is presented in respect of the Group's business and geographical segments. Business segment information is chosen as the primary reporting format because this is more relevant to the Group's internal financial reporting.
Business segments
The Group comprises the following main business segments:
Bus operations: The provision of franchised and non-franchised public buses services.
Media sales services: The provision of audio-video programming through a multi-media on-board system and marketing of exterior advertising spaces on transit vehicles and transit vehicle shelters.
MEDIA INTER-SEGMENT BUS OPERATIONS SALES BUSINESS ELIMINATION CONSOLIDATED 2001 2000 2001 2000 2001 2000 2001 2000
HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000
Revenue from external customers 6,533,143 6,232,338 328,666 91,054 - - 6,861,809 6,323,392
Inter-segment revenue - - 25,736 - (25,736) - - -
Other revenue from external customers 50,626 32,746 - - - - 50,626 32,746
Total 6,583,769 6,265,084 354,402 91,054 (25,736) - 6,912,435 6,356,138
Segment result 1,284,733 914,131 239,643 80,091 - - 1,524,376 994,222
Unallocated net operating income and expenses 54,984 122,207
Profit from operations 1,579,360 1,116,429
Deemed profit on partial disposal of a subsidiary 349,569 -
Finance cost (113,984) (180,236)
Share of profits less losses of associates and jointly controlled entity (682) 286 - - - - (682) 286
page>97 THE KOWLOON MOTOR BUS HOLDINGS LIMITED 2001 ANNUAL REPORT NOTES ON THE FINANCIAL STATEMENTS
13. SEGMENT REPORTING (continued) Business segments (continued)
MEDIA INTER-SEGMENT BUS OPERATIONS SALES BUSINESS ELIMINATION CONSOLIDATED 2001 2000 2001 2000 2001 2000 2001 2000
HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000
Taxation (180,658) (81,379)
Minority interests (38,063) (446) Profit attributable to shareholders 1,595,542 854,654
Depreciation for the year 646,966 600,151 18,621 219 - -
Significant non-cash expenses (other than depreciation and amortisation) - - 7,581 - - -
Segment assets 6,189,754 5,655,011 316,110 18,212 - - 6,505,864 5,673,223
Interests in associates and jointly controlled entity 6,283 9,939 - - - - 6,283 9,939
Unallocated assets 2,239,852 2,272,540
Total assets 8,751,999 7,955,702
Segment liabilities 1,214,445 1,317,176 14,574 7,168 - - 1,229,019 1,324,344
Unallocated liabilities 2,491,500 3,882,398
Total liabilities 3,720,519 5,206,742
Capital expenditure incurred during the year 1,177,038 1,006,447 133,765 5,865 - -
Geographical segments The Group's turnover and operating profit are almost entirely derived from Hong Kong. Accordingly, no analysis by geographical segment is provided.
page>98 14. FIXED ASSETS (a) The Group:
BUSES AND BUSES AND OTHER VESSELS LEASEHOLD MOTOR UNDER LAND BUILDINGS VEHICLES CONSTRUCTION OTHERS TOTAL
HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000
Cost or valuation: At 1 January 2001 132,909 994,494 7,132,660 197,725 683,482 9,141,270 Additions - 318,985 27,537 647,520 359,377 1,353,419 Transfer of buses - - 665,211 (665,211) - - Disposals (2,898) (14,984) (128,224) - (2,495) (148,601) At 31 December 2001 130,011 1,298,495 7,697,184 180,034 1,040,364 10,346,088
Aggregate depreciation: At 1 January 2001 33,277 431,072 2,932,617 - 407,735 3,804,701 Charge for the year 2,126 68,743 451,206 - 143,512 665,587 Written back on disposal (370) (12,902) (127,904) - (1,943) (143,119) At 31 December 2001 35,033 486,913 3,255,919 - 549,304 4,327,169
Net book value: At 31 December 2001 94,978 811,582 4,441,265 180,034 491,060 6,018,919
Add: Deposits paid in respect of buses on order 28,341 6,047,260
Net book value: At 31 December 2000 99,632 563,422 4,200,043 197,725 275,747 5,336,569
Add: Deposits paid in respect of buses on order 44,298 5,380,867
(b) The Company: Others
HK$'000
Cost: At 1 January 2001 and 31 December 2001 201
Aggregate depreciation: At 1 January 2001 34 Charge for the year 34
At 31 December 2001 68
Net book value: At 31 December 2001 133
At 31 December 2000 167
page>99 THE KOWLOON MOTOR BUS HOLDINGS LIMITED 2001 ANNUAL REPORT NOTES ON THE FINANCIAL STATEMENTS
14. FIXED ASSETS (continued) (c) All the Group's leasehold land and buildings are held in Hong Kong and on medium-term leases.
(d) Valuation Included in the cost or valuation of fixed assets of the Group is the following asset shown at valuation:
DATE OF VALUATION VALUATION NET BOOK VALUE
HK$'000 HK$'000
Leasehold land 15 July 1959 3,284 -
In preparing these financial statements, advantage has been taken of the transitional provisions set out in paragraph 80 of SSAP 17 (revised) "Property, Plant and Equipment" issued by the HKSA, with the effect that leasehold land has not been revalued to fair value at the balance sheet date.
15. GOODWILL
HK$'000
Cost: At 1 January 2001(restated) and 31 December 2001 23,172
Accumulated amortisation: At 1 January 2001 (restated) 1,398 Amortisation for the year 1,159
At 31 December 2001 2,557
Carrying amount: At 31 December 2001 20,615
At 31 December 2000 (restated) 21,774
16. INTEREST IN SUBSIDIARIES
2001 2000
HK$'000 HK$'000 RESTATED
Unlisted shares, at cost 1,036,507 1,036,507 Amounts due from subsidiaries 1,564,534 944,614 Amounts due to subsidiaries (16,664) (43,683)
2,584,377 1,937,438
page>100 16. INTEREST IN SUBSIDIARIES (continued) Details of the principal subsidiaries are as follows:
PERCENTAGE OF EQUITY PARTICULARS PLACE OF OF ISSUED GROUP'S INCORPORATION AND PAID EFFECTIVE HELD BY THE HELD BY PRINCIPAL NAME OF COMPANY AND OPERATION UP CAPITAL HOLDING COMPANY SUBSIDIARY ACTIVITY
The Kowloon Motor Hong Kong 403,639,413 100 - 100 Provision of Bus Company (1933) Limited shares of franchised HK$1 each public bus services in Hong Kong
Long Win Bus Hong Kong 100,000,000 100 - 100 Provision of Company Limited shares of franchised HK$1 each public bus services for North Lantau and the airport at Chek Lap Kok
Sun Bus Limited Hong Kong 2 shares of 100 - 100 Provision of HK$1 each non-franchised bus services in Hong Kong
Chomang Travel Hong Kong 10,000 shares 100 - 100 Provision of Transport Company Limited of HK$1 each non-franchised bus services in Hong Kong
Bun Tang Bus Service Hong Kong 120,000 100 - 100 Provision of Company Limited shares of non-franchised HK$1 each bus services in Hong Kong
Sau Luen P.L.B. Co., Limited Hong Kong 10,000 shares 100 - 100 Provision of of HK$1 each non-franchised bus services in Hong Kong
New Hong Kong Hong Kong 1,000 shares 100 - 100 Provision of Bus Company Limited of HK$1 each cross border shuttle bus services between Lok Ma Chau (Hong Kong) and Huanggang (Shenzhen)
page>101 THE KOWLOON MOTOR BUS HOLDINGS LIMITED 2001 ANNUAL REPORT NOTES ON THE FINANCIAL STATEMENTS
16. INTEREST IN SUBSIDIARIES (continued) Details of the principal subsidiaries are as follows: (continued)
PERCENTAGE OF EQUITY PARTICULARS PLACE OF OF ISSUED GROUP'S INCORPORATION AND PAID EFFECTIVE HELD BY THE HELD BY PRINCIPAL NAME OF COMPANY AND OPERATION UP CAPITAL HOLDING COMPANY SUBSIDIARY ACTIVITY
Park Island Transport Hong Kong 10,000 shares 65 - 65 Provision of Company Limited of HK$1 each non-franchised bus and ferry services in Hong Kong
RoadShow Holdings Limited Bermuda 981,694,000 73.3 - 73.3 Investment holding shares of HK$0.1 each
CityVision Limited Hong Kong 10,000 shares 66 - 66 Operation of of HK$1 each multi-media on-board business on transit vehicles
KM-Vision Limited Hong Kong 10,000 shares 74.6 - 74.6 Operation of of HK$1 each multi-media on-board business on transit vehicles
LW-Vision Limited Hong Kong 10,000 shares 74.6 - 74.6 Operation of of HK$1 each multi-media on-board business on transit vehicles
RoadShow Creations Limited Hong Kong 2 shares of 73.3 - 73.3 Trading of HK$1 each bus souvenir
RoadShow Media Limited Hong Kong 2 shares of 73.3 - 73.3 Provision of media HK$1 each sales agency and management services for advertising on transit vehicle exteriors and shelters, and for the multi-media on-board business
RoadShow Productions Limited Hong Kong 2 shares of 73.3 - 73.3 Production of HK$1 each content for the multi-media on-board systems
page>102 16. INTEREST IN SUBSIDIARIES (continued) Details of the principal subsidiaries are as follows (continued):
PERCENTAGE OF EQUITY PARTICULARS PLACE OF OF ISSUED GROUP'S INCORPORATION AND PAID EFFECTIVE HELD BY THE HELD BY PRINCIPAL NAME OF COMPANY AND OPERATION UP CAPITAL HOLDING COMPANY SUBSIDIARY ACTIVITY
Lai Chi Kok Incorporated 1 share of 100 - 100 Property holding Properties Investment Limited in British US$1 Virgin Islands and operated in Hong Kong
KMB Financial British 1 share of 100 - 100 Investment holding Services Limited Virgin Islands US$1
HK Macau Ltd British 1,200 shares 60 - 60 Investment holding Virgin Islands of US$1 each
17. INTEREST IN ASSOCIATES
THE GROUP 2001 2000
HK$'000 HK$'000
Unlisted Shares Share of net assets less provision 59 59 Amount due from associate 5,500 5,000 Amount due to associate (4,922) (4,922)
637 137
Details of the associates are as follows:
PROPORTION OF OWNERSHIP INTEREST PARTICULARS PLACE OF OF ISSUED GROUP'S INCORPORATION AND PAID EFFECTIVE HELD BY THE HELD BY PRINCIPAL NAME OF ASSOCIATE AND OPERATION UP CAPITAL INTEREST COMPANY SUBSIDIARY ACTIVITY
Art East Limited Hong Kong 200,000 50 - 50 Dormant shares of HK$1 each
HK Macau Investment British 2 shares of 50 - 50 Investment (Tianjin) Limited Virgin Islands US$1 each holding
page>103 THE KOWLOON MOTOR BUS HOLDINGS LIMITED 2001 ANNUAL REPORT NOTES ON THE FINANCIAL STATEMENTS
18. INTEREST IN JOINTLY CONTROLLED ENTITY
THE GROUP 2001 2000
HK$'000 HK$'000
Share of net assets 2,906 7,650 Amount due from jointly controlled entity 2,740 2,152
5,646 9,802
Details of the Group's interest in the jointly controlled entity are as follows:
PROPORTION OF OWNERSHIP INTEREST PARTICULARS FORM OF PLACE OF OF ISSUED GROUP'S BUSINESS INCORPORATION AND PAID EFFECTIVE HELD BY THE HELD BY PRINCIPAL NAME OF JOINT VENTURE STRUCTURE AND OPERATION UP CAPITAL INTEREST COMPANY SUBSIDIARY ACTIVITY
Dalian HK Incorporated People's Registered (Note) - (Note) Provision of Macau Motor Bus Republic of capital of bus services Services Limited China RMB in Dalian, ("PRC") 22,000,000 PRC
Note: A co-operative joint venture, Dalian HK Macau Motor Bus Services Limited ("Dalian HK Macau"), was formed between HK Macau Ltd ("HK Macau"), a 60% owned subsidiary of the Group, and , a PRC entity. The principal activity of Dalian HK Macau is the operation of bus services in Dalian, the PRC.
Pursuant to the joint venture agreement, HK Macau contributed the whole of the registered capital of RMB22 million. The joint venture is for a period of 15 years commencing from 31 July 1997. The capital contribution is repayable by Dalian HK Macau in equal annual instalments over 5 years. The profits and losses of Dalian HK
Macau are shared equally by HK Macau and .
According to the joint venture agreement, HK Macau has the right to appoint five out of a total of nine directors of Dalian HK Macau with each director carrying one vote. Although this represents a majority of the board of directors, a board resolution can only be passed with a minimum of six votes in accordance with the articles of association of the joint venture. Accordingly, HK Macau has no effective control over the board of directors and Dalian HK Macau has been excluded from consolidation and dealt with in the consolidated financial statements under the equity method of accounting and classified as a jointly controlled entity.
19. INVESTMENT SECURITIES
THE GROUP 2001 2000
HK$'000 HK$'000
Unlisted equity securities 15,355 1,260
page>104 20. OTHER INVESTMENTS
THE GROUP 2001 2000
HK$'000 HK$'000
Trading securities (at market value) Listed equity securities in Hong Kong 36,068 6,080
Other securities Unlisted debt securities 50,169 -
86,237 6,080
21. ACCOUNTS RECEIVABLE
THE GROUP 2001 2000
HK$'000 HK$'000
Trade and other receivables 346,326 143,361 Interest receivable 3,083 23,490
349,409 166,851
Included in accounts receivable are trade receivables (net of provisions for doubtful debts) with the following ageing analysis:
THE GROUP 2001 2000
HK$'000 HK$'000
Current 182,933 68,648 1 to 3 months overdue 31,013 8,763 More than 3 months overdue 1,883 4,383
215,829 81,794
Debts are normally due within 30 - 90 days from the date of billing.
22. CASH AND CASH EQUIVALENTS
THE GROUP THE COMPANY 2001 2000 2001 2000
HK$'000 HK$'000 HK$'000 HK$'000
Deposits with banks 2,090,118 2,051,826 - - Cash at bank and in hand 29,727 39,384 6,076 4,208
2,119,845 2,091,210 6,076 4,208
page>105 THE KOWLOON MOTOR BUS HOLDINGS LIMITED 2001 ANNUAL REPORT NOTES ON THE FINANCIAL STATEMENTS
23. ACCOUNTS PAYABLE AND ACCRUALS
THE GROUP THE COMPANY 2001 2000 2001 2000
HK$'000 HK$'000 HK$'000 HK$'000
Trade payables 142,417 186,188 - - Other payables and accruals 662,517 611,643 12,582 5,929
804,934 797,831 12,582 5,929
Included in accounts payable and accruals are trade payables with the following ageing analysis:
THE GROUP THE COMPANY 2001 2000 2001 2000
HK$'000 HK$'000 HK$'000 HK$'000
Due within 1 month or on demand 138,882 181,486 - - Due after 1 month but within 3 months 1,461 4,292 - - Due after 3 months but within 12 months 2,074 410 - -
142,417 186,188 - -
24. BANK LOANS AND OVERDRAFTS At 31 December 2001, the interest-bearing bank loans and overdrafts were repayable as follows:
THE GROUP 2001 2000
HK$'000 HK$'000
Within 1 year or on demand 602,919 568,429
After 1 year but within 2 years 475,037 589,524 After 2 years but within 5 years 985,916 1,406,486 After 5 years 281,788 179,704
1,742,741 2,175,714
2,345,660 2,744,143
All bank loans and overdrafts were unsecured at 31 December 2000 and 2001.
page>106 25. CONTINGENCY PROVISION - INSURANCE
THE GROUP 2001 2000
HK$'000 HK$'000
Balance at 1 January 298,053 304,787 Adjustment (note 12(c) and 28(c)) (42,470) - Provision written back during the year (53,603) (6,734)
Balance at 31 December 201,980 298,053
This provision represents amounts set aside annually by the Group to meet liabilities which are expected to arise from third party claims in connection with the Group's bus operations.
26. DEFERRED TAXATION (a) Movements of deferred taxation comprises:
THE GROUP 2001 2000
HK$'000 HK$'000
Balance at 1 January 35,000 35,000 Transfer from profit and loss account (note 6(a)) 30,000 -
Balance at 31 December 65,000 35,000
(b) Major components of deferred tax of the Group are set out below:
2001 2000 POTENTIAL POTENTIAL LIABILITIES LIABILITIES PROVIDED UNPROVIDED PROVIDED UNPROVIDED
HK$'000 HK$'000 HK$'000 HK$'000
Depreciation allowances in excess of related depreciation 65,000 610,185 35,000 592,735 General provisions - (37,205) - (228,506) Future benefit of tax losses - (58,549) - (62,984)
65,000 514,431 35,000 301,245 (Note (a)) (Note (b)) (Note (a)) (Note (b))
Notes: (a) A provision has been made in the financial statements for deferred taxation amounting to HK$30,000,000 (2000: HK$Nil) during the year which the Directors expect with reasonable probability to crystallise in the foreseeable future. (b) The Directors consider that these potential liabilities will not crystallise in the foreseeable future as the timing differences will be replaced by similar timing differences from the Group's capital expenditure in the coming years and therefore will not reverse. Accordingly, no provision for deferred taxation has been made. (c) There are no significant potential deferred tax liabilities of the Company for which provision has not been made.
page>107 THE KOWLOON MOTOR BUS HOLDINGS LIMITED 2001 ANNUAL REPORT NOTES ON THE FINANCIAL STATEMENTS
27. SHARE CAPITAL
2001 2000
HK$'000 HK$'000
Authorised: 600,000,000 shares of HK$1 each 600,000 600,000
Issued and fully paid: 403,639,413 shares of HK$1 each 403,639 403,639
28. RESERVES
THE GROUP THE COMPANY 2001 2000 2001 2000
HK$'000 HK$'000 HK$'000 HK$'000 (RESTATED) (RESTATED)
(a) Capital reserve At 1 January and 31 December 2,412 2,412 - -
(b) General reserve At 1 January and 31 December 17,601 17,601 - -
(c) Retained profits At 1 January - as previously reported 1,794,564 1,596,042 166,657 82,874 - change in accounting policy with respect to: - dividends proposed (note 12(b)) 504,549 431,894 504,549 431,894 - dividends income (note 12(b)) - - (435,931) (431,894) - prior period adjustment in respect of goodwill (note 12(a)) 21,774 3,392 - -
As restated 2,320,887 2,031,328 235,275 82,874
Adjustment in respect of provision for loss in bus fire damage (note 12(c) and 25) 42,470 - - - Adjustment in respect of provision for staff retirement funds (note 12(c)) 1,082,600 - - -
3,445,957 2,031,328 235,275 82,874
Profit for the year 1,595,542 854,654 1,305,580 717,496 Dividends approved in respect of the previous financial year (note 10(b)) (504,549) (431,894) (504,549) (431,894) Interim dividend paid during the year (161,456) (133,201) (161,456) (133,201) Transfer to staff retirement fund reserve (1,082,600) - - -
At 31 December 3,292,894 2,320,887 874,850 235,275
page>108 28. RESERVES (continued)
THE GROUP THE COMPANY 2001 2000 2001 2000
HK$'000 HK$'000 HK$'000 HK$'000 (RESTATED) (RESTATED)
(d) Contributed surplus At 1 January and 31 December - - 1,300,000 1,300,000
(e) Staff retirement fund reserve At 1 January - - - - Transferred from retained profits 1,082,600 - - -
At 31 December 1,082,600 - - -
Total reserves 4,395,507 2,340,900 2,174,850 1,535,275
Included in the figure for the retained profits of the Group is a loss of HK$116,000 (2000: HK$116,000) attributable to associates; and a loss of HK$282,000 (2000: a profit of HK$400,000) attributable to a jointly controlled entity.
The distributable reserves of the Company as at 31 December 2001 amounted to HK$2,174,850,000 (2000: (restated) HK$1,535,275,000).
Retained earnings arising from the adjustment in respect of provision for staff retirement funds have been transferred to a staff retirement fund reserve for future utilisation.
29. NOTES ON THE CONSOLIDATED CASH FLOW STATEMENT (a) Reconciliation of operating profit to net cash inflow from operating activities
2001 2000
HK$'000 HK$'000
Operating profit 1,814,945 936,193 Interest expense 113,984 180,236 Interest income (90,144) (139,105) Dividend income (1,047) - Depreciation 665,587 600,370 (Gain)/loss on disposal of fixed assets (10,735) 3,821 Realised and unrealised loss/(gain) on investment in securities 6,082 (420) Amortisation of positive goodwill 1,159 - Decrease in spare parts and stores 29,435 111,005 Increase in accounts receivable (202,971) (20,144) (Increase)/decrease in deposits and prepayments (9,209) 10,681 Increase in amount due from jointly controlled entity (588) (572) Decrease in amounts due to associates (500) (4,999) (Decrease)/increase in accounts payable and accruals (58,918) 129,646 (Decrease)/increase in third party claims payable (9,325) 16,427 Decrease in contingency provision - insurance (53,603) (6,734) Effect of foreign exchange rates 28 111
Net cash inflow from operating activities 2,194,180 1,816,516
page>109 THE KOWLOON MOTOR BUS HOLDINGS LIMITED 2001 ANNUAL REPORT NOTES ON THE FINANCIAL STATEMENTS
29. NOTES ON THE CONSOLIDATED CASH FLOW STATEMENT (continued) (b) Purchase of subsidiaries
2001 2000
HK$'000 HK$'000
Net assets acquired: Fixed assets - 23,286 Other receivable - 1,708 Accounts payable - (13,424) - 11,570 Goodwill arising on consolidation - 18,382
- 29,952
Satisfied by: cash paid - 29,952
(c) Analysis of net outflow of cash and cash equivalents in respect of the purchase of subsidiaries
2001 2000
HK$'000 HK$'000
Net outflow of cash and cash equivalents in respect of the purchase of subsidiaries - 29,952
(d) Analysis of changes in financing during the year
BANK LOANS MINORITY INTERESTS TOTAL
HK$'000 HK$'000 HK$'000
Balance at 1 January 2001 2,722,538 4,421 2,726,959 Cash (outflows)/inflows from financing (410,373) 189,850 (220,523) Profit for the year attributable to minority interests - 38,063 38,063
Balance at 31 December 2001 2,312,165 232,334 2,544,499
Balance at 1 January 2000 2,438,159 6,374 2,444,533
Cash inflows/(outflows) from financing 284,379 (2,399) 281,980 Profit for the year attributable to minority interests - 446 446
Balance at 31 December 2000 2,722,538 4,421 2,726,959
(e) Analysis of the balances of cash and cash equivalents
2001 2000
HK$'000 HK$'000
Cash at bank and in hand 29,727 39,384 Deposits with banks maturity within three months of the balance sheet date 2,090,118 2,051,826 Bank loans and overdrafts repayable within three months from the date of the advance (33,495) (21,605)
2,086,350 2,069,605
page>110 30. COMMITMENTS (a) Capital commitments of the Group outstanding at 31 December 2001 not provided for in the financial statements were as follows:
2001 2000
HK$'000 HK$'000
Contracted for 590,367 515,198 Authorised but not contracted for 200,280 647,828
790,647 1,163,026
(b) At 31 December 2001, the total future minimum lease payments under non-cancellable operating leases for the Group are payable as follows:
2001 2000
HK$'000 HK$'000
Within 1 year 4,801 5,429 After 1 year but within 5 years 2,523 6,731
7,324 12,160
The Group leases a number of properties under operating leases. The leases typically run for an initial period of one to six years, with an option to renew the lease when all the terms are renegotiated. None of the leases includes contingent rentals.
31. CONTINGENT LIABILITIES At 31 December 2001, the Company has undertaken to guarantee certain bank loans granted to certain subsidiaries to the extent of HK$582,330,000 (2000: HK$807,667,000).
32. MATERIAL RELATED PARTIES TRANSACTIONS (a) During the year, the Group entered into a contract with a subsidiary of Sun Hung Kai Properties Limited ("SHKP"), its substantial shareholder, for the provision of insurance services to the Group. This company entered into the contract with the Group under the same terms as those available to other customers in the ordinary course of business. The insurance premium paid by the Group amounted to HK$46,112,000 (2000: HK$44,734,000) during the year ended 31 December 2001. The amount due from/(to) this company at the year end amounted to HK$258,000 (2000: HK$(88,000)).
(b) During the year, the Group provided coach services to certain subsidiaries of SHKP under the same terms as those available to other customers in the ordinary course of business. The services fees received by the Group amounted to HK$46,235,000 (2000: HK$30,731,000) during the year ended 31 December 2001. The amounts due from these companies at the year end amounted to HK$17,409,000 (2000: HK$10,335,000).
(c) The Group has entered into a contract with a subsidiary of SHKP for the provision of project consultancy services relating to the construction of a new bus depot of the Group. The contract sum of the project consultancy services is HK$15,800,000 or 3.2% of the total construction cost of the new bus depot, whichever is the higher. During the year, the payment for these project consultancy services made by the Group to this company amounted to HK$1,580,000 (2000: HK$9,164,000). There was no outstanding amount (2000: HK$Nil) due to this company at the year end. The Group's capital commitment outstanding at 31 December 2001 under this contract amounted to HK$3,160,000 (2000: HK$4,740,000) as disclosed in note 30(a).
page>111 THE KOWLOON MOTOR BUS HOLDINGS LIMITED 2001 ANNUAL REPORT NOTES ON THE FINANCIAL STATEMENTS
32. MATERIAL RELATED PARTIES TRANSACTIONS (continued) (d) The Group entered into a contract with a subsidiary of SHKP for the provision of project management services relating to the proposed property development of the Group. The contract sum of the project management services is HK$15,000,000, or the lower of 1% of the project costs and HK$20,000,000, whichever is the higher. During the year, no payment for these project management services was made by the Group to this company (2000: HK$3,000,000). There was no outstanding amount (2000: HK$Nil) due to this company at the year end. The Group's capital commitment outstanding at 31 December 2001 under this contract amounted to HK$17,000,000 (2000: HK$17,000,000) as disclosed in note 30(a).
(e) The Group entered into a contract with a subsidiary of SHKP for the provision of the transportation services for Ma Wan Island in the Hong Kong SAR. The service has not commenced during the year. Park Island Transport Company Limited ("PITC"), a subsidiary of the Group, shall be entitled to a return lying within the range of 9% and 16% per annum of the simple arithmetic average of the opening balance and the closing balance of the net book value of PITC's fixed assets with respect to the accounting year concerned. Further, Sun Hung Kai (Ma Wan) Transport Company Limited, a wholly-owned subsidiary of SHKP, shall make and advance to PITC every calendar month, commencing from 1 January 2002, an unsecured loan in the sum of HK$2,000,000 for a period of 26 calendar months at the interest rate of one per cent per annum above HIBOR, which together with interest is to be repaid upon expiration or early termination of the contract.
33. POST BALANCE SHEET EVENTS After the balance sheet date the Directors proposed a final dividend. Further details are disclosed in note 10.
34. COMPARATIVE FIGURES Certain comparative figures have been restated based on the change in accounting policies as set out in note 12 in the financial statements.
page>112 CORPORATE DIRECTORY
BOARD OF DIRECTORS Lana WOO Bun Tang Bus Service Company Limited The Hon Sir Sze-yuen CHUNG* BA, AAT, CGA, ACIS, MIFC, CFC Telephone: (852) 2959 1881 GBM, GBE, PhD, FREng, JP (Alternate Director to Dr the Hon WOO Pak Chairman Chuen, JP) Sau Luen P.L.B. Co., Limited Telephone: (852) 2791 1633 Norman LEUNG Nai Pang Patrick CHAN Kai Lung GBS, JP, BA BEc(Hon), MEc Deputy Chairman (Alternate Director to Mr Walter KWOK Ping AUDITORS Sheung, JP) KPMG Dr the Hon WOO Pak Chuen* 8/F, Prince's Building JP, LLD(Hon), LLB, PhD SHAM Yat Wah 10 Chater Road BSc, MIMarE, CEng Central, Hong Kong Raymond KWOK Ping Luen (Alternate Director to Mr Raymond KWOK MA(Cantab), MBA, Hon DBA Ping Luen) REGISTRARS Walter KWOK Ping Sheung (* Independent Non-executive Director) Hong Kong JP, MSc(Lond), DIC, MICE Central Registration Hong Kong Limited 17/F, Hopewell Centre YU Shu Chuen COMPANY SECRETARY 183 Queen's Road East Honorary Executive Director Lana WOO Hong Kong BA, AAT, CGA, ACIS, MIFC, CFC NG Siu Chan Bermuda Butterfield Corporate Services Limited William LOUEY Lai Kuen REGISTERED OFFICE 11 Rosebank Centre BSc(Econ) Clarendon House Bermudiana Road 2 Church Street Hamilton, Bermuda John CHAN Cho Chak Hamilton HM11 GBS, JP, DBA(Hon), BA, DipMS, MIMgt, FCILT, FHKIoD Bermuda Managing Director REGISTER OF MEMBERS Book closed from 6 May 2002 to 16 May 2002, Charles LUI Chung Yuen PRINCIPAL OFFICE both dates inclusive M.H., BEc, AASA, FCILT No. 1, Po Lun Street Executive Director Lai Chi Kok, Kowloon Hong Kong ANNUAL GENERAL Winnie J NG Telephone: (852) 2786 8888 MEETING BA, MBA(Chicago) Facsimile: (852) 2745 0300 Date & Time : 16 May 2002, 3:00 pm Executive Director Internet: http://www.kmb.com.hk/ Venue : The Royal Plaza Hotel E-mail: [email protected] Ballroom, 193 Prince Dr KUNG Ziang Mien, James* Edward Road West OBE Kowloon, Hong Kong CUSTOMER SERVICE George CHIEN Yuan Hwei HOTLINES MSc(Lond), BSc(Eng), DIC, FICE, CEng, PEng, MITE The Kowloon Motor Bus DIVIDENDS Company (1933) Limited Interim The Hon Eric LI Ka Cheung* Telephone: (852) 2745 4466 HK$0.40 per share, paid on 9 October 2001 JP, LLD, DSocSc, BA(Econ) Hon, FHKSA, Hon HKAT, Facsimile: (852) 2745 0600 FCA, FCIS, OBE Final (proposed) Long Win Bus Company Limited HK$1.46 per share, payable on 17 May 2002 LUI Pochiu Telephone: (852) 2261 2791 or (852) 2261 2792 MCILT Sun Bus Limited STOCK CODE Edmond HO Tat Man Telephone: (852) 2371 2666 The Stock Exchange of Hong Kong: 062 MA(Cantab), MBA, MCILT, MHKIoD Bloomberg: 62HK Deputy Managing Director Chomang Travel Transport Reuters: 0062.HK Company Limited Telephone: (852) 2459 8836
( This Annual Report is also available on our corporate website: http://www.kmb.com.hk/ )
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