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The Kowloon Motor Bus Holdings Limited

Report of the Directors


The Directors have pleasure in submitting their annual report together with the audited statement of accounts for the year ended 31 December 1996.

Principal activities

The principal activity of the Company is the operation of franchised public buses in Hong Kong. The principal activities and other particulars of the Company's subsidiary at 31 December 1996 are set out in Note 10 on the accounts.

Accounts

The profit of the Company and the Group for the year ended 31 December 1996 and the state of the Company's and the Group's affairs as at that date are set out in the accounts on pages 43 to 61.

An analysis of the results and financial position of the Group is set out on pages 21 and 22 of this Annual Report.

Dividends

An interim dividend of 24 cents per share was paid to the Shareholders on 10 October 1996. The Directors now recommend that a final dividend of 80 cents per share in respect of the year ended 31 December 1996 be paid to the Shareholders on 13 June 1997.

Charitable donations

Donations made by the Group during the year amounted to HK$1,724,000 (1995: HK$856,000).

Fixed assets

During the year, major additions of the Group were buses with total cost of HK$524,035,000 (1995: HK$474,438,000).

Other details of movements in fixed assets during the year are set out in Note 9 on the accounts.

Directors

The Directors as at 31 December 1996 were as follows:

The Hon Woo Pak Chuen, CBE, JP (Chairman)
Walter Kwok Ping Sheung (Vice Chairman)
Yu Shu Chuen
Raymond Kwok Ping Luen
Ng Siu Chan
William Louey Lai Kuen
John Chan Cho Chak, CBE, LVO, JP
Charles Lui Chung Yuen
Sir Quo Wei Lee, CBE, LLD (Hon), DBA (Hon), D Litt (Hon), HonPhD, FCIB, FRCPEd (Hon), FHKCP (Hon), JP
Winnie J Ng
Yam Kwan Pui Ying, Lily Teresa, JP
Isaac Chow Yiu Nam
George Chien Yuan Hwei (Alternate Director to Walter Kwok Ping Sheung)
Tsim Tak Po (Alternate Director to Raymond Kwok Ping Luen)

Mrs Yam Kwan Pui Ying, JP, resigned as a Director of the Company on 10 March 1997. Mrs Dorothy Chan Yuen Tak Fai, JP, Acting Commissioner for Transport, was appointed to the Board on 10 March 1997.

In accordance with articles 99 and 101 of the Company's articles of association, all of the existing Directors with the exception of Messrs John Chan Cho Chak, Charles Lui Chung Yuen, Isaac Chow Yiu Nam and Mrs Dorothy Chan Yuen Tak Fai retire from the Board and, being eligible, offer themselves for re-election.

Brief biographical details of the Directors of the Company are set out on pages 9 and 10 of this Annual Report.

Directors' and chief executive's interests in shares

At 31 December 1996, the Directors and chief executive had the following interests in the issued share capital of the Company as recorded in the register of Directors' interests in shares:



As at 31 December 1996, none of the Directors or chief executive had any non-beneficial interest in the share capital of the Company.

Directors' service contracts

No Director proposed for re-election at the forthcoming Ordinary Yearly Meeting has an unexpired service contract with the Company which is not determinable by the Company within one year without payment of compensation, other than normal statutory obligations.

Interest in contracts

No contract of significance to which the Company 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.

Arrangements to purchase shares or debentures

At no time during the year was the Company a party to any arrangement to enable the Directors of the Company to acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate.

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 1996 amounting to 10% or more of the ordinary shares in issue:



The register of substantial shareholders indicates that the interest disclosed by Sun Hung Kai Properties Limited includes the 62,664,285 ordinary shares disclosed by Arklake Limited.

Purchase, sale or redemption of the Company's shares

No purchase, sale or redemption of the Company's own shares was made by the Company during the year.

Senior management's profile

Brief biographical details of the members of senior management of the Company are set out on page 11 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" for its monthly- and daily-rated employees respectively. The assets of these 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 1994 which showed that there were sufficient assets in the schemes to cover both the solvency and on-going liabilities of the schemes. Other relevant information extracted from the valuation pertaining to the two schemes is set out below:

The KMB monthly-rated employees provident fund scheme
  1. The scheme was established with effect from 15 February 1978.

  2. The actuary of the scheme is Mr C K Cheung, Fellow of the Canadian Institute of Actuaries and Fellow of the Society of Actuaries. In the actuarial valuation, the aggregate cost valuation method was used. Other major assumptions used in the valuation were: Investment return and Salary Escalation at 8% per annum; Mortality Rates 1981 Hong Kong Life Tables; Normal Retirement Age 65; and Service Related Withdrawal Rates.

  3. The market value of the scheme assets at 31 December 1994 was HK$452.8 million.

  4. The minimum level of funding as recommended by the actuary was 11.1% of pay.

  5. The on-going funding surplus in the scheme was HK$98.7 million and the solvency basis funding surplus was HK$158.6 million as at 31 December 1994.
The KMB daily-rated employees retirement fund scheme
  1. The scheme was established with effect from 1 July 1983.

  2. The actuary of the scheme is Mr C K Cheung, Fellow of the Canadian Institute of Actuaries and Fellow of the Society of Actuaries. In the actuarial valuation, the aggregate cost valuation method was used. Other major assumptions used in the valuation were: Investment return and Salary Escalation at 8% per annum; Mortality Rates 1981 Hong Kong Life Tables; Normal Retirement Age 60; and Service Related Withdrawal Rates.

  3. The market value of the scheme assets at 31 December 1994 was HK$922.5 million.

  4. The minimum level of funding as recommended by the actuary was 3.7% of pay.

  5. The on-going funding surplus in the scheme was HK$296 million and the solvency basis funding surplus was HK$448.7 million as at 31 December 1994.
Bank loans and overdrafts

Particulars of bank loans and overdrafts of the Company and the Group are set out in Note 18 on the accounts.

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% by value of the Group's total purchases for the year.

At no time during the year, have the Directors, their associates or any Shareholder of the Company (which to the knowledge of the Directors owns more than 5% of the Company's share capital) any interests (as defined in the Listing Rules) in these major customers and suppliers.

Financial summary

A summary of the results and of the assets and liabilities of the Group for the two years ended 31 December 1996 and 1995 and for the previous four financial years of the Company is set out on page 23.

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.

Auditors

KPMG Peat Marwick retire and, being eligible, offer themselves for reappointment.

By Order of the Board
P C Woo
Chairman

Hong Kong, 10 April 1997
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