Keep Cities
Moving
Annual Report 2020
Stock code: 66
SUSTAINABLE
CARING
INNOVATIVE
CONTENTS
For over four decades, MTR has evolved to become one of the
leaders in rail transit, connecting communities in Hong Kong, the
Mainland of China and around the world with unsurpassed levels
of service reliability, comfort and safety. In our Annual Report
2020, we look back at one of the most challenging years in our
history, a time when our Company worked diligently in the midst
of an unprecedented global pandemic to continue delivering high
operational standards while safeguarding the well-being of our
customers and colleagues – striving, as always, to keep cities moving.
Despite the adverse circumstances, we were still able to achieve
our objective of planning an exciting strategic direction. This report
also introduces our Corporate Strategy, “Transforming the Future”,
which outlines how innovation, technology and, most importantly,
sustainability and robust environmental, social and governance
practices will shape the future for MTR. In addition, we invite you
to read our Sustainability Report 2020, which covers how relevant
and material sustainability issues are managed and integrated into
our business strategies. We hope that together, these reports offer
valuable insights into the events of the past year and the steps we
plan on taking toward helping Hong Kong and other cities we serve
realise a promising long-term future.
Annual Report
2020
Sustainability
Report 2020
Keep Cities
Moving
Highlights
Key Awards
Corporate Strategy
Overview
2
4
7
8
Key Figures
10 Our Network
12 Chairman’s Letter
16 CEO’s Review of Operations and Outlook
Cover image: composite photograph at Kai Tak Station
Business Review and Analysis
Business Review
36 – Hong Kong Transport Operations
46 – Hong Kong Station Commercial Businesses
50 – Hong Kong Property and Other Businesses
60 – Hong Kong Network Expansion
66 – Mainland of China and International Businesses
74 Corporate Responsibility
80 Human Resources
83 MTR Academy
84 Financial Review
94 Ten-Year Statistics
96 Investor Relations
Transport
Operations (p.36)
Property and Other
Businesses (p.50)
Network
Expansion (p.60)
MTR SHOP
Station Commercial
Businesses (p.46)
Mainland of China and
International Businesses (p.66)
Corporate Governance
98 Corporate Governance Report
123 Audit Committee Report
126 Risk Management
130 Risk Committee Report
132 Capital Works Committee Report
133 Remuneration Committee Report
138 Board and Executive Directorate
153 Key Corporate Management
154 Report of the Members of the Board
Financials and Other Information
185 Contents of Consolidated Accounts and Notes
186 Independent Auditor’s Report
190 Consolidated Profit and Loss Account
191 Consolidated Statement of Comprehensive Income
192 Consolidated Statement of Financial Position
193 Consolidated Statement of Changes in Equity
194 Consolidated Cash Flow Statement
195 Notes to the Consolidated Accounts
271 Glossary
Annual Report 2020
1
Our Vision
We aim to be an
internationally-
recognised company
that connects and
grows communities
with caring,
innovative and
sustainable services.
Our Purpose
Keep Cities Moving
Our Values
• Excellent Service
• Value Creation
• Mutual Respect
• Enterprising Spirit
Our Cultural
Focus Area
• Participative
Communication
• Collaboration
• Effectiveness &
Innovation
• Agility to Change
Hong Kong Core
Attain full potential of Hong Kong
Core Business and advance our
social objectives
OUR
CORPORATE
STRATEGY
We will embed sustainability,
Environmental, Social and
Governance principles into our
businesses and operations with the
aim of creating value for all
our stakeholders.
Mainland China and
International Business
Expand into new hubs and new products
across Mainland China and International
Business, maintaining a steady growth
2
MTR Corporation
Annual Report 2020
3
CORPORATE STRATEGY New Growth Engine
Invest in new technologies and
mobility services to reinforce our
core for long-term growth
Transformation
Management Office
• Dedicated to enable and deliver
the strategic transformation
• Engage MTR stakeholders for trust,
commitment & results
Organisation &
Processes
• Clearer accountabilities and more
effective decision-making
• Simplify and streamline processes
Technology
• Utilise data and analytics for
decisions and opportunities
Invest in focus areas & systems
to improve effectiveness
and efficiency
•
Finance
• Redefine accountability and profit/
loss ownership of business units
• Establish & track long-term
financial goals for
financial sustainability
People
• Build new capabilities for
staff development
• Work smarter with innovative
methods and technology
2
MTR Corporation
Annual Report 2020
3
5 ENABLERS3 STRATEGICPILLARSCorporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis Hong Kong
Businesses
COVID-19
Challenges
1.3+ billion
Total Patronage in Hong Kong
99.9 %
Passenger Journeys On-time
Tuen Ma Line
Phase 1
Commenced Service
New Signalling System and
New Trains of East Rail Line
Commissioned
Awarded LOHAS
Park Property
Packages 12 and 13 and
The Southside
Package 5
Opened
The LOHAS
Shopping Mall
Popcorn
Telford
Took on Full Interest of
Telford Plaza II and
PopCorn 2
Won
Shenzhen Metro Line 13 and
Sweden Mälartåg Train Service
Mainland of
China and
International
Businesses
4
4
MTR Corporation
MTR Corporation
Annual Report 2020
Annual Report 2020
5
5
HIGHLIGHTS Growth
and
Outlook
Tuen Ma Line Full Line Operation expected by
Third Quarter 2021
Proceed with
Tung Chung Line Extension,
Tuen Mun South Extension and
Kwu Tung Station and
Northern Link
Proceed with Technical Studies of
Siu Ho Wan Depot Site
Topside Property Development
Over
23,000 Residential Units and
2 Shopping Malls
under Development
Smart Mobility
to Enhance Customer Experience
COVID-19
Challenges and “New Normal”
4
4
MTR Corporation
MTR Corporation
Annual Report 2020
Annual Report 2020
Annual Report 2020
5
5
5
Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis Environmental,
Social and
Governance
3.4%
Voluntary Staff
Turnover Rate
in Hong Kong
4.8 Average
Training Days
per Employee in Hong Kong
Fare Rebates
offered to passengers as
Relief Measures
Rental Concessions
Granted
to Tenants in Stations and
Shopping Malls
HK$15.4 million
Donated and Sponsored to
Charitable and Other Organisations
Adopted
Corporate Governance
Best Practices
Issued
US$1.2 billion
10-year Green Bond
0.58
Reportable Events
per million passengers carried
in our Heavy Rail and
Light Rail networks
6
MTR Corporation
Annual Report 2020
7
HIGHLIGHTS Hong Kong
Transport Operations
Public Transportation Award,
Hong Kong Service Awards 2020
East Week
Public Transportation Service Award,
Sing Tao Service Awards 2019
Sing Tao Daily
Public Transportation Service Award – Elite Awards 2019
Ming Pao Weekly
Hong Kong Power Brand Award,
HKIM Market Leadership Award 2019/2020
Hong Kong Institute of Marketing
2020 Hong Kong Digital Transformer,
IDC Digital Transformation Awards 2020
International Data Corporation
Hong Kong Property
and Other Businesses
ELEMENTS – Excellence Service Award,
Hong Kong Service Awards 2020
East Week
ELEMENTS – Best Property Management Award in
Occupational Safety and Health – Gold Award,
The 7th Best Property Safety Management Award
Occupational Safety and Health Council and Construction
Industry Council
Telford Plaza – Shopping Mall Award for Warm Service,
Hong Kong Service Awards 2020
East Week
Telford Plaza – Top 25 My Favourite Shopping Mall Events
Hong Kong Economic Times
Paradise Mall – Best Use of KOL, Digital Ex Award 2020
Metro Finance
Two ifc – Outstanding Team (Private Housing – Non-
residential) Excellence Award, HKIH, Elite Awards 2020
The Hong Kong Institute of Housing
Mainland of China and
International Businesses
Beijing MTR – 2020 GoldenBee CSR China Honor Roll –
GoldenBee Enterprise
GoldenBee Think Tank & China Sustainability Tribune
Shenzhen MTR – Outstanding Foreign Enterprises in 2020
Shenzhen Global Investment Promotion Conference
Commerce Bureau of Shenzhen Municipality, Shenzhen
Association of Enterprises with Foreign Investment
MTRX – Ranked 3rd in the Swedish Innovation Index 2019
CTF Service Research Centre and Karlstad Business School
Sydney Metro North West Line – Infrastructure Project of
the Year
Sydney Metro City & Southwest Line – Government
Partnership Excellence Award
National Infrastructure Awards 2020
Infrastructure Partnerships Australia
Environmental, Social
and Governance
The Asset Triple A Country Awards 2020
Best Green Bond Award, Hong Kong
Best Issuer for Sustainable Finance, Hong Kong
The Asset
15 Years Plus Caring Company Logo
Hong Kong Council of Social Service
2019/2020 Corporate and Employee Contribution
Programme
Diamond Award
3rd Highest Donation Award for CARE Scheme
4th Top Fund-raiser Award
The Community Chest
HR Appreciation Awards 2020
Grand Winner – COVID-19 Special Award
(Corporate)
Winner – COVID-19 Special Award (Corporate)
Winner – HR Best Practice – Compensation &
Benefits
Winner – HR Best Practice – Training &
Development (2 awards)
Winner – HR Best Practice – Business Partner
Classified Post
Greater Bay Area Corporate Sustainability
Awards 2020 – GBA’s Outstanding Corporation
Social Sustainability Award – Sustainable
Cities and Communities
Environmental Sustainability Award –
Climate Action
Metro Finance
Corporate Responsibility Award,
Hong Kong Service Awards 2020
East Week
Public Utility Sector – Excellence Award in
Anti-pandemic Measures, Barrier-free Access
Facilities and Corporate Responsibility
01 Gold Medal Awards 2020
HK01
InnoESG Prize 2020
UNESCO HK Association Global Peace Centre,
Lions Club HKIFC, Rotary Action Group for Peace and
SocietyNext Foundation
Investor Relations
Bronze Award – General Category,
2020 Best Annual Reports Awards
Hong Kong Management Association
Two awards received in 2020 International Annual
Reports Competition (ARC) Awards
MerComm, Inc.
6
MTR Corporation
Annual Report 2020
7
KEY AWARDSCorporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis
2020
2019
HK$ million
%
HK$ million
% Inc./(Dec.) %
28.0
7.7
11.9
50.3
2.1
100.0
–
100.0
(3.6)
23.6
36.0
4.6
(16.1)
44.5
55.6
(0.1)
55.5
100.0
(81.0)
37.5
62.7
3.9
(29.2)
9.1
3.0
97.2
(0.2)
97.0
100.0
Total revenue
Recurrent business revenue
– Hong Kong transport operations
– Hong Kong station commercial businesses
– Hong Kong property rental and management businesses
– Mainland of China and international railway, property rental
and management subsidiaries
– Other businesses
Property development business revenue
– Mainland of China property development
Total revenue
Total EBITDA(1)
Recurrent business EBITDA
– Hong Kong transport operations
– Hong Kong station commercial businesses
– Hong Kong property rental and management businesses
– Mainland of China and international railway, property rental
and management subsidiaries
– Other businesses, project studies and business
development expenses
Property development business EBITDA
– Hong Kong property development
– Mainland of China property development
Total EBITDA
Total EBIT (2)
Recurrent business EBIT
EBIT
– Hong Kong transport operations
– Hong Kong station commercial businesses
– Hong Kong property rental and management businesses
– Mainland of China and international railway, property rental
and management subsidiaries
– Other businesses, project studies and business
development expenses
Share of profit of associates and joint venture
Property development business EBIT
– Hong Kong property development
– Mainland of China property development
Total EBIT
Interest and finance charges
Investment property revaluation (loss)/gain
(Loss)/profit before taxation
Income tax
(Loss)/profit for the year
Non–controlling interests
(Loss)/profit for the year attributable to shareholders
of the Company
(Loss)/profit for the year attributable to shareholders
of the Company arising from:
Recurrent businesses
Property development businesses
Underlying businesses
Investment property revaluation (loss)/gain
Total (loss)/profit for the year attributable to
shareholders of the Company
11,896
3,269
5,054
21,428
894
42,541
–
42,541
(422)
2,760
4,204
533
(1,881)
5,194
6,491
(13)
6,478
11,672
(5,408)
2,502
4,185
261
(1,949)
605
196
6,491
(13)
6,478
6,674
(1,004)
(9,190)
(3,520)
(1,301)
(4,821)
12
(4,809)
(1,126)
5,507
4,381
(9,190)
(4,809)
36.6
12.5
9.4
38.7
2.8
100.0
–
100.0
28.1
29.1
20.4
6.3
(10.9)
73.0
27.1
(0.1)
27.0
100.0
(4.4)
37.9
31.6
8.1
(17.4)
2.1
57.9
42.3
(0.2)
42.1
100.0
19,938
6,799
5,137
21,085
1,545
54,504
–
54,504
5,909
6,119
4,286
1,325
(2,288)
15,351
5,707
(25)
5,682
21,033
(591)
5,122
4,264
1,089
(2,353)
288
7,819
5,707
(25)
5,682
13,501
(859)
1,372
14,014
(1,922)
12,092
(160)
11,932
4,980
5,580
10,560
1,372
11,932
(40.3)
(51.9)
(1.6)
1.6
(42.1)
(21.9)
n/m
(21.9)
n/m
(54.9)
(1.9)
(59.8)
17.8
(66.2)
13.7
48.0
14.0
(44.5)
(815.1)
(51.2)
(1.9)
(76.0)
17.2
110.1
(97.5)
13.7
48.0
14.0
(50.6)
16.9
n/m
n/m
(32.3)
n/m
n/m
n/m
n/m
(1.3)
(58.5)
n/m
n/m
Notes
1 EBITDA represents operating profit/(loss) before depreciation, amortisation, variable annual payment and share of profit of associates and joint venture.
2 EBIT represents profit/(loss) before interest, finance charges and taxation and after variable annual payment.
n/m: not meaningful
8
MTR Corporation
Annual Report 2020
9
KEY FIGURES
Financial ratios
EBITDA margin(3)(in %)
EBITDA margin(3) (excluding Mainland of China and international subsidiariesδ ) (in %)
EBIT margin(4) (in %)
EBIT margin(4) (excluding Mainland of China and international subsidiariesφ ) (in %)
Net debt-to-equity ratio(5) (in %)
Return on average equity attributable to shareholders of the Company arising from
underlying businesses (in %)
Interest cover(6) (times)
Share information
Basic (loss)/earnings per share (in HK$)
Basic earnings per share arising from underlying businesses (in HK$)
Ordinary dividend per share (in HK$)
Share price at 31 December (in HK$)
Market capitalisation at 31 December (HK$ million)
Operations highlights
Total passenger boardings for Hong Kong (million)
Domestic Service
Cross-boundary Service
High Speed Rail
Airport Express
Light Rail and Bus
Average number of passengers (thousand)
Domestic Service (weekday)
Cross-boundary Service (daily)
High Speed Rail (daily)
Airport Express (daily)
Light Rail and Bus (weekday)
Average fare (in HK$)
Domestic Service
Cross-boundary Service
High Speed Rail
Airport Express
Light Rail and Bus
Proportion of franchised public transport boardings (in %)
2020
2019
Inc./(Dec.) %
12.2
22.1
(1.0)
(3.2)
22.5
2.4
8.2
28.1
42.0
13.8
19.3
15.4
5.8
15.3
(15.9)% pts.
(19.9)% pts.
(14.8)% pts.
(22.5)% pts.
7.1% pts.
(3.4)% pts.
(7.1) times
(0.78)
0.71
1.23
43.35
267,943
1.94
1.72
1.23
46.05
283,574
1,145.0
7.6
1.0
3.1
154.0
3,406
20.9
35.6^
8.4
438.0
7.82
27.23
86.44
45.52
3.12
45.3
1,568.2
104.2
16.9
15.8
207.3
4,658
285.4
46.4
43.2
598.6
8.11
29.08
88.73
64.16
3.27
47.4
n/m
(58.7)
–
(5.9)
(5.5)
(27.0)
(92.7)
(93.9)
(80.5)
(25.8)
(26.9)
(92.7)
(23.2)
(80.6)
(26.8)
(3.6)
(6.4)
(2.6)
(29.1)
(4.4)
(2.1)% pts.
Notes
3
4
EBITDA margin represents total EBITDA (excluding profit on Hong Kong property development) as a percentage of total revenue.
EBIT margin represents total EBIT (excluding profit on Hong Kong property development and share of profit of associates and joint venture) as a percentage of total
revenue.
5 Net debt-to-equity ratio represents loans and other obligations, short-term loans, obligations under service concession and loans from holders of non-controlling interests
6
δ
φ
net of cash, bank balances and deposits in the consolidated statement of financial position as a percentage of total equity.
Interest cover represents operating profit before depreciation, amortisation, variable annual payment and share of profit of associates and joint venture divided by gross
interest and finance charges before capitalisation, and utilisation of government subsidy for Shenzhen Metro Line 4 operation.
Excluding the relevant revenue and expenses of Mainland of China and international subsidiaries of HK$21,428 million and HK$20,908 million (2019: HK$21,085 million
and HK$19,785 million) respectively.
Excluding the relevant revenue, expenses, depreciation and amortisation of Mainland of China and international subsidiaries of HK$21,428 million, HK$20,908 million
and HK$272 million (2019: HK$21,085 million, HK$19,785 million and HK$236 million) respectively.
^ Average of 1 to 29 January 2020.
8
MTR Corporation
Annual Report 2020
9
Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis HONG KONG OPERATING NETWORK WITH
FUTURE EXTENSIONS
Lok M a C h a u
Shenzhen
Lo W u
Sheung Shui
Fanling
K w u Tu n g
San Tin
Intercity Through
Train Route Map
Beijing
Beijing Line
Shanghai Line
Guangdong Line
G uangzhou
D ongguan
Shanghai
HONG KONG SAR
Lo n g
Pin g
41
47
Tin S h ui W ai
48
Y u e n Lo n g
K a m
S h e u n g
R o a d
49
50
N gau
Ta m
M ei
A u Tau
Tai W o
Tai Po M arket
33
New Territories
U niversity
Tai Sh ui
H an g
H u n g S h ui Kiu
Siu H o n g
T u e n M u n
T u e n M u n S o uth
Area 1 6
30
39
28
29
M a O n Shan
W u Kai Sha
36
H en g O n
Shek M u n
Raceco urse*
City O ne
W ai
38
Sha
Tin
C he Ku n g
Te m ple
27
35
F o Ta n
S h a Tin
31
Tai W ai
40
37
Hin Ken g
Sha m Shui Po Ko wloon
Cheung Sha W an
Lai Chi Kok
Tong
44
W ong
Lok Fu
Tai Sin
Kowloon
Kai Tak
Su n g
M o n g
W o n g
K ok East
Toi
To
K w a
W an
H o
M an
Tin
W ha m p oa
F ortress Hill
N orth
P oint
H u n g
H o m
C a use w ay
B ay N orth
Tin
H a u
Shek
Kip M ei
M o n g
Kok
Yau M a
Tei
Jord a n
East Tsim
Sha Tsui
Exhibitio n
C e ntre
W a n
C a use w ay
C h ai
B ay
32
10
16
Prince
Ed w ard
04
42
A ustin
Tsim
Sha
Tsui
Ta m ar
14
25
Choi W an
Shun Tin
Sau M au Ping
Po Tat
Dia m o n d Hill
Choi
Hung
Kowloon
Ngau Tau Kok
Kwun Tong
Lam Tin
Yau Tong
Bay
01
Po La m
24
Hang Hau
53
26
23
Tseung
K w an O
Tiu
Keng
Leng
51
09
Q u arry B ay
17
12
Tai K o o
Sai W a n H o
S h a u K ei W a n
H e n g Fa C h u e n
C h ai W a n
34
LOHAS Park
15
13
Hong Kong Island
Tsuen W an W est
Tsuen W an
05
45
18
Tsing Yi
Lai King
Disneylan d
Resort
Sun ny Bay
Tai W o H au
K w ai Hing
K w ai Fong
M ei Foo
07
06
46
Na m
Cheong
20
pic
O ly m
o
p
o rl d - E x
W
A sia
o rt
A ir p
Cable Car
Ngong Ping 360
Tung
Chung
West
Lantau Island
52
19
Tung
Chung
Tung Chung East
K o
K e n n e d y
T o w n
H K U
Q u e e n M ary
H ospital
C y b erp ort
W a h F u
96
Stations
LEGEND
262.6 km
Route Length
Sai Yin g P u n
11
S h e u n g W a n
21
w lo o n
H o n g Ko n g
W est Ko wlo o n
H o n g
K o n g
22
02
03
08
C e ntral
A d m iralty
A b erd e e n
W o n g
C h u k
H a n g
43
Tin W a n
S o uth
H orizo ns
Lei T u n g
O cea n
P ark
Station
Interchange Station
Proposed Station
Proposed Interchange Station
Shenzhen Metro Network
*
Racing days only
EXISTING NETWORK
Airport Express
Disneyland Resort Line
East Rail Line
High Speed Rail
PROJECTS IN PROGRESS
Island Line
Kwun Tong Line
Light Rail
Tuen Ma Line Phase 1
South Island Line
Tseung Kwan O Line
Tsuen Wan Line
Tung Chung Line
West Rail Line
Shatin to Central Link (Tai Wai to Hung Hom Section)
Shatin to Central Link (Hung Hom to Admiralty Section)
10
MTR Corporation
Annual Report 2020
11
OUR NETWORK
POTENTIAL FUTURE EXTENSIONS UNDER RAILWAY DEVELOPMENT STRATEGY 2014
Northern Link and Kwu Tung Station
Tuen Mun South Extension
East Kowloon Line
Tung Chung Line Extension
Hung Shui Kiu Station
South Island Line (West)
North Island Line
PROPERTIES OWNED / DEVELOPED / MANAGED BY THE CORPORATION
01 Telford Gardens / Telford Plaza I and II
02 World-wide House
03 Admiralty Centre
04 Argyle Centre
05 Luk Yeung Sun Chuen / Luk Yeung Galleria
06 New Kwai Fong Gardens
07 Sun Kwai Hing Gardens
08 Fairmont House
09 Kornhill / Kornhill Gardens
10 Fortress Metro Tower
11 Hongway Garden / Infinitus Plaza
12 Perfect Mount Gardens
13 New Jade Garden
14 Southorn Garden
15 Heng Fa Chuen / Heng Fa Villa / Paradise Mall
16 Park Towers
17 Felicity Garden
18 Tierra Verde / Maritime Square 1 / Maritime Square 2
19 Tung Chung Crescent / Citygate / Novotel Citygate /
Seaview Crescent / Coastal Skyline / Caribbean Coast
32 MTR Hung Hom Building / Hung Hom Station Carpark
33 Trackside Villas
34 The Capitol / Le Prestige / Hemera / Wings at Sea / MALIBU / LP6 / The LOHAS
35 The Palazzo
36 Lake Silver
37 Festival City
38 The Riverpark
39 Century Gateway
42 The Austin / Grand Austin
45 Ocean Pride / Ocean Supreme / PARC CITY / THE PAVILIA BAY / City Point
46 Cullinan West
47 The Spectra / Sol City
PROPERTY DEVELOPMENTS
UNDER CONSTRUCTION / PLANNING
34 LOHAS Park Packages
40 Tai Wai Station Packages
41 Tin Wing Stop
43 The Southside
44 Ho Man Tin Station Packages
51 Yau Tong Ventilation Building
52 Tung Chung Traction Substation
53 Pak Shing Kok Ventilation Building
20 Central Park / Island Harbourview / Park Avenue / Harbour Green /
Bank of China Centre / HSBC Centre / Olympian City One / Olympian City Two
21 The Waterfront / Sorrento / The Harbourside / The Arch / Elements /
The Cullinan / The Harbourview Place / W Hong Kong /
International Commerce Centre / The Ritz-Carlton, Hong Kong
22 One International Finance Centre / Two International Finance Centre /
IFC Mall / Four Seasons Hotel / Four Seasons Place
23 Central Heights / The Grandiose / The Wings / PopCorn 1 / PopCorn 2 /
Crowne Plaza Hong Kong Kowloon East /
Holiday Inn Express Hong Kong Kowloon East / Vega Suites
24 Residence Oasis / The Lane
25 No.8 Clear Water Bay Road / Choi Hung Park & Ride
26 Metro Town
27 Royal Ascot / Plaza Ascot
28 Ocean Walk
29 Sun Tuen Mun Centre / Sun Tuen Mun Shopping Centre
30 Hanford Garden / Hanford Plaza
31 Citylink Plaza
MAINLAND OF CHINA AND
INTERNATIONAL BUSINESSES
EUROPE
Stockholm
London
MAINLAND
OF CHINA
AND MACAO
Macao
Beijing
Tianjin
Hangzhou
Shenzhen
Sydney
Melbourne
AUSTRALIA
10
MTR Corporation
WEST RAIL LINE PROPERTY
DEVELOPMENTS (AS AGENT FOR THE
RELEVANT SUBSIDIARIES OF KCRC)
39 Century Gateway
45 Ocean Pride / Ocean Supreme / PARC CITY / THE PAVILIA BAY / City Point
46 Cullinan West
47 The Spectra / Sol City
48 Yuen Long Station
49 Kam Sheung Road Station Packages
50 Pat Heung Maintenance Centre
MAINLAND OF CHINA AND MACAO
Beijing
Metro Line 4
Metro Line 4 – Daxing Line
Metro Line 14
Metro Line 16
Metro Line 17
(under construction)
Ginza Mall
Shenzhen
Metro Line 4
Metro Line 4 North Extension
Metro Line 13 (under construction)
Tiara
TIA Mall
Tianjin
Shopping Mall
(under construction)
Macao
Light Rapid Transit Taipa Line
Hangzhou
Metro Line 1
Metro Line 1 Xiasha
Extension
Metro Line 1 Phase 3
(Airport Extension)
Metro Line 5
Metro Line 5 West Extension
Hangzhou West Station
Property Development
(under construction)
EUROPE
United Kingdom
TfL Rail (future Elizabeth Line)
South Western Railway
Sweden
Stockholm Metro
(Stockholms tunnelbana)
MTRX
Stockholm commuter rail
(Stockholms pendeltåg)
Mälartåg (service to be taken over)
AUSTRALIA
Melbourne
Metropolitan Rail Service
Sydney
Sydney Metro North West Line
Sydney Metro City &
Southwest Line
(under construction)
Annual Report 2020
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Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis CHAIRMAN’S
LETTER
Dear Shareholders and other Stakeholders,
For over four decades, MTR has been fulfilling its purpose to “keep cities moving”. Never has this mission been tested
more than in the past two years. From the public order events of 2019 to the COVID-19 outbreak in 2020, these have been
extraordinarily trying times for a company dedicated to keeping communities connected.
Around the world, the pandemic brought commerce to a halt, closed schools and forced employees to stay at home. In
Hong Kong, train patronage fell sharply, foot traffic at our malls and station retail areas decreased, and tenants sought
rental relief from the economic downturn, impacting our revenue across multiple business channels.
Through it all, we did our best to ensure safe, reliable, hygienic and affordable transport for our communities. We ensured
the health and safety of our staff by providing them with appropriate personal protective equipment. We intensified
the cleaning of our trains and railway facilities and employed innovative sanitisation technologies to safeguard public
health. We adjusted service frequency to match Government’s objectives in fighting the pandemic. We offered rebates to
passengers and rental concessions to retail tenants to help them weather the downturn.
Indeed, corporate responsibility and strong corporate governance principles guided our actions throughout 2020 more
prominently than ever, and our stakeholders can expect a robust environmental, social and governance (“ESG”) regime to
play an even bigger role in the Company moving forward. This is evident in our new Corporate Strategy, which the Board
approved in June 2020 to set out the direction of our future development.
Despite the difficulties faced during the year, MTR was still able to make progress on a number of important projects.
Works on the Shatin to Central Link continued. We awarded the design consultancies for two new projects under
Government’s Railway Development Strategy 2014. Residential unit pre-sales in Hong Kong progressed well, and our
investment property portfolio continued to expand.
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None of this would have been possible without the
contributions of our exceptional staff. I offer them
my most sincere thanks for their hard work and
professionalism, which have kept MTR and Hong Kong
moving despite great challenges.
CORPORATE STRATEGY
Near-term challenges have not dampened our spirit to
plan for the future success of MTR and all of the cities we
serve. Our new Corporate Strategy, “Transforming the
Future”, charts a future path marked by business and ESG
targets that will contribute to the long-term sustainability
of the Company and the communities it serves. It also
defines a more fit-for-future structure with a strengthened
Hong Kong core, expanded Mainland of China and
international outreach, and new growth engines to
explore – our three strategic pillars for success.
We aim to become an internationally recognised
company that connects and grows communities with
caring, innovative and sustainable services. By working
together on our Corporate Strategy, I am confident that
we will be able to build an even more effective, efficient
and agile organisation that can tackle the challenges of
tomorrow and help us create a better future. In managing
our business sustainably and in accordance with world-
class principles of governance, I also believe we can help
individuals and communities thrive while contributing to
the fight against climate change.
BUSINESS PERFORMANCE
AND GROWTH
In 2020, MTR was able to advance a number of railway
and property projects that will contribute to Hong
Kong’s transport infrastructure and the Company’s future
business growth.
The year saw the successful opening of the Tuen Ma
Line Phase 1 with new stations. We have been invited by
Government to proceed with the detailed planning and
design for the Tung Chung Line Extension, Tuen Mun
South Extension (which will become the Tuen Ma Line
Extension in the future), and Kwu Tung Station and the
Northern Link. We awarded design consultancies for the
first two extensions and have commenced procurement
of the design consultancy for the third project. We
are also making progress in planning future property
development at the Siu Ho Wan Depot site. In addition
to advancing these four new projects, we submitted
proposals to Government for Hung Shui Kiu Station and
the South Island Line (West) project.
As a global leader in railway transport, MTR is committed
to strong corporate governance and upholding the
highest standards of operational excellence. Regarding
the Hung Hom Extension of the Shatin to Central Link
project, we have been working diligently to implement
the recommendations made in the Final Report of
the Commission of Inquiry, which concluded that
the structures are safe and fit for purpose with the
suitable measures in place. These actions have now
been completed. In the recent report issued by the
Government-appointed Expert Advisor Team, it also
concluded that it is safe in practical terms to use the
related built structures at Hung Hom Station for their
intended purposes after the implementation of suitable
measures. Following the results of the investigation
into the derailment near Hung Hom Station that were
made public in March 2020, we implemented immediate
measures to address the situation and prevent similar
incidents from happening in future. In September
2020, we launched a detailed internal investigation into
the postponement of the commissioning of the new
signalling system and new trains on the East Rail Line and
implemented remedial measures after carrying out the
review. The new signalling system and new trains on the
East Rail Line were launched on 6 February 2021. Moving
forward, MTR will continuously review its practices to
ensure world-class design, construction and operations
for new projects and asset replacement works alike.
We are also seeking to improve our risk management
processes by implementing a “three lines of defence”
framework. This model strengthens the depth of a
company’s risk management response by retaining strong
accountability at the business unit level while enhancing
assurance at the Executive and Board levels.
For our existing lines, we continued to enhance our
facilities and services to keep delivering a world-class
customer experience. New technology and smart mobility
initiatives like QR code ticketing and our MTR Mobile – an
app with features including train service information,
journey planning and ticketing functions as well as
shopping and lifestyle offers – make commuting better
than ever by improving convenience and enriching the
customer experience. We have been expanding our Wi-Fi
coverage and mobile charging facilities in stations to keep
passengers connected while in transit. We are adding lift
button sensors, drinking water dispensers, public toilets
and baby care rooms to improve passenger comfort.
Ultimately, we strive to design journeys around the needs
of each individual and ensure that our railway system is
inclusive for all, from an age-friendly policy that caters to
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Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis senior citizens to ensuring accessibility for the disabled.
For example, new and refurbished seats throughout our
network give our customers more places to rest.
In August, we were delighted to open The LOHAS
shopping mall, which expands our Hong Kong portfolio of
quality retail destinations adjacent to convenient railway
transport links. We awarded the property development
tenders for LOHAS Park Package 12 and Package 13
in 2020 and The Southside (also known as the Wong
Chuk Hang Station Property Development) Package 5
in January 2021. We continued to diversify our revenue
streams internationally, including in the Greater Bay
Area and elsewhere in the Mainland of China. In August
2020, the Shenzhen Municipal Government awarded
the consortium led by our wholly owned subsidiary the
tender for Shenzhen Metro Line 13, a public-private
partnership project that will boost our passenger
numbers in a growing market. During the year we opened
additional lines across the Mainland of China, including
the Shenzhen Metro Line 4 North Extension, full line
operation of Hangzhou Metro Line 5, Hangzhou Metro
Line 1 Phase 3 (Airport Extension) and the Middle Section
of Beijing Metro Line 16. In Sweden, our subsidiary was
awarded the operations and maintenance concession for
the Mälartåg train service, which we expect to take over
from December 2021.
FINANCIAL PERFORMANCE
As announced on 19 January 2021, COVID-19 caused a
substantial decrease in patronage and reduced revenue
for our station commercial and property rental businesses
in 2020. As a result, the loss arising from our recurrent
businesses was HK$1,126 million. Together with the
profit from our property development businesses, which
decreased by 1.3% to HK$5,507 million, profit arising from
our underlying businesses was HK$4,381 million, 58.5%
lower than the previous year. Including the loss arising
from the revaluation of our investment property portfolio,
the net loss attributable to shareholders of the Company
in 2020 was HK$4,809 million, equating to a loss per share
of HK$0.78. Notwithstanding the challenging economic
conditions, your Board has proposed a final ordinary
dividend of HK$0.98 per share, which, together with the
interim dividend of HK$0.25 per share, will bring the full-
year dividend to HK$1.23 per share, same as that of 2019.
The Board of Directors of the Company will continue to
monitor the Group’s financial performance and position
as well as future capital requirements, but it currently
proposes maintaining the Company’s progressive
ordinary dividend policy.
ENVIRONMENTAL, SOCIAL
AND GOVERNANCE
ESG creates shared value for our stakeholders and
supports the symbiotic relationship between the
Company and the people and communities it serves. In
accordance with our Corporate Strategy, we are striving
to embed into our business and operations three primary
ESG goals: social inclusion, reducing greenhouse gas
emissions, and promoting advancement and opportunity.
We support social inclusion by, among other things,
ensuring that all individuals – regardless of age, ability
or socioeconomic status – can avail themselves of our
services. We combat climate change and aim for a carbon-
neutral future by reducing greenhouse gas emissions
across our operations. We are also committed to creating
opportunities for our staff, supply chain and communities
as we continue to grow and expand our network.
Environmental Aspects
In August 2020, MTR issued a Green Bond under its
new Sustainable Finance Framework to further support
the Company’s sustainable development. The US$1.2
billion 10-year bond was issued to fund projects that
conserve energy, protect the environment, and enhance
and expand low-carbon railway services. It was the
largest single tranche green bond for corporates in Asia
Pacific. The bond won Hong Kong’s “Best Green Bond”
Award and, being at the forefront of raising sustainable
financing, the Company was also named the “Best Issuer
for Sustainable Finance” in Hong Kong in The Asset Triple
A Country Awards 2020.
To help conserve our planet’s natural resources, we
continued to reduce electricity consumption across all
our businesses. We also supported the development of
renewable energy in Hong Kong through the installation
of a 93.24 kW solar energy system at our headquarters to
start with. Actions like these will help Hong Kong achieve
its target of becoming carbon neutral in the future.
Social Aspects
As an integral part of the wider Hong Kong community,
MTR gives back through charitable and social
programmes designed to nurture future generations
and help those in need. In the face of COVID-19, we
launched special economic relief measures including fare
rebates for passengers and rental concessions for mall
and station tenants. Our Board and Executive Directorate
donated HK$4.3 million of their remuneration to NGOs
and charity organisations to help communities during
the pandemic. We donated 100,000 surgical masks at a
time when supply was tight, and we also set up vending
machines at 20 stations where members of the public
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CHAIRMAN’S LETTER could conveniently pick up COVID-19 specimen collection
packs. Since March 2020, we have been providing free
Airport Express tickets through the Hospital Authority
to healthcare workers who need to travel between
AsiaWorld-Expo Station and the urban area. Over 16,900
tickets had been provided as at the end of January 2021.
We also donated 200 tablet devices to underprivileged
children to facilitate their online learning.
Online hosting helped us carry out our social outreach
efforts safely. These included our “‘Train’ for Life’s
Journeys” career- and life-coaching programmes;
“Summer Online Railway Workshops”, which introduced
railways to children on summer break through fun
activities; and “Christmas Delight” workshops, which
featured Christmas carol performances in sign language
and DIY musical instrument upcycling classes to promote
social inclusion and green practices. MTR also hosted
talks at senior centres and launched its annual elderly
programme with RTHK to promote railway safety to
seniors across the territory.
In 2020, we were once again privileged to promote
artistic talent and art appreciation among the public. We
installed new artworks in Wan Chai, Tiu Keng Leng and
Tuen Ma Line Phase 1 stations and organised exhibitions
at Sheung Wan, Sai Wan Ho and Central stations. One
highlight was a memorial exhibition for legendary singer
Teresa Teng, which received an enthusiastic response
from the community.
Through our “More Time Reaching Community” Scheme,
we encourage our staff to initiate and participate
in volunteer activities that serve the community. In
2020, despite the prolonged COVID-19 pandemic, 64
volunteering projects were organised involving a total of
6,344 volunteer hours of service, including those offering
timely support to help underprivileged families ride out
the difficulties.
Our ESG efforts were recognised with “Outstanding
Corporation” awards in the “Social Sustainability” and
“Environmental Sustainability” categories of Metro
Finance’s Greater Bay Area Corporate Sustainability
Awards 2020. We were awarded the “15 Years Plus Caring
Company Logo” by the Hong Kong Council of Social
Service in recognition of our care for the community, the
environment and our staff. The commitment of our staff in
contributing to the community was also reflected in their
donations to a variety of charitable causes. We received
the “Diamond Award”, “4th Top Fund-raiser Award” and
“3rd Highest Donation Award for CARE Scheme” in The
Community Chest’s 2019/2020 Corporate and Employee
Contribution Programme. We were also named the
“Grand Winner – COVID-19 Special Award (Corporate)”
and received other awards in the HR Appreciation Awards
2020 organised by Classified Post.
Governance
Achieving the goals set out in our Corporate Strategy
requires having a strong governance framework in place
that safeguards the best interests of MTR, its shareholders
and stakeholders. We regularly review our businesses to
ensure we are operating according to the highest standards
of corporate governance and best practices in areas such as
functioning of the Board and Enterprise Risk Management.
ACKNOWLEDGEMENTS
AND APPRECIATION
We greatly value the counsel of those with the wisdom
to help us navigate calm and rough waters alike. I am
grateful to my fellow members of the Board for their
support in these challenging times.
I would like to thank once again Dr Allan Wong Chi-yun,
who retired from the Board as an Independent Non-
executive Director on 20 May 2020, Mr James Henry Lau
Jr, who resigned as a Non-executive Director with effect
from 1 June 2020, and Ms Mable Chan, who ceased to be
a Non-executive Director with effect from 1 August 2020.
I would also like to welcome once more Dr Bunny Chan
Chung-bun, who was appointed as an Independent
Non-executive Director of the Board effective 20 May
2020, and Mr Christopher Hui Ching-yu, the newly
appointed Secretary for Financial Services and the
Treasury, who was appointed as a Non-executive Director
effective 1 June 2020. Finally, I would like to welcome
Miss Rosanna Law Shuk-pui, the newly appointed
Commissioner for Transport, who was appointed as a
Non-executive Director with effect from 9 September 2020.
Many of the challenges of 2020 remain, but I truly believe
that by working together, we can keep Hong Kong and all
the cities we serve moving, ushering them into a future full
of hope and prosperity once again. Our talented people
have a strong commitment to the city they call home, and
I feel exceptionally proud to be part of the MTR family.
Rex Auyeung Pak-kuen
Chairman
Hong Kong, 11 March 2021
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Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis CEO’S REVIEW
OF OPERATIONS
AND OUTLOOK
Dear Shareholders and other Stakeholders,
The past year was one of the most difficult in the history of our company. COVID-19 presented stiff challenges to our
operations and business, demanding decisive actions and resolute execution as we worked tirelessly to ensure that Hong
Kong stayed on track throughout the worst of the pandemic.
Despite the circumstances, our dedicated colleagues rose to the occasion and performed admirably. We did our best to
support our communities with strong service performance and an unwavering commitment to health and safety. Most
importantly for the long-term prospects of both MTR and Hong Kong, we also formulated a visionary new corporate
strategy, one that will support our future growth and deliver shareholder and stakeholder value by emphasising
innovation and sustainability, particularly environmental, social and governance (“ESG”) principles.
CORPORATE STRATEGY: “TRANSFORMING THE FUTURE”
Socioeconomic trends, technological advances and increasingly interconnected communities are driving transformational
changes in our world. MTR aims to be at the vanguard of tomorrow by pursuing a new Corporate Strategy that allows us
not only to anticipate and respond to change, but also to participate in its creation.
Our Corporate Strategy, “Transforming the Future”, will firmly establish clear business and social and environmental
goals under a robust ESG framework, driving the sustainability of our business and creating healthy, long-term, symbiotic
relationships with the communities in which we operate. It will help us pursue business growth opportunities that support
local economies and keep cities moving. We also aim to foster a corporate culture that responds to external changes with
agility and care.
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The new Corporate Strategy clearly defines our three core
pillars, their importance to our company and how we
intend to bolster them.
• Pillar 1: Hong Kong Core. We will continue to realise
the full potential of our businesses in Hong Kong
through expanding our existing businesses and
entering into adjacencies, ensuring smooth delivery
of projects as well as enhancing cost effectiveness. We
will also strive to reduce carbon emissions, promote
social inclusion and create opportunities for society as
we develop new rail lines, properties and commercial
activities across the city – increasing stakeholder value
while also ensuring a sustainable business that grows
together with the areas it serves.
• Pillar 2: Mainland of China and International
Business. We will continue to maintain steady growth
in the Mainland of China and globally. This pillar also
enables us to build our presence in the Mainland
and international markets, leveraging our corporate
culture, expertise and, importantly, our brand.
• Pillar 3: New Growth Engines. Technology and
innovation have long played key roles in MTR’s success.
This pillar is where we invest in new technologies
and mobility services for long-term growth. It is
instrumental both as an enabler and as a source of
new business opportunities.
These pillars are supported by five enablers that together
strengthen our operational foundation.
• Technology: utilising data and analytics to make
decisions and identify opportunities, as well as
investing in technology to improve effectiveness and
efficiency and explore new business opportunities
• Organisation and Processes: strengthening
organisational structures so as to make faster
and more accountable business decisions
• People: investing resources in talent development and
smart working with innovative methods and technology
• Finance: enhancing accountability and focus on
sustainable financial goals
• Transformation Management Office: guiding the
delivery of our Corporate Strategy
With the Corporate Strategy as our roadmap, we
will continue endeavouring to “Keep Cities Moving”
sustainably and more efficiently, helping our Company,
its shareholders and stakeholders shape a better
future together. To support the implementation of the
Corporate Strategy, a new management organisation will
be put in place by phases with the intention of clarifying
accountability for the delivery of the Corporate Strategy
and strengthening the Company’s internal control and
risk management framework. The first phase of the
reorganisation has been implemented as announced on
10 February 2021.
COVID-19 AND
THE “NEW NORMAL”
COVID-19 brought Hong Kong and other markets
around the world to a virtual standstill as governments
issued stay-at-home mandates, restricted travel and
implemented various other anti-pandemic guidelines.
The results were steep declines in tourism, retail, food and
beverage, travel and a number of other industries.
Immediately following the outbreak, we took decisive
and thorough measures to ensure public health and
safety at our facilities. We increased the frequency
and comprehensiveness of our cleaning routines.
We employed sanitising robots to disinfect trains,
especially in spaces that are hard to reach by cleaning
crews. We applied technology to further enhance the
hygiene of public-facing facilities at stations, reinforcing
photocatalytic coating and introducing touch-free
buttons for passenger lifts. We not only required masks
in trains and stations but also provided sanitiser and
even installed vending machines to make masks more
accessible to the public. We launched our own face mask
production lines to ensure a steady supply for our staff
in addition to providing workplace personal protection
equipment (“PPE”). We also initiated appropriate flexible
work arrangements to safeguard our staff’s health and
safety against COVID-19. Outside of Hong Kong, we
have also been dedicated in providing a safe and clean
environment for our staff and customers.
Importantly, the pandemic showed just how significant
corporate responsibility and governance principles are to
MTR for ensuring sustainable operations. Underscoring
our commitment to society and our support of local
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Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis businesses in difficult times, we introduced a number of
relief measures. These included offering fare rebates for
commuters and granting rental concessions to most of our
mall and station shop tenants, commencing in February
and lasting throughout the year, with priority given to
small to medium tenants. Earlier in the year, we donated
100,000 masks to communities in need, and our Board and
Executive Directors donated part of their remuneration
to local charity groups. We also placed vending machines
at 20 stations for the public to conveniently pick up free
COVID-19 specimen collection packs. Initiatives such as
these demonstrated our care and commitment for the
communities where we operate.
Financially, MTR was affected by significantly reduced train
patronage owing to various pandemic control measures.
We saw lower rental income as a result of the economic
slowdown and rental concessions given to tenants who
were suffering from cross-boundary station closures and
reduced footfall at our commercial properties. Advertising
income also came under severe pressure due to poor retail
sales and consumer sentiment. Therefore, we adopted a
number of measures to alleviate these impacts, including
making timely adjustments of off-peak-hour service level
in response to changes in travel demand; ensuring even
higher levels of travel health and safety; enhancing MTR
Mobile loyalty programmes and lifestyle content; making
rental leases more attractive through greater flexibility and
shorter terms; building tenant loyalty by granting rental
concessions, particularly to small to medium tenants; and
implementing stringent cost controls.
Many of the changes our society has experienced are likely
to continue as governments around the world continue to
grapple with containing COVID-19. Mask-wearing, social
distancing, work-from-home policies, greater reliance on
e-commerce, and intensified cleaning and sanitisation
routines are all potentially part of the “new normal”. We
are adjusting ourselves for the “new normal” through
digital development. For example, we are leveraging
MTR Mobile to further improve the customer experience;
providing more payment options at gates; developing
new and effective hygiene measures to maintain public
confidence; improving cost efficiency through technology
deployment; launching “online-offline” advertising
packages; introducing new retail modes; and continuing
our data strategy to capture business opportunities
and make operational improvements. As an important
transport provider in Hong Kong and overseas, one that
keeps people moving and connected every day, we have
fully taken on board the lessons of the novel coronavirus
and will continue to help set the new standards for public
health and safety and staff well-being.
2020 POLICY ADDRESS
AND RDS 2014
In our Hong Kong railway business, MTR continued to
work toward helping Government achieve its objectives
for the future development of the city’s transport
infrastructure as outlined in the 2020 Policy Address and
Railway Development Strategy 2014 (“RDS 2014”).
Under RDS 2014, we awarded the design consultancies
for the Tung Chung Line Extension and Tuen Mun South
Extension (which will become the Tuen Ma Line Extension
in the future) after being invited earlier in the year to
proceed with detailed planning and design for the two
projects. We were also invited by Government to proceed
with detailed planning and design for Kwu Tung Station
and the Northern Link.
To support Government’s housing supply policy, we have
been invited by Government to proceed with technical
studies on the development of the Siu Ho Wan Depot site,
which is planned to offer approximately 20,000 residential
units as well as community and retail facilities. Advance
works and design are underway.
In 2020, we submitted the remaining proposals under
RDS 2014 – the Hung Shui Kiu Station and South Island
Line (West) projects – to Government.
OVERCOMING CHALLENGES
ENCOUNTERED
We decided in September 2020 to postpone the
commencement of the new signalling system and gradual
introduction of the new nine-car trains on the East Rail
Line in order to properly resolve the route recall situation,
which has no impact on safety. After completing
additional testing and obtaining approvals from relevant
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CEO’S REVIEW OF OPERATIONS AND OUTLOOK Government departments, the new signalling system and
new trains on the East Rail Line were commissioned on
6 February 2021.
The Final Report of the Commission of Inquiry (“COI”)
into the Construction Works at and near the Hung Hom
Station Extension under the Shatin to Central Link and
the Final Report of the Expert Advisor Team (“EAT”) on
the Shatin to Central Link project were released in May
2020 and February 2021, respectively. The COI report
concluded that the relevant structures at and near
Hung Hom Station are safe and fit for purpose with the
completion of suitable measures. Separately, the EAT
report also concluded that it is safe in practical terms
to use the related built structures at Hung Hom Station
for their intended purposes after the implementation
of suitable measures. Over the past two years, we
have already introduced a number of improvements
in our project management systems. Many of these
enhancements have now been incorporated into our
standard project management practices and procedures
and will be applied for the completion of the Shatin to
Central Link as well as new railway projects.
We also moved quickly to implement a number of
improvement measures following the March 2020 release
of the investigation report into the derailment incident
near Hung Hom Station along the East Rail Line.
BUSINESS HIGHLIGHTS
AND PERFORMANCE
In a difficult year, there were still a number of highlights
to note. We once again posted excellent 99.9%
performance for train service delivery and on-time
passenger journeys. Meanwhile, technology continued
to be an increasingly important contributor to our
operations. The year under review saw us enhancing
the information, news and functions of MTR Mobile to
improve the customer experience as well as increase
our use of smart asset management to boost railway
reliability. We opened Tuen Ma Line Phase 1 in February
2020 and are on schedule to open the full line in the third
quarter of 2021.
MTR made good progress in property development in
Hong Kong. We awarded the tenders for LOHAS Park
Package 12 and Package 13 in 2020 and The Southside
(also known as “Wong Chuk Hang Station Property
Development”) Package 5 in January 2021, and we
opened The LOHAS shopping mall in August 2020.
In Mainland of China and International businesses,
we were awarded Shenzhen Metro Line 13, a
public-private partnership (“PPP”) project for investment
in and construction of the line as well as operations and
maintenance (“O&M”) for 30 years after completion. We
were awarded the O&M concession for the Mälartåg train
service in Sweden for eight years starting from December
2021. We also opened the full Hangzhou Metro Line 5
(“HZL5”) in April, the Shenzhen Metro Line 4 North
Extension in October, and Hangzhou Metro Line 1
Phase 3 (Airport Extension) and the Middle Section of
Beijing Metro Line 16 in December.
As announced on 19 January 2021, our financial results
in 2020 were affected by the significant impact of
the COVID-19 pandemic. Loss arising from recurrent
businesses for the year was HK$1,126 million. Property
development profit for the year decreased by 1.3%
to HK$5,507 million. As a result, profit arising from
underlying businesses decreased by 58.5% to HK$4,381
million. Including the loss arising from investment
property revaluation (a non-cash accounting item),
net loss attributable to shareholders of the Company
was HK$4,809 million, representing loss per share after
revaluation of HK$0.78.
Your Board has proposed a final ordinary dividend of
HK$0.98 per share, which together with the interim
dividend of HK$0.25 per share brings the full-year
dividend to HK$1.23 per share, same as that of 2019.
HONG KONG BUSINESSES
MTR’s “Hong Kong Core” is one of the Company’s three
strategic pillars. Our “Rail Plus Property” business model
drives revenue for this pillar through diversified streams,
enabling the Company and its shareholders to participate
in and benefit from Hong Kong’s expanding transport
links as well as their associated developments.
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Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis Transport Operations
HK$ million
Hong Kong Transport Operations
Total Revenue
(Loss)/Profit before Depreciation, Amortisation and Variable Annual
Payment (“EBITDA”)
(Loss)/Profit before Interest and Finance Charges and after Variable
Annual Payment (“EBIT”)
EBITDA Margin (in %)
EBIT Margin (in %)
n/m: not meaningful
Year ended 31 December
2020
2019
Inc./(Dec.) %
11,896
(422)
(5,408)
(3.5)%
(45.5)%
19,938
5,909
(591)
29.6%
(3.0)%
(40.3)
n/m
(815.1)
(33.1)% pts
(42.5)% pts
In 2020, total revenue from Hong Kong transport
operations decreased by 40.3% to HK$11,896 million
from HK$19,938 million in 2019. Loss before interest and
finance charges and after the variable annual payment
was HK$5,408 million. These results were primarily due to
the COVID-19 outbreak, which had negative impacts on
patronage and average fare from early 2020 onward.
Patronage and Revenue
Hong Kong Transport Operations
Domestic Service
Cross-boundary Service
High Speed Rail (“HSR”)
Airport Express
Light Rail and Bus
Intercity
Others
Total
Patronage
in millions
Revenue
HK$ million
2020
Inc./(Dec.) %
2020
Inc./(Dec.) %
1,145.0
7.6
1.0
3.1
154.0
0.1
1,310.8
(27.0)
(92.7)
(93.9)
(80.5)
(25.8)
(94.5)
(31.5)
9,229
516
1,277
140
481
20
11,663
233
11,896
(27.4)
(83.7)
(39.1)
(86.2)
(29.0)
(88.6)
(41.2)
135.4
(40.3)
Total patronage across all MTR rail and bus passenger
services decreased by 31.5% to 1,310.8 million compared
to 2019. Average weekday patronage decreased by
30.9% to 3.88 million. The closures of Cross-boundary
Service and the High Speed Rail (“HSR”) due to COVID-19
together had a significant impact on cross-border
patronage. Passengers of Domestic Service decreased by
27.0% to 1,145.0 million as a result of Government- and
workplace-mandated social distancing measures as well
as school closures, which caused more people to work
and study from home. Travel restrictions greatly affected
the number of air travellers entering and departing
Hong Kong, resulting in an 80.5% decrease in Airport
Express patronage.
To stimulate ridership in response to the challenges
posed by the COVID-19 pandemic, we have been
promoting non-peak travel and creating attractive
fare, ticket and pass promotions. We are leveraging our
constantly evolving MTR Mobile to effectively bring
the latest offers to users. More than ever, we have been
regularly reviewing our train schedules to account for
demand fluctuations and ensure customer convenience.
We are also seeking to promote MTR to domestic users as
the preferred transit method for exploring the numerous
travel and sightseeing opportunities within Hong Kong.
Market Share
The Company’s overall market share of the franchised
public transport market in Hong Kong in 2020 was 45.3%
compared with 47.4% in 2019. This decline was mainly
due to the precipitous drop in patronage owing to the
COVID-19 pandemic for Cross-boundary Service, HSR
20
MTR Corporation
Annual Report 2020
21
CEO’S REVIEW OF OPERATIONS AND OUTLOOK and Airport Express, in which we have a relatively higher
market share than other franchised transport operators.
Our share of cross-harbour traffic was 66.1% compared
with 67.5% in 2019. Our share of the cross-boundary
business for 2020, including HSR and Cross-boundary
Service, fell to 47.2% from 51.3%. Our share of traffic to
and from the airport decreased to 16.3% from 20.5%.
Fare Adjustment, Promotions and Concessions
Passengers using Octopus received a rebate of 3.3% on
every trip, in effect paying no actual fare increase as set
by the +3.3% Fare Adjustment Mechanism (“FAM”) for
2019/2020. In 2020, we made no price adjustments
for various tickets and passes, offered discount
promotions, and granted HK$1.7 billion in on-going fare
concessions to the elderly, children, students and persons
with disabilities.
In April 2020, MTR announced a six-month package of
economic relief measures, including a 20% rebate on
every Octopus trip and HK$100 discounts on MTR City
Saver and Monthly Pass Extras; in November 2020 these
measures were extended till March 2021 and June 2021,
respectively. Government agreed to bear half of the total
actual revenue forgone arising from these measures
during the period between July 2020 and March 2021.
With no fare increase in 2020 owing to the negative
growth of Median Monthly Household Income, the
announced 2020/2021 FAM of +2.55% may be recouped
over the subsequent two years, with +1.28% to be
recouped in 2021/2022 and +1.27% to be recouped in
2022/2023. The +0.3% fare adjustment for the announced
2019/2020 FAM that was not implemented may also be
recouped in 2021/2022. Such recoupments will be made
subject to the provisions of the FAM.
Service Performance
MTR prides itself on service reliability and excellence.
In 2020, we were able to achieve an exemplary 99.9%
on-time mark for passenger journeys and train service
delivery for our heavy rail network. Passenger journeys
on-time are defined as those that are completed within
five minutes of their scheduled journey times, while train
service delivery measures actual train trips against those
scheduled to be run.
In 2020, MTR ran more than 1.78 million trips on its heavy
rail network and more than 1 million trips on its light
rail network. Of these, the heavy rail network and light
rail network experienced eight delays and no delays,
respectively, defined as those lasting 31 minutes or more
and attributable to factors within the Company’s control.
The light rail network continued its record dating back
to 2019 of no delays lasting 31 minutes or more and
attributable to factors within the Company’s control.
In all cases of delay, we thoroughly investigate the
circumstances and take necessary steps to ensure that
similar instances do not occur again in future.
An Investigation Panel was convened to examine delays
to the commencement of the new signalling system and
gradual introduction of new trains on the East Rail Line,
an important part of the Shatin to Central Link project.
An investigation report was submitted in January 2021.
Safety has been reaffirmed by the technical investigation,
which showed that the concerned issue was caused by
a non-safety-critical software module being overloaded
by a new software module specifically built for the
Company to provide extra train monitoring information
to the Operations Control Centre. The contractor resolved
the issue by upgrading the software and stopping the
new software module. Following satisfactory completion
of all further testing and approvals from relevant
Government departments on the safe and sound
condition of the new signalling system and new trains, the
new signalling system and trains were commissioned on
6 February 2021.
On 3 March 2020, MTR released to the public the
investigation report detailing the train derailment near
Hung Hom Station in September 2019. Investigators
concluded that the derailment was caused by dynamic
track gauge widening at a turnout near the station.
Following the release of the report, the Company took
immediate actions to prevent similar incidents.
Enhancing the Customer Service Experience
MTR places great emphasis on delivering a world-class
customer experience, and the year under review saw
us once again embark upon a number of enhancement
projects for our trains and stations. In line with one
of our core strategic pillars, we are also keen on areas
such as smart mobility as well as smart operations and
maintenance to drive our future growth.
Boosting Passenger Convenience
On 14 February 2020, we opened Phase 1 of the Tuen
Ma Line, commencing services at the new stations of
Hin Keng and Kai Tak as well as the expanded section of
20
MTR Corporation
Annual Report 2020
21
Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis Diamond Hill Station. The average daily usage of these
three stations was 125,000 passengers from opening to
the end of 2020.
During the pandemic we strove to balance public health
with the need to maintain sufficient service, increasing
and decreasing non-peak service based on social
distancing requirements as well as work and school
guidelines. We continue to monitor the situation
closely to provide adequate service while also ensuring
public health.
Greater Comfort for Passengers
MTR has ordered 93 new heavy rail eight-car trains
and 40 new light rail vehicles to retire older trains and
vehicles before their life expiry. Nine new heavy rail
trains have been delivered and two more are scheduled
to be delivered by early 2021. The first two new light rail
vehicles were put into service in November 2020; eight
more have been delivered and were undergoing testing
and commissioning as at the end of 2020.
Since 2017, we have been systematically replacing
chillers throughout our stations and depots to ensure
comfortable environments for passengers and staff. This
work is expected to be completed in 2023.
We are also upgrading our signalling system to increase
service capacity. Software revamping and assurance work
on the Tsuen Wan Line signalling system is progressing
slowly, further compounded by COVID-19 lockdown
measures imposed at the contractor’s office in Canada.
Work is also underway on the replacement of the
signalling systems for the Island, Kwun Tong and Tseung
Kwan O lines. Work on the signalling of the Tung Chung
and Disneyland Resort lines as well as Airport Express will
be planned together with the Tung Chung Line Extension
under RDS 2014.
Enhancing Station Facilities
To provide greater comfort and convenience for
passengers, we opened new public toilets and baby care
rooms at the stations along Phase 1 of the Tuen Ma Line
in February 2020 as well as Yau Ma Tei and North Point
stations in June 2020 and September 2020, respectively.
We also continued to install drinking water dispensers at
selected stations to meet passenger needs and reduce
plastic waste. New external lifts and escalators were
provided to further improve barrier-free access at stations.
Over 100 passenger lifts across the network have now
been equipped with “contactless” lift button sensors to
protect our customers during the pandemic.
To help passengers stay connected while on the go, our
free Wi-Fi coverage was expanded during the year from
station hotspots to all station platform and concourse
areas. We continued to increase the number of mobile
charging spots available in stations, including USB
charging sockets and wireless charging pads. There are
now mobile charging facilities at 29 stations, including all
interchange stations.
Smart Mobility to Enhance Customer Journeys
MTR is committed to keeping abreast of technologies
and trends that can help communities stay connected
and ride smart. The new MTR Mobile features railway
and other transport information and functions, news and
offers from MTR Malls and station shops, and a variety of
lifestyle content. Its MTR Points loyalty scheme enables
customers to earn and redeem MTR Points for free rides
and other attractive rewards. The “Next Train” function
now shows estimated times of arrival for selected heavy
rail and light rail lines. “Trip Planner” now recommends up
to three journey options. “Traffic News” lets passengers
enter their preferred time and date for a point-to-point
route and informs them of any service disruptions
through push notifications.
To digitalise and automate customer touchpoints and
deliver a smarter, more seamless travel experience,
a number of initiatives were introduced in 2020. For
example, passengers can purchase monthly passes in
advance via MTR Mobile and avoid queues. Students may
now use the app to renew their “Student Status” on their
Octopus cards and continue enjoying concessionary fares.
Starting from 23 January 2021, passengers can tap the
entry/exit gates with a QR code ticket on MTR Mobile or
EasyGo on AlipayHK, marking a new milestone for MTR’s
efforts to promote smart mobility.
Smart Operations and Maintenance
In 2020, we continued to improve our services through
innovation by introducing five AI-powered “smart
trainee” robots to the Kai Tak Station operations team.
Their functions include giving passengers directions,
helping with journey planning, inspecting station
facilities and carrying out cleaning tasks. We launched
the InnoEtronic invention zone and robotics co-working
space at Kowloon Bay Depot, a strategic partnership
that explores innovative technologies for smart rolling
stock maintenance. Automatic Air-conditioning Filter
Cleaning Machines were installed at the Pat Heung and
Chai Wan depots to replace tedious manual cleaning
22
MTR Corporation
Annual Report 2020
23
CEO’S REVIEW OF OPERATIONS AND OUTLOOK and standardise filter cleaning quality and efficiency.
We started trials for an Underframe Inspection Robot at
Pat Heung Depot, which is designed to automate part
of the rolling stock inspection process by using image
recognition, AI and precise motion control to identify and
report anomalies. We also started trialling a Smart Train
Roof and Pantograph Monitoring System at Tuen Ma Line
Phase 1, which automatically captures a complete image
of the train pantograph and train roof and uses image
recognition technology to identify potential anomalies
and alert users to prevent further escalation of failure.
MTR has also been exploring and adopting smart asset
management to improve the reliability of its railway
services. We are currently trialling SmartChain,
a blockchain-based platform that optimises supply chain
management and workflow transparency. We developed
an award-winning Maintenance Cloud System and
Condition Monitoring Hardware to manage manpower
and monitor train relay electronic performance in real
time. Smart Train Planning, rolled out in October 2020,
is a self-regulating AI platform using cloud technology
that shortens train downtime by optimising train
deployment and maintenance. A Digital Monitoring
System for workshop processes is in development to
help staff plan and monitor train maintenance. We
also began using Smart Forms mobile app to digitise
information and records, resulting in faster, higher-
quality maintenance work.
Station Commercial Businesses
HK$ million
Hong Kong Station Commercial Businesses
Station Retail Rental Revenue
Advertising Revenue
Telecommunication Income
Other Station Commercial Income
Total Revenue
EBITDA
EBIT
EBITDA Margin (in %)
EBIT Margin (in %)
Year ended 31 December
2020
2,021
516
640
92
3,269
2,760
2,502
84.4%
76.5%
2019
Inc./(Dec.) %
4,800
1,130
743
126
6,799
6,119
5,122
90.0%
75.3%
(57.9)
(54.3)
(13.9)
(27.0)
(51.9)
(54.9)
(51.2)
(5.6)% pts.
1.2% pts.
In 2020, total revenue from all Hong Kong station
commercial activities decreased by 51.9% to HK$3,269
million. This was mainly due to rental concessions granted
to tenants who were affected by station closures and
suspended cross-boundary rail services following border
shutdowns, as well as rental concessions granted to other
station shop tenants during the COVID-19 outbreak.
During the year, COVID-19 caused steep declines in
tenant business at MTR stations due to anti-pandemic
measures, travel restrictions and the weak economic
environment, which greatly reduced store business
and almost completely eliminated overseas and
cross-boundary tourism. Advertising revenue was also
significantly impacted. To address these issues, MTR
offered more aggressive advertising sales packages as
well as solutions encouraging tenants to use more
online-offline retail, which enables customers to receive
offers digitally and fulfil them in-store, thus driving
sales while reducing face-to-face interaction. We also
digitalised our advertising panels and back-end system
to boost the visual appeal and digital creativity of our
advertising offerings for advertisers.
Rental concessions and the closure of duty free shops in
border stations resulted in a 57.9% decrease in station
retail rental revenue to HK$2,021 million. In addition
to rental concessions granted to tenants affected by
the suspended cross-boundary rail services, MTR also
offered rental relief to small to medium tenants in other
station shops by granting half-month reductions of
their rents from February to April 2020. Rental relief
for large corporations was considered on a case-by-
case basis. From May to December 2020, we continued
offering rental relief to all tenants. Rental reversion and
average occupancy rates in 2020 for station kiosks were
approximately -8% and 98.3%, respectively.
22
MTR Corporation
Annual Report 2020
23
Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis During the year, the Company continued to employ
innovative marketing promotions to stimulate retail
activity. The MTR Points loyalty scheme, introduced in
May 2020, encourages customers to ride on MTR, make
purchases at designated station shops and MTR Malls,
and redeem gifts with earned MTR Points. We also
launched promotional campaigns from time to time,
including special offers from station shops and MTR Malls
to boost sales. Meanwhile, our two “v-smart” unmanned
automated station shops at Kowloon and Tsing Yi stations
continued to offer customers a new retail experience.
As at 31 December 2020, the lease expiry profile of
our station kiosks (including duty free shops) by area
occupied was such that approximately 32% will expire in
2021, 47% in 2022, and 21% in 2023 and beyond.
In terms of trade mix, food and beverage accounted for
approximately 22% of the leased area of our station kiosks
(excluding duty free shops), followed by cake shops 16%,
convenience stores 14%, passenger services 11% and
others 37% as at 31 December 2020.
Revenue from advertising decreased by 54.3% to
HK$516 million in 2020 as the COVID-19 outbreak
resulted in steep declines in tourism and retail sales,
causing advertisers to postpone or cancel campaigns.
To drive sales in a difficult market, the Company offered
value-added packages to capture limited budgets and
late bookings.
Telecommunications revenue decreased by 13.9% to
HK$640 million in 2020. This was attributed to the special
fee concession given during the COVID-19 pandemic and
subsequent economic downturn as well as the revised fee
due to contract renewal. Our project to increase capacity
by installing a new commercial telecom system at 31 of
our stations is well underway with 26 stations completed
as at 31 December 2020. Some telecom operators had
launched 5G services at 40 stations as at year-end.
Property Businesses
Property Rental and Management
HK$ million
Hong Kong Property Rental and
Property Management Businesses
Revenue from Property Rental
Revenue from Property Management
Total Revenue
EBITDA
EBIT
EBITDA Margin (in %)
EBIT Margin (in %)
Year ended 31 December
2020
2019
Inc./(Dec.) %
4,817
237
5,054
4,204
4,185
83.2%
82.8%
4,833
304
5,137
4,286
4,264
83.4%
83.0%
(0.3)
(22.0)
(1.6)
(1.9)
(1.9)
(0.2)% pt.
(0.2)% pt.
Property rental revenue decreased by 0.3% year on year
to HK$4,817 million in 2020. This was mainly due to relief
measures provided to tenants during the pandemic,
which were granted on a case-by-case basis with priority
given to small to medium tenants. However, these
concessions were partially offset by the incremental
contribution from our newly opened and acquired
shopping malls. In 2020, MTR shopping malls recorded
a negative rental reversion of approximately 21% due to
adverse retail sentiment. Our shopping malls (other than
The LOHAS, which was opened in August 2020)
and the Company’s 18 floors in Two International
Finance Centre had average occupancy rates of 99%
and 98%, respectively.
As at 31 December 2020, the lease expiry profile of our
shopping malls by area occupied was such that
approximately 33% will expire in 2021, 30% in 2022,
20% in 2023, and 17% in 2024 and beyond.
In terms of trade mix as at 31 December 2020, food
and beverage accounted for approximately 29% of the
leased area of our shopping malls, followed by fashion,
beauty and accessories 22%, services 22%, leisure
and entertainment 17%, and department stores and
supermarkets 10%.
Steep declines in tourist traffic and domestic spending
negatively impacted our mall rental business, while
work-from-home arrangements and the weak economic
24
MTR Corporation
Annual Report 2020
25
CEO’S REVIEW OF OPERATIONS AND OUTLOOK environment adversely affected our office tenants’
business expansion plans and reduced their space
requirements. We remained keenly attuned to the
business difficulties faced by our mall tenants, particularly
those operating in food and beverage and discretionary
segments, collaborating with them on initiatives such as
loyalty and redemption programmes to boost business.
We helped e-commerce and online merchants open pop-
up stores at our properties to help drive mall traffic. We
are also considering widening the trade mix in our malls
to further diversify our offerings.
During the year the Company held a number of marketing
programmes across its commercial portfolio to drive sales.
Many of these were conducted via MTR Mobile, which
delivers news and offers related to shopping, dining and
parking services at MTR Malls.
In August 2020, MTR opened Phase 1 of The LOHAS
shopping mall to support the daily needs of residents.
Phase 2 was opened in November 2020 with a cinema, a
new retail pop-up zone, and a series of smart services and
digital interactive motion zones. In 2020, the Company
also acquired the remaining economic interests in Telford
Plaza II and PopCorn 2 shopping centres and now holds
100% interest in both, alleviating the impact of COVID-19
and the economic downturn through increased rental
income. Repartitioning work for the fourth and fifth levels
of Telford Plaza II has been completed, and all shops are
now open.
Property management revenue in Hong Kong decreased
by 22.0% to HK$237 million compared to 2019.
Property Development and Tendering
Hong Kong property development profit for the year was
HK$5,442 million, which was primarily derived from the
surplus proceeds from LOHAS Park Package 6 and sales of
inventory units.
Pre-sales activities of MTR properties have progressed
well for The Pavilia Farm I and The Pavilia Farm II, both
located at Tai Wai Station, with approximately 97% and
95%, respectively, of units sold as at 31 December 2020.
Also as at 31 December 2020, approximately 70% of units
at SEA TO SKY (LOHAS Park Package 8) and 97% of units at
MARINI, GRAND MARINI and OCEAN MARINI (LOHAS Park
Package 9) had been sold. Pre-sale for LP10 (LOHAS Park
Package 10) commenced in January 2021.
West Rail property sales activities for Cullinan West III (Nam
Cheong Station) and Sol City (Long Ping Station (South)),
where we act as the agent for the Kowloon-Canton Railway
Corporation, also continue. The application for pre-sale
consent for Yuen Long Station property development
(Phase 1) is in progress.
In February 2020, MTR awarded the tender for LOHAS Park
Package 12 to a subsidiary of Wheelock and Company
Limited. In October 2020, the Company awarded the
tender for LOHAS Park Package 13 to a consortium
formed by Sino Land Company Limited, Kerry Properties
Limited, K. Wah International Holdings Limited and China
Merchants Land Limited. In January 2021, the Company
awarded the tender for The Southside Package 5 to a
consortium formed by New World Development Company
Limited, Empire Development Hong Kong (BVI) Limited,
CSI Properties Limited and Lai Sun Development Company
Limited. For the Ho Man Tin Station Package 1 property
development project, a novation agreement has been
reached between MTR Corporation Limited, Goldin
Properties Holdings Limited and Great Eagle Group. The
Company will work together with Great Eagle Group to
bring this project to completion.
GROWING OUR
HONG KONG BUSINESSES
MTR’s “Hong Kong core” business pillar is supported
by the “Rail Plus Property” model, which enables the
Company, its shareholders and stakeholders to benefit
from the city’s growing transport links as well as their
associated urban development. The year under review
saw us continue to grow our Hong Kong business
through the Shatin to Central Link and the new projects
under Government’s RDS 2014.
Shatin to Central Link
The 17-km Shatin to Central Link, a Government project
managed by MTR, is a vital infrastructure initiative that
will greatly enhance the existing railway network and
reduce travel times between major population centres in
Hong Kong.
As at 31 December 2020, the Tai Wai to Hung Hom
section of the Shatin to Central Link was 99.99%
complete. Phase 1 of the Tuen Ma Line, which connects
communities around Hin Keng, Diamond Hill and Kai Tak
24
MTR Corporation
Annual Report 2020
25
Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis stations, opened in February 2020. The full opening of the
Tuen Ma Line, which will connect Phase 1 with the West
Rail Line via Sung Wong Toi, To Kwa Wan, Ho Man Tin
and Hung Hom stations, is expected in the third quarter
of 2021. Trial operations of the full Tuen Ma Line began
in January 2021, marking a major milestone towards the
commencement of passenger service.
As the existing East Rail Line will connect with the future
Hung Hom to Admiralty section, its signalling system
must be upgraded for compatibility with the extension.
As reported earlier, the introduction of the new signalling
system was put on hold in September 2020 and the
system was finally commissioned in February 2021
following the satisfactory completion of all further testing
and approvals from relevant Government departments.
After reviewing the report of the investigation panel,
the Company has established a dedicated “Shatin to
Central Link Technical and Engineering Assurance
Team” to monitor the project from both technical and
service readiness perspectives, as well as to identify
any important potential issues regarding the project’s
remaining works for timely reporting and follow-up.
A new Service Reliability Report will also be introduced
as part of Government’s reviewing mechanism of
the commissioning of new lines to ensure the timely
reporting and handling of issues with potentially
significant reliability impacts. The Company will also
implement other recommendations made in the report of
the investigation panel.
The Hung Hom to Admiralty section was 91.2% complete
as at 31 December 2020. In July 2020, we completed
track-laying works for the Hung Hom Station to Admiralty
Station section, and a topping-out ceremony for
Exhibition Centre Station was held in November 2020.
Due to the major challenges encountered, the targeted
opening date of the first quarter of 2022 is significantly at
risk. The Company is working to the best of its ability to
open the line at the earliest opportunity.
On 12 May 2020, Government released the Final Report of
the COI into the Construction Works at and near the Hung
Hom Station Extension under the Shatin to Central Link.
According to the COI report, the relevant structures at and
near the Hung Hom Station Extension are safe and fit for
purpose with the completion of suitable measures. These
measures were completed in mid-2020. Separately, the
EAT report also concluded that it is safe in practical terms
to use the related built structures at Hung Hom Station
for their intended purposes after the implementation of
suitable measures.
The Group has made a provision of HK$1.4 billion for the
estimated additional cost to the Company of continuing
to comply with its project management responsibilities in
its consolidated profit and loss account for the year ended
31 December 2020. Further details can be found in note
21B to the Consolidated Accounts of this Annual Report.
Other New Railway Projects
Working under the RDS 2014 framework for the future
development of Hong Kong’s railway network which
will potentially add 35 km to our network, we were
invited by Government in April, May and December
2020 to proceed with the detailed planning and design
of the Tung Chung Line Extension, Tuen Mun South
Extension, and Kwu Tung Station and the Northern Link,
respectively. We awarded the design consultancies for
the Tung Chung Line Extension and Tuen Mun South
Extension in June and October 2020, respectively, and
have proceeded with ground investigation works and
environmental impact assessments. Procurement of
the design consultancies for Kwu Tung Station and the
Northern Link has commenced.
In May 2020, we submitted a proposal to Government
for the Hung Shui Kiu Station project, and we continue to
provide further information and details to Government.
We also submitted a project proposal for the South Island
Line (West) in December 2020. We are currently working
alongside Government to address technical challenges on
the East Kowloon Line and North Island Line projects.
Expanding the Property Portfolio
Investment Properties
Our shopping centres in Tai Wai and Wong Chuk Hang
(now named “The Southside”) are expected to open
in 2023. These two new malls will add 107,620 square
metres to the attributable GFA of our existing retail
portfolio as at 31 December 2020, representing an
increase of approximately 30%.
Residential Property Development
Our 17 new residential property projects under
development are expected to deliver over 23,000 units
to the market in the coming five years, supporting
Government’s efforts to increase housing supply.
26
MTR Corporation
Annual Report 2020
27
CEO’S REVIEW OF OPERATIONS AND OUTLOOK We have been invited by Government to proceed with the
technical studies on the Siu Ho Wan Depot site topside
development, which will provide about 20,000 residential
units in the medium to long term, about half of which
will be Subsidised Sale Flats. The development will also
provide community facilities and a 30,000-square-metre
shopping mall. The design and planning of advance
works have commenced.
The draft Outline Zoning Plans for the Tung Chung
Traction Substation site and Pak Shing Kok Ventilation
Building site were gazetted in June 2020. Subject to
completion of the rezoning process and the subsequent
land grant for development, we will tender out these two
sites in the next 12 months or so. Subject to our entering
into a project agreement with Government, we will
tender out Tung Chung East Station Package 1 in the next
12 months or so. Meanwhile, we are also exploring the
development potential of sites along existing and future
railway lines, including the Tuen Mun South Extension,
Kwu Tung Station and Northern Link.
MAINLAND OF CHINA AND INTERNATIONAL BUSINESSES
MTR’s Mainland of China and International businesses
together represent one of the three strategic pillars
of our Corporate Strategy. In 2020, it served a total of
approximately 1.38 billion passengers in the Mainland
of China, Macao, Europe and Australia through various
subsidiaries and associates. While COVID-19 affected
passenger numbers, patronage losses had varied impacts
on our financial performance depending on the business
models for different business contracts.
Mainland of China and International Businesses
Mainland of China and Macao
Railway, Property Rental
and Property
Management Businesses
International Railway Businesses
Total
2020
2019 Inc./(Dec.) %
2020
2019 Inc./(Dec.) %
2020
2019 Inc./(Dec.) %
1,836
224
212
1,881
529
517
(2.4)
(57.7)
(59.0)
19,592
309
49
19,204
796
572
2.0
(61.2)
(91.4)
21,428
533
261
21,085
1,325
1,089
1.6
(59.8)
(76.0)
212
(59.0)
517
12.2% 28.1% (15.9)% pts.
11.5% 27.5% (16.0)% pts.
(63.1)
472
174
61
1.6%
0.3%
(4)
412
4.1%
3.0%
200
(85.2)
(2.5)% pts.
(2.7)% pts.
n/m
273
2.5%
1.2%
170
(70.6)
929
6.3% (3.8)% pts.
5.2% (4.0)% pts.
(74.7)
672
844
363
1,005
457
(16.0)
(20.6)
63
61
(403)
(403)
n/m
n/m
907
424
602
54
50.7
685.2
1,056
1,522
(30.6)
124
9
1,277.8
1,180
1,531
(22.9)
Year ended 31 December
HK$ million
Recurrent Businesses
Subsidiaries
Revenue
EBITDA
EBIT
EBIT
(Net of Non-controlling Interests)
EBITDA Margin (in %)
EBIT Margin (in %)
Recurrent Business Profit/(Loss)
Associates and Joint Venture
Share of EBIT
Share of Profit/(Loss)
EBIT of Subsidiaries (Net of
Non-controlling Interests)
and Share of EBIT of
Associates and Joint Venture
(Loss)/Profit Attributable to Shareholders of the Company
– Arising from Recurrent Businesses (before Business Development Expenses)
– Business Development Expenses
– Arising from Recurrent Businesses (after Business Development Expenses)
– Arising from Mainland of China Property Development
– Arising from Underlying Businesses
594
(183)
411
65
476
726
(201)
525
49
574
(18.2)
(9.0)
(21.7)
32.7
(17.1)
n/m: not meaningful
In the Mainland of China and Macao, recurrent business
profit from our railway, property rental and property
management subsidiaries decreased by 63.1% to
HK$174 million in 2020. This was mainly due to
COVID-19’s impact on fare revenue from Shenzhen
Metro Line 4 (“SZL4”) as well as rental concessions
granted to our shopping mall tenants.
26
MTR Corporation
Annual Report 2020
27
Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis In our International businesses, recurrent business loss
from our railway subsidiaries was HK$4 million for the
year compared to the recurrent business profit of HK$200
million in 2019. This was mainly due to lower farebox
revenue from Metro Trains Melbourne Pty. Ltd. and
MTRX (formerly known as MTR Express) due to COVID-19
and an initial operating loss by our O&M business at
Sydney Metro North West. These impacts were partially
offset by much-improved operating performance from
Stockholms pendeltåg.
Our share of profits from our associates and joint venture
increased to HK$424 million in 2020 from HK$54 million
in the previous year. This was mainly due to the one-off
onerous contract provision of HK$436 million made in
2019 for First MTR South Western Trains Limited, which
was offset somewhat by the negative impact of COVID-19
in our Hangzhou and Beijing operations.
Excluding Mainland of China property development, our
railway, property rental and management subsidiaries
(after business development expenses), together with
our associates and joint venture outside of Hong Kong,
contributed a net after-tax profit of HK$411 million in
2020 on an attributable basis. This represented a decrease
of 21.7% compared with 2019.
Railway Businesses in the
Mainland of China
Beijing
In Beijing, our associate operates Beijing Metro Line 4
(“BJL4”), the Daxing Line, the first three phases of Beijing
Metro Line 14 (“BJL14”), and the Northern and Middle
sections of Beijing Metro Line 16 (“BJL16”). COVID-19
impacted patronage of all lines during the year.
Construction of the full BJL14 and BJL16 continued during
the year. BJL16 Middle Section opened in December 2020.
BJL14 full line and first phase of Beijing Metro Line 17 are
scheduled to open in late 2021. BJL16 full line is expected
to open in late 2022 at the earliest.
Shenzhen
SZL4, operated by our wholly owned subsidiary, saw a
decline in patronage in 2020 due to COVID-19. There
has been no increase in fares at SZL4 since we began
operating the line in 2010. In July 2020, the Shenzhen
Municipal Government publicised a fare adjustment
framework for the Shenzhen Metro network that will take
effect on 1 January 2021 for five years. This framework is
expected to enable the establishment of a fare-setting
mechanism and the procedures for fare adjustment.
However, if a suitable fare increase and adjustment
mechanism are not implemented soon, the long-term
financial viability of this line will be impacted.
The Company signed the O&M agreement for the SZL4
North Extension in 2020, and the extension formally
opened on 28 October 2020.
Hangzhou
Our businesses in Hangzhou include Hangzhou Metro
Line 1 (“HZL1”), the HZL1 Xiasha Extension and HZL5.
HZL1 Phase 3 (Airport Extension) formally opened at
the end of December 2020. The full HZL5 commenced
operation in April 2020.
Property Businesses in the
Mainland of China
At the Tiara – the residential development at Shenzhen
Metro Longhua Line Depot Site Lot 1 – more than 98% of
units have been sold and handed over to buyers.
COVID-19 negatively impacted the occupancy rates
and patronage of Ginza Mall in Beijing and TIA Mall in
Shenzhen. The Company granted rental concessions to
eligible tenants to help them withstand the impact of
business disruption caused by the pandemic.
In Tianjin, project completion for the Beiyunhe Station
shopping centre development has been delayed to
2024 as additional works are required for railway safety
assurance during basement construction.
Macao Railway Business
MTR operates and maintains Macao’s first rapid transit
system, the Macao Light Rapid Transit Taipa Line, which
opened in December 2019. We also provide project
management and technical support to other light rail
lines and extensions in the city.
28
MTR Corporation
Annual Report 2020
29
CEO’S REVIEW OF OPERATIONS AND OUTLOOK Growth Outside of Hong Kong
In Shenzhen, the consortium led by our wholly owned
subsidiary was awarded the tender for the Shenzhen
Metro Line 13 PPP project, which covers investment,
construction and O&M for a period of 30 years following
anticipated completion in 2023. The formal PPP contract
was signed on 30 October 2020. In Chengdu, the
Company set up a new company with Chengdu Rail
Transit Group to explore and develop station commercial
and related businesses in the city. In Hangzhou, our
rolling stock maintenance company with the CRRC
Hangzhou Digital Technology Co., Ltd consortium won
the contracts for the rolling stock fleet overhaul for certain
lines in Hangzhou and Shenzhen.
Discussions are on-going regarding potential cooperation
opportunities in the Guangdong-Hong Kong-Macao
Greater Bay Area to build transport infrastructure as well
as property and community projects. The Company has
been involved as the Transit Oriented Development
(“TOD”) advisor of Dongguan Binhaiwan New Area
Government for the conceptual planning of the High
Speed Rail Binhaiwan Station TOD. We are also exploring
opportunities for rail-related projects in other Greater Bay
Area cities. Leveraging our experience, we will continue
to play an active role in the integrated development and
TOD of the Greater Bay Area.
In March 2021, we jointly secured the land use right for a
TOD site in the south of Hangzhou West Station together
with our partners. This project is a mixed-use property
development comprising serviced apartment, office, retail
and hotel components and has a total developable GFA of
approximately 688,210 square metres. The Company has
a 10% interest in the project with an equity investment of
RMB350 million.
In Sweden, our subsidiary was awarded the O&M
concession for the Mälartåg train service in December
2020. Our subsidiary will start running this service in
December 2021 for an eight-year operating period with
a one-year extension option. Currently, there are legal
challenges from other bidders against the tender process.
Europe Railway Business
United Kingdom
In London, our wholly owned subsidiary operates the
Crossrail operating concession under the TfL Rail brand.
MTR continues to support the phased opening of TfL Rail,
which will be renamed Elizabeth Line upon the opening
of the Central Operating Section. Although ridership
has fallen, TfL Rail services have managed to minimise
the risks presented by COVID-19. Our financial interest
is reasonably protected as this concession has no fare
revenue risks.
Our associate operates the South Western Railway (“SWR”)
franchise, one of the largest rail networks in the UK.
Services for the SWR were also reduced during lockdown
as a result of COVID-19. SWR was transitioned into the
Emergency Recovery Measures Agreement in September
2020 for a period spanning to May 2021.
Sweden
MTR is the largest rail operator in Sweden by passenger
volume. It operates three rail businesses via wholly owned
subsidiaries: Stockholm Metro (Stockholms tunnelbana),
MTRX and the Stockholm commuter rail service
(Stockholms pendeltåg).
During the pandemic, Stockholm Metro continued to
run a full service with strong operational performance.
MTRX has been operating a reduced service since March
2020 due to travel restrictions and decreased demand.
Stockholms pendeltåg continued to run a full service
while recording high punctuality.
Australia Railway Business
Patronage for the Melbourne metropolitan rail network
decreased sharply in 2020 amid the COVID-19 outbreak.
Our subsidiary reached an agreement with the State
government in May 2020 on financial support to ease the
effects of the pandemic.
Sydney Metro North West continued to run a full service
in 2020. Although patronage was affected by COVID-19,
there is no fare revenue risk according to the terms of
this franchise. Service performance continued to improve
throughout the year. The Sydney Metro City & Southwest
project continued to move forward with milestones
achieved as planned despite some restrictions on the
flows of people and materials between countries as a
result of COVID-19.
28
MTR Corporation
Annual Report 2020
29
Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis FINANCIAL REVIEW
In addition to the above brief report of the Group’s results and operations, this section discusses and analyses such results
in more details.
Profit and Loss
HK$ million
Total Revenue
Recurrent Business (Loss)/Profitζ
EBIT
Hong Kong Transport Operations
Hong Kong Station Commercial Businesses
Hong Kong Property Rental and Management Businesses
Mainland of China and International Railway, Property Rental and
Management Subsidiaries
Other Businesses, Project Study and Business Development Expenses
Share of Profit of Associates and Joint Venture
Total Recurrent EBIT
Interest and Finance Charges
Income Tax
Non-controlling Interests
Recurrent Business (Loss)/Profit
Property Development Profit (Post-tax)
Hong Kong
Mainland of China
Property Development Profit (Post-tax)
Underlying Business Profitε
Investment Property Revaluation (Loss)/Gain
Net (Loss)/Profit Attributable to Shareholders of
the Company
Year ended 31 December
Inc./(Dec.)
2020
42,541
2019
HK$ million
54,504
(11,963)
%
(21.9)
(5,408)
2,502
4,185
261
(1,949)
605
196
(1,097)
(237)
12
(1,126)
5,442
65
5,507
4,381
(9,190)
(591)
5,122
4,264
1,089
(2,353)
288
7,819
(939)
(1,740)
(160)
4,980
5,531
49
5,580
10,560
1,372
(4,817)
(2,620)
(79)
(828)
404
317
(7,623)
158
(1,503)
(172)
(6,106)
(89)
16
(73)
(6,179)
(10,562)
(815.1)
(51.2)
(1.9)
(76.0)
17.2
110.1
(97.5)
16.8
(86.4)
n/m
n/m
(1.6)
32.7
(1.3)
(58.5)
n/m
(4,809)
11,932
(16,741)
n/m
ζ:
Recurrent business (loss)/profit represents (loss)/profit from the Group’s Hong Kong transport operations, Hong Kong station commercial businesses, Hong Kong
property rental and management businesses, Mainland of China and international railway, property rental and management businesses and other businesses.
Underlying business profit represents (loss)/profit from the Group’s recurrent businesses and property development businesses.
ε:
n/m: not meaningful
Total Revenue
The adverse impact of the on-going COVID-19 pandemic
and the deterioration of the general economic
environment on the Group’s businesses has been
unprecedented. Total revenue of the Group in 2020
was HK$42,541 million, decreased by 21.9% when
compared to 2019, mainly due to the adverse impact of
the COVID-19 pandemic on fare revenue of our Hong
Kong transport operations (“HKTO”), as well as decrease
in rental revenue of our Hong Kong station commercial
businesses (“HKSC”).
Recurrent Business Loss
Various measures implemented by governmental
authorities in Hong Kong and globally to address the
COVID-19 pandemic have resulted in a significant
reduction in domestic and international travel demand
and consumer spending. Furthermore, prolonged
closures of major passenger boundary crossings between
Hong Kong SAR and the Mainland of China have further
adversely impacted the Group’s recurrent businesses. As a
result, the Group reported a loss of HK$1,126 million in its
recurrent businesses in 2020, as compared with a profit of
HK$4,980 million in 2019.
30
MTR Corporation
Annual Report 2020
31
CEO’S REVIEW OF OPERATIONS AND OUTLOOK EBIT
EBIT of HKTO decreased drastically by HK$4,817 million
resulting in a loss of HK$5,408 million, mainly due
to substantial reduction of 31.5% in total patronage
resulting from the COVID-19 pandemic and related
governmental measures such as the closure of several
boundary crossings between Hong Kong SAR and the
Mainland of China (including the crossings at Lo Wu,
Lok Ma Chau and Hong Kong West Kowloon stations,
as well as the Intercity through train control point at
Hung Hom Station), social distancing, work-from-home
arrangements, school closures, entry immigration
controls and quarantine measures.
EBIT of the HKSC decreased by 51.2% to HK$2,502
million, mainly due to profit and loss impact of rental
concessions granted to duty free shop concession
holders and other station kiosks as a result of the closure
of several boundary crossings between Hong Kong
SAR and the Mainland of China, as well as retail tenants
of station kiosks in domestic lines whose businesses
have been adversely affected by reduced footfall in
stations, and coupled with the significant drop in our
advertising revenue.
EBIT of the Hong Kong property rental and management
businesses slightly decreased by 1.9% to HK$4,185
million, mainly due to profit and loss impact of rental
concessions granted to retail mall tenants, but mostly
offset by profit contribution from our new shopping
mall, The LOHAS, opened by phases in August and
November 2020 and the remaining economic interests of
Telford Plaza II and PopCorn 2 acquired in March 2020.
EBIT of our Mainland of China and international railway,
property rental and management business subsidiaries
have also been adversely affected but to varying degrees
(with Melbourne Train being affected the most) due
to the severity of COVID-19 pandemic and related
governmental measures in different cities we operate,
resulting in a decrease in EBIT by 76.0% to HK$261 million.
EBIT of other businesses, project study and business
development expenses reported a loss of HK$1,949
million in 2020 (2019: a loss of HK$2,353 million). The loss
in 2020 was mainly due to a provision of HK$1.4 billion
made in respect of the additional project management
cost of the Shatin to Central Link (“SCL”) project in Hong
Kong and the loss incurred by Ngong Ping 360 due to
service suspension as a result of the COVID-19 pandemic.
On the other hand, the loss in 2019 was mainly due to
a provision of HK$2 billion made in respect of the Hung
Hom Incidents of the SCL project.
Share of Profit of Associates and Joint Venture
Share of profit of associates and joint venture was HK$605
million in 2020, compared to a profit of HK$288 million
in 2019 which included a provision of onerous contract
of HK$436 million made in respect of the South Western
Railway franchise agreement in the United Kingdom. If
the provision in 2019 had been excluded, the share of
profit in 2020 would have decreased by HK$119 million
or 16.4% when compared with 2019, mainly due to the
adverse financial impact of the COVID-19 pandemic on
our associate in Hangzhou as well as Octopus Holdings
Limited in Hong Kong, partly offset by the incremental
profit contribution from our joint venture of HZL5 with
full line operation since April 2020.
Property Development Profit (Post-tax)
Property development profit (post-tax) slightly decreased
from HK$5,580 million in 2019 to HK$5,507 million in
2020, which was mainly derived from the share of surplus
proceeds of LP6 (LOHAS Park Package 6) as well as sales of
inventory units.
Investment Property Revaluation Loss
Revaluation of the Group’s investment properties in
Hong Kong and Mainland of China, which was
performed by independent professional valuation
firms, resulted in a revaluation loss of HK$9,190 million
in 2020, compared to a revaluation gain of HK$1,372
million in 2019. The revaluation loss, being a non-cash
item, mainly reflected the decrease in reversionary rent
as a result of the COVID-19 and the deterioration of
general economic environment.
Net Loss Attributable to Shareholders of
the Company
Taking into account the Group’s recurrent businesses,
property development businesses and investment
property revaluation, the Group reported a net loss
attributable to shareholders of the Company of HK$4,809
million in 2020, compared to a net profit of HK$11,932
million in 2019.
30
MTR Corporation
Annual Report 2020
31
Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis Financial Position
HK$ million
Net Assets
Total Assets
Total Liabilities
Gross Debt^
Net Debt-to-equity Ratioδ
As at
31 December
2020
As at
31 December
2019
Inc./(Dec.)
HK$ million
176,981
290,574
113,593
50,340
22.5%
186,798
289,214
102,416
39,456
15.4%
(9,817)
1,360
11,177
10,884
%
(5.3)
0.5
10.9
27.6
7.1% pts
^:
δ:
Gross debt represents loans and other obligations and short-term loans.
Net debt-to-equity ratio represents net debt of HK$39,887 million (2019: HK$28,764 million), which comprises loans and other obligations, short-term loans, obligations
under service concession and loan from holders of non-controlling interests net of cash, bank balances and deposit in the consolidated statement of financial position,
as a percentage of the total equity of HK$176,981 million (2019: HK$186,798 million).
Net Assets
Our financial position remains strong. The Group’s net
assets decreased by 5.3% from HK$186,798 million as
at 31 December 2019 to HK$176,981 million as at 31
December 2020 mainly reflecting the revaluation loss of
the Group’s investment property portfolio.
Total Assets
Total assets increased slightly by 0.5% from HK$289,214
million to HK$290,574 million. This was mainly due to a
combination of:
•
•
increase in amounts due from related parties;
increase in debtors and other receivables mainly due to:
(i) the portion of rental concession granted yet to be
amortised to the profit and loss account, and (ii) increase
in property development receivables upon the
recognition of the property development profit of LP6;
•
increase in service concession assets in respect of KCRC
systems; and partly offset by
• net decrease in investment properties as a result of the
revaluation loss on our existing portfolio being partially
offset by our acquisition of remaining 50% economic
interests of Telford Plaza II and 30% in Popcorn 2.
Total Liabilities
Total liabilities increased by 10.9% from HK$102,416
million to HK$113,593 million. This was mainly due to a
combination of:
•
•
issuance of 10-year US$1.2 billion green bond, and net
drawdown of loans and issuance of other bonds/notes;
increase in creditors, other payables and provisions
mainly due to: (i) advance cash received from property
development packages, and (ii) provision of HK$1,371
million made in respect of SCL project management
cost; and partly offset by
• decrease in amounts due to related parties due to
lower variable annual payment as a result of revenue
decrease during the year.
Gross Debt and Cost of Borrowing
Gross debt of the Group (being loans and other
obligations and short-term loans) increased by 27.6% to
HK$50,340 million as at 31 December 2020. Weighted
average borrowing cost of the Group’s interest-bearing
borrowings was at 2.3% p.a., compared to 2.8% p.a.
in 2019.
Net Debt-to-equity Ratio
Net debt-to-equity ratio increased by 7.1% points to 22.5%
as at 31 December 2020 from 15.4% as at 31 December
2019 due to (i) increase in borrowings to fund the
acquisition of the remaining economic interests in Telford
Plaza II and PopCorn 2, capital expenditure for our Hong
Kong railways and related operations as well as the net
cash used in operating activities, and (ii) decrease in
equity mainly due to the revaluation loss on the Group’s
investment property portfolio recognised.
32
MTR Corporation
Annual Report 2020
33
CEO’S REVIEW OF OPERATIONS AND OUTLOOK Cash Flow
HK$ million
Net Cash (Used in)/Generated from Operating Activities after Fixed and Variable Annual Payments
Net Receipts from Property Development
Other Net Cash Outflow from Investing Activities
Net Borrowing/(Repayment) of Debts, Net of Lease Rental and Interest Payment
Dividends Paid to Shareholders of the Company
(Decrease)/Increase in Cash, Bank Balances and Deposits#
Year ended 31 December
2020
(2,561)
8,171
(9,326)
9,661
(6,808)
(872)
2019
13,988
5,916
(7,490)
(2,362)
(6,649)
3,286
#:
Excluding effect of exchange rate change
Net Cash (Used in)/Generated from Operating
Activities after Fixed and Variable Annual Payments
Net cash used in operating activities after fixed and
variable annual payments for Hong Kong railway and
related operations was HK$2,561 million, compared to net
cash generated of HK$13,988 million in 2019, mainly due
to decrease in operating profit resulting from the adverse
impact of the COVID-19.
Net Receipts from Property Development
Net receipts from property development were
HK$8,171 million, comprising mainly cash receipts
from LOHAS Park packages.
ENVIRONMENTAL, SOCIAL
AND GOVERNANCE
Despite the challenges of the past year, MTR continued
to implement ESG initiatives that contributed to the
safety, environmental protection, health and wellbeing of
the city it calls home. We also strove to ensure inclusion
with services that are accessible to all, regardless of age
or ability.
As one of the leading railway operators in the world, our
priority is to provide convenient, efficient transport in an
environmentally sound manner. In August 2020, we were
proud to issue a new US$1.2 billion 10-year Green Bond,
the largest single-tranche green bond for corporates
in Asia-Pacific, to fund railway-related conservation
and energy efficiency projects. During the year we also
embarked upon a consultancy study that will help us
develop a long-term roadmap for reducing greenhouse
gas emissions; we aim to launch a comprehensive
programme by 2021. We also published our Climate
Change Strategy outlining our three-pronged approach
to addressing this critical issue.
To ensure that MTR safeguards the best interests of
its shareholders and stakeholders, the Company strives
to maintain the very highest standards of corporate
Other Net Cash Outflow from Investing Activities
Other net cash outflow from investing activities was
HK$9,326 million, which mainly included capital
expenditure of HK$9,249 million (comprising HK$5,226
million for investments in additional assets for Hong Kong
existing railways and related operations, HK$3,539 million
for Hong Kong investment properties, HK$250 million for
Hong Kong railway extension projects and HK$234 million
for the Mainland of China and overseas subsidiaries).
governance across all its businesses. Robust structures,
mechanisms and management practices are in
place to ensure responsible, ethical decision-making
and transparency.
Safety
As a major Hong Kong transport and property
conglomerate, MTR places the highest priority on the
health and safety of its customers, staff and visitors.
Each year we seek to make improvements and
enhancements wherever possible to ensure that we
are upholding industry-leading safety standards, all in
accordance with our comprehensive Corporate Safety
Policy and best practices.
The year under review presented considerable
challenges, from the public order events that carried
over from 2019 to the rapid spread of COVID-19 from
early 2020 onward. Demonstrating our emphasis on
health and safety as well as our keen focus on employing
the latest innovations and technologies, we employed
vaporised hydrogen peroxide robots to deep-clean our
trains and stations. We also applied a special coating
on various points of frequent passenger contact to
eliminate bacteria and viruses.
32
MTR Corporation
Annual Report 2020
33
Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis To give our passengers added convenience and peace of
mind, we made PPE such as face masks and hand sanitiser
easily accessible by installing PPE vending machines at 14
stations. To help ensure a reliable supply of quality face
masks, MTR launched a production line at an ISO-certified
cleanroom at Siu Ho Wan Depot that can produce more
than 300,000 masks per month. During the year under
review we also optimised our station and train ventilation,
filter cleaning and replacement processes in our trains,
stations and shopping malls. We also placed vending
machines at 20 stations for the public to conveniently
pick up free COVID-19 specimen collection packs.
The number of reportable events on our heavy rail and
light rail networks decreased by 45% compared to 2019.
The number of reportable events per million passengers
carried on our heavy rail and light rail networks continued
to improve, falling to 0.58 in 2020.
Enterprise Risk Management
Perhaps no year has underscored the importance
of risk management more than 2020. To cope with
unprecedented challenges, MTR’s business units have
followed the Company’s Enterprise Risk Management
framework in their day-to-day operations to ensure
business continuity, health and safety. The Company’s
risk profile, top risks and key emerging risks are regularly
reviewed by the Executives and the Risk Committee and
reported to the Board on a half-yearly basis. “Deep dive”
reviews on selected key risk areas are conducted during
the year, and risk mitigation measures are formulated or
adjusted as necessary to ensure effective risk management.
COVID-19 remains a significant risk to MTR and its business
operations and is likely to remain so well into 2021. In
2020, we introduced a host of initiatives to deal with the
effects of the pandemic and get our operations back
on track as effectively and efficiently as we can. Moving
forward, we remain committed to staying abreast of the
latest developments in order to control risks associated
with the pandemic as much as possible and safeguard the
well-being of our businesses and stakeholders.
HUMAN RESOURCES
As at 31 December 2020, MTR along with our subsidiaries
employed 17,288 people in Hong Kong and 16,921
people outside Hong Kong. Our associates employed an
additional 17,121 people worldwide.
Our staff are our most valuable asset, and their dedication
is key to MTR’s success. We provide competitive pay and
benefits, short- and long-term incentive schemes, and a
broad range of career development opportunities under
the total reward framework to attract, retain and motivate
our staff. We also recognise and reward our staff through
a robust performance-based pay review mechanism as
well as a variety of staff motivational schemes and awards.
Our staff engagement efforts are reflected in our stable
workforce, with the voluntary staff turnover rate in Hong
Kong staying low at 3.4% in 2020. We provided an average
of 4.8 training days per staff in Hong Kong during the year.
Amid the unprecedented challenges of COVID-19 and the
weakened macro economy, our top priority is to ensure the
health and safety of our staff, protect their jobs and ensure
business sustainability. To safeguard our staff against the
pandemic, we enhanced protective measures, initiated
appropriate flexible work arrangements and organised
programmes to enhance their total wellbeing. We have
taken a prudent recruitment approach since early January
2020 to meet our operational needs while containing costs.
MTR ACADEMY
Despite the challenges of operating during a pandemic,
the MTR Academy was still able to deliver its programmes
and expertise to railway professionals and global clients
from the Mainland of China, Belt and Road countries and
elsewhere via online learning and virtual examinations. In
September 2020, the MTR Academy also began offering
full-time diploma programmes.
OUTLOOK
COVID-19 is a global phenomenon that will have
long-lasting impacts. In 2020, it posed unprecedented
challenges to our business and operations and adversely
affected the financial performance of the Group.
At the time of writing, travel restrictions, quarantine
mandates, mask-wearing orders and social distancing
guidelines are still in place to varying degrees as
everyone works together to contain and eliminate the
spread of COVID-19. Although vaccines have started to
be administered around the world, it remains unclear
how the current situation will develop over the coming
months. The speed and magnitude of a global economic
recovery remains highly dependent on the progress made
in combatting the pandemic as well as the fiscal and
monetary policies of various governments.
34
MTR Corporation
Annual Report 2020
35
CEO’S REVIEW OF OPERATIONS AND OUTLOOK In 2020, COVID-19 substantially impacted the financial
performance of our recurrent businesses. Patronage
suffered a large drop, and shopping malls, duty free
shops, station kiosks and advertising were all badly
affected. The pandemic also resulted in a lower
revaluation of our investment property portfolio. Such
effects may continue well into 2021 as a return to
normalcy for our patronage, particularly among tourist
customers, will not be immediate and could potentially
take longer than a year. Our station commercial and
shopping mall businesses will continue to face challenges
in rentals following the aftermath of last year’s negative
rental reversions as well as in the accounting standard
requirement to spread last year’s rental rebates into
2021 and beyond. Our duty free business will depend
completely on the timing of the re-opening of borders
and the recovery of border patronage while advertising
income will be dependent on economic recovery and
consumer spending. The impact of COVID-19 on the
asset valuation of our investment property portfolio may
continue until market conditions are stabilised.
While the near term remains challenging, we have
reasons to be optimistic about our medium- to long-
term future. Despite the fact that our businesses suffered
to varying degrees in 2020, the Company is in a solid
financial position, and we continue to drive a number of
projects and developments that offer strong potential.
Subject to market conditions and necessary Government
approvals, we aim to tender out The Southside
(also known as “Wong Chuk Hang Station Property
Development”) Package 6, Tung Chung Traction
Substation site, Pak Shing Kok Ventilation Building site
and Tung Chung East Station Package 1 (subject to our
entering into a project agreement with Government) in
the next 12 months or so. These packages are expected to
provide about 4,800 residential units in total. Applications
for pre-sale consent for The Southside Package 1 and
Package 2 property development projects and The Pavilia
Farm III are in progress. Depending on construction
progress, we target to book development profits from
Packages 7, 8 and 9 of LOHAS Park in 2021.
We look forward to the Tuen Ma Line full line opening,
expected to be in the third quarter of 2021. Working
under Government’s RDS 2014 development framework
for expanding Hong Kong’s railway network, we will
continue to progress the design of the Tung Chung Line
Extension and Tuen Mun South Extension, and we will
commence the detailed planning and design of Kwu Tung
Station and the Northern Link.
We will conduct the detailed design for the Siu Ho Wan
Depot site and its adjacent station, and we will explore
potential sites for residential and commercial property
development along existing and future railway lines.
To maintain world-class service for customers and keep
cities moving, we must continue to operate safely and
efficiently in the “new normal”. Our new Corporate
Strategy – guided by strong ESG principles to ensure
sustainable and profitable operations for years to come
– will play a key role in our progress moving forward. The
new strategy seeks to enhance our business and profit
growth in each of the three pillars: (i) attaining the full
potential of our world-class service performance, cost
optimisation and new revenue-generating initiatives
in our Hong Kong core businesses; (ii) leveraging our
competitive strengths to maintain steady growth
through new products and new markets, particularly
in the Mainland of China and also in our international
businesses; and (iii) embracing new technologies as
enablers for our existing operations and as new engines
to strengthen our long-term growth.
I would like to thank Dr Peter Ewen, who retired from the
Company as Engineering Director on 22 February 2021,
for his contributions during his time at MTR.
In closing, I cannot emphasise enough how grateful I am
for our exceptional staff, who have continued to deliver
world-class service in very challenging conditions over
the years, particularly in 2020. Difficult times still lie ahead,
but I believe that as we keep working together to fulfil the
goals set in our Corporate Strategy, our Company – and
Hong Kong – will emerge from them even stronger.
Dr Jacob Kam Chak-pui
Chief Executive Officer
Hong Kong, 11 March 2021
34
MTR Corporation
Annual Report 2020
35
Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis Safety
Enhancing
Customer
Experience
Smart Mobility
and Smart
Operations and
Maintenance
Composite photograph at Kai Tak Station
45% Fewer
Reportable
Events
99.9 %
Passenger Journeys
On-time
3.88 million
Average Weekday
Patronage
36
MTR Corporation
Annual Report 2020
37
HONG KONG TRANSPORT OPERATIONS AIM
We strive to be an internationally-recognised company that
connects and grows communities with caring, innovative
and sustainable services. We also seek to generate returns
that enable us to invest in our world-class rail network,
further improve our high levels of service, and continue
meeting the ever-changing needs and expectations of
our customers. These investments involve upgrading
and replacing our existing railway assets, as well as
constructing new railway lines that reduce travel times
and bring communities closer together – enabling us
to develop networks that support Hong Kong’s future
growth as an economy and a society.
CHALLENGES
• Maintaining high levels of health, safety and reliability
during the COVID-19 pandemic
• Patronage affected by social restrictions, work-from-
home arrangements and border closures
• Managing major asset upgrades and replacements
without compromising our safety and service
performance or the customer experience
STRATEGIES
• Adjust and optimise train services, apply cost control
measures, and employ further smart operating,
smart maintenance and automation initiatives with
a customer centric mindset to alleviate the impact of
reduced patronage due to COVID-19
OUTLOOK
•
Intensify cleaning and sanitisation procedures and
introduce leading-edge technologies to ensure
station and train cleanliness. Manufacture and provide
personal protective equipment for the health and
safety of our staff and customers
• Launch promotions that encourage travel during
non-peak hours and promote domestic leisure travel
via MTR. Leverage MTR Mobile to encourage usage
of our services
• Maintain high performance standards that exceed
the targets set out in the Operating Agreement and
our own even more demanding Customer Service
Pledges. Continue our stringent maintenance
regime and invest significantly in renewing and
upgrading our railway assets
• Leverage our strong culture of safety to deliver
operational excellence. Equip staff with clear
guidelines and sound training in operations and
customer service, and raise public awareness of rail
safety through targeted campaigns and information
•
Integrate innovation and technology into our
operations to drive customer service excellence and
fuel future growth
• Work to digitise our own internal processes, enhancing
the customer experience and optimising operations
and workflow
The COVID-19 pandemic could have profound long-term effects in terms of how customer behave. Travel
restrictions and boundary closures have led to an almost complete halt to Hong Kong visitation by travellers
from the Mainland of China and overseas, dramatically impacting our Airport Express and High Speed Rail
(“HSR”) patronage. Domestic patronage for our heavy and light rail networks has decreased due to quarantine
measures, work- and study-from-home arrangements, and lower in-store spending by shoppers. These
conditions are expected to continue to varying degrees well into 2021.
As one of the leading operators in the railway business, we will continue to do our utmost to ensure that our
stations, trains and facilities meet the highest standards of cleanliness and sanitisation, thereby providing peace
of mind during passenger journeys. We will also keep striving for excellence in service reliability and safety,
maintaining world-class operational standards as we move closer to the full line opening of the Tuen Ma Line.
Our Corporate Strategy outlines the way forward for MTR and its transport operations. We will seek to achieve
sustainable business results by adhering to strong environmental, social and governance principles that foster
mutually beneficial growth in our communities. In 2021, this will include driving patronage by reviewing our
scheduling and fares while remaining sensitive to the latest Government guidelines and prevailing economic
conditions. MTR Mobile will enhance the customer experience by making it easier to plan trips. As always,
providing comfortable, caring and inclusive customer service will remain a key focus.
36
MTR Corporation
Annual Report 2020
37
Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis SAFETY
Safety is always our highest priority. This year there
was a 45% decrease in reportable events compared
to the same period in 2019. The number of reportable
events per million passengers carried on our heavy rail
and light rail networks continued to improve, falling to
0.58 in 2020. While we achieved solid passenger safety
performance in 2020, it must be noted that the number
of reportable events in the previous year was skewed by
the public order events. Further details about our safety
performance can be found in the Ten-Year Statistics of
this Annual Report.
The Escalator Safety Special Task Force continued to
organise programmes following accidents to help
prevent similar occurrences in future. The Task Force also
took a number of proactive measures to educate the
public on the importance of escalator safety, setting up
Escalator Safety Promotion Booths at various stations and
organising Escalator Safety Walks throughout the year.
May saw the launch of the Escalator Safety Campaign
2020 featuring MTR Ambassador T Chai. In addition, new
safety labels were placed on all escalators in Kowloon Bay,
Nam Cheong and Causeway Bay stations on a trial basis.
The Platform Gap Incident Special Task Force made a
number of site visits throughout the year to identify
improvement opportunities and platform gap incident
control measures. In addition to the various measures we
already have in place to raise passenger awareness, we
also held an internal promotional campaign during the
year to convey the importance of the issue to staff and
encourage them to proactively remind passengers.
To enhance safety in our Light Rail operations, we
installed smart flashing bollards with highly visible
flashing yellow strips at pedestrian crossings at two Light
Rail locations. We implemented our innovative Integrated
Speed and Position Supervision System, which helps
improve operational safety and efficiency by monitoring
light rail vehicle speed in real time.
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MTR Corporation
Annual Report 2020
39
BUSINESS REVIEWHONG KONG TRANSPORT OPERATIONS PATRONAGE AND REVENUE
Hong Kong Transport Operations
Domestic Service
Cross-boundary Service
High Speed Rail (“HSR”)
Airport Express
Light Rail and Bus
Intercity
Others
Total
Total patronage for all our rail and bus passenger services
in 2020 decreased by 31.5% to 1,310.8 million passenger
trips. This was attributed to the COVID-19 pandemic and
its effects on both the domestic and tourist markets,
which were negatively impacted by anti-pandemic
measures, cross-boundary service closures, international
travel restrictions and overall economic decline.
Our Domestic Service (comprising the Kwun Tong, Tsuen
Wan, Island, Tung Chung, Tseung Kwan O, Disneyland
Resort, East Rail (excluding the Cross-boundary Service),
West Rail and South Island lines as well as Tuen Ma Line
Phase 1) recorded total patronage of 1,145.0 million in
2020, which was 27.0% lower than the previous year.
Patronage for the Cross-boundary Service to Lo Wu and
Lok Ma Chau decreased by 92.7% to 7.6 million. This
was attributed to the drastic reduction in travellers from
the Mainland of China following the COVID-19 outbreak
and subsequent boundary closure. HSR patronage was
1.0 million, a 93.9% decrease compared to 2019. Airport
Express patronage decreased by 80.5% to 3.1 million as a
result of the steep drop-off in air travellers.
Domestic Service – Patronage and
Average Fare
20
18
16
14
12
10
8
6
4
2
–
2,000
1,800
1,600
1,400
1,200
1,000
800
600
400
200
–
7.81
7.84
7.92
8.11
1,145.0
9.2
7.82
2016
2017
2018
2019
2020
Patronage
(million)
(right scale)
Revenue
(HK$ billion)
(left scale)
Average Fare
(HK$)
(left scale)
Patronage
in millions
Revenue
HK$ million
2020
Inc./(Dec.) %
2020
Inc./(Dec.) %
1,145.0
7.6
1.0
3.1
154.0
0.1
1,310.8
(27.0)
(92.7)
(93.9)
(80.5)
(25.8)
(94.5)
(31.5)
9,229
516
1,277
140
481
20
11,663
233
11,896
(27.4)
(83.7)
(39.1)
(86.2)
(29.0)
(88.6)
(41.2)
135.4
(40.3)
Average weekday patronage for all our rail and bus
passenger services decreased by 30.9% to 3.88 million
passenger trips. Our Domestic Service saw a 26.9%
decrease to 3.41 million.
To stimulate ridership in response to the challenges
posed by the COVID-19 pandemic, we have been
launching promotions such as the Early Bird Discount to
promote non-peak travel. We have also been creating
attractive fare, ticket and pass promotions, such as a 20%
rebate on Octopus trips and HK$100 discounts on MTR
City Saver and Monthly Pass Extras. We are leveraging our
constantly evolving MTR Mobile to deliver these attractive
promotions and other information to users. More than
ever, we have been regularly reviewing our train schedules
to account for demand fluctuations and ensure customer
convenience. We are also seeking to promote MTR to
domestic users as the preferred transit method for
exploring the numerous travel and sightseeing
opportunities within Hong Kong.
Fare Trend
450
400
350
300
250
200
150
100
50
–
1990
1995
2000
2005
2010
2015
2020
HK Payroll Index
(avg. 5%
growth p.a.)
Average Fare
(Domestic Service only)
(avg. 2.4% growth p.a.)
Composite
Consumer Price
Index (avg. 2.9%
growth p.a.)
Annual Report 2020
39
38
MTR Corporation
Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis MARKET SHARE
Our overall share of the franchised public transport
market in Hong Kong was 45.3% compared to 47.4%
in 2019. This decline was mainly due to the precipitous
drop in patronage owing to the COVID-19 pandemic
for Cross-boundary Service, HSR and Airport Express, in
which we have a relatively higher market share than other
franchised transport operators. Our share of cross-harbour
traffic was 66.1% against the 67.5% recorded in 2019.
In 2020, our Cross-boundary and HSR service registered
a decrease in market share of cross-boundary business
to 47.2% from 51.3%. Our market share to and from the
airport decreased to 16.3% from 20.5%.
Market Shares of Major Transport
Operators in Hong Kong
(Percentage)
Market Shares of Major Transport
Operators Crossing the Harbour
(Percentage)
2.1
2.1
14.2
13.5
11.5
11.7
25.3
26.9
2020
2019
2.4
3.3
31.5
29.2
47.4
45.3
MTR
KMB
Other buses
Green minibus
Trams and ferries
67.5
66.1
2020
2019
MTR
Buses
Ferries
FARE ADJUSTMENTS, PROMOTIONS AND CONCESSIONS
In accordance with the Fare Adjustment Mechanism (“FAM”),
the overall adjustment rate of MTR fares for 2019/2020
was +3.3%. However, MTR introduced a 3.3% rebate for
every Octopus trip valid from 30 June 2019 to 4 April 2020,
meaning passengers using Octopus effectively paid no
actual fare increase. The +0.3% fare adjustment for the
announced 2019/2020 FAM that was not implemented may
also be recouped in 2021/2022, subject to the provisions of
the FAM.
package for 2020/2021. Other promotions included
setting no price adjustment for the MTR City Saver and
Tuen Mun-Nam Cheong Day Pass until 1 January 2021;
setting no price adjustment for Monthly Pass Extras
until December 2020 (which, as announced in November
2020, was further extended to June 2021); and extending
the Early Bird Discount Promotion until 31 May 2021.
In 2020, we offered HK$1.7 billion in on-going fare
concessions to the elderly, children, students and persons
with disabilities.
In March 2020, we announced the fare adjustment rate for
2020/2021 is +2.55% according to the FAM. In view of the
Affordability Cap owing to the negative growth of Median
Monthly Household Income, there is no fare increase for
2020, and +2.55% may be recouped over the subsequent
two years, with +1.28% to be recouped in 2021/2022 and
+1.27% to be recouped in 2022/2023. Such recoupments
will be made subject to the provisions of the FAM.
We also announced in March 2020 an extension of the
3.3% rebate to 1 January 2021 as part of a promotional
In April 2020, MTR announced a six-month package of
one-off relief measures, effective 1 July 2020 to 1 January
2021, to help people across the city deal with the adverse
economic effects of COVID-19. These included a 20%
rebate on every Octopus trip, a substantial increase over
the 3.3% rebate previously being offered. Other relief
measures included a HK$100 discount on MTR City Saver
and a HK$100 discount on Monthly Pass Extras (from July
40
MTR Corporation
Annual Report 2020
41
BUSINESS REVIEWHONG KONG TRANSPORT OPERATIONS to December 2020). Following the announcement of the
extension of these relief measures in November 2020, the
20% rebate will be effective till March 2021, and the
discounts on MTR City Saver and Monthly Pass Extras
will be effective till June 2021. Government agreed to
bear half of the total actual revenue forgone arising from
these measures during the period between July 2020
and March 2021.
SERVICE PERFORMANCE
Despite the difficult circumstances presented by the
COVID-19 pandemic, train service delivery and passenger
journeys on-time for our heavy rail network both
remained at 99.9% in 2020, exceeding the targets set
in our Operating Agreement and our own even more
demanding Customer Service Pledges. Train service
delivery is a measure of the actual train trips run against
the train trips scheduled to be run by the Company.
Passenger journeys on-time is a measure of all passenger
journeys that are completed within five minutes of their
scheduled journey times.
In 2020, more than 1.78 million train trips were made on
our heavy rail network and more than 1 million trips were
made on our light rail network. There were eight delays
on the heavy rail network and no delays on the light rail
network, respectively, defined as those lasting 31 minutes
or more and attributable to factors within the Company’s
control. The light rail network continued its record dating
back to 2019 of no delays lasting 31 minutes or more and
attributable to factors within the Company’s control.
On 11 September 2020, we announced a delay in the
commencement of the new signalling system and gradual
introduction of new trains on the East Rail Line in order
to properly resolve the route recall situation, which
has no impact on safety. An Investigation Panel was
convened and an investigation report was submitted in
January 2021. Safety has been reaffirmed by the technical
investigation, which showed that the concerned issue
was caused by a non-safety-critical software module
being overloaded by a new software module specifically
built for the Company to provide extra train monitoring
information to the Operations Control Centre. The
contractor resolved the issue by upgrading the software
and stopping the new software module. Following
satisfactory completion of all further testing and
approvals from relevant Government departments on the
safe and sound condition of the new signalling system
and new trains, the new signalling system and trains were
commissioned on 6 February 2021.
On 3 March 2020, MTR released to the public the
investigation report detailing the train derailment that
occurred in September 2019 when three cars of a Hung
Hom-bound East Rail Line train shifted out of their
positions on the track, causing the fourth and fifth cars to
separate. Investigators concluded that the derailment was
caused by dynamic track gauge widening at a turnout
near Hung Hom station. Following the release of the
report, the Company took immediate actions according
to the recommendations of the panel to prevent similar
incidents from occuring again in future.
To gauge customer satisfaction levels concerning our
services and fares, we carry out regular surveys and
research, the results of which are published in our Service
Quality Index and Fare Index, respectively.
Service Quality Index
2020
2019
Domestic and Cross-boundary services
Airport Express
Light Rail
Bus
HSR
64^
N/A*
62
75
N/A*
66
79
58
68
83
Fare Index
2020
2019
Domestic and Cross-boundary services
Airport Express
Light Rail
Bus
HSR
59^
N/A*
61
74
N/A*
56
70
58
66
78
^ This only measured Domestic Service as the Cross-boundary services of Lo Wu
*
and Lok Ma Chau were closed from early February 2020.
The Voice of Customer surveys for Airport Express and HSR in 2020 were
suspended due to the outbreak of the COVID-19 pandemic in 2020.
MTR is one of the participants in The Community of
Metros (“CoMET”), which comprises 20 metro systems
around the world to benchmark performance and
improve practices across the industry. In 2019, our
performance was greatly affected by the public order
events and saw unfavourable change in some of the key
performance indicators. The 2019 CoMET benchmarking
results can be found in the “Performance Metrics” section
of our sustainability website.
40
MTR Corporation
Annual Report 2020
41
Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis Operations Performance in 2020
Service Performance Item
Train service delivery
– Kwun Tong Line, Tsuen Wan Line, Island Line, Tseung Kwan O Line, South Island Line,
Tung Chung Line, Disneyland Resort Line and Airport Express
– East Rail Line (including Tuen Ma Line Phase 1)
– West Rail Line
– Light Rail
Passenger journeys on-time
– Kwun Tong Line, Tsuen Wan Line, Island Line, Tseung Kwan O Line, South Island Line,
Tung Chung Line and Disneyland Resort Line
– Airport Express
– East Rail Line (including Tuen Ma Line Phase 1)
– West Rail Line
Train punctuality
– Kwun Tong Line, Tsuen Wan Line, Island Line, Tseung Kwan O Line, South Island Line,
Tung Chung Line and Disneyland Resort Line
– Airport Express
– East Rail Line (including Tuen Ma Line Phase 1)
– West Rail Line
– Light Rail
Train reliability: train car-km per train failure causing delays ≥5 minutes
– Kwun Tong Line, Tsuen Wan Line, Island Line, Tseung Kwan O Line, South Island Line,
Tung Chung Line, Disneyland Resort Line and Airport Express
– East Rail Line (including Tuen Ma Line Phase 1) and West Rail Line
Ticket reliability: smart ticket transactions per ticket failure
– Kwun Tong Line, Tsuen Wan Line, Island Line, Tseung Kwan O Line, South Island Line,
Tung Chung Line, Disneyland Resort Line, Airport Express, East Rail Line (including Tuen
Ma Line Phase 1) and West Rail Line
Add value machine reliability
– Kwun Tong Line, Tsuen Wan Line, Island Line, Tseung Kwan O Line, South Island Line,
Tung Chung Line, Disneyland Resort Line and Airport Express
– East Rail Line (including Tuen Ma Line Phase 1)
– West Rail Line
Ticket machine reliability
– Kwun Tong Line, Tsuen Wan Line, Island Line, Tseung Kwan O Line, South Island Line,
Tung Chung Line, Disneyland Resort Line and Airport Express
– East Rail Line (including Tuen Ma Line Phase 1)
– West Rail Line
– Light Rail^
Ticket gate reliability
– Kwun Tong Line, Tsuen Wan Line, Island Line, Tseung Kwan O Line, South Island Line,
Tung Chung Line, Disneyland Resort Line and Airport Express
– East Rail Line (including Tuen Ma Line Phase 1)
– West Rail Line
Light Rail platform Octopus processor reliability*
Escalator reliability
– Kwun Tong Line, Tsuen Wan Line, Island Line, Tseung Kwan O Line, South Island Line,
Tung Chung Line, Disneyland Resort Line and Airport Express
– East Rail Line (including Tuen Ma Line Phase 1)
– West Rail Line
Passenger lift reliability
– Kwun Tong Line, Tsuen Wan Line, Island Line, Tseung Kwan O Line, South Island Line,
Tung Chung Line, Disneyland Resort Line and Airport Express
– East Rail Line (including Tuen Ma Line Phase 1)
– West Rail Line
Temperature and ventilation
– Trains, except Light Rail: to maintain a cool, pleasant and comfortable train environment
generally at or below 26ºC
– Light Rail: on-train air-conditioning failures per month
– Stations: to maintain a cool, pleasant and comfortable environment generally at or
below 27ºC for platforms and 29ºC for station concourses, except on very hot days
Cleanliness
– Train compartment: cleaned daily
– Train exterior: washed every two days (on average)
Northwest transit service area bus service
– Service Delivery
– Cleanliness: washed daily
Passenger enquiry response time within six working days
Performance
Requirement
Customer
Service
Pledge Target
Actual
Performance
98.5%
98.5%
98.5%
98.5%
98.5%
98.5%
98.5%
98.5%
98.0%
98.0%
98.0%
98.0%
98.0%
99.5%
99.5%
99.5%
99.5%
99.5%
99.0%
99.0%
99.0%
99.0%
99.0%
99.0%
99.0%
99.0%
99.9%
99.8%
99.9%
99.9%
99.9%
99.9%
99.9%
99.9%
99.8%
99.9%
99.9%
99.9%
99.9%
N/A
N/A
700,000
700,000
5,267,876
8,877,544
N/A
10,500
34,919
98.0%
98.0%
98.0%
97.0%
97.0%
97.0%
N/A
97.0%
97.0%
97.0%
N/A
98.0%
98.0%
98.0%
98.5%
98.5%
98.5%
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
99.0%
99.0%
99.0%
99.0%
99.0%
99.0%
N/A
99.0%
99.0%
99.0%
N/A
99.0%
99.0%
99.0%
99.5%
99.5%
99.5%
97.5%
<3
93.0%
99.0%
99.0%
99.0%
99.0%
99.0%
99.8%
99.9%
99.9%
99.8%
99.9%
99.9%
N/A
99.9%
99.9%
99.9%
N/A
99.9%
99.8%
99.9%
99.8%
99.9%
99.9%
99.9%
0
99.9%
99.9%
100.0%
99.7%
100.0%
100.0%
^ Repair works on damaged Light Rail Ticket Machines are underway. Performance data will be available after completion of repair and testing works.
* Light Rail Platform Octopus Processor replacement works and testing are underway. Performance data will be available after completion of
installation, testing and trial operations of the new processors.
42
MTR Corporation
Annual Report 2020
43
BUSINESS REVIEWHONG KONG TRANSPORT OPERATIONS
ENHANCING THE CUSTOMER EXPERIENCE
Delivering a world-class customer experience is one of the
hallmarks of MTR and a major focal point of our Corporate
Strategy as we seek to constantly improve the comfort
and utility of our services for passengers from all walks of
life. During the year under review, we invested more than
HK$10.9 billion to maintain, upgrade or replace our Hong
Kong railway assets.
New Trains
our scheduling in a timely manner according to the latest
situation to meet fluctuating passenger demand and
deliver the highest level of service convenience.
Greater Comfort for Passengers
Boosting Passenger Convenience
New Line Openings
On 14 February 2020, MTR opened Phase 1 of the Tuen
Ma Line, commencing services at the new stations of Hin
Keng Station and Kai Tak Station, as well as the expanded
section of Diamond Hill Station. Passengers travelling on
the former Ma On Shan Line can now travel to Kai Tak
Station in East Kowloon via Hin Keng and Diamond Hill
stations without needing to interchange. To celebrate
the launch, we offered a special fare promotion for
passengers. The average daily usage of these three
stations from opening to the end of 2020 was
125,000 passengers.
During the year, the frequency of our train services
was affected by COVID-19 and the implementation
of work-from-home arrangements, social distancing
measures and travel restrictions. In response, we adjusted
MTR ordered 93 new heavy rail eight-car trains earlier,
nine of which had been delivered as at the time of writing.
Two more are scheduled to be delivered by early 2021.
Testing and commissioning continue with the aim of
retiring older trains before their life expiry.
New Light Rail Vehicles
We ordered 40 new light rail vehicles to retire older
vehicles and meet increasing demand for light rail
services. Two of these light rail vehicles were put into
service in November 2020. As at the end of 2020, eight
more had been delivered and were undergoing testing
and commissioning. By 2023, we expect the size of our
light rail fleet to be expanded to 150.
Replacement of Air Conditioning Systems
Work to replace approximately half our chillers with
newer, more energy-efficient models continued
throughout our stations and depots this year. We
42
MTR Corporation
Annual Report 2020
43
Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis completed Phase 3 in November 2020; a total of
92 chillers in 18 stations and four depots have now been
replaced. Phase 4 began in fourth quarter 2020, which
involved the replacement of another 32 chillers in eight
stations and one depot and is expected to be completed
in April 2021. The completion of all phases of work is
expected in 2023, at which time passengers will be
able to enjoy even more comfortable train and
station environments.
Upgrading of Signalling System
In order to increase the overall capacity of our services,
we are in the process of upgrading our signalling system.
Software revamping and assurance work on the Tsuen
Wan Line signalling system is progressing slowly,
further compounded by COVID-19 lockdown measures
imposed at the contractor’s office in Canada. We are
also replacing the signalling systems for the Island, Kwun
Tong and Tseung Kwan O lines. Work on the signalling
of the Tung Chung and Disneyland Resort lines as well
as Airport Express will be planned together with the
Tung Chung Line Extension under Railway Development
Strategy 2014.
Enhancing Station Facilities
During the year, we continued our efforts to make the
passenger experience as comfortable and convenient as
possible. In February 2020, new public toilets and baby
care rooms were opened at the stations along the newly
opened Tuen Ma Line Phase 1, followed by openings at
Yau Ma Tei Station in June 2020 and North Point Station
in September 2020. New toilet and baby care rooms
are scheduled to be opened at Tsim Sha Tsui Station by
2022. New external lifts and escalators were provided
to further improve barrier-free access at stations. Over
100 passenger lifts across the network have now been
equipped with “contactless” lift button sensors to protect
our customers during the pandemic.
To cater for growing passenger demand for public
drinking water facilities, support environmental
protection and support Government in its pursuit of
related policies, we continued to install drinking water
dispensers at selected stations throughout the year.
Seven newly installed dispensers were put in service in
2020. We plan to have water dispensers installed at
18 stations by 2022.
To meet the needs of Hong Kong’s growing aged
population, we installed a number of extra seats in
concourses and on platforms to provide more places to
rest. We also completed the repainting of platforms and
replacement of platform seats at 17 light rail stops during
the year for improved station environment and comfort.
Works for remaining light rail stops are scheduled to be
completed by 2025.
To help passengers stay connected while on the go,
our free Wi-Fi coverage was expanded during the year
from station hotspots to all of the station concourse and
platform areas. In addition, mobile charging stations,
including USB charging sockets and wireless charging
pads, are now available in 29 stations.
Enhancing Customer Journeys
Through Technology
Smart Mobility
New innovations and technologies are cornerstones of
our future growth as we fully implement our Corporate
Strategy. In May 2020, we launched a new version of
MTR Mobile to provide customers with railway and other
transport information and functions, as well as news and
offers from MTR Malls and MTR Shops plus a variety of
lifestyle content. The app also features the MTR Points
loyalty scheme whereby customers can earn and redeem
MTR Points.
In August 2020, MTR Mobile’s “Next Train” function was
extended to the light rail network. Passengers may now
check the estimated arrival times for up to five routes at
each platform of any light rail stop, in real time.
In October 2020, the app’s “Trip Planner” was improved
to recommend up to three journey options, each
supplemented with estimated travel times, interchange
walking times and numbers of interchanges. “Traffic
News” was also enhanced to inform passengers of any
service disruptions based on their pre-set route via
push notifications.
MTR is also committed to offering the latest in smart
mobility. A number of initiatives were introduced in 2020
to digitalise and automate customer touchpoints and
deliver a smarter, more seamless travel experience. For
example, passengers can purchase monthly passes in
advance via MTR Mobile and avoid queuing in stations.
Students may now use the app to renew their “Student
Status” on their Octopus cards and continue enjoying
concessionary fares. Starting from 23 January 2021, a
brand-new QR code payment service for the heavy rail
44
MTR Corporation
Annual Report 2020
45
BUSINESS REVIEWHONG KONG TRANSPORT OPERATIONS network was launched, which enables passengers to
tap entry and exit gates using a QR Code Ticket on MTR
Mobile or EasyGo on AlipayHK.
Smart Operations and Maintenance
MTR continued to explore robotics and automation to
improve the effectiveness and efficiency of a variety of
maintenance and back-of-house processes. In the third
quarter of 2020, we introduce five AI-powered “smart
trainee” robots at Kai Tak Station to perform cleaning,
inspection and customer relations tasks. In May, we
launched the InnoEtronic invention zone and robotics
co-working space at Kowloon Bay Depot, a strategic
partnership with 13 local start-ups and industry solution
experts. The project aims to support the development
and application of innovative technologies for smart
maintenance, inspire future innovators and provide a
working space for them to develop proof-of-concept
projects and trials.
Following its successful introduction at Pat Heung Depot,
we expanded the use of the Automatic Air-conditioning
Filter Cleaning Machine (“ACM”) to Chai Wan depot.
ACMs replace tedious manual cleaning and help
standardise filter cleaning quality and efficiency. We
also began trialling the Underframe Inspection Robot
(“UIR”) at Pat Heung Depot. The UIR adopts cutting-edge
technologies, including image recognition, AI and precise
motion control, to identify and report anomalies in the
underframes of rolling stock. We also started trialling a
Smart Train Roof and Pantograph Monitoring System at
the Tuen Ma Line Phase 1, which automatically captures
a complete image of the train pantograph and train
roof and uses image recognition technology to identify
potential anomalies and alert users to prevent further
escalation of failure.
During the year, MTR introduced leading-edge smart
asset management technologies such as blockchain,
cloud computing and AI to streamline its supply chain,
improve workflow and collaboration, and optimise train
deployment and maintenance. We also continued to
apply digital technology to improve our maintenance
records and processes. MTR has also introduced a smart
Track Dynamic Performance System on East Rail Line
trains to monitor in real time the critical track geometry
parameters and vibration measurements along the
line, thereby facilitating predictive and prescriptive
maintenance. In April 2020, we began using the Smart
Forms mobile app to digitise maintenance information
and records, resulting in faster and higher-quality
maintenance works.
On the Light Rail, our innovative Integrated Speed and
Position Supervision System was enhanced so that the
speed of light rail vehicles can be monitored in real time,
further improving operational safety and efficiency.
44
MTR Corporation
Annual Report 2020
45
Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis Station
Retail
Advertising
Tele-
communications
49,519
Advertising Units
5G
Data Access in
40 Stations
1,529
Station Shops with
67,746m2
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MTR Corporation
Annual Report 2020
47
HONG KONG STATIONCOMMERCIAL BUSINESSES AIM
We strive to deliver value-added services to our customers
and business partners with a variety of offerings along
our railway network, including a wide selection of station
retail outlets as well as leading-edge, diverse advertising
modes and telecommunications services.
CHALLENGES
Station Retail
• COVID-19 outbreak and subsequent economic
downturn substantially affected tenant operations
and retail sales, impacting the Company’s station
retail business
STRATEGIES
Station Retail
• Foster strong tenant relations and attract new tenants
by offering flexible as well as shorter-term rental
agreements to help retail businesses – particularly
small to medium enterprises – persevere through the
economic downturn
• Help tenants leverage online-to-offline commerce
and drive sales despite lower foot traffic and in-store
shopping via offers with the MTR Mobile app and MTR
Points loyalty programme
• Continue reviewing the station tenant mix to enhance
customer appeal and drive rental revenue
• Continue introducing new brands into our
• Rental concessions provided to help tenants
station shops
withstand station closures and reduced foot traffic
resulted in a drop in rental revenue. For leases to be
renewed, there was downward pressure on rentals due
to market conditions, causing a further reduction in
rental income
Advertising
• Revenue fell by more than 50% as advertising
spending drastically shrank following COVID-19
• Traditional advertising formats continued to be
challenged by online media
Telecommunications
• Telecoms infrastructure continued to be stretched
by growing customer demand for faster, more
sophisticated networks and wider coverage
• Reduced revenue from telecommunication operators
resulted in downward pressure on contract renewal
OUTLOOK
Advertising
• Offer more targeted, aggressive and flexible sales
packages as well as extra sales incentives to capture
advertisers’ limited advertising budgets
• Continue to integrate digital formats into our
advertising mix to target online budgets and increase
the media value and appeal of our media offerings
with digital solutions, driving new growth areas as per
our Corporate Strategy
Telecommunications
• Continue working with telecom operators to upgrade
data network capacity and launch 5G across our
railway network to enhance mobile communications
for our customers
The COVID-19 pandemic will continue to have significant impacts on our station retail tenants and rental
revenue in 2021 as consumer sentiment is expected to remain sluggish in the near term. Our station retail
businesses may see continuing challenges in rentals resulting from the aftermath of last year’s negative
rental reversions as well as the accounting standard requirement to spread last year’s rental rebates into
2021 and beyond. Our duty free business recovery will depend completely on the timing of the re-opening
of borders and the recovery of border patronage. In the longer term, we are still well positioned for growth
as more lines and stations are added to our Hong Kong network, which will bring more passengers through
our stations and increase the prospect of more rental revenue from tenants.
Our advertising income will be dependent on economic recovery and retail spending. To capture clients’
advertising budgets, we will continue to incorporate more digital formats in our advertising portfolio to keep
up with consumer demand for dynamic, flexible and targeted offers as well as online and mobile commerce.
We will also continue to work with telecommunications providers to upgrade our networks and ensure that
we are delivering the best possible service for our passengers.
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MTR Corporation
Annual Report 2020
47
Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis Revenue from Hong Kong
Station Commercial Businesses
(HK$ million)
6,799
6,458
126
696
1,212
126
743
1,130
5,975
126
635
1,071
5,544
170
561
1,090
4,143
4,424
4,800
3,723
3,269
92
640
516
2,021
2016
2017
2018
2019
2020
Station Retail
Telecommunication Services
Advertising
Others
STATION RETAIL
Rental concessions and the closure of duty free shops in
border stations resulted in a 57.9% decrease in station
retail rental revenue to HK$2,021 million.
In addition to rental concessions granted to tenants
affected by the suspended cross-boundary rail services,
we offered rental relief to small to medium tenants in
other station shops by granting half-month reductions
of their rents from February to April 2020, underscoring
our commitment to society and our support of local
businesses in difficult times. Rental relief for large
corporations was considered on a case-by-case basis.
From May to December 2020, we continued offering
rental relief to all tenants. Rental reversion and average
occupancy rates in 2020 for our station kiosks were
approximately -8% and 98.3%, respectively.
During the year, the Company continued to employ
innovative marketing promotions to stimulate retail
activity. The MTR Mobile app’s MTR Points loyalty scheme,
introduced in May 2020, encourages customers to
make purchases at designated station shops and MTR
Malls and redeem gifts with earned MTR Points. We also
launched promotional campaigns from time to time,
including special offers from station shops to boost sales.
Meanwhile, our two “v-smart” unmanned automated
station shops at Kowloon and Tsing Yi stations continued
to offer customers a new retail experience. In 2020,
22 new brands were introduced to our network.
In 2020, total revenue from all Hong Kong station
commercial activities decreased by 51.9% to HK$3,269
million. This was mainly due to rental concessions granted
to tenants who were affected by station closures and
suspended cross-boundary rail services following border
shutdowns, as well as rental concessions granted to other
station shop tenants during the COVID-19 outbreak.
As at 31 December 2020, the lease expiry profile of
our station kiosks (including duty free shops) by area
occupied was such that approximately 32% will expire in
2021, 47% in 2022, and 21% in 2023 and beyond.
In terms of trade mix, food and beverage accounted for
approximately 22% of the leased area of our station kiosks
(excluding duty free shops), followed by cake shops 16%,
convenience stores 14%, passenger services 11% and
others 37% as at 31 December 2020.
As at 31 December 2020, there were 1,529 station
shops occupying 67,746 square metres of retail space,
representing an increase of 37 shops and 409 square
metres of lettable space when compared with
31 December 2019. The increases were mainly due to
the openings of shops at the new Hin Keng Station,
Kai Tak Station, and the expanded Diamond Hill Station
along the Tuen Ma Line Phase 1 as well as Admiralty and
Kowloon stations.
To help non-governmental organisations and social
enterprises provide services for the community, we rent
them certain station shops along the West Rail Line and
other lines at a nominal rate. In 2020, a total of nine
station shops were leased on this basis.
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MTR Corporation
Annual Report 2020
49
BUSINESS REVIEWHONG KONG STATION COMMERCIAL BUSINESSES ADVERTISING
Revenue from advertising decreased by 54.3% to
HK$516 million as a result of the COVID-19 outbreak,
leading to steep declines in tourism and retail sales and
causing advertisers to postpone or cancel campaigns.
As at 31 December 2020, the number of advertising units
in stations and trains had increased to 49,519. This year
we installed a new 108” LED concourse network along
Island Line and Kwun Tong Line and two new trackside
108” LED zones at Central Station and Tsim Sha Tsui
Station. We also launched a new 86” 4K resolution digital
panel network along East Rail Line, Tuen Ma Line Phase 1
and West Rail Line. New advertising provisions were also
available after the opening of the Tuen Ma Line Phase 1.
To drive business for our advertisers, we launched
online-offline advertising modes with sales packages
bundling our MTR Mobile app and station advertising
platforms. We also collaborated with advertisers on
various promotional activities via MTR Mobile’s
loyalty programme.
In 2020, MTR provided free advertising space to 64
non-profit organisations to help promote their services.
TELECOMMUNICATIONS
Telecommunications revenue decreased by 13.9% to
HK$640 million in 2020. This was attributed to the special
fee concession given during the COVID-19 pandemic and
subsequent economic downturn as well as the revised fee
due to contract renewal.
Our new commercial telecom system project continued
during the year, with 26 of 31 stations completed as at
31 December 2020. Also as at year-end, 5G services had
been launched at 40 stations by some telecom operators.
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MTR Corporation
Annual Report 2020
49
Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis Property
Development
Property
Rental
Property
Management
Over 23,000
Residential Units
and 2 Shopping Malls
Under Development
14
Shopping Malls
in Our Portfolio
Managing Over
111,000
Residential Units
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MTR Corporation
Annual Report 2020
51
HONG KONG PROPERTYAND OTHER BUSINESSES AIM
We aim to create shareholder value by maximising our assets
through exploring property development, rental, management and
acquisition opportunities, creating integrated, inclusive communities
along our world-class rail network. We also strive to provide excellent
service for these projects by applying our expertise in all aspects of
property development and management as well as engaging the
community.
CHALLENGES
Property Rental
• COVID-19 caused steep declines in tourist traffic and domestic
spending, negatively impacting our mall rental business
• Work-from-home arrangements and the weak economic
environment curbed business expansion and office demand
•
The rise of e-commerce continues to affect consumer
behaviour and retail space demand and drive business toward
online shopping, particularly in response to the pandemic
Property Management
• Statutory changes in licensing, procurement and maintenance
are impacting the residential property management industry in
Hong Kong
Property Development
• COVID-19 continues to disrupt the global economy and create
fluctuations in capital flow
STRATEGIES
Property Rental
• Continue to support tenants, especially small to medium
enterprises, with rental concessions and flexible lease
arrangements in order to further build long-term relationships
and maintain occupancy
OUTLOOK
•
Remain keenly attuned to the business difficulties faced by
our mall tenants, particularly those operating in food and
beverage and discretionary segments, by working together on
collaborations such as loyalty and redemption programmes
• Widen the targeted trades in our malls to further diversify
our offerings
Property Management
• Continue implementing anti-pandemic measures at our
estates, buildings and malls to ensure health and safety
• Optimise costs by reviewing operational processes
and expenditures
• Continue offering a world-class property management
service that meets or exceeds customer requirements
and expectations
•
In line with the sustainability and environmental goals set out
in the Corporate Strategy, develop and promote more green
projects with greater energy efficiency for the health of our
residents, tenants and communities
Property Development
• Continue leveraging our proven “Rail Plus Property” integrated
development model as a competitive advantage for buyers
seeking quality units with convenient transportation links
•
Expand by seeking the rezoning of feasible existing railway sites
for potential new developments
• Deliver property developments of a high standard, on time and
within budget
• Continuously improve our standards through innovation and by
capturing new development opportunities
Property Safety
• Safety at our construction sites, investment and managed
properties, and adjoining railway facilities is our top priority
COVID-19 will continue to impact mall rentals as travel restrictions limit tourism to Hong Kong, especially from the Mainland of China,
and work-from-home and social distancing policies curtail in-store spending by domestic consumers. In line with our Corporate
Strategy, which emphasises new growth engines such as digital retail as a core growth pillar, we will seek to leverage our enhanced
MTR Mobile app and new “MTR Points” loyalty programme to inform users of offers from mall tenants and drive online-to-offline
sales. We will also analyse our trade mix to determine where we can further diversify our offerings into lifestyle to attract more mall
traffic. Our shopping mall business will continue to face challenges in rentals resulting from the aftermath of last year’s negative
rental reversions as well as the spreading of last year’s rental rebates into 2021 and beyond in accordance with accounting standard
requirement. We look forward to opening the remaining shops of The LOHAS and our shopping centres in Tai Wai and Wong Chuk
Hang (now named “The Southside”) in 2023. The impact of COVID-19 on the asset valuation of our investment property portfolio may
continue until market conditions are stabilised. Office rentals will remain under pressure as work-from-home arrangements and the
weak economic environment dampen business expansion plans and office demand.
Despite the pandemic and economic downturn, our property development business is performing relatively well. Profit from property
development is dependent on the sale of the property developments and construction progress and will vary from year to year.
Depending on construction progress, we target to book development profits from Packages 7, 8 and 9 of LOHAS Park in 2021. Subject
to market conditions and necessary Government approvals, we aim to tender out The Southside (also known as “Wong Chuk Hang
Station Property Development”) Package 6, Tung Chung Traction Substation site, Pak Shing Kok Ventilation Building site and Tung
Chung East Station Package 1 (subject to our entering into a project agreement with Government) in the next 12 months or so. These
packages are expected to provide about 4,800 residential units in total. Applications for pre-sale consent for The Southside Package 1
and Package 2 property development projects and The Pavilia Farm III are in progress.
Revenue from property management is recurrent and dependent on the properties under management, which will increase as new
projects are completed.
The health and safety of our customers, staff, tenants and residents is our number one priority. As we anticipate that the societal
impacts of COVID-19 will last well into 2021, we will continue to take all necessary precautions to ensure hygiene in our estates, malls
and office buildings.
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Annual Report 2020
51
Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis PROPERTY RENTAL
Property rental revenue decreased by 0.3% year on year
to HK$4,817 million in 2020. This was mainly due to relief
measures provided to tenants during the pandemic,
which were granted on a case-by-case basis with priority
given to small to medium tenants; however, these were
partially offset by the incremental contribution from our
newly opened and acquired shopping malls. In 2020, our
shopping malls recorded a negative rental reversion rate
of approximately 21% due to adverse retail sentiment.
Our shopping malls (other than The LOHAS, which was
opened in August 2020) and the Company’s 18 floors in
Two International Finance Centre had average occupancy
rates of 99% and 98%, respectively.
As at 31 December 2020, the lease expiry profile of our
shopping malls by area occupied was such that
approximately 33% will expire in 2021, 30% in 2022,
20% in 2023 and 17% in 2024 and beyond.
In terms of trade mix as at 31 December 2020, food
and beverage accounted for approximately 29% of the
leased area of our shopping malls, followed by fashion,
beauty and accessories for 22%, services 22%, leisure
and entertainment 17%, and department stores and
supermarkets 10%.
As at 31 December 2020, the Company’s attributable
share of investment properties in Hong Kong was 257,692
square metres of lettable floor area for retail properties,
39,410 square metres of lettable floor area for offices and
18,905 square metres of property for other use.
Steep declines in tourist traffic and domestic spending
negatively impacted our mall rental business, while
work-from-home arrangements and the weak economic
environment adversely affected our office tenants’
business expansion plans and reduced their space
requirements. We remained keenly attuned to the
business difficulties faced by our mall tenants, particularly
those operating in food and beverage and discretionary
segments, collaborating with them on initiatives such as
loyalty and redemption programmes to boost business.
We helped e-commerce and online merchants open
pop-up stores at our properties to help drive mall traffic.
We are also considering widening the trade mix in our
malls to further diversify our offerings.
During the year, the Company held marketing activities to
drive traffic to malls and help tenants offset the adverse
effects of COVID-19. Many of these were promoted via
the upgraded MTR Mobile app, an integrated platform
covering information on MTR Malls and MTR Shops,
lifestyle content, and a new “MTR Points” loyalty scheme
that allows customers to earn MTR Points for their
purchases at designated MTR outlets and redeem them
for special rewards.
In August and November 2020, we opened phases 1
and 2 of The LOHAS, a three-storey, 44,500-square-metre
shopping centre at LOHAS Park that connects seamlessly
with the LOHAS Park Station and nearby residential
buildings. The LOHAS will be home to over 140 tenants
and features Hong Kong’s largest indoor ice rink, Tseung
Kwan O’s largest cinema and a family entertainment
centre project that is the first of its kind in Hong Kong.
In 2020, the Company acquired the remaining economic
interests in Telford Plaza II in Kowloon Bay and PopCorn 2
in Tseung Kwan O from New World Development
Company Limited and Chow Tai Fook Enterprises Limited
for a total consideration of HK$3 billion. We now hold
100% interest in both shopping centres. Repartitioning
work for the fourth and fifth levels of Telford Plaza II has
been completed, and all shops are now open.
Pursuant to MTR’s environmental goals of reducing
energy use in its investment property portfolio, the
Company worked to install energy-efficient lighting,
water pumps, air conditioning systems and chillers in our
managed properties. In 2013, we set a target to reduce
energy use in our investment properties portfolio by 12%
by 2023. As of 2020, our Hong Kong investment property
portfolio has already exceeded this target. Further
information about our environmental efforts can be
found in our Sustainability Report 2020.
52
MTR Corporation
Annual Report 2020
53
BUSINESS REVIEWHONG KONG PROPERTY AND OTHER BUSINESSES Investment Property Portfolio in Hong Kong (as at 31 December 2020)
Location
Telford Plaza I, Kowloon Bay, Kowloon
Telford Plaza II 7–8/F, Kowloon Bay, Kowloon
Telford Plaza II 3–6/F, Kowloon Bay, Kowloon
Luk Yeung Galleria, Tsuen Wan, New Territories
Paradise Mall, Heng Fa Chuen, Hong Kong
Maritime Square 1, Tsing Yi
Maritime Square 2, Tsing Yi
The Lane, Hang Hau
PopCorn 2, Tseung Kwan O
PopCorn 1, Tseung Kwan O
G/F, No. 308 Nathan Road, Kowloon
G/F, No. 783 Nathan Road, Kowloon
New Kwai Fong Gardens, Kwai Chung, New Territories
International Finance Centre ("ifc"), Central, Hong Kong
– Two ifc
– One and Two ifc
Phase I, Carpark Building, Kornhill, Quarry Bay, Hong Kong
Roof Advertising Signboard, Admiralty Centre, No. 18 Harcourt
Road, Hong Kong
Ten Shop Units, First Floor Podium, Admiralty Centre, No. 18
Harcourt Road, Hong Kong
Olympian City One, Tai Kok Tsui, Kowloon
Olympian City Two, Tai Kok Tsui, Kowloon
Choi Hung Park & Ride Public Car Park, No. 8 Clear Water Bay Road,
Choi Hung, Kowloon
Elements, No. 1 Austin Road West, Kowloon
Type
Shopping Centre
Car Park
Shopping Centre
Shopping Centre
Car Park
Shopping Centre
Car Park
Shopping Centre
Wet Market
Kindergarten
Car Park
Shopping Centre
Kindergarten
Car Park
Motorcycle Park
Shopping Centre
Car Park
Motorcycle Park
Shopping Centre
Car Park
Motorcycle Park
Shopping Centre
Car Park
Shopping Centre
Car Park
Motorcycle Park
Shop Unit
Shop Unit
Kindergarten
Car Park
Office
Car Park
Car Park
Advertising
Signboard
Shop Unit
Indoor Sports Hall
Shop Unit
Car Park
Motorcycle Park
Park & Ride
Shopping Centre
Car Park
Cross Border Coach Terminus, No. 1 Austin Road West, Kowloon
Coach Terminus
Kindergarten, No. 1 Austin Road West, Kowloon
Plaza Ascot, Fo Tan
Royal Ascot, Fo Tan
Ocean Walk, Tuen Mun
Sun Tuen Mun Shopping Centre, Tuen Mun
Kindergarten
Shopping Centre
Car Park
Residential
Car Park
Shopping Centre
Car Park
Shopping Centre
Car Park
Lettable floor
area (sq. m.)
No. of parking
spaces
Company’s
economic
interest
39,331
–
2,397
19,057
–
11,094
–
15,410
1,216
2,497
–
28,547
920
–
–
6,448
–
–
2,629
–
–
8,456
–
12,174
–
–
70
36
540
–
39,410
–
–
–
286
13,512
1,096
–
–
–
45,510
–
5,113
1,045
7,720
–
2,784
–
6,083
–
9,022
–
–
993
–
–
136
–
651
–
–
–
415
–
–
220
50
–
65
21
–
16
1
–
50
–
115
16
–
–
–
126
–
1,308
292
–
–
–
–
54
10
450
–
898
–
–
–
67
–
20
–
32
–
421
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
50%
50%
50%
100%
100%
100%
100%
100%
51%
100%
100%
50%
100%
100%
100%
100%
100%
81%
81%
100%
81%
100%
100%
100%
100%
100%
100%
100%
100%
52
MTR Corporation
Annual Report 2020
53
Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis Investment Property Portfolio in Hong Kong (at 31 December 2020)(continued)
Location
Hanford Plaza, Tuen Mun
Retail Floor and 1–6/F., Citylink Plaza, Shatin
The Capitol, LOHAS Park, Tseung Kwan O
Le Prestige, LOHAS Park, Tseung Kwan O
The Riverpark, No.8 Che Kung Miu Road, Shatin
Hemera, LOHAS Park, Tseung Kwan O
THE LOHAS, Tseung Kwan O
Type
Shopping Centre
Car Park
Shopping Centre
Shop Unit
Residential Care
Home for the Elderly
Kindergarten
Car Park
Shop Unit
Kindergarten
Car Park
Kindergarten
Shopping Centre
Kindergarten
Car Park
Motorcycle Park
Lettable floor
area (sq. m.)
No. of parking
spaces
Company’s
economic
interest
1,924
–
12,154
391
2,571
800
–
154
708
–
985
27,852
1,141
–
–
–
22
–
–
–
–
2
–
–
5
–
–
–
333
33
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
All Properties are held by the Company and its subsidiaries under Government Leases for over 50 years except for:
• Telford Plaza I and II, Luk Yeung Galleria, Maritime Square 1 and 2, New Kwai Fong Gardens, ifc, Olympian City, Elements, Cross Border Coach Terminus and Kindergarten at No. 1
Austin Road West, Plaza Ascot, Royal Ascot, Ocean Walk, Sun Tuen Mun Shopping Centre and Hanford Plaza where the Government Leases expire on 30 June 2047
• Choi Hung Park & Ride where the Government Lease expires on 11 November 2051
• The Lane where the Government Lease expires on 21 October 2052
• PopCorn 2 where the Government Lease expires on 27 March 2052
• LOHAS Park where the Government Lease expires on 15 May 2052
• Citylink Plaza where the Government Leases expire on 1 December 2057
• The Shop Units and Kindergarten of The Riverpark where the Government Lease expires on 21 July 2058
Properties Held for Sale (as at 31 December 2020)
Location
Olympian City One, No. 11 Hoi Fai Road, Kowloon
Bank of China Centre, No. 11 Hoi Fai Road, Kowloon
The Arch, No. 1 Austin Road West, Kowloon
Harbour Green, No. 8 Sham Mong Road, Kowloon
Type
Shopping Centre
Car Park
Car Park
Residential
Car Park
Kindergarten
Residence Oasis, No. 15 Pui Shing Road, Hang Hau, Tseung Kwan O Motorcycle Park
The Grandiose, No. 9 Tong Chun Street, Tseung Kwan O
Wings at Sea and Wings at Sea II, LOHAS Park, Tseung Kwan O
MALIBU, LOHAS Park, Tseung Kwan O
LP6, LOHAS Park, Tseung Kwan O
The Palazzo, No. 28 Lok King Street, Shatin
Festival City, No. 1 Mei Tin Road, Shatin
Lake Silver, No. 599 Sai Sha Road, Shatin
The Riverpark, No. 8 Che Kung Miu Road, Shatin
* Lettable floor area
** Brochure gross floor area as per previously issued marketing brochures
*** Saleable area
Motorcycle Park
Residential
Car Park
Motorcycle Park
Residential
Car Park
Residential
Car Park
Motorcycle Park
Retail
Car Park
Motorcycle Park
Car Park
Car Park
Car Park
Gross floor
area (sq. m.)
No. of parking
spaces
Company’s
economic
interest
6,026 *
–
–
548 **
–
1,299
–
–
2,847 ***
–
–
1,058 ***
–
5,238 ***
–
–
2,000
–
–
–
–
–
–
330
117
–
12
–
5
24
–
300
46
–
111
–
479
50
–
9
5
79
2
2
40%
40%
40%
1%
1%
50%
71%
70%
20.1%
20.1%
20.1%
47%
47%
63.3%
63.3%
63.3%
55%
55%
55%
100%
92.88%
87%
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Annual Report 2020
55
BUSINESS REVIEWHONG KONG PROPERTY AND OTHER BUSINESSES Investment Properties in Hong Kong
100
90
80
70
60
50
40
30
20
10
–
85.5
3,652
3,814
3,921
3,973
3,865
10,000
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
–
2016
2017
2018
2019
2020
Total Value of Investment Properties
(HK$ billion) (left scale)
Net Rental Income
(HK$ million) (right scale)
Distribution of Hong Kong Property
Management Income
(Percentage)
2020
2019
3.8
3.7
10.7
10.4
14.2
15.8
70.1
71.3
Residential
Retail
Office
Car Park
EXPANDING THE RETAIL PORTFOLIO
We are opening two new malls that will add
approximately 30% to the attributable GFA of our existing
retail portfolio as of 31 December 2020 for a total of
107,620 square metres.
Tai Wai Shopping Centre
Construction of the 60,620-square-metre (GFA) shopping
centre at Tai Wai Station continued to make progress in
2020. Construction of the basement and superstructure
is in progress. The project is scheduled for completion
in 2023.
The Southside
In January 2021, the Company announced the naming
of the mall at Wong Chuk Hang as The Southside.
Foundation works on the 47,000-square-metre (GFA)
project continued, and it is on target for completion by
the end of 2023.
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MTR Corporation
Annual Report 2020
55
Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis PROPERTY MANAGEMENT
Property management revenue in Hong Kong decreased
by 22.0% to HK$237 million compared to 2019. As at
31 December 2020, MTR managed more than 111,000
PROPERTY DEVELOPMENT
Hong Kong property development profit for the year was
HK$5,442 million, which was primarily derived from the
surplus proceeds from LOHAS Park Package 6 and sales of
inventory units.
Pre-sales
Despite the pandemic and economic downturn, our
property development business is performing relatively
well with satisfactory sales. Our property development
projects at LOHAS Park and Tai Wai Station were received
favourably by the market in 2020.
Property Development Projects
Pre-sales
Launch Date
Units Sold as at
31 December
2020
The Pavilia Farm I (Tai Wai Station)
October 2020
The Pavilia Farm II (Tai Wai Station) November 2020
SEA TO SKY
(LOHAS Park Package 8)
MARINI, GRAND MARINI and
OCEAN MARINI
(LOHAS Park Package 9)
June 2020
August 2019,
September 2019
and March 2020
97% of
783 units
95% of
1,415 units
70% of
1,422 units
97% of
1,653 units
Pre-sale for LP10 (LOHAS Park Package 10) commenced in
January 2021.
Sales activities also continued for the Cullinan West III (Nam
Cheong Station) and Sol City (Long Ping Station (South))
property development projects, where we act as agent for
the relevant subsidiaries of the Kowloon-Canton Railway
Corporation. As at 31 December 2020, 83% of the 1,172 units
at Cullinan West III and 93% of the 720 units at Sol City were
sold. The application for pre-sale consent for Yuen Long
Station property development (Phase 1) is in progress.
Property Tendering
In February 2020, MTR awarded the tender for LOHAS
Park Package 12 to a subsidiary of Wheelock and
Company Limited. In October 2020, the Company
awarded the tender for LOHAS Park Package 13, our last
package at LOHAS Park, to a consortium formed by Sino
Land Company Limited, Kerry Properties Limited, K. Wah
residential units and over 772,000 square metres of office
and commercial space in Hong Kong.
International Holdings Limited and China Merchants
Land Limited. In January 2021, the Company awarded
the tender for The Southside Package 5 to a consortium
formed by New World Development Company Limited,
Empire Development Hong Kong (BVI) Limited, CSI
Properties Limited and Lai Sun Development Company
Limited. For the Ho Man Tin Station Package 1 property
development project, a novation agreement has been
reached between MTR Corporation Limited, Goldin
Properties Holdings Limited and Great Eagle Group. The
Company will work together with Great Eagle Group to
bring this project to completion.
Future Development
Our 17 new residential property projects under
development are expected to deliver over 23,000 units
to the market in the coming five years, supporting
Government’s efforts to increase housing supply.
We have been invited by Government to proceed with the
technical studies on the Siu Ho Wan Depot site topside
development, which will provide about 20,000 residential
units in the medium to long term, about half of which
will be Subsidised Sale Flats. The development will also
provide community facilities and a 30,000-square-metre
shopping mall. The design and planning of advance
works have commenced.
The draft Outline Zoning Plans for the Tung Chung
Traction Substation site and Pak Shing Kok Ventilation
Building site were gazetted in June 2020. Subject to
completion of the rezoning process and the subsequent
land grant for development, we will tender out these two
sites in the next 12 months or so. Subject to our entering
into a project agreement with Government, we will
tender out Tung Chung East Station Package 1 in the next
12 months or so. Meanwhile, we are also exploring the
development potential of sites along existing and future
railway lines, including the Tuen Mun South Extension,
Kwu Tung Station and Northern Link.
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Annual Report 2020
57
BUSINESS REVIEWHONG KONG PROPERTY AND OTHER BUSINESSES Ho Man Tin Station
Package 1
Package 2
LOHAS Park Station
LP6
MONTARA and
GRAND MONTARA
SEA TO SKY
MARINI, GRAND MARINI and
OCEAN MARINI
LP10
Package 11
Package 12
Package 13
Tai Wai Station
Tai Wai
Tin Wing Stop
Tin Wing
Wong Chuk Hang Station
Package 1
Package 2
Package 3
Package 4
Package 5
Property Development Packages Completed during the year and awarded
Location
Developers
Type
(sq. m.) Tender award date
Gross floor
area
Expected
completion date
Great Eagle Group
Chinachem Group
Residential
Residential
69,000
59,400
December 2016
October 2018
2022
2024
Nan Fung Group Holdings Limited
Wheelock and Company Limited
CK Asset Holdings Limited
Wheelock and Company Limited
Nan Fung Group Holdings Limited
Sino Land Company Limited, K. Wah
International Holdings Limited and China
Merchants Land Limited
Wheelock and Company Limited
Sino Land Company Limited, Kerry Properties
Limited, K. Wah International Holdings
Limited and China Merchants Land Limited
Residential
Residential
Retail
Kindergarten
Residential
Residential
Kindergarten
Residential
Residential
136,970
70,260
44,500
1,160
97,000
104,110
810
75,400
88,858
January 2015
June 2015
2020
By phases from
2019 – 2021
October 2015
December 2015
2021
By phases in 2021
March 2016
April 2019
Residential
Residential
89,290
143,694
February 2020
October 2020
New World Development Company Limited
Residential
Retail
190,480
60,620*
October 2014
By phases from
2022 – 2023
Sun Hung Kai Properties Limited
Residential
Retail
91,051
205
February 2015
Road King Infrastructure Limited and Ping An
Real Estate Company Limited
Kerry Properties Limited and Sino Land
Company Limited
CK Asset Holdings Limited
Kerry Properties Limited, Swire Properties
Limited and Sino Land Company Limited
New World Development Company Limited,
Empire Development Hong Kong (BVI) Limited,
CSI Properties Limited and Lai Sun
Development Company Limited
Residential
53,600
February 2017
Residential
45,800
December 2017
Residential
Retail
Residential
92,900
47,000
59,300
August 2018
October 2019
Residential
59,100
January 2021
Yau Tong Ventilation Building
Yau Tong Ventilation
Building
Kam Sheung Road Station#
Package 1
Sino Land Company Limited and
CSI Properties Limited
Sino Land Company Limited, China Overseas
Land & Investment Limited and K. Wah
International Holdings Limited
Residential
30,225
May 2018
Residential
114,896
May 2017
2022
2025
2026
2026
2024
2022
2023
2024
2025
2026
2025
2025
Yuen Long Station#
Yuen Long
Sun Hung Kai Properties Limited
Residential
Retail
126,455
11,535^
August 2015
2022
# as a development agent for the relevant subsidiaries of KCRC
*
^
excluding a bicycle park with cycle track
including a 24-hour pedestrian walkway and a covered landscape plaza
Property Development Packages to be Awarded Notes 1 and 2
Location
Wong Chuk Hang Station
Type
Residential
Gross floor area
(sq. m.)
Period of
package tenders
Expected
completion date
46,800
2021
2027
Notes:
1 Property development packages for which we are acting as development agent for the relevant subsidiaries of KCRC are not included.
2 These property development packages are subject to review in accordance with planning approval, land grant conditions and completion of statutory processes.
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Annual Report 2020
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Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis Progress of Property Development Packages Awarded
Project Status
Location
Design
Foundation Works
Superstructure
Ho Man Tin Station Package 1
Ho Man Tin Station Package 2
LOHAS Park Package 6
LOHAS Park Package 7^
LOHAS Park Package 8
LOHAS Park Package 9
LOHAS Park Package 10
LOHAS Park Package 11
LOHAS Park Package 12
LOHAS Park Package 13
Tai Wai Station
Tin Wing Stop
The Southside Package 1
The Southside Package 2
The Southside Package 3
The Southside Package 4
The Southside Package 5
Yau Tong Ventilation Building
Completed
In Progress
Completed
Completed
Completed
Completed
Completed
Completed
In Progress
In Progress
Completed
Completed
Completed
Completed
Completed
Completed
In Progress
Completed
In Progress
In Progress
Completed
Completed
Completed
Completed
Completed
In Progress
Completed
Completed
In Progress
In Progress
In Progress
^ The shopping mall of this package (“The LOHAS”) was opened in August 2020.
West Rail Line Property Development Plan
The Company acts as development agent for the West Rail property projects.
Completed
In Progress
In Progress
In Progress
In Progress
In Progress
In Progress
In Progress
In Progress
Station/Site
Property Development Packages Awarded
Tuen Mun
Tsuen Wan West (TW7)
Nam Cheong
Long Ping (North)
Tsuen Wan West (TW5) Cityside
Tsuen Wan West (TW5) Bayside
Tsuen Wan West (TW6)
Long Ping (South)
Yuen Long
Kam Sheung Road Package 1
Property Development Packages to be Awarded
Kam Sheung Road Package 2
Pat Heung Maintenance Centre
Total
58
MTR Corporation
Site Area
(hectares)
Actual/Expected
tender award date
Actual/Expected
completion date
August 2006
September 2008
October 2011
October 2012
January 2012
August 2012
January 2013
June 2013
August 2015
May 2017
By phases from 2012 – 2014
2014
By phases from 2017 – 2019
2017
2018
2018
2018
2019
2022
2025
2024 – 2025
Under review
2031 – 2032
Under review
2.65
2.37
6.18
0.99
1.34
4.29
1.38
0.84
3.91
4.17
28.12
About 5.17
About 23.56
28.73
56.85
Annual Report 2020
59
BUSINESS REVIEWHONG KONG PROPERTY AND OTHER BUSINESSES OTHER BUSINESSES
Ngong Ping 360
Due to COVID-19, revenue at the Ngong Ping Cable Car
and its associated theme village (“Ngong Ping 360”)
decreased by 83.4% to HK$65 million while patronage
decreased by 82.1% to 0.26 million. Following the
pandemic, cable car services either operated on
shortened hours or were suspended for around 150 days
in 2020 and provided normal service on other days. The
indoor attractions at Ngong Ping Village were closed from
27 January 2020.
In September 2020, we launched the 360 FILA Sports
Fest outdoor sports campaign in conjunction with
sporting apparel brand FILA to alleviate the financial
impact of the pandemic. We also provided various offers
for cable car tickets and products depending on the
pandemic situation.
Octopus
The Company’s share of profit from Octopus Holdings
Limited decreased by 22.6% to HK$181 million, mainly
due to lower transport transaction volume and lower sales
of consumer products. As at 31 December 2020, more
than 31,000 service providers in Hong Kong accepted
Octopus payments. Total cards and other stored-value
Octopus products in circulation stood at 34.1 million,
while average daily transaction volumes and value were
11.6 million and HK$193.7 million, respectively.
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Annual Report 2020
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Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis Shatin to
Central Link
Other
New Railway
Projects
Tai Wai to
Hung Hom Section
99.99%
Complete
Hung Hom to
Admiralty Section
91.2%
Complete
Proceed with
3 Railway Projects
under Railway
Development Strategy
2014
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Annual Report 2020
61
HONG KONGNETWORK EXPANSION STRATEGIES
• Further improve our project management systems
and processes to ensure quality delivery of current and
future projects
• Continue digitalising our approach to project
management by adapting modern systems
and technology
• Continue to strengthen collaboration among internal
and key external stakeholders
• Ensure the Company’s future success by leveraging
and building upon previous project experience to
secure future projects, diversify our business and
contribute to long-term, sustainable growth
AIM
Network expansion is a key aspect of our “Hong Kong
Core” strategic pillar, laying the foundations for our future
growth as we enhance connectivity to meet the city’s
developing transport needs. We strive to design and
construct new railway projects to the highest possible
standards of quality, emphasising safety, cost control,
efficiency and environmental sustainability.
CHALLENGES
• Progressing the design of railway projects under Railway
Development Strategy 2014 (“RDS 2014”), which could
add 35 km to the MTR railway network in the coming
years and create further development opportunities
• Working toward the opening of the full Tuen Ma Line
in the third quarter of 2021; for the Hung Hom to
Admiralty section of the Shatin to Central Link, the
targeted opening date of the first quarter of 2022
is significantly at risk due to the major challenges
encountered
OUTLOOK
We continue to work toward the delivery of the 17-km Shatin to Central Link project, which will greatly
reduce travel times between major population centres in Hong Kong. We expect the full Tuen Ma Line –
connecting Phase 1 of the Tuen Ma Line with West Rail Line via Sung Wong Toi, To Kwa Wan, Ho Man Tin
and Hung Hom stations – to open in the third quarter of 2021, bringing the important Shatin to Central
Link project one step closer to completion. We are also working hard on the project’s Hung Hom to
Admiralty section.
Elsewhere, we are progressing the design of the Tung Chung Line Extension and the Tuen Mun South
Extension, and have commenced the procurement of the design consultancies for Kwu Tung Station and
the Northern Link. We are also continuing to work closely with Government on other railway projects under
RDS 2014.
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Annual Report 2020
61
Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis With the opening of Tuen Ma Line Phase 1, the Shatin
to Central Link made further progress in 2020. We are
continuing to work closely with Government on the RDS
2014 development framework for Hong Kong railways,
which will potentially increase the city’s railway network
by 35 km and bring with it even more opportunities for
development and business expansion.
interchange between the Tuen Ma Line and Kwun Tong
Line, allowing passengers to travel between the New
Territories North and East districts to East Kowloon and
Hong Kong Island East more conveniently.
Trial operations of the full Tuen Ma Line began in
January 2021, marking a major milestone toward the
commencement of passenger service.
During 2020, track-laying works were completed along
the full length of the 6-km section from Hung Hom
Station to Admiralty Station. To mark this milestone,
a small celebration event was held in the tunnel at
SHATIN TO CENTRAL LINK
The ten-station, 17-km Shatin to Central Link, a project
managed by MTR on behalf of Government, is a strategic
railway that will enhance the existing rail network and
improve connectivity in Hong Kong. The first phase is
the 11-km Tai Wai to Hung Hom Section, and the second
phase is the 6-km Hung Hom to Admiralty Section.
The Tai Wai to Hung Hom Section will connect the former
Ma On Shan Line to the West Rail Line via Diamond Hill
and Hung Hom stations to form the Tuen Ma Line. When
the Hung Hom to Admiralty Section is completed, the
East Rail Line will run under Victoria Harbour to Exhibition
Centre Station and Admiralty Station via Hung Hom.
Upon completion, the Shatin to Central Link will connect
several existing railway lines and significantly reduce
travel times between New Territories North, Kowloon and
Hong Kong Island. Passengers will also have more routes
to choose from, particularly in the busy cross-harbour
section of the Tsuen Wan Line and the Tai Wai to Kowloon
Tong section of the East Rail Line.
Project Progress
As at 31 December 2020, 99.99% of the Tai Wai to Hung
Hom Section and 91.2% of the Hung Hom to Admiralty
Section had been completed.
On 11 February 2020, the Company entered into relevant
agreements with Government and Kowloon-Canton
Railway Corporation to supplement current agreements to
enable the Company to operate Tuen Ma Line Phase 1
in substantially the same manner as the existing railway
network for a period of two years from 14 February 2020.
Tuen Ma Line Phase 1, opened on 14 February 2020,
enables passengers on the former Ma On Shan Line to
travel directly to Kai Tak Station in East Kowloon via
Hin Keng and Diamond Hill stations. Meanwhile, the
expanded Diamond Hill Station has become a new
62
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Annual Report 2020
63
BUSINESS REVIEWHONG KONG NETWORK EXPANSION Exhibition Centre Station on 17 July 2020. In November
2020, a topping-out ceremony for Exhibition Centre
Station was held.
As the existing East Rail Line will connect with the future
Hung Hom to Admiralty section, its signalling system
must be upgraded for compatibility with the extension to
the line. As reported earlier, the introduction of the new
signalling system was put on hold in September 2020 and
the system was finally commissioned in February 2021
after the satisfactory completion of all further testing and
approvals from relevant Government departments.
After reviewing the report of the investigation panel,
the Company has established a dedicated “Shatin to
Central Link Technical and Engineering Assurance
Team” to monitor the project from both a technical
and service readiness perspective and to identify any
important potential issues of the remaining works for
timely reporting and follow-up. A new Service Reliability
Report will also be introduced as part of Government’s
reviewing mechanism of the commissioning of new lines
to ensure the timely reporting and handling of issues with
potentially significant reliability impacts. The Company
will also implement other recommendations made in the
report of the investigation panel.
Programme for Delivery
The full line opening of the Tuen Ma Line is anticipated to
be in the third quarter of 2021. As for the Hung Hom to
Admiralty Section (East Rail Line extending to Admiralty
Station), due to the major challenges encountered, the
targeted opening date of the first quarter of 2022 is
significantly at risk. The Company is working to the best of
its ability to open the line at the earliest opportunity.
Concerns Relating to Construction Works
On 12 May 2020, Government released the Final Report of
the Commission of Inquiry (“COI”) into the Construction
Works at and near the Hung Hom Station Extension under
the Shatin to Central Link. The report concluded that the
relevant structures at and near the Hung Hom Station
Extension are safe and fit for purpose with the completion
of suitable measures. Works for the suitable measures
were completed to programme in mid-2020.
Separately, the Expert Advisor Team report also
concluded that it is safe in practical terms to use the
related built structures at Hung Hom Station for their
intended purposes after the implementation of the
suitable measures.
In its Final Report, the COI identified a number of
inadequacies in respect of the construction process used
during the construction of the Hung Hom Station and
adjacent structure (including failures in respect thereof,
such as poor workmanship incidents compounded by
lax supervision, and that in a number of respects also,
management of the construction endeavour fell below
the standards of reasonable competence) and made
recommendations on how the Company’s project
management practices should be improved. Based on
the COI’s interim report and the recommendations of
the review carried out by the Capital Works Committee
of the Board in 2018, the latter aided by an external
consultant Turner & Townsend (“T&T”), the Company has
been updating and improving its project management
practices over the past two years. Many of these have
already been incorporated into the Company’s standard
practices. Out of the 38 recommendations made by T&T,
31 have been implemented, and implementation of the
remaining seven is well underway. The Company notes
the comments and recommendations made by the COI
in its Final Report. These are now being incorporated into
our on-going work to improve our project management
and quality assurance systems and processes for the
delivery of future railway projects.
In the meantime, we are continuing our discussions
with the contractor about fulfilling their contractual
responsibilities and will be considering our legal position.
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63
Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis Funding
The Company carried out a further review and
revalidation of the Shatin to Central Link Cost to
Complete, and this was submitted to Government on
10 February 2020. The Company’s submission included
an additional amount of project management cost
for the Company. However, Government advised the
Company that Government considers there has been no
material modification in respect of the Shatin to Central
Link project and, therefore, Government disagrees with
the inclusion of any additional project management
cost in the Cost to Complete. The additional funding
sought by Government and subsequently approved by
the Legislative Council on 12 June 2020 did not include
any additional amount of project management cost for
the Company. Government has recently responded to
the Company that Government maintains its position of
disagreement to any increase in the project management
fee. The Company believes it is entitled (in accordance
with the relevant entrustment agreement and following
the Company’s receipt of independent expert advice)
to an increase in the project management cost, to be
agreed by way of good faith negotiations or otherwise
determined in accordance with the relevant entrustment
agreement. Despite the fact that this matter needs to
be resolved, the Company continues to comply with its
project management obligations under the agreement
and meet the costs thereof, on an interim and without
prejudice basis, to allow the Shatin to Central Link
project to progress whilst reserving its position. The
Company continues to exercise rigorous cost control
with the objective of ensuring that construction costs are
contained as far as possible.
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65
BUSINESS REVIEWHONG KONG NETWORK EXPANSION In light of the matters described above, the Group has
made a provision of HK$1.4 billion for the estimated
additional cost to the Company of continuing to comply
with its project management responsibilities in its
consolidated profit and loss account for the year ended
31 December 2020. Further details can be found in note
21B to the Consolidated Accounts of this Annual Report.
OTHER NEW RAILWAY PROJECTS
Working under the RDS 2014 framework for the future
development of the Hong Kong railway network, the
Company was invited by Government in April, May and
December 2020 to proceed with the detailed planning and
design of the Tung Chung Line Extension, Tuen Mun South
Extension, as well as Kwu Tung Station and the Northern
Link, respectively. In June and October 2020, the design
consultancies were awarded for the Tung Chung Line
Extension and Tuen Mun South Extension, respectively.
Ground investigation works and environmental impact
assessments have also commenced. Procurement of
the design consultancies for Kwu Tung Station and the
Northern Link has commenced.
The Tung Chung Line Extension project comprises two
components: i) a new intermediate Tung Chung East
Station between Sunny Bay Station and Tung Chung
Station, and ii) an extension of the existing Tung Chung
Line to a new terminal station at Tung Chung West.
Construction is expected to commence in 2023. The
Company has also agreed with Government to construct
the Airport Railway Extended Overrun Tunnel to facilitate
an increase in the train frequency of Tung Chung Line in
the future.
The Tuen Mun South Extension is a 2.4-km extension
of the West Rail Line (which will become the Tuen Ma
Line in the future) from the existing Tuen Mun Station
to a new terminus at Tuen Mun South via a proposed
intermediate station between Tuen Mun Station and the
new Tuen Mun South Station. Construction is expected to
commence in 2023.
The Kwu Tung Station and Northern Link project
comprises two phases: i) a new Kwu Tung Station along
the Lok Ma Chau Spur Line between Sheung Shui Station
and Lok Ma Chau Station, and ii) a 10.7 km-long railway
line linking Kam Sheung Road Station on the West Rail
Line (future Tuen Ma Line) with the new Kwu Tung Station
via three proposed intermediate stations in San Tin, Ngau
Tam Mei and Au Tau. Upon completion of the project,
a loop will be formed in the Northwest New Territories to
enhance transport network connectivity between the east
and west New Territories.
In May 2020, we submitted a proposal to Government
for the Hung Shui Kiu Station project, and we continue to
provide further information and details to Government.
We also submitted a project proposal for the South Island
Line (West) in December 2020.
During the year, we continued to work with Government
to address technical challenges on the East Kowloon Line
and North Island Line projects.
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Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis Mainland
China Business
Australia
Business
Europe
Business
11 Railway
Services in
4 Countries
2,183km
Operating Route Length
Outside of Hong Kong
1.38 billion
Total Patronage
Outside of Hong Kong
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MAINLAND OF CHINA AND INTERNATIONAL BUSINESSES AIM
Representing one of the three core pillars under
our Corporate Strategy, our Mainland of China and
International Businesses enable us to grow and connect
communities in markets beyond Hong Kong as we strive
to become a leading multinational provider of railway
services, delivering world-class operations in geographies
as diverse as the Mainland of China, Europe and Australia.
CHALLENGES
• COVID-19 has led to reduced patronage and services
due to stay-at-home policies and lockdown protocols
• Competition is increasing in the Mainland and
international passenger rail markets as more rail
operators look outside their home markets
• Railway operators must adjust to different operating
and investment models to participate in the Mainland
of China and overseas markets
OUTLOOK
• Operators must also continuously enhance their
services and facilities in order to meet rising customer
satisfaction standards
STRATEGIES
• Continue delivering operational excellence to fulfil and
renew existing contracts and win new ones, capturing
both construction and O&M opportunities
• Expand business in the Mainland of China by
continuing to explore transit-oriented development
(“TOD”) opportunities and further participate in the
development of the Greater Bay Area
• Explore “Rail Plus Property” development opportunities
in Europe and Australia
• Further diversify revenue streams via asset
replacement, maintenance and public-private
partnership (“PPP”) infrastructure development
opportunities in selective markets
COVID-19 will continue affecting our Mainland of China and International Business for some time as the
world struggles to get the pandemic under control and re-establish business and travel as usual. Therefore,
we can expect passenger demand and revenue to fluctuate to varying degrees in 2021 depending on the
business models of different business contracts. In the meantime, we must keep adapting our operations in
different markets to continue delivering world-class railway services for our overseas customers.
Hangzhou Metro Line 1 Phase 3 (Airport Extension), the full Hangzhou Metro Line 5, Middle Section of
Beijing Metro Line 16 and Shenzhen Metro Line 4 North Extension all opened at various points
througout 2020. These lines and their related businesses should all begin making financial contributions
moving forward.
Over the coming months and years, we will strive to expand our presence in the Mainland of China market
and continue taking an active role in the development of the Greater Bay Area. We will also be seeking
new opportunities across Europe and Australia. This will be done via three primary approaches: delivering
operational excellence, exploring more TOD opportunities in the Mainland and overseas markets, and
raising our railway value chain capabilities.
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Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis Over the years, we have exported our considerable
expertise and experience in the construction, operation
and maintenance of world-class railway networks to a
variety of markets outside Hong Kong, including the
Mainland of China, Macao, Europe and Australia. These
businesses carried a total of approximately 1.38 billion
passengers and an average of approximately 4.4 million
passengers per weekday in 2020.
RAILWAY BUSINESSES IN THE MAINLAND OF CHINA
Beijing
In Beijing, our associate operates Beijing Metro Line 4
(“BJL4”), the Daxing Line, the first three phases of Beijing
Metro Line 14 (“BJL14”) and the Northern Section and
Middle Section of Beijing Metro Line 16 (“BJL16”). The
average on-time performance of these four lines in 2020
was 99.9%.
Beijing Metro Line 4 and the Daxing Line
The COVID-19 outbreak impacted patronage for BJL4
and the Daxing Line during the year. Combined ridership
for the two lines in 2020 was approximately 239 million
passenger trips while average weekday patronage was
742,000, representing year-on-year decreases of 47.5%
and 45%, respectively. The Daxing Line operations and
maintenance (“O&M”) contract has been extended to 29
December 2022.
Beijing Metro Line 14
The first three phases of BJL14 recorded combined
passenger trips of approximately 148 million and average
weekday patronage of over 479,000 in 2020, representing
decreases of 40.8% and 39.2%, respectively, compared to
2019. The full opening of BJL14 is scheduled for late 2021
at the earliest.
Beijing Metro Line 16
The Northern Section of BJL16 recorded approximately 25
million passenger trips and average weekday patronage
of more than 81,000 in 2020. The Middle Section of
BJL16 opened on 31 December 2020, with the full line
scheduled to open in late 2022 at the earliest.
Beijing Metro Line 17
The opening of the first phase of Beijing Metro Line 17 is
targeted for the end of 2021. Our associate will lease the
rolling stock over a 20-year period, with lease payments to
be made in instalments after the opening of each phase.
Shenzhen
Shenzhen Metro Line 4 and North Extension
Shenzhen Metro Line 4 (“SZL4”), operated by our
wholly owned subsidiary, saw a decline in patronage
in 2020 due to COVID-19. Patronage decreased by 35%
to approximately 156 million passengers and average
weekday patronage dropped to approximately 446,000.
The line once again recorded exceptional on-time
performance of 99.9%.
There has been no increase in fares at SZL4 since we
began operating the line in 2010. In July 2020, the
Shenzhen Municipal Government publicised a fare
adjustment framework for the Shenzhen Metro network
that will take effect on 1 January 2021 for a period of
five years. This framework is expected to enable the
establishment of a fare-setting mechanism and the
procedures for fare adjustment. However, if a suitable
fare increase and adjustment mechanism are not
implemented soon, the long-term financial viability of this
line will be impacted.
The Company signed the O&M agreement for the SZL4
North Extension in 2020, and the extension formally
opened on 28 October 2020.
Hangzhou
Hangzhou Metro Line 1 and Xiasha Extension
Our associate operates Hangzhou Metro Line 1 (“HZL1”)
and the HZL1 Xiasha Extension. In 2020, patronage on
these lines decreased by 27.4% to about 215 million
year on year and average weekday patronage dropped
to about 612,000. On-time train performance remained
at 99.9%. The HZL1 Phase 3 (Airport Extension) formally
opened at the end of December 2020.
Hangzhou Metro Line 5
The full line of Hangzhou Metro Line 5 commenced
operation in April 2020. Total patronage was about 108
million in 2020 and average weekday patronage was
about 332,000.
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BUSINESS REVIEWMAINLAND OF CHINA AND INTERNATIONAL BUSINESSES PROPERTY BUSINESSES IN THE MAINLAND OF CHINA
Shenzhen
The Tiara residential development at Shenzhen Metro
Longhua Line Depot Site Lot 1 has a total developable
GFA of approximately 206,167 square metres with a retail
centre of about 10,000 square metres by GFA. More than
98% of residential units have been sold and handed over
to buyers.
COVID-19 negatively impacted the occupancy rate and
patronage of TIA Mall in 2020. The Company granted
rental concessions to eligible tenants to help them
withstand the impact of business disruption caused by
the pandemic.
Beijing
The occupancy rate for Ginza Mall in Beijing decreased
during the year to 84%. The Company extended rental
relief to eligible tenants to help them withstand the
impact of business disruption caused by the pandemic.
Tianjin
In Tianjin, project completion for the Beiyunhe Station
shopping centre development has been delayed to
2024 as additional works are required for railway safety
assurance during basement construction.
Property Management Businesses
As at 31 December 2020, the Company managed a total
of approximately 406,000 square metres of self-developed
and other third-party properties in the Mainland of China.
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Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis MACAO
MTR operates and maintains Macao’s first rapid transit
system, the Macao Light Rapid Transit Taipa Line, which
opened in December 2019. We also provide project
EUROPE RAILWAY BUSINESSES
United Kingdom
TfL Rail/Elizabeth Line
In London, our wholly owned subsidiary operates the
Crossrail operating concession under the TfL Rail brand.
Services include Liverpool Street Station to Shenfield,
Paddington Station to Heathrow Airport and Paddington
Station to Reading, the latter of which is a 57-km route
that was included into the service at the end of 2019.
MTR continues to support the phased opening of TfL Rail,
which will be renamed Elizabeth Line upon the opening
of the Central Operating Section. We recently introduced
the new class 345 Full Length Unit to operate to
Heathrow Airport.
Although ridership has fallen, TfL Rail services have
managed to minimise the risks presented by COVID-19.
Our financial interest is reasonably protected as this
concession has no fare revenue risks.
South Western Railway
Our associate operates the South Western Railway (“SWR”)
franchise, one of the largest rail networks in the UK.
Services for the SWR were also reduced during lockdown
as a result of COVID-19. SWR was transitioned into the
Emergency Recovery Measures Agreement (“ERMA”) in
September 2020 for a period spanning to May 2021. The
termination sum for the SWR franchise was agreed with
the client which will be paid at the end of the ERMA term.
The full exposure to the SWR franchise has already been
provided in our 2019 financial statements.
management and technical support to other light rail
lines and extensions in the city.
Sweden
MTR is the largest rail operator in Sweden by passenger
volume. It operates three rail businesses via wholly
owned subsidiaries: Stockholm Metro (Stockholms
tunnelbana); MTRX (formerly known as MTR Express), an
intercity service between Stockholm and Gothenburg;
and the Stockholm commuter rail service (“Stockholms
pendeltåg”), which serves the greater Stockholm area.
Stockholm Metro (Stockholms tunnelbana)
During the pandemic, Stockholm Metro continued to run
a full service with strong operational performance.
MTRX
MTRX – which underwent a successful rebranding earlier
in 2020 and was recently ranked third in the Swedish
Innovation Index – has been operating a reduced service
since March 2020 due to travel restrictions and decreased
demand brought by the COVID-19 outbreak.
Stockholms pendeltåg
Stockholms pendeltåg continued to run a full service
during the pandemic while achieving record-high
punctuality.
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BUSINESS REVIEWMAINLAND OF CHINA AND INTERNATIONAL BUSINESSES AUSTRALIA RAILWAY BUSINESSES
Melbourne’s Metropolitan Rail Service
In Melbourne, our subsidiary operates the Melbourne
metropolitan rail network. Passenger volume decreased
sharply in 2020 amid COVID-19 outbreak. Our subsidiary
reached an agreement with the State government in
May 2020 on financial support to ease the effects of
the pandemic.
Sydney Metro North West Line
In Sydney, MTR is a member of Northwest Rapid Transit
(“NRT”) Consortium and is responsible for the delivery
of the PPP contract including design, financing and
construction of the Sydney Metro North West Line as well
as its on-going operations and maintenance. The line
opened in May 2019 and continued to run a full service
in 2020. Patronage was affected by COVID-19; however,
there is no fare revenue risk to NRT according to the
terms of this franchise. Service performance continued to
improve throughout the year.
Sydney Metro City & Southwest Project
In 2019, the NRT consortium was awarded the PPP
contract for delivery of new metro trains and core rail
systems, as well as operation and maintenance of the
combined Sydney Metro North West and Sydney Metro
City & Southwest lines until 2034. The project continued
to move forward with milestones achieved as planned
despite some restrictions on the flow of people and
materials between countries as a result of COVID-19.
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Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis GROWTH OUTSIDE OF HONG KONG
Mainland of China
In August 2020, the consortium led by our wholly owned
subsidiary was awarded the tender for the Shenzhen
Metro Line 13 PPP project. The contract was formally
signed in October 2020. The project covers investment,
construction, and operations and maintenance for a
period of 30 years following completion. Construction
covers track laying, rolling stock, and electrical and
mechanical systems, including the signalling system and
automated fare collection system for the 22.4-km line. The
total capital cost of approximately RMB4.91 billion will be
financed by both debt and equity. The PPP project will
be undertaken by a company in which our wholly owned
subsidiary will have an effective interest of 83%. Shenzhen
Metro Line 13 is expected to commence service in 2023.
Our bid for Shenzhen Metro Line 12 was unsuccessful.
In June 2020, the Company signed a joint venture
agreement with Chengdu Rail Transit Group to set up a
new company to explore and develop station commercial
and related businesses in Chengdu. One of the priorities
of the new company is to demonstrate the added value
MTR brings to station commercial activities.
Also in June 2020, our rolling stock maintenance company
with the CRRC Hangzhou Digital Technology Co., Ltd
consortium won the contracts for the rolling stock fleet
overhaul for certain lines in Hangzhou and Shenzhen.
Discussions are on-going regarding potential cooperation
opportunities in the Guangdong-Hong Kong-Macao
Greater Bay Area to build transport infrastructure as
well as property and community projects. The Company
has been involved as the TOD advisor of Dongguan
Binhaiwan New Area Government for the conceptual
planning of the High Speed Rail Binhaiwan Station
TOD. In other Greater Bay Area cities, we are exploring
the investment opportunities of rail-related projects.
Leveraging our experience, we will continue to play an
active role in the integrated development and TOD of the
Greater Bay Area.
In March 2021, we jointly secured the land use right
for a TOD site in the south of Hangzhou West Station
together with three joint venture partners. This project
is a mixed-use property development comprising
serviced apartment, office, retail and hotel, with a total
developable GFA of approximately 688,210 square
metres. The Company has a 10% interest in the project
with an equity investment of RMB350 million.
Sweden
In December 2020, our wholly owned subsidiary was
awarded the O&M concession for the Mälartåg train
service, which covers an eight-year period with a one-
year option for extension. The tender process is currently
subject to legal challenges from other bidders, and traffic
may start from December 2021 or later depending on
the results of these challenges. The Mälartåg network
currently serves around 11 million passenger journeys a
year and connects Stockholm with major towns and cities
including Linköping in the south, Uppsala in the north
and Örebro in the west. A further line extension to the
north, the Upptåget service, will be included from mid-
2022 depending on the results of the legal challenges.
Our bid for the O&M of Roslagsbanan, the commuter
network connecting Stockholm and the municipalities
north of the city, was unsuccessful.
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BUSINESS REVIEWMAINLAND OF CHINA AND INTERNATIONAL BUSINESSES Mainland of China and International Railway Businesses at a Glance
MTR
Corporation
Shareholding
Business Model
49%
49%
49%
Public-Private-
Partnership (“PPP”)
Operations and
Maintenance
(“O&M”) Concession
PPP
Mainland of China
Beijing Metro Line 4
(“BJL4”)
Daxing Line of BJL4
Beijing Metro Line 14
(“BJL14”)
Beijing Metro Line 16
(“BJL16”)
49%
Phase 1: O&M
Concession
Full Line: PPP
Beijing Metro Line 17
49% O&M Concession
Commencement
of Franchise/
Expected Date of
Commencement of
Operation
Franchise/
Concession Period
Total Number of
Stations
Route Length
(km)
September 2009
30 years
December 2010 10 years till 2020 and
2 years extension
till 2022
30 years from
December 2015
24
11
28.2
21.8
Phase 1 to 3: 30
Full Line: 37
Note 1 Phase 1 to 3: 43.8
Full Line: 47.3
Phase 1 to 3: by phases
from May 2013 to
December 2015
Full Line: Targeted late
2021
Phase 1: December 2016
Phase 2: December 2020
Full Line: Targeted after
2021
Subject to local
government
arrangement
Phase 1: till full line
opens
Full Line: 30 years
Phase 1: 10
Phase 2: 7
Full Line: 29
Note 1
Phase 1: 19.6
Phase 2: 10.9
Full Line: 49.8
Full Line: 21
Full Line : 49.7
Full Line: 15
Full Line: 20.5
Shenzhen Metro Line 4
(“SZL4”)
100%
Build-Operate-
TransferNote 2
SZL4 North Extension
100% O&M Concession
Phase 1 and 2: by
phases from July 2010
to June 2011
October 2020
83%
49%
PPP
PPP
2023
November 2012
49% O&M Concession
November 2015
49% O&M Concession
December 2020
60%
PPPNote 3
Initial Section:
June 2019
Latter Section (Included
West Extension):
April 2020
100%
O&M
Service Contract
December 2019
80 months
100% O&M Concession
May 2015
8 years Until End 2021: 31
Full line: 41
30% O&M ConcessionNote 4
August 2017
7 years
100% O&M Concession
November 2009
20 years after service
commencement
(no later than 31
December 2045)
30 years
End together with
SZL4 concession
30 years
25 years
End together with
HZL1 concession
End together with
HZL1 concession
25 years
8 years till 2017 and
6 years extension till
2023
Operating license is
subject to renewal
10 years
8 years
8 years till 2017 and
7 years extension till
2024
15 years
8
16
31
3
5
39
11
216
100
7
54
46
222
13
18
10.8
22.4
48
5.6
11.2
56.2
9.3
Until End 2021:
99
Full line: 128
998
108
462
247
1,060
409
36
30
MTRX, Sweden
100%
Open Access
Operation
Initial service:
March 2015
Full schedule:
August 2015
December 2016
100% O&M Concession
100% O&M Concession
December 2021
60% O&M Concession
November 2009
Mixed PPP (Operations,
Trains & Systems)
Mixed PPP (Operations,
Trains & Systems)
May 2019
Target in 2024 10 years after service
commencement
Shenzhen Metro Line 13
Hangzhou Metro
Line 1 (“HZL1”)
HZL1 Xiasha Extension
HZL1 Phase 3
(Airport Extension)
Hangzhou Metro Line 5
(“HZL5”)
Macao
Macao Light Rapid
Transit Taipa Line
Europe
TfL Rail/Elizabeth Line,
United Kingdom
South Western Railway,
United Kingdom
Stockholm Metro,
Sweden
Stockholm commuter
rail, Sweden
Mälartåg, Sweden
Australia
Melbourne‘s
Metropolitan Rail Service
Sydney Metro North
West Line
Sydney Metro City &
Southwest Line
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Notes:
1 BJL14 Phase 2 East Section has 12 stations, 11 opened (one is currently bypassed). BJL14 Phase 3 Middle Section has 11 stations, ten opened (one is currently bypassed).
BJL16 Phase 2 has seven stations, five opened (two are currently bypassed).
SZL4 Phase 1 assets are owned by the Shenzhen Municipal Government and MTR Corporation (Shenzhen) Limited took over the operation of Phase 1 in July 2010.
2
3 HZL5 West Extension is out of PPP scope.
4
South Western Railway was transitioned into Emergency Recovery Measures Agreement in September 2020.
Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis Environmental
Protection
Community
Investment
HK$15.4 million
Donated and Sponsored to
Charitable and Other
Organisations
64
Volunteering Projects
Organised
MTR’s success has been built on the clear vision, mission
and values that steer our corporate behaviour and guide
us toward achieving business results. We also recognise
that corporate responsibility is crucial to maintaining our
position as a responsible business that contributes to and
benefits society.
As an organisation whose purpose is to “keep cities moving”,
MTR provides rail and property services that are integral
parts of people’s lives. Therefore, our corporate responsibility
strategy and efforts, underpinned by our sustainable
financial model, focus on ensuring safe, responsible
operations in all aspects of our business and contributing
positively to the development of communities.
As outlined in our Corporate Strategy, the Company is
placing greater emphasis than ever on its Environmental,
Social and Governance (“ESG”) behaviour and practices.
Moving forward, our aim is to foster an even stronger
sense of corporate responsibility as we address our
74
CORPORATE RESPONSIBILITYMTR Corporation communities’ ever-changing societal and environmental
needs and work together toward a better future.
We have published a Sustainability Report every year for
the past two decades to keep stakeholders up to date on
our ESG performance. It fulfils the disclosure requirements
of both the Hong Kong Stock Exchange ESG Reporting
Guide and the Global Reporting Initiative Standards: Core
option. We also produce a separate sustainability website,
which in addition to the Sustainability Report itself
provides details of our approach to sustainability and
serves as a focal point of the Company.
The Sustainability Report will contain an Independent
Assurance Report prepared by an external auditor,
who performed limited assurance in relation to certain
sustainability performance data. These include data for
our Hong Kong, Mainland of China and international
businesses covering greenhouse gas (“GHG”) emissions;
staff indicators such as turnover and training days; safety
performance for operations, staff and contractors;
and supply chain management numbers. The
Sustainability Report 2020 has been published on our
sustainability website.
ACTIONS WE HAVE TAKEN UNDER COVID-19
The global pandemic demonstrated the power of corporate
social responsibility and firm action to help communities
dealing with adversity. Our responsibility is to provide safe
and reliable service to the community, allowing cities to
keep moving during the pandemic. Following the outbreak
of COVID-19, face masks were in very short supply in Hong
Kong society. In response, we immediately donated 100,000
surgical masks to communities in need. We also installed
vending machines at our stations to ensure that members
of the public could more easily obtain potentially life-saving
personal protective equipment (“PPE”). We launched our
own mask production lines, provided PPE to staff for their
protection at their workplace, and initiated appropriate
flexible work arrangements.
out the storm. Our Board and Executive Directors donated
HK$4.3 million of their remuneration to local charity groups
providing special pandemic support such as food, study
kits and shelter for around 50,000 beneficiaries. Such
initiatives supported our operational efforts to address
people’s immediate health and safety concerns, namely
by requiring frontline staff to wear face masks in trains
and stations and by thoroughly cleaning and disinfecting
our trains, stations and other facilities on a regular basis.
We also set up vending machines at 20 stations where
the public could conveniently pick up COVID-19 testing
specimen collection packs. Since March 2020, we have
been providing free Airport Express tickets through the
Hospital Authority to healthcare workers who need to
travel between AsiaWorld-Expo Station and the urban
area. Over 16,900 tickets had been provided as at the end
of January 2021. We also donated 200 tablet devices to
underprivileged children to facilitate their
online learning.
COVID-19 had a severely detrimental impact on the local
economy and affected people's livelihoods. In response,
we announced a number of fare rebates to help make
transit more affordable, and we offered rental concessions
for many of our station and mall tenants to help them ride
CORPORATE STRATEGY
Our Corporate Strategy outlines a fresh approach to
our business development by entrenching robust ESG
principles even deeper into our businesses and operations
in order to create value for all our stakeholders. We aim to
lead the way in three priority areas: social inclusion, GHG
emissions, as well as advancement and opportunities for
our staff and the community.
• Social inclusion: We strive to design journeys around
each individual – from a railway system that is accessible
to all, to age-friendly policies catering for senior citizens.
We also foster diversity and inclusion to nurture the
uniqueness of Hong Kong and its community.
75
Annual Report 2020Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis • GHG emissions: The MTR railway network is already a
green, low-carbon mode of transport, but we aim to
strengthen our current actions to reduce emissions
even further. Our long-term strategy is focused on
continuing to develop a low-carbon transport network,
further reducing our carbon emissions, and pursuing
climate adaptation and resilience.
• Advancement and opportunities: We seek to empower
people by striving to address societal needs and
enable new growth opportunities. We will also
champion ideas and innovation to support the growth
of individuals and communities, shaping a flourishing
society and a better future.
VALUE ADDED AND DISTRIBUTION STATEMENT IN 2020
(HK$ MILLION)
Economic Value Generated
Economic Value Distributed
Revenue from Hong Kong
Transport Operations
11,896
Revenue from Hong Kong
Station Commercial
Businesses
3,269
Revenue from Hong Kong
Property Rental and
Management Businesses
5,054
Revenue from
Mainland of China and
International Subsidiaries
21,428
Revenue from
Other Businesses1
1,499
Profit from Hong Kong
Property Development2
6,509
49,655
3,923
Economic Value Retained
from Prior Years and Reinvested
in 2020
Total: 53,578
Staff Costs3
Employees
15,138
Maintenance, Renewal
and Upgrade Expenditure
on Existing Hong Kong
Railway System
Existing Hong Kong
Railway System
10,985
Other Operating Costs4
Suppliers &
Business Partners
16,905
Fixed and Variable
Annual Payments
Interest &
Finance Costs5
KCRC
988
Lenders
701
Taxes6
TAX
Governments
1,258
Ordinary Dividends
HKSAR Government
5,700
Other Shareholders
1,881
Community
Investment7
Community
22
Total: 53,578
Notes:
1
Includes share of profit of associates and joint venture.
2 Before taking into account staff costs of HK$18 million.
3
4
Excludes staff costs related to Hong Kong railway system maintenance of HK$2,430 million, capitalised for asset creation of HK$1,412 million and recoverable of
HK$596 million.
For simplicity reason, other operating costs include interest income, netted with non-controlling interests. Excludes operating costs related to Hong Kong railway system
maintenance of HK$2,424 million.
Excludes interest expenses capitalised for asset creation of HK$360 million.
5
6 Represents current tax and excludes deferred tax for the year.
7
Includes donations, sponsorships and other community engagement contributions, and excludes in-kind donations of HK$20 million given. In addition, there were
(i) ongoing fare concessions and promotions of HK$1,710 million, (ii) MTR's share of additional fare promotions offered to our Hong Kong passengers (including 20%
rebate on every Octopus trip and HK$100 discounts on MTR City Saver and Monthly Pass Extras), and (iii) rental concessions granted to station and mall tenants that have
not been accounted for in this amount.
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77
CORPORATE RESPONSIBILITY COMMUNITY INVESTMENT
“Community Connect” is our platform for initiatives
that help a wide range of sectors in the communities
we serve while also enhancing the liveability of our city.
Programmes and activities are carefully designed to
support and engage communities across all 18 districts
of Hong Kong. In addition, we enhance customers’ travel
experiences and promote art appreciation through our
“Art in MTR” programme.
We also encourage our employees to volunteer for
activities that benefit the community. On a corporate
level, we collaborate with non-profit organisations and
social enterprises to address evolving community needs.
Youth, Children and the Elderly
Our youth and children’s programmes are designed to
support young people’s aspirations for a better future,
promote education, and disseminate important messages
regarding railway safety and courtesy.
For 13 years, our annual summer programme, “‘Train’
for Life’s Journeys”, has been helping secondary school
students develop soft skills and strengthen their
self-confidence through interactive workshops, adventure
camps and on-the-job experience. The event was
deferred and carried out online between 1 and 4 October
2020 in view of continued disruption to school calendars
due to COVID-19. The four-day programme proved
popular with nearly 100 students from Secondary Three
to Secondary Five participating in various workshops and
sharing sessions.
Since COVID-19, we created online shows on top of
physical show for the “MTR x Hong Kong Repertory
Theatre Drama Education Programme 2019-2020” to
promote railway safety and courteous behaviour, which
was delivered to 24,000 students from kindergarten,
primary and special schools. During the year, we also
launched a mobile app and online activities on social
media platforms to promote railway safety to children
during stay-at-home periods.
To promote STEAM (science, technology, engineering,
art and math) education, MTR arranged live broadcasts of
the “Summer Online Railway Workshops” and “Christmas
Delight Online Workshops” in August and December
2020, respectively, to promote green and social inclusion
with railway elements. These workshops attracted
positive feedback from netizens.
In addition to programmes for our young passengers, we
once again organised a variety of activities for the elderly.
Our annual elderly programme, launched in co-operation
with Radio Television Hong Kong (RTHK) Radio 5, featured
a series of posters displayed throughout the MTR network
and broadcasts on RTHK promoting railway safety
messages to seniors. We also regularly conduct outreach
activities in elderly centres, both online and offline, to
provide railway and safety messages.
Community Outreach
Although many of our community programmes had
to be curtailed due to the COVID-19 pandemic, our
staff continued to volunteer their own time to serve
the community through the “More Time Reaching
Community” Scheme. In 2020 despite various
challenges, 64 volunteering projects were organised
involving a total of 6,344 volunteer-hours of service to
help people in need, involving over 900 participating
volunteer headcount.
To help the underprivileged groups ride out the
pandemic, our MTR volunteers supported the Hong
Kong Council of Social Service and other NGOs on a
variety of special volunteering activities. These included
packing and distributing pandemic supplies to the
underprivileged, delivering food items for low-income
families and the elderly, and preparing learning kits for
children with special education needs to learn at home.
During the year, we donated and sponsored HK$15.4
million to charitable and other organisations.
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Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis Arts and Culture
We promote the development of artistic talent, promote
public appreciation of art, and make customers’ journeys
more inspiring and enjoyable through our “Art in MTR”
programme, which offers space for art exhibitions in our
highly travelled stations.
We aim to integrate art pieces into stations and enrich
passengers’ journeys. In 2020, we unveiled seven new
artworks in Kai Tak, Diamond Hill and Hin Keng stations
following the opening of Tuen Ma Line Phase 1 in
addition to Wan Chai Station and Tiu Keng Leng Station.
These art pieces featured local heritage, history and
customs in various art formats such as time tunnel,
colourful glass canopy, platform seats and even a
photographic installation of balletic street scenes in
collaboration with the Hong Kong Ballet. We also hosted
a number of exhibitions, including the “Life and Hope –
Ling Tsz Hin Photo Exhibition” and Ming Yue “Embrace
Positive Energy for Hong Kong” painting exhibition,
across both Sheung Wan and Sai Wan Ho stations, to
inject positive energy into the community. In Central
Station, a memorial exhibition for legendary singer Teresa
Teng was held, which received positive response from
the community.
ENVIRONMENTAL PROTECTION
MTR is a proud provider of electrically powered
mass transit railway services, offering low-carbon,
environmentally sustainable transportation for large
urban populations. In order to make our operations even
more environmentally friendly, we strive to minimise
emissions from our fleet of road vehicles, including buses;
use resources as efficiently as possible; and minimise or
mitigate other environmental impacts of our business as
set out in our Corporate Responsibility Policy.
This past year we introduced our Corporate Strategy,
which lays out a roadmap for our future business
development as well as strong ESG guiding principles.
We published our Climate Change Strategy, which
specifies a three-pronged approach to combat climate
change: 1) providing a low-carbon transport network;
2) further reducing our carbon emissions; and
3) adapting and remaining resilient to climate change.
In line with this approach, we intend to strengthen
our current actions and develop a long-term roadmap
to achieve even more impactful GHG reduction goals.
Therefore, the Company initiated a consultancy study to
develop long-term GHG reduction targets, and it intends
to launch the programme by 2021. The new targets will
be disclosed soon.
We have been reporting our GHG emissions since
2002. We monitor Scope 1, 2 and 3 GHG emissions
in accordance with the Greenhouse Gas Protocol
established by the World Resources Institute and the
World Business Council for Sustainable Development.
In tandem, we follow the guidelines published by the
Environmental Protection Department and Electrical and
Mechanical Services Department in Hong Kong as well as
other international guidelines.
To help conserve our planet’s natural resources, we
continued to reduce electricity consumption across all
our businesses. We were active in continuing to replace
our air conditioning systems with more energy-efficient
chillers in our Hong Kong network. We also supported
the development of renewable energy in Hong Kong
by installing a 93.24 kW solar energy system at our
headquarters. Actions like these will help Hong Kong
become carbon-neutral in the future.
In 2020, we issued a new, US$1.2 billion 10-year Green
Bond under our new Sustainable Finance Framework
to fund projects that conserve energy and protect the
environment while enhancing and expanding low-carbon
railway services. It was the largest single-tranche green
bond for corporates in Asia Pacific. Our Sustainable Finance
Framework covers additional eligible investments that
support the United Nations Sustainable Development
Goals. Details of our sustainable investments are provided
in our annual Green Finance Report, which will be
published on our sustainability website.
As a builder of new railways and property developments,
we are also conscientious of meeting our environmental
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CORPORATE RESPONSIBILITY responsibilities when undertaking new projects. In Hong
Kong, an Environmental Impact Assessment must be
conducted and appropriate mitigation measures have to
be put in place before the start of all designated projects.
We are also guided by Environmental Management
Systems that are independently audited and certified to
be ISO 14001 compliant.
SAFETY FIRST
The safety of our customers, employees and
business partners is always our number one priority.
We ensure a safe and healthy environment through
cultivating a safety-first culture and promoting
continuous improvement.
Our Corporate Strategic Safety Plan, which is reviewed
and updated every four years, helps us focus our safety
efforts across all our business areas to maintain safety
performance excellence in support of our growth and
global expansion. We have applied a Corporate Safety
Management Model with a framework for overseeing
our safety management and governance across our
businesses. For details on how we enhance customer
safety, please refer to the “Hong Kong Transport
Operations” section (page 38) of this Annual Report.
We take a rigorous approach with regard to the safety
of our staff, contractors and customers. To promote our
safety-first culture, we hold a Corporate Safety Month each
year alongside on-going initiatives to address specific
safety focuses. Another initiative is pursuing our long-term
ambition to achieve a “Zero Harm” operating and working
environment by prioritising efforts in safety, health and
well-being and building a strong preventive culture.
We also invest heavily in maintaining our assets, and
we assess operational safety impacts throughout the
lifecycles of our projects.
GOVERNANCE AND POLICIES
All our corporate responsibility initiatives are aligned with
our business objectives and corporate values and are
supported by our corporate governance framework.
Our management approach to corporate responsibility
comprises a number of policies, including our Corporate
Responsibility Policy, Green Procurement Policy, Climate
Change Strategy, and Modern Slavery and Human
Trafficking Statement. These policies are overseen by
the Board’s Corporate Responsibility Committee, which
provides strategic guidance and reviews our corporate
responsibility practices and performance. Please also refer
to the Corporate Responsibility Committee section of the
“Corporate Governance Report” (page 103) of this Annual
Report for its principal responsibilities. Our Corporate
Responsibility Steering Committee supports our
corporate responsibility efforts by providing direction on
responsible business practices and fostering collaboration
across all divisions.
RESPONSIBLE PROCUREMENT
All our suppliers and contractors are required to comply
with our Supplier Code of Practice, which sets out a
compulsory behavioural framework covering ethical
standards, human and labour rights, and supply chain
management. We also have a Green Procurement
Policy that promotes high standards of environmental
protection, both internally and among our suppliers
and contractors. To comply with the UK Modern Slavery
Act, we have updated our Modern Slavery and Human
Trafficking Statement to elucidate our commitment to
preventing any incidence of modern slavery or human
trafficking within our supply chains and business.
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Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis Staff
Motivation and
Engagement
Listening
and
Responding
to Staff
3.4%
Voluntary Staff
Turnover Rate in Hong Kong
4.8
Average Training Days
per Employee in Hong Kong
50,000+
Staff Worldwide
Our staff are our most valuable assets, and we are
committed to inspiring, engaging and developing them.
As at 31 December 2020, the Company together with its
subsidiaries employed 17,288 people in Hong Kong
and 16,921 people outside of Hong Kong. Our associates
also employed an additional 17,121 people in Hong Kong
and worldwide.
RECRUITMENT, TALENT DEVELOPMENT AND RETENTION
During the year, we continued to implement various
initiatives to enhance talent acquisition, employee
engagement, motivation and talent development. These
efforts are reflected in our stable workforce, with the
voluntary staff turnover rate in Hong Kong staying low at
3.4% during the year.
ensure business sustainability. Starting from early
January 2020, we adopted a prudent recruitment
approach to meet our operational needs while containing
costs. We have implemented cost control measures with
less impact on staff but meaningful financial outcome for
the Company.
The worldwide impact of COVID-19 posed unprecedented
challenges to the Company’s business performance.
Despite reduced patronage and revenue, we made
considerable efforts to protect the jobs of our staff and
To fulfil our long-term manpower and succession needs,
and to offer career opportunities to the youth of
Hong Kong, we continued our graduate recruitment
during the pandemic by stepping up our use of online
80
HUMAN RESOURCESMTR Corporation platforms. During the year, we conducted more than
20 virtual recruitment talks at vocational institutes and
organised over 350 virtual interviews. These efforts
brought 30 high-calibre graduates into the Company’s
various graduate development programmes as well
as 67 apprentices and Technician Associates into
apprenticeship programmes.
In support of our youth development and engagement
initiatives, we offered 74 internship placements to students
in Bachelor Degree and Associate Degree courses in Hong
Kong in 2020. We also successfully leveraged campus
recruitment campaigns in different cities in the Mainland
of China to recruit around 500 staff for the opening of the
Shenzhen Metro Line 4 North Extension.
To attract, retain and motivate our staff, the Company
provides competitive pay and benefits, short- and
long-term incentive schemes, and a broad range of
career development opportunities under its total reward
framework. We also conduct regular reviews to maintain
market competitiveness of our pay and benefits for staff.
The Company has in place a robust performance
management system. We also recognise and reward our staff
through our performance-based pay review mechanism as
well as various staff motivational schemes and awards.
STAFF MOTIVATION AND ENGAGEMENT
To enhance the on-boarding experience and introduce
staff development and recreational facilities to our new
joiners, we have produced a series of virtual tours of
various workplaces and staff facilities and posted them on
the New Joiner Portal. Since May 2020, we have provided
free Metro Recreation Club membership for our new
joiners as a welcome gift and have also launched a New
Joiners Pulse Survey to solicit feedback on candidates’
experience and identify areas where we can improve.
During the year, the Company rolled out a number of
initiatives to support our staff to combat the COVID-19
pandemic. In February 2020, we issued Care Packs
containing face masks and hand sanitiser to our staff
at a time when personal protective equipment (“PPE”)
supplies were tight. Later in the year, we strengthened
our staff’s PPE and launched in-house face mask
production lines at Siu Ho Wan Depot to fulfil the daily
operational needs of our local staff. In August, more
than 2,000 Operations staff participated in the voluntary
COVID-19 test provided by the Transport Department,
and all tests results were negative. We also enhanced
our medical and counselling service provisions for
assignees working overseas in the Mainland of China and
international hubs to protect their health and safety.
Other initiatives to support our staff’s total well-being
included the introduction of one-day paid “Well-being
Leave” and the Flexible Benefits Online Platform for our
staff to redeem health products and services, and the
formalisation of the staggered working hours policy for
office staff. In addition to various wellness programmes
like health talks and newsletters to help our staff relieve
pressure during the difficult times of 2020, we launched
an “Emotional Health One-stop Learning Portal” to
provide resources such as a stress self-assessment
online questionnaire, topical learning videos and
scenario-based e-courses.
Staff Distribution by Geographic Location
(Percentage)
Staff Productivity – Earnings Per Employee*
(HK$ million)
5.0
4.9
14.4
13.6
12.8
12.7
51.8
50.5
17.0
17.3
2020
2019
Hong Kong
Australia
Sweden
0.96
0.97
1.04
0.81
0.28
2016
2017
2018
2019
2020
Mainland of China
* Hong Kong businesses excluding property development
Others
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Annual Report 2020Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis LISTENING AND RESPONDING TO STAFF
During the year, the Company placed great emphasis on
launching the new Corporate Strategy, “Transforming
the Future”. This included communicating to our staff
via channels such as the Chairman’s Letter and CEO
Blog, a dedicated website set up by the Transformation
Management Office, quarterly pulse surveys starting in
December 2020 to solicit staff feedback, and meetings
and forums at the corporate and departmental levels.
To maintain timely business communications during
the pandemic, the Company held a number of virtual
forums and meetings for executive managers and
managers around the world. Our Staff Consultation
Mechanism continued to serve as a key communication
channel between management and staff. In response
to the COVID-19 outbreak, we also organised regular
communication sessions with staff representatives and
unions to proactively engage our staff and formulate
measures in a timely manner to address their concerns.
To foster mutual appreciation between colleagues and
encourage collaboration, we held promotional events
for the “We Praise We Support” programme and the
“Living the MTR Values Award Scheme” in May 2020. To
enhance staff awareness of the Code of Conduct and
facilitate its application in the workplace, we held a series
of promotional programmes in July 2020 with interactive
games featuring real-life situations.
Through our multinational internal communication
platform MTRconnects, our staff can share corporate
updates and stories with colleagues in different business
hubs across the globe. In 2020, this platform achieved
a total view rate of approximately 178,000. Meanwhile,
our staff suggestion scheme continued to be a successful
channel for soliciting innovative ideas from our staff.
groups. Such initiatives have helped our staff maintain
business as usual and sustained the Company’s growth.
In 2020, we introduced a structured corporate
development ladder to all newly recruited and
promoted staff. It aims to provide colleagues with
learning opportunities that strengthen their skills and
readiness to lead; facilitate their understanding of MTR’s
vision, values and DNA; enhance self-understanding; and
widen their networks within the Company to facilitate
collaboration. We also launched an online newsletter,
“L&DD Learning Digest”, to provide colleagues with
practical tips in learning and development, promote
learning culture and encourage self-learning.
A CULTURE OF CONTINUOUS LEARNING
The Company provides a wide range of learning and
development programmes for new recruits and in-service
staff. In 2020, we offered 6,787 training courses in Hong
Kong, averaging 4.8 training days per staff member. In
addition, we have launched a new learning management
platform with enhanced self-learning resources which
encourages staff utilisation anytime anywhere.
In the wake of the pandemic, the Company accelerated
its use of learning technology via virtual classrooms,
webinars and e-learning to deliver training and
development programmes for staff. We took a blended
approach to many of our training and development
programmes as well as our apprenticeship scheme by
combining virtual learning and hands-on practice in small
DRIVING WORK IMPROVEMENT
MTR’s Work Improvement Team (“WIT”) programme plays
a prominent role in driving innovation and creating a
spirit of betterment. During the year, we held over 75 WIT
classes and organised 680 projects.
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HUMAN RESOURCES FUTURE PLANS
The Hong Kong Rail Transit Innovation Research Institute
has set up a rail transit control simulation system at
Hung Hom Centre, which is being put into service in the
first half of 2021. In addition to being used for research
purposes, it can also provide simulated facilities for
various types of Academy courses. Members of this
Research Institute are Beijing Jiaotong University, The
Hong Kong Polytechnic University, MTR, MTR Academy
and Traffic Control Technology Co. Ltd.
In addition, MTRA will begin offering accredited
Security Training courses in 2021. These are self-funded
certification courses for security jobs. After MTRA
becomes recognised by the Employee Retraining Board as
an appointed training body, these courses can be offered
to a wider audience, including those seeking to re-enter
the employment market.
The MTR Academy (“MTRA” or “the Academy”) is
recognised as a valuable centre of management and
engineering expertise for the railway industry. Now
offered in the Mainland of China and Belt and Road
countries as well as Hong Kong, MTRA’s high-quality
programmes – in particular its Executive Certificate
Programmes – are designed to mould the next generation
of railway professionals.
In September 2020, MTRA expanded its suite of
accredited programmes to include full-time programmes.
The Advanced Diploma in Transport & Operations
Management and Diploma in Transport Studies are
accredited at Qualification Framework Level 4 and 3,
respectively. The Academy also successfully obtained
programme recognition from HK PolyU SPEED and
City U SCOPE, creating more articulation pathways
for graduates.
Overall, 120 students were admitted in Academic Year
2020, nearly half of whom are full-time students. A total
of 48 graduates were presented with Advanced Diploma
and Diploma awards this year.
The Applied Learning (Railway Studies) course of the New
High School (DSE) saw its first batch of graduates in 2020
with 30 students completing the course.
As part of its Corporate Programme for Belt & Road
Countries and Global Clients, MTRA held two Executive
Certificate courses in June and July 2020, attracting
43 senior managers from railway companies as well as
relevant government officials from the United States,
Singapore, Hong Kong and the Mainland of China. This
also marked the first time these programmes were
streamed live online. Programmes have a modular design
to increase flexibility for individual students in choosing
learning items.
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MTR ACADEMY Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis Revenue
Performance
HK$42,541million
Total Revenue
Decreased by 21.9%
HK$4,381million
Underlying Business Profit
Decreased by 58.5%
Strong Credit Ratings
AA+
by Standard & Poor’s
(long-term)
84
84
84
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85
FINANCIAL REVIEWMTR Corporation A review of the Group’s results and operations is featured in the preceding sections. This section discusses and analyses
such results in a greater level of detail.
PROFIT AND LOSS
HK$ million
Total Revenue
Recurrent Business (Loss)/Profit
EBIT
Hong Kong Transport Operations
Hong Kong Station Commercial Businesses
Hong Kong Property Rental and Management Businesses
Mainland of China and International Railway,
Property Rental and Management Subsidiaries
Other Businesses, Project Study and Business
Development Expenses
Share of Profit of Associates and Joint Venture
Total Recurrent EBIT
Interest and Finance Charges
Income Tax
Non-controlling Interests
Recurrent Business (Loss)/Profit
Property Development Profit (Post-tax)
Underlying Business Profit
Investment Property Revaluation (Loss)/Gain
Net (Loss)/Profit Attributable to Shareholders of
the Company
Total Recurrent EBIT Margin# (in %)
Total Recurrent EBIT Margin#
Year ended 31 December
Inc./(Dec.)
2020
2019
HK$ million
42,541
54,504
(11,963)
(5,408)
2,502
4,185
261
(1,949)
605
196
(1,097)
(237)
12
(1,126)
5,507
4,381
(9,190)
(4,809)
(1.0%)
(591)
5,122
4,264
1,089
(2,353)
288
7,819
(939)
(1,740)
(160)
4,980
5,580
10,560
1,372
11,932
13.8%
%
(21.9)
(815.1)
(51.2)
(1.9)
(4,817)
(2,620)
(79)
(828)
(76.0)
404
317
(7,623)
158
(1,503)
(172)
(6,106)
(73)
(6,179)
(10,562)
17.2
110.1
(97.5)
16.8
(86.4)
n/m
n/m
(1.3)
(58.5)
n/m
(16,741)
n/m
(14.8%) pts.
(22.5%) pts.
(excluding Mainland of China and International Subsidiaries) (in %)
(3.2%)
19.3%
#
n/m
: Excluding share of profit of associates and joint venture
: not meaningful
The outbreak of COVID-19 has become a pandemic and
adversely impacted all the cities where we operate. The
anti-pandemic measures put in place by governmental
authorities in Hong Kong and globally, such as social
distancing and travel restrictions, have had a widespread
negative impact on the social, economic and travel
activities, hence seriously affected the Group’s businesses.
Total Revenue
The Group’s total revenue in 2020 decreased by 21.9% to
HK$42,541 million when compared to 2019, mainly due
to the adverse impact of the COVID-19 pandemic and
the deterioration of the general economic environment
on the fare revenue of our Hong Kong transport
operations (“HKTO”) and the decrease in station retail
rental revenue of our Hong Kong station commercial
businesses (“HKSC”).
Total Revenue
(HK$ billion)
55.4
45.2
1.4
2.3
13.6
4.7
5.5
17.7
7.0
2.1
17.2
4.9
6.0
18.2
53.9
0.1
2.0
54.5
1.6
20.9
21.1
0.9
42.5
5.0
6.4
5.1
6.8
19.5
19.9
21.4
5.0
3.3
11.9
2016
2017
2018
2019
2020
Total Revenue
Mainland of China
Property Development
Other Businesses
Mainland of China and
International Railway,
Property Rental and
Management Subsidiaries
Hong Kong Property
Rental and Management
Businesses
Hong Kong Station
Commercial Businesses
Hong Kong Transport
Operations
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Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis Recurrent Business Loss
Total Recurrent EBIT*
(HK$ billion)
11.6
0.5
0.5
3.9
4.4
2.6
(0.3)
12.2
11.4
0.5
0.8
4.1
4.7
0.7
0.7
4.2
5.0
1.7
(0.4)
2.0
(0.4)
7.8
0.3
1.1
4.3
5.1
(0.6)
(2.4)
0.6
0.3
4.2
0.2
2.5
(5.4)
(2.0)
2016
2017
2018
2019
2020
Total Recurrent EBIT
Share of Profit of Associates
and Joint Venture
Mainland of China and
International Railway,
Property Rental and
Management Subsidiaries
Hong Kong Property Rental
and Management Businesses
Hong Kong Station
Commercial Businesses
Hong Kong Transport
Operations
Other Businesses,
Project Study and Business
Development Expenses
*
Including share of profit of associates and joint venture, project study
and business development expenses
Total Recurrent EBIT
The Group’s total recurrent EBIT (including share of profit
of associates and joint venture as well as project study
and business development expenses) in 2020 decreased
by 97.5% to HK$196 million when compared to 2019. The
decrease was mainly due to the adverse impact of the
on-going COVID-19 pandemic and deterioration of the
general economic environment.
EBIT of HKTO decreased drastically by HK$4,817 million,
resulting in a loss of HK$5,408 million, mainly due to
the COVID-19 pandemic. The anti-pandemic measures
implemented by the Hong Kong Government (such
as the closure of several boundary crossings between
the Hong Kong SAR and the Mainland of China, social
distancing, work-from-home arrangements, school
closures, entry immigration controls and quarantine
measures) have resulted in a significant reduction in
domestic and international travel demand, resulting in
an unprecedented drop of 31.5% in our patronage. Amid
this difficult time, the Company implemented several
relief measures for our passengers, including a substantial
increase of the “3.3% Rebate for Every Octopus Trip” to
“20% Rebate for Every Octopus Trip” from 1 July 2020 to
31 March 2021, and a price reduction for MTR City Saver
and Monthly Pass Extra from 1 July 2020 to 30 June 2021.
The Company has also deployed proactive measures to
save costs and improve operating efficiency.
EBIT of HKSC decreased by 51.2% to HK$2,502 million.
The rental revenue from our station retail business
significantly decreased primarily due to the profit and
loss impact of rental concessions granted to (i) duty
free shop concession holders and other station kiosks
as a result of the closure of several boundary crossings
between the Hong Kong SAR and the Mainland of China,
and (ii) retail tenants of station kiosks in domestic lines
whose businesses have been adversely affected by
reduced footfall in stations. Our advertising revenue also
recorded a major decrease mainly due to lower
advertising spending since retail and tourism market
sentiments continued to be dampened under the
COVID-19 pandemic.
EBIT of Hong Kong property rental and management
businesses slightly decreased by 1.9% to HK$4,185 million.
The decrease was mainly due to the profit and loss impact
of rental concessions granted to retail mall tenants
whose businesses have been adversely affected by the
sluggish retail sentiment and social distancing measures
implemented from time to time. These rental concessions
granted are amortised to the profit and loss account over
the remaining lease term of respective tenants, of which
a certain portion had been charged to the profit and loss
account in 2020 accordingly. The adverse impact brought
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FINANCIAL REVIEW by the COVID-19 pandemic on our property rental
business was mostly offset by (i) the profit contribution
from the Group’s newly acquired remaining economic
interests in Telford Plaza II and PopCorn 2 since March
2020, (ii) the profit contribution from The LOHAS, our
new shopping mall which opened by phases in August
and November 2020, and (iii) substantially lower rental
concessions granted in 2020 in respect of the public order
events (“POE”).
EBIT of our Mainland of China and international railway,
property rental and management subsidiaries business
have also been adversely affected, but to varying
degrees, resulting in a decrease in EBIT of 76.0% to
HK$261 million. Our Melbourne Train in Australia
experienced a small loss during 2020 as a result of
the COVID-19 pandemic. Our Shenzhen Metro Line
4 in Mainland of China recorded a slight loss in 2020
due to the COVID-19 pandemic. Stockholm commuter
rail service (Stockholms pendeltåg) continued its
turnaround trajectory with its loss substantially reduced
resulting from stringent cost controls.
EBIT of other businesses, project study and business
development expenses reported a loss of HK$1,949
million in 2020 mainly due to a provision of HK$1.4 billion
made in respect of the additional project management
cost of the SCL project in Hong Kong and the loss incurred
by Ngong Ping 360 due to service suspension as a result
of the COVID-19 pandemic. On the other hand, the loss of
HK$2,353 million in 2019 was mainly due to a provision of
HK$2 billion made in respect of the Hung Hom Incidents
of the SCL project.
Share of profit of associates and joint venture was HK$605
million in 2020, compared to a profit of HK$288 million
in 2019 which included a provision of onerous contract
of HK$436 million made in respect of the South Western
Railway franchise agreement in the United Kingdom. If
the provision in 2019 had been excluded, the share of
profit in 2020 would have decreased by HK$119 million
or 16.4% when compared with 2019, mainly due to the
adverse financial impact of the COVID-19 pandemic on
our associate in Hangzhou as well as Octopus Holdings
Limited in Hong Kong, partly offset by the incremental
profit contribution from our joint venture of Hangzhou
Metro Line 5 with full line operation since April 2020.
Total Recurrent EBIT Margin
Total recurrent EBIT margin maintained a stable trend
from 2016 to 2018 and declined in 2019 and 2020.
In 2019, the decline of total recurrent EBIT margin was
mainly due to the adverse impact of the POE in Hong
Kong, as well as the provisions made for the Hung Hom
incidents of the SCL project in Hong Kong of HK$2 billion
and the South Western Railway franchise agreement in
the United Kingdom of HK$436 million.
In 2020, the further decline of total recurrent EBIT margin
was due to the adverse impact of the COVID-19 pandemic
in Hong Kong and globally, as well as the provision made
for the SCL project management cost of HK$1.4 billion.
Total Recurrent EBIT Margin^
(Percentage)
40
30
20
10
–
-10
1.2
(1.0)
(3.2)
2016
2017
2018
2019
2020
Total Recurrent EBIT Margin
(Excluding Mainland of China and International Subsidiaries)
Total Recurrent EBIT Margin
Total Recurrent EBIT Margin
(Mainland of China and International Subsidiaries)
^ Excluding share of profit of associates and joint venture
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Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis Interest and Finance Charges
Interest and finance charges for recurrent businesses
were HK$1,097 million, representing an increase of 16.8%
from 2019, mainly due to higher net interest expense
as a result of higher average net borrowing. A detailed
review of the Group’s financing activities is featured in the
ensuing section.
Income Tax
Income tax for recurrent businesses was HK$237 million,
representing a decrease of 86.4% from 2019 due to
declined financial performance.
Property Development Profit (Post-tax)
The Group’s property development profit was HK$5,507
million, representing a decrease of 1.3% from 2019. The
property development profit for 2020 was mainly derived
from the share of surplus proceeds of LP6 (LOHAS Park
Package 6) and sales of inventory units.
Underlying Business Profit
The Group’s underlying business profit was HK$4,381
million, representing a decrease of 58.5% from 2019 as
a result of the on-going COVID-19 pandemic and the
deterioration of the general economic environment.
Investment Property Revaluation Loss
Revaluation of the Group’s investment properties in Hong
Kong and Mainland of China, which was performed by
independent professional valuation firms, resulted in a
revaluation loss of HK$9,190 million for the year ended
31 December 2020, compared to a revaluation gain of
HK$1,372 million for 2019.
The revaluation loss, being a non-cash item, of a 10%
drop in the value of our investment properties in
Hong Kong was mainly attributable to the decrease in
reversionary rents due to the COVID-19 pandemic and the
deterioration of the general economic environment.
Net Loss Attributable to Shareholders of
the Company
Taking into account the Group’s recurrent businesses,
property development businesses and investment
property revaluation, the Group reported a net loss
attributable to shareholders of the Company of HK$4,809
million for the year ended 31 December 2020, compared
to a net profit of HK$11,932 million for 2019.
Underlying Business Profit
(HK$ billion)
9.4
0.5
10.5
1.9
8.9
8.6
11.3
10.6
2.3
9.0
5.6
4.4
5.0
5.5
(1.1)
2016
2017
2018
2019
2020
Underlying Business Profit
Property Development Profit
Recurrent Business Profit/(Loss)
88
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Annual Report 2020
89
FINANCIAL REVIEW STATEMENT OF FINANCIAL POSITION
HK$ million
Fixed Assets
Property Development in Progress
Interests in Associates and Joint Venture
Debtors and Other Receivables
Cash, Bank Balances and Deposits
Other Assets
Total Assets
Total Loans and Other Obligations
Creditors and Other Liabilities
Obligations Under Service Concession
Deferred Tax Liabilities
Total Liabilities
Net Assets
Represented by:
Total Equity Attributable to Shareholders of the Company
Non-controlling Interests
Total Equity
Fixed Assets
Fixed assets decreased by 2.1% to HK$220,932 million,
mainly due to the revaluation loss of our investment
property portfolio of HK$9,190 million, partly offset by
(i) the acquisition of the remaining economic interests in
Telford Plaza II and PopCorn 2 for a total consideration of
HK$3,000 million and (ii) renewal and upgrade works for
our existing Hong Kong railway network. With the new
asset additions in our Hong Kong railway network, total
depreciation and amortisation increased by 2.4%.
Fixed Assets Growth
(HK$ billion)
201.9
28.3
209.8
215.9
29.8
30.4
225.6
220.9
31.3
32.9
103.6
102.9
102.8
102.6
102.0
70.0
77.1
82.7
91.7
86.0
2016
2017
2018
2019
2020
Total Fixed Assets
Service Concession Assets
Other Property,
Plant and Equipment
Investment Properties
As at
31 December
2020
As at
31 December
2019
Inc./(Dec.)
HK$ million
220,932
11,942
11,592
13,313
20,906
11,889
290,574
(50,340)
(38,833)
(10,295)
(14,125)
225,605
12,022
10,359
11,169
21,186
8,873
289,214
(39,456)
(38,881)
(10,350)
(13,729)
(113,593)
(102,416)
176,981
186,798
176,788
193
176,981
186,606
192
186,798
(4,673)
(80)
1,233
2,144
(280)
3,016
1,360
10,884
(48)
(55)
396
11,177
(9,817)
(9,818)
1
(9,817)
%
(2.1)
(0.7)
11.9
19.2
(1.3)
34.0
0.5
27.6
(0.1)
(0.5)
2.9
10.9
(5.3)
(5.3)
0.5
(5.3)
Interests in Associates and Joint Venture
Interests in associates and joint venture increased mainly due
to share of profit from associates and joint venture, the equity
injections into Sydney Metro City & Southwest (SMCSW) and
Beijing MTR, as well as exchange gain on carrying amount
mainly due to the appreciation of the Renminbi.
Debtors and Other Receivables
Debtors and other receivables increased mainly due to
(i) the portion of rental concession granted yet to be
amortised to the profit and loss account, and (ii) the
increase in property development receivables upon the
recognition of the property development profit of LP6.
Other Assets
Other assets increased mainly due to the increase in amount
due from related parties and properties held for sales.
Total Loans and Other Obligations
Total loans and other obligations increased mainly due to
the issuance of a 10-year US$1.2 billion green bond, and
net drawdown of loans and issuance of other bonds/notes.
Total Equity
Total equity decreased by HK$9,817 million, mainly due
to the investment property revaluation loss and the
payments of the 2019 final ordinary dividend and 2020
interim ordinary dividend during the year partly offset by
the underlying business profit recorded for the year.
88
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Annual Report 2020
89
Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis
CASH FLOW
HK$ million
Net Cash Generated From Operating Activities and Other Receipts
Receipts from Property Developments
Net Cash Receipts
Capital Expenditure
Payments in respect of Property Developments
Fixed Annual Payment
Variable Annual Payment
Investments in Associates and Joint Venture and Loan to Associates
Total Cash Outflow
Net Cash (Outflow)/Inflow before Financing
Net Drawdown/(Repayment) of Loans and Capital Market Instruments, and Lease
Rental Payments
Net Interest Payment
10,145
(484)
Net Drawdown/(Repayment) of Debts, Lease Rental and Net Interest Payments
Dividends Paid to Shareholders of the Company
Other Financing Activities
(Decrease)/Increase in Cash
Cash, Bank Balances and Deposits as at 1 January
(Decrease)/Increase in Cash
Effect of Exchange Rate Changes
Cash, Bank Balances and Deposits as at 31 December
Cash Flow for the Year Ended 31 December 2020
(HK$ billion)
2020
835
8,583
9,418
(9,249)
(412)
(750)
(2,583)
(140)
(13,134)
(3,716)
9,661
(6,808)
(9)
(872)
21,186
(872)
592
20,906
(1,678)
(684)
2019
17,164
9,175
26,339
(6,072)
(3,259)
(750)
(2,305)
(1,539)
(13,925)
12,414
(2,362)
(6,649)
(117)
3,286
18,022
3,286
(122)
21,186
12
8
4
–
(4)
(8)
8.2
(9.2)
9.2
0.5
(6.8)
0.8
(3.3)
(3.7)
(0.9)
(0.1)
Net Cash
Generated from
Operating
Activities and
Other Receipts
Net Receipts
from
Property
Developments
Capital
Expenditure
Fixed and
Variable
Annual
Payments
Investments in
Associates and
Joint Venture
and Loan to
Associates
Net Cash
Outflow before
Financing
Issuance of
a 10-year
US$1.2 billion
Green Bond
Decrease
in Cash
Net Drawdown
of Loans and
Issuance of
Other Bonds/
Notes, Lease
Rental and
Net Interest
Payments
Dividends
Paid to
Shareholders
of the Company
and Other
Financing Activities
Net Cash Generated from Operating
Activities and Other Receipts
Compared to net cash generated from operating activities
and other receipts of HK$17,164 million for 2019, the net
cash generated from operating activities and other receipts
decreased by HK$16,329 million to HK$835 million, mainly
due to the decrease in operating profit resulting from the
adverse impact of the COVID-19 pandemic.
Net Receipts from Property
Development
The net receipts from property development of
HK$8,171 million mainly comprised cash receipts from
LOHAS Park Packages.
90
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Annual Report 2020
91
FINANCIAL REVIEW Capital Expenditure
In 2020, capital expenditure mainly comprised cash
outflow of HK$5,226 million for Hong Kong transport
and related operations, HK$3,539 million for Hong Kong
investment property projects mainly for the acquisition
of the remaining economic interests in Telford Plaza II
and PopCorn 2 shopping malls in 2020, HK$250 million
for Hong Kong railway extension projects, and HK$234
million for Mainland of China and overseas subsidiaries.
Capital Expenditure
(HK$ billion)
9.2
0.2
3.5
0.3
5.2
6.1
0.2
0.3
0.3
5.3
2019
2020
Total Capital Expenditure
Mainland of China and
International Subsidiaries
Hong Kong
Investment Property Projects
Hong Kong Railway
Extension Projects
Purchase of Assets for
Hong Kong Transport and
Related Operations
FINANCING ACTIVITIES
Preferred Financing Model
and Debt Prof ile
The Preferred Financing Model exemplifies the Company's
approach to debt management and helps ensure a prudent
and well-balanced debt portfolio.
(Preferred Financing Model) vs. Actual debt profile
as at 31 December 2020
Source
(Percentage)
Interest rate base
(Percentage)
Maturity
(Percentage)
Currency
(Percentage)
(45-80) 76.7
(20-55) 23.3
Capital market instruments
Bank facilities
(45-75) 69.8
(25-55) 30.2
Fixed rate
Floating rate
(0-30) 16.0
(20-55) 23.4
(35-65) 60.6
Within 2 years
2 to 5 years
Beyond 5 years
Average fixed rate debt maturity: 13.1 years
Hedged
Financing Horizon
(Month)
(85-100) 100.0
(12-24) 13
Investments in Associates and Joint
Venture and Loan to Associates
The investments in associates and joint venture and loans
to associates mainly related to the equity injection into
Sydney Metro City & Southwest (SMCSW) in 2020.
Net Drawdown of Loans and Issuance
of Other Bonds/Notes, Lease Rental and
Net Interest Payments
In 2020, net drawdown of loans and issuance of other
bonds/notes, lease rental and net interest payment
comprised of (i) proceeds mainly from capital market
instruments of HK$26,872 million (including the issuance
of a 10-year US$1.2 billion green bond), (ii) mainly
repayment of loans of HK$16,495 million and (iii) net
interest payment of HK$484 million.
A detailed review of the Group’s financing activities is
featured in the ensuing section.
Dividends Paid to Shareholders of
the Company
The Group paid dividends of HK$6,808 million (2019:
HK$6,649 million) in cash, being the 2019 final dividend
of HK$0.98 per share and the 2020 interim dividend of
HK$0.25 per share.
The year 2020 was a challenging one for companies in
many industries all around the world. The COVID-19
pandemic forced cities to lock down to varying degrees,
causing businesses to close and leading to substantial job
losses. Vaccines have been developed in record time, and
several countries have launched vaccination programmes
since late 2020. However, it may take some time for the
vaccination programmes to achieve their desired results.
The US Federal Reserve cut the target range of the federal
funds rate to 0 – 0.25% p.a. in March 2020 and undertook
a broad array of activities to limit the economic fallout
of the pandemic, including resuming the purchase of
massive amounts of securities. It is expected that the
federal funds rate will remain at 0 – 0.25% p.a. for some
time until the average annual inflation rate reaches 2%.
90
MTR Corporation
Annual Report 2020
91
Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis Interest rates fell in 2020. The three-month USD Libor
fell to 0.24% p.a. at year-end from 1.91% p.a. at the start
of the year. Likewise, the three-month HKD Hibor fell to
0.35% p.a. from 2.43% p.a. The 10-year US Treasury yield
fell to 0.91% p.a. at year-end from 1.92% p.a. at the start
of the year, while the 10-year HKD swap rate fell to
0.86% p.a. from 2.04% p.a.
The Company started the year raising financing with
shorter tenors with a view to lowering overall borrowing
cost. With the business environment deteriorating
sharply by the middle of March, the Company switched
its focus to financing facilities with longer maturities and
higher drawdown flexibility. The Company established
a Sustainable Finance Framework in August to cover
green, social and sustainable financing, reflecting its
commitment to the environment and sustainable
community development.
In total, the Company arranged around HK$29.2 billion of
financing in 2020, including a 10-year US$1.2 billion green
bond, HK$5.3 billion equivalent of MTNs with maturities
ranging from six months to 35 years, and HK$14.6 billion
in loans with maturities ranging from one to five years.
The US$1.2 billion green bond issued in August 2020
under the Sustainable Finance Framework is the largest
single-tranche green bond for corporates in Asia-Pacific.
The issuance won Hong Kong's “Best Green Bond”
Award and, being at the forefront of raising sustainable
financing, the Company was also named the “Best Issuer
for Sustainable Finance” in Hong Kong in The Asset Triple
A Country Awards 2020.
Maturity Profile
The graph below shows the maturity profiles of the
Company‘s interest-bearing borrowings at year-end
from 2016 to 2020. This demonstrates the spread of
the maturities of the Company’s borrowings and well-
managed refinancing risk. The increase in the proportion
of borrowings beyond five years in 2020 was mainly due
to the issuance of the 10-year USD bond.
Maturity Prof ile
(Percentage)
100
80
60
40
20
–
36.5
63.5
52.0
51.3
51.8
44.3
46.4
26.2
22.0
60.6
23.4
16.0
3.7
2.3
2016
2017
2018
2019
2020
Beyond 5 years
2 to 5 years
Within 2 years
*
The Company monitors the refinancing risk (i.e. the debt
maturity profile) based on available committed facilities.
Gearing Ratio and Net Interest Coverage
The Group’s gearing ratio, as measured by net debt-to-
equity ratio, increased by 7.1% points to 22.5% at the
end of 2020 compared to 15.4% at the end of 2019. This
was mainly due to an increase in net debts. The Group’s
interest cover decreased from 15.3 times to 8.2 times.
The graph below shows the level of leverage and our
ability to meet interest payment obligations over the
past five years. Despite the fact that net debt-to-equity
ratio and interest cover in 2020 stayed at the highest and
lowest points for the past five years respectively, they
remain at healthy levels.
Net Debt-to-Equity Ratio and
Interest Coverage
(Percentage)
80
60
40
20
–
15.0
15.3
12.7
13.6
8.2
22.5%
20.2%
20.6%
18.1%
15.4%
2016
2017
2018
2019
2020
Interest cover (right axis)
Net debt-to-equity ratio (left axis)
(Times)
20
15
10
5
–
92
MTR Corporation
Annual Report 2020
93
FINANCIAL REVIEW Cost of Borrowing
The Group’s consolidated gross debt position increased
to HK$50,340 million at the end of 2020 compared to
HK$39,456 million at the end of 2019. The weighted
average cost of the Group’s interest-bearing borrowings
decreased to 2.3% p.a. in 2020 from 2.8% p.a. in 2019.
The diagramme below shows the Group’s gross debt level
and weighted average cost of interest-bearing borrowings.
Capital expenditure on Hong Kong railway projects
(including maintenance costs for the Hong Kong railway
system) will continue to constitute a significant portion of
capital expenditure in 2021–2023.
The Group believes that, based on its cash balance and
available committed banking facilities totalling more
than HK$30 billion as at 31 December 2020, as well as its
ready access to both the loan and debt capital markets, it
will have sufficient financing capacity to fund its capital
expenditure and investment programme.
Group’s Gross Debt Level and
Weighted Average Cost of
Interest Bearing Borrowings
(HK$ billion)
(Percentage)
2.9%
2.5%
2.8%
2.8%
2.3%
50.3
39.9
42.0
40.2
39.5
90
60
30
–
3
2
1
–
2016
2017
2018
2019
2020
Weighted average cost of interest bearing borrowings (right axis)
Group’s gross debt level (left axis)
Capital Expenditure and Investment
The Group’s capital expenditure and investment mainly
consists of three parts: Hong Kong railway projects
(including maintenance), Hong Kong property investment
and development, and Mainland of China and overseas
investments. The total spending from 2021 to 2023 is
estimated at HK$47.1 billion.
Capital Expenditure and Investment
(2021–2023)
(Percentage)
7
7
#
58
Estimated expenditure
2021: HK$15.4 billion
2022: HK$17.5 billion
2023: HK$14.2 billion
21
7
Hong Kong
Maintenance CAPEX
Hong Kong
New Railway Projects
Advance Railway
Works related to SCL#
Mainland of China &
Overseas Investment
Hong Kong Property
Advanced Railway Works involve modifications to or upgrades
or expansion of assets for which MTR is responsible under the
existing service concession agreement with KCRC. This will
predominantly be covered by the reduction in future
maintenance CAPEX during the construction period of SCL
Project which MTR would have otherwise incurred.
Credit Ratings (as of 11 March 2021)
Credit ratings
Short-term
ratings*
Long-term
ratings*
Standard & Poor’s
A–1+/A–1+
AA+/AA+
Moody’s
Rating & Investment
Information, Inc. (R&I)
–/P-1
a–1+
Aa3/Aa3
AA+
* Ratings for Hong Kong dollar/foreign currency denominated debts respectively
92
MTR Corporation
Annual Report 2020
93
Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis Financial
Consolidated Profit and Loss (in HK$ million)
Total revenue
– Hong Kong transport operations
– Hong Kong station commercial businesses
– Hong Kong property rental and
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
11,896
3,269
19,938
6,799
19,490
6,458
18,201
5,975
17,655
5,544
16,916
5,380
16,223
4,963
15,166
4,588
14,523
3,680
13,509
3,422
management businesses
5,054
5,137
5,055
4,900
4,741
4,533
4,190
3,778
3,401
3,083
– Mainland of China and international railway,
property rental and management subsidiaries
– Other businesses
– Recurrent businesses
– Mainland of China property development
– Total
Total EBITDA
– Recurrent businesses
– Hong Kong property development
– Mainland of China property development
– Total
Depreciation and amortisation
Variable annual payment
Total EBIT
– Recurrent business EBIT
EBIT
Hong Kong transport operations
Hong Kong station commercial businesses
Hong Kong property rental and
management businesses
Mainland of China and international
railway, property rental and
management subsidiaries
Other businesses
Project studies and business
development expenses
Share of profit of associates and
joint venture
Sub-total
– Property development business EBIT
– Total
(Loss)/profit attributable to shareholders of
the Company arising from:
– Recurrent businesses
– Property development businesses
– Underlying businesses
– Investment property revaluation (loss)/gain
– Total
(Loss)/profit for the year
(Loss)/earnings per share (in HK$)
Ordinary dividend per share (in HK$)
Ordinary dividend proposed and declared
Share price at 31 December (in HK$)
Market capitalisation at 31 December
21,428
894
42,541
–
42,541
5,194
6,491
(13)
11,672
(5,365)
(238)
21,085
1,545
54,504
–
54,504
15,351
5,707
(25)
21,033
(5,237)
(2,583)
20,877
1,990
53,870
60
53,930
18,843
2,574
25
21,442
(4,985)
(2,305)
17,194
2,174
48,444
6,996
55,440
17,677
1,097
2,314
21,088
(4,855)
(1,933)
13,562
2,339
43,841
1,348
45,189
16,947
311
366
17,624
(4,127)
(1,787)
12,582
2,290
41,701
–
41,701
16,260
2,891
(140)
19,011
(3,849)
(1,649)
12,627
2,153
40,156
–
40,156
15,478
4,216
(55)
19,639
(3,485)
(1,472)
13,246
1,929
38,707
–
38,707
14,399
1,396
–
15,795
(3,372)
(1,247)
12,786
1,349
35,739
–
35,739
12,895
3,238
–
16,133
(3,208)
(883)
12,411
998
33,423
–
33,423
12,124
4,934
–
17,058
(3,206)
(647)
(5,408)
2,502
(591)
5,122
1,985
5,025
1,656
4,722
2,572
4,362
2,493
4,230
2,710
3,927
2,716
3,668
2,881
2,969
2,701
2,799
4,185
4,264
4,225
4,082
3,912
3,650
3,427
3,092
2,764
2,490
261
(1,670)
1,089
(2,077)
722
(81)
814
(53)
490
58
640
53
782
129
704
86
520
(7)
381
23
(279)
(276)
(323)
(332)
(361)
(304)
(454)
(486)
(323)
(123)
605
196
6,478
6,674
(1,126)
5,507
4,381
(9,190)
(4,809)
(4,821)
(0.78)
1.23
7,602
43.35
288
7,819
5,682
13,501
658
12,211
2,599
14,810
494
11,383
3,411
14,794
537
11,570
675
12,245
361
11,123
2,751
13,874
121
10,642
4,161
14,803
158
9,938
1,396
11,334
456
9,260
3,238
12,498
297
8,568
4,934
13,502
4,980
5,580
10,560
1,372
11,932
12,092
1.94
1.23
7,574
46.05
9,020
2,243
11,263
4,745
16,008
16,156
2.64
1.20
7,359
41.20
8,580
1,935
10,515
6,314
16,829
16,885
2.83
1.12
6,728
45.80
8,916
530
9,446
808
10,254
10,348
1.74
1.07
6,317
37.70
8,565
2,329
10,894
2,100
12,994
13,138
2.22
1.06
6,207
38.40
8,024
3,547
11,571
4,035
15,606
15,797
2.69
1.05
6,116
31.80
7,437
1,163
8,600
4,425
13,025
13,208
2.25
0.92
5,335
29.35
6,914
2,704
9,618
3,757
13,375
13,514
2.31
0.79
4,575
30.50
6,243
4,225
10,468
5,088
15,556
15,688
2.69
0.76
4,396
25.15
(HK$ million)
267,943
283,574
252,947
275,156
222,629
224,956
185,284
170,187
176,692
145,490
Consolidated Financial Position (in HK$ million)
Total assets
Loans, other obligations and bank overdrafts
Obligations under service concession
Total equity attributable to shareholders
of the Company
Financial Ratios
EBITDA margin◊ (in %)
EBITDA margin◊
(excluding Mainland of China and
international subsidiaries) (in %)
EBIT marginφ (in %)
EBIT marginφ
(excluding Mainland of China and
international subsidiaries) (in %)
Net debt-to-equity ratio (in %)
Return on average equity attributable to
shareholders of the Company arising from
underlying businesses (in %)
Interest cover (times)
290,574
50,340
10,295
289,214
39,456
10,350
274,687
40,205
10,409
263,768
42,043
10,470
257,340
39,939
10,507
241,103
20,811
10,564
227,152
20,507
10,614
215,823
24,511
10,658
206,687
23,577
10,690
197,684
23,168
10,724
176,788
186,606
180,447
166,304
149,461
170,055
163,325
152,557
142,904
131,907
12.2
28.1
35.0
36.1
38.3
38.7
38.4
37.2
36.1
36.3
22.1
(1.0)
(3.2)
22.5
2.4
8.2
42.0
13.8
19.3
15.4
5.8
15.3
54.5
21.5
32.8
18.1
6.5
13.6
53.5
23.8
32.2
20.6
6.7
15.0
54.0
25.2
34.8
20.2
5.9
12.7
53.3
25.5
34.8
11.3
6.5
14.4
53.1
26.1
35.4
7.6
7.3
15.2
53.4
25.3
35.6
11.8
5.8
11.5
53.6
24.6
36.1
11.0
7.0
13.0
55.6
24.7
37.5
11.6
8.2
14.5
Excluding profit on Hong Kong property development.
◊
φ Excluding profit on Hong Kong property development and share of profit of associates and joint venture.
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TEN-YEAR STATISTICS
Hong Kong Transport Operations
Revenue car-km operated (thousand)
Domestic and Cross-boundary services
Airport Express
Light Rail
Total number of passengers (thousand)
Domestic Service
Cross-boundary Service
High Speed Rail
Airport Express
Light Rail
Bus
Intercity
Average number of passengers (thousand)
Domestic Service – weekday average
Cross-boundary Service – daily average
High Speed Rail – daily average
Airport Express – daily average
Light Rail – weekday average
Bus – weekday average
Intercity – daily average
Average passenger km travelled
Domestic and Cross-boundary services
Airport Express
Light Rail
Bus
Average car occupancy (number of passengers)
Domestic and Cross-boundary services
Airport Express
Light Rail
Proportion of franchised public transport
boardings (%)
HK$ per car-km operated
(Hong Kong Transport Operations*)
Total revenue
Operating costs
Operating profit
HK$ per passenger carried
(Hong Kong Transport Operations*)
Total revenue
Operating costs
Operating profit
Safety Performance
Domestic Service, Cross-boundary Service and
Airport Express
Number of reportable events^
Reportable events per million
passengers carried^
Number of staff and contractors’
staff accidents∆
Light Rail
Number of reportable events^
Reportable events per million
passengers carried^
Number of staff and contractors’
staff accidents∆
Employees
Hong Kong
Corporate management and
support departments
Station commercial businesses
Operations
Projects
Property and other businesses
Mainland of China and international businesses
Outside of Hong Kong
Offshore employees
Total
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
268,492
12,631
10,385
301,552
22,971
10,592
308,742
23,190
11,139
301,541
23,202
11,145
287,828
23,276
11,152
284,487
23,242
11,034
273,771
23,232
10,728
269,141
23,216
10,554
260,890
23,134
10,453
254,407
19,603
10,166
1,145,035
7,647
1,033
3,070
111,865
42,077
103
1,568,196
104,183
16,923
15,764
155,885
51,484
1,880
1,669,973
117,448
5,302@
17,710
179,411
51,025
3,630
1,637,898
112,549
–
16,621
178,502
50,744
3,698
1,586,522
113,274
–
16,133
178,709
50,413
3,739
1,577,457
114,241
–
15,725
176,149
50,537
4,080
1,547,757
113,049
–
14,881
174,199
50,404
4,348
1,474,659
111,362
–
13,665
171,652
47,738
4,324
1,431,040
109,707
–
12,695
167,210
45,962
4,028
1,366,587
103,881
–
11,799
161,289
43,956
3,787
3,406
21
36##
8
317
121
4##
10.5
25.8
2.8
4.1
45
6
30
4,658
285
46
43
448
151
5
10.6
28.2
2.7
4.5
59
19
40
4,862
322
53#
49
506
147
10
10.8
28.3
2.7
4.5
62
22
44
4,772
308
–
46
503
146
10
10.8
28.5
2.7
4.5
63
20
44
4,608
309
–
44
500
144
10
10.9
28.4
2.7
4.5
64
20
44
4,577
313
–
43
493
145
11
11.0
28.4
2.7
4.5
65
19
44
4,490
310
–
41
487
144
12
11.0
28.6
2.7
4.5
67
18
45
4,297
305
–
37
482
137
12
11.0
29.0
2.8
4.5
65
17
45
4,148
300
–
35
466
131
11
10.9
29.0
2.8
4.5
65
16
45
3,968
285
–
32
451
126
10
10.9
29.4
2.8
4.5
63
18
45
45.3
47.4
49.0&
49.1
48.4
48.5
48.1
46.9
46.4
45.4
35.6
33.3
2.3
8.11
7.60
0.51
51.7
33.0
18.7
9.40
5.99
3.41
53.4
28.2
25.2
9.26
4.89
4.37
52.5
28.5
24.0
9.10
4.93
4.17
53.0
27.7
25.3
9.06
4.73
4.33
51.3
27.2
24.1
8.73
4.63
4.10
51.0
26.8
24.2
8.52
4.47
4.05
48.4
24.9
23.5
8.31
4.27
4.04
47.6
24.2
23.4
8.20
4.18
4.02
45.9
23.1
22.8
7.99
4.02
3.97
656
1,164
1,056
1,148
1,134
1,246
1,327
1,408
1,761
1,769
0.57
0.69
0.58
0.65
0.66
51
80
81
163
50
87
46
104
61
191
0.72
1.05
0.48
0.58
1.07
10
8
2
5
8
0.73
64
157
0.89
6
0.79
57
122
0.70
4
0.88
67
118
0.69
4
1.13
58
151
0.90
2
1.19
44
164
1.02
7
1,852
224
11,983
1,426
1,548
255
16,921
34,209
1,899
234
12,211
1,531
1,549
318
16,521
34,263
1,932
204
11,948
1,711
1,500
331
1,882
191
11,591
2,144
1,440
276
14,270
31,896
10,781
28,305
1,837
192
11,349
2,615
1,416
230
9,866
27,505
1,792
182
10,891
2,684
1,384
194
8,157
25,284
1,756
170
10,404
2,764
1,350
180
7,530
24,154
1,676
158
10,033
2,804
1,305
182
7,078
23,236
1,600
148
9,460
2,495
1,273
224
1,486
144
9,244
2,109
1,282
179
6,955
22,155
6,851
21,295
@ High Speed Rail service commenced on 23 September 2018.
# Average of 23 September 2018 to 31 December 2018.
## Average of 1 to 29 January 2020.
& Market share for 2018 was rebased to reflect the impact on the opening of Hong Kong – Zhuhai – Macao Bridge.
* Does not include the High Speed Rail service.
^ Reportable events are occurrences affecting railway premises, plant and equipment, or directly affecting persons (with or without injuries), that are reportable to the
Secretary for Transport and Housing and Director of Electrical and Mechanical Services, Government of the Hong Kong SAR under the Mass Transit Railway Regulations,
ranging from suicides/attempted suicides, trespassing onto tracks, to accidents on escalators, lifts and moving paths.
∆ Any accident connected with the operation of the railway or with the maintenance thereof, which is notifiable to Railway Branch, Electrical & Mechanical Services
Department according to Mass Transit Railway Regulations, as a result of which an employee of the Corporation or of a contractor with the Corporation is suffering 'fatal
injury', 'serious injury', or unable to fully carry out his / her normal duties for a period exceeding 3 days immediately after the accident.
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Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis
MTR has been participating in international capital
markets for over four decades. During this time, we
have built a reputation as a leader in investor relations
practices in Asia, respected for our high standards of
corporate governance and disclosure. We believe that
communicating our strategies, business development
and future outlook in a clear, transparent and proactive
manner enhances shareholder value, and we engage
regularly with both institutional and retail investors.
COMMUNICATING WITH
INVESTORS
Our continuous engagement with the investment
community has made MTR one of the most widely
covered listed companies in Hong Kong. We are followed
by many international and local brokers, research
analysts, and a wide range of institutional investors.
MTR management makes every effort to ensure that
investors have a thorough understanding of the
Company’s business. In 2020, we held 271 meetings with
institutional investors and analysts globally. Many of
these meetings were held with the aid of technologies in
observance of social distancing requirements.
The Company’s Annual General Meeting (“AGM”) is
one of its principal channels of communication with
shareholders. Further details on the 2020 AGM are set
SHARE PRICE PERFORMANCE
out in the “Annual General Meeting” section of the
“Corporate Governance Report” on page 121 of this
Annual Report.
ACCESS TO INFORMATION
Our corporate website provides investors with equal
and timely access to Company information. The Investor
Information section provides details on our financial
performance in readily accessible form. Financial reports,
patronage figures, and other Company news and stock
exchange filings are all accessible on the website.
In addition to the shareholder services offered by
Computershare, our dedicated hotline answered
approximately 26,000 enquiries from individual
shareholders in 2020.
INDEX LISTING
AND RECOGNITIONS
The Company’s shares have been listed on the Stock
Exchange of Hong Kong since 2000 and have been
included as one of the Hang Seng Index’s constituent
stocks since 2001.
Our Annual Report achieves considerable recognition
each year for presenting a clear picture of the Company’s
performance and strategy. These are listed in the “Key
Awards” section on page 7 of this Annual Report.
120
110
100
90
80
2020 January
December
60
55
50
45
40
35
Baseline
MTR share price
(HK$)(right scale)
MTR share price
relative to HSI
(Relative Index)
(left scale)
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INVESTOR RELATIONS FINANCIAL CALENDAR 2021
Announcement of 2020 annual results
Annual General Meeting
Last day to register for 2020 final dividend
Book closure period
2020 final dividend payment date
Announcement of 2021 interim results
2021 interim dividend payment date
Financial year end
11 March
26 May
31 May
1 June to 4 June
20 July
August
October
31 December
DIVIDEND INFORMATION
Dividend per Share
2019 Total Ordinary Dividend
2020 Interim Ordinary Dividend
2020 Final Ordinary Dividend
Dividend history can be found in the
“Ten-Year Statistics” section on page 94
of this Annual Report and our
corporate website.
(in HK$)
1.23
0.25
0.98
Dividend Policy
MTR is committed to a progressive ordinary dividend policy. The
aim of this policy is to steadily increase or at least maintain the Hong
Kong dollar value of ordinary dividends per share annually. The
prospective dividend growth, however, remains dependent upon
the financial performance and future funding needs of the Company.
SHAREHOLDINGS AS AT
31 DECEMBER 2020
Ordinary Shares
Shares outstanding
Hong Kong SAR Government Shareholding
Free float
Market Capitalisation
(as at 31 December 2020)
SHARE INFORMATION
6,180,927,873 shares
4,634,173,932 shares
(74.98%)
1,546,753,941 shares
(25.02%)
HK$ 267,943 million
Stock Codes
Ordinary Shares
The Stock Exchange of Hong Kong
Reuters
Bloomberg
66
0066.HK
66 HK Equity
CONTACTS
Shareholder Services
Any matters relating to your shareholding, such as transfer of shares,
change of name or address, and loss of share certificates should be
addressed in writing to the Registrar:
Computershare Hong Kong Investor Services Limited
17M Floor, Hopewell Centre,
183 Queen’s Road East, Wan Chai, Hong Kong
Telephone: (852) 2862 8628
(852) 2529 6087
Facsimile:
Shareholder Enquiries
Shareholders are, at any time, welcome to raise questions and request
information (to the extent it is publicly available) from the Board and
management by writing to the Company Secretary, MTR Corporation
Limited, MTR Headquarters Building, Telford Plaza, Kowloon Bay,
Kowloon, Hong Kong. Any such letter from the Shareholders should
be marked “Shareholders’ Communications” on the envelope.
Our enquiry hotline is operational during normal office hours:
Telephone: (852) 2881 8888
Investor Relations
For enquiries from institutional investors and securities analysts,
please contact:
Investor Relations Department, MTR Corporation Limited
MTR Headquarters Building, Telford Plaza, Kowloon Bay,
Kowloon, Hong Kong
Email: investor@mtr.com.hk
Annual Report 2020
Shareholders can obtain copies of our annual report by writing to:
Computershare Hong Kong Investor Services Limited
17M Floor, Hopewell Centre
183 Queen’s Road East, Wan Chai, Hong Kong
If you are not a shareholder, please write to:
Corporate Affairs Division, MTR Corporation Limited
MTR Headquarters Building, Telford Plaza, Kowloon Bay,
Kowloon, Hong Kong
Our annual/interim reports and
accounts are also available online at
our corporate website.
Principal Place of Business and
Registered Office
MTR Corporation Limited, incorporated and domiciled in Hong Kong.
MTR Headquarters Building, Telford Plaza, Kowloon Bay, Kowloon,
Hong Kong
Telephone: (852) 2993 2111
(852) 2798 8822
Facsimile:
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Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis
Strong governance is important for the Company in
achieving its vision and fulfilling its purpose, and doing
so in a way that delivers long term sustainable growth
for its stakeholders. This Report describes the corporate
governance best practices that the Company has adopted
and highlights how the Company has applied the
principles of the Code Provisions set out in the Corporate
Governance Code (the “CG Code”) contained in Appendix
14 to the Listing Rules.
CORPORATE GOVERNANCE
PRACTICES
Corporate governance is the collective responsibility of
the Members of the Board and the Board firmly believes
that good corporate governance is fundamental in
ensuring the proper management of the Company in
the interests of all of its stakeholders. The Board actively
seeks opportunities for continuous improvement in the
area of corporate governance and takes prompt action
in responding to identified improvement opportunities.
According to the “2020 HKIoD Corporate Governance
Scorecard” announced by The Hong Kong Institute of
Directors in May 2020, the Company is one of the top 10
listed companies with the highest Corporate Governance
Index scores.
Following the unearthing of various issues arising from
the construction of the Hung Hom Station Extension of
the Shatin to Central Link project in 2018, improvements
have been identified for implementation progressively
starting from 2019. In March 2020, the Commission of
Inquiry (“COI”) Final Report was issued and a progress
summary is as follows:
• Several working groups have been established to
oversee the implementation of the recommendations
from the COI Interim and Final Reports (“COI Reports”);
• A cross-referencing check has been carried out
between the recommendations from the COI Reports,
the recommendations from Government appointed
Expert Advisor Team and the recommendations
coming out of the Company’s own work to enhance
its project management system to identify common
themes;
• The Building Excellence Quality Working Group is
responsible for coordinating and reporting on the
implementation of these recommendations to the
Building Excellence Board monthly and to the Capital
Works Committee quarterly; and
•
In relation to the recommendations from the COI
Reports, an external consultant has been appointed to
audit the implementation of the recommendations.
Acting through the Risk Committee and the Audit
Committee, the Board has mandated a review of the
internal control and risk management systems of the
Company for Hong Kong operations. Following the first
phase review conducted in 2019, an external consultant,
Arthur D Little, was appointed to conduct a deep-dive
assessment of the Company’s existing Three Lines of
Defence framework, with a view to identifying any
gaps in the framework and making recommendations
for improvement. The results of this assessment were
presented to and endorsed by the Risk Committee
and the Audit Committee in late 2020. The next phase
of the project will be to strengthen the Company’s
Second Line of Defence (in particular) in certain key risk
areas through the establishment of new technical and
engineering Centres of Excellence and the adoption of a
new assurance framework. A further update on progress
will be presented to the Risk Committee and the Audit
Committee in mid-2021.
In addition, a Board evaluation exercise, assisted by
an external consultant, has been kicked off in the
third quarter of 2020, with the aim of ensuring that
the Company’s Board is fit for purpose to support the
implementation of the new corporate strategy. The
exercise will review the composition of the Board, the
structure, composition and authority of the Board
Committees, the information provided to the Board and
the Board decision-making process and effectiveness.
Recognising the increasing importance of Environmental,
Social and Governance (“ESG”) issues as criteria for
assessing a company’s long term sustainability and
performance, the Company publishes a separate
Sustainability Report to keep its stakeholders abreast of
the Company’s initiatives and performance in the ESG
arena on an annual basis.
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CORPORATE GOVERNANCE REPORT The Company has followed the ESG Reporting Guide (“ESG Guide”) as set out in Appendix 27 to the Listing Rules and has
made reference to various international reporting standards and guidelines in the preparation of its Sustainability Report.
The Company substantially meets the new requirements under the ESG Guide, which will be implemented for financial
years commencing on or after 1 July 2020. The Company’s Sustainability Report is available on the websites of both the
Company (www.mtr.com.hk) and the Stock Exchange.
CORPORATE GOVERNANCE CODE COMPLIANCE
During the year ended 31 December 2020, the Company has complied with the CG Code. In the following corporate
governance areas, the Company’s practices have exceeded the relevant CG Code/Listing Rules requirements:
Corporate Governance Areas
Details of Exceedance
Number of Independent
Non-executive Directors (“INED”)
The number of INEDs represents more than two-thirds of the Board, which exceeds
the independence requirement under the Listing Rules
Number of Members of
Audit Committee
The Audit Committee consists of five INEDs, which exceeds the independence
requirement under the Listing Rules
Number of Regular Board Meetings
The Company holds seven Regular Board Meetings each year; in addition, there are
Special Board Meetings when required, which exceeds the requirement under the CG
Code
Notice of Regular Board Meetings
The dates of Regular Board Meetings for the following year are usually fixed in the
third quarter of the prior year
Model Code Confirmation
• Confirmation of Compliance with the Model Code is obtained from each Director
and Model Code Manager half-yearly
• An electronic platform has been established to give a one-stop access to the
relevant key processes to support compliance with the Model Code
Evaluation of the Effectiveness
of Risk Management System
The Company reviews not only the effectiveness of the risk management system
of the Company and its subsidiaries, but also that of its key associates operating in
Mainland of China and overseas
The Company continues to monitor developments in the arena of corporate governance externally to ensure the
suitability and robustness of its corporate governance framework in light of the evolving business and regulatory
environment and to meet the expectations of stakeholders.
THE BOARD OF DIRECTORS
Overall Management
The overall management of the Company’s business is vested in the Board. Pursuant to the Articles of Association and
the “Protocol: Matters Reserved for the Board” (the “Protocol”) adopted by the Board, the Board has delegated the
day-to-day management of the Company’s business to the Executive Committee, and focuses its attention on matters
affecting the Company’s overall strategic policies, corporate governance, finances and shareholders. These include
financial statements, dividend policy, significant changes in accounting policy, annual operating budget, certain material
contracts, strategies for future growth, major financing arrangements and major investments, corporate governance
functions, risk management and internal control systems, treasury policies and fare structures.
The commencement of the new signalling system and gradual introduction of nine-car trains on the East Rail Line as part
of the Shatin to Central Link project, originally scheduled in mid-September 2020, was deferred to February 2021 due to
a signalling system issue which could have had a potential service impact. Overseen by the Board, which received and
reviewed the investigation reports in detail, investigations have been undertaken and improvement actions have been
identified for implementation.
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Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis Below is a diagram of the governance structure of the Company:
Board Committees
Note 1
Board of Directors
Audit
Committee
Capital Works
Committee
Corporate
Responsibility
Committee
Nominations
Committee
Remuneration
Committee
Risk
Committee
Executive
Committee Note 2
Business/Functional
Management Committees Note 3
Operations of
the Group
Notes:
1 All Board Committees are provided with sufficient resources to discharge their duties and can seek independent professional advice (as and when required) at the
Company’s expense, to perform their responsibilities. The Terms of Reference of each Committee are available on the websites of both the Company (www.mtr.com.hk)
and the Stock Exchange.
2 The Executive Committee is delegated by the Board to handle the day-to-day management of the Company’s business pursuant to the Articles of Association and the
Protocol; and is chaired by the Chief Executive Officer (“CEO”) and made up of nine other Members of the Executive Directorate.
3 Key Business/Functional Management Committees are listed out on pages 115 to 116 of this Annual Report.
Composition of the Board
A list of Members of the Board and the Executive Directorate and their roles and functions is available on the respective
websites of the Company (www.mtr.com.hk) and the Stock Exchange. Biographical details of each of the Members of the
Board and the Executive Directorate are set out on pages 138 to 150 of this Annual Report.
As at the date of this Report, the Board has 20 Members, made up of 14 INEDs, five Non-executive Directors (“NEDs”) and
one Executive Director. The number of INEDs currently comprises more than two-thirds of the Company’s Board, which is
well above the Listing Rules requirement of having one-third of a board made up of INEDs. This structure ensures that the
Board comprises a majority of independent members, which is conducive to maintaining an independent and objective
decision-making process.
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CORPORATE GOVERNANCE REPORT Government, through The Financial Secretary Incorporated, held approximately 74.98% of the issued shares of the
Company as at 31 December 2020, and is a substantial shareholder of the Company. The Chief Executive of the HKSAR, in
the exercise of her right under Section 8 of the MTR Ordinance, has appointed three persons as “additional directors” of
the Company (the “Additional Directors”). They are:
• The office of the Secretary for Transport and Housing (currently held by Mr Frank Chan Fan);
• The office of the Permanent Secretary for Development (Works) (currently held by Mr Lam Sai-hung); and
• The office of the Commissioner for Transport (currently held by Miss Rosanna Law Shuk-pui).
The Additional Directors are all NEDs and are treated for all purposes (other than the requirement to retire by rotation
according to the Articles of Association) in the same way as other Directors and are, therefore, subject to the usual
common law duties of directors, including the requirement to act in the best interests of the Company.
Mr Christopher Hui Ching-yu, the Secretary for Financial Services and the Treasury, is another NED of the Company.
Coming from diverse business and professional backgrounds, Members of the Board actively bring their valuable
experience to the Board for promoting the best interests of the Company and its shareholders. In addition, the INEDs also
contribute to ensuring that the interests of all shareholders of the Company are taken into account by the Board and that
relevant issues are subject to objective and dispassionate consideration by the Board.
Chairman and CEO
The posts of the Chairman and the CEO are distinct and separate. Their respective roles and responsibilities are set
out below:
Chairman (Non-executive Director)
CEO (Executive Director)
Chairing and managing the operations of
Head of the Executive Directorate;
Chairman of the Executive Committee;
Responsible to the Board for managing the
business of the Company; and
Responsible for performing a bridging
function between the Board and the
Executive Directorate.
the Board;
Monitoring the performance of the CEO and
other Members of the Executive Directorate;
Making sure that adequate information about
the Company’s business is provided to the
Board on a timely basis;
Providing leadership for the Board and
promoting a culture of openness;
Ensuring views on all issues are exchanged by
all Members of the Board in a timely manner;
Encouraging Members of the Board to make a
full and effective contribution to the discussion
at Board Meetings; and
Establishing good corporate governance
practices and procedures.
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Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis Board Committees
The Board discharges some of its responsibilities through
delegation, with appropriate oversight, to respective
Board Committees. The Board Committee memberships
and the attendance record of each Member of the Board
in 2020 are set out on pages 112 to 113 of this Annual
Report.
The duties and work performed by the Audit Committee,
Risk Committee, Capital Works Committee and
Remuneration Committee during the year are set out in
their respective reports in this Annual Report:
• “Audit Committee Report” on pages 123 to 125;
• “Risk Committee Report” on pages 130 to 131;
• “Capital Works Committee Report” on page 132; and
• “Remuneration Committee Report” on pages 133
to 137.
Nominations Committee
Principal responsibilities:
• Reviewing the structure, size and composition
(including the perspectives, skills, diversity, knowledge
and experience) of the Board at least annually and
making recommendations on any proposed changes
to the Board to complement the Company’s corporate
strategy;
•
Identifying individuals suitably qualified to become
Members of the Board and putting forward
nominations or recommendations to the Board for
proposed appointments to the Board;
• Assessing the independence of INEDs and, in case a
proposed director will be holding his/her seventh (or
more) listed company directorship, his/her ability to
devote sufficient time to Board matters;
• Making recommendations to the Board on the
appointment or re-appointment of Members of the
Board and succession planning for Members of the
Board; and
• Nominating and recommending to the Board,
candidates for filling the positions of CEO, Finance
Director and Chief Operating Officer (provided that the
Chief Operating Officer position exists).
During the year, the Committee conducted reviews and
made corresponding recommendations to the Board in
respect of the following matters:
• Annual review of the structure, size and composition
of the Board and a list of desirable skills/experience/
perspectives for the Board;
• Annual assessment of the independence of each INED;
• Re-election of Members of the Board retiring at the
Company’s annual general meeting held on 20 May
2020 (“2020 AGM”); and
• Proposed nomination of new Members of the Board
(i) for appointment by the Board during 2020; and
(ii) for election by shareholders at the 2020 AGM.
As at the date of this Report, the Nominations
Committee has conducted an annual review of (i) the
current structure, size and composition of the Board
and considered the same is appropriate in light of
the Company’s strategy and business needs; (ii) the
Company’s Board Diversity Policy (the “BD Policy”); and
(iii) the list of skillsets of the Board. The Nominations
Committee has also assessed that the Board (1) currently
possesses a balanced mix of skills, experience and
diversity of perspectives, (2) is in line with the Company’s
BD Policy, and (3) is appropriate for continuing to support
the execution of the Company’s business strategies in
an efficient and effective manner. In addition, subject
to the election of a new INED by shareholders at the
forthcoming Annual General Meeting, he will hold
cross-directorships with two NEDs of the Company and
the Airport Authority. The Nominations Committee has
assessed their cross-directorships and considered that
this should not have an impact on the independence of
such new INED with respect to his directorship with the
Company since all three of them are not directly involved
in the day-to-day operations of the Airport Authority.
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CORPORATE GOVERNANCE REPORT Corporate Responsibility Committee
• Reviewed and recommended the 2019 Sustainability
Principal responsibilities:
Report to the Board for approval;
• Overseeing the Company’s stakeholder engagement
and external communication strategies;
• Considered the Company’s performance on various
local and international sustainability indices; and
• Recommending the Corporate Responsibility Policy to
• Endorsed the commencement of a Carbon
the Board for approval;
Reduction Study.
• Monitoring and overseeing the implementation of
the Company’s Corporate Responsibility Policy and
related initiatives;
•
Identifying emerging corporate responsibility issues
arising from external trends;
Company Secretary
Ms Gillian Elizabeth Meller, being the Legal and
Governance Director and a Member of the Executive
Directorate, reports to the CEO. Her role as the Company
Secretary includes:
• Reviewing the Company’s annual Sustainability Report
• Providing access to advice and services for Members of
and recommending approval by the Board;
the Board;
• Reviewing the Company’s environmental and social
• Ensuring the correct Board procedures are followed;
performance; and
• Providing updates to the Board on matters falling
within the Committee’s remit as required.
Please also refer to the “Corporate Responsibility” section
(pages 74 to 79) of this Annual Report.
Work performed during the year:
• Monitored the advancement of the New Social
Objectives of Social Inclusion, Greenhouse Gas
Emissions and Advancement & Opportunities;
• Monitored the progress of various youth, elderly and
district-level community engagement and investment
programmes;
• Reviewed a series of special measures and partnering
initiatives in response to COVID-19 to help the
community tide over the challenges amidst the
pandemic;
• Reviewed the development and strategic way
forward for the “More Time Reaching Community”
Volunteering Scheme;
• Advising the Board on all corporate governance matters;
• Arranging for Members of the Board, their Alternate
Directors and Members of the Executive Directorate,
upon their appointment, to receive a comprehensive,
formal and tailored induction programme on key areas
of business operations and practices of the Company,
as well as the general and specific duties of directors
under general law (common law and legislation) and
the Listing Rules;
• Recommending Members of the Board, their Alternate
Directors and Members of the Executive Directorate to
attend relevant seminars and courses; and
• Arranging for training on relevant new or amended
legislation or other regulations to be provided at
Board meetings.
In 2020, Ms Meller undertook over 15 hours of
professional training to update her skills and knowledge.
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Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis Appointment, Re-election and Removal
of Members of the Board
A person may be appointed as a Member of the Board at
any time either by:
•
•
•
the shareholders in general meeting in accordance
with the “Appointment Procedure for Members of
the Board of the Company”, which is available on the
website of the Company (www.mtr.com.hk); or
the Board upon the recommendation of the
Nominations Committee of the Company; or
the Chief Executive of the HKSAR in the case of the
Additional Directors.
Members of the Board who are appointed by the Board
during a year must retire at the first annual general
meeting after their appointment and are eligible for
election at that meeting.
Except for the Additional Directors, all other Members
of the Board are required to retire by rotation. At each
annual general meeting of the Company, Members of the
Board who were last elected or re-elected at the annual
general meeting which was held in the third calendar year
prior to the annual general meeting in question, are those
who will retire by rotation.
The Additional Directors may not be removed from office
except by the Chief Executive of the HKSAR and are not
subject to any requirement to retire by rotation.
The Company has a service contract with each of the
NEDs (with the exception of the Additional Directors) and
the INEDs, specifying the terms of his/her continuous
appointment as a NED or an INED and as the chairman
or a member of the relevant Board Committee(s), for a
period not exceeding three years.
Nomination Policy
A Nomination Policy (the “Nomination Policy”),
documenting the procedures and practices that have
been adopted by the Company, is posted on the
Company’s website (www.mtr.com.hk).
The Nomination Policy sets out the process and
procedures for governing the nomination of Members
of the Board applicable to both new appointments and
re-appointments, except for appointments made by the
Chief Executive of the HKSAR pursuant to Section 8 of the
MTR Ordinance and nomination by shareholders of the
Company in accordance with the Articles of Association.
The Board has delegated to the Nominations Committee
the authority to identify and assess potential candidates
for appointment to the Board through different means
and channels, including recommendations from Members
of the Board, use of external search firms, and any other
means or channels that it deems appropriate.
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CORPORATE GOVERNANCE REPORT Nomination Procedures
The following diagram demonstrates the nomination procedures for new appointment and re-election of a Member of
the Board:
Nominations Committee
New Appointment
Request the candidate to provide his/her
biographical information and other information
deemed necessary
Review and take reasonable steps to verify the
information obtained from the candidate and seek
clarification, where required
Invite the candidate to meet with the Nominations
Committee members, at their discretion, to assist
them in their consideration of the proposed
nomination or recommendation
Submit nomination proposal to the Board
for consideration and approval or to make
recommendation to the shareholders for approval
Re-election
Review the profile of the Member of the
Board who has offered himself/herself for
re-appointment to consider his/her suitability
in light of the strategy of the Company as well
as the structure, size and composition of the
Board at that time
Make recommendation for the Board’s
consideration
Board
NEW
New
Appointment
Re-
election
Consider recommendation
from the Nominations
Committee and approve
the appointment during
the year
Consider recommendation from the Nominations Committee and
make recommendation to the shareholders
for election (re-election) of the Member of the Board
Shareholders
Approve the election and/or re-election of new/existing Member
of the Board at the Company’s annual general meeting
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Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis Selection Parameters
In evaluating a proposed candidate, including a Member
of the Board eligible for re-appointment, the Nominations
Committee will consider the following factors (which are
by no means exhaustive):
(i)
the strategy of the Company;
(ii)
the structure, size, composition and needs of the
Board and its respective Board Committees at the
time, taking into account succession planning,
where appropriate;
(iii) the required skills, which should be complementary
to those of the existing Members of the Board;
(iv) the BD Policy of the Company as amended by the
Board from time to time;
(v) any information obtained through third party
references or background checks;
(vi) any other factors that may be used as reference in
assessing the suitability of a proposed candidate,
including but not limited to the candidate’s
reputation for integrity, accomplishments and likely
commitment in terms of time and interest;
(vii) if a proposed candidate will be holding his/her
seventh (or more) listed company directorship,
the candidate’s ability to devote sufficient time to
the Board; and
(viii) the independence of a candidate proposed to be
appointed as an INED, in particular by reference to
the independence requirements under the Listing
Rules.
The Nominations Committee is vested with discretion to
take into account such other factors that it may consider
appropriate.
Board Diversity
The Company has posted its BD Policy on the Company’s
website (www.mtr.com.hk). The BD Policy sets out a
clear objective and provides that the Company should
endeavour to ensure that its Members of the Board have
the appropriate balance of skills, experience and diversity
of perspectives that are required to support the execution
of its business strategy and in order for the Board to be
effective. The Company is conscious of maintaining a
Board made up with INEDs as the majority, together with
an appropriate level of female Members on the Board.
While conscious efforts are being taken by the Company
to fulfil its pledges, all appointments are ultimately made
on a merit basis taking into account available and suitable
candidates.
The Board reviews the BD Policy on a regular basis to
ensure its continued effectiveness.
The BD Policy and the list of desirable skills/experience/
perspectives Members of the Board were taken into
account by the Nominations Committee and the Board in
considering the following new appointments during the
year:
(i) Dr Bunny Chan Chung-bun as an INED; and
(ii) Mr Christopher Hui Ching-yu as a NED.
The Committee and the Board formed the view
that, with their different backgrounds and expertise,
respective extensive experience and active involvement
in community service, including youth development,
social welfare and district council affairs, each of the
new Members of the Board mentioned above would
be a valuable addition to the Board and would further
enrich the spectrum of skills, experience and diversity
of perspectives of the Board, thereby enhancing the
diversity and effectiveness of the Board.
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CORPORATE GOVERNANCE REPORT Gender
Designation
Age Group
Number of Years
as Board Members
(Years)
Male (15)
INED (14)
Female (5)
NED (5)
ED (1)
≤50 (1)
50-54 (2)
55-59 (2)
60-64 (3)
65-69 (8)
≥70 (4)
0-1 (7)
2-3 (6)
4-5 (1)
≥6 (6)
Outside Directorships
(Number of listed
companies)
0 (12)
Statutory Confirmations
For the year ended 31 December 2020, the Company has
received an annual confirmation from each INED about
his/her independence and, where applicable, the interests
of his/her immediate family member(s) (as defined
under the Listing Rules). The Nominations Committee
has reviewed the said confirmations and assessed the
independence of the INEDs, and continues to consider
each of them to be independent.
Each Member of the Board ensures that he/she can give
sufficient time and attention to the affairs of the Company
and contribute to the development of the Company’s
strategy and policies through independent, constructive
and informed comments.
Regarding disclosure of the number and nature of offices
held by Members of the Board in public companies
or organisations and other significant commitments,
as well as their identity and the time involved (the
“Commitments”), to the Company, all Members of the
Board have disclosed their Commitments to the
1-2 (5)
3-4 (3)
Company in a timely manner. In relation to the two
Members of the Board having a common directorship as
INEDs in the Company and another company listed on
the Stock Exchange, the Nominations Committee has
assessed during the year that the said cross-directorship
should not undermine their independence.
Before each regular Board meeting, the Company
reminds each Member of the Board to update his/her
“Declaration of Other Directorships, Major Appointments
and Interests” (the “Declaration”). The Declaration of
each Alternate Director is sent to him/her for update on
a quarterly basis. In addition, each Member of the Board
and each Alternate Director is required to confirm his/her
other directorships, major appointments and interests to
the Company twice a year.
Save as disclosed in this Annual Report, none of the
Members of the Board or the Executive Directorate has
any relationship (including financial, business, family or
other material or relevant relationships) with another
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Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis Member of the Board or the Executive Directorate. In
addition, none of the Members of the Board holds seven
(or more) directorships in listed companies (including
the Company) or holds any cross-directorships or has
significant links with other Members of the Board
through involvements in other companies or bodies as
at 31 December 2020.
MODEL CODE FOR SECURITIES
TRANSACTIONS BY DIRECTORS
OF LISTED ISSUERS
The Company has adopted the Model Code set out in
Appendix 10 to the Listing Rules (the “Model Code”). After
having made specific enquiry, the Company confirms
that all Members of the Board and (where applicable)
their Alternate Directors and all Members of the Executive
Directorate have complied with the Model Code
throughout the year.
Senior managers, other nominated managers and staff
who, because of their office in the Company, may be
in possession of Inside Information (which term shall
bear the same meaning as in the Securities and Futures
Ordinance (Cap. 571 of the Laws of Hong Kong) (the
“SFO”)) of the Company (collectively the “Model Code
Managers”), have also been requested to comply with the
provisions of the Model Code.
The Company launched a Model Code Managers
Management System in late 2019, which provides an
electronic platform to give a one-stop access to the
relevant key processes to support compliance with the
Model Code and to enhance effectiveness in monitoring
such compliance. Periodic training is also required to be
completed by Model Code Managers.
DIRECTORS’ INSURANCE
As permitted under the Articles of Association, it has
been the practice of the Company to arrange Directors’
and Officers’ (“D&O”) Liability Insurance for which
Members of the Board and officers of the Company do
not have to bear any excess. To ensure sufficient cover
is provided, the Company undertakes an annual review
of the Company’s D&O insurance policy in light of recent
trends in the insurance market and other relevant factors.
The review benchmarks the amount of cover against
other similar companies and considers whether separate
cover will be required for Members of the Executive
Directorate or Members of the Board. The conclusion of
the review in year 2020 was that the level of cover was
adequate and, given this, together with the indemnity
provided by the Company to Members of the Board, the
broad policy wording and the financial strength of the
insurance panel, no additional cover was required.
CORPORATE GOVERNANCE
FUNCTIONS REVIEW
The Board conducted an annual review of its Corporate
Governance duties in accordance with its Terms of
Reference on Corporate Governance Functions and
the latest review was done in March 2021. Below is a
summary of the work performed during the year ended
31 December 2020 and up to the date of the Report:
• Reviewed the Company’s policies and practices
on corporate governance, including the corporate
governance framework, the BD Policy and the
Nomination Policy;
• Reviewed and monitored the training and continuous
professional development of Members of the Board
and senior management;
• Reviewed and monitored the Company’s policies
and practices on compliance with legal and
regulatory requirements;
• Developed, reviewed and monitored the Code of
Conduct and Directors’ Manual; and
• Reviewed the Company’s compliance with the
CG Code.
The Board considers that, overall, the Company’s
Corporate Governance Functions are adequate and
appropriate for the Company in light of its current
corporate strategy. They will be kept under review in light
of the changing legal and regulatory environment and
any changes to the Company’s business.
The Terms of Reference on Corporate Governance
Functions are available on the websites of the Company
(www.mtr.com.hk) and the Stock Exchange.
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CORPORATE GOVERNANCE REPORT BOARD PROCEEDINGS
The Board generally meets in person regularly. In light of
the outbreak of Coronavirus Disease 2019 (“COVID-19”)
in 2020, electronic means have also been provided to
Members of the Board to facilitate them to participate
in meetings virtually, which is permissible under the
Company’s Articles of Association, while at the same time
reducing face-to-face contact. The same arrangements
also applied to the Executive Committee meetings and
meetings of other Board Committees. The Company’s
introduction of an electronic meeting solution for Board
meetings and Executive Committee meetings in 2017,
which has subsequently been expanded to meetings of
other Board Committees, has also enabled all Members
of the Board, Executive Committee and other Board
Committees to access meeting documents and join
virtual meetings remotely in a secure, efficient and
convenient manner.
All Members of the Board have full and timely access
to relevant information and may take independent
professional advice at the Company’s expense,
if necessary, in accordance with the approved
procedures. Members of the Board also have full access
to Members of the Executive Directorate as and when
they consider necessary.
The draft agenda for Board meetings is prepared by
the Company Secretary and approved by the Chairman
of the Company. Members of the Board are advised to
inform the Chairman or the Company Secretary not
less than one week before the relevant Board meeting
if they wish to include a matter in the agenda of the
meeting. The agenda together with Board Papers are
usually sent at least three days before the intended
date of the Board meeting.
The Board meeting dates for the following year are
usually fixed by the Company Secretary with the
agreement of the Chairman, before communicating with
other Members of the Board, in the third quarter of
each year.
At regular Board meetings, Members of the Executive
Directorate together with senior managers report to the
Board on their respective areas of business.
The CEO Report, provided to the Board on a monthly
basis, covers the overall strategies, principal issues and
key events of the Company for the relevant month and
provides key information in areas such as the Group’s
safety performance in different business sectors, financial
activities, contingent liabilities, human resources
developments and new railway projects, as well as a look
ahead to key issues or events in the following three to six
months. This CEO Report together with the discussions at
Board meetings, ensures that Members of the Board have
an overall understanding of the Company’s business and
other key information about the Company, and provides
up-to-date information to enable them to make informed
decisions for the benefit of the Company.
MATERIAL INTERESTS
AND VOTING
All Members of the Board and the Executive Directorate
are required to comply with their common law duty to act
in the best interests of the Company and have particular
regard to the interest of the Company’s shareholders as
a whole. To this end, all of them are required to declare
the nature and extent of their interests, if any, in any
contract, transaction, arrangement or other proposal to
be considered by the Board at Board meetings.
Unless specifically permitted by the Articles of
Association, a Member of the Board cannot cast a vote on
any contract, transaction, arrangement or any other kind
of proposal in which he/she has an interest which he/
she knows is material. For this purpose, the interests of
a person who is connected with a Member of the Board
(including any of his/her associates) are treated as the
interests of the Member of the Board himself/herself.
Interests purely as a result of an interest in the Company’s
shares, debentures or other securities are disregarded. A
Member of the Board may not be included in the quorum
for such part of a meeting that relates to a resolution he
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Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis or she is not allowed to vote on but he or she shall be
included in the quorum for all other parts of that meeting.
This reduces potential conflicts which might otherwise
arise between the Company’s business and an individual
Member of the Board’s other interests or appointments.
Regular Meetings
At each Regular Meeting, the Board reviewed, discussed
and, where appropriate, approved matters relating to
the Company’s different businesses and financial and
operational performance.
If a conflict arises between the interests of the Company
and those of Government, each Government-nominated
Director and any Director holding a senior Government
position, is not included in the quorum for that part of
the meeting which relates to the contract, transaction,
arrangement or other proposal being considered by the
Board and in relation to which the conflict exists and is
not allowed to vote on the related resolution.
There are a number of contractual arrangements that
have been entered into between the Company and
Government (and/or its related entities), some of
which are continuing in nature. As Government is a
substantial shareholder of the Company, such contractual
arrangements are connected transactions (and in
some cases continuing connected transactions) for
the purposes of the Listing Rules. The sections headed
“Connected Transactions” and “Continuing Connected
Transactions” (pages 161 to 182) of this Annual Report
explain how, in accordance with the Listing Rules, these
transactions have been treated.
Matters to be decided at Board meetings are decided by
a majority of votes from Members of the Board allowed to
vote, although the usual practice is that decisions reflect
the consensus of the Board.
BOARD MEETINGS
The Board held 15 meetings in 2020 (seven Regular
Meetings and eight Special Meetings), well exceeding the
requirement of the CG Code which requires every listed
issuer to hold board meetings at least four times a year.
In addition and as required by the Listing Rules, the
Chairman has met with INEDs only without the presence
of other Members of the Board during the year, at which
matters surrounding the functioning of the Board and
the Management team, and the strategic direction and
organisational matters of the Company were discussed.
In addition, other key matters discussed at Board meetings
held in 2020 included:
• Strategy:
– Receipt of updates on the development of the new
Corporate Strategy and High-level Transformation
Planning Project;
• Corporate Governance matters, including:
– Annual review of the structure, size and
composition of the Board and its corporate
governance functions for 2019; annual assessment
of (i) the independence of the INEDs; and (ii) the
effectiveness of the Company’s risk management
and internal control systems for 2019;
– Recommendation of the appointment of
new Members of the Board and re-election of
retiring Members of the Board for approval by
shareholders at the 2020 AGM;
– Approval of changes to the composition of
Board Committees and the annual update to the
Directors’ Manual;
– Receipt and consideration of reports from
Management on key matters such as safety, risk
management and sustainability; and
– Receipt of shareholder analysis and investors’
feedback;
• Operations:
– Review of 2019 train service performance;
– Receipt of updates on the Hung Hom derailment
incident that happened in 2019;
– Contract award for asset replacement project; and
– Receipt of updates on a signalling replacement
project and approval of funding for the said project;
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CORPORATE GOVERNANCE REPORT • Consultancy:
– Approval of the extension and renewal of the
maintenance contract of the Automated People
Mover System with Airport Authority;
– Receipt of updates on the financial and other
impacts of COVID-19 and mitigation measures;
– Approval of the renewal of the US$7 Billion Debt
Issuance Programme; and
• Projects:
– Approval of the 2021 Budget and Longer Term
– Receipt of updates on the Shatin to Central Link
Forecast;
project and related matters;
• Human Resources:
– Receipt of update on the proposal and approval of
budget for a consultancy for the Tung Chung Line
Extension project at Lantau North; and
– Receipt of updates/review/approval of technical
and financial proposals/funding relating to
proposed railway lines under the Railway
Development Strategy 2014 (“RDS-2014”);
• Mainland of China and International Businesses:
– Receipt of updates on Macau, Mainland of China
and International Businesses; and
– Approval of contracts/tender submissions for
projects in the Mainland of China and overseas;
• Property:
– Approval of tenders arrangement for property
development in Hong Kong; and
– Receipt of update on a property development
project in Hong Kong;
• Commercial and Marketing:
– Approval of the Company’s fares proposal for 2020
under the Fare Adjustment Mechanism and its
implementation; and
– Approval of renewal of a franchise agreement for
station commercial space;
• Financial:
– Approval of the 2019 Annual and the 2020 Interim
Report and Accounts;
– Approval of 2020 Annual Pay Review.
The minutes of Board meetings are prepared by the
Company Secretary or her delegate with details of the
matters considered by the Board and decisions reached,
including any concerns raised by Members of the Board
or dissenting views expressed. The draft minutes are
circulated to all Members of the Board for their comments
within a reasonable time after the meeting. The approval
procedure is that the Board formally adopts the draft
minutes at the subsequent meeting. If Members of the
Board have any comments on the draft minutes, they will
discuss it at that meeting and any agreed changes will be
reflected in the formal minutes of the relevant meeting.
Minutes of Board meetings are kept by the Company
Secretary and are open for inspection by all Members of
the Board at the Company’s registered office.
Special Meetings
During 2020, a total of eight Special Meetings were held
to consider various matters including the acquisition of
interests in real estate properties in Hong Kong, the Shatin
to Central Link project, the handling of the outbreak
of COVID-19 and its financial impact on the Company,
COVID-19 relief measures for passengers, the Tung Chung
Line Extension project at Lantau North under RDS-2014,
and investment projects in the Mainland of China.
The attendance record of each Member of the Board (and
each Member of the Executive Directorate) during the
year is set out on pages 112 to 113 of this Annual Report.
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Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis Members of the Board and the Executive Directorate
Attendance of Meetings and Training in 2020
Board Meetings
Board Committees Meetings
2020 AGM TrainingΩ
Attendance
RM
SM
AC
NC
RC
CWC
RiskC
CRC
7
8
4
2
4
4
4
2
1
Total Number of Meetings
Members of the Board
Non-executive Directors ("NED")
Dr Rex Auyeung Pak-kuen (Chairman)
Christopher Hui Ching-yu(1)
(Secretary for Financial Services and the Treasury)
Secretary for Transport and Housing
(Frank Chan Fan)(2)
Permanent Secretary for Development (Works)
(Lam Sai-hung)(3)
Commissioner for Transport
(Rosanna Law Shuk-pui)(4)
Independent Non-executive Directors ("INED")
Andrew Clifford Winawer Brandler
Dr Bunny Chan Chung-bun(5)
Walter Chan Kar-lok
Dr Pamela Chan Wong Shui
Dr Dorothy Chan Yuen Tak-fai
Cheng Yan-kee(6)
Dr Anthony Chow Wing-kin
Dr Eddy Fong Ching
James Kwan Yuk-choi
Rose Lee Wai-mun
Lucia Li Li Ka-lai(7)
Jimmy Ng Wing-ka
Benjamin Tang Kwok-bun
Johannes Zhou Yuan
Executive Director ("ED")
7/7
4/4
4/7
5/7
2/2
7/7
3/4
7/7
7/7
7/7
7/7
7/7
7/7
7/7
7/7
7/7
7/7
6/7
6/7
8/8
1/2
3/8
4/8
1/1
5/8
2/2
6/8
8/8
7/8
8/8
8/8
5/8
7/8
8/8
6/8
7/8
7/8
1/8
2/2
4/4
N/A
1/3
2/2
2/4
1/1
3/4
2/2
2/2C
4/4C
2/2
1/1
3/4
4/4
2/4
4/4C
4/4
4/4
4/4
4/4
4/4
4/4C
2/4
3/4
4/4
3/4
1/1
4/4C
4/4
3/4
2/4
2/4
Dr Jacob Kam Chak-pui (CEO)
7/7
8/8
Members of the Executive Directorate & the Executive Committee
Dr Jacob Kam Chak-pui (CEO)
7/7
8/8
Adi Lau Tin-shing(8)
Roger Francis Bayliss(9)
Margaret Cheng Wai-ching
Linda Choy Siu-min(10)
Dr Peter Ronald Ewen(11)
Herbert Hui Leung-wah
Dr Tony Lee Kar-yun(12)
Gillian Elizabeth Meller(13)
David Tang Chi-fai(14)
Jeny Yeung Mei-chun
Members departed during 2020
NED
James Henry Lau Jr(15)
(Secretary for Financial Services and the Treasury)
Commissioner for Transport
(Mable Chan)(16)
INED
1/3
4/4
2/6
2/7
2/3
1/2
0/1
2/3
Dr Allan Wong Chi-yun(17)
2/3
5/6
1/1
1/1C
Member of the Executive Directorate & the Executive Committee
Linda So Ka-pik(18)
2/2C
1/1
1/1
2/2
2/2
1/1
2/2
2/2
2/2
2/2
1/1
N/A*
N/A#
N/A#
N/A*
1/1
N/A*
N/A#
1/1
1/1
N/A#
N/A#
1/1
N/A#
N/A#
N/A#
N/A#
N/A#
N/A#
1/1
1/1
1/1
1/1
N/A#
1/1
N/A#
1/1
N/A#
1/1
1/1
1/1
0/1
N/A#
1/1
N/A
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
x
√
x
√
112
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CORPORATE GOVERNANCE REPORT Legend:
Board Meetings
RM – Regular Meeting(s)
SM – Special Meeting(s)
Board Committee Meetings
AC – Audit Committee
NC – Nominations Committee
RC – Remuneration Committee
CWC – Capital Works Committee
RiskC – Risk Committee
CRC – Corporate Responsibility Committee
2020 AGM – Annual General Meeting of the Company held on 20 May 2020
N/A – Not applicable
* – appointed after the conclusion of 2020 AGM
# – not invited to attend 2020 AGM in person due to maintenance of social
distancing during COVID–19
C – Chairman of the committee
Ω – This includes (i) continuous professional development through attending
expert briefings/seminars/conferences relevant to the Company’s business or
directors' duties arranged by the Company or external organisations, and reading
regulatory/corporate governance or industry related updates; and (ii) induction and
familiarisation programmes attended by newly appointed Directors
Notes:
1. Mr Christopher Hui Ching-yu (Secretary for Financial Services and the Treasury) was appointed by the Board as a NED and a member of each of the NC and the RC of the
Company, all with effect from 1 June 2020.
The alternate director of Mr Christopher Hui Ching-yu, acting on his behalf, attended one SM and two RC meetings. Mr Hui was not present at a portion of a Board Meeting
at which the South Island Line (West) project was discussed for avoidance of any actual or perceived conflict of interest.
2. The alternate directors of the Secretary for Transport and Housing (Mr Frank Chan Fan), acting on his behalf, attended three RM, two SM and two RC meetings. Mr Chan
and his alternate directors were not present at the relevant Board Meetings or a portion thereof at which the Shatin to Central Link project and related matters, the Tung
Chung Line Extension project at Lantau North, the Hung Shui Kiu Station submission, the Northern Link project and the South Island Line (West) project were discussed for
avoidance of any actual or perceived conflict of interest.
3. Permanent Secretary for Development (Works) (Mr Lam Sai-hung) was not present at the relevant Board Meetings or a portion thereof at which the Shatin to Central Link
project and related matters, the Tung Chung Line Extension project at Lantau North, the Hung Shui Kiu Station submission, the Northern Link project and the South Island
Line (West) project were discussed for avoidance of any actual or perceived conflict of interest.
4. Miss Rosanna Law Shuk-pui became a NED of the Company with effect from 9 September 2020 when she took up the post of Commissioner for Transport (the “C for T”).
She also became a member of each of the AC and the RiskC of the Company, both with effect from the same date. Miss Law was not present at a portion of a Board
Meeting at which the South Island Line (West) project was discussed for avoidance of any actual or perceived conflict of interest.
5. Dr Bunny Chan Chung-bun was elected as a Board Member and became an INED of the Company with effect from the conclusion of the 2020 AGM, and was appointed by
the Board as a member of the CRC of the Company with effect from the same date.
6. Mr Cheng Yan-kee was appointed by the Board as the chairman of the CWC of the Company with effect from the conclusion of the 2020 AGM.
7. Mrs Lucia Li Li Ka-lai was appointed by the Board as a member of the NC of the Company and ceased to be a member of the CRC of the Company, both with effect from
the conclusion of the 2020 AGM.
8. Mr Adi Lau Tin-shing was appointed as the Managing Director – Operations and Mainland Business and ceased to be the Operations Director of the Company, both with
effect from 1 January 2020.
9. Mr Roger Francis Bayliss was appointed as the Capital Works Director and ceased to be the Projects Director of the Company, both with effect from 22 February 2021.
10. Ms Linda Choy Siu-min was appointed as the Corporate Affairs Director and became a Member of the Executive Directorate and a member of the CRC of the Company, all
with effect from 2 March 2020.
11. Following the retirement of Dr Peter Ronald Ewen immediately after 21 February 2021, Dr Ewen ceased to be the Engineering Director and a Member of the Executive
Directorate of the Company, both with effect from 22 February 2021.
12. Dr Tony Lee Kar-yun was appointed as the Operations Director and became a Member of the Executive Directorate of the Company, both with effect from 1 January 2020.
13. Ms Gillian Elizabeth Meller was appointed as the Legal and Governance Director and ceased to be the Legal and European Business Director of the Company, both with
effect from 22 February 2021.
14. Mr David Tang Chi-fai was appointed as the Property and International Business Director of the Company with effect from 22 February 2021; before then Mr Tang was
appointed as the Property and Australian Business Director and ceased to be the Property Director of the Company, both with effect from 1 October 2020.
15. Mr James Henry Lau Jr resigned and ceased to be a NED and a member of each of the NC and the RC of the Company, all with effect from 1 June 2020.
The alternate directors of Mr James Henry Lau Jr, acting on his behalf, attended two RM, one SM, one NC meeting, one RC meeting and the 2020 AGM. Mr Lau and his
alternate director were not present at the relevant Board Meetings or a portion thereof at which the Shatin to Central Link project and related matters, the Tung Chung
Line Extension project at Lantau North, the Hung Shui Kiu Station submission and the Northern Link project were discussed for avoidance of any actual or perceived
conflict of interest.
16. Ms Mable Chan ceased to hold the post of the C for T with effect from 1 August 2020 and, as a result, ceased to be a NED and a member of each of the AC and the RiskC of
the Company, all with effect from the same date.
The alternate director of the C for T (Ms Mable Chan), acting on her behalf, attended two SM, one AC meeting and one RiskC meeting. Ms Chan and her alternate director
were not present at the relevant Board Meetings or a portion thereof at which the Shatin to Central Link project and related matters, the Tung Chung Line Extension
project at Lantau North, the Hung Shui Kiu Station submission and the Northern Link project were discussed for avoidance of any actual or perceived conflict of interest.
Before the post of the C for T was taken up by Miss Rosanna Law, the alternate director of the C for T attended one RM.
17. Dr Allan Wong Chi-yun retired as an INED and ceased to be the chairman of the CWC and a member of the NC of the Company, all with effect from the conclusion of the
2020 AGM.
18. Ms Linda So Ka-pik resigned as the Corporate Affairs Director and ceased to be a Member of the Executive Directorate and a member of the CRC of the Company, all with
effect from 16 January 2020.
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Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis INDUCTION PROGRAMME AND
OTHER TRAINING
Induction Programme
On appointment, each new Member of the Board
(including Government-nominated Directors), Alternate
Director and Member of the Executive Directorate is
given a comprehensive, formal and tailored induction
programme which covers:
•
•
the roles of a director from the strategic, planning and
management perspectives, as well as the essence of
corporate governance and the trends in these areas;
and
the general and specific duties of a director under
general law (common law and legislation) and the
Listing Rules.
In addition to the above, a Familiarisation Programme to
understand the key areas of the Company’s business and
operations is also provided.
All Members of the Board, Alternate Directors and
Members of the Executive Directorate are also given a
Directors’ Manual on their appointment which sets out,
amongst other things, directors’ roles and responsibilities,
their key obligations from both a statutory and a
regulatory perspective, and the Terms of Reference
of the Board on its Corporate Governance Functions
and of its Board Committees. The Directors’ Manual
is updated regularly to keep the contents up to date
so that the Directors are kept abreast of changes and
latest developments in the laws and regulations that
are relevant to Directors and the Company. The latest
updates to the Directors’ Manual, approved by the Board
in January 2021, reflect the Company’s latest mission
statement with new sections covering board evaluation
and ESG being added.
Training and Continuous Professional
Development
Members of the Board and the Executive
Directorate
To assist Members of the Board and the Executive
Directorate in continuing their professional development,
the Company Secretary recommends them to attend
relevant seminars and courses at the cost of the Company.
Board Visit
In October 2020, certain Members of the Board and the
Executive Directorate visited The LOHAS, Malibu (LOHAS
Park Package 5) and the Public Transport Interchange in
LOHAS Park to understand the Company’s latest property
development in LOHAS Park.
Training
Materials on the subject of corporate governance and
e-learning provided by the Stock Exchange are provided/
notified to Members of the Board, Alternate Directors
and Members of the Executive Directorate from time to
time to keep them abreast of the latest developments on
this front.
Each Member of the Board and the Executive Directorate
has also provided to the Company a record of the training
he/she has received during the year, which is set out on
pages 112 to 113 of this Annual Report.
Senior Executives
A comprehensive and tailored training programme
has been developed for the Senior Executives of the
Company. This programme consists of a series of
workshops, seminars, e-learning and benchmarking visits
which are organised on an on-going basis.
To support the enhancement of the business acumen,
leadership and management skills of the Senior
Executives, professors from renowned business schools
are engaged to share cutting-edge research and
insights on thought leadership, leading change, digital
transformation and innovation as well as contemporary
management and business topics. Various tailored
global leadership development virtual workshops were
also organised in 2020 to enable key Senior Executives
to enhance their leadership, customer-centric and
strategic thinking capabilities.
ACCOUNTABILITY
Members of the Board are responsible for the
consolidated accounts of the Group. The consolidated
accounts are prepared on a going concern basis and
give a true and fair view of the consolidated financial
position of the Group as at 31 December 2020, and of
the Group’s consolidated financial performance and
consolidated cash flows for the year then ended. In
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CORPORATE GOVERNANCE REPORT preparing the consolidated accounts for the year ended
31 December 2020, Members of the Board have selected
appropriate accounting policies and, apart from those
new and amended accounting policies as disclosed in the
notes to the consolidated accounts for the year ended
31 December 2020, have applied them consistently with
previous financial periods. Judgments and estimates
have been made that are prudent and reasonable. The
reporting responsibilities of the external auditor of the
Company (the “External Auditor”) are set out on pages
186 to 189 of this Annual Report.
In support of the above, the consolidated accounts
presented to the Board have been reviewed by Members
of the Executive Directorate. For both the annual
and interim reports and consolidated accounts, the
Finance Division is responsible for clearing them with
the External Auditor and then the Audit Committee. In
addition, all new and amended accounting standards
and requirements, as well as any changes in accounting
policies adopted by the Group, have been discussed and
approved at the Audit Committee before adoption by
the Group.
RISK MANAGEMENT AND
INTERNAL CONTROL SYSTEMS
The Board is responsible for the risk management
and the internal control systems of the Company
and its subsidiaries and reviewing their effectiveness.
With the assistance from the Risk Committee and the
Audit Committee respectively, the Board oversees the
Company’s risk management system (the “ERM” system)
and internal control system on an on-going basis, sets
appropriate policies and reviews the effectiveness of the
systems at least annually.
The ERM system and the internal control system, with
processes put in place by the Board, management and
other personnel, are designed to manage (as opposed
to eliminate) the risk of failure and provide reasonable
assurance, and not absolute assurance, against material
misstatement or loss, regarding the achievement of
objectives in the following areas:
• Compliance with applicable laws and regulations
• Effectiveness of risk management
Systems Overview
The Executive Committee is responsible for:
•
•
Implementing the Board’s policies on risk management
and internal controls;
Identification and evaluation of the risks faced by the
Company for consideration by the Board;
• Designing, operating and monitoring a suitable
internal control system and an ERM system; and
• Providing assurance to the Board that it has done so,
together with a confirmation that these systems are
effective and adequate.
In addition, all employees have responsibility for risk
management and internal controls within their areas
of accountability.
Business/Functional Management
Committees
A number of committees have been established to assist
the Executive Committee in the management and control
of the Company’s various core businesses and functions.
Key committees include:
• Operations Executive Management Committee
• Property Executive Management Committee
• Project Control Group
•
Investment Committee
• European Business Management Committee
• Australian and International Consultancy Business
Management Committee
• Mainland China Business Management Committee
• Macau Business Management Committee
•
Information Technology Executive Management
Committee
• Corporate Safety Management Committee
• Effectiveness and efficiency of operations
• Enterprise Risk Committee
• Reliability of financial reporting
• Executive Tender Panel/Tender Board
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Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis • Corporate Responsibility Steering Committee
• Cost Control Committee (Projects)
• Executive Cost Control Committee (Projects)
• Corporate Cyber Security Committee
• Corporate Security Management Committee
• Railway Development Steering Group
• Technical Management Steering Group
• Technology and Innovation Steering Committee
• Commercial Letting Committee
• High Speed Rail Executive Management Committee
Internal Audit
The Head of Internal Audit reports directly to the Board
via the Audit Committee and reports administratively
to the CEO. The Internal Audit Department (“IAD”) has
unrestricted access to information that allows it to review
all aspects of the Company’s risk management, control
and governance processes.
On a regular basis, it conducts audits on financial,
operational and compliance controls and the risk
management functions of the Company and its
subsidiaries. Relevant members of the management team
are responsible for ensuring that control deficiencies
highlighted in internal audit reports are rectified within a
reasonable time.
The IAD produces an annual internal audit plan for the
Audit Committee’s approval. The audits are selected
based on a risk assessment to ensure that business
activities with higher risks are covered. On a half-yearly
basis, the Head of Internal Audit reports to the Audit
Committee including his opinion on the adequacy and
effectiveness of the Company’s internal control system.
ERM System
The ERM system is an essential and integral part of
the Company’s corporate governance framework and
helps to sustain business success and create value for
stakeholders. It involves a corporate-wide systematic
risk identification and management process which
aims to assist the Executive Committee and individual
business unit managers to manage the key risks facing
the Company and supports the Board in discharging its
corporate governance functions.
More details of the features of the ERM system, the
process used to identify, evaluate and manage significant
risks, the significant risks being managed and the process
used to review the effectiveness of the ERM system are set
out in the “Risk Management” section (pages 126 to 129)
of this Annual Report.
Control Activities and Processes
To ensure the efficient and effective operation of business
units and functions, and the safety of the operating
railway and construction works in railway projects,
Corporation General Instruction(s) (“CGI(s)”), divisional/
departmental procedures and manuals, committees,
working groups and quality assurance units are
established to monitor and enforce internal controls and
evaluate their effectiveness.
CGIs and various departmental procedures and manuals
are established for preventing or detecting unauthorised
expenditures/payments, safeguarding the Company’s
assets, ensuring the accuracy and completeness of
accounting records, and timely preparation of reliable
financial information.
Divisional Directors, Department Heads, including
General Managers/Project Managers for overseas
subsidiaries/projects, are required to conduct annual
assessments and certifications on the effectiveness of risk
management and internal control systems within their
areas of responsibility.
Compliance with Statutes and Regulations
All Department Heads, including General Managers/
Project Managers for overseas subsidiaries/projects, are
responsible for ensuring compliance with the statutes
and regulations applicable to their own functional units in
accordance with the Regulatory Compliance Framework,
with necessary legal support.
Issues relating to compliance with statutes and
regulations, including potential and actual non-
compliances, and the status of rectification and actions
taken to prevent recurrence are reported annually to the
Executive Committee and the Audit Committee.
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117
CORPORATE GOVERNANCE REPORT Department Heads
Department Heads
Maintain a list of applicable statutes / regulations
Identify relevant new or updated statutes /
regulations
Corporation General Instruction sets out
compliance responsibilities
Assess impact of statutes / regulations on operations
Review compliance at least once a year
Plan and
Monitor
Board
via Audit Committee
Assess
Executive
Committee
Regulatory
Compliance
Framework
Supporting
Functions
(Legal, ERM)
Department Heads
Report
Improve
Department Heads report non-compliances
to Divisional Directors
Executive Committee and Audit Committee
receive annual report
Department Heads
Identify potential and actual non-compliances
Devise improvement actions
Whistle-blowing Policy
A whistle-blowing policy has been put in place to deal with concerns related to fraudulent or unethical acts or non-
compliances with laws and the Company’s policies that have or could have significant adverse financial, legal or
reputational impacts on the Company. The policy applies to all staff, parties who deal with the Company as well as the
general public. Every half year, a summary of all whistle-blowing cases handled by the Whistle Blowing Panel and staff
complaints handled by the Human Resources Management Department and management initiated investigations are
reported to the Executive Committee and the Audit Committee.
Inside Information Policy
The Company has developed a system with established policies, processes and procedures across all relevant Division(s)
and Department(s) for the handling and dissemination of Inside Information, which encompasses the following:
• A CGI sets out:
(i) the internal processes for identifying, assessing and escalating potential Inside Information to the Executive
Committee and the Board;
(ii) the responsibilities of Model Code Managers in preserving the confidentiality of Inside Information, escalating
upwards any such potential information and cascading down the message and responsibilities to relevant staff;
and
(iii) the process for disclosure of Inside Information;
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Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis • Training for Members of the Board and the Executive Directorate, Executive Managers, Department Heads and Model
Code Managers is provided from time to time. In particular, Members of the Executive Directorate, Executive Managers,
Department Heads and Model Code Managers are regularly required to complete a computer-based training
programme (“CBT Programme”) on Inside Information. To refresh their awareness of the Inside Information policy, the
CBT Programme as updated was re-launched in September 2020; and
• On-going training sessions on the latest developments/requirements of the SFO are arranged as appropriate.
Evaluation of the Effectiveness of the Risk Management System
The Company has surpassed the relevant requirement in the CG Code by completing an effectiveness review of the ERM
system for the Company and its subsidiaries, and extending the review to the Company’s key associates operating in
Mainland of China and overseas. For the year ended 31 December 2020, the Risk Committee, with delegated authority
from the Board, has evaluated the effectiveness of the ERM system of the Company and considers that it is overall
effective and adequate.
Details about the “Process of System Effectiveness Review” are set out in the Risk Management section (page 129) of this
Annual Report.
Evaluation of the Effectiveness of the Internal Control System
For the year ended 31 December 2020, the annual review of the effectiveness of the internal control system of the
Company and its subsidiaries and key associates was performed by the Audit Committee based on the following:
• Review of significant issues arising from internal audit reports and the external
audit report
• Private sessions with internal and external auditors
• Review of annual assessment and certification of internal controls from
Members of the Executive Directorate, management of overseas subsidiaries
and key associates and Department Heads in their areas of responsibility
The Audit
Committee
concluded that
the internal
control system
was overall
effective
Evaluation of the Adequacy of Resources of the Company’s Accounting, Financial
Reporting and Internal Audit Functions
For the year ended 31 December 2020, the annual assessment performed by the Finance Division and IAD concluded that
there were adequate resources, staff qualifications and experience, training programmes and budget of the Company’s
accounting, financial reporting and internal audit functions.
The Company is committed to recruit, train and develop a team of qualified and competent accountants for overseeing
the Group’s financial reporting and other accounting-related matters. A process to capture and update relevant laws, rules
and regulations applicable to the reporting and accounting function is in place. Designated officers will ensure relevant
standards and ordinances including Hong Kong Financial Reporting Standards, the Listing Rules and the Companies
Ordinance under their responsibility are complied with. Resources and provisions required to deliver the accounting and
financial reporting function are critically reviewed during the annual budgeting exercise. Company-wide recruitment
processes and staff development programmes are in place to address the competency, qualifications and experience
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119
CORPORATE GOVERNANCE REPORT required. Adherence to the process is confirmed on an
annual basis by the designated officers to the Finance
Director, who will conduct a formal annual review and
report the review results to the Audit Committee.
In terms of internal audit, the Company is also committed
to recruit, train and develop a team of qualified and
competent internal auditors to provide independent and
objective assurance and consulting services designed to add
value and improve the Company’s operations. A process
to capture updated standards and best practices relating
to internal audit is in place. Proper recruitment processes
and staff development programmes are in place to address
the competency, qualifications and experience required.
The Head of Internal Audit conducts a formal annual review
on the adequacy of staff resources, qualifications and
experience of the internal audit function and reports the
review results to the Audit Committee.
Based on the above, the Audit Committee considered
the resources, qualifications and experience of staff,
training programmes and budget of the Company’s
accounting, financial reporting and internal audit
functions were adequate.
Board’s Annual Review
The Board has, through the Risk Committee and the Audit
Committee, overseen the Company’s risk management
and internal control systems on an on-going basis.
The Board has conducted its annual review of the
risk management and internal control systems of the
Company and its subsidiaries and key associates for
the year ended 31 December 2020, and considers that
such systems are overall effective and adequate, with
supporting compliance mechanisms to provide assurance
that the Company and its officers observe their disclosure
obligations in respect of Inside Information.
The Board has also conducted a review of the adequacy
of resources, staff qualifications and experience, training
programmes and budget of the Company’s accounting,
financial reporting and internal audit functions for the
year ended 31 December 2020, and considers the above
resource components to be adequate.
CRISIS MANAGEMENT
To uphold the reputation of being one of the world’s
leading railway operators and in order to help ensure
that the Company will respond to and recover from crises
in an organised and highly effective manner, including
timely communication with principal stakeholders such
as Government departments and shareholders, the
Company has an established mechanism to activate the
formation of the Crisis Management Team in the event of
a crisis. The Crisis Management Team comprises relevant
Members of the Executive Directorate and Executive
Managers, and its operation is governed by a Crisis
Management Plan which, among other things, sets out
the duties of respective members. The Crisis Management
Plan is kept in line with world-class standards and up-to-
date through regular reviews. The operation of the Crisis
Management Team is aided by an information system to
keep track of the latest crisis situation, issues and strategic
actions and disseminate crisis related information. Regular
Crisis Management Team exercises are held to validate
the crisis management organisation and arrangements
and to provide practices for members.
In response to the outbreak of COVID-19 since early 2020,
the Crisis Management Team was activated to monitor
the situation and direct the Company’s responses and
actions in a coordinated manner, with a view to striving
to safeguard the health and safety of our customers,
staff and contractors and reducing the impacts on the
Company’s operations.
GOVERNANCE OF SUBSIDIARIES
AND ASSOCIATES
The Company has a number of subsidiaries and
associates which operate independent businesses in
Hong Kong, Macau, the Mainland of China and overseas.
Notwithstanding the fact that these subsidiaries and
associates are separate legal entities, the Company has
implemented a management governance framework
(the “Governance Framework”) to ensure that it exercises
an appropriate level of control and oversight as a
shareholder of these subsidiaries and associates.
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Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis The Company’s Governance Framework promotes
collaboration between the corresponding functions in
the Company on the one hand and the subsidiaries and
associates on the other hand and the implementation
process of the Governance Framework in the Company’s
subsidiaries and associates starts from inception of any
new business operations/investments.
Staff members are encouraged to report existing or
perceived violations of the Code of Conduct as well as
malpractices. Proper procedures related to the whistle-
blowing policy of the Company are also in place,
enabling staff members to raise their concerns in a safe
environment and in complete confidence if they have
genuine suspicions about any wrongdoings.
Pursuant to the Governance Framework, the Company
exercises its control and oversight through formulation
of a governance structure that is tailored for individual
subsidiaries and associates through (i) imposition of
certain internal controls in key areas; and (ii) adoption of
management practices and policies that are appropriate
to the business nature and local situation. As a result,
adequate internal controls will be adopted by subsidiaries
and associates and the Company will be consulted
and notified on important matters, complemented by
regular reporting and assurance. Compliance with this
governance structure is reported by subsidiaries and
associates with significant operations on an annual basis.
BUSINESS ETHICS
Practising integrity and responsible business ethics is
paramount to the Company’s continued success. The
Company’s Code of Conduct lays down the requirements
of the Company in terms of ethical practices and obliges
staff to operate transparently and under the highest
principles of fairness, impartiality and integrity in all of the
places where the Company does business.
The Code of Conduct is reviewed and updated
periodically to ensure appropriateness and compliance
with corporate and regulatory requirements. Following
the release of an updated Code of Conduct in July 2020, a
new series of staff awareness programmes was launched
featuring animation videos and interactive games
with real life examples to help staff members better
understand the principles of the Code and if certain acts
are unlawful or unacceptable. For instance, animation
videos under the theme of Outside Work and Workplace
Harassment were launched in July and October 2020
respectively. Other education programmes, including
seminars and mandatory CBT Programmes were also
introduced to raise staff awareness.
To assist new recruits in embracing the Company’s values
and ethical commitments, they are briefed on the Code
of Conduct during the staff induction programme. New
recruits are also required to complete the mandatory
CBT Programmes within three months of joining the
Company. The Code of Conduct is available on the
Company’s website (www.mtr.com.hk).
In addition, the Code of Conduct serves as a guideline
for establishing a comparable ethical culture among our
subsidiaries and associates in Hong Kong, Macau, the
Mainland of China and overseas.
EXTERNAL AUDITOR
The Company engages KPMG as its External Auditor. In
order to maintain KPMG’s independence and objectivity
and the effectiveness of the audit process in accordance
with applicable standards, the Audit Committee, under its
Terms of Reference, pre-approves all audit services to be
provided by KPMG and discusses with KPMG the nature
and scope of their audit and reporting obligations before
the audit commences.
The Audit Committee also reviews and pre-approves the
engagement of KPMG to provide any non-audit services,
for complying with relevant legal requirements and
seeks to balance the maintenance of objectivity with
value for money.
The nature of audit and non-audit services provided by
KPMG and fees paid to KPMG (including any entity that
is under common control, ownership or management
with KPMG or any entity that a reasonable and informed
third party having knowledge of all relevant information
would reasonably conclude as part of KPMG nationally or
internationally) are set out in note 10B to the consolidated
accounts on page 214 of this Annual Report.
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CORPORATE GOVERNANCE REPORT For maintaining integrity and objectivity as the External
Auditor of the Company, KPMG implements policies
and procedures to comply with professional ethics and
independence policies and requirements applicable
to the work it performs. In addition, KPMG requires its
audit partner serving the Group to rotate off the audit
engagement with the Group at least once every seven
years in accordance with the Hong Kong Institute of
Certified Public Accountants/International Federation of
Accountants Code of Ethics.
COMMUNICATION WITH
SHAREHOLDERS
Annual General Meeting (the “AGM”)
The Company’s AGM is one of the principal channels
of communication with its shareholders. It provides an
opportunity for shareholders to communicate face to face
with the Directors about the Company’s performance and
operations. It has been the practice for the Chairman of
the Company, the chairman of each Board Committee, all
Members of the Executive Directorate and the External
Auditor of the Company to attend AGMs to answer
shareholders’ questions. However, in light of the outbreak
of COVID-19 and the Prevention and Control of Disease
(Prohibition on Group Gathering) Regulations (Cap. 599G
of the Laws of Hong Kong), only the Chairman of the
Company, the chairman of each Board Committee,
certain Members of the Executive Directorate and the
External Auditor of the Company were invited to attend
the 2020 AGM.
The 2020 AGM was held on 20 May 2020 and the
Company continued providing sign language
interpretation in addition to simultaneous Cantonese,
English and Putonghua interpretation. The Company
also implemented a number of precautionary measures
for the 2020 AGM, including restricting the number of
shareholders who could physically attend the 2020 AGM
through pre-registration and requiring submission of
questions in advance of the meeting. For the benefit
of the Company’s shareholders who were unable to
physically attend the AGM, the Company arranged its
first-ever live webcast of the AGM with three choices
of language (Cantonese, English and Putonghua). The
webcast of the whole proceedings was also posted on the
Company’s website in the same evening for viewing.
The 2021 AGM has been scheduled on 26 May 2021
and the Company plans to continue providing the
abovementioned simultaneous interpretation to further
facilitate smooth and direct communication between
the shareholders of the Company and the Company’s
Directors and management. The Company is committed
to making available meeting facilities to enable all
eligible attendees to be able to participate in the AGM.
In addition, the Company will continue to monitor the
legal restrictions on public gatherings in light of the
continuation of the COVID-19 pandemic and will make
appropriate arrangements with a view to safeguarding
the health and safety of attendees at the 2021 AGM while,
at the same time, protecting shareholders’ fundamental
rights to attend, ask questions and vote.
Resolutions passed at the 2020 AGM
The Chairman proposed separate resolutions for each
substantially separate issue at the 2020 AGM. Before the
resolutions were considered, the Chairman exercised his
right as the Chairman of the 2020 AGM under Article 71 of
the Articles of Association to call a poll on all resolutions
conducted by electronic means.
A total of 10 resolutions were passed at the 2020
AGM (with resolution no. 3 comprising four separate
resolutions), each supported by over 98% of the votes
cast. The full text of the resolutions is set out in the
2020 AGM Circular (which comprised Notice of the 2020
AGM) dated 14 April 2020 and the results of the AGM
are available on the respective websites of the Company
(www.mtr.com.hk) and the Stock Exchange.
Calling General Meetings
Directors of the Company may call a general meeting of
the Company.
Shareholders representing at least 5% of the total voting
rights of all the shareholders having a right to vote
at general meetings may request the Directors of the
Company to call a general meeting of the Company.
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Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis The requesting shareholders must state in their request
the general nature of the business to be dealt with,
and may include the text of a resolution to be moved
at the general meeting. The request may consist of
several documents in like form and may be sent to the
Company in hard copy or electronic form, which must be
authenticated by the requesting shareholders.
The Directors of the Company are required to call the
general meeting within 21 days after the date on which
the Company receives such requests, and the general
meeting must be held on a date not more than 28 days
after the date of the notice convening the general
meeting. If the requests include a resolution to be moved
at the general meeting, the notice of the general meeting
must include notice of the resolution. If the resolution is
to be proposed as a special resolution, the Directors of the
Company are required to specify the intention to propose
the resolution as a special resolution in the notice of the
general meeting.
If, within 21 days after the date on which the Company
receives the required requests, the Directors of the
Company do not proceed duly to call a general meeting,
the shareholders who requested the general meeting, or
any of them representing more than one-half of the total
voting rights of all of them, may themselves call a general
meeting, provided that the general meeting must be
called for a date not more than 3 months after the date on
which the Company receives the required requests.
Procedures for Shareholders Putting
Forward Proposals
Shareholders may put forward proposals for
consideration at a general meeting according to the
Companies Ordinance and the Articles of Association.
As regards proposing a person for election as a director,
please refer to the “Appointment Procedure for Members
of the Board of the Company” which is available on the
website of the Company (www.mtr.com.hk).
Enquiries from Shareholders
The Company has a Shareholders’ Communication Policy
(available on the website of the Company
(www.mtr.com.hk)) to provide shareholders with
information about the Company to enable them to
engage actively with the Company and exercise their
rights as shareholders in an informed manner.
The Company’s Shareholders Communication Policy has
set out, amongst other things, a channel for shareholders
access to the Board and management by writing to the
Company Secretary of the Company.
Please also refer to the Investor Relations section (pages
96 to 97) of this Annual Report on other means of
communication with shareholders.
CONSTITUTIONAL DOCUMENT
The Articles of Association (in both English and Chinese)
are available on the websites of both the Company
(www.mtr.com.hk) and the Stock Exchange. During the
year ended 31 December 2020, there was no change to
the Articles of Association.
The Board has proposed to make certain amendments
to the Articles of Association with a view to (i) providing
greater flexibility for the Company in holding general
meetings as hybrid meetings and conducting general
meetings at more than one location where shareholders
of the Company can participate using electronic
facilities, in addition to/instead of attending physically;
(ii) empowering the Board and the chairman of general
meetings to make necessary arrangements for managing
shareholders’ attendance and/or participation and/or
voting at general meetings; (iii) simplifying the
calculation of the relevant value of scrip dividends
under the Company’s scrip dividend scheme in force
from time to time; (iv) providing additional means for
directors to approve written resolutions; and (v) making
housekeeping amendments to align the Articles of
Association with the Companies Ordinance.
The proposed amendments will be subject to the
approval of the shareholders of the Company by way of
a special resolution at the forthcoming Annual General
Meeting. Details will be set out in the circular to be issued
to shareholders together with this Annual Report.
For and on behalf of the Board
Gillian Elizabeth Meller
Company Secretary
Hong Kong, 11 March 2021
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CORPORATE GOVERNANCE REPORT As at the date of this Report, the Audit Committee of
the Company (referred to as the “Committee” in this
Report) consists of six Non-executive Directors, five of
whom are Independent Non-executive Directors of the
Company. Details of the Committee’s membership and
their attendance records during 2020 are set out on pages
112 to 113 of this Annual Report. None of the Committee
members is a partner or former partner of KPMG, the
Company’s external auditor.
The Finance Director (the “FD”), the Head of Internal Audit
(the “Head of IA”) and representatives of the external
auditor attend all meetings of the Committee. At the
discretion of the Committee, others may also be invited
to attend meetings. The Committee normally meets
four times a year, and the Chairman of the Committee,
the external auditor or the FD may request additional
meetings if they consider necessary. The Committee may,
upon request, approve the appointment of the Company’s
external auditor for undertaking non-audit work.
TERMS OF REFERENCE OF
THE COMMITTEE
The Terms of Reference of the Committee (the “ToR”)
is available on the respective websites of the Company
(www.mtr.com.hk) and the Stock Exchange.
DUTIES OF THE COMMITTEE
Under the ToR, the duties of the Committee primarily
comprise the following:
• Oversight of the relationship with the Company’s
external auditor, including making recommendations
to the Board on the appointment of and any change to
the Company’s external auditor and communicating
with the external auditor on financial matters of
the Company;
• Review of the financial information of the
Company, including monitoring the integrity of
financial statements;
• Oversight of the Company’s financial reporting
and internal control systems, including overseeing
the adequacy of the resources and competence of
the Company’s accounting and financial reporting
functions; and
• Overseeing the Company’s Internal Audit function,
including liaison with the Head of IA, approval of
the annual internal audit plan of the Company and
receiving periodic reports from the Head of IA.
More details on the duties of the Committee are set out in
the ToR and further information can be found in the “Risk
Management and Internal Control Systems” section of the
Corporate Governance Report on pages 115 to 119 of this
Annual Report.
Reporting to the Board
The Chairman of the Committee summarises the activities
of the Committee and highlights issues arising therefrom
in a report to the Board after each Committee meeting.
The minutes of Committee meetings are prepared by
the secretary of the meetings with details of the matters
considered by Committee members and decisions
reached, including any concerns raised by Committee
members, dissenting views expressed and suggestions for
enhancing the governance and internal control systems
of the Company. The draft minutes are circulated to
Committee members for comment after each meeting.
The Committee formally adopts the draft minutes at the
next subsequent meeting, after taking into account any
comments that Committee members may have made.
Minutes of Committee meetings are open for inspection by
Committee members at the Company’s registered office.
In advance of the first regular Committee meeting each
year, the secretary of the meetings pre-agrees key agenda
items for the year with the Chairman of the Committee
who makes a final determination on the agenda for the
Committee meetings.
PB
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AUDIT COMMITTEE REPORTCorporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis WORK PERFORMED BY THE
COMMITTEE IN 2020
In 2020, the Committee held four regular meetings.
Representatives of the external auditor, the FD and the
Head of IA attended all four regular meetings to report
and answer questions about their work. In addition,
relevant Members of the Executive Directorate were
invited to join certain presentations to the Committee.
The Committee also held private sessions with the
external auditors without the presence of Management
during the year.
The Committee devoted its attention to the review of the
Company’s annual and interim results announcement/
accounts at the February and July meetings respectively,
allowing more time to review and discuss the Company’s
internal controls, internal audit and other activities at the
May and November regular meetings.
Acting through the Risk Committee and the Committee,
the Board has mandated a review of the internal control
and risk management systems for the Company’s Hong
Kong operations. In 2020, an external consultant was
appointed to conduct a deep-dive assessment of the
Company’s existing Three Lines of Defence framework,
with a view to identifying any gaps in the framework and
making recommendations for improvement. The results
of this assessment were presented to and endorsed by
the Risk Committee and the Committee in late 2020.
The next phase of the project will be to strengthen the
Company’s Second Line of Defence (in particular) in
certain key risk areas through the establishment of new
technical and engineering Centres of Excellence and the
adoption of a new assurance framework. A further update
on progress will be presented to both Committees in
mid-2021.
The following key matters were reviewed/considered/
endorsed (as relevant) by the Committee in 2020:
Financial
• The draft 2019 Annual Report and Accounts and 2020
Interim Report and Accounts, including the financial
impact of the Company’s railway construction projects
under entrustment by the HKSAR Government, and
the relevant disclosure notes in the said Accounts and
recommendation of the same for the Board’s approval;
• Updates on the carrying value of the Group’s
properties and rail fixed assets;
• Updates on the latest positions of the Company’s
railway construction projects under entrustment by
the HKSAR Government;
• Update relating to Service Concession Payments and
tax matters;
• 2020 cost savings analysis; and
• Preview of the 2020 interim and annual accounting
and financial reporting issues.
Internal Audit and Internal Control
• Risk Management and Internal Control Systems
Effectiveness for 2019 for submission to the Board
(focused on the internal control system, as the risk
management system effectiveness was separately
reviewed and endorsed by the Risk Committee of
the Company);
• Report on Evaluation of Effectiveness of Internal Audit
Department for 2019;
• Continuing Connected Transactions for 2019;
•
Internal Audit Department’s Reports;
• Whistle-blowing Progress Reports; and
• Approval of the 2021 Internal Audit Plan.
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AUDIT COMMITTEE REPORT RE-APPOINTMENT OF
EXTERNAL AUDITOR
The Committee was satisfied with KPMG’s work, its
independence and objectivity, and therefore recommended
the re-appointment of KPMG (which has indicated
its willingness to continue in office) as the Group’s
external auditor for 2021 for approval by the Company’s
Shareholders at the 2021 Annual General Meeting.
Dr Eddy Fong Ching
Audit Committee Chairman
Hong Kong, 11 March 2021
The Audit Committee Report has been reviewed and endorsed by the Committee.
External Auditor
• KPMG’s reports on the salient features of the 2019
Annual Accounts and 2020 Interim Accounts respectively;
• 2019 Auditor’s Report;
• KPMG’s independence and other relevant factors when
approving the appointment of KPMG in providing
non-audit services; pre-approval of the engagement
of KPMG to provide non-audit services; and KPMG’s
confirmation of independence in its audit report in
respect of the 2019 Annual Accounts and 2020 Interim
Accounts respectively;
• Summary of KPMG services provided to the Company
and fees received by them;
• Approval of KPMG’s fee proposal for the 2020 annual
audit and the 2021 interim review, as well as other
audit related and tax services; and
• KPMG’s audit plan and strategy for the year ended
31 December 2020.
Governance
• Report on compliance with statutes and regulations,
Operating Agreement and Rail Merger Related
Agreements in 2019 and outstanding litigation/
potential litigation;
• Updates on the Three Lines of Defence of the
Company; and
• Summaries on the salient features of the Audit/Risk/
Governance Committee Minutes of various subsidiaries
of the Company.
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Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis SYSTEM FEATURES
Business units across the Company embrace the
Company’s Enterprise Risk Management (“ERM”)
framework that underpins their day-to-day business
activities. The framework provides a simple and effective
management process to:
•
Identify and review risks across all business units of
the organisation
• Prioritise resources to manage risks
• Give management a clear view of the significant risks
facing the Company
• Support decision making and project execution for
better business performance
The Board, with the assistance of the Risk Committee,
oversees the Company’s ERM framework and top
risks, whereas the Executive Committee, with the
support of the Enterprise Risk Committee (“ERC”), is
overall accountable for the ERM policy and system
implementation and continuous improvement.
The Executives provide top-down views on the key risks
of the Company through discussions on the quarterly
enterprise risk reports. Two “Blue Sky” workshops were
also held in February and August 2020 adopting a
“futures” thinking approach. At the February workshop,
the Executives reviewed the latest challenges around
Environmental, Social and Governance (“ESG”) issues,
which provided important input to the development of
the new Corporate Strategy. As disclosed elsewhere in
this Report, the outbreak of the COVID-19 pandemic has
significantly affected the Company’s businesses. While
the ultimate duration and scale of the COVID-19 impact
remain uncertain, at the August workshop the Executives
deliberated on potential medium and long-term risk
scenarios arising from the pandemic, with follow-up
actions formulated to mitigate the associated impacts.
The Company’s risks are rigorously identified, assessed
and managed. Each risk is evaluated on the basis of the
likelihood of the identified risk and the consequence
of the risk event, taking into consideration the control
measures in place. A risk matrix is used to determine
risk ratings (E1 – E4), with E1 being a very high risk and
E4 being a low risk. The risk ratings reflect the required
management attention and risk treatment effort, and take
into account the Company’s risk appetite. The highest
category of risks, “E1”, is subject to Board, Risk Committee
and Executive Committee oversight.
While risk taking is inevitable in the course of business,
the Company’s appetite for risk varies, but is particularly
low in certain areas, such as in relation to safety and the
provision of a reliable transport service.
The Company’s ERM system provides an important
internal control in identifying and managing risks
affecting the Company. As a learning organisation, the
Company constantly looks for improvement opportunities
through internal and external reviews and studies, as
well as learning from incidents encountered during its
operations. The commencement of the new signaling
Board
assisted by
Risk
Committee*
Executive Committee
assisted by
Enterprise Risk Committee
Business Units
• Exercise ongoing risk oversight
• Establish appropriate risk management strategies
• Oversee the ERM framework
• Review top risks and emerging risks
• Conduct annual review of ERM system effectiveness
Implement and continuously improve ERM framework
•
• Enterprise Risk Committee
- Chaired by Legal and Governance Director
- Comprises representatives from key business functions
- Steers framework implementation and improvement
- Reviews Company’s top risks and key emerging risks
- Reports to Executive Committee and Risk Committee
quarterly, and to Board every six months
• Establish arrangements and implement risk management
process consistent with the Company’s ERM framework
and policy
• Capture identified risks in risk registers for regular review
and monitoring
*
See the Risk Committee Report (pages 130 to 131 of this Annual Report) for
duties and work performed by the Committee in 2020
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RISK MANAGEMENT system and gradual introduction of nine-car trains on the
East Rail Line as part of the Shatin to Central Link project,
originally scheduled in mid-September 2020, has been
deferred to February 2021 due to a signaling system
issue which could have had a potential service impact.
Investigations have been undertaken and improvement
actions have been identified for implementation.
MANAGEMENT PROCESS FOR
SIGNIFICANT RISKS
The Company takes proactive measures to identify,
evaluate and manage significant risks arising from its
recurrent and growth businesses and from the constantly
changing business environment. Risk management
strategies are developed for different areas including but
not limited to construction, operations, finance, treasury,
safety and insurance.
The ERM Team within the Legal and Governance function
maintains a list of running issues and risk drivers pertinent
to the changing business and external environments,
which is used to assist the ERC in identifying potential
risks that may emerge.
In addition, the ERC, the Executive Committee and the
Risk Committee review the Company’s enterprise risk
profile and brainstorm emerging risks quarterly to ensure
that key risks and those cutting across different areas of
the business are captured.
Identify Risk*
Evaluate Risk
Treat Risk*
• Existing businesses
• Changing external
environment
• New projects or business
ventures
• New and emerging issues
or trends which may pose
significant risks
• List of running issues
and risk drivers for
brainstorming
• Change in laws and
regulations
* Areas below are not exhaustive
• Evaluate risk by estimating
• Take into account risk
likelihood and consequence
of the risk event
• Determine risk rating using
the risk matrix (E1-E4)
appetite
• Avoid risks where no
appetite and possible to
do so
• Mitigate – review controls
in place to evaluate
adequacy and effectiveness
and ensure owners in place
to implement
• Transfer – take out insurance
to transfer risks where cost
effective and efficient
• Accept once mitigated to
an appropriate level
Report and
Monitor Risk
• Capture risks in risk registers
• Periodic ERM reports to
– Enterprise Risk Committee
– Executive Committee
– Risk Committee
– Board
In 2020, the COVID-19 pandemic emerged as a key risk
that is significantly affecting the Company’s businesses
and has required careful management to mitigate the
financial, operational, human resources and societal
impacts. The Infectious Disease Management Team
(“IDMT”) has been activated to coordinate corporate-wide
strategic response actions across the Company according to
the Infectious Disease Business Continuity Plan, including
overseeing the stock level of Personal Protective
Equipment (“PPE”), recommending work arrangements
for risk reduction and issuing notices and situation
reports for staff communication. The Company has
made extra efforts and deployed additional resources to
maintain a hygienic environment for staff and customers,
including the deployment of new technology, such as
the Vapourized Hydrogen Peroxide (“VHP”) Robot, in
disinfecting company premises, stations and trains.
The long-term financial sustainability of the Company
is continuously monitored by the Executive Committee
and the Board. The impact of the Public Order Events
in 2019 and the prolonged COVID-19 pandemic have
caused short-term financial impacts on the Company’s
businesses, as previously disclosed. To mitigate
the impacts, cost control initiatives, include service
adjustments, a recruitment freeze as well as a reduction
in discretionary spending, have been put in place.
Further, the Company continues to maintain low gearing,
even under the current difficult situation. Overall, the
financial position of the Company remains sound. The
Company has also started implementing transformation
initiatives with a view to further improving the Company’s
profitability in the longer term and ensuring long-term
financial sustainability.
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Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis Key focus areas for risk management of the Company include:
Effective and Balanced Relationship with Key Stakeholders
Key Challenges
• Challenging political landscape and diverse stakeholders’ expectations
• Uphold trust and public confidence in light of the earlier Shatin to Central Link incident, the Public Order Events
and operational incidents
Key Controls
•
Implement tailored engagement plans for different stakeholders to maintain effective communication
and understanding
• Observe the Company’s operating obligations and maintain good performance of the Company
People and Operations Safety
Key Challenges
• Health threat to the workforce, loss of productivity and potential impact on normal operations arising from the
COVID-19 pandemic
• More challenging employee relations environment due to more diverse and polarised views
• Safety and security threats associated with potential further Public Order Events
Key Controls
• Enhanced cleaning and sterilisation at workplaces, including offices, depots, stations and trains, provision of face
masks and personal protective equipment for staff, special work arrangements such as fixed team, split team and
work-from-home arrangements
• Robust tracking and management protocol for confirmed or close-contact cases in the workforce
•
• Proactive employee engagement through various communication channels including virtual meetings and close
Implementation of business continuity arrangements
communication with staff bodies
• Enhanced security arrangements
• Review of asset and design standards
Key Challenges
• Adherence to programme, cost and quality of projects
New Projects Quality, Delivery and Cost
Key Controls
• Periodic audits and assurance to ensure compliance with processes and procedures
• Monitoring project quality and progress against Key Performance Indicators
• Familiarization of staff with the processes and procedures relevant to their work and encouraging lessons learned
Key Challenges
Key Controls
Key Challenges
to be shared
• Adoption of technology to strengthen supervision and record keeping
• Stringent control of contingency funds
New Business Model/Technological Disruption/Competition
• Current business model disrupted by new technology
• Manage competition from other transport modes
Invest in technology and digital solutions to strengthen business model
•
• Monitor competition from other transport modes and implement initiatives to maintain market share
Delivery of Growth Strategy
• Challenging business model for future new lines in Hong Kong
• Keen competition for business opportunities outside Hong Kong
• Business performance below the bid models and assumptions
• Heightened geopolitical risk
Key Controls
• Formulate innovative business models for new lines in Hong Kong
• Maximise branding effect of the Company and stakeholder engagement
• Diversify the Company’s businesses in locations outside Hong Kong and conduct regular environmental scan for
new business opportunities
• Formulate and implement business plans for underperforming businesses for improvement and monitoring
Security Threat (Cyber/Physical)
Key Challenges
Key Controls
• Threat of cyber-attack on Operations and IT systems
• Threats associated with Public Order Events
• Terrorist attack threat, in particular for railway operations of the Company outside Hong Kong
Implementation of cyber security protection systems for IT and railway operations systems
• Enhanced IT network resilience to protect the Company against cyber attacks
•
• Enhanced security measures
• Enhanced corporate security governance framework
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RISK MANAGEMENT Process of System Effectiveness Review
On behalf of the Executive Committee, the ERC evaluates the effectiveness of the ERM system at least annually. The Legal
and Governance Director, who chairs the ERC, presented the ERM system effectiveness review results for the year ended
31 December 2020 to the Executive Committee, which confirmed the review results, on 11 February 2021, and to the Risk
Committee on 26 February 2021.
For the year ended 31 December 2020, the Risk Committee, with delegated authority from the Board, has evaluated the
effectiveness and adequacy of the Company’s ERM system and considers that it is overall effective and adequate, based on a
number of review areas.
Factors considered during the review
• Review areas suggested in the Corporate Governance Code
for the Board’s annual review of the risk management system
• Annual internal certification of risk management
effectiveness by Department Heads and Heads of
subsidiaries/associates
• Risk management of subsidiaries and associates
• Benchmarking /roundtable/peer group ideas exchange
• Risk management training and promotion held in 2020
Conclusion
The ERM system was
considered overall effective
and adequate for the year
ended 31 December 2020.
CONTINUOUS PROCESS IMPROVEMENT
Key initiatives undertaken in relation to the ERM system in 2020 include the following:
• The ERM Team continued to produce ERM Newsletters for dissemination to all staff focusing on topical issues in risk
management, aiming to raise risk awareness and share good risk management practices.
• A series of 3 bite-sized animated videos, which form a story to promote risk management principles and application,
has also been developed. The last of the three videos was launched in March 2020. The fun and innovative approach
has received a good response with the series receiving over 6,000 views by staff.
•
In November 2020, a Risk Awareness Webinar adopting the theme “Forward Looking Risk Management” was held
covering topics such as the use of contactless technology for new travel norms and futuristic thinking tools. The
Webinar was attended by about 150 senior managers and was well received.
• Acting through the Risk Committee and the Audit Committee, the Board has mandated a review of the Company’s
internal control and risk management systems for Hong Kong operations. Following the first phase review conducted
in 2019, an external consultant, Arthur D Little, was appointed to conduct a deep-dive assessment of the Company’s
existing Three Lines of Defence framework, with a view to identifying any gaps in the framework and making
recommendations for improvement. The results of this assessment were presented to and endorsed by the Risk
Committee and the Audit Committee in late 2020. The next phase of the project will be to strengthen the Company’s
Second Line of Defence (in particular) in certain key risk areas through the establishment of new technical and
engineering Centres of Excellence and the adoption of a new assurance framework. A further update on progress will
be presented to the Risk Committee and the Audit Committee in mid-2021.
We keep ourselves abreast of the latest developments in risk management through reviews with users, cross-industry
benchmarking and experience sharing, including through participation in the UK ERM Roundtable and the HK ERM
Roundtable meetings.
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Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis As at the date of this Report, the Risk Committee of the
Company (referred to as the “Committee” in this report)
consists of seven non-executive Directors, five of whom
are Independent Non-executive Directors of the Company
(“INEDs”). Details of the Committee’s members and their
attendance records during 2020 are set out on pages 112
to 113 of this Annual Report.
The Committee, with delegated authority from the Board,
has evaluated the effectiveness and adequacy of the
Company’s Enterprise Risk Management (“ERM”) system
and considers that it is overall effective and adequate.
DUTIES OF THE COMMITTEE
The Committee’s Terms of Reference are available on the
respective websites of the Company (www.mtr.com.hk)
and The Stock Exchange of Hong Kong Limited.
The principal duties of the Committee include reviewing
the Company’s ERM framework, guidelines, policy and
procedures for risk assessment and risk management;
reviewing the Company’s top risks and key emerging
risks and the controls in place to mitigate such risks;
monitoring the Company’s risk profile; conducting “deep
dive” reviews on selected key risk areas; reviewing the
effectiveness of the ERM function; and reviewing the
Company’s crisis management arrangements.
The Committee assists the Board in overseeing the
Company’s ERM system on an ongoing basis. The
Committee reviews the effectiveness of the Company’s
ERM system annually, and reports to the Board in
relation to such review. More details of the features of
the ERM system and processes, the significant areas of
risk being managed, and the process used to review the
effectiveness of the ERM system are set out in the “Risk
Management” section on pages 126 to 129 of this Annual
Report. Each year, the Committee agrees on a list of
reviews and presentations in respect of selected key risk
areas to be considered for that year, taking into account
the ongoing activities of the Company at the material
time; and invites relevant management to present
on the subjects and conduct interactive discussions.
The list of matters to be considered is updated as
required to include any topical subjects or risks that
may emerge during the year. The Committee provides
observations and, where applicable, recommendations to
management, based on their reviews and discussions.
The secretary of the meetings draws up agendas for
each meeting in consultation with the chairman of the
Committee, making reference to the list of reviews and
presentations determined by the Committee, as well as
topical matters at the relevant time.
The chairman of the Committee summarises the activities
of the Committee and highlights issues arising therefrom
by a report to the Board after each Committee meeting.
The minutes of the Committee meetings are prepared by
the secretary of the meetings with details of the matters
considered by the Committee Members, including
recommendations and any observations raised by the
Committee Members. Draft minutes are circulated to the
Committee Members before adoption. The Committee
formally adopts the draft minutes at its next subsequent
meeting, after taking into account any comments that the
Committee Members may have on the draft minutes.
A total of four meetings have been scheduled to be held
on a quarterly basis in 2021.
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RISK COMMITTEE REPORT WORK PERFORMED BY THE
COMMITTEE IN 2020
In 2020, the Committee held four meetings. During
the year, the Committee reviewed the Company’s ERM
quarterly reports and the effectiveness of the Company’s
ERM system for the year ended 31 December 2019. A
review of the Company’s ERM annual report and ERM
system effectiveness for the year ended 31 December
2020 was conducted by the Committee on 26 February
2021.
The Committee reviewed the Company’s risk profile,
top risks and key emerging risks at each of its meetings.
At its first meeting, the Committee agreed on a list of
“deep dive” reviews and presentations on selected key
risk areas for the year (as adjusted during the course of
year), which reviews and presentations took place as
planned. Relevant Members of the Executive Directorate
and managers were invited to present on the “deep
dive” reviews to the Committee, with comments and
recommendations provided by the Committee for
appropriate action by management.
Acting through the Committee and the Audit Committee,
the Board has mandated a review of the Company’s
internal control and risk management systems for
Hong Kong operations. Following the first phase review
conducted in 2019, an external consultant, Arthur D Little,
was appointed to conduct a deep-dive assessment of the
Company’s existing Three Lines of Defence framework,
with a view to identifying any gaps in the framework and
making recommendations for improvement. The results
of this assessment were presented to and endorsed
by the Committee and Audit Committee in late 2020.
The next phase of the project will be to strengthen the
Company’s Second Line of Defence (in particular) in
certain key risk areas through the establishment of new
technical and engineering Centres of Excellence and the
adoption of a new assurance framework. A further update
on progress will be presented to the Committee and the
Audit Committee in mid-2021.
The Legal and Governance Director, the General
Manager – Governance & Risk Management and the
Senior Manager – Enterprise Risk, representing the ERM
function, attended all four meetings in 2020 to report and
answer questions on ERM related matters.
The Committee considered the following key matters in
2020:
•
Impact of Public Order Events on fare business, human
resources, station operations and asset management
and maintenance
• Special work arrangements for protection against
COVID-19 infection
• Medium to long term impact of COVID-19 and
associated risk scenarios
• Management Review Report on the High Speed Rail
trespassing incident which occurred on 9 December
2019
• Management of Derailment Risks
• Cyber security management of signalling systems
• Near Capacity Operations on the East Rail Line in light
of Mixed Fleet Operations
• RDS-2014 projects
• Readiness and preparation for Hangzhou Line 5 full
line opening
•
•
Interim update on Three Lines of Defence review
Insurance summary update
• Notable cyber security incidents summary overviews
• Major global rail accidents summary overviews
Andrew Brandler
Risk Committee Chairman
Hong Kong, 11 March 2021
The Risk Committee Report has been reviewed and endorsed by the Committee.
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Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis As at the date of this Report, the Capital Works Committee
of the Company (referred to as the “Committee” in this
report) consists of six Non-executive Directors, five of
whom are Independent Non-executive Directors of the
Company (“INEDs”). Mr Cheng Yan-kee succeeded Dr
Allan Wong Chi-yun as the Committee Chairman on
20 May 2020. Details of the Committee’s members and
their attendance records during 2020 are set out on
pages 112 to 113 of this Annual Report.
DUTIES OF THE COMMITTEE
The Committee’s Terms of Reference are available on the
website of the Company (www.mtr.com.hk).
The principal duties of the Committee include overseeing
any capital project of the Company in Hong Kong
and outside of Hong Kong involving design and/or
construction activities (“Relevant Project”) with a capital
value in excess of HK$10 billion and any other Relevant
Project, in the event that such Relevant Project is four
months or more behind programme on an overall basis;
reviewing the progress of such projects, from both a
programme and cost perspective; reviewing matters that
could have a material impact on the quality, delivery and
management of such projects, including processes and
protocols adopted by the Company in supervising and
managing the projects and non-compliances in relation
to materials, works and processes; checking that there
are adequate resources for such projects; keeping under
review the Company’s communication strategy and
protocols, and crisis management plans in respect of such
projects; and reporting to the Board on a quarterly basis
or ad hoc basis if the Committee deems appropriate, in
respect of the above.
Agendas for each meeting were drawn up taking into
account topical matters relating to the projects at the
relevant time.
The chairman of the Committee summarises the activities
of the Committee and highlights issues arising therefrom
in a report to the Board after each Committee meeting.
WORK PERFORMED BY THE
COMMITTEE IN 2020
In 2020, we saw the conclusion of the Commission of
Inquiry (“CoI”) hearing on Hung Hom Station, and the
subsequent issue of their final Report. The observations
therein and the follow up actions necessarily dominated
the Committee’s agenda in the first half of 2020. During
the year, consultant selection exercises carried out
for the Tung Chung Line Extension and the Tuen Mun
South Extension, and the major signalling issues also
merited the Committee’s attention. The Committee held
four meetings at which the following key matters were
reviewed and considered:
•
reports on the progress and cost status of the
Company’s capital projects under construction
including the Express Rail Link, Shatin to Central Link,
the Signalling Replacement Works on the urban lines
• special reports on the CoI and the Suitable Measures at
Hung Hom Station and follow up action
• planning work for the Tung Chung Line Extension, and
Tuen Mun South Extension
• progress of the Building Excellence programme
dealing with on-going project transformation
initiatives to enhance the Company’s capability in
railway capital project management
• half-yearly reports on the construction programme and
cost status of all the awarded development projects of
the Company’s Property Division in Hong Kong
• half-yearly reports on projects-related audits
conducted by the Company’s Internal Audit
Department
Projects Director, Engineering Director, Divisional General
Manager – New Projects and General Manager –
Procurement & Contracts attended all four Committee
meetings in 2020 to report and answer questions on
progress of projects and cost related matters. Executives
and senior managers were also invited to attend
Committee meetings when required. I thank Committee
members and colleagues for their support and hard work.
Mr Cheng Yan-kee
Capital Works Committee Chairman
Hong Kong, 11 March 2021
The Capital Works Committee Report has been reviewed and endorsed by
the Committee.
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133
CAPITAL WORKS COMMITTEE REPORT INTRODUCTION
The Remuneration Committee has been delegated the
authority to consider and recommend to the Board the
Company’s remuneration policy and the remuneration
packages of the Non-executive Directors, as well as to
review and determine the remuneration packages for
the Chief Executive Officer and other Members of the
Executive Directorate.
Throughout the year, the Committee met regularly to
discuss and approve remuneration issues pertaining to the
Company’s Core Incentive Scheme, long-term incentive
scheme, and also the remuneration packages of the Chief
Executive Officer and other Members of the Executive
Directorate in the light of the Company’s remuneration
policy, and to consider and make recommendations to
the Board on the remuneration packages of the Non-
executive Directors. In determining the remuneration of
the Chief Executive Officer, the Committee consults with
the Chairman and in the case of other Members of the
Executive Directorate, the Committee consults with both
the Chairman and the Chief Executive Officer in respect of
their recommendations.
Currently, the Committee has seven Non-executive
Directors, four of whom are independent Non-executive
Directors. The Chairman of the Remuneration
Committee is an independent Non-executive Director.
As necessary and with the agreement of the Chairman
of the Remuneration Committee, the Remuneration
Committee is authorised to obtain outside independent
professional advice to support the Committee on relevant
issues. No individual Director or any of his associates is
involved in deciding his own remuneration.
The principal responsibilities of the Remuneration
Committee include:
• Formulating a remuneration policy and practices that
facilitate the employment of top quality personnel;
• Recommending to the Board the remuneration of the
Non-executive Directors;
• Determining, with delegated responsibility, the
remuneration packages of Members of the Executive
Directorate; and
• Reviewing and approving performance-based
remuneration of Members of the Executive
Directorate by reference to the Board’s corporate goals
and objectives.
The Committee’s responsibilities are set out in its Terms
of Reference and are consistent with the Code.
This Remuneration Committee Report has been
reviewed and authorised by the Remuneration
Committee of the Company.
REMUNERATION POLICY
It is the Company’s policy to ensure that remuneration
is appropriate and aligns with the Company’s goals,
objectives and performance. To achieve this, the
Company has taken into consideration a number of
relevant factors such as salaries paid by comparable
companies, job responsibilities, duties and scope,
employment conditions elsewhere in the Company and
its subsidiaries, market practices, financial and
non-financial performance, and the desired mix of fixed
and performance-based remuneration.
The Company is committed to effective corporate
governance and employing and motivating top quality
personnel. The Company also recognises the importance
of a formal and transparent remuneration policy covering
its Board and Executive Directorate.
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REMUNERATION COMMITTEE REPORTCorporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis REMUNERATION FOR
NON-EXECUTIVE DIRECTORS
The Remuneration Committee makes recommendations
to the Board from time to time on the remuneration
of the Members of the Board who are Non-executive
Directors. The remuneration of Non-executive Directors is
in the form of annual director’s fees.
To ensure that Non-executive Directors are appropriately
remunerated for their time and responsibilities devoted
to the Company, the Committee undertakes periodic
reviews and considers the following factors as they put
forward recommendations to the Board:
• Fees paid by comparable companies;
• Time commitment;
• Responsibilities of the Non-executive Directors; and
• Employment conditions elsewhere in the Company.
Details of the remuneration for Non-executive Directors
are set out in note 11 to the accounts. The current
Non-executive Director remuneration framework, in
effect since 1 January 2017, is set out below:
Board
– Chairman
– Other Members
(HK$)
1,500,000
300,000
Audit Committee and Capital Works Committee
– Chairman
– Other Members
Risk Committee, Remuneration Committee,
Nominations Committee, and Corporate
Responsibility Committee
– Chairman
– Other Members
150,000
90,000
110,000
60,000
REMUNERATION FOR
EMPLOYEES
The Company’s remuneration structure for its employees,
including the Chief Executive Officer and other Members
of the Executive Directorate, comprises:
•
fixed compensation – base salary, allowances
and benefits-in-kind (e.g. medical);
• variable incentives – discretionary or
performance-based payment and other
business-specific cash incentive plans;
•
long-term incentives – e.g. restricted shares
and performance shares; and
•
retirement schemes.
The specifics of these components are described below.
Fixed Compensation
Base salary and allowances are set and reviewed annually.
The annual review process takes into consideration the
Company’s remuneration policy, competitive market
positioning, market practice, as well as the Company’s
and the individuals’ performance. Benefits-in-kind
are reviewed as and when appropriate taking into
consideration market practices.
Variable Incentives
The Chief Executive Officer, other Members of the
Executive Directorate and management of the Company
are eligible to receive an annual performance-based
cash incentive under the Company’s Core Incentive
Scheme (“CIS”), the terms and rules of which are regularly
reviewed by the Remuneration Committee.
Under the current scheme rules, the overall CIS funding is
subject to the Company’s performance which is measured
by both financial and non-financial factors including:
Financial Factors
• Operating profit;
• EBITDA margin; and
• Hong Kong property development profits.
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REMUNERATION COMMITTEE REPORT Non-financial Factors
• Results from Customer satisfaction surveys;
• Fulfillment of the Customer Service Pledges; and
• Fulfillment of Performance Requirements in relation to
“Train Service Delivery”, “Passenger Journeys on Time”
and “Train Punctuality” as defined in Schedule 2, Part 1
of the Operating Agreement.
CIS funding will be automatically reduced if the Company
does not achieve any one or more of the Performance
Requirements. They will also be adjusted subject to the
Company’s achievement of all the Customer Service
Pledges. The final payout will then be adjusted based on
the performance of individual employees.
Following the end of each year, the Company engages
an independent expert to conduct a review and audit of
its performance against the Performance Requirements
and Customer Service Pledges. The results of this
audit are shared with the Remuneration Committee
to determine if adjustments to the funding under the
scheme are appropriate.
Individual performance ratings are part of the thorough
annual performance assessment process that is applied
throughout the Company. The performance ratings and
assessments reflect the full range of factors over which
the individual has accountability, including operational,
other non-financial and financial factors. Performance for
the Chief Executive Officer is assessed by the Chairman,
and the individual performance ratings for other
Members of the Executive Directorate are determined by
the Chief Executive Officer.
Target incentive levels for the Chief Executive Officer and
other Members of the Executive Directorate represent
approximately 25-35% of total cash compensation.
In addition, the Company operates other business-related
incentive schemes to motivate the staff concerned to
reach specific business targets of the Company.
Discretionary Awards
In 2020, discretionary awards were provided to
non-managerial staff with competent or above
performance, as a recognition of their contribution to
the Company’s performance and achievements in the
past year and to motivate staff to strive for continuous
business growth. In addition, a one-off special
discretionary award was granted to all staff except for key
corporate management in 2020 as a token of appreciation
for their hard work to keep Hong Kong moving in the past
year, in spite of the challenges arising from the pandemic.
Long-Term Incentives
During 2020, the Company maintained the 2007 Share
Option Scheme and the Executive Share Incentive
Scheme (formerly the “2014 Share Incentive Scheme”).
(i) 2007 Share Option Scheme
The 2007 Share Option Scheme was approved and
adopted by shareholders at the Company’s Annual
General Meeting on 7 June 2007 and terminated
on 6 June 2014. Under the terms of the 2007 Scheme,
no new grant of options could be made after 5:00 p.m.
on 6 June 2014. The Scheme includes a provision which
specifies that options cannot be exercised under the
Scheme unless the Company has satisfied each of the three
Key Performance Requirements included in the Operating
Agreement in order for any options to be exercised.
Options exercised and outstanding in respect of each
Member of the Executive Directorate as at 31 December
2020 under the 2007 Scheme are set out under the
paragraph “Directors’ Interests in Shares and Underlying
Shares of the Company” of the Report of the Members of
the Board.
Details of the 2007 Scheme and options granted to
Members of the Executive Directorate and selected
employees of the Company under the Schemes are set
out in notes 11 and 41 to the accounts.
(ii) Executive Share Incentive Scheme
On 15 August 2014, the Board approved the adoption
of the Executive Share Incentive Scheme, following the
expiry of the 2007 Share Option Scheme on 6 June 2014.
The Executive Share Incentive Scheme took effect on
1 January 2015 for a term of 10 years (unless terminated
earlier by the Company).
The purposes of the Executive Share Incentive Scheme
are to retain management and key employees, to align
participants’ interest with the long-term success of the
Company and to drive the achievement of strategic
objectives of the Company.
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Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis The Remuneration Committee may, from time to time,
at its absolute discretion, determine the criteria for any
eligible employee to participate in the Executive Share
Incentive Scheme as award holders in accordance with
the rules of the Executive Share Incentive Scheme. An
award holder may be granted an award of Restricted
Shares and/or Performance Shares. Awards under the
Executive Share Incentive Scheme were granted to
selected employees of the Company, including Members
of the Executive Directorate, in 2020. Award holders
are entitled to cash dividends accrued in respect of
unvested Restricted Shares that are granted on or after
1 January 2018.
Restricted Shares are awarded on the basis of the
individual performance of the relevant eligible employee
and vest ratably over three years in equal tranches (unless
otherwise determined by the Remuneration Committee).
Performance Shares are awarded which vest subject to
the performance of the Company over a pre-determined
performance period, assessed with reference to such
Board-approved performance metric and in respect of
such performance period, and any other performance
conditions, as determined by the Remuneration
Committee from time to time.
In general, the Company will pay to the third party trustee
(the “Trustee”) monies and may give directions or a
recommendation to the Trustee to apply such amount
of monies and/or such other net amount of cash derived
from shares held as part of the funds of the trust to
acquire existing shares from the market. Such shares will
be held on trust by the Trustee for the relevant award
holder. The Trustee shall not exercise any voting rights
in respect of any shares held in the trust and no award
holder is entitled to instruct the Trustee to exercise the
voting rights in respect of any unvested award shares.
As part of the overall governance of the Executive
Share Incentive Scheme, the Company reviews scheme
features on a regular basis to ensure continued relevance
and effectiveness.
Details of the Executive Share Incentive Scheme and
shares granted to Members of the Executive Directorate
and selected employees of the Company under the
Executive Share Incentive Scheme are set out in notes 11
and 41 to the accounts.
Retirement Schemes
In Hong Kong, the Company operates four retirement
schemes under trust, the MTR Corporation Limited
Retirement Scheme (the “MTR Retirement Scheme”),
the MTR Corporation Limited Provident Fund Scheme
(the “MTR Provident Fund Scheme”) and two Mandatory
Provident Fund (“MPF”) Schemes, the “MTR MPF Scheme”
and the “KCRC MPF Scheme”, with details as follows:
(i) MTR Retirement Scheme
The MTR Retirement Scheme is a defined benefit scheme
registered under the Occupational Retirement Schemes
Ordinance (Cap. 426) (the “ORSO”) and has been granted
an MPF Exemption Certificate by the Mandatory Provident
Fund Schemes Authority (the “MPFA”).
The MTR Retirement Scheme has been closed to new
employees from 1 April 1999 onwards. It is administrated
in accordance with the Trust Deed and Rules by the Board
of Trustees, comprising management and employee
representatives, and independent non-employer
trustees. It provides benefits based on the greater of a
multiple of final salary times service and a factor times
the accumulated member contributions with investment
returns. Members’ contributions are based on fixed
percentages of base salary. The Company’s contributions
are determined by reference to an annual actuarial
valuation carried out by an independent actuarial
consulting firm.
(ii) MTR Provident Fund Scheme
The MTR Provident Fund Scheme is a defined
contribution scheme registered under the ORSO and
has been granted an MPF Exemption Certificate by the
MPFA. All benefits payable under the MTR Provident Fund
Scheme are calculated by reference to members’ own
contributions and the Company’s contributions, together
with investment returns on these contributions. Both
members’ and the Company’s contributions are based on
fixed percentages of members’ base salary.
(iii) MTR MPF Scheme
The MTR MPF Scheme is a defined contribution scheme
covered under an MPF master trust registered with the
MPFA. It covers those employees who did not opt for or
who are not eligible to join the MTR Retirement Scheme
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REMUNERATION COMMITTEE REPORT or the MTR Provident Fund Scheme. Both members and
the Company each contribute to the MTR MPF Scheme
at the mandatory levels as required by the Mandatory
Provident Fund Schemes Ordinance (Cap. 485) (the
“MPFSO”). The Company makes additional contributions
above the mandatory level for eligible members who
joined the MTR MPF Scheme before 1 April 2008, subject
to individual terms of employment.
(iv) KCRC MPF Scheme
The KCRC MPF Scheme is a defined contribution scheme
covered under an MPF master trust registered with the
MPFA. It covers those former KCRC employees who were
previously members of the KCRC MPF scheme and are
eligible to join the MTR Provident Fund Scheme but opt
to re-join the KCRC MPF Scheme. Both members and the
Company each contribute to the KCRC MPF Scheme at
the mandatory levels as required by the MPFSO.
The Members of the Executive Directorate who were
hired by the Company before 1 April 1999 are eligible to
join the MTR Retirement Scheme. Other Members of the
Executive Directorate are eligible to join either the MTR
Provident Fund Scheme or the MTR MPF Scheme.
Dr. Jacob Kam, the Company’s Chief Executive Officer
effective from 1 April 2019, participates in the MTR
Provident Fund Scheme.
For subsidiary companies in Hong Kong, Macau, the
Mainland of China, United Kingdom, Sweden and
Australia, the Group operates retirement schemes
established in accordance with, in the case of subsidiaries
in Hong Kong, the MPFSO and, in the case of subsidiaries
in Macau, the Mainland of China and overseas, their
respective local laws and regulations.
WORK PERFORMED BY THE
REMUNERATION COMMITTEE
DURING THE YEAR
• Approved the 2019 Remuneration Committee Report
as incorporated in the 2019 Annual Report;
•
reviewed and approved payouts under the
Company’s performance-based CIS for the 2019
performance period;
•
reviewed and approved restricted share and/or
performance share awards for eligible employees
under the Executive Share Incentive Scheme;
• conducted an annual review of the remuneration
packages for Members of the Executive Directorate,
which took effect in July 2020;
• conducted review on the remuneration packages for
Members of the Executive Directorate, as appropriate;
and
• approved refinements of the CIS to take effect in
2021 and endorsed the performance metrics which
determine the vesting of Performance Shares covering
the performance period of 2021-2023 under the
Executive Share Incentive Scheme.
REMUNERATION OF
NON-EXECUTIVE AND
EXECUTIVE DIRECTORS
The total remuneration of the Members of the Board
and the Executive Directorate (excluding share-based
payments) is shown below and the remuneration details
are set out in note 11 to the accounts.
in HK$ million
Fees
Base salaries, allowances and other
benefits-in-kind
Variable remuneration related to performance
Retirement scheme contributions
Total
2020
9.3
2019
10.0
54.2
55.1
3.5
6.6
8.1
6.2
73.6
79.4
Please refer to note 11 to the accounts for information
relating to the five highest paid employees of the
Company for the year ended 31 December 2020.
Dr Dorothy Chan Yuen Tak-fai
Remuneration Committee Chairperson
Hong Kong, 22 February 2021
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Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis Full biographies of Members of the Board and the Executive Directorate are available on the Company’s website
(www.mtr.com.hk).
MEMBERS OF THE BOARD
Dr Rex
Auyeung Pak-kuen*
Age 68
Dr Jacob
Kam Chak-pui*
Age 59
Chairman since 1 July 2019
NED since 7 March 2019
Corporate Responsibility Committee (Chairman)
Nominations Committee (Member)
Remuneration Committee (Member)
Dr Auyeung is an independent non-executive director of
China Construction Bank (Asia) Corporation Limited and
C-MER Eye Care Holdings Limited.
Dr Auyeung has over 40 years of experience in the
insurance industry in Canada and Hong Kong. Before his
retirement in June 2017, Dr Auyeung was Chairman – Asia
of the Principal Financial Group Inc. (“PFG”), a Fortune 500
company, responsible for PFG’s overall businesses in Asia.
Dr Auyeung also actively serves the public sector and
is currently an observer of the Independent Police
Complaints Council Observers Scheme, and a member
of the Board of Directors of the Investor and Financial
Education Council under the Securities and Futures
Commission. In addition, he is a board member of Bo
Charity Foundation (Food Angel) and a convenor of the
Advisory Committee of the Jockey Club Community
eHealth Care Project.
Dr Auyeung was previously an independent
non-executive director of HSBC Provident Fund Trustee
(Hong Kong) Limited, Standard Life (Asia) Limited and
Sompo Insurance China Co. , Ltd. , the chairman of Hong
Kong Strategy for Financial Literacy Sub-committee on
Stakeholder Coordination and Collaboration, a member
of the Independent Review Committee on Hong Kong’s
Franchised Bus Service, the chairman of the Council of
Lingnan University and the Senior Strategy and Business
Advisor at Athenex Inc. , a company listed on NASDAQ in
the United States of America.
Chief Executive Officer (“CEO”)
since 1 April 2019
Corporate Responsibility Committee (Member)
Dr Kam joined the Company in 1995 and had held various
management positions in the Operations, Projects and
Mainland China and International Business Divisions.
As the CEO, Dr Kam is responsible for all performance
of the Company and its group companies, both in and
outside Hong Kong.
Dr Kam is the chairman of the Regional and Suburban
Railways Division of the International Association of
Public Transport (UITP), a member of the Hong Kong
Quality Assurance Agency Governing Council, a member
of the board of directors of The Community Chest of
Hong Kong, a member of the General Committee of The
Hong Kong General Chamber of Commerce, and a council
member of The Hong Kong Management Association.
Dr Kam qualified as a Chartered Engineer in the United
Kingdom in 1989.
Andrew Clifford
Winawer Brandler
Age 64
INED since 17 May 2017
Risk Committee (Chairman)
Audit Committee (Member)
Mr Brandler is the chairman of Sir Elly Kadoorie & Sons
Limited. He was formerly the group managing director
and chief executive officer of CLP Holdings Limited from
2000 to 2013, an executive director between October
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BOARD AND EXECUTIVE DIRECTORATE 2013 and April 2014, and currently is a non-executive
director of that company. Mr Brandler is also the
non-executive deputy chairman of The Hongkong and
Shanghai Hotels, Limited, and a non-executive director of
Tai Ping Carpets International Limited. He is also currently
the Chairman of the Board of Governors of the Chinese
International School.
Prior to joining CLP Holdings Limited in 2000, Mr Brandler
was an investment banker, his last position being Head
of Asia Pacific Corporate Finance at Schroders based
in Hong Kong. He is the former chairman of The Hong
Kong General Chamber of Commerce and a member of
the Operations Review Committee of the Independent
Commission Against Corruption.
Mr Brandler is a member of The Institute of Chartered
Accountants in England and Wales.
Dr Bunny
Chan Chung-bun
Age 63
INED since 20 May 2020
Corporate Responsibility Committee (Member)
Dr Chan has over 30 years of experience in the garment
industry and is the founder and chairman of Prospectful
Holdings Limited. He is an independent non-executive
director of Li Ning Company Limited, Great Harvest
Maeta Group Holdings Limited, Speedy Global Holdings
Limited and Glorious Sun Enterprises Limited. Dr Chan is
currently a member of the Hong Kong delegation to the
National People’s Congress of the People’s Republic of
China. He is also the chairman and a founding member of
the Hong Kong Army Cadets Association, the President
of the Kowloon Federation of Associations, a member of
the Court of The Open University of Hong Kong, and an
advisor to Our Hong Kong Foundation.
Dr Chan was appointed to the Commission on Youth in
2004 and was the chairman from 2009 to 2015. He set
up the Hong Kong Association of Youth Development
in 2007 and was the former chairman of the Kwun
Tong District Council and the vice-chairperson of the
Community Care Fund Task Force of the Commission on
Poverty. Dr Chan also served on the Financial Reporting
Council, the Social Welfare Advisory Committee, the
Personal Data (Privacy) Advisory Committee, and the
Council for Sustainable Development.
Walter
Chan Kar-lok
Age 67
INED since 22 May 2019
Nominations Committee (Member)
Corporate Responsibility Committee (Member)
Mr Chan has been a practising lawyer for over 39 years
and is currently a consultant of Messrs. So, Lung &
Associates, Solicitors and Messrs. Rowland Chow, Chan
& Co. , Solicitors. He is also a China Appointed Attesting
Officer. Mr Chan currently is the chairman of The Hong
Kong Housing Society, a convenor-cum-member of the
Pensions Appeal Panel under the Civil Service Bureau,
and a member of the Advisory Committee on Post-service
Employment of Civil Servants.
Mr Chan was formerly the chairman of Appeal Tribunal
(Buildings), a non-executive director of the Urban
Renewal Authority, and a member of the Housing
Authority, the Town Planning Board, the Harbourfront
Commission and the Board of Advisors of Radio Television
Hong Kong.
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Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis Community College. She is an independent non-executive
director of AMS Public Transport Holdings Limited, the
chairperson of the Sustainable Agricultural Development
Fund Advisory Committee, a director of TWGHs E-Co
Village Limited, a Strategy Advisor to the Serco Group
(HK) Limited, a member of the Board of Governors of the
Hong Kong Institute for Public Administration, and the
Honorary Fellow of the Chartered Institute of Logistics
and Transport (“CILT”).
Dr Chan was a board member of the Logistics and Supply
Chain MultiTech R&D Centre Limited, a member of the
Social Welfare Advisory Committee and the Advisory
Council on Environment of the HKSAR Government, and
the International President, the Global Chairperson and
a Global Advisor for Women in Logistics and Transport
in CILT. She was previously the Deputy Commissioner
for Transport of Government from 1995 to 2002. From
2000 to 2002, Dr Chan was the Alternate Director to the
office of the Commissioner for Transport, a Non-executive
Director of the Company.
Cheng Yan-kee*
Age 66
INED since 22 May 2019
Capital Works Committee (Chairman)
Remuneration Committee (Member)
Mr Cheng is a practising civil and structural engineer,
and an Authorised Person and a Registered Structural
Engineer under the Buildings Ordinance. He is also a
Class 1 Registered Structural Engineer in the People’s
Republic of China.
Dr Pamela
Chan Wong Shui
Age 74
INED since 4 July 2013
Nominations Committee (Chairman)
Corporate Responsibility Committee (Member)
Dr Chan is chairman of The Insurance Complaints Bureau,
vice-chairman of The Boys’ and Girls’ Clubs Association of
Hong Kong, an independent director of the Travel Industry
Council of Hong Kong, a member of the Judicial Officers
Recommendation Commission, chairman of the Advisory
Committee of the Department of Social Behavioural
Sciences of City University of Hong Kong and a member of
the board of The Community Chest of Hong Kong. She is
also patron of Consumers International.
Dr Chan was chief executive of the Consumer Council,
chairman of the Hong Kong Deposit Protection Board,
deputy chairman of the Hong Kong Baptist University
Council and the Court, chairman of the governing
committee of Princess Margaret Hospital, and a member
of the Law Reform Commission of Hong Kong, Hospital
Authority, The Hong Kong Housing Authority,
Estate Agents Authority and the Private Columbaria
Appeal Board.
Dr Dorothy
Chan Yuen Tak-fai*
Age 71
INED since 4 July 2013
Remuneration Committee (Chairman)
Capital Works Committee (Member)
Dr Chan is currently the Deputy Director (Administration
and Resources), Head of Centre for Logistics & Transport
and advisor of the International College of the HKU
School of Professional and Continuing Education, and a
council member of HKU SPACE Po Leung Kuk Stanley Ho
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BOARD AND EXECUTIVE DIRECTORATE Mr Cheng currently is a director of H. K. Cheng & Partners
Limited and is a member of the Advisory Committee on
Post-service Employment of Civil Servants.
Mr Cheng formerly was an independent non-executive
director of K. H. Group Holdings Limited, President of the
Institution of Structural Engineers, and Chairman of both
the Council of the Hong Kong Baptist University and the
Corruption Prevention Advisory Committee under the
Independent Commission Against Corruption. He was
also a member of the Hospital Authority, Town Planning
Board and Hong Kong Housing Authority.
Dr Anthony
Chow Wing-kin
Age 70
INED since 18 May 2016
Capital Works Committee (Member)
Remuneration Committee (Member)
Dr Chow is a solicitor admitted to practise in Hong Kong
and England and Wales. He has been a practising solicitor
in Hong Kong for over 34 years and is currently the Senior
Consultant and Global Chairman of the law firm Messrs.
Guantao & Chow Solicitors and Notaries. Dr Chow is a
China Appointed Attesting Officer and an arbitrator of
the South China International Economic and Trade
Arbitration Commission/Shenzhen Court of International
Arbitration. He is currently the deputy chairman of the
Council of The Hong Kong Academy for Performing Arts,
a non-executive director of Kingmaker Footwear Holdings
Limited, an independent non-executive director of
S. F. Holding Co., Ltd. and Ping An Healthcare and
Technology Company Limited, and an independent
director of OneConnect Financial Technology Co., Ltd.
Dr Chow was previously a non-executive director of
China City Construction Group Holdings Limited, an
independent non-executive director of Fountain Set
(Holdings) Limited and the president of The Law Society
of Hong Kong. He is the former chairman of the Process
Review Panel for the Securities and Futures Commission
of Hong Kong and the board of stewards of The Hong
Kong Jockey Club.
Dr Eddy
Fong Ching*^
Age 74
INED since 13 January 2015
Audit Committee (Chairman)
Nominations Committee (Member)
Dr Fong is currently an independent non-executive
director of Standard Chartered Bank (Hong Kong) Limited.
Dr Fong was the non-executive chairman of the
Securities and Futures Commission from 2006 to 2012
and the past chairman of both the Council of The Open
University of Hong Kong and the Process Review Panel
in relation to the Regulation of Mandatory Provident
Fund Intermediaries. His other past public duties include
director of The Hong Kong Mortgage Corporation Limited,
the Mandatory Provident Fund Schemes Authority and
the Exchange Fund Investment Limited; a member of The
Hong Kong Housing Authority and the Greater Pearl River
Delta Business Council; and a council member of The
Hong Kong Academy for Performing Arts. Dr Fong was
also a senior audit partner with PricewaterhouseCoopers
specialising in capital markets work in Hong Kong and the
Mainland of China until his retirement in 2003.
Dr Fong is a member of the Institute of Chartered
Accountants in England and Wales and the Hong Kong
Institute of Certified Public Accountants.
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Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis Member of the West Kowloon Cultural District Authority,
and Vice Patron of the Community Chest of Hong Kong.
Ms Lee is a Fellow of The Hong Kong Institute of Bankers.
She was previously Vice-Chairman and Chief Executive of
Hang Seng Bank Limited, Group General Manager of HSBC
Holdings plc, Director of The Hongkong and Shanghai
Banking Corporation Limited and Chairman of the Board
of Governors of Hang Seng University. In addition, she
was previously Vice President of The Hong Kong Institute
of Bankers, Board Member and Deputy Chairman of the
Executive Committee of The Community Chest of Hong
Kong, and a member of the Financial Services Advisory
Committee of the Hong Kong Trade Development Council.
Lucia
Li Li Ka-lai#
Age 66
INED since 14 October 2014
Audit Committee (Member)
Nominations Committee (Member)
Mrs Li is a retired civil servant. She was Director of
Accounting Services of the HKSAR Government from
October 2003 to January 2009. Mrs Li was formerly a
member of the Public Service Commission, a member
of the Communications Authority, a board member
and treasurer of Chung Ying Theatre Company (HK)
Limited, and a member of a task force formed by the
Commissioner for Innovation and Technology to follow
up on the Director of Audit’s Report No. 61 with regard to
the Small Entrepreneur Research Assistance Programme.
Mrs Li is a Fellow member of the Hong Kong Institute of
Certified Public Accountants.
James
Kwan Yuk-choi#
Age 69
INED since 14 October 2014
Capital Works Committee (Member)
Risk Committee (Member)
Mr Kwan is currently an independent non-executive
director of Towngas China Company Limited.
Mr Kwan was previously a senior adviser, an executive
director and the chief operating officer of The Hong
Kong and China Gas Company Limited, and a director
of Shenzhen Gas Corporation Limited. He was also the
President of The Institution of Gas Engineers (currently
known as The Institution of Gas Engineers & Managers)
(“IGEM”) in the United Kingdom in 2000/2001 and The
Hong Kong Institution of Engineers (“HKIE”) in 2004/2005.
Mr Kwan is a former member of the Construction
Industry Council, the Transport Advisory Committee, the
Vocational Training Council, and the Standing Committee
on Disciplined Services Salaries and Conditions of Service
of the HKSAR Government.
Mr Kwan is a Chartered Engineer.
Rose
Lee Wai-mun^
Age 68
INED since 16 May 2018
Audit Committee (Member)
Risk Committee (Member)
Ms Lee is an Independent Non-Executive Director of CK
Hutchison Holdings Limited and Swire Pacific Limited. Ms
Lee is also a member of the Election Committee of the
13th National People’s Representative Meeting, a Board
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BOARD AND EXECUTIVE DIRECTORATE Chairman of its Broadcast Complaints Committee. He is
also an independent non-executive director of
BE Reinsurance Limited and United Builders Insurance
Company, Limited.
Mr Tang joined the Hong Kong Civil Service in 1974.
From the late 1990s to early 2000s, he served as the
Government Printer and the Commissioner of Insurance.
Mr Tang was appointed by the Central Government of
the People’s Republic of China as the Director of Audit of
the HKSAR in December 2003 until he retired in July 2012.
He was appointed a Commissioner of the Commission of
Inquiry Into the Collision of Vessels Near Lamma Island in
2012, and the Commission’s report was presented to the
Chief Executive in April 2013.
Johannes
Zhou Yuan
Age 65
INED since 17 May 2017
Audit Committee (Member)
Risk Committee (Member)
Mr Zhou is an independent director of Citibank (China)
Co. , Ltd.
Mr Zhou retired in June 2016 as Chief Strategic Officer of
China Investment Corporation (“CIC”). He joined CIC in
2008 and held a variety of portfolios of responsibilities
including alternative assets, direct investments, asset
allocation and finance/treasury. Prior to that, Mr Zhou
led Asia business development at Chicago Mercantile
Exchange. From 2001 to 2005, he worked as a financial
researcher and consultant, working on assignments
ranging in asset management, private equity, hedge
funds, risk models, financial software architecture, and
financial market reform, with consulting work done for
Jimmy
Ng Wing-ka
Age 51
INED since 22 May 2019
Capital Works Committee (Member)
Corporate Responsibility Committee (Member)
Mr Ng is a solicitor admitted to practise in Hong Kong
and currently is a partner of Messrs. Tung, Ng, Tse &
Lam, Solicitors. He is a Legislative Council member
representing the Industrial (Second) Functional
Constituency. Mr Ng is an independent non-executive
director of Yanchang Petroleum International Limited
and Glorious Sun Enterprises Limited. He is the chairman
of the Hong Kong – Taiwan Business Co-operation
Committee and the HKSAR Passports Appeal Board, a
vice-chairman of the Independent Police Complaints
Council, a director of Hong Kong Science and Technology
Parks Corporation, and a member of the Court of The
University of Hong Kong, the Council of The Hong Kong
Polytechnic University, the Competition Commission and
the Chinese People’s Political Consultative Conference of
Chongqing City, the People’s Republic of China.
Mr Ng was formerly an independent non-executive
director of China Weaving Materials Holdings Limited
and a member of the Small and Medium Enterprises
Committee of the Trade and Industry Department.
Benjamin
Tang Kwok-bun^
Age 69
INED since 14 October 2014
Remuneration Committee (Member)
Risk Committee (Member)
Mr Tang is Chairman of the Operations Review Committee
and a member of the Advisory Committee on Corruption
of the Independent Commission Against Corruption,
and a member of the Communications Authority and
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Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis the China Securities Regulatory Commission, Shanghai
Futures Exchange and a number of western firms. From
1998 to 2001, Mr Zhou was chief executive officer of
HKFE Clearing Corporation Limited and concurrently
chief financial officer of Hong Kong Futures Exchange
Limited, responsible for the Exchanges’s finance,
treasury, risk and clearing functions. He was UBS AG’s
China country head from 1994 to 1998, responsible for
the bank’s investment banking, commercial banking,
asset management and private banking businesses in
China. From 1988 to 1994, Mr Zhou worked at State
Street Bank in Boston, where he founded and managed
the research department. Prior to that, he taught at
Brandeis University, United States of America.
Christopher
Hui Ching-yu^
(Secretary for
Financial Services
and the Treasury)
Age 44
NED since 1 June 2020
Nominations Committee (Member)
Remuneration Committee (Member)
Mr Hui sits on the boards of several public bodies, including
Airport Authority Hong Kong, Mandatory Provident Fund
Schemes Authority, The Hong Kong Mortgage Corporation
Limited and West Kowloon Cultural District Authority,
and is the Chairman of the Kowloon-Canton Railway
Corporation and an ex-officio member of the Financial
Services Development Council (“FSDC”) in his official
capacity. He is also, in his official capacity, a director of
Hongkong International Theme Parks Limited. In addition,
Mr Hui is a member of the Democratic Alliance for the
Betterment and Progress of Hong Kong.
Mr Hui was an Administrative Officer in the HKSAR
Government from 1999 to 2003 and held different
positions in the Economic Development Branch, the
Office of the HKSAR Government in Beijing and the Home
Affairs Department. After he left the HKSAR Government
in 2003, Mr Hui worked in the banking sector before
joining Hong Kong Exchanges and Clearing Limited
(“HKEx”) in 2006. From 2006 to 2018, Mr Hui held various
senior positions in the Market Development Division and
Listing Division in HKEx and was the Managing Director
at the time he left HKEx. He was the Executive Director of
FSDC from 2019 to 2020.
Alternate Directors
(i) Joseph Chan Ho-lim (since 1 June 2020)
(ii) Alice Lau Yim (since 1 June 2020)
(iii) Maurice Loo Kam-wah (since 10 August 2020)
Secretary for
Transport and
Housing@
(Frank Chan Fan)
Age 63
NED since 1 July 2017
Nominations Committee (Member)
Remuneration Committee (Member)
Mr Chan, in his official capacity, acts as the chairman
of The Hong Kong Housing Authority and a board
member of Airport Authority Hong Kong. He is also a
non-executive director of The Hong Kong Mortgage
Corporation Limited.
Mr Chan joined the Electrical and Mechanical Services
Department as an Assistant Electronics Engineer in
August 1982. He was promoted to Chief Electronics
Engineer in February 2001 and to Government Electrical
and Mechanical Engineer in May 2005. Mr Chan was
appointed as the Deputy Director of Electrical and
Mechanical Services in January 2009 and was the Director
of Electrical and Mechanical Services and the General
Manager of the Electrical and Mechanical Services Trading
Fund from December 2011 to June 2017.
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BOARD AND EXECUTIVE DIRECTORATE Mr Chan is an Honorary Fellow of the Institution of
Mechanical Engineers, United Kingdom, and a Fellow of
The Hong Kong Institution of Engineers.
Alternate Directors
(i) Under Secretary for Transport and Housing
(Dr Raymond So Wai-man since 25 September 2017)
(ii) Permanent Secretary for Transport and Housing (Transport)
(Mable Chan since 1 August 2020)
(iii) Deputy Secretaries for Transport and Housing (Transport)
(Amy Wong Pui-man since 14 December 2020 and
Sharon Yip Lee Hang-yee since 15 July 2019)
Commissioner
for Transport@
(Rosanna
Law Shuk-pui)
Age 53
NED since 9 September 2020
Audit Committee (Member)
Risk Committee (Member)
Permanent Secretary
for Development
(Works)@
(Lam Sai-hung)
Age 59
NED since 13 October 2018
Capital Works Committee (Member)
Risk Committee (Member)
Mr Lam joined the Hong Kong Government in August
1986 and was the Director of Civil Engineering and
Development from September 2016 to October 2018.
Mr Lam is a Fellow of The Hong Kong Institution of
Engineers, the Institution of Civil Engineers, United
Kingdom, and the China Hong Kong Railway Institution.
Alternate Director
Deputy Secretary for Development (Works)2
(Mak Shing-cheung since 5 October 2016)
Miss Law, in her official capacity as Commissioner for
Transport, also serves as a director of several
transport-related companies including The Kowloon
Motor Bus Company (1933) Limited, Long Win Bus
Company Limited, New World First Bus Services Limited,
New Lantao Bus Company (1973) Limited, Citybus
Limited, The “Star” Ferry Company Limited, New Hong
Kong Tunnel Company Limited, Western Harbour Tunnel
Company Limited and Route 3 (CPS) Company Limited.
Miss Law joined the Hong Kong Government in
1989 and has served in various policy bureaux and
departments, including as Principal Assistant Secretary
for the Environment, Transport and Works (Transport)
(later renamed to Principal Assistant Secretary for
Transport and Housing (Transport)) from March 2007 to
August 2009, Deputy Commissioner for Tourism from
August 2010 to September 2016, and Deputy Secretary
for Constitutional and Mainland Affairs from September
2016 to September 2020.
Alternate Director
Deputy Commissioner for Transport/Transport Services
and Management
(Macella Lee Sui-chun since 1 September 2016)
Notes:
* Also a director of the Company’s subsidiary(ies).
^ Up for retirement by rotation and eligible for re-election/election at the Company’s forthcoming Annual General Meeting (“AGM”).
# Director who will retire after the conclusion of the Company’s forthcoming AGM.
@ Director appointed by the Chief Executive of the HKSAR pursuant to Section 8 of the MTR Ordinance, who is not required to retire by rotation under the Articles
of Association.
INED : independent non-executive director
NED : non-executive director
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Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis Members of the Executive Directorate
From left to right:
Linda Choy Siu-min, Margaret Cheng Wai-ching, Dr Tony Lee Kar-yun, Adi Lau Tin-shing, Dr Jacob Kam Chak-pui,
Herbert Hui Leung-wah, Jeny Yeung Mei-chun, David Tang Chi-fai, Gillian Elizabeth Meller, Roger Francis Bayliss
A composite photograph at the Kai Tak Station.
MEMBERS OF THE EXECUTIVE DIRECTORATE
Dr Jacob Kam Chak-pui*
Age 59
Adi Lau Tin-shing*
Age 61
Chief Executive Officer (since 1 April 2019)
Corporate Responsibility Committee (Member)
Managing Director – Operations and
Mainland Business (since 1 January 2020)
His biography is set out on page 138.
Mr Lau joined the Company in 1982 and has held
various management positions related to the design,
construction, operations and maintenance of the
Company’s railway system in Hong Kong and the
Company’s rail business in the Mainland of China.
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147
BOARD AND EXECUTIVE DIRECTORATE Roger Francis Bayliss
Age 64
Capital Works Director (since 22 February 2021)
Mr Bayliss joined the Company as Projects Director in
March 2019.
Mr Bayliss is responsible for leading the Capital Works
Business Unit, overseeing the Company’s capital
works portfolio covering new railway extensions and
operations projects.
Mr Bayliss has over 40 years of experience in project
management, implementation and delivery of large scale
infrastructure and railway projects in Hong Kong, the
Mainland of China and the United Kingdom. Between
1992 and 2004, he worked for the Company and managed
the completion of several construction contracts leading
to the delivery of the Lantau Airport Railway, the Tseung
Kwan O Extension and Ngong Ping 360. In 2004, Mr
Bayliss joined BAA plc. (now known as LHR Airports
Limited), prior to joining Skanska UK in 2007. Before
joining the Company, he was the Senior Vice President
Operational Efficiency (responsible for driving operational
efficiency and the development of a digital business
strategy) at Skanska AB, a company listed in Sweden.
Mr Bayliss is a Fellow of The Hong Kong Institution of
Engineers and the Institution of Civil Engineers in the
United Kingdom.
Margaret Cheng Wai-ching*
Age 55
Human Resources Director (since 1 June 2016)
Corporate Responsibility Committee (Member)
Ms Cheng is responsible for all of the Company’s human
resources and administration affairs.
Ms Cheng is a seasoned human resources practitioner
with rich senior management experience. She took up
different human resources roles in Citibank, N. A. between
Mr Lau is responsible for managing and overseeing the
Company’s railway related operations in Hong Kong and
its rail and property businesses in the Mainland of China.
He is also responsible for overseeing railway operations
standards and ensuring mutual sharing and learning
of best practices among all the Company’s railway
operations globally.
Mr Lau is the president of the China Hong Kong
Railway Institution, vice president of the International
Association of Public Transport (UITP) Asia-Pacific
Committee and the former chairman of the UITP
Asia-Pacific Urban Rail Platform.
Mr Lau is a Chartered Engineer, a Corporate Member of
the Institution of Civil Engineers in the United Kingdom
and a Fellow of The Hong Kong Institution of Engineers.
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Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis 1993 and 1997, and was with JP Morgan as Vice President,
Human Resources between 1997 and 2001. From 2001 to
2013, Ms Cheng was with The Hongkong and Shanghai
Banking Corporation Limited (“HSBC”) and was Head of
Human Resources, Hong Kong and Global Business, Asia
Pacific when she left HSBC. Before joining the Company,
she was Group Head of Human Resources of Hong Kong
Exchanges and Clearing Limited.
Ms Cheng is serving as the vice chairman of the
Cross-Industry Training Advisory Committee for the
Human Resource Management Sector under the
Qualifications Framework of Education Bureau of
the HKSAR Government; a member of The Standing
Committee on Disciplined Services Salaries and
Conditions of Service of the HKSAR Government and
the chairman of its Police Sub-Committee; a member of
the Labour Advisory Board Committee on Employment
Services of Labour Department of the HKSAR
Government; and a member of the Panel of Arbitrators
appointed under the Labour Relations Ordinance. She
is also a member of the Hospital Authority, a council
member of The Hong Kong Management Association and
the Hong Kong Council for Accreditation of Academic
and Vocational Qualifications, and an honorary advisor
of the ERB Manpower Developer Award Scheme of the
Employees Retraining Board.
Ms Cheng is currently the President and a Fellow Member of
the Hong Kong Institute of Human Resource Management.
Ms Choy has extensive experience in public affairs and
communications, public engagement and journalism.
She started her career in 1992 as a reporter for the South
China Morning Post (“SCMP”) and later joined the HKSAR
Government as an Administrative Officer, holding a
number of positions in various policy bureaux between
1998 and 2004. Ms Choy rejoined SCMP as its China News
Editor in 2004 and was later promoted to News Editor
before she took on the position of Director, Government
Relations of Hong Kong Disneyland Management Limited
(“HKDML”) in 2007. In 2008, she left this role and was
appointed by the HKSAR Government as the Political
Assistant to the Secretary for the Environment until 2012,
after which she rejoined HKDML as its Vice President,
Communications & Public Affairs, a position which she
held from 2013 to January 2020.
Ms Choy is currently the Chairperson of Make-A-Wish
Foundation of Hong Kong Limited, a Non-official
Member of the Community Involvement Committee
on Greening, and a Member of the Board of Advisors of
Radio Television Hong Kong, the Public Libraries Advisory
Committee, and the Advisory Board of The Hong Kong
Red Cross. She was formerly the President of the Hong
Kong Association of Amusement Parks and Attractions
Limited and the Vice-chairwoman of Lantau Development
Alliance Limited.
Linda Choy Siu-min
Age 50
Herbert Hui Leung-wah*
Age 58
Finance Director (since 2 July 2016)
Corporate Affairs Director (since 2 March 2020)
Corporate Responsibility Committee (Member)
Ms Choy is responsible for overseeing the Company’s
stakeholder engagement activities, external
communications and corporate responsibility function.
Mr Hui joined the Company in June 2016.
Mr Hui is responsible for the financial management of all
of the Company’s affairs, including financial planning and
control, budgeting, accounting and reporting, corporate
finance, and the treasury function. He also leads the
Company’s investor relations as well as materials and
stores functions.
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BOARD AND EXECUTIVE DIRECTORATE Mr Hui has extensive corporate finance and investment
banking experience. He began his career at Morgan
Stanley Asia Limited in 1988. Mr Hui left in 1990 to pursue
a career in corporate finance with Wardley Corporate
Finance Limited (later known as Corporate, Investment
Banking and Markets Division of The Hongkong and
Shanghai Banking Corporation Limited) and was the Chief
Operating Officer, Investment Banking, Asia Pacific and
Co-Head, Corporate Finance Execution when he left in
2004. He was General Manager – Corporate Finance of
the Company from 2004 to 2011, and the Chief Financial
Officer of Digital China Holdings Limited from 2011 to
2012. Mr Hui was the Chief Financial Officer of K. Wah
International Holdings Limited before re-joining the
Company in 2016.
Mr Hui is a Chartered Financial Analyst.
Dr Tony Lee Kar-yun*
Age 60
Operations Director (since 1 January 2020)
Dr Lee joined the Company in 1991 and has held
various management positions related to the design,
construction, operations and maintenance of the
Company’s railway system in Hong Kong.
Dr Lee is responsible for managing the Company’s railway
related operations in Hong Kong.
Dr Lee is a Chartered Engineer and is a Member of The
Hong Kong Institution of Engineers, The Institution
of Engineering and Technology and The Hong Kong
Institute of Directors. He is also a Member of the Electrical
Discipline Advisory Panel of The Hong Kong Institution
of Engineers, a Member of the Engineering Discipline
Advisory Board of the Hong Kong Institute of Vocational
Education, and an Honorary Advisory Board Member of
the Theme-based Research Scheme Project on “Safety,
Reliability, and Disruption Management of High Speed Rail
and Metro Systems” of the City University of Hong Kong.
Gillian Elizabeth Meller*
Age 48
Legal and Governance Director
(since 22 February 2021)
Ms Meller joined the Company in August 2004 as Legal
Adviser. Prior to her current position, Ms Meller was the
Legal Director & Secretary between September 2011 and
June 2016, and the Legal and European Business Director
between July 2016 and February 2021.
Ms Meller is responsible for overseeing the Company’s
legal, company secretarial, insurance and risk
management functions and a central procurement and
supply chain function. She is also responsible for leading
the Company’s assurance function with the aim of
providing a strengthened second line of defence across
key risk areas of the Company.
Before joining the Company, Ms Meller was Director of
Legal Services for Metronet Rail SSL Limited in London,
the United Kingdom, and a solicitor at CMS Cameron
McKenna in London, the United Kingdom.
Ms Meller is a vice chairman of the Legal Committee
of The Hong Kong General Chamber of Commerce,
and a member of the Standing Committee on Company
Law Reform.
Ms Meller is qualified to practise as a solicitor in Hong
Kong and England and Wales. She is the President of The
Hong Kong Institute of Chartered Secretaries.
David Tang Chi-fai*
Age 56
Property and International Business Director
(since 22 February 2021)
Mr Tang joined the Company in August 2004 as Contracts
& Commercial Manager – China Business. Prior to his
current position, Mr Tang was appointed as the Property
Director in October 2011 and the Property and Australian
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Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis Business Director in October 2020, and before that he
had held various senior management positions in the
then Legal and Procurement Division, the China and
International Business Division, and the Property Division.
Mr Tang is responsible for all of the property development
projects, asset and leasing management of investment
properties (including shopping malls and offices), and
property management business of the Company in Hong
Kong, as well as overseeing the Company’s Australian
and European businesses. He is also accountable for
the business results of the Hong Kong Property and
International Business portfolios.
Before joining the Company, Mr Tang was Commercial
Manager – Hong Kong & China Region, and Deputy
General Manager – Hong Kong & China Region for
Acciona, S. A. He had close to 20 years’ working
experience in contract administration, project
management and quantity surveying in the United
Kingdom and Hong Kong after starting his career as a
Group Trainee of George Wimpey Plc.
Mr Tang is a co-opted member of the Public Private
Partnership Projects Committee under the Board of the
West Kowloon Cultural District Authority and a former
non-executive director of the Urban Renewal Authority of
the HKSAR Government. He is also an adjunct professor
in the Department of Real Estate and Construction at The
University of Hong Kong.
Mr Tang is a Chartered Surveyor.
Jeny Yeung Mei-chun*
Age 56
Commercial Director (since 1 September 2011)
Ms Yeung joined the Company in November 1999. She is
responsible for the marketing of the Company’s railway
services as well as managing and enhancing the MTR
Brand. Ms Yeung is also responsible for customer service
development and the management of station shops
rental, advertising media and other non-fare businesses.
In addition, she oversees the Company’s business in
Macau and is the Chairlady of Ngong Ping 360 Limited.
Ms Yeung is currently a Director of Octopus Holdings
Limited and two members of its group.
Before joining the Company, Ms Yeung held various
marketing and business development positions in
Standard Chartered Bank (Hong Kong) Limited and
Citibank in Hong Kong.
Ms Yeung is a member of the Advisory Committee on
Enhancing Self-Reliance Through District Partnership
Programme, the Advisory Committee on Enhancing
Employment of People with Disabilities, the Marketing
Management Committee of The Hong Kong Management
Association, the Hong Kong Trade Development Council
Infrastructure Development Advisory Committee
and the Cyberport Advisory Panel of Hong Kong
Cyberport Management Company Limited (“Hong
Kong Cyberport”), and a non-official member of the
Immigration Department Users’ Committee. She is also an
independent non-executive director of Mox Bank Limited.
Ms Yeung was a director of Hong Kong Cyberport and a
member of the Hong Kong Tourism Board.
Ms Yeung is a Fellow of The Chartered Institute
of Marketing.
* Also a director of the Company’s subsidiary(ies).
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BOARD AND EXECUTIVE DIRECTORATE CHANGES IN INFORMATION
Changes in information of Directors during 2020 and up to the date of this Report which are required to be disclosed
pursuant to the Listing Rules are set out below:
(i) Changes in Biographical Details
Name
Change(s)
Dr Rex Auyeung Pak-kuen
Dr Bunny Chan Chung-bun
Walter Chan Kar-lok
The Community Chest of Hong Kong
• Member of the Investment Sub-committee
HSBC Provident Fund Trustee (Hong Kong) Limited
•
Independent Non-executive Director
C-MER Eye Care Holdings Limited
•
Independent Non-executive Director
Lingnan University
• Doctor of Business Administration, honoris causa
Council for Sustainable Development (Hong Kong)
• Member
Radio Television Hong Kong
• Member of Board of Advisors
Dr Pamela Chan Wong Shui
Private Columbaria Appeal Board (Hong Kong)
• Member
Nature and
Effective Date of
Change(s)
Cessation
(22 June 2020)
Cessation
(14 August 2020)
Appointment
(6 November 2020)
Conferment
(19 November 2020)
Cessation
(1 March 2021)
Cessation
(1 September 2020)
Cessation
(29 September 2020)
Dr Dorothy Chan Yuen Tak-fai
The Chartered Institute of Logistics and Transport
• Global Chairperson and Global Advisor for Women in Logistics and Transport
Cessation
(1 July 2020)
Dr Anthony Chow Wing-kin
The Hong Kong Academy for Performing Arts
• Deputy Chairman of the Council
The Hong Kong Jockey Club
• Chairman of the board of stewards
OneConnect Financial Technology Co., Ltd.
•
Independent Director
Dr Eddy Fong Ching
Mox Bank Limited (formerly known as SC Digital Solutions Limited)
•
Independent Non-executive Director
Christopher Hui Ching-yu
Jimmy Ng Wing-ka
Standard Chartered Bank (China) Limited
Independent Non-executive Director
•
The Hong Kong Mortgage Corporation Limited
• Non-executive Director
Competition Commission (Hong Kong)
• Member
The University of Hong Kong
• Member of the Court
Independent Police Complaints Council (Hong Kong)
• Vice-Chairman
Trade and Industry Department (Hong Kong)
• Member of the Small and Medium Enterprises Committee
Appointment
(1 January 2020)
Cessation
(22 June 2020)
Appointment
(1 October 2020)
Cessation
(26 July 2020)
Cessation
(4 November 2020)
Appointment
(25 May 2020)
Appointment
(1 May 2020)
Appointment
(5 June 2020)
Appointment
(1 January 2021)
Cessation
(1 January 2021)
150
MTR Corporation
Annual Report 2020
151
Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis (i) Changes in Biographical Details (continued)
Name
Change(s)
James Henry Lau Jr
(Resigned on 1 June 2020)
The Government of the HKSAR
• Secretary for Financial Services and the Treasury
Kowloon-Canton Railway Corporation
• Chairman
Hongkong International Theme Parks Limited
• Director
Mandatory Provident Fund Schemes Authority (Hong Kong)
• Director
Airport Authority Hong Kong
• Board Member
West Kowloon Cultural District Authority (Hong Kong)
• Board Member
Financial Services Development Council (Hong Kong)
• Ex-officio Member
The Hong Kong Mortgage Corporation Limited
• Non-executive Director
United Builders Insurance Company, Limited
•
Independent Non-executive Director
Communications Authority (Hong Kong)
• Chairman of the Broadcast Complaints Committee
Vocational Training Council in Hong Kong
• Council Member
The Hong Kong Management Association
• Council Member
Benjamin Tang Kwok-bun
Dr Jacob Kam Chak-pui
Margaret Cheng Wai-ching
Hospital Authority (Hong Kong)
• Member
Labour and Welfare Bureau (Hong Kong)
• Member of Panel of Arbitrators under the Labour Relations Ordinance
Linda Choy Siu-min
Public Libraries Advisory Committee (Hong Kong)
• Member
Dr Tony Lee Kar-yun
Gillian Elizabeth Meller
The Hong Kong Red Cross
• Member of the Advisory Board
Community Involvement Committee on Greening (Hong Kong)
• Non-official Member
The Hong Kong Institute of Directors
• Member
The Hong Kong Institute of Chartered Secretaries
• President
• Vice-president
David Tang Chi-fai
The University of Hong Kong
• Adjunct Professor in the Department of Real Estate and Construction
Jeny Yeung Mei-chun
Octopus Holdings Limited and two members of its group
• Director and Alternate Director
Octopus Holdings Limited and two members of its group
• Director
Nature and
Effective Date of
Change(s)
Cessation
(22 April 2020)
Cessation
(22 April 2020)
Cessation
(22 April 2020)
Cessation
(22 April 2020)
Cessation
(22 April 2020)
Cessation
(22 April 2020)
Cessation
(22 April 2020)
Cessation
(25 May 2020)
Appointment
(13 February 2020)
Appointment
(8 April 2020)
Cessation
(1 July 2020)
Appointment
(2 July 2020)
Appointment
(1 April 2020)
Appointment
(1 October 2020)
Appointment
(1 May 2020)
Appointment
(1 September 2020)
Appointment
(1 March 2021)
Admission
(7 May 2020)
Appointment
(1 January 2020)
Cessation
(1 January 2020)
Appointment
(1 June 2020)
Cessation
(1 March 2021)
Appointment
(1 March 2021)
(ii) Changes in Directors’ Remuneration
For details of the changes in Directors’ remuneration, please refer to pages 215 to 219 of the Annual Report.
152
MTR Corporation
Annual Report 2020
PB
BOARD AND EXECUTIVE DIRECTORATE Jacob Kam Chak-pui
Chief Executive Officer
Adi Lau Tin-shing
Managing Director – Operations & Mainland Business
Peter Ewen
Engineering Director (up to 21 February 2021)
Capital Works
Roger Bayliss
Capital Works Director (w.e.f. 22 February 2021)
Andrew Mead
Chief Architect (ARBUK)
Thomas Lau Ming-yu
Chief Design Manager
Barry Sum Pang-tuen
Divisional General Manager – New Projects
James Chow So-hung
Divisional General Manager – Projects Construction
Scott Mackenzie
General Manager – Commercial Management
(w.e.f. 22 February 2021)
Peter Leung Man-fat
General Manager – Operations Projects
Lawrence Chung Kwok-leung
General Manager – Planning & Civil Engineering
Ken Wong Kin-wai
General Manager – Projects
Henry Young
General Manager – Projects Management Office
Leung Chi-lap
Head of E&M Construction
Wong Sha
Head of E&M Engineering
Clement Ngai Yum-keung
Head of Project Engineering (up to 31 December 2020)
Robin Wong Koon-sang
Head of Technical (w.e.f. 22 February 2021)
Neil Ng Wai-hang
Lead Project Manager – SCL Civil – NSL
Timothy Edmonds
Principal Contracts Administration Manager – HSR
Raymond Au Koon-shan
Principal Contracts Administration Manager – SCL
Chan Chun-sing
Project Manager – Rolling Stock
Walter Lam Wai-tak
Project Manager – SCL Civil – Exhibition Station
Tim Leung Chi-tim
Project Manager – SCL E&M
Terence Law Che-chung
Project Manager – Signalling
Nelson Yeung Kin-wa
Project Manager – TME
Lesly Leung Po-po
Project Manager – TUE
Commercial & Marketing
Jeny Yeung Mei-chun
Commercial Director
Karen Woo Kit-sum
General Manager – Branding & Marketing
Diane Chiu Man
General Manager – Business Insights & Growth
Annie Leung Ching-man
General Manager – Customer Experience Development
Margaret Chu Fung-kuen
General Manager – Station Retail
Andy Lau Wai-ming
Managing Director of Ngong Ping 360
Corporate Affairs
Linda So Ka-pik
Corporate Affairs Director (up to 15 January 2020)
Linda Choy Siu-min
Corporate Affairs Director (w.e.f. 2 March 2020)
Osbert Kwan Wing-cheung
Deputy General Manager – Media & Corporate Communications
Lam Chan Lam-sang
Deputy General Manager – Projects & Property Communications
Eric Lee Ka-chun
General Manager – Public Affairs
Finance
Herbert Hui Leung-wah
Finance Director
Sammy Jim Kwok-wah
General Manager – Corporate Finance
Dennis Tam Lup-kwan
General Manager – Financial Control
Candy Ng Chui-lok
Head of Investor Relations & Retirement Benefits
David Pang Hoi-hing
Treasurer
Hong Kong Property &
International Business
David Tang Chi-fai
Property & International Business Director (w.e.f. 22 February 2021)
Australia
Terry Wong Ping-sau
Deputy Director – Australian Business
Raymond O’Flaherty
Chief Executive Officer – Metro Trains Melbourne
Nigel Holness
Chief Executive Officer – Metro Trains Sydney
(up to 19 February 2021)
Daniel Williams
Chief Executive Officer – Metro Trains Sydney
(w.e.f. 25 January 2021)
Tommy Lam Choi-fung
Design & Delivery Director – SMC&SW
David Yam Pak-nin
General Manager – Business Development
Europe
Joakim Sundh
Chief Executive Officer – MTR Express (w.e.f. 8 March 2021)
Mark Jensen
Chief Executive Officer – MTR Nordic (up to 28 February 2021)
Henrik Dahlin
Chief Executive Officer – MTR Nordic (w.e.f. 1 March 2021)
Mats Johannesson
Chief Executive Officer – MTR Pendeltågen (w.e.f. 8 March 2021)
Erika Enestad
Chief Executive Officer – MTR Tech / Emtrain
Caroline Astrand
Chief Executive Officer – MTR Tunnelbanan
Steve Murphy
Chief Executive Officer – MTR UK
Richard Schofield
Interim Managing Director – MTR Elizabeth Line
(up to 14 March 2021)
Nigel Holness
Managing Director – MTR Elizabeth Line (w.e.f. 15 March 2021)
Hong Kong Property
Angus Lee Chun-ming#
Chief Executive Officer – OHL
Edward Wong Koon-pong
Deputy General Manager – Property Project
Debbie Chan Yuen-ping
General Manager – Investment Property (Team 1)
Kenneth Lung Tze-ho
General Manager – Investment Property (Team 2)
Melissa Pang Mee-yuk
General Manager – Property Development
Kenny Chow Chun-ling
General Manager – Property Management
Wilfred Yeung Sze-wai
General Manager – Property Project
Sharon Liu Chung-gay
General Manager – Town Planning (w.e.f. 1 March 2021)
Human Resources & Administration
Margaret Cheng Wai-ching
Human Resources Director
Albert Man Tat-shing
General Manager – Corporate Security
Doreen Siu Wai-man
General Manager – Human Resources
Denise Ng Kee Wing-man
General Manager – Learning & Human Resources Transformation
Lillian Ng Lok-yee
General Manager – Performance & Reward
Internal Audit
Paul Chow Yuen-ming
Head of Internal Audit
Legal & Governance
Gillian Meller
Legal & Governance Director (w.e.f. 22 February 2021)
Stephen Hamill
Chief Engineer (w.e.f. 22 February 2021)
Brian Downie
Deputy Director – Legal, Procurement & Supply Chain
(w.e.f. 22 February 2021)
Roger Lee Chak-man
General Manager – Corporate Safety (w.e.f. 16 February 2021)
Cecilia Cheng Yuet-fong
General Manager – Governance & Risk Management
Linda Li Sau-lin
General Manager – Legal (Property)
Nicholas Zhang Xiaolong
General Manager – Procurement & Supply Chain
(w.e.f. 22 February 2021)
Vincent Simon Ho
Head of Corporate Safety (up to 31 December 2020)
Macau & Mainland China Business
Macau
Jeff Chan Yue-chiu
General Manager – Macau Light Rapid Transit
Mainland China
Jeremy Xu Muhan
Deputy Director – Mainland China Business
Paul Wong Kah-ming
Chief of Engineering (Beijing)
Tse Che-ming
Chief of Engineering (Hangzhou)
Ronnie Tong Chai-ming
Deputy General Manager – Operations (Beijing)
George Mui Wai-ming
Deputy General Manager – Operations (Hangzhou)
(w.e.f. 1 February 2021)
Justin Man Wing-fai
Deputy General Manager – Operations (Shenzhen)
Charles Lau Kam-keung
Deputy General Manager – Projects (Beijing)
Jia Jun
General Manager – Business Development (Mainland China)
Frank Liu Zhui-ming
General Manager – Hangzhou
Wilson Shao Shing-ming
General Manager – Jing-Jin-Ji
Oscar Ho Ka-wa
General Manager – Mainland China Property
Terry Wong Wing-kin
General Manager – Shenzhen
MTR Academy
Margaret Cheng Wai-ching
President of MTR Academy (Acting)
Operations
Tony Lee Kar-yun
Operations Director
Sammy Wong Kwan-wai
Chief of Operating
Nelson Ng Wai-hung
Chief of Operations Engineering
Gordon Lam Bik-shun
Chief Signal Engineer (Operations)
Joseph Sin Chi-man
Chief Signalling Design Manager
Michael Leung Yu-hing
Deputy General Manager – Technical & Asset Engineering
Chan Hing-keung
Deputy General Manager – Train Services & Systems Engineering
Carmen Li Wai-ching
General Manager – HSR & Intercity
Ronald Cheng Kin-wai
General Manager – Planning & Development
(up to 31 December 2020)
Allen Ding Ka-chun
General Manager – Planning & Development (w.e.f. 1 January 2021)
Alex Lau Hing-hon
General Manager – Safety & Quality
Manho John-william
General Manager – Special Duties (up to 31 December 2020)
Weller Chan Kwok-wai
General Manager – Works Management
Ben Lui Gon-yee
Head of Operating – South Region
Cheung Chi-keung
Head of Operating – West Region
Siman Tang
Head of Operations Strategic Business Management
Rick Wong Hoi-wah
Head of P-Way Asset Replacement (w.e.f. 1 January 2021)
Lee Kim-hung
Head of Workshops
Strategy, Innovation & Technology
Jerry Li Zhe
Deputy Director – Strategy, Innovation & Technology
Ted Suen Yiu-tat
Chief Information Officer
Sylvia Ng Yuen-hung
General Manager – Corporate Strategy
Daniel Wong
General Manager – Global Innovation
Raymond Yuen Lap-hang
Transformation Lead – Hong Kong Core Business
Vinnie Chi Man-yan
Transformation Lead – People
Cheris Lee Yuen-ling
Transformation Programme Manager
# Mr. Angus Lee is seconded to Octopus Holdings Limited and Octopus Cards Limited to take up the role of Chief Executive Officer.
PB
MTR Corporation
Annual Report 2020
153
KEY CORPORATE MANAGEMENTCorporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis The Members of the Board have pleasure in submitting their Report and the audited statement of Consolidated Accounts
for the financial year ended 31 December 2020.
PRINCIPAL ACTIVITIES OF THE GROUP
The Group is principally engaged in the following core businesses: railway design, construction, operation, maintenance
and investment in Hong Kong, Macau, the Mainland of China and a number of overseas cities; project management in
relation to railway and property development businesses in Hong Kong and the Mainland of China; station commercial
business including leasing of station retail space, leasing of advertising space inside trains and stations, and enabling of
telecommunication services on the railway system in Hong Kong; property business including property development and
investment, management and leasing management of investment properties (including shopping malls and offices) in
Hong Kong and the Mainland of China; investment in Octopus Holdings Limited; and provision of railway management,
engineering and technology training.
The principal businesses of the Company’s principal subsidiaries and associates as at 31 December 2020 are set out in
notes 23 and 24 to the Consolidated Accounts.
BUSINESS REVIEW
The Company has always been committed to providing comprehensive reviews of the Group’s businesses and
performance in its Annual Reports. A summary of the relevant sections in the Company’s Annual Report 2020 covering the
required disclosures under the Companies Ordinance is set out below for ease of reference.
Required Disclosures
Relevant Sections
(1) A fair review of the Group’s businesses and a discussion and an
analysis of the Group’s performance during the financial year 2020
(2) Particulars of important events affecting the Group that have
occurred since the end of the financial year 2020
(3) Description of the significant risks and uncertainties facing
the Group
(4) Outlook for the Group’s businesses
• Chairman’s Letter (pages 12 to 15)
• CEO’s Review of Operations and Outlook (pages 16 to 35)
• Business Review (pages 36 to 73)
• Financial Review (pages 84 to 93)
• Chairman’s Letter (pages 12 to 15)
• CEO’s Review of Operations and Outlook (pages 16 to 35)
• Business Review (pages 36 to 73)
• CEO’s Review of Operations and Outlook (pages 16 to 35)
• Business Review (pages 36 to 73)
• Risk Management (pages 126 to 129)
• Financial Risks – note 27B to the Consolidated Accounts (pages 240
to 241)
• Chairman’s Letter (pages 12 to 15)
• CEO’s Review of Operations and Outlook (pages 16 to 35)
• Business Review (pages 36 to 73)
(5) Details regarding the Group’s compliance with relevant laws and
• Corporate Governance Report (pages 98 to 122)
regulations which have a significant impact on the Group
(6) Description of the Group’s relationships with its key stakeholders
(7) Description of the Group’s environmental policies
and performance
• Chairman’s Letter (pages 12 to 15)
• CEO’s Review of Operations and Outlook (pages 16 to 35)
• Business Review (pages 36 to 73)
•
• Corporate Responsibility (pages 74 to 79)
• Human Resources (pages 80 to 82)
• Sustainability Report 2020 (www.mtr.com.hk)
Investor Relations (pages 96 to 97)
• Chairman’s Letter (pages 12 to 15)
• CEO’s Review of Operations and Outlook (pages 16 to 35)
• Corporate Responsibility (pages 74 to 79)
• Sustainability Report 2020 (www.mtr.com.hk)
154
154
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Annual Report 2020
Annual Report 2020
155
155
REPORT OF THE MEMBERS OF THE BOARD DIVIDENDS
The Board has recommended to pay a final dividend of HK$0.98 per share (2019: HK$0.98 per share) and proposes that
a scrip dividend option will be offered to all shareholders of the Company (except for those with registered addresses
in New Zealand or the United States of America or any of its territories or possessions). Subject to the approval of the
shareholders at the Company’s forthcoming annual general meeting (“AGM”), the proposed 2020 final dividend, with a
scrip dividend option, is expected to be distributed on 20 July 2021 to shareholders whose names appear on the Register
of Members of the Company as at the close of business on 4 June 2021.
ACCOUNTS
The financial position of the Group as at 31 December 2020 and the Group’s financial performance and cash flows for the
year are set out in the Consolidated Accounts on pages 190 to 270.
TEN-YEAR STATISTICS
A summary of the results and of the assets and liabilities of the Group together with some major operational statistics for
the last ten years are set out on pages 94 to 95.
DIRECTORS
Members of the Board (including Alternate Directors) and the Executive Directorate as at the date of this Report are stated below:
Members of the Board
• Dr Rex Auyeung Pak-kuen (Chairman)
• Dr Jacob Kam Chak-pui (CEO)
• Andrew Clifford Winawer Brandler
• Dr Bunny Chan Chung-bun
• Walter Chan Kar-lok
• Dr Pamela Chan Wong Shui
• Dr Dorothy Chan Yuen Tak-fai
• Cheng Yan-kee
• Dr Anthony Chow Wing-kin
• Dr Eddy Fong Ching
•
• Rose Lee Wai-mun
Lucia Li Li Ka-lai
•
•
Jimmy Ng Wing-ka
• Benjamin Tang Kwok-bun
•
Johannes Zhou Yuan
• Christopher Hui Ching-yu
James Kwan Yuk-choi
(Secretary for Financial Services and the Treasury)
Alternate Directors:
–
– Alice Lau Yim
– Maurice Loo Kam-wah
Joseph Chan Ho-lim
•
Secretary for Transport and Housing
(Frank Chan Fan)
Alternate Directors:
– Under Secretary for Transport and Housing
(Dr Raymond So Wai-man)
– Permanent Secretary for Transport and Housing (Transport)
(Mable ChanNote 1)
– Deputy Secretaries for Transport and Housing (Transport)
(Amy Wong Pui-manNote 2 and Sharon Yip Lee Hang-yee)
• Permanent Secretary for Development (Works)
(Lam Sai-hung)
Alternate Director:
– Deputy Secretary for Development (Works)2
(Mak Shing-cheung)
• Commissioner for Transport
(Rosanna Law Shuk-puiNote 3)
Alternate Director:
– Deputy Commissioner for Transport /
Transport Services and Management
(Macella Lee Sui-chun)
Notes
1 Change of holder of the post from Joseph Lai Yee-tak to Mable Chan with effect from 1 August 2020.
2 Change of holder of the post from Kevin Choi to Amy Wong Pui-man with effect from 14 December 2020.
3 Change of holder of the post from Mable Chan (ceased on 1 August 2020) to Rosanna Law Shuk-pui (appointed on 9 September 2020).
Members of the Executive Directorate
• Dr Jacob Kam Chak-pui (CEO)
• Adi Lau Tin-shing (Managing Director –
Operations and Mainland Business)
• Roger Francis Bayliss (Capital Works Director)
• Margaret Cheng Wai-ching (Human Resources Director)
•
Linda Choy Siu-min (Corporate Affairs Director)
• Herbert Hui Leung-wah (Finance Director)
• Dr Tony Lee Kar-yun (Operations Director)
• Gillian Elizabeth Meller (Legal and Governance Director)
• David Tang Chi-fai (Property and International
Business Director)
Jeny Yeung Mei-chun (Commercial Director)
•
The biographies of each Member of the Board and the Executive Directorate as at the date of this Report are set out on
pages 138 to 150.
154
154
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Annual Report 2020
Annual Report 2020
155
155
Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis In addition, resolutions for electing Mr Hui Siu-wai and Mr Adrian Wong Koon-man as new Directors will be proposed at
the 2021 AGM. Please refer to the Company’s circular containing the Notice of the 2021 AGM sent together with this Report.
Members of the Board, the Alternate Director(s) and Members of the Executive Directorate who were directors/alternate
director(s) during the course of 2020 but have since ceased their position with the Company are stated below:
• Dr Allan Wong Chi-yun (retired on 20 May 2020)
•
James Henry Lau Jr (resigned on 1 June 2020)
• Andrew Lai Chi-wah (ceased on 25 July 2020)
Linda So Ka-pik (resigned on 16 January 2020)
•
• Dr Peter Ronald Ewen (retired on 22 February 2021)
DIRECTORS OF SUBSIDIARY UNDERTAKINGS
The directors of the subsidiary undertakings of the Company during the year and up to the date of this Report (unless
otherwise stated) are listed on page 184.
DIRECTORS’ SERVICE CONTRACTS
No Director proposed for election or re-election at the forthcoming AGM has a service contract which is not
determinable by the Company or any of its subsidiaries within one year without payment of compensation, other than
statutory compensation.
DIRECTORS’ MATERIAL INTERESTS IN TRANSACTIONS,
ARRANGEMENTS OR CONTRACTS
Except for, in respect of Mr James Henry Lau Jr (up to 31 May 2020) and Mr Christopher Hui Ching-yu (since 1 June 2020)
(Secretary for Financial Services and the Treasury), Secretary for Transport and Housing (Mr Frank Chan Fan), Permanent
Secretary for Development (Works) (Mr Lam Sai-hung), and Commissioner for Transport (Ms Mable Chan (up to 31
July 2020) and Miss Rosanna Law Shuk-pui (since 9 September 2020)), all of whom were officials of Government, those
connected transactions and continuing connected transactions between the Company and Government (and/or its
associates) which are described on pages 161 to 182, there was no transaction, arrangement or contract of significance
in relation to the Group’s business, to which the Company or any of its subsidiary undertakings was a party and in which
a Member of the Board or a Member of the Executive Directorate or an entity connected with him/her had a material
interest (whether direct or indirect), which was entered into during the year or subsisted at any time during the year.
DIRECTORS’ INTERESTS IN SHARES AND UNDERLYING SHARES OF
THE COMPANY
As at 31 December 2020, the interests or short positions of the Members of the Board and the Executive Directorate in the
shares, underlying shares and debentures of the Company (within the meaning of Part XV of the Securities and Futures
Ordinance (Cap. 571 of the Laws of Hong Kong) (“SFO”)) as recorded in the register required to be kept under section 352
of the SFO or as otherwise notified to the Company and the HKSE pursuant to the Model Code set out in Appendix 10 of
the Listing Rules (the “Model Code”) were as follows:
Members of the Board/
Alternate Directors/
Members of the
Executive Directorate
Dr Jacob Kam Chak-pui
Dr Pamela Chan Wong Shui
Cheng Yan-kee
Rose Lee Wai-mun
No. of Ordinary Shares held
No. of share
options#
No. of award
shares#
Personal
interests*
Family
interests†
Other
interests
Personal
interests*
Personal
interests*
Total
interests
312,837
9,072
–
3,350
–
1,675
(Note 1)
2,000
(Note 1)
–
–
–
–
–
–
–
–
–
391,618
–
704,455
10,747
–
–
2,000
3,350
Percentage
of aggregate
interests to
total no. of
voting shares
in issueD
0.01140
0.00017
0.00003
0.00005
156
MTR Corporation
Annual Report 2020
157
REPORT OF THE MEMBERS OF THE BOARD DIRECTORS’ INTERESTS IN SHARES AND UNDERLYING SHARES OF
THE COMPANY (continued)
Members of the Board/
Alternate Directors/
Members of the
Executive Directorate
Lucia Li Li Ka-lai
Alice Lau Yim
Maurice Loo Kam-wah
Mak Shing-cheung
Dr Raymond So Wai-man
Adi Lau Tin-shing
Roger Francis Bayliss
Margaret Cheng Wai-ching
Dr Peter Ronald Ewen
Herbert Hui Leung-wah
Dr Tony Lee Kar-yun
Gillian Elizabeth Meller
David Tang Chi-fai
Jeny Yeung Mei-chun
No. of Ordinary Shares held
No. of share
options#
No. of award
shares#
Personal
interests*
Family
interests†
Other
interests
Personal
interests*
Personal
interests*
Total
interests
–
1,116
588
558
–
138,637
–
133,371
99
57,109
41,910
127,347
211,084
681,886
1,614
(Note 1)
–
–
8,058
(Note 1)
1,675
(Note 1)
–
–
–
–
2,233
(Note 1)
–
–
–
–
2,215
(Note 2)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
47,500
–
–
–
–
–
–
–
–
105,868
60,400
99,802
89,368
93,434
34,168
91,734
98,885
99,784
3,829
1,116
588
8,616
1,675
244,505
60,400
233,173
89,467
152,776
123,578
219,081
309,969
781,670
Percentage
of aggregate
interests to
total no. of
voting shares
in issueD
0.00006
0.00002
0.00001
0.00014
0.00003
0.00396
0.00098
0.00377
0.00145
0.00247
0.00200
0.00354
0.00501
0.01265
Notes
As at 31 December 2020,
1
2
# Details of the share options and award shares are set out in the sections headed “2007 Share Option Scheme” and “Executive Share Incentive Scheme”, respectively, on
these shares were held by the Director’s spouse.
the 2,215 shares were jointly held by Mrs Lucia Li Li Ka-lai and her spouse.
pages 158 to 159
Interests as beneficial owner
Interests of spouse or child under 18 as beneficial owner
*
†
D The Company’s total number of voting shares in issue as at 31 December 2020 was 6,180,927,873
Save as disclosed above and in the sections headed “2007 Share Option Scheme” and “Executive Share Incentive Scheme”:
A as at 31 December 2020, no Member of the Board or the Executive Directorate of the Company had any interest or
short position in the shares, underlying shares or debentures of the Company or any of its associated corporations
(within the meaning of Part XV of the SFO); and
B during the year ended 31 December 2020, no Member of the Board or the Executive Directorate of the Company nor
any of their spouses or children under 18 years of age held any rights to subscribe for equity or debt securities of the
Company nor had there been any exercises of any such rights by any of them,
as recorded in the register kept by the Company under section 352 of the SFO or otherwise notified to the Company and
the HKSE pursuant to the Model Code.
SUBSTANTIAL SHAREHOLDERS’ INTERESTS
Set out below is the name of the party which was interested in 5% or more of all the Company’s voting shares in issue and
the number of shares in which it was interested as at 31 December 2020 as recorded in the register kept by the Company
under section 336 of the SFO:
Name
The Financial Secretary Incorporated (“FSI”)
(in trust on behalf of Government)
No. of
Ordinary Shares held
Percentage of Ordinary Shares to all
the voting shares in issueD
4,634,173,932
74.98%
D The Company’s total number of voting shares in issue as at 31 December 2020 was 6,180,927,873
156
MTR Corporation
Annual Report 2020
157
Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis The Company has been informed by the Hong Kong Monetary Authority that, as at 31 December 2020, approximately
0.30% of the Ordinary Shares in issue (not included in the FSI shareholding set out in the above table) were held for the
account of the Exchange Fund. The Exchange Fund is a fund established under the Exchange Fund Ordinance (Cap. 66 of
the Laws of Hong Kong) under the control of the Financial Secretary.
OTHER PERSONS’ INTERESTS
Pursuant to section 337 of the SFO, the Company has maintained a register recording the shareholding information
provided by persons in response to the Company’s requests pursuant to section 329 of the SFO.
Save as disclosed above and in the sections headed “Directors’ Interests in Shares and Underlying Shares of the Company”
and “Substantial Shareholders’ Interests”, as at 31 December 2020, the Company has not been notified of any other
persons who had any interests or short positions in the shares or underlying shares of the Company which would be
required to be recorded in the register kept by the Company pursuant to section 336 of the SFO.
2007 SHARE OPTION SCHEME
Movements in the outstanding share options to subscribe for Ordinary Shares granted under the 2007 Share Option
Scheme during the year ended 31 December 2020 are set out below:
Members of the
Executive
Directorate and
eligible employees
Options
granted
(Notes
1 to 3)
Date
granted
Period during which
rights exercisable
(day/month/year)
Adi Lau Tin-shing
30/5/2014
80,000
23/5/2015 – 23/5/2021
Dr Tony Lee Kar-yun 30/5/2014
71,500
23/5/2015 – 23/5/2021
Other eligible
employees
6/5/2013
20,331,500
26/4/2014 – 26/4/2020
30/5/2014
19,812,500
23/5/2015 – 23/5/2021
Options
outstanding
as at
1 January
2020
26,000
47,500
1,385,500
3,450,000
Options
vested
during the
year
Options
lapsed
during the
year
Options
exercised
during the
year
Exercise
price per
share of
options
(HK$)
Options
outstanding
as at
31 December
2020
–
–
–
–
–
–
–
26,000
–
1,385,500
14,000
1,136,000
28.65
28.65
31.40
28.65
–
47,500
–
2,300,000
Weighted
average
closing price
of shares
immediately
before the
date(s)
on which
options were
exercised
(HK$)
42.50
–
42.08
41.86
Notes
1 No option may be exercised later than seven years after its date of offer and no option may be offered to be granted more than seven years after the adoption of the 2007
Share Option Scheme on 7 June 2007. The 2007 Share Option Scheme expired at 5.00 p.m. on 6 June 2014, with no further option granted since then.
2 Unless approved by shareholders in the manner as required by the Listing Rules, the total number of shares issued and issuable upon exercise of the options granted to
any eligible employee under the 2007 Share Option Scheme together with the total number of shares issued and issuable upon the exercise of any option granted to such
eligible employee under any other share option scheme of the Company (including, in each case, both exercised and outstanding options) in any 12-month period must
not exceed 0.2% of the shares of the Company in issue at the date of offer in respect of such option under the 2007 Share Option Scheme.
3 The share options granted were subject to a vesting schedule in tranches of one-third each per annum starting from the first anniversary of the date of offer of the options
(the “Offer Anniversary”) and became fully vested on the third Offer Anniversary.
4 Pursuant to the terms of the 2007 Share Option Scheme, each grantee undertakes to pay HK$1.00, on demand, to the Company, in consideration for the grant of the options.
5 Other details of the 2007 Share Option Scheme are set out in notes 11B and 41(i) to the Consolidated Accounts.
EQUITY-LINKED AGREEMENT
Save as disclosed in the section headed “2007 Share Option Scheme” above, no equity-linked agreements were entered
into during the year ended 31 December 2020 or subsisted at the end of the year.
EXECUTIVE SHARE INCENTIVE SCHEME
The Company adopted the Executive Share Incentive Scheme with effect from 1 January 2015 (“Effective Date”) for a term
of ten years. Further details on the purposes and operation of the Executive Share Incentive Scheme are set out in the
section headed “Long-Term Incentives” under the Remuneration Committee Report (pages 135 to 136) and notes 11C and
41(ii) to the Consolidated Accounts in this Report.
The maximum number of award shares that may at any time be the subject of an outstanding award granted under the
Executive Share Incentive Scheme shall not exceed 2.5% of the number of issued Ordinary Shares as at the Effective Date.
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REPORT OF THE MEMBERS OF THE BOARD The particulars of the award shares granted are as follows:
Members of the
Executive Directorate and
eligible employees
Dr Jacob Kam Chak-pui
Adi Lau Tin-shing
Roger Francis Bayliss
Margaret Cheng Wai-ching
Dr Peter Ronald Ewen
Herbert Hui Leung-wah
Dr Tony Lee Kar-yun
Gillian Elizabeth Meller
David Tang Chi-fai
Jeny Yeung Mei-chun
Other eligible employees
Types of award
shares granted
(Note 1)
Date of
award
Restricted
shares
(Note 2)
Performance
shares
(Note 3)
Award shares
outstanding
as at
1 January
2020
Award shares
lapsed and/or
forfeited
during
the year
Award shares
outstanding
as at
31 December
2020
Award shares
vested during
the year
10/4/2017
10/4/2018
1/4/2019
8/4/2019
8/4/2020
10/4/2017
10/4/2018
8/4/2019
8/4/2020
8/4/2019
8/4/2020
10/4/2017
10/4/2018
8/4/2019
8/4/2020
10/4/2017
10/4/2018
8/4/2019
8/4/2020
10/4/2017
10/4/2018
8/4/2019
8/4/2020
10/4/2017
10/4/2018
8/4/2019
8/4/2020
10/4/2017
10/4/2018
8/4/2019
8/4/2020
10/4/2017
10/4/2018
8/4/2019
8/4/2020
10/4/2017
10/4/2018
8/4/2019
8/4/2020
10/4/2017
10/4/2018
8/4/2019
8/4/2020
22,050
25,550
120,000
47,400
89,300
17,700
16,450
16,250
39,100
–
50,450
–
91,750
–
25,050
50,450
–
–
7,350
67,484
120,000
139,150
–
5,900
61,417
16,250
–
–
30,150
30,150
30,250
16,950
17,600
16,550
32,450
15,050
12,250
12,500
26,500
15,200
14,200
13,800
29,050
6,800
7,900
8,300
15,500
16,200
16,050
13,400
27,000
17,250
16,850
17,200
31,350
17,700
17,350
16,350
32,650
–
30,400
50,450
–
–
–
50,450
–
–
30,400
50,450
–
–
–
10,500
–
–
–
50,450
–
–
–
50,450
–
–
–
50,450
–
–
–
5,650
62,184
16,550
–
5,018
58,617
12,500
–
5,068
59,917
13,800
–
2,268
15,767
8,300
–
5,400
61,150
13,400
–
5,750
61,684
17,200
–
5,900
62,017
16,350
–
7,350
8,516
–
15,800
–
5,900
5,483
5,416
–
–
–
5,650
5,866
5,516
–
5,018
4,083
4,166
–
5,068
4,733
4,600
–
2,268
2,633
2,766
–
5,400
5,350
4,466
–
5,750
5,616
5,733
–
5,900
5,783
5,450
–
2,100,300
26,350
547,682
2,064,750
1,358,800
2,314,805
1,780,400
1,981,600
122,750
1,835,300
6,950
–
538,582
599,955
624,783
70,800
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
9,100
–
58,968
120,000
123,350
89,300
–
55,934
10,834
39,100
30,150
30,250
–
56,318
11,034
32,450
–
54,534
8,334
26,500
–
55,184
9,200
29,050
–
13,134
5,534
15,500
–
55,800
8,934
27,000
–
56,068
11,467
31,350
–
56,234
10,900
32,650
–
139,534
1,575,316
83,639
51,400
1,126,878
1,866,350
Notes
1 The award shares to be granted under the Executive Share Incentive Scheme are issued Ordinary Shares.
2 Restricted shares are awarded to selective eligible employees and vest over three years in equal tranches (unless otherwise determined by the Remuneration Committee).
3 Performance shares are awarded to eligible employees generally on a three-year performance cycle, subject to review and approval by the Remuneration Committee from
time to time.
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Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis SHARES ISSUED
As at 31 December 2019
Shares issued under the 2007 Share Option Scheme
(Further details can be found in note 41(i) to the Consolidated Accounts)
Scrip shares issued in respect of 2019 final dividend
Scrip shares issued in respect of 2020 interim dividend
As at 31 December 2020
No. of Ordinary
Shares issued
6,157,948,911
Consideration/Value
(HK$)
N/A
2,547,500
77 million
(received by the Company)
18,426,649
2,004,813
6,180,927,873
692 million
81 million
N/A
Details of the movements in share capital of the Company during the year are set out in note 38 to the Consolidated Accounts.
PURCHASE, SALE OR REDEMPTION OF LISTED SECURITIES
The Group did not purchase, sell or redeem any of the Group’s listed securities during the year ended 31 December
2020. However, the Trustee of the Executive Share Incentive Scheme, pursuant to the terms of the rules and the trust
deed of the Executive Share Incentive Scheme, purchased on the HKSE a total of 2,020,000 Ordinary Shares for a total
consideration of approximately HK$86 million during the year ended 31 December 2020 (2019: HK$88 million).
PUBLIC FLOAT
The HKSE granted to the Company, at the time of its listing on the Main Board of the HKSE in 2000, a waiver from
strict compliance with Rule 8.08(1) of the Listing Rules (“Public Float Waiver”). Pursuant to the Public Float Waiver, the
Company’s prescribed minimum percentage of shares which must be in the hands of the public must not be less than
10% of the total number of issued shares of the Company. Based on the information that is publicly available to the
Company and within the knowledge of the Directors, the Company has maintained the prescribed amount of public float
during the year and up to the date of this Report as required by the Public Float Waiver.
MAJOR SUPPLIERS AND CUSTOMERS
Information in respect of the Group’s major suppliers and major customers for the year ended 31 December 2020 is as follows:
Total value of supplies (not of a capital nature) attributable to the Group’s five largest suppliers
Total revenue attributable to the Group’s five largest customers
Total revenue attributable to the Group’s largest customer
As a percentage of
the Group’s total supplies
19.94%
As a percentage of
the Group’s total revenue
38.95%
16.49%
As at 31 December 2020, no Members of the Board or the Executive Directorate or any of their respective close associates
or any shareholder including the FSI, the substantial shareholder of the Company (which, to the knowledge of the
Members of the Board or the Executive Directorate, owned more than 5% of all the Company’s voting shares in issue), had
any beneficial interests in the Group’s five largest customers.
DONATIONS
During the year, the Group donated and sponsored approximately HK$15.4 million (2019: approximately HK$12.7 million)
to charitable and other organisations.
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161
REPORT OF THE MEMBERS OF THE BOARD
BANK OVERDRAFTS,
BANK LOANS AND
OTHER BORROWINGS
The total borrowings of the Group as at 31 December
2020 amounted to HK$50,340 million (2019: HK$39,456
million). Particulars of the borrowings are set out in
note 32 to the Consolidated Accounts.
BONDS AND NOTES ISSUED
The Group issued notes with total face value amounting
to HK$14,642 million equivalent during the year
ended 31 December 2020 (2019: HK$1,183 million
equivalent), details of which are set out in note 32C to
the Consolidated Accounts. Such notes were issued in
order to meet the Group’s general corporate funding
requirements, including financing of capital expenditure
and refinancing of debts.
LOAN AGREEMENTS WITH
COVENANT RELATING TO
SPECIFIC PERFORMANCE OF THE
CONTROLLING SHAREHOLDER
As at 31 December 2020, the Group had borrowing of
HK$500 million (2019: HK$32,183 million) with maturity in
2022 and no undrawn committed banking facility (2019:
HK$5,568 million), which were subject to the condition
that Government, being the Company’s controlling
shareholder, owns more than half of all the Company’s
voting shares in issue. Failure to satisfy such condition
may result in immediate repayment of the borrowings
being demanded and cancellation of the undrawn
committed banking facilities.
PROPERTIES
Particulars of the principal investment properties and
properties held for sale of the Company are shown on
pages 53 to 54.
CONNECTED TRANSACTIONS
During the year under review, the transactions described
below were entered into with Government (which is a
substantial shareholder of the Company as defined in
the Listing Rules). Government is therefore a “connected
person” of the Company for the purposes of the Listing
Rules, and each transaction described below is a connected
transaction for the Company under the Listing Rules.
As disclosed in the announcement of the Company
dated 13 January 2005, the Stock Exchange has granted
a waiver to the Company from strict compliance with
the requirements of Chapter 14A of the Listing Rules
which would otherwise apply to connected transactions
and continuing connected transactions between the
Company and Government, subject to certain conditions
(the “Waiver”).
Consequently, the Company makes the disclosures below
in accordance with Rule 14A.71 of the Listing Rules and in
accordance with the conditions of the Waiver.
Land Agreements
A On 14 February 2020, the Company accepted an
offer dated 30 December 2019 from Government to
proceed with the proposed LOHAS Park Package Twelve
Property Development at Site D of The Remaining Portion
of Tseung Kwan O Town Lot No. 70 subject to payment
of a land premium of HK$2,725,000,000 and on the terms
and conditions of the relevant modification to New Grant
No. 9689.
B On 6 November 2020, the Company accepted an
offer dated 29 September 2020 from Government to
proceed with the proposed LOHAS Park Package Thirteen
Property Development at Site KL of The Remaining
Portion of Tseung Kwan O Town Lot No. 70 subject to
payment of a land premium of HK$5,568,000,000 and on
the terms and conditions of the relevant modification to
New Grant No. 9689.
C On 8 February 2021, the Company accepted an offer
dated 29 December 2020 from Government to proceed
with the proposed Wong Chuk Hang Station Package
Five Property Development at Site E of Aberdeen Inland
Lot No. 467 subject to payment of a land premium of
HK$6,437,310,000 and on the terms and conditions of the
relevant Conditions of Exchange No. 20304.
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Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis CONTINUING CONNECTED
TRANSACTIONS
During the year under review, the following transactions
and arrangements described below involved the
provision of goods or services carried out on an ongoing
or recurring basis and are expected to extend over a
period of time with Government and/or KCRC, the Airport
Authority (the “AA”) and Leighton Contractors (Asia)
Limited (“LCAL”).
As noted above under the section headed “Connected
Transactions”, Government is a substantial shareholder of
the Company for the purposes of the Listing Rules. KCRC
and the AA are both associates of Government and they
are also connected persons of the Company as defined in
the Listing Rules.
Metro Trains Melbourne Pty. Ltd. is a company
incorporated in Australia, which is wholly owned by Metro
Trains Australia Pty Ltd (“MTA”). The Company, UGL Rail
Services Pty Limited (“UGL”) and John Holland MTA Pty
Ltd (“JHMTA”) own 60%, 20% and 20% respectively of
MTA and are, therefore, substantial shareholders of MTA.
Accordingly, UGL and JHMTA are connected persons of
the Company.
Since both UGL and LCAL are indirect wholly owned
subsidiaries of CIMIC Group Limited, LCAL is an associate
of UGL and is also a connected person of the Company.
Therefore, each of Government, KCRC, the AA and LCAL
is a “connected person” of the Company for the purposes
of the Listing Rules and, during 2020, each transaction
set out at sections I, II III, IV and V below constituted a
continuing connected transaction for the Company under
the Listing Rules.
In accordance with the Guidance Letter GL 73-14 issued
by the Stock Exchange and taking into account the Stock
Exchange’s recommendation, the Company’s Internal
Audit Department (“IAD”) has reviewed the Company’s
continuing connected transactions set out below and the
related internal control procedures. IAD found that the
internal control procedures put in place by the Company
were adequate and effective and reported the same
to the Audit Committee of the Company to assist the
Company’s Independent Non-executive Directors in their
annual review and confirmation required to be given
pursuant to the Merger-related Waiver (as defined below),
the Waiver and the Listing Rules (as appropriate).
I
Merger-related Continuing
Connected Transactions
Each of the transactions listed in paragraphs A to C below
of this section (together, the “Merger-related Continuing
Connected Transactions”) and which formed part of
the Rail Merger, was approved by the independent
shareholders of the Company at an Extraordinary General
Meeting held on 9 October 2007. These paragraphs
should be read in conjunction with the paragraphs
contained in the section headed “Additional Information
in respect of the Rail Merger”.
As disclosed in the circular issued by the Company on
3 September 2007 in connection with the Rail Merger,
the Stock Exchange granted a waiver to the Company
from strict compliance with the requirements under
Chapter 14A of the Listing Rules which would otherwise
apply to continuing connected transactions between the
Company, Government and/or KCRC arising as a result
of the Rail Merger, subject to certain conditions (the
“Merger-related Waiver”).
A Merger Framework Agreement
The Merger Framework Agreement was entered into on
9 August 2007 between the Company, KCRC and the Secretary
for Transport and Housing and the Secretary for Financial
Services and the Treasury for and on behalf of Government.
The Merger Framework Agreement contains provisions
for the overall structure and certain specific aspects of the
Rail Merger, including in relation to:
•
•
a seamless interchange programme;
corporate governance of the Company Post-Rail
Merger;
• payments relating to property enabling works;
•
•
•
arrangements relating to the establishment
of a rolling programme on the level of flat
production arising from tenders for railway
property development;
arrangements in relation to the assessment of land
premium amounts;
arrangements in relation to the employees of the
Company and KCRC, including provisions preventing
the Company from terminating the employment of
relevant frontline staff for any reason that relates
to the process of integrating the operations of the
Company and KCRC;
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REPORT OF THE MEMBERS OF THE BOARD the implementation of certain fare reductions;
C Property Package Agreements
•
•
arrangements in relation to the proposed Shatin to
Central Link;
• KCRC’s continuing responsibility for its existing
financial arrangements;
•
•
•
•
treatment of KCRC’s cross border leases;
the payment of HK$7.79 billion in respect of the
Property Package Agreements (as described in
paragraph C on pages 163 to 164 and in paragraph
E in the section headed “Additional Information in
respect of the Rail Merger” below);
the allocation of liability for any Pre-Rail Merger and
Post-Rail Merger claims by third parties; and
the Company’s retention of its English name and
(pursuant to the Rail Merger Ordinance) the change of
its Chinese name to “香港鐵路有限公司”.
B West Rail Agency Agreement
The West Rail Agency Agreement and related agreements
were entered into on 9 August 2007 between the
Company, KCRC and certain KCRC subsidiary companies
(the “West Rail Subsidiaries”). Pursuant to the terms of the
West Rail Agency Agreement, the Company was appointed:
•
•
to act as KCRC’s agent, and donee under powers of
attorney, to exercise certain rights and perform certain
obligations relating to specified development sites
along West Rail; and
to act as agent for, and donee under powers of
attorney from, each of the West Rail Subsidiaries to
exercise certain rights and perform certain obligations
relating to specified development sites along West Rail.
The Company will receive an agency fee of 0.75% of the
gross sale proceeds in respect of the unawarded West
Rail development sites and 10% of the net profits accrued
to the West Rail Subsidiaries under the development
agreements in respect of the awarded West Rail
development sites. The Company will also recover from
the West Rail Subsidiaries its costs (including internal
costs) incurred in respect of the West Rail development
sites plus 16.5% on-cost, together with interest
accrued thereon.
Category 2A Properties
On 9 August 2007, Government entered into an
undertaking that it would issue to KCRC an offer for
the grant at nil premium of Government leases in
respect of the land upon which certain properties
(the “Category 2A Properties”) are situated (the “said
Government Leases”). The Category 2A Properties were
held by KCRC as vested land under the Kowloon-Canton
Railway Corporation Ordinance (Cap. 372 of the Laws of
Hong Kong). On 9 August 2007, KCRC entered into an
undertaking that it would, immediately after the grant of
the said Government Leases referred to in the preceding
sentence, enter into agreements for sale and purchase
to sell the Category 2A Properties to the Company (the
“said Agreements for Sale and Purchase”). Assignments
of the Category 2A Properties to the Company shall then
take place pursuant to the said Agreements for Sale and
Purchase (the “said Assignments”).
The said Government Leases were issued to KCRC
respectively on 27 March 2009 and 31 March 2009. The
said Agreements for Sale and Purchase were entered into
between KCRC and the Company on 27 March 2009 and
31 March 2009 respectively and the said Assignments to
the Company were executed on 27 March 2009 and
31 March 2009 respectively. Deeds of Mutual Grant were
also entered into between the Company and KCRC on
27 March 2009 and 31 March 2009 respectively setting
out the easements, rights, entitlements, privileges and
liberties of the Company and KCRC in the land on which
the Category 2A Properties are situated.
Category 2B Property
On 9 August 2007, Government entered into an
undertaking that it would issue to the Company an offer
for the grant of a Government Lease of a certain property
(the “Category 2B Property”) on terms to be agreed.
The basic terms offer for the Category 2B Property (i.e.
Trackside Villas) was issued and accepted by the Company
on 31 December 2009 and Government Lease in respect
of Tai Po Town Lot No. 199 dated 29 March 2010 was
issued for a term of 50 years from 2 December 2007.
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Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis Category 3 Properties
On 9 August 2007, the Company entered into three
agreements (the “Category 3 Agreements”) and related
powers of attorney with KCRC. Each Category 3
Agreement relates to a certain property (each a
“Category 3 Property”). KCRC has previously entered into
a development agreement in respect of each Category 3
Property. None of the rights and obligations granted to or
undertaken by the Company under the Category 3
Agreements may be exercised or performed by the
Company if they relate exclusively to the concession
property situate on any Category 3 Property. Matters
affecting the concession property situate on any
Category 3 Property are dealt with under the terms
of the Service Concession Agreement (as defined and
summarised on pages 180 to 181).
Pursuant to the terms of each Category 3 Agreement, the
Company has been appointed to act as KCRC’s agent,
and donee under powers of attorney, to exercise rights
and to perform obligations of KCRC which relate to the
Category 3 Property (but excluding the right or obligation
to dispose of the relevant Category 3 Property).
The Company is required at all times to comply with
statutory restrictions and obligations binding on KCRC
which relate to the Category 3 Properties, and shall pay
all amounts due and payable from KCRC which have been
incurred by KCRC as a result of the Company’s actions.
In acting as KCRC’s agent, the Company is required to act
according to prudent commercial principles, and aim to
maximise gross profits under the Category 3 Properties
and to run a safe and efficient railway. In order to assist
the Company in performing its agency functions, KCRC
has granted powers of attorney to the Company. The
Company may only use the powers of attorney to exercise
rights and perform obligations conferred or undertaken
by it under the relevant Category 3 Agreement. As well
as acting as KCRC’s agent, the Company has the right to
give KCRC instructions in respect of any action or matter
relating to each Category 3 Property (including its related
development agreement) which the Company is unable
to take by reason of the limitation of the scope of its
agency powers. KCRC is required to comply promptly with
those instructions provided that it is permitted under law,
and under the relevant Government grant, to carry out
those instructions.
KCRC is required to account for revenue received in
respect of a Category 3 Property by way of balance sheet
movement (rather under its profit and loss account),
provided that such treatment is permitted under law and
accounting principles and practices.
KCRC shall not take any action in respect of a Category 3
Property which is not carried out by the Company
(acting as KCRC’s agent), or according to the Company’s
instructions, or otherwise in accordance with the terms of
the Category 3 Agreement.
As consideration for acting as KCRC’s agent, the Company
shall be paid a fee which is expected to be similar in
quantum to the profits made by KCRC in respect of the
relevant Category 3 Property (after deducting certain
initial and upfront payments and consultant contribution
costs, in each case paid or to be paid by the relevant
developer to KCRC). Generally, the Company’s fee shall
be payable in instalments promptly following receipt
of relevant funds by KCRC (but subject to specified
deductions of amounts due from KCRC to the relevant
Category 3 Property developer).
The Company has agreed to give certain indemnities to
KCRC in respect of each Category 3 Property.
The Company shall be the first manager, or shall ensure
that a manager is appointed in respect of, each Category
3 Property (once developed).
The Company’s appointment as agent shall terminate
when KCRC ceases to have any undivided share in the
relevant Category 3 Property, other than concession
property, and neither KCRC nor the developer nor
the guarantors have any further rights to exercise,
or obligations to perform, under the development
agreement relating to the relevant Category 3 Property.
II
Non Merger-related Continuing
Connected Transactions
The following disclosures, in paragraphs A1 to D below
of this section together with the Third XRL Agreement
(as defined below) (together, the “Non Merger-related
Continuing Connected Transactions”), are made in
accordance with the conditions of the Waiver and Rule
14A.71 of the Listing Rules.
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165
REPORT OF THE MEMBERS OF THE BOARD A1 Entrustment Agreement for Design and
Site Investigation in relation to the Shatin to
Central Link
The Entrustment Agreement for Design and Site Investigation
in relation to the Shatin to Central Link (the “First SCL
Agreement”) was entered into on 24 November 2008
between the Company and the Secretary for Transport
and Housing for and on behalf of Government.
The First SCL Agreement contains provisions for the
design of and site investigation and procurement
activities in relation to the proposed Shatin to Central
Link, including in relation to:
• Government’s obligation to pay the Company up to
a maximum aggregate amount of HK$1,500 million
in respect of certain costs incurred by the Company
pursuant to the First SCL Agreement, including the
Company’s in-house design costs and certain on-costs
and preliminary costs;
• Government’s obligation to bear and finance the total
cost of the design and site investigation activities
under the First SCL Agreement (subject to the limit
noted above in respect of payments to the Company)
and arrangements for the payment of these costs
directly by Government;
•
•
•
the Company’s obligation to carry out or procure the
carrying out of the design and site investigation activities
in relation to the proposed Shatin to Central Link;
the limitation of the Company’s liability to
Government under the First SCL Agreement, except
in respect of death or personal injury caused by the
negligence of the Company, to HK$600 million; and
should the railway scheme for the Shatin to Central
Link be authorised under the Railways Ordinance
(Cap. 519 of the Laws of Hong Kong), the execution of
a further agreement by Government and the Company
setting out each of their rights, obligations, duties and
powers with respect to the financing, construction,
completion, testing, commissioning and putting into
service the works necessary for the construction and
operation of the Shatin to Central Link.
A2 Entrustment Agreement for Advance Works
relating to the Shatin to Central Link
The Entrustment Agreement for Advance Works relating
to the Shatin to Central Link (the “Second SCL Agreement”)
was entered into on 17 May 2011 between the Company
and the Secretary for Transport and Housing for and on
behalf of Government.
The Second SCL Agreement contains the following
provisions:
•
•
in consideration of the Company executing or procuring
the execution of certain entrustment activities as set
out in the Second SCL Agreement and carrying out its
other obligations under the Second SCL Agreement,
Government shall pay to the Company the Company’s
project management cost. The amount of such project
management cost is to be agreed between the Company
and Government and prior to such agreement, the
project management cost shall be paid by Government
to the Company on a provisional basis calculated in
accordance with the Second SCL Agreement;
the Company and Government may agree that the
Company will carry out (or procure the carrying out of)
certain additional works for Government (such agreed
additional works being “miscellaneous works”).
Miscellaneous works (if any) are to be carried out by the
Company in the same manner as if they had formed
part of the activities specified to be carried out under
the Second SCL Agreement and in consideration of the
Company executing or procuring the execution of such
miscellaneous works (if any) and carrying out its other
obligations under the Second SCL Agreement in relation
to such miscellaneous works (if any), Government shall
pay to the Company an amount to be agreed between
the Company and Government as being the project
management fee payable to the Company for designing
and constructing such miscellaneous works;
• Government shall bear all of the “Works Cost” (as
defined in the Second SCL Agreement). In this
connection, Government will make payments to the
Company in respect of the Works Cost on a provisional
basis, subject to adjustments when the final outturn
cost of the Works Cost is determined;
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related costs and those costs which are incurred by
the Lands Department in connection with the Shatin
to Central Link project;
•
•
•
•
•
the maximum aggregate amount payable by
Government to the Company under the Second SCL
Agreement is limited to approximately HK$3,000
million per annum and a total in aggregate of
approximately HK$15,000 million;
the Company shall carry out or procure the carrying out
of certain enabling works on the expanded Admiralty
Station and the to be constructed Ho Man Tin Station,
the reprovisioning of the International Mail Centre
from Hung Hom to Kowloon Bay and other works as
described under the Second SCL Agreement;
the Company’s total liability to Government under the
First SCL Agreement and the Second SCL Agreement,
except in respect of death or personal injury caused
by the negligence of the Company, is limited to the
aggregate fees that have been and will be received by
the Company from Government under the First SCL
Agreement and the Second SCL Agreement;
the Company will provide to Government by the end
of each calendar month, a progress report on the
activities under the Second SCL Agreement that were
carried out in the immediately preceding calendar
month and, within three months following the
completion of the relevant works, a final report on the
activities required to be carried out under the Second
SCL Agreement;
the Company shall be responsible for the care of all
works constructed under the Shatin to Central Link
project from the commencement of construction until
the date of handover of those works to Government
and for completing or procuring the completion
of any outstanding works and/or defective works
identified prior to the handover of the works;
• during the period of twelve years following the issue
of a certificate of completion by the Company in
respect of work carried out under any contract with
any third party, the Company shall be responsible
for the repair of any defects in such work that are
identified following the expiry of any defects liability
period under the relevant contract;
•
the Company warrants that:
–
–
–
in the case of those activities under the Second SCL
Agreement that relate to the provision of project
management services, such activities shall be carried
out with the skill and care reasonably to be expected
of a professional and competent project manager;
in the case of those activities under the Second SCL
Agreement that relate to the provision of design
services, such activities shall be carried out with
the skill and care reasonably to be expected of a
professional and competent design engineer; and
in the case of those activities under the Second
SCL Agreement that relate to the carrying out of
construction activities, such activities shall be carried
out with the skill and care reasonably to be expected
of, and by utilising such plant, goods and materials
reasonably to be expected from, a competent and
workmanlike construction contractor; and
• Government further undertakes to use reasonable
endeavours to provide the Company with assistance of
a non-financial nature, including taking all reasonable
steps to procure that all necessary licences and
consents, required in connection with the design,
construction and operation of the Shatin to Central Link
are given or granted.
A3 Entrustment Agreement for Construction and
Commissioning of the Shatin to Central Link
The Entrustment Agreement for Construction and
Commissioning of the Shatin to Central Link (the “Third
SCL Agreement”) was entered into on 29 May 2012
between the Company and the Secretary for Transport
and Housing for and on behalf of Government.
The Third SCL Agreement contains the following
provisions:
•
in consideration of the Company executing or
procuring the execution of certain entrustment
activities as set out in the Third SCL Agreement and
carrying out its other obligations under the First
SCL Agreement and the Second SCL Agreement,
Government shall pay to the Company the Company’s
project management cost. The amount of the project
management cost is HK$7,893 million and will be paid
by Government to the Company on a quarterly basis;
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REPORT OF THE MEMBERS OF THE BOARD •
the Company and Government may agree that the
Company will carry out (or procure the carrying out of)
certain additional works for Government (such agreed
additional works being “miscellaneous works”).
Miscellaneous works (if any) are to be carried out by the
Company in the same manner as if they had formed
part of the activities specified to be carried out under
the Third SCL Agreement and in consideration of the
Company executing or procuring the execution of such
miscellaneous works (if any) and carrying out its other
obligations under the Third SCL Agreement in relation
to such miscellaneous works (if any), Government
shall pay to the Company an amount to be agreed
between the Company and Government as being the
project management fee payable to the Company for
designing and constructing such miscellaneous works;
• Government shall bear certain “Third Party Costs”, any
“Interface Works Costs” and any “Direct Costs” (each as
defined in the Third SCL Agreement);
• Government shall bear land acquisition, clearance and
related costs and those costs which are incurred by
the Lands Department in connection with the Shatin
to Central Link project;
•
•
•
the maximum aggregate amount payable by
Government to the Company under the Third SCL
Agreement is limited to HK$3,000 million per annum
and a total in aggregate of HK$15,000 million;
the maximum aggregate amount payable by the
Company to Government under the Third SCL
Agreement in relation to its contribution to certain
railway works under the Third SCL Agreement is
limited to HK$4,000 million per annum and a total in
aggregate of HK$15,000 million;
the Company’s total liability to Government under
the First SCL Agreement, the Second SCL Agreement
and the Third SCL Agreement, except in respect of
death or personal injury caused by the negligence of
the Company, is limited to the aggregate fees that
have been and will be received by the Company from
Government under the First SCL Agreement, the
Second SCL Agreement and the Third SCL Agreement;
•
•
the Company will provide to Government by the
end of each calendar month, a progress report on
the activities under the Third SCL Agreement that
were carried out in the immediately preceding
calendar month and, within three months following
the handover of the Shatin to Central Link project to
Government, a final report on the activities required to
be carried out under the Third SCL Agreement;
the Company shall be responsible for the care of all
works constructed under the Shatin to Central Link
project from the commencement of construction until
the date of handover of those works to Government
and for completing or procuring the completion of any
outstanding works and/or defective works identified
prior to the handover of the works;
• during the period of twelve years following the issue of
a certificate of completion by the Company in respect
of work carried out under any contract with any third
party, the Company shall be responsible for the repair
of any defects in such work that are identified following
the expiry of any defects liability period under the
relevant contract;
•
the Company warrants that:
–
–
–
in the case of those activities under the Third SCL
Agreement that relate to the provision of project
management services, such activities shall be carried
out with the skill and care reasonably to be expected
of a professional and competent project manager;
in the case of those activities under the Third SCL
Agreement that relate to the provision of design
services, such activities shall be carried out with
the skill and care reasonably to be expected of a
professional and competent design engineer; and
in the case of those activities under the Third
SCL Agreement that relate to the carrying out
of construction activities, such activities shall
be carried out with the skill and care reasonably
to be expected of, and by utilising such plant,
goods and materials reasonably to be expected
from, a competent and workmanlike construction
contractor; and
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Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis • Government further undertakes to use reasonable
endeavours to provide the Company with assistance of
a non-financial nature, including taking all reasonable
steps to procure that all necessary licences and
consents, required in connection with the design,
construction and operation of the Shatin to Central Link
are given or granted.
B1 Entrustment Agreement for Design and Site
Investigation in relation to the Express Rail Link
The Entrustment Agreement for Design and Site
Investigation in relation to the Express Rail Link (the “First
XRL Agreement”) was entered into on 24 November 2008
between the Company and the Secretary for Transport
and Housing for and on behalf of Government.
The First XRL Agreement contains provisions for the
design of and site investigation and procurement
activities in relation to the proposed Express Rail Link,
including in relation to:
• Government’s obligation to pay the Company, up to
a maximum aggregate amount of HK$1,500 million,
in respect of certain costs incurred by the Company
pursuant to the First XRL Agreement, including the
Company’s in-house design costs and certain on-costs,
preliminary costs and recruited staff costs;
• Government’s obligation to bear and finance the total
cost of the design and site investigation activities
under the First XRL Agreement (subject to the limit
noted above in respect of payments to the Company)
and arrangements for the payment of these costs
directly by Government;
•
•
•
the Company’s obligation to carry out or procure
the carrying out of the design and site investigation
activities in relation to the proposed Express Rail Link;
the limitation of the Company’s liability to
Government under the First XRL Agreement, except
in respect of death or personal injury caused by the
negligence of the Company, to HK$700 million; and
should the railway scheme for the Express Rail Link be
authorised under the Railways Ordinance (Cap. 519
of the Laws of Hong Kong), the execution of a further
agreement by Government and the Company setting
out each of their rights, obligations, duties and
powers with respect to the financing, construction,
completion, testing, commissioning and putting into
service the works necessary for the construction and
operation of the Express Rail Link.
B2 Entrustment Agreement for Construction,
Testing and Commissioning of the Express Rail Link
The Entrustment Agreement for the Construction and
Commissioning of the Express Rail Link was entered
into on 26 January 2010 between the Company and the
Secretary for Transport and Housing for and on behalf of
Government (the “Second XRL Agreement”).
The scheme in respect of the Express Rail Link was first
gazetted under the Railways Ordinance (Cap. 519 of
the Laws of Hong Kong) on 28 November 2008, with
amendments and corrections gazetted on 30 April 2009.
The scheme, as amended with such minor modifications
as deemed necessary, was authorised by the Chief
Executive in Council on 20 October 2009 and funding
support approved by the Finance Committee on
16 January 2010.
The Second XRL Agreement contains the following
provisions:
•
•
in consideration of the Company executing or
procuring the execution of certain entrustment
activities as set out in the Second XRL Agreement
and carrying out its other obligations under the
Second XRL Agreement and the First XRL Agreement,
Government shall pay to the Company HK$4,590
million (further details relating to the amendments to
this provision are set out in the section headed “The
Third Agreement in relation to the Express Rail Link”),
to be paid in cash quarterly in advance on a scheduled
basis as such sum may be varied in accordance with
the Second XRL Agreement, subject to the maximum
payment limits stated in the Second XRL Agreement
(being HK$2,000 million annually and HK$10,000
million in total) (the “Maximum Payment Limits”);
the Company and Government may agree that the
Company will carry out (or procure the carrying
out of) certain additional works for Government
(such agreed additional works being “miscellaneous
works”). Miscellaneous works (if any) are to be carried
out by the Company in the same manner as if they
had formed part of the activities specified to be
carried out under the Second XRL Agreement and in
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REPORT OF THE MEMBERS OF THE BOARD consideration of the Company executing or procuring
the execution of the miscellaneous works (if any) and
carrying out its other obligations under the Second XRL
Agreement in relation to the miscellaneous works (if
any), Government shall pay to the Company an amount
equal to an agreed fixed percentage of third party costs
attributable to the miscellaneous works from time to
time subject to the Maximum Payment Limits;
the Company will provide to Government by the
end of each calendar month, a progress report on
the activities under the Second XRL Agreement
that were carried out in the immediately preceding
calendar month and, within three months following
the earlier of handover of the Express Rail Link project
to Government or termination of the Second XRL
Agreement, a final report on the activities required to
be carried out under the Second XRL Agreement;
the Company shall be responsible for the care of all
works constructed under the Express Rail Link project
from the commencement of construction until the
date of handover of those works to Government
(or to a third party directed by Government) and
for completing or procuring the completion of any
outstanding works and/or defective works identified
prior to the handover of the works;
•
•
• during the period of twelve years following the issue
of a certificate of completion by the Company in
respect of work carried out under any contract with
any third party, the Company shall be responsible
for the repair of any defects in such work that are
identified following the expiry of any defects liability
period under the relevant contract;
•
the Company warrants that:
–
–
in the case of those activities under the Second
XRL Agreement that relate to the provision of
project management services, such activities shall
be carried out with the skill and care reasonably
to be expected of a professional and competent
project manager;
in the case of those activities under the Second XRL
Agreement that relate to the provision of design
services, such activities shall be carried out with
the skill and care reasonably to be expected of a
professional and competent design engineer; and
–
in the case of those activities under the Second
XRL Agreement that relate to the carrying out of
construction activities, such activities shall be carried
out with the skill and care reasonably to be expected
of, and by utilising such plant, goods and materials
reasonably to be expected from, a competent and
workmanlike construction contractor;
• Government is required to bear (i) any costs payable
to third parties, (ii) any charges, costs or amounts
payable to any Government department, bureau,
agency or body in relation to the activities to be
carried out under the Second XRL Agreement, (iii) any
and all amounts payable to KCRC as compensation for
damage arising as a result of the Company and/or a
third party contractor carrying out activities under the
Second XRL Agreement; and (iv) all land acquisition,
clearance and related costs (including all amounts
arising as a result of any claim for compensation by
any third party) and those costs which are incurred
by the Lands Department in connection with the
Express Rail Link project (further details relating to
the amendments to this provision are set out in the
section headed “The Third Agreement in relation to
the Express Rail Link”); and
• Government further undertakes to use reasonable
endeavours to provide the Company with assistance
of a non-financial nature, including taking all
reasonable steps to procure that all necessary licences
and consents, required in connection with the design,
construction and operation of the Express Rail Link are
given or granted.
Government had agreed that the Company would
proceed with the construction, testing and commissioning
of the Express Rail Link (pursuant to and on the terms of
the Second XRL Agreement) on the understanding that
the Company would be invited to undertake the operation
of the Express Rail Link under the concession approach.
The Third Agreement in relation to the Express
Rail Link
On 30 November 2015, Government and the Company
entered into the deed of agreement relating to the further
funding and completion of the Express Rail Link project
(the “Third XRL Agreement”). The Third XRL Agreement
contains an integrated package of terms and provides that:
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Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis (i) Government will bear and finance the project cost up
to HK$84.42 billion;
(ii) if the project cost exceeds HK$84.42 billion, the
Company will bear and finance the portion which
exceeds that sum (if any), except for certain agreed
excluded costs;
(iii) the Company will pay a special dividend of HK$4.40 in
aggregate per share in two equal tranches (of HK$2.20
per share, in cash in each tranche);
(iv) certain amendments will be made to the existing
entrustment arrangements entered into in 2010
relating to the Express Rail Link, including an increase
in the project management fee payable to the
Company to HK$6.34 billion;
(v) Government reserves the right to refer to arbitration,
after commencement of operations on the Express
Rail Link, the question of the Company’s liability for
the current cost overrun (if any); and
“System”) for a seven-year period (the “Existing Contract”),
effective from 6 July 2013. It is expected that the highest
amount per year receivable from the AA under the
Existing Contract will be no more than HK$85 million.
The Existing Contract contains provisions relating to
the operation and maintenance by the Company of the
System and the carrying out by the Company of certain
specified services in respect of the System, they include
the following:
• provisions stating that the duration of the Existing
Contract shall be seven years from 6 July 2013 up to
and including 5 July 2020;
• provisions relating to the performance of scheduled
maintenance works and overhaul of the System by
the Company;
• provisions relating to monitoring the System for
any breakdown and the Company providing repair
services where necessary;
(vi) the Third XRL Agreement was subject to (a) the
• provisions relating to the standards to which the
obtaining of approval of the Company’s independent
shareholders (which was obtained on 1 February 2016)
and (b) the obtaining of approval of the Legislative
Council for Government’s additional funding
obligations (which was obtained on 11 March 2016).
The first tranche of the special dividend of HK$2.20 per
share was distributed on 13 July 2016 and the second
tranche, also of HK$2.20 per share, was distributed on
12 July 2017.
Pursuant to the Third XRL Agreement, certain
amendments have been made to the Second XRL
Agreement to reflect the arrangements contained in the
Third XRL Agreement, including (i) amendments to the
arrangements for the bearing and financing of the project
cost; and (ii) an increase in the project management cost
payable to the Company to an aggregate of HK$6.34
billion (which reflects the estimate of the Company’s
expected internal costs in performing its obligations in
relation to the Express Rail Link project).
C1 Maintenance Agreements for the Automated
People Mover System at the Hong Kong
International Airport
On 5 July 2013, the Company entered into a contract with
the AA for the maintenance of the Automated People
Mover system at the Hong Kong International Airport (the
Company must operate the System;
• provisions relating to the carrying out by the
Company (as additional services), in certain
circumstances, of upgrade work on the System; and
• provisions relating to the operations of and
maintenance for the extension of the System to the
Midfield Concourse.
With the outbreak of COVID-19 and its disruptions to the
aviation industry, the Existing Contract was extended
for 6 months to 5 January 2021 and, on 2 July 2020, the
Company entered into a new contract with the AA for
the maintenance of the System for a seven-year period
(“the New Contract”) effective from 6 January 2021. It is
expected that the highest amount per year receivable
from the AA will be no more than HK$130 million under
the New Contract.
The New Contract contains provisions relating to the
operation and maintenance by the Company of the
System and the carrying out by the Company of certain
specified services in respect of the System, they include
the following:
• provisions stating that the duration of the New
Contract shall be seven years from 6 January 2021 up to
and including 5 January 2028;
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REPORT OF THE MEMBERS OF THE BOARD • provisions relating to the performance of scheduled
maintenance works and overhaul of the System by
the Company;
• provisions relating to monitoring the System for any
breakdown and the Company providing repair services
where necessary;
• provisions relating to the standards to which the
Company must operate the System;
• provisions relating to the carrying out by the Company
(as additional services), in certain circumstances, of
upgrade work on the System; and
• provisions of operational training and corresponding
qualifications to the AA’s personnel.
C2 Subcontractor Warranty to the AA
On 18 May 2018, the Company provided a sub-contractor
warranty to the AA as a result of obtaining a subcontract
from Niigata Transys Co., Ltd. (“NTS”) for the modification
works of the existing System for a seven-year period,
effective from 25 September 2017 (the “Subcontract”). It
is expected that the highest amount per year receivable
from NTS will be no more than HK$60 million.
The Subcontract contains provisions covering the
provision and modification of the power distribution,
communication and control subsystems in respect of the
System, which includes the following:
• modification of the existing System for its extension to
the new Automated People Mover Interchange Station;
• provision of related electrical and mechanical
systems, including power distribution system,
telecommunication systems and maintenance
equipment; and
•
relocation of existing maintenance equipment to the
new Automated People Mover depot.
D Project Agreement for the Financing, Design,
Construction and Operation of the West Island Line
The Project Agreement for the Financing, Design,
Construction and Operation of the West Island Line
(the “WIL Project Agreement”) was entered into on
13 July 2009 between the Company and the Secretary for
Transport and Housing for and on behalf of Government.
The WIL Project Agreement contains provisions for
the financing of and the carrying out, or procuring the
carrying out, of the design, construction, completion,
testing and commissioning by the Company of the
railway works required in order to bring the West
Island Line into operation in accordance with the MTR
Ordinance, the Operating Agreement between the
Company and the Secretary for Transport and Housing
for and on behalf of Government dated 9 August 2007
and the WIL Project Agreement. The West Island Line will
be owned, operated and maintained by the Company for
its own account for the period of the Company’s railway
franchise. The final payment certificate was issued on
28 June 2019.
The WIL Project Agreement includes provisions in
relation to:
• payment by Government of HK$12,252 million to
the Company in consideration of the Company’s
obligations under the WIL Project Agreement, such sum
constituting funding support from Government for the
Company to implement the West Island Line project;
• within 24 months of commercial operations
commencing on the West Island Line on a revenue
earning basis and providing scheduled transport for
the public (which period was extended to no later
than 30 June 2018 by a supplemental agreement
between the Company and Government dated
23 December 2016, further extended for a period
ended on or before 31 March 2019 by a second
supplemental agreement between the Company
and Government dated 29 June 2018, and further
extended for a period ended on 30 June 2019 by a
third supplemental agreement between the Company
and Government dated 29 March 2019), payment
by the Company to Government of any “Repayment
Amounts” for any over-estimation of certain capital
expenditure, price escalation costs, land costs and
the amount of contingency in relation to the railway
works and reprovisioning, remedial and improvement
works (together with interest);
the design, construction and completion of the
associated reprovisioning, remedial and improvement
works (the cost of which shall be the responsibility
of the Company) and the associated essential public
infrastructure works (the cost of which shall be the
responsibility of Government);
the Company’s responsibility for costs relating to
land acquisition, clearance and related costs arising
from the implementation of the West Island Line
•
•
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Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis project (save for costs arising from certain claims for
compensation by third parties) and all costs, expenses
and other amounts incurred or paid by the Lands
Department pursuant to the involvement of the Lands
Department in connection with the implementation
of the West Island Line project; and
•
the Company carrying out measures specified in
the environmental impact assessment and the
environmental permit issued by Government to
the Company in relation to the West Island Line on
12 January 2009.
III
Continuing Connected Transactions
relating to the Operation of the High
Speed Rail (formerly known as the
Express Rail Link)
The following disclosures, in paragraphs A and B below
of this section (together, the “Continuing Connected
Transactions relating to the Operation of the High Speed
Rail”), are made in accordance with the conditions of the
Waiver, the Merger-related Waiver and Rule 14A.71 of the
Listing Rules.
A Amendment Operating Agreement
On 23 August 2018, the Company and the Secretary for
Transport and Housing, for and on behalf of Government,
entered into the Amendment Operating Agreement
(the “AOA”) to amend and supplement the Integrated
Operating Agreement dated 9 August 2007 (as described
in paragraph D of the section headed “Additional
Information in respect of the Rail Merger” on page 181, as
amended (“Existing Integrated Operating Agreement”),
in order to prescribe the operational requirements that
will apply to the High Speed Rail. The intent and effect
of the AOA is that the operational requirements that are
applicable to the existing railway network will apply in
substantially the same manner to the High Speed Rail,
save where any amendments are necessary to reflect the
particular characteristics of, and arrangements for, the
High Speed Rail.
The AOA is an “operating agreement” for the purposes of
the MTR Ordinance, forms part of the legal and regulatory
regime for the operation of railways in Hong Kong and is
required for the purposes of the MTR Ordinance so that
the High Speed Rail is properly regulated under the
MTR Ordinance.
Principal Terms of the AOA are as follows:
The terms of the AOA are based substantially on the terms
of the Existing Integrated Operating Agreement. The AOA
has taken effect on 23 September 2018 (the “Commercial
Operation Date (High Speed Rail)”) and will expire at
the same time as the Supplemental Service Concession
Agreement (the “SSCA”) entered into between the
Company and KCRC on 23 August 2018.
Certain principal terms of the AOA that are specific to the
High Speed Rail include:
• obligations on the Company to maintain specific
performance requirements in relation to train service
delivery, ticket machine reliability, ticket-gate reliability
and escalators and passenger lifts reliability;
• obligations on the Company to publish specific
customer services pledges in relation to train service
delivery, ticket machine reliability, ticket-gate reliability,
escalators and passenger lifts reliability, temperature
and ventilation levels, railway cleanliness (relating only
to the Company’s High Speed Rail trains) and passenger
enquiry response time;
• obligations in relation to the carrying out of the
maintenance of the Company’s High Speed Rail trains
outside Hong Kong;
• obligations on the Company to carry out design
checks and tests to verify that the Mainland operator’s
High Speed Rail trains are compatible with the
Company’s infrastructure and can run on the High
Speed Rail safely;
•
establishing procedures with the Mainland operator for
approving the Mainland operator’s trains to run on the
High Speed Rail safely and for informing Government
of the modification of any such trains;
• developing and maintaining a training qualification
system for drivers of High Speed Rail trains;
•
•
facilitating the carrying out of inspections by the
railway inspector, including liaising with the Mainland
operator for this purpose, where necessary;
security obligations in relation to maintaining the
integrity and security of the boundaries of the Mainland
Port Area and the Cross-Boundary Restricted Area; and
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REPORT OF THE MEMBERS OF THE BOARD • mechanisms and Government approval procedures
for setting fares for High Speed Rail train journeys,
including that:
(i) a revocation of the Company’s franchise under the
MTR Ordinance in whole or in respect of the High
Speed Rail; and
(i) prior to the Commercial Operation Date (High
(ii) the date falling immediately before the tenth
Speed Rail), the Company will seek prior written
consent from Government before setting the fares
for the various available High Speed Rail ticket
types; and
(ii) thereafter, fares cannot be adjusted, introduced or
withdrawn without the prior consent of Government.
B
Supplemental Service Concession Agreement
On 23 August 2018, the Company and KCRC entered
into the SSCA to supplement the Service Concession
Agreement dated 9 August 2007 (as described in
paragraph B of the section headed “Additional Information
in respect of the Rail Merger” on pages 180 and 181) (the
“Existing Service Concession Agreement”) in order for
KCRC to grant a concession to the Company in respect
of the High Speed Rail and to prescribe the operational
and financial requirements that will apply to the High
Speed Rail. The intent and effect of the SSCA is that the
operational requirements that are applicable to the
Company’s operation of the existing KCRC railway system
will apply in substantially the same manner to the High
Speed Rail, save where any amendments are necessary to
reflect the particular characteristics of, and arrangements
for, the High Speed Rail. The financial provisions in the
SSCA have been designed to reflect the provisions of the
Existing Integrated Operating Agreement that relate to
new concession projects, such as the High Speed Rail
subject as set out below.
The SSCA is a “service concession agreement” for the
purposes of the MTR Ordinance, forms part of the legal
and regulatory regime for the operation of railways in
Hong Kong and is required for the purposes of the MTR
Ordinance so that the High Speed Rail is properly regulated
under the MTR Ordinance.
Principal Terms of the SSCA
The terms of the SSCA are based substantially on the terms
of the Existing Service Concession Agreement. The operating
period with respect to the High Speed Rail has commenced
on the Commercial Operation Date (High Speed Rail) and
will terminate automatically on the earlier of:
anniversary of the Commercial Operation Date (High
Speed Rail), but may be extended subject to further
negotiation between the Company and KCRC in
accordance with the mechanism set out in the SSCA,
in which case it shall terminate on such other date
as is agreed between the Company and KCRC (the
“Concession Period (High Speed Rail)”).
Certain principal terms of the SSCA that are specific to the
High Speed Rail include:
• Additional concession payments for the High Speed Rail
(i) General
The additional concession payments to be
made by the Company to KCRC and by KCRC to
the Company in respect of the High Speed Rail
(described below) have been designed to reflect
the requirements under the Existing Integrated
Operating Agreement, inter alia, for the Company
to retain 10% of the currently expected positive
discounted net cash flow from the operation
of the High Speed Rail (being discounted at
a discount rate which reflects the Company’s
commercial rate of return in relation to the High
Speed Rail).
The SSCA provides for the fixed annual payments
and variable annual payments structure for the
additional concession payments, to reflect the
current concession payments structure for the
existing KCRC system under the Existing Service
Concession Agreement.
The additional concession payments for the
High Speed Rail are in addition to, and do not
replace, the payments made in respect of the
existing KCRC system under the Existing Service
Concession Agreement.
(ii) Variable annual payments
The variable annual payments (being payments
by the Company to KCRC) will be calculated in
the same manner prescribed under the Existing
Service Concession Agreement whereby the
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a certain percentage of the revenue generated
from the KCRC system (being 35% for revenues
generated from the KCRC system that are beyond
the first HK$7.5 billion). For the purposes of
calculating the variable annual payments, the
revenue generated from the KCRC system shall
include the actual revenue from the High Speed
Rail fares received or retained by the Company
and revenue derived from businesses related to
the High Speed Rail which may include, without
limitation, advertising, telecommunications, duty
free and kiosk rental.
(iii) Fixed annual payments for the High Speed Rail
In light of the variable annual payments described
in paragraph (ii) above and in order for the
Company to be able to retain 10% of the currently
expected positive discounted net cash flow from
the operation of the High Speed Rail as described
above, the fixed annual payments shall comprise
payments from KCRC to the Company which,
in aggregate, over the Concession Period (High
Speed Rail), will be equal to HK$7,965 million.
These fixed annual payments shall be without
prejudice to the Company’s obligation to pay the
fixed annual payments of HK$750 million each
financial year to KCRC under the Existing Service
Concession Agreement.
• Revenue-related arrangements
In addition, the SSCA contains the following revenue-
related arrangements:
(i) Patronage adjustment
In respect of actual deviations from the current
patronage projections for the High Speed Rail:
(a) any excess or shortfall in actual patronage of
up to 15% in relation to the currently projected
patronage for the High Speed Rail will be
borne by the Company; and
(b) any excess or shortfall in actual patronage
greater than 15% in relation to the currently
projected patronage for the High Speed Rail
will be borne between the Company and KCRC
in the proportions of 30% by the Company and
70% by KCRC.
(ii) Incremental revenue adjustment
In respect of actual deviations from the currently
projected patronage for the Company’s existing
cross-boundary services to and from Lo Wu and
Lok Ma Chau, and the existing intercity service, the
Company may receive two payments from KCRC
(in respect of the period from and including the
Commercial Operation Date (High Speed Rail) up
to and including 31 December 2023 and in respect
of the period from and including 1 January 2024
up to and including the day falling immediately
before the tenth anniversary of the Commercial
Operation Date (High Speed Rail), respectively)
and which will be capped at HK$500 million and
HK$1,000 million, respectively.
(iii) Mainland discount programme loss
In respect of revenue loss resulting from the
Mainland Student Ticket Discount and the
Mainland Disabled Military/Police Officer Discount
programmes adopted by the Mainland operator, the
Company will receive reimbursement payments from
KCRC on an annual basis.
KCRC and the Company will also discuss in good
faith similar reimbursement arrangements should
the Mainland operator introduce any other discount
programmes in future.
(iv) Service fees subsidy
In respect of the proportion of the service fee
charged in respect of tickets sold at West Kowloon
Station for journeys originating from and terminating
at any railway station in the Mainland which
Government has directed should be borne by the
Company, the Company will receive reimbursement
payments from KCRC on an annual basis.
• Pre-operating costs reimbursements
In addition, KCRC shall reimburse the Company for
the pre-operating costs that are agreed between
the Company and KCRC, being costs and expenses
reasonably incurred by the Company prior to the
Commercial Operation Date (High Speed Rail) that
satisfy all of the following criteria:
(i) that directly resulted from the planning and
commencement of the operation of the relevant
High Speed Rail assets;
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REPORT OF THE MEMBERS OF THE BOARD (ii) that have not already been paid, and will not be
paid or payable, by Government to the Company
under any relevant agreement or which the
Company and Government otherwise agree in
writing should be treated as a pre-operating cost;
(iii) that are not covered in any of the payments to be
made by KCRC to the Company under the SSCA; and
(iv) that fall within certain other types of agreed costs
and expenses in connection with the operation
of the High Speed Rail (including, mobilisation
activities in preparation for the opening of the
High Speed Rail and trial operations prior to the
opening of the High Speed Rail, and other items as
may be agreed between KCRC and the Company).
•
Equalisation payment
If the franchise is revoked by Government prior
to 31 December 2023, KCRC is required to make
a payment to the Company of an amount that is
equivalent to the aggregate fixed annual payment
payable by KCRC over the ten-year life of the
concession, reduced pro rata to take account of
the time at which termination occurs, and less any
amounts of the fixed annual payment already paid
to the Company. The intention of this equalisation
payment is to ensure that the Company is partly
protected in the event of early termination of the
concession in respect of the High Speed Rail.
• High Speed Rail services
The Company is obliged to operate the High Speed
Rail during the Concession Period (High Speed Rail)
to the standards prescribed in the MTR Ordinance
and the Existing Operating Agreement (subject
as otherwise stated herein). The Company is not
regarded as having failed to meet a requirement
under the MTR Ordinance or the Existing Integrated
Operating Agreement if the failure has resulted from
anything done or omitted to be done by the Mainland
operator, any Mainland authority or persons directly
under their control.
• Return requirements
If the Concession Period (High Speed Rail) expires
or is terminated, the Company shall, at no cost to
KCRC, redeliver possession of the High Speed Rail
concession property.
IV
Continuing Connected Transactions
relating to the Operation of the First
Phase of the Tuen Ma Line
The following disclosures, in paragraphs A and B below
of this section (together, the “Continuing Connected
Transactions relating to the Operation of the first phase
of the Tuen Ma Line”), are made in accordance with the
conditions of the Waiver, the Merger-related Waiver and
Rule 14A.71 of the Listing Rules.
A Amendment Operating Agreement and
Supplemental Operating Agreement
On 11 February 2020, the Company and the Secretary for
Transport and Housing, for and on behalf of Government,
entered into the Amendment Operating Agreement
(“TML1 AOA”) and the Company and the Commissioner
for Transport, for and on behalf of Government, entered
into the Supplemental Operating Agreement (“TML1
SOA”) to amend and supplement, respectively, the
Existing Integrated Operating Agreement in order to
prescribe the operational requirements, such as service
standards, that will apply to the first phase of the Tuen
Ma Line (“TML1”) which shall extend the existing Ma
On Shan Railway from Tai Wai to Kai Tak with two new
stations at Hin Keng and Kai Tak, and an interchange
station at Diamond Hill. The intent and effect of the TML1
AOA and the TML1 SOA together is that the operational
requirements that are applicable to the existing railway
network will apply in substantially the same manner
to TML1.
The TML1 AOA and the TML1 SOA are each an “operating
agreement” for the purposes of the MTR Ordinance, form
part of the legal and regulatory regime for the operation
of railways in Hong Kong and are required for the
purposes of the MTR Ordinance so that TML1 is properly
regulated under the MTR Ordinance.
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Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis The principal terms of the TML1 AOA and the TML1 SOA
have the effect of bringing TML1 within the legal and
regulatory regime for the operation of railways in Hong
Kong contained in the Existing Integrated Operating
Agreement, as explained above. The amendments
under the TML1 AOA and the TML1 SOA took effect on
14 February 2020.
B
Supplemental Service Concession Agreement
On 11 February 2020, the Company and KCRC entered
into the Supplemental Service Concession Agreement
No. 2 (“TML1 SSCA”) relating to TML1, to supplement
the Existing Service Concession Agreement in order
for KCRC to grant a concession to the Company in
respect of TML1 and to prescribe the operational and
financial requirements that will apply to TML1. The intent
and effect of the TML1 SSCA is that the operational
requirements that are applicable to the Company’s
operation of the existing KCRC railway system will
apply in substantially the same manner to TML1, save
where any amendments are necessary to reflect the
particular characteristics of, and arrangements for,
TML1. The financial provisions in the TML1 SSCA have
been designed to reflect the principles contained in the
Existing Integrated Operating Agreement that relate to
new concession projects, such as TML1 (as referred to in
paragraph A above of this section) other than as set
out below.
The TML1 SSCA is a “service concession agreement” for
the purposes of the MTR Ordinance, forming part of the
legal and regulatory regime for the operation of railways
in Hong Kong, and is required for the purposes of the MTR
Ordinance so that TML1 is properly regulated under the
MTR Ordinance.
Principal Terms of the TML1 SSCA
The terms of the TML1 SSCA are based substantially on
the terms of the Existing Service Concession Agreement,
as explained above. The TML1 SSCA was made on
11 February 2020 and the term of the service concession
and licence granted by KCRC to the Company pursuant
to the terms of the TML1 SSCA and the commercial
operation of TML1 commenced on 14 February 2020 (the
“New Project Effective Date (TML1)”), which will terminate
automatically on and from the earlier of (being the
“Termination Date (TML1)”):
(i) the effective date of the revocation of the franchise
pursuant to the MTR Ordinance as it relates to the
KCRC railway;
(ii) the effective date of the withdrawal or revocation
of the permission by the Director of Lands pursuant
to the vesting deed entered into between KCRC and
Government as well as the revocation of the franchise
pursuant to the MTR Ordinance as it relates to TML1;
(iii) the first date of commissioning and commercial
operation of the entire Tuen Ma Line (“TML2”) to be
designated by Government under a new supplemental
service concession agreement for TML2 (which shall
supersede and replace the TML1 SSCA); and
(iv) the day falling immediately before the second
anniversary of the New Project Effective Date (TML1),
or such later date as each of the Company, KCRC
and Government may agree in a written agreement
by no later than the date falling one month prior to
the second anniversary of the New Project Effective
Date (TML1) or prior to the last extended date (where
applicable) (“Natural Expiry Date (TML1)”).
Certain principal terms of the TML1 SSCA that are specific
to TML1 include:
• Concession payments
(i) Variable annual payments
The variable annual payments (being payments
by the Company to KCRC) will be calculated in
the same manner prescribed under the Existing
Service Concession Agreement whereby the
Company pays to KCRC, for each financial year,
a certain percentage of the revenue generated
from the KCRC system (being 35% for revenues
generated from the KCRC system that are
beyond the first HK$7.5 billion). For the purposes
of calculating the variable annual payments,
the revenue generated from the KCRC system
shall include the actual revenue from the TML1
fares received or retained by the Company and
revenue derived from businesses related to
TML1 which may include, without limitation,
telecommunications and kiosk rental.
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REPORT OF THE MEMBERS OF THE BOARD
(ii) Fixed annual payments for TML1
In light of the variable annual payments described
above and in order for the Company to be able to
earn a commercial return as described above, the
fixed annual payments for TML1 shall comprise
payments from KCRC to the Company which, in
aggregate over the period commencing on the
New Project Effective Date (TML1) and ending
on the day prior to the Termination Date (TML1)
(“Concession Period (TML1)”) and assuming that
the Concession Period (TML1) terminates on
the Natural Expiry Date (TML1), will be equal to
HK$465 million. These fixed annual payments
shall be without prejudice to the Company’s
obligation to pay the fixed annual payments of
HK$750 million each financial year to KCRC under
the Existing Service Concession Agreement.
• A new supplemental service concession agreement
for TML2
On and from the date of the TML1 SSCA, to and
including the date that is four months before the
Natural Expiry Date (TML1) (prior to any extension or
otherwise after such extension(s) as agreed in writing
by the Company, KCRC and Government for the
purposes of this end date), Government, the Company
and KCRC shall commence exclusive negotiations
in good faith with a view to agreeing the terms of a
supplemental service concession agreement for TML2
which shall, in accordance with the Existing Integrated
Operating Agreement, enable the Company to earn
a commercial rate of return from its operation of
TML2 (and that new supplemental service concession
agreement for TML2 is intended to replace the
TML1 SSCA).
• Return requirements
If the Concession Period (TML1) expires or is
terminated, and no supplemental service concession
agreement is entered into for TML2, the Company
shall, at no cost to KCRC, redeliver possession of the
TML1 concession property.
V
Non-Governmental Continuing
Connected Transaction
The following disclosure (the “Non-Governmental
Continuing Connected Transaction”) is made in
accordance with Rule 14A.71 of the Listing Rules.
Contract 903 between the Company and LCAL
relating to certain works on the South Island
Line (East)
As explained above, LCAL is a “connected person” of
the Company within the meaning of Chapter 14A of the
Listing Rules. Contract 903 (as defined below) is therefore
a “continuing connected transaction” within the meaning
of Rule 14A.31 of the Listing Rules.
On 17 May 2011, the Company and LCAL entered into
Contract 903 (as amended by supplementary agreement
no. 1 on 14 November 2014 and supplementary
agreement no. 2 on 8 October 2020) (the “Contract 903”)
for the construction of certain works relating to the
Aberdeen Channel Bridge, Wong Chuk Hang Station and
Ocean Park Station in respect of the South Island Line
(East) (the “Contract 903 Works”).
Contract 903 is in substantially the same form as the
Company’s standard conditions of contract for target cost
construction and contains the following provisions:
•
•
the principal obligation of LCAL under Contract 903 is
the construction of the Contract 903 Works;
LCAL shall indemnify the Company against any loss
or expense sustained by the Company and against
all losses and claims in respect of death or injuries or
damage to any person or property whatsoever which
may arise out of or in consequence of the execution
of the Contract 903 Works and against all claims,
proceedings, damages, costs, charges and expenses
whatsoever in respect of or in relation thereto,
except for compensation or damages related to the
permanent use or occupation of land by the Contract
903 Works, or the right of the Company to execute
the Contract 903 Works on any part of the land, or
on account of any negligence by the Company, its
agents, servants or other contractors, not being
employed by LCAL;
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•
•
•
•
•
•
LCAL shall indemnify the Company against all
damages and compensation and against all
claims, demands, proceedings, costs, charges and
expenses whatsoever in respect of any damages
or compensation payable at law in respect of or in
consequence of any accident, injury or illness to any
workman or other person in the employment of LCAL
or its sub-contractors or suppliers arising out of and in
the course of such employment;
LCAL shall effect and maintain insurance with a limit
of not less than HK$200 million in relation to certain of
its liabilities;
a bond issued by Chartis Insurance Hong Kong
Limited has been provided to the Company in respect
of the obligations of LCAL under Contract 903;
LCAL’s liability to indemnify the Company is reduced
proportionally to the extent that any act or neglect
of the Company, the Engineer or any other person
employed by the Company in connection with
the Contract 903 Works, their respective agents,
employees or representatives, may have contributed
to the relevant death, illness, or damage. The total
liability of LCAL to the Company for all damages
(liquidated damages and general) for delay shall not
exceed 10% of the target cost plus fees as calculated
under Contract 903;
the total amount payable by the Company to LCAL
under Contract 903 includes costs for the Contract 903
Works and fees to LCAL. From time to time the scope
of the Contract 903 Works may vary and the Company
will be obliged to revise the fees payable to LCAL in
accordance with the terms of the Contract;
the Company is obliged to pay the costs for the
Contract 903 Works to LCAL on a scheduled basis
set out in Contract 903. If the final total cost of the
Contract 903 Works exceeds or is less than the target
cost for the Works, the deficit or, as the case may
be, the excess will be borne by or, as the case may
be, distributed to the Company and LCAL on a basis
calculated in accordance with Contract 903;
•
the maximum aggregate amount payable annually
by the Company under Contract 903 is approximately
HK$1,400 million. As payments by the Company
to LCAL are paid on a scheduled basis as set out in
Contract 903, the maximum aggregate annual amount
is set by reference to the highest amount payable by
the Company in any given year under such schedule;
•
•
the Company is obliged to effect “Contractor’s All
Risks” and “Third Party Liability” insurance with a third
party liability limit of not less than HK$700 million.
In addition, LCAL has agreed to separately purchase
additional cover for “Third Party Liability” insurance in
the amount of HK$3,638 million; and
the Company may at any time, by giving 30 days’
notice in writing to LCAL, terminate Contract 903 but
without prejudice to any claims by the Company for
breach of contract.
The final payment certificate of Contract 903 was issued
to LCAL and payment was settled in September 2020.
The final account price for Contract 903 was settled and
agreed between the Company and LCAL, and the bond
issued by Chartis Insurance Hong Kong Limited was
returned to LCAL in October 2020.
In relation to the Merger-related Continuing Connected
Transactions, the Non Merger-related Continuing
Connected Transactions, the Continuing Connected
Transactions relating to the Operation of the High
Speed Rail, the Continuing Connected Transactions
relating to the Operation of the first phase of the
Tuen Ma Line and the Non-Governmental Continuing
Connected Transaction (collectively “Transactions”) and
in accordance with (i) in the case of the Merger-related
Continuing Connected Transactions, paragraph B(I)(i)
of the Merger-related Waiver; (ii) in the case of the Non
Merger-related Continuing Connected Transactions,
paragraph B(I)(iii)(a) of the Waiver; (iii) in the case of
the Continuing Connected Transactions relating to the
Operation of the High Speed Rail, paragraph B(I)(i) of
the Merger-related Waiver and paragraph B(I)(iii)(a) of
the Waiver; (iv) in the case of the Continuing Connected
Transactions relating to the Operation of the first phase of
the Tuen Ma Line, paragraph B(I)(i) of the Merger-related
Waiver and paragraph B(I)(iii)(a) of the Waiver; and (v) in
the case of the Non-Governmental Continuing Connected
Transaction, Rule 14A.55 of the Listing Rules, the
Company confirms that the Independent Non-executive
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REPORT OF THE MEMBERS OF THE BOARD Directors of the Company have reviewed and confirmed
that each of the Transactions was entered into:
in the case of the Non-Governmental Continuing
Connected Transaction, in addition, that:
(1) in the ordinary and usual course of business (within
the meaning of the Listing Rules) of the Group;
(2) on normal commercial terms or better (within the
meaning of the Listing Rules); and
(3) according to the agreement governing them on terms
that are fair and reasonable and in the interests of the
Company’s shareholders as a whole.
The Company has engaged the auditors of the Company
to report on the Transactions in accordance with Hong
Kong Standard on Assurance Engagements 3000 (Revised)
“Assurance Engagements Other Than Audits or Reviews
of Historical Financial Information” and with reference
to Practice Note 740 “Auditor’s Letter on Continuing
Connected Transactions under the Hong Kong Listing
Rules” issued by the Hong Kong Institute of Certified
Public Accountants. In accordance with (i) in the case of
the Merger-related Continuing Connected Transactions,
paragraph B(I)(ii) of the Merger-related Waiver; (ii) in the
case of the Non Merger-related Continuing Connected
Transactions, paragraph B(I)(iii)(b) of the Waiver; (iii) in the
case of the Continuing Connected Transactions relating
to the Operation of the High Speed Rail, paragraph B(I)(ii)
of the Merger-related Waiver and paragraph B(I)(iii)(b) of
the Waiver; (iv) in the case of the Continuing Connected
Transactions relating to the Operation of the first phase of
the Tuen Ma Line, paragraph B(I)(ii) of the Merger-related
Waiver and paragraph B(I)(iii)(b) of the Waiver; and (v) in
the case of the Non-Governmental Continuing Connected
Transaction, Rule 14A.56 of the Listing Rules, the auditors
have provided a letter to the Board confirming that:
(a) nothing has come to their attention that causes them
to believe that any of the Transactions has not been
approved by the Board;
(b) nothing has come to their attention that causes them
to believe that any of the Transactions was not entered
into, in all material respects, in accordance with the
relevant agreements governing such transactions; and
(c) for transactions involving the provision of goods or
services by the Group, nothing has come to their
attention that causes them to believe that such
transactions were not, in all material respects, in
accordance with the pricing policies of the Group; and
(d) with respect to the aggregate amount of each of such
transactions, nothing has come to their attention
that causes them to believe that such transactions
have exceeded the relevant annual caps as set by the
Company in respect of each of such transactions.
Additional Information in respect of the
Rail Merger
The Rail Merger consisted of a number of separate
agreements, each of which was detailed in the circular
issued by the Company on 3 September 2007 in
connection with the Rail Merger, and which together
formed a complete package deal which was approved
by the independent shareholders of the Company at an
Extraordinary General Meeting held on 9 October 2007. The
information set out at paragraph A below of this section
describes the payment framework adopted in respect of
the Rail Merger and paragraphs B to E below of this section
set out summaries of the various agreements entered into
by the Company in respect of the Rail Merger in addition
to those agreements disclosed above under the heading
“Merger-related Continuing Connected Transactions”.
A Payments in connection with Merger-related
Agreements
In connection with the Rail Merger, the following initial
payments were made by the Company to KCRC on
2 December 2007 (being the Merger Date):
•
an upfront payment of HK$4.25 billion, payable under
the Service Concession Agreement (as described in
paragraph B below of this section), being the upfront
fee for the right to operate the Service Concession (as
defined in paragraph B below of this section) and the
consideration for the purchased rail assets; and
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an upfront payment of HK$7.79 billion payable under
the Merger Framework Agreement (as described on
pages 162 to 163) in consideration for the execution
of the Property Package Agreements (as described
on pages 163 to 164 and in paragraph E below of this
section) and the sale of the shares in the subsidiaries of
KCRC (the “KCRC Subsidiaries”) that were transferred to
the Company under the Sale and Purchase Agreement
which was entered into on 9 August 2007 between the
Company and KCRC.
In addition to the initial payments above, the Company
is also required to make the following payments to KCRC
going forward:
•
•
fixed annual payments of HK$750 million payable
under the Service Concession Agreement, for the right
to use and operate the concession property for the
operation of the service concession, in arrears on the
day immediately preceding each anniversary of the
Merger Date which falls during the concession period in
respect of the 12-month period up to and including the
date on which such payment falls due; and
variable annual payments payable under the Service
Concession Agreement, for the right to use and
operate the concession property for the operation of
the service concession, in each case, calculated on a
tiered basis by reference to the amount of revenue
from the KCRC system (as determined in accordance
with the Service Concession Agreement) for each
financial year of the Company. No variable annual
payment is payable in respect of the first 36 months
following the Merger Date.
As a complete package deal, other than the payment
elements described above and unless stated otherwise in
the relevant paragraph below in this section, no specific
allocation was made between the various elements of the
Rail Merger.
B
Service Concession Agreement
The Service Concession Agreement was entered into on
9 August 2007 between the Company and KCRC.
The Service Concession Agreement contains provisions in
relation to the grant and operation of a service concession
and licence granted by KCRC to the Company (the
“Service Concession”), including in relation to:
•
•
•
•
the grant of the Service Concession to the Company
to access, use and operate the concession property
(other than KCRC railway land referred to immediately
below) to certain specified standards;
the grant of a licence to access and use certain KCRC
railway land;
the term (being an initial period of 50 years from the
Merger Date) of the Service Concession and redelivery
of the KCRC system upon expiry or termination of the
concession period. The Service Concession will end if
the Company’s franchise relating to the KCRC railway
is revoked;
the payments of an upfront payment of HK$4.25 billion
and fixed annual payments and variable annual
payments (as described in paragraph A above in
this section);
• KCRC remaining the legal and beneficial owner of
the concession property as at the Merger Date and
the Company being the legal and beneficial owner of
certain future concession property (the “Additional
Concession Property”);
•
•
•
the regime for compensation payable by KCRC to
the Company if Additional Concession Property is
returned to KCRC at the end of the concession period;
the rights and restrictions of the Company and KCRC
in relation to the concession property; and
subject to certain conditions, the Company bearing
all risks, liabilities and/or costs whatsoever associated
with or arising from the concession property and
the land on which any of the concession property is
located during the concession period.
On 23 August 2018, the Company and KCRC entered
into the SSCA in order for KCRC to grant a concession to
the Company in respect of the High Speed Rail and to
prescribe the operational and financial requirements that
will apply to the High Speed Rail. Further details are set
out in the sub-section headed “III Continuing Connected
Transactions relating to the Operation of the High Speed
Rail (formerly known as the Express Rail Link)” in the
section headed “Continuing Connected Transactions”.
On 11 February 2020, the Company and KCRC entered
into the TML1 SSCA in order for KCRC to grant a
concession to the Company in respect of the first phase
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REPORT OF THE MEMBERS OF THE BOARD of the Tuen Ma Line of the Shatin to Central Link and to
prescribe the operational and financial requirements
that will apply to the TML1. Further details are set out
in the sub-section headed “IV Continuing Connected
Transactions relating to the Operation of the First Phase
of the Tuen Ma Line” in the section headed “Continuing
Connected Transactions”.
C
Sale and Purchase Agreement
The Sale and Purchase Agreement was entered into on
9 August 2007 between the Company and KCRC.
The Sale and Purchase Agreement provides the terms
pursuant to which the Company acquired certain assets
and contracts (the “Purchased Rail Assets”) from KCRC.
The consideration for the sale of the Purchased Rail
Assets (excluding the shares in the KCRC Subsidiaries)
formed part of the upfront payment of HK$4.25 billion.
The consideration for the sale of the shares in the KCRC
Subsidiaries (which own the Category 1A Properties
referred to at paragraph E below in this section and act
as property managers) formed part of the payment of
HK$7.79 billion for the property package (as described
in paragraph A above in this section and in paragraph E
below in this section).
D Operating Agreement
The Operating Agreement was entered into on 9 August
2007 between the Company and the Secretary for
Transport and Housing for and on behalf of Government
as contemplated in the MTR Ordinance.
The Operating Agreement is based on the previous
Operating Agreement which was signed on 30 June
2000. The Operating Agreement differs from the previous
Operating Agreement to provide for, amongst other
things, the nature of the combined MTRC railway and
KCRC railway.
The Operating Agreement includes terms relating to:
•
the extension of the Company’s franchise under the
MTR Ordinance;
•
the design, construction and maintenance of the railway;
• passenger services;
•
a framework for the award of new projects and the
operation and ownership structure of new railways;
•
•
the adjustment mechanism to be applied to certain of
the Company’s fares; and
compensation which may be payable under the MTR
Ordinance to the Company in relation to a suspension,
expiry or termination of the franchise.
Under the Operating Agreement, the fare adjustment
mechanism is subject to review periodically. The first of
such reviews was undertaken in 2013 and the second was
conducted in 2017. The Company and Government agreed
on 16 April 2013 to amend the fare adjustment mechanism.
On 21 March 2017, the Company announced that it and
Government had agreed to maintain the fare adjustment
mechanism formula and direct-drive nature of such formula,
save for certain consequential changes as a result of the
review of the formula having been advanced by one year.
In addition, the wider terms of the Operating Agreement
are subject to review every five years and such a review
was also undertaken in 2013. As a result of such review, the
Company and Government agreed measures in enhancing
communication and liaison on operational arrangements.
On 23 August 2018, the Company and the Secretary for
Transport and Housing, for and on behalf of Government,
entered into the AOA to amend and supplement the
Integrated Operating Agreement dated 9 August 2007, as
amended, in order to prescribe the operational requirements
that will apply to the High Speed Rail. Further details are set
out in the sub-section headed “III Continuing Connected
Transactions relating to the Operation of the High Speed
Rail (formerly known as the Express Rail Link)” in the section
headed “Continuing Connected Transactions”.
On 11 February 2020, the Company and the Secretary for
Transport and Housing, for and on behalf of Government,
entered into the TML1 AOA and the Company and
the Commissioner for Transport, for and on behalf of
Government, entered into the TML1 SOA to amend
and supplement, respectively, the Existing Integrated
Operating Agreement, in order to prescribe the operational
requirements that will apply to the first phase of the Tuen
Ma Line of the Shatin to Central Link. Further details are set
out in the sub-section headed “IV Continuing Connected
Transactions relating to the Operation of the First Phase
of the Tuen Ma Line” in the section headed “Continuing
Connected Transactions”.
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181
Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis E Additional Property Package Agreements
Category 1A Properties
The Category 1A Properties are held by the KCRC
Subsidiaries. Under the terms of the Sale and Purchase
Agreement, the Company acquired from KCRC the shares
in the KCRC Subsidiaries (and thereby indirectly acquired
the “Category1A Properties”).
Category 1B Properties
On 9 August 2007, KCRC and the Company entered into
an agreement for sale and purchase under which KCRC
agreed to assign certain properties (the “Category 1B
Properties”) to the Company on the Merger Date. The
relevant assignment was executed between KCRC and
the Company on 2 December 2007.
Category 4 Properties
On 9 August 2007, Government entered into an
undertaking that it would, within periods to be agreed
between the Company and Government, offer to the
Company a private treaty grant in respect of certain
development sites (the “Category 4 Properties”). The
terms of each private treaty grant shall generally be
determined by Government, and the premium for each
private treaty grant shall be assessed on a full market
value basis ignoring the presence of the railway other
than the Tin Shui Wai Terminus, Light Rail, Yuen Long,
New Territories.
On 9 August 2007, the Company issued a letter to KCRC
confirming that, if there should be any railway premises
on the Category 4 Properties, the Company would assign
the railway premises to KCRC.
Metropolis Equity Sub-participation Agreement
The Metropolis Equity Sub-participation Agreement
was entered into on 9 August 2007 between KCRC and
the Company. KCRC is obliged to act on the Company’s
instructions, and pay to the Company any distributions,
or proceeds of sale, relating to its shareholding in
the property management company The Metropolis
Management Company Limited (“Metropolis”). The issued
share capital of Metropolis is 25,500 A shares (which are
held by KCRC) and 24,500 B shares (which are held by
Cheung Kong Property Management Limited). Metropolis’
business is property management.
F Application of Merger-related Waiver
In relation to the Operating Agreement and the Service
Concession Agreement, pursuant to paragraph A of the
Merger-related Waiver, the Stock Exchange granted a
waiver to the Company from strict compliance with all
the continuing connected transaction requirements of
Chapter 14A of the Listing Rules.
CAPITAL AND
REVENUE EXPENDITURE
There are defined procedures for the appraisal, review
and approval of major capital and revenue expenditures.
During the year ended 31 December 2020, all project
expenditures over 0.2% of the net assets of the Company
and the employment of consultancy services over 0.1% of
the net assets of the Company required the approval of
the Board.
REPORTING AND MONITORING
There is a comprehensive budgeting system for all
operational and business activities, with an annual budget
approved by the Board. Monthly results of the Company’s
operations, businesses and projects are reported against
the budget to the Board and updated forecasts for the
year are prepared regularly.
TREASURY MANAGEMENT
The Company’s Treasury Department operates within
approved guidelines from the Board. It manages the
Company’s debt portfolio with reference to the Preferred
Financing Model which defines the preferred mix of
financing instruments, fixed and floating rate debt,
maturities, interest rate risks, currency exposure and
financing horizon. The model is reviewed and refined
periodically to reflect changes in the Company’s financing
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183
REPORT OF THE MEMBERS OF THE BOARD requirements and the market environment. Derivative
financial instruments such as interest rate swaps and
cross currency swaps are used only as hedging tools
to manage the Group’s exposure to interest rate and
currency risks. Prudent guidelines and procedures are
in place to control the Company’s derivatives activities,
including a comprehensive credit risk management
system for monitoring counterparty credit exposure using
the Value-at-Risk approach. There is also appropriate
segregation of duties within the Company’s
Treasury Department.
Major financing transactions and guidelines for
derivatives transactions, including the credit risk
management framework, are approved at the
Board level.
COMPUTER PROCESSING
There are defined procedures, controls and regular quality
reviews on the operation of computer systems to ensure
the accuracy and completeness of financial records and
efficiency of data processing. The Company’s computer
centre operation and support, help desk operation and
support services, and also software development and
maintenance, have been certified under ISO 9001:2015.
Disaster recovery rehearsal on critical applications is
conducted annually. For cyber security, the Company has
been certified with ISO 27001:2013 on the Information
Security Management System that complies with the
required standard for the comprehensive scope of
IT services operation. The Corporate Cyber Security
Committee sets the direction, strategy, and policies
related to cyber security for the Company. It steers and
oversees the management and performance of all matters
relating to cyber security. Various security controls have
been implemented and are reviewed regularly to protect
the Company from cyber-attacks.
PERMITTED INDEMNITY
PROVISION
Pursuant to the Articles of Association, subject to the
statutes, the Company will indemnify every Director of
the Company out of its own assets against any liability
incurred by him/her in the execution of his/her office in
defending any civil or criminal proceedings. The relevant
Article was in force during the year ended 31 December
2020 and on 11 March 2021 when this Report was
approved. To ensure sufficient coverage is provided, the
Company undertakes an annual review of the Directors’
and Officers’ liability insurance policy of the Company
(the “D&O Insurance Policy”) in light of recent trends in
the insurance market and other relevant factors. The
D&O Insurance Policy also indemnifies the other directors
within the Group.
GOING CONCERN
The Consolidated Accounts on pages 190 to 270 have
been prepared on a going concern basis. The Board has
reviewed the Group’s budget for 2021, together with
the longer-term forecast for the following five years and
is satisfied that the Group has sufficient resources to
continue as a going concern for the foreseeable future.
AUDITORS
The retiring auditors, KPMG, have signified their
willingness to continue in office. A resolution will be
proposed at the forthcoming AGM to reappoint them and
to authorise the Directors to fix their remuneration.
For and on behalf of the Board
Gillian Elizabeth Meller
Company Secretary
Hong Kong, 11 March 2021
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183
Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis DIRECTORS OF SUBSIDIARY UNDERTAKINGS
The directors of the subsidiary undertakings of the Company during the year and up to the date of this Report (unless
otherwise stated) are listed below:
Name
Director
Alternate Director
Name
Director
Alternate Director
Altamirano Celis, Sandra Elena
Arrowsmith, Stephen
Dr Auyeung Pak-kuen, Rex
Bailie, William Paul
Butcher, Stephen Anthony*
Chan Chi-kun
Chan Hing-keung
Chan Wai-man, Raymond*
Chan Yuen-ping*
Dr Chan Yuen Tak-fai, Dorothy
Chen Lei
Cheng Wai-ching, Margaret*
Cheng Yan-kee
Chow Chiu-wai*
Chow Chun-ling*
Chu Fung-kuen, Margaret
Collis, Charles G.
Dalin, Bengt Carl Harald Henrik*
Damm, Bo Fredrik
Downie, Brian Francis*
Edlund, Lars Anders
Dr Ewen, Peter Ronald*
Dr Fong Ching, Eddy
Fu Oi-yu
Fung Wai-yee*
Gao Ling
Hellners, Karl Erik Hjalmar*
Ho Ka-wa*
Holness, Nigel Graham
Hui Leung-wah, Herbert*
Jensen, Frederik Mark*
Jia Jun
Jim Kwok-wah*
Johannesson, Mats Göran
Jones, Niel L.
Jubian, Albert*
Dr Kam Chak-pui, Jacob*
King, Andrew Lewis*
Kwok Lai-kay, Lena*
Kwong Chung-hing*
Lai Ching-kai*
Lau Kwai-hin, Kenneth*
Lau Tin-shing, Adi*
Lau Wai-ming*
Dr Lee Kar-yun, Tony*
Lee Yuen-ling*
Leung Hang-kin
Leung Yiu-fai, David
Li Sau-lin, Linda*
√
√
√
√
√
√
√(Resigned)
√
√
√
√
√
√
√
√
√
√
√(Resigned)
√(Resigned)
√
√
√
√
√
√
√(Resigned)
√
√(Resigned)
√
√
√
√
√
√
√
√
√
√
√
√
√(Resigned)
√
√
√
√
√(Resigned)
√
√
√
√
√
√
Li Jerry Zhe*
Liu Chung-gay
Long, Jeremy Paul Warwick*
Lung Tze-ho*
Luo Jiancheng
McCusker, Andrew*
McKenzie, Andrew Charles*
Meller, Gillian Elizabeth*
Meyer, Peter*
Moros, Tony Antonio
Murphy, Stephen John*
Mylvaganam, Deva Rajan*
Nelson, Michael John*
Ng Yuen-fan, Hannah
Nilsson, Per Håkan Lennart*
Norris, Mark Frederick*
O’Flaherty, Raymond Anthony*
Oscarsson, Karl Johan*
Pang Hoi-hing*
Poon Kai-chung*
Quarrie, Ian Roger*
Shao Jianming
Shen Linchong
Sin Pik-kwan
Söderström, Tim Rafael
Soo Tsung Lee, Gene
Suen Yiu-tat
Tam Lup-kwan*
Tang Chi-fai, David*
Waymark, Leah Nicole
Wei Li-ping
Williams Daniel
Dr Wong Chi-yun, Allan
Wong Daniel*
Wong Ho-leung*
Wong Kin-wai*
Wong Kwan-wai, Sammy
Wong O-cheung, Ernest
Wong Ping-sau*
Wong Wing-kin*
Xia Jing
Xu Muhan*
Yam Pak-nin*
Yeung Mei-chun, Jeny*
Young Ka-fan, Glen
Yuen Lai-ki*
Yuen Lap-hang
Zhang Ling
Zhu Chunlei
√
√(Resigned)
√(Resigned)
√
√
√
√
√
√
√
√
√(Resigned)
√
√(Resigned)
√
√(Resigned)
√
√
√
√
√
√
√
√
√
√(Resigned)
√
√
√(Resigned)
√
√(Resigned)
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√(Resigned)
√
√
√
√
√
√
*
Person who serves as a director and/or an alternate director in more than one subsidiary.
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PB
REPORT OF THE MEMBERS OF THE BOARD 244 31
244 32
246 33
248 34
248 35
248 36
249 37
250 38
253 39
255 40
256 41
Cash, Bank Balances and Deposits
Loans and Other Obligations
Creditors, Other Payables and Provisions
Amounts Due to Related Parties
Obligations under Service Concession
Loans from Holders of Non-controlling Interests
Income Tax in the Consolidated Statement of Financial
Position
Share Capital, Shares Held for Executive Share Incentive
Scheme, Company-level Movements in Components of
Equity and Capital Management
Other Cash Flow Information
Fair Value Measurement
Share-based Payments
259 42
Retirement Schemes
260 43
Defined Benefit Retirement Scheme
263 44 Material Related Party Transactions
265 45
Commitments
268 46
269 47
270 48
Company-level Statement of Financial Position
Accounting Estimates and Judgements
Possible Impact of Amendments, New Standards and
Interpretations Issued but Not Yet Effective for the
Annual Accounting Year Ended 31 December 2020
270 49
Approval of the Consolidated Accounts
186 Independent Auditor’s Report
Consolidated Accounts
190 Consolidated Profit and Loss Account
191 Consolidated Statement of Comprehensive Income
192 Consolidated Statement of Financial Position
193 Consolidated Statement of Changes in Equity
194 Consolidated Cash Flow Statement
Notes to the Consolidated Accounts
195 1
195 2
207 3
208 4
209 5
209 6
209 7
210 8
210 9
Statement of Compliance
Principal Accounting Policies
Rail Merger with Kowloon-Canton Railway Corporation
and Operating Arrangements for High Speed Rail and
Tuen Ma Line Phase 1
Revenue from Hong Kong Transport Operations
Revenue from Hong Kong Station Commercial
Businesses
Revenue from Hong Kong Property Rental and
Management Businesses
Revenue and Expenses Relating to Mainland of China
and International Subsidiaries
Revenue from Other Businesses
Segmental Information
214 10
Operating Expenses
215 11
219 12
219 13
220 14
221 15
Remuneration of Members of the Board and the
Executive Directorate
Profit on Hong Kong Property Development
Depreciation and Amortisation
Interest and Finance Charges
Income Tax in the Consolidated Profit and Loss Account
222 16
Dividends
222 17
223 18
223 19
227 20
228 21
234 22
235 23
236 24
237 25
237 26
238 27
(Loss)/Earnings Per Share
Other Comprehensive Income
Investment Properties and Other Property, Plant and
Equipment
Service Concession Assets
Railway Construction Projects under Entrustment by the
HKSAR Government
Property Development in Progress
Investments in Subsidiaries
Interests in Associates and Joint Venture
Investments in Securities
Properties Held for Sale
Derivative Financial Assets and Liabilities
242 28
Stores and Spares
242 29
243 30
Debtors and Other Receivables
Amounts Due from Related Parties
PB
MTR Corporation
Annual Report 2020
185
CONTENTS OF CONSOLIDATED ACCOUNTS AND NOTESCorporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis Independent auditor’s report to the members of MTR Corporation Limited
(incorporated in Hong Kong with limited liability)
Opinion
We have audited the consolidated accounts of MTR Corporation Limited (“the Company”) and its subsidiaries (“the Group”) set out on pages 190
to 270, which comprise the consolidated statement of financial position as at 31 December 2020, the consolidated profit and loss account, the
consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated cash flow statement for
the year then ended and notes to the consolidated accounts, including a summary of significant accounting policies.
In our opinion, the consolidated accounts give a true and fair view of the consolidated financial position of the Group as at 31 December 2020 and
of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with Hong Kong Financial Reporting
Standards (“HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”) and have been properly prepared in compliance
with the Hong Kong Companies Ordinance.
Basis for opinion
We conducted our audit in accordance with Hong Kong Standards on Auditing (“HKSAs”) issued by the HKICPA. Our responsibilities under those
standards are further described in the Auditor’s responsibilities for the audit of the consolidated accounts section of our report. We are independent
of the Group in accordance with the HKICPA’s Code of Ethics for Professional Accountants (“the Code”) and we have fulfilled our other ethical
responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated accounts of
the current period. These matters were addressed in the context of our audit of the consolidated accounts as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters.
Railway construction in progress under entrustment by the HKSAR Government
Refer to note 21 to the consolidated accounts and the accounting policies in note 2AA
The key audit matter
How the matter was addressed in our audit
The Group and the Government of the Hong Kong Special Administrative
Region (“HKSAR Government”) have entered into certain entrustment
arrangements whereby the Group has been entrusted by the HKSAR
Government to proceed with the planning, design, construction, testing
and commissioning of the Hong Kong Section of the Guangzhou-Shenzhen-
Hong Kong Express Rail Link (“the HSR”) and the Shatin to Central Link (“the
SCL”). As the HKSAR Government is the owner of both the HSR and the SCL,
the financing of the development of these two railway lines is borne by the
HKSAR Government, with the Group receiving project management fees.
HSR
Pursuant to an agreement entered into with the HKSAR Government on 30
November 2015, the Group will bear and finance project costs for the HSR
(including the Group’s project management fees) which exceed HK$84.42
billion and the HKSAR Government reserves the right to refer to arbitration
the question of the Group’s liability, if any, in respect of the project costs
borne and financed by the HKSAR Government which exceed HK$65 billion
up to HK$84.42 billion. In the event that the Group is found to be liable under
the relevant HSR entrustment agreements, the Group’s liability for such
costs is currently limited to the amount of the project management fees and
certain other additional fees received by the Group under the agreements.
Our audit procedures in relation to railway construction in progress under
entrustment by the HKSAR Government included the following:
• inspecting the minutes of the relevant committees of the Group and
discussing with management the current status of the HSR and SCL
projects, including:
(a) For the HSR, the forecast total project costs, assessment of contract
claims, estimate of further internal costs to be incurred and the
assessment of the financial implications of the project for the Group;
(b) For the SCL, the costs incurred to date, remaining critical milestones
and estimated costs to complete, and further internal costs to be
incurred and the assessment of the financial implications of the
project for the Group;
• assessing the design and implementation of management’s key internal
controls over the determination of the project costs for the HSR and
SCL projects;
• evaluating the qualifications, experience, expertise, independence and
objectivity of the independent expert engaged by management for
the HSR;
In September 2018, construction of the HSR was completed following which
commercial operations commenced. However, the total project costs can
only be ascertained upon finalisation of all construction contracts which
may take several years to reach agreement and settlement.
• discussing with the independent expert the forecast total project costs
for the HSR project and the risk of these exceeding HK$84.42 billion, and
comparing, on a sample basis, the assessed project costs for the HSR with
relevant underlying documentation;
Management has engaged an independent expert to provide an
independent assessment of management’s estimate of cost to complete the
HSR project.
• comparing, on a sample basis, costs incurred during the current year in
respect of the HSR and SCL with underlying contracts and interim or final
payment certificates;
As at 31 December 2020, the Group has made a provision for project
management costs as it estimated that the total costs to complete its
performance obligations under the HSR entrustments are likely to exceed
the project management fees from the HKSAR Government. No other
provision for project costs has been made.
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187
INDEPENDENT AUDITOR’S REPORT Railway construction in progress under entrustment by the HKSAR Government (continued)
Refer to note 21 to the consolidated accounts and the accounting policies in note 2AA
The key audit matter
How the matter was addressed in our audit
• inspecting the relevant entrustment agreements to ascertain project
management fees receivable and comparing the receipt of such project
management fees for the year with bank statements and other relevant
documentation;
• assessing the provisions made for the Hung Hom Incidents Related Costs
and Project Management Costs, which are funded by the Group, by
inspecting, on a sample basis, the relevant underlying documentation
and, where applicable, the actual amounts incurred during the year;
• holding discussions with management and the Group’s external legal
advisors to assess the Group’s legal obligations and financial exposure in
connection with the HSR and SCL projects; and
• assessing the disclosures in the consolidated accounts in relation to
the HSR and SCL projects with reference to the requirements of the
prevailing accounting standards.
SCL
Towards the end of the first half of 2018, there were allegations concerning
workmanship in relation to the Hung Hom Station extension. A commission
of enquiry (“COI”) was set up by the HKSAR Government to investigate,
inter-alia, certain construction works at the Hung Hom station extension.
Subsequently, the Group advised the HKSAR Government of an insufficiency
of construction records and certain construction issues at the Hung Hom
North Approach Tunnel, the South Approach Tunnel and the Hung Hom
Stabling Sidings. The terms of the COI were expanded in February 2019. A
redacted final report from the COI was published in May 2020, in which the
COI determined that it is satisfied that, with suitable measures completed,
the relevant structures will be safe and fit for purpose. The management
considered that the suitable measures for the relevant structures were
completed during the year.
In July 2019, the HKSAR Government accepted the Group’s
recommendation that the Tuen Ma Line should open in phases (“Phased
Opening”). The Group has announced that it would fund, on an interim
and without prejudice basis, certain costs arising from the Hung Hom
incidents and certain costs associated with the Phased Opening (“Hung
Hom Incidents Related Costs”), which were estimated to be around HK$2
billion in aggregate, and has charged the full amount of such estimate in its
consolidated profit and loss account for the year ended 31 December 2019.
In February 2020, the Group notified the HKSAR Government of the latest
estimate of the cost to complete the SCL Project of HK$82,999 million
including the additional project management fee payable to the Group of
HK$1,371 million, which increased from the original estimate of HK$70,827
million. In June 2020, the Legislative Council approved additional funding
amounting to HK$10,801 million sought by the HKSAR Government, which
excludes the Hung Hom Incidents Related Costs and the additional project
management fee for the Group, and the HKSAR Government has maintained
its position of disagreement to any increase in the project management fee.
The Group has announced that it would continue to meet, on an interim and
without prejudice basis, the costs of complying with its project management
obligations under the entrustment agreements, which were estimated to be
around HK$1,371 million (“Project Management Costs”), and has charged the
full amount of such estimate in its consolidated profit and loss account for
the year ended 31 December 2020.
The above matters are ongoing and the timing of their ultimate resolution
and any further financial impact to the Group are highly uncertain at this
stage.
In the event that the Group is found to be liable under the entrustment
agreements, the Group’s liability is currently limited to a cap equal to the
aggregate fees received by the Group under the relevant SCL agreements.
However, such cap could not be relied upon if the Group were, in
accordance with general principles of law, found to be liable for any loss
that had been caused by the fraudulent or other dishonest conduct of its
employees or agents.
We identified railway construction in progress under entrustment by the
HKSAR Government as a key audit matter because the arrangements in
respect of these railway projects are highly complex and convey rights and
obligations on the Group which could potentially have significant financial
implications for the Group.
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187
Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis Valuation of investment properties (“IP”)
Refer to note 19A to the consolidated accounts and the accounting policies in note 2E(i)
The key audit matter
How the matter was addressed in our audit
The fair value of the Group’s IP as at 31 December 2020 was HK$86,058
million, with a revaluation loss for the year ended 31 December 2020
recorded in the consolidated profit and loss account of HK$9,190 million.
The Group’s IP, which are mainly located in Hong Kong, principally
comprise shopping malls and office premises.
The fair values of the Group’s IP were assessed by external property valuers
based on independent valuations.
We identified valuation of the Group’s IP as a key audit matter because
of the significance of IP to the consolidated accounts and because
the determination of the fair values involves significant judgement
and estimation, particularly in selecting the appropriate valuation
methodology, market yields and market rents.
Our audit procedures to assess the valuation of the Group’s IP included the
following:
• obtaining and inspecting the IP valuation reports prepared by the
external property valuers;
• evaluating the independence, qualifications, expertise and objectivity of
the external property valuers;
• evaluating the valuation methodologies adopted with reference to
prevailing accounting standards and those applied by other external
property valuers for similar property types;
• holding discussions with management and the external property
valuers and challenging the key assumptions and estimates adopted
in the valuations, including prevailing market rents and market yields
applied by comparing, on a sample basis, the key estimates adopted with
comparable available market data; and
• comparing the tenancy information, including occupancy rates and
market rents, provided by the Group to the external property valuers with
underlying contracts and documentation, on a sample basis.
Assessing potential impairment of fixed assets other than assets carried at revalued amounts
Refer to notes 19B and 20 to the consolidated accounts and the accounting policies in note 2I(ii)
The key audit matter
How the matter was addressed in our audit
The carrying value of the Group’s fixed assets other than assets carried at
revalued amounts as at 31 December 2020 totalled HK$131,127 million and
the related depreciation and amortisation charge for the year ended 31
December 2020 amounted to HK$5,589 million.
The carrying values of these assets are reviewed annually by management
for potential indicators of impairment. For assets where such indicators
exist, management performs detailed impairment reviews, taking into
account, inter alia, the impact of revenue assumptions and technical factors
which may affect the expected remaining useful lives and carrying value of
the assets.
We identified the potential impairment of fixed assets other than assets
carried at revalued amounts as a key audit matter because the assessment
can involve a significant degree of management judgement in determining
the key assumptions such as expected revenue levels.
Our audit procedures to assess the potential impairment of fixed assets
other than assets carried at revalued amounts included the following:
• discussing indicators of impairment on fixed assets with management,
and where such indicators were identified, evaluating management’s
impairment assessments and the assumptions adopted therein, including
revenue assumptions, with reference to the actual revenue levels
achieved in the current year, future operating plans and broader city
specific developments;
• assessing the discount rates adopted by management in the impairment
assessments by comparison with available financial information of other
similar companies taking into account regional and industry specific risk
premiums;
• comparing the assumptions adopted in the prior year’s impairment
assessments with actual results for the current year, investigating
significant variances identified and considering the impact on the current
year’s impairment assessments; and
• performing sensitivity analyses for the discount rates applied and the
assumptions for revenue levels adopted and considering the information
used to derive the most sensitive assumptions and whether there were
any indicators of management bias in their selection.
Information other than the consolidated accounts and auditor’s report thereon
The directors are responsible for the other information. The other information comprises all the information included in the annual report, other
than the consolidated accounts and our auditor’s report thereon.
Our opinion on the consolidated accounts does not cover the other information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated accounts, our responsibility is to read the other information and, in doing so, consider whether
the other information is materially inconsistent with the consolidated accounts or our knowledge obtained in the audit or otherwise appears to be
materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that
fact. We have nothing to report in this regard.
Responsibilities of the directors for the consolidated accounts
The directors are responsible for the preparation of the consolidated accounts that give a true and fair view in accordance with HKFRSs issued by the
HKICPA and the Hong Kong Companies Ordinance, and for such internal control as the directors determine is necessary to enable the preparation of
consolidated accounts that are free from material misstatement, whether due to fraud or error.
188
MTR Corporation
Annual Report 2020
189
INDEPENDENT AUDITOR’S REPORT In preparing the consolidated accounts, the directors are responsible for assessing the Group’s ability to continue as a going concern, disclosing,
as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the
Group or to cease operations, or have no realistic alternative but to do so.
The directors are assisted by the Audit Committee in discharging their responsibilities for overseeing the Group’s financial reporting process.
Auditor’s responsibilities for the audit of the consolidated accounts
Our objectives are to obtain reasonable assurance about whether the consolidated accounts as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes our opinion. This report is made solely to you, as a body, in accordance
with section 405 of the Hong Kong Companies Ordinance, and for no other purpose. We do not assume responsibility towards or accept liability to
any other person for the contents of this report.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with HKSAs will always detect a
material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated accounts.
As part of an audit in accordance with HKSAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:
•
•
•
•
•
•
Identify and assess the risks of material misstatement of the consolidated accounts, whether due to fraud or error, design and perform audit
procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of
not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by
the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained,
whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as
a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related
disclosures in the consolidated accounts or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit
evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a
going concern.
Evaluate the overall presentation, structure and content of the consolidated accounts, including the disclosures, and whether the consolidated
accounts represent the underlying transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to
express an opinion on the consolidated accounts. We are responsible for the direction, supervision and performance of the group audit. We
remain solely responsible for our audit opinion.
We communicate with the Audit Committee regarding, among other matters, the planned scope and timing of the audit and significant audit
findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide the Audit Committee with a statement that we have complied with relevant ethical requirements regarding independence and
communicate with them all relationships and other matters that may reasonably be thought to bear on our independence and, where applicable,
actions taken to eliminate threats or safeguards applied.
From the matters communicated with the Audit Committee, we determine those matters that were of most significance in the audit of the
consolidated accounts of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law
or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be
communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits
of such communication.
The engagement partner on the audit resulting in this independent auditor’s report is Leung Sze Kit Roy.
KPMG
Certified Public Accountants
8th Floor, Prince’s Building
10 Chater Road
Central, Hong Kong
11 March 2021
188
MTR Corporation
Annual Report 2020
189
Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis for the year ended 31 December in HK$ million
Revenue from Hong Kong transport operations
Revenue from Hong Kong station commercial businesses
Revenue from Hong Kong property rental and management businesses
Revenue from Mainland of China and international railway,
property rental and management subsidiaries
Revenue from other businesses
Revenue from Mainland of China property development
Total revenue
Expenses relating to Hong Kong transport operations
– Staff costs and related expenses
– Maintenance and related works
– Energy and utilities
– General and administration expenses
– Railway support services
– Stores and spares consumed
– Government rent and rates
– Other expenses
Expenses relating to Hong Kong station commercial businesses
Expenses relating to Hong Kong property rental and management businesses
Expenses relating to Mainland of China and international railway,
property rental and management subsidiaries
Expenses relating to other businesses
Project study and business development expenses
Expenses relating to Mainland of China property development
Operating expenses before depreciation, amortisation and
variable annual payment
Operating profit before Hong Kong property development,
depreciation, amortisation and variable annual payment
– Arising from recurrent businesses
– Arising from Mainland of China property development
Profit on Hong Kong property development
Operating profit before depreciation, amortisation and
variable annual payment
Depreciation and amortisation
Variable annual payment
Share of profit of associates and joint venture
Profit before interest, finance charges and taxation
Interest and finance charges
Investment property revaluation (loss)/gain
(Loss)/profit before taxation
Income tax
(Loss)/profit for the year
Attributable to:
– Shareholders of the Company
– Non-controlling interests
(Loss)/profit for the year
(Loss)/profit for the year attributable to shareholders of the Company:
– Arising from recurrent businesses
– Arising from property development
– Arising from underlying businesses
– Arising from investment property revaluation
(Loss)/earnings per share:
– Basic
– Diluted
The notes on pages 195 to 270 form part of the consolidated accounts.
Note
4
5
6
7
8
7
10A
7
21B(b)(iii)&
(c)(iii)
7
2020
11,896
3,269
5,054
21,428
894
42,541
–
42,541
(6,317)
(2,085)
(1,671)
(888)
(295)
(572)
(284)
(206)
(12,318)
(509)
(850)
(20,895)
(2,496)
(279)
(37,347)
(13)
2019
19,938
6,799
5,137
21,085
1,545
54,504
–
54,504
(6,489)
(2,662)
(1,841)
(1,209)
(630)
(613)
(256)
(329)
(14,029)
(680)
(851)
(19,760)
(3,557)
(276)
(39,153)
(25)
10B&C
(37,360)
(39,178)
12
13
24
14
19A
15A
17
5,194
(13)
5,181
6,491
11,672
(5,365)
(238)
605
6,674
(1,004)
(9,190)
(3,520)
(1,301)
(4,821)
(4,809)
(12)
(4,821)
(1,126)
5,507
4,381
(9,190)
(4,809)
15,351
(25)
15,326
5,707
21,033
(5,237)
(2,583)
288
13,501
(859)
1,372
14,014
(1,922)
12,092
11,932
160
12,092
4,980
5,580
10,560
1,372
11,932
(HK$0.78)
(HK$0.78)
HK$1.94
HK$1.94
190
MTR Corporation
Annual Report 2020
PB
CONSOLIDATED PROFIT AND LOSS ACCOUNT for the year ended 31 December in HK$ million
(Loss)/profit for the year
Other comprehensive income for the year
(after taxation and reclassification adjustments):
Items that will not be reclassified to profit or loss:
– (Loss)/surplus on revaluation of self-occupied land and buildings
– Remeasurement of net asset/liability of defined benefit schemes
Items that may be reclassified subsequently to profit or loss:
– Exchange differences on translation of:
– financial statements of subsidiaries, associates and joint venture outside Hong Kong
– non-controlling interests
– Cash flow hedges: net movement in hedging reserve
Total comprehensive (loss)/income for the year
Attributable to:
– Shareholders of the Company
– Non-controlling interests
Total comprehensive (loss)/income for the year
2020
(4,821)
2019
12,092
Note
18
(274)
752
478
1,282
13
(73)
1,222
1,700
(3,121)
(3,122)
1
(3,121)
121
730
851
(344)
(15)
244
(115)
736
12,828
12,683
145
12,828
PB
MTR Corporation
Annual Report 2020
191
The notes on pages 195 to 270 form part of the consolidated accounts.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMECorporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis
Note
At 31 December
2020
At 31 December
2019
19A
19B
20
22A
24
37B
25
26
27
28
29
30
31
32A
33
37A
34
32A
35
27
36
37B
38
86,058
101,999
32,875
220,932
79
11,942
1,116
11,592
470
468
1,800
480
2,014
13,313
5,462
20,906
290,574
3,357
36,837
1,004
453
46,983
10,295
381
158
14,125
113,593
176,981
59,666
(262)
117,384
176,788
193
176,981
91,712
102,632
31,261
225,605
77
12,022
1,948
10,359
134
386
1,245
198
1,844
11,169
3,041
21,186
289,214
3,371
33,315
2,024
2,990
36,085
10,350
408
144
13,729
102,416
186,798
58,804
(263)
128,065
186,606
192
186,798
in HK$ million
Assets
Fixed assets
– Investment properties
– Other property, plant and equipment
– Service concession assets
Goodwill and property management rights
Property development in progress
Deferred expenditure
Interests in associates and joint venture
Deferred tax assets
Investments in securities
Properties held for sale
Derivative financial assets
Stores and spares
Debtors and other receivables
Amounts due from related parties
Cash, bank balances and deposits
Liabilities
Short-term loans
Creditors, other payables and provisions
Current taxation
Amounts due to related parties
Loans and other obligations
Obligations under service concession
Derivative financial liabilities
Loans from holders of non-controlling interests
Deferred tax liabilities
Net assets
Capital and reserves
Share capital
Shares held for Executive Share Incentive Scheme
Other reserves
Total equity attributable to shareholders of the Company
Non-controlling interests
Total equity
Approved and authorised for issue by the Members of the Board on 11 March 2021
Rex P K Auyeung
Chairman
Jacob C P Kam
Chief Executive Officer
Herbert L W Hui
Finance Director
The notes on pages 195 to 270 form part of the consolidated accounts.
192
MTR Corporation
Annual Report 2020
PB
CONSOLIDATED STATEMENT OF FINANCIAL POSITION for the year ended 31 December
in HK$ million
Note
Share
capital
Shares
held for
Executive
Share
Incentive
Scheme
Fixed assets
revaluation
reserve
Hedging
reserve
Employee
share-based
capital
reserve
Exchange
reserve
Retained
profits
Total equity
attributable to
shareholders of
the Company
Non-
controlling
interests
Total
equity
Other reserves
2020
Balance as at 1 January 2020
Changes in equity for the year ended
31 December 2020:
– Loss for the year
– Other comprehensive income
for the year
– Total comprehensive loss
for the year
– 2019 final ordinary dividend
– Shares issued in respect of scrip
dividend of 2019 final
ordinary dividend
– 2020 interim ordinary dividend
– Shares issued in respect of scrip
dividend of 2020 interim
ordinary dividend
– Shares purchased for Executive
Share Incentive Scheme
– Vesting and forfeiture of
award shares of Executive
Share Incentive Scheme
– Employee share-based payments
– Employee share options
exercised
Balance as at 31 December 2020
2019
Balance as at 1 January 2019
58,804
(263)
3,936
221
160
(1,132)
124,880
186,606
192
186,798
18
16
38A
16
38A
38B
38B
–
–
–
–
692
–
81
–
6
–
38A
83
–
–
–
–
(2)
–
(1)
(86)
90
–
–
–
–
(274)
(73)
(274)
(73)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
59,666
(262)
3,662
148
–
–
–
–
–
–
–
–
(94)
121
(6)
181
–
(4,809)
(4,809)
(12)
(4,821)
1,282
752
1,687
13
1,700
1,282
–
–
–
–
–
–
–
–
(4,057)
(6,036)
2
(1,545)
1
–
(2)
–
–
(3,122)
(6,036)
692
(1,545)
81
(86)
–
121
77
1
–
–
–
–
–
–
–
–
(3,121)
(6,036)
692
(1,545)
81
(86)
–
121
77
150
113,243
176,788
193
176,981
57,970
(265)
3,815
(26)
142
(788)
119,591
180,439
172
180,611
Changes in equity for the year ended
31 December 2019:
– Profit for the year
– Other comprehensive income
for the year
18
– Total comprehensive income
for the year
– Amounts transferred from
hedging reserve to initial
carrying amount of
hedged items
– 2018 final ordinary dividend
16
– Shares issued in respect of scrip
dividend of 2018 final
ordinary dividend
– 2019 interim ordinary dividend
– Shares issued in respect of scrip
dividend of 2019 interim
ordinary dividend
– Shares purchased for Executive
Share Incentive Scheme
– Vesting and forfeiture of
award shares of Executive
Share Incentive Scheme
– Ordinary dividends paid to
holders of non-controlling
interests
– Employee share-based payments
38A
16
38A
38B
38B
–
–
–
–
–
654
–
71
–
5
–
–
– Employee share options
exercised
38A
104
–
–
–
–
–
(2)
–
(1)
(88)
93
–
–
–
–
121
121
–
244
244
–
–
–
–
–
–
–
–
–
–
3
–
–
–
–
–
–
–
–
–
Balance as at 31 December 2019
58,804
(263)
3,936
221
–
–
–
–
–
–
–
–
–
(96)
–
122
(8)
160
–
11,932
11,932
160
12,092
(344)
730
751
(15)
736
(344)
12,662
12,683
145
12,828
–
–
–
–
–
–
–
–
–
–
–
(5,835)
2
(1,539)
1
–
(2)
–
–
–
3
(5,835)
654
(1,539)
71
(88)
–
–
122
96
–
–
–
–
–
–
–
(125)
–
–
3
(5,835)
654
(1,539)
71
(88)
–
(125)
122
96
(1,132)
124,880
186,606
192
186,798
PB
MTR Corporation
Annual Report 2020
193
The notes on pages 195 to 270 form part of the consolidated accounts.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITYCorporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis
for the year ended 31 December in HK$ million
Note
2020
2019
Cash flows from operating activities
Cash generated from operations
Receipt of government subsidy for Shenzhen Metro Line 4 operation
Purchase of tax reserve certificates
Current tax paid
– Hong Kong Profits Tax paid
– Tax paid outside Hong Kong
Net cash generated from operating activities
Cash flows from investing activities
Capital expenditure
– Purchase of assets for Hong Kong transport and related operations
– Hong Kong railway extension projects
– Investment property projects and fitting out work
– Other capital projects
Fixed and variable annual payments
Receipts in respect of property development
Payments in respect of property development
Decrease/(increase) in bank deposits with more than three months to maturity
when placed or pledged
Investments in associates and joint venture
Others
Net cash used in investing activities
Cash flows from financing activities
Proceeds from shares issued under share option scheme
Purchase of shares for Executive Share Incentive Scheme
Proceeds from loans and capital market instruments
Repayment of loans and capital market instruments
Interest and finance charges paid
Interest received
Capital element of lease rentals paid
Dividends paid to shareholders of the Company
Dividends paid to holders of non-controlling interests
Net cash generated from/(used in) financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at 1 January
Effect of exchange rate changes
39
2,548
587
(57)
(1,964)
(342)
(5,226)
(250)
(3,539)
(234)
(3,333)
8,583
(412)
3,813
(210)
133
77
(86)
26,872
(16,495)
(1,039)
555
(232)
(6,808)
–
Cash and cash equivalents at 31 December
31
17,120
608
(54)
(308)
(323)
772
17,043
(5,291)
(292)
(308)
(181)
(3,055)
9,175
(3,259)
(3,683)
(1,416)
(2)
(675)
(8,312)
96
(88)
11,659
(13,172)
(1,054)
370
(165)
(6,649)
(125)
2,844
2,941
8,346
592
11,879
(9,128)
(397)
8,865
(122)
8,346
The notes on pages 195 to 270 form part of the consolidated accounts.
194
MTR Corporation
Annual Report 2020
PB
CONSOLIDATED CASH FLOW STATEMENT 1 Statement of Compliance
These accounts have been prepared in compliance with the Hong Kong Companies Ordinance and the applicable disclosure provisions of the Rules
Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”). These accounts have also been prepared in
accordance with all applicable Hong Kong Financial Reporting Standards (“HKFRSs”), which collective term includes all applicable individual Hong
Kong Financial Reporting Standards, Hong Kong Accounting Standards (“HKASs”) and Interpretations issued by the Hong Kong Institute of Certified
Public Accountants (“HKICPA”), and accounting principles generally accepted in Hong Kong. The HKFRSs are fully converged with International
Financial Reporting Standards in all material respects. A summary of the principal accounting policies adopted by the Group is set out in note 2.
The HKICPA has issued certain amendments to HKFRSs that are first effective or available for early adoption for accounting periods beginning on or
after 1 January 2020. None of these have had a material effect on how the Group’s results and financial position for the current or prior periods have
been prepared or presented in this annual report. The Group has not applied any new standard or amendment to standards that is not yet effective
for the current accounting period (note 48).
2 Principal Accounting Policies
A Basis of Preparation of the Consolidated Accounts
(i)
liabilities are stated at their fair value as explained in the accounting policies set out below:
The measurement basis used in the preparation of the consolidated accounts is the historical cost basis except that the following assets and
•
•
•
•
investment properties (note 2E(i));
self-occupied buildings (note 2E(ii));
investments in securities (note 2O); and
derivative financial instruments (note 2V).
(ii)
The preparation of the consolidated accounts in conformity with HKFRSs requires management to make judgements, estimates and
assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenditure. The estimates and associated
assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results
of which form the basis of making the judgements and estimations about carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in
which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both
current and future periods.
Judgements made by management in the application of HKFRSs that have significant effect on the consolidated accounts and estimates are
discussed in note 47.
B Basis of Consolidation
The consolidated accounts include the accounts of the Company and its subsidiaries (together referred to as the “Group”) and the Group’s interest
in associates and joint venture (note 2D) made up to 31 December each year. The results of subsidiaries acquired or disposed of during the year are
included in the consolidated profit and loss account from or to the date of their acquisition or disposal, as appropriate.
Subsidiaries and Non-controlling Interests
C
Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed, or has rights, to variable returns from its
involvement with the entity and has the ability to affect those returns through its power over the entity. When assessing whether the Group has
power, only substantive rights (held by the Group or other parties) are considered.
An investment in a subsidiary is consolidated into the consolidated accounts from the date that control commences until the date that control
ceases. Intra-group balances, transactions and cash flows and any unrealised profits arising from intra-group transactions are eliminated in full in
preparing the consolidated accounts. 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.
Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated profit and loss account, consolidated
statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of financial position respectively.
When the Group loses control of a subsidiary, it is accounted for as a disposal of the entire interest in that subsidiary, with a resulting gain or loss
being recognised in the consolidated profit and loss account. Any interest retained in that former subsidiary at the date when control is lost is
recognised at fair value and this amount is regarded as the fair value on initial recognition of a financial asset or, when appropriate, the cost on initial
recognition of an investment in an associate or a joint venture (note 2D).
Investments in subsidiaries are carried in the Company’s statement of financial position at cost less any impairment losses (note 2I(ii)).
PB
MTR Corporation
Annual Report 2020
195
NOTES TO THE CONSOLIDATED ACCOUNTSCorporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis 2 Principal Accounting Policies (continued)
D Associates and Joint Ventures
An associate is an entity over which the Group or the Company has significant influence, but not control or joint control, over its management,
including participation in the financial and operating policy decisions.
A joint venture is an arrangement whereby the Group or the Company and other parties contractually agree to share control of the arrangement,
and have rights to the net assets of the arrangement.
An investment in an associate or a joint venture is accounted for in the consolidated accounts of the Group using the equity method and is initially
recorded at cost and adjusted thereafter for the post acquisition change in the Group’s share of the investees’ net assets and any impairment loss
relating to the investment (note 2I(ii)). At each reporting date, the Group assesses whether there is any objective evidence that the investment is
impaired. The Group’s share of the post-acquisition, post-tax results of the investees and any impairment losses for the year is recognised in the
consolidated profit and loss account, whereas the Group’s share of the post-acquisition items of the investees’ other comprehensive income is
recognised in the consolidated statement of comprehensive income.
When the Group’s share of losses equals or exceeds its interest in the associate or the joint venture, the Group’s interest is reduced to nil and
recognition of further losses is discontinued except to the extent that the Group has incurred legal or constructive obligations or made payments
on behalf of the investee. For this purpose, the Group’s interest in the investee is the carrying amount of the investment under the equity method
together with any other long-term interests that in substance form part of the Group’s net investment in the associate or the joint venture (after
applying the expected credit losses (“ECL”) model to such other long-term interests where applicable (note 2I(i)).
Unrealised profits and losses resulting from transactions between the Group and its associates and joint venture are eliminated to the extent of the
Group’s interest in the investee, except where unrealised losses provide evidence of an impairment of the asset transferred, in which case they are
recognised immediately in the consolidated profit and loss account.
If an investment in an associate becomes an investment in a joint venture or vice versa, retained interest is not remeasured. Instead, the investment
continues to be accounted for under the equity method.
In all other cases, when the Group ceases to have significant influence over an associate or joint control over a joint venture, it is accounted for as a
disposal of the entire interest in that investee, with a resulting gain or loss being recognised in the consolidated profit and loss account. Any interest
retained in that former investee at the date when significant influence or joint control is lost is recognised at fair value and this amount is regarded as
the fair value on initial recognition of a financial asset.
In the Company’s statement of financial position, investments in associates and joint venture are stated at cost less impairment losses (note 2I(ii)).
E
(i)
Fixed Assets
Investment Properties
Investment properties are land and/or buildings which are owned or held under a leasehold interest to earn rental income and/or for capital
appreciation. These include properties that are being constructed or developed for future use as investment properties.
Investment properties are stated at fair value as measured semi-annually by independent professionally qualified valuers. Gains or losses arising
from changes in the fair value are recognised in the consolidated profit and loss account in the period in which they arise.
(ii)
Other Property, Plant and Equipment
Leasehold land registered and located in the Hong Kong Special Administrative Region is stated at cost less accumulated depreciation and
impairment losses (note 2I(ii)). Self-occupied leasehold buildings where the Group is the registered owner of the property interest are stated at their
fair value at the date of revaluation less any subsequent accumulated depreciation. Revaluations are performed by independent qualified valuers
semi-annually, with changes in the fair value arising on revaluations recorded as movements in the fixed assets revaluation reserve, except:
where the balance of the fixed assets revaluation reserve relating to a self-occupied leasehold building is insufficient to cover a revaluation
(a)
deficit of that property, the excess of the deficit is charged to the consolidated profit and loss account; and
where a revaluation deficit had previously been charged to the consolidated profit and loss account and a revaluation surplus subsequently
(b)
arises, this surplus is firstly credited to the consolidated profit and loss account to the extent of the deficit previously charged to the consolidated
profit and loss account, and thereafter taken to the fixed assets revaluation reserve.
Civil works and plant and equipment, including right-of-use assets arising from freehold or leasehold properties where the Group is not the
registered owner of the property interest, and right-of-use assets arising from leases of underlying plant and equipment are stated at cost less
accumulated depreciation and impairment losses (note 2I(ii)).
Assets under construction include capital works on operating railway and are stated at cost less impairment losses (note 2I(ii)). Cost comprises direct
costs of construction, such as materials, staff costs and overheads, together with interest expense capitalised during the period of construction or
installation and testing. Capitalisation of these costs ceases and the asset concerned is transferred to the appropriate fixed assets category when
substantially all the activities necessary to prepare the asset for its intended use are completed.
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NOTES TO THE CONSOLIDATED ACCOUNTS 2 Principal Accounting Policies (continued)
E
(iii)
Fixed Assets (continued)
Service Concession Assets
Where the Group enters into service concession arrangements under which the Group acquires the right to access, use and operate certain assets
for the provision of public services, upfront payments and expenditure directly attributable to the acquisition of the service concession up to
inception of the service concession are capitalised as service concession assets and amortised on a straight-line basis over the period of the service
concession. Annual payments over the period of the service concession with the amounts fixed at inception are capitalised at their present value,
calculated using the incremental long term borrowing rate determined at inception as the discount rate, as service concession assets and amortised
on a straight-line basis over the period of the service concession, with a corresponding liability recognised as obligations under service concession.
Annual payments for the service concession which are not fixed or determinable at inception and are contingent on future revenue are charged to
the consolidated profit and loss account in the period when incurred.
Where the Group enters into service concession arrangements under which the Group constructs, uses and operates certain assets for the provision
of public services, construction revenue and costs are recognised in the consolidated profit and loss account by reference to the stage of completion
at the end of the reporting period while the fair value of construction service is capitalised initially as service concession assets in the consolidated
statement of financial position and amortised on a straight-line basis over the shorter of the assets’ useful lives and the period in which the service
concession assets are expected to be available for use by the Group.
Expenditure for assets subject to service concession is capitalised and amortised on a straight-line basis at rates sufficient to write off their cost less
their estimated residual value, if any, over the shorter of the assets’ useful lives and the remaining period of the service concession.
Service concession assets are carried at cost less accumulated amortisation and impairment losses, if any (note 2I(ii)).
(iv)
Subsequent Expenditure and Gains or Losses on Retirement or Disposal
Subsequent expenditure relating to the replacement and/or upgrade of certain parts of an existing asset is recognised in the carrying amount of the
asset if it is probable that future economic benefit will flow to the Group and the cost of the item can be measured reliably. The carrying amount of
those parts that are replaced is derecognised, with any gain or loss arising therefrom being dealt with in the consolidated profit and loss account.
Expenditure on repairs or maintenance of an existing asset to restore or maintain the originally assessed standard of performance of that asset is
charged as an expense in the consolidated profit and loss account when incurred.
Gains or losses arising from the retirement or disposal of an asset are determined as the difference between the net disposal proceeds and the
carrying amount of the asset. Such gains or losses are recognised as income or expense in the consolidated profit and loss account on the date
of retirement or disposal. Any related revaluation surplus is transferred from the fixed assets revaluation reserve to retained profits and is not
re-classified to consolidated profit and loss account.
Leased Assets
F
At inception of a contract, the Group assesses whether the contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys
the right to control the use of an identified asset for a period of time in exchange for consideration. Control is conveyed where the customer has
both the right to direct the use of the identified asset and to obtain substantially all of the economic benefits from that use.
(i)
As a Lessee
At the lease commencement date, the Group recognises a right-of-use asset and a lease liability, except for short-term leases that have a lease term
of 12 months or less and leases of low-value assets. When the Group enters into a lease in respect of a low-value asset, the Group decides whether
to capitalise the lease on a lease-by-lease basis. The lease payments associated with those leases which are not capitalised are recognised as an
expense on a systematic basis over the lease term.
Where the lease is capitalised, the lease liability is initially recognised at the present value of the lease payments payable over the lease term,
discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, using a relevant incremental borrowing rate.
After initial recognition, the lease liability is measured at amortised cost and interest expense is calculated using the effective interest method.
The right-of-use asset recognised when a lease is capitalised is initially measured at cost, which comprises the initial amount of the lease liability plus
any lease payments made at or before the commencement date, and any initial direct costs incurred. Where applicable, the cost of the right-of-use
assets also includes an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is
located, discounted to their present value, less any lease incentives received. The right-of-use asset is subsequently stated at cost less accumulated
depreciation and impairment losses (notes 2J and 2I(ii)), except for the following types of right-of-use asset:
–
–
–
right-of-use assets that meet the definition of investment property are carried at fair value in accordance with note 2E(i);
right-of-use assets related to leasehold self-occupied buildings where the Group is the registered owner of the leasehold interest are carried at
fair value in accordance with note 2E(ii); and
right-of-use assets related to interests in leasehold land where the interest in the land is held as inventory are carried at the lower of cost and net
realisable value in accordance with note 2N.
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Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis Leased Assets (continued)
2 Principal Accounting Policies (continued)
F
The lease liability is remeasured when there is a change in future lease payments arising from a change in an index or rate, or there is a change in
the Group’s estimate of the amount expected to be payable under a residual value guarantee, or there is a change arising from the reassessment of
whether the Group will be reasonably certain to exercise a purchase, extension or termination option. When the lease liability is remeasured in this
way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of
the right-of-use asset has been reduced to zero.
The lease liability is also remeasured when there is a change in the scope of a lease or the consideration for a lease that is not originally provided
for in the lease contract (“lease modification”) that is not accounted for as a separate lease. In this case the lease liability is remeasured based on the
revised lease payments and lease term using a revised discount rate at the effective date of the modification.
(ii)
As a Lessor
When the Group acts as a lessor, it determines at lease inception whether each lease is a finance lease or an operating lease. A lease is classified as
a finance lease if it transfers substantially all the risks and rewards incidental to the ownership of an underlying assets to the lessee. If this is not the
case, the lease is classified as an operating lease.
When a contract contains lease and non-lease components, the Group allocates the consideration in the contract to each component on a relative
stand-alone selling price basis. The rental income from operating leases is recognised in accordance with note 2AA(ii).
G Goodwill
Goodwill represents the excess of:
the aggregate of the fair value of the consideration transferred, the amount of any non-controlling interest in the acquiree and the fair value
(i)
of the Group’s previously held equity interest in the acquiree; over
(ii)
the net fair value of the acquiree’s identifiable assets and liabilities measured as at the acquisition date.
When (ii) is greater than (i), then this excess is recognised immediately in profit or loss as a gain on a bargain purchase.
Goodwill is stated at cost less accumulated impairment losses. Goodwill arising on a business combination is allocated to each cash-generating unit,
or groups of cash-generating units, that is expected to benefit from the synergies of the combination and is tested annually for impairment (note
2I(ii)).
On disposal of a cash-generating unit during the year, any attributable amount of purchased goodwill is included in the calculation of the profit or
loss on disposal.
H Property Management Rights
Where the Group makes payments for the acquisition of property management rights, the amounts paid are capitalised as intangible assets and
stated at cost less accumulated amortisation and impairment losses (note 2I(ii)). Property management rights are amortised to the consolidated
profit and loss account on a straight-line basis over the terms of the management rights.
I
(i)
Impairment of Assets
Credit Losses from Financial Instruments, Contract Assets and Lease Receivables
For the Group’s trade receivables, contract assets and lease receivables, the Group recognises a loss allowance for expected credit losses (“ECL”)
which is measured at an amount equal to “lifetime ECLs” (which are the losses that are expected to result from all possible default events over the
expected lives of the items to which the ECL model applies). For the Group’s other financial assets measured at amortised cost, the loss allowance is
measured at an amount equal to “12-month ECLs” (which are losses that are expected to result from possible default events within the 12 months
after the reporting date) unless there has been a significant increase in credit risk of the financial instrument since initial recognition, in which case
the loss allowance is measured at an amount equal to “lifetime ECLs”. Financial assets measured at fair value are not subject to the ECL assessment.
ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all expected cash shortfalls (i.e. the
difference between the cash flows due to the Group in accordance with the contract and the cash flows that the Group expects to receive).
In assessing whether the credit risk of a financial instrument has increased significantly since initial recognition, the Group compares the risk of
default occurring on the financial instrument assessed at the reporting date with that assessed at the date of initial recognition. The Group considers
both quantitative and qualitative information that is reasonable and supportable, including historical experience and forward-looking information
that is available without undue cost or effort.
ECLs are remeasured at each reporting date to reflect changes in the financial instrument’s credit risk since initial recognition. Any change in the ECL
amount is recognised as an impairment gain or loss in profit or loss. The Group recognises an impairment gain or loss for all financial instruments
with a corresponding adjustment to their carrying amount through a loss allowance account.
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NOTES TO THE CONSOLIDATED ACCOUNTS 2 Principal Accounting Policies (continued)
I
(ii)
Impairment of Assets (continued)
Impairment of Other Assets
Internal and external sources of information are reviewed at the end of each reporting period to identify indications that the following assets may be
impaired or, except in the case of goodwill, an impairment loss previously recognised no longer exists or may have decreased:
•
•
•
•
•
•
•
fixed assets (including right-of-use assets and service concession assets but other than assets carried at revalued amounts);
property management rights;
goodwill;
railway construction in progress;
property development in progress;
deferred expenditure; and
investments in subsidiaries, associates and joint ventures.
If any such indication exists, the asset’s recoverable amount is estimated. In addition, the recoverable amount for goodwill is estimated annually
whether or not there is any indication of impairment.
The recoverable amount of an asset is the greater of its fair value less costs of disposal 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 the 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).
An impairment loss is recognised in the consolidated profit and loss account whenever the carrying amount of an asset, or the cash-generating unit
to which it belongs, exceeds its recoverable amount. Impairment losses recognised in respect of cash-generating units are allocated first to reduce
the carrying amount of any goodwill allocated to the cash-generating unit (or group of units) and then, to reduce the carrying amount of the other
assets in the unit (or group of units) on a pro rata basis, except that the carrying value of an asset will not be reduced below its individual fair value
less costs of disposal (if measurable) or value in use (if determinable).
In respect of assets other than goodwill, an impairment loss is reversed if there has been a favourable change in the estimates used to determine the
recoverable amount of the asset. An impairment loss in respect of goodwill is not reversed.
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 consolidated profit and loss account in the year in which the reversals are
recognised.
J Depreciation and Amortisation
Investment properties are not depreciated.
(i)
Fixed assets other than investment properties, assets under construction and service concession assets which are amortised over the entire or
(ii)
remaining period of the service concession (note 2E(iii)) are depreciated or amortised on a straight-line basis at rates sufficient to write off their cost
or valuation, less their estimated residual value, if any, over their estimated useful lives as follows:
Land and Buildings
Self-occupied buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . the shorter of 50 years and the unexpired term of the lease
Leasehold land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .the unexpired term of the lease
Civil Works
Excavation and boring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Indefinite
Tunnel linings, underground civil structures, overhead structures and immersed tubes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 years
Station building structures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 years
Depot structures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 years
Kiosk structures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 – 30 years
Cableway station tower and theme village structures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 – 30 years
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Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis 2 Principal Accounting Policies (continued)
J Depreciation and Amortisation (continued)
Plant and Equipment
Rolling stock and components . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6 – 42 years
Platform screen doors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 – 35 years
Rail track . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 15 – 50 years
Environmental control systems, lifts and escalators, fire protection and drainage system . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7 – 45 years
Power supply systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 – 40 years
Aerial ropeway and cabin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 – 27 years
Automatic fare collection systems, metal station kiosks, and other mechanical equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9 – 25 years
Train control and signalling equipment, station announcement systems, telecommunication systems and advertising panels . . . . . . . . . . . . .5 – 35 years
Station architectural finishes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 – 30 years
Fixtures and fittings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 – 25 years
Maintenance equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 – 40 years
Office furniture and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 – 15 years
Computer software licences and applications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 – 10 years
Computer equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 – 5 years
Cleaning equipment and tools . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 years
Motor vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 – 12 years
Where parts of an item of property, plant and equipment have different useful lives, each part is depreciated or amortised separately. The useful
lives of the various categories of fixed assets are reviewed annually in the light of actual asset condition, usage experience and the current asset
replacement programme.
No depreciation or amortisation is provided on assets under construction until the construction is completed and the assets are ready for
(iii)
their intended use.
K Construction Costs
(i)
in-house staff costs and overheads) are dealt with as follows:
Costs incurred by the Group in respect of feasibility studies on proposed railway related construction projects (including consultancy fees,
•
•
where the proposed projects are at a preliminary review stage with no certainty of materialising, the costs concerned are charged to the
consolidated profit and loss account; and
where the proposed projects are at a detailed study stage, having been agreed based on a feasible financial plan, the costs concerned
are recorded as deferred expenditure until such time as a project agreement is reached, whereupon the costs are transferred to railway
construction in progress.
After entering into a project agreement, all costs incurred in the construction of the railway are dealt with as railway construction in progress
(ii)
until commissioning of the railway line, whereupon the relevant construction costs are transferred to fixed assets.
Joint Operations
L
A joint operation is an arrangement whereby the Group and other parties contractually agree to share control of the arrangement, and have rights
to the assets, and obligations for the liabilities, relating to the arrangement. The Group recognises its interest in the joint operation by combining the
assets, liabilities, revenues and expenses relating to its interest with similar items on a line by line basis. Consistent accounting policies are applied for
like transactions and events in similar circumstances.
The arrangements entered into by the Group with developers for Hong Kong property development without establishing separate entities are
considered to be joint operations in accordance with HKFRS 11, Joint Arrangements. Under the development arrangements, the Group is normally
responsible for its own costs, including in-house staff costs and the costs of enabling works, and the developers normally undertake to pay for all
other project costs such as land premium (or such remaining portion as not already paid by the Group), construction costs, professional fees, etc.
In respect of its interests in such operations, the Group accounts for the purchase consideration of development rights, costs of enabling works
(including any interest accrued) and land costs (including any land premiums) paid net of payments received as property development in progress.
In cases where payments received from developers exceed the related expenditures incurred by the Group, such excess is recorded as deferred
income. Expenses incurred by the Group on staff, overhead and consultancy fees in respect of these developments are also capitalised as property
development in progress. The Group’s share of income earned from such operations is recognised in the consolidated profit and loss account on the
basis of note 2M(iii) after netting off any related balance in property development in progress at that time.
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NOTES TO THE CONSOLIDATED ACCOUNTS 2 Principal Accounting Policies (continued)
M Property Development
(i)
borrowing costs capitalised, provisions and other direct expenses are dealt with as property development in progress.
Costs incurred by the Group in respect of site preparation, land costs, acquisition of development rights, aggregate cost of development,
Payments received from developers in respect of property developments are offset against the amounts in property development in progress
(ii)
attributable to that development. Payments received from developers in excess of the balance in property development in progress are transferred
to deferred income which is included in creditors and other payables. In these cases, further costs subsequently incurred by the Group in respect of
that development are charged against deferred income.
Profits arising from the development of properties in Hong Kong undertaken in conjunction with property developers are recognised in the
(iii)
consolidated profit and loss account as follows:
•
•
•
where the Group receives payments from developers, profits arising from such payments are recognised when the foundation and site
enabling works are complete and acceptable for development, and after taking into account the outstanding risks and obligations, if any,
retained by the Group in connection with the development;
where the Group receives a right to a share of the net surplus from the development, the Group’s share of the profit is initially recognised
once the amounts of revenue (including the fair value of any unsold properties) and costs for the development as a whole can be estimated
reliably. The Group’s interest in any unsold properties is subsequently remeasured on a basis consistent with the policy set out in note 2N and
included within properties held for sale; and
where the Group receives a distribution of the assets of the development, profit is recognised based on the fair value of such assets at
the time of receipt and after taking into account any outstanding risks and obligations retained by the Group in connection with the
development.
Upon recognition of profit, the balance of deferred income or property development in progress relating to that development is credited or charged
to the consolidated profit and loss account, as the case may be.
Revenue arising from sales of properties in Mainland of China is recognised when the legal assignment is completed, which is the point in
(iv)
time when the purchaser has the ability to direct the use of the properties and obtain substantially all of the remaining benefits of the properties.
Deposits and instalments received on properties sold prior to the date of revenue recognition are included in the consolidated statement of financial
position under “Creditors and other payables”.
(v) Where properties under construction are received from a development for investment purpose, these properties are recognised as
investment properties at fair value. Further costs incurred in the construction of those assets and the related fitting out costs are capitalised in
investment properties.
N Properties Held for Sale
Where properties are held for sale, those properties are stated initially at their cost and subsequently carried at the lower of cost and net realisable
value.
For those properties in Hong Kong, cost represents the fair value, as determined by reference to an independent open market valuation, upon the
recognition of profits arising from the development as set out in note 2M(iii).
For those properties in Mainland of China, cost is determined by the apportionment of the development costs attributable to the unsold properties.
Net realisable value represents the estimated selling price less costs to be incurred in selling the properties.
The amount of any write-down of properties to net realisable value is recognised as an expense in the period the write-down occurs. The amount of
any reversal of any write-down of properties arising from an increase in net realisable value is recognised as a reduction in the cost of properties sold
in the period in which the reversal occurs.
When properties held for sale are sold, the carrying amount of those properties is recognised in the consolidated profit and loss account.
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Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis 2 Principal Accounting Policies (continued)
O
Investments in securities (other than investments in subsidiaries, associates and joint venture) are classified as at fair value through profit or loss
(“FVPL”). Changes in the fair value of the investments (including interest) are recognised in profit or loss.
Investments in Securities
Investments in securities are recognised/derecognised on the date the Group commits to purchase/sell the investments. Profit or loss on disposal of
investments in securities are determined as the difference between the net disposal proceeds and the carrying amount of the investments and are
accounted for in the consolidated profit and loss account as they arise.
Stores and Spares
P
Stores and spares used for business operation are categorised as either revenue or capital. Revenue spares are stated at cost, using the weighted
average cost method and are recognised as expenses in the period in which the consumption occurs. Provision is made for obsolescence where
appropriate. Capital spares are included in fixed assets and stated at cost less accumulated depreciation and impairment losses (note 2I(ii)).
Depreciation is charged at the rates applicable to the relevant fixed assets against which the capital spares are held in reserve.
Q Contract Assets and Contract Liabilities
A contract asset is recognised when the Group recognises revenue (note 2AA) before being unconditionally entitled to the consideration under the
payment terms set out in the contract. Contract assets are assessed for ECL in accordance with the policy set out in note 2I(i) and are reclassified to
receivables when the right to the consideration has become unconditional (note 2S).
A contract liability is recognised when the customer pays consideration before the Group recognises the related revenue (note 2AA). A contract
liability would also be recognised if the Group has an unconditional right to receive consideration before the Group recognises the related revenue.
In such cases, a corresponding receivable would also be recognised (note 2S).
For a single contract with the customer, either a net contract asset or a net contract liability is presented. For multiple contracts, contract assets and
contract liabilities of unrelated contracts are not presented on a net basis.
When the contract includes a significant financing component, the contract balance includes interest accrued under the effective interest method
(note 2AB).
R Cash and Cash Equivalents
Cash and cash equivalents comprise cash at banks and on hand, demand deposits with banks and other financial institutions, and short-term highly
liquid investments that are readily convertible into known amounts of cash and subject to an insignificant risk of changes in value with a maturity at
acquisition within three months. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are also
included as a component of cash and cash equivalents for the purpose of the consolidated cash flow statement.
S Debtors and Other Receivables
A receivable is recognised when the Group has an unconditional right to receive consideration. A right to receive consideration is unconditional
if only the passage of time is required before payment of that consideration is due. If revenue has been recognised before the Group has an
unconditional right to receive consideration, the amount is presented as a contract asset (note 2Q). Receivables are stated at amortised cost using
the effective interest method less allowance for credit losses (note 2I(i)).
Interest-bearing Borrowings
T
Interest-bearing borrowings are measured initially at fair value net of transaction costs incurred. The interest-bearing borrowings not subject to fair
value hedges are subsequently stated at amortised costs using effective interest method. Interest expense is recognised in accordance with the
Group’s accounting policy for interest and finance charges (note 2AB).
Subsequent to initial recognition, the carrying amount of interest-bearing borrowings subject to fair value hedges is remeasured and the change in
fair value attributable to the risk being hedged is recognised in the consolidated profit and loss account to offset the effect of the gain or loss on the
related hedging instrument.
U Creditors and Other Payables
Creditors and other payables are stated at amortised cost if the effect of discounting would be material, otherwise they are stated at cost.
V Derivative Financial Instruments and Hedging Activities
The Group uses derivative financial instruments such as interest rate swaps and currency swaps to manage its interest rate and foreign exchange
exposure. Based on the Group’s policies, these instruments are used solely for reducing or eliminating financial risks associated with the Group’s
investments and liabilities and not for trading or speculation purposes.
Derivatives are recognised at fair value and are remeasured at their fair value at the end of each reporting period. The method of recognising the
resulting gain or loss depends on whether the derivative is designated as a hedging instrument and the nature of the item being hedged.
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NOTES TO THE CONSOLIDATED ACCOUNTS 2 Principal Accounting Policies (continued)
V Derivative Financial Instruments and Hedging Activities (continued)
Where hedge accounting applies, the Group designates derivatives employed as either: (1) a fair value hedge: to hedge the fair value of recognised
liabilities; (2) a cash flow hedge: to hedge the variability in cash flows of a recognised liability or the foreign currency risk of a firm commitment; or
(3) a hedge of a net investment: to hedge the variability in cash flows of a monetary item that is receivable from or payable to a foreign operation
where the settlement for the monetary item is neither planned nor likely to occur in foreseeable future.
(i)
Fair Value Hedge
Changes in the fair value of derivatives that are designated and qualified as fair value hedges are recorded in the consolidated profit and loss
account, together with any changes in the fair value of the hedged assets or liabilities that are attributable to the hedged risk.
(ii)
Cash Flow Hedge
The effective portion of changes in the fair value of derivatives that are designated and qualified as cash flow hedges is recognised in other
comprehensive income which is accumulated separately in equity in the hedging reserve. The gain or loss relating to the ineffective portion is
recognised immediately in the consolidated profit and loss account.
Amounts previously recognised in other comprehensive income and accumulated in equity are transferred to the consolidated profit and loss
account in the periods when the hedged item is recognised in the consolidated profit and loss account. However, when the transaction in respect
of the hedged item results in the recognition of a non-financial asset or liability, the associated gains and losses that were previously recognised
in other comprehensive income and accumulated in equity are transferred from equity and included in the initial cost or carrying amount of the
non-financial asset or liability.
When a hedging instrument expires or is sold, terminated or exercised, or the Group revokes designation of the hedge relationship but the
transaction in respect of the hedged item is still expected to occur, the cumulative gain or loss existing in equity at that time remains in equity until
the transaction occurs and it is recognised in accordance with the above policy. However, if the transaction in respect of the hedged item is no
longer expected to occur, the gain or loss accumulated in equity is immediately transferred to the consolidated profit and loss account.
(iii)
Hedge of a Net Investment
The effective portion of changes in the fair value of derivatives that are designated and qualified as hedges of net investments in foreign operations
is recognised in other comprehensive income which is accumulated separately in equity in the exchange reserve. The gain or loss relating to the
ineffective portion is recognised immediately in the consolidated profit and loss account.
Amounts previously recognised in other comprehensive income and accumulated in equity are transferred to the consolidated profit and loss
account as a reclassification adjustment on the disposal or partial disposal of the foreign operation.
(iv)
Derivatives That Do Not Qualify for Hedge Accounting
Changes in the fair value of any derivative instruments that do not qualify for hedge accounting are recognised immediately in the consolidated
profit and loss account.
Salaries, annual leave, other allowances, contributions to defined contribution retirement schemes, including contributions to Mandatory
W Employee Benefits
(i)
Provident Funds (“MPF”) as required under the Hong Kong Mandatory Provident Fund Schemes Ordinance, and other costs of non-monetary
benefits are accrued in the period in which the associated services are rendered by employees of the Group. Where these benefits are incurred for
staff relating to construction projects, capital works and property developments, they are capitalised as part of the cost of the qualifying assets. In
other cases, they are recognised as expenses in the consolidated profit and loss account as incurred.
The Group’s net obligation in respect of defined benefit retirement schemes is calculated separately for each scheme by estimating
(ii)
the amount of future benefit that employees have earned in return for their service in the current and prior years; that benefit is discounted to
determine the present value, and the fair value of any scheme assets is deducted. The calculation is performed by a qualified actuary using the
Projected Unit Credit Method. When the calculation results in a benefit to the Group, the recognised asset is limited to the present value of economic
benefits available in the form of any future refunds from the scheme or reductions in future contributions to the scheme. Service cost and net
interest expense/income on the net defined benefit liability/asset are recognised either as an expense in the consolidated profit and loss account, or
capitalised as part of the cost of the relevant construction projects, capital works or property developments, as the case may be. Current service cost
is measured as the increase in the present value of the defined benefit obligation resulting from employee service in the current period. Net interest
expense/income for the period is determined by applying the discount rate used to measure the defined benefit obligation at the beginning of the
reporting period to the net defined benefit liability/asset. The discount rate is the yield at the end of the reporting period on high quality corporate
bonds that have maturity dates approximating the weighted average duration of the scheme’s obligations.
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Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis 2 Principal Accounting Policies (continued)
W Employee Benefits (continued)
When the benefits of a scheme are changed, or when a scheme is curtailed, current service cost for the portion of the changed benefit related to past
service by employees, or the gain or loss on curtailment, is recognised as an expense in the profit or loss account or capitalised at the earlier of when
the scheme amendment or curtailment occurs and when related restructuring costs or termination benefits are recognised.
Remeasurements arising from defined benefit retirement schemes are recognised in other comprehensive income and reflected immediately in
retained earnings. Remeasurements comprise of actuarial gains and losses, the return on scheme assets (excluding amounts included in net interest
on the net defined benefit liability/asset) and any change in the effect of the asset ceiling (excluding amounts included in net interest on the net
defined benefit liability/asset).
(iii)
•
•
Equity-settled share-based payments are measured at fair value at the date of grant.
For share options, the fair value determined at the grant date is recognised as staff costs, unless the relevant employee expenses qualify for
recognition as an asset, on a straight-line basis over the vesting period and taking into account the probability that the options will vest,
with a corresponding increase in the employee share-based capital reserve within equity. Fair value is measured by use of the Black-Scholes
model, taking into account the terms and conditions upon which the options are granted. The expected life used in the model is adjusted,
based on management’s best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations.
During the vesting period, the number of share options that is expected to vest is reviewed. Any adjustment to the cumulative fair value
recognised in prior years is charged/credited to the consolidated profit and loss account in the year of the review, unless the original
employee expenses qualify for recognition as an asset, with a corresponding adjustment to the employee share-based capital reserve. On
vesting date, the amount recognised as an expense is adjusted to reflect the actual number of share options that vest (with a corresponding
adjustment to the employee share-based capital reserve). The equity amount is recognised in the employee share-based capital reserve until
either the option is exercised which is transferred to the share capital account or the option is lapsed (on expiry of the share options) which is
released directly to retained profits.
For award shares under the Executive Share Incentive Scheme, the amounts to be expensed as staff costs are determined by reference to
the fair value of the award shares granted, taking into account all non-vesting conditions associated with the grants. The total expense is
recognised over the relevant vesting periods, with a corresponding credit to the employee share-based capital reserve under equity.
For those award shares which are amortised over the vesting periods, the Group reviews its estimates of the number of award shares
that are expected to ultimately vest based on the vesting conditions at the end of each reporting period. Any resulting adjustment to the
cumulative fair value recognised in prior years is charged/credited to consolidated profit and loss account in the year of the review, with a
corresponding adjustment to the employee share-based capital reserve. Upon vesting of award shares, the related costs of the vested award
shares purchased from the market (the “purchased shares”) and shares received in relation to scrip dividend and shares purchased from
the proceeds of cash ordinary dividends received (the “ordinary dividend shares”) are credited to Shares held for Executive Share Incentive
Scheme, with a corresponding decrease in employee share-based compensation reserve for the purchased shares, and decrease in retained
earnings for the ordinary dividend shares.
For cash-settled share-based payments, a liability equal to the portion of the services received is recognised at the fair value of the shares
determined at the end of each reporting period.
Termination benefits are recognised at the earlier of when the Group can no longer withdraw the offer of those benefits and when it
(iv)
recognises restructuring costs involving the payment of termination benefits.
Income Tax
Income tax for the year comprises current tax and movements in deferred tax assets and liabilities. Income tax is recognised in the
X
(i)
consolidated profit and loss account except to the extent that it relates to items recognised in other comprehensive income or directly in equity, in
which case it is recognised in other comprehensive income or directly in equity respectively.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the end of the
(ii)
reporting period, and any adjustment to tax payable in respect of previous years.
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial
(iii)
statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax assets also arise from unused tax losses and
unused tax credits. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are generally
recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such
assets and liabilities are not recognised if the temporary difference arises from the initial recognition of assets and liabilities in a transaction that
affects neither the taxable profit nor the accounting profit (provided they are not part of a business combination).
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NOTES TO THE CONSOLIDATED ACCOUNTS
Income Tax (continued)
2 Principal Accounting Policies (continued)
X
Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries and an associate, and interests
in a joint venture, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference
will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and
interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the
temporary differences and they are expected to reverse in the foreseeable future.
Where investment properties are carried at their fair value in accordance with the accounting policy set out in note 2E(i), the amount of deferred tax
recognised is measured using the tax rates that would apply on sale of those assets at their carrying value at the end of the reporting period unless
the property is depreciable and is held within a business model whose objective is to consume substantially all of the economic benefits embodied
in the property over time, rather than through sale. In all other cases, the amount of deferred tax recognised is measured based on the expected
manner of realisation or settlement of the carrying amount of the assets and liabilities, using tax rates enacted or substantively enacted at the end of
the reporting period. Deferred tax assets and liabilities are not discounted.
The carrying amount of a deferred tax asset is reviewed at the end of each reporting period and is reduced to the extent that it is no longer probable
that sufficient taxable profits will be available to allow the related tax benefit to be utilised. Any such reduction is reversed to the extent that it
becomes probable that sufficient taxable profits will be available.
Financial Guarantee Contracts
Y
Financial guarantees are contracts that require the issuer to make specified payments to reimburse the holder of the guarantee for a loss it incurs
because a specified debtor fails to make payment to the holder when due in accordance with the original or modified terms of a debt instrument.
When the Group issues a financial guarantee, where the effect is material, the fair value of the guarantee, after netting off any consideration received
or receivable at inception, is initially debited to the consolidated profit and loss account and recognised as deferred income within creditors
and other payables. The fair value of financial guarantees issued at the time of issuance is determined by reference to fees charged in an arm’s
length transaction for similar services, when such information is obtainable, or is otherwise estimated by reference to interest rate differentials, by
comparing the actual rates charged by lenders when the guarantee is made available with the estimated rates that lenders would have charged, had
the guarantees not been available, where reliable estimates of such information can be made.
The amount of the guarantee initially recognised as deferred income is amortised in the consolidated profit and loss account over the term of the
guarantee as income from financial guarantees issued.
The Group monitors the risk that the specified debtor will default on the contract and recognises a provision when ECLs on the financial guarantees
are determined to be higher than the amount carried in creditors and other payables in respect of the guarantees (i.e. the amount initially
recognised, less accumulated amortisation). To determine ECLs, the Group considers changes in the risk of default of the specified debtor since the
issuance of the guarantee. A 12-month ECL is measured unless the risk that the specified debtor will default has increased significantly since the
guarantee is issued, in which case a lifetime ECL is measured. The same definition of default and the same assessment of significant increase in credit
risk as described in note 2I(i) apply.
As the Group is required to make payments only in the event of a default by the specified debtor in accordance with the terms of the instrument that
is guaranteed, an ECL is estimated based on the expected payments to reimburse the holder for a credit loss that it incurs less any amount that the
Group expects to receive from the holder of the guarantee, the specified debtor or any other party. The amount is then discounted using the current
risk-free rate adjusted for risks specific to the cash flows.
Z
(i)
Provisions, Contingent Liabilities and Onerous Contracts
Provisions and Contingent Liabilities
Provisions are recognised when the 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 the present value of the expenditure 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 of economic benefits 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 of economic benefits is remote.
(ii)
Onerous Contracts
An onerous contract exists when the Group has a contract under which the unavoidable costs of meeting the obligations under the contract exceed
the economic benefits expected to be received from the contract. Provisions for onerous contracts are measured at the present value of the lower of
the expected cost of terminating the contract and the net cost of continuing with the contract.
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Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis 2 Principal Accounting Policies (continued)
AA Revenue Recognition
Revenue is recognised when control over a product or service is transferred to the customer, or the lessee has the right to use the asset, at the
amount of promised consideration to which the Group is expected to be entitled, excluding those amounts collected on behalf of third parties.
Revenue excludes value added tax or other sales taxes and is after deduction of any trade discounts. Further details of the Group’s revenue and other
income recognition policies are as follows:
(i)
Fare revenue is recognised when the journey is provided.
(ii)
Rental income from investment properties, station kiosks and other railway premises under operating leases is recognised in profit or loss in
equal instalments over the periods covered by the lease term, except where an alternative basis is more representative of the pattern of benefits to
be derived from the use of the leased assets. Lease incentives granted are recognised in the consolidated profit and loss account as an integral part
of the aggregate net lease payments receivable. Variable lease payments that do not depend on an index or a rate are recognised as income in the
accounting period in which they are earned.
(iii)
Contract revenue is recognised when the outcome of a consultancy, construction or service contract can be estimated reliably. Contract
revenue is recognised progressively over-time using the cost-to-cost method, i.e. based on the proportion of the actual costs incurred relative to the
estimated total costs. When the outcome of a consultancy, construction or service contract cannot be estimated reliably, revenue is recognised only
to the extent of contract costs incurred that are expected to be recovered.
Income from other railway and station commercial businesses, property management, railway franchises and service concessions are
(iv)
recognised when the services are provided.
AB Interest and Finance Charges
Interest income and expense directly attributable to the financing of capital projects prior to their completion or commissioning are capitalised.
Exchange differences arising from foreign currency borrowings relating to the acquisition of assets are capitalised to the extent that they are
regarded as an adjustment to capitalised interest costs. Interest expense attributable to other purposes is charged to the consolidated profit and loss
account.
Finance charges on lease liabilities are charged to the consolidated profit and loss account over the period of the lease so as to produce an
approximately constant periodic rate of charge on the remaining balance of the obligations for each accounting period.
AC Foreign Currency Translation
Foreign currency transactions during the year are translated into Hong Kong dollars and recorded at exchange rates ruling at the transaction dates.
Foreign currency monetary assets and liabilities are translated into Hong Kong dollars at the exchange rates ruling at the end of the reporting period.
Exchange gains and losses are recognised in the consolidated profit and loss account.
The results of foreign enterprises are translated into Hong Kong dollars at the average exchange rates for the year. Statement of financial position
items are translated into Hong Kong dollars at the closing exchange rates at the end of the reporting period. The resulting exchange differences are
recognised in other comprehensive income and accumulated separately in equity in the exchange reserve.
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NOTES TO THE CONSOLIDATED ACCOUNTS 2 Principal Accounting Policies (continued)
AD Segment Reporting
Operating segments, and the amounts of each segment item reported in the consolidated accounts, are identified from the financial information
provided regularly to the Group’s most senior executive management for the purposes of allocating resources to, and assessing the performance of,
the Group’s various lines of businesses and operations in different geographical locations.
Individually material operating segments are not aggregated for financial reporting purposes unless the segments have similar economic
characteristics and are similar in respect of the nature of services and products, the type or class of customers, the methods used to provide the
services or distribute the products, and the nature of the regulatory environment. Operating segments which are not individually material may be
aggregated if they share a majority of these criteria.
AE Related Parties
For the purposes of these accounts, a person, or a close member of that person’s family, is related to the Group if that person has control, joint
control or significant influence over the Group, or is a member of the key management personnel of the Group.
An entity is related to the Group if (i) the entity and the Group are members of the same group; (ii) the entity is an associate or joint venture of the
Group; (iii) the entity is a post-employment benefit scheme for the benefit of employees of the Group or of any entity that is a related party of the
Group; (iv) an individual who is a related party of the Group has control or joint control over that entity; (v) a person, or a close member of that
person’s family, who has control or joint control over the Group has significant influence over the entity or is a member of the key management
personnel of that entity; or (vi) the entity, or any member of a group of which it is a part, provides key management personnel services to the Group
or to the Group’s parent.
AF Government Grants
Government grants are assistance by governments in the form of transfer of resources in return for the Group’s compliance with the conditions
attached thereto. Government grants which represent compensation for the cost of an asset are deducted from the cost of the asset in arriving at
its carrying value to the extent of the amounts received and receivable as at the end of the reporting period. Government grants which represent
compensation for expenses or losses are deducted from the related expenses. Any excess of the amount of grant received or receivable over the cost
of the asset or the expenses or losses at the end of the reporting period are carried forward as advance receipts or deferred income to set off against
the future cost of the asset or future expenses or losses.
3 Rail Merger with Kowloon-Canton Railway Corporation and Operating
Arrangements for High Speed Rail and Tuen Ma Line Phase 1
Rail Merger
On 2 December 2007 (the “Appointed Day”), the Company’s operations merged with those of Kowloon-Canton Railway Corporation (“KCRC”) (the
“Rail Merger”). The structure and key terms of the Rail Merger were set out in a series of transaction agreements entered into between, inter alia, the
Government of the Hong Kong Special Administrative Region (the “HKSAR Government”), KCRC and the Company including the Service Concession
Agreement, Property Package Agreements and Merger Framework Agreement.
Pursuant to the Service Concession Agreement (“SCA”), KCRC granted the Company the right to access, use and operate the KCRC system for an
initial term of 50 years (the “Concession Period”), which will be extended if the franchise period (as it relates to the KCRC railway) is extended. In
accordance with the terms of the SCA, the Company paid an upfront lump sum to KCRC on the Appointed Day and is obliged to pay to KCRC fixed
annual payments and variable annual payments (calculated on a tiered basis by reference to the revenue generated from the KCRC system above
certain thresholds).
Under the SCA, the Company is responsible for the expenditure incurred in relation to the maintenance, repair, replacement and upgrade of the
KCRC system (with any new assets acquired being classified as “additional concession property”). To the extent that such expenditure exceeds an
agreed threshold (“Capex Threshold”), the Company will be reimbursed for any above-threshold expenditure at the end of the Concession Period
with such reimbursement to be on the basis of depreciated book value.
Details of the Rail Merger are disclosed in the Company’s circular dated 3 September 2007.
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Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis 3 Rail Merger with Kowloon-Canton Railway Corporation and Operating
Arrangements for High Speed Rail and Tuen Ma Line Phase 1 (continued)
Operating Arrangements for High Speed Rail
On 23 August 2018, the Company entered into relevant agreements with the HKSAR Government and KCRC to supplement and amend the then
current agreements to enable the Company to operate the Hong Kong Section of the Guangzhou-Shenzhen-Hong Kong Express Rail Link (“High
Speed Rail” or “HSR”) in substantially the same manner as the existing railway network. Under the supplemental service concession agreement that
was executed on 23 August 2018 (“SSCA-HSR”), the operating period with respect to the HSR is for an initial term of 10 years from 23 September
2018 (“Concession Period (High Speed Rail)”), which may be extended subject to further negotiation between the Company and KCRC in accordance
with the mechanism set out in the SSCA-HSR. Under the SSCA-HSR, the Company is responsible for the expenditure incurred in relation to the
maintenance, repair, replacement and upgrade of the concession property of the High Speed Rail (with any new assets acquired being classified
as “additional concession property (High Speed Rail)”). To the extent that such expenditure exceeds an agreed threshold (“Capex Threshold (High
Speed Rail)”), the Company will be reimbursed for any above-threshold expenditure at the end of the concession period with such reimbursement
to be on the basis of depreciated book value.
Details of the SSCA-HSR are disclosed in the Company’s announcement dated 23 August 2018.
Operating Arrangements for Tuen Ma Line Phase 1
On 11 February 2020, the Company entered into relevant agreements with the HKSAR Government and KCRC to supplement and amend the
then current agreements to enable the Company to operate Tuen Ma Line Phase 1 (which extends the Ma On Shan Line from Tai Wai to Kai Tak) in
substantially the same manner as the existing railway network for a period of two years from 14 February 2020 including a supplemental service
concession agreement (“SSCA-SCL”) with KCRC. Prior to the full opening of the Tuen Ma Line, the parties are obliged to commence exclusive
negotiations in good faith with a view to agreeing the terms of a supplemental service concession agreement for the entire Tuen Ma Line (which is
intended to replace the SSCA-SCL that was executed on 11 February 2020). Under the SSCA-SCL, the Company is responsible for the expenditure
incurred in relation to the maintenance, repair, replacement and upgrade of the concession property of the Tuen Ma Line Phase 1.
Details of the SSCA-SCL are disclosed in the Company’s announcement dated 11 February 2020.
4 Revenue from Hong Kong Transport Operations
Revenue from Hong Kong transport operations comprises:
in HK$ million
Domestic Service
Cross-boundary Service
High Speed Rail
Airport Express
Light Rail and Bus
Intercity Service
Others
2020
9,229
516
1,277
140
481
20
233
2019
12,714
3,164
2,098
1,011
677
175
99
11,896
19,938
Domestic Service comprises the Kwun Tong, Tsuen Wan, Island, South Island, Tung Chung, Tseung Kwan O, Disneyland Resort, East Rail (excluding
Cross-boundary Service), West Rail and Ma On Shan Lines, and Tuen Ma Line Phase 1. Others include mainly by-law infringement surcharge, Octopus
load agent fees and other rail-related income.
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NOTES TO THE CONSOLIDATED ACCOUNTS 5 Revenue from Hong Kong Station Commercial Businesses
Revenue from Hong Kong station commercial businesses comprises:
in HK$ million
Duty free shops and kiosks
Advertising
Telecommunication income
Other station commercial income
2020
2,021
516
640
92
3,269
2019
4,800
1,130
743
126
6,799
6 Revenue from Hong Kong Property Rental and Management Businesses
Revenue from Hong Kong property rental and management businesses comprises:
in HK$ million
Property rental income
Property management income
2020
4,817
237
5,054
2019
4,833
304
5,137
7 Revenue and Expenses Relating to Mainland of China and International
Subsidiaries
Revenue and expenses relating to Mainland of China and international subsidiaries comprise:
in HK$ million
Melbourne Train
Sydney Metro North West
Sydney Metro City & Southwest
MTR Nordic**
TfL Rail/Elizabeth Line
Shenzhen Metro Line 4 (“SZL4”)
Others
Property development in Mainland of China
Total Mainland of China and international subsidiaries
2020
Revenue
10,308
681
1,493
4,747
2,363
692
1,144
21,428
–
21,428
Expenses*
10,280
752
1,474
4,600
2,177
719
893
20,895
13
20,908
2019
Revenue
10,680
1,110
515
4,862
2,037
761
1,120
21,085
–
21,085
Expenses*
10,154
1,073
450
4,832
1,899
599
753
19,760
25
19,785
*
Expenses include staff costs of HK$9,260 million (2019: HK$9,006 million) (note 10A), maintenance and related work costs of HK$2,850 million (2019: HK$3,322 million)
and energy and utilities of HK$782 million (2019: HK$876 million).
** MTR Nordic comprises the Stockholm Metro, MTR Tech, MTRX (formerly known as “MTR Express”), Stockholm Commuter Rail (“Stockholms pendeltåg”) and Emtrain
operations in Sweden.
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Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis 8 Revenue from Other Businesses
Revenue from other businesses comprises income from:
in HK$ million
Ngong Ping 360
Consultancy business
Project management for HKSAR Government
Miscellaneous businesses
2020
65
231
565
33
894
2019
392
184
935
34
1,545
9 Segmental Information
The Group’s businesses consist of (i) recurrent businesses (comprising Hong Kong transport operations, Hong Kong station commercial businesses,
Hong Kong property rental and management businesses, Mainland of China and international railway, property rental and management businesses
and other businesses) and (ii) property development businesses (together with recurrent businesses referred to as underlying businesses).
The Group manages its businesses by the various business executive committees. In a manner consistent with the way in which information is
reported internally to the Group’s most senior executive management for the purposes of resource allocation and performance assessment, the
Group has identified the following reportable segments:
Hong Kong transport operations: The provision of passenger operation and related services on the domestic mass transit railway system in
(i)
Hong Kong, the Airport Express serving both the Hong Kong International Airport and the AsiaWorld-Expo at Chek Lap Kok, cross-boundary railway
connection with the border of Mainland of China at Lo Wu and Lok Ma Chau, the Guangzhou-Shenzhen-Hong Kong Express Rail Link (Hong Kong
Section) (“High Speed Rail”), light rail and bus feeder with railway system in the north-west New Territories and intercity railway transport with
certain cities in the Mainland of China.
Hong Kong station commercial businesses: Commercial activities including the letting of advertising, retail and car parking spaces at railway
(ii)
stations, the provision of telecommunication and bandwidth services in railway premises and other commercial activities within the Hong Kong
transport operations network.
Hong Kong property rental and management businesses: The letting of retail, office and car parking spaces and the provision of estate
(iii)
management services in Hong Kong.
(iv)
Hong Kong property development: Property development activities at locations near the railway systems in Hong Kong.
(v) Mainland of China and international railway, property rental and management businesses: The construction, operation and maintenance of
mass transit railway systems including station commercial activities outside of Hong Kong and the letting of retail spaces and provision of estate
management services in the Mainland of China.
(vi) Mainland of China property development: Property development activities in the Mainland of China.
(vii) Other businesses: Businesses not directly relating to transport operations or properties such as Ngong Ping 360, which comprises cable
car operation in Tung Chung and related businesses at the Ngong Ping Theme Village, railway consultancy business and the provision of project
management services to the HKSAR Government.
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211
NOTES TO THE CONSOLIDATED ACCOUNTS 9 Segmental Information (continued)
The results of the reportable segments and reconciliation to the corresponding consolidated totals in the consolidated accounts are shown below:
Hong Kong
transport
operations
Hong Kong
station
commercial
businesses
Hong Kong
property
rental and
management
businesses
Hong Kong
property
development
Mainland of China and
international affiliates
Mainland of
China and
international
railway,
property
rental and
management
businesses
Mainland
of China
property
development
Other
businesses
Un-allocated
amount
Total
11,896
1,262
315
11,140
756
–
29
1,233
2,007
–
315
4,739
–
–
1,971
4,664
36
75
11,896
(12,318)
3,269
(509)
5,054
(850)
–
–
–
(422)
2,760
4,204
–
–
–
–
–
–
–
–
–
–
–
–
–
6,491
(422)
(4,810)
(176)
2,760
(197)
(61)
4,204
(18)
(1)
6,491
–
–
–
–
–
–
(5,408)
–
2,502
–
–
–
–
–
4,185
–
(9,090)
–
6,491
–
–
(1,049)
(5,408)
2,502
(4,905)
5,442
21,289
1,994
19,295
139
137
2
21,428
(20,895)
(183)
350
–
350
(272)
–
424
502
(62)
(100)
(41)
299
–
–
–
–
–
–
–
(13)
–
886
67
819
8
7
1
894
(2,496)
–
–
–
–
–
–
–
–
35,648
13,230
22,418
6,893
6,779
114
42,541
(37,081)
–
(96)
(279)
(13)
(1,602)
(96)
5,181
–
–
–
6,491
(13)
–
–
–
(13)
93
–
(15)
65
(1,602)
(68)
–
181
(1,489)
–
–
–
(96)
–
–
–
(96)
(1,035)
–
(196)
11,672
(5,365)
(238)
605
6,674
(1,004)
(9,190)
(1,301)
(1,489)
(1,327)
(4,821)
124,355
6,610
2,928
587
85,532
911
–
–
326
–
–
–
–
–
–
2
–
–
16
–
16
–
–
–
–
131,291
–
3,517
–
86,475
–
3,412
–
11,942
3
–
–
1,572
–
16,929
7,473
9,739
58
4,447
586
1,760
–
14,709
220,932
42,175
63
–
–
443
5
–
–
–
–
–
249
228
–
–
771
25
214
–
–
–
–
–
–
–
79
11,942
1,116
470
468
1,800
10,530
28,253
–
4,982
1,062
4,418
–
14,709
11,592
290,574
8,045
2,090
2,588
12,924
11,024
10,114
18,159
–
2,090
–
2,588
–
12,924
181
11,205
5,928
497
3,516
–
–
–
–
687
249
–
875
–
875
–
–
3,417
62,335
103,298
–
3,417
–
62,335
10,295
113,593
30
–
–
–
10,220
687
in HK$ million
2020
Revenue from contracts with
customers within the scope
of HKFRS 15
– Recognised at a point
in time
– Recognised over time
Revenue from other sources
– Lease payments that are
fixed or depend on
an index or a rate
– Variable lease payments
that do not depend on
an index or a rate
Total revenue
Operating expenses
Project study and business
development expenses
Operating (loss)/profit
before Hong Kong property
development, depreciation,
amortisation and variable
annual payment
Profit on Hong Kong property
development
Operating (loss)/profit before
depreciation, amortisation
and variable annual
payment
Depreciation and amortisation
Variable annual payment
Share of profit of associates
and joint venture
(Loss)/profit before interest,
finance charges and taxation
Interest and finance charges
Investment property
revaluation loss
Income tax
(Loss)/profit for the year ended
31 December 2020
Assets
Fixed assets
Other segment assets *
Goodwill and property
management rights
Property development
in progress
Deferred expenditure
Deferred tax assets
Investments in securities
Properties held for sale
Interests in associates and
joint venture
Total assets
Liabilities
Segment liabilities
Obligations under service
concession
Total liabilities
Other information
Capital expenditure on:
Fixed assets
Property development
in progress
* Other segment assets mainly include debtors, stores and spares, cash and cash equivalents and other assets employed in the operations of individual business
segments.
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211
Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis
9 Segmental Information (continued)
Hong Kong
transport
operations
Hong Kong
station
commercial
businesses
Hong Kong
property
rental and
management
businesses
Hong Kong
property
development
Mainland of China and
international affiliates
Mainland of
China and
international
railway,
property
rental and
management
businesses
Mainland
of China
property
development
4,286
5,707
(25)
(2,012)
(75)
in HK$ million
2019
Revenue from contracts with
customers within the scope
of HKFRS 15
– Recognised at a point
in time
– Recognised over time
Revenue from other sources
– Lease payments that are
fixed or depend on
an index or a rate
– Variable lease payments
that do not depend on
an index or a rate
Total revenue
Operating expenses
Project study and business
development expenses
Operating profit/(loss)
before Hong Kong property
development, depreciation,
amortisation and variable
annual payment
Profit on Hong Kong property
development
Operating profit/(loss) before
depreciation, amortisation
and variable annual
payment
Depreciation and amortisation
Variable annual payment
Share of profit of associates
and joint venture
(Loss)/profit before interest,
finance charges and taxation
Interest and finance charges
Investment property
revaluation gain/(loss)
Income tax
(Loss)/profit for the year ended
31 December 2019
Assets
Fixed assets
Other segment assets*
Goodwill and property
management rights
Property development
in progress
Deferred expenditure
Deferred tax assets
Investments in securities
Properties held for sale
Interests in associates and
joint venture
Total assets
Liabilities
Segment liabilities
Obligations under service
concession
Total liabilities
Other information
Capital expenditure on:
Fixed assets
Property development
in progress
19,938
19,174
764
–
–
–
19,938
(14,029)
–
2,026
49
1,977
4,773
304
–
304
4,833
4,511
4,702
262
131
6,799
(680)
–
5,137
(851)
–
5,909
6,119
4,286
–
–
–
–
–
–
–
–
–
–
–
–
–
5,707
5,909
(4,728)
(1,772)
–
6,119
(192)
(805)
–
(591)
5,122
–
–
–
–
–
–
(591)
5,122
123,669
3,552
2,598
310
–
–
140
–
–
–
–
–
–
–
2
–
–
–
(16)
(6)
–
4,264
–
1,449
–
5,713
91,110
459
21
–
7
–
–
–
–
127,361
2,910
91,597
11,694
10,177
21,871
5,085
–
2,126
–
2,126
449
–
2,379
–
2,379
311
–
–
–
–
5,707
–
–
(176)
5,531
–
2,850
–
12,022
–
–
–
1,034
–
15,906
10,434
–
10,434
–
3,819
20,902
2,701
18,201
183
182
1
21,085
(19,760)
(201)
1,124
–
1,124
(236)
–
54
942
(57)
(77)
(200)
608
7,544
8,549
56
–
–
131
–
–
9,335
25,615
9,449
173
9,622
204
–
Other
businesses
Un-allocated
amount
Total
1,529
387
1,142
16
14
2
1,545
(3,557)
–
–
–
–
–
–
–
–
44,699
22,311
22,388
9,805
9,409
396
54,504
(38,902)
–
(75)
(276)
(2,012)
–
(75)
–
(65)
–
234
(1,843)
–
–
–
–
–
–
(75)
(882)
–
(1,540)
15,326
5,707
21,033
(5,237)
(2,583)
288
13,501
(859)
1,372
(1,922)
(1,843)
(2,497)
12,092
626
1,665
–
–
1,801
–
386
–
1,024
5,502
3,162
–
3,162
28
–
–
15,553
225,605
37,438
–
–
–
–
–
–
–
15,553
77
12,022
1,948
134
386
1,245
10,359
289,214
51,958
92,066
–
51,958
10,350
102,416
–
–
6,077
3,819
–
–
–
–
–
–
–
(25)
–
(25)
–
–
–
–
(25)
80
–
(6)
49
58
4,500
–
–
–
1
–
211
–
4,770
864
–
864
–
–
* Other segment assets mainly include debtors, stores and spares, cash and cash equivalents and other assets employed in the operations of individual business
segments.
212
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Annual Report 2020
213
NOTES TO THE CONSOLIDATED ACCOUNTS
9 Segmental Information (continued)
Unallocated assets and liabilities mainly comprise cash, bank balances and deposits, tax reserve certificates, derivative financial assets and liabilities,
interest-bearing loans and borrowings, current taxation as well as deferred tax liabilities.
For the year ended 31 December 2020, revenue from two customers (2019: one customer) of the Mainland of China and international railway,
property rental and management businesses segment has exceeded 10% of the Group’s revenue. Approximately 16.49% and 10.60% of the Group’s
total revenue was attributable to each of the two customers respectively (2019: Approximately 14.47% of the Group’s total revenue was attributable
to the customer).
The following table sets out information about the geographical location of the Group’s revenue from external customers and the Group’s fixed
assets, goodwill and property management rights, property development in progress, deferred expenditure and interests in associates and joint
venture (“specified non-current assets”). The geographical location of customers is based on the location at which the services were provided or
goods were delivered. The geographical location of the specified non-current assets is based on the physical location of the asset in the case of
investment properties, other property, plant and equipment and property development in progress, the location of the proposed capital project
in the case of deferred expenditure, the location of the operation to which they are related in the case of service concession assets, goodwill and
property management rights and the location of operation in the case of interests in associates and joint venture.
in HK$ million
Hong Kong SAR (place of domicile)
Australia
Mainland of China and Macao SAR
Sweden
United Kingdom
Revenue from external customers
Specified non-current assets
2020
21,043
12,482
1,896
4,747
2,373
21,498
42,541
2019
33,357
12,305
1,934
4,862
2,046
21,147
54,504
2020
227,537
1,309
15,935
819
61
18,124
245,661
2019
233,019
941
15,155
786
110
16,992
250,011
As at 31 December 2020, the aggregated amount of the transaction price allocated to the remaining performance obligation under the Group’s
existing contracts is HK$41,913 million (2019: HK$42,183 million). This amount represents revenue expected to be recognised in the future
mainly from the fixed annual payments in relation to High Speed Rail under the SSCA-HSR, as well as the construction, consultancy and project
management contracts entered into with the Group’s customers. The Group will recognise the expected revenue in future when or as the work is
completed which is expected to occur over the next one to fifteen years.
The Group has applied the practical expedients in paragraph 121 of HKFRS 15 to exempt the disclosure of revenue expected to be recognised in the
future arising from certain contracts with customers in existence at the reporting date that are billed based on the performance completed to date
or have an original expected duration of one year or less.
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213
Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis
10 Operating Expenses
A
Total staff costs include:
in HK$ million
Amounts charged to consolidated profit and loss account under:
– staff costs and related expenses for Hong Kong transport operations
– maintenance and related works for Hong Kong transport operations
– other expense line items for Hong Kong transport operations
– expenses relating to Hong Kong station commercial businesses
– expenses relating to Hong Kong property rental and management businesses
– expenses relating to Mainland of China and international subsidiaries
– expenses relating to other businesses
– project study and business development expenses
– profit on Hong Kong property development
Amounts capitalised under:
– property development in progress
– assets under construction and other projects
– service concession assets
Amounts recoverable
Total staff costs
Amounts recoverable relate to property management, entrustment works and other agreements.
The following expenditures are included in total staff costs:
in HK$ million
Share-based payments
Contributions to defined contribution retirement schemes and Mandatory Provident Fund
Amounts recognised in respect of defined benefit retirement schemes
B
Auditors’ remuneration charged to the consolidated profit and loss account include:
in HK$ million
Audit services
Tax services
Other audit related services
C
Loss on disposal of fixed assets of HK$104 million (2019: HK$57 million) is included in operating expenses.
2020
6,317
105
505
120
147
9,260
884
212
18
204
759
449
596
2019
6,489
117
304
117
149
9,006
1,384
271
24
194
733
359
602
19,576
19,749
2020
121
921
451
1,493
2019
122
907
469
1,498
2020
2019
19
2
6
27
19
2
6
27
214
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215
NOTES TO THE CONSOLIDATED ACCOUNTS 11 Remuneration of Members of the Board and the Executive Directorate
A Remuneration of Members of the Board and the Executive Directorate
The emoluments of Members of the Board and the Executive Directorate of the Company were as follows:
(i)
in HK$ million
2020
Members of the Board
– Rex Auyeung Pak-kuen
– Andrew Clifford Winawer Brandler
– Bunny Chan Chung-bun (appointed on 20 May 2020)**
– Walter Chan Kar-lok
– Pamela Chan Wong Shui
– Dorothy Chan Yuen Tak-fai
– Cheng Yan-kee
– Anthony Chow Wing-kin
– Eddy Fong Ching
– James Kwan Yuk-choi
– Rose Lee Wai-mun
– Lucia Li Li Ka-lai
– Jimmy Ng Wing-ka
– Benjamin Tang Kwok-bun
– Allan Wong Chi-yun (retired on 20 May 2020)*
– Johannes Zhou Yuan
– James Henry Lau Jr (resigned on 1 June 2020)
– Christopher Hui Ching-yu (appointed on 1 June 2020)
– Secretary for Transport and Housing
– Permanent Secretary for Development (Works)
– Commissioner for Transport
Members of the Executive Directorate
– Jacob Kam Chak-pui
– Adi Lau Tin-shing
– Roger Francis Bayliss
– Margaret Cheng Wai-ching
– Linda Choy Siu-min (appointed on 2 March 2020)****
– Peter Ronald Ewen (retired on 22 February 2021)
– Herbert Hui Leung-wah
– Tony Lee Kar-yun (appointed on 1 January 2020)****
– Gillian Elizabeth Meller
– Linda So Ka-pik (resigned on 16 January 2020)***
– David Tang Chi-fai
– Jeny Yeung Mei-chun
Base pay,
allowances and
benefits in kind
Retirement
scheme
contribution
Fees
Variable
remuneration
related to
performance
1.6
0.5
0.2
0.4
0.5
0.5
0.5
0.4
0.5
0.4
0.4
0.4
0.4
0.4
0.2
0.4
0.2
0.2
0.4
0.4
0.4
–
–
–
–
–
–
–
–
–
–
–
–
9.3
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
8.0
5.6
4.6
5.2
3.2
4.3
4.8
4.2
4.3
0.5
4.8
4.7
54.2
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1.2
–~
–~~
0.7
0.5
0.7
0.7
0.7
0.7
–~~~
0.7
0.7
6.6
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.8
0.3
0.3
0.3
0.2
0.2
0.3
0.2
0.3
–~~~
0.3
0.3
3.5
Total
1.6
0.5
0.2
0.4
0.5
0.5
0.5
0.4
0.5
0.4
0.4
0.4
0.4
0.4
0.2
0.4
0.2
0.2
0.4
0.4
0.4
10.0
5.9
4.9
6.2
3.9
5.2
5.8
5.1
5.3
0.5
5.8
5.7
73.6
* Allan C Y Wong retired as a Member of the Board on the date shown in the above table. The amount of his emolument shown in the above table covers the period
from 1 January 2020 to the date of his retirement.
** Bunny C B Chan was appointed as a Member of the Board on the date shown in the above table. The amount of his emolument shown in the above table covers the
period from the date of his appointment to 31 December 2020.
*** Linda K P So resigned as a Member of the Executive Directorate on the date shown in the above table. The amount of her emolument shown in the above table covers
the period from 1 January 2020 to the date of her resignation.
**** Linda S M Choy and Tony K Y Lee were appointed as Members of the Executive Directorate on the date shown in the above table. The amounts of their emolument
shown in the above table cover the period from the dates of their respective dates of appointment to 31 December 2020.
~
The total contributions paid by the Company attributable to the financial year ended 31 December 2020 for Adi T S Lau, who participated in MTR Retirement Scheme
was HK$20,475, pursuant to the requirement of the scheme.
~ ~ The total contributions paid by the Company attributable to the financial year ended 31 December 2020 for Roger F Bayliss, who participated in Mandatory Provident
Fund Scheme was HK$18,000.
~ ~ ~ The total contributions under MTR Provident Fund Scheme paid by the Company and the pro-rated variable remuneration related to performance for the period from
1 January 2020 to the date of resignation for Linda K P So was HK$24,024 and HK$10,174 respectively.
All Members of the Board except Bunny Chan Chung-bun (appointed on 20 May 2020) and Christopher Hui Ching-yu (appointed on 1 June 2020)
agreed to waive HK$25,000 of each of their director fees for the year ended 31 December 2020. The aggregate amount of such remuneration waived
was donated by the Company for charity use. The amounts waived are excluded from the above table.
All Members of the Executive Directorate except Linda So Ka-pik (resigned on 16 January 2020) agreed to waive a portion of their remuneration for
the year ended 31 December 2020 (HK$566,040 for Jacob Kam Chak-pui, HK$378,000 for Adi Lau Tin-shing, HK$329,220 for Roger Francis Bayliss,
HK$326,400 for Margaret Cheng Wai-ching, HK$270,000 for Linda Choy Siu-min, HK$299,580 for Peter Ronald Ewen, HK$325,560 for Herbert Hui
Leung-wah, HK$282,000 for Tony Lee Kar-yun, HK$309,120 for Gillian Elizabeth Meller, HK$345,600 for David Tang Chi-fai and HK$337,320 for
Jeny Yeung Mei-chun). The aggregate amount of such remuneration waived was donated by the Company for charity use. The amounts waived
are excluded from the above table.
214
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215
Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis 11 Remuneration of Members of the Board and the Executive Directorate
(continued)
A Remuneration of Members of the Board and the Executive Directorate (continued)
in HK$ million
2019
Members of the Board
– Frederick Ma Si-hang (retired on 1 July 2019)#
– Rex Auyeung Pak-kuen (appointed on 7 March 2019)##
– Andrew Clifford Winawer Brandler
– Walter Chan Kar-lok (appointed on 22 May 2019)##
– Pamela Chan Wong Shui
– Dorothy Chan Yuen Tak-fai
– Cheng Yan-kee (appointed on 22 May 2019)##
– Vincent Cheng Hoi-chuen (retired on 22 May 2019)#
– Anthony Chow Wing-kin
– Eddy Fong Ching
– James Kwan Yuk-choi
– Kaizer Lau Ping-cheung (retired on 22 May 2019)#
– Rose Lee Wai-mun
– Lucia Li Li Ka-lai
– Jimmy Ng Wing-ka (appointed on 22 May 2019)##
– Abraham Shek Lai-him (retired on 22 May 2019)#
– Benjamin Tang Kwok-bun
– Allan Wong Chi-yun
– Johannes Zhou Yuan
– James Henry Lau Jr
– Secretary for Transport and Housing
– Permanent Secretary for Development (Works)
– Commissioner for Transport
Members of the Executive Directorate
– Lincoln Leong Kwok-kuen (retired on 1 April 2019)###
– Jacob Kam Chak-pui
– Roger Francis Bayliss (appointed on 18 March 2019)####
– Margaret Cheng Wai-ching
– Peter Ronald Ewen
– Herbert Hui Leung-wah
– Adi Lau Tin-shing
– Gillian Elizabeth Meller
– Linda So Ka-pik
– David Tang Chi-fai
– Jeny Yeung Mei-chun
Base pay,
allowances and
benefits in kind
Retirement
scheme
contribution
Fees
Variable
remuneration
related to
performance
Total
0.9
0.9
0.5
0.2
0.4
0.5
0.3
0.2
0.5
0.5
0.5
0.2
0.4
0.5
0.3
0.2
0.4
0.5
0.5
0.4
0.4
0.4
0.4
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
4.4
8.1
4.0
5.0
4.5
5.0
5.1
4.5
4.5
5.1
4.9
10.0
55.1
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.3
1.2
–^
0.7
0.6
0.7
–^^
0.7
0.6
0.7
0.7
6.2
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1.4
0.6
0.8
0.7
0.7
0.9
0.7
0.7
0.8
0.8
8.1
0.9
0.9
0.5
0.2
0.4
0.5
0.3
0.2
0.5
0.5
0.5
0.2
0.4
0.5
0.3
0.2
0.4
0.5
0.5
0.4
0.4
0.4
0.4
4.7
10.7
4.6
6.5
5.8
6.4
6.0
5.9
5.8
6.6
6.4
79.4
#
Frederick S H Ma, Vincent H C Cheng, Kaizer P C Lau and Abraham L H Shek retired as Members of the Board on the date shown in the above table. The amounts of
their emolument shown in the above table cover the period from 1 January 2019 to the respective dates of retirement.
## Rex P K Auyeung, Walter K L Chan, Cheng Y K and Jimmy W K Ng were appointed as Members of the Board on the date shown in the above table. The amounts of
their emolument shown in the above table covers the period from the date of their respective dates of appointment to 31 December 2019.
### Lincoln K K Leong retired as a Member of the Executive Directorate on the date shown in the above table. The amount of his emolument shown in the above
table covers the period from 1 January 2019 to his retirement date. Lincoln K K Leong agreed to waive his variable remuneration related to performance in 2019 of
approximately HK$6,613,020.
#### Roger F Bayliss was appointed as a Member of the Executive Directorate on the date shown in the above table. The amount of his emolument shown in the above
table covers the period from the date of his appointment to 31 December 2019.
^
The total contributions paid by the Company attributable to the financial year ended 31 December 2019 for Roger F Bayliss, who participated in Mandatory Provident
Fund Scheme was HK$15,000.
^^ The total contributions paid by the Company attributable to the financial year ended 31 December 2019 for Adi T S Lau, who participated in MTR Retirement Scheme
was nil, pursuant to the requirement of the scheme.
216
MTR Corporation
Annual Report 2020
217
NOTES TO THE CONSOLIDATED ACCOUNTS 11 Remuneration of Members of the Board and the Executive Directorate
(continued)
A Remuneration of Members of the Board and the Executive Directorate (continued)
The above emoluments do not include the fair value of Award Shares granted under the Executive Share Incentive Scheme.
The director’s fees in respect of the office of the Secretary for Transport and Housing (Frank Chan Fan), the office of the Permanent Secretary for
Development (Works) (Lam Sai-hung) and the office of the Commissioner for Transport (Mable Chan for the period from 1 January 2020 to 31 July
2020 and Rosanna Law Shuk-pui for the period from 9 September 2020 to 31 December 2020), each of whom was appointed Director by the Chief
Executive of the HKSAR pursuant to Section 8 of the Mass Transit Railway Ordinance (“MTR Ordinance”), were received by Government rather than
by the individuals concerned.
The director’s fee in respect of James Henry Lau Jr (for the period from 1 January 2020 to 31 May 2020) and Christopher Hui Ching-yu (for the period
from 1 June 2020 to 31 December 2020), being the Secretary for Financial Services and the Treasury of Government for the respective periods, was
received by Government rather than by the individuals personally.
Alternate Directors were not entitled to director’s fees.
Restricted Shares and Performance Shares were granted to Members of the Executive Directorate under the Company’s Executive Share
(ii)
Incentive Scheme. Performance Shares offered to Members of the Executive Directorate under such grants, in general, covered a period of three
years from the date of grant. The entitlements of each of the Members of the Executive Directorate with vesting periods falling in the years ended
31 December 2019 and 2020, if any, are as follows:
•
•
•
•
•
•
•
•
•
•
Jacob C P Kam was granted 21,550 Restricted Shares on 8 April 2016, 22,050 Restricted Shares on 10 April 2017, 25,550 Restricted Shares
and 50,450 Performance Shares on 10 April 2018, 120,000 Contract-end Restricted Shares on 1 April 2019, 47,400 Restricted Shares and
91,750 Performance Shares on 8 April 2019, and 89,300 Restricted Shares on 8 April 2020, of which a total of 31,666 Restricted Shares were
vested in 2020 (2019: 23,050 Restricted Shares), and the respective fair value of the share-based payments recognised for the year ended
31 December 2020 was HK$7.6 million (2019: HK$5.5 million). No award shares were lapsed/forfeited in 2020 (2019: nil);
Adi T S Lau was granted 8,400 Restricted Shares on 8 April 2016, 17,700 Restricted Shares on 10 April 2017, 16,450 Restricted Shares and
50,450 Performance Shares on 10 April 2018, 16,250 Restricted Shares on 8 April 2019 and 39,100 Restricted Shares on 8 April 2020, of which
a total of 16,799 Restricted Shares were vested in 2020 (2019: 14,183 Restricted Shares), and the respective fair value of the share-based
payments recognised for the year ended 31 December 2020 was HK$1.9 million (2019: HK$1.5 million). No award shares were lapsed/forfeited
in 2020 (2019: nil);
Roger Francis Bayliss was granted 30,150 Performance Shares on 8 April 2019 and 30,250 Restricted Shares on 8 April 2020, of which nil was
vested in 2020 (2019: nil), and the respective fair value of the share-based payments recognised for the year ended 31 December 2020 was
HK$1.3 million (2019: HK$0.5 million). No award shares were lapsed/forfeited in 2020 (2019: nil);
Margaret W C Cheng was granted 71,428 Restricted Shares on 19 August 2016, 16,950 Restricted Shares on 10 April 2017, 17,600 Restricted
Shares and 50,450 Performance Shares on 10 April 2018, 16,550 Restricted Shares on 8 April 2019 and 32,450 Restricted Shares on 8 April
2020, of which a total of 17,032 Restricted Shares were vested in 2020 (2019: 35,326 Restricted Shares), and the respective fair value of the
share-based payments recognised for the year ended 31 December 2020 was HK$1.8 million (2019: HK$1.7 million). No award shares were
lapsed/forfeited in 2020 (2019: nil);
Peter Ronald Ewen was granted 15,050 Restricted Shares on 10 April 2017, 12,250 Restricted Shares and 50,450 Performance Shares on
10 April 2018, 12,500 Restricted Shares on 8 April 2019 and 26,500 Restricted Shares on 8 April 2020, of which 13,267 Restricted Shares were
vested in 2020 (2019: 9,099 Restricted Shares), and the respective fair value of the share-based payments recognised for the year ended
31 December 2020 was HK$1.6 million (2019: HK$1.3 million). No award shares were lapsed/forfeited in 2020 (2019: nil);
Herbert L W Hui was granted 15,200 Restricted Shares on 10 April 2017, 14,200 Restricted Shares and 50,450 Performance Shares on 10 April
2018, 13,800 Restricted Shares on 8 April 2019 and 29,050 Restricted Shares on 8 April 2020, of which 14,401 Restricted Shares were vested in
2020 (2019: 9,799 Restricted Shares), and the respective fair value of the share-based payments recognised for the year ended 31 December
2020 was HK$1.6 million (2019: HK$1.3 million). No award shares were lapsed/forfeited in 2020 (2019: nil);
Tony K Y Lee was granted 7,150 Restricted Shares on 8 April 2016, 6,800 Restricted Shares on 10 April 2017, 7,900 Restricted Shares and
10,500 Performance Shares on 10 April 2018, 8,300 Restricted Shares on 8 April 2019 and 15,500 Restricted Shares on 8 April 2020, of which
a total of 7,667 Restricted Shares were vested in 2020 (2019: 7,283 Restricted Shares), and the respective fair value of the share-based
payments recognised for the year ended 31 December 2020 was HK$0.6 million. No award shares were lapsed/forfeited in 2020;
Gillian E Meller was granted 17,300 Restricted Shares on 8 April 2016, 16,200 Restricted Shares on 10 April 2017, 16,050 Restricted Shares
and 50,450 Performance Shares on 10 April 2018, 13,400 Restricted Shares on 8 April 2019 and 27,000 Restricted Shares on 8 April 2020, of
which a total of 15,216 Restricted Shares were vested in 2020 (2019: 16,518 Restricted Shares), and the respective fair value of the share-based
payments recognised for the year ended 31 December 2020 was HK$1.6 million (2019: HK$1.4 million). No award shares were lapsed/forfeited
in 2020 (2019: nil);
Linda K P So was granted 16,400 Restricted Shares on 8 April 2016, 15,300 Restricted Shares on 10 April 2017, 14,200 Restricted Shares
and 50,450 Performance Shares on 10 April 2018 and 14,800 Restricted Shares on 8 April 2019, of which nil was vested in 2020
(2019: 15,301 Restricted Shares), and the respective fair value of the share-based payments recognised for the year ended 31 December 2019
was HK$1.4 million. 79,817 award shares were lapsed/forfeited in 2020 (2019: nil);
David C F Tang was granted 17,950 Restricted Shares on 8 April 2016, 17,250 Restricted Shares on 10 April 2017, 16,850 Restricted Shares
and 50,450 Performance Shares on 10 April 2018, 17,200 Restricted Shares on 8 April 2019 and 31,350 Restricted Shares on 8 April 2020, of
which a total of 17,099 Restricted Shares were vested in 2020 (2019: 17,350 Restricted Shares), and the respective fair value of the share-based
payments recognised for the year ended 31 December 2020 was HK$1.8 million (2019: HK$1.5 million). No award shares were lapsed/forfeited
in 2020 (2019: nil);
216
MTR Corporation
Annual Report 2020
217
Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis 11 Remuneration of Members of the Board and the Executive Directorate
(continued)
A Remuneration of Members of the Board and the Executive Directorate (continued)
•
Jeny M C Yeung was granted 18,850 Restricted Shares on 8 April 2016, 17,700 Restricted Shares on 10 April 2017, 17,350 Restricted Shares
and 50,450 Performance Shares on 10 April 2018, 16,350 Restricted Shares on 8 April 2019 and 32,650 Restricted Shares on 8 April 2020, of
which a total of 17,133 Restricted Shares were vested in 2020 (2019: 17,967 Restricted Shares), and the respective fair value of the share-based
payments recognised for the year ended 31 December 2020 was HK$1.8 million (2019: HK$1.5 million). No award shares were lapsed/forfeited
in 2020 (2019: nil); and
•
Lincoln K K Leong was granted 64,850 Restricted Shares on 8 April 2016, 63,900 Restricted Shares on 10 April 2017, 80,000 Contract-end
Restricted Shares on 16 March 2018 and 73,300 Restricted Shares and 239,950 Performance Shares on 10 April 2018, of which a total of
217,518 Restricted Shares were vested in 2019, and the respective fair value of the share-based payments recognised for the year ended
31 December 2019 was HK$6.5 million. No award shares were lapsed/forfeited in 2019.
None of the Performance Shares awarded to the Members of the Executive Directorate were vested in 2020 (2019: nil).
The details of Board Members’ and Members of the Executive Directorate’s interest in the Company’s shares are disclosed in the Report of the
Members of the Board and note 41.
For the year ended 31 December 2020, two (2019: three) Members of the Executive Directorate of the Company, whose emoluments are
(iii)
shown above, were among the five individuals whose emoluments were the highest. The total remuneration of the five highest paid individuals for
the year is shown below:
in HK$ million
Base pay, allowances and benefits in kind
Variable remuneration related to performance
Retirement scheme contributions
The emoluments of the top 5 highest paid individuals for the year are within the following bands:
HK$6,000,001 – HK$6,500,000
HK$6,500,001 – HK$7,000,000
HK$7,000,001 – HK$7,500,000
HK$8,000,001 – HK$8,500,000
HK$10,000,001 – HK$10,500,000
HK$10,500,001 – HK$11,000,000
2020
29.6
2.0
4.3
35.9
2020
3
–
1
–
1
–
5
2019
30.1
6.2
2.6
38.9
2019
1
2
–
1
–
1
5
The aggregate emoluments and share-based payments of Members of the Board and the Executive Directorate for the year was
(iv)
HK$95.2 million (2019: HK$103.5 million).
The Company has a service contract with each of the independent non-executive Directors (“INED”)/non-executive Directors (“NED”)
(v)
(excluding three additional directors appointed pursuant to Section 8 of the MTR Ordinance) specifying the terms of his/her continuous
appointments as an INED/a NED and a Member of the relevant Board Committees, for a period not exceeding three years. He/she is also subject to
retirement by rotation and re-election at the Company’s annual general meetings in accordance with the Articles of Association where applicable.
Dr Rex P K Auyeung was appointed by the Financial Secretary Incorporated (“FSI”) as non-executive Chairman of the Company for a term
commencing from 1 July 2019 until 31 December 2021 (both dates inclusive).
Share Options
B
Options exercised and outstanding in respect of each Member of the Executive Directorate as at 31 December 2020 are set out in the Report of the
Members of the Board.
Under the 2007 Share Option Scheme (the “2007 Option Scheme”) as described in note 41(i), all Members of the Executive Directorate were granted
options to acquire shares between 2007 and 2014. No grant was made after the scheme’s expiry date on 6 June 2014.
Under the vesting terms of the options, options granted will be evenly vested in respect of their underlying shares over a period of three years from
the date of offer to grant such options. As all the share options granted to each Member of the Executive Directorate were vested prior to 2018, the
respective fair value of the share based payments recognised for the year ended 31 December 2020 was HK$nil (2019: HK$nil).
218
MTR Corporation
Annual Report 2020
219
NOTES TO THE CONSOLIDATED ACCOUNTS 11 Remuneration of Members of the Board and the Executive Directorate
(continued)
C Award Shares
Award Shares outstanding in respect of each Member of the Executive Directorate as at 31 December 2020 are set out in the Report of the Members
of the Board.
Under the Executive Share Incentive Scheme as described in note 41(ii), all Members of the Executive Directorate may be granted an award of
Restricted Shares and/or Performance Shares (collectively known as “Award Shares”). Restricted Shares are awarded on the basis of individual
performance. Performance Shares are awarded which vest subject to the performance of the Company over a pre-determined performance
period, assessed by reference to such Board-approved performance metric and in respect of such performance period and any other performance
conditions, as determined by the Remuneration Committee from time to time.
An award of Restricted Shares will vest ratably over three years in equal tranches (unless otherwise determined by the Remuneration Committee). An
award of Performance Shares will vest upon certification by the Remuneration Committee that the relevant performance metric and performance
conditions have been achieved.
12 Profit on Hong Kong Property Development
Profit on Hong Kong property development comprises:
in HK$ million
Share of surplus, income and interest in unsold properties from property development
Income from receipt of properties for investment purpose
Agency fee and other income from West Rail property development (note 22C)
Overheads and miscellaneous studies
2020
6,481
–
42
(32)
6,491
2019
4,376
1,211
182
(62)
5,707
During the year ended 31 December 2020, profit attributable to joint operations of HK$6,481 million (2019: HK$5,587 million) was recognised.
13 Depreciation and Amortisation
Depreciation and amortisation comprise:
in HK$ million
Depreciation charge relating to:
– Owned property, plant and equipment
– Right-of-use assets
Amortisation charge:
– Amortisation charge relating to service concession assets and other intangible assets
– Utilisation of government subsidy for SZL4 operation
2020
3,788
357
4,145
1,601
(381)
1,220
5,365
2019
3,865
332
4,197
1,439
(399)
1,040
5,237
218
MTR Corporation
Annual Report 2020
219
Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis 14 Interest and Finance Charges
in HK$ million
Interest expenses in respect of:
– Bank loans, overdrafts and capital market instruments
– Obligations under service concession
– Lease liabilities
– Others
Finance charges
Exchange loss/(gain)
Utilisation of government subsidy for SZL4 operation
Derivative financial instruments:
– Fair value hedges
– Cash flow hedges:
– transferred from hedging reserve to interest expenses
– transferred from hedging reserve to offset exchange (loss)/gain
– Hedge of net investments:
– ineffective portion
– Derivatives not adopted hedge accounting
Interest expenses capitalised
Interest income in respect of:
– Deposits with banks
– Others
2020
2019
1,001
696
56
25
52
234
2
(21)
(240)
–
1
(348)
(36)
2,064
(58)
(258)
(360)
1,388
(384)
1,004
1,053
700
58
23
42
(53)
1
(32)
69
(1)
–
(466)
(16)
1,823
(70)
37
(449)
1,341
(482)
859
During the year ended 31 December 2020, interest expenses capitalised were calculated on a monthly basis at the pre-determined cost of
borrowings and/or the relevant group companies’ borrowing cost which varied from 2.0% to 2.9% per annum (2019: 2.5% to 2.9% per annum).
During the year ended 31 December 2020, interest and finance charges net of interest expenses capitalised in relation to the SZL4 were
HK$58 million (2019: HK$70 million), which was fully offset by the subsidy received from the Shenzhen Municipal Government.
During the year ended 31 December 2020, the loss resulting from fair value changes of the underlying financial assets and liabilities being hedged
under fair value hedge was HK$140 million (2019: HK$45 million) while the gain resulting from fair value changes of hedging instruments comprising
interest rate and cross currency swaps was HK$138 million (2019: HK$44 million), thus resulting in a net loss of HK$2 million (2019: HK$1 million).
220
MTR Corporation
Annual Report 2020
221
NOTES TO THE CONSOLIDATED ACCOUNTS
15 Income Tax in the Consolidated Profit and Loss Account
A
Income tax in the consolidated profit and loss account represents:
in HK$ million
Current tax
– Hong Kong Profits Tax
– Tax outside Hong Kong
Less: Utilisation of government subsidy for SZL4 operation
Deferred tax
– Origination and reversal of temporary differences on:
– tax losses
– depreciation allowances in excess of related depreciation
– revaluation of properties
– provisions and others
2020
958
328
1,286
(28)
1,258
(20)
356
(1)
(292)
43
1,301
2019
1,191
264
1,455
(71)
1,384
(1)
620
(5)
(76)
538
1,922
Except for the Company which is a qualifying corporation under the two-tiered Profits Tax rate regime in Hong Kong, the provision for Hong Kong
Profits Tax for the year ended 31 December 2020 is calculated at 16.5% (2019: 16.5%) on the estimated assessable profits for the year after deducting
accumulated tax losses brought forward, if any. Under the two-tiered Profits Tax rate regime, the Company’s first HK$2 million of assessable profits
are taxed at 8.25% and the remaining assessable profits are taxed at 16.5%. The provision for Hong Kong Profits Tax for the Company was calculated
on the same basis in 2020 and 2019.
Current taxes for subsidiaries outside Hong Kong are charged at the appropriate current rates of taxation ruling in the relevant tax jurisdictions.
Provision for deferred tax on temporary differences arising in Hong Kong is calculated at the Hong Kong Profits Tax rate at 16.5% (2019: 16.5%), while
that arising outside Hong Kong is calculated at the appropriate current rates of taxation ruling in the relevant tax jurisdictions.
The Company purchased tax reserve certificates in connection with the tax deductibility of certain payments relating to the Rail Merger. Please refer
to note 29 to the consolidated accounts for details.
B
Reconciliation between tax expense and accounting profit or loss at applicable tax rates:
(Loss)/profit before taxation
Notional tax on (loss)/profit before taxation, calculated at the rates applicable to
profits in the tax jurisdictions concerned
Tax effect of non-deductible expenses
Tax effect of non-taxable revenue
Tax effect of unused tax losses not recognised
Utilisation of government subsidy for SZL4 operation
Actual tax expenses
2020
2019
HK$ million
%
HK$ million
%
(3,520)
(728)
2,232
(207)
32
(28)
1,301
14,014
2,330
1,241
(1,562)
(16)
(71)
1,922
(20.7)
63.4
(5.9)
0.9
(0.8)
36.9
16.6
8.8
(11.1)
(0.1)
(0.5)
13.7
220
MTR Corporation
Annual Report 2020
221
Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis
16 Dividends
During the year, ordinary dividends paid and proposed to shareholders of the Company comprise:
in HK$ million
Ordinary dividends attributable to the year
– Interim ordinary dividend declared of HK$0.25 (2019: HK$0.25) per share
– Final ordinary dividend proposed after the end of the reporting period of HK$0.98
(2019: HK$0.98) per share
2020
1,545
6,057
7,602
2019
1,539
6,035
7,574
Ordinary dividends attributable to the previous year
– Final ordinary dividend of HK$0.98 (2019: HK$0.95 per share attributable to year 2018)
per share approved and payable/paid during the year
6,036
5,835
The final ordinary dividend proposed after the end of the reporting period has not been recognised as a liability at the end of the reporting period.
For 2020 final ordinary dividend, the Board proposed that a scrip dividend option will be offered to all shareholders of the Company whose names
appeared on the register of members of the Company as at the close of business on 4 June 2021 (except for those with registered addresses in New
Zealand or the United States of America or any of its territories or possessions).
Details of ordinary dividends paid to the Financial Secretary Incorporated are disclosed in note 44O.
17 (Loss)/Earnings Per Share
A Basic (Loss)/Earnings Per Share
The calculation of basic (loss)/earnings per share is based on the loss for the year attributable to shareholders of HK$4,809 million (2019: profit of
HK$11,932 million) and the weighted average number of ordinary shares in issue less shares held for Executive Share Incentive Scheme, which is
calculated as follows:
Issued ordinary shares at 1 January
Effect of scrip dividend issued
Effect of share options exercised
Less: Shares held for Executive Share Incentive Scheme
2020
2019
6,157,948,911
6,139,485,589
8,968,601
1,399,931
6,682,480
2,130,711
(5,787,780)
(5,752,047)
Weighted average number of ordinary shares less shares held for Executive Share Incentive Scheme
at 31 December
6,162,529,663
6,142,546,733
B Diluted (Loss)/Earnings Per Share
The calculation of diluted (loss)/earnings per share is based on the loss for the year attributable to shareholders of HK$4,809 million (2019: profit
of HK$11,932 million) and the weighted average number of ordinary shares in issue less shares held for Executive Share Incentive Scheme after
adjusting for the dilutive effect of the Company’s share option scheme and Executive Share Incentive Scheme, which is calculated as follows:
2020
2019
Weighted average number of ordinary shares less shares held for Executive Share Incentive Scheme
at 31 December
6,162,529,663
6,142,546,733
Effect of dilutive potential shares under the share option scheme
Effect of shares awarded under Executive Share Incentive Scheme
–
–
2,218,657
5,759,306
Weighted average number of shares (diluted) at 31 December
6,162,529,663
6,150,524,696
The effect of the Group’s share option scheme (1,055,658 shares) and Executive Share Incentive Scheme (5,836,013 shares) are anti-dilutive for the
year ended 31 December 2020 since they would result in a decrease in the loss per share.
C
shareholders of the Company arising from underlying businesses of HK$4,381 million (2019: HK$10,560 million).
Both basic and diluted earnings per share would have been HK$0.71 (2019: HK$1.72), if the calculation is based on profit attributable to
222
MTR Corporation
Annual Report 2020
223
NOTES TO THE CONSOLIDATED ACCOUNTS
18 Other Comprehensive Income
A
Tax effects relating to each component of other comprehensive income of the Group are shown below:
2020
Tax
benefit/
(expense)
2019
Net-of-tax
amount
Before-tax
amount
Tax
(expense)
Net-of-tax
amount
in HK$ million
Exchange differences on translation of:
– Financial statements of overseas subsidiaries,
associates and joint venture
– Non-controlling interests
Before-tax
amount
1,282
13
1,295
–
–
–
1,282
13
1,295
(Loss)/surplus on revaluation of self-occupied land
and buildings
Remeasurement of net asset/liability of defined
benefit schemes
Cash flow hedges: net movement in hedging
reserve (note 18B)
Other comprehensive income
(328)
54
(274)
893
(141)
752
(87)
1,773
14
(73)
(73)
1,700
(344)
(15)
(359)
145
869
292
947
–
–
–
(24)
(139)
(48)
(211)
(344)
(15)
(359)
121
730
244
736
B
The components of other comprehensive income of the Group relating to cash flow hedges are as follows:
in HK$ million
Cash flow hedges:
Effective portion of changes in fair value of hedging instruments recognised during the year
Amounts (credited)/charged to profit or loss:
– Interest and finance charges (note 14)
Tax effect resulting from:
– Effective portion of changes in fair value of hedging instruments recognised during the year
– Amounts charged/(credited) to profit or loss
2020
2019
174
(261)
(87)
(29)
43
(73)
255
37
292
(42)
(6)
244
19 Investment Properties and Other Property, Plant and Equipment
A
Movements and analysis of the Group’s investment properties, all of which being held in Hong Kong and Mainland of China and carried at fair value,
are as follows:
Investment Properties
in HK$ million
At 1 January
Additions
Change in fair value
Exchange gain/(loss)
At 31 December
2020
91,712
3,501
(9,190)
35
86,058
2019
83,037
7,316
1,372
(13)
91,712
All investment properties of the Group were revalued at 31 December 2020 and 2019. Details of the fair value measurement are disclosed in
note 40. The net decrease in fair value of HK$9,190 million (2019: net increase of HK$1,372 million) arising from the revaluation has been debited
(2019: credited) to the consolidated profit and loss account. Investment properties in Hong Kong and Mainland of China are revalued semi-annually
by Colliers International (Hong Kong) Limited (2019: Jones Lang LaSalle Limited) and Cushman & Wakefield Limited respectively. Future market
condition changes may result in further gains or losses to be recognised through consolidated profit and loss account in subsequent periods.
Included in the Group’s investment properties as at 31 December 2020 was HK$605 million (2019: HK$670 million) relating to properties in Mainland
of China.
222
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Annual Report 2020
223
Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis
19 Investment Properties and Other Property, Plant and Equipment (continued)
B Other Property, Plant and Equipment
in HK$ million
2020
Cost or Valuation
At 1 January 2020
Additions
Disposals/write-offs
Loss on revaluation
Transfer to additional concession property
(note 20)
Other assets commissioned
Exchange differences
At 31 December 2020
At Cost
At 31 December 2020 Valuation
Aggregate depreciation
At 1 January 2020
Charge for the year
Written back on disposals
Written back on revaluation
Exchange differences
At 31 December 2020
Net book value at 31 December 2020
2019
Cost or Valuation
At 1 January 2019
Additions
Disposals/write-offs
Loss on revaluation
Transfer to stores and spares
Transfer to additional concession property
(note 20)
Other assets commissioned
Exchange differences
At 31 December 2019
At Cost
At 31 December 2019 Valuation
Aggregate depreciation
At 1 January 2019
Charge for the year
Written back on disposals
Written back on revaluation
Exchange differences
At 31 December 2019
Net book value at 31 December 2019
Leasehold
land
Self-
occupied
buildings
Civil works
Plant and
equipment
Assets under
construction
Total
1,765
4,650
62,378
88,175
–
–
–
–
–
–
30
(1)
(480)
–
–
23
3
–
–
(4)
76
–
348
(544)
–
1
1,798
195
6,835
3,401
(3)
–
(8)
(1,874)
4
163,803
3,782
(548)
(480)
(11)
–
222
1,765
4,222
62,453
89,973
8,355
166,768
62,453
89,973
8,355
163,021
–
–
1,765
–
374
34
–
–
–
408
1,357
475
3,747
74
233
(1)
(152)
4
158
9,388
521
–
–
–
9,909
51,335
3,357
(491)
–
93
54,294
35,679
4,064
52,544
1,757
4,597
62,385
86,824
–
(2)
–
–
–
(5)
–
292
(315)
–
(12)
(4)
1,441
(51)
–
–
–
–
–
–
–
3,747
61,171
4,145
(492)
(152)
97
64,769
8,355
101,999
5,115
3,173
(6)
–
–
(2)
(1,444)
(1)
160,678
3,525
(323)
(7)
(12)
(6)
–
(52)
62,378
88,175
6,835
163,803
62,378
88,175
6,835
159,576
–
–
8,865
523
–
–
–
9,388
52,990
48,206
3,414
(270)
–
(15)
51,335
36,840
–
–
–
–
–
–
–
6,835
4,227
57,411
4,197
(270)
(152)
(15)
61,171
102,632
–
–
–
–
–
8
–
1,765
1,765
–
340
34
–
–
–
374
1,391
60
–
(7)
–
–
–
–
4,650
423
4,227
–
226
–
(152)
–
74
4,576
224
MTR Corporation
Annual Report 2020
225
NOTES TO THE CONSOLIDATED ACCOUNTS
19 Investment Properties and Other Property, Plant and Equipment (continued)
C Right-of-use Assets
The analysis of the net book value of right-of-use assets by class of underlying asset is as follows:
in HK$ million
Note
31 December 2020
31 December 2019
Ownership interests in leasehold land held for own use, with remaining lease term of:
– less than 50 years
Ownership interests in self-occupied buildings held for own use, with remaining lease
term of:
– less than 50 years
Other self-occupied buildings leased for own use, with remaining lease term of:
– less than 10 years
Plant and equipment, with remaining lease term of:
– less than 10 years
(i)
(i)
(ii)
(iii)
Ownership interests in leasehold investment property, with remaining lease term of:
– 50 years or more
– less than 50 years
Other leasehold investment property, with remaining lease term of:
– less than 10 years
1,357
1,391
3,747
317
507
5,928
14
85,801
85,815
243
86,058
91,986
4,227
349
503
6,470
15
91,412
91,427
285
91,712
98,182
The analysis of expense items in relation to leases recognised in profit or loss is as follows:
in HK$ million
2020
2019
Depreciation charge of right-of-use assets by class of underlying asset:
Ownership interests in leasehold land held for own use
Ownership interests in self-occupied buildings held for own use
Other self-occupied buildings leased for own use
Plant and equipment
Interest on lease liabilities
Expense relating to short-term leases and other leases with remaining lease term ending on or
before 31 December
Expense relating to leases of low-value assets, excluding short-term leases of low-value assets
34
152
81
90
357
56
14
22
34
152
74
72
332
58
37
22
During the year, additions to right-of-use assets were HK$3,566 million (2019: HK$7,438 million). This amount primarily related to additions of
investment properties.
Details of total cash outflow for leases and the maturity analysis of lease liabilities are set out in notes 39C and 32D, respectively.
(i)
Ownership Interests in Leasehold Land and Buildings Held for Own Use
The lease of the land on which civil works as well as plant and equipment are situated for Hong Kong transport operations was granted to the
Company under a running line lease which is coterminous with the Company’s franchise to operate the mass transit railway under the Operating
Agreement (notes 44A, 44B and 44C).
Under the terms of the lease, the Company undertakes to keep and maintain all the leased areas, including underground and overhead structures, at
its own cost. With respect to parts of the railway situated in structures where access is shared with other users, such as the Lantau Fixed Crossing, the
Company’s obligation for maintenance is limited to the railway only. All maintenance costs incurred under the terms of the lease have been dealt
with as expenses relating to Hong Kong transport operations in the consolidated profit and loss account.
All self-occupied buildings of the Group in Hong Kong are carried at fair value. The details of the fair value measurement are disclosed in note 40.
The revaluation loss of HK$328 million (2019: surplus of HK$145 million) and the related deferred tax credit of HK$54 million (2019: expenses of
HK$24 million) has been recognised in other comprehensive income and accumulated in the fixed assets revaluation reserve (note 38D). The
carrying amount of the self-occupied buildings at 31 December 2020 would have been HK$665 million (2019: HK$692 million) had the buildings
been stated at cost less accumulated depreciation.
224
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Annual Report 2020
225
Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis
19 Investment Properties and Other Property, Plant and Equipment (continued)
C Right-of-use Assets (continued)
(ii)
Other Self-occupied Buildings Leased for Own Use
The Group has obtained the right to use other properties as its offices through tenancy agreements. The leases typically run for an initial period
of 4 to 7 years.
(iii)
Other Leases
The Group leases plant and equipment under leases expiring from 2 to 20 years. Some leases include an option to renew the lease when all terms
are renegotiated, while some include an option to purchase the leased equipment at the end of the lease term at a price deemed to be a bargain
purchase option. None of the leases includes variable lease payments.
D Properties Leased Out under Operating Leases
The Group leases out investment properties and station kiosks, including duty free shops, under operating leases. The leases typically run for an
initial period of one to ten years, with an option to renew the lease after that date, at which time all terms will be renegotiated. Lease payments
are adjusted periodically to reflect market rentals. Certain leases carry additional rental based on turnover, some of which are with reference
to thresholds. Lease incentives granted are amortised in the consolidated profit and loss account as an integral part of the net lease payment
receivable.
The gross carrying amount of investment properties of the Group held for use in operating leases were HK$86,058 million (2019: HK$84,624 million).
The costs of station kiosks of the Group held for use in operating leases were HK$818 million (2019: HK$775 million) and the related accumulated
depreciation charges were HK$519 million (2019: HK$493 million).
Total future minimum lease receipts under non-cancellable operating leases are receivable as follows:
in HK$ million
Within 1 year
After 1 year but within 2 years
After 2 years but within 3 years
After 3 years but within 4 years
After 4 years but within 5 years
After 5 years
2020
8,436
6,038
2,666
1,440
1,077
1,903
2019
8,466
6,629
4,234
985
305
341
21,560
20,960
E
In March 2003, the Group entered into a series of structured transactions with unrelated third parties to lease out and lease back certain of its
passenger cars (“Lease Transaction”) involving a total original cost of HK$2,562 million and a total net book value of HK$1,674 million as at 31 March
2003. Under the Lease Transaction, the Group has leased the assets to institutional investors in the United States (the “Investors”), who have prepaid
all the rentals in relation to the lease agreement. Simultaneously, the Group has leased the assets back from the Investors based on terms ranging
from 21 to 29 years with an obligation to pay rentals in accordance with a pre-determined payment schedule. The Group has an option to purchase
the Investors’ leasehold interest in the assets at the expiry of the lease term for fixed amounts. Part of the rental prepayments received from the
Investors has been invested in debt securities to meet the Group’s rental obligations and the amount payable for exercising the purchase option
under the Lease Transaction. The Group has an obligation to replace these debt securities with other debt securities in the event those securities
do not meet certain credit ratings requirements. In addition, the Group has provided standby letters of credit to the Investors to cover additional
amounts payable by the Group in the event the transactions are terminated prior to the expiry of the lease terms.
The Group retains legal title to the assets and there are no restrictions on the Group’s ability to utilise these assets in the operation of the railway
business.
As a result of the Lease Transaction, an amount of approximately HK$3,688 million was received in an investment account and was used to purchase
debt securities (“Defeasance Securities”) to be used to settle the long-term lease payments with an estimated net present value of approximately
HK$3,533 million in March 2003. This resulted in the Group having received in 2003 an amount of HK$141 million net of costs. As the Group is not
able to control the investment account in pursuit of its own objectives and its obligations to pay the lease payments are funded by the proceeds of
the above investments, those obligations and investments in the Defeasance Securities were not recognised in March 2003 as liabilities and assets of
the Group. The net amount of cash received was accounted for as deferred income by the Group and amortised to the consolidated profit and loss
account over the lease period until 2008, when credit ratings of some of these Defeasance Securities were downgraded and subsequently replaced
by standby letters of credit, the charge on which had fully offset the remaining balance of the deferred income.
226
MTR Corporation
Annual Report 2020
227
NOTES TO THE CONSOLIDATED ACCOUNTS 20 Service Concession Assets
Movements and analysis of the Group’s service concession assets are as follows:
KCRC Rail Merger
Initial
concession
property
Additional
concession
property
Additional
concession
property
(High Speed
Rail)
Additional
concession
property
(Tuen Ma
Line)
in HK$ million
2020
Cost
At 1 January 2020
15,226
17,582
Net additions during the year
Disposals
Transfer from other property,
plant and equipment (note 19)
Reclassification within service
concession assets
Exchange differences
At 31 December 2020
Accumulated amortisation
At 1 January 2020
Charge for the year
Written-off on disposals
Exchange differences
At 31 December 2020
–
–
–
–
–
2,741
(97)
3
(9)
–
51
129
–
–
–
–
15,226
20,220
180
3,680
305
–
–
3,509
894
(82)
–
3,985
4,321
–
4
–
–
4
–
10
–
8
9
–
27
–
1
–
–
1
Net book value at 31 December 2020
11,241
15,899
176
26
2019
Cost
At 1 January 2019
15,226
Net additions during the year
Disposals
Transfer from other property,
plant and equipment (note 19)
Exchange differences
At 31 December 2019
Accumulated amortisation
At 1 January 2019
Charge for the year
Written-off on disposals
Exchange differences
At 31 December 2019
Net book value at 31 December 2019
15,397
2,232
(53)
6
–
–
–
–
–
15,226
17,582
3,375
305
–
–
3,680
11,546
2,825
719
(35)
–
3,509
14,073
1
50
–
–
–
51
–
–
–
–
–
51
–
–
–
–
–
–
–
–
–
–
–
–
Shenzhen
Metro Line 4
MTR Nordic
TfL Rail/
Elizabeth Line
Total
8,460
76
58
41,453
57
(91)
–
–
511
8,937
2,903
384
(53)
198
3,432
5,505
8,587
75
(45)
–
(157)
8,460
2,584
401
(27)
(55)
2,903
5,557
–
–
–
–
10
86
63
2
–
9
74
12
84
–
(4)
–
(4)
76
65
2
(1)
(3)
63
13
–
–
–
–
2
2,937
(188)
11
–
523
60
44,736
37
10,192
6
–
1
44
16
56
–
–
–
2
58
29
7
–
1
37
21
1,596
(135)
208
11,861
32,875
39,351
2,357
(102)
6
(159)
41,453
8,878
1,434
(63)
(57)
10,192
31,261
SZL4 forms part of the Shenzhen Metro, which is operated by a wholly-owned subsidiary, MTR Corporation (Shenzhen) Limited (“MTRSZ”). There
has been no increase in fare since MTRSZ started operating the line in 2010. In July 2020, the Shenzhen Municipal Government has publicised a fare
adjustment framework for Shenzhen Metro network which will take effect on 1 January 2021. The framework sets out the mechanism of fare setting
and the procedures of fare adjustment. Based on progress of the fare adjustment made to date, no impairment loss is recognised at 31 December
2020. If a suitable fare adjustment mechanism is not put in place, the long-term financial viability of SZL4 is expected to be impacted.
Initial concession property relates to the payments recognised at inception of the Rail Merger with KCRC while additional concession property
relates to the expenditures for the upgrade of the initial concession property after inception of the Rail Merger. Additional concession property (High
Speed Rail) and additional concession property (Tuen Ma Line) relate to the expenditures for the upgrade of the concession property of High Speed
Rail and Tuen Ma Line respectively.
226
MTR Corporation
Annual Report 2020
227
Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis
21 Railway Construction Projects under Entrustment by the HKSAR
Government
A Hong Kong Section of the Guangzhou-Shenzhen-Hong Kong Express Rail Link (“High Speed
Rail” or “HSR”) Project
HSR Preliminary Entrustment Agreement
(a)
On 24 November 2008, the HKSAR Government and the Company entered into an entrustment agreement for the design of and site investigation
and procurement activities in relation to the HSR (the “HSR Preliminary Entrustment Agreement”). Pursuant to the HSR Preliminary Entrustment
Agreement, the HKSAR Government is obligated to pay the Company the Company’s in-house design costs and certain on-costs, preliminary costs
and staff costs.
(b)
HSR Entrustment Agreement
In 2009, the HKSAR Government decided that the Company should be asked to proceed with the construction, testing and commissioning of the
HSR on the understanding that the Company would subsequently be invited to undertake the operation of the HSR under the service concession
approach. On 26 January 2010, the HKSAR Government and the Company entered into another entrustment agreement for the construction,
and commissioning of the HSR (the “HSR Entrustment Agreement”). Pursuant to the HSR Entrustment Agreement, the Company is responsible
for carrying out or procuring the carrying out of the agreed activities for the planning, design, construction, testing and commissioning of the
HSR and the HKSAR Government, as owner of HSR, is responsible for bearing and financing the full amount of the total cost of such activities (the
“Entrustment Cost”) and for paying to the Company a fee in accordance with an agreed payment schedule (the “HSR Project Management Fee”)
(subsequent amendments to these arrangements are described below). As of 31 December 2020, the Company had received full payment of the
HSR Project Management Fee from the HKSAR Government.
The HKSAR Government has the right to claim against the Company if the Company breaches the HSR Entrustment Agreement (including, if
the Company breaches the warranties it gave in respect of its project management services) and, under the HSR Entrustment Agreement, to be
indemnified by the Company in relation to losses suffered by the HKSAR Government as a result of any negligence of the Company in performing its
obligations under the HSR Entrustment Agreement or any breach of the HSR Entrustment Agreement by the Company. Under the HSR Entrustment
Agreement, the Company’s total aggregate liability to the HKSAR Government arising out of or in connection with the HSR Preliminary Entrustment
Agreement and the HSR Entrustment Agreement (other than for death or personal injury) is subject to a cap equal to the HSR Project Management
Fee and any other fees that the Company receives under the HSR Entrustment Agreement and certain fees received by the Company under the HSR
Preliminary Entrustment Agreement (the “Liability Cap”). In accordance with general principles of law, such Liability Cap could not be relied upon
if the Company were found to be liable for the fraudulent or other dishonest conduct of its employees or agents, to the extent that the relevant loss
had been caused by such fraudulent or other dishonest conduct. Although the HKSAR Government has reserved the right to refer to arbitration the
question of the Company’s liability for the Current Cost Overrun (as defined hereunder) (if any) under the HSR Preliminary Entrustment Agreement
and the HSR Entrustment Agreement (as more particularly described in note 21A(c)(iv) below), up to the date of this annual report, no claim has
been received from the HKSAR Government.
In April 2014, the Company announced that the construction period for the HSR project needed to be extended, with the target opening of the line
for passenger service revised to the end of 2017.
On 30 June 2015, the Company reported to the HKSAR Government that the Company estimated:
•
•
the HSR would be completed in the third quarter of 2018 (including programme contingency of six months) (the “HSR Revised
Programme”); and
the total project cost of HK$85.3 billion (including contingency), based on the HSR Revised Programme.
As a result of adjustments being made to certain elements of the Company’s estimated project cost of 30 June 2015, the HKSAR Government and
the Company reached agreement that the estimated project cost be reduced to HK$84.42 billion (the “Revised Cost Estimate”). Further particulars
relating to the Revised Cost Estimate are set out in notes 21A(c) and (e) below.
(c)
HSR Agreement
On 30 November 2015, the HKSAR Government and the Company entered into an agreement (the “HSR Agreement”) relating to the further
funding and completion of the HSR. The HSR Agreement contains an integrated package of terms (subject to conditions as set out in note 21A(c)(vi)
below) and provides that:
The HKSAR Government will bear and finance the project cost up to HK$84.42 billion (which includes the original budgeted cost of
(i)
HK$65 billion plus the agreed increase in the estimated project cost of HK$19.42 billion (the portion of the entrustment cost (up to HK$84.42 billion)
that exceeds HK$65 billion being the “Current Cost Overrun”));
The Company will, if the project exceeds HK$84.42 billion, bear and finance the portion of the project cost which exceeds that sum (if any)
(ii)
(the “Further Cost Overrun”) except for certain agreed excluded costs (namely, additional costs arising from changes in law, force majeure events or
any suspension of construction contracts specified in the HSR Agreement);
The Company will pay a special dividend in cash of HK$4.40 in aggregate per share in two equal tranches (of HK$2.20 per share in cash in
(iii)
each tranche) (“Special Dividend”). The first tranche was paid on 13 July 2016 and the second tranche was paid on 12 July 2017;
228
MTR Corporation
Annual Report 2020
229
NOTES TO THE CONSOLIDATED ACCOUNTS 21 Railway Construction Projects under Entrustment by the HKSAR
Government (continued)
A Hong Kong Section of the Guangzhou-Shenzhen-Hong Kong Express Rail Link (“High Speed
Rail” or “HSR”) Project (continued)
The HKSAR Government reserves the right to refer to arbitration the question of the Company’s liability for the Current Cost Overrun (if any)
(iv)
under the HSR Preliminary Entrustment Agreement and HSR Entrustment Agreement (“Entrustment Agreements”) (including any question the
HKSAR Government may have regarding the validity of the Liability Cap). The Entrustment Agreements contain dispute resolution mechanisms
which include the right to refer a dispute to arbitration. Under the HSR Entrustment Agreement, the Liability Cap is equal to the HSR Project
Management Fee and any other fees that the Company receives under HSR Entrustment Agreement and certain fees received by the Company
under the Preliminary Entrustment Agreement. Accordingly, the Liability Cap increases from up to HK$4.94 billion to up to HK$6.69 billion as the
HSR Project Management Fee is increased in accordance with the HSR Agreement (as it will be equal to the increased HSR Project Management Fee
under the HSR Entrustment Agreement of HK$6.34 billion plus the additional fees referred to above). If the arbitrator does not determine that the
Liability Cap is invalid and determines that, but for the Liability Cap, the Company’s liability under the Entrustment Agreements for the Current Cost
Overrun would exceed the Liability Cap, the Company shall:
•
•
•
bear such amount as is awarded to the HKSAR Government up to the Liability Cap;
seek the approval of its independent shareholders, at another General Meeting (at which the FSI, the HKSAR Government and their Close
Associates and Associates and the Exchange Fund will be required to abstain from voting), for the Company to bear the excess liability; and
if the approval of the independent shareholders (referred to immediately above) is obtained, pay the excess liability to the HKSAR
Government. If such approval is not obtained, the Company will not make such payment to the HKSAR Government;
Certain amendments are made to the HSR Entrustment Agreement to reflect the arrangements contained in the HSR Agreement, including
(v)
an increase in HSR Project Management Fee payable to the Company under HSR Entrustment Agreement to an aggregate of HK$6.34 billion (which
reflects the estimate of the Company’s expected internal costs in performing its obligations under the HSR Entrustment Agreement in relation to
HSR project) and to reflect the HSR Revised Programme;
(vi)
The arrangements under the HSR Agreement (including the payment of the Special Dividend) were conditional on:
•
•
independent shareholder approval (which was sought at the General Meeting held on 1 February 2016); and
Legislative Council approval in respect of the HKSAR Government’s additional funding obligations.
The HSR Agreement (and the Special Dividend) was approved by the Company’s independent shareholders at the General Meeting held on
1 February 2016 and became unconditional upon approval by the Legislative Council on 11 March 2016 of the HKSAR Government’s additional
funding obligations.
(d)
Operations of HSR
On 23 August 2018, the Company and KCRC entered into the supplemental service concession agreement for the HSR (“SSCA-HSR”) to supplement
the Service Concession Agreement dated 9 August 2007 in order for KCRC to grant a concession to the Company in respect of the HSR and to
prescribe the operational and financial requirements that will apply to the HSR. The commercial operation of HSR began on 23 September 2018.
(e)
Based on the Company’s latest review of the Revised Cost Estimate for the agreed scope of the project and having taken account of the
opinion of independent experts including one on the review of the Revised Cost Estimate, the Company believes that, although the latest final
project cost is likely to come close to the Revised Cost Estimate, the Revised Cost Estimate is still achievable and there is no current need to revise
further such estimate. However, the final project cost can only be ascertained upon finalisation of all contracts, some of which will involve the
resolution of commercial issues and may take several years to reach settlement based on past experience.
Having considered the number of contracts yet to be finalised and the contingency allowance currently available, there can be no absolute
assurance that the final project cost will not exceed the Revised Cost Estimate, particularly if unforeseen difficulties arise in the resolution of
commercial issues during the process of negotiating the final accounts. In such case, under the terms of the HSR Agreement, the Company will be
required to bear and finance the portion of the project cost that exceeds the Revised Cost Estimate (if any) except for certain agreed excluded costs
(as more particularly described in note 21A(c)(ii) above).
(f)
The Company has not made any provision in its consolidated accounts in respect of:
(i)
any possible liability of the Company for any Further Cost Overrun (if any), given the Company does not currently believe based on
information available to date there is any need to revise further the Revised Cost Estimate. However, the final project cost can only be ascertained
upon finalisation of all contracts, some of which will involve the resolution of commercial issues and may take several years to reach settlement;
(ii)
any possible liability of the Company that may be determined in accordance with any arbitration that may take place (as more particularly
described in note 21A(c)(iv) above), given that (a) the Company has not received any notification from the HKSAR Government of any claim by the
HKSAR Government against the Company or of any referral by the HKSAR Government to arbitration (which, as a result of the HSR Agreement,
cannot take place until after commencement of commercial operations on the HSR) as of 31 December 2020 and up to the date of this annual
report; (b) the Company has the benefit of the Liability Cap; and (c) as a result of the HSR Agreement, the Company will not make any payment to the
HKSAR Government in excess of the Liability Cap pursuant to a determination of the arbitrator without the approval of its independent shareholders;
and
(iii) where applicable, because the Company is not able to measure with sufficient reliability the amount of the Company’s obligation or liability
(if any).
228
MTR Corporation
Annual Report 2020
229
Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis 21 Railway Construction Projects under Entrustment by the HKSAR
Government (continued)
A Hong Kong Section of the Guangzhou-Shenzhen-Hong Kong Express Rail Link (“High Speed
Rail” or “HSR”) Project (continued)
During the year ended 31 December 2020, HSR Project Management Fee of HK$nil (2019: HK$78 million) was recognised in the consolidated
(g)
profit and loss account. As at 31 December 2020, the total HSR Project Management Fee and the additional fees referred to above recognised to
date in the consolidated profit and loss account amounted to HK$6,548 million (as at 31 December 2019: HK$6,548 million).
In relation to the sufficiency of the HSR Project Management Fee, the Company estimated that the total costs to complete performance of its
obligations in relation to the HSR project are likely to exceed the HSR Project Management Fee. Accordingly, an appropriate amount of provision
was recognised in the consolidated profit and loss account in the prior years.
B
(a)
Shatin to Central Link (“SCL”) Project
SCL Agreements
The Company and the HKSAR Government entered into the SCL Preliminary Entrustment Agreement (“SCL EA1”) in 2008, the SCL Advance Works
Entrustment Agreement (“SCL EA2”) in 2011, and the SCL Entrustment Agreement (“SCL EA3”) in 2012 (together, the “SCL Agreements”), in relation
to the SCL.
Pursuant to the SCL EA1, the Company is responsible for carrying out or procuring the carrying out of the design, site investigation and procurement
activities while the HKSAR Government is responsible for funding directly the total cost of such activities.
Pursuant to the SCL EA2, the Company is responsible for carrying out or procuring the carrying out of the agreed works while the HKSAR
Government is responsible for bearing and paying to the Company all the work costs (“EA2 Advance Works Costs”). The EA2 Advance Works Costs
and the Interface Works Costs (as described below) are payable by the HKSAR Government to the Company. During the year ended 31 December
2020, HK$122 million (2019: HK$343 million) of costs were incurred by the Company, which are payable by the HKSAR Government. As at
31 December 2020, the amount of such costs which remained outstanding from the HKSAR Government was HK$1,035 million (as at 31 December
2019: HK$1,219 million).
The SCL EA3 was entered into in 2012 for the construction and commissioning of the SCL. The HKSAR Government is responsible for bearing all
the work costs specified in the SCL EA3 including costs to contractors and costs to the Company (“Interface Works Costs”) (which the Company
would pay upfront and recover from the HKSAR Government) except for certain costs of modification, upgrade or expansions of certain assets
(including rolling stock, signalling, radio and main control systems) for which the Company is responsible under the existing service concession
agreement with KCRC. The Company will contribute an amount in respect of the costs relating to such modifications, upgrades or expansions. This
will predominantly be covered by the reduction in future maintenance capital expenditure which the Company would have otherwise incurred. The
total sum entrusted to the Company by the HKSAR Government for the main construction works under the SCL EA3, including project management
fee, was HK$70,827 million (“Original Entrusted Amount”).
The Company is responsible for carrying out or procuring the carrying out of the works specified in the SCL Agreements for a project management
fee of HK$7,893 million (the “Original PMC”). As at 31 December 2020 and up to the date of this annual report, the Company has received payments
of the Original PMC from the HKSAR Government in accordance with the original agreed payment schedule. During the year ended 31 December
2020, Original PMC of HK$565 million (2019: HK$857 million) was recognised in the consolidated profit and loss account. As at 31 December 2020,
the total Original PMC recognised to date in the consolidated profit and loss account amounted to HK$7,893 million (as at 31 December 2019:
HK$7,328 million).
(b)
(i)
SCL EA3 Cost Overrun
Cost to Complete
The Company has previously announced that, due to the continuing challenges posed by external factors, the Original Entrusted Amount under
SCL EA3 would not be sufficient to cover the total estimated cost to complete (“CTC”) and would need to be revised upwards significantly. The
Company carried out a detailed review of the estimated CTC for the main construction works in 2017 and submitted a revised estimated total CTC of
HK$87,328 million, including an increase in the project management fee payable to the Company (“2017 CTC Estimate”) to the HKSAR Government
on 5 December 2017, taking into account a number of factors, including issues such as archaeological relics, the HKSAR Government’s requests for
additional scope and late or incomplete handover of construction sites.
The Company then carried out and completed a further review and revalidation of the CTC and, on 10 February 2020, notified the HKSAR Government,
in accordance with the terms of the SCL EA3, of the latest estimate of the CTC, being HK$82,999 million (“2020 CTC Estimate”), including additional
project management fee payable to the Company of HK$1,371 million (“Additional PMC”), being the additional cost to the Company of carrying out
its remaining project management responsibilities under the SCL EA3, as detailed in note 21B(b)(ii) below but excluding the Hung Hom Incidents
Related Costs in respect of which the Company has already recognised a provision of HK$2 billion in its consolidated profit and loss account for the
year ended 31 December 2019 (as detailed in note 21B(c)(iii) below). The 2020 CTC Estimate represents an increase of HK$12,172 million from the
Original Entrusted Amount of HK$70,827 million, which is less than the increase in the 2017 CTC Estimate of HK$16,501 million.
In accordance with the terms of SCL EA3, the HKSAR Government issued its paper on 18 March 2020 to seek the approval of Legislative Council for
additional funding required for the SCL Project amounting to HK$10,801 million (“Additional Funding”) so that the SCL can be completed. On
12 June 2020, the Legislative Council approved the Additional Funding for the SCL Project. For the avoidance of doubt, the Additional Funding
sought by the HKSAR Government and approved by the Legislative Council excluded the Hung Hom Incidents Related Costs (as detailed in
note 21B(c)(iii) below) and any Additional PMC for the Company as further detailed in note 21B(b)(ii) below.
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231
NOTES TO THE CONSOLIDATED ACCOUNTS 21 Railway Construction Projects under Entrustment by the HKSAR
Government (continued)
Shatin to Central Link (“SCL”) Project (continued)
Additional PMC
B
(ii)
As detailed in note 21B(b)(i) above and as previously disclosed by the Company, the programme for the delivery of the SCL Project has been
significantly impacted by certain key external events. Not only do these matters increase the cost of works, they also increase the cost to the
Company of carrying out its project management responsibilities under the relevant SCL entrustment agreement, which is estimated to be around
HK$1,371 million.
By December 2020, the aggregate amount of project management fee paid by the HKSAR Government to the Company in accordance with the
payment schedule contained in the SCL EA3 was substantially close to the Original PMC (excluding, for the avoidance of doubt, the Additional PMC
of HK$1,371 million previously sought by the Company) and has been expended in full by the Company. The Additional Funding approved by the
Legislative Council did not include any Additional PMC for the Company which the Company had previously sought from the HKSAR Government.
Therefore, the cost to the Company of continuing to comply with its project management obligations under the SCL EA3 is currently being met by
the Company on an interim and without prejudice basis (to allow the SCL Project to progress in accordance with the latest programme) and the
Company reserves its position as to the ultimate liability for such costs and as to its right to pursue the courses of action and remedies available
under the SCL EA3.
However, given the Company’s view that there has been a significant delay to the project programme and associated increase in project management
costs to the Company, the Company has recently written to the HKSAR Government to restate the Company’s belief that the Company is entitled
(in accordance with the terms of the SCL EA3 and following the Company’s receipt of independent expert advice) to an increase in the project
management fee, to be agreed by way of good faith negotiations or otherwise determined in accordance with the provisions of the SCL EA3.
However, the HKSAR Government has responded to the Company by reiterating that the HKSAR Government considers there have not been any
material modifications to any of the scope of works, entrustment activities and/or entrustment programme contained in the SCL EA3 and, as such,
the HKSAR Government maintains its position of disagreement to any increase in the project management fee.
Despite the fact that this matter needs to be resolved, the Company has continued, and intends to continue, to comply with its project management
obligations under the SCL EA3 and has met, and intends to continue to meet, the costs thereof, on an interim and without prejudice basis, to allow
the SCL Project to progress in accordance with the latest programme in order to achieve a full opening of the SCL as soon as reasonably practicable,
whilst reserving its position as to the ultimate liability for such costs and as to its rights to pursue the courses of action and remedies available under
the SCL EA3.
(iii)
Provision for the SCL PMC
After taking into account the matters described in note 21B(b)(ii) above, and in particular, the Company meeting, on an interim and without
prejudice basis (whilst reserving its position as to the ultimate liability for such costs and as to its rights to pursue the courses of action and
remedies available under the SCL EA3), the cost to the Company of continuing to comply with its project management obligations, the Group has
recognised a provision of HK$1,371 million, for the estimated additional cost to the Company of continuing to comply with its project management
responsibilities, in its consolidated profit and loss account for the year ended 31 December 2020. During the year ended 31 December 2020, the
provision utilised amounted to HK$45 million and no provision was written back. The provision (net of amount utilised) is included in “Creditors,
other payables and provisions” in the consolidated statement of financial position.
This amount does not take into account any potential payment to the Company of any Additional PMC (whether in the circumstances that no overall
settlement is reached and / or as a result of an award, settlement or otherwise). Accordingly, if any such potential payment becomes virtually certain,
the amount of any such payment will be recognised and credited to the Company’s consolidated profit and loss account in that financial period.
(c)
Hung Hom Incidents
As stated in the Company’s announcement dated 18 July 2019, towards the end of the first half of 2018, there were allegations concerning
workmanship in relation to the Hung Hom Station extension (“First Hung Hom Incident”). The Company took immediate steps to investigate
the issues, report the Company’s findings to the HKSAR Government and reserve the Company’s position against relevant contractors. To address
the First Hung Hom Incident, the Company submitted to the HKSAR Government a holistic proposal for the verification and assurance of the
as-constructed conditions and workmanship quality of the Hung Hom Station extension.
In late 2018 and early 2019, the Company advised the HKSAR Government of an insufficiency of construction records and certain construction issues
at the Hung Hom North Approach Tunnel (“NAT”), the South Approach Tunnel (“SAT”) and the Hung Hom Stabling Sidings (“HHS”), forming an
addition to the First Hung Hom Incident (“Second Hung Hom Incident”). To address the Second Hung Hom Incident, the Company submitted to
the HKSAR Government a verification proposal for verification of the as-constructed condition and workmanship quality of these areas.
(i)
Commission of Inquiry (“COI”)
On 10 July 2018, the COI was set up by the HKSAR Chief Executive in Council pursuant to the Commissions of Inquiry Ordinance (Chapter 86 of the
Laws of Hong Kong). The Company has cooperated fully with the COI. The COI process included hearing of evidence from factual witnesses and
reviewing evidence from experts on project management and structural engineering issues. On 29 January 2019, the HKSAR Government made
its closing submission to the first phase of the COI in which it stated its view that the Company ought to have provided the required skills and care
reasonably expected of a professional and competent project manager but that the Company had failed to do so.
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Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis 21 Railway Construction Projects under Entrustment by the HKSAR
Government (continued)
Shatin to Central Link (“SCL”) Project (continued)
B
On 25 February 2019, the COI submitted an interim report to the Chief Executive on its findings and recommendations on matters covered by the
original terms of reference. On 26 March 2019, the HKSAR Government published the redacted interim report in which the COI, while recognising it
to be an interim report, found that although the Hung Hom Station extension diaphragm wall and platform slab construction works are safe, they
were not executed in accordance with the relevant contract in material aspects. The COI also made a number of comments regarding the Company’s
performance and systems as well as a number of recommendations for the future.
On 18 July 2019, the Company completed and submitted to the HKSAR Government two separate final reports, one in respect of the First Hung Hom
Incident and one in respect of the Second Hung Hom Incident, containing, inter alia, proposals for suitable measures required at certain locations to
achieve code compliance. These suitable measures have been implemented to enable the SCL Project to be completed for public use in accordance
with the latest project programme.
On 22 January 2020, the HKSAR Government reiterated, in its closing submissions on factual evidence for the extended inquiry submitted to the COI,
that there was failure on the part of both the Company and the contractor Leighton Contractors Asia Limited to perform the obligations which the
two parties undertook for the SCL project and that the Company, which was entrusted by the HKSAR Government as the project manager of the SCL
project, ought to have provided the requisite degree of skill and care reasonably expected of a professional and competent project manager.
On 27 March 2020, the COI submitted its final report to the Chief Executive on its findings and recommendations on matters covered by the original
and extended terms of reference. On 12 May 2020, the HKSAR Government published the final report in which the COI determined that it is fully
satisfied that, with the suitable measures in place, the station box structure will be safe and also fit for purpose. The COI also stated that it is satisfied
that, with suitable measures completed, the NAT, SAT and HHS structures will be safe and fit for purpose. The suitable measures for the station box
structure were completed in June 2020 and the suitable measures for the NAT, SAT and HHS structures were completed in May 2020. The COI also
made a number of comments on the construction process (including regarding failures in respect thereof such as unacceptable incidents of poor
workmanship compounded by lax supervision and that in a number of respects also, management of the construction endeavour fell below the
standards of reasonable competence) and made recommendations to the Company for the future.
(ii)
Expert Adviser Team (“EAT”)
On 1 February 2021, the EAT on the SCL project, which was appointed by the HKSAR Government in August 2018 to conduct an overall review
of the Company’s project management system and recommend additional management and monitoring measures to be undertaken by the
Company and the HKSAR Government in taking forward the SCL project, has submitted its final report to the HKSAR Government. The report noted
that it is safe in practical terms to use the related built structures at Hung Hom Station for their intended purposes after the implementation of the
suitable measures. The EAT has also put forward in the report recommendations to the Company and the HKSAR Government for the continuous
improvement of railway project management.
(iii)
Provision for the Hung Hom Incidents Related Costs
In July 2019, the HKSAR Government accepted the Company’s recommendation that the Tuen Ma Line (Tai Wai to Hung Hom Section of the SCL)
should open in phases, with the first phase involving the opening of commercial service on the Tuen Ma Line from Tai Wai Station to Kai Tak Station
(“Phased Opening”) which occurred on 14 February 2020.
In order to progress the SCL Project and to facilitate the Phased Opening in the first quarter of 2020, the Company announced in July 2019 that it
would fund, on an interim and without prejudice basis, certain costs arising from the Hung Hom Incidents and certain costs associated with Phased
Opening (being costs for alteration works, trial operations and other costs associated with the preparation activities for the Phased Opening) (“Hung
Hom Incidents Related Costs”), whilst reserving the Company’s position as to the ultimate liability for such costs.
The Company and the HKSAR Government will continue discussions with a view to reaching an overall settlement in relation to the Hung Hom
Incidents and their respective funding obligations relating to the CTC and the Hung Hom Incidents Related Costs. If no overall settlement is reached
between the Company and the HKSAR Government within a reasonable period, the provisions of the SCL EA3 shall continue to apply (as they
currently do) including in relation to such costs, and the responsibility for the funding of such costs shall be determined in accordance with the
SCL EA3.
After taking into account the matters described in note 21B(c) above, and in particular, the Company’s decision to fund, on an interim and without
prejudice basis, the Hung Hom Incidents Related Costs, the Company recognised a provision of HK$2,000 million in its consolidated profit and loss
account for the year ended 31 December 2019. During the year ended 31 December 2020, the provision utilised amounted to HK$566 million (2019:
HK$284 million) and no provision was written back (2019: HK$nil). The provision (net of amount utilised) is included in “Creditors, other payables and
provisions” in the consolidated statement of financial position.
This amount does not take into account any potential recovery from any other party (whether in the circumstances that no overall settlement is
reached and/or as a result of an award, settlement or otherwise). Accordingly, if any such potential recovery becomes virtually certain, the amount of
any such recovery will be recognised and credited to the Company’s consolidated profit and loss account in that financial period.
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233
NOTES TO THE CONSOLIDATED ACCOUNTS 21 Railway Construction Projects under Entrustment by the HKSAR
Government (continued)
Shatin to Central Link (“SCL”) Project (continued)
B
(d) Mixed Fleet Operation Incident
On 11 September 2020, the Company announced the delay in service commencement of the new East Rail Line (“EAL”) signalling system and
introduction of new nine-car trains which was originally scheduled for 12 September 2020 (collectively “Mixed Fleet Operation Incident”),
following a review on the new signalling system conducted by the Company prior to service commencement.
On 13 September 2020, the Company announced the setting up of the Investigation Panel to look into the Mixed Fleet Operation Incident and to
submit an investigation report to the HKSAR Government. On 21 January 2021, the Company submitted to the HKSAR Government for its review
the report from the Investigation Panel. The Company acknowledged and accepted the findings of the Investigation Panel which include a finding
that the issue concerned in the Mixed Fleet Operation Incident is not an issue of safety but of service reliability. The Company also accepted and will
implement the recommendations made in the report. Following the satisfactory completion of further additional testing and approval by relevant
HKSAR Government departments, the new signalling system and the new nine-car trains on the EAL were commissioned on 6 February 2021 in
preparation for extending the EAL across the harbour to Admiralty Station.
(e)
Potential Claims from and Indemnification to the HKSAR Government
The HKSAR Government has the right to claim against the Company if the Company breaches the SCL Agreements (including, if the Company
breaches the warranties it gave in respect of its project management services) and, under each SCL Agreement, to be indemnified by the Company
in relation to losses incurred by the HKSAR Government as a result of the negligence of the Company in performing its obligations under the
relevant SCL Agreement or breach thereof by the Company. Under the SCL EA3, the Company’s total aggregate liability to the HKSAR Government
arising out of or in connection with the SCL Agreements (other than for death or personal injury) is subject to a cap equal to the fees that the
Company receives under the SCL Agreements. In accordance with general principles of law, such cap could not be relied upon if the Company were
found to be liable for the fraudulent or other dishonest conduct of its employees or agents, to the extent that the relevant loss had been caused by
such fraudulent or other dishonest conduct. Although the HKSAR Government has stated that it reserves all rights to pursue further actions against
the Company and related contractors and has made the statements in its closing submission to the COI (as stated in note 21B(c)(i) above), up to the
date of this annual report, no claim has been received from the HKSAR Government in relation to any SCL Agreement. It is uncertain as to whether
such claim will be made against the Company in the future and, if made, the nature and amount of such claim.
The eventual outcome of the discussions between the Company and the HKSAR Government on various matters including the timing of any overall
settlement in relation to the Hung Hom Incidents and their respective funding obligations relating to the Hung Hom Incidents Related Costs and
the level of recovery from relevant parties remain highly uncertain at the current stage. As a result, no additional provision other than as stated
above has been made as the Company is currently not able to measure with sufficient reliability the ultimate amount of the Company’s obligation
or liability arising from the SCL Project as a whole in light of the significant uncertainties involved. While no provision in respect of the SCL Project
related matters was recognised at 31 December 2020 other than as stated above, the Company will reassess on an ongoing basis the need to
recognise any further provision in the future in light of any further development.
(f)
Phased Opening of SCL
On 11 February 2020, the Company entered into relevant agreements with the HKSAR Government and KCRC to supplement and amend the current
agreements to enable the Company to operate Tuen Ma Line Phase 1 in substantially the same manner as the existing railway network for a period
of two years from 14 February 2020 including with KCRC the supplemental service concession agreement (“SSCA-SCL”). Prior to the full opening of
the Tuen Ma Line, the parties are obliged to commence exclusive negotiations in good faith with a view to agreeing the terms of a supplemental
service concession agreement for the entire Tuen Ma Line (which is intended to replace the SSCA-SCL that was executed on 11 February 2020).
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233
Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis 22 Property Development in Progress
Pursuant to the project agreements in respect of the construction of railway extensions and the Property Package Agreements in respect of the Rail
Merger, the HKSAR Government has granted the Company with development rights on the land over the stations along railway lines.
As at 31 December 2020, the outstanding Hong Kong Property Development Projects of the Company include the Tseung Kwan O Extension
Property Projects at the depot sites in Tseung Kwan O Area 86 (LOHAS Park) and at the ventilation building in Yau Tong, South Island Line Property
Project at sites in Wong Chuk Hang, Kwun Tong Line Extension Property Project at sites in Ho Man Tin and the East Rail Line/Light Rail Property
Projects at sites along the related railway lines.
A Property Development in Progress
in HK$ million
2020
Balance at
1 January
Expenditure
Offset against
payments
received from
developers
Transfer out to
profit or loss
Balance at
31 December
Hong Kong Property Development Projects
12,022
687
(276)
(491)
11,942
2019
Hong Kong Property Development Projects
14,840
3,819
(662)
(5,975)
12,022
The lease terms of leasehold land in Hong Kong included under property development in progress are between 10 and 50 years.
Stakeholding Funds
B
Being the stakeholder under certain Airport Railway, Tseung Kwan O Extension and East Rail Line Property Projects, the Company receives and
manages deposit monies and sales proceeds in respect of sales of properties under those developments. These monies are placed in separate
designated bank accounts and, together with any interest earned, are to be released to the developers for the reimbursement of costs of the
respective developments in accordance with the terms and conditions of the HKSAR Government Consent Schemes and development agreements.
Any balance remaining is to be released for distribution only after all obligations relating to the developments have been met. Accordingly, the
balances of the stakeholding funds and the corresponding bank balances have not been included in the consolidated statement of financial
position. As at 31 December 2020, the balance of the stakeholding funds was HK$16,034 million (2019: HK$21,283 million).
C West Rail Property Development
As part of the Rail Merger, the Company was appointed to act as the agent of KCRC and certain KCRC subsidiary companies (“West Rail Subsidiaries”)
in the development of specified development sites along the West Rail. The Company can receive an agency fee of 0.75% of the gross sale proceeds
in respect of the developments except for the Tuen Mun development on which the Company can receive 10% of the net profits accrued under
the development agreement. The Company can also recover from the West Rail Subsidiaries all the costs incurred in respect of the West Rail
development sites plus 16.5% on-cost, together with interest accrued thereon. During the year ended 31 December 2020, HK$42 million (2019:
HK$182 million) agency fee and other income in respect of West Rail property development was recognised (note 12). During the year ended
31 December 2020, the reimbursable costs incurred by the Company including on-cost and interest accrued were HK$70 million (2019: HK$81 million).
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235
NOTES TO THE CONSOLIDATED ACCOUNTS 23 Investments in Subsidiaries
The following list contains the particulars of principal subsidiaries of the Company:
Name of company
Proportion of ownership interest
Issued
share capital/
contributed
registered capital
Group’s
effective
interest
Held by the
Company
Held by
subsidiary(ies)
Place of
incorporation/
establishment
and operation
MTR Academy (HK) Company Limited
HK$10,000
100%
–
100%
Hong Kong
MTR Telecommunication Company Limited
HK$100,000,000
100%
100%
Ngong Ping 360 Limited
HK$2
100%
100%
Pierhead Garden Management
Company Limited
HK$50,000
100%
100%
TraxComm Limited
HK$15,000,000
100%
100%
Metro Trains Melbourne Pty. Ltd.*
AUD39,999,900
AUD100
60% on
ordinary
shares;
30% on
Class A
shares
Metro Trains Sydney Pty Ltd*
AUD100
60%
MTR Corporation (Sydney) NRT Pty Limited
AUD2
100%
MTR Corporation (Sydney) SMCSW Pty
Limited
AUD1
100%
–
–
–
–
–
MTR Corporation (C.I.) Limited
US$1,000
100%
100%
MTR Consultadoria (Macau) Sociedade
Unipessoal Lda.
MTR Operações Ferroviárias (Macau)
Sociedade Unipessoal Lda.
(also known as MTR Railway Operations
(Macau) Company Limited)
MOP25,000
100%
MOP25,000
100%
MTR Express (Sweden) AB
SEK10,050,000
100%
MTR Pendeltågen AB
SEK10,050,000
100%
MTR Tech AB
MTR Tunnelbanan AB
MTR (Beijing) Commercial Facilities
Management Co., Ltd.^
SEK30,000,000
SEK40,000,000
100%
100%
HK$93,000,000
100%
MTR Corporation (Shenzhen) Limited^
HK$2,636,000,000
100%
MTR Property Development
(Shenzhen) Company Limited#
HK$2,180,000,000
100%
MTR Corporation (Crossrail) Limited
GBP1,000,000
100%
*
Subsidiaries not audited by KPMG
^ Wholly foreign owned enterprise registered under PRC Law
# Sino-foreign equity joint venture registered under PRC Law
–
–
–
–
–
–
–
–
–
–
Hong Kong
Hong Kong
Principal activities
Administering
the operation of
MTR Academy
Mobile
telecommunication
services
Operating the Tung
Chung to Ngong Ping
cable car system and
theme village
in Ngong Ping
Hong Kong
Property investment
Hong Kong
Fixed telecommunication
network and
related services
Australia
Railway operations
and maintenance
–
–
–
–
100% on
ordinary
shares;
100% on
Class A
shares
60%
Australia
100%
100%
Australia
Australia
–
Cayman Islands/
Hong Kong
Railway operations
and maintenance
Design and delivery of
railway related systems
Design, delivery and
integration of railway
related systems
Financing
100%
100%
Macao
Macao
Railway consultancy
services
Railway operations
and management
100%
Sweden
100%
Sweden
Railway operations
and maintenance,
property investment
and management
Railway operations,
maintenance and
station management
Sweden
Railway maintenance
100%
100%
100%
100%
Sweden
The People’s
Republic of China
The People’s
Republic of China
100%
The People’s
Republic of China
100%
United Kingdom
Railway operations
and maintenance
Property leasing
and management
Railway construction,
operations and
management
Property development,
operation, leasing,
management and
consultancy services
Railway operations
and maintenance
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Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis
23 Investments in Subsidiaries (continued)
The Directors of the Company are of the opinion that a complete list of all subsidiaries and their particulars will be of excessive length and therefore
the above table contains only those subsidiaries which, in the opinion of the Directors, materially contribute to the Group’s results, assets or
liabilities.
24 Interests in Associates and Joint Venture
The following list contains the particulars of material associates and joint venture, all of which are unlisted corporate entities whose quoted market
price is not available:
Name of company
Associates
Proportion of ownership interest
Group’s
effective
interest
Held by the
Company
Held by
subsidiary
Place of
incorporation/
establishment
and operation
Octopus Holdings Limited
57.4%
57.4%
–
Hong Kong
Principal activities
Holding company of a group
of companies which engage in
the operation of a contactless
smartcard common payment
system in Hong Kong and
consultancy services
Metro investment,
construction, operations
and passenger services
Metro investment,
construction and operations
Railway operations
and management
Railway operations
and management
49%
The People’s
Republic of China
49%
49%
The People’s
Republic of China
The People’s
Republic of China
30%
United Kingdom
27.55%
Australia
Financing, railway operations
and maintenance
60%
The People’s
Republic of China
Railway electrical and
mechanical construction,
operations and management
Beijing MTR Corporation Limited~
Beijing MTR L16 Corporation Limited#
Hangzhou MTR Corporation Limited*~
First MTR South Western Trains Limited*
NRT Pty Ltd*
Joint Venture
49%
49%
49%
30%
27.55%
Hangzhou MTR Line 5 Corporation Limited~
60%
–
–
–
–
–
–
* Companies not audited by KPMG
~ Sino-foreign co-operative joint venture registered under PRC Law
# Limited liability company (wholly owned by a legal person) under PRC Law
All the associates and joint venture are accounted for using the equity method in the consolidated accounts and considered to be not individually
material.
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237
NOTES TO THE CONSOLIDATED ACCOUNTS 24 Interests in Associates and Joint Venture (continued)
The summary financial information of the Group’s effective interests in associates and joint venture is as follows:
in HK$ million
Assets
Liabilities
Net assets
Income
Expenses and others
Profit before taxation
Income tax
Net profit
Other comprehensive income
Total comprehensive income
Group’s share of net assets of the associates and joint venture
Goodwill
Carrying amount in the consolidated statement of financial position
2020
30,576
(19,036)
11,540
6,228
(5,412)
816
(211)
605
600
1,205
11,540
52
11,592
2019
28,085
(17,765)
10,320
8,424
(7,794)
630
(342)
288
(185)
103
10,320
39
10,359
In March 2017, the Department for Transport of the United Kingdom (“DfT”) awarded the South Western Railway franchise (“Franchise”) to First
MTR South Western Trains Limited (“SWR”), an associate of the Company which the Company holds a 30% shareholding and FirstGroup plc in the
United Kingdom holds a 70% shareholding. Pursuant to a franchise agreement (“Franchise Agreement”) with DfT, the period of the Franchise runs
from 20 August 2017 for seven years, with an option for an eleven-month extension at the discretion of the DfT. As noted in the Company’s 2019
annual accounts, a provision of GBP43 million (HK$436 million) has been made under “share of profit or loss of associates and joint venture” in the
consolidated profit and loss account for the year ended 31 December 2019 which represents the Company’s 30% share of the maximum potential
loss under the Franchise Agreement. Since March 2020, the franchise has been operating under the terms of the Emergency Measures Agreement
and subsequently the Emergency Recovery Measures Agreement (“ERMA”) put in place by the UK Government. As required under ERMA, SWR has
agreed with DfT the termination sum required to terminate the pre-existing Franchise Agreement. Such termination sum will fall due at the end of
the ERMA term, at which point the pre-existing franchise contract would also terminate by agreement. At the end of 2020, SWR is in the process of
negotiating a new directly awarded management contract with the DfT, which will come into effect at the end of the ERMA. SWR’s ERMA is in place
up to 29 May 2021.
25 Investments in Securities
Investments in securities at 31 December 2020 represented investments in unlisted equity securities held by subsidiaries in the Mainland of China
of HK$254 million (2019: HK$nil) and debt securities held by an overseas insurance underwriting subsidiary measured at FVPL of HK$214 million
(2019: HK$386 million). As at 31 December 2020, all debt securities were expected to mature within one year except for HK$154 million
(2019: HK$332 million) which were expected to mature after one year.
26 Properties Held for Sale
in HK$ million
Properties held for sale
– at cost
– at net realisable value
Representing:
Hong Kong property development
Mainland of China property development
2020
1,159
641
1,800
1,572
228
1,800
2019
1,125
120
1,245
1,034
211
1,245
Properties held for sale of the Group at 31 December 2020 comprise interests in properties from property developments in Hong Kong and Mainland
of China.
For Hong Kong property development, the net realisable values as at 31 December 2020 and 2019 were determined by reference to an open market
valuation of the properties as at those dates, undertaken by an independent firm of surveyors, Colliers International (Hong Kong) Limited (2019:
Jones Lang LaSalle Limited), who have among their staff Members of the Hong Kong Institute of Surveyors.
Properties held for sale at net realisable value of the Group are stated net of provision of HK$8 million (2019: HK$12 million) made in order to state
these properties at the lower of their cost and estimated net realisable value. The remaining lease terms of leasehold land in Hong Kong included
under properties held for sale are between 10 and 50 years.
236
MTR Corporation
Annual Report 2020
237
Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis 27 Derivative Financial Assets and Liabilities
A
The contracted notional amounts, fair values and maturities based on contractual undiscounted cash flows of derivative financial instruments
outstanding are as follows:
Fair Value
in HK$ million
2020
Derivative Financial Assets
Gross settled:
Foreign exchange forwards
– cash flow hedges:
– inflow
– outflow
– not qualified for hedge accounting:
482
19
– inflow
– outflow
Cross currency swaps
– fair value hedges:
– inflow
– outflow
2,333
110
– cash flow hedges:
12,797
277
Notional
amount
Fair value
Contractual undiscounted cash flows maturing in
Less than
1 year
1-2 years
2-5 years
Over
5 years
Total
386
11
269
(263)
471
(453)
1,274
(1,176)
78
(75)
30
(28)
14
(3)
40
(39)
1
(1)
9
(9)
–
–
396
(386)
502
(482)
478
(466)
705
(698)
2,471
(2,343)
279
(249)
280
(248)
840
(746)
16,629
(16,432)
18,028
(17,675)
– inflow
– outflow
Net settled:
Interest rate swaps
– fair value hedges
– cash flow hedges
– not qualified for hedge accounting
Derivative Financial Liabilities
Gross settled:
Foreign exchange forwards
– fair value hedges:
– inflow
– outflow
– cash flow hedges:
– inflow
– outflow
– inflow
– outflow
Cross currency swaps
– cash flow hedges:
– inflow
– outflow
Net settled:
– not qualified for hedge accounting:
1,390
4,390
250
413
21,051
62
1
–
480
55
(2)
–
205
1,960
25
7
1
6
1,960
(1,985)
–
–
1,371
(1,377)
21
(2)
–
67
–
–
1
(2)
19
(19)
15
(2)
–
120
–
7
–
211
91
1
–
603
–
–
5
(5)
–
–
–
–
–
–
–
–
1,960
(1,985)
6
(7)
1,390
(1,396)
5,730
301
126
(146)
127
(146)
649
(759)
5,728
(5,873)
6,630
(6,924)
Interest rate swaps
– cash flow hedges
– not qualified for hedge accounting
Total
3,250
1,734
14,071
35,122
47
1
381
(21)
1
(71)
(16)
–
(36)
(33)
(1)
(144)
22
–
(123)
(48)
–
(374)
238
MTR Corporation
Annual Report 2020
239
NOTES TO THE CONSOLIDATED ACCOUNTS
27 Derivative Financial Assets and Liabilities (continued)
A
Fair Value (continued)
Notional
amount
Fair value
Contractual undiscounted cash flows maturing in
Less than
1 year
1-2 years
2-5 years
Over 5
years
Total
in HK$ million
2019
Derivative Financial Assets
Gross settled:
Foreign exchange forwards
– cash flow hedges:
– inflow
– outflow
– not qualified for hedge accounting:
– inflow
– outflow
Cross currency swaps
– fair value hedges:
– inflow
– outflow
– cash flow hedges:
– inflow
– outflow
51
721
698
1
19
9
8,430
139
– hedges of net investments:
64
1
– inflow
– outflow
Net settled:
Interest rate swaps
– fair value hedges
– cash flow hedges
– not qualified for hedge accounting
Derivative Financial Liabilities
Gross settled:
Foreign exchange forwards
– cash flow hedges:
– inflow
– outflow
– hedges of net investments:
– inflow
– outflow
8,841
1,250
1,913
21,968
321
1,984
– not qualified for hedge accounting:
783
12
14
3
198
11
16
15
– inflow
– outflow
Cross currency swaps
– cash flow hedges:
– inflow
– outflow
Net settled:
Interest rate swaps
– fair value hedges
– cash flow hedges
– not qualified for hedge accounting
Total
5,446
350
3,785
100
783
13,202
35,170
11
3
2
408
42
(41)
640
(622)
1
–
244
(218)
67
(66)
14
11
2
74
150
(154)
1,984
(2,000)
650
(663)
78
(101)
(14)
–
–
(70)
10
(10)
84
(82)
1
–
245
(218)
–
–
2
4
2
38
135
(142)
–
–
118
(120)
79
(100)
(3)
–
–
(33)
–
–
–
–
5
–
–
–
–
–
700
(698)
52
(51)
724
(704)
707
(698)
737
(657)
9,276
(9,214)
10,502
(10,307)
–
–
2
–
2
89
22
(23)
–
–
–
–
504
(633)
(2)
(1)
–
(133)
–
–
–
–
–
64
2
(2)
–
–
–
–
67
(66)
18
15
6
265
309
(321)
1,984
(2,000)
768
(783)
8,136
(8,343)
8,797
(9,177)
–
(1)
–
(208)
(19)
(2)
–
(444)
238
MTR Corporation
Annual Report 2020
239
The Group’s derivative financial instruments consist predominantly of interest rate and cross currency swaps entered into exclusively by the
Company, and the relevant interest rate swap curves as of 31 December 2020 and 2019 were used to discount the cash flows of financial
instruments. Interest rates used ranged from 0.163% to 1.105% (2019: 1.760% to 2.666%) for Hong Kong dollars, 0.164% to 1.189% (2019: 1.630%
to 2.010%) for US dollars, 0.020% to 1.325% (2019: 0.809% to 1.768%) for Australian dollars and -0.058% to 0.183% (2019: 0.012% to 0.124%) for
Japanese yen.
The table above details the remaining contractual maturities at the end of the reporting period of the Group’s derivative financial assets and
liabilities, which are based on contractual undiscounted cash flows (including interest payments computed using contractual rates or, if floating,
based on rates current at the end of the reporting period) and the earliest date the Group can be required to pay. The details of the fair value
measurement are disclosed in note 40.
Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis
Financial Risks
27 Derivative Financial Assets and Liabilities (continued)
B
The Group’s operating activities and financing activities expose it to four main types of financial risks, namely liquidity risk, interest rate risk, foreign
exchange risk and credit risk. The Group’s overall risk management policy focuses on the unpredictability of financial markets and seeks to minimise
potential adverse effects of these financial risks on the Group’s financial performance.
The Board of Directors provides principles for overall risk management and approves policies covering specific areas, such as liquidity risk, interest
rate risk, foreign exchange risk, credit risk, concentration risk, use of derivative financial instruments and non-derivative financial instruments, and
investment of excess liquidity. The Group’s Preferred Financing Model (the “Model”) for the Company is an integral part of its risk management
policies. The Model specifies, amongst other things, the preferred mix of fixed and floating rate debts, the permitted level of foreign currency debts
and an adequate length of financing horizon for coverage of forward funding requirements, against which the Company’s financing related liquidity,
interest rate and currency risk exposures are measured, monitored and controlled. The Board regularly reviews its risk management policies and
authorises changes if necessary based on operating and market conditions and other relevant factors. The Board also reviews on an annual basis
as part of the budgeting process and authorises changes if necessary to the Model in accordance with changes in market conditions and practical
requirements.
The use of derivative financial instruments to control and hedge against interest rate and foreign exchange risk exposures is an integral part of the
Group’s risk management strategy. In accordance with Board policy, these instruments shall only be used for controlling or hedging risk exposures,
and cannot be used for speculation purposes. All of the derivative instruments used by the Company are over-the-counter derivatives comprising
principally interest rate swaps, cross currency swaps and foreign exchange forward contracts.
(i)
Liquidity Risk
Liquidity risk refers to the risk that funds are not available to meet liabilities as they fall due, and it may result from timing and amount mismatches of
cash inflow and outflow.
The Group employs projected cash flow analysis to manage liquidity risk by forecasting the amount of cash required, including working capital, debt
repayments, dividend payments, capital expenditures and new investments, and by maintaining sufficient cash balance and/or undrawn committed
banking facilities to ensure these requirements are met. It adopts a prudent approach and will maintain sufficient cash balance and committed
banking facilities to provide forward coverage of at least 12 to 24 months of projected cash requirements at the parent company level as specified
in the Model. The Company also conducts stress testing of its projected cash flow to analyse liquidity risk, and would arrange additional banking
facilities or debt issuance or otherwise take appropriate actions if such stress tests reveal significant risk of material cash flow shortfall.
The following table details the remaining contractual maturities at the end of the reporting period of the Group’s loans and other obligations other
than lease liabilities, which are based on contractual undiscounted cash flows (including interest payments computed using contractual rates or, if
floating, based on rates current at the end of the reporting period) and the earliest date the Group can be required to pay:
2020
2019
Capital
market
Capital
market
in HK$ million
instruments Bank loans
Others
Total
instruments Bank loans
Others
Total
Loans and other obligations
Amounts repayable beyond 5 years
35,782
731
–
36,513
25,138
887
–
26,025
Amounts repayable within a period
of between 2 and 5 years
Amounts repayable within a period
of between 1 and 2 years
Amounts repayable within 1 year
3,881
1,979
618
6,478
4,517
3,001
624
8,142
3,220
4,985
234
9,608
–
–
3,454
14,593
1,029
3,513
254
9,489
–
–
1,283
13,002
47,868
12,552
618
61,038
34,197
13,631
624
48,452
Others represent obligations under lease out/lease back transaction (note 19E).
240
MTR Corporation
Annual Report 2020
241
NOTES TO THE CONSOLIDATED ACCOUNTS 27 Derivative Financial Assets and Liabilities (continued)
B
(ii)
Financial Risks (continued)
Interest Rate Risk
The Group’s interest rate risk arises principally from its borrowing activities at the parent company level (including its financing vehicles). Borrowings
based on fixed and floating rates expose the Group to fair value and cash flow interest rate risk respectively due to fluctuations in market interest
rates. The Group manages and controls its interest rate risk exposure at the parent company level by maintaining a level of fixed rate debt between
45% and 75% (2019: 45% and 75%) of total debt outstanding as specified by the Model. Should the actual fixed rate debt level deviate substantially
from the Model, derivative financial instruments such as interest rate swaps would be procured to align the fixed and floating mix with the Model.
As at 31 December 2020, 70% (2019: 63%) of the Company’s (including financing vehicles) total debt outstanding was denominated either in or
converted to fixed interest rate after taking into account outstanding cross currency and interest rate swaps. Interest rate risk at subsidiary, associate
and joint venture companies are managed separately based on their own borrowing requirement, circumstances and market practice.
As at 31 December 2020, it is estimated that a 100 basis points increase/25 basis points decrease in interest rates, with all other variables held
constant, would decrease/increase the Group’s loss after tax and increase/decrease the Group’s retained profits by approximately HK$73 million/
HK$18 million. Other components of consolidated equity would increase/decrease by approximately HK$195 million/HK$52 million.
The sensitivity analysis above has been determined assuming that the change in interest rates had occurred at the end of the reporting period
and had been applied to the exposure to interest rate risk for both derivative and non-derivative financial instruments in existence at that date.
The interest rate assumptions represent management’s assessment of a reasonably possible change in interest rates over the period until the next
annual financial period.
In 2019, a similar analysis was performed based on the assumption of a 100 basis points increase/100 basis points decrease in interest rates,
which would decrease/increase the Group’s profit after tax and the Group’s retained profits by approximately HK$46 million/HK$51 million. Other
components of consolidated equity would increase/decrease by approximately HK$30 million/HK$30 million.
(iii)
Foreign Exchange Risk
Foreign exchange risk arises when recognised assets and liabilities are denominated in a currency other than the functional currency of the Group’s
companies to which they relate. For the Group, it arises principally from its borrowing as well as overseas investment and procurement activities.
The Group manages and controls its foreign exchange risk exposure by maintaining a modest level of unhedged non-Hong Kong dollar debt at
the parent company level as specified by the Model, and minimal foreign exchange open positions created by its investments and procurements
overseas. Where the currency of a borrowing is not matched with that of the expected cash flows for servicing the debt, the Company would convert
its foreign currency exposure resulting from the borrowing to Hong Kong dollar exposure through cross currency swaps. For investment and
procurement in foreign currencies, the Group would purchase the foreign currencies in advance or enter into foreign exchange forward contracts to
secure the necessary foreign currencies at pre-determined exchange rates for settlement.
The Company’s exposure to US dollars due to its foreign currency borrowings is also offset by the amount of US dollar cash balances, bank deposits
and investments that it maintains.
As most of the Group’s receivables and payables are denominated in the respective Group companies’ functional currencies (Hong Kong dollars,
Renminbi, Australian dollars, British Pound or Swedish Krona) or United States dollars (with which Hong Kong dollars are pegged) and most of its
payment commitments denominated in foreign currencies are covered by foreign exchange forward contracts, management does not expect that
there will be any significant currency risk associated with them.
(iv)
Credit Risk
Credit risk refers to the risk that a counterparty will be unable to pay amounts in full when due. For the Group, this arises mainly from the deposits
it maintains and the derivative financial instruments that it has entered into with various banks and counterparties as well as from the Defeasance
Securities it procured under the lease out/lease back transaction (note 19E). The Group limits its exposure to credit risk by placing deposits and
transacting derivative financial instruments only with financial institutions with acceptable investment grade credit ratings or guarantee, and
diversifying its exposure to various counterparties.
All derivative financial instruments are subject to a maximum counterparty limit based on the respective counterparty’s credit ratings in accordance
with policy approved by the Board. Credit exposure in terms of estimated fair market value of and largest potential loss arising from these
instruments based on the “value-at-risk” concept is measured, monitored and controlled against their respective counterparty limits. To further
reduce counterparty risk exposure, the Group also applies set-off and netting arrangements across all derivative financial instruments and other
financial transactions with the same counterparty.
All deposits and investments are similarly subject to a separate maximum counterparty/issuer limit based on the respective counterparty/issuer’s
credit ratings and/or status as Hong Kong’s note-issuing banks. There is also a limit on the length of time that the Group can maintain a deposit with
a counterparty or investment from an issuer based upon the counterparty/issuer’s credit ratings. Deposit/investment outstanding and maturity
profile are monitored regularly to ensure they are within the limits established for the counterparties/issuers. In addition, the Group actively
monitors the credit default swap levels of counterparties/issuers and their daily changes, and may on the basis of the observed levels and other
considerations adjust its exposure and/or maximum counterparty/issuer limit to the relevant counterparty.
As at the end of the reporting period, the maximum exposure to credit risk of the Group with respect to derivative financial assets and bank deposits
is represented respectively by the carrying amount of the derivative financial assets and the aggregate amount of deposits on its consolidated
statement of financial position. As at the end of the reporting period, there was no significant concentration risk to a single counterparty.
In addition, the Company also manages and controls its exposure to credit risks in respect of receivables as stated in note 29.
240
MTR Corporation
Annual Report 2020
241
Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis 28 Stores and Spares
As at 31 December 2020, stores and spares net of provision for obsolete stock of HK$19 million (2019: HK$21 million) amounted to HK$2,014 million
(2019: HK$1,844 million), of which HK$1,434 million (2019: HK$1,310 million) is expected to be consumed within 1 year and HK$580 million (2019:
HK$534 million) is expected to be consumed after 1 year. Stores and spares expected to be consumed after 1 year comprise mainly contingency
spares and stocks kept to meet cyclical maintenance requirements.
29 Debtors and Other Receivables
The Group’s credit policies in respect of receivables arising from its principal activities are as follows:
The majority of fare revenue from Hong Kong transport operation (except for that from the High Speed Rail as described in note 29 (ii) below)
(i)
is collected either through Octopus Cards with daily settlement on the next working day or in cash for other ticket types. A small portion of it is
collected through pre-sale agents which settle the amounts due within 21 days.
(ii)
In respect of the High Speed Rail, tickets are sold by the Company and other mainland train operators. The clearance centre of China Railway
Corporation administers the revenue allocation and settlement system of the Guangzhou-Shenzhen-Hong Kong Express Rail Link and allocates the
revenue of the High Speed Rail to the Company under a “section-based” approach with settlement in the following month.
Fare revenue from SZL4 is collected either through Shenzhen Tong Cards or QR code payment with daily settlement on the next working day
(iii)
or in cash for other ticket types. Fare revenue from MTRX is collected through a third party financial institution with settlement within 14 days and
sales through pre-sale agents are settled in the following month.
Franchise revenue in Australia is collected either daily or monthly depending on the revenue nature. The majority of the franchise revenue
(iv)
from operations in Stockholm is collected in the transaction month with the remainder being collected in the following month. Concession revenue
for TfL Rail/Elizabeth Line is collected once every 4 weeks. Service fees from Macao Light Rapid Transit Taipa Line are billed monthly with due dates
in accordance with the terms of the service agreement.
Rentals, advertising and telecommunication service fees are billed monthly with due dates ranging from immediately due to 50 days. Tenants
(v)
of the Group’s investment properties and station kiosks are required to pay three months’ rental deposit upon the signing of lease agreements.
Amounts receivable under interest rate and currency swap agreements with financial institutions are due in accordance with the terms of the
(vi)
respective agreements.
(vii) Consultancy service incomes are billed monthly for settlement within 30 days upon work completion or on other basis stipulated in the
consultancy contracts.
(viii) Debtors in relation to contracts and capital works entrusted to the Group, subject to any agreed retentions, are due within 30 days upon the
certification of work in progress.
Amounts receivable in respect of property development are due in accordance with the terms of relevant development agreements or sale
(ix)
and purchase agreements.
The ageing of debtors is analysed as follows:
in HK$ million
Amounts not yet due
Overdue by 30 days
Overdue by 60 days
Overdue by 90 days
Overdue by more than 90 days
Total debtors
Other receivables and contract assets
2020
3,343
209
80
24
126
3,782
9,531
13,313
2019
2,775
153
59
41
192
3,220
7,949
11,169
Included in other receivables as at 31 December 2020 was HK$3,387 million (2019: HK$2,813 million) in respect of property development profit in
Hong Kong distributable from stakeholding funds and receivables from property purchasers based on the terms of the development agreements
and sales and purchase agreements.
During the years ended 31 December 2017 and 2018, the Inland Revenue Department of Hong Kong (“IRD”) issued notices of assessment/additional
assessment for the years of assessment 2010/2011 to 2017/2018 following queries in connection with the tax deductibility of certain payments
relating to the Rail Merger.
242
MTR Corporation
Annual Report 2020
243
NOTES TO THE CONSOLIDATED ACCOUNTS 29 Debtors and Other Receivables (continued)
Based on the strength of advice from external senior counsels and tax advisor, the directors of the Company have determined to strongly contest
the assessments raised by the IRD. The Company has lodged objections against these tax assessments and has applied to hold over the additional
tax demanded. The IRD has agreed to the holdover of the additional tax demanded subject to the purchases of tax reserve certificates (“TRCs”)
amounting to HK$1,816 million and HK$462 million in 2017 and 2018 respectively. The purchases of TRCs do not prejudice the Company’s tax
position and the purchased TRCs were included in debtors and other receivables in the Group’s consolidated statement of financial position.
No additional tax provision has been made during the years ended 31 December 2019 and 2020 in respect of the above notices of assessment/
additional assessment.
On 23 March 2017, MTR Property (Tianjin) No.1 Company Limited (“MTR TJ No.1”) entered into a Framework Agreement comprising, inter alia, a
Share Transfer Agreement, with Tianjin Xingtai Jihong Real Estate Co., Ltd. (“TJXJRE”), a wholly-owned subsidiary of Beijing Capital Land Ltd., for the
disposal of MTR TJ No.1’s 49% equity interest in Tianjin TJ – Metro MTR Construction Company Limited (“Tianjin TJ – Metro MTR”) at a consideration
of RMB1.3 billion; and MTR TJ No.1’s conditional future acquisition of a shopping centre to be developed on the same site at a consideration of
RMB1.3 billion subject to the agreement of Tianjin TJ – Metro MTR. The disposal was completed on 10 July 2017 and consequently a prepayment
is recognised on the consolidated statement of financial position. A performance bond in the amount of RMB1.6 billion issued by a Hong Kong
licensed bank has been provided by TJXJRE to MTR TJ No.1 to guarantee its obligations under the Framework Agreement.
The Group’s exposure to credit risk on debtors and other receivables mainly relates to debtors relating to rental receivables in Hong Kong and
franchise fee/project fee receivables outside of Hong Kong. Given the Group’s policy is to receive rental deposits from tenants in Hong Kong and the
debtors in relation to the franchise fee/project fee receivables outside of Hong Kong are government related entities, the Group considers the credit
risk is low and the expected credit loss is immaterial.
As at 31 December 2020, all debtors and other receivables were expected to be recovered within one year except for amounts relating to deposits
and other receivables of HK$4,844 million (2019: HK$2,548 million) in the Group which were expected to be recovered after more than one year. The
nominal values less credit losses are not discounted as it is considered that the effect of discounting would not be significant.
Included in debtors and other receivables are the following amounts denominated in a currency other than the functional currency of the entity to
which they relate:
in million
Australian dollars
Renminbi
United States dollars
30 Amounts Due from Related Parties
in HK$ million
Amounts due from:
– HKSAR Government
– KCRC
– associates
2020
8
12
12
2019
8
66
8
2020
2019
2,504
2,859
99
5,462
1,783
1,159
99
3,041
As at 31 December 2020, the amount due from the HKSAR Government mainly related to the recoverable cost for the advanced works in relation
to the Shatin to Central Link, reimbursable costs for the essential public infrastructure works in respect of the South Island Line and Kwun Tong
Line Extension projects, reimbursement of the fare revenue difference shared by the HKSAR Government in relation to the “20% Rebate for Every
Octopus Trip” scheme, reimbursement of the fare revenue difference in relation to the “Public Transport Fare Concession Scheme for the Elderly and
Eligible Persons with Disabilities”, agency fee receivables and reimbursable costs in respect of West Rail property development (note 22C), as well as
receivables and retention for other entrustment and maintenance works.
The amount due from KCRC mainly related to the recoverable cost for certain capital works in accordance with the agreements in relation to the Rail
Merger, as well as amounts in relation to the High Speed Rail.
Given the amounts due from related parties mainly related to HKSAR Government and government related entity, the Group considers the credit
risk is low and the expected credit loss is immaterial.
As at 31 December 2020, all amounts due from related parties were expected to be recovered within one year except for HK$2,077 million
(2019: HK$1,156 million) which were expected to be recovered after more than one year. The carrying amounts of amounts due from the HKSAR
Government and other related parties are considered not significantly different from their fair values.
242
MTR Corporation
Annual Report 2020
243
Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis 31 Cash, Bank Balances and Deposits
in HK$ million
Deposits with banks and other financial institutions
Cash at banks and on hand
Cash, bank balances and deposits
Less: Bank deposits with more than three months to maturity when placed or pledged deposits
(note 32E)
Cash and cash equivalents in the cash flow statement
2020
10,869
10,037
20,906
(9,027)
11,879
2019
13,892
7,294
21,186
(12,840)
8,346
Included in cash, bank balance and deposits in the consolidated statement of financial position are the following amounts denominated in a
currency other than the functional currency of the entity to which they relate:
in million
Australian dollars
Euros
Japanese yen
Pound sterling
United States dollars
32 Loans and Other Obligations
A By Type
2020
33
13
957
210
442
2019
16
8
893
8
2
2020
2019
Carrying
amount
Fair value
Repayable
amount
Carrying
amount
Fair value
Repayable
amount
in HK$ million
Capital market instruments
Listed or publicly traded:
Debt issuance programme notes due during
2023 to 2047 (2019: due during 2026 to 2047)
18,382
21,555
18,575
8,712
10,110
8,852
Unlisted:
Debt issuance programme notes due during
2021 to 2055 (2019: due during 2020 to 2055)
Total capital market instruments
Bank loans
Lease liabilities
Others
Loans and other obligations
Short-term loans
Total
17,614
35,996
9,287
1,180
520
21,143
42,698
9,287
1,240
611
17,767
36,342
9,293
1,180
520
46,983
53,836
47,335
3,357
3,357
3,357
50,340
57,193
50,692
15,492
24,204
10,141
1,241
499
36,085
3,371
39,456
17,418
27,528
10,142
1,311
573
39,554
3,371
42,925
15,973
24,825
10,147
1,241
499
36,712
3,371
40,083
Others include non-defeased obligations under lease out/lease back transaction (note 19E).
The fair values are based on the discounted cash flows method which discounts the future contractual cash flows at the current market interest and
foreign exchange rates that is available to the Group for similar financial instruments. The carrying amounts of short-term loans approximated their
fair values. Details of the fair value measurement are disclosed in note 40.
244
MTR Corporation
Annual Report 2020
245
NOTES TO THE CONSOLIDATED ACCOUNTS
32 Loans and Other Obligations (continued)
A By Type (continued)
The amounts of borrowings, denominated in a currency other than the functional currency of the entity to which they relate, before and after
currency hedging activities are as follows:
Before hedging activities
After hedging activities
in million
Australian dollars
Japanese yen
Renminbi
United States dollars
2020
431
15,000
1,130
2,290
2019
431
15,000
–
1,130
B By Repayment Terms
2020
2020
2019
–
–
–
–
–
–
–
–
2019
in HK$ million
Loans and other obligations
Capital
market
instruments
Bank
loans
Lease
liabilities Others
Total
Capital
market
instruments
Bank
loans
Lease
liabilities Others
Total
Amounts repayable beyond 5 years
28,119
807
15
–
28,941
18,738
978
27
– 19,743
Amounts repayable within a period
of between 2 and 5 years
Amounts repayable within a period
of between 1 and 2 years
Amounts repayable within 1 year
1,732
2,024
192
520
4,468
2,847
2,952
788
499
7,086
2,430
4,061
231
6,231
322
651
–
2,983
–
10,943
413
2,827
217
6,000
194
232
–
–
824
9,059
36,342
9,293
1,180
520
47,335
24,825
10,147
1,241
499 36,712
Short-term loans
–
3,357
–
–
3,357
–
3,371
–
–
3,371
36,342
12,650
1,180
520
50,692
24,825
13,518
1,241
499 40,083
Less: Unamortised discount/
premium/finance
charges outstanding
Adjustment due to fair value
change of financial instruments
(286)
(60)
(6)
–
–
–
–
(292)
(148)
–
(60)
(473)
(6)
–
–
–
–
–
(154)
(473)
Total carrying amount of debt
35,996
12,644
1,180
520
50,340
24,204
13,512
1,241
499 39,456
The amounts repayable within 1 year in respect of capital market instruments and bank loans are included in long-term loans as these amounts are
intended to be refinanced on a long-term basis.
C Bonds and Notes Issued and Redeemed
Notes issued during the years ended 31 December 2020 and 2019 comprise:
in HK$ million
2020
2019
Principal
amount
Net consideration
received
Principal
amount
Net consideration
received
Debt issuance programme notes
14,642
14,511
1,183
1,183
During the year ended 31 December 2020, the Company issued HK$3,630 million, RMB720 million (or HK$782 million), and USD60 million
(or HK$465 million) of its unlisted debt securities in the respective currency (2019: HK$400 million and USD100 million (or HK$783 million) of its
unlisted debt securities) and RMB410 million (or HK$465 million) and USD1,200 million (or HK$9,300 million) of its listed debt securities in the
respective currency (2019: HK$nil).
As at 31 December 2020, there were outstanding debt securities issued by a wholly-owned subsidiary, MTR Corporation (C.I.) Limited (“MTRCI”). The
obligations of the debt securities issued by MTRCI are direct, unsecured and unsubordinated to the other unsecured obligations of MTRCI which
are unconditionally and irrevocably guaranteed by the Company. The obligations of the Company under the guarantee are direct, unsecured,
unconditional, and unsubordinated to other unsecured and unsubordinated obligations of the Company.
During the year ended 31 December 2020, the Group redeemed HK$2,348 million and USD100 million (or HK$783 million) of its unlisted debt
securities (2019: HK$500 million) and did not redeem any of its listed debt securities (2019: HK$nil).
244
MTR Corporation
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245
Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis 32 Loans and Other Obligations (continued)
D
At 31 December 2020 and 2019, the Group had lease liabilities as follows:
Lease Liabilities
in HK$ million
Within 1 year
After 1 year but within 2 years
After 2 years but within 5 years
After 5 years
Less: Total future interest expenses
Present value of lease obligations
2020
2019
Present value of
the minimum
lease payments
Total minimum
lease payments
Present value of
the minimum
lease payments
Total minimum
lease payments
651
322
192
15
529
1,180
704
343
206
16
565
1,269
(89)
1,180
232
194
788
27
1,009
1,241
276
235
876
28
1,139
1,415
(174)
1,241
E Guarantees and Pledges
(i)
There were no guarantees given by the HKSAR Government in respect of the loan facilities of the Group as at 31 December 2020 and 2019.
(ii)
As at 31 December 2020, MTR Corporation (Shenzhen) Limited has pledged the fare and non-fare revenue and the benefits of insurance
contracts in relation to Phase 2 of Shenzhen Metro Line 4 as security for the RMB1,653 million (2019: RMB1,847 million) bank loan facility granted to it.
Save as disclosed above and those disclosed elsewhere in the consolidated accounts, none of the other assets of the Group was charged or subject
to any encumbrance as at 31 December 2020.
33 Creditors, Other Payables and Provisions
in HK$ million
Creditors and accrued charges
Other payables and provisions (notes 21B(b)(iii)&(c)(iii))
Contract liabilities
A Creditors and Accrued Charges
The analysis of creditors by due dates is as follows:
in HK$ million
Due within 30 days or on demand
Due after 30 days but within 60 days
Due after 60 days but within 90 days
Due after 90 days
Rental and other refundable deposits
Accrued employee benefits
The Group’s general payment terms are one to two months from the invoice date.
2020
19,419
14,974
2,444
36,837
2020
8,024
1,450
638
4,844
14,956
2,989
1,474
19,419
2019
19,315
11,787
2,213
33,315
2019
7,157
1,559
774
4,978
14,468
2,857
1,990
19,315
246
MTR Corporation
Annual Report 2020
247
NOTES TO THE CONSOLIDATED ACCOUNTS
33 Creditors, Other Payables and Provisions (continued)
A Creditors and Accrued Charges (continued)
Movements in contract liabilities of the Group during the year ended 31 December are as follows:
in HK$ million
Balance as at 1 January
Increase in contract liabilities as a result of billing in advance
Decrease in contract liabilities as a result of revenue recognised during the year that was included
in the contract liabilities at the beginning of the year
Exchange differences
Balance as at 31 December
2020
2,213
981
(836)
86
2,444
2019
2,116
1,520
(1,410)
(13)
2,213
Contract liabilities mainly arise from construction contracts and other project arrangements, when the Group receives a deposit before the activity
commences and until the revenue recognised on the project exceeds the amount of the deposit received. The payment terms are negotiated on a
case by case basis with customers.
The nominal values of creditors and accrued charges are not significantly different from their fair values.
Included in creditors and accrued charges are the following amounts denominated in a currency other than the functional currency of the entity to
which they relate:
in million
Australian dollars
Euros
Pound sterling
Renminbi
United States dollars
2020
9
18
4
113
28
2019
9
9
3
8
12
B Other Payables
Other payables comprised contract retentions and deferred income. Deferred income related to the surplus amounts of payments received from
property developers in excess of the balance in property development in progress, as well as the unutilised government subsidy for SZL4 operation.
As at 31 December 2020, all of the creditors and other payables were expected to be settled or recognised as income within one year except for
HK$16,043 million (2019: HK$16,204 million), including contract liabilities of HK$963 million (2019: HK$801 million), of the Group which were
expected to be settled or recognised as income after one year. The amounts due after one year for the Group as at 31 December 2020 mainly relate
to rental deposits received from investment property and station kiosk tenants and advance income received, majority of which are due to be repaid
within three years. The Group considers the effect of discounting would be immaterial.
246
MTR Corporation
Annual Report 2020
247
Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis
34 Amounts Due to Related Parties
in HK$ million
Amounts due to:
– HKSAR Government
– KCRC
– associates
2020
94
301
58
453
2019
117
2,873
–
2,990
The amount due to the HKSAR Government as at 31 December 2020 relates to land administrative fees in relation to railway extensions.
The amount due to KCRC as at 31 December 2020 mainly relates to the accrued portion of the fixed annual payment and variable annual payment
that is expected to be settled within 12 months.
35 Obligations under Service Concession
Movements of the Group’s obligations under service concessions are as follows:
in HK$ million
Balance as at 1 January
Less: Net amount repaid during the year
Exchange differences
Balance as at 31 December
2020
10,350
(65)
10
2019
10,409
(56)
(3)
10,295
10,350
The outstanding balances as at 31 December 2020 and 2019 are repayable as follows:
in HK$ million
2020
Interest
expense
relating
to future
periods
Present
value of
payment
obligations
Total
payment
obligations
Present
value of
payment
obligations
2019
Interest
expense
relating
to future
periods
Total
payment
obligations
Amounts repayable beyond 5 years
9,904
14,346
24,250
9,978
15,013
24,991
Amounts repayable within a period of
between 2 and 5 years
Amounts repayable within a period of
between 1 and 2 years
Amounts repayable within 1 year
247
1,976
2,223
238
1,990
2,228
74
70
688
692
762
762
69
65
692
696
761
761
10,295
17,702
27,997
10,350
18,391
28,741
36 Loans from Holders of Non-controlling Interests
Loans from holders of non-controlling interests as at 31 December 2020 mainly represents the portion of total shareholder loan of AUD60 million
(HK$359 million) (2019: AUD60 million (HK$328 million)) granted to Metro Trains Australia Pty. Ltd. (“MTA”) by the holders of its non-controlling
interests. The loan carries an interest rate of 6.2% per annum and is repayable at the discretion of MTA or on 1 December 2024, whichever is earlier.
248
MTR Corporation
Annual Report 2020
249
NOTES TO THE CONSOLIDATED ACCOUNTS 37 Income Tax in the Consolidated Statement of Financial Position
A
Current taxation in the consolidated statement of financial position includes:
in HK$ million
Balance relating to Hong Kong Profits Tax
Balance relating to tax outside Hong Kong
2020
898
106
1,004
2019
1,904
120
2,024
B Deferred Tax Assets and Liabilities Recognised
The components of deferred tax assets and liabilities recognised in the consolidated statement of financial position and the movements during the
year are as follows:
Deferred tax arising from
Depreciation
allowances
in excess
of related
depreciation
Revaluation
of properties
Provision
and other
temporary
differences
Cash flow
hedges
Tax losses
Total
in HK$ million
2020
Balance as at 1 January 2020
13,007
778
(123)
Charged/(credited) to consolidated profit and
loss account
(Credited)/charged to reserves
Exchange differences
Balance as at 31 December 2020
2019
Balance as at 1 January 2019
Charged/(credited) to consolidated profit and
loss account
Charged to reserves
Acquisition of subsidiary
Exchange differences
Balance as at 31 December 2019
in HK$ million
Net deferred tax assets
Net deferred tax liabilities
356
–
2
13,365
12,385
620
–
–
2
13,007
(1)
(54)
–
723
759
(5)
24
–
–
778
(292)
141
(40)
(314)
(183)
(76)
139
–
(3)
(123)
43
–
(14)
–
29
(110)
13,595
(20)
–
(18)
(148)
43
73
(56)
13,655
(5)
(103)
12,853
–
48
–
–
43
(1)
–
(12)
6
538
211
(12)
5
(110)
13,595
2020
(470)
14,125
13,655
2019
(134)
13,729
13,595
The Group has not recognised deferred tax assets in respect of some of its subsidiaries’ cumulative tax losses of HK$410 million (2019:
C
HK$326 million) as it is not probable that future taxable profits against which the losses can be utilised will be available in the relevant tax
jurisdictions and entities.
248
MTR Corporation
Annual Report 2020
249
Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis
38 Share Capital, Shares Held for Executive Share Incentive Scheme,
Company-level Movements in Components of Equity and Capital
Management
Share Capital
A
Ordinary shares, issued and fully paid:
At 1 January
6,157,948,911
58,804
6,139,485,589
57,970
2020
2019
Number of shares
HK$ million
Number of shares
HK$ million
Shares issued in respect of scrip dividend of
2019/2018 final ordinary dividend
Shares issued in respect of scrip dividend of
2020/2019 interim ordinary dividend
Vesting of shares of Executive Share Incentive
Scheme
Shares issued under the share option scheme
2,547,500
18,426,649
692
13,707,539
2,004,813
–
81
6
83
1,494,283
–
3,261,500
654
71
5
104
At 31 December
6,180,927,873
59,666
6,157,948,911
58,804
In accordance with section 135 of the Companies Ordinance, the ordinary shares of the Company do not have a par value.
Shares Held for Executive Share Incentive Scheme
B
During the year ended 31 December 2020, the Company awarded Performance Shares and Restricted Shares under the Company’s Executive Share
Incentive Scheme to certain eligible employees of the Company (note 41(ii)). In this regard, a total of 6,950 Performance Shares (2019: 244,650) and
2,334,750 Restricted Shares (2019: 2,062,150) were awarded and accepted by the grantees on 8 April 2020 (2019: 1 April 2019 and 8 April 2019). The
fair values of these Award Shares were HK$41.90 per share (2019: HK$48.90 per share on 1 April 2019 and HK$48.40 per share on 8 April 2019).
During the year ended 31 December 2020, the Trustee of the Executive Share Incentive Scheme, pursuant to the terms of the rules and the trust
deed of the Executive Share Incentive Scheme, purchased on the Hong Kong Stock Exchange a total of 2,020,000 Ordinary Shares (2019: 1,870,000
Ordinary Shares) of the Company for a total consideration of approximately HK$86 million (2019: HK$88 million). During the year ended
31 December 2020, 58,339 Ordinary Shares of the Company (2019: 64,088 Ordinary Shares) were issued to the Executive Share Incentive Scheme
in relation to scrip dividend issued amounting to HK$3 million (2019: HK$3 million).
During the year ended 31 December 2020, 1,984,400 shares (2019: 2,230,420 shares) were transferred to the awardees under the Executive Share
Incentive Scheme upon vesting. The total cost of the vested shares was HK$90 million (2019: HK$93 million). During the year ended 31 December
2020, HK$6 million (2019: HK$5 million) was credited to share capital in respect of vesting of shares whose fair values at the grant date were higher
than the costs of the vested shares. During the year ended 31 December 2020, 283,673 award shares (2019: 174,697 award shares) were lapsed/
forfeited.
As at 31 December 2020, taking into account the shares acquired out of the dividends from the shares held under the trust, there were
5,947,665 shares (2019: 5,853,726) held in trust under the Executive Share Incentive Scheme (excluding shares vested but not yet transferred
to awardees).
C New Shares Issued and Fully Paid Up during the Year
Employee share options exercised:
– 2007 Share Option Scheme
An analysis of the Company’s outstanding share options as at 31 December 2020 is disclosed in note 41.
Number of shares
Weighted average
exercise price
HK$
2,547,500
30.146
250
MTR Corporation
Annual Report 2020
251
NOTES TO THE CONSOLIDATED ACCOUNTS
38 Share Capital, Shares Held for Executive Share Incentive Scheme,
Company-level Movements in Components of Equity and Capital
Management (continued)
D
(note 2E(ii)).
The fixed assets revaluation reserve is used to deal with the surpluses or deficits arising from the revaluation of self-occupied buildings
The hedging reserve comprises the effective portion of the cumulative net change in the fair value of hedging instruments used in cash flow hedges
pending subsequent recognition of the hedged cash flow in accordance with the accounting policy adopted for cash flow hedges as explained in
note 2V(ii).
The employee share-based capital reserve comprises the share-based payment expenses recognised in respect of share options under the share
option scheme which are yet to be exercised, and in respect of award shares under the Executive Share Incentive Scheme granted which are yet
to be vested, as explained in the accounting policy under note 2W(iii). The amount will either be transferred to the share capital account when the
option is exercised or when the award share is vested, or be released directly to retained profits if the option is lapsed.
The exchange reserve comprises all foreign exchange differences arising from the translation of the accounts of foreign enterprises. The reserve is
dealt with in accordance with the accounting policy set out in note 2AC.
Apart from retained profits, the other reserves are not available for distribution to shareholders because they do not constitute realised profits. In
addition, the Company considers the cumulative surpluses on revaluation of investment properties of HK$51,935 million (2019: HK$60,964 million)
included in retained profits of the Company are non-distributable as they do not constitute realised profits. As at 31 December 2020, the Company
considers that the total amount of reserves of the Company available for distribution to shareholders amounted to HK$54,347 million (2019:
HK$56,546 million).
Included in the Group’s retained profits as at 31 December 2020 is an amount of HK$2,656 million (2019: HK$2,431 million), being the retained
profits attributable to the associates and joint venture.
Capital Management
E
The Group’s primary objectives in managing capital are to safeguard its ability to continue as a going concern, and to generate sufficient profit to
maintain growth and provide an adequate return to its shareholders.
The Group manages the amount of capital in proportion to risk, and makes adjustments to its capital structure through the amount of dividend
payment to shareholders, issuance of scrip and new shares, and managing its debt portfolio in conjunction with projected financing requirement.
The Financial Secretary Incorporated of the HKSAR Government is the majority shareholder of the Company holding 4,634,173,932 shares as at
31 December 2020, representing 74.98% of total equity interest in the Company.
The Group monitors capital on the basis of the net debt-to-equity ratio, which is calculated based on net borrowings as a percentage of the total
equity, where net borrowings are represented by the aggregate of loans and other obligations, obligations under service concession and loans from
holders of non-controlling interests net of cash and cash equivalents and bank medium term notes. As at 31 December 2020, the Group’s net
debt-to-equity ratio is 22.5% (2019: 15.4%).
Fasttrack Insurance Ltd. is required to maintain a minimum level of shareholders’ fund based on the Bermuda Insurance Act. MTR Corporation
(Shenzhen) Limited is required to maintain a registered capital at or above 40% of the total investment for the SZL4 project in accordance with
the concession agreement. MTR Property Development (Shenzhen) Company Limited is required to maintain a registered capital at or above 33%
of the total investment based on Jianfang [2015] No. 122. Metro Trains Melbourne Pty. Ltd. is required to maintain total shareholders’ funds at a
specified amount in accordance with the franchise agreement. All the Group’s subsidiaries in Sweden are required to maintain total shareholders’
fund at or above 50% of their respective registered share capital based on the Swedish Companies Act. MTR Travel Limited is required to maintain
a certain level of paid-up capital in order to maintain membership of the Travel Industry Council of Hong Kong. As at 31 December 2020, all these
capital requirements were met. Apart from these, neither the Company nor any of its other subsidiaries are subject to externally imposed capital
requirements.
250
MTR Corporation
Annual Report 2020
251
Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis 38 Share Capital, Shares Held for Executive Share Incentive Scheme,
Company-level Movements in Components of Equity and Capital
Management (continued)
Company-level Movements in Components of Equity
F
The reconciliation between the opening and closing balances of each component of the Group’s consolidated equity is set out in the consolidated
statement of changes in equity. Details of the changes in the Company’s individual components of equity between the beginning and the end of the
year are set out below:
Other reserves
Shares
held for
Executive
Share
Incentive
Scheme
Note
Share
capital
Fixed
assets
revaluation
reserve
Employee
share-based
capital
reserve
Hedging
reserve
Retained
profits
Total
equity
in HK$ million
2020
Balance as at 1 January 2020
46
58,804
(263)
3,936
Loss for the year
Other comprehensive income for the year
Total comprehensive loss for the year
2019 final ordinary dividend
Shares issued in respect of scrip dividend of
2019 final ordinary dividend
2020 interim ordinary dividend
Shares issued in respect of scrip dividend of
2020 interim ordinary dividend
Shares purchased for Executive Share
Incentive Scheme
Vesting and forfeiture of award shares of
Executive Share Incentive Scheme
Employee share-based payments
Employee share options exercised
–
–
–
–
692
–
81
–
6
–
83
–
–
–
–
(2)
–
(1)
(86)
90
–
–
–
(274)
(274)
–
–
–
–
–
–
–
–
175
–
(227)
(227)
–
–
–
–
–
–
–
–
160
117,510
180,322
–
–
–
–
–
–
–
–
(94)
121
(6)
(4,311)
(4,311)
715
214
(3,596)
(4,097)
(6,036)
(6,036)
2
692
(1,545)
(1,545)
1
–
(2)
–
–
81
(86)
–
121
77
Balance as at 31 December 2020
46
59,666
(262)
3,662
(52)
181
106,334
169,529
2019
Balance as at 1 January 2019
57,970
(265)
3,815
Profit for the year
Other comprehensive income for the year
Total comprehensive income for the year
Amounts transferred from hedging
reserve to initial carrying amount of
hedged items
2018 final ordinary dividend
Shares issued in respect of scrip dividend of
2018 final ordinary dividend
2019 interim ordinary dividend
Shares issued in respect of scrip dividend of
2019 interim ordinary dividend
Shares purchased for Executive Share
Incentive Scheme
Vesting and forfeiture of award shares of
Executive Share Incentive Scheme
Employee share-based payments
Employee share options exercised
Balance as at 31 December 2019
46
–
–
–
–
–
654
–
71
–
5
–
104
58,804
–
–
–
–
–
(2)
–
(1)
(88)
93
–
–
–
121
121
–
–
–
–
–
–
–
–
–
(263)
3,936
175
(99)
–
271
271
3
–
–
–
–
–
–
–
–
142
113,376
174,939
–
–
–
–
–
–
–
–
–
(96)
122
(8)
160
10,805
702
11,507
10,805
1,094
11,899
–
3
(5,835)
(5,835)
2
654
(1,539)
(1,539)
1
–
(2)
–
–
71
(88)
–
122
96
117,510
180,322
252
MTR Corporation
Annual Report 2020
253
NOTES TO THE CONSOLIDATED ACCOUNTS
39 Other Cash Flow Information
A
payment from recurrent businesses to cash generated from operations is as follows:
Reconciliation of the Group’s operating profit before Hong Kong property development, depreciation, amortisation and variable annual
in HK$ million
2020
2019
Operating profit before Hong Kong property development, depreciation, amortisation and
variable annual payment from recurrent businesses
Adjustments for non-cash items
Operating profit before working capital changes
Increase in debtors and other receivables
Increase in stores and spares
(Decrease)/increase in creditors and other payables
Cash generated from operations
B
Reconciliation of the Group’s liabilities arising from financing activities is as follows:
5,194
1,519
6,713
(3,583)
(119)
(463)
2,548
15,351
1,836
17,187
(1,372)
(188)
1,493
17,120
in HK$ million
2020
At 1 January 2020
Changes from financing cash flows:
– Proceeds from loans and capital
market instruments
– Repayment of loans and capital
market instruments
– Capital element of lease rentals paid
– Interest and finance charges
Exchange differences
Other changes:
– Adjustment due to fair value change
of financial instruments
– Recognition of lease liabilities
– Interest and finance charges
Loans and other obligations
Capital
market
instruments
Bank
loans
Lease
liabilities
Others
Short-term
loans
Interest and
finance
charges
payables
Total
24,204
10,141
1,241
499
3,371
145
39,601
14,511
12,287
(3,130)
(13,274)
–
–
–
–
11,381
(987)
–
–
(232)
–
(232)
–
–
–
–
–
4
133
107
(4)
407
–
–
407
–
–
–
–
–
64
–
64
–
–
25
25
74
(91)
–
–
(17)
3
–
–
–
–
–
–
–
(1,039)
(1,039)
26,872
(16,495)
(232)
(1,039)
9,106
(7)
236
–
–
1,051
1,051
407
64
1,076
1,547
At 31 December 2020
35,996
9,287
1,180
520
3,357
150
50,490
252
MTR Corporation
Annual Report 2020
253
Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis
39 Other Cash Flow Information (continued)
B
Reconciliation of the Group’s liabilities arising from financing activities is as follows (continued):
Loans and other obligations
Capital
market
instruments
Bank
loans
Lease
liabilities
Others
Short-term
loans
Interest and
finance
charges
payables
Total
23,541
11,312
1,315
478
4,424
113
41,183
in HK$ million
2019
At 1 January 2019
Changes from financing cash flows:
– Proceeds from loans and capital
market instruments
– Repayment of loans and capital
market instruments
– Capital element of lease rentals paid
– Interest and finance charges
Exchange differences
Other changes:
– Adjustment due to fair value change
of financial instruments
– Recognition of lease liabilities
– Interest and finance charges
1,182
10,477
(500)
(11,619)
–
–
–
–
682
(1,142)
–
–
(165)
–
(165)
–
–
–
–
–
(3)
(42)
(54)
(2)
(16)
–
–
(16)
13
–
–
13
–
145
–
145
–
–
23
23
–
(1,053)
–
–
(1,053)
–
–
–
–
–
At 31 December 2019
24,204
10,141
1,241
499
3,371
Total Cash Outflow for Leases
C
Amounts included in the cash flow statement for leases comprise the following:
in HK$ million
Within operating cash flows
Within financing cash flows
These amounts relate to the leases of the following:
in HK$ million
Buildings
Plant and equipment
–
–
–
(1,054)
(1,054)
11,659
(13,172)
(165)
(1,054)
(2,732)
(8)
(109)
–
–
1,094
1,094
145
(3)
145
1,117
1,259
39,601
2020
36
288
324
2020
197
127
324
2019
50
213
263
2019
189
74
263
254
MTR Corporation
Annual Report 2020
255
NOTES TO THE CONSOLIDATED ACCOUNTS
40 Fair Value Measurement
In accordance with HKFRS 13, Fair Value Measurement, the level into which a fair value measurement is classified is determined with reference to the
observability and significance of the inputs used in the valuation technique as follows:
Level 1: Fair value measured using only Level 1 inputs, i.e. unadjusted quoted prices in active markets for identical assets or liabilities at the
measurement date
Level 2: Fair value measured using Level 2 inputs, i.e. observable inputs which fail to meet Level 1, and not using significant unobservable inputs.
Unobservable inputs are inputs for which market data are not available
Level 3: Fair value measured using significant unobservable inputs
Fair Value Measurements of Fixed Assets
A
All of the Group’s investment properties and self-occupied buildings measured at fair value on a recurring basis are categorised as Level 3 of the fair
value hierarchy.
During the year ended 31 December 2020, there were no transfers between Level 1 and Level 2, or transfers into or out of Level 3 in respect of the
Group’s investment properties and self-occupied buildings. The Group’s policy is to recognise transfers between levels of fair value hierarchy as at
the end of the reporting period in which they occur.
All the Group’s investment properties and self-occupied buildings were revalued as at 31 December 2020 and 2019 by independent qualified
surveyors. The Group’s senior management have discussion with the surveyors on the valuation assumptions and valuation results when the
valuation is performed at each interim and annual reporting date.
The fair value of all the Group’s self-occupied buildings is determined on a recurring basis using primarily the direct comparison approach assuming
sale of properties in their existing state with vacant possession.
The property interests of all the shopping malls and office accommodation held by the Group as investment properties have been valued using the
income capitalisation approach. Under this approach, the market value is derived from the capitalisation of the rental revenue to be received under
existing tenancies and the estimated full market rental value to be received upon expiry of the existing tenancies with reference to the market rental
levels prevailing as at the date of valuation by an appropriate single market yield rate. The range of market yield rate adopted for the valuation of
major investment properties as at 31 December 2020 was 3.5% - 5.75% (2019: 3.5% - 5.75%) with a weighted average of 4.8% (2019: 4.8%). The fair
value measurement is negatively correlated to the market yield rate.
The movements of investment properties during the year ended 31 December 2020 are shown in note 19A. All the fair value adjustment related to
investment properties held as at 31 December 2020 was recognised under “Investment property revaluation (loss)/gain” in the consolidated profit
and loss account.
B
(i)
Fair Value Measurements of Financial Instruments
Financial Assets and Liabilities Carried at Fair Value
All of the Group’s investments in debt securities were carried at fair value using Level 1 measurements, and the fair value of these financial assets
as at 31 December 2020 was HK$214 million (2019: HK$386 million). The derivative financial instruments were carried at fair value using Level 2
measurements. As at 31 December 2020, the fair values of derivative financial assets and derivative financial liabilities were HK$480 million (2019:
HK$198 million) and HK$381 million (2019: HK$408 million) respectively. The investments in unlisted equity securities were carried at fair value using
Level 3 measurements.
The discounted cash flow method, which discounts the future contractual cash flows at the current market interest rates, is the main valuation
technique used to determine the fair value of the Group’s borrowings and derivative financial instruments. For interest rate swaps, cross currency
swaps and foreign exchange forward contracts, the discount rates used were derived from the swap curves of the respective currencies and the
cross currency basis curves of the respective currency pairs at the end of the reporting period. Closing exchange rates at the end of the reporting
period were used to convert value in foreign currency to local currency.
During the year, the additions to the investments in unlisted equity securities amounted to HK$254 million (2019: HK$nil). As at 31 December
2020, the fair value of investments in equity securities was HK$254 million (2019: HK$nil). The fair value of the Group’s investments in unlisted
equity securities is determined based on the adjusted net asset method. The significant unobservable input includes the fair value of the individual
assets and liabilities (recognised and unrecognised). The fair value measurement is positively correlated to the fair value of the individual assets
and liabilities (recognised and unrecognised). As at 31 December 2020, it is estimated that a 5-percent increase/decrease in fair value of the total
individual assets and liabilities (recognised and unrecognised), with all other variables held constant, would decrease/increase the Group’s loss after
tax by approximately HK$13 million/HK$13 million.
At the end of each interim and annual reporting period, valuations are performed for the financial instruments which are categorised into Level 3 of
the fair value hierarchy, and the valuation assumptions and results are reviewed by the Group’s management accordingly.
During the years ended 31 December 2020 and 2019, there were no transfers between Level 1 and Level 2, or transfers into or out of Level 3. The
Group’s policy is to recognise transfers between levels of fair value hierarchy as at the end of the reporting period in which they occur.
254
MTR Corporation
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255
Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis 40 Fair Value Measurement (continued)
B
(ii)
Fair Value Measurements of Financial Instruments (continued)
Financial Assets and Liabilities Not Carried at Fair Value
The carrying amounts of the Group’s financial assets and liabilities not carried at fair value are not materially different from their fair values as at
31 December 2020 and 2019 except for capital market instruments and other obligations, for which their carrying amounts and fair values are
disclosed below:
in HK$ million
Capital market instruments
Other obligations
At 31 December 2020
At 31 December 2019
Carrying amount
Fair value
Carrying amount
Fair value
35,996
1,700
42,698
1,851
24,204
1,740
27,528
1,884
The above fair value measurement is categorised as Level 2. The discounted cash flow method, which discounts the future contractual cash flows
at the current market interest rates, is the main valuation technique used to determine the fair value of the Group’s capital market instruments and
other obligations. The discount rates used were derived from the swap curves of the respective currencies at the end of the reporting period. Closing
exchange rates at the end of the reporting period were used to convert value in foreign currency to local currency.
41 Share-based Payments
Equity-settled Share-based Payments
The Group granted share options under share option scheme and share awards under Executive Share Incentive Scheme to its Members of the
Executive Directorate and certain employees. As at 31 December 2020, the Company maintained the 2007 Share Option Scheme and the Executive
Share Incentive Scheme. Details of the schemes are as follows:
(i)
2007 Share Option Scheme
Following the expiry of the New Joiners Share Option Scheme (the “New Option Scheme”) in May 2007, the 2007 Share Option Scheme (the “2007
Option Scheme”) was submitted and approved at the 2007 Annual General Meeting to enhance the Company’s ability to attract the best available
personnel, to retain and motivate critical and key employees, to align their interest to the long-term success of the Company and to provide them
with fair and market competitive remuneration. Under the Rules of the 2007 Option Scheme, a maximum of 277,461,072 shares may be issued
pursuant to the exercise of options granted after 7 June 2007 under all share option schemes of the Company including the 2007 Option Scheme.
Options granted will be vested in respect of their underlying shares not less than 1 year from the date on which the relevant option is offered. The
exercise price of any option granted under the 2007 Option Scheme is to be determined by the Company upon the offer of grant of the option
and the exercise price should not be less than the greatest of (i) the average closing price of an MTR share for the five business days immediately
preceding the day of offer of such option; (ii) the closing price of an MTR share on the day of offer of such option, which must be a business day; and
(iii) the nominal value of an MTR share.
Subject to the rules of the 2007 Option Scheme, the Company may, from time to time during the scheme period, offer to grant share options to any
eligible employees at its absolute discretion. Under the 2007 Option Scheme, the date of grant is defined as the date of acceptance of the offer to
grant the option. The 2007 Option Scheme expired in June 2014. All the share options granted were vested prior to 2018.
The following table summarises the outstanding share options as at 31 December 2020 granted under the 2007 Option Scheme since inception:
Date of grant
Number of share options
Exercise price
HK$
Exercisable period
2014 Award
30 May 2014
2,347,500
28.65
on or prior to 23 May 2021
256
MTR Corporation
Annual Report 2020
257
NOTES TO THE CONSOLIDATED ACCOUNTS 41 Share-based Payments (continued)
Equity-settled Share-based Payments (continued)
Movements in the number of share options outstanding and their related weighted average exercise prices were as follows:
Outstanding as at 1 January
Exercised during the year
Forfeited during the year
Outstanding as at 31 December
Exercisable as at 31 December
2020
2019
Number of
share options
Weighted average
exercise price
HK$
Number of
share options
Weighted average
exercise price
HK$
4,909,000
(2,547,500)
(14,000)
2,347,500
2,347,500
29.426
30.146
28.650
28.650
28.650
8,170,500
(3,261,500)
–
4,909,000
4,909,000
29.441
29.465
–
29.426
29.426
The weighted average closing price in respect of the share options exercised during the year was HK$42.138 (2019: HK$47.750).
Share options outstanding at the end of the reporting period had the following exercise prices and remaining contractual lives:
Exercise price
HK$31.40
HK$28.65
2020
2019
Number of
share options
Remaining
contractual life
years
Number of
share options
Remaining
contractual life
years
–
2,347,500
2,347,500
–
0.4
1,385,500
3,523,500
4,909,000
0.3
1.4
During the year ended 31 December 2020, no expense was recognised for the equity-settled share-based payments relating to the 2007 Share
Option Scheme (2019: HK$nil).
(ii)
Executive Share Incentive Scheme
On 15 August 2014, the Board of the Company approved the adoption of the Executive Share Incentive Scheme, following the expiry of the
2007 Option Scheme on 6 June 2014. The purposes of the Executive Share Incentive Scheme are to retain management and key employees, to
align participants’ interest with the long-term success of the Company and to drive the achievement of strategic objectives of the Company. The
Executive Share Incentive Scheme took effect on 1 January 2015 for a term of 10 years, under which an award holder may be granted an award of
Restricted Shares and/or Performance Shares (collectively known as “Award Shares”). Restricted Shares are awarded to selective eligible employees.
Performance Shares are awarded to eligible employees which vest subject to the performance of the Company over a pre-determined performance
period, assessed by reference to such Board-approved performance metric and in respect of such performance period and any other performance
conditions as determined by the Remuneration Committee from time to time.
Subject to the Scheme Rules, the Remuneration Committee shall determine the vesting criteria and conditions or periods for the Award Shares to
be vested, subject to review from time to time. An award of Restricted Shares will vest ratably over three years in equal tranches (unless otherwise
determined by the Remuneration Committee). An award of Performance Shares will vest upon certification by the Remuneration Committee that
the relevant performance metric and performance conditions have been achieved. The Executive Share Incentive Scheme will be administered
by the Company in accordance with the Scheme Rules and the Company has entered into a Trust Deed with the Trustee for the purpose of
implementing the Scheme. The number of Award Shares will be acquired in the market at the cost of the Company by the Trustee. Award Shares will
be held on trust by the Trustee until the end of each vesting period.
256
MTR Corporation
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257
Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis 41 Share-based Payments (continued)
Equity-settled Share-based Payments (continued)
As at 31 December 2020, the following awards of shares with vesting period falling in the years ended 31 December 2019 and 2020 were offered to
Members of the Executive Directorate and selected employees of the Company under the Executive Share Incentive Scheme:
Number of
Award Shares granted
Average fair
value per share
Vesting period
Date of award
8 April 2016
19 August 2016
10 April 2017
16 March 2018
10 April 2018
1 April 2019
8 April 2019
Restricted
Shares
Performance
Shares
2,401,150
71,428
2,245,200
80,000
–
–
–
–
2,208,950
1,772,900
120,000
1,942,150
–
244,650
HK$
38.65
42.50
44.45
43.70
42.80
48.90
48.40
From
1 April 2016
15 August 2016
3 April 2017
16 March 2018
3 April 2018
1 April 2019
1 April 2019
8 April 2020
2,334,750
6,950
41.90
1 April 2020
Movement in the number of Award Shares outstanding was as follows:
To
1 April 2019
15 August 2019
3 April 2020
31 March 2019
3 April 2021 (Restricted Shares)
3 April 2021 (Performance Shares)
31 March 2022
1 April 2022 (Restricted Shares)
3 April 2021 (Performance Shares)
1 April 2023 (Restricted Shares)
3 April 2021 (Performance Shares)
Outstanding as at 1 January
Awarded during the year
Vested during the year
Forfeited during the year
Outstanding as at 31 December
2020
2019
Number of Award Shares
Number of Award Shares
5,659,978
2,341,700
(1,984,400)
(283,673)
5,733,605
5,758,295
2,306,800
(2,230,420)
(174,697)
5,659,978
Award Shares outstanding at 31 December 2020 had the following remaining vesting periods:
Award Shares
Restricted Shares
10 April 2018
1 April 2019
8 April 2019
8 April 2020
Performance Shares
10 April 2018
8 April 2019
8 April 2020
Remaining vesting period
years
Number of Award Shares
0.26
1.25
1.25
2.25
0.26
0.25
0.25
543,990
120,000
1,122,465
2,212,550
1,493,500
234,150
6,950
The details of the Executive Share Incentive Scheme are also disclosed in the Remuneration Report.
During the year ended 31 December 2020, the equity-settled share-based payments relating to the Executive Share Incentive Scheme recognised as
an expense amounted to HK$121 million (2019: HK$122 million).
258
MTR Corporation
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259
NOTES TO THE CONSOLIDATED ACCOUNTS 42 Retirement Schemes
The Group operates a number of retirement schemes in Hong Kong, the Mainland of China, Macao, United Kingdom, Sweden and Australia. The
assets of these schemes are held under the terms of separate trust arrangements so that the assets are kept separate from those of the Group. The
majority of the Group’s employees are covered by the retirement schemes operated by the Company.
A Retirement Schemes Operated by the Company in Hong Kong
The Company operated four retirement schemes under trust in Hong Kong during the year ended 31 December 2020, including the MTR
Corporation Limited Retirement Scheme (the “MTR Retirement Scheme”), the MTR Corporation Limited Provident Fund Scheme (the “MTR Provident
Fund Scheme”) and two Mandatory Provident Fund (“MPF”) Schemes, the “MTR MPF Scheme” and the “KCRC MPF Scheme”.
Currently, new eligible employees can choose between the MTR Provident Fund Scheme and the MTR MPF Scheme while the MTR MPF Scheme
covers employees who did not opt for or who are not eligible to join the MTR Provident Fund Scheme.
(i)
MTR Retirement Scheme
The MTR Retirement Scheme is a defined benefit scheme registered under the Occupational Retirement Schemes Ordinance (Cap. 426) (the “ORSO”)
and has been granted with an MPF Exemption Certificate by the Mandatory Provident Fund Schemes Authority (the “MPFA”).
The MTR Retirement Scheme has been closed to new employees from 1 April 1999 onwards. It is administrated in accordance with the Trust Deed
and Rules by the Board of Trustees, comprising management and employee representatives, and independent non-employer trustees. It provides
benefits based on the greater of a multiple of final salary times service and a factor times the accumulated member contributions with investment
returns. Members’ contributions are based on fixed percentages of base salary. The Company’s contributions are determined by reference to an
annual actuarial valuation carried out by an independent actuarial consulting firm. As at 31 December 2020, the total number of member was
3,100 (2019: 3,356). In 2020, members contributed HK$65 million (2019: HK$69 million) and the Company contributed HK$253 million (2019:
HK$351 million) to the MTR Retirement Scheme. The net asset value of the MTR Retirement Scheme excluding the portion attributable to members’
voluntary contributions as at 31 December 2020 was HK$9,855 million (2019: HK$9,417 million).
The actuarial valuations as at 31 December 2019 and 2020 to determine the accounting obligations in accordance with HKAS 19, Employee benefits,
were carried out by an independent actuarial consulting firm, Willis Towers Watson, which is represented by Ms Wing Lui, a Fellow of the Society of
Actuaries of the United States of America, using the Projected Unit Credit Method. The results of the valuation are shown in note 43.
The actuarial valuations as at 31 December 2019 and 2020 to determine the cash funding requirements were also carried out by Ms Wing Lui of Willis
Towers Watson using the Attained Age Method. The principal actuarial assumptions used for the valuation as at 31 December 2020 included a
long-term rate of investment return net of salary increases of 0.25% (2019: -0.25%) per annum, together with appropriate allowances for expected
rates of mortality, turnover and retirement. As at the valuation date of 31 December 2020:
the MTR Retirement Scheme was solvent, covering 113.8% (2019: 105.8%) of the aggregate vested liability had all members left service with
(a)
their leaving service benefits secured, resulting in a solvency surplus of HK$1,218 million; and
on the assumption that the MTR Retirement Scheme would continue in force, its value of assets was more than sufficient to cover the
(b)
aggregate past service liability, with a funding level of 113.2% (2019: 101.3%), representing a past service surplus of HK$1,173 million.
(ii)
MTR Provident Fund Scheme
The MTR Provident Fund Scheme is a defined contribution scheme registered under the ORSO and has been granted an MPF Exemption Certificate
by the MPFA. All benefits payable under the MTR Provident Fund Scheme are calculated by reference to members’ own contributions and the
Company’s contributions, together with investment returns on these contributions. Both members’ and the Company’s contributions are based on
fixed percentages of members’ base salary.
As at 31 December 2020, the total number of employees participating in the MTR Provident Fund Scheme was 10,614 (2019: 10,571). In 2020,
total members’ contributions were HK$159 million (2019: HK$153 million) and total contributions from the Company were HK$372 million
(2019: HK$362 million). No contributions forfeited by employees leaving the scheme were utilised to offset contributions during the year
(2019: HK$nil). As at the end of the reporting period, forfeited contributions of HK$75 million (2019: HK$54 million) were available to reduce the
contributions payable in future years. The net asset value as at 31 December 2020 was HK$7,523 million (2019: HK$6,843 million).
(iii) MTR MPF Scheme
The MTR MPF Scheme is a defined contribution scheme covered under an MPF master trust registered with the MPFA. It covers those employees
who did not opt for or who are not eligible to join the MTR Retirement Scheme or the MTR Provident Fund Scheme. Both members and the
Company each contribute to the MTR MPF Scheme at the mandatory levels as required by the Mandatory Provident Fund Schemes Ordinance
(Cap. 485) (the “MPFSO”). The Company makes additional contributions above the mandatory level for eligible members who joined the MTR MPF
Scheme before 1 April 2008, subject to individual terms of employment.
As at 31 December 2020, the total number of employees participating in the MTR MPF Scheme was 5,068 (2019: 5,747). In 2020, total members’
contributions were HK$49 million (2019: HK$50 million) and total contribution from the Company were HK$52 million (2019: HK$56 million). No
contributions forfeited by employees leaving the scheme were utilised to offset contributions during the year (2019: HK$nil). As at the end of the
reporting period, there were no forfeited contributions (2019: HK$nil) available to reduce the contributions payable in future years.
258
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259
Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis
42 Retirement Schemes (continued)
A Retirement Schemes Operated by the Company in Hong Kong (continued)
(iv)
KCRC MPF Scheme
The KCRC MPF Scheme is a defined contribution scheme covered under an MPF master trust registered with the MPFA. It covers those former KCRC
employees who were previously members of the KCRC MPF Scheme and are eligible to join the MTR Provident Fund Scheme but opt to re-join the
KCRC MPF Scheme. Both members and the Company each contribute to the KCRC MPF Scheme at the mandatory levels as required by the MPFSO.
As at 31 December 2020, the total number of employees participating in the KCRC MPF Scheme was 329 (2019: 372). In 2020, total members’
contributions were HK$4 million (2019: HK$5 million) and total contribution from the Company were HK$4 million (2019: HK$5 million). No
contributions forfeited by employees leaving the scheme were utilised to offset contributions during the year (2019: HK$nil). As at the end of the
reporting period, there were no forfeited contributions (2019: HK$nil) available to reduce the contributions payable in future years.
B Retirement Schemes for Employees of Mainland of China and Overseas Offices and
Subsidiaries
Employees not eligible for joining the retirement schemes operated by the Company in Hong Kong are covered by the retirement schemes
established by their respective subsidiary companies or in accordance with respective applicable labour regulations.
Certain employees of the Group’s Australian subsidiary are entitled to receive retirement benefits from the Emergency Services Superannuation
Scheme operated in Australia. The benefit amounts are calculated based on the member’s years of service and final average salary. The Group
does not recognise any defined benefit liability in respect of this scheme because the Group has no legal or constructive obligation to pay future
benefits relating to its employees; its only obligation is to pay contributions as they fall due. As at 31 December 2020, total number of the Group’s
employees participating in this scheme was 533 (2019: 546). In 2020, total members’ contributions were HK$11 million (2019: HK$23 million) and
total contribution from the Group was HK$62 million (2019: HK$59 million).
Certain employees of the Group’s Swedish subsidiaries are entitled to receive retirement benefits from the ITP 2 Retirement Scheme operated in
Sweden. The benefit amounts are calculated based on the member’s years of service and annual salary. The Group does not recognise any defined
benefit liability in respect of this scheme because the Group has no legal or constructive obligation to pay future benefits relating to its employees;
its only obligation is to pay contributions as they fall due. As at 31 December 2020, total number of the Group’s employees participating in this
scheme was 786 (2019: 741). In 2020, total contribution from the Group was HK$20 million (2019: HK$23 million).
Certain employees of the Group’s MTR Crossrail subsidiary are entitled to join the MTR Corporation (Crossrail) section of the Railway Pension Scheme
in the United Kingdom. The scheme is a shared cost arrangement whereby the Group is only responsible for a share of the cost. The benefit amounts
are calculated based on the member’s years of service and final average salary. The Group does not recognise any net defined benefit liability in
respect of this scheme because the Group has no legal or constructive obligation for any deficit in the value of the scheme. Its only obligation is to
pay contributions as they fall due. As at 31 December 2020, total number of the Group’s employees participating in this scheme was 736 (2019: 621).
In 2020, total members’ contributions were HK$26 million (2019: HK$22 million) and total contribution from the Group was HK$39 million (2019:
HK$32 million). Pension expense of HK$86 million (2019: HK$67 million) was recognised in profit and loss and actuarial gain of HK$37 million (2019:
HK$28 million) was recognised in the statement of other comprehensive income.
Except for the retirement schemes described above, all other retirement schemes to cover employees in overseas offices or in subsidiaries in Hong
Kong, the Mainland of China, Macao or overseas are defined contribution schemes. For Hong Kong employees, these schemes are registered under
the MPFSO in Hong Kong. For the Mainland of China, Macao or overseas employees, these schemes are operated in accordance with the respective
local laws and regulations. As at 31 December 2020, the total number of employees of the Group participating in these schemes was 16,161 (2019:
14,015). In 2020, total members’ contributions were HK$110 million (2019: HK$95 million) and total contribution from the Group was HK$493 million
(2019: HK$484 million). During the years ended 31 December 2019 and 2020, the amount of contributions forfeited in accordance to the schemes’
rules, if applicable, is not significant.
43 Defined Benefit Retirement Scheme
The Company makes contributions to and recognises defined benefit liabilities in respect of MTR Retirement Scheme which provides employees
with benefits upon retirement or termination of services for other reasons (note 42). This defined benefit scheme exposes the Group to actuarial
risks, such as interest rate, salary increase and investment risks. The information about the MTR Retirement Scheme is summarised as below:
A Amounts Recognised in the Consolidated Statement of Financial Position
in HK$ million
Present value of defined benefit obligations
Fair value of scheme assets
Net assets/(liabilities)
2020
(9,517)
9,855
338
2019
(9,905)
9,417
(488)
The net assets (2019: net liabilities) are recognised under “Debtors and other receivables” (2019: “Creditors, other payables and provisions”) in the
consolidated statement of financial position. A portion of the above obligations is expected to be paid after more than one year. However, it is
not practicable to segregate this amount from the amounts to be paid in the next twelve months, as future contributions will also relate to future
services rendered and future changes in actuarial assumptions and market conditions. The Company expects to pay HK$29 million in contribution to
the MTR Retirement Scheme in 2021.
260
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Annual Report 2020
261
NOTES TO THE CONSOLIDATED ACCOUNTS 43 Defined Benefit Retirement Scheme (continued)
B
Scheme Assets
in HK$ million
Equity securities
– Financial institutions
– Non-financial institutions
Bonds
– Government
– Non-government
Cash
Voluntary units
2020
396
4,091
4,487
1,831
3,384
5,215
367
10,069
(214)
9,855
2019
482
4,046
4,528
2,173
2,614
4,787
297
9,612
(195)
9,417
The scheme assets did not include any ordinary shares of the Company as at 31 December 2020 (2019: HK$nil). Also, there were no investment in
other shares and debt securities of the Company as at 31 December 2020 and 2019. All of the equity securities and bonds have quoted prices in
active markets.
An asset-liability modelling review is performed periodically to analyse the strategic investment policies of the MTR Retirement Scheme. Based on
the latest study, the long-term strategic asset allocation of the MTR Retirement Scheme as at 31 December 2020 is set at 42.5% in equities and 57.5%
in bonds and cash (2019: 42.5% in equities and 57.5% in bonds and cash).
C Movements in the Present Value of the Defined Benefit Obligations
in HK$ million
At 1 January
Remeasurements:
– Actuarial (gains)/losses arising from changes in liability experience
– Actuarial (gains)/losses arising from changes in demographic assumptions
– Actuarial losses/(gains) arising from changes in financial assumptions
Members’ contributions paid to the scheme
Benefits paid by the scheme
Current service cost
Interest cost
At 31 December
2020
9,905
(127)
–
163
36
65
(1,000)
269
242
9,517
2019
10,022
252
–
(96)
156
69
(876)
285
249
9,905
The weighted average duration of the present value of the defined benefit obligations was 5.6 years as at 31 December 2020 (2019: 6.0 years).
260
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Annual Report 2020
261
Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis
43 Defined Benefit Retirement Scheme (continued)
D Movements in Scheme Assets
in HK$ million
At 1 January
Company’s contributions paid to the scheme
Members’ contributions paid to the scheme
Benefits paid by the scheme
Administrative expenses paid from scheme assets
Interest income
Return on scheme assets, excluding interest income
At 31 December
2020
9,417
253
65
(1,000)
(5)
233
892
9,855
E
Expenses Recognised in the Profit and Loss and Other Comprehensive Income
in HK$ million
Current service cost
Net interest on net defined benefit liability
Administrative expenses paid from scheme assets
Less: Amount capitalised
Net amount recognised in profit or loss
Actuarial losses
Return on scheme assets, excluding interest income
Amount recognised in other comprehensive income
2020
269
9
5
283
(49)
234
36
(892)
(856)
The retirement scheme expense is recognised under staff costs and related expenses in the consolidated profit and loss account.
F
Significant Actuarial Assumptions and Sensitivity Analysis
Discount rate
Future salary increase
Unit value increase
2020
1.17%
2.75%
3.00%
2019
8,662
351
69
(876)
(5)
219
997
9,417
2019
285
30
5
320
(41)
279
156
(997)
(841)
2019
2.61%
4.00%
3.75%
The below analysis shows how the present value of the defined benefit obligations as at 31 December would have increased/(decreased) as a result
of 0.25% change in the significant actuarial assumptions:
Discount rate
Future salary increases
Unit value increase
2020
2019
Increase in 0.25%
HK$ million
Decrease in 0.25%
HK$ million
Increase in 0.25%
HK$ million
Decrease in 0.25%
HK$ million
(131)
103
32
135
(98)
(29)
(142)
127
13
146
(122)
(11)
The above sensitivity analysis is based on the assumption that changes in actuarial assumptions are not correlated and therefore it does not take
into account the correlations between the actuarial assumptions.
262
MTR Corporation
Annual Report 2020
263
NOTES TO THE CONSOLIDATED ACCOUNTS 44 Material Related Party Transactions
The Financial Secretary Incorporated, which holds approximately 74.98% of the Company’s issued share capital on trust for the HKSAR Government
as at 31 December 2020, is the majority shareholder of the Company. Transactions between the Group and the HKSAR Government departments
or agencies, or entities controlled by the HKSAR Government, other than those transactions such as the payment of fees, taxes, leases and rates, etc.
that arise in the normal dealings between the HKSAR Government and the Group, are considered to be related party transactions pursuant to
HKAS 24 (revised), Related party disclosures, and are identified separately in these accounts.
Major related party transactions entered into by the Group which are relevant for the current year include:
A
On 30 June 2000, the Company was granted by the HKSAR Government a franchise, for an initial period of 50 years, to operate the then
existing mass transit railway, and to operate and construct any extension to the railway. On the same day, the Company and the HKSAR Government
entered into an operating agreement which laid down the detailed provisions for the design, construction, maintenance and operation of the
railway under the franchise. With the Rail Merger, the operating agreement was replaced with effect from 2 December 2007 by a new operating
agreement, details of which are set out in note 44C below.
B
On 14 July 2000, the Company received a comfort letter from the HKSAR Government pursuant to which the HKSAR Government agreed
to extend the period of certain of the Company’s land interests so that they are coterminous with the Company’s franchise period. To prepare for
the Rail Merger, on 3 August 2007, the HKSAR Government wrote to KCRC confirming that, subject to all necessary approvals being obtained, the
period of certain of KCRC’s land interests (which are the subject of the service concession under the Rail Merger) will be extended so that they are
coterminous with the concession period of the Rail Merger.
In connection with the Rail Merger (note 3), on 9 August 2007, the Company and the HKSAR Government entered into a new operating
C
agreement (“OA”), which is based on the then existing operating agreement referred to in note 44A above. On the Appointed Day, the Company’s
then existing franchise under the Mass Transit Railway Ordinance was expanded to cover railways other than the then existing MTR railway for an
initial period of 50 years from the Appointed Day (“expanded franchise”). A detailed description of the OA is contained in the circular to shareholders
in respect of the Extraordinary General Meeting convened to approve the Rail Merger. Such transaction is considered to be a related party
transaction and also constitute continuing connected transaction as defined under the Listing Rules.
Other than the OA described in note 44C above, the Company also entered into principal agreements with KCRC and the HKSAR Government
D
in connection with the Rail Merger. These principal agreements are: (i) Merger Framework Agreement, (ii) Service Concession Agreement,
(iii) Sale and Purchase Agreement, (iv) West Rail Agency Agreement, and (v) Property Package Agreements. For the year ended 31 December 2020,
amounts recoverable or invoiced by the Company under West Rail Agency Agreement and Property Package Agreements are HK$57 million
(2019: HK$84 million) and HK$nil (2019: HK$3 million) respectively and the net amounts payable or paid by the Company in relation to the Service
Concession is HK$830 million (2019: HK$3,333 million).
The above agreements are considered to be related party transactions and also constitute continuing connected transactions as defined under the
Listing Rules. A detailed description of each of the agreements is contained under the paragraph “Continuing Connected Transactions” in the Report
of the Members of the Board.
E
the High Speed Rail:
The Company entered into the following principal agreements with KCRC and the HKSAR Government in connection with the operation of
An amendment operating agreement, which was entered into with the HKSAR Government on 23 August 2018, to amend and supplement
(i)
the OA, in order to prescribe the operational requirements that will apply to the High Speed Rail.
(ii)
A supplemental service concession agreement, which was entered into with KCRC on 23 August 2018, to supplement the SCA, in order for
KCRC to grant a concession to the Company in respect of the High Speed Rail and to prescribe the operational and financial requirements that will
apply to the High Speed Rail. During the year ended 31 December 2020, net revenue received or receivable from KCRC in respect of the High Speed
Rail amounted to HK$1,536 million (2019: HK$717 million).
The above transactions are considered to be related party transactions and also constitute continuing connected transactions as defined under the
Listing Rules. A detailed description of each of the above agreements is contained under the paragraph “Continuing Connected Transactions” in the
Report of the Members of the Board.
F
the Tuen Ma Line Phase 1:
The Company entered into the following principal agreements with KCRC and the HKSAR Government in connection with the operation of
An amendment operating agreement and a supplemental operating agreement, which were entered into with the HKSAR Government on
(i)
11 February 2020, to amend and supplement, respectively, the OA, in order to prescribe the operational requirements that will apply to the Tuen Ma
Line Phase 1.
A supplemental service concession agreement, which was entered into with KCRC on 11 February 2020, to supplement the SCA, in order for
(ii)
KCRC to grant a concession to the Company in respect of the Tuen Ma Line Phase 1 and to prescribe the operational and financial requirements that
will apply to the Tuen Ma Line Phase 1. During the year ended 31 December 2020, net revenue received or receivable from KCRC in respect of the
Tuen Ma Line Phase 1 amounted to HK$276 million (2019: HK$nil).
The above transactions are considered to be related party transactions and also constitute continuing connected transactions as defined under the
Listing Rules. A detailed description of each of the above agreements is contained under the paragraph “Continuing Connected Transactions” in the
Report of the Members of the Board.
262
MTR Corporation
Annual Report 2020
263
Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis The Company and the HKSAR Government entered into Preliminary Project Agreement, which was signed on 6 February 2008, and Project
44 Material Related Party Transactions (continued)
G
Agreement, which was signed on 13 July 2009 in respect of the Island Line Extension to the Western District. Pursuant to the agreements, the
Company has received from the HKSAR Government a total of HK$12,652 million of government grant as funding support subject to a repayment
mechanism. The timeframe for the repayment mechanism was extended for a period ended on or before 30 June 2019 pursuant to various
supplemental agreements between the Company and the HKSAR Government. During the year ended 31 December 2019, the Company has made
a final repayment to the HKSAR Government with a principal of HK$114 million and interest of HK$59 million. Such transactions are considered to
be related party transactions and also constitute continuing connected transactions as defined under the Listing Rules. A detailed description of the
Project Agreement is contained under the paragraph “Continuing Connected Transactions” in the Report of the Members of the Board.
The Company entered into entrustment agreements with the HKSAR Government for the design, site investigation, procurement activities,
H
construction, testing and commissioning of HSR and SCL. Detailed description of the agreements and the amount of project management fees
recognised for the year ended 31 December 2020 are provided in notes 21A and 21B. In addition, an amount of HK$580 million was paid/payable
to the HKSAR Government in 2020 (2019: HK$891 million) under SCL EA3’s payment arrangement with the HKSAR Government and relevant
contractors.
The above transactions are considered to be related party transactions and also constitute continuing connected transactions as defined under the
Listing Rules. A detailed description of each of the above agreements is contained under the paragraph “Continuing Connected Transactions” in the
Report of the Members of the Board.
I
Government or allowed to proceed with the development at the following sites during the year:
In connection with certain property developments along the railway system, the Company has been granted land lots by the HKSAR
Property development site
Site D of the Remaining Portion of
Tseung Kwan O Town Lot No. 70
Site KL of the Remaining Portion of
Tseung Kwan O Town Lot No. 70
Land grant/land premium
offer acceptance date
Total
land premium
in HK$ million
Land premium
settlement date
14 February 2020
6 November 2020
2,725
5,568
19 March 2020
4 December 2020
J
On 8 February 2021, the Company accepted an offer from the HKSAR Government to proceed with THE SOUTHSIDE (or Wong Chuk Hang
Station) Package Five Property Development at Site E of Aberdeen Inland Lot No. 467 at a land premium of HK$6,437.31 million and on the terms
and conditions of the relevant Conditions of Exchange No. 20304. The land premium is expected to be paid on or before mid March 2021.
On 5 July 2013, the Company entered into a contract with the Hong Kong Airport Authority (“HKAA”) for the maintenance of the Automated
K
People Mover system at the Hong Kong International Airport (“System”) for a seven-year period (“Existing Contract”), effective from 6 July 2013.
During the year, the Existing Contract was extended for 6 months to 5 January 2021 and, on 2 July 2020, the Company entered into a new contract
with the HKAA for the maintenance of the System for a seven-year period effective from 6 January 2021. In respect of the services provided,
HK$122 million was recognised as consultancy income during the year ended 31 December 2020 (2019: HK$82 million).
On 18 May 2018, the Company provided a sub-contractor warranty to the HKAA as a result of obtaining a subcontract from a third party for the
modification works of the existing System for a seven year period, effective from 25 September 2017 (“Subcontract”). The Subcontract contains
provisions covering the provision and modification of the power distribution, communication and control subsystems in respect of the System.
The above transactions are considered to be related party transactions and also constitute continuing connected transactions as defined under the
Listing Rules. A detailed description of each of the above agreements is contained under the paragraph “Continuing Connected Transactions” in the
Report of the Members of the Board.
During the year ended 31 December 2020, the Group incurred HK$82 million (2019: HK$148 million) of expenses for the central clearing
L
services provided by Octopus Cards Limited (“OCL”), a wholly owned subsidiary of Octopus Holdings Limited (“OHL”). OCL incurred HK$25 million
(2019: HK$42 million) of expenses for the load agent and Octopus card issuance and refund services, computer equipment and relating services as
well as warehouse storage space provided by the Group. During the year, OHL distributed HK$144 million (2019: HK$187 million) of dividends to
the Group.
During the year ended 31 December 2020, MTR Corporation (Sydney) NRT Pty Ltd, through its joint operation, provided services in respect of the
design and delivery of electrical and mechanical systems and rolling stock to NRT Pty Ltd at a total amount of AUD13 million (HK$68 million) (2019:
AUD106 million or HK$587 million). Metro Trains Sydney Pty Ltd also provided operations and maintenance services in respect of Sydney Metro
North West to NRT Pty Ltd at a total amount of AUD99 million (HK$526 million) (2019: AUD96 million or HK$523 million) and mobilisation services in
respect of Sydney Metro City & Southwest to NRT CSW Pty Ltd at a total amount of AUD6 million (HK$30 million). MTR Corporation (Sydney) SMCSW
Pty Limited also provided delivery of electrical and mechanical systems and rolling stock as well as integration of railway system services to NRT CSW
Pty Ltd at a total amount of AUD286 million (HK$1,540 million) (2019: HK$nil).
264
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Annual Report 2020
265
NOTES TO THE CONSOLIDATED ACCOUNTS 44 Material Related Party Transactions (continued)
M
HKSAR Government and the Company’s associates in the normal course of business operations. Details of the transactions and the amounts
involved for the reporting period are disclosed in notes 30 and 34.
Other than those stated in notes 44A to 44L, the Company has business transactions with the HKSAR Government, entities related to the
The Group has paid remuneration to Members of the Board and the Executive Directorate. Details of these transactions are described in note
N
11A. In addition, Members of the Executive Directorate were granted share options under the Company’s 2007 Share Option Scheme and award
shares under the Executive Share Incentive Scheme. Details of the terms of these options and award shares are disclosed in note 11B, note 11C and
the Report of the Members of the Board. Their gross remuneration charged to the consolidated profit and loss account is summarised as follows:
in HK$ million
Short-term employee benefits
Post-employment benefits
Equity compensation benefits
2020
67.0
6.6
21.6
95.2
2019
73.2
6.2
24.1
103.5
The above remuneration is included in staff costs and related expenses disclosed in note 10A.
O
During the year, the following dividends were paid to the Financial Secretary Incorporated of the HKSAR Government:
in HK$ million
Ordinary dividends
– Cash dividends paid
2020
2019
5,700
5,561
45 Commitments
A Capital Commitments
(i)
Outstanding capital commitments as at 31 December 2020 not provided for in the consolidated accounts were as follows:
in HK$ million
At 31 December 2020
Authorised but not yet contracted for
Authorised and contracted for
At 31 December 2019
Authorised but not yet contracted for
Authorised and contracted for
Hong Kong
transport
operations,
station
commercial
and other
businesses
10,799
19,473
30,272
8,476
13,558
22,034
Hong Kong
railway
extension
projects
Hong Kong
property
rental and
development
Mainland of
China and
overseas
operations
–
115
115
–
170
170
2,127
991
3,118
2,442
1,183
3,625
67
9
76
9
20
29
Total
12,993
20,588
33,581
10,927
14,931
25,858
In addition to the above, the Group has the following capital commitments in respect of its investments in associates and joint venture:
In respect of Shenzhen Metro Line 13, the Group is responsible to contribute equity injection of up to RMB1,428 million. Up to the end of December
2020, the Group has not contributed equity to the project.
In respect of Sydney Metro City & Southwest, the Group is expected to further contribute equity of approximately AUD12.7 million and loans of
approximately AUD13.3 million to the project for the share of investment.
264
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265
Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis 45 Commitments (continued)
A Capital Commitments (continued)
(ii)
The commitments under Hong Kong transport operations, station commercial and other businesses comprise the following:
in HK$ million
At 31 December 2020
Authorised but not yet contracted for
Authorised and contracted for
At 31 December 2019
Authorised but not yet contracted for
Authorised and contracted for
Improvement,
enhancement and
replacement works
Acquisition of
property, plant
and equipment
Additional
concession
property
5,395
16,121
21,516
4,090
10,267
14,357
1,533
491
2,024
746
246
992
3,871
2,861
6,732
3,640
3,045
6,685
Total
10,799
19,473
30,272
8,476
13,558
22,034
Liabilities and Commitments in respect of Property Management Contracts
B
The Group has, over the years, jointly developed with outside property developers certain properties above or adjacent to railway depots and
stations. Under most of the development agreements, the Group retained the right to manage these properties after their completion. The Group,
as manager of these properties, enters into service contracts with outside contractors for the provision of security, cleaning, maintenance and
other services on behalf of the managed properties. The Group is primarily responsible for these contracts, but any contract costs incurred will be
reimbursed by the owners and tenants of the managed properties from the management funds as soon as they are paid.
As at 31 December 2020, the Group had total outstanding liabilities and contractual commitments of HK$2,718 million (2019: HK$3,101 million)
in respect of these works and services. Cash funds totalling HK$3,010 million (2019: HK$2,820 million) obtained through monthly payments of
management service charges from the managed properties are held by the Group on behalf of those properties for settlement of works and services
provided.
C Material Financial and Performance Guarantees
In respect of the debt securities issued by MTR Corporation (C.I.) Limited (note 32C), the Company has provided guarantees to the investors of
approximately HK$18,544 million (in notional amount) as at 31 December 2020. The proceeds from the debts issued are on lent to the Company. As
such, the primary liabilities have been recorded in the Company’s statement of financial position.
In respect of the lease out/lease back transaction (“Lease Transaction”) (note 19E), the Group has provided standby letters of credit (“standby LC’s”)
to the Investors to cover additional amounts payable by the Group in the event the transactions are terminated prior to the expiry of the lease terms,
and such standby LC’s amounted to US$76.5 million (HK$593 million) as at 31 December 2020. The Group has also provided standby LC’s to certain
of the Investors under the Lease Transaction to replace some of the Defeasance Securities previously used to support the corresponding long-term
lease payments as a result of credit rating downgrades of these securities, and such standby LC’s amounted to US$62.5 million (HK$485 million) as at
31 December 2020.
In respect of the lease on the shopping centre in Beijing, the Group provided a bank guarantee of RMB12.5 million (HK$15 million) and a parent
company guarantee of RMB52.5 million (HK$62 million) in respect of the quarterly rental payments to the landlord.
In respect of the SZL4 concession, the Group has provided to the Shenzhen Municipal Government a parent company guarantee in respect of MTR
Corporation (Shenzhen) Limited’s performance and other obligations under the concession agreement, which can be called if the performance and
other obligations are not met.
In respect of the Melbourne train system franchise, the Group and the other shareholders of the Group’s 60% owned subsidiary, Metro Trains
Melbourne Pty. Ltd. (“MTM”), have provided to the Public Transport Victoria a joint and several parent company guarantee of AUD147.3 million
(HK$880 million) and a performance bond of AUD57.0 million (HK$341 million) for MTM’s performance and other obligations under the franchise
agreement, with each shareholder bearing its share of liability based on its shareholdings in MTM. In respect of the lease of the office premises, MTM
has provided bank guarantees of AUD2.6 million (HK$16 million) for the monthly rental payments to the landlords.
In respect of the Stockholm metro franchise, the Group has provided to the Stockholm transport authority a guarantee of SEK1,000 million
(HK$945 million), which can be called if the franchise is terminated early as a result of default by MTR Tunnelbanan AB, the wholly owned subsidiary
of the Group to undertake the franchise.
In respect of the Stockholms pendeltåg franchise, the Group has provided to the Stockholm transport authorities a guarantee of SEK1,000 million
(HK$945 million), which can be called if the franchise is terminated early as a result of default by MTR Pendeltågen AB, the wholly owned subsidiary
of the Group to undertake the franchise.
In December 2020, the Group was awarded the Mälartåg franchise in Stockholm, Sweden. The Group commits to provide to the Stockholm
transport authorities a bank guarantee of SEK300 million (HK$284 million) upon signing the franchise agreement. The bank guarantee can be called
if the franchise is terminated early as a result of default by MTR Jota AB (to be renamed MTR Mälartåg AB), the wholly owned subsidiary of the Group
to undertake the franchise.
266
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Annual Report 2020
267
NOTES TO THE CONSOLIDATED ACCOUNTS 45 Commitments (continued)
C Material Financial and Performance Guarantees (continued)
In respect of the TfL Rail/Elizabeth Line Franchise in London, the Group has provided to the Rail for London Limited a parent company guarantee of
GBP80 million (HK$847 million) and a performance bond of GBP25 million (HK$265 million) for MTR Corporation (Crossrail) Limited’s performance
and other obligations under the franchise agreement.
In respect of the Sydney Metro North West Franchise, the Group has provided to NRT Pty Ltd, an associate of the Group, a parent company
guarantee with a liability cap of AUD1,526 million (HK$9,118 million) for the design and construction contract as well as the mobilisation phase
of the operations and maintenance contract (the cap being subject to the usual exclusions of losses arising from wilful misconduct, fraudulent
and criminal actions and, in addition, losses arising from abandonment of the contracts). The Group has also provided a performance bond of
AUD17.8 million (HK$106 million) for the performance and other obligations under the design and construction sub-contract. The Group has also
provided a parent company guarantee with a liability cap of AUD147.6 million (HK$882 million) for the operation and maintenance of Sydney Metro
North West, which can be called if the franchise is terminated early as a result of default by Metro Trains Sydney Pty Limited. The Group has also
provided bank guarantee amounting to AUD25.3 million (HK$151 million) as at 31 December 2020 for the operation and maintenance of Sydney
Metro North West.
In respect of the Sydney Metro City & Southwest Franchise, the Group has provided to NRT CSW Pty Ltd, an associate of the Group, a parent
company guarantee with a liability cap of approximately AUD602 million (HK$3,597 million) for the integrator works under the integrator contract
(the cap being subject to the usual exclusions of losses arising from wilful misconduct, fraudulent and criminal actions and, in addition, losses
arising from abandonment of the contracts). The Group has also provided a parent company guarantee with a liability cap of approximately
AUD27.5 million (HK$164 million) for the mobilisation phase of the operation and maintenance of Sydney Metro City & Southwest. The Group has
also provided a parent company guarantee to Metro Trains Sydney Pty Ltd with a liability cap of approximately AUD221 million (HK$1,321 million)
and a parent company guarantee to MTR Corporation (Sydney) SMCSW Pty Limited with a liability cap of approximately AUD221 million
(HK$1,321 million) for the interface works under Sydney Metro North West and Sydney Metro City & Southwest.
In respect of the South Western Trains Franchise, the Group has provided to the Secretary of State for Transport a parent company guarantee of
GBP13.1 million (HK$139 million), a parent company support facility of GBP1.1 million (HK$12 million), a performance bond of GBP4.8 million
(HK$51 million) and a season ticket bond amounting to GBP20.8 million (HK$221 million) as at 31 December 2020 for the performance and other
obligations under the franchise agreement.
In respect of the various lines of the Macao Light Rapid Transit, the Group has provided to Macao Light Rapid Transit Corporation, Limited and
the Infrastructures Development Bureau of the Macao SAR Government (Gabinete para o Desenvolvimento de Infra-estruturas) a number of bank
guarantees amounting to MOP277.3 million (HK$269 million) as at 31 December 2020 for the performance and other obligations under the project.
In respect of the Hangzhou Metro Line 1 and Line 5 concessions, the Group is required to provide handover bank bonds to the Hangzhou Municipal
Government before the end of the concessions for a period of three years to cover any non-compliance of handover requirements under the
concession agreements.
Except for the provision of SWR as discussed in note 24, no other provision was recognised in respect of the above financial and performance
guarantees as at 31 December 2020.
D Service Concession in respect of the Rail Merger
Pursuant to the Rail Merger, the Company is obliged under the SCA to pay an annual fixed payment of HK$750 million to KCRC over the period of the
service concession. Additionally, commencing after three years from the Appointed Day, the Company is obliged to pay a variable annual payment
to KCRC based on the revenue generated from the KCRC system above certain thresholds. Furthermore, under the SCA, the Company is obliged
to maintain, repair, replace and/or upgrade the KCRC system over the period of the service concession which is to be returned at the expiry of the
service concession.
266
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Annual Report 2020
267
Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis 46 Company-level Statement of Financial Position
in HK$ million
Assets
Fixed assets
– Investment properties
– Other property, plant and equipment
– Service concession assets
Property management rights
Property development in progress
Deferred expenditure
Investments in subsidiaries
Interests in associates
Properties held for sale
Derivative financial assets
Stores and spares
Debtors and other receivables
Amounts due from related parties
Cash, bank balances and deposits
Liabilities
Short-term loans
Creditors, other payables and provisions
Current taxation
Amounts due to related parties
Loans and other obligations
Obligations under service concession
Derivative financial liabilities
Deferred tax liabilities
Net assets
Capital and reserves
Share capital
Shares held for Executive Share Incentive Scheme
Other reserves
Total equity
Approved and authorised for issue by the Members of the Board on 11 March 2021
Rex P K Auyeung
Chairman
Jacob C P Kam
Chief Executive Officer
Herbert L W Hui
Finance Director
At 31 December
2020
At 31 December
2019
83,560
99,865
27,311
210,736
16
11,942
1,116
2,175
24
1,572
480
1,378
8,381
21,524
11,769
271,113
3,259
27,781
898
19,800
25,422
10,114
381
13,929
101,584
169,529
59,666
(262)
110,125
169,529
89,105
100,681
25,638
215,424
21
12,022
1,948
1,955
24
1,034
198
1,200
6,727
18,413
12,934
271,900
3,342
25,829
1,842
23,322
13,117
10,177
408
13,541
91,578
180,322
58,804
(263)
121,781
180,322
268
MTR Corporation
Annual Report 2020
269
NOTES TO THE CONSOLIDATED ACCOUNTS 47 Accounting Estimates and Judgements
A
Key sources of accounting estimates and estimation uncertainty include the following:
(i)
Estimated Useful Life and Depreciation and Amortisation of Property, Plant and Equipment and Service Concession Assets
The Group estimates the useful lives of the various categories of property, plant and equipment and service concession assets on the basis of their
design lives, planned asset maintenance programme and actual usage experience. Depreciation is calculated using the straight-line method at rates
sufficient to write off their cost or valuation over their estimated useful lives (note 2J).
(ii)
Impairment of Long-lived Assets
The Group reviews its long-lived assets for indications of impairment at the end of each reporting period according to accounting policies set out
in note 2I(ii). Long-lived assets are reviewed for impairment at each reporting date or whenever events or changes in circumstances indicate that
the carrying amount of the assets exceeds its recoverable amount. The recoverable amount of an asset is the greater of the fair value less costs of
disposal and value in use. In estimating the value in use, the Group uses projections of future cash flows from the assets based on management’s
assignment of a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.
(iii)
Pension Costs
The Group employs independent valuation professionals to conduct annual assessment of the actuarial position of the MTR Retirement Scheme.
The determination of the Group’s obligation and expense for the defined benefit element of the scheme is dependent on certain assumptions and
factors provided by the Company, which are disclosed in notes 42A(i) and 43F.
(iv)
Profit Recognition on Hong Kong Property Development
Recognition of Hong Kong property development profits requires management’s estimation of the final project costs upon completion, assessment
of outstanding transactions and market values of unsold units and, in the case of sharing-in-kind properties, the properties’ fair value upon
recognition. The Group takes into account independent qualified surveyors’ reports, past experience on sales and marketing costs when estimating
final project costs on completion and makes reference to professionally qualified valuers’ reports in determining the estimated fair value of sharing-
in-kind properties.
(v)
Properties Held for Sale
The Group values unsold interests in properties at the lower of their costs and net realisable values (note 26) at the end of each reporting period. In
ascertaining the properties’ net realisable values, which are represented by the estimated selling prices less costs to be incurred in relation to the
sales, the Group employs independent valuation professionals to assess the properties’ estimated selling prices and makes estimations on further
selling and property holding costs to be incurred based on past experience and with reference to general market practice.
(vi)
Valuation of Investment Properties
The valuation of investment properties requires management’s input of various assumptions and factors relevant to the valuation. The Group
conducts semi-annual revaluation of its investment properties by independent professionally qualified valuers based on these assumptions agreed
with the valuers prior to adoption.
(vii)
Franchise in Hong Kong
The current franchise under which the Group is operating in Hong Kong allows the Group to run the mass transit railway system in Hong Kong
until 1 December 2057. Pursuant to the terms of the OA and the MTR Ordinance, the Company may apply for extensions of the franchise and the
Secretary for Transport and Housing shall, subject to certain provisions, recommend to the Chief Executive in Council that the franchise should
be extended for a further period of 50 years (from a date relating to certain capital expenditure requirements) if the Company has satisfied such
capital expenditure requirements, at no additional payment for any such extension. If the franchise is not extended, it will expire on 1 December
2057. Following such expiry, the HKSAR Government has the right to take possession of railway property (and, where the HKSAR Government has
taken possession of any such property which is not concession property, the Company may require the HKSAR Government to take possession of
any other property which the HKSAR Government was entitled to take possession of, but did not take possession of), but must compensate the
Company: (i) in the case of such property which is not concession property, at the higher of fair value and depreciated book value, and (ii) in the case
of such property which is concession property and to the extent that the capital expenditure exceeds an agreed threshold (“Capex Threshold”), in an
amount equal to any above-threshold expenditure at the end of the Concession Period with such reimbursement to be on the basis of depreciated
book value. The Group’s depreciation policies (note 2J) for such property which is not concession property with assets’ lives which extend beyond
2057 reflect the above.
(viii)
Income Tax
Certain treatments adopted by the Group in its Hong Kong Profits Tax returns in the past years are yet to be finalised with the Hong Kong Inland
Revenue Department. In assessing the Group’s income tax and deferred taxation in the consolidated accounts, the Company has predominantly
followed the tax treatments it has adopted in these tax returns, which may be different from the final outcome in due course.
As detailed in note 29, there are tax queries from the IRD with the Company on tax deductibility of certain expenses and payments for which the
ultimate tax determination is uncertain up to the date of this annual report. The Group recognises tax provision for these tax matters based on
estimates of whether additional taxes will eventually be due. Where the final tax outcome of these matters is different from the amounts that were
initially recorded, such difference will impact the income tax expenses in the period when such determination is made.
(ix)
Project Provisions
The Group establishes project provisions for the settlement of estimated claims that may arise due to time delays, additional costs or other
unforeseen circumstances common to major construction contracts. The claims provisions are estimated based on an assessment of the Group’s
liabilities under each contract by professionally qualified personnel, which may differ from the actual claims settlement.
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MTR Corporation
Annual Report 2020
269
Corporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis 47 Accounting Estimates and Judgements (continued)
A
Key sources of accounting estimates and estimation uncertainty include the following: (continued)
(x)
Fair Value of Derivatives and Other Financial Instruments
In determining the fair value of financial instruments, the Group uses its judgement to select a variety of methods and make assumptions that are
mainly based on market conditions existing at the end of each reporting period. For financial instruments that are not traded in active markets, the
fair values were derived using the discounted cash flows method which discounts the future contractual cash flows at the current market interest or
foreign exchange rates, as applicable, for similar financial instruments that were available to the Group at the time.
(xi)
Obligations under Service Concession
In determining the present value of the obligations under service concession, the discount rate adopted was the relevant Group company’s
estimated long-term incremental cost of borrowing at inception after due consideration of the relevant Group company’s existing fixed rate
borrowing cost, future interest rate and inflation trends.
B
(i)
Critical accounting judgements in applying the Group’s accounting policies include the following:
Provisions and Contingent Liabilities
The Group recognises provisions for liabilities of uncertain timing or amount when the Group has a legal or constructive obligation arising as a result
of a past event (including in relation to those under entrustment arrangements), and it is probable that an outflow of economic benefits will be
required to settle the obligation and a reliable estimate can be made. 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 contingent liability. Other than set out in note 21, as at 31 December 2020,
the Group considered that it had no disclosable contingent liabilities as there were neither pending litigations nor events with potential obligation
which were probable to result in material outflow of economic benefits from the Group.
48 Possible Impact of Amendments, New Standards and Interpretations
Issued but Not Yet Effective for the Annual Accounting Year Ended
31 December 2020
Up to the date of issue of these accounts, the HKICPA has issued a number of amendments and a new standard, HKFRS 17, Insurance contracts, which
are not yet effective for the year ended 31 December 2020 and which have not been adopted in these accounts. These developments include the
following which may be relevant to the Group:
Amendments to HKFRS 16, Covid-19-Related Rent Concessions
Amendments to HKFRS 3, HKAS 16 and HKAS 37, Narrow-scope amendments
Annual Improvements to HKFRSs 2018-2020 Cycle
Amendments to HKAS 1, Classification of Liabilities as Current or Non-current
HKFRS 17, Insurance contracts
Effective for accounting periods
beginning on or after
1 June 2020
1 January 2022
1 January 2022
1 January 2023
1 January 2023
The Group is in the process of making an assessment of what the impact of these new issues or amendments is expected to be in the period of initial
application. So far, the Group considers that the adoption of them is unlikely to have a significant impact on the Group’s accounts.
49 Approval of the Consolidated Accounts
The consolidated accounts were approved by the Board on 11 March 2021.
270
MTR Corporation
Annual Report 2020
PB
NOTES TO THE CONSOLIDATED ACCOUNTS Airport Express
Train service provided between AsiaWorld-Expo Station and Hong Kong Station
Appointed Day or Merger Date
2 December 2007 when the Rail Merger was completed
Articles of Association
The articles of association of the Company
Board
The board of directors of the Company
Bus
Feeder bus services operated in support of West Rail Line, East Rail Line and Light Rail
Company or MTR Corporation MTR Corporation Limited, a company which was incorporated in Hong Kong under the Companies
Ordinance on 26 April 2000
Companies Ordinance
The Companies Ordinance (Chapter 622 of the Laws of Hong Kong or the predecessor Companies
Ordinance Chapter 32 of the Laws of Hong Kong (as the case may be))
Computershare
Computershare Hong Kong Investor Services Limited, the share registrar of the Company
Cross-boundary Service or
Cross-boundary
Journeys with the destination to/commencing from Lo Wu and Lok Ma Chau stations
Customer Service Pledge
Annually published performance targets in accordance with the Operating Agreement
Director or Member of the Board
A member of the Board
Domestic Service
Collective name for Kwun Tong, Tsuen Wan, Island, South Island, Tung Chung, Tseung Kwan O, Disneyland
Resort, East Rail (excluding Cross-boundary Service), West Rail lines and Tuen Ma Line Phase 1
EBITDA
Operating profit / loss before depreciation, amortisation, variable annual payment and share of profit or
loss of associates and joint venture
EBITDA Margin
EBITDA as a percentage of revenue
EBIT
Profit / loss before interest, finance charges and taxation and after variable annual payment
EBIT Margin
EBIT as a percentage of revenue
Express Rail Link or
High Speed Rail or HSR
Hong Kong Section of the Guangzhou-Shenzhen-Hong Kong Express Rail Link, also known as Guangzhou-
Shenzhen-Hong Kong High Speed Rail (Hong Kong Section) after the commencement of passenger
service on 23 September 2018
Fare Index
A measure of customer satisfaction for the fares charged for Domestic and Cross-boundary services, HSR,
Airport Express, Light Rail and Bus based on satisfaction scores for different fare attributes weighted by the
corresponding importance rating from the customer research
FSI
The Financial Secretary Incorporated, a corporation solely established under the Financial Secretary
Incorporation Ordinance (Chapter 1015 of the Laws of Hong Kong)
Government
The Government of the Hong Kong SAR
Group
The Company and its subsidiaries
HKSE or Stock Exchange
The Stock Exchange of Hong Kong Limited
Heavy Rail
Collective name for Domestic Service, Cross-boundary Service and Airport Express
PB
MTR Corporation
Annual Report 2020
271
GLOSSARYCorporate GovernanceFinancials and Other InformationOverviewBusiness Review and Analysis Hong Kong or
Hong Kong SAR or HKSAR
The Hong Kong Special Administrative Region of the People’s Republic of China
Intercity Service or Intercity
Intercity through train services operated between Hong Kong and major cities in the Mainland of China
such as Beijing, Shanghai and Guangzhou
Interest Cover
Operating profit before depreciation, amortisation and variable annual payment divided by gross interest
and finance charges before capitalisation, utilisation of government subsidy for Shenzhen Metro Line 4
operation and accreted interest on loan to a property developer
KCRC
Kowloon-Canton Railway Corporation
KPMG
KPMG, Certified Public Accountants, the independent auditor of the Company. KPMG is a Public Interest
Entity Auditor registered in accordance with the Financial Reporting Council Ordinance
Light Rail
Light rail system serving North West New Territories
Listing Rules
The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited
MTR Ordinance
The Mass Transit Railway Ordinance (Chapter 556 of the Laws of Hong Kong)
Net Debt-to-equity Ratio
Loans and other obligations, bank overdrafts, short-term loans, obligations under service concession
and loan from holders of non-controlling interests net of cash, bank balances and deposits, and
investment in bank medium term notes in the consolidated statement of financial position as a
percentage of the total equity
Operating Agreement
The agreement entered into by the Company and the Government on 30 June 2000 for the operation of
our rail services before the Rail Merger and a new agreement entered on 9 August 2007 for the operation
of all of our rail and bus passenger services after the Rail Merger
Ordinary Shares
Ordinary shares in the capital of the Company
Rail Merger or Merger
The merger of the rail operations of MTR Corporation and KCRC and the acquisition of certain property
interests by MTR Corporation from KCRC, full details of which are set out in the Rail Merger Circular.
The Rail Merger was completed on 2 December 2007
Rail Merger Ordinance
The Rail Merger Ordinance (Ordinance No.11 of 2007)
Return on Average Equity
Attributable to Shareholders
of the Company arising from
Underlying Businesses
Service Concession
Profit attributable to shareholders of the Company arising from underlying businesses as a percentage of
the average of the beginning and closing total equity attributable to shareholders of the Company of
the period
A contract to provide services for a particular period which is awarded by a public sector entity to an
operator; in the context of concession projects in Hong Kong, service concession refers to the concession
granted or to be granted by KCRC and/or Government to the Company to operate, maintain and renew
certain railway lines under the Service Concession Agreement or a Supplemental Service Concession
Agreement, as more particularly described in the Rail Merger Circular; in the context of concession
projects in the Mainland of China and Overseas, service concession refers to the concession granted by the
government or relevant public sector entity to a subsidiary or associate of the Company to provide certain
specified services for a specified period under a negotiated concession agreement
Service Quality Index
A measure of customer satisfaction for the services provided by Domestic and Cross-boundary services,
HSR, Airport Express, Light Rail and Bus based on satisfaction scores for different service attributes
(excluding fares) weighted by the corresponding importance rating from the customer research
272
GLOSSARYMTR Corporation .
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SHAREHOLDER SERVICES
Any matters relating to your shareholding, such as transfer of shares,
change of name or address, and loss of share certificates should be
addressed in writing to the Registrar:
Computershare Hong Kong Investor Services Limited
17M Floor, Hopewell Centre,
183 Queen’s Road East, Wan Chai, Hong Kong
Telephone: (852) 2862 8628 Facsimile: (852) 2529 6087
MTR Corporation Limited
MTR Headquarters Building, Telford Plaza
Kowloon Bay, Kowloon, Hong Kong
GPO Box 9916, Hong Kong
Telephone : (852) 2993 2111
Facsimile
: (852) 2798 8822
www.mtr.com.hk