MTR Corporation Ltd Annual Report 2022

FY2022 Annual Report · MTR Corporation Ltd

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Connecting The Future

Annual Report 2022

Stock code: 66

CONTENTS

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

MTR SHOP

Our Values
• Excellent Service
• Value Creation
• Mutual Respect
• Enterprising Spirit

Our Cultural Focus Area
• Participative Communication
• Collaboration
• Effectiveness & Innovation
• Agility to Change

Stakeholder Engagement

ESG Highlights

Highlights

OVERVIEW
2
4
6
7
8
10
12
16

Our Network

Key Awards

Key Figures

Chairman’s Letter

CEO’s Review of Operations and Outlook

BUSINESS REVIEW
AND ANALYSIS
Business Review

36 – Hong Kong Transport Services
Transport Operations
46 – Hong Kong Transport Services
Station Commercial Businesses

50 – Hong Kong Property and Other Businesses
60 – Hong Kong Network Expansion
64 – Mainland China and International Businesses
72 Environmental & Social Responsibility
80 Human Resources
83 MTR Academy
84 Financial Review
96 Ten-Year Statistics
98 Investor Relations

MTR’s mission is to keep cities moving by delivering
safe, efficient, environmentally friendly and accessible
rail transport. As we move cautiously but confidently
into a post-pandemic operating environment, MTR must
continue to meet its growing passenger demand with
world-class service while enhancing the connectivity of
its core market in Hong Kong and further expanding its
networks and services in the Greater Bay Area, Mainland
China and overseas. By doing so, we can contribute to
a wider infrastructural platform that fosters economic
growth and opportunities for the places we serve.

Our Annual Report 2022, “Connecting the Future”,
presents our numerous efforts to fulfil these aims
during a difficult year. It details MTR’s activities and
accomplishments as well as its strategic plans to connect
communities across Hong Kong and around the world
with the railway networks of tomorrow. We also invite
our valued shareholders and stakeholders to review
our Sustainability Report 2022, which highlights the
Company’s progress according to key environmental,
social and governance objectives that guide our
organisation and its business strategies.

Annual Report
2022

Sustainability
Report 2022

CORPORATE GOVERNANCE
100 Corporate Governance Report
135 Audit & Risk Committee Report
138 Risk Management
143 Capital Works Committee Report
144 Finance & Investment Committee Report
145 Remuneration Committee Report
150 Board and Executive Directorate
166 Key Corporate Management
167 Report of the Members of the Board

FINANCIALS AND
OTHER INFORMATION
201 Contents of Consolidated Financial Statements

and Notes

202 Independent Auditor’s Report
207 Consolidated Statement of Profit or Loss
208 Consolidated Statement of Comprehensive Income
209 Consolidated Statement of Financial Position
210 Consolidated Statement of Changes in Equity
211 Consolidated Statement of Cash Flows
212 Notes to the Consolidated Financial Statements
295 Glossary

Annual Report 2022

HIGHLIGHTS

HONG KONG BUSINESSES

1.5+ billion

Total Patronage

99.9%

Passenger Journeys On-time

East Rail Line
Cross-harbour
Extension

Commenced Service

Awarded

Pak Shing Kok Ventilation
Building and Tung Chung
Traction Substation

Property Development Projects

MAINLAND CHINA
AND INTERNATIONAL
BUSINESSES

Central Operating

Section of the
Elizabeth line in London
Commenced Service

Southern Section of
Beijing Metro Line 16
Commenced Service

MTR Corporation Limited

Hong Kong Core
Attain Full Potential of Hong Kong
Core Business and Advance our
Social Objectives

New Growth Engine
Invest in New Technologies and
Mobility Services to Reinforce our
Core for Long-term Growth

3 STRATEGIC
PILLARS

Mainland China
and International
Business
Expand into New Hubs and New
Products across Mainland China
and International Business,
Maintaining a Steady Growth

GROWTH AND OUTLOOK

Oyster Bay Property
Development Project
Completed Land Exchange Documents

Oyster Bay Station and

Tung Chung Line Extension
Entered into Project Agreements

Schemes of

Tuen Mun South Extension and
Kwu Tung Station were Authorised under
the Railways Ordinance

14 Residential Property Projects

under Development

The Wai and THE SOUTHSIDE

Shopping Malls Target to Open in 2023

Annual Report 2022

Business Review and AnalysisFinancials and Other InformationOverviewCorporate GovernanceSTAKEHOLDER ENGAGEMENT
STAKEHOLDER
GROUP

2022 Engagement Initiatives
and Achievements

Provided on-going fare concessions to reduce economic hardship during the pandemic and promote

accessibility and inclusivity

Launched smart mobility initiatives to tackle pain points in the customer journey, including the Train Car

Loading Indicator for the Tuen Ma and East Rail lines and Cross-Harbour Easy at Admiralty Station

Launched the MTR • Care mobile app to facilitate seamless travel for passengers with special needs

Provided a more seamless experience enabling passengers to enjoy a wide variety of goods and services in

station shops and connecting shopping malls

Customers

Conducted personalisation and engagement activities as well as digital marketing campaigns on the

MTR Mobile app

Launched MTR Web3 Discord as a new channel to engage customers

Conducted approximately 100 meetings with investors to provide information on our various businesses

Issued regular updates of key figures on our website and in financial reports

Hosted the Annual General Meeting to provide an opportunity for shareholders to communicate face to

face with Directors about the Company’s performance and operations

Worked closely with Government on railway projects under Railway Development Strategy 2014 and

supported Government’s Northern Metropolis Development Strategy

Supported the community work of Legislative Council and District Councils by arranging various activities

and providing sponsorships

Welcomed the participation of Government officials and departments in various events, including the

25th Anniversary of the Establishment of the HKSAR, test drills and opening ceremonies

Supported Government on the reopening of boundary control points at Lo Wu, Lok Ma Chau and Hong

Kong West Kowloon stations with gradual resumption of train services in early 2023

Organised a range of care initiatives during COVID-19, including free tickets for healthcare workers, rental
concessions for tenants, food and daily necessities for social enterprises and charitable organisations to
support those in need, and the “MTR Points” Donation Programme for users to donate their MTR Points to
charitable projects

Held career and life planning events for students (e.g., “‘Train’ for Life’s Journeys” programme)

Provided sponsorships and volunteer services to NGOs and ethnic minorities

Helped NGOs promote family well-being through play and toy recycling and provided STEM classes for

underprivileged families

Leased a number of station shops to NGOs at nominal rent and provided free advertising space to

non-profit organisations

Ensured the health and safety of suppliers by providing support and assistance during the

COVID-19 pandemic

Organised exchange and training sessions regarding environmental, social and governance (“ESG”)

initiatives and best practices for related supplier categories

Established a long-term strategy and engagement plans for focus categories and suppliers

Established a supplier audit scheme, conducted supplier audits and suggested areas for improvement

Conducted a survey for key suppliers to understand their challenges and potential improvements to be

made regarding service support to MTR Corporation

Provided performance feedback to suppliers via Supplier Management Meetings or the Supplier

Appraisal System

Formalised the Work From Home policy

Introduced paid adoption leave, extended paid maternity leave to 16 weeks and paid paternity leave to
10 days, and expanded the eligibility of compassionate leave

Formed task forces for follow-up action planning and implementation based on the results of the

Employee Engagement Survey 2021, conducted pulse survey in December 2022

Maintained a two-tier Staff Consultation Mechanism, comprising a Staff Consultative Council at the

corporate level and Joint Consultative Committees at the business unit/ function level

Granted MTR Grand Awards for Outstanding Contribution, Long Service Awards and Living the

MTR Values Awards

Continued employee wellness initiatives such as the Flexible Benefits Online Platform, Metro Recreation

Club and “More Time Reaching Community” staff volunteering scheme

Investors

Government
and Regulators

Communities

Contractors
and Suppliers

Employees

MTR Corporation Limited

Initiatives for 2023 and Beyond

Continue to provide on-going fare concessions and other promotions

Fare Concessions

Engage various passenger groups to develop smart mobility initiatives throughout

the entire MTR network and continue the development of the MTR • Care app

Continue to optimise our trade mix according to the latest trends and

customer preferences

Leverage advanced data platforms through the enriched MTR Mobile customer
profile to enable data-driven personalisation and engagement applications for
general passengers and specific customer segments

Continue to explore the Web3 arena for new and digitalised ways to

engage customers

Smart Mobility Initiatives

MTR • Care Mobile App

Continue to keep investors informed of all key announcements and updates

via various channels

Resume physical meetings and roadshows

Continue to support Government’s policy of using railways as the backbone of

Hong Kong’s public transportation system including the development of the three
strategic railways recommended under the Strategic Studies on Railways and
Major Roads (RMR2030+ Study)

Acknowledge and engage the proposed Railways Department and new bureaux

Continue other on-going engagement initiatives

Provide updates on our social and environmental engagement strategy
in accordance with social and environmental objectives to ensure that
MTR programmes suit the needs of different groups in society

Expand the railway network to connect more communities with safe,

environmentally friendly, affordable and accessible mass transit

Establish several joint collaborations on innovative intelligence with various

academic institutes

Continue other on-going engagement initiatives

Enhance the current supplier lists to manage our suppliers efficiently

and effectively

Continue to organise exchange and training sessions regarding ESG initiatives

and best practices for related supplier categories

Continue to rationalise the long-term strategy for focus categories and suppliers

Enhance the supplier audit scheme and extend supplier audits to global

MTR suppliers

Continue to conduct Supplier Management Meetings with key suppliers to
strengthen business relations and understand the latest innovations and
technologies for workload and process enhancements

Meetings with Investors
Financial Reports
Annual General
Meeting

RDS 2014

RMR2030+ Study

Community Work

Care Initiatives

Career and Life Planning Events

Sponsorships and
Volunteer Services

Health and Safety

ESG Initiatives

Strengthen Business Relations

Pulse Survey

Two-tier Staff
Consultation Mechanism

Communicate the results of the pulse survey to staff in February 2023 and review
the progress of action plan implementation. Hold the next Employee Engagement
Survey in the fourth quarter of 2023

Employee
Wellness Initiatives

Continue other on-going engagement initiatives

Annual Report 2022

Business Review and AnalysisFinancials and Other InformationOverviewCorporate GovernanceESG HIGHLIGHTS

Social Inclusion

Advancement &
Opportunities

Established Gender Equity Network

More Time Reaching Community volunteering

scheme with 111 volunteering projects organised

Launched MTR • Care app to serve the elderly and

people with special needs

Donated retired train parts to schools to build a
train theme classroom for students with special
education needs

9% of summer interns were from an ethnic

minority background or students with special
educational needs

Launched Global Safety Hackathon and Global

Safety and Health Conference to build a stronger
safety culture

“Art in MTR” programme transformed our stations
into spaces for art exhibitions and in support of
local talent

MTR Corporation Limited

10% of students joining “‘Train’ for Life’s

Journeys” summer youth programme were from
ethnic minority background

Provided STEM classes for underprivileged

families during COVID-19

Supported various case competitions for youth

Greenhouse Gas
Emissions Reduction

Set science-based carbon reduction targets

for the year 2030 for our railway and property
businesses in Hong Kong

Over 25% of F&B tenants at our shopping malls

have joined our food waste reduction programme

Solar photovoltaic systems installed at

Hin Keng Station

Achieved BEAM Plus Provisional Gold

accreditation for our planned Tung Chung East
and Tung Chung West stations

KEY AWARDS

Hong Kong
Transport Services

Public Transportation Category Award,

Hong Kong Service Awards 2022
East Week

Public Transportation Service Award,

Sing Tao Service Awards 2021
Sing Tao Daily

Public Transportation Service Award, Elite Awards 2021

Ming Pao Weekly

UITP Asia-Pacific Special Recognition Award 2021

International Association of Public Transport

Most Innovative Transport Solutions Global 2022

Capital Finance International

MTR Mobile

• Five awards received in The Loyalty &

Engagement Awards 2022

• Four awards received in Mob-Ex Awards 2022
Marketing Interactive Magazine

• Excellence in Customer Engagement and Experience,

HKMA/ViuTV & Now TV Awards for Marketing
Excellence 2022

Hong Kong Management Association/ViuTV & Now TV

Environmental, Social
and Governance

Merit Employee Engagement Award and Special Award for

COVID-19 Response, HR Excellence Awards 2021/2022
Hong Kong Institute of Human Resource Management

15 Years Plus Caring Company Logo

Hong Kong Council of Social Service

e-Contribution Award and MPF Support Award of the

Good MPF Employer Award 2021 – 2022
The Mandatory Provident Fund Schemes Authority

Greater Bay Area Corporate Sustainability Awards 2022
• Greater Bay Area Corporate Sustainability Award
• Outstanding GBA Corporation –
Social Sustainability Award
• Outstanding GBA Corporation –

Environmental Sustainability Award

• Outstanding GBA Corporation –
Corporate Governance Award

Metro Finance

Best ESG Reporting Award
(Logistics & Transport),
2022 Best Annual Reports Awards
Hong Kong Management Association

Hong Kong Property
and Other Businesses

ELEMENTS

• Excellent Service Award, Hong Kong Service Awards 2022

East Week

Telford Plaza

• Shopping Mall Award for Warm Service,

Hong Kong Service Awards 2022
East Week

The LOHAS

Mainland China and
International Businesses

BJMTR

2022 China Best Employers Award Top 100
Zhaopin.com

MTR (SZ)

2021/2022 Annual Awards for National Excellent
Foreign-Invested Enterprises
China Association of Enterprises with Foreign Investment and Shenzhen
Association of Enterprises with Foreign Investment

• Silver Award – Best Use of Real-time Marketing,

MTRX

Markies Awards 2022
The Marketing Interactive Magazine

Maritime Square

• HKIM Market Leadership Award and HKIM Triple Crown

Ranked 1st in the Swedish Quality Index 2022 measurement
of the most satisfied customers for passenger transport in
the category of train companies
Swedish Quality Index

Award Winner, Market Leadership Award 2021

South Western Railway

Hong Kong Institute of Marketing

Two ifc

• LEED Platinum Certification for Operations and

Maintenance: Existing Buildings v4.1
The U.S. Green Building Council and verified by Green Business
Certification INC

Finance and Investor Relations

Silver Whistle: London & South East on-time performance,
Golden Whistle Award 2022

Modern Railways and the Institution of Railway Operators

Bronze Award – General Category,
2022 Best Annual Reports Awards
Hong Kong Management Association

Best Public Service Financial Management Team

Hong Kong 2022 Award
Capital Finance International

Four awards received in 2022 International Annual Reports

Competition (ARC) Awards

MerComm, Inc.

Annual Report 2022

Business Review and AnalysisFinancials and Other InformationOverviewCorporate Governance

KEY FIGURES

Total revenue
Recurrent business revenue
– Hong Kong transport services

– Hong Kong transport operations
– Hong Kong station commercial businesses

– Total Hong Kong transport services
– Hong Kong property rental and management businesses
– Mainland China and international railway, property rental

and management subsidiaries

– Other businesses

Property development business revenue
– Mainland China property development
Total revenue
Total EBITDA(1)
Recurrent business EBITDA
– Hong Kong transport services

– Hong Kong transport operations
– Hong Kong station commercial businesses

– Total Hong Kong transport services
– Hong Kong property rental and management businesses
– Mainland 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 China property development

Total EBITDA
Total EBIT(2)
Recurrent business EBIT
EBIT
– Hong Kong transport services

– Hong Kong transport operations
– Hong Kong station commercial businesses

– Total Hong Kong transport services
– Hong Kong property rental and management businesses
– Mainland China and international railway, property rental

and management subsidiaries(3)

– Other businesses, project studies and business

development expenses

– Impairment loss on Shenzhen Metro Line 4
Share of profit of associates and joint ventures

Property development business EBIT
– Hong Kong property development
– Mainland China property development

Total EBIT
Loss from fair value measurement of investment properties
Interest and finance charges
Profit before taxation
Income tax
Profit for the year
Non-controlling interests
Profit for the year attributable to shareholders
of the Company
Profit/(loss) for the year attributable to shareholders
of the Company arising from:
Recurrent businesses
– in Hong Kong
– outside Hong Kong

Property development businesses
– in Hong Kong
– outside Hong Kong

Underlying businesses
Fair value measurement of investment properties
Total profit for the year attributable to
shareholders of the Company

2022

2021

HK$ million

Favourable/
(Unfavourable)
Change %

28.0
6.5
34.5
10.0

54.4
0.7
99.6

0.4
100.0

3.5
13.1
16.6
19.6

6.5

(2.4)
40.3

59.4
0.3
59.7
100.0

(35.0)
16.8
(18.2)
28.1

7.1

(4.0)
(7.1)
8.1
14.0

85.6
0.4
86.0

100.0

13,404
3,077
16,481
4,779

26,016
363
47,639

173
47,812

691
2,555
3,246
3,815

1,265

(474)
7,852

11,589
59
11,648
19,500

(4,733)
2,270
(2,463)
3,800

962

(539)
(962)
1,095
1,893

11,589
59
11,648

13,541
(810)
(982)
11,749
(1,608)
10,141
(314)

9,827

384
(227)
157

10,413
67
10,480
10,637
(810)

9,827

27.9
6.8
34.7
10.7

53.1
0.8
99.3

0.7
100.0

4.3
14.2
18.5
21.1

4.7

(2.6)
41.7

57.6
0.7
58.3
100.0

(29.4)
17.1
(12.3)
27.9

4.3

(3.9)
–
6.7
22.7

76.4
0.9
77.3

100.0

13,177
3,208
16,385
5,036

25,045
383
46,849

353
47,202

834
2,728
3,562
4,066

890

(499)
8,019

11,097
129
11,226
19,245

(4,262)
2,488
(1,774)
4,048

622

(567)
–
968
3,297

11,097
129
11,226

14,523
(1,616)
(967)
11,940
(2,261)
9,679
(127)

9,552

979
829
1,808

9,277
66
9,343
11,151
(1,599)

9,552

1.7
(4.1)
0.6
(5.1)

3.9
(5.2)
1.7

(51.0)
1.3

(17.1)
(6.3)
(8.9)
(6.2)

42.1

5.0
(2.1)

4.4
(54.3)
3.8
1.3

(11.1)
(8.8)
(38.8)
(6.1)

54.7

4.9
n/m
13.1
(42.6)

4.4
(54.3)
3.8

(6.8)
49.9
(1.6)
(1.6)
28.9
4.8
(147.2)

2.9

(60.8)
n/m
(91.3)

12.2
1.5
12.2
(4.6)
49.3

2.9

Notes
1

2
3
n/m: not meaningful

EBITDA represents operating profit/(loss) before fair value measurement of investment properties, depreciation, amortisation, impairment loss, variable annual payment,
share of profit of associates and joint ventures, interest, finance charges and taxation.
EBIT represents profit/(loss) before fair value measurement of investment properties, interest, finance charges and taxation and after variable annual payment.
Excluding the impairment loss of HK$962 million in respect of Shenzhen Metro Line 4 in Mainland China.

MTR Corporation Limited

Total Revenue
(HK$ billion)

Total EBIT
(HK$ billion)

53.9

54.5

0.1

20.9

42.5

21.1

47.2

47.8

0.4

0.2

25.0

26.0

21.4

32.9

33.4

21.1

21.8

21.6

14.8

12.3

2.6
0.9

11.3

4.5
0.9

6.9

14.5

13.5

6.7

11.2

11.6

6.5

0.5
(0.3)

1.1

2.2

0.4
1.5

Net Profit/(Loss) Attributable to
Shareholders of the Company
(HK$ billion)

16.0

11.9

4.7

2.3
0.6

8.4

2.6

4.3

0.5

4.5

9.6

9.8

9.4

0.8
1.0
(1.6)

10.4

0.4
(0.2)
(0.8)

5.5

0.4

(1.5)

(9.2)

(4.8)

2018

2019

2020

2021

2022

2018

2019

2020

2021

2022

2018

2019

2020

2021

2022

Mainland China Property Development
Recurrent Businesses – Mainland China
and International
Recurrent Businesses – Hong Kong
Total Revenue

Property Development Businesses
Recurrent Businesses – Mainland China
and International*
Recurrent Businesses – Hong Kong
Total EBIT
Including Share of Proﬁt from Associates and Joint
Ventures and Business Development Expenses from
Mainland China and International Businesses

Gain/(Loss) from Fair Value Measurement of
Investment Properties
Property Development Profit
Recurrent Business Profit/(Loss) – outside
Hong Kong
Recurrent Business Profit/(Loss) – in Hong Kong
Net Proﬁt/(Loss) Attributable to Shareholders of
the Company

Financial ratios
EBITDA margin(4) (in %)
EBITDA margin(4) (excluding Mainland China and international subsidiariesδ ) (in %)
EBIT margin(5) (in %)
EBIT margin(5) (excluding Mainland China and international subsidiariesφ ) (in %)
Net debt-to-equity ratio(6) (in %)
Return on average equity attributable to shareholders of the Company arising from
underlying businesses (in %)
Interest cover(7) (times)

Share information
Basic earnings per share (in HK$)
Basic earnings per share arising from underlying businesses (in HK$)
Ordinary dividend per share (in HK$)
Dividend payout ratio (based on underlying business profit) (in %)
Share price at 31 December (in HK$)
Market capitalisation at 31 December (in HK$ million)

Hong Kong Transport Operations
Total passenger boardings (in million)
Domestic Service
Cross-boundary Service
High Speed Rail
Airport Express
Light Rail and Bus
Average number of passengers (in 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 %)

2022

2021

16.5
30.5
1.8^
3.7
23.3

5.9
14.2

1.59
1.72
1.31
76
41.35
256,455

1,334.6
0.4
–
3.1
180.0

3,920.1
1.2
–
8.5
515.7

8.06
9.55
–
41.27
3.12
48.3

17.3
32.7
5.2
7.8
18.1

6.3
14.4

1.55
1.80
1.27
71
41.85
259,196

1,421.7
0.5
–
2.2
191.9

4,188.8
1.3
–
5.9
548.2

7.64
9.85
–
41.27
3.04
47.3

Favourable/
(Unfavourable)
Change %

(0.8)% pt.
(2.2)% pts.
(3.4)% pts.
(4.1)% pts.
(5.2)% pts.

(0.4)% pt.
(0.2) time

2.6
(4.4)
3.1
5% pts.
(1.2)
(1.1)

(6.1)
(11.7)
n/m
44.2
(6.3)

(6.4)
(11.7)
n/m
44.2
(5.9)

5.5
(3.1)
n/m
–
2.6
1.0% pt.

Notes
4

EBITDA margin represents total EBITDA (excluding Hong Kong property development profit from share of surplus and interest in unsold properties) as a percentage of
total revenue.
EBIT margin represents total EBIT (excluding Hong Kong property development profit from share of surplus and interest in unsold properties, and share of profit of
associates and joint ventures) as a percentage of total revenue.

6 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
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 total equity.
Interest cover represents operating profit before fair value measurement of investment properties, depreciation, amortisation, impairment loss, variable annual payment
and share of profit of associates and joint ventures divided by gross interest and finance charges before capitalisation, and utilisation of government subsidy for Shenzhen
Metro Line 4 operation.

δ Excluding the relevant revenue and expenses of Mainland China and international subsidiaries of HK$26,189 million and HK$24,865 million (2021: HK$25,398 million and

HK$24,379 million) respectively.

φ Excluding the relevant revenue, expenses, depreciation and amortisation, and impairment loss of Mainland China and international subsidiaries of HK$26,189 million,

HK$24,865 million, HK$303 million, and HK$962 million (2021: HK$25,398 million, HK$24,379 million, HK$268 million, and HK$nil) respectively.

^ Excluding the impairment provision of HK$962 million made in respect of Shenzhen Metro Line 4, the EBIT margin would have been 3.8%.

Annual Report 2022

Business Review and AnalysisFinancials and Other InformationOverviewCorporate GovernanceLEGEND
Station

Proposed Station

Interchange Station

Proposed Interchange Station

EXISTING NETWORK

Shenzhen Metro Network

Racing days only

Airport Express
Disneyland Resort Line
East Rail Line

High Speed Rail

Island Line

Kwun Tong Line

Light Rail
South Island Line
Tseung Kwan O Line

Tsuen Wan Line
Tuen Ma Line
Tung Chung Line

PROJECTS IN PROGRESS
Tung Chung Line Extension, Tung Chung East

and Tung Chung West stations

Airport Railway Extended

Overrun Tunnel

Oyster Bay Station

POTENTIAL FUTURE EXTENSIONS

Tuen Mun South Extension
Northern Link and Kwu Tung Station
Northern Link Spur Line

East Kowloon Line
South Island Line (West)
North Island Line

Hung Shui Kiu Station
Pak Shek Kok Station

THE PAVILIA BAY / City Point

46 Cullinan West
47 The Spectra / Sol City

42 The Austin / Grand Austin
43 SOUTHLAND
45 Ocean Pride / Ocean Supreme / PARC CITY /

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
20 Central Park / Island Harbourview / Park Avenue / Harbour
Green / Bank of China Centre / HSBC Centre / Olympian City
One / Olympian City Two

PROPERTY DEVELOPMENTS
UNDER CONSTRUCTION / PLANNING
34 LOHAS Park Packages
40 Tai Wai Station Packages
41 Tin Wing Stop
43 THE SOUTHSIDE Packages
44 Ho Man Tin Station Packages
51 Yau Tong Ventilation Building
52 Tung Chung Traction Substation
53 Pak Shing Kok Ventilation Building
54 Oyster Bay Packages
55 Tung Chung East Station Packages

WEST RAIL LINE PROPERTY
DEVELOPMENTS (AS AGENT FOR THE
RELEVANT SUBSIDIARIES OF KCRC)
39 Century Gateway
45 Ocean Pride / Ocean Supreme / PARC CITY /

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
32 MTR Hung Hom Building / Hung Hom Station Carpark
33 Trackside Villas
34 The Capitol / Le Prestige / Hemera / Wings at Sea / MALIBU /
LP6 / MONTARA / SEA TO SKY / MARINI / GRAND MONTARA /
GRAND MARINI / OCEAN MARINI / LP10 / The LOHAS

Stockholm

London

35 The Palazzo
36 Lake Silver
37 Festival City
38 The Riverpark
39 Century Gateway
40 THE PAVILIA FARM I / THE PAVILIA FARM II

MTR Corporation Limited

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 CHINA AND
INTERNATIONAL BUSINESSES

Stockholm

London

AUSTRALIA

EUROPE

Stockholm

London

Melbourne

Sydney

MAINLAND
CHINA
AND
MACAO

Beijing

Chengdu

Macao

Tianjin

Hangzhou

Shenzhen

Sydney

Melbourne
AUSTRALIA

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Shenzhen

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Fanling

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San Tin

N gau

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Tin

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OUR NETWORK

Lo n g

Pin g

Tin S h ui W ai

H u n g S h ui Kiu

Siu H o n g

T u e n M u n

Area 1 6

T u e n M u n S o uth

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

Y u e n Lo n g
K a m
S h e u n g
R o a d

N gau
Ta m
M ei

A u Tau

Tai W o

Tai Po M arket

Pak Shek Kok

New Territories

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27
35

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40
37

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West

Lantau Island

99
Stations

271 km
Route Length

Annual Report 2022

Business Review and AnalysisFinancials and Other InformationOverviewCorporate GovernanceCHAIRMAN’S LETTER

Dear Shareholders and other Stakeholders,

Conventional wisdom says that a strong start is important, but a strong finish is even better. The year under review is a
case in point. Although 2022 began with promise, the fifth wave of COVID-19 soon sent Hong Kong into another period
of tightened anti-pandemic and social distancing measures that inevitably impacted MTR’s railway patronage and retail
traffic. Meanwhile, cross-boundary services remained closed, further reducing revenue from the Company’s recurrent
businesses. But despite it all, we were still able to accomplish a great deal. We opened the highly anticipated East Rail
Line cross-harbour extension, an important new piece of railway infrastructure that creates a new route spanning Victoria
Harbour to offer added convenience and greatly reduced travelling times for the tens of thousands of passengers who
travel along the East Rail Line to and from Hong Kong Island every day. We announced the signing of agreements to
embark on new railway extension projects that will also provide thousands of much-needed new homes. Many exciting
opportunities lie ahead for us to participate in the further development of railway networks in Hong Kong, Mainland China
and around the world. Perhaps most encouraging of all were the lifting of travel restrictions in late 2022 and subsequent
resumption of cross-boundary traffic, decisions that not only signal the world’s transition from pandemic to endemic, but
which also bode very well for Hong Kong’s economy as well as our own business.

The last two months of the year included a pair of concerning incidents that we regard as matters demanding thorough
investigation. Such events are unfortunate, but they also provide opportunities for us to strengthen our operations and
organisation. In fact, we are constantly seeking to enhance and improve ourselves; in 2022, for example, we continued
to make solid progress towards the full integration of our environmental, social and governance objectives, which are
playing more critical roles in our strategic planning and operations.

MTR Corporation Limited

Ever since the outbreak of COVID-19 in early 2020, we
have been working closely with our communities to keep
people safe and Keep Cities Moving. We have also spent
the past three years building MTR into an organisation
that operates together with the communities it serves as
we strive together for a better future. I am confident that
the foundations we have laid will support the sustainable
growth of the Company and Hong Kong as we overcome
the difficulties of recent times and embrace a promising
new era.

BUSINESS
PERFORMANCE
AND GROWTH

Undoubtedly, one of the highlights of the year happened
on 15 May 2022, when the East Rail Line cross-harbour
extension commenced service. The century-old East Rail
Line now crosses the Victoria Harbour to connect the New
Territories and Kowloon with Hong Kong Island, providing
enhanced connectivity for passengers during their daily
commutes. The opening also marked the culmination of a
critical period in the development of Hong Kong’s railway
transport infrastructure. In November, we were proud to
put our first new eight-car Q-trains into service, refreshing
our fleet and delivering added comfort for passengers.

On 20 September 2022, Government launched a
three-month public consultation on the review of the
Fare Adjustment Mechanism (“FAM”). This review seeks
to identify a feasible and pragmatic package that will
maintain the financial sustainability of the Company
while enabling it to take new railway projects forward;
cope with increasing expenditures for maintaining the
railway system and respond to public concerns regarding
fare adjustments. This regular review, which takes place
every five years, is expected to be concluded in the first
half of 2023. Following the completion of the review, the
updated FAM will take effect in June 2023.

Our Hong Kong property development business
continued to thrive in 2022. We awarded the Pak Shing
Kok Ventilation Building and Tung Chung Traction
Substation development projects, which together are
expected to offer approximately 2,150 units to local
residents. In November, we completed the land exchange
documents for the Siu Ho Wan Depot to transform the
site into a new development called “Oyster Bay”, which
will provide about 10,720 private residential units.

To cater for the transportation needs of the future
Oyster Bay community, we entered into a Project
Agreement with Government for building a new Oyster
Bay Station. We also entered into a Project Agreement
with Government for the Tung Chung Line Extension to
enhance the connectivity of North Lantau. Other railway
projects continued to make satisfactory progress during
the year as well, including those where we are supporting
Government’s Railway Development Strategy 2014 for
Hong Kong’s future railway network expansion.

It was also a year of achievements for our Mainland China
and international businesses. In May 2022, the
MTR-operated Central Operating Section of London’s
Elizabeth line commenced service, marking an exciting
new era of travel for one of the world’s busiest cities.
In December, our associate commenced service of
the Southern Section of Beijing Metro Line 16, further
connecting key areas of the capital and bringing the total
length of MTR’s operational network in Mainland China to
more than 300 kilometres.

Everywhere we operate – from our home city of Hong
Kong to Mainland China and major markets in Australia
and Europe – we strive to Keep Cities Moving with safe,
reliable, accessible and sustainable rail transport services.
Therefore, it was heartening to learn that a 2022 study
by the University of California, Berkeley, and the Oliver
Wyman Forum determined Hong Kong to be the world’s
best city for public transit. As the city’s mass railway
transport provider, we feel both privileged and honoured
to play a key role in connecting communities across the
city, bringing convenience to people’s daily lives and
contributing to the growth of the local economy.

FINANCIAL
PERFORMANCE

The fifth wave of COVID-19 resulted in decreased
domestic patronage and retail traffic in 2022 despite
general recoveries over the second half of the year.
Meanwhile, the closures of cross-boundary stations
in 2022 continued to have significant impacts on fare
revenue and rentals. With the recent reopening of
cross-boundary stations, we have now seen a gradual
improvement in railway patronage and retail traffic.

Profit from our recurrent businesses was HK$1,119 million
before the HK$962 million impairment provision made
in respect of Shenzhen Metro Line 4. Together with the

Annual Report 2022

Business Review and AnalysisFinancials and Other InformationOverviewCorporate Governanceprofit from our property development businesses, which
increased by 12.2% to HK$10,480 million, profit from our
underlying business was HK$10,637 million. Including the
loss arising from the fair value measurement of investment
properties, net profit attributable to shareholders of the
Company in 2022 was HK$9,827 million, equating to
earnings per share of HK$1.59. The Board has proposed
a final ordinary dividend of HK$0.89 per share, which
together with the interim dividend of HK$0.42 per share
will bring the full-year dividend to HK$1.31 per share
(2021: HK$1.27 per share).

ENVIRONMENTAL,
SOCIAL AND
GOVERNANCE

We strongly believe that having a robust environmental,
social and governance framework helps us achieve
sustainable growth for the Company and its shareholders
while also taking account of other stakeholder interests
and providing tangible benefits for the communities we
serve in Hong Kong and around the world. Since unveiling
our Corporate Strategy, “Transforming the Future”, in
2020, we have worked vigorously to align our operations
in accordance with our three primary environmental and
social objectives: reducing Greenhouse Gas Emissions,
promoting Social Inclusion, and fostering Advancement
& Opportunities. To help us do this, we have defined
10 specific areas of focus across these three objectives,
supported by 35 key performance indicators (“KPIs”).
By the end of 2022, many of these KPIs had either been
achieved or were on track to be achieved, and we will
be setting new KPIs to further challenge ourselves in the
pursuit of our corporate purpose.

Reducing Greenhouse Gas Emissions
Climate change is one of the most important issues
of our time. At MTR, a global leader in low-carbon
transit services, we strive to promote environmental
sustainability by taking concrete, measurable actions to
manage and further reduce our carbon footprint.

We have completed a comprehensive carbon reduction
study to help us establish science-based reduction targets
for our railway and property businesses in Hong Kong for
2030, and these 2030 targets have been submitted to the
Science Based Targets initiative for validation. Our
longer-term goal is to increase our use of green
technologies, boost operational efficiencies and

collaborate with likeminded partners en route to
achieving carbon neutrality by 2050.

In April 2022, we completed the installation of solar
panels and glass at Hin Keng Station, supporting the
operation of the station’s facilities with renewable
energy. Installations at Pat Heung and Chai Wan
depots are on-going. In 2022, we attained BEAM
Plus Provisional Gold accreditation for our proposed
Tung Chung East and Tung Chung West stations.
In June, we established the HKUST-MTR Joint Research
Laboratory with the Hong Kong University of Science
and Technology, an initiative designed to promote the
application of innovative smart community and smart
mobility technologies in railway and other services. We
are also pleased that more than 25% of F&B tenants at
our shopping malls joined our food waste reduction
programme during the year.

In 2022, green finance totalling HK$2.8 billion was
arranged under our Sustainable Finance Framework.
These funds will go towards supporting the Company’s
sustainable development via projects designed to
conserve energy, protect the environment, and enhance
and expand low-carbon railway services.

Promoting Social Inclusion
By its very nature, quality mass transit should be
accessible to everyone, irrespective of age, physical ability
or socioeconomic status. In November 2022, we proudly
launched our new “MTR • Care” mobile app, which offers
functions for the elderly and those with special needs.
The year also included a series of pre-opening visits and
guided tours for NGOs and disabled support groups at
the new Exhibition Centre Station. A number of station
shops have been let to NGOs at nominal rent to help
them provide services for the community and create job
opportunities for families with special needs.

At MTR, we work very hard to ensure that our hiring
practices, arrangements and support for our colleagues
are inclusive and to provide equal employment
opportunities for all. This was evident in our 2022 summer
internship programme, where we increased the number
of interns hired who were either from an ethnic minority
background or students with special educational needs
to 9%. We also strive to promote social inclusion among
our colleagues and strengthen our connections with the
community. September 2022 saw the launch of “Social
Inclusion Week”, a series of events and initiatives during
which more than 3,000 colleagues engaged with over
30 NGOs and social enterprises serving people with
different needs. The highlight was an “Inclusive Concert”
hosted at Telford Plaza, where visually impaired musicians

MTR Corporation Limited

CHAIRMAN’S LETTERshared stories of overcoming adversity and performed a
selection of Chinese and Western music pieces. The year
also marked the establishment of our “Gender Equity
Network”, as one of the milestones in driving diversity,
equity and inclusion in our workplace.

It was another productive year for our “More Time
Reaching Community” volunteering scheme, which
organised 111 activities that attracted a headcount of
1,599 participating volunteers serving 25,000 people
in need. In 2022, our volunteers also provided support
in packing and delivering anti-pandemic supplies.
In addition, we collaborated with schools and NGOs to
pilot the “Legacy Train Revitalisation Programme” to
preserve and revitalise retired trains and their components.

Fostering Advancement &
Opportunities
The achievements of MTR can be attributed to the hard
work and drive for excellence of our valued members
of staff. In 2022, we continued to offer our colleagues
a robust suite of learning and development resources,
delivered in both face-to-face and virtual formats to
ensure their health and safety during the pandemic.
We were also excited to introduce new programmes and
self-directed learning initiatives via online platforms.

MTR is passionate about pursuing new innovations and
technologies that can help further improve its world-class
services. In August 2022, we signed an agreement with
Hong Kong Science and Technology Parks Corporation
on a three-year cooperative framework structured around
exploring technological applications, data collaboration
and co-investments in tech ventures to foster the
development of smart solutions and promote Hong Kong
as a global IT hub. We also sponsored the “She Loves Tech
2022” Global Startup Competition and Global Conference
for female entrepreneurs.

During the year, we worked to help young people achieve
brighter futures with our “‘Train’ for Life’s Journeys”
programme. Themed “Achievement • Inclusion • Dream”,
the 2022 programme featured sharings, workshops
and community visits to help students from diverse
backgrounds embrace innovation and inclusion while also
offering them valuable career and life planning guidance.

Governance
Following an external evaluation of the effectiveness
of the Board and its suitability for providing oversight
of the new corporate strategy, we initiated a revamp
of the Board’s Committee structure in February 2022.
This resulted in the establishment of a new Finance &

Investment Committee and a new Technology Advisory
Panel; the combination of the former Audit Committee
and the former Risk Committee to form a new Audit &
Risk Committee; and the update of all Board Committees’
terms of reference. In 2022, we updated our Board
Diversity Policy to include a specific gender diversity
target for the Board to have no less than 20% female
members with immediate effect and no less than 25% by
2025. We also held our first-ever hybrid format Annual
General Meeting in May, offering our shareholders
additional ways of participating in the meeting and, at the
same time, helping to reduce our carbon footprint.

ACKNOWLEDGEMENTS
AND APPRECIATION

I would like to take this opportunity to recognise the
contributions of our Board, Members of Executive
Directorate, management and staff, whose guidance and
hard work have been invaluable to our mission to Keep
Cities Moving no matter the circumstances. In particular,
I would like to thank once more Dr Anthony Chow
Wing-kin, Dr Eddy Fong Ching and Mr Benjamin Tang
Kwok-bun, who retired from their roles as Independent
Non-Executive Directors of the Board on 25 May 2022, for
their strong leadership and counsel. I also welcome once
again Mr Sunny Lee Wai-kwong and Mr Carlson Tong,
who were appointed as Independent Non-Executive
Directors of the Board on 25 May 2022, and Mr Lam
Sai-hung (Secretary for Transport and Logistics), who
re-joined the Board as a Non-executive Director in July 2022.
I would also like to thank Mr Frank Chan Fan (former
Secretary for Transport and Housing) for his valuable
contributions to the Board and the Company during
his tenure.

It has been a tumultuous few years, but I believe that
better times are ahead. I have no doubt that our talented,
dedicated people will help take MTR and Hong Kong
towards a promising new horizon as we move ahead full
steam into 2023.

Dr Rex Auyeung Pak-kuen
Chairman
Hong Kong, 9 March 2023

Annual Report 2022

Business Review and AnalysisFinancials and Other InformationOverviewCorporate GovernanceCEO’S REVIEW
OF OPERATIONS AND OUTLOOK

Dear Shareholders and other Stakeholders,

I am pleased to report on MTR Corporation Limited’s performance and progress in 2022.

In another trying year, we continued to deliver world-class service for our customers while enhancing the quality and
comfort of our transit services. In Hong Kong, we delivered a major piece of railway infrastructure that has greatly boosted
convenience for passengers travelling across Victoria Harbour, while our property development business secured a
major project that will increase the city’s supply of much-needed residential units. We also continued to make promising
headway in terms of our environmental and social objectives – particularly in our focus areas of Greenhouse Gas (“GHG”)
Emissions Reduction, promoting Social Inclusion, and fostering Advancement & Opportunities – while further embedding
the goals and values of our Corporate Strategy throughout the organisation to achieve sustainable, mutually beneficial
growth for MTR and the communities that we serve around the world.

MTR Corporation Limited

Undoubtedly, one of the highlights of the year was the
commencement of the East Rail Line cross-harbour
extension, the final piece of the Shatin to Central
Link project. This milestone represents not only the
completion of a major infrastructure project, one that
seamlessly connects the New Territories and Kowloon
with Hong Kong Island, but also the conclusion of an
important era in the growth of the city’s railway network.
We were also proud to introduce our initial set of new
eight-car Q-trains, which have been deployed along the
Kwun Tong Line. These are the first of 93 new trains that
are being brought in to replace our existing rail fleet
throughout the Hong Kong network.

It was also a successful year for our property development
business. We completed the land exchange documents
for the Siu Ho Wan Depot to transform the site into a new
development called “Oyster Bay”, which is expected to
provide about 10,720 private residential units to the city’s
housing supply. To serve this future community with
convenient rail transport service, we also entered into a
Project Agreement with Government for the new Oyster
Bay Station. Elsewhere, we awarded tenders for the Pak
Shing Kok Ventilation Building and Tung Chung Traction
Substation property development projects in 2022. These
two projects should deliver about 2,150 residential units.

We continued to make headway on a number of projects
under Government’s Railway Development Strategy 2014
(“RDS 2014”), the blueprint for the future development
of Hong Kong’s railway network. On 28 February 2023,
the Company entered into a Project Agreement with
Government for the Tung Chung Line Extension, which
will enhance the connectivity of North Lantau and
support the growth of communities around rail stations
in line with Government’s strategy of making railways the
backbone of public transport.

In our Mainland China and international businesses, we
proudly commenced service of the Central Operating
Section of London’s Elizabeth line, a landmark
development that has increased the city’s rail capacity.
Our wholly owned subsidiary is responsible for the daily
operations of the full line, which is over 100km in route
length. The Southern Section of Beijing Metro Line 16
(“BJL16”) opened for passenger service in December
2022, enhancing Beijing’s metro network and providing
passengers with more commuting options. We also
continued to explore opportunities in Mainland China
and overseas for railway projects and transit-oriented
development (“TOD”) that can further diversify our
revenue streams and build the MTR brand globally.

Financially, the Company’s results were impacted
by the fifth wave of COVID-19 in the first half of
the year, which had negative effects on patronage,
fare revenue and revenue from commercial rentals,
although property development profit offset this to
some degree. Profit attributable to equity shareholders
from recurrent businesses was HK$1,119 million
before the HK$962 million impairment provision made
in respect of Shenzhen Metro Line 4 (“SZL4”), while
property development profit increased by 12.2% to
HK$10,480 million. Profit attributable to shareholders
from underlying businesses was HK$10,637 million.
Including the loss arising from fair value measurement
of investment properties, net profit attributable to the
shareholders of the Company was HK$9,827 million,
representing earnings per share of HK$1.59.

Your Board has proposed a final ordinary dividend of
HK$0.89 per share, which together with the interim
dividend of HK$0.42 per share brings the full-year
dividend to HK$1.31 per share. This represents an increase
of 3.1% compared to 2021.

Annual Report 2022

Business Review and AnalysisFinancials and Other InformationOverviewCorporate GovernanceHONG KONG BUSINESSES

MTR SHOP

MTR operates largely under a rail plus property business
model that includes the Company’s “Hong Kong
Transport Services” – comprising rail and bus services as
well as related commercial activities at stations –
and the development, rental and management of its
railway-linked properties. Such a business model benefits
MTR, all of its shareholders and communities at large.

In 2022, COVID-19 continued to impact our domestic
patronage and fare revenue. The outbreak also affected
retail traffic and rentals. Since the lifting of international
air travel restrictions in late 2022 and the reopening of
cross-boundary stations in early 2023, we have seen
gradual recoveries in railway patronage and retail traffic.

Hong Kong Transport Services – Transport Operations

Year ended 31 December

HK$ million

2022

2021

Inc./(Dec.) %

Hong Kong Transport Operations
Total Revenue
Operating Profit/(Loss) before Depreciation,
Amortisation and Variable Annual Payment (“EBITDA”)
(Loss)/Profit before Interest, Finance Charges, Taxation
and after Variable Annual Payment (“EBIT”)
EBITDA Margin (in %)
EBIT Margin (in %)

13,404

691

(4,733)
5.2%
(35.3)%

13,177

834

(4,262)
6.3%
(32.3)%

1.7

(17.1)

(11.1)
(1.1)% pts.
(3.0)% pts.

In 2022, total revenue from Hong Kong transport
operations increased by 1.7% to HK$13,404 million
compared to the HK$13,177 million recorded in 2021.
Loss before interest, finance charges, taxation and after

variable annual payment was HK$4,733 million. The
increase in loss was mainly due to increased staff and
energy costs as well as higher depreciation resulting from
the opening of the East Rail Line cross-harbour extension.

Patronage
In millions

Revenue
HK$ million

2022

Inc./(Dec.) %

2022

Inc./(Dec.) %

1,334.6
0.4
–
3.1
180.0
–
1,518.1

(6.1)
(11.7)
n/m
44.2
(6.3)
n/m
(6.1)

11,245
4
1,401
128
561
–
13,339
65
13,404

1.6
(20.0)
2.8
43.8
(3.8)
n/m
1.8
(7.1)
1.7

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

n/m: not meaningful

MTR Corporation Limited

CEO’S REVIEW OF OPERATIONS AND OUTLOOKTotal patronage for all MTR rail and bus services
decreased by 6.1% to 1,518.1 million compared to
1,616.3 million in 2021 due to the effects of the pandemic.
Average weekday patronage decreased by 6.3% to
4.45 million. The recent reopening of cross-boundary
stations between Hong Kong and Mainland China has had
a positive impact on our patronage, and cross-boundary
patronage in particular will gradually recover. Restrictions
and quarantine requirements for travellers entering Hong
Kong suppressed Airport Express patronage in the first
half of the year, although the relaxation of such measures
in the second half led to a recovery. Throughout the
year, MTR continued to offer special promotions and
fare discounts for domestic travel to help drive ridership
and mitigate the effects of the pandemic. The end of the
special rebate programme in March 2021 had a positive
effect on the average fare for Domestic Service in 2022.

Market Share

MTR’s overall market share of the franchised public
transport market in Hong Kong in 2022 increased to
48.3% compared with 47.3% in 2021. This was due to
additional patronage from the openings of the full Tuen
Ma Line in June 2021 and East Rail Line cross-harbour
extension in May 2022. The Company’s share of
cross-harbour traffic was 70.1% compared with 67.6%
in 2021. Our share of the cross-boundary business,
including HSR and Cross-boundary Service, was 0% on
account of the closures of all boundary crossings that
we serve. Our share of traffic to and from the airport
was 18.2% compared to 21.6% in 2021, mainly due to
the denominator effect resulting from a sharp increase
in inbound travellers who were under closed-loop
quarantine using designated transport vehicles during
the most part of the year and thereby unable to use any
public transport.

Fare Adjustment, Promotions and
Concessions

In March 2022, MTR announced there would be no
adjustment of fares in 2022/23 according to the fare
adjustment mechanism (“FAM”) and that the Overall
Fare Adjustment Rate, calculated at 0.5%, would be
rolled over to 2023/24. Including the 1.85% fare decrease
announced in 2021/22, this was the third consecutive
year that there was no fare increase under the FAM.
MTR also announced that its special 3.8% fare rebate
(0.8% on top of the committed 3.0% rebate under the
FAM) would be extended till 31 January 2023. In addition

to the extension of the 3.8% fare rebate, the Company
offered other promotions worth over HK$600 million in
total for 2022/23. To further reduce economic hardship
during the pandemic and promote accessibility and
inclusivity, the Company also continued to offer
approximately HK$2.1 billion in on-going fare concessions
to customers including general commuters, the elderly,
children, eligible students and persons with disabilities.

On 20 September 2022, the Government launched
a three-month public consultation on the review of
the FAM. This review seeks to identify a feasible and
pragmatic package that will maintain the financial
sustainability of the Company and enable it to take
new railway projects forward; cope with increasing
expenditures for maintaining the railway system; and
respond to public concerns regarding fare adjustments.
This regular review, which takes place every five years,
is expected to be concluded in the first half of 2023.
Following the completion of the review, the updated FAM
will take effect in June 2023.

Service Performance

MTR is committed to achieving excellence in service and
reliability. During the year, we once again attained a
world-class 99.9% rate in passenger journeys on-time and
train service delivery for our heavy rail network.

In 2022, we ran more than 1.64 million train trips on our
heavy rail network and more than 0.89 million trips on
our light rail network. There were eight delays (defined
as those lasting 31 minutes or more and attributable to
factors within the Company’s control) on the heavy
rail network and no delays of this nature on the light
rail network.

We are very concerned about the two incidents in late
2022, which demand extensive investigation and
follow-up action. In November, a metallic trackside
protection barrier came dislodged and collided with
a Tsuen Wan Line train that was entering Yau Ma Tei
Station. As a result, the front wheel axle of the first car
came off the rail, and two pairs of train doors were
dislocated. The investigation report was made public in
January 2023. It revealed that there was serious corrosion
of the metallic protection barrier’s mounting bolts and
nuts, both at its base frames on the ground and on the
tunnel wall, thus causing structural instability. We are
implementing the improvement measures recommended
in the report. In December 2022, a Tseung Kwan O Line
train approaching Tseung Kwan O Station was brought

Annual Report 2022

Business Review and AnalysisFinancials and Other InformationOverviewCorporate Governanceto a stop by the fault-protection mechanism because an
abnormal extension of the gangway between the sixth
and seventh train cars was detected. The investigation
report was made public in February 2023. It concluded
that the incident was caused by the detachment of a
collar that held the energy absorption device in a secured
position within the semi-permanent coupler assembly
of the train’s sixth car, resulting in the device dislodging
internally. Besides inspecting energy absorption devices
removed from inter-car coupler assemblies of the same
type, we are also implementing the improvement actions
recommended in the report.

It is the Company’s top priority to provide safe, reliable
and efficient railway services for passengers. In addition
to carrying out immediate and in-depth investigations
into these two incidents, MTR set up an Expert Panel
in December 2022 to conduct a comprehensive review
of the Company’s railway asset management and
maintenance regime with the aim of completing the
review and reporting to the Board in six months.

Enhancing the Customer Service
Experience

On 15 May 2022, we opened the East Rail Line cross-harbour
extension. Passengers now have a fourth option for crossing
the harbour to and from Hong Kong Island, enabling even
faster, more convenient railway service.

We also made numerous enhancements to our customer
services and facilities in 2022. Works included installing
smart toilet facilities and drinking water dispensers as
well as initiating a programme for providing a wheelchair
charging service at station concourse to improve
accessibility for the disabled and customers with
special needs.

During the year, we completed the last phase of our
chiller replacement programme. A total of 154 newer,
more energy-efficient chillers have been installed that will
deliver increased comfort for commuters in stations while
reducing approximately 15,000 tonnes of CO2 per annum.
A new programme to replace 31 more chillers will take
place between 2023 and 2026.

By December 2022, three new eight-car Q-trains had
commenced service on the Kwun Tong Line, part of our
extensive efforts to phase out older trains and replace
them with newer, more comfortable models. As at
31 December 2022, the Company had received delivery

of 19 of the 93 new eight-car heavy rail trains ordered,
which will be put into passenger service in stages over the
next few years.

Signalling replacement is an important asset renewal
project. The replacement of our existing signalling
system (“SACEM System”) by a communication-based
train control signalling system (“CBTC System”) along the
Island, Tseung Kwan O, Kwun Tong and Tsuen Wan lines
continued in 2022. During the year, a revised technical
proposal for the project was developed using established
CBTC software with a range of customised functions that
are essential for MTR operations. Once the CBTC System
project is completed, train services can be enhanced to
increase overall carrying capacity, fulfilling our long-term
operational needs. After undergoing necessary testing
and meeting the requirements of relevant Government
departments, the new CBTC System is expected to
commence service on the Tsuen Wan Line between
2025 and 2026, followed by implementation on the
Island, Kwun Tong and Tseung Kwan O lines. Overall
project completion is expected between 2028 and 2029.

Smart Mobility, Operations and
Maintenance

MTR strives to “Go Smart Go Beyond” in its customer
service, operations and maintenance, adopting the latest
technologies, innovations and sustainable practices to
make the Company and customer journey better than
ever. During the year, we added the UnionPay and
WeChat Pay options to our QR code ticketing at gates
for added convenience. We introduced the new
“Cross-Harbour Easy”, a display located at Admiralty
Station’s concourse and interchange platform, to show
real-time traffic and train frequency along the Tsuen
Wan Line and East Rail Line platforms and enable
passengers to select their best route. In 2022, MTR also
became the first global transport operator to join The
Sandbox metaverse, where we are creating an immersive,
railway-themed virtual space to engage with the
younger generations.

Our quest to “Go Smart Go Beyond” is also helping
us improve our railway maintenance and operations.
For example, we are now employing an artificial
intelligence-powered SACEM Remote Monitoring and
Alarm Detection (“AI SACEM”) platform, co-developed
with Alibaba Cloud, that streams fault log data via
telecommunication so we can analyse, predict and
respond to faults earlier.

MTR Corporation Limited

CEO’S REVIEW OF OPERATIONS AND OUTLOOKHong Kong Transport Services – Station Commercial Businesses

Year ended 31 December

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 %)

2022

1,544
836
616
81
3,077
2,555
2,270
83.0%
73.8%

2021

Inc./(Dec.) %

1,594
894
631
89
3,208
2,728
2,488
85.0%
77.6%

(3.1)
(6.5)
(2.4)
(9.0)
(4.1)
(6.3)
(8.8)
(2.0)% pts.
(3.8)% pts.

In 2022, total revenue from all Hong Kong station
commercial activities decreased by 4.1% to HK$3,077 million.
This was mainly due to the impact of the fifth wave of
COVID-19, which led to lower spending by advertisers and
lower rental revenue from negative rental reversions.

As at 31 December 2022, the lease expiry profile of
our station kiosks (including Duty Free shops) by area
occupied was such that approximately 36% will expire
in 2023, 24% in 2024, 35% in 2025, and 5% in 2026
and beyond.

Station retail rental revenue decreased by 3.1% to
HK$1,544 million, which was primarily attributed to
negative rental reversions. To retain and attract small and
medium tenants during the pandemic, we continued to
offer flexible and/ or shorter-term leases. Rental reversion
and average occupancy rates for station kiosks were
approximately -14.6% and 97.3%, respectively. To
help drive traffic to our station retail outlets in a difficult
economic environment, we ran several promotions via
our MTR Mobile app and MTR Points loyalty programme,
and we also reviewed our tenant mix to ensure the
attractiveness of our retail offerings. Our Duty Free
business was impacted by the closure of cross-boundary
stations. In early 2023, Duty Free business resumed with
the reopening of cross-boundary stations. However, its
performance is expected to be impacted as compared
to the past by contracts that were renewed in adverse
market conditions, and it will also be dependent on
patronage and turnover levels.

In terms of trade mix, food and beverage accounted for
approximately 46% of the leased area of our station kiosks
(excluding Duty Free shops) as at 31 December 2022,
followed by cake shops at 15%, convenience stores at
15%, passenger services at 10% and others at 14%.

Advertising revenue decreased by 6.5% to HK$836 million
in 2022. Spending started to improve in the latter part
of the year after the fifth wave of the pandemic subsided.
During the year, we continued our progress in transforming
our media to digital advertising platforms, offered
competitive sales packages, and designed flexible, targeted
packages, including online-plus-offline campaign offerings.

Telecommunications revenue was HK$616 million in
2022, representing a 2.4% decrease compared to the
previous year. 5G services were available at 75 stations
by the end of 2022. We also issued a tender for a new
commercial 5G telecom system in the fourth quarter of
the year. A co-developed data centre service in Tseung
Kwan O has been up and running since February 2022.

Annual Report 2022

Business Review and AnalysisFinancials and Other InformationOverviewCorporate GovernanceProperty 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 %)

In 2022, revenue from property rental and management
decreased by 5.1% year on year to HK$4,779 million as
rental revenue suffered from the pandemic’s dampening
effects on mall traffic and rental reversions. We also
continued to offer rental concessions for tenants, which
are granted on a case-by-case basis. For the year, MTR
shopping malls recorded a rental reversion of -9.0% and
an average occupancy rate of 99%. The Company’s
18 floors in Two International Finance Centre had an
average occupancy rate of 94%.

As at 31 December 2022, the lease expiry profile of
our shopping malls by area occupied was such that
approximately 36% will expire in 2023, 30% in 2024,
17% in 2025, and 17% in 2026 and beyond.

In terms of trade mix, food and beverage accounted for
approximately 28% of the leased area of our shopping
malls as at 31 December 2022, followed by services
(24%), fashion, beauty and accessories (21%), leisure
and entertainment (18%), and department stores and
supermarkets (9%).

In 2022, mall rentals continued to be impacted by the
pandemic and the closure of cross-boundary stations.
To drive traffic to our malls, we launched tactical
promotional programmes via our MTR Mobile app as well
as targeted marketing campaigns designed to appeal to
specific groups of shoppers. We also proudly launched
“LOUDER”, a new retail programme to help small local
brands build their businesses through enhanced
online-to-offline presence. This initiative is part of our
efforts to drive our New Growth Engine and support MTR’s

Year ended 31 December

2022

2021

Inc./(Dec.) %

4,525
254
4,779
3,815
3,800
79.8%
79.5%

4,787
249
5,036
4,066
4,048
80.7%
80.4%

(5.5)
2.0
(5.1)
(6.2)
(6.1)
(0.9)% pt.
(0.9)% pt.

sustainable business growth and environmental, social
and governance objectives by creating opportunities for
small local businesses to grow alongside the Company.

Property Development and Tendering

In 2022, Hong Kong property development profit (post-tax)
was HK$10,413 million. This was mainly derived from LP10
(LOHAS Park Package 10), SOUTHLAND (THE SOUTHSIDE
Package 1) and La Marina (THE SOUTHSIDE Package 2).

During the year, pre-sales activities continued for our
property development projects. As at 31 December 2022,
SOUTHLAND and La Marina were 78% and 83% sold,
respectively, while LP10 was 89% sold. Pre-sales for Villa
Garda I and II (LOHAS Park Package 11) launched in June
and July 2022 and were 79% and 22% sold, respectively,
as at the end of the year. We have also obtained pre-sale
consent for IN ONE Phase IA, Phase IB and Phase IC
(Ho Man Tin Station Package 2) and Phase 4A and Phase 4B
of THE SOUTHSIDE Package 4.

Earlier in 2022, we awarded the Pak Shing Kok Ventilation
Building property development project to a consortium
formed by New World Development Company Limited
and China Merchants Land Limited. We also awarded the
Tung Chung Traction Substation property development
project to a subsidiary of Chinachem Group. Three tender
submissions for Oyster Bay Package 1 were received
in February 2023. However, we decided not to accept
any of the tender submissions as none of them met our
minimum requirements, and we will retender the project
in due course subject to market conditions.

MTR Corporation Limited

CEO’S REVIEW OF OPERATIONS AND OUTLOOKGROWING OUR
HONG KONG BUSINESSES

In 2022, we strengthened our “Hong Kong Core” strategic
pillar by completing a major infrastructure project,
securing an important future residential development
and making headway on important initiatives under
Government’s RDS 2014.

Shatin to Central Link
In May 2022, we opened the East Rail Line cross-harbour
extension, marking the completion of the Hung Hom to
Admiralty Section of the Shatin to Central Link. Passengers
are now enjoying enhanced connectivity and reduced
travel times between Hong Kong Island and Kowloon
and the New Territories. The opening also signified the
conclusion of an important era in the development of
Hong Kong’s railway transport infrastructure, one that
included a total of five new rail projects.

Building the Future of the Hong Kong
Railway Network
With the completion of the Shatin to Central Link, MTR
is now fully focused on the next exciting phase of rail
transport development in Hong Kong. In addition to
building infrastructure to support future communities,
we are also working on projects under RDS 2014,
initiatives for the new Northern Metropolis Development
Strategy, and strategic railway projects recommended
under the Strategic Studies on Railways and Major Roads
Beyond 2030 (“RMR2030+ Study”). Together, these
initiatives will provide more efficient links between
local communities, strengthen economic ties with
neighbouring cities in the Greater Bay Area, and create
opportunities for TOD that benefits residents and grows
the Company’s businesses.

On 23 September 2022, we entered into a Project Agreement
with Government on the financing, design, construction,
operation and maintenance of a new Oyster Bay Station,
which will serve the future Oyster Bay community at the
existing Siu Ho Wan Depot Site. Construction is expected to
commence in 2023 and be completed in 2030.

construction of the Airport Railway Extended Overrun
Tunnel. The Tung Chung Line Extension project will
be funded by the financial contribution from the “Rail
plus Property” development model and the Company’s
internal resources. With the Project Agreement in place,
the tendering for the key contracts of Tung Chung Line
Extension will be completed soon, upon which the project
will proceed to the construction stage. It is expected that
the construction of the Tung Chung Line Extension will
commence in mid-2023 for targeted completion in 2029,
while the construction of the Airport Railway Extended
Overrun Tunnel is targeted to commence in 2025 for
completion in 2032.

Regarding RDS 2014, for the Tuen Mun South Extension,
the scheme was authorised under the Railways Ordinance
in June 2022. Construction will commence in 2023 and
is targeted for completion in 2030. For the new Kwu
Tung Station on the East Rail Line, the scheme was
authorised under the Railways Ordinance in November
2022; construction is expected to commence in 2023
for completion in 2027. The preliminary design of the
Northern Link main line is progressing. The scheme for
the new Hung Shui Kiu Station on the Tuen Ma Line
was gazetted under the Railways Ordinance in February
2023, and we are working on the reference design of this
new station. Apart from challenges on the availability of
sufficient labour in Hong Kong’s construction sector, each
of these projects has its own technical difficulties and
challenges to be addressed, including works needing to
be carried out at night during non-traffic hours. It should
be noted that we are still in various stages of discussions
with Government on the abovementioned projects and
have yet to enter into project agreements. However,
Government has announced its intention to proceed with
MTR on these projects using the ownership approach.
Elsewhere, we are also working with Government on the
South Island Line (West) and North Island Line.

As Hong Kong’s leading provider of low-carbon mass
transportation services, MTR fully welcomed the
announcement made in the Chief Executive’s Policy
Address 2022 outlining the development of the “Northern
Metropolis” as well as the further extension of Hong
Kong’s railway network, which is to include three strategic

Annual Report 2022

Business Review and AnalysisFinancials and Other InformationOverviewCorporate Governancedevelopment opportunities throughout its extensive
rail network. Overall, we have 14 on-going residential
property projects in the pipeline that will deliver a supply
of approximately 16,000 units for Hong Kong’s housing
market in the near to medium terms.

Oyster Bay
In November 2022, we completed the land exchange
documents for the existing depot at Siu Ho Wan, which
will be transformed into an exciting new development
called “Oyster Bay”. Subject to tender award, the intake
for the first batch of residents is expected in 2030. In all,
Oyster Bay will provide about 10,720 private residential
units. The public housing units (subsidised housing) will
be provided by Government.

Other Potential Property
Development Projects
Regarding the property development at Tung Chung East
Station, we will start preparation work for the tendering
subject to market conditions. Elsewhere, we continue to
explore potential sites for development along our existing
and future railway lines.

railway projects: the Tseung Kwan O Line Southern
Extension, Central Rail Link and Hong Kong-Shenzhen
Western Rail Link. These three projects are currently in
the public consultation phase as part of RMR2030+ Study.
We are also progressing with a construction study on the
proposed New Science Park/ Pak Shek Kok Station to be
located on the East Rail Line.

Expanding the Property Portfolio

Investment Properties

Our two new shopping malls, The Wai in Tai Wai and THE
SOUTHSIDE in Wong Chuk Hang, will expand our existing
retail portfolio by nearly 30%. The 60,620-square-metre
The Wai will have over 150 retail tenants providing
entertainment, leisure and community services for more
than 710,000 residents in the Sha Tin district. Fitout
work and pre-leasing activities are progressing well in
preparation for the mall’s opening, which is scheduled for
summer 2023. The 47,000-square-metre THE SOUTHSIDE
is currently under pre-leasing and is expected to open in
the fourth quarter of 2023.

Residential Property Development

During the year, the Company advanced important
residential property projects while exploring new

MAINLAND CHINA AND
INTERNATIONAL BUSINESSES

In 2022, MTR’s Mainland China and international
businesses served approximately 1.77 billion passenger
journeys outside of Hong Kong through its subsidiaries,
associates and joint ventures. Being one of the
Company’s three strategic pillars, this segment provides

environmentally friendly mass transportation services
for passengers in Mainland China, Macao, Europe and
Australia, offering geographic diversification of revenue
and opportunities to build the MTR brand worldwide.

MTR Corporation Limited

CEO’S REVIEW OF OPERATIONS AND OUTLOOKMainland China and International Businesses

Mainland China and Macao
Railway, Property Rental and
Property Management Businesses*

International Railway Businesses

Total

2022

2021 Inc./(Dec.) %

2022

2021 Inc./(Dec.) %

2022

2021 Inc./(Dec.) %

2,355
105
42
4.5%
1.8%

2,686
(12.3)
216
(51.4)
(79.3)
203
8.0% (3.5)% pts.
7.6% (5.8)% pts.

23,661
1,160
920
4.9%
3.9%

22,359
674
419
3.0%
1.9%

5.8
72.1
119.6
1.9% pts.
2.0% pts.

26,016
1,265
962
4.9%
3.7%

25,045
890
622
3.6%
2.5%

3.9
42.1
54.7
1.3% pts.
1.2% pts.

Year ended 31 December
HK$ million

Recurrent Businesses
Subsidiaries
Revenue
EBITDA
EBIT
EBITDA Margin (in %)
EBIT Margin (in %)
Recurrent Business Profit

(Net of Non-controlling Interests)

157

(82.2)

267

155

72.3

295

312

(5.4)

Associates and Joint Ventures
Share of Profit

640

692

(7.5)

25.0

695

736

(5.6)

Profit/(Loss) Attributable to Shareholders of the Company

– Arising from Recurrent Businesses (before Business Development Expenses and Impairment Loss)
– Business Development Expenses
– Arising from Recurrent Businesses (after Business Development Expenses but before Impairment Loss)
– Impairment Loss on Shenzhen Metro Line 4
– Arising from Recurrent Businesses (after Business Development Expenses and Impairment Loss)
– Arising from Mainland China Property Development
– Arising from Underlying Businesses

990
(255)
735
(962)
(227)
67
(160)

1,048
(219)
829
–
829
66
895

(5.5)
(16.4)
(11.3)
n/m
n/m
1.5
n/m

n/m: not meaningful
* Excluding the impairment loss of HK$962 million on Shenzhen Metro Line 4 in Mainland China

Excluding Mainland China property development, our
railway, property rental and management subsidiaries
(after business development expenses), together with
our associates and joint ventures outside of Hong Kong,
contributed a net after-tax profit of HK$735 million in
2022 on an attributable basis, before the HK$962 million
impairment provision made for SZL4. This represented a
decrease of 11.3% compared with 2021.

In Mainland China and Macao, recurrent business profit
from our railway, property rental and property management
subsidiaries decreased by 82.2% to HK$28 million in 2022,
before the HK$962 million impairment provision made for
SZL4. This was primarily due to decreased patronage on
SZL4 as a result of the pandemic.

In our international businesses, recurrent business
profit from our railway subsidiaries increased by 72.3%
to HK$267 million in 2022. This was mainly due to the
contribution under the revenue protection mechanism
for Melbourne’s metropolitan rail service, which took
effect in 2022, and the Company’s recognition of profit
from Sydney Metro City & Southwest as construction
progressed. These results were partially offset by
operating losses by Stockholms pendeltåg and Mälartåg.

Our share of results from our associates and joint
ventures decreased by 5.6% to HK$695 million in 2022,
mainly on account of the pandemic in Mainland China,
which led to stringent anti-pandemic measures and
reduced patronage.

Annual Report 2022

Business Review and AnalysisFinancials and Other InformationOverviewCorporate Governance

Mainland China and Macao
In Beijing, our associate operates Beijing Metro Line 4, the
Daxing Line, Beijing Metro Line 14, the Northern, Middle
and Southern sections of BJL16, and the initial section of
Beijing Metro Line 17 (“BJL17”). All lines maintained stable
operations during the year. The Southern Section of BJL16
successfully opened on 31 December 2022, and the full
line is expected to open in 2023. The remaining sections
of BJL17 are still under construction.

In Shenzhen, SZL4, including the SZL4 North Extension,
is operated by our wholly owned subsidiary. The line
maintained stable operations during the year, but as
previously stated, there has been no increase in fares
for SZL4 since we began operating the line in 2010.
We now anticipate that the mechanism and procedures
for fare adjustments will take longer to implement,
and that patronage will remain at a lower level for
longer than expected. We have therefore recognised
an impairment provision of HK$962 million for the SZL4
service concession assets during the year. Elsewhere,
construction on Shenzhen Metro Line 13 continued to
progress, and all the key contracts have been awarded.
This line is expected to commence service in 2024.

In Hangzhou, Hangzhou Metro Line 1 (“HZL1”), the Xiasha
Extension and Airport Extension as well as Hangzhou
Metro Line 5 all achieved stable operations in 2022.
HZL1 has been suffering from losses for most of the
time during the past several years due to slow growth
in patronage. Over the last few years, patronage has
been further impacted by the pandemic. As there is no
patronage protection mechanism under this concession
agreement, the long-term financial viability of this line
will be impacted if patronage remains at a low level over a
period of time.

MTR operates and maintains Macao’s first rapid transit
system, the Macao Light Rapid Transit Taipa Line, where
train services achieved stable operations during the year.

The Company also develops and manages a number
of residential and commercial properties in Mainland
China. TIA Mall in Shenzhen and Ginza Mall in Beijing
both experienced reduced foot traffic during the year
due to the pandemic. Elsewhere, our shopping mall at
Tianjin Beiyunhe Station is progressing, with targeted
completion after 2024, while our mixed-used TOD project
at Hangzhou West Station also continued to progress.

Europe
In the United Kingdom, the concession to operate the
Elizabeth line has been extended to May 2025. The
Central Operating Section of the line opened in May 2022,
and the line achieved stable operations during the year.
Our associate operates the South Western Railway, one
of the UK’s largest rail networks. Services were stable
during the year apart from days that were impacted by an
industry-wide strike. Under the National Rail Contract that
has just been extended by two years till May 2025, the
UK Department for Transport retains all revenue risk and
substantially all cost risk.

In Sweden, where we are the largest rail operator
by passenger volume, we operate four businesses.
Stockholm Metro (Stockholms tunnelbana) achieved
steady operations during the year. The contract has been
extended for a minimum of 18 months and a maximum
of 24 months until 2025. MTRX saw patronage gradually
return after the lifting of COVID restrictions in February
2022, but there remain challenges in terms of, inter alia,
energy costs, and we are studying options as to the way
forward for this business. At Mälartåg, we added the
Upptåget lines to this regional network in June 2022.
Operations of Mälartåg and Stockholms pendeltåg
businesses were impacted by a shortage of operational
staff and maintenance issues, and we are working hard to
improve their financial performance.

Australia
Our subsidiary in Melbourne operating the metropolitan
network achieved steady operations in 2022, and we
continued to support our client on initiatives to further
improve the network. The Sydney Metro North West Line
also achieved satisfactory operations during the year.
Passenger journeys have reached more than 56 million
since this service began in 2019. We continued to make
progress on the construction of the Sydney Metro City &
Southwest project as well as the manufacturing, testing
and commissioning of new, driverless trains.

Growth Outside of Hong Kong
As always, the Company continued to seek growth
opportunities in Mainland China and overseas.
Discussions regarding transport infrastructure, station
commercial and TOD opportunities are on-going in areas
including Chengdu and the Greater Bay Area.

MTR Corporation Limited

CEO’S REVIEW OF OPERATIONS AND OUTLOOKFINANCIAL 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.

Consolidated Profit or Loss

HK$ million

Total Revenue
Recurrent Business Profitζ
EBIT#
Hong Kong Transport Services
– Hong Kong Transport Operations
– Hong Kong Station Commercial Businesses
Total Hong Kong Transport Services
Hong Kong Property Rental and Management Businesses
Mainland China and International Railway, Property Rental and

Management Subsidiaries*

Other Businesses, Project Study and Business Development Expenses
Share of Profit of Associates and Joint Ventures
Total Recurrent EBIT (before Impairment Loss)
Impairment Loss on Shenzhen Metro Line 4
Total Recurrent EBIT (after Impairment Loss)
Interest and Finance Charges
Income Tax
Non-controlling Interests
Recurrent Business Profit
Property Development Profit (Post-tax)
Hong Kong
Mainland China
Property Development Profit (Post-tax)
Underlying Business Profitε
Loss from Fair Value Measurement of
Investment Properties (Post-tax)

Loss from Fair Value Remeasurement on Investment Properties
Gain from Fair Value Measurement of Investment Properties on

Initial Recognition from Property Development

Loss from Fair Value Measurement of
Investment Properties (Post-tax)

Net Profit Attributable to Shareholders of the Company

Year ended 31 December

Favourable/
(Unfavourable) Change

2022

47,812

2021

HK$ million

47,202

610

(4,733)
2,270
(2,463)
3,800

962
(539)
1,095
2,855
(962)
1,893
(1,061)
(361)
(314)
157

10,413
67
10,480

10,637

(4,262)
2,488
(1,774)
4,048

622
(567)
968
3,297
–
3,297
(1,045)
(317)
(127)
1,808

9,277
66
9,343

11,151

(3,076)

(2,065)

2,266

(810)

9,827

466

(1,599)

9,552

(471)
(218)
(689)
(248)

340
28
127
(442)
(962)
(1,404)
(16)
(44)
(187)
(1,651)

1,136
1
1,137

(514)

(1,011)

1,800

789

275

1.3

(11.1)
(8.8)
(38.8)
(6.1)

54.7
4.9
13.1
(13.4)
n/m
(42.6)
(1.5)
(13.9)
(147.2)
(91.3)

12.2
1.5
12.2

(4.6)

(49.0)

386.3

49.3

2.9

ζ:

Recurrent business profit represents profit from the Group’s Hong Kong transport operations, Hong Kong station commercial businesses, Hong Kong property rental
and management businesses, Mainland China and international railway, property rental and management businesses and other businesses (excluding fair value
measurement of investment properties in Hong Kong and Mainland China).
EBIT represents profit before interest, finance charges and taxation.
Excluding the impairment loss of HK$962 million in respect of Shenzhen Metro Line 4 in Mainland China.
Underlying business profit represents profit from the Group’s recurrent businesses and property development businesses.

#:
*:
ε:
n/m: not meaningful

Annual Report 2022

Business Review and AnalysisFinancials and Other InformationOverviewCorporate Governance

Our recurrent business financial performance in 2022
was adversely impacted by the outbreak of the fifth wave
of COVID-19 in Hong Kong since the beginning of 2022
and the impairment provision of HK$962 million made
in respect of Shenzhen Metro Line 4 in Mainland China.
On the other hand, the Group recorded satisfactory
property development profit mainly from three of our
development projects in Hong Kong.

Total Revenue
The Group’s total revenue in 2022 increased slightly by
1.3% to HK$47,812 million when compared to 2021. The
increase was mainly contributed by (i) higher revenue
from our Melbourne transport operations, (ii) an increase
in design and delivery project income from the Sydney
Metro City & Southwest project, and (iii) incremental
revenue for Hong Kong transport operations (“HKTO”)
from the full-year operation of the full Tuen Ma Line
and the opening of the East Rail Line cross-harbour
extension in May 2022, but partly offset by (iv) the impact
of unfavourable exchange rates on revenue from our
overseas businesses and (v) weaker fare and non-fare
revenue from our Hong Kong businesses due to the fifth
wave of COVID-19.

The closures of major passenger boundary crossings
between Hong Kong and Mainland China in 2022 and
various air travel restrictions in place almost throughout
the year continued to have material adverse impacts
on our Cross-boundary and Airport Express fare, Duty
Free Shops and other rental revenue as visitor arrivals
remained minimal.

Omicron variant in Mainland China as well as a shortage
of operational staff and maintenance issues in the Nordic
region, although these factors were mitigated by improved
profit from our Australia businesses.

Besides, the Group recognised an impairment provision
of HK$962 million in respect of Shenzhen Metro Line 4
in first half of 2022 resulting from the no fare increase
situation as explained in the past.

As a result, the Group’s recurrent business profit decreased
significantly by 91.3% to HK$157 million in 2022. Excluding
the HK$962 million impairment provision, our recurrent
profit would have been HK$1,119 million, a decrease of
HK$689 million or 38.1% as compared with 2021.

EBIT
HKTO: Significant EBIT loss of HK$4,733 million was
recorded in 2022 with the loss widened by HK$471 million
when compared to 2021. This was due to decreases
in our Domestic patronage and fare revenue after the
fifth wave of COVID-19 struck Hong Kong in early 2022.
Our patronage in February and March 2022 reduced to
the lowest level since the outbreak of COVID-19. Our
Domestic patronage started to rebound since late April
2022 following the phased relaxation or lifting of
anti-pandemic measures. The adverse impact of the fifth
wave of COVID-19 on HKTO EBIT was mitigated by our
collective effort in maintaining stringent cost control
measures and incremental revenue from the full-year
operation of the full Tuen Ma Line and the opening of the
East Rail Line cross-harbour extension in May 2022.

HKTO continued to report a significant loss as
Cross-boundary Service, High Speed Rail and Intercity
patronage remained severely impacted by the closures of
boundary crossings between Hong Kong and Mainland
China in 2022. Airport Express patronage showed good
signs of recovery as international air travel sentiment
improved resulting from the new “0+3” quarantine
scheme for inbound travellers effective from late
September 2022 which was subsequently fully lifted in
late December 2022.

MTR Corporation Limited

CEO’S REVIEW OF OPERATIONS AND OUTLOOKHong Kong station commercial businesses (“HKSC”):
EBIT profit decreased by HK$218 million (8.8%) to
HK$2,270 million. HKSC has been significantly impacted
by the pandemic since February 2020, when the revenue
stream from Duty Free Shops was suspended due to the
closure of boundary crossing stations. The decrease in
EBIT when compared to 2021 was mainly due to (i) lower
advertising revenue as the improved market sentiment
from the second half of 2021 turned bearish in 2022, and
(ii) lower rental income from negative rental reversions
experienced on renewals and new lets, after the outbreak
of the fifth wave of COVID-19.

Hong Kong property rental and management businesses:
EBIT profit decreased by HK$248 million or 6.1% to
HK$3,800 million. The decrease in EBIT when compared
to 2021 was mainly due to negative rental reversions
experienced on renewals and new lets in the backdrop of
COVID-19.

Mainland China and international railway, property
rental and management businesses subsidiaries:
The COVID-19 continued to adversely impact our
Mainland China and international businesses subsidiaries
to varying degrees, depending on the impact of the
pandemic in the different cities in which we operate
and the revenue exposure under different business
models in such cities. EBIT profit in 2022 increased by
HK$340 million (54.7%) to HK$962 million. This was
contributed by better performance of our Melbourne
transport operation and Sydney Metro City & Southwest
project, though it was partly offset by adverse impacts
from (i) the shortage of operational staff and maintenance
issues in our Nordic businesses, (ii) the pandemic on
our Mainland China businesses and (iii) the depletion
of government subsidies for Shenzhen Metro Line 4 by
late 2022.

Other businesses, project study and business
development expenses:
EBIT loss from these businesses was HK$539 million in 2022,
compared to the loss of HK$567 million recorded in 2021.
The incurred loss was mainly due to service suspension of
Ngong Ping 360 during the fifth wave of COVID-19.

Share of Profit of Associates and
Joint Ventures
Share of profit of associates and joint ventures increased
by HK$127 million or 13.1% to HK$1,095 million in 2022.
This was mainly due to the increase in profit sharing
from Octopus Holdings Limited, which resulted from
improved consumer sentiments and the spill over
effect from the Government Consumption Voucher
Scheme, as well as our increased shareholding since
early 2022. Profit was partially offset by the COVID-19
outbreaks in Mainland China which adversely impacted
our Hangzhou operations.

Impairment Loss on Shenzhen Metro Line 4
(“SZL4”)
As we have been warning repeatedly for some time, if a
suitable fare increase and adjustment mechanism are not
implemented in Shenzhen soon, the long-term financial
viability of this line will be impacted. In this connection,
an impairment provision of HK$962 million was made in
the first half of 2022 for SZL4 as it is anticipated that the
mechanism and procedures for fare adjustments will take
longer time to implement and patronage will remain at a
lower level for a period of time.

Based on the review performed by the Group as at
31 December 2022, no further impairment provision
was made.

Annual Report 2022

Business Review and AnalysisFinancials and Other InformationOverviewCorporate GovernanceLoss from Fair Value Measurement of
Investment Properties (Post-tax)
Loss from fair value measurement of investment
properties in Hong Kong and Mainland China was
HK$810 million in 2022. This comprised (i) a loss of
HK$3,076 million from investment property fair value
remeasurement after tax, which was partly mitigated
by (ii) a gain of HK$2,266 million from fair value
measurement of our sharing-in-kind (i.e. The Wai
shopping mall) in the second half of 2022.

The loss from investment property fair value
remeasurement of HK$3,076 million represents an
approximately 3.6% drop against the value as of
31 December 2021. This loss was mainly explained
by the continued negative rental reversions recorded
in 2022 due to the pandemic.

Net Profit Attributable to Shareholders
of the Company
Taking into account the Group’s recurrent businesses,
property development businesses and fair value
measurement of investment properties, the Group
reported a net profit attributable to shareholders
of the Company of HK$9,827 million in 2022, increase
of HK$275 million or 2.9% when compared to the
HK$9,552 million recorded in 2021.

Total Recurrent EBIT
Total recurrent EBIT before impairment loss decreased by
HK$442 million or 13.4% to HK$2,855 million. Including
the impairment loss on SZL4 of HK$962 million, total
recurrent EBIT decreased by HK$1,404 million (42.6%) to
HK$1,893 million.

Income Tax
Income tax increased by HK$44 million or 13.9% to
HK$361 million in 2022. This was mainly due to the
increased proportion of profit arising in tax jurisdictions
with relatively higher tax rates including Australia.

Since the Rail Merger in 2007, the Company has claimed
annual Hong Kong Profits Tax deductions in respect of
certain payments relating to the Rail Merger (collectively
“the Sums”). The total tax amount in respect of the
Sums for the years of tax assessment from 2007/2008
to 2022/2023 amounted to HK$4.6 billion. On 20 May
2022, the Commissioner of Inland Revenue issued a
determination to the Company disagreeing that the
Sums are tax deductible. The Company lodged a notice
of appeal to the Inland Revenue Board of Review on
16 June 2022. The date of hearing before the Board of
Review is scheduled to be held in early 2024. Further
details are set out in Note 16 “Income Tax” to the
Consolidated Financial Statements.

Property Development Profit (Post-tax)
Property development profit (post-tax) increased by
HK$1,137 million to HK$10,480 million in 2022, which
was mainly derived from the incomes and share of
surplus proceeds of LP10 (LOHAS Park Package 10),
SOUTHLAND (THE SOUTHSIDE Package 1) and La Marina
(THE SOUTHSIDE Package 2).

MTR Corporation Limited

CEO’S REVIEW OF OPERATIONS AND OUTLOOKConsolidated Financial Position

HK$ million

Net Assets
Total Assets
Total Liabilities
Gross Debt^
Net Debt-to-equity Ratioδ

31 December
2022

31 December
2021

Inc./(Dec.)

HK$ million

179,912
327,081
147,169
47,846
23.3%

180,037
292,082
112,045
43,752
18.1%

(125)
34,999
35,124
4,094

(0.1)
12.0
31.3
9.4
5.2% pts

^: Gross debt represents loans and other obligations, and short-term loans.
δ: Net debt-to-equity ratio represents net debt of HK$41,994 million (2021: HK$32,660 million), which comprises loans and other obligations, short-term loans, obligations
under service concession and loans 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 of HK$179,912 million (2021: HK$180,037 million).

Net Assets
Our financial position remains strong. The Group’s
net assets decreased slightly by HK$125 million to
HK$179,912 million as at 31 December 2022. This was
mainly due to 2021 final and 2022 interim ordinary
dividend payments and loss in exchange reserves arising
from the translation of investments outside Hong Kong
due to the unfavourable exchange difference resulting
from a stronger Hong Kong dollar, but mitigated by the
net profit recognised for the year.

Total Assets
Total assets increased by 12.0% to HK$327,081 million
from HK$292,082 million. This was predominantly due to
the increase in property development in progress arising
from the government grant accounting in relation to the
Oyster Bay Project.

Total Liabilities
Total liabilities increased by 31.3% to HK$147,169 million
from HK$112,045 million. This was mainly due to the

booking of notional deferred income under government
grant accounting relating to the Oyster Bay Project. This
deferred income will be used to offset the costs for the
construction of the new Oyster Bay Station, re-provision
of the Siu Ho Wan depot, property enabling works and
site formation of the project.

Gross Debt and Cost of Borrowing
Gross debt of the Group (being loans and other
obligations, and short-term loans) increased by 9.4% to
HK$47,846 million as at 31 December 2022. The weighted
average borrowing cost of the Group’s interest-bearing
borrowings increased from 2.2% p.a. in 2021 to 2.5% p.a.
in 2022.

Net Debt-to-equity Ratio
Net debt-to-equity ratio increased by 5.2% points to
23.3% as at 31 December 2022 from 18.1% as at
31 December 2021. This was mainly due to an increase
in net debts as a result of the land premium paid for the
Oyster Bay Project.

Annual Report 2022

Business Review and AnalysisFinancials and Other InformationOverviewCorporate GovernanceConsolidated Cash Flows

HK$ million

Net Cash Generated from Operating Activities

Receipts from Property Development
Payment of Property Development
Fixed and Variable Annual Payments
Other Net Cash Outflow from Investing Activities
Net Cash (Used in)/Generated from Investing Activities

Net Drawdown/(Repayment) of Debts, Net of Lease Rental and Interest Payments
Dividends Paid to Shareholders of the Company
Other Net Cash Outflow from Financing Activities
Net Cash Used in Financing Activities

Effect of Exchange Rate Changes

(Decrease)/Increase in Cash, Bank Balances and Deposits

Year ended 31 December

2022

6,757

14,162
(9,245)
(1,010)
(10,219)

(6,312)

4,100
(8,562)
(109)

(4,571)

(710)

(4,836)

2021

7,472

17,779
(1,137)
(988)
(8,489)

7,165

(7,317)
(7,165)
(49)

(14,531)

(42)

Net Cash Generated from
Operating Activities
Net cash generated from operating activities was
HK$6,757 million compared to HK$7,472 million in 2021.
This was mainly due to the decrease in operating profit as
discussed above.

Net Receipts from Property Development
Net receipts from property development were
HK$4,917 million. These comprised (i) cash receipts of
HK$14,162 million from THE SOUTHSIDE and LOHAS Park
packages, which were offset by (ii) cash payments of
HK$9,245 million mainly for Oyster Bay Project.

Other Net Cash Outflow from
Investing Activities
Other net cash outflow from investing activities
was HK$10,219 million. This mainly included capital
expenditure of HK$10,808 million, comprising
HK$7,370 million for investments in additional assets such
as station renovation works, new trains and signalling
systems for existing Hong Kong railways and related
operations, HK$1,465 million for Hong Kong railway
extension projects, primarily initial work for RDS 2014
projects, HK$1,204 million for Mainland China and
overseas subsidiaries such as Shenzhen Metro Line 13,
and HK$769 million for Hong Kong investment properties.

ENVIRONMENTAL, SOCIAL
AND GOVERNANCE

In 2022, we strengthened our commitment to
environmental, social and governance (“ESG”), the
backbone of our Corporate Strategy, by defining
10 commitments and 35 key performance indicators
(“KPIs”) across our three environmental and social
objectives: GHG Emissions Reduction, Social Inclusion,

and Advancement & Opportunities. Throughout the year,
we pursued these objectives with a range of initiatives
designed to combat climate change and protect the
environment while fostering a healthier, more harmonious
and inclusive society. As at the end of 2022, many of these
KPIs had either been achieved or were on target.

MTR Corporation Limited

CEO’S REVIEW OF OPERATIONS AND OUTLOOKEnvironmental Aspects
As a leader in environmentally friendly mass transit,
MTR is contributing to the fight against climate change
by pursuing GHG Emissions Reduction through improved
energy efficiency. Following a comprehensive study, we
have committed to establishing science-based carbon
reduction targets for the year 2030 for our railway and
property businesses in Hong Kong with the aim of
achieving carbon neutrality by 2050. These 2030 targets,
which have been submitted to the Science Based Targets
initiative for validation and cover Scope 1, 2 and 3
emissions, will be attained by adopting energy efficiency
measures and cleaner energy as well as green and
low-carbon building designs.

Social Aspects
Social Inclusion is essential to MTR’s function as a global
leader in mass transit. In 2022, we promoted accessibility
and universal basic mobility by launching “MTR • Care”,
a new app featuring functions that assist passengers with
special needs and the elderly; hosting a series of talks at
schools and senior centres on our operations and railway
safety; and organising special events designed to provide
barrier-free access for appreciation of the arts.

Safety is our number one priority, and it is also key to our
efforts to ensure that MTR’s services are delivered safely
for all. In 2022, the number of reportable events on our
heavy rail and light rail networks increased by 7.1%. We
continue to use innovation and technology to manage
our operational risks. During the fifth wave of COVID-19
in Hong Kong, we implemented a wide range of cleaning
and sanitisation initiatives to keep passengers and staff
safe during the pandemic. Although the risk posed by
COVID-19 to local public health has declined since the
end of 2022, we will conduct regular reviews of our health
and safety practices to ensure that they are in line with
global standards and our own Corporate Safety Policy.

MTR also aims to create opportunities for its communities
and business partners. We continued the “‘Train’ for Life’s
Journeys” programme, a series of visits and activities
for secondary school students featuring career and
life planning advice as well as career sharing at MTR.
We are also collaborating with Hong Kong Science
and Technology Parks and Hong Kong Cyberport to
explore opportunities in innovative technologies, data
collaboration, and investments in technology ventures and
start-ups. In addition, we sponsored the “She Loves Tech
2022” Global Startup Competition and Global Conference
for female entrepreneurs.

Governance
Our corporate governance framework supports our
ESG initiatives while ensuring ethical and transparent
business operations. In 2022, we further strengthened
our governance efforts by implementing a new Board
Committee structure designed to optimise the
decision-making processes of the Board and help achieve
the governance goals set out in our Corporate Strategy.

Strong corporate governance is at the heart of our
business and decision-making, ensuring that we operate
ethically and transparently to safeguard the interests of
our shareholders and stakeholders. We were proud to
receive a number of well-recognised awards locally and
globally during the year, including the “Best Public Service
Financial Management Team Hong Kong 2022” and “Most
Innovative Transport Solutions Global 2022” awards from
Capital Finance International.

To ensure business continuity, strong corporate
reputation, legal compliance, and health and safety for
customers and staff, we regularly review MTR’s enterprise
risk management framework and the Company’s risk
profile, top risks and key emerging risks, including
ESG-related risks. Our “three lines of defence” model,
which is aligned with international best practice,
enhances our governance and risk management
practices, including identifying and addressing
unmitigated material risks.

Annual Report 2022

Business Review and AnalysisFinancials and Other InformationOverviewCorporate GovernanceWe greatly value the opinions of our staff. Following our
most recent Employee Engagement Survey in December
2021, we formulated and implemented follow-up action
plans at both the corporate and business unit/ function
levels to convey to our staff that they are valued
members of the Company and that we are eager to make
MTR an even better place to work. In December 2022,
we conducted a pulse survey to track our progress with
these efforts.

As at 31 December 2022, the Company and its
subsidiaries employed 16,804 people in Hong Kong and
15,504 people outside Hong Kong. Our associates and
joint ventures employed an additional 20,735 people in
Hong Kong and worldwide. In 2022, the voluntary staff
turnover rate in Hong Kong was 7.5%.

While the railway incidents that occurred in the last
quarter of 2022 are concerning, we also view them
as important learning opportunities in our quest for
continuous improvement as a world-leading provider
of mass transit services. We are currently engaged
in a comprehensive review of our railway assets and
maintenance management, and we will implement
recommendations that can strengthen our operations
and help prevent similar incidents from happening in the
future. New and smart technologies will also continue to
play increasingly important roles in our railway operations
and maintenance.

HUMAN RESOURCES

As a good and caring employer, MTR strives to
foster Advancement & Opportunities for staff and
the communities we serve. We invest significantly
in our staff’s learning and development by offering
a comprehensive range of training programmes. To
boost our talent recruitment and retention efforts, we
provide competitive pay and benefits, short- and
long-term incentive schemes, and a broad range of career
development opportunities. We recognise the dedicated
work of our staff through a performance-based pay
review mechanism as well as a variety of motivational
schemes and awards. We also have in place a wide range
of policies designed to ensure that MTR is a progressive
and family-friendly place to work.

OUTLOOK

In late December 2022, restrictions on international
arrivals to Hong Kong were lifted, and by February 2023,
cross-boundary transport channels between Hong
Kong and Mainland China had largely resumed. These
developments are sure to be a boon for both the Hong
Kong economy and MTR. Chinese and international
visitors are, historically, one of the contributors to our
rail fare revenue and Duty Free non-fare business. As the
world transitions towards a more manageable, endemic
era of COVID-19, we are hopeful that it spurs an economic
recovery where improved consumer sentiment drives the
revitalisations of the travel, tourism and retail industries,
which would benefit our recurrent businesses. However,
expectations in the near term still must be tempered,
given the current uncertainty of the global economy,
inflationary trends, rising interest rates and heightened
geopolitical tensions.

MTR Corporation Limited

CEO’S REVIEW OF OPERATIONS AND OUTLOOKIn our property development business, subject to
market conditions, we anticipate tendering out
Oyster Bay Packages 1 and 2 and Tung Chung East
Station Package 1 in the next 12 months or so. The
three residential developments will offer a total of
approximately 4,530 residential units. In addition, we
plan to tender out a commercial development site in
the Tung Chung East Station property development.
Meanwhile, applications for pre-sale consent for
THE SOUTHSIDE Package 3, LOHAS Park Package 12,
Ho Man Tin Station Package 1, Tin Wing Stop and the
Yau Tong Ventilation Building are in progress. Depending
on construction and sale progress, we also anticipate
booking initial property development profit from LOHAS
Park Package 11, THE SOUTHSIDE Package 4 and Ho Man
Tin Station Package 2, and booking of gain from fair value
measurement from our sharing-in-kind shopping mall
THE SOUTHSIDE.

Following the successful opening of the East Rail Line
cross-harbour extension, we look forward to continuing
our work with Government on RDS 2014 projects for
Hong Kong’s future railway expansion. We are excited
about opportunities to work on Northern Metropolis
Development Strategy projects and enhance the city’s
connectivity with the Pearl River Delta and Greater Bay
Area. We will also continue to seek further railway and
property development opportunities overseas and in
Mainland China.

I would like to take this opportunity to thank Mr Roger
Bayliss, who retired from the position of Capital Works
Director effective 31 July 2022, and Mr Adi Lau, who retired
from the position of Managing Director – Mainland China
Business and Global Operations Standards effective
31 December 2022, for their contributions to the Company
and its success. I would also like to welcome Mr Carl
Devlin, who was appointed as Capital Works Director
effective 1 August 2022, and Mr Sammy Wong, who was
appointed as Mainland China Business Director effective
1 January 2023.

Despite the difficulties of the past few years, we have
done our utmost to keep Hong Kong and many cities
around the world moving with safe, accessible and
environmentally friendly mass transit services. We have
also worked hard to build a company that can succeed
in generating shareholder value while creating growth
opportunities for individuals and society, in favourable
and challenging environments alike. I look forward to
working with our Board, management and staff as we
move confidently into 2023 and embrace the possibilities
of more auspicious times to come.

Dr Jacob Kam Chak-pui
Chief Executive Officer
Hong Kong, 9 March 2023

Annual Report 2022

Business Review and AnalysisFinancials and Other InformationOverviewCorporate Governance4.45
million
Average Weekday
Patronage

1,518.1
million

Total Patronage

99.9%

Passenger Journeys
On-time

HONG KONG TRANSPORT SERVICES
TRANSPORT OPERATIONS

AIM
As one of the global leaders in environmentally friendly mass rail transit, MTR connects communities throughout
Hong Kong and around the world by providing safe, reliable services that are accessible to everyone. Revenues generated
from railway operations help the Company maintain, improve and expand its network for sustainable growth,
benefitting passengers and shareholders alike.

MTR Corporation Limited

CHALLENGES
The fifth wave of COVID-19 affected domestic patronage in the first half of 2022, and cross-boundary patronage
remained severely impacted due to continued closures of cross-boundary stations. The pandemic also continued to
present operational challenges as MTR strove to protect the health and safety of its passengers and staff. Meanwhile, the
Company prepared for the latest regular review of the Fare Adjustment Mechanism (“FAM”).

STRATEGIES
During the year, MTR strove to increase domestic fare revenue with special marketing offers and promotions while
maintaining service excellence, health and safety. The Company worked around the clock to ensure the successful
opening of the much-anticipated East Rail Line cross-harbour extension. We also continued to enhance our network with
the latest technologies and innovations while engaging the local community through numerous outreach efforts.

OUTLOOK
While the first half of 2022 saw difficulties brought by the fifth wave of the COVID-19 pandemic, patronage gradually
recovered as the situation came under control. Meanwhile, Government’s relaxation measures on quarantine and
self-monitoring policies for international arrivals has driven patronage for both our domestic network and Airport
Express. With the lifting of cross-boundary travel restrictions in January 2023, our Cross-boundary Service and High Speed
Rail (“HSR”) Service have resumed after being suspended since early 2020.

The opening of the East Rail Line cross-harbour extension in May 2022 completed the Shatin to Central Link and created
yet another convenient way that passengers can travel through the city. Moving forward, the Company is ready to work
with Government on the next phase of the city’s transit infrastructure development, an era that will further enhance
connections within the city, support the growth of communities around rail stations in line with Government’s strategy of
making railways the backbone of public transport, and establish new links with the Greater Bay Area and Mainland China.

Our “Go Smart Go Beyond” campaign continues as we strive to use smart technologies to build more connected and
inclusive communities while emphasising sustainable growth and environmental protection. As always, we will spare no
effort to continue providing world-class transport operations that are clean, comfortable, accessible and affordable for the
millions of passengers who journey along our networks each day.

Annual Report 2022

Business Review and AnalysisFinancials and Other InformationOverviewCorporate GovernanceSAFETY
Safety is and always will remain our number one focus.
MTR recorded 880 reportable events throughout its heavy
rail and light rail network in 2022, which represents a
7.1% increase compared to 2021. Further details about
our safety performance can be found in the Ten-Year
Statistics of this Annual Report.

During the year, our Escalator Safety Task Force continued
to promote the importance of riding escalators safely
to prevent accidents, opening promotional information
booths at stations and launching awareness campaigns.

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

n/m: not meaningful

An Elderly Caring Programme will be established to focus
on preventing accidents among the elderly. Our Platform
Gap Incident Special Task Force promoted platform gap
safety by distributing souvenirs to passengers at stations.
Smart Junctions were introduced at two Light Rail stops
to enhance the safety of trackside works. We also placed
smart flashing bollards with flashing yellow strips at the
pedestrian crossings of 14 Light Rail locations. Meanwhile,
we launched a smart tunnel system at the Tsuen Wan
Line; these are also being extended to the East Rail Line.

Patronage
In millions

Revenue
HK$ million

2022

Inc./(Dec.) %

2022

Inc./(Dec.) %

1,334.6
0.4
–
3.1
180.0
–
1,518.1

(6.1)
(11.7)
n/m
44.2
(6.3)
n/m
(6.1)

11,245
4
1,401
128
561
–
13,339
65
13,404

1.6
(20.0)
2.8
43.8
(3.8)
n/m
1.8
(7.1)
1.7

MTR rail and bus passenger services recorded
1,518.1 million passenger trips in 2022, representing a
year-on-year decrease of 6.1%. Patronage was impacted
by the fifth wave of COVID-19 over the first half of the
year, although ridership increased from May as the
number of cases subsided. Average weekday patronage
decreased by 6.3% to 4.45 million passenger trips.

Total patronage for Domestic Service was 1,334.6 million
in 2022, a year-on-year decrease of 6.1%. Average weekday
patronage for Domestic Service decreased by 6.4% to
3.92 million. The recent reopening of cross-boundary
stations between Hong Kong and Mainland China has had
a positive impact on our patronage, and cross-boundary
patronage in particular will gradually recover.

Patronage at Airport Express was 3.1 million in 2022,
representing a 44.2% increase compared to 2021.
This was attributed to the gradual relaxation of

international air travel restrictions and quarantine
requirements in the second half of the year. Following the
announcements of these updated Government policies,
MTR responded promptly to cater to growing travel
demand with increased Airport Express service frequency
and promotions.

During the year, we launched a number of promotions
to drive ridership and make trips on MTR even more
affordable and enjoyable. These included offering
100,000 free domestic single journeys for MTR Mobile
app users in celebration of the opening of the East Rail
Line cross-harbour extension, and launching an
MTR Mobile “Instant Win” lucky draw promotion
campaign featuring 25,000 prizes per day for three
consecutive Tuesday to mark the 25th anniversary of the
establishment of the Hong Kong Special
Administrative Region.

MTR Corporation Limited

BUSINESS REVIEWHONG KONG TRANSPORT SERVICES – TRANSPORT OPERATIONSMARKET SHARE
In 2022, our overall share of the franchised public
transport market in Hong Kong increased to 48.3%
compared to the 47.3% recorded in 2021. This was mainly
attributed to additional patronage from the openings
of the full Tuen Ma Line in June 2021 and East Rail Line
cross-harbour extension in May 2022. Our share of
cross-harbour traffic was 70.1% compared to the
67.6% recorded in 2021.

Due to the on-going closures of all boundary crossings that
we serve since January 2020, our Cross-boundary and HSR
services once again registered 0% market share. Market
share to and from the airport was 18.2% compared to
21.6% in 2021, which was mainly due to the denominator
effect resulting from a sharp increase in inbound travellers
who were under closed-loop quarantine using designated
transport vehicles during the most part of the year and
thereby unable to use any public transport.

Domestic Service – Patronage and
Average Fare

Fare Trend

–

7.92

8.11

7.82

7.64

1,334.6

11.2

8.06

2,000

1,800

1,600

1,400

1,200

1,000

800

600

400

200

–

450

400

350

300

250

200

150

100

–

2018

2019

2020

2021

2022

1990

1995

2000

2005

2010

2015

2022

Patronage
(million)
(right scale)

Revenue
(HK$ billion)
(left scale)

Average Fare
(HK$)
(left scale)

HK Payroll Index
(avg. 4.7%
growth p.a.)

Average Fare
(Domestic Service only)
(avg. 2.4% growth p.a.)

Composite
Consumer Price
Index (avg. 2.8%
growth p.a.)

Annual Report 2022

Business Review and AnalysisFinancials and Other InformationOverviewCorporate GovernanceMarket Shares of Major Transport
Operators in Hong Kong
(Percentage)

Market Shares of Major Transport
Operators Crossing the Harbour
(Percentage)

2.0

13.7

2.1

13.5

10.4

11.0

47.3

26.1

25.6

2022

2021

28.0

48.3

30.2

MTR

KMB

Other buses

Green minibus

Trams and ferries

1.9

2.2

67.6

2022

2021

70.1

MTR

Buses

Ferries

FARE ADJUSTMENTS, PROMOTIONS AND CONCESSIONS
In March 2022, MTR announced there would be no
adjustment of fares in 2022/2023 according to the fare
adjustment mechanism (“FAM”). Also, the Overall Fare
Adjustment Rate, calculated at 0.5%, would be rolled
over to 2023/2024. Including the 1.85% fare decrease
in 2021/2022, this was the third consecutive year that
there was no fare increase under the FAM. We also
announced that the special 3.8% fare rebate (0.8% on top
of the committed 3.0% rebate under the FAM) would be
extended till 31 January 2023, a measure designed to help
customers cope with economic difficulties brought by
COVID-19.

To further reduce economic hardship and promote
accessibility and inclusivity, we also continued to offer
approximately HK$2.1 billion in on-going fare concessions
to customers from all walks of life, including commuters,
the elderly, children, eligible students and persons
with disabilities.

On 20 September 2022, Government launched a
three-month public consultation on the review of
the FAM. This review seeks to identify a feasible and
pragmatic package that will maintain the financial
sustainability of the Company while enabling it to take
new railway projects forward, cope with increasing
expenditures for maintaining the railway system and
respond to public concerns regarding fare adjustments.
This regular review, which takes place every five years,
is expected to be concluded in the first half of 2023.
Following the completion of the review, the updated FAM
will take effect in June 2023.

In addition to the extension of the 3.8% fare rebate, we
announced there would be no price adjustments for
“Monthly Pass Extras”, “MTR City Saver” and the “Tuen
Mun – Nam Cheong Day Pass”; the 35%-off “Early Bird
Discount Promotion” would be extended until 31 May
2023; and the interchange discount (HK$0.3 or above)
for Green Minibuses covering more than 500 designated
routes would be continued. In total, these promotions are
worth more than HK$600 million for 2022/2023.

MTR Corporation Limited

BUSINESS REVIEWHONG KONG TRANSPORT SERVICES – TRANSPORT OPERATIONSSERVICE PERFORMANCE

Passengers rely on MTR for safe, on-time rail transport
services, and we are pleased to have reached and
exceeded our key performance indicators for the railway
network in Hong Kong once again in 2022 despite
the challenges of the pandemic. During the year, we
attained 99.9% train service delivery and passenger
journeys on-time, exceeding the targets set in MTR’s
Operating Agreement and the Company’s own even
more demanding Customer Service Pledges. Train service
delivery is a measure of the actual train trips run against
those scheduled to be run. Passenger journeys on-time is
a measure of all passenger journeys completed within five
minutes of their scheduled journey times.

In 2022, we made more than 1.64 million train trips on
our heavy rail network and more than 0.89 million trips
on our light rail network. There were eight delays on the
heavy rail network and none on the light rail network,
delays being defined as those lasting 31 minutes or more
and attributable to factors within the Company’s control.
The light rail network has faced no such delays since
2019. We place the highest priority on passenger safety,
and we closely review all incidents with the objective of
preventing similar situations from occurring again.

Our service performance was marred by two incidents
during the year. The first, on 13 November, involved a
metallic trackside protection barrier coming dislodged
and colliding with a Tsuen Wan Line train that was
entering Yau Ma Tei Station. As a result, the front wheel
axle of the first car came off the rail, and two pairs of
train doors were dislocated. MTR promptly submitted
the preliminary investigation report to Government to

provide information about the cause and handling of the
incident and outline follow-up actions. The investigation
report performed by the Investigation Panel was made
public in January 2023. It revealed that there was serious
corrosion at the mounting bolts and nuts of the metallic
protection barrier at its base frames on the ground
and on the tunnel wall, causing structural instability
of the barrier. We are implementing the improvement
measures recommended in the report, including
upgrading or replacing all metallic protection barriers
of a similar nature, implementing specific inspections
of all metallic protection barriers, and completing a
comprehensive trackside infrastructure and equipment
survey, as well as exploring using technology to provide
real-time monitoring and alerts for trackside installations.
Modifications on trains will be made so that a direct alert
from the train will be sent to the Operations Control
Centre when the detrainment ramp is operated.

The second incident, on 5 December, a Tseung Kwan
O Line train encountered a mechanical failure as it
approached Tseung Kwan O Station. It was brought to
a stop by the fault-protection mechanism because an
abnormal extension of the gangway between the sixth
and seventh train cars was detected. The investigation
report was made public in February 2023. It concluded
that the incident was caused by the detachment of a
collar that held the energy absorption device in a secured
position within the semi-permanent coupler assembly
of the train’s sixth car, resulting in the device dislodging
internally. Besides inspecting the energy absorption
devices removed from inter-car coupler assemblies of
the same type, we are implementing the improvement
actions recommended in the report, such as adding extra
security to collars of the same type for the train fleet
by the end of February 2023, requiring the supplier to
progressively replace the incident-type energy absorption
device with an enhanced design, and exploring the
adoption of technology to monitor the device.

As a follow-up to these two incidents, an Expert Panel was
set up in December 2022 to conduct a comprehensive
review of the Company’s railway asset management and
maintenance regime with an aim to complete the review
and report to the Board in six months. The full report will
be submitted to Government.

Annual Report 2022

Business Review and AnalysisFinancials and Other InformationOverviewCorporate GovernanceOperations Performance in 2022

Service Performance Item

Train service delivery

– Kwun Tong Line, Tsuen Wan Line, Island Line, Tseung Kwan O Line and South Island Line
– Tung Chung Line, Disneyland Resort Line and Airport Express
– East Rail Line(1)
– Tuen Ma Line(2)
– 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(1)
– Tuen Ma Line(2)
Train punctuality

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 and Tuen Ma 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 and Tuen Ma 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
– Tuen Ma 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
– Tuen Ma 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
– Tuen Ma 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
– Tuen Ma 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
– Tuen Ma 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%
N/A
98.5%

98.5%

98.5%
98.5%
N/A

98.0%
98.0%
98.0%
N/A
98.0%

N/A

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

99.5%
99.5%
99.5%
N/A
99.5%

99.5%

99.0%
99.0%
N/A

99.0%
99.0%
99.0%
N/A
99.0%

99.8%
99.9%
99.9%
N/A
99.9%

99.9%

99.9%
99.9%
N/A

99.8%
99.9%
99.9%
N/A
99.9%

850,000

3,238,124

850,000

8,005,373

11,500

37,079

99.0%

99.0%
99.0%

99.0%

99.0%
99.0%
99.0%

99.0%

99.0%
99.0%
99.0%

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%

99.9%

99.9%
99.9%

99.8%

99.9%
99.8%
99.8%

99.9%

99.9%
99.9%
99.9%

99.9%

99.9%
99.9%

99.8%

99.9%
99.8%

99.9%

0
99.9%

99.9%
100%

99.7%
100%
100%

Notes:
1 The performance requirement, customer service pledge target and actual performance result will be available upon completion of two-year revenue operations of the East

Rail Line cross-harbour extension, which commenced service on 15 May 2022. The figure reflects January to May only.

2 The performance requirement, customer service pledge target and actual performance result will be available upon completion of two-year revenue operations of the

Tuen Ma Line.

MTR Corporation Limited

BUSINESS REVIEWHONG KONG TRANSPORT SERVICES – TRANSPORT OPERATIONSMTR conducts regular surveys and research to gauge
customer satisfaction levels regarding its services and
fares, the results of which are published in the Company’s
Service Quality Index and Fare Index, respectively.

MTR also belongs to The Community of Metros
(“COMET”), which establishes performance benchmarks
from urban metro systems around the world with the
aim of improving industry best practices. The 2021
COMET benchmarking exercise assessed data from 44
metro systems in 40 cities around the world. Results can
be found in the “Performance Metrics” section of our
sustainability website.

Service Quality Index

2022

2021

Domestic and Cross-boundary services
Airport Express
Light Rail
Bus
HSR

68^
N/A*
66
73
N/A*

66^
N/A*
63
74
N/A*

Fare Index

2022

2021

Domestic and Cross-boundary services
Airport Express
Light Rail
Bus
HSR

64^
N/A*
65
74
N/A*

62^
N/A*
61
72
N/A*

^ This only measured Domestic Service as the Cross-boundary Service of Lo Wu

and Lok Ma Chau were closed in both 2021 and 2022.
The Voice of Customer surveys for Airport Express and HSR were suspended
from 2020 to 2022 due to the outbreak of the COVID-19 pandemic.

ENHANCING THE CUSTOMER EXPERIENCE
MTR always strives to “Go Smart Go Beyond”, integrating
the latest innovations and technologies to improve the
customer experience and incorporating sustainability into
virtually every aspect of its operations. Such initiatives
form a major part of the Company’s environmental,
social and governance strategy and help make its rail
transport services even more comfortable, inclusive and
environmentally friendly. MTR also invests heavily to
maintain, upgrade and renew the Company’s Hong Kong
railway system.

New Trains

Greater Comfort for Passengers

MTR has ordered 93 new heavy rail eight-car trains as
part of its programme to upgrade the fleet by replacing
older trains with new models. As at 31 December 2022,
the Company had received delivery of a total of 19 new
eight-car heavy rail trains. Eight out of the 19 trains
received are SACEM Q-trains, which are furnished with
equipment for operating under the existing signalling
system, and they will also be able to accommodate the
new signalling system once that replacement project
is completed. Three SACEM Q-trains had been put into
service on the Kwun Tong Line by the end of 2022.

Boosting Passenger Convenience
MTR proudly opened the East Rail Line cross-harbour
extension on 15 May 2022. This new extension provides
passengers with a fourth rail line that crosses Victoria
Harbour, offering added choice and convenience for
travelling across the city. The project also includes the
new Exhibition Centre Station, expansions of Admiralty
and Hung Hom stations, and renovated platforms and
enhanced facilities along the East Rail Line. After the
opening of the East Rail Line cross-harbour extension,
about 48,000 hours of travelling time were saved daily for
our passengers. The Company celebrated the opening by
offering 2,000 people the chance to take the inaugural
ride from Exhibition Centre Station to Hung Hom Station
and giving away 100,000 free domestic single-journey
rides to registered MTR Mobile users.

Replacement of Signalling System

Annual Report 2022

Business Review and AnalysisFinancials and Other InformationOverviewCorporate Governance
operational needs. After undergoing necessary testing
and meeting the requirements of relevant Government
departments, the new CBTC System is expected to
commence service on the Tsuen Wan Line between 2025
and 2026, followed by implementation on the Island,
Kwun Tong and Tseung Kwan O lines. Overall project
completion is expected between 2028 and 2029.

Replacement of Air Conditioning Systems

In 2022, we completed the last phase of our programme
to replace 154 chillers with newer, more energy-efficient
models. These replacements are expected to save
15,000 tonnes of CO2 per annum while delivering
increased comfort for station passengers. A new
programme to replace 31 more chillers will take place
between 2023 and 2026.

New Light Rail Vehicles

The Company has also ordered 40 new light rail vehicles
(“LRVs”) to replace older vehicles and expand its fleet.
As at 31 December 2022, 36 new LRVs had been delivered to
Hong Kong and 28 had been put into service. The remaining
LRVs are undergoing testing and commissioning.

Enhancing Station Facilities
Enjoyable journeys start at our stations, which is why
we work hard to “Care For You Along The Way”, ensuring
comfort, convenience and easy access throughout
these critical customer touchpoints for different types of

customers. During the year, we continued to “Go Smart
Go Beyond” by opening smart toilet facilities across our
network, which provide passengers with digital display
information on toilet availability and indoor air quality. In
pursuit of our environmental conservation goals, we now
offer 18 drinking water dispensers across our network.
To improve access and service for the disabled and those
with special needs, we have launched a pilot programme
for a wheelchair service to escort passengers through the
concourses of Sung Wong Toi Station and a dedicated
charging socket at Kowloon Tong Station for powered
wheelchairs. We also launched a detection system with
the Hong Kong Jockey Club to help caretakers find lost
passengers with dementia. Elsewhere, we continued our
lift and escalator refurbishment programme to improve
the comfort and safety of passengers.

Furthering our efforts under our Corporate Strategy to
reduce Greenhouse Gas Emissions, we recently embarked
upon a programme to replace conventional lighting with
energy-saving LED lighting at 65 stations across the city.
Contracts have been awarded, and work is expected to
finish in 2025. Upon completion, the project is expected to
save 10,000 tonnes of CO2 emission per annum.

We have also launched a “Renewable Energy – Solar
Facilities” study to explore the feasibility of installing
and operating solar facilities to help further reduce
emissions. Panel installation at five stations and depots
was completed in early 2023, and contracts for installation

MTR Corporation Limited

BUSINESS REVIEWHONG KONG TRANSPORT SERVICES – TRANSPORT OPERATIONSat three additional locations were also awarded in 2022.
Other locations are currently being reviewed under the
feasibility study.

Enhancing Passenger Journeys
Through Technology

Smart Mobility

In 2022, MTR continued to “Go Smart Go Beyond” with a
host of innovations designed to improve customer service
and enhance the customer experience. In early 2022, we
made it possible for customers to travel in our network
via QR codes ticketing at gates, adding the widely used
payment platforms WeChat Pay and UnionPay options
for extra convenience. In May, we launched the new
“e-Store”, an online shopping platform; extended the
“Next Train” function to provide real-time train arrival
time and car loading information for the East Rail Line;
and introduced “Cross-Harbour Easy”, a display at the
concourse and interchange platform of Admiralty Station
that shows real-time traffic and train frequency along
the Tsuen Wan Line and East Rail Line platforms to help
passengers select the best route and save time on their
cross-harbour journeys.

There are now more than 1.75 million monthly users with
MTR Mobile, accessing the app to take advantage of its
useful functions and receive news about the Company’s
latest promotions. As at 31 December 2022, there were
more than 1.3 million members of the MTR Points loyalty
scheme, which enables users to earn points and redeem
them for various ticketing offers and a wide range of gifts.

In November 2022, we were proud to introduce
“MTR • Care”, an app that offers smart functions to cater
to the needs of the elderly and passengers with special
needs. Phase 1 features a simplified version of

“Trip Planner” as well as an “In-station Navigation”
function at Exhibition Centre Station for the visually
impaired. We are also exploring further additions to
MTR • Care, including a portable ramp booking service
for mobility-impaired passengers, a “call for assistance”
function for the hearing-impaired and the provision of
real-time information on station lift operations.

Smart Operations and Maintenance

We also continued to employ the latest technologies to
enhance the operations and maintenance of our trains
and railways and ensure safe, reliable passenger transport.

The SACEM Remote Monitoring and Alarm Detection
(“AI SACEM”) platform, co-developed with Alibaba Cloud
using artificial intelligence, streams fault log data via
telecommunication, enabling us to analyse, predict and
respond to faults earlier. This platform has been installed
in our Operation Control Centre, Data Studio and three
depot control centres thus far. Elsewhere, we are trialling
a Smart Depot Control Centre to provide an integrated
console that can help staff oversee depot operations in
regard to the health of our train and track assets.

Data analytics is another important area where
technology enables us to deliver caring service to our
customers. With the help of big data, we have been
able to deliver more than 300 targeted communications
programmes regarding customer service, safety,
marketing and more. In addition, we can further
understand the needs of our customers through
data analysis, and in turn facilitate the formulation
and enhancement of our customer service strategy,
continuously improving the overall customer experience
in smart mobility.

In April 2022, MTR became the first global transport
operator to join The Sandbox metaverse, a leading
decentralised virtual gaming world. With this
collaboration, we are building a railway-focused,
immersive virtual space to create a fun new way of
interacting with our customers, especially the
younger generations.

Annual Report 2022

Business Review and AnalysisFinancials and Other InformationOverviewCorporate Governance1,568

Station Shops with
68,664 square metres

43,186

Advertising Units

Data Access in
75 Stations

HONG KONG TRANSPORT SERVICES
STATION COMMERCIAL BUSINESSES

AIM
We aim to provide high-quality retail, advertising and telecommunications services throughout our network, bringing
value to our customers, business partners as well as shareholders.

MTR Corporation Limited

CHALLENGES
Station Retail

STRATEGIES
Station Retail

In the wake of the COVID-19 pandemic, we continue
to deal with dampened consumer sentiment and
reduced foot traffic, which have combined to impact
tenant operations and place downward pressure on
rental revenue.

Advertising

The ever-changing pandemic situation and the
weakened local and global economy caused
advertising revenue to decline as advertisers closely
monitored spending.

Telecommunications

Increased customer demand for faster connections
and wider coverage across the MTR network continue
to place pressure on the upgrading of infrastructure.

To offset the effects of the pandemic and economic
downturn, we continued to offer flexible and/ or
shorter-term leases to build tenant relationships and
help their businesses recover. Promotions via our MTR
Mobile app and MTR Points loyalty programme were
launched to help attract customers and drive spending.
Reviews of our tenant mix were carried out to drive
rental revenue and ensure that our retail offerings are
up to date.

Advertising

We continued with the digital transformation of our
advertising platforms while designing competitive
sales packages and flexible, target audience-centric
packages, including innovative online-plus-offline
(“O+O”) campaign offerings.

Telecommunications

We made solid progress during the year in our
efforts to plan a new commercial telecom network
that can support more 5G services and faster mobile
communications for customers.

OUTLOOK
Station retail rental revenue is likely to stay under pressure due to negative rental reversions. To drive rental revenue at
our stations in what continues to be a challenging operating environment for tenants, we will keep optimising our retail
mix to ensure that it is fresh and in line with what our customers want and expect. Meanwhile, our Duty Free business has
resumed after the reopening of cross-boundary stations in early 2023, but its performance is expected to be impacted
compared to the past by contracts that were renewed in adverse market conditions, and it will also be dependent on
patronage and turnover levels.

Recent trends have shown a modest recovery in advertising revenue, although this business is still highly susceptible to
changes in the economic environment and their effects on consumer sentiment and spending, as the first six months of
2022 demonstrated. In line with our commitment to leverage technology and innovation for future growth, we will continue
to expand our digital advertising capabilities and build our 5G telecommunication network to drive revenue and meet
passengers’ expectations.

Annual Report 2022

Business Review and AnalysisFinancials and Other InformationOverviewCorporate GovernanceRevenue from Hong Kong
Station Commercial Businesses
(HK$ million)

6,799

6,458

126
696

1,212

126
743

1,130

4,424

4,800

3,269

92
640

516

2,021

3,208

89
631

894

3,077

81
616

836

1,594

1,544

2018

2019

2020

2021

2022

Station Retail

Telecommunications Services

Advertising

Others

Total revenue from Hong Kong station commercial
activities decreased by 4.1% to HK$3,077 million in 2022.
This was mainly due to the impact of the fifth wave of

COVID-19, which led to lower spending by advertisers and
lower rental revenue from negative rental reversions.

Our Duty Free business was impacted by the on-going
closure of cross-boundary stations. In early 2023, Duty Free
business resumed with the reopening of cross-boundary
stations. However, its performance is expected to be
impacted as compared to the past by the contracts that
were renewed in adverse market conditions, and it will be
dependent on patronage and turnover levels.

STATION RETAIL
In 2022, negative reversions on renewed rentals and new
lets contributed to a decrease in revenue from station
shop rentals of 3.1% to HK$1,544 million. In response,
we offered tenants flexible and/ or shorter-term leases,
particularly for small and medium tenants; reviewed
the tenant mix to drive rental revenue and keep retail
offerings up to date; and brought in new brands to attract
customers. Rental relief was offered to tenants on a
case-by-case basis following the fifth wave of COVID-19
in the early part of the year. Rental reversion and average
occupancy rates for our station kiosks were -14.6% and
97.3%, respectively.

During the year, we launched several promotions for
station shops via MTR Mobile and MTR Points, leveraging
large user bases to drive campaigns such as “MTR
Shops Stamp Reward”, which was designed to stimulate
spending at station shops (especially during the roll-out
of Government’s Consumption Voucher Scheme). In
April and October 2022, we distributed MTR Shops cash
coupons to passengers via promotional campaigns to
encourage spending. We also unveiled new shop posters
at stations to showcase new brands at MTR Shops.

MTR Corporation Limited

BUSINESS REVIEWHONG KONG TRANSPORT SERVICES – STATION COMMERCIAL BUSINESSESAs at 31 December 2022, there were 1,568 station
shops occupying 68,664 square metres of retail space,
representing an increase of 18 shops and 385 square
metres of lettable space, respectively, when compared
with 31 December 2021. This was mainly due to the
opening of new shops at Exhibition Centre Station.

To help non-governmental organisations and social
enterprises provide services for the community, we rent
them certain station shops along the Tuen Ma Line at
nominal rates. In 2022, a total of 10 station shops were
leased on this basis.

ADVERTISING
Revenue from advertising decreased by 6.5% to
HK$836 million in 2022. This was due to the dampened
economic outlook disrupting consumption-related
activities and impeding the momentum of a rebounding
advertising market. MTR’s enhanced O+O and
Out-of-Home (i.e., outdoor advertising display) offerings
helped the Company capitalise under the volatile
advertising market.

As at 31 December 2022, the number of advertising units
in stations and trains had decreased to 43,186. This was
primarily due to the fact that the new nine-car trains
along the East Rail Line have less in-train card space,
resulting in a reduced number of in-train tube cards.

TELECOMMUNICATIONS
In 2022, MTR’s revenue from telecommunications
decreased by 2.4% to HK$616 million. 5G services were
available in 75 stations by the end of the year. We also
issued a tender for a new commercial telecom system at

Throughout the year, we continued our progress in
transforming our media to digital advertising platforms,
launching new digital formats and increasing the number
of digital panels across our network. We promoted flexible
packages targeting specific audiences via our audience-
targeting and media-selling platform. MTR was also
proud to be the first metro in Asia to offer programmatic
Digital Out-of-Home trading and launch Hong Kong’s
first metaverse online-to-offline (“O2O”) campaign on
Out-of-Home media, leveraging the occasion of the
25th anniversary of the establishment of the HKSAR.

In 2022, MTR provided free advertising space to
68 non-profit organisations to help them promote
their services.

24 stations that can support more 5G services and provide
even faster data throughput. Following the opening of
a co-developed data centre service in Tseung Kwan O
in February 2022, we are exploring opportunities for
additional data centres.

Annual Report 2022

Business Review and AnalysisFinancials and Other InformationOverviewCorporate GovernanceManaging Over

118,000

Residential Units

14 Projects to Supply
Approximately

16,000

Residential Units to
the Market

Shopping Malls in
our Portfolio

Shopping Malls
Under Development

HONG KONG PROPERTY
AND OTHER BUSINESSES

AIM
Our property business, which includes the development, management and rental of high-quality residential and
commercial projects, contributes to the growth of integrated and inclusive communities, creates opportunities for local
businesses, and generates shareholder value.

MTR Corporation Limited

CHALLENGES
Property Rental

STRATEGIES
Property Rental

Rental revenues continued to be impacted by
COVID-19 – particularly during the fifth wave of
the pandemic in the first half of the year – due to
reduced tourism, negative rental reversions and rental
concessions for tenants.

Property Management

Our property management services continued to face
challenges related to statutory changes in licensing,
procurement and maintenance.

Property Development

COVID-19 continued to disrupt the global economy
and create fluctuations in capital flow, inflation and
interest rates.

To drive mall traffic, encourage spending and
increase rental values, we launched promotional
campaigns and targeted marketing promotions via
our MTR Mobile app. We also continued to assist small
and medium enterprises with rental concessions
and flexible lease arrangements while continuously
reviewing our retail mix.

Property Management

We strove to deliver world-class property
management services that safeguarded the health
and safety of our residents, tenants and customers;
emphasised sustainability and green initiatives to
reduce our carbon footprint; and continued to seek
cost-efficiency wherever possible.

Property Development

We continued to leverage our integrated “rail plus
property” development model to appeal to buyers
seeking high-quality units. Meanwhile, we continued
to explore new development opportunities along our
railway lines and deliver existing projects on time,
within budget and to the highest possible standards.

OUTLOOK
Although pandemic and economic conditions improved over the second half of the year, the outbreak of the fifth wave
of COVID-19 in early 2022 demonstrated that the situation is still fluid. Restrictions on international air travel have eased
in late 2022 and cross-boundary stations reopened in January 2023, which could bring more tourists to Hong Kong and
provide modest boosts to mall traffic and retail spending.

To help our mall tenants through the pandemic and increase the rental value of our commercial properties, we will
continue to leverage targeted marketing and online-to-offline campaigns that drive footfall and spending at shops.
Our MTR Points programme is also becoming an increasingly popular platform to engage members and deepen customer
loyalty. As always, we will regularly review our retail portfolio to ensure it is aligned with current trends and demand.
We also look forward to the opening of the two new shopping malls, The Wai and THE SOUTHSIDE, in 2023.

Subject to market conditions, in the next 12 months or so, we expect to tender out Oyster Bay Packages 1 and 2 and Tung Chung
East Station Package 1. These three residential developments will offer a total of approximately 4,530 residential units.
In addition, we plan to tender out a commercial development site in the Tung Chung East Station property development.
In property pre-sales, applications for pre-sale consent for THE SOUTHSIDE Package 3, LOHAS Park Package 12, Ho Man Tin
Station Package 1, Tin Wing Stop and the Yau Tong Ventilation Building are all in progress. Subject to construction and
sale progress, we also anticipate booking initial property development profit from the LOHAS Park Package 11, THE SOUTHSIDE
Package 4 and Ho Man Tin Station Package 2, and booking of gain from fair value measurement from our sharing-in-kind
shopping mall THE SOUTHSIDE.

Annual Report 2022

Business Review and AnalysisFinancials and Other InformationOverviewCorporate GovernancePROPERTY RENTAL
In 2022, property rental revenue decreased by 5.5% year
on year to HK$4,525 million, as rental revenue suffered
from the pandemic’s dampening effects on mall traffic
and rental reversions. We also continued to offer rental
concessions for tenants, which are granted on a
case-by-case basis.

For the year, MTR shopping malls recorded a rental
reversion of -9.0% and an average occupancy rate of 99%.
The Company’s 18 floors in Two International Finance
Centre had an average occupancy rate of 94%.

As at 31 December 2022, the lease expiry profile of
our shopping malls by area occupied was such that
approximately 36% will expire in 2023, 30% in 2024,
17% in 2025, and 17% in 2026 and beyond.

In terms of trade mix, as at 31 December 2022, food
and beverage accounted for approximately 28% of the
leased area of our shopping malls, followed by services
at 24%, fashion, beauty and accessories at 21%, leisure
and entertainment at 18%, and department stores and
supermarkets at 9%.

As at year-end, the Company’s attributable share of
investment properties in Hong Kong was 256,890 square
metres of lettable floor area for retail properties,
39,451 square metres of lettable floor area for offices and
19,634 square metres of property for other use.

In 2022, the on-going closures of cross-boundary stations
between Hong Kong and Mainland China continued to
have an adverse impact on mall traffic and spending and,
by extension, mall rental values. In response, we launched
a series of tactical promotional programmes via our MTR
Mobile app to encourage consumers to spend at MTR
Malls. Of particular note were “Click & Grab” coupon
promotions, which generated buzz among the public and
a high volume of earned media coverage, and our “Catch
the Rewards” online-to-offline campaign. We also rolled
out targeted marketing campaigns that appealed to
specific groups of shoppers according to behaviours and
preferences to boost customer acquisition and stimulate
spending. Other innovative promotional campaigns
included Chinese New Year Markets, “Fun Family
Farming” events and an Organic Farmers’ Market.

A new retail programme, “LOUDER”, was launched in
September 2022 to help small local brands of design
and handcraft build their businesses through this
online-to-offline platform. This initiative is part of our
efforts to drive our New Growth Engine and support
MTR’s sustainable business growth and environmental,
social and governance objectives by creating
opportunities for small local businesses to grow alongside
the Company.

MTR Corporation Limited

BUSINESS REVIEWHONG KONG PROPERTY AND OTHER BUSINESSESInvestment Property Portfolio in Hong Kong (as at 31 December 2022)

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

Type

Shopping Centre
Car Park

Shopping Centre

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

Shopping Centre
Car Park
Motorcycle Park

Shop Unit

Kindergarten
Car Park

International Finance Centre (“ifc”), Central, Hong Kong
– Two ifc
– One and Two ifc

Phase I, Carpark Building, Kornhill, Quarry Bay, Hong Kong

Office
Car Park

Car Park

Roof Advertising Signboard, Admiralty Centre, No. 18 Harcourt
Road, Hong Kong

Advertising Signboard

Ten Shop Units, First Floor Podium, Admiralty Centre, No. 18
Harcourt Road, Hong Kong

Shop Unit

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

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

Hanford Plaza, Tuen Mun

Retail Floor and 1 – 6/F., Citylink Plaza, Shatin

The Capitol, LOHAS Park, Tseung Kwan O

Kindergarten

Shopping Centre
Car Park

Residential
Car Park

Shopping Centre
Car Park

Shopping Centre

Shop Unit
Residential Care Home
for the Elderly

Lettable floor
area (sq. m)

No. of parking
spaces

Company’s
economic
interest

39,331
–

2,397

18,253
–

11,094
–

15,410
1,216
2,497
–

28,597
920
–
–

6,448
–
–

2,629
–
–

8,456
–

12,174
–
–

540
–

39,451
–

–

286

13,512

1,096

–
–
–

45,510
–

5,113

1,045

7,720
–

2,784
–

6,083
–

9,022
–

1,924
–

12,154

391
2,571

–
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

–
22

–

–
–

100%
100%

100%

100%
100%

100%
100%
100%
100%

100%
100%
100%

100%
100%

50%
50%
50%

100%

100%
100%

100%
51%

100%

50%

100%

100%
100%
100%

81%
81%

100%

81%

100%
100%

100%

100%
100%

Annual Report 2022

Business Review and AnalysisFinancials and Other InformationOverviewCorporate GovernanceInvestment Property Portfolio in Hong Kong (as at 31 December 2022) (continued)

Location

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

MONTARA, LOHAS Park, Tseung Kwan O
SEA TO SKY, LOHAS Park, Tseung Kwan O
MARINI, LOHAS Park, Tseung Kwan O

Type

Kindergarten
Car Park
Shop Unit
Kindergarten
Car Park
Kindergarten
Shopping Centre
Kindergarten
Car Park
Motorcycle Park
Car Park
Car Park
Kindergarten
Car Park

Lettable floor
area (sq. m)

No. of parking
spaces

Company’s
economic
interest

800
–
154
708
–
985
27,804
1,141
–
–
–
–
729
–

–
2
–
–
5
–
–
–
333
33
162
52
–
103

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 2022)

Type

Gross floor
area (sq. m.)

No. of parking
spaces

Company’s
economic
interest

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
Residence Oasis, No. 15 Pui Shing Road, Hang Hau, Tseung Kwan O Motorcycle Park
Motorcycle Park
The Grandiose, No. 9 Tong Chun Street, Tseung Kwan O
Residential
Wings at Sea and Wings at Sea II, LOHAS Park, Tseung Kwan O
Car Park
Motorcycle Park
Residential
Car Park
Residential
Car Park
Motorcycle Park
Residential

MALIBU, LOHAS Park, Tseung Kwan O

LP6, LOHAS Park, Tseung Kwan O

MARINI, GRAND MARINI and OCEAN MARINI,
LOHAS Park, Tseung Kwan O
LP10, LOHAS Park, Tseung Kwan O

Shopping centre
Car Park
Car Park
Residential
Car Park
Kindergarten

Residential
Car Park
Motorcycle Park
Retail
Car Park
Motorcycle Park
Car Park
Car Park
Car Park
Residential
Car Park
Motorcycle Park
Residential
Car Park
Motorcycle Park

6,026*
–
–
420**
–
1,299
–
–
1,258**
–
–
–
–
237**
–
–
150**

14,867**

–
–
2,000
–
–
–
–
–
925**
–
–
765**
–
–

–
330
117
–
12
–
4
24
–
95
2
–
28
–
183
–
–

–
178
19
–
9
5
69
2
2
–
120
15
–
206
24

40%
40%
40%
1%
1%
50%
71%
70%
20.1%
20.1%
20.1%
47%
47%
63.3%
63.3%
63.3%
38%

20.0%
20.0%
20.0%
55%
55%
55%
100%
92.88%
87%
68.3%
68.3%
68.3%
68.3%
68.3%
68.3%

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
THE PAVILIA FARM I, No. 18 Che Kung Miu Road, Shatin

THE PAVILIA FARM II, No. 18 Che Kung Miu Road, Shatin

* Lettable floor area
** Saleable area

MTR Corporation Limited

BUSINESS REVIEWHONG KONG PROPERTY AND OTHER BUSINESSESIn line with our commitment to sustainability, green
practices and reducing our carbon footprint, we
continuously adopt initiatives that help us meet the
robust environmental commitments set out in our
Corporate Strategy. Moreover, due to the pandemic, we
have been further reducing our energy use across our

investment property portfolio over the past two years.
As conditions return to normal, we shall be setting new
reduction targets along with our other environmental,
social and governance key performance indicators.
Further information about our environmental efforts can
be found in our Sustainability Report 2022.

EXPANDING THE RETAIL PORTFOLIO
Our two new malls are expected to add nearly 30% to
the attributable GFA of our existing retail portfolio as at
31 December 2022.

the Sha Tin district. Fitout work and pre-leasing activities
are progressing well for the scheduled opening in the
summer of 2023.

The Wai
The new 60,620-square-metre (GFA) shopping centre
The Wai is located at Tai Wai Station. It will have over
150 retail tenants providing entertainment, leisure and
community services for more than 710,000 residents in

THE SOUTHSIDE
Superstructure works are currently underway for THE
SOUTHSIDE, our new 47,000-square-metre (GFA) mall at
Wong Chuk Hang. The mall is currently under pre-leasing
and is expected to open in the fourth quarter of 2023.

Investment Properties in Hong Kong

Distribution of Hong Kong Property
Management Income
(Percentage)

100

–

3,921

3,973

3,865

3,701

81.6

3,489

10,000

9,000

8,000

7,000

6,000

5,000

4,000

3,000

2,000

1,000

–

3.7

9.8

3.6

10.1

15.0

14.6

71.3

2022

2021

71.9

Residential

Retail

Office

Car Park

2018

2019

2020

2021

2022

Value of Investment Properties in Use
(HK$ billion) (left scale)

Net Rental Income
(HK$ million) (right scale)

PROPERTY MANAGEMENT
Property management revenue in Hong Kong
increased by 2.0% to HK$254 million compared to 2021.
As at 31 December 2022, MTR managed more than

118,000 residential units and over 820,000 square metres
of office and commercial space in Hong Kong.

Annual Report 2022

Business Review and AnalysisFinancials and Other InformationOverviewCorporate GovernancePROPERTY DEVELOPMENT
Hong Kong property development profit (post-tax) for
2022 was HK$10,413 million, mainly derived from LP10
(LOHAS Park Package 10), SOUTHLAND (THE SOUTHSIDE
Package 1) and La Marina (THE SOUTHSIDE Package 2).

Pre-sales
The Company’s property development business once
again achieved satisfactory performance in 2022 despite
the difficulties presented by the fifth wave of the
pandemic in the first half of the year.

Property Development Projects

LP10 (LOHAS Park Package 10)
Villa Garda I (LOHAS Park Package 11)
Villa Garda II (LOHAS Park Package 11)
SOUTHLAND (THE SOUTHSIDE Package 1)
La Marina (THE SOUTHSIDE Package 2)

Units Sold as at
31 December 2022

89% of 893 units
79% of 592 units
22% of 644 units
78% of 800 units
83% of 600 units

Pre-sales of SOUTHLAND, La Marina and LP10 continued
during the year, while pre-sales of Villa Garda I and II were
launched in June and July 2022, respectively. Pre-sales
consents were obtained for IN ONE – Phase IA, Phase IB
and Phase IC (Ho Man Tin Station Package 2) and THE
SOUTHSIDE Package 4 Phase 4A and Phase 4B.

Pre-sales and sales activities for West Rail property
development projects, where we act as agent for
the relevant subsidiaries of Kowloon-Canton Railway
Corporation (“KCRC”), also continued during the year. As
at 31 December 2022, 99% of 1,050 units were sold at
Cullinan West, 99% of 1,188 units were sold at Cullinan
West II and 95% of 1,172 units were sold at Cullinan West
III. At The YOHO Hub Phase 1 (Yuen Long Station),

43% of 1,030 units were sold. Pre-sale consent for The
YOHO Hub Phase 2 has been obtained. Pre-sales for
GRAND MAYFAIR I and GRAND MAYFAIR II (Kam Sheung
Road Station Package 1) were launched in April and May
2022, with 99% of 715 units and 82% of 805 units sold,
respectively. Pre-sale consent has been obtained for
GRAND MAYFAIR III.

Pre-sales remain temporarily suspended at THE PAVILIA
FARM III (Tai Wai Station Phase 3) due to the issue with
concrete quality. We continue to work with New World
Development Company Limited (“the developer”) to
ensure that the project meets its design and statutory
requirements, and that the developer addresses the
interests of affected purchasers.

Property Tendering
In April 2022, we awarded the Pak Shing Kok Ventilation
Building property development project to a consortium
formed by New World Development Company Limited
and China Merchants Land Limited. In July 2022, the
Tung Chung Traction Substation property development
project was awarded to a subsidiary of Chinachem Group.
Three tender submissions for Oyster Bay Package 1 were
received in February 2023. However, we decided not to
accept any of the tender submissions as none of them
met our minimum requirements, and we will retender the
project in due course subject to market conditions.

Future Development
The Company currently has 14 residential property
projects under development, which are expected to
deliver a supply of approximately 16,000 quality units to
the market.

MTR Corporation Limited

BUSINESS REVIEWHONG KONG PROPERTY AND OTHER BUSINESSESOyster Bay

We have completed land exchange documents for the
Siu Ho Wan Depot in November 2022 and will proceed
with the proposed development, which has been named
“Oyster Bay”. Adjacent to the future Oyster Bay Station,
Oyster Bay will be developed in phases. Subject to
tender award, the intake for the first batch of residents
is expected in 2030. In all, Oyster Bay will provide about
10,720 private residential units with a total GFA of about
860,500 square metres, comprising about 826,000 square
metres for private residential purposes and 34,500 square
metres for commercial purposes. The public housing units
(subsidised housing) will be provided by Government.

Other Potential Property
Development Projects

For the Tung Chung Line Extension, subject to market
conditions, we will start preparation work for the
tendering of the Tung Chung East Station property
development sites. For the Tuen Mun South Extension,
the rezoning proposal for a mixed-use development at
Area 16 has been agreed by the Town Planning Board in
June 2022 and is now going through the statutory Outline
Zoning Plan amendment procedure.

We continue to explore the development potential
of stations and associated railway facilities along our
existing and future railway lines and will engage in further
discussions with Government regarding the financing
arrangements of these projects to ensure that we can
continue meeting the needs of new railway projects and
community developments.

Annual Report 2022

Business Review and AnalysisFinancials and Other InformationOverviewCorporate GovernanceProperty Development Packages Completed during the year and awarded

Location

Developers

Type

Gross floor
area
(sq. m.)

Tender award
date

Expected
completion date

Ho Man Tin Station
Package 1
IN ONE

LOHAS Park Station
LP10

Villa Garda

Package 12
Package 13

Tai Wai Station
THE PAVILIA FARM

Tin Wing Stop
Tin Wing

La Marina

Package 3

Package 4

Package 5

Package 6

Great Eagle Group
Chinachem Group

Residential
Residential

69,000
59,400

December 2016 By phases in 2024
October 2018 By phases in 2024

Nan Fung Group Holdings Limited

Residential

75,400

Residential

88,858

March 2016

Completed
in 2022
April 2019 By phases in 2024

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

89,290
143,694

February 2020
October 2020

2026
2026

New World Development Company Limited

Residential

190,480

October 2014

Retail

60,620*

Phase I and II
completed
in 2022
Phase III to be
confirmed
Completed
in 2022

Sun Hung Kai Properties Limited

Residential
Retail

91,051
205

February 2015

2024

Wong Chuk Hang Station (THE SOUTHSIDE)
SOUTHLAND

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
Wheelock Properties Limited

Yau Tong Ventilation Building
Yau Tong Ventilation
Building

Sino Land Company Limited and
CSI Properties Limited

Pak Shing Kok Ventilation Building
Pak Shing Kok Ventilation
Building

New World Development Company Limited
and China Merchants Land Limited

Tung Chung Traction Substation
Tung Chung Traction
Substation

Chinachem Group

Kam Sheung Road Station#
GRAND MAYFAIR

Sino Land Company Limited,
China Overseas Land & Investment Limited
and K. Wah International Holdings Limited

Yuen Long Station#
The YOHO Hub

Sun Hung Kai Properties Limited

# 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

MTR Corporation Limited

Residential

53,600

February 2017

Residential

45,800

December 2017

Residential
Retail
Residential

92,900
47,000
59,300

August 2018

October 2019

Completed
in 2022
Completed
in 2022
By phases from
2023 to 2025
2025

Residential

59,100

January 2021

2026

Residential

46,800

April 2021

Residential

30,225

May 2018

2027

2025

Residential

27,006

April 2022

2031

Residential

87,288

July 2022

2031

Residential

114,896

May 2017

By phases from
2024 to 2025

Residential
Retail

126,455
11,535^

August 2015

By phases from
2022 to 2023

BUSINESS REVIEWHONG KONG PROPERTY AND OTHER BUSINESSESProperty Development Packages to be Awarded(1)

Location

Oyster Bay

Tung Chung East Station(2)

Type

Residential
Retail
Kindergarten
Residential
Retail
Office
Kindergarten

Gross floor area
(sq. m.)

Period of
package tenders

Expected
completion date

2023 – 2036

2030 – 2042

2023 – 2026

2030 – 2034

826,000
30,000
4,500
456,600
60,000
110,000
1,800

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 land grant conditions and completion of statutory processes.

West Rail Line Property Development Plan
The Company acts as development agent for the West Rail property projects.

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

Site Area
(hectares)

Actual/Expected
tender award date

Actual/Expected
completion date

September 2008

August 2006 By phases from 2012 to 2014
2014
October 2011 By phases from 2017 to 2019
2017
October 2012
2018
January 2012
2018
August 2012
2018
January 2013
2019
June 2013
August 2015 By phases from 2022 to 2023
May 2017 By phases from 2024 to 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

OTHER BUSINESSES

Ngong Ping 360
Revenue for the Ngong Ping Cable Car and its associated
theme village (“Ngong Ping 360”) decreased by 19.4% to
HK$83 million during 2022, while visitation decreased by 16%
to 0.39 million. This was largely due to the effects of the fifth
wave of COVID-19 in the first half of 2022, which resulted in
the suspension of the cable car service for nearly four months.

To maintain brand exposure and keep the attraction top
of mind among the public, we organised virtual live tours
during the suspension period – including a behind-the-scenes
tour of the cable car garage – and hosted STEM classes for
students in collaboration with a local education group.
Upon resumption of service, we launched an array of
promotional and seasonal events, including the “360°
Metaverse Experience”, “Ngong Ping Mid-Autumn Lantern
Festival”, “NP360 Glamping Christmas” event and many
more. The brand-new cabin “Crystal+” was launched in early

December, and a series of communications and marketing
activities were launched to raise public awareness.

Octopus
In 2022, MTR’s share of profit from Octopus Holdings Limited
(“OHL”) increased by 72.4% to HK$400 million, resulting from
improved consumer sentiment and the spillover effect from
the Government Consumption Voucher Scheme as well as
our increased shareholding of OHL since early 2022. As at
31 December 2022, more than 90,000 service providers in
Hong Kong accepted Octopus payments. Total cards and
other stored-value Octopus products in circulation were
20.7 million, while average daily transaction volume and
value were 14.1 million and HK$342.6 million, respectively.

The Company now holds approximately 64% of OHL
shares after acquiring approximately 6.6% of the shares
from New World First Bus and Citybus on 24 January 2022.

Annual Report 2022

Business Review and AnalysisFinancials and Other InformationOverviewCorporate GovernanceCompletion of the
Shatin to
Central Link

Oyster Bay
Station and
Tung Chung
Line
Extension
entered into
Project Agreements

Schemes of
Tuen Mun
South
Extension and
Kwu Tung
Station
were authorised under
the Railways Ordinance

HONG KONG
NETWORK EXPANSION

AIM
We are committed to expanding our network and supporting our “Hong Kong Core” strategic pillar by developing,
designing and constructing new railway projects that enhance connections between communities and deliver safe,
reliable, affordable, accessible and environmentally friendly mass transit services for all.

MTR Corporation Limited

CHALLENGES
Following the completion of the Shatin to Central Link, we are in the midst of Hong Kong’s next phase of railway
development, including important projects under Railway Development Strategy 2014 (“RDS 2014”), the Northern
Metropolis Development Strategy and other strategic railway projects.

Apart from challenges on the availability of sufficient labour in Hong Kong’s construction sector, each of our new railway
projects has its own technical difficulties and challenges to be addressed, including works needing to be carried out at
night during non-traffic hours.

STRATEGIES
We continue to “Go Smart Go Beyond” by leveraging cutting-edge innovation and technology to enhance our project
design, construction and management, delivering high-quality railway networks for communities and securing important
projects that ensure MTR’s sustainable future growth and success.

OUTLOOK
With the completion of the Shatin to Central Link, which signified the conclusion of a major phase of railway network
growth in Hong Kong, we are now moving forward to the next phase of the city’s infrastructural development.

We continue to advance a number of projects under RDS 2014. On 28 February 2023, the Company entered into a Project
Agreement with Government for the Tung Chung Line Extension, which will enhance the connectivity of North Lantau
and support the growth of communities around rail stations in line with Government’s strategy of making railways the
backbone of public transport.

Other projects under RDS 2014, including the Tuen Mun South Extension, the new Kwu Tung Station on the East Rail Line,
the Northern Link, and the new Hung Shui Kiu Station on the Tuen Ma Line, are at various stages and are progressing
satisfactorily. We are also excited to be taking part in discussions and preparations regarding potential projects under the
Policy Address 2022 and Government’s Northern Metropolis Development Strategy.

Annual Report 2022

Business Review and AnalysisFinancials and Other InformationOverviewCorporate GovernanceService commenced for the East Rail Line cross-harbour
extension in May 2022, signifying the completion of
the Shatin to Central Link. This extension offers another
convenient option for passengers to travel throughout
the city and provides a fourth rail line spanning
Victoria Harbour.

Meanwhile, works continued on several projects under
RDS 2014, which guides Hong Kong’s future railway
expansion. Preparations are also underway for the
initiatives under Government’s Northern Metropolis
Development Strategy and strategic railway projects
recommended under the Strategic Studies on Railways
and Major Roads Beyond 2030 (“RMR2030+ Study”).

SHATIN TO CENTRAL LINK
The 17-km Shatin to Central Link, a project managed by
the Company on behalf of Government, has enhanced
the railway network in Hong Kong by offering passengers
more choices and reduced travel times when travelling
between Hong Kong Island and Central Kowloon and the
Northeast New Territories. The first phase of the Shatin
to Central Link, the 11-km Tai Wai to Hung Hom Section,
opened with the commissioning of the full Tuen Ma Line
in June 2021.

The second phase, the 6-km Hung Hom to Admiralty
Section, comprised the new Exhibition Centre Station and
the expanded Admiralty and Hung Hom stations. After
the Company signed the agreements with Government
and KCRC on the operation of the East Rail Line
cross-harbour extension for a concession period of 10 years
on 10 May 2022, passenger service has commenced on
15 May 2022. The East Rail Line now covers 46 km and
offers interchanges with five other railway lines, connecting
communities across the city more seamlessly than ever.

BUILDING THE FUTURE OF HONG KONG RAILWAY NETWORK

Oyster Bay Station
On 23 September 2022, MTR entered into a Project
Agreement with Government for the financing, design,
construction, operation and maintenance of a new Oyster
Bay Station. The station will be located at Siu Ho Wan
between Sunny Bay and Tung Chung stations on the

Tung Chung Line. Planning and design work of the station
has commenced. Construction is expected to commence
in 2023, and the project is targeted for completion in 2030.

RDS 2014
In 2022, we continued to advance several important
projects supporting Government’s RDS 2014 framework
for the development of Hong Kong’s rail network.

Tung Chung Line Extension

On 28 February 2023, the Company entered into a Project
Agreement with Government for the financing, design,
construction, operation, and maintenance of the Tung
Chung Line Extension. This agreement also covers the
construction of the Airport Railway Extended Overrun
Tunnel. The Tung Chung Line Extension project will be
funded by the financial contribution from the
“Rail plus Property” development model and the
Company’s internal resources. With the Project
Agreement in place, the tendering for the key contracts of

MTR Corporation Limited

BUSINESS REVIEWHONG KONG NETWORK EXPANSIONApart from challenges on the availability of sufficient
labour in Hong Kong’s construction sector, each of these
projects has its own technical difficulties and challenges
to be addressed, including works needing to be carried
out at night during non-traffic hours.

It is important to note that the Company is still in various
stages of discussion with Government and has yet to
enter into project agreements for the Tuen Mun South
Extension, Northern Link/ Kwu Tung Station and Hung
Shui Kiu Station projects. Government has announced its
intention to proceed with MTR on these projects using the
ownership approach. Different funding models, including
the rail plus property model, may be deployed to ensure
commercial returns on the Company’s investments.

For the South Island Line (West) and North Island Line, we
are working closely with Government to address various
technical matters and comments.

Policy Address 2022 and Northern
Metropolis Development Strategy
The Chief Executive’s 2022 Policy Address proposed
further extension of Hong Kong’s railway network as well
as plans for long-term land development. In particular,
Government intends to take forward the three strategic
railway projects recommended in the RMR2030+ Study:
two new local railway projects, the Tseung Kwan O Line
Southern Extension and the Central Rail Line connecting
Kam Tin in Yuen Long with Kowloon Tong via Kwai
Chung; and the Hong Kong – Shenzhen Western Rail Link
project linking Hung Shui Kiu and Qianhai in Shenzhen.

The Policy Address also outlined plans to develop the
Northern Metropolis as the foundation for Hong Kong’s
strategic future growth. We have submitted a technical
proposal to Government on the Northern Link Spur
Line, and we have appointed a consultant to carry out
a technical study on the construction of a new Science
Park/ Pak Shek Kok Station on the East Rail Line between
University Station and Tai Po Market Station as well as the
use of the station site and its adjoining land to provide
more residential units and auxiliary facilities. Existing MTR
works related to the Northern Link main line and Hung
Shui Kiu Station projects are progressing to help facilitate
these developments.

As always, MTR will offer its expertise in developing and
operating world-class railway networks for Hong Kong’s
sustainable development.

Annual Report 2022

the Tung Chung Line Extension will be completed soon,
after which the project will proceed to the construction
stage. It is expected that the construction of the Tung
Chung Line Extension will commence in mid-2023 for
targeted completion in 2029, while the construction of
the Airport Railway Extended Overrun Tunnel is targeted
to commence in 2025 for completion in 2032.

Other Projects

The scheme for the Tuen Mun South Extension – a 2.4-km
extension of the Tuen Ma Line 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 – was
authorised under the Railways Ordinance in June 2022.
Construction is anticipated to commence in 2023, and
completion is targeted for 2030.

The scheme for Kwu Tung Station, a new station that
will be located between Lok Ma Chau and Sheung Shui
stations on the East Rail Line, was authorised under the
Railways Ordinance in November 2022. Construction is
targeted to commence in 2023 for completion in 2027.
Meanwhile, we are making progress on the preliminary
design of the Northern Link main line, which will connect
the Tuen Ma and East Rail lines via the new Kwu Tung
Station and three intermediate stations. Construction on
the Northern Link is targeted to commence in 2025 and
be completed in 2034.

Reference design works continue for Hung Shui Kiu
Station, which will be located on the Tuen Ma Line
between Tin Shui Wai and Siu Hong stations to serve the
growing Hung Shui Kiu/ Ha Tsuen New Development
Area. The scheme for the Hung Shui Kiu Station was
gazetted under the Railways Ordinance in February 2023.

Business Review and AnalysisFinancials and Other InformationOverviewCorporate Governance12

Railway Services in
4 Countries

3,321 km

Operating Route Length
Outside of Hong Kong

1.77 billion

Total Patronage
Outside of Hong Kong

MAINLAND CHINA AND
INTERNATIONAL BUSINESSES

AIM
Our Mainland China and international businesses, together representing one of our Corporate Strategy’s three core pillars,
enable us to diversify our revenue streams across multiple geographies, generating shareholder value while building the
MTR brand as one of the world’s leading providers of environmentally friendly mass transit.

MTR Corporation Limited

CHALLENGES
Strict anti–COVID-19 measures during most of 2022 in Mainland China once again placed pressure on patronage and
revenue. Meanwhile, we continued to face increasing competition as well as challenges related to varying investment and
operating models in both the Mainland China and international markets.

STRATEGIES
During the year, MTR continued to explore new transit-oriented development (“TOD”) opportunities in Mainland
China, the Greater Bay Area, Europe and Australia, and the further diversification of its revenue streams through asset
replacement, maintenance and public-private partnership (“PPP”) infrastructure development opportunities – all while
retaining existing contracts by providing consistently excellent service.

OUTLOOK
Overall, our Mainland China and international businesses continue to represent a major part of our Corporate Strategy
and future growth. To maximise their potential, we will continue to explore new opportunities in Mainland China and
overseas that will help us expand our geographic footprint and widen our revenue streams. Meanwhile, we will strive as
always to deliver quality railway construction, operations and maintenance services for our existing businesses.

Patronage has been gradually returning following the easing or lifting of pandemic restrictions, but the extent to which
it impacts revenue is dependent on the business models of different contracts. A number of concessions have been
extended, and a number of new railway lines are targeted for completion soon; thus, they should begin generating
revenue for the Company in the near term and beyond.

Annual Report 2022

Business Review and AnalysisFinancials and Other InformationOverviewCorporate GovernanceMTR constructs, operates and maintains world-class
railway networks in some of the world’s largest and
fastest-growing markets, including Mainland China,
Macao, Europe and Australia. In 2022, our subsidiaries,
associates and joint ventures served a total of

approximately 1.77 billion passengers, averaging
approximately 5.6 million per weekday outside of Hong
Kong. It also develops, rents and manages a host of
residential and commercial properties in Mainland China.

RAILWAY BUSINESSES IN MAINLAND CHINA

Beijing
In Beijing, our associate operates Beijing Metro Line 4
(“BJL4”), the Daxing Line, Beijing Metro Line 14 (“BJL14”),
the Northern, Middle and Southern sections of Beijing
Metro Line 16 (“BJL16”), and the initial section of
Beijing Metro Line 17 (“BJL17”). The average on-time
performance of these lines in 2022 was 99.9%, and
all achieved stable operations during the year. With
waves of COVID-19 in the Mainland necessitating the
reintroduction of anti-pandemic measures, patronage
was substantially impacted.

Beijing Metro Line 4 and the Daxing Line

BJL4 and the Daxing Line together recorded
approximately 212 million passenger trips and average
weekday patronage of 675,000, representing year-on-year
decreases of 33% and 31%, respectively.

Beijing Metro Line 14

In 2022, BJL14 recorded approximately 163 million
passenger trips and average weekday patronage of
approximately 534,000, representing year-on-year
decreases of 19% and 18%, respectively.

Beijing Metro Line 16

In 2022, the Northern and Middle sections of BJL16
recorded combined passenger trips of approximately
37 million and average weekday patronage of
approximately 122,000. The Southern section of BJL16

commenced passenger service in December 2022. This
new 14.3-km section contains 10 stations and connects
to the Northern and Middle sections, enhancing our
network in Beijing and providing passengers with more
commuting options. Construction on the remaining
sections of BJL16 continued during the year, and the full
line is expected to open in 2023.

Beijing Metro Line 17

In its first full year of operation, the Southern (initial)
Section of BJL17 recorded approximately 11 million
passenger trips and average weekday patronage of
approximately 35,000. This 15.8-km, seven-station section
serves residents living in the southeast of the city. The
remaining sections of BJL17 are still under construction.

MTR Corporation Limited

BUSINESS REVIEWMAINLAND CHINA AND INTERNATIONAL BUSINESSESShenzhen

Shenzhen Metro Line 4

Shenzhen Metro Line 4 (“SZL4”) is operated by our wholly
owned subsidiary. During the year, both SZL4 and the
SZL4 North Extension maintained stable operations and
on-time train service performance of 99.9%. Patronage
decreased by 21% year on year to 149 million passengers,
while average weekday patronage was 451,000.

As previously stated, there has been no increase in
fares for SZL4 since we began operating the line in 2010.
We now anticipate that the mechanism and procedures
for fare adjustments will take longer to implement, and
that patronage will remain at a lower level for longer than
expected. We have therefore recognised an impairment
provision of HK$962 million for the SZL4 service
concession assets during the year.

Hangzhou

Hangzhou Metro Line 1 and its Extensions

Hangzhou Metro Line 1 (“HZL1”) and its extensions, the
Xiasha Extension and Airport Extension all achieved stable
operations in 2022. Patronage of these lines decreased
by 17% year on year to 221 million, while average
weekday patronage was 639,000. On-time train service
performance remained at 99.9%.

HZL1 has been suffering from losses for most of the
time during the past several years due to slow growth
in patronage. Over the last few years, patronage has
been further impacted by the pandemic. As there is no
patronage protection mechanism under this concession
agreement, the long-term financial viability of this line
will be impacted if patronage remains at a low level over
a period of time.

Shenzhen Metro Line 13

Hangzhou Metro Line 5

During the year, construction on Shenzhen Metro Line 13
continued to progress with all key contracts awarded. The
line is expected to commence service in 2024.

In 2022, total patronage of Hangzhou Metro Line 5
(“HZL5”) increased by 0.5% to 187 million, while average
weekday patronage was 583,000. HZL5’s Baoshanqiao
Station opened on 1 April 2022.

Annual Report 2022

Business Review and AnalysisFinancials and Other InformationOverviewCorporate GovernancePROPERTY BUSINESSES IN MAINLAND CHINA

Shenzhen
As at 31 December 2022, 30 out of the remaining 32 flats
at the Tiara, the residential development located at SZL4
Depot Site Lot 1, had been sold. The Tiara has a total
developable GFA of approximately 206,167 square metres
and a retail centre of about 10,000 square metres by GFA.

Foot traffic at TIA Mall remained impacted by COVID-19
and anti-pandemic measures. The mall’s average
occupancy rate was 56%.

Beijing
Foot traffic at Ginza Mall continued to be impacted by
COVID-19. The mall’s average occupancy rate was 61%.

MACAO
MTR operates and maintains the Macao Light Rapid
Transit Taipa Line, Macao’s first rapid transit system.
MTR is also providing project management and technical

Tianjin
Construction of the shopping mall at Tianjin Beiyunhe
Station is in progress and is expected to be completed
after 2024.

Hangzhou
Construction of the Hangzhou West Station TOD project
continued to make good progress during the year. The
project is a mixed-use property development with a total
developable GFA of about 688,210 square metres.
The Company has 10% equity interest in the project.

support services for the Taipa Line Extension to Barra, the
Seac Pai Van Line and Hengqin Line.

MTR Corporation Limited

BUSINESS REVIEWMAINLAND CHINA AND INTERNATIONAL BUSINESSESEUROPE RAILWAY BUSINESSES

United Kingdom

Elizabeth Line

The Central Operating Section of the Elizabeth line owned
by Transport for London (“TfL”) opened on 24 May 2022,
one week following a ceremonial event attended by
Queen Elizabeth II. Our wholly owned subsidiary was
awarded the concession by TfL to operate the service
starting from 2015 (initially under the “TfL Rail” brand
name), and it also manages 28 of the line’s 41 stations.
The concession agreement has now been extended by
two years to May 2025. The Company’s financial interest
is reasonably protected as this concession carries no fare
revenue risk.

Overall, the Elizabeth line achieved stable operations
during the year. In November 2022, the Elizabeth line
integrated services from the east and west into new
central tunnels and stations, enabling direct services
from Reading and Heathrow to Abbey Wood and from
Shenfield to Paddington. Services also increased to
22 trains per hour during peak hours and expanded to
seven days a week in the Central Operating Section.

South Western Railway

Our associate operates the South Western Railway
franchise, one of the largest rail networks in the UK,
achieving stable operations outside of days that were
impacted by an industry-wide strike. The National Rail
Contract that was signed in May 2021 for a two-year term
has now been extended for another full two-year period
till May 2025 on the existing terms. Under this agreement,
the UK Department for Transport retains all revenue risk
and substantially all cost risk.

Sweden
MTR is the largest rail operator in Sweden by passenger
volume. The Company operates four rail businesses in the
country via wholly owned subsidiaries.

Stockholm Metro (Stockholms
tunnelbana)

Stockholm Metro maintained steady operations during
the year. Our contract for this service has been extended
for a minimum of 18 months and a maximum of
24 months until 2025.

MTRX

MTRX is an intercity service between Stockholm and
Gothenburg. Although the pandemic significantly
impacted ticket revenue in early 2022, patronage
gradually began to return following the lifting of
COVID-19 restrictions in February 2022. However, there
remain challenges in terms of, inter alia, energy costs,
and we are studying options as to the way forward for
this business.

Stockholms pendeltåg

The Stockholm commuter rail service (Stockholms
pendeltåg) serves the greater Stockholm area. Operations
during the year were challenging due to a shortage of
operational staff and maintenance issues, and we are
working hard to improve its financial performance.

Mälardalen Regional Traffic (Mälartåg)

The Mälartåg regional traffic service connects Stockholm
with all major towns in the Mälardalen region. We
took over the operations of Mälartåg regional traffic
from December 2021. With the conclusion of the legal
challenge by competing bidders, the interim agreement
has reverted to an eight-year agreement with the
possibility of a one-year extension. We also took over the
Upptåget lines in June 2022. Performance for Mälartåg
regional traffic during the year was also affected by a
shortage of operational staff and maintenance issues. We
are working hard to improve its financial performance.

Annual Report 2022

Business Review and AnalysisFinancials and Other InformationOverviewCorporate GovernanceAUSTRALIA RAILWAY BUSINESSES

Melbourne’s Metropolitan Rail Service
The Melbourne metropolitan rail network, operated
by our subsidiary, achieved stable operations despite
anti-pandemic measures that continued to affect
patronage, particularly in the first half of the year.
We continue to support our client on initiatives to
further improve the network. This concession has been
extended by 18 months to mid-2026.

Metro North West Line in Sydney
MTR is a member of the Northwest Rapid Transit (“NRT”)
Consortium and is responsible for the delivery of the PPP
contract, including design, financing and construction,
of the Metro North West Line as well as its on-going
operations and maintenance. During the year, the line
achieved satisfactory operations. Patronage remained
impacted by the pandemic, but there is no fare revenue
risk according to the terms of this franchise. There have
been more than 56 million passenger journeys since the
service began in 2019.

Sydney Metro City &
Southwest Project
The NRT Consortium has the PPP contract for the delivery
of new metro trains and core rail systems as well as the
operation and maintenance of the combined Metro North
West Line and Metro City & Southwest Line until 2034. In
2022, we continued to make progress on the construction
as well as the manufacturing, testing and commissioning
of new, driverless trains for the Sydney Metro City &
Southwest project despite pandemic-related challenges to
material and talent flow. Since November 2022, new trains
were gradually introduced on the Metro North West Line.

GROWTH OUTSIDE OF HONG KONG
To support our Mainland China and international
businesses, we constantly strive to identify and pursue
growth opportunities outside of Hong Kong that enable
us to diversify our revenue streams, build the MTR brand,
and bring environmentally friendly mass transit services
to more and more people around the world. In 2022,
we continued to discuss transport infrastructure, station

commercial and TOD opportunities in areas including
Chengdu and the Guangdong – Hong Kong – Macao
Greater Bay Area. We also continue to explore growth
prospects overseas.

MTR Corporation Limited

BUSINESS REVIEWMAINLAND CHINA AND INTERNATIONAL BUSINESSESMainland China and International Railway Businesses at a Glance

MTR
Corporation
Shareholding

Business Model

Commencement of
Franchise/Expected Date
of Commencement
of Operation

Franchise/
Concession Period

Total Number of
Stations

Route Length
(km)

Mainland China
Beijing Metro Line 4
(“BJL4”)
Daxing Line of BJL4

Beijing Metro Line 14
(“BJL14”)

Beijing Metro Line 16
(“BJL16”)

49%

Public-Private-
Partnership (“PPP”)
Operations and
Maintenance
(“O&M”) Concession
PPP

49%

Phase 1,2 and 3:
O&M Concession
Full Line: PPP

Beijing Metro Line 17

49% O&M Concession

Shenzhen Metro Line 4
(“SZL4”)

100%

Build-Operate-

Transfer(2)

SZL4 North Extension

100% O&M Concession

Full Line: by phases
from May 2013 to
December 2021
Phase 1: December 2016
Phase 2: December 2020
and December 2021
Phase 3: December 2022
Full Line: Targeted 2023
Phase 1: December 2021
Subject to local
government arrangement
Phase 1 and 2: by phases
from July 2010 to
June 2011
October 2020

September 2009

30 years

December 2010

End together with
BJL4 concession

30 years from
December 2015

Phase 1, 2 and 3:
till full line opens
Full Line: 30 years

Full Line: 37(1)

Full Line: 50.8

(1)
Phase 1, 2 and 3: 28
Full Line: 30

Phase 1, 2
and 3: 46.2
Full Line: 49.5

20 years from
December 2021

Phase 1: 7
Full Line: 21

Phase 1: 15.8
Full Line: 49.7

30 years

Full Line: 15

Full Line: 20.5

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
Elizabeth Line,
United Kingdom

South Western Railway,
United Kingdom

Stockholm Metro,
Sweden

MTRX, Sweden

Stockholm commuter
rail, Sweden
Mälartåg, Sweden
Australia
Melbourne’s
Metropolitan
Rail Service

83%
49%

PPP
PPP

2024
November 2012

49% O&M Concession

November 2015

49% O&M Concession

December 2020

60%

PPP(4)

Initial Section: June 2019
Latter Section (Included
West Extension): April 2020

End together with
SZL4 concession
30 years
25 years

End together with
HZL1 concession
End together with
HZL1 concession
25 years

100%

O&M
Service Contract

December 2019

80 months

100% O&M Concession

May 2015

30% O&M Concession(5)

May 2021

100% O&M Concession

November 2009

100%

Open Access
Operation
100% O&M Concession

Initial service: March 2015
Full schedule: August 2015
December 2016

8 years till 2023,
2 years extension
till 2025
2 years till 2023,
2 years extension
till 2025
8 years till 2017,
6 years extension
till 2023 and
1.5 – 2 years extension
till 2025(6)
Operating license is
subject to renewal
10 years

100% O&M Concession

December 2021

8 years

60% O&M Concession

November 2009

8 years till 2017,
7 years extension
till 2024 and
18 months extension
till 2026
15 years

May 2019

Target in 2024 10 years after service
commencement

16
25(3)

40(5)

210

100

222

10.8

22.4
35.6(3)

5.6

11.2

58.2

9.3

128

998

108

462

247

1,060

432

Sydney Metro North
West Line
Sydney Metro City &
Southwest Line

Mixed

PPP (Operations,
Trains & Systems)
PPP (Operations,
Trains & Systems)

Notes:
1 BJL14 Phase 2 East Section has 12 stations, 11 opened and one bypassed currently. BJL14 Phase 3 Middle Section has 13 stations, ten opened and three bypassed currently.

BJL16 Phase 2 has eight stations, six opened and two bypassed currently. BJL16 Phase 3 has ten stations, nine opened and one bypassed currently.
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. SZL4
North Extension assets are owned by the Shenzhen Municipal Government and MTR Corporation (Shenzhen) Limited was granted operations and maintenance.

3 HZL1 Linping Section became an independent operation under Hangzhou Metro Line 9 in July 2021.
4 HZL5 West Extension is out of PPP scope.
5 One station of HZL5 is under construction.
6

In December 2021, public transport authority decided to extend this contract for a minimum of 18 months and a maximum of 24 months.

Annual Report 2022

Business Review and AnalysisFinancials and Other InformationOverviewCorporate Governance111

Volunteering Projects Organised

HK$16.2
million
Donated and Sponsored
to Charitable and
Other Organisations

Setting
Science-Based
Targets
for 2030 and achieving
Carbon
Neutrality
by 2050

MTR’s success has been built on the clear vision, purpose
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 conscientious business that contributes to
the development of society.

MTR’s rail and property services form integral parts
of people’s lives and fulfil our purpose to “keep cities
moving”. Our sustainability efforts, underpinned by
our sustainable financial model, focus on ensuring
safe, reliable, accessible and environmentally friendly
operations throughout these services and all aspects
of our business. The Company’s Corporate Strategy,
“Transforming the Future”, ensures sustainable long-term
growth according to robust environmental, social and
governance (“ESG”) principles, operational excellence
and innovation. We are striving to foster an even
stronger sense of corporate responsibility throughout

our organisation as we address our communities’
ever-changing societal and environmental needs and
work together towards a better future.

We have published a Sustainability Report every year for
the past two decades to keep stakeholders up to date on
our sustainability performance. The Sustainability Report
fulfils the disclosure requirements of the Hong Kong
Stock Exchange ESG Reporting Guide and is prepared in
accordance with Global Reporting Initiative Standards.
The Sustainability Report contains an Independent
Assurance Report prepared by an external auditor,
who performed limited assurance in relation to certain
sustainability performance data. 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 regarding sustainability information.

MTR Corporation Limited

ENVIRONMENTAL & SOCIAL RESPONSIBILITY111

Volunteering Projects Organised

Our management approach to sustainability is overseen
by the Board’s Environmental & Social Responsibility
Committee (formerly known as the Corporate
Responsibility Committee), which provides strategic
guidance and reviews our sustainability practices and
performance. Please also refer to the “Environmental &
Social Responsibility Committee” section of this Annual

Report’s “Corporate Governance Report” (pages 108 to 109)
for its principal responsibilities. Our Environmental &
Social Responsibility Steering Committee (formerly known
as the Corporate Responsibility Steering Committee)
supports our sustainability efforts by providing direction
on responsible business practices and fostering
collaboration across all business units and functions.

KEEP CITIES MOVING SUSTAINABLY
Our Corporate Strategy outlines a business development
approach guided by strong ESG principles to create value
for all our stakeholders. It sets forth three environmental
and social objectives to strive for further enhancement
of the Company and the communities where it operates:
GHG Emissions Reduction, Social Inclusion, and

Advancement & Opportunities. Ten commitments further
define the areas in which we strive to make a difference.
Our Key Performance Indicators (“KPIs”) also establish
clear areas of emphasis for each commitment, giving
focus to our efforts to achieve meaningful results.

3 ENVIRONMENTAL AND SOCIAL OBJECTIVES AND
10 COMMITMENTS

Social Inclusion
As a provider of public
transport services for all,
social inclusion lies at the
very heart of who we are and
what we do

Advancement &
Opportunities
As we fulfil our vision to connect
and grow communities, we create
opportunities for others to develop
themselves and grow alongside us

GHG Emissions
Reduction
As a low-carbon transport provider,
we are committed to managing
our environmental footprint and
achieving carbon neutrality

Contribute to the following
United Nations Sustainable
Development Goals (“UN SDGs”):

Contribute to the
following UN SDGs:

Commitments

Universal Basic
Mobility

Diversity &
Inclusion

Equal
Opportunities

Employees

Business
Partners

Future Skills &
Innovation

Commitments
Carbon
Emissions
Clean Energy and
Energy Efficiency
Waste
Management
Green and Low-
carbon Designs

Annual Report 2022

Business Review and AnalysisFinancials and Other InformationOverviewCorporate Governance

SOCIAL INCLUSION

Universal Basic Mobility
To promote universal basic mobility, we launched a social
inclusion app, “MTR • Care”, in November 2022 to serve
the elderly and people in need. More features are planned
to be introduced in the coming year. We also continued
to communicate with non-governmental organisations
(“NGOs”) to better understand the mobility needs of
different services users and made improvements to our
age- and people with disabilities friendly facilities at new
and existing stations.

Safety First
Our number one priority is the safety of our customers,
colleagues and business partners. Fostering a safety-first
culture throughout our operations helps ensure safe
and healthy environments in our trains, stations and
properties and enhances the accessibility and inclusivity
of our services.

Our Corporate Strategic Safety Plan has been updated for
2021-2024 under the four-year review cycle with our path
to Zero Harm defined. The Plan guides all our business
areas to continue effectively managing safety and
maintaining safety performance excellence in support of
our growth and global expansion. It sets out our safety
goals and strategic focus areas, enabling a systematic
way to meet our safety objectives across all our business
units, subsidiaries and associates, both in Hong Kong
and around the world. We also use the “Three Lines of
Defence” model for enhanced safety governance.

To promote our safety-first culture, we evolved the
traditional safety month to a year-long “Corporate Safety
Campaign”. We invited participation from colleagues
in Hong Kong and our global hubs in activities that
strengthen our safety culture and enable the sharing of
safe practices corporate-wide. We created innovative
initiatives to enhance engagement and interactions with
our businesses, such as the Global Safety Hackathon and
Global Safety and Health Conference, to share expertise
and build a stronger proactive safety culture for the MTR
community globally.

For details on how we enhance customer safety, please
refer to the “Hong Kong Transport Services – Transport
Operations” section (page 38) of this Annual Report.

MTR Corporation Limited

Diversity and Inclusion
In 2022, 9% of our summer interns recruited were from
ethnic minority backgrounds or students with special
educational needs. We have also started a number of
initiatives to support diversity and inclusion, including an
assessment of office accessibility and the establishment of
a “Gender Equity Network”.

To raise awareness of diversity and inclusion among
our colleagues and to strengthen connections with the
community, “Social Inclusion Week” was launched in
September with 13 activities including a marketplace with
social enterprises, team challenges, cross-industry/ cross-hub
seminars and experiential workshops, in collaboration with
over 30 NGOs and social enterprises. Over 3,000 colleagues
were engaged to understand more about the needs of
different people in the community. One of the highlights
was an inclusive concert, at which the inclusive orchestra
True Colors Symphony’s visually impaired musicians
performed pieces with MTR colleague, and shared their
stories of overcoming adversity with general public.

Equal Opportunities
We continued to promote equal opportunities during
the year under review. We aim to make Hong Kong a
better, more caring and liveable city through “Community
Connect”, our platform for activities that support the
needs of communities across the city, and launched
initiatives in collaborations with non-profit organisations,

ENVIRONMENTAL & SOCIAL RESPONSIBILITYsocial enterprises and Government entities. We also aim
to promote appreciation of the arts and enhance the
passenger experience through our “Art in MTR” programme.

In 2022, our “More Time Reaching Community”
volunteering scheme was revamped to strengthen
alignment with the Company’s three primary social
and environmental objectives. During the year,
111 volunteering projects were organised, involving
a headcount of 1,599 participating volunteers serving
25,000 people in need. In June and July 2022, we held
an “MTR Volunteering Month” themed “Go Green Grow
Love” that featured five volunteering activities designed
to serve people with intellectual disabilities or visual
impairment, the underprivileged and ethnic minority
children, and youngsters with special educational
needs. During the year, our volunteers also took part
in initiatives organised by the Government or NGOs to
help Hong Kong people combat the pandemic, including
distributing food vouchers, care packs and learning kits
and providing disinfection services.

To show our support for International Volunteer Day, the
Company co-organised an Inter-Company International
Volunteer Week in December 2022 with 10 other
companies; together, the group supported 16 NGOs and
contributed more than 800 volunteer hours in one week.

We also supported the Hong Kong Family Welfare
Society’s “Pla-mily” project, which aims to promote
family well-being through playing and toy recycling.
A total of 1,500 families, including 300 families from
underrepresented groups, benefitted from the project.

In 2022, MTR donated and sponsored approximately
HK$16.2 million to charitable and other organisations.

During the year, retired train components were donated
to schools and NGOs for revitalisation projects. Certain
station shops were let to NGOs to help them provide
services for the community and create job opportunities
for families with special needs.

Through our “Art in MTR” programme, we transform our
stations into spaces for arts exhibitions and promotion
for the enjoyment of the travelling public and in support
of local talent. In August, we collaborated with the Hong
Kong Youth Arts Foundation to invite two local artists and
local primary and secondary students to create an “East
Rail Line • Fun Fun Art” train by decorating an East Rail
Line train with landmarks and cultural icons that can be
found along the line. Late in the year, we collaborated with
M+ to launch the Yayoi Kusama-themed train, featuring
Kusama’s signature motifs of polka dots and pumpkins
and featured works, quotes and even an audio guide
about the artist’s work. This eye-catching train ran along
the Tuen Ma Line between November and December.

Annual Report 2022

Business Review and AnalysisFinancials and Other InformationOverviewCorporate GovernanceADVANCEMENT & OPPORTUNITIES

Future Skills and Innovation
We strive to help young people achieve promising futures
by promoting educational and personal development.
Our “‘Train’ for Life’s Journeys” summer youth programme
offers students a holistic career and life planning
experience to help them set goals for their future
development. In 2022, with the theme “Achievement •
Inclusion • Dream”, 66 students including 10% students
from ethnic minority backgrounds participated in the
programme, which features workshops, community visits
and career sharing about various positions within MTR.
Participants embraced diversity and inclusion through
interactions and collaboration with people from different
cultural backgrounds. Throughout the year, the Company
also supported various case competitions for youth,
including the AIESEC Outlier Challenge, Hong Kong
Shared Good Value Competition and HKMA Business
Simulation Competition.

The Company supported the “She Loves Tech 2022”
Global Startup Competition and Global Conference for
female entrepreneurs. We also collaborated with the
Hong Kong Family Welfare Society for a series of STEM

classes for 500 students from underprivileged families
during the fifth wave of COVID-19, and sponsored
200 tickets for underprivileged students to attend
the Social Enterprise Summit and gain exposure to
entrepreneurship with social purpose.

The Company signed a collaboration agreement with
Hong Kong Science and Technology Parks Corporation
(“HKSTP”) in August to set up a three-year collaboration
framework focusing on the application of innovative
technologies, data collaboration and co-investment
in tech ventures. This collaboration aims to further
enhance MTR’s services and customer experience by
adopting innovative technologies, while promoting an
open innovation and technology (“I&T”) ecosystem in
Hong Kong, as well as developing Hong Kong into an
international I&T hub.

Our new subsidiary, MTR Lab Company Limited, also
signed a Memorandum of Understanding with Hong
Kong Cyberport Management Company Limited in June
to set up a two-year collaboration framework for joint
investment in digital technology start-ups.

MTR Corporation Limited

ENVIRONMENTAL & SOCIAL RESPONSIBILITYEnabling the Development of Our
Business Partners
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 have a Green Procurement Policy that
promotes high standards of environmental protection,
both internally and among our suppliers and contractors.

Also, our Modern Slavery and Human Trafficking
Statement defines our commitment to preventing any
incidence of modern slavery or human trafficking within
our business and supply chains.

To promote ESG among our suppliers, we organised a
session on ESG best practice sharing for our suppliers
and have launched an incentive scheme for major
contracts of new railway projects to measure and reward
environmental and safety performance.

GREENHOUSE GAS EMISSIONS REDUCTION
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; use resources
as efficiently as possible; and minimise or mitigate other
environmental impacts of our business.

Carbon Emissions
We have been reporting our GHG emissions since
2002. We measure our 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.

We have completed a carbon reduction study that helped
us formulate a long-term roadmap for achieving our GHG
reduction objectives. We have committed to establishing
science-based carbon reduction targets for the year 2030
for our railway and property businesses in Hong Kong with
the aim of achieving carbon neutrality by 2050. These 2030

targets have been submitted to the Science Based Targets
initiative for validation. We are also proud to report that
we are on track to install more than 200 additional electric
vehicle (“EV”) charging stations to promote EV use and
reduce carbon emissions on local roads.

Clean Energy and Energy Efficiency
In 2022, MTR shopping malls engaged tenants to
participate in a variety of energy-saving initiatives. We
also piloted a building energy management system in one
of our shopping malls. In addition, we have installed solar
photovoltaic systems at Hin Keng Station; installations at
Pat Heung Depot and Chai Wan Depot are on-going.

Waste Management
With a comprehensive railway station network and
sizeable portfolio of shopping malls, waste management
is a focal point of our environmental initiatives. In 2022,
more than 25% of our F&B tenants in shopping malls
joined our food waste reduction programme. We
engaged registered food waste collectors to transfer food
waste from our staff canteen to O • Park for treatment. To
reduce the use of single-use plastic beverage bottles, we
installed six additional water dispensers in our stations
during the year, making a total of 18 water dispensers
available in our network.

Annual Report 2022

Business Review and AnalysisFinancials and Other InformationOverviewCorporate GovernanceGreen and Low-carbon Designs
In 2022, we achieved BEAM Plus Provisional Gold
accreditation for our planned Tung Chung East and
Tung Chung West stations. We also saved 2.5% more
water at our depots in 2022 compared with 2021, and
saved 2% of water at our shopping malls compared to our
2018 baseline level.

Green Finance
In 2022, green finance totalling HK$2.8 billion was arranged
to fund a variety of railway-related conservation and energy
efficiency projects. Details of our sustainable investments
are provided in our annual Sustainable Finance Report,
which is published on our sustainability website.

INDEX AND RECOGNITION
We are proud that our ESG efforts have been recognised
in several international sustainability indices. MTR
has been included in S&P Global’s “The Sustainability
Yearbook 2023” for the fourth consecutive year for
performance achievements ranking within the top 15%
of the industry. Among more than 7,800 companies that
were assessed, just 700+ were selected. We are pleased

that MTR was awarded an AAA rating in the
MSCI ESG Leaders Indexes and “Prime Status” in the
ISS ESG Corporate Rating. We are also a constituent of
the Dow Jones Sustainability Indices (DJSI) Asia Pacific,
FTSE4Good Index Series, Hang Seng Corporate
Sustainability Index and Hang Seng ESG 50 Index, all of
which serve as testimonial of MTR’s unfailing efforts in the
ESG space.

MTR Corporation Limited

ENVIRONMENTAL & SOCIAL RESPONSIBILITYVALUE ADDED AND DISTRIBUTION STATEMENT IN 2022
(HK$ MILLION)

Economic Value Generated

Economic Value Distributed

Revenue from Hong Kong
Transport Operations
13,404

Revenue from Hong Kong
Station Commercial
Businesses
3,077

Revenue from Hong Kong
Property Rental and
Management Businesses
4,779

Revenue from
Mainland China and
International Subsidiaries
26,189

Revenue from
Other Businesses1
1,458

Hong Kong Property
Development Profit from
Share of Surplus and Interest
in Unsold Properties2
11,599

Total: 60,506

Staff Costs3

Employees
15,683

Capital and Operating
Expenditures in Maintaining,
Upgrading and Renewing
the Existing Hong Kong
Railway System

Other Operating Costs4

Existing Hong Kong
Railway System
12,358

Suppliers & Business
Partners
19,062

Fixed and Variable
Annual Payments

Interest and
Finance Costs5

Taxes6

Ordinary Dividends

59,223

KCRC
1,073

Lenders
699

Governments
1,402

HKSAR Government
6,673

Other Shareholders
2,248

Community
Investment7

Community
25

Economic Value Retained for Reinvestment8

1,283

Total: 60,506

Notes:
1
Includes share of profit of associates and joint ventures.
2 Before taking into account staff costs of HK$10 million.
3

Excludes staff costs related to Hong Kong railway system maintenance of HK$2,477 million, capitalised for asset creation of HK$2,168 million and recoverable of
HK$606 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$2,511 million.
Excludes interest expenses capitalised for asset creation of HK$356 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$29 million given. In addition, there were
(i) ongoing fare concessions of approximately HK$2.1 billion, (ii) other fare promotions, and (iii) rental concessions granted to station and mall tenants that have not been
accounted for in this amount.
Economic value retained for reinvestment to generate future economic values. This represents underlying business profit attributable to shareholders of the Company
(before depreciation, amortisation, impairment loss and deferred tax) for the year retained, after the amounts distributed to our stakeholders and invested in maintenance,
upgrade and renewal of our Hong Kong railway system.

Annual Report 2022

Business Review and AnalysisFinancials and Other InformationOverviewCorporate GovernanceEnhanced Family-friendly
Benefits including

16-weeks Maternity Leave
10-days Paternity Leave

6.1

Average Training Days
per Employee in
Hong Kong

50,000+

Staff Worldwide

We invest in nurturing, developing and engaging our
people to help them reach their fullest potential. We
also prioritise fostering a progressive workplace with
equal employment opportunities for all. In 2022, our
efforts in employee engagement and development
of our human capital were recognised by a number of
external recognitions.

As at 31 December 2022, the Company together with its
subsidiaries employed 16,804 people in Hong Kong and
15,504 people outside Hong Kong. Our associates and
joint ventures employed an additional 20,735 people in
Hong Kong and worldwide.

RECRUITMENT, TALENT MANAGEMENT AND RETENTION
Each year, we launch a variety of initiatives designed
to boost our talent acquisition and retention while
enhancing employee engagement, motivation and
development. In 2022, the voluntary staff turnover rate in
Hong Kong was 7.5%.

years. As we continue to take a prudent approach towards
resourcing and cost management, we are also investing in
staff development to ensure the long-term success of our
business and people.

We provide competitive pay and benefits, short- and
long-term incentive schemes, and a broad range of
career development opportunities under our total reward
framework. We conduct regular reviews to maintain

In the face of the pandemic and the resulting economic
downturn, we have striven to protect jobs while ensuring
business sustainability and continuity over the past few

MTR Corporation Limited

HUMAN RESOURCESthe market competitiveness of our pay and benefits for
staff. In 2022, adoption leave was introduced to support
colleagues with different family needs. Eligible colleagues
are also entitled to the enhanced paid maternity leave of
16 weeks and paid paternity leave of ten days. Our robust
performance management system recognises and rewards
staff through a performance-based pay review mechanism
as well as various motivational schemes and awards. As
a caring employer, we also promote staff well-being and
family-friendly policies to enhance work-life balance. Our
Work From Home policy was formalised after the one-year
pilot to assist colleagues to better integrate work and life
commitments during the pandemic. Colleagues who are
able to perform their jobs remotely may apply to work
from home for greater flexibility under certain situations.

We continue to identify, engage and develop
high-potential talents through the Annual Talent Review
Process and Talent Pipeline Programmes. For instance,
the Management Potential Development Programme
aims to build a sustainable talent pipeline of future leaders
who will contribute to the achievement of the Company’s
business goals and corporate strategy objectives. To this

end, we have enhanced our performance management
process with the MTR Leadership Competency
Framework, which will promote greater organisational
alignment of staff’s performance goals with the
Company’s priorities to facilitate successful delivery.

We also continued to offer rewarding career opportunities
for youth in 2022. Facing the challenges arising from
the pandemic, we continued our graduate recruitment
programme by enhancing our digital capability
and hosting virtual recruitment initiatives to attract
high-potential university graduates to join MTR. In 2022,
we welcomed 74 high-calibre graduates to the Company’s
various graduate development programmes. In addition,
we recruited 112 apprentices and technician associates
and 41 graduate engineers to our Apprenticeship and
Graduate Engineer schemes, respectively. During the year,
we also provided summer internship opportunities to
a diverse group of 110 tertiary-level students. In 2022,
we became a signatory of the Equal Opportunities
Commission’s Racial Diversity & Inclusion Charter, which
encourages employers to promote racial diversity and
inclusion in the workplace.

STAFF MOTIVATION AND ENGAGEMENT
MTR values staff’s opinions and strives to take measures
to enhance employee engagement. In December 2021,
we conducted an Employee Engagement Survey to solicit
feedback from staff in Hong Kong and managers of our
wholly owned subsidiaries outside Hong Kong, the results
of which were communicated to management and staff
in February and March 2022. Our employee engagement
level decreased slightly compared to the previous survey

due to the unprecedented challenges faced by MTR
in recent years, including the pandemic’s effects and
work-related stress arising from various societal and
economic issues. In total, ten task forces were formed
at the corporate and business unit/ function levels to
analyse the results and formulate follow-up action plans
for addressing staff’s concerns with full support from
Management. Follow-up action planning was completed

Staff Distribution by
Geographical Location
(Percentage)

Staff Productivity –
Earnings Per Employee*
(HK$ million)

5.6

6.9

15.0

5.6

6.9

14.8

19.9

20.5

2022

2021

1.04

0.81

52.0

52.8

Hong Kong

Australia

Sweden

Mainland China

Others

0.43

0.41

0.28

2018

2019

2020

2021

2022

* Hong Kong businesses excluding property development

Annual Report 2022

Business Review and AnalysisFinancials and Other InformationOverviewCorporate Governancein June 2022 for implementation starting from July 2022
onwards. In addition, a pulse survey was conducted in
December 2022 to listen to staff’s feedback and track the
progress of action plan implementation.

Throughout the year, we organised a number of initiatives
to recognise the hard work and strong performance of
our staff. In February 2022, we granted a HK$1,000 special
lai-see to all eligible colleagues to thank them for their
contributions in difficult times. In March and April 2022,
we gave special “Living the MTR Values” awards to eligible
staff for exceptional efforts made in the fight against the
fifth wave of COVID-19. In addition to the annual

pay review in July, we offered special salary increases
to colleagues who had demonstrated consistently strong
performance in recent years, enhanced many of our
family-friendly benefits, including maternity, paternity and
compassionate leave, and introduced adoption leave as
mentioned above. In November 2022, we held the annual
“MTR Grand Awards for Outstanding Contribution and
Long Service Awards Presentation Ceremony” to recognise
colleagues and teams who have demonstrated exemplary
performance and loyal contributions to the Company.
Among the 460 long service awardees who have served
for 20, 30 or 40 years in MTR, 50 awardees received the 40
Years’ Service Award, which was a record high.

LISTENING AND RESPONDING TO STAFF
Maintaining regular two-way communications with
staff is critical to our engagement efforts. Our Staff
Consultation Mechanism enables management to
maintain close connection with more than 1,000 staff
representatives directly elected by fellow colleagues
to discuss matters of common concerns. In 2022,
more seats of staff representatives were introduced
to enhance engagement with our younger workforce.
Throughout the year, the Company held quarterly
meetings for the Staff Consultative Council (“SCC”) and
49 Joint Consultative Committees, with the outcomes
of constructive discussions published as part of regular
updates for colleagues. In addition to regular meetings,
12 communication sessions with staff representatives
and unions were organised in 2022 to update them on

the latest developments of our business, particularly
railway operations and anti-pandemic measures, and to
proactively address their concerns.

During the year, we continued to host a variety of
staff communications initiatives to keep employees
from different parts of the Company around the world
informed of corporate developments. These included
CEO focus groups, CEO site visits, CEO Messages
and blog posts, and feature videos through various
Company platforms, including MTRconnects. A total
of 12 virtual forums and meetings were conducted,
including Executive Managers Forum and Management
Communication Meetings, connecting managers in
Hong Kong, Mainland China and overseas hubs.

A CULTURE OF CONTINUOUS LEARNING
In 2022, we provided 1,418 training courses in Hong
Kong covering a comprehensive range of learning
and development topics, delivering an average of
6.1 training days per staff member. We also continued
our digital training offerings during the year, conducting
520 various e-learning courses to 15,366 staff for a total of
77,424 hours. Delivering our learning and development
programmes via virtual workshops, webinars and other
technology-aided modes in addition to face-to-face
sessions once again enabled us to engage as many
colleagues as possible during the pandemic.

In 2022, we introduced a series of self-directed learning
initiatives to colleagues via platforms including
LinkedIn Learning and Blinkist as well as modules from
the Executive Online programme hosted by leading
business schools. Managers also used virtual platforms
to take advantage of new opportunities to learn the
latest business management practices from world-class
institutions such as INSEAD and Oxford Business School.

We also continued to operate our Learning Management
System during the year. This one-stop portal nurtures a
continuous learning culture by providing staff with access
to valuable technical and management self-learning
resources anywhere and at any time.

MTR Corporation Limited

HUMAN RESOURCESFUTURE PLANS
Through the MRF Scheme, the Academy will continue
to foster forward-looking, railway-oriented research in
the academic community and nurture research talent
for future industry growth. Meanwhile, it will continue
to build upon its reputation as a leading railway
management and engineering institution while exploring
potential partnership opportunities to bring
high-quality programmes to more students and
professionals throughout the region.

MTR ACADEMY

The MTR Academy (“the Academy”) is a world-leading
institution where railway management and engineering
professionals can enhance their knowledge, further their
careers and contribute to the long-term growth of the
industry. The Academy also serves as a valuable tool for
exporting MTR’s brand and expertise both regionally
and globally.

For the 2022 academic year, 92 students were admitted,
including 50 full-time students. A total of 75 students
attained their Diploma in Transport Studies, Advanced
Diploma in Railway Engineering and Advanced
Diploma in Transport Operations & Management with
the Academy, while 29 students graduated from the
“Railway Studies” Applied Learning programme in 2022.
The Academy continued to provide Master programme
teaching support to the Hong Kong Polytechnic
University on railway engineering. The Academy also
chaired the Corporate Tech Academies Network Task
Force for the 2022 Vocational & Professional Education &
Training (“VPET”) Secondary School Competition as part
of its efforts to promote VPET skills in Hong Kong.

In addition, the Academy achieved a new milestone with
the launch of the MTR Research Funding (“MRF”) Scheme,
promoting and facilitating exploratory research on the
transport of tomorrow.

Annual Report 2022

Business Review and AnalysisFinancials and Other InformationOverviewCorporate GovernanceHK$47,812 million

HK$10,637 million

Total Revenue
Increased by 1.3%

Underlying Business Profit
Decreased by 4.6%

Strong Credit Ratings

AA+

by Standard & Poor’s
(long-term)

MTR Corporation Limited

FINANCIAL REVIEWA review of the Group’s results and operations is featured in the preceding sections. This section discusses and analyses
these results in a greater level of detail.

CONSOLIDATED PROFIT OR LOSS

HK$ million

Total Revenue
Recurrent Business Profit
EBITε

Hong Kong Transport Services
– Hong Kong Transport Operations
– Hong Kong Station Commercial Businesses
Total Hong Kong Transport Services
Hong Kong Property Rental and Management Businesses
Mainland China and International Railway,

Property Rental and Management Subsidiaries*

Other Businesses, Project Study and Business

Development Expenses

Share of Profit of Associates and Joint Ventures
Total Recurrent EBIT (before Impairment Loss)
Impairment Loss on Shenzhen Metro Line 4
Total Recurrent EBIT (after Impairment Loss)
Interest and Finance Charges
Income Tax
Non-controlling Interests
Recurrent Business Profit
Property Development Profit (Post-tax)
In Hong Kong
Outside Hong Kong
Property Development Profit (Post-tax)

Underlying Business Profit
Loss from Fair Value Measurement of Investment

Properties (Post-tax)

Loss from Fair Value Remeasurement on Investment Properties
Gain from Fair Value Measurement of Investment
Properties on Initial Recognition from Property
Development

Loss from Fair Value Measurement of Investment

Properties (Post-tax)

Net Profit Attributable to Shareholders of the Company
Total Recurrent EBIT Margin# (in %)
Total Recurrent EBIT Margin#

(excluding Mainland China and International Subsidiaries) (in %)

Year ended 31 December

Favourable/
(Unfavourable) Change

2022

47,812

2021

HK$ million

47,202

610

1.3

(4,733)
2,270
(2,463)
3,800

962

(539)
1,095

2,855
(962)

1,893
(1,061)
(361)
(314)

157

10,413
67

10,480

10,637

(4,262)
2,488
(1,774)
4,048

622

(567)
968

3,297
–

3,297
(1,045)
(317)
(127)

1,808

9,277
66

9,343

11,151

(471)
(218)
(689)
(248)

340

28
127

(442)
(962)

(1,404)
(16)
(44)
(187)

(1,651)

1,136
1

1,137

(514)

(11.1)
(8.8)
(38.8)
(6.1)

54.7

4.9
13.1

(13.4)
n/m

(42.6)
(1.5)
(13.9)
(147.2)

(91.3)

12.2
1.5

12.2

(4.6)

(3,076)

(2,065)

(1,011)

(49.0)

2,266

(810)

9,827
1.7%

3.7%

466

1,800

789

275

(1,599)

9,552
5.0%

7.8%

386.3

49.3

2.9
(3.3)% pts

(4.1)% pts

ε
*
#

n/m

: EBIT represents profit before interest, finance charges and taxation.
: Excluding the impairment loss of HK$962 million in respect of Shenzhen Metro Line 4 in Mainland China.
: Excluding share of profit of associates and joint ventures. If excluding the impairment loss of HK$962 million made in respect of Shenzhen Metro Line 4 in 2022, the
recurrent EBIT margins (both including and excluding Mainland China and International Subsidiaries) would have been 3.7%.
: not meaningful

Our Hong Kong recurrent businesses had been severely
impacted by the outbreak of the fifth wave of COVID-19
since the beginning of 2022, but they started to
gradually recover following the phased lifting of various
anti-pandemic measures. Outside of Hong Kong, our
railway businesses in Mainland China were significantly
impacted by the outbreak of the Omicron variant and

an impairment provision that was made in respect of
Shenzhen Metro Line 4, but higher profit contribution
was seen from our businesses in Australia. Our property
development business recorded satisfactory profit during
the year, mainly from three of our development projects
in Hong Kong.

Annual Report 2022

Business Review and AnalysisFinancials and Other InformationOverviewCorporate GovernanceTotal Revenue
The Group’s total revenue in 2022 increased slightly by
1.3% to HK$47,812 million when compared to 2021. The
increase was mainly contributed by (i) higher revenue
from our Melbourne transport operations, (ii) increased
design and delivery project income from the Sydney Metro
City & Southwest project, and (iii) incremental revenue
from our Hong Kong transport operations (“HKTO”) from
the full-year of operation of the full Tuen Ma Line and the
opening of the East Rail Line cross-harbour extension in
May 2022. These factors were partially offset by (iv) the
impact of unfavourable exchange rates on revenue from
our overseas businesses and (v) weaker fare and non-fare
revenue from our Hong Kong businesses due to the fifth
wave of COVID-19.

The closures of major passenger boundary crossings
between Hong Kong and Mainland China in 2022
and various air travel restrictions that were in place
throughout almost the entire year continued to have
material adverse impacts on our Cross-boundary
and Airport Express fare revenue as well as Duty Free
Shops and other rental revenue as visitor arrivals
remained minimal.

Recurrent Business Profit
The reintroduction and further tightening of anti-pandemic
measures at the time when the fifth wave of COVID-19
struck Hong Kong in early 2022 had severely impacted
the financial performance of our Hong Kong recurrent
businesses, particularly leading to a significant decrease
in patronage. Outside of Hong Kong, our railway
businesses were also adversely impacted by the outbreak
of the Omicron variant in Mainland China as well as a
shortage of operational staff and maintenance issues in
the Nordic region, although these factors were mitigated
by improved profit in our Australia businesses.

Besides, the Group recognised an impairment provision
of HK$962 million in respect of Shenzhen Metro Line 4 in
the first half of 2022 resulting from the no fare increase
situation as explained in the past. As a result, the Group’s
recurrent businesses reported a profit of HK$157 million
this year, compared to HK$1,808 million in 2021. Excluding
the HK$962 million impairment provision, our recurrent
profit would have been HK$1,119 million, a decrease of
HK$689 million or 38.1% as compared with 2021.

Total Recurrent EBIT by Businesses

Total Revenue
(HK$ billion)

53.9

0.1
2.0

54.5

1.6

21.1

42.5

0.9

47.2

0.4
0.4

47.8

0.2
0.4

20.9

5.0

6.4

5.1

6.8

19.5

19.9

21.4

5.0

3.3

11.9

25.0

26.0

5.0
3.2

4.8
3.0

13.2

13.4

2018

2019

2020

2021

2022

Total Revenue

Mainland China
Property Development

Other Businesses

Mainland 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

MTR Corporation Limited

Total Recurrent EBIT^
(HK$ billion)

12.2

0.7
0.7

4.2

5.0

2.0

(0.4)

0.3
1.1

4.3

7.8

0.2

5.1

(0.6)

(2.4)

3.3

1.0
0.6

4.1

2.5

(4.3)

(0.6)

2.9

1.1
1.0

3.8

2.2

(4.7)

(0.5)

0.6
0.3

4.2

2.5

(5.4)

(2.0)

2018

2019

2020

2021

2022

Total Recurrent EBIT

Share of Proﬁt of
Associates and Joint Ventures

Hong Kong Property Rental
and Management Businesses

Mainland China and
International Railway,
Property Rental and
Management Subsidiaries

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 ventures, project
study and business development expenses but excluding
Impairment Loss on Shenzhen Metro Line 4

FINANCIAL REVIEWThe Group’s total recurrent EBIT (including share of
profit of associates and joint ventures as well as project
study and business development expenses) in 2022
was HK$1,893 million, a decrease of HK$1,404 million
when compared to 2021. Contributions from respective
businesses are as follows:

HKTO: Continued to record significant EBIT loss of
HK$4,733 million in 2022, and the loss was widened by
HK$471 million or 11.1% when compared to 2021. This
was mainly due to the significant decline in our Domestic
patronage and fare revenue when the fifth wave of
COVID-19 struck Hong Kong in early 2022. Our patronage
in February and March 2022 reduced to the lowest
level since the outbreak of COVID-19. Nevertheless, our
Domestic patronage started to rebound since late April
2022 following the ease of social distancing measures by
phases, as well as the incremental patronage resulting
from the opening of the East Rail Line cross-harbour
extension in May 2022. Our Airport Express patronage
showed good signs of recovery as international air
travel sentiment improved following the new “0+3”
quarantine scheme for inbound travellers effective from
late September 2022, which was subsequently fully lifted
in late December 2022. As boundary railway crossings
between Hong Kong and Mainland China remained
closed throughout 2022, HKTO continued to report a
significant loss during the reporting period.

Hong Kong station commercial businesses (“HKSC”):
EBIT profit decreased by HK$218 million or 8.8% to
HK$2,270 million. HKSC performance has been adversely
impacted by the pandemic since February 2020, when
revenue stream derived from Duty Free Shops stopped
due to the closure of boundary crossing stations.

Decrease in EBIT profit against 2021 were primarily due
to lower advertising revenue from austerity budget of
advertisers, in light of the relatively slow consumption
market recovery resulting from the outbreak of the fifth
wave of COVID-19 in 2022.

Rental income from station kiosks along Domestic lines
also decreased as a result of negative rental reversions
of 14.6% on renewals and new lets for station kiosks.
This was partially offset by the lower rental concessions
amortised in 2022 in respect of the current and prior
years’ grants.

Hong Kong property rental and management businesses
(“HKPR&M”): EBIT profit decreased by HK$248 million or
6.1% to HK$3,800 million. This decrease was mainly due to
the negative rental reversion suffered from the pandemic.
For the year, shopping malls recorded negative rental
reversion of 9.0% on renewals and new lets. A series of
promotional campaigns on our MTR Mobile app and a
variety of targeted marketing campaigns were launched
to drive mall traffic and stimulate spending during this
challenging period.

Mainland China and international railway, property rental
and management subsidiaries: COVID-19 continued to
adversely impact our Mainland China and international
business subsidiaries to varying degrees, depending on
the impact of the pandemic in the different cities in which
we operate and the revenue exposure under different
business models in such cities.

Overall, EBIT profit improved by HK$340 million, or 54.7%,
to HK$962 million. This was mainly attributable to better
performance by our Melbourne transport operation from
revenue protection mechanism and Sydney Metro City
& Southwest project, though it was partly offset by the
adverse impact from (i) the shortage of operational staff
and maintenance issues on our Nordic businesses, (ii) the
impact of the pandemic on our Mainland China business
and (iii) the depletion of local government subsidies for
Shenzhen Metro Line 4 by late 2022.

Other businesses, project study and business
development expenses: EBIT loss from these businesses
was HK$539 million in 2022, compared to HK$567 million
in 2021. The incurred loss is mainly due to service
suspension of Ngong Ping 360 during the fifth wave of
COVID-19.

Share of profit of associates and joint ventures

Share of profit of associates and joint ventures increased
by HK$127 million or 13.1% to HK$1,095 million in 2022.
The increase was mainly due to the increase in profit
sharing from Octopus Holdings Limited, which resulted
from improved consumer sentiment and the spill over
effect from the Government Consumption Voucher
Scheme, as well as our increased shareholding since early
2022. Profit was partly offset by worsening performance
in our Hangzhou operations due to lower patronage as a
result of the pandemic.

Annual Report 2022

Business Review and AnalysisFinancials and Other InformationOverviewCorporate GovernanceImpairment Loss on Shenzhen Metro Line 4

Income Tax

As we have been warning repeatedly for some time, if a
suitable fare increase and adjustment mechanism are not
implemented in Shenzhen soon, the long-term financial
viability of this line will be impacted. In this connection,
an impairment provision of HK$962 million was made
in the first half of 2022 for Shenzhen Metro Line 4 as it is
anticipated that the mechanism and procedures for
fare adjustments will take longer time to implement
and patronage will remain at a lower level for a period of
time. Based on the review performed by the Group as
at 31 December 2022, no further impairment provision
was made.

Total Recurrent EBIT Margin

Total recurrent EBIT margin had declined since 2019
before rebounding in 2021 following stabilisation in
the number of pandemic cases. Due to the fifth wave of
COVID-19 in Hong Kong and other outbreaks in Mainland
China, EBIT margins declined to 3.7% and 1.7% in 2022,
before and after taking into account the impairment
provision of Shenzhen Metro Line 4, respectively.

Total Recurrent EBIT Margin#
(Percentage)

–

-10

3.7
1.7
0.0

2018

2019

2020

2021

2022

Total Recurrent EBIT Margin
(Excluding Mainland China and International Subsidiaries)

Total Recurrent EBIT Margin

Total Recurrent EBIT Margin
(Mainland China and International Subsidiaries)

Excluding share of profit of associates and joint ventures

Interest and Finance Charges

Interest and finance charges for recurrent businesses
were HK$1,061 million, representing an increase of 1.5%
from 2021. This was mainly due to higher interest rate.
A detailed review of the Group’s financing activities is
featured in the ensuing section.

MTR Corporation Limited

Tax expenses for recurrent businesses were HK$361 million,
an increase of 13.9% over 2021. This was mainly due to the
increased proportion of profit generated in tax jurisdictions
with higher tax rates, particularly in Australia.

Since the Rail Merger in 2007, the Company has claimed
annual Hong Kong Profits Tax deductions in respect of the
amortisation of upfront payment and cut-over liabilities,
and fixed annual payments and variable annual payments
relating to the Rail Merger (collectively “the Sums”). The
total tax amount in respect of the Sums for the years of
tax assessment from 2007/2008 to 2022/2023 amounted
to HK$4.6 billion. As disclosed in previous years, the
Inland Revenue Department of Hong Kong (“IRD”) issued
notices of profits tax assessments/additional profits tax
assessments for the years of assessment from 2009/2010
to 2017/2018 disallowing deduction of the Sums in
the computation of the Company’s assessable profits.
Based on the strength of advice from the external legal
counsels and tax advisor, the Company has lodged
objections against these tax assessments (regarding the
deductibility of the Sums) 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$2.3 billion. The Company has purchased the
required TRCs and the additional tax demanded has been
held over by IRD. 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.

FINANCIAL REVIEWLoss from Fair Value Measurement of
Investment Properties (Post-tax)
Loss from fair value measurement of investment
properties was HK$810 million in 2022, comprising
investment property fair value remeasurement loss of
HK$3,076 million, partly mitigated by gain from fair value
measurement of investment properties of HK$2,266 million
on initial recognition of the shopping mall, The Wai.

The fair value remeasurement on the Group’s investment
properties in Hong Kong and Mainland China, which
were performed by independent professional valuation
firms, resulted in a post-tax fair value remeasurement
loss of HK$3,076 million for the year ended 31 December
2022, compared to a fair value remeasurement loss of
HK$2,065 million for 2021. The loss, being a non-cash
item, represents an approximately 3.6% drop against
the value as of 31 December 2021. This loss was mainly
explained by the continued negative rental reversions
recorded in 2022 due to the pandemic.

Gain from fair value measurement of investment
properties on initial recognition from property
development of HK$2,266 million represented the receipt
of sharing-in-kind shopping mall, The Wai.

Net Profit Attributable to
Shareholders of the Company
Taking into account the Group’s recurrent businesses,
property development businesses and fair value
measurement of investment properties, the Group
reported a net profit attributable to shareholders of
the Company of HK$9,827 million for the year ended
31 December 2022, compared to HK$9,552 million
for 2021.

Company has strong legal grounds and have determined
to contest and appeal against the assessments for the
years of assessment from 2011/2012 to 2017/2018.
Accordingly, the Company lodged a notice of appeal to
the Inland Revenue Board of Review on 16 June 2022. No
additional tax provision has been made as a result of the
determination received in respect of the above notices of
profits tax assessments/additional profits tax assessments
and other relevant years of assessment. The date of
hearing before the Board of Review is scheduled to be
held in early 2024.

Property Development Profit (Post-tax)
The Group’s property development profit (post-tax) was
HK$10,480 million, representing an increase of 12.2% over
2021. Property development profit for 2022 was mainly
derived from the incomes and share of surplus proceeds
from LP10 (LOHAS Park Package 10), SOUTHLAND (The
SOUTHSIDE Package 1) and La Marina (The SOUTHSIDE
Package 2), while profit recorded for 2021 was mainly
contributed by MONTARA (LOHAS Park Package 7), SEA
TO SKY (LOHAS Park Package 8) and MARINI (LOHAS Park
Package 9).

Underlying Business Profit
The Group’s underlying business profit was HK$10,637 million
compared to HK$11,151 million in 2021. This was due to
the decrease in Recurrent Business Profit of HK$1,651 million,
which was partly offset by the increase in Property
Development Profit of HK$1,137 million.

Underlying Business Proﬁt
(HK$ billion)

11.3

2.3

9.3

11.2

10.6

9.0

4.3

5.0

9.4

1.8

10.4

0.2

4.4

5.5

(1.1)

2018

2019

2020

2021

2022

Underlying Business Profit

Property Development Profit

Recurrent Business Profit/(Loss)

Annual Report 2022

Business Review and AnalysisFinancials and Other InformationOverviewCorporate GovernanceCONSOLIDATED FINANCIAL POSITION

HK$ million

Fixed Assets
Property Development in Progress
Interests in Associates and Joint Ventures
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

As at
31 December
2022

As at
31 December
2021

Inc./(Dec.)

HK$ million

229,491
41,269
12,338
13,889
16,134
13,960

327,081

47,846
74,481
10,142
14,700

221,032
11,215
12,442
14,797
20,970
11,626

292,082

43,752
43,644
10,231
14,418

147,169

112,045

8,459
30,054
(104)
(908)
(4,836)
2,334

34,999

4,094
30,837
(89)
282

35,124

Net Assets

179,912

180,037

(125)

Represented by:
Total Equity Attributable to Shareholders of the Company
Non-controlling Interests
Total Equity

179,286
626

179,912

179,714
323

180,037

(428)
303

(125)

3.8
268.0
(0.8)
(6.1)
(23.1)
20.1

12.0

9.4
70.7
(0.9)
2.0

31.3

(0.1)

(0.2)
93.8

(0.1)

Fixed Assets
Fixed assets increased by HK$8,459 million to
HK$229,491 million, mainly due to additions of
HK$19,242 million on The Wai, renewal and upgrade
works for our existing Hong Kong railway network and
investment property portfolio, and service concession

assets in respect of Shenzhen Metro Line 13. These factors
were partly offset by total depreciation and amortisation
of HK$6,034 million for the year, an impairment provision
of HK$962 million for Shenzhen Metro Line 4 and the
loss from fair value remeasurement on our investment
property portfolio of HK$3,076 million.

(3.1)

(6.0)

(1.0)

(0.6)

229.5

Movements in Fixed Assets
(HK$ billion)

19.2

221.0

240

230

220

210

–

2021
Fixed Assets

Additions
(including The Wai)

Loss from Fair
Value Remeasurement
on Investment Properties

Depreciation &
Amortisation

Impairment Loss
respect of
Shenzhen
Metro Line 4

Exchange
Differences
and Others

2022
Fixed Assets

MTR Corporation Limited

FINANCIAL REVIEWThe graph below shows the Group’s fixed assets trend
over the past five years.

Total Loans and Other Obligations
Total loans and other obligations increased mainly due to
net drawdown of loans.

Fixed Assets Trend
(HK$ billion)

215.9

30.4

225.6

220.9

221.0

31.3

32.9

34.7

229.5

35.5

102.8

102.6

102.0

101.5

102.3

82.7

91.7

86.0

84.8

91.7

2018

2019

2020

2021

2022

Total Fixed Assets

Service Concession Assets

Other Property,
Plant and Equipment

Investment Properties

Property Development in Progress
Property development in progress increased significantly
by HK$30,054 million to HK$41,269 million, which was
predominantly due to the asset increase arising from the
government grant accounting in relation to the Oyster
Bay Project.

Interests in Associates and
Joint Ventures
Interests in associates and joint ventures decreased
mainly due to exchange loss on the carrying amounts of
investments arising primarily from the depreciation of the
Renminbi, but mitigated by share of profit from associates
and joint ventures, net of dividend declared.

Debtors and Other Receivables
Debtors and other receivables decreased mainly due
to receipts of cash in respect of LOHAS Park property
development projects.

Movements in Total Loans and
Other Obligations
(HK$ billion)

41.6

(37.6)

43.8

47.8

2021
Total Loans
and Other
Obligations

Proceeds
from Debts

Repayment
of Debts and
Lease Rental,
and Others

2022
Total Loans
and Other
Obligations

Creditors and Other Liabilities
Creditors and other liabilities increased significantly
by HK$30,837 million to HK$74,481 million, which was
mainly due to recognition of notional deferred income
under government grant accounting relating to the
Oyster Bay Project. This deferred income will be used to
offset the costs for the construction of the new Oyster Bay
Station, re-provision of the Siu Ho Wan depot, property
enabling works and site formation of the project.

Total Equity
Total equity slightly decreased by HK$125 million to
HK$179,912 million. This was mainly attributable to the
payments of the 2021 final and 2022 interim ordinary
dividends during the year, as well as the unfavourable
exchange differences on our Mainland China and
international assets as a result of the stronger HK dollar,
mitigated by net profit recorded for the year.

Annual Report 2022

Business Review and AnalysisFinancials and Other InformationOverviewCorporate GovernanceCONSOLIDATED CASH FLOWS
HK$ million

Net Cash Generated from Operating Activities
Receipts in respect of Property Development
Payments in respect of Property Development
Net Receipts from Property Development
Capital Expenditure
Fixed Annual Payments
Variable Annual Payments
Fixed and Variable Annual Payments
Other Investing Activities
Net Cash Inflow before Financing Activities

Net Drawdown/(Repayment) of Debts, and Lease Rental Payments
Net Interest Payments

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, Bank Balances and
Deposits before Effect of Exchange Rate Changes
Effect of Exchange Rate Changes
(Decrease)/Increase in Cash, Bank Balances and
Deposits after Effect of Exchange Rate Changes

Cash, Bank Balances and Deposits as at 1 January
(Decrease)/Increase in Cash, Bank Balances and
Deposits after Effect of Exchange Rate Changes
Cash, Bank Balances and Deposits as at 31 December

Cash Flows for the Year Ended 31 December 2022
(HK$ billion)

2022

2021

6,757

7,472

17,779
(1,137)

(750)
(238)

(6,583)
(734)

14,162
(9,245)

(750)
(260)

4,768
(668)

4,917
(10,808)

(1,010)
589

445

4,100
(8,562)
(109)

(4,126)
(710)

(4,836)

20,970

(4,836)

16,134

16,642
(7,785)

(988)
(704)

14,637

(7,317)
(7,165)
(49)

106
(42)

20,906

20,970

4.9

(10.8)

6.8

(3)

(5)

4.1

(8.6)

(1.0)

0.6

0.5

Net Cash
Generated from
Operating
Activities

Net Receipts
from
Property
Development

Capital
Expenditure

Fixed and
Variable
Annual
Payments

Other
Investing
Activities

Net Cash
Inflow before
Financing
Activities

Net Drawdown
of Debts,
Net of Lease
Rental and
Net Interest
Payments

Dividends
Paid to
Shareholders
of the
Company

(0.1)

(0.7)

Other
Financing
Activities

Effect of
Exchange
Rate Changes

(4.8)

Decrease
in Cash, Bank
Balances and
Deposits
after Effect of
Exchange
Rate Changes

Net Cash Generated from
Operating Activities
Net cash generated from operating activities decreased
by HK$715 million to HK$6,757 million in 2022 from
HK$7,472 million in 2021. This resulted mainly from the
decrease in operating profit due to the pandemic.

Net Receipts for Property
Development
Net receipts for property development were
HK$4,917 million, comprising (i) cash receipts of
HK$14,162 million from The SOUTHSIDE and LOHAS Park
packages, which were offset by (ii) cash payments of
HK$9,245 million mainly for the Oyster Bay Project.

MTR Corporation Limited

FINANCIAL REVIEWCapital Expenditure
In 2022, capital expenditure amounted to
HK$10,808 million. This comprised HK$7,370 million for
investments in additional assets such as station renovation
works, new trains and signalling systems for existing Hong
Kong railways and related operations; HK$1,465 million
for Hong Kong railway extension projects mainly initial
work for RDS 2014 projects; HK$1,204 million for Mainland
China and overseas subsidiaries such as Shenzhen
Metro Line 13, and HK$769 million for Hong Kong
investment properties.

Total Capital Expenditure
(HK$ billion)

10.8

1.2

0.7

1.5

7.4

7.8

1.1
0.3
0.7

5.7

2021

2022

Total Capital Expenditure

Mainland 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 Proﬁle
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 2022

Source
(Percentage)

Interest rate base
(Percentage)

Maturity
(Percentage)

Currency
(Percentage)

Financing Horizon
(Month)

(45-80) 73

(20-55) 27

Capital market instruments

Bank facilities

(45-80) 70

(20-55) 30

Fixed rate

Floating rate

(0-30) 22

(20-55) 28

(35-65) 50

Within 2 years

2 to 5 years

Beyond 5 years

Average fixed rate debt maturity: 11 years

Hedged

(85-100) 100

(Not less than 12) 14

Net Drawdown of Debts, Net of Lease
Rental and Net Interest Payments
In 2022, net drawdown of debts, net of lease rental and
net interest payments of HK$4,100 million comprised
(i) proceeds of HK$41,646 million from loans and
capital market instruments, offset by (ii) repayment of
HK$36,878 million mainly relating to loans and (iii) net
interest payment of HK$668 million.

Dividends Paid to Shareholders of
the Company
The Group paid dividends of HK$8,562 million
(2021: HK$7,165 million) in cash, being the 2021 final
dividend of HK$1.02 per share and the 2022 interim
dividend of HK$0.42 per share. The increase was due to
a higher interim dividend per share in 2022, which was
around one-third of the total dividends per share for the
entire year, as compared to the 2021 interim dividend of
HK$0.25 per share.

Interest rates for both USD and HKD rose significantly as
the US Federal Reserve hiked its benchmark rate multiple
times in 2022 at the fastest pace in decades. The 3-month
USD Libor increased to 4.77% p.a. at the end of the year
from 0.21% p.a. at the start of the year. Likewise, 3-month
HKD Hibor rose to 4.99% p.a. from 0.26% p.a. The 10-year
US Treasury yield rose to 3.87% p.a. at year end from
1.51% p.a. at the start of the year, while the 10-year HKD
swap rate rose to 3.86% p.a. from 1.54% p.a.

Financing of HK$12.8 billion in total was arranged by the
Company in 2022, including the equivalent of HK$10.3
billion from MTN issuance with maturities ranging
between one and five years, and HK$2.5 billion from bank
loans with tenors between three and five years. HK$2.8
billion of financing in 2022 was arranged under our
Sustainable Finance Framework, where the proceeds were
earmarked for eligible investments.

As at the end of 2022, the proportion of fixed rate
borrowings of the Company stood at 70%.

Annual Report 2022

Business Review and AnalysisFinancials and Other InformationOverviewCorporate GovernanceMaturity Profile
The graph below shows the maturity profiles of the
Company‘s interest-bearing borrowings at year-end
2018-2022. The spread of the maturities of the Company’s
borrowings helps diversify the refinancing risk of
the Company.

Maturity Proﬁle
(Percentage)

100

–

51.3

51.8

60.6

57.9

26.2

22.0

23.4

25.2

16.0

16.9

46.4

2.3

2018

2019

2020

2021

2022

Beyond 5 years

2 to 5 years

Within 2 years

49.9

28.4

21.7

The graph below shows the level of leverage and our
ability to meet interest payment obligations over the past
five years.

Net Debt-to-Equity Ratio and
Interest Cover
(Percentage)

(Times)

–

14.4

14.2

13.6

18.1%

15.4%

8.2

22.5%

23.3%

18.1%

2018

2019

2020

2021

2022

Interest cover (right axis)

Net debt-to-equity ratio (left axis)

–

Gearing Ratio and Interest Cover
The Group’s gearing ratio, as measured by net debt-to-
equity ratio, increased by 5.2 percentage points to 23.3%
at year-end 2022 from 18.1% at year-end 2021 mainly
due to payment for the land premium in relation to the
Oyster Bay Project during the year. The Group’s interest
cover decreased from 14.4 times in 2021 to 14.2 times
in 2022.

Cost of Borrowing
The Group’s consolidated gross debt position
increased to HK$47,846 million at year-end 2022 from
HK$43,752 million at year-end 2021. The weighted average
cost of the Group’s interest-bearing borrowings increased
to 2.5% p.a. in 2022 from 2.2% p.a. in 2021 mainly due to
higher average cost of floating rate borrowing resulting
from higher HKD Hibor.

MTR Corporation Limited

FINANCIAL REVIEWThe diagram below shows the Group’s gross debt level and
weighted average cost of interest-bearing borrowings.

Group’s Gross Debt Level and
Weighted Average Cost of
Interest-bearing Borrowings
(HK$ billion)

(Percentage)

–

2.8%

40.2

39.5

2.5%

2.3%

2.2%

50.3

47.8

43.8

–

2018

2019

2020

2021

2022

Weighted average cost of interest bearing borrowings (right axis)

Group’s gross debt level (left axis)

HK$15.7
billion
(24%)

The Group believes that based on its cash, bank balances
and deposits of more than HK$16 billion, total available
committed banking facilities of more than HK$14 billion
as at 31 December 2022, and 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.

Capital Expenditure and Investment
(2023–2025)

HK$3.9 billion (6%)

HK$7.4
billion
(11%)

HK$38.2 billion (59%)

Estimated expenditure
2023: HK$20.2 billion
2024: HK$24.2 billion
2025: HK$20.8 billion
Total: HK$65.2 billion

Hong Kong Railway
Maintenance CAPEX

Hong Kong
New Railway Projects*

Hong Kong Property

Mainland China &
Overseas Investment

Capital Expenditure and Investment
The Group’s capital expenditure and investment can
be categorised into the following: Hong Kong railway
projects (further classified into maintenance work for
existing railways and new projects), Hong Kong property
investment and development, and Mainland China and
overseas investment. Total spending from 2023 to 2025 is
estimated at around HK$65 billion.

Capital expenditure on Hong Kong railway projects will
continue to constitute a significant portion of capital
expenditure in 2023-2025, following the signing of
the project agreements for the Oyster Bay Project and
Tung Chung Line Extension Project. The capital works
expenditure and the funding arrangements of the other
RDS 2014 new projects can only be ascertained after
our entering into the relevant project agreements with
the Government.

Including planning and design CAPEX but excluding related
construction CAPEX of New Railway Projects, which are subject to
the signing of project agreements.

Credit Ratings (as of 9 March 2023)
Credit ratings

Short-term*

Long-term*

Standard & Poor’s
Moody’s
Rating & Investment

Information, Inc. (R&I)

A-1+/A-1+
–/P-1

AA+/AA+
Aa3/Aa3

a–1+

AA+

* Ratings for Hong Kong dollar/foreign currency-denominated debts

respectively

Annual Report 2022

Business Review and AnalysisFinancials and Other InformationOverviewCorporate GovernanceTEN-YEAR STATISTICS

Financial
Consolidated Profit or Loss (in HK$ million)
Total revenue
– Hong Kong transport services

– Hong Kong transport operations
– Hong Kong station commercial businesses

– Total Hong Kong transport services
– Hong Kong property rental and

management businesses

– Mainland China and international railway,

property rental and management subsidiaries

– Other businesses
– Recurrent businesses
– Mainland China property development
– Total
Total EBITDA
– Recurrent businesses
– Hong Kong property development
– Mainland China property development
– Total
Depreciation and amortisation
Impairment loss
Variable annual payment
Total EBIT
– Recurrent business EBIT

EBIT
Hong Kong transport services
– Hong Kong transport operations
– Hong Kong station commercial businesses
Total Hong Kong transport services
Hong Kong property rental and
management businesses
Mainland China and international
railway, property rental and
management subsidiaries*
Other businesses
Project studies and business
development expenses

Impairment loss

Share of profit of associates and joint ventures
Sub-total

– Property development business EBIT
– Total
(Loss)/gain from fair value measurement of

investment properties

Profit/(loss) attributable to shareholders of

the Company arising from:

– Recurrent businesses

– in Hong Kong
– outside Hong Kong

– Property development businesses

– in Hong Kong
– outside Hong Kong

– Underlying businesses
– Fair value measurement of investment

properties

– Total
Profit/(loss) for the year
Share Information
Basic earnings/(loss) per share (in HK$)
Basic earnings per share arising from underlying
businesses (in HK$)
Ordinary dividend per share (in HK$)
Dividend payout ratio (based on underlying
business profit) (in %)
Ordinary dividend proposed and declared

(in HK$ million)

Share price at 31 December (in HK$)
Market capitalisation at 31 December

(in HK$ million)

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 China and
international subsidiaries) (in %)

EBIT marginφ (in %)
EBIT marginφ

(excluding Mainland 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) **

2022

2021

2020

2019

2018

2017

2016

2015

2014

2013

13,404
3,077
16,481

13,177
3,208
16,385

11,896
3,269
15,165

19,938
6,799
26,737

19,490
6,458
25,948

18,201
5,975
24,176

17,655
5,544
23,199

16,916
5,380
22,296

16,223
4,963
21,186

15,166
4,588
19,754

4,779

5,036

5,054

5,137

5,055

4,900

4,741

4,533

4,190

3,778

26,016
363
47,639
173
47,812

7,852
11,589
59
19,500
(5,769)
(962)
(323)

25,045
383
46,849
353
47,202

8,019
11,097
129
19,245
(5,430)
–
(260)

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
4,496
(25)
19,822
(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
228
366
17,541
(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
1,352
–
15,751
(3,372)
–
(1,247)

(4,733)
2,270
(2,463)

(4,262)
2,488
(1,774)

(5,408)
2,502
(2,906)

(591)
5,122
4,531

1,985
5,025
7,010

1,656
4,722
6,378

2,572
4,362
6,934

2,493
4,230
6,723

2,710
3,927
6,637

2,716
3,668
6,384

3,800

4,048

4,185

4,264

4,225

4,082

3,912

3,650

3,427

3,092

962
(213)

(326)
(962)
1,095
1,893
11,648
13,541

622
(255)

261
(1,670)

1,089
(2,077)

722
(81)

814
(53)

490
58

640
53

782
129

704
86

(312)
–
968
3,297
11,226
14,523

(279)
–
605
196
6,478
6,674

(276)
–
288
7,819
4,471
12,290

(323)
–
658
12,211
2,599
14,810

(332)
–
494
11,383
3,411
14,794

(361)
–
537
11,570
592
12,162

(304)
–
361
11,123
2,751
13,874

(454)
–
121
10,642
4,161
14,803

(486)
–
158
9,938
1,352
11,290

(810)

(1,616)

(9,190)

2,583

4,745

6,314

891

2,100

4,035

4,469

384
(227)
157

10,413
67
10,480
10,637

(810)
9,827
10,141

1.59

1.72
1.31

979
829
1,808

9,277
66
9,343
11,151

(1,599)
9,552
9,679

1.55

1.80
1.27

8,124
41.35

7,865
41.85

(1,537)
411
(1,126)

5,442
65
5,507
4,381

(9,190)
(4,809)
(4,821)

(0.78)

0.71
1.23

173

7,602
43.35

4,455
525
4,980

4,320
49
4,369
9,349

2,583
11,932
12,092

1.94

1.52
1.23

8,460
560
9,020

2,153
90
2,243
11,263

4,745
16,008
16,156

2.64

1.86
1.20

7,949
631
8,580

916
1,019
1,935
10,515

6,314
16,829
16,885

2.83

1.77
1.12

8,717
199
8,916

184
263
447
9,363

891
10,254
10,348

1.74

1.59
1.07

8,352
213
8,565

2,416
(87)
2,329
10,894

2,100
12,994
13,138

2.22

1.87
1.06

8,185
(161)
8,024

3,584
(37)
3,547
11,571

4,035
15,606
15,797

2.69

1.99
1.05

7,591
(154)
7,437

1,119
–
1,119
8,556

4,469
13,025
13,208

2.25

1.48
0.92

7,574
46.05

7,359
41.20

6,728
45.80

6,317
37.70

6,207
38.40

6,116
31.80

5,335
29.35

256,455

259,196

267,943

283,574

252,947

275,156

222,629

224,956

185,284

170,187

327,081
47,846
10,142

292,082
43,752
10,231

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

179,286

179,714

176,788

186,606

180,447

166,304

149,461

170,055

163,325

152,557

16.5

17.3

12.2

28.1

35.0

36.1

38.3

38.7

38.4

37.2

30.5
1.8

3.7
23.3

5.9
14.2

32.7
5.2

7.8
18.1

6.3
14.4

22.1
(1.0)

(3.2)
22.5

2.4
8.2

42.0
13.8

19.3
15.4

5.1
14.4

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
12.6

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

Excluding impairment loss.
Excluding Hong Kong property development profit from share of surplus and interest in unsold properties.

*
◊
φ Excluding Hong Kong property development profit from share of surplus and interest in unsold properties, and share of profit of associates and joint ventures.
** Excluding fair value measurement of investment properties.

MTR Corporation Limited

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
Transport operations
Capital works
Property and other businesses
Mainland China and international businesses
Outside of Hong Kong
Employees outside of Hong Kong
Total

2022

2021

2020

2019

2018

2017

2016

2015

2014

2013

265,209
12,328
9,727

268,050
10,165
10,245

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

1,334,591
429
–
3,102
131,715
48,230
–

1,421,737
486
–
2,150
141,581
50,380
–

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

3,920
1
–
8
377
139
–

10.7
25.3
2.6
4.5

54
6
36

4,189
1
–
6
403
145
–

10.5
23.7
2.7
4.5

56
5
37

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

48.3

47.3

45.3

47.4

40.0
34.4
5.6

7.31
6.28
1.03

35.6
33.3
2.3

8.11
7.60
0.51

51.7
33.0
18.7

9.40
5.99
3.41

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

4,862
322
53#
49
506
147
10

10.8
28.3
2.7
4.5

62
22
44

49.0&

53.4
28.2
25.2

9.26
4.89
4.37

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

49.1

48.4

48.5

48.1

46.9

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

760

656

1,164

1,056

1,148

1,134

1,246

1,327

1,408

0.53

0.57

0.69

0.58

0.65

0.66

163

104

191

0.43

0.44

0.72

1.05

0.48

0.58

1.07

0.73

157

0.89

0.79

122

0.70

0.88

118

0.69

1,952
186
11,492
1,428
1,551
195

15,504
32,308

1,923
188
11,688
1,335
1,528
201

15,105
31,968

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

40.8
36.0
4.8

7.91
6.98
0.93

823

0.62

@ 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 Logistics and Director of Electrical and Mechanical Service, 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 and 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 three days immediately after the accident.

Annual Report 2022

Business Review and AnalysisFinancials and Other InformationOverviewCorporate Governance

INVESTOR RELATIONS

MTR has been participating in international capital
markets for more than 40 years. Over this time, we have
developed a reputation as a leader in investor relations
with high standards of corporate governance and
disclosure. We believe in enhancing shareholder value
through clear, transparent and proactive communication
of our strategies, business development and future, and
we priorities the regular engagement of 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 2022, we held about 100
meetings with institutional investors and analysts
globally. Many of these meetings were held via online
conferencing technology to maintain social distancing
during the pandemic.

The Company’s Annual General Meeting (“AGM”) is
one of its principal channels of communication with

SHARE PRICE PERFORMANCE

shareholders. Further details on the 2022 AGM are set out
in the “Annual General Meeting” section of the “Corporate
Governance Report” on page 133 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, 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 31,000 enquiries from individual
shareholders in 2022.

INDEX LISTING
AND RECOGNITIONS
The Company’s shares have been listed on the Stock
Exchange of Hong Kong since 2000, and it has been
included as a Hang Seng Index constituent stock 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.

130

120

110

100

January 2022

December 2022

Baseline

MTR share price
(HK$)(right scale)

MTR share price
relative to HSI
(Relative Index)
(left scale)

MTR Corporation Limited

FINANCIAL CALENDAR 2023
Announcement of 2022 annual results
Annual General Meeting
Ex-dividend date for 2022 final dividend
Book closure period for 2022 final dividend
2022 final dividend payment date
Announcement of 2023 interim results
Ex-dividend date for 2023 interim dividend
2023 interim dividend payment date
Financial year end

9 March
24 May
29 May
31 May to 5 June
18 July
August
August
October
31 December

DIVIDEND INFORMATION

Dividend per Share
2021 Total Ordinary Dividend
2022 Interim Ordinary Dividend
2022 Final Ordinary Dividend

Dividend history can be found in the
“Ten-Year Statistics” section on page 96
of this Annual Report and our
corporate website.

(in HK$)

1.27
0.42
0.89

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 2022

Ordinary Shares
Shares outstanding
Hong Kong SAR Government Shareholding

Free float

6,202,060,784 shares
4,634,173,932 shares
(74.72%)
1,567,886,852 shares
(25.28%)

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 2022
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

Market Capitalisation
As at 31 December 2022

HK$ 256,455 million

Our annual/interim reports and
accounts are also available online at
our corporate website.

SHARE INFORMATION

Stock Codes
The Stock Exchange of Hong Kong
Reuters
Bloomberg

66
0066.HK
66 HK Equity

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:

Annual Report 2022

Business Review and AnalysisFinancials and Other InformationOverviewCorporate GovernanceCORPORATE GOVERNANCE REPORT

Strong governance is critical for the Company in
achieving its vision and fulfilling its purpose, and doing
so in a way that delivers long term sustainable value for
all of 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 Appendix 14
(Corporate Governance Code) to the Listing Rules (the
“CG Code”).

The Board has the overall responsibility for effective
corporate governance and for ensuring that the
Company’s governance framework (which is described
in this Report) enables it to oversee and address
environmental and social issues that are material to
the operations and businesses of the Company. The
Environmental & Social Responsibility Committee has
strategic oversight of the Company’s environmental
and social strategy and is also responsible for tracking
performance against the Company’s environmental and
social commitments and reporting to the Board on these
issues. For details of its principal responsibilities and the
work performed during the year, please refer to pages 108
to 109 of this Report.

To keep its stakeholders abreast of the Company’s
initiatives and performance in the environmental and
social arenas, a separate Sustainability Report is published
on an annual basis. The Sustainability Report complies
with the Environmental, Social and Governance Reporting
Guide as set out in Appendix 27 to the Listing Rules, has
been prepared in accordance with the Global Reporting
Initiative Reporting Standards, and makes reference to
various international reporting standards and guidelines,
including the International Association of Public
Transport (UITP) Sustainability Reporting Guide,
ISO 26000 Guidance on Social Responsibility and the
World Economic Forum’s (WEF) Stakeholder Capitalism
Metrics. The Company also discloses climate-related
information in line with the framework recommended by
the Task Force on Climate-related Financial Disclosures
(TCFD). The Company’s Sustainability Report covering the
period from 1 January to 31 December 2022 is available,
together with this Annual Report, on the websites of both
the Company (www.mtr.com.hk) and the Stock Exchange.

The Company also issues an annual Sustainable Finance
Report, which is available on the Company’s website
(www.mtr.com.hk) and responds to CDP (previously
the Carbon Disclosure project) on climate related risks,
opportunities and disclosures.

VISION, PURPOSE,
CORPORATE STRATEGY,
VALUES AND CULTURE
The Company’s vision is to be an internationally recognised
company that connects and grows communities with
caring, innovative and sustainable services.

To safeguard the long-term prospects of the Company,
a new Corporate Strategy – “Transforming the Future”
(the “Corporate Strategy”), was adopted by the
Board in mid-2020 and is being implemented by the
Executive Directorate, with periodic reports to the
Board. The Corporate Strategy establishes clear business
priorities and social and environmental goals with a
view to maintaining competitiveness and driving the
sustainability of the Company’s businesses, as well as
creating healthy, long-term symbiotic relationships with
the communities in which the Company operates. With
a clearly defined purpose of “keeping cities moving”,
the Corporate Strategy defines a more fit-for-future
organisation with a strengthened Hong Kong core,
steady growth in Mainland China and internationally and
powerful new growth engines – three strategic pillars so
that the Company can stay competitive in a fast-changing
business environment.

The Corporate Strategy is underpinned by a set of values
(Excellent Service, Mutual Respect, Value Creation and
Enterprising Spirit), which help to provide all staff with a
clear indication of what is expected from them, from both
a performance and a competency perspective. To foster
a corporate culture which is aligned with the Company’s
vision, purpose, strategy and values, and align the
mindsets and behaviours of staff to support the delivery
of the Corporate Strategy, the Company has established
four cultural focus areas and associated attributes.

100

MTR Corporation Limited

The values and culture of the Company work hand-in-hand, as illustrated in the diagram below:

e O p e n - m i n d e d

Create Synergy

Take O w n ers hip
Agility to C h a n

t u r a l Focus Areas

u l

Excellent
Service

o
w E
uil

T
r

olla

t
i

Enterprising
Spirit

The
Company’s
Values

Mutual
Respect

t
i
v

Value
Creation

nication

i
s

tiv

ely

n ess & Innovatio
S et Priorities

c ti v

f f

o
s

m
a
e
T
r
u
o
r Y
e
w
o
p
Em

al
b

a Glo

t
e
s
d
n
i
M

e
v
a
H

S
h
a
r
e

a
n

Provide Constructive
Feedback

l e n g e
C h a l
S t a t u s Q u o

During the year ended 31 December 2022, a series of
actions have been undertaken to promote the desired
corporate culture, including regular reviews by the Board
of the progress made in the implementation of the
Corporate Strategy and the associated enablers, including
(i) changing the operating model of the Company and, in
particular, the organisational structure and performance
management framework to transform the way of working
and evaluating staff performance; (ii) promoting and
enabling digitalisation and technology transformation
across the Company; and (iii) embedding the social
objectives and the three lines of defence model into
daily operations. The Company has also provided regular
training sessions aimed at strengthening different aspects
of the corporate culture, which were attended by over
3,500 participants in 2022.

The Company values all feedback received, whether
through more formal channels or through interactive
communication sessions carried out by Members of
the Executive Directorate, who host town hall forums,
management communication meetings and informal
meetings with different groups of employees for them
to share their views and ideas. Following the Employee
Engagement Survey (“EES”) conducted by an independent
consulting firm engaged by the Company for employees
in Hong Kong and wholly-owned subsidiaries outside
Hong Kong in December 2021, ten taskforces with over
80 taskforce members at both the corporate and business
unit/function level have been set up for the purpose of
formulating and implementing over 120 EES follow-up
actions during the year. For continuous engagement and
to understand the feedback from employees after the

Annual Report 2022

101

Business Review and AnalysisFinancials and Other InformationOverviewCorporate Governance

implementation of the EES follow-up actions, a pulse survey was conducted in December 2022 to which over 9,000 eligible
colleagues responded. The results of this pulse survey, together with the information provided through other forums,
will provide important input to allow the Company to steer the continued implementation of the Corporate Strategy and
ensure alignment between the Corporate Strategy and the Company’s vision, purpose, values and culture.

For more details about the Company’s approach to human capital management, including how the corporate culture is
nurtured, as well as how the Company approaches equal employment opportunities and diversity and inclusion, please
refer to the Sustainability Report.

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.

With effect from 1 January 2022, the CG Code was updated, with the new provisions applicable to financial years
commencing on or after 1 January 2022. The Company is and, in most cases, has been compliant for a number of years
with the new requirements as highlighted below:

New Requirements

Highlights of the Company’s Practices

1. Culture

a. To require board to align the

company’s culture with its purpose,
values and strategy

Please refer to the Vision, Purpose, Corporate Strategy, Values and Culture
section (pages 100 to 102 of this Report).

b. To establish anti-corruption and

•

whistle-blowing policies

The Company has issued different in-house Corporation General
Instructions (“CGIs”) to staff. The CGI relating to Prevention of Bribery
and Illegal Acceptance/Offer of Advantages has been in issue since
the Company’s incorporation and has been supplemented by
subsequent CGIs relating to Conflicts of Interest and Conflicts of
Interests – Disclosure Requirements. The Company conducts regular
reviews to keep abreast of the latest governance developments
and new or updated CGIs are issued from time to time as required.
Highlights of the relevant instructions are also referred to in the
Company’s Code of Conduct which is available on the Company’s
website (www.mtr.com.hk).

•

The Company first formally established a whistle-blowing process in
2012 through the issue of a CGI, which was last updated in 2019. The
whistle-blowing channel is open to all staff, parties who deal with
the Company as well as the general public. The Company has also
adopted a Whistle-blowing Policy which is available on the Company’s
website (www.mtr.com.hk).

2. Board independence and refreshment

a. To ensure independent views are

available to the board

•

The Company’s Nomination Policy (which was updated in March 2022
and is reviewed by the Nominations Committee at least annually)
includes “the need for a strong independent element on the Board”
as one of the selection parameters for consideration when evaluating
proposed candidates for appointment to the Board.

The Board has maintained a supermajority of Independent
Non-executive Directors of the Company (“INED”) with diversified
backgrounds for many years to ensure a wide spectrum of
independent views are expressed at the Board.

102

MTR Corporation Limited

CORPORATE GOVERNANCE REPORTNew Requirements

Highlights of the Company’s Practices

2. Board independence and refreshment (continued)

b. Additional disclosures on factors

considered, process and the Board or
Nomination Committee’s discussion
in arriving at determination that
the Long Serving INED (i.e. INED
serving more than nine years) is still
independent and should be re-elected

Since 2015, the Nominations Committee has adopted a practice that
justification for nominating a Member of the Board (excluding Directors
nominated by Government) who has completed three consecutive terms of
service (each of three years) for re-appointment should be clearly specified.
Such practice has been formalised in the Nomination Policy, which also
provides that for an INED who has completed three consecutive terms of
service (each of three years), a recommendation from the Nominations
Committee for his/her re-appointment shall include the reason(s) why such
INED is still considered to be independent and should be re-appointed,
including the factors considered, the process and the discussion of the
Nominations Committee in arriving at such determination.

c. No equity-based remuneration with
performance-related elements to
INEDs

INEDs’ fees are determined primarily by benchmarking against the market
and do not involve any equity-based remuneration with performance
related elements.

3. Diversity

• No single gender board
• Gender diversity targets at board

level

•

To review board diversity policy

4. Nomination Committee

Chaired by an INED and comprising a
majority of INEDs

• As at 31 December 2022, the Board has four female Members,

representing approximately 21% of the Board. In March 2022, the
Board amended the Company’s Board Diversity Policy (the “BD
Policy”) (which was first adopted in 2013 and is available on the
Company’s website (www.mtr.com.hk)) to include a commitment to
maintain an appropriate level of female Members on the Board, which
shall not be less than 20% with immediate effect and 25% by 2025.

•

The Nominations Committee reviews the BD Policy annually to ensure
its continuing appropriateness and effectiveness.

As at 31 December 2022, the Company’s Nominations Committee was
chaired by an INED and the other six members were made up of three NEDs
and three INEDs.

5. Communications with shareholders

Shareholders communication policy
and annual review

The Shareholders’ Communication Policy of the Company was introduced
in 2012 and was last updated in January 2022. The Policy is available on
the Company’s website (www.mtr.com.hk) and is reviewed by the Board
on an annual basis to ensure its effectiveness.

6. Other enhancement

To disclose directors’ attendance in the
poll results announcements

The Company has disclosed the attendance of its Board Members at the
Annual General Meeting of the Company held on 25 May 2022 (the “2022 AGM”)
in the poll results announced on the same day, which are also available on the
Company’s website (www.mtr.com.hk).

7. Elaborate the linkage between Corporate Governance and

Environmental, Social and Governance (“ESG”)

To elaborate the linkage between
Corporate Governance and ESG
(the “Linkage”)

8. Timely disclosure of ESG report

To publish ESG reports at the same
time as publication of annual reports

The Company has elaborated the Linkage in the Corporate Governance
Report starting from the 2021 Annual Report.

The Company’s Sustainability Report and Annual Report have been
uploaded on the websites of the Company and the Stock Exchange on
the same day since 2020.

Annual Report 2022

103

Business Review and AnalysisFinancials and Other InformationOverviewCorporate GovernanceCORPORATE GOVERNANCE CODE COMPLIANCE
During the year ended 31 December 2022, the Company has complied with the code provisions as set out 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 INEDs

Number of INEDs in Audit &
Risk Committee (formerly known
as Audit Committee)

Number of Regular Board Meetings

Notice of Regular Board Meetings

Model Code Confirmation

Evaluation of the Effectiveness of
Risk Management System

The number of INEDs represents more than two-thirds of the Board, which
exceeds the independence requirement under the Listing Rules

The Audit & Risk Committee consists of five INEDs, which exceeds the
independence requirement under the Listing Rules

The Company holds seven Regular Board Meetings each year and Special
Board Meetings are held as and when required, which exceeds the
requirement under the CG Code

The dates of Regular Board Meetings for the following year are usually fixed
in the third quarter of the preceding year
• Confirmation of Compliance with the Model Code is obtained from each
Director and Model Code Manager (as defined under the section “Model
Code for Securities Transactions by Directors of Listed Issuers”)
every half-year

• An electronic platform has been established to give one-stop access to
the relevant key processes to support compliance with the Model Code

•

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 China and overseas

The Company has established a risk-based Three Lines of Defence
framework to ensure appropriate focus is applied to relevant risks and
provide recommendations to address identified gaps and inefficiencies

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 policies, 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 Board reviews the
delegation arrangement periodically.

Following the restructuring of the Board Committees and a review of the Protocol in late 2021 and January 2022, the
Protocol was updated such that the Board reserves the right to delegate any decision-making powers reserved by it
in accordance with the Protocol to any of the Board Committees in existence from time to time (whether or not such
delegation is expressly referred to in the Protocol).

104

MTR Corporation Limited

CORPORATE GOVERNANCE REPORTTo enable the Board to maintain adequate oversight, the Board receives updates and briefings on matters that have a
significant impact on the Company’s operations and businesses on a regular basis, supplemented by ad hoc reporting as
and when required.

Below is a diagram of the governance structure of the Company:

Note 2

Board of Directors

Board Committees/
Advisory Panel

Note 1

Audit & Risk
Committee

Capital Works
Committee

Environmental
& Social
Responsibility
Committee

Finance &
Investment
Committee

Nominations
Committee

Remuneration
Committee

Technology
Advisory
Panel

Executive Committee

Business/Functional

Management Committees Note 3

Operations of the Group

Notes:
1. All Board Committees/Advisory Panel(s) 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 Board Committee/Advisory Panel are available on the respective
websites of 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. Business/Functional Management Committees are set up to assist the Executive Committee in the management and control of the Company’s various core businesses

and functions.

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 150 to 162 of this Annual Report.

Annual Report 2022

105

Business Review and AnalysisFinancials and Other InformationOverviewCorporate GovernanceAs at the date of this Report, the Board has 19 Members, made up of 13 INEDs, five Non-executive Directors (“NEDs”) and
one Executive Director. This structure ensures that the Board is comprised of a majority of independent members, which is
conducive to maintaining an independent and objective decision-making process.

Government, through The Financial Secretary Incorporated, held approximately 74.72% of the issued shares of the
Company as at 31 December 2022, and is a substantial shareholder of the Company. The Chief Executive of the HKSAR, in
the exercise of his 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 Logistics (currently held by Mr Lam Sai-hung);

The office of the Permanent Secretary for Development (Works) (currently held by Mr Ricky Lau Chun-kit); 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 stakeholders 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 the Board;

Head of the Executive Directorate;

Monitoring the performance of the CEO and other

Chairman of the Executive Committee;

Members of the Executive Directorate;

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.

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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MTR Corporation Limited

CORPORATE GOVERNANCE REPORT

More details about the new Finance & Investment
Committee are set out in its report on page 144 of this
Annual Report, and the new Technology Advisory Panel
are provided on page 109 of this Report.

As part of the implementation of the other
recommendations arising from the Board evaluation
exercise (i) the financial delegation from the Board to
the Executive Committee was revised with effect from
1 February 2022; and (ii) the Nominations Committee
held an additional meeting in October 2022 specifically
to discuss Board succession.

Board Committees/Advisory Panel(s)
The Board discharges some of its responsibilities
through delegation, with appropriate oversight, to
respective Board Committees and Advisory Panel(s). The
memberships of Board Committee and Advisory Panel
and the attendance record of each Member of the Board
in 2022 are set out on pages 120 to 122 of this Report.

The duties and work performed by the Audit & Risk
Committee, Capital Works Committee, Finance &
Investment Committee and Remuneration Committee
during the year are set out in their respective reports in
this Annual Report:

•

“Audit & Risk Committee Report” on pages 135 to 137;

“Capital Works Committee Report” on page 143;

“Finance & Investment Committee Report” on
page 144; and

“Remuneration Committee Report” on pages 145 to 149.

Board Evaluation Exercise
As mentioned in the 2021 Annual Report, a Board
evaluation exercise was conducted by an external
consultant in 2021, focusing on the Board’s engagement,
communication, structure and composition.

The recommendations from the said exercise led to
a restructuring of the Company’s Board Committees
and a revamping of their terms of reference with a
view to enhancing Board effectiveness and ensuring
that the Board was fit for purpose for supporting
the implementation of the Corporate Strategy. On
11 January 2022, the Board approved (i) the establishment
of the Finance & Investment Committee and the
Technology Advisory Panel; (ii) changes to the Company’s
existing Board Committees, namely, the renaming of
and revision of the terms of reference of the then Audit
Committee to become the Audit & Risk Committee,
the disbanding of the then Risk Committee (“the then
RiskC”) and the renaming of and revision of the terms of
reference of the then Corporate Responsibility Committee
(“the then CRC”) to become the Environmental & Social
Responsibility Committee; and (iii) the appointment of
members/changes to the composition of the relevant
Board Committees and Advisory Panel, all with effect from
1 February 2022.

A summary of the changes to the Board Committees/
Advisory Panel is set out below:

Before Restructuring

After Restructuring

Audit Committee

Audit & Risk Committee

Capital Works Committee

Corporate Responsibility
Committee

Environmental & Social
Responsibility
Committee

Nominations Committee

Remuneration Committee

Risk Committee

Finance & Investment
Committee (New)

Technology Advisory
Panel (New)

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Business Review and AnalysisFinancials and Other InformationOverviewCorporate GovernanceNominations Committee

The Nominations Committee consists of seven NEDs, four
of whom are INEDs. The Chairman of the Committee is an
INED. Its terms of reference, as updated in February 2022,
are available on the respective websites of the Company
(www.mtr.com.hk) and the Stock Exchange.

Principal responsibilities:

• Reviewing the structure, size and composition

(including the perspectives, skills, diversity, knowledge
and experience) of the Board, the appropriateness and
effectiveness of the BD Policy and Nomination Policy,
as well as the adequacy and appropriateness of the list
of skillsets of the Board at least annually and making
recommendations to the Board to complement the
Company’s corporate strategy and for succession
planning purposes;

•

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,
discussed and, where applicable, made corresponding
recommendations to the Board in respect of the
following matters:

• Annual review of the structure, size and composition
of the Board, and proposed amendments to the
Nomination Policy, BD Policy and the list of skillsets;

• Annual assessment of the independence of each INED;

• Proposed nomination of new Members of the Board
for election by shareholders at the 2022 AGM; and

•

Succession planning for the Board.

As at the date of this Report, the Nominations Committee
has conducted, inter alia, (i) another annual review of
the size, structure and composition (including skills/
experience/perspectives) of the Board and consider the
same is appropriate in light of the Company’s strategy
and business needs and the list of skillsets of the Board;
(ii) an annual assessment of the independence of each
INED; and (iii) re-election of the retiring Members of
the Board and proposed nomination of new Members
of the Board for election at the 2023 Annual General
Meeting of the Company (the “2023 AGM”). The
Nominations Committee has also concluded 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.

Environmental & Social Responsibility
Committee

Following the Board Committee restructuring, with
effect from 1 February 2022, the Corporate Responsibility
Committee was renamed as the Environmental & Social
Responsibility Committee. Its terms of reference, as
updated in February 2022, are available on the respective
websites of the Company (www.mtr.com.hk) and the
Stock Exchange.

As at the date of this Report, the Environmental & Social
Responsibility Committee consists of seven members,
made up of three INEDs, one NED and three Members of
the Executive Directorate. The Environmental & Social
Responsibility Committee is chaired by the Chairman of
the Company.

After the Board Committee restructuring, the principal
responsibilities of the Committee include:

•

Engaging in any activity and acting as an advisor
to the Board in respect of matters falling within the
Committee’s terms of reference;

• Approving the Company’s environmental and social

• Re-election of Members of the Board retiring at the

(“E&S”) strategy;

2022 AGM;

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MTR Corporation Limited

• Overseeing the setting and achievement of targets

under the Company’s E&S strategy;

CORPORATE GOVERNANCE REPORT• Monitoring and overseeing the Company’s E&S
(including safety) performance and the related
frameworks and initiatives;

• Approving E&S investments by the Company in excess
of the thresholds set by the Board, in accordance with
the Company’s E&S investment framework;

• Overseeing the Company’s stakeholder engagement

strategy;

•

Identifying emerging corporate responsibility and
sustainability issues arising from external trends;

• Reviewing the Company’s annual Sustainability Report
and recommending endorsement by the Board; and

• Providing updates to the Board on matters falling

within the Committee’s remit as required.

Please also refer to the “Environmental & Social
Responsibility” section (pages 72 to 79) of this
Annual Report.

Work performed during the year:

• Monitored the advancement of the Environmental

and Social Objectives of Social Inclusion, Greenhouse
Gas Emissions Reduction and Advancement &
Opportunities;

• Reviewed and recommended the 2021 Sustainability

Report to the Board for approval;

• Considered the Company’s performance on various

local and international sustainability indices;

•

Endorsed a Carbon Reduction Study;

Endorsed an E&S Investment Framework; and

• Monitored the progress of various youth, elderly
and district-level community engagement and
investment programmes.

As at the date of this Report, the Environmental & Social
Responsibility Committee has conducted, inter alia, a
review of the adequacy of the Company’s resources for
ESG performance and reporting. For more information,
please refer to the “Evaluation of the Adequacy of
Resources of the Company’s Accounting, Financial
Reporting and Internal Audit Functions and for ESG
Performance and Reporting” under the section headed
the “Risk Management and Internal Control Systems”
(pages 127 to 128) of this Report. Going forward, this
review will be carried out on an annual basis.

Technology Advisory Panel

The Technology Advisory Panel is a panel of the Company
established on 1 February 2022. As at the date of this
Report, the Panel consists of three members of the Board,
of which two are INEDs, and an external advisor. The
Chairman of the Panel is an INED. The terms of reference
of the Panel are available on the respective websites of
the Company (www.mtr.com.hk) and the Stock Exchange.

Principal responsibilities:

• Reviewing and providing input and direction to the

setting and implementation of the Company’s digital
strategy and “Engine 2” strategy, the Company’s
long-term technological development plans and
implementation schemes, as well as the Group’s cyber
security positioning; and

• Reviewing relevant digital trends, new technologies
and cyber security developments and incidents
and making recommendations to the Company’s
Executive Directorate and, where appropriate, the
Board on further developing the Company’s digital
strategy and cyber security positioning.

Work performed during the year:

The Panel reviewed and provided guidance on the
following key matters:

•

the technology governance model of the Company;

the technology plan of a major business unit;

the digital plan of a business unit;

the progress of cyber security work, including initiatives,
security audits and horizon scanning of incidents;

the digital and enterprise architecture strategy; and

• updates on major digital and innovation projects.

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:

• Providing access to advice and services for Members

of the Board;

•

Ensuring the correct Board procedures are followed;

• Advising the Board on all corporate governance matters;

Annual Report 2022

109

Business Review and AnalysisFinancials and Other InformationOverviewCorporate Governance• 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 2022, Ms Meller undertook over 15 hours of
professional training to update her skills and knowledge.

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 Procedures 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)/
Advisory Panel.

Nomination Policy
A Nomination Policy (the “Nomination Policy”)
documenting the procedures and practices that are
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. To ensure
an appropriate level of refreshment of views at the Board,
recommendations from the Nominations Committee
to the Board are required to set out justifications for
re-appointing a Member of the Board who has completed
three consecutive terms of service (each of three years);
in addition, for an INED who has completed three
consecutive terms of service (each of three years), a
recommendation from the Nominations Committee for
his/her re-appointment shall include the reason(s) why
such INED is still considered to be independent and
should be re-appointed.

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MTR Corporation Limited

CORPORATE GOVERNANCE REPORTNomination Procedures

The following diagram demonstrates the nomination procedures for new appointments and re-elections of Members of
the Board:

Nominations Committee

New Appointment

Re-election

Review the profile of the Member of the
Board (including independence in case of INED)
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

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

For INED appointment, the independence of a
candidate would be assessed by reference to the
independence requirements under the Listing Rules

Submit nomination proposal to the Board
for consideration and approval or to make
recommendation to the shareholders for approval

Board

New Appointment

Re-election

Consider recommendation from
the Nominations Committee
and approve the appointment
during the year

Note

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

Note: Any Member of the Board appointed during the year is subject to election by the shareholders at the next following annual general meeting.

Annual Report 2022

111

Business Review and AnalysisFinancials and Other InformationOverviewCorporate GovernanceSelection 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):

Diversity
The Company is well aware of the benefits of diversity from
the perspectives of, inter alia, creativity, innovation and
decision making, and has a number of initiatives underway
as part of the social inclusion pillar of its E&S strategy.

the strategy of the Company;

Board Level

•

the structure, size, composition and needs of the
Board and its respective Board Committees at the time
(including the number of INEDs on the Board), taking
into account succession planning and the diversity of
the Board, where appropriate;

the required skills, which should be complementary to
those of the existing Members of the Board;

the BD Policy of the Company as adopted/amended
by the Board from time to time;

any information obtained through third party
references or background checks;

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, qualifications, accomplishments, likely
commitment in terms of time and interest and
expected contribution to the Company;

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;

the need for a strong independent element on the
Board; and

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.

The Nominations Committee will review the implementation
of the Nomination Policy at least annually, including the
mechanisms for ensuring independent views and input
are available to the Board, and make recommendations
on any proposed changes to the Board for the Board’s
review and approval to ensure its effectiveness.

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MTR Corporation Limited

As at 31 December 2022, the Board had four female
Members, representing approximately 21% of the Board.
In March 2022, the Board committed the Company to
maintaining an appropriate level of female Members on
the Board, which shall not be less than 20% with effect
from that date and 25% by 2025.

The Company first adopted a BD Policy in 2013 and
a regular review of the policy is conducted by the
Nominations Committee. The latest BD Policy, updated
in March 2022, is available on the Company’s website
(www.mtr.com.hk).

The BD Policy provides that the Company should
endeavour to ensure that the 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. A summary of the BD Policy is set out below:

•

the Company is committed to equality of opportunity
in all aspects of its business and does not discriminate
on the grounds of race, gender, disability, nationality,
religious or philosophical belief, age, sexual orientation,
family status or any other factor;

a diversity of perspectives can be achieved through
consideration of a number of factors, including but
not limited to skills, regional and industry experience,
background, race, gender and other qualities. In
informing the Company’s perspective on diversity, its
own business model and specific needs from time to
time will also be taken into account; and

the Company is committed to maintaining a Board
made up with INEDs as the majority, together with an
appropriate level of female Members on the Board,
which shall not be less than 20% with immediate
effect and 25% by 2025.

CORPORATE GOVERNANCE REPORTAs at the date of this Report, the Board through the Nominations Committee has reviewed the implementation of the BD
Policy to ensure its appropriateness and effectiveness.

While conscious efforts are being taken by the Company to fulfil its pledges, all appointments will continue to take into
account the Company’s Nomination Policy and ultimately be made on a merit basis taking into account available and
suitable candidates.

The BD Policy and the list of skillsets were taken into account by the Nominations Committee and the Board in considering
the following new appointments during the year:

• Mr Sunny Lee Wai-kwong as an INED; and

• Mr Carlson Tong as an INED.

The Committee and the Board formed the view that, with Mr Lee’s rich experience in business and technology
management in both Hong Kong and overseas and Mr Tong’s significant experience in the capital markets, corporate
governance and regulatory compliance fields, each of them would be a valuable addition to the Board and would further
enrich the spectrum of skills, experience and diversity of perspectives on the Board, thereby enhancing the diversity and
effectiveness of the Board.

The current diversity of the Board can be seen in the below diagram:

Gender

Male (15)

Designation

INED (13)

Age Group

Female (4)

NED (5)

ED (1)

<50 (1)

50-54 (1)

55-59 (3)

60-64 (3)

65-69 (7)

≥70 (4)

Number of Years as Board Members (Years)

0-1 (6)

2-3 (7)

4-5 (4)

≥6 (2)

Outside Directorships (Number of listed companies)

0 (11)

1-2 (6)

3-4 (2)

Board Skills
During the year, the Nominations Committee reviewed the appropriateness of the list of skillsets and considered that
Board Members’ individual experience (past and current) spanning across different sectors (including public bodies,
private companies, charitable organisations and Government authorities) has enriched the diverse perspectives of the
Board, while collectively providing a reservoir of balanced skills that supports the Company’s strategic needs.

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Business Review and AnalysisFinancials and Other InformationOverviewCorporate GovernanceThe list of skillsets of the Members of the Board covers the
following key areas:

• business related experiences including risk

management, human resources management,
strategic planning, multi-national companies
experience, and passenger/customer perspectives;

•

compliance related experiences including listed
company experience, and environment, social and
governance matters;

industry related experiences including railway
operations, engineering, construction and
infrastructure, property development, planning/urban
development, commercial/business operations and
overseas business growth and management;

• professional expertise including accounting and

finance, engineering, legal and regulatory;

• public administration including Government liaison,
Hong Kong political environment, government
relations in Mainland China, and public affairs/
communications; and

•

technology, particularly in the areas of digital and
cyber security.

Workforce Level

“Diversity and Inclusion” (“D&I”) is one of the
ten commitments under the Company’s E&S Objectives,
under which the Company commits to eliminating
discrimination in its practices and policies and increasing
the diversity of its workforce.

The Company has achieved several D&I related key
performance indicators in 2022. For instance, three
initiatives aimed at enhancing workforce diversity
were organised in collaboration with NGOs and around
230 Diversity, Equity and Inclusion (“DEI”) training events
for staff were organised. In addition, a review of the DEI
clauses in the Code of Conduct and Equal Opportunities
Policy has been completed and the revised Code of
Conduct was released to all staff in February 2022. Also,
9% of the Company’s summer interns recruited were
ethnic minorities or persons with disabilities, which is
higher than the target of 8%. Meanwhile, workplace
inclusiveness has also been enhanced in 2022 through:
(1) the establishment of a women’s network; and (2) the
review of the language requirements for ten job positions.

For the gender distribution of the workforce (including
the senior management) in 2022, please refer to the
information disclosed in the 2022 Sustainability Report.

INED INDEPENDENCE AND
STATUTORY CONFIRMATIONS
For the year ended 31 December 2022, 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.

As at the date of this Report, the Board, through
the Nominations Committee, has reviewed the
implementation and effectiveness of the below
mechanisms to ensure that independent views and input
are available to the Board.

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MTR Corporation Limited

CORPORATE GOVERNANCE REPORTStructure

INED’s tenure

Time commitment

Overboarding

Cross-directorship

The number of INEDs represents more than two-thirds of the Board, which exceeds the
independence requirement under the Listing Rules.

For an INED who has completed three consecutive terms of service (each of three years),
a recommendation from the Nominations Committee for his/her re-appointment shall include
the reason(s) why such INED is still considered to be independent and should be re-appointed.

Each Member of the Board is required to ensure 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. The
attendance record of each Member of the Board during the year is set out on pages 120 to 122
of this Report.
• All Members of the Board (including INEDs) have disclosed to the Company in a timely

manner the number and nature of offices held by them in public companies or organisations
and other significant commitments, as well as their identity and the time involved.

•

There is no overboarding issue (i.e. holding of seven or more listed company directorships).

Certain Members of the Board have common directorships as INEDs in the Company and other
companies/bodies. The Nominations Committee has assessed the said cross-directorships and
confirmed that they should not undermine the independence of the relevant INEDs.

Interest in the shares
of the Company

None of the INEDs, nor any of their family members, holds more than 1% of the total number of
the issued shares of the Company.

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 Member
of the Board or the Executive Directorate or holds any
cross-directorships. In addition, none of the Members of
the Board holds seven (or more) directorships in listed
companies (including the Company) or has significant links
with other Members of the Board through involvements
in other companies or bodies as at 31 December 2022.

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) of the
Company (collectively the “Model Code Managers”), have
also been requested to comply with the provisions of the
Model Code.

For enhanced monitoring and effectiveness, the
Company has implemented an electronic platform
“Model Code Managers Management System” to provide
one-stop access to the relevant key processes to support
compliance with the Model Code. Periodic training is also
required to be completed by Model Code Managers, with
the latest training being provided in February 2023.

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

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Business Review and AnalysisFinancials and Other InformationOverviewCorporate GovernanceCompany’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 2022 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
During the year, the Board conducted an annual review
of its Corporate Governance duties in accordance with its
terms of reference on Corporate Governance Functions.
Below is a summary of the work performed during the
year ended 31 December 2022:

• Reviewed the purpose, values and strategy

established by the Company;

• Developed and 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 and reviewed and monitored the Code of

Conduct and Directors’ Manual; and

• Reviewed the Company’s compliance with the CG Code.

As at the date of this Report, the Board has reviewed
the Company’s culture to ensure alignment with the
Company’s purpose, values and strategy and has also
reviewed the implementation and effectiveness of the
Shareholders’ Communication Policy.

The Board considers that, overall, the Company’s
Corporate Governance Functions remain 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 updated in January 2022 are available on the
websites of the Company (www.mtr.com.hk) and the
Stock Exchange.

BOARD PROCEEDINGS
The Board generally meets in person regularly. In light of
the prolonged Coronavirus Disease 2019 (“COVID-19”)
pandemic situation, electronic means have also been
provided to Members of the Board to facilitate them to
participate in meetings virtually, which is permissible
under the Articles of Association. The same arrangements
also applied to meetings of Board Committees and
Executive Committee meetings. 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
Board Committees, has also enabled all Members of the
Board, Board Committees and the Executive Committee
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. 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.

116

MTR Corporation Limited

CORPORATE GOVERNANCE REPORTThe 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, progress updates on
the Company’s transformation and Corporate Strategy
implementation as well as innovation and technology
implementation, principal issues (including topical issues
such as the impact of the pandemic on the Company’s
business in different jurisdictions) 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, new railway projects and most recently
highlights of asset maintenance works, 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.

In addition, 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. Also, 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.

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
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.

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. Where
appropriate, Government-nominated Directors and any
Directors holding a senior Government position will be
excused from attendance for discussion of a particular item.

Annual Report 2022

117

Business Review and AnalysisFinancials and Other InformationOverviewCorporate GovernanceThere 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 176 to 198) 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 ten meetings in 2022 (seven Regular
Meetings and three 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 operations of the
Board and Board Committees, further enhancement
of the information presented to the Board, the Board’s
oversight in respect of major projects, progress of the
transformation programme, the Corporate Strategy
(especially relating to the Company’s Mainland China
and International Businesses), prioritisation of major
projects and resource allocations, safety performance and
progress made on Environmental, Social and Governance
matters were discussed.

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.

In addition, other key matters discussed at the Regular
Board meetings held in 2022 included:

• Corporate Strategy:

– Receipt of progress report and updates on the

corporate transformation programme;

•

Environmental, Social and Governance:

– Annual review of the structure, size and

composition of the Board and its corporate
governance functions for 2021; annual assessment
of (i) the independence of the INEDs; and (ii) the
effectiveness of the Company’s risk management
and internal control systems for 2021;

– Recommendation of the appointment of new
Members of the Board, re-election of retiring
Members of the Board, and amendments to
the Articles of Association for approval by
shareholders at the 2022 AGM;

– Approval of (i) changes to the structure of the

Board Committees and the establishment of a new
Advisory Panel, including the adoption of relevant
terms of reference, and approval of memberships
and associated fees; (ii) amendments to the
Protocol; (iii) appointment of an advisor to the
Capital Works Committee; and (iv) annual update
to the Directors’ Manual;

– Approval of amendments to the Nomination Policy

and the BD Policy of the Company;

– Approval of 2021 Sustainability Report;

– Receipt of Carbon Reduction Study and approval
of the setting of science-based carbon emission
reduction targets; and

– Receipt and consideration of reports from

Management on key matters such as corporate
safety governance and enterprise risk management;

118

MTR Corporation Limited

CORPORATE GOVERNANCE REPORT• Hong Kong Transport Services:

• New Growth Engine:

– Review of report on the 2021 Hong Kong

– Approval of an investment cap for the New Growth

Transport Service Performance;

Engine business;

– Approval of fares for the East Rail Line Cross

•

Financial:

Harbour Extension;

– Receipt of status updates on a major resignalling
project, and approval of additional funding
requests for the project;

– Receipt of an update on the project delivery strategy
and procurement approach relating to the signalling
works for certain railway lines and projects;

– Approval of a major licence renewal; and

– Approval of the Company’s fare adjustment

principles in 2022 under the Fare Adjustment
Mechanism (“FAM”) and receipt of a progress
update on the 2023 FAM review;

• Capital Works:

– Approval of the budget for the advance works of

certain new railway projects;

– Receipt of updates on the project agreement for a

new railway project; and

– Approval of the technical and financial submission

proposals for a proposed railway project;

• Property:

– Approval of contract award for the fit out works of

a property development in Hong Kong;

– Approval of tender arrangements for certain

property developments in Hong Kong;

– Receipt of progress updates on a new property

development; and

– Approval of a major lease renewal;

• Mainland China and International Businesses:

– Receipt of annual business updates, business
development, strategy updates and/or long
term plans of the Mainland China, Macao and
International businesses; and

– Receipt of an update on the opening of the Central
Section of the Elizabeth Line in the United Kingdom;

– Review and approval of the 2021 Annual Report and
the 2022 Interim Report and financial statements;

– Receipt of updates on the financial impact of

COVID-19;

– Approval of the renewal of the US$7 Billion Debt

Issuance Programme; and

– Approval of the 2023 Budget and 10-Year Forecast;

• Human Resources:

– Receipt of report on Employee Engagement

Survey and actions planned; and

– Approval of 2022 Annual Pay Review.

Special Meetings
During 2022, three Special Meetings were held
to consider and, where appropriate, approve the
transactions and associated agreements relating to
the full operation of the Shatin to Central Link, the way
forward and additional funding for a resignalling project,
the project agreement for a new railway project and the
Oyster Bay Property Development.

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.

The attendance record of each Member of the Board (and
each Member of the Executive Directorate) during the
year is set out on pages 120 to 122 of this Report.

Annual Report 2022

119

Business Review and AnalysisFinancials and Other InformationOverviewCorporate GovernanceMembers of the Board and the Executive Directorate
Attendance of Meetings and Training in 2022

Board Meetings

Board Committees/Advisory Panel Meetings

2022 AGM TrainingΩ

Attendance

A&RC

CWC E&SRC F&IC

TAP

Total Number of Meetings

Members of the Board

Non-executive Directors (“NED”)

Dr Rex Auyeung Pak-kuen (Chairman)(1)

7/7

3/3

2/2

2/2C

Christopher Hui Ching-yu(2)

(Secretary for Financial Services and the Treasury)

6/7

1/3

0/1

1/2

4/7

Secretary for Transport and Logistics

(Lam Sai-hung)(3)

Permanent Secretary for Development (Works)

(Ricky Lau Chun-kit)(4)

4/4

0/2

3/7

1/3

Commissioner for Transport
(Rosanna Law Shuk-pui)(5)

Independent Non-executive Directors (“INED”)

Andrew Clifford Winawer Brandler(6)

Dr Bunny Chan Chung-bun(7)

Walter Chan Kar-lok(8)

Dr Pamela Chan Wong Shui

Dr Dorothy Chan Yuen Tak-fai

Cheng Yan-kee

Hui Siu-wai(9)

Sunny Lee Wai-kwong(10)

Dr Rose Lee Wai-mun(11)

Jimmy Ng Wing-ka(12)

Carlson Tong(13)

Adrian Wong Koon-man(14)

Johannes Zhou Yuan(15)

Executive Director (“ED”)

6/7

1/3

2/4

6/7

7/7

4/4

5/7

6/7

4/4

7/7

1/3

3/3

2/2

3/3

1/2

3/3

4/4

1/1

3/3C

4/4

Dr Jacob Kam Chak-pui (CEO)

7/7

3/3

Members of the Executive Directorate
& the Executive Committee

Dr Jacob Kam Chak-pui (CEO)

Adi Lau Tin-shing

Margaret Cheng Wai-ching

7/7

3/3

1/1

0/1

2/2

2/2C

1/1

2/2C

2/2

1/1

2/3

7/7C

7/7

2/2

2/4

3/3

4/4

4/4C

4/4

1/1

2/2

7/7

5/5

2/2

3/3C

2/2

2/3

0/1

0/2

3/3

1/1

1/2

1/1

Linda Choy Siu-min

Carl Michael Devlin(16)

Herbert Hui Leung-wah

Dr Tony Lee Kar-yun

Gillian Elizabeth Meller

David Tang Chi-fai

Jeny Yeung Mei-chun

Members departed during 2022

NED

Secretary for Transport and Housing

(Frank Chan Fan)(17)

INED

Dr Anthony Chow Wing-kin(18)

Dr Eddy Fong Ching(19)

Benjamin Tang Kwok-bun(20)

Member of the Executive Directorate
& the Executive Committee

Roger Francis Bayliss (21)

120

MTR Corporation Limited

1/1

0/1

N/A*

0/1

1/1

1/1
1/1
N/A*
1/1
1/1
N/A*
1/1

1/1

0/1

1/1

1/1
N/A*
1/1

1/1

0/1

1/1

√

CORPORATE GOVERNANCE REPORT

Legend:

Board Meetings
RM – Regular Meeting(s)
SM – Special Meeting(s)

Board Committees/Advisory Panel Meetings
A&RC – Audit & Risk Committee
NC – Nominations Committee
RC – Remuneration Committee
CWC – Capital Works Committee
E&SRC – Environmental & Social Responsibility

Committee

F&IC – Finance & Investment Committee
TAP – Technology Advisory Panel

2022 AGM – Annual General Meeting of the Company held on 25 May 2022

N/A – Not applicable

* – appointed after the conclusion of 2022 AGM

C – Chairman of the Board committee/advisory panel

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. Dr Rex Auyeung Pak-kuen has been re-appointed by the Financial Secretary Incorporated as the Chairman of the Board for a period of two and a half years starting from

1 January 2022 to 30 June 2024 (both dates inclusive).

2. Mr Christopher Hui Ching-yu (Secretary for Financial Services and the Treasury) was appointed by the Board as a member of the F&IC of the Company and ceased to be a

member of the NC of the Company, both with effect from 1 February 2022.

The alternate directors of Mr Hui, acting on his behalf, attended one RM, one NC meeting, one RC meeting and two F&IC meetings. Mr Hui was not present at those Board
meetings or a portion thereof and a F&IC meeting at which the Northern Link Spur Line, Tung Chung Line Extension, Oyster Bay Property Development project and/or
Shatin to Central Link project were discussed for avoidance of any actual or perceived conflict of interest.

3. The office of the Secretary for Transport and Logistics (“S for T&L”) became a NED and was appointed by the Board as a member of each of the NC and the RC of the

Company, all with effect from 1 July 2022. Mr Lam Sai-hung, who holds the post of the S for T&L, by virtue of holding such post, became a NED and a member of each of
the NC and the RC of the Company, all with effect from the same date.

The alternate director of S for T&L (Mr Lam Sai-hung), acting on his behalf, attended one SM. Mr Lam was not present at those Board meetings or a portion thereof at
which the Tung Chung Line Extension and/or Oyster Bay Property Development project was discussed for avoidance of any actual or perceived conflict of interest.

4. The office of the Permanent Secretary for Development (Works) (“PS for D(W)”) (Mr Ricky Lau Chun-kit) was appointed by the Board as a member of the NC of the

Company and ceased to be a member of the then RiskC, both with effect from 1 February 2022.

The alternate director of PS for D(W) (Mr Ricky Lau Chun-kit), acting on his behalf, attended four RM, one NC meeting and two CWC meetings. Mr Lau or his alternate
director were not present at those Board meetings or a portion thereof at which the Northern Link Spur Line, Tung Chung Line Extension, Oyster Bay Property
Development project and/or Shatin to Central Link project were discussed for avoidance of any actual or perceived conflict of interest.

5. The office of the Commissioner for Transport (“C for T”) (Miss Rosanna Law Shuk-pui) was appointed by the Board as a member of the TAP of the Company and ceased to

be a member of the then RiskC, both with effect from 1 February 2022.

The alternate director of C for T (Miss Rosanna Law Shuk-pui), acting on her behalf, attended one RM, two A&RC meetings and one TAP meeting. Miss Law was not present
at those Board meetings or a portion thereof at which the Northern Link Spur Line, Tung Chung Line Extension, Oyster Bay Property Development project and/or Shatin to
Central Link project were discussed for avoidance of any actual or perceived conflict of interest.

6. Mr Andrew Brandler was appointed by the Board as a member and the chairman of the F&IC of the Company and ceased to be a member and the chairman of the then

RiskC, all with effect from 1 February 2022.

7. Dr Bunny Chan Chung-bun was appointed by the Board as a member of the F&IC of the Company with effect from 1 February 2022.

8. Mr Walter Chan Kar-lok was appointed by the Board as a member of the CWC of the Company and ceased to be a member of the then CRC, both with effect from

1 February 2022.

9. Mr Hui Siu-wai was appointed by the Board as a member of the A&RC of the Company and ceased to be a member of the then RiskC, both with effect from 1 February 2022.

10. Mr Sunny Lee Wai-kwong was elected as a Member of the Board and became an INED with effect from the conclusion of the 2022 AGM, and was appointed by the Board

as a member of each of the NC and the TAP of the Company, both with effect from the same date.

11. Dr Rose Lee Wai-mun was appointed by the Board as a member of the F&IC of the Company and ceased to be a member of the then RiskC, both with effect from

1 February 2022. She was then appointed by the Board as a member of the RC of the Company and ceased to be a member of the A&RC of the Company, both with effect
from 25 May 2022.

12. Mr Jimmy Ng Wing-ka was appointed by the Board as a member of the NC of the Company and ceased to be a member of the CWC of the Company, both with effect from

1 February 2022.

13. Mr Carlson Tong was elected as a Member of the Board and became an INED with effect from the conclusion of the 2022 AGM, and was appointed by the Board as a

member and the chairman of the A&RC of the Company and a member of the F&IC of the Company, all with effect from the same date.

14. Mr Adrian Wong Koon-man was appointed by the Board as a member of the F&IC of the Company and ceased to be a member of the NC of the Company, both with effect
from 1 February 2022. He was then appointed by the Board as a member of the RC of the Company and ceased to be a member of the F&IC of the Company, both with
effect from 25 May 2022.

15. Mr Johannes Zhou Yuan was appointed by the Board as a member and the chairman of the TAP of the Company and ceased to be a member of the then RiskC, all with

effect from 1 February 2022.

16. Mr Carl Michael Devlin was appointed as the Capital Works Director and a Member of the Executive Directorate of the Company, both with effect from 1 August 2022.

Annual Report 2022

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Business Review and AnalysisFinancials and Other InformationOverviewCorporate Governance

17. The office of the then Secretary for Transport and Housing (“the then S for T&H”) (held by Mr Frank Chan Fan until 30 June 2022) ceased to be a NED and a member of each

of the NC and the RC of the Company, all with effect from 1 July 2022.

The alternate directors of the then S for T&H (Mr Frank Chan Fan), acting on his behalf, attended one RM, one NC and two RC meetings. Mr Chan and his alternate director
were not present at those Board meetings or a portion thereof at which the Northern Link Spur Line, Tung Chung Line Extension and/or Shatin to Central Link project were
discussed for avoidance of any actual or perceived conflict of interest.

18. Dr Anthony Chow Wing-kin was appointed by the Board as a member of the NC of the Company and ceased to be a member of the CWC of the Company, both with effect

from 1 February 2022. He retired as an INED, and a member of each of the NC and the RC of the Company, all with effect from the conclusion of the 2022 AGM.

19. Dr Eddy Fong Ching was appointed by the Board as a member of the F&IC of the Company and ceased to be a member of the NC of the Company, both with effect from
1 February 2022. He retired as an INED, a member and the chairman of the A&RC of the Company, and a member of the F&IC of the Company, all with effect from the
conclusion of the 2022 AGM.

20. Mr Benjamin Tang Kwok-bun was appointed by the Board as a member of the TAP of the Company and ceased to be a member of the then RiskC, both with effect from

1 February 2022. He retired as an INED, and a member of each of the RC and the TAP of the Company, all with effect from the conclusion of the 2022 AGM.

21. Mr Roger Francis Bayliss retired from the Company upon the completion of his service agreement with the Company immediately after 31 July 2022, and ceased to be the

Capital Works Director and a Member of the Executive Directorate of the Company at the same time.

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 provided with 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, the terms of reference of the Board on its
Corporate Governance Functions and the terms of reference of the Board Committees and Advisory Panel. 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 2023, covered (i) certain reminders to Directors in the areas
of corporate governance and directors’ duties and responsibilities covering directors’ training, good record-keeping
and corporate culture; (ii) the Terms of Reference of the Executive Committee which were formalised in 2022; and
(iii) miscellaneous housekeeping updates.

122

MTR Corporation Limited

CORPORATE GOVERNANCE REPORT
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 April 2022, certain Members of the Board and the
Executive Directorate visited Exhibition Centre and Admiralty
stations to gain a first hand understanding of the railway
operations of the East Rail Line Cross-Harbour Extension.

Training

Materials on the subject of corporate governance and
e-learning provided by the Stock Exchange and other
professional firms and institutes are also 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 provided to the Company a record of the training
he/she has received during the year, which is set out on
pages 120 to 122 of this 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 and e-learning 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
and companies 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.
Partnering with overseas business schools, various
self-paced online executive programmes were also
organised in 2022 to enable senior leaders to expand their
business skills and connect with world-class professors
and experienced executives from around the globe.

In early February 2023, the Company has arranged an
external law firm to provide a briefing on connected
transactions and continuing connected transactions to
managerial or above staff to promote understanding of
the relevant requirements under the Listing Rules.

FINANCIAL REPORTING
Members of the Board are responsible for preparing
the consolidated financial statements of the Group.
The consolidated financial statements 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 2022, and of the Group’s consolidated
financial performance and consolidated cash flows for
the year then ended. In preparing the consolidated
financial statements for the year ended 31 December
2022, Members of the Board have selected appropriate
accounting policies and have applied them consistently
with previous financial periods, apart from those new and
amended accounting policies effective from 1 January
2022 as disclosed in the notes to the consolidated
financial statements for the year ended 31 December
2022. Judgments and estimates that have been made are
prudent and reasonable. The reporting responsibilities of
the external auditor of the Company (the “External Auditor”)
are set out on page 131 of this Report.

In support of the above, the consolidated financial
statements presented to the Board have been reviewed
by Members of the Executive Directorate. For both the
annual and interim reports and consolidated financial
statements, the Finance Function is responsible for
clearing them with the External Auditor and the Audit
& Risk 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 reviewed by the Audit & Risk
Committee before adoption by the Group.

Members of the Board endeavour to ensure a balanced,
clear and coherent assessment of the Group’s
consolidated financial position and performance in
annual reports, interim reports, inside information
announcements, and other financial disclosures required
under the Listing Rules and other statutory requirements.

Annual Report 2022

123

Business Review and AnalysisFinancials and Other InformationOverviewCorporate GovernanceRISK 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 on an
annual basis. With the assistance of the Audit & Risk
Committee as mentioned in the Audit & Risk Committee
Report on pages 135 to 137 of this Annual Report, 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.

Over the course of 2022, the Company has strengthened
its Second Line of Defence through the independent
Assurance Management Department, complemented
by the technical and engineering Centres of Excellence,
and Strategic Assurance Review Board, which serves to
coordinate and focus assurance activities on material risks
as well as to highlight any insights or concerns to relevant
Executives.

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) risk and provide reasonable assurance,
not absolute assurance, against material misstatement
or loss, regarding the achievement of objectives in the
following areas:

•

Effectiveness and efficiency of operations

• Reliability of financial reporting

• 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 risk management 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.
Each committee has its own terms of reference which,
together with the structure and composition of the
committees, are reviewed from time to time to ensure
they meet the Company’s business and operational needs.

Internal Audit
The Head of Internal Audit reports directly to the
Board via the Audit & Risk 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.

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MTR Corporation Limited

CORPORATE GOVERNANCE REPORTOn 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 & Risk Committee’s approval. The audits are
selected based on risk assessment of the Company’s
audit universe to ensure that business activities with
higher risks are covered. On a quarterly basis, the Head
of Internal Audit reports to the Audit & Risk Committee
on major observations identified in audit reviews and
the implementation progress of audit recommendations,
together with her 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 138 to 142)
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, CGI(s),
Business Units’/Functions’/Departments’ 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 Departments’ 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 the timely preparation of reliable
financial information.

Directors and Department Heads of Business Units/
Functions, 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 rectifications and actions taken to prevent
recurrence are reported annually to the Executive
Committee and the Audit & Risk Committee.

Annual Report 2022

125

Business Review and AnalysisFinancials and Other InformationOverviewCorporate GovernanceDepartment Heads

Department Heads

Maintain a list of applicable statutes/regulations

Assess impact of statutes/regulations on operations

Identify relevant new or updated statutes/
regulations

Corporation General Instruction sets out
compliance responsibilities

Review compliance at least once a year

Plan and
Monitor

Board via
Audit & Risk Committee

Assess

Executive
Committee

Regulatory
Compliance
Framework

Supporting
Functions
(Legal, ERM)

Report

Department Heads

Improve

Department Heads report non-compliances
to Members of Executive Directorate

Executive Committee and Audit & Risk
Committee receive annual report

Department Heads

Identify potential and actual non-compliances

Devise improvement actions

Whistle-blowing Policy

A whistle-blowing policy, which is available on the Company’s website (www.mtr.com.hk), 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 whistle-blowing policy is
regularly reviewed by the IAD. The whistle-blowing channel is available to all staff, parties who deal with the Company as
well as the general public. Every quarter, a summary of all whistle-blowing cases handled by the Whistle-blowing Panel,
staff complaints handled by the Human Resources Management Department and management initiated investigations
are reported to the Executive Committee and the Audit & Risk Committee.

Inside Information Policy

The Company has developed a system with established policies, processes and procedures across all relevant Functions,
Business Units and Departments for the handling and dissemination of Inside Information, which encompasses the following:

• A CGI setting out:

(i)

the internal processes for identifying, assessing and escalating potential Inside Information to the Executive
Committee and the Board;

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MTR Corporation Limited

CORPORATE GOVERNANCE REPORT(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; and

•

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 an online training
programme on Inside Information. To refresh their awareness of the Inside Information policy, a new mandatory
online training programme was launched in October 2022.

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 China and overseas. For the year ended 31 December 2022, the Audit & 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 141) of this
Annual Report.

Evaluation of the Effectiveness of the Internal Control System
For the year ended 31 December 2022, 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 & Risk 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 & Risk
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 and for ESG Performance
and Reporting
For the year ended 31 December 2022, the annual assessments performed by the Finance Function, IAD and the
Environmental & Social Responsibility Team concluded that there were adequate resources, staff qualifications and
experience, training programmes and budgets for the Company’s accounting, financial reporting, internal audit and ESG
performance and reporting functions respectively.

Annual Report 2022

127

Business Review and AnalysisFinancials and Other InformationOverviewCorporate GovernanceThe 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 financial 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 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 & Risk 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 along with 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 also 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 results to
the Audit & Risk Committee.

In terms of ESG performance and reporting, the Company
is also committed to recruiting, training and developing
a team of qualified and competent specialists for
overseeing the implementation of the Company’s ESG
initiatives, enhancing and monitoring ESG performance
and preparing ESG reports and other disclosures.
A process to capture and update laws, regulations,
standards and best practices applicable to the Company’s
ESG performance and reporting is in place. Designated
officers will ensure relevant ordinances, regulations and
standards under their responsibility are complied with.
Resources and provisions required to deliver the ESG
performance and reporting function are reviewed during
the annual budgeting exercise by respective business
units and corporate functions. Proper recruitment
processes and staff development programmes are in
place to address the competency, qualifications and
experience required. The Legal and Governance Director
will conduct a formal annual review on the adequacy
of staff resources, qualifications and experience of staff
involved in delivering the Company’s ESG performance
and reporting function and report the review results to
the Audit & Risk Committee as part of the report on risk
management and internal control systems effectiveness.

Based on the above, the Audit & Risk Committee
considers that the resources, qualifications and
experience of staff, training programmes and budgets
for the Company’s accounting, financial reporting,
and internal audit functions, as well as for the ESG
performance and reporting functions are adequate.

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MTR Corporation Limited

CORPORATE GOVERNANCE REPORTBoard’s Annual Review
The Board has, through the Audit & Risk 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 2022, 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 budgets for the Company’s accounting,
financial reporting and internal audit functions, as well
as the ESG performance and reporting functions for the
year ended 31 December 2022, and considers the above
resource components to be adequate.

CRISIS MANAGEMENT
To uphold the reputation of being one of the world’s
leading railway operating companies and in order to
ensure that the Company will respond to and recover
from crises in an organised and highly effective manner,
the Company has established a mechanism to activate
pre-defined levels of crisis response in the event of a
crisis which enable timely communication with principal
stakeholders such as Government departments and
shareholders. The Corporate Crisis Management Team
comprises relevant Members of the Executive Directorate
and Executive Managers and its operation is governed
by a Corporate Crisis Management Plan which, among
other things, sets out the duties of respective members.
The Corporate Crisis Management Plan is kept in line with
world-class standards and up-to-date through regular
reviews. The operation of the Corporate Crisis Management
Team is aided by an information system, which keeps track
of the latest situation, issues and strategic actions, and
disseminates crisis related information. Regular Corporate
Crisis Management Team exercises are held to validate
the corporate crisis management mechanism and to
provide practice for members.

To further enhance the Corporate Crisis Management
Framework, a review was conducted in 2021 on the
crisis response structure, to which the Business Unit
Crisis Response level was added to provide additional
granularity and agility in crisis response. The enhanced
Framework was implemented along with the new issue
of the Corporate Crisis Management Plan (Version 2.0) in
March 2022.

In 2022, in response to the prolonged COVID-19
pandemic, the Corporate Crisis Management Team
delegated the tactical level monitoring of the situation
and the coordination of the Company’s responses and
actions to the Infectious Diseases Management Team,
with the goal of safeguarding the health and safety of our
customers, staff and contractors and reducing the impact
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, Macao, Mainland China and overseas.
Notwithstanding the fact that these subsidiaries and
associates are separate legal entities, the Company has
implemented a management governance framework
(the “Management Governance Framework”) to ensure
that it exercises an appropriate level of control and
oversight as a shareholder of these subsidiaries and
associates. In addition, a number of other enhancements
have been made to the Company’s policies and practices
on corporate governance during the year ended
31 December 2022, including the rollout of new CGIs
on (i) legal entity management; and (ii) connected and
continuing connected transactions.

The Company’s Management Governance Framework
promotes collaboration between the corresponding
Business Units/Functions in the Company on the
one hand and the subsidiaries and associates on the
other hand and the implementation process of the
Management Governance Framework in the Company’s
subsidiaries and associates starts from the inception of
any new business operations/investments.

Annual Report 2022

129

Business Review and AnalysisFinancials and Other InformationOverviewCorporate GovernanceIn 2022, the Company conducted a review and updated
the CGI governing the Management Governance
Framework to enhance the implementation process, as
well as formalising exceptions for certain subsidiaries and
associates from compliance with relevant CGI, subject to
satisfaction of specified criteria and conditions.

Pursuant to the Management Governance Framework,
the Company exercises its control and oversight through
the formulation of a governance structure that is tailored
for individual subsidiaries and associates through (i) the
imposition of certain internal controls in key areas; and
(ii) the 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.

To facilitate colleagues who act as a director and/or
alternate director of the Company’s subsidiaries and
associates in gaining a better understanding of their
directors’ duties and responsibilities, mandatory training
was provided to them in January 2023, which covered
the fundamental legal principles governing the duties
and responsibilities of a director and key protocols and
policies that are relevant to discharging their duties as the
Company’s representatives on the boards of directors of
those entities.

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. The latest
version was released in February 2022 in the form of
a digital flipbook to facilitate staff understanding and
access. In addition, a new staff awareness programme
was launched in early June 2022. The main theme of the
first session was the Personal Data (Privacy) Ordinance.
Animation videos and interactive games with real
life examples as well as a webinar were provided to
help staff members better understand the principles
of the Ordinance and if certain acts are unlawful or
unacceptable. Other education programmes, such as
mandatory online training programmes, have also been
introduced to raise staff awareness.

To ensure our staff members live up to the highest ethical
standards, a policy related to the prevention of bribery
and corrupt practices has been put in place and is reviewed
periodically. Staff members are also 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 established,
which enable staff members to raise their concerns in
a safe environment and in complete confidence if they
have genuine suspicions about any wrongdoings.

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 mandatory online
training programmes within three months of joining
the Company. The Code of Conduct is available on the
Company’s website (www.mtr.com.hk).

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MTR Corporation Limited

CORPORATE GOVERNANCE REPORTIn addition, the Code of Conduct serves as a guideline
for establishing a comparable ethical culture among
our subsidiaries and associates in Hong Kong, Macao,
Mainland 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 & Risk 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 & Risk Committee also reviews and
pre-approves the engagement of KPMG to provide any
non-audit services, for complying with relevant regulatory
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
financial statements on page 231 of this Annual Report.

For maintaining independence 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.

KPMG confirms its independence with regard to The Code
of Ethics for Professional Accountants issued by the Hong
Kong Institute of Certified Public Accountants regarding
auditor independence.

COMMUNICATION WITH
SHAREHOLDERS
The Company aims 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 Board
is responsible for maintaining an on-going dialogue with
shareholders and, in particular, for communicating with
them and encouraging their participation. The Company
adopted a Shareholders’ Communication Policy in 2012,
which was last updated in January 2022 and is available
on the website of the Company (www.mtr.com.hk).

A high-level summary of the Shareholders’
Communication Policy is set out below:

•

as a general policy: the Company (i) will assign
dedicated management personnel to be in charge
of ensuring effective and timely dissemination
of information to shareholders; (ii) will provide
shareholders with ready access to information about
the Company; and (iii) will facilitate shareholders’
participation in annual general meetings; and

as specific policies: (i) corporate communications
(such as annual reports, interim reports, circulars
and announcements) will take full account of the
Company’s obligations under the Listing Rules
and other relevant laws and regulations; (ii) annual
general meetings and other general meetings are
opportunities for shareholders to exercise their right
to speak and discuss the business activities of the
Company; (iii) announcements, notices, circulars and
other documents as required by the Listing Rules,
and news releases and data/information about latest
developments of the Company are available on
the Company’s website; and (iv) shareholders can
communicate their views on various matters affecting
the Company, and the Company has set out different
engagement channels to solicit and understand the
views of its stakeholders.

Annual Report 2022

131

Business Review and AnalysisFinancials and Other InformationOverviewCorporate GovernanceDuring the year, the key communication channels and engagements with shareholders were as follows:

2022 AGM

Held in hybrid format, which

provided shareholders with the
option of attending the 2022 AGM
physically or joining online

Submission of questions

in advance

Corporate Communications

Over 70 corporate communications documents
(including annual report, interim report and
sustainability report as well as various notices and
announcements) on the websites of both the Company
and the Stock Exchange

Press releases and webcast archives of results
announcements on the Company’s website

Investor Meetings

About 100 meetings with
institutional investors and
analysts globally

Dividend Information

Dividend Policy is available on page 99 of this Annual

Report under “Investor Relations” section

Dividend payment history can be found on the

Company’s website

Dividend calculator is made available on the

Company’s website during the scrip dividend election
period to facilitate shareholders’ calculation of the
maximum number of scrip shares to which they
are entitled

The Board has conducted its annual review of the Shareholders’ Communication Policy and considers that it has been
effectively implemented during the year ended 31 December 2022 and remains appropriate.

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MTR Corporation Limited

CORPORATE GOVERNANCE REPORTAnnual General Meeting
The Company’s Annual General Meeting 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 Annual
General Meetings to answer shareholders’ questions.

In light of the COVID-19 pandemic and the requirements
of the relevant social distancing laws and regulations,
the Company implemented a number of precautionary
measures for the 2022 AGM, including:

•

the 2022 AGM was held in a hybrid format, which
provided shareholders with option of attending
physically or joining online;

• 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 2022 AGM at the
AGM venue and other Members of the Board and the
Executive Directorate joined by electronic means;

• only 50 shareholders were accepted to physically attend
the 2022 AGM through online pre-registration; and

•

submission of questions in advance of the 2022 AGM
was required.

At the 2022 AGM, the Company continued providing
sign language interpretation in addition to simultaneous
Cantonese, English and Putonghua interpretation, and,
for the benefit of the Company’s shareholders who were
unable to physically attend the 2022 AGM, the Company
provided shareholders with an option to join the
meeting through an online platform with three choices
of language (Cantonese, English and Putonghua). The
webcast of the whole proceedings was also posted on the
Company’s website for viewing during the year.

The 2023 AGM has been scheduled on 24 May 2023.
With the aim of helping shareholders save time and
resources and reducing the Company’s carbon footprint,
the Company plans to continue holding the 2023 AGM
in a hybrid format, which will provide shareholders

with the option of attending physically or joining the
AGM online, and the abovementioned sign language
interpretation and simultaneous interpretation services
will continue to be provided to further facilitate smooth
and direct communication between the shareholders
of the Company and the Members of the Board and the
Executive Directorate of the Company. The Company
is committed to making available meeting facilities to
enable all eligible attendees to be able to participate in
the 2023 AGM.

Resolutions passed at the 2022 AGM

The Chairman proposed separate resolutions for each
substantially separate issue at the 2022 AGM. Before the
resolutions were considered, the Chairman exercised his
right as the Chairman of the 2022 AGM under Article 71 of
the Articles of Association to call a poll on all resolutions
conducted by electronic means.

A total of 13 resolutions were passed at the 2022
AGM (with resolution no. 3 comprising five separate
resolutions), all of which were supported by over 97%
of the votes cast, with a vast majority of the resolutions
receiving over 99% support. The full text of the
resolutions is set out in the 2022 AGM Circular (which
comprised Notice of the 2022 AGM) dated 14 April 2022
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.

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.

Annual Report 2022

133

Business Review and AnalysisFinancials and Other InformationOverviewCorporate GovernanceThe Directors of the Company are required to call a
general meeting within 21 days after the date on which
the Company receives such request, 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 request includes 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 request, the Directors of the
Company do not proceed duly to call a general meeting,
the shareholder(s) 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 three months after
the date on which the Company receives the required
request.

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
Shareholders are, at all times, welcome to raise questions,
communicate their views on various matters affecting
the Company and request information (to the extent it is
publicly available) from the Board and management by
writing to the Company Secretary.

For other means of communication with the Company,
please refer to the Investor Relations section (pages 98
to 99) of this Annual Report.

CONSTITUTIONAL DOCUMENT
To allow flexibility for the Company in reviewing the
Directors’ fees and to enable the Company to bring
the Directors’ fees more in line with the market so as
to allow the Company to continue to attract Directors
of a suitable calibre, the cap on Directors’ fees set out
in Article 100 of the Articles of Association has been
increased from HK$10,000,000 to HK$11,000,000 with the
approval of the Company’s shareholders at the 2022 AGM.
The updated 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.

For and on behalf of the Board

Gillian Elizabeth Meller
Company Secretary
Hong Kong, 9 March 2023

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MTR Corporation Limited

CORPORATE GOVERNANCE REPORTAUDIT & RISK COMMITTEE REPORT

As mentioned in the Annual Report last year, the Board
restructured the Company’s Board Committees in early
2022, with a view to enhancing Board effectiveness and
ensuring that the Board was fit for purpose for supporting
the implementation of the new Corporate Strategy. As
a result of that restructuring, the Audit Committee, with
effect from 1 February 2022, took up certain duties of the
former Risk Committee, including regularly reviewing
the Company’s enterprise risk management (“ERM”)
framework (one of the Company’s key internal controls)
and associated policies and procedures and assessing,
on an annual basis, the effectiveness of the ERM function.
The Audit Committee was therefore renamed as the Audit
& Risk Committee (referred to as the “Committee” in this
Report) on the same date.

During 2022, Dr Eddy Fong Ching retired as a Member
of the Board of the Company after the conclusion of
the Company’s annual general meeting on 25 May
and accordingly stepped down as the Chairman of the
Committee after having served for seven years and
gratitude should be given to Dr Fong for his contribution
and leadership as the Committee Chairman. As at the date
of this Report, the Committee consists of six Non-executive
Directors, five of whom are Independent Non-executive
Directors of the Company. None of the Committee
members was or is a partner or former partner of KPMG,
the Company’s external auditor. Details of the Committee’s
membership and their attendance records during 2022 are
set out on pages 120 to 122 of this Annual Report.

The Finance Director (the “FD”), the Head of Internal
Audit (the “Head of IA”) and the Legal and Governance
Director (the “L&GD”), or their respective delegates, and
representatives of the external auditor are required to
attend all meetings of the Committee. The Committee
meets at least once every quarter and the Chairman of
the Committee or any two members of the Committee
or the external auditor or the FD may request additional
meetings if they consider necessary.

TERMS OF REFERENCE OF
THE COMMITTEE
The Terms of Reference of the Committee (the “ToR”), last
updated in February 2022, 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:

• Overseeing 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;

• Reviewing the financial information of the

Company, including monitoring the integrity of
financial statements;

• Developing and implementing a policy on the
engagement of the external auditor to supply
non-audit services;

• Overseeing the Company’s financial reporting system
and internal control procedures, including overseeing
the adequacy of the resources and competence of the
Company’s accounting and financial reporting functions;

• 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;

• Reviewing the Company’s ERM framework and the

guidelines, policies and procedures for risk assessment
and risk management;

• Receiving reports on the Company’s enterprise risks

and key emerging risks; and

• Reviewing the effectiveness of the ERM function
(including staffing levels and qualifications), the
Company’s “Three Lines of Defence” (“3LoD”) assurance
framework and crisis management arrangements.

Annual Report 2022

135

Business Review and AnalysisFinancials and Other InformationOverviewCorporate GovernanceMore 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 124 to 129 of this
Annual Report.

For more details of the features of the ERM system and
processes, the significant risks being managed and the
process used to review the effectiveness of the ERM
system, please refer to the “Risk Management” section on
pages 138 to 142 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.

WORK PERFORMED BY THE
COMMITTEE IN 2022
In 2022, the Committee held four regular meetings.
Representatives of the external auditor, the FD, the L&GD
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.
During the year, the Committee also held private sessions
with the external auditors and the Head of IA, without the
presence of Management representatives.

The Committee devoted its attention to the review of the
Company’s annual and interim results announcements/
financial statements at the February and August 2022
meetings respectively, allowing more time to review and
discuss the Company’s internal controls, internal audit,
regular reports on ERM and the Second Line of Defence
(“2LoD”) and other activities at the June and November
2022 regular meetings.

Over the course of 2022, the Company has continued
to implement its strengthened 3LoD model through
the independent Assurance Management Department,
complemented by technical and engineering Centres of
Excellence and a new Strategic Assurance Review Board
which serves to coordinate and focus assurance activities,
as well as to highlight any insights or concerns to relevant
Executives. Although in the early implementation phase,
the newly formed 2LoD has introduced and piloted the
refreshed 3LoD model and framework within the Capital
Works Business Unit and has expanded its roll out to
Hong Kong Transport Services and other Business Units.
While a substantial journey remains, the foundation for an
effective 2LoD has been established.

Other major work performed by the Committee in
2022 included:

Financial
• Reviewed the draft 2021 Annual Report, Annual

Results Announcement and Financial Statements and
2022 Interim Report, Interim Results Announcement
and Financial Statements, accounting matters,
and relevant disclosure notes in the said Financial
Statements and made recommendations on the same
for the Board’s approval;

• Received updates on the valuations of the Group’s
Hong Kong property assets and Mainland China
investment properties;

• Received updates on the latest budget status of

the Company’s railway construction projects under
entrustment by the HKSAR Government;

• Received a preview of the 2022 interim and annual
accounting and financial reporting issues; and

• Reviewed the accounting matters and disclosure
notes in the financial statements in relation to a
resignalling project;

136

MTR Corporation Limited

AUDIT & RISK COMMITTEE REPORTInternal Audit and Internal Control
• Reviewed the Risk Management and Internal Control
Systems effectiveness paper for 2021 for submission
to the Board;

• Reviewed the report on the evaluation of the

effectiveness of the Internal Audit Department for 2021;

• Reviewed the continuing connected transactions

for 2021;

Risk Management and Assurance
• Received an introduction to the ERM Framework;

• Reviewed ERM’s 2021 Annual Report, 2022 Half Yearly

Report and a Quarterly Report;

• Received the roadmap of the 3LoD model and
framework and regular updates on the 2LoD’s
progress, results and Key Performance Indicators (KPIs);

• Received an introduction to the Corporate Crisis

• Reviewed Internal Audit Department’s Six-monthly

Management Framework; and

• Received an insurance summary update.

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 2023 for approval by the Company’s
Shareholders at the 2023 Annual General Meeting.

Carlson Tong
Audit & Risk Committee Chairman
Hong Kong, 9 March 2023

This Audit & Risk Committee Report has been reviewed and endorsed by
the Committee.

Report and Quarterly Reports;

• Received an update on the status of an Internal Audit

Report on a resignalling project; and

• Approved the 2023 Internal Audit Plan;

External Auditor
• Received KPMG’s reports on the salient features of the
2021 Annual Financial Statements and 2022 Interim
Financial Statements respectively;

• Considered KPMG’s independence and other relevant
factors when approving the appointment of KPMG
in providing a non-audit service; and noted KPMG’s
confirmation of independence in its audit report in
respect of the 2021 Annual Financial Statements and
2022 Interim Financial Statements respectively;

• Approved KPMG’s fee proposal for the 2022 annual
audit and the 2023 interim review, as well as other
audit related and tax services; and

• Reviewed KPMG’s audit plan for the year ending

31 December 2022;

Governance
• Reviewed the report on compliance with statutes
and regulations, Operating Agreement and Rail
Merger Related Agreements in 2021, and outstanding
litigation/potential litigation;

•

Endorsed the Audit Committee Report, Risk
Committee Report and Risk Management related
disclosures for the 2021 Annual Report;

• Reviewed the governance of the Mainland China and
Macau Businesses and International Business; and

• Reviewed summaries of key issues reported to the

Audit/Risk/Governance Committee Minutes of various
subsidiaries of the Company;

Annual Report 2022

137

Business Review and AnalysisFinancials and Other InformationOverviewCorporate GovernanceRISK MANAGEMENT

SYSTEM FEATURES
Business units across the Company embrace the
Company’s Enterprise Risk Management (“ERM”)
framework which underpins their day-to-day business
activities. The framework provides a simple and effective
management process to:

•

Identify, assess, and effectively manage operational,
functional, and enterprise risks across the Company

• 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 Audit & 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 quarterly enterprise
risk reports, receive technical input and analysis, make
informed decisions and take decisive tactical and strategic
action on the key risks that the Company faces. Two
“Blue Sky” workshops were held in July and November
2022 respectively. At the July workshop, the Executives
discussed the impact of increasing interest rates and

Board
assisted by
Audit & Risk
Committee*

Executive Committee
assisted by
Enterprise Risk Committee

Business Units and Corporate Functions

See the Audit & Risk Committee Report (pages 135 to 137 of this Annual Report)
for duties and work performed by the Committee in 2022.

138

MTR Corporation Limited

worsening inflation on the Company’s businesses. At the
November workshop the Executives had a more in-depth
discussion and review on the risks associated with inflation
and rising interest rates, as well as contemporary issues
such as currency risk, supply chain challenges and the risk
of economic slowdown in Mainland China and Hong Kong.

The Company’s risks are rigorously identified, assessed
and managed. Each risk is evaluated on the likelihood
of occurrence as well as potential consequence while
taking existing controls into consideration. A risk matrix is
used to determine a risk rating (E1 – E4), with E1 being a
relatively high risk and E4 being a relatively low risk. The
risk rating determines the required level of management
attention and risk treatment effort, while considering the
Company’s risk appetite. The highest category of risk,
“E1”, is subject to Board, Board Committee and Executive
Committee oversight.

While encountering risk is inevitable in the course of
business, the Company’s appetite for risk varies and is
particularly low in certain areas such as in relation to
public and employee safety and the provision of a reliable
transport service.

The Company’s ERM system provides an important
internal control in identifying, assessing 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. On 13 November 2022, our

• 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 all business units and

corporate functions

– Steers framework implementation and improvement
– Reviews Company’s top risks and key emerging risks
– Reports to Executive Committee and Audit & 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

• Manage risks, and identify and implement risk controls
• Capture identified risks in risk registers for regular review

and monitoring

Tsuen Wan Line (“TWL”) service in Hong Kong was
interrupted after a TWL train struck a dislodged permanent
fixed metallic protection barrier along the trackside,
leading to a train front wheel axle moving off the
rail. Following the incident, the rear end detrainment ramp
of the incident train was operated by passengers without
the knowledge of the train captain, as the communication
system had been damaged by the incident.

A comprehensive incident investigation was immediately
initiated which found that the mounting bolts and nuts
of the metallic protection barrier were seriously corroded
at its base frames. The barrier involved in the incident
and similar other barriers were not registered in the asset
management system, and hence had not been subject to
specific maintenance inspections. A series of follow-up
actions, including enhancement of the associated
maintenance regime, upgrading or replacement of all
barriers of a similar nature, and the commencement of a
comprehensive trackside infrastructure and equipment
survey, were undertaken. The Company has also taken
action to improve public communications in the event of
an incident through the use of more standard messages
(where possible) and is adding a function on all trains
to send a direct alert to the Operations Control Centre
whenever a detrainment ramp is operated.

On 5 December 2022, our Tseung Kwan O Line service
was interrupted after a device inside the coupler
connecting two train cars was dislodged, leading
to lengthening of the train gangway. An in-depth
investigation has been undertaken together with the
equipment supplier, while immediate inspections were
conducted based on the advice of the supplier.

Following these two incidents, the Company has
commissioned a comprehensive review of its asset
management and activities, with the aim of further
enhancing the company’s asset management.

MANAGEMENT PROCESS
FOR SIGNIFICANT RISKS
The Company adopts a proactive management process
to identify, evaluate, treat, report and monitor 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, operations, construction,
finance, and environment, social and governance (“ESG”).
ESG risks identified through the ERM framework are
further mapped against relevant issues under ISO 26000
for materiality assessment purposes.

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 likelihood and
consequence of the
risk event

• Determine risk rating
using the risk matrix
(E1-E4)

• Take into account

risk 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
– Audit & Risk Committee
– Board

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 and the Executive Committee review
the Company’s enterprise risk profile and brainstorm
emerging risks quarterly to ensure key risks are captured,
assessed and controlled. The Board also reviews these on
a six-monthly basis.

Annual Report 2022

139

Business Review and AnalysisFinancials and Other InformationOverviewCorporate GovernanceKey risk management focus areas for the Company include:

Effective and Balanced Relationship with Key Stakeholders

Key Challenges

Key Controls

Key Challenges

Key Controls

Challenging political landscape and diverse stakeholder expectations

•
• Upholding public confidence in light of operational incidents
•

Building relationships with communities and stakeholders affected by new projects

•

Implement proactive tailored engagement plans for different stakeholders to maintain effective communication
and understanding
Fulfill the Company’s operating obligations and maintain good performance

Operations

• Uphold asset performance while assets are ageing
• Manage interfaces from works along the operating railway to mitigate any major impact on train services
•
•
• Unplanned disruption of services due to incidents

Secure sufficient Non-traffic Hours (“NTH”) possessions to meet asset replacement and maintenance needs
Replace complex signalling systems in a live operating railway environment

•
•
•
•
•

•
•

Strengthened governance of asset replacement strategy to manage asset replacement demand
Comprehensive review on asset management and activities for continuous improvement opportunities
Explore use of technology to monitor asset condition and performance
Railway Protection and assurance teams to review potential railway interface hazards
Secure required NTH possessions through the NTH Office established to coordinate supply and demand across
business units and invest in necessary resources
Engage independent safety assessor to assist delivery of safety critical projects to safety and quality standards
Comprehensive investigation of incidents followed by implementation of corrective and preventative actions

People

Key Challenges

Talent recruitment and retention especially for specific disciplines, new/growth business
Challenging employee relations environment due to more diverse and polarised views

•
•
• Health threat to the workforce, loss of productivity and potential impact on normal operations arising from the

COVID-19 pandemic

Key Controls

•
•

•

Succession planning, talent development, forward manpower planning and resourcing strategies
Employee Engagement Survey to gauge more accurately staff sentiment, addressing issues raised via action plan
executed by taskforces
Proactive employee engagement through various communication channels, starting with the onboarding process
Provision of personal protective equipment for staff such as face masks and test kits, special work arrangements and
implementation of business continuity arrangements, as appropriate, with due consideration of prevailing situation
and restrictions
Enhanced cleaning and sterilisation of workplaces, including offices, depots, stations and trains

New Projects Quality, Programme and Cost

Key Challenges

• Delivering new projects on time, within budget, and to the expected standard of quality while meeting

stakeholder expectations

• Obtaining adequate and timely NTH possessions to deliver new projects on time while need for operational

maintenance/asset replacement NTH possessions is met

• Negotiation of Project Agreements for new projects with Government

Key Controls

• Deploy Three Lines of Defence to provide project assurance, including audits and assurance to ensure compliance

with processes and procedures
Revamped Capital Works Project Integrated Management System

•
• Monitoring of project quality and progress against Key Performance Indicators
•
•

Stringent control of change and management of contingency funds
Introduction of competency and resource management framework in the Capital Works Business Unit to ensure
sufficient staff with the right skills and competencies
Increased use of technology to deliver and manage projects, including the use of Building Information Modelling
(“BIM”) and digital supervision and record keeping

•

• NTH Office established to coordinate supply and demand for track possessions across business units and to develop

initiatives and procure resources to improve possession efficiency
Proactive engagement with Government to establish the future way of delivering railway projects

•

New Business Model/Technological Disruption/Competition

Key Challenges

•
Current business model disrupted by new technology
• Manage competition from other transport providers

Key Controls

Invest in technology and digital solutions to strengthen business model

•
• Monitor competition from other transport providers and implement initiatives to maintain market share

140

MTR Corporation Limited

RISK MANAGEMENTDelivery of Growth Strategy

Key Challenges

• Uncertain business model for future new lines in Hong Kong
•
•
• Heightened geopolitical/isolationist risk

Keen competition for business opportunities outside Hong Kong
Business performance below bid models and assumptions

Key Controls

• Ongoing engagement with Government to establish 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 scans for new

Key Challenges

Key Controls

business opportunities
Formulate and implement business improvement plans for underperforming businesses

Security Threat (Cyber/Physical)

Threat of cyber-attack on Operations and IT systems
Terrorist attack threat

Enhanced IT network resilience to protect against cyber attacks
Implementation of cyber security protection systems for IT and railway operations systems
Enhanced security measures
Enhanced corporate security governance framework

•

•
•

•
•
•
•

The long-term financial sustainability of the Company is continuously monitored by the Board and the Executive
Committee. The prolonged COVID-19 pandemic is a key enterprise risk which has and continues to significantly affect
the Company’s businesses over the course of 2022, and has required careful management to mitigate the financial,
operational, staff and customer impacts. Our recurrent businesses will benefit from the revitalisation of the travel, tourism
and retail industries when the world gradually transitions towards a more manageable endemic era of COVID-19. Overall,
the financial position of the Group remains sound. The Group has also been implementing transformation initiatives with
a view to further improving the Group’s profitability in the longer-term, while the new railway and other projects in the
pipeline will also contribute to the Group’s long-term financial sustainability.

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 ending
31 December 2022 to the Executive Committee, who confirmed its agreement with the review results on 9 February 2023
and to the Audit & Risk Committee on 27 February 2023, who likewise confirmed their agreement with the review results.

The Audit & Risk Committee, with delegated authority from the Board, has evaluated the effectiveness and adequacy of
the Company’s ERM system and considers it to be 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/associates

• Benchmarking/roundtable/peer group engagements and interactions

• Risk management training and promotion events held in 2022

Conclusion

The ERM system was
considered overall
effective and adequate
for the year ended
31 December 2022.

Annual Report 2022

141

Business Review and AnalysisFinancials and Other InformationOverviewCorporate GovernanceCONTINUOUS PROCESS IMPROVEMENT
Key initiatives undertaken in relation to the ERM system in 2022 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.

The annual event of the Risk Awareness Week (or “RAW”) for promoting risk awareness and risk management
discussions across the organisation was kicked off on 12 October 2022 by a keynote seminar on managing Diversity,
Equity and Inclusion inaction risks for business sustainability. The seminar was well received and was attended
by approximately 330 senior managers. As part of the RAW, four half-day interactive workshops on barrier-based
risk management using the Bow-Tie risk analysis method were attended by approximately 70 senior supervisors/
managerial staff from different Business Units/Functions. These workshops helped uplift risk management skills within
the organisation.

• Over the course of 2022, the Company has continued to implement its strengthened Three Lines of Defence (“3LoD”)
model through the independent Assurance Management Department, complemented by technical and engineering
Centres of Excellence and a new Strategic Assurance Review Board which serves to coordinate and focus assurance
activities, as well as to highlight any insights or concerns to relevant Executives. Although in the early implementation
phase, the newly formed Second Line of Defence (“2LoD”) has introduced and piloted the refreshed 3LoD model and
framework within the Capital Works Business Unit and has expanded its rollout to Hong Kong Transport Services and
other Business Units. While a substantial journey remains, the foundation for an effective 2LoD has been established.

• We keep ourselves abreast of the latest developments in risk management through reviews with users, reviewing
a variety of global risk reports, and cross-industry benchmarking and experience sharing, including through
participation in UK and Hong Kong ERM Roundtable meetings.

142

MTR Corporation Limited

RISK MANAGEMENTCAPITAL WORKS COMMITTEE REPORT

As at the date of this Report, the Capital Works Committee
of the Company (referred to as the “Committee” in this
report) consists of five Non-executive Directors, four of
whom are Independent Non-executive Directors of the
Company (“INEDs”). Details of the Committee’s members
and their attendance records during 2022 are set out on
pages 120 to 122 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 are 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 2022
In 2022, the Committee held four meetings at which the
following key matters were reviewed and considered:

• progress and cost status of the Company’s capital

projects under construction including the Shatin to
Central Link and the Signalling Replacement Works on
the urban lines

• planning and design work for new railway projects

under the Lantau Portfolio, including the Tung Chung
Line Extension and Siu Ho Wan Depot Development,
and the New Territories Portfolio, including the Tuen
Ma Line Extension

• progress of continuous improvements under the

Building Excellence programme for enhancing the
capability of the Company’s Capital Works Business
Unit in railway project management

• half-yearly reports on the construction programme and
cost status of all the awarded development projects of
the Company’s Property Business Unit in Hong Kong,
including THE PAVILIA FARM at Tai Wai Station

• half-yearly reports on projects-related audits

conducted by the Company’s Internal
Audit Department

Capital Works Director, General Manager – New Territories
(Projects), General Manager – Lantau (Projects) and
General Manager – Commercial Management attended
all four Committee meetings in 2022, to report and
answer questions on progress of projects and cost
related matters. Operations Director attended all four
meetings in 2022 to report and answer questions on
Signalling Replacement Works. Property and International
Business Director attended two meetings in 2022 to
report and answer questions on progress of awarded
Property development projects. Other 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, 9 March 2023

The Capital Works Committee Report has been reviewed and endorsed by
the Committee.

Annual Report 2022

143

Business Review and AnalysisFinancials and Other InformationOverviewCorporate GovernanceFINANCE & INVESTMENT
COMMITTEE REPORT

WORK PERFORMED BY THE
COMMITTEE IN 2022
During 2022, the Committee held seven meetings at
which the following key proposals were reviewed and
considered, and the Committee made corresponding
recommendations to the Board for its consideration:

•

the concession arrangement for the full operation of
the Shatin to Central Link;

the project agreements required for undertaking
certain railway extension and property
development projects;

the Company’s 2023 Budget and Longer-Term
Forecast

the Company’s 2021 Final Dividend and
2022 Interim Dividend;

• Major lease and licence renewal of the Company’s

investment properties; and

•

the tender arrangements and sales price proposals of
various property development projects.

Mr Andrew Brandler
Finance & Investment Committee Chairman
Hong Kong, 9 March 2023

The Finance & Investment Committee Report has been reviewed and endorsed by
the Committee.

The Finance & Investment Committee (referred to as
the “Committee” in this report) was established on
1 February 2022. As at the date of this Report, the
Committee consists of five Non-executive Directors, of
which four are Independent Non-executive Directors
(INEDs). The Chairman of the Committee is an INED.
Details of the Committee’s members and their attendance
records during 2022 are set out on pages 120 to 122 of
this Annual Report.

The Chief Executive Officer, the Finance Director, and the
General Manager – Corporate Finance are required to
attend all meetings of the Committee. Other executives
and senior managers were also invited to attend
Committee meetings when required.

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.

Reviewing proposals from the Company’s Executive
Directorate on the following matters and providing
an assessment of such proposals to the Board for
its consideration:

•

the annual budget and financing plan of
the Company;

the Company’s preferred financing model;

the Company’s dividend policy;

if in excess of the financial or other thresholds set
by the Board, bank borrowings or other financing
agreements, investments and disposals, parent
company guarantees, expenditure and revenue
contract awards;

the strategy for (if in excess of the investment
threshold set by the Board) and the award of tenders
for the Company’s property development projects in
Hong Kong;

the average and floor selling prices for units within the
Company’s property development projects;

• project proposals for new capital works projects in

Hong Kong; and

•

the investment caps for the Company’s Mainland
China and International Businesses and for any other
part(s) of the Company’s business.

144

MTR Corporation Limited

REMUNERATION 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 talent;

• 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
talent. The Company also recognises the importance of a
formal and transparent remuneration policy covering its
Board and Executive Directorate.

Annual Report 2022

145

Business Review and AnalysisFinancials and Other InformationOverviewCorporate GovernanceREMUNERATION 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.

During the third quarter of 2020, the Company
appointed an independent consultant to undertake
a Board Evaluation exercise with a view to enhancing
Board effectiveness and ensuring that the Board is
fit for supporting the implementation of the new
corporate strategy. Based on the consultant’s findings
and recommendations, a new Finance & Investment
Committee and a new Technology Advisory Panel
was established with effect from 1 February 2022. The
Remuneration Committee reviewed the proposed
membership fee of the said new Committee and Panel
and recommended for approval by the Board in January
2022. Details of the remuneration for the Non-executive
Directors are set out in note 11 to the consolidated
financial statements. The current Non-executive Director
fees payable in respect of each Board Committee and
Panel in effect since 1 February 2022, is set out below:

(HK$)

Board
– Chairman
1,500,000
– Other Members
300,000
Audit & Risk Committee and Capital Works Committee
– Chairman
150,000
– Other Members
90,000
Finance & Investment Committee, Remuneration
Committee, Nominations Committee,
Environmental & Social Responsibility
Committee, and Technology Advisory Panel
– Chairman
– Other Members

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.

Non-financial Factors
• Results from Customer satisfaction surveys;

•

Fulfillment of the Customer Service Pledges; and

146

MTR Corporation Limited

REMUNERATION COMMITTEE REPORT•

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 2022, 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 – award
was granted to all staff in 2022 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 2022, the Company maintained the Executive
Share Incentive Scheme.

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.

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 2022. 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 every three years
and 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. For
the current performance share grant covering 2021 to
2023, performance metrics include financial metrics
and operational and strategic metrics to support the
Company’s growth and transformation, Environmental,
Social and Governance commitments and project delivery
in Hong Kong.

Annual Report 2022

147

Business Review and AnalysisFinancials and Other InformationOverviewCorporate GovernanceIn 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.
For purpose of the Amended Chapter 17 of the Listing
Rules, the scheme is classified as “share schemes involving
existing shares of listed issuers”.

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 44 to the consolidated financial statements.

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 years of 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
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.

148

MTR Corporation Limited

REMUNERATION COMMITTEE REPORT(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 were
eligible to join the MTR Provident Fund Scheme but opted
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 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 China and overseas, their respective local
laws and regulations.

WORK PERFORMED BY THE
REMUNERATION COMMITTEE
DURING THE YEAR
• Approved the 2021 Remuneration Committee Report

as incorporated in the 2021 Annual Report;

•

reviewed and approved payouts under the
Company’s performance-based CIS for the 2021
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 2022;

conducted review on the remuneration packages
for Members of the Executive Directorate, as
appropriate; and

• endorsed the membership fees payable to

non-executive Directors under the new Board
Committee structure

REMUNERATION OF
NON-EXECUTIVE AND
EXECUTIVE DIRECTORS
The total remuneration of the Members of the Board
and the Executive Directorate is shown below and
the remuneration details are set out in note 11 to the
consolidated financial statements.

in HK$ million

Fees
Base salaries, allowances and other
benefits-in-kind
Variable remuneration related to performance
Retirement scheme contributions
Share-based payments
Total

2022

9.7

62.6
21.9
6.5
29.9
130.6

2021

10.0

56.5
13.6
6.1
14.3
100.5

Please refer to note 11 to the consolidated financial
statements for information relating to the five highest
paid employees of the Company for the year ended
31 December 2022.

Dr Dorothy Chan Yuen Tak-fai
Remuneration Committee Chairperson
Hong Kong, 20 February 2023

Annual Report 2022

149

Business Review and AnalysisFinancials and Other InformationOverviewCorporate GovernanceBOARD AND EXECUTIVE DIRECTORATE

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*
GBS, JP
Age 70

Dr Jacob
Kam Chak-pui*
JP
Age 61

Chief Executive Officer (“CEO”) (since 1 April 2019)
Environmental & Social 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.
Before the CEO appointment, he was the Operations
Director between January 2011 and April 2016 and the
Managing Director – Operations and Mainland Business
from May 2016.

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 a member of the Hong Kong Quality Assurance
Agency Governing Council, the board of directors of The
Community Chest of Hong Kong, the General Committee
of The Hong Kong General Chamber of Commerce, and
the General Committee of the Employers’ Federation
of Hong Kong. He is also an Honorary Chairman of the
International Association of Public Transport (UITP).

Dr Kam qualified as a Chartered Engineer in the United
Kingdom in 1989.

Chairman (since 1 July 2019)
NED (since 7 March 2019)
Environmental & Social Responsibility Committee (Chairman)
Nominations Committee (Member)
Remuneration Committee (Member)

Dr Auyeung is the vice chairman and an independent
non-executive director of C-MER Eye Care Holdings
Limited, and an independent non-executive director of
China Construction Bank (Asia) Corporation Limited.

Dr Auyeung has over 40 years of experience in the
insurance industry in Canada and Hong Kong. Before
his retirement in June 2017, he 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 a member of the Board of Directors of the
Investor and Financial Education Council under the
Securities and Futures Commission, 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, an observer of the
Independent Police Complaints Council Observers Scheme,
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.

150

MTR Corporation Limited

Andrew Clifford
Winawer Brandler^
Age 66

INED (since 17 May 2017)
Finance & Investment Committee (Chairman)
Audit & Risk 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
2013 and April 2014, and currently is the vice chairman of
the board and 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^
GBM, GBS, SBS, BBS, JP
Age 65

INED (since 20 May 2020)
Environmental & Social Responsibility Committee (Member)
Finance & Investment 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 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, a member of the Court of Hong Kong
Metropolitan University (“HKMU”) (formerly The Open
University of Hong Kong (“OUHK”)), and an advisor to Our
Hong Kong Foundation.

Dr Chan was formerly an independent non-executive
director of Speedy Global Holdings Limited. He was
appointed to the Commission on Youth in 2004 and was
the chairman from 2009 to 2015. Dr Chan 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. He 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
SBS, JP
Age 69

INED (since 22 May 2019)
Nominations Committee (Member)
Capital Works Committee (Member)

Mr Chan has been a practising lawyer for over 40 years and
is currently a consultant of Messrs. So, Lung & Associates,
Solicitors. He is also a China Appointed Attesting
Officer. Mr Chan currently is the chairman of The Hong
Kong Housing Society, 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, a member of the Housing Authority,
the Town Planning Board, the Harbourfront Commission
and the Board of Advisors of Radio Television Hong Kong,
and a convenor-cum-member of the Pensions Appeal
Panel under the Civil Service Bureau.

Annual Report 2022

151

Business Review and AnalysisFinancials and Other InformationOverviewCorporate GovernanceDr Pamela
Chan Wong Shui#
Age 76

INED (since 4 July 2013)
Nominations Committee (Chairman)
Environmental & Social Responsibility Committee (Member)

Dr Chan is chairman of The Insurance Complaints Bureau,
The Boys’ and Girls’ Clubs Association of Hong Kong and
the Advisory Committee of the Department of Social
Behavioural Sciences of City University of Hong Kong.
She is a member of the Judicial Officers Recommendation
Commission and third vice president of the board of The
Community Chest of Hong Kong. Dr Chan 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, 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, and an independent director of the Travel Industry
Council of Hong Kong.

Dr Dorothy
Chan Yuen Tak-fai*^
Age 73

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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MTR Corporation Limited

Community College. She is an independent non-executive
director of AMS Public Transport Holdings Limited,
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, a member of the Commercial Letting
Panel under the Board of West Kowloon Cultural District
Authority, and the Honorary Fellow and an advisor to the
Council of Trustees 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, the chairperson of
the Sustainable Agricultural Development Fund Advisory
Committee, 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*
BBS, JP
Age 68

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.

Mr Cheng currently is a director of H. K. Cheng & Partners
Limited. He is also a member of the Advisory Committee
on Post-service Employment of Civil Servants and the
Advisory Committee on Post-office Employment for
Former Chief Executives and Politically Appointed Officials.

BOARD AND EXECUTIVE DIRECTORATEMr 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.

Hui Siu-wai
SBS
Age 66

INED (since 26 May 2021)
Audit & Risk Committee (Member)
Capital Works Committee (Member)

Mr Hui joined the Hong Kong Government in 1978 as a
student building surveyor. He worked in a wide range of
posts in the former Buildings Ordinance Office, the former
Building Development Department, the former Buildings
and Lands Department and the Buildings Department.
In 2001, he was seconded to the Security Bureau of the
HKSAR Government and assumed the position of the
Principal Assistant Secretary/Special Duties, with the
primary responsibility of overseeing aviation security.
Before his retirement, Mr Hui was the Director of Buildings
between 2014 and 2017.

Mr Hui was appointed by the HKSAR Government and
served as a member of the Expert Adviser Team for the
Shatin-to-Central Link Project between 2018 and 2020.

Mr Hui has been a member of the Hong Kong Institute of
Surveyors since 1984.

Sunny
Lee Wai-kwong*
BBS, JP
Age 63

INED (since 25 May 2022)
Nominations Committee (Member)
Technology Advisory Panel (Member)

Mr Lee has more than 30 years of experience in business
and technology management gained in both Hong Kong
and overseas. He is the vice-president (Administration)
of City University of Hong Kong, and an independent
non-executive director of SUNeVision Holdings Ltd and
BOC Hong Kong (Holdings) Limited.

Mr Lee was the executive director of information
technology (“IT”) of The Hong Kong Jockey Club
(“HKJC”), where he served as a member of the board of
management and had overall responsibility for HKJC’s
IT strategy and innovation. Prior to joining HKJC, Mr Lee
held various key positions at The Hong Kong and
China Gas Company Limited, including as an executive
committee member, and as chief information officer of
the group and chief executive officer of two strategic
diversification businesses, iCare.com Limited and
Towngas Telecommunications Company Limited.

Mr Lee also actively serves in many governing and
advisory committees in the academic, professional and
community arena. He is the board chairman of Hong
Kong Applied Science and Technology Research Institute
Company Limited, the chairman of Public Libraries
Advisory Committee and an ex-officio member of the
Committee on Innovation, Technology and Industry
Development of the HKSAR, and a council member of
each of Hong Kong Management Association, Hong Kong
Quality Assurance Agency and Hong Kong Professionals
and Senior Executives Association.

Mr Lee, formerly, was a president of Hong Kong Computer
Society, a chairman of the Hong Kong Institute of IT
Professional Certification, a council member of Vocational
Training Council, an audit committee member of Hong
Kong Housing Society, a member of Working Group of
Intellectual Property Trading of the HKSAR, and a board
chairman of Hong Kong Education City.

Mr Lee is a Chartered IT Professional and a Chartered Engineer.

Annual Report 2022

153

Business Review and AnalysisFinancials and Other InformationOverviewCorporate GovernanceDr Rose
Lee Wai-mun
JP
Age 70

INED (since 16 May 2018)
Remuneration Committee (Member)
Finance & Investment Committee (Member)

Dr Lee is an Independent Non-Executive Director of CK
Hutchison Holdings Limited and Swire Pacific Limited.
She is also a member of the Election Committee of the
13th National People’s Representative Meeting, a Board
Member of the West Kowloon Cultural District Authority,
and Vice Patron of the Community Chest of Hong Kong.
Dr Lee is a Fellow of The Hong Kong Institute of Bankers.

Dr Lee 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 The Hang Seng University of
Hong Kong. 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.

Jimmy
Ng Wing-ka
BBS, JP
Age 53

INED (since 22 May 2019)
Nominations Committee (Member)
Environmental & Social 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 currently a member of the Hong
Kong delegation to the National People’s Congress of
the People’s Republic of China and a Legislative Council

154

MTR Corporation Limited

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 also 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 non-executive director of Mandatory Provident
Fund Schemes Authority and The Hong Kong Mortgage
Corporation Limited, a director of Hong Kong Science
and Technology Parks Corporation, and a member of the
Court and the Council 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 Shaanxi Province, 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.

Carlson Tong
GBS, SBS, JP
Age 68

INED (since 25 May 2022)
Audit & Risk Committee (Chairman)
Finance & Investment Committee (Member)

Mr Tong is a chartered accountant and has extensive
experience in the financial services sector and the capital
market in both the Mainland China and Hong Kong
markets. He is an independent non-executive director of
Standard Chartered PLC.

Mr Tong joined KPMG UK in 1979 and became an audit
partner of the firm in Hong Kong in 1989. He was elected
chairman of KPMG China and Hong Kong in 2007, before
becoming the Asia Pacific chairman and a member of the
global board and global executive team of KPMG in 2009.
Mr Tong spent over 30 years at KPMG and was actively
involved in the work of the capital market, corporate
governance and regulatory compliance, serving as a
member of the Main Board and Growth Enterprise Market

BOARD AND EXECUTIVE DIRECTORATEListing Committee of The Stock Exchange of Hong Kong
Limited from 2002 to 2006, before becoming the chair
during 2006 to 2008. After retiring from KPMG in 2011, he
was appointed a non-executive director of the Securities
and Futures Commission (“SFC”), and later acted as its
chairman for the period from 2012 to October 2018.
Mr Tong oversaw a number of major policy initiatives
during his term as the chairman of the SFC, including the
introduction of the Hong Kong and Shanghai/Shenzhen
Stock connect schemes and the mutual recognition of
funds between the Mainland and Hong Kong.

Mr Tong, formerly, was a non-executive director of the Hong
Kong International Airport Authority, chairman of Aviation
Security Company Limited, chairman of the University
Grants Committee, a member of the Exchange Fund
Advisory Committee of Hong Kong Monetary Authority,
a vice president and a council member of the Hong Kong
Institute of Certified Public Accountants and a member of
the Hong Kong Human Resources Planning Commission.

Mr Tong currently sits on various HKSAR Government and
professional bodies. He is the chairman of the Independent
Commission on Remuneration for Members of the
Executive Council and the Legislature, and Officials under
the Political Appointment System, a board member of
each of Hong Kong Investment Corporation Limited, the
Hong Kong Academy of Finance and Hong Kong Laureate
Forum Limited and an observer on behalf of the HKSAR
Government for Cathay Pacific Airways Limited.

Mr Tong is a Fellow of the Institute of Chartered
Accountants in England and Wales and the Hong Kong
Institute of Certified Public Accountants respectively.

Adrian
Wong Koon-man
BBS, MH, JP
Age 58

INED (since 26 May 2021)
Audit & Risk Committee (Member)
Remuneration Committee (Member)

Mr Wong is an executive director and Chief Operations
Officer of VL Asset Management Limited and a director
of Abercan Limited. He is also a board member of

Airport Authority Hong Kong and Aviation Security
Company Limited, the chairman of the Corruption
Prevention Advisory Committee, and a member of the
Advisory Committee on Corruption of the Independent
Commission Against Corruption, and a member of the
Travel Industry Authority, the Standing Commission on
Civil Service Salaries and Conditions of Service and the
Unsolicited Electronic Messages (Enforcement Notices)
Appeal Board.

Mr Wong previously worked for commercial law firms
in England and in Hong Kong and specialised in listings
and mergers and acquisitions in the Greater China
region. He was a member of the Listing Committee of
The Stock Exchange of Hong Kong Limited, a member
of the Communications Authority, a member of the Air
Transport Licensing Authority and a director of the Urban
Renewal Fund.

Johannes
Zhou Yuan#
Age 67

INED (since 17 May 2017)
Technology Advisory Panel (Chairman)
Audit & 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
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,

Annual Report 2022

155

Business Review and AnalysisFinancials and Other InformationOverviewCorporate Governanceresponsible 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)
GBS, JP
Age 46

NED (since 1 June 2020)
Remuneration Committee (Member)
Finance & Investment 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 and Hong Kong Investment Corporation
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) Cathy Chu Man-ling (since 9 August 2021)
(iii) Maurice Loo Kam-wah (since 10 August 2020)

Secretary for
Transport and
Logistics@@
(Lam Sai-hung)
GBS, JP
Age 61

NED (since 1 July 2022)
Nominations Committee (Member)
Remuneration Committee (Member)

Mr Lam joined the Hong Kong Government as an
Assistant Engineer in 1986. He was promoted to Chief
Engineer in 2009 and to Principal Government Engineer
in 2014. Mr Lam was appointed as Project Manager of the
Hong Kong Island and Islands Development Office in the
Civil Engineering and Development Department in 2015
and as the Director of Civil Engineering and Development
in 2016. In his official capacity as the Permanent Secretary
for Development (Works), he served as a Non-executive
Director and a member of each of the Capital Works
Committee and the former Risk Committee of the
Company during the period from 13 October 2018 to
7 October 2021.

Mr Lam is the Chairman of the Hong Kong Maritime and
Port Board, Hong Kong Logistics Development Council,
and Aviation Development and Three-runway System
Advisory Committee, and a Vice-Chairperson of the Hong
Kong-Taiwan Economic and Cultural Cooperation and
Promotion Council. He is also a board member of Airport
Authority Hong Kong and a member of the Council for
Sustainable Development and the Steering Committee on
Three-Runway System and North Commercial District.

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.

156

MTR Corporation Limited

BOARD AND EXECUTIVE DIRECTORATEAlternate Directors

(i) Under Secretary for Transport and Logistics

(Liu Chun-san since 2 August 2022)

(ii) Permanent Secretary for Transport and Logistics

(Mable Chan since 1 July 2022)

(iii) Deputy Secretary for Transport and Logistics 1

(Sharon Yip Lee Hang-yee from 1 July 2022 to 29 January
2023 and Amy Wong Pui-man since 30 January 2023)

(iv) Deputy Secretary for Transport and Logistics 2

(Amy Wong Pui-man from 1 July 2022 to 29 January
2023 and Ida Lee Bik-sai since 30 January 2023)

Permanent
Secretary for
Development
(Works)@@
(Ricky Lau Chun-kit)
JP
Age 56

NED (since 8 October 2021)
Nominations Committee (Member)
Capital Works Committee (Member)

Mr Lau joined the Hong Kong Government in March
1992 and was the Director of Civil Engineering and
Development from October 2018 to October 2021.

Mr Lau is a fellow of The Hong Kong Institution of Engineers
and the Institution of Civil Engineers, United Kingdom.

Alternate Director

Deputy Secretary for Development (Works)3
(Francis Chau Siu-hei since 3 March 2022)

Commissioner
for Transport@@
(Rosanna
Law Shuk-pui)
JP
Age 55

NED (since 9 September 2020)
Audit & Risk Committee (Member)
Technology Advisory Panel (Member)

Miss Law, in her official capacity as the 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, 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 the Principal Assistant Secretary for the
Environment, Transport and Works (Transport) (later
renamed to the Principal Assistant Secretary for Transport
and Housing (Transport)) from March 2007 to August
2009, the Deputy Commissioner for Tourism from August
2010 to September 2016, and the 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 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

Annual Report 2022

157

Business Review and AnalysisFinancials and Other InformationOverviewCorporate GovernanceMEMBERS OF THE EXECUTIVE DIRECTORATE

Dr Jacob Kam Chak-pui*
JP
Age 61

Margaret Cheng Wai-ching*
JP
Age 57

Chief Executive Officer (since 1 April 2019)
Environmental & Social Responsibility Committee (Member)

Human Resources Director (since 1 June 2016)
Environmental & Social Responsibility Committee (Member)

His biography is set out on page 150.

Adi Lau Tin-shing
Age 63

Managing Director – Mainland China Business and
Global Operations Standards (up to 31 December 2022)

Mr Lau was the Managing Director – Mainland China
Business and Global Operations Standards from July 2021
to December 2022. He retired from the Company after
31 December 2022 after cumulatively 40 years of service.

Ms Cheng is responsible for all of the Company’s human
resources and administration affairs. She is currently the
President of MTR Academy.

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
1993 and 1997, and was with JP Morgan as Vice President,
Human Resources between 1997 and 2001. From 2001 to

158

MTR Corporation Limited

BOARD AND EXECUTIVE DIRECTORATEMembers of the Executive Directorate
From left to right:
Dr Tony Lee Kar-yun, Margaret Cheng Wai-ching,
David Tang Chi-fai, Herbert Hui Leung-wah,
Dr Jacob Kam Chak-pui, Jeny Yeung Mei-chun,
Linda Choy Siu-min, Adi Lau Tin-shing, Gillian Elizabeth Meller,
Carl Michael Devlin, Sammy Wong Kwan-wai

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 various public duties at the HKSAR
Government, including acting as the vice chairman
of the Cross-Industry Training Advisory Committee
for the Human Resource Management Sector under
the Qualifications Framework of Education Bureau;
a member of the Standing Committee on Directorate
Salaries and Conditions of Service; a member of the Panel
of Arbitrators appointed under the Labour Relations

Ordinance; and a non-official member of the Civil Service
Training Advisory Board. She is also the chairman of the
Career Development Board of The Chinese University of
Hong Kong, the vice-chairman of the Hong Kong Council
for Accreditation of Academic and Vocational Qualifications
and the chair of the Business Development Committee,
a board member of the Hospital Authority and the
chairman of the Human Resources Committee, a council
member of The Hong Kong Management Association, and
a member of the Employees Retraining Board.

Ms Cheng is currently the Immediate Past President and
a Fellow Member of the Hong Kong Institute of Human
Resource Management.

Annual Report 2022

159

Business Review and AnalysisFinancials and Other InformationOverviewCorporate GovernanceLinda Choy Siu-min
Age 52

Corporate Affairs and Branding Director
(since 1 July 2021)

Ms Choy joined the Company as the Corporate Affairs
Director in March 2020.

Ms Choy is responsible for overseeing the Company’s
corporate communications, corporate relations and
branding functions.

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 an Honorary Advisor of Make-A-Wish
Foundation of Hong Kong Limited, a Non-official Member
of both the Community Involvement Committee
on Greening and the Lantau Development Advisory
Committee, 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.

Carl Michael Devlin
Age 53

Capital Works Director (since 1 August 2022)

Mr Devlin joined the Company in November 2021.

Mr Devlin is responsible for leading the Capital Works
Business Unit and overseeing the Company’s capital

works portfolio, covering new railway extensions and
operations projects.

Mr Devlin possesses extensive experience across a
range of large-scale, complex and multi-disciplinary
projects in different sectors including transport, rail
and civil infrastructure, aviation, energy, oil and gas.
He has a strong project management background
with solid business leadership experience and has
worked successfully with stakeholders and international
companies in the United Kingdom, New Zealand,
Australia, United States of America, Canada and Japan.
Before joining the Company, Mr Devlin was General
Manager, Rail & Mass Transit of Waka Kotahi New Zealand
Transport Agency. Prior to that, from 2015 to 2018, he was
the Executive Director of Construction for Horizon Nuclear
Power in the United Kingdom and Programme Director
for Transport for London, United Kingdom, from 2013 to
2015. Mr Devlin previously held senior leadership roles
with Laing O’Rourke, BAA plc and Bechtel Infrastructure.

Mr Devlin is a Chartered Member of Engineers Ireland.

Herbert Hui Leung-wah*
Age 60

Finance Director (since 2 July 2016)

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 and
corporate finance. He also leads the treasury and investor
relations functions. Mr Hui is the chairman of the Tender
Board and of the Board of Trustees of both the Retirement
Scheme and Provident Fund Scheme of the Company.

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

160

MTR Corporation Limited

BOARD AND EXECUTIVE DIRECTORATE2012. Mr Hui was the Chief Financial Officer of K. Wah
International Holdings Limited before re-joining the
Company in 2016.

Mr Hui is a member of the Standing Committee on
Disciplined Services Salaries and Conditions of Service
of the HKSAR Government and the chairman of its
ICAC Sub-Committee, and a non-official member of the
Advisory Committee on Chinese Medicine Development
Fund supervised by the Health Bureau. He is also a director
of HKBU Chinese Medicine Hospital Company Limited and
the chairman of its Human Resources Committee.

Mr Hui is a Chartered Financial Analyst.

Dr Tony Lee Kar-yun*
Age 62

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
Institution of Engineering and Technology and The Hong
Kong Institute of Directors. He is also a Member of the
Advisory Committee of the Department of Electrical and
Electronic Engineering of The University of Hong Kong,
the Engineering Discipline Advisory Board of the Hong
Kong Institute of Vocational Education and a Member
of the Technical Committee of National Rail Transit
Electrification and Automation Engineering Technology
Research Center (Hong Kong Branch).

Gillian Elizabeth Meller*
Age 50

Legal and Governance Director
(since 22 February 2021)
Environmental & Social Responsibility Committee (Member)

Ms Meller joined the Company in August 2004. 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, insurance, governance and risk management,
environmental and social responsibility, and central
procurement and supply chain functions. 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 Listing Committee of The Stock Exchange
of Hong Kong Limited. She was formerly 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 a representative
of the China/Hong Kong Division on the Council of
the international Chartered Governance Institute
and a former President of The Hong Kong Chartered
Governance Institute.

David Tang Chi-fai*
Age 58

Property and International Business Director
(since 22 February 2021)

Mr Tang joined the Company in August 2004. Prior to his
current position, Mr Tang was appointed as the Property
Director in October 2011 and the Property and Australian
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 international
businesses. He is also accountable for the business
results of the Hong Kong property and international
businesses portfolios.

Annual Report 2022

161

Business Review and AnalysisFinancials and Other InformationOverviewCorporate GovernanceBefore 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 an adjunct professor in the Department of Real
Estate and Construction at The University of Hong Kong.
He is also a former 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.

Mr Tang is a Chartered Surveyor.

Sammy Wong Kwan-wai*
Age 49

Mainland China Business Director
(since 1 January 2023)

Mr Wong joined the Company in 1995 as Operating
Management Trainee and has since then advanced
his career in the Company having taken on different
positions. Prior to his current position, Mr Wong was
appointed as General Manager-Shenzhen Line 4 in July
2017, Chief of Operating in January 2020 and Chief of
Operating and Metro Segment in July 2021.

Mr Wong is responsible for overseeing the Company’s
business portfolios in Mainland China and is accountable
for their business performance.

Mr Wong is a fellow member of the China Hong Kong
Railway Institution, a member of The Chartered Institute
of Logistics and Transport in Hong Kong and a member
of the International Association of Public Transport (UITP)
Metro Operations Subcommittee.

Jeny Yeung Mei-chun*
Age 58

Hong Kong Transport Services Director
(since 1 July 2021)

Ms Yeung joined the Company in November 1999. Prior
to her current position, Ms Yeung was the Commercial
Director between September 2011 and June 2021. She is
currently the Chairman of Ngong Ping 360 Limited, and the
Non-Executive Chairman of Octopus Holdings Limited and
of two members of the Octopus Holdings Limited group.

Ms Yeung heads the Hong Kong Transport Services
Business and has overall responsibility for the Company’s
railway transport operations and its commercial
businesses in Hong Kong. These include the metro
network, the Airport Express and the High Speed Rail.

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 Employment of People with Disabilities,
a non-official member of both the Immigration
Department Users’ Committee and the Commercial
Properties Committee of The Hong Kong Housing
Authority, and an independent non-executive director
of Hongkong International Theme Parks Limited. She
was an independent non-executive director of Mox Bank
Limited, a director of Hong Kong Cyberport Management
Company Limited and a member of the Cyberport
Advisory Panel, and a member of the Hong Kong
Tourism Board.

Ms Yeung is a Fellow of both The Chartered Institute of
Marketing and Hong Kong Institute of Marketing and a
Chartered Fellow of The Chartered Institute of Logistics
and Transport in Hong Kong.

* Also a director of the Company’s subsidiary(ies).

162

MTR Corporation Limited

BOARD AND EXECUTIVE DIRECTORATECHANGES IN INFORMATION OF DIRECTORS
Changes in information of Directors during 2022 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

Independent Police Complaints Council (Hong Kong)
• Observer of Observers Scheme

Gold Bauhinia Star medal awarded by the Chief Executive of the
Hong Kong Special Administrative Region (the “HKSAR”)

Dr Jacob Kam Chak-pui

Employers’ Federation of Hong Kong
• Member of the General Committee

The Chartered Institute of Logistics and Transport in Hong Kong
• Vice President

The Hong Kong Management Association
• Fellow

Andrew Clifford
Winawer Brandler

CLP Holdings Limited
• Vice Chairman of the board

Dr Bunny Chan Chung-bun

Dr Pamela Chan Wong Shui

Speedy Global Holdings Limited
•

Independent Non-executive Director

Travel Industry Council of Hong Kong
•

Independent Director

Dr Dorothy Chan Yuen Tak-fai

West Kowloon Cultural District Authority (Hong Kong)
• Member of the Commercial Letting Panel under the board

Sustainable Agricultural Development Fund Advisory Committee
(Hong Kong)
• Chairperson

Nature and
Effective Date of Change(s)

Cessation (1 April 2022)

Award (2022)

Appointment (May 2022)

Cessation (1 October 2022)

Grant (22 November 2022)

Appointment (1 January 2023)

Cessation (31 January 2023)

Cessation (31 August 2022)

Appointment (1 April 2022)

Cessation (30 November 2022)

Walter Chan Kar-lok

Pensions Appeal Panel under the Civil Service Bureau (Hong Kong)
• Convenor-cum-Member

Cessation (8 April 2022)

Messrs. Rowland Chow, Chan & Co., Solicitors
• Consultant

Dr Anthony Chow Wing-kin
(Retired on 25 May 2022)

The Council of The Hong Kong Academy for Performing Arts
• Deputy Chairman

Christopher Hui Ching-yu

Gold Bauhinia Star medal awarded by the Chief Executive of
the HKSAR

Cessation (1 January 2023)

Cessation (1 January 2022)

Award (2022)

Lam Sai-hung

Hong Kong Investment Corporation Limited
• Director

Hong Kong-Taiwan Economic and Cultural Cooperation and
Promotion Council
• Vice-Chairperson

Appointment (15 February 2023)

Appointment (7 February 2023)

Sunny Lee Wai-kwong

Bronze Bauhinia Star medal awarded by the Chief Executive of
the HKSAR

Award (2022)

BOC Hong Kong (Holdings) Limited
•

Independent Non-executive Director

MTR Academy (HK) Company Limited
• Director

Appointment (14 September 2022)

Appointment (18 October 2022)

Committee on Innovation, Technology and Re-industrialisation
(Hong Kong)
• Ex-officio member

Committee on Innovation, Technology and Industry Development
(Hong Kong)
• Ex-officio member

Cessation (21 December 2022)

Appointment (3 March 2023)

Annual Report 2022

163

Business Review and AnalysisFinancials and Other InformationOverviewCorporate Governance(i) Changes in Biographical Details (continued)

Name

Change(s)

Jimmy Ng Wing-ka

The University of Hong Kong
• Council Member

Carlson Tong

The Hong Kong Mortgage Corporation Limited
• Non-executive Director

Chinese People’s Political Consultative Conference of Chongqing City
• Member

Chinese People’s Political Consultative Conference of Shaanxi Province
• Member

The National People’s Congress of the People’s Republic of China
• Member of the Hong Kong delegation

University Grants Committee (Hong Kong)
• Chairman

Human Resources Planning Commission (Hong Kong)
• Member

Standard Chartered Bank
• Member of the Court

Hong Kong Investment Corporation Limited
• Director

Nature and
Effective Date of Change(s)

Appointment (8 April 2022)

Appointment (27 June 2022)

Cessation (31 December 2022)

Appointment (1 January 2023)

Appointment (5 March 2023)

Cessation (1 January 2023)

Appointment (15 February 2023)

Adrian Wong Koon-man

Unsolicited Electronic Messages (Enforcement Notices) Appeal Board
(Hong Kong)
• Member

Standing Commission on Civil Service Salaries and Conditions of
Service (Hong Kong)
• Member

Appointment (December 2022)

Appointment (1 January 2023)

Adi Lau Tin-shing
(Retired on 1 January 2023)

Hong Kong Trade Development Council
• Member of the Infrastructure Development Advisory Committee

Appointment (1 April 2022)

Margaret Cheng Wai-ching

Linda Choy Siu-min

Herbert Hui Leung-wah

The Standing Committee on Disciplined Services Salaries and
Conditions of Service (Hong Kong)
• Member
• Chairman of the Police Sub-Committee

Hong Kong Institute of Human Resource Management
• President
•

Immediate Past President

The Chinese University of Hong Kong
• Chairman of the Career Development Board

Civil Service Training Advisory Board (Hong Kong)
• Non-official Member

Hospital Authority (Hong Kong)
• Chairman of the Human Resources Committee

Labour Department (Hong Kong)
• Member of the Labour Advisory Board Committee on

Employment Services

Lantau Development Advisory Committee (Hong Kong)
• Non-official Member

The Standing Committee on Disciplined Services Salaries and
Conditions of Service (Hong Kong)
• Member
• Chairman of the ICAC Sub-Committee

HKBU Chinese Medicine Hospital Company Limited
• Chairman of the Human Resources Committee

Chinese Medicine Development Fund supervised by the
Health Bureau (Hong Kong)
• Non-official member of the Advisory Committee

Cessation (1 January 2022)
Cessation (1 January 2022)

Cessation (22 June 2022)
Appointment (22 June 2022)

Appointment (1 August 2022)

Appointment (1 November 2022)

Appointment (1 December 2022)

Cessation (1 January 2023)

Appointment (1 February 2022)

Appointment (1 January 2022)
Appointment (1 January 2023)

Appointment (14 April 2022)

Appointment (1 March 2023)

164

MTR Corporation Limited

BOARD AND EXECUTIVE DIRECTORATEName

Change(s)

Dr Tony Lee Kar-yun

City University of Hong Kong
• Honorary Advisory Board Member of the Theme-based

Research Scheme Project on “Safety, Reliability, and Disruption
Management of High Speed Rail and Metro Systems”

National Rail Transit Electrification and Automation Engineering
Technology Research Center (Hong Kong Branch)
• Member of the Technical Committee

Gillian Elizabeth Meller

The Chartered Governance Institute
• China/Hong Kong Division representative on the Council

The Hong Kong Chartered Governance Institute
• President

The Stock Exchange of Hong Kong Limited
• Member of the Listing Committee

Nature and
Effective Date of Change(s)

Cessation (1 January 2022)

Appointment (January 2022)

Appointment (1 January 2022)

Cessation (1 January 2022)

Appointment (8 July 2022)

David Tang Chi-fai

Jeny Yeung Mei-chun

The Standing Committee on Company Law Reform (Hong Kong)
• Member

Cessation (1 February 2023)

West Kowloon Cultural District Authority (Hong Kong)
• Co-opted Member of the Public Private Partnership Projects

Committee under the board

Advisory Committee on Enhancing Self-Reliance Through District
Partnership Programme (Hong Kong)
• Member

Mox Bank Limited
•

Independent Non-executive Director

Hong Kong Institute of Marketing
• Fellow

Hong Kong Cyberport Management Company Limited
• Member of the Cyberport Advisory Panel

Octopus Holdings Limited and two members of the Octopus
Holdings Limited group
• Non-Executive Chairman

Cessation (1 January 2022)

Cessation (1 July 2022)

Cessation (1 October 2022)

Conferment (7 December 2022)

Cessation (1 January 2023)

Appointment (1 January 2023)

(ii) Changes in Directors’ Remuneration
For details of the Directors’ remuneration received during the year, please refer to pages 232 to 235 of the Annual Report.

Annual Report 2022

165

Business Review and AnalysisFinancials and Other InformationOverviewCorporate GovernanceKEY CORPORATE MANAGEMENT

Jacob Kam Chak-pui
Chief Executive Officer
Adi Lau Tin-shing
Managing Director – Mainland China Business and
Global Operations Standards (up to 31 December 2022)
Capital Works
Roger Bayliss
Capital Works Director (up to 31 July 2022)
Carl Devlin
Capital Works Director (w.e.f. 1 August 2022)
Eva Kong Nai-kui
Capital Works Chief of Staff
Clifford Chow Lung-hung
Deputy Project Manager – NSL Signalling
Robin Wong Koon-sang
General Manager – Capital Works Technical (up to 31 January 2023)
Scott Mackenzie
General Manager – Commercial Management
Tim Leung Chi-tim
General Manager – E&M Construction
Neil Smith
General Manager – Lantau (Projects)
Barry Sum Pang-tuen
General Manager – New Territories (Projects)
Peter Leung Man-fat
General Manager – Operations Projects
Lyndon Adolphus
General Manager – Projects Management Office
James Chow So-hung
General Manager – Special Duties (up to 28 February 2023)
Andrew Mead
Head of Architecture
Thomas Lau Ming-yu
Head of Civil Engineering (Capital Works)
Ken Lee Kwong-wah
Head of Design
Wong Sha
Head of E&M Engineering (Capital Works)
Bernard Chui Wan-tak
Head of Programming
Raymond Au Koon-shan
Principal Projects Commercial Manager
Michael Mellor
Principal Projects Commercial Manager – Lantau
Dominic Law Tik-ko
Project Manager – NOL
Kevin Man Kwoon-yin
Project Manager – Operations Projects – Civil
Bruce Chang Chi-tat
Project Manager – Operations Projects – E&M
Adrian Stearn
Project Manager – OYB & ARO
Chan Chun-sing
Project Manager – Rolling Stock & Signalling
Neil Ng Wai-hang
Project Manager – SCL Civil
Walter Lam Wai-tak
Project Manager – TME & HSK
Lesly Leung Po-po
Project Manager – TUE
Corporate Affairs & Branding
Linda Choy Siu-min
Corporate Affairs & Branding Director
Karen Woo Kit-sum
General Manager – Branding & Communications
Joey Chan Ka-ching
General Manager – Corporate Communications
Lam Chan Lam-sang
General Manager – Corporate Relations
Corporate Strategy
Michael Chan Ting-bond
General Manager – Corporate Strategy
Digitalisation and Innovation
Leo Ng Lup-nung
Chief Digital Officer
Wan Wai-yin
Chief Information Officer
Daniel Wong
General Manager – Global Innovation
Finance
Herbert Hui Leung-wah
Finance Director
Wilson Ma Wai-yuen
ERP Project Management Office Lead (up to 15 February 2023)
Sammy Jim Kwok-wah
General Manager – Corporate Finance
Dennis Tam Lup-kwan
General Manager – Financial Control (up to 10 April 2023)
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

Paul Chow Yuen-ming
General Manager – Property & International Business
Planning & Governance
Australia
Raymond Yuen Lap-hang
Deputy Director – Australian Business
Raymond O'Flaherty
Chief Executive Officer – Metro Trains Melbourne
Daniel Williams
Chief Executive Officer – Metro Trains Sydney
David Yam Pak-nin
General Manager – Business Development
Tommy Lam Choi-fung
Head of Projects Engineering – Australian Business
Hong Kong Property
Monita Ko Suet-ying
Deputy General Manager – Property Development
Lawrence Chung Kwok-leung
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
Sweden
Henrik Dahlin
Chief Executive Officer – MTR Nordic
Filip Johansson
Chief Executive Officer – MTR Express
Erika Ahlqvist
Chief Executive Officer – MTR Facility Management
Joakim Sundh
Chief Executive Officer – MTR Pendeltågen
Anders Gustafsson
Chief Executive Officer – MTR Tech
Caroline Astrand
Chief Executive Officer – MTR Tunnelbanan
United Kingdom
Steve Murphy
Chief Executive Officer – MTR UK
Nigel Holness
Managing Director – MTR Elizabeth Line (up to 5 February 2023)
Mike Bagshaw
Managing Director – MTR Elizabeth Line (w.e.f. 6 February 2023)
Hong Kong Transport Services
Jeny Yeung Mei-chun
Hong Kong Transport Services Director
Tony Lee Kar-yun
Operations Director
Paul Wong Kah-ming
Chief of Airport Segment (w.e.f. 1 January 2023)
Cheung Chi-keung
Chief of Cross Boundary Segment
Cheris Lee Yuen-ling
Chief of Operating & Metro Segment (w.e.f. 1 January 2023)
Nelson Ng Wai-hung
Chief of Operations Engineering
Chan Hing-keung
Chief of Operations Engineering Service & Innovation
Gordon Lam Bik-shun
Chief Signal Engineer (Operations)
Joseph Sin Chi-man
Chief Signalling Design Manager
Chan Ho-wing
Deputy General Manager – Operations Innovation Hub
Felix Chan So-Kwan
Deputy General Manager – Projects Planning &
Development (Operations)
Mark Chan Tat-tai
Deputy General Manager – Projects Planning &
Development (Operations)
Simon Tang Siu-cheung
Deputy General Manager – Technical & Asset Engineering
(w.e.f. 1 February 2023)
Margaret Chu Fung-kuen
General Manager – Commercial
Aiken Tam
General Manager – Engineering Maintenance (Gateway Segment)
Frankie Ng Sze-ho
General Manager – Engineering Maintenance
(Operating & Metro Segment)
Winson Tse Fuk-sum
General Manager – Infrastructure Maintenance
Annie Leung Ching-man
General Manager – Marketing & Customer Experience
Diane Chiu Man
General Manager – Marketing & Revenue Management
Siman Tang
General Manager – Operations Performance &
Services Management
Zoe Tse Yu-yuk
General Manager – Operations Safety & Quality

Allen Ding Ka-chun
General Manager – Projects Planning & Development (Operations)
Rick Wong Hoi-wah
General Manager – PWay Asset Replacement & Operations
Interfacing Works
Lee Kim-hung
General Manager – Rolling Stock Maintenance
Weller Chan Kwok-wai
General Manager – Works Management
Bess Ng Suet-fa
Head of Line Group Management – EAL & IC
David Chan Chi-hung
Head of Line Group Management – TML, LR & Bus
Ben Lui Gon-yee
Head of Line Group Management – Urban Lines
Rico Wong Kong-kit
Head of Traffic Operations
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
Sylvia Choi Yuk-ling
General Manager – Performance & Reward
Vinnie Chi Man-yan
General Manager – Talent Management &
Organisation Development
Internal Audit
Linda Chan
Head of Internal Audit
Legal & Governance
Gillian Meller
Legal & Governance Director
Brian Downie
Deputy Director – Legal, Procurement & Supply Chain
Stephen Hamill
Chief Engineer
Michael Parker
General Manager – Assurance Management
Roger Lee Chak-man
General Manager – Corporate Safety
Olivia Wong Ka-ying
General Manager – Environmental & Social Responsibility
Cecilia Cheng Yuet-fong
General Manager – Governance & Company Secretarial
Nicholas Zhang Xiaolong
General Manager – Procurement & Supply Chain
Katherine Kendall
Head of Corporate Quality & Compliance
Doreen Kong Yuk-foon
Head of Legal (Property)
Robert Littlefair
Head of Programme and Portfolio Management
Mainland China & Macau Businesses
Sammy Wong Kwan-wai
Mainland China Business Director (w.e.f. 1 January 2023)
Macau
Jeff Chan Yue-chiu
General Manager – Macau Light Rapid Transit
Ken Wong Kin-wai
General Manager – Macau (Projects)
Mainland China
Kyle Lau Ki-ming
Chief of Engineering (Beijing)
Tse Che-ming
Deputy General Manager – Engineering (Hangzhou)
Kevin Kiang Yee-wing
Deputy General Manager – Operations (Beijing)
George Mui Wai-ming
Deputy General Manager – Operations (Hangzhou)
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
Justin Man Wing-fai
General Manager – Shenzhen L13
MTR Academy
Margaret Cheng Wai-ching
President of MTR Academy
Ngong Ping 360
Andy Lau Wai-ming
Managing Director of Ngong Ping 360
Octopus Holdings Limited
Angus Lee Chun-ming#
Chief Executive Officer – Octopus Holdings Limited

# Mr. Angus Lee is seconded to Octopus Holdings Limited and Octopus Cards Limited to take up the role of Chief Executive Officer.

166

MTR Corporation Limited

REPORT OF THE MEMBERS
OF THE BOARD

The Members of the Board have pleasure in submitting their Report and the audited Consolidated Financial Statements
for the financial year ended 31 December 2022.

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, Mainland China and a number of overseas cities; project management in relation to
railway and property development businesses in Hong Kong and Mainland 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 Mainland China; investment in Octopus Holdings Limited; provision of railway management, engineering and
technology training; and investment in relevant new technologies.

The principal businesses of the Company’s principal subsidiaries, associates and joint venture as at 31 December 2022 are
set out in notes 26 and 27 to the Consolidated Financial Statements.

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 2022 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 2022

(2) Particulars of important events affecting the Group that have

occurred since the end of the financial year 2022

(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 71)
• Financial Review (pages 84 to 95)

• Chairman’s Letter (pages 12 to 15)
• CEO’s Review of Operations and Outlook (pages 16 to 35)
• Business Review (pages 36 to 71)

• CEO’s Review of Operations and Outlook (pages 16 to 35)
• Business Review (pages 36 to 71)
• Risk Management (pages 138 to 142)
• Financial Risks – note 30B to the Consolidated Financial

Statements (pages 258 to 260)

• Chairman’s Letter (pages 12 to 15)
• CEO’s Review of Operations and Outlook (pages 16 to 35)
• Business Review (pages 36 to 71)

(5) Details regarding the Group’s compliance with relevant laws and

• Corporate Governance Report (pages 100 to 134)

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 71)
• Environmental & Social Responsibility (pages 72 to 79)
• Human Resources (pages 80 to 82)
•
Investor Relations (pages 98 to 99)
• Sustainability Report 2022 (www.mtr.com.hk)

• Chairman’s Letter (pages 12 to 15)
• CEO’s Review of Operations and Outlook (pages 16 to 35)
• Environmental & Social Responsibility (pages 72 to 79)
• Sustainability Report 2022 (www.mtr.com.hk)

Annual Report 2022

167

Business Review and AnalysisFinancials and Other InformationOverviewCorporate GovernanceDIVIDENDS
The Board has recommended to pay a final dividend of HK$0.89 per share (2021: HK$1.02 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 2022 final dividend, with a
scrip dividend option, is expected to be distributed on 18 July 2023 to shareholders whose names appear on the Register
of Members of the Company as at the close of business on 5 June 2023.

CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial position of the Group as at 31 December 2022 and the Group’s consolidated financial
performance and consolidated cash flows for the year are set out in the Consolidated Financial Statements on pages 207
to 294.

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 is set out on pages 96 to 97.

DIRECTORS
Members of the Board (including their Alternate Director(s)) 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
• Hui Siu-wai
•
Sunny Lee Wai-kwong
• Dr Rose Lee Wai-mun
•
Jimmy Ng Wing-ka
• Carlson Tong
• Adrian Wong Koon-man
•
Johannes Zhou Yuan
• Christopher Hui Ching-yu

(Secretary for Financial Services and the Treasury)
Alternate Directors:
– Joseph Chan Ho-lim
– Cathy Chu Man-ling
– Maurice Loo Kam-wah

•

Secretary for Transport and Logistics
(Lam Sai-hung)
Alternate Directors:
– Under Secretary for Transport and Logistics

(Liu Chun-san)

– Permanent Secretary for Transport and Logistics

(Mable Chan)

– Deputy Secretary for Transport and Logistics 1

(Amy Wong Pui-man N1)

– Deputy Secretary for Transport and Logistics 2

(Ida Lee Bik-sai N2)

• Permanent Secretary for Development (Works)

(Ricky Lau Chun-kit)
Alternate Director:
– Deputy Secretary for Development (Works) 3

(Francis Chau Siu-hei)

• Commissioner for Transport
(Rosanna Law Shuk-pui)
Alternate Director:
– Deputy Commissioner for Transport/
Transport Services and Management
(Macella Lee Sui-chun)

N1: Change of holder of the post from Sharon Yip Lee Hang-yee to Amy Wong Pui-man with effect from 30 January 2023.
N2: Change of holder of the post from Amy Wong Pui-man to Ida Lee Bik-sai with effect from 30 January 2023.

168

MTR Corporation Limited

REPORT OF THE MEMBERS OF THE BOARDMembers of the Executive Directorate

• Dr Jacob Kam Chak-pui (CEO)
• Margaret Cheng Wai-ching (Human Resources Director)
•
Linda Choy Siu-min (Corporate Affairs and Branding
Director)

• Carl Michael Devlin (Capital Works 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)
Sammy Wong Kwan-wai (Mainland China Business
Director)
Jeny Yeung Mei-chun (Hong Kong Transport Services
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 150 to 162.

In addition, resolutions for electing Ms Sandy Wong Hang-yee and Professor Anna Wong Wai-kwan as new Directors
will be proposed at the 2023 AGM. Please refer to the Company’s circular containing the Notice of the 2023 AGM sent
together with this Report.

Members of the Board, Alternate Directors and Members of the Executive Directorate who were directors/alternate
directors during the course of 2022 but have since ceased their positions with the Company are stated below:

• Deputy Secretary for Development (Works) 2
(Mak Shing-cheung) (until 2 March 2022)

• Dr Anthony Chow Wing-kin (retired on 25 May 2022)
• Dr Eddy Fong Ching (retired on 25 May 2022)
• Benjamin Tang Kwok-bun (retired on 25 May 2022)
•
Former Secretary for Transport and Housing
(Frank Chan Fan) (until 30 June 2022)
Former Under Secretary for Transport and Housing
(Dr Raymond So Wai-man) (until 30 June 2022)
Former Permanent Secretary for Transport and
Housing (Transport)
(Mable Chan) (until 30 June 2022)

•

Former Deputy Secretary for Transport and Housing
(Transport) 1
(Sharon Yip Lee Hang-yee) (until 30 June 2022)
Former Deputy Secretary for Transport and Housing
(Transport) 2
(Amy Wong Pui-man) (until 30 June 2022)
• Roger Francis Bayliss (retired on 1 August 2022)
• Adi Lau Tin-shing (retired on 1 January 2023)

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 200.

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 Christopher Hui Ching-yu (Secretary for Financial Services and the Treasury), the former
Secretary for Transport and Housing (Mr Frank Chan Fan) (until 30 June 2022), Secretary for Transport and Logistics
(Mr Lam Sai-hung) (since 1 July 2022), Permanent Secretary for Development (Works) (Mr Ricky Lau Chun-kit), and
Commissioner for Transport (Miss Rosanna Law Shuk-pui) and their respective Alternate Director(s), 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 176 to 198, 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, an Alternate Director 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.

Annual Report 2022

169

Business Review and AnalysisFinancials and Other InformationOverviewCorporate GovernanceDIRECTORS’ INTERESTS IN SHARES AND UNDERLYING
SHARES OF THE COMPANY
As at 31 December 2022, the interests or short positions of the Members of the Board, Alternate Director(s) and Members
of 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 Director/
Members of the
Executive Directorate

Dr Jacob Kam Chak-pui

Dr Pamela Chan Wong Shui

Cheng Yan-kee

Dr Rose Lee Wai-mun

Adrian Wong Koon-man

Maurice Loo Kam-wah

Adi Lau Tin-shing

Margaret Cheng Wai-ching

Linda Choy Siu-min

Carl Michael Devlin

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

Personal
interests*

648,187

9,072

–

3,350

–

588

305,041

212,531

4,500

–

133,405

126,943

199,191

293,545

760,879

Family
interests†

–

1,675
(Note)

2,000
(Note)

–

558
(Note)

–

2,233
(Note)

–

No. of award
shares#

Personal
interests*

530,435

–

47,850

109,802

89,050

15,000

105,784

96,102

100,950

115,767

116,201

Percentage
of aggregate
interests to
total no. of
voting shares
in issueD

0.01900

0.00017

0.00003

0.00005

0.00001

0.00569

0.00520

0.00151

0.00024

0.00389

0.00360

0.00484

0.00660

0.01414

Total
interests

1,178,622

10,747

2,000

3,350

558

588

352,891

322,333

93,550

15,000

241,422

223,045

300,141

409,312

877,080

Note: As at 31 December 2022, these shares were held by the spouse of relevant Members of the Board or a Member of the Executive Directorate of the Company.
# Details of the award shares are set out in the section headed “Executive Share Incentive Scheme” on pages 171 to 173
*
†
Δ The Company’s total number of voting shares in issue as at 31 December 2022 was 6,202,060,784

Interests as beneficial owner
Interests of spouse or child under 18 as beneficial owner

Save as disclosed above and in the section headed “Executive Share Incentive Scheme”:

A as at 31 December 2022, no Member of the Board or Alternate Director or Member of 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 2022, no Member of the Board or Alternate Director or Member of 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.

170

MTR Corporation Limited

REPORT OF THE MEMBERS OF THE BOARDSUBSTANTIAL 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 2022 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
total no. of voting shares in issueD

4,634,173,932

74.72%

Δ The Company’s total number of voting shares in issue as at 31 December 2022 was 6,202,060,784

The Company has been informed by the Hong Kong Monetary Authority that, as at 31 December 2022, approximately
0.15% 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 2022, 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.

EQUITY-LINKED AGREEMENT
No equity-linked agreement was entered into by the Company during the year ended 31 December 2022 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”) and it will
remain in force until 31 December 2024. The purposes of the Executive Share Incentive Scheme are to retain management
and key employees, to align participants’ interests with the long-term success of the Company and to drive the
achievement of the strategic objectives of the Company. Under the terms of the Executive Share Incentive Scheme, the
participants can be any employees and any directors of the Company or any of its subsidiaries (excluding non-executive
members of the Board but including Members of the Executive Directorate).

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% (i.e. 145,663,358 Ordinary Shares) of the number of issued
Ordinary Shares as at the Effective Date (i.e. 5,826,534,347 Ordinary Shares) and the maximum number of award shares
that may be granted to a single eligible employee in the 12-month period up to the relevant award date shall be 0.03% of
the number of issued Ordinary Shares on the relevant award date.

The number of award shares that are the subject of outstanding awards granted under the Executive Share Incentive
Scheme is 24,150,678 Ordinary Shares up to the date of this Report. Therefore, the total number of award shares
available under the Executive Share Incentive Scheme that may be granted is 121,512,680 Ordinary Shares, representing
approximately 1.96% of the Company’s total number of issued shares as at the date of this Report.

Annual Report 2022

171

Business Review and AnalysisFinancials and Other InformationOverviewCorporate GovernanceEXECUTIVE SHARE INCENTIVE SCHEME (continued)
Pursuant to the terms of the Executive Share Incentive Scheme, each grantee undertakes to pay HK$1.00, on demand, to
the Company, in consideration for the grant of the award shares. Save for the above, the grantee is not required to pay
any price for the shares purchased by the Trustee from the open market pursuant to the terms of the Executive Share
Incentive Scheme. Any offers of award shares made under the Executive Share Incentive Scheme will specify the date by
which the offer of the award shares must be accepted (being a date no more than 30 days (inclusive) from the date on
which the offer is made).

Movements in the award shares under the Executive Share Incentive Scheme during the year ended 31 December 2022
are set out below:

Types of award
shares granted
(Note 1)

Members of the
Executive Directorate
and eligible employees

Date of
award

Restricted
shares
(Note 2)

Performance
shares
(Note 3)

Award
shares
outstanding
as at
1 January
2022

Award
shares
vested
during
the year

Award
shares
lapsed
and/or
forfeited
during
the year

Award
shares
outstanding
as at
31 December
2022

Dr Jacob Kam Chak-pui

1/4/2019

120,000

–

120,000

Weighted
average
closing price
of shares
immediately
before the
date(s) on
which the
award shares
were vested
(HK$)

42.45

42.35

–

42.35

41.85

41.68

41.35

41.92

41.78

41.50

42.35

–

42.35

–

42.35

–

42.35

–

29,768

234,967

132,000

133,700

–

47,850

–

47,850

–

10,818

59,484

39,500

56,850

32,200

15,000

–

9,684

58,250

37,850

–

5,168

56,884

34,050

8/4/2019

8/4/2020

8/4/2021

1/4/2022
(Note 9)

8/4/2022
(Note 9)

8/4/2019

8/4/2020

8/4/2021

8/4/2022
(Note 9)

8/4/2020

8/4/2021

8/4/2022
(Note 9)

8/4/2019

8/4/2020

8/4/2021

8/4/2022
(Note 9)

8/4/2021

8/4/2022
(Note 9)

Adi Lau Tin-shing
(Note 4)

Roger Francis Bayliss
(Note 5)

Margaret Cheng
Wai-ching

Linda Choy Siu-min

Carl Michael Devlin
(Note 6)

Herbert Hui Leung-wah

8/4/2019

8/4/2020

8/4/2021

8/4/2022
(Note 9)

8/4/2019

8/4/2020

8/4/2021

8/4/2022
(Note 9)

Dr Tony Lee Kar-yun

172

MTR Corporation Limited

47,400

89,300

52,750

132,000

133,700

16,250

39,100

19,700

43,000

30,250

15,050

35,400

16,550

32,450

17,450

39,500

13,500

32,200

91,750

–

15,800

59,534

199,800

252,550

–

47,850

–

47,850

–

47,850

–

5,418

26,067

67,550

–

20,167

62,900

–

5,518

21,634

65,300

–

15,800

29,766

17,583

–

5,418

26,067

19,700

43,000

20,167

15,050

35,400

5,518

10,816

5,816

–

47,850

61,350

4,500

–

7,700

7,300

13,800

29,050

15,600

37,850

8,300

15,500

13,550

34,050

–

47,850

–

47,850

–

4,600

19,367

63,450

–

2,768

10,334

61,400

–

4,600

9,683

5,200

–

2,768

5,166

4,516

–

REPORT OF THE MEMBERS OF THE BOARDEXECUTIVE SHARE INCENTIVE SCHEME (continued)

Members of the
Executive Directorate
and eligible employees

Gillian Elizabeth Meller

David Tang Chi-fai

Jeny Yeung Mei-chun

Five highest paid
individuals
(Note 11)

Other eligible employees
(Note 7)

Date of
award

8/4/2019

8/4/2020

8/4/2021

8/4/2022
(Note 9)

8/4/2019

8/4/2020

8/4/2021

8/4/2022
(Note 9)

8/4/2019

8/4/2020

8/4/2021

8/4/2022
(Note 9)

1/4/2019

8/4/2019

8/4/2020

8/4/2021

1/4/2022
(Note 9)

8/4/2022
(Note 9)

8/4/2019

8/4/2020

8/4/2021

8/4/2022
(Note 9)

Types of award
shares granted
(Note 1)

Restricted
shares
(Note 2)

Performance
shares
(Note 3)

Award
shares
outstanding
as at
1 January
2022

13,400

27,000

14,250

34,600

17,200

31,350

17,200

46,000

16,350

32,650

17,200

46,000

120,000

97,200

222,650

121,900

132,000

304,100

1,792,900

2,008,100

1,759,700

2,017,250

–

47,850

–

47,850

–

47,850

–

91,750

–

391,200

–

122,750

6,950

927,600

233,400

4,468

18,000

62,100

–

5,734

20,900

65,050

–

5,450

21,767

65,050

–

120,000

32,402

148,435

513,100

–

466,084

1,128,007

2,564,550

–

Award
shares
vested
during
the year

4,468

9,000

4,750

–

5,734

10,450

5,733

–

5,450

10,883

5,733

–

120,000

32,402

97,333

63,799

–

78,400

457,242

597,578

602,963

46,000

Weighted
average
closing price
of shares
immediately
before the
date(s) on
which the
award shares
were vested
(HK$)

Award
shares
lapsed
and/or
forfeited
during
the year

Award
shares
outstanding
as at
31 December
2022

–

9,000

57,350

34,600

–

10,450

59,317

46,000

–

10,884

59,317

46,000

–

51,102

449,301

132,000

225,700

8,842

34,469

144,930

67,250

–

495,960

1,816,657

2,137,400

42.35

–

42.35

–

42.35

–

42.45

42.35

42.13

42.01

–

41.42

42.34

42.20

42.16

39.15

Notes
1. The award shares 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 of

the Company).

3. Performance shares are awarded to eligible employees and generally vest over a three-year performance cycle, subject to review and approval by the Remuneration

Committee of the Company from time to time.

4. Mr Adi Lau Tin-shing retired as Managing Director – Mainland China Business and Global Operations Standards and ceased to be a Member of the Executive Directorate

of the Company, both with effect from 1 January 2023.

5. Mr Roger Francis Bayliss retired as Capital Works Director and ceased to be a Member of the Executive Directorate of the Company, both with effect from 1 August 2022.
6. Mr Carl Michael Devlin was appointed as Capital Works Director and became a Member of the Executive Directorate of the Company, both with effect from 1 August 2022.
7. Other eligible employees also include former employees of the Company.
8. Mr Sammy Wong Kwan-wai was appointed as the Mainland China Business Director and became a Member of the Executive Directorate of the Company, both with effect
from 1 January 2023. As disclosed in the announcement of the Company dated 14 December 2022, Mr Wong has an interest in 29,783 Ordinary Shares and an interest in
25,600 Ordinary Shares awarded to him under the Company’s Executive Share Incentive Scheme.

9. The closing price of the Ordinary Shares immediately before the date on which the award shares were granted on 1 April 2022 and 8 April 2022 was HK$42.35 and

HK$42.05 respectively.

10. No award shares were cancelled during the year.
11. Among the five highest paid individuals for the financial year, five (2021: three) were Members of the Executive Directorate of the Company and details of the movements

in their awarded shares under the Executive Share Incentive Scheme during the year ended 31 December 2022 are also shown in the table above.

12. Further details on the operation of the Executive Share Incentive Scheme including, but not limited to, the performance targets, the fair value of the share awards at the
date of grant and the accounting standard and policy adopted are set out in the section headed “Long-Term Incentives” under the Remuneration Committee Report
(pages 147 to 148) and notes 2(W)(iii), 11B and 44(ii) to the Consolidated Financial Statements in this Report.

Annual Report 2022

173

Business Review and AnalysisFinancials and Other InformationOverviewCorporate GovernanceSHARES ISSUED

As at 31 December 2021

Scrip shares issued in respect of 2021 final dividend

Scrip shares issued in respect of 2022 interim dividend

As at 31 December 2022

No. of Ordinary
Shares issued

6,193,462,514

5,772,961

2,825,309

6,202,060,784

Value
(HK$)

N/A

246 million

113 million

N/A

Details of the movements in share capital of the Company during the year are set out in note 41 to the Consolidated
Financial Statements.

PURCHASE, SALE OR REDEMPTION OF LISTED SECURITIES
The Company redeemed its RMB1.15 billion and RMB200 million bonds at par on 18 March 2022 and 19 April 2022
respectively. The bonds were listed on the HKSE prior to redemption. Save as disclosed above, the Group did not
purchase, sell or redeem any of the Group’s listed securities during the year ended 31 December 2022. 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 2,560,000 Ordinary Shares for a total consideration of
approximately HK$109 million during the year ended 31 December 2022 (2021: HK$116 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 2022 is as follows:

Total value of purchases (not of a capital nature) attributable to the Group’s five largest suppliers

20.98%

As a percentage of the
Group’s total purchases

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 revenue

45.46%

17.21%

As at 31 December 2022, no Member of the Board, Alternate Director or Member of 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, Alternate Directors or Members of 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.

174

MTR Corporation Limited

REPORT OF THE MEMBERS OF THE BOARDDONATIONS
During the year, the Group donated and sponsored approximately HK$16.2 million (2021: approximately HK$10.7 million)
to charitable and other organisations.

LOANS AND OTHER OBLIGATIONS
The total loans and other obligations of the Group as at 31 December 2022 amounted to HK$47,846 million (2021:
HK$43,752 million), details of which are set out in note 35 to the Consolidated Financial Statements.

BONDS AND NOTES ISSUED
The Group issued notes with total face value amounting to HK$10,288 million equivalent during the year ended
31 December 2022 (2021: HK$5,225 million equivalent), details of which are set out in note 35C to the Consolidated
Financial Statements. 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 2022, the Group did not have any borrowing (2021: note outstanding of HK$500 million), which was
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 redemption of the note
being demanded.

PROPERTIES
Particulars of the principal investment properties and properties held for sale of the Company are shown on pages 53 to 54.

Annual Report 2022

175

Business Review and AnalysisFinancials and Other InformationOverviewCorporate GovernanceCONNECTED 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 27 April 2022, the Company accepted an offer
dated 16 March 2022 from Government to proceed with
the proposed Pak Shing Kok Ventilation Building Property
Development at Tseung Kwan O Town Lot No. 132 subject
to payment of a land premium of HK$1,101,370,000 and
on the terms and conditions of the relevant Conditions of
Exchange No. 22980.

B On 9 August 2022, the Company accepted an offer
dated 30 June 2022 from Government to proceed with
the proposed Tung Chung Traction Substation Property
Development at Tung Chung Town Lot No. 50 subject to
payment of a land premium of HK$3,547,500,000 and on
the terms and conditions of the relevant Conditions of
Exchange No. 23007.

C On 23 September 2022, the Company accepted an
offer dated 24 August 2022 from Government to proceed
with the proposed land exchange where the Company
surrendered Lot No. 143 in Demarcation District No. 346
and Portions of the Remaining Portion of Mass Transit
Railway Lot No. 2 to Government and Government
granted the in-situ Lot No. 145 in Demarcation

District No. 346 for the proposed Oyster Bay Property
Development and Lot No. 146 in Demarcation District
No. 346 to the Company, subject to payment of a total
land premium of HK$8,603,001,000 and on the terms
and conditions of the respective Conditions of Exchange
No. 23008 and Conditions of Exchange No. 23009.

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 and the
Airport Authority (the “AA”).

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.

Therefore, each of Government, KCRC and the AA is a
“connected person” of the Company for the purposes
of the Listing Rules and, during 2022, each transaction
set out at sections I, II, III and IV 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 & Risk 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).

176

MTR Corporation Limited

REPORT OF THE MEMBERS OF THE BOARDI 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 then
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;

•

the implementation of certain fare reductions;

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 page 178 and in paragraph F 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.

Annual Report 2022

177

Business Review and AnalysisFinancials and Other InformationOverviewCorporate GovernanceC Property Package Agreements

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 195 to 196).

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.

178

MTR Corporation Limited

REPORT OF THE MEMBERS OF THE BOARDA1 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 then 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 then 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;

Annual Report 2022

179

Business Review and AnalysisFinancials and Other InformationOverviewCorporate Governance• 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 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 then 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

180

MTR Corporation Limited

REPORT OF THE MEMBERS OF THE BOARD•

management cost is HK$7,893 million and will be paid
by Government to the Company on a quarterly basis;

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 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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Business Review and AnalysisFinancials and Other InformationOverviewCorporate Governance• Government further undertakes to use reasonable

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 then 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 then
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”);

•

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MTR Corporation Limited

REPORT OF THE MEMBERS OF THE BOARDMiscellaneous 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 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;

•

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

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.

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Business Review and AnalysisFinancials and Other InformationOverviewCorporate GovernanceThe 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:

(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

(vi) the Third XRL Agreement was subject to (a) 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 Contract for the
Automated People Mover System at the
Hong Kong International Airport

On 2 July 2020, 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 “System”) for a seven-year period (the “Contract”)
effective from 6 January 2021. For the total amount
received from AA in respect of the services provided
under the Contract for the year ended 31 December 2022,
please refer to Note 47J to the Notes to the Consolidated
Financial Statements. Based on the foregoing and the
services expected to be provided by the Company
under the Contract, it is expected that the highest
amount per year receivable from the AA will be around
HK$150 million.

The Contract contains provisions relating to the operation and
maintenance of the System as undertaken by the Company
and, in particular, it includes the following provisions:

•

the duration of the Contract shall be seven years from
6 January 2021 up to and including 5 January 2028;

the performance of scheduled maintenance works
and overhaul of the System;

the monitoring of the System against any breakdown
and the related repair services where necessary;

the standards to which the Company must operate
the System;

the Company to carry out, in certain circumstances,
upgrade work on the System; and

• 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:

184

MTR Corporation Limited

REPORT OF THE MEMBERS OF THE BOARD• 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 then 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 then 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
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.

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Business Review and AnalysisFinancials and Other InformationOverviewCorporate GovernanceA Amendment Operating Agreement

• obligations in relation to the carrying out of the

On 23 August 2018, the Company and the then
Secretary for Transport and Housing, for and on behalf
of Government, entered into the Amendment Operating
Agreement (the “AOA”) to amend and supplement the
Operating Agreement dated 9 August 2007 (as described
in paragraph D of the section headed “Additional
Information in respect of the Rail Merger” on pages 196
to 197), as amended (the “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;

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

• mechanisms and Government approval procedures
for setting fares for High Speed Rail train journeys,
including that:

(i) prior to the Commercial Operation Date (High

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 195
to 196) (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

186

MTR Corporation Limited

REPORT OF THE MEMBERS OF THE BOARDthe 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:

(i) a revocation of the Company’s franchise under the
MTR Ordinance in whole or in respect of the High
Speed Rail; and

(ii) the date falling immediately before the tenth

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
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 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.

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Business Review and AnalysisFinancials and Other InformationOverviewCorporate GovernanceThese 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:

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.

(a) any excess or shortfall in actual patronage of

• Pre-operating costs reimbursements

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.

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;

(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).

(iii) Mainland discount programme loss

•

Equalisation payment

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.

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

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MTR Corporation Limited

REPORT OF THE MEMBERS OF THE BOARDconcession, 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
Shatin to Central Link

The following disclosures, in paragraphs IV-1 and
IV-2 below of this section (together, the “Continuing
Connected Transactions relating to the Operation of the
Shatin to Central Link”), are made in accordance with the
conditions of the Waiver, the Merger-related Waiver and
Rule 14A.71 of the Listing Rules.

The Shatin to Central Link is commissioned in two parts.
The Tuen Ma Line as a whole was commissioned on
27 June 2021 and formed the first part of the Shatin to
Central Link. Construction of the second part of the Shatin
to Central Link has been completed and commercial
operations on the Shatin to Central Link as a whole
commenced on 15 May 2022.

IV-1 First Part of the Shatin to Central

Link – Tuen Ma Line

The first phase of the Tuen Ma Line (the “TML1”) which
extended the Ma On Shan Railway (“MOSR”) from Tai Wai

to Kai Tak with two stations at Hin Keng and Kai Tak,
and an interchange station at Diamond Hill, was
commissioned on 14 February 2020. The second phase
of the Tuen Ma Line, runs from Kai Tak to Hung Hom
with two new stations at Sung Wong Toi and To Kwa
Wan and incorporating one existing station at Ho Man
Tin, and it integrated the TML1 with West Rail into a
single railway line that is known as the Tuen Ma Line
(the “TML”). Commercial operations on the TML as a
whole commenced on 27 June 2021. This forms the first
part of the Shatin to Central Link.

A Amendment Operating Agreements,
Supplemental Operating Agreements and
Amendment No.1 to Memorandum on
Performance Requirements
On 11 February 2020, the Company and the then
Secretary for Transport and Housing, for and on behalf
of Government, entered into the Amendment Operating
Agreement (the “TML1 AOA”) and the Company and
the Commissioner for Transport, for and on behalf of
Government, entered into the Supplemental Operating
Agreement (the “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 TML1. 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 the TML1.

On 21 June 2021, the Company and the then Secretary for
Transport and Housing, for and on behalf of Government,
entered into the Amendment Operating Agreement
(the “TML AOA”) to amend and the Company and
the Commissioner for Transport, for and on behalf of
Government, entered into the Supplemental Operating
Agreement (the “TML SOA”) and the Amendment No.1
to Memorandum on Performance Requirements (the
“Memorandum Amendment”) to supplement the Existing
Integrated Operating Agreement in order to prescribe the
operational requirements that will apply to the TML as a
whole, such as service standards. The intent and effect
of the TML AOA, the TML SOA and the Memorandum
Amendment together is that the operational
requirements that are applicable to the existing railway
network will apply in substantially the same manner to
the TML as a whole.

Annual Report 2022

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Business Review and AnalysisFinancials and Other InformationOverviewCorporate GovernanceThe TML1 AOA, TML AOA, TML1 SOA, TML SOA and
the Memorandum Amendment 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 the TML as a
whole is properly regulated under the MTR Ordinance.

The principal terms of the TML1 AOA, TML AOA, TML1 SOA,
TML SOA and the Memorandum Amendment have the
effect of bringing the TML as a whole within the legal and
regulatory regime for the operation of railways in Hong
Kong contained in the Existing Integrated Operating
Agreement, as explained in the paragraphs above. The
amendments under (1) the TML1 AOA and TML1 SOA
took effect on 14 February 2020; and (2) the TML AOA, the
TML SOA and the Memorandum Amendment took effect
on 21 June 2021.

B Supplemental Service Concession
Agreement
On 21 June 2021, the Company and KCRC entered into
the Supplemental Service Concession Agreement No. 3
(the “TML SSCA”) relating to the TML, to supplement
the Existing Service Concession Agreement and to
supersede and replace the Supplemental Service
Concession Agreement No. 2 (the “TML1 SSCA”) dated
11 February 2020 entered into between the Company
and KCRC relating to the TML1 in order for KCRC to grant
a concession to the Company in respect of the TML as
a whole and to prescribe the operational and financial
requirements that will apply to the TML as a whole. The
intent and effect of the TML 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 TML as a whole,
save where any amendments are necessary to reflect the
particular characteristics of, and arrangements for, the
TML as a whole. The financial provisions in the TML SSCA
have been designed to reflect the principles contained in
the Existing Integrated Operating Agreement that relate
to new concession projects, such as the TML (as referred
to in the sub-section headed “Amendment Operating
Agreements, Supplemental Operating Agreements and
Amendment No.1 to Memorandum on Performance
Requirements” above relating to the TML) other than as
set out below.

The TML 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 the TML as a whole is properly
regulated under the MTR Ordinance.

Principal Terms of the TML SSCA

The terms of the TML SSCA are based substantially on
the terms of the Existing Service Concession Agreement,
as explained above. The TML SSCA was made on
21 June 2021 and the term of the service concession and
licence granted by KCRC to the Company pursuant to the
terms of the TML SSCA commenced on 25 June 2021
(the “New Project Effective Date (TML)”) and the
commercial operation of the TML commenced on
27 June 2021 (the “Commercial Operation Date (TML)”),
which will terminate automatically on and from the earlier
of (being the “Termination Date (TML)”):

(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 deeds entered into between KCRC and
Government as well as the revocation of the franchise
pursuant to the MTR Ordinance as it relates to the TML;

(iii) the first date of commissioning and commercial

operation of the extension of the existing East Rail
from Hung Hom station to the Admiralty station
via the Exhibition Centre station to be designated
by Government under a new supplemental service
concession agreement for the whole of the Shatin to
Central Link (which shall supersede and replace the
TML SSCA); and

(iv) the day falling immediately before the second

anniversary of the Commercial Operation Date (TML),
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 Commercial Operation
Date (TML) or prior to the last extended date (where
applicable) (the “Natural Expiry Date (TML)”).

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MTR Corporation Limited

REPORT OF THE MEMBERS OF THE BOARDCertain principal terms of the TML SSCA that are specific
to the TML include:

• Concession payments

The concession payments under the TML SSCA
consists of variable annual payments (payable by the
Company to KCRC) and fixed annual payments for the
TML (payable by KCRC to the Company).

(i) Variable annual payments and fixed 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. For the purposes of calculating
the variable annual payments, the revenue
generated from the KCRC system shall include
the actual revenue from the TML fares received
or retained by the Company and revenue derived
from businesses related to the TML which may
include, without limitation, telecommunications
and kiosk rental, subject to certain agreed
adjustments.

In light of the variable annual payments described
in the paragraph above and in order for the
Company to be able to earn a commercial return,
the fixed annual payments for the TML shall
comprise payments from KCRC to the Company
over the period commencing on the New Project
Effective Date (TML) and ending on the day prior
to the Termination Date (TML) (the “Concession
Period (TML)”). 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.

(ii) Estimated net amount of the concession payments

Based on the Concession Period (TML) terminating
on the Natural Expiry Date (TML), the estimated net
amount of the concession payments under the TML
SSCA (taking into account both the estimated variable
annual payments and the fixed annual payments for
the TML) receivable by the Company from KCRC is

expected, in aggregate, to be approximately
HK$49 million (subject to certain agreed
adjustments) over the Concession Period (TML).

• A new supplemental service concession agreement

for the Shatin to Central Link

On and from the date of the TML SSCA, to and
including the date that is four months before the
Natural Expiry Date (TML) (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 the
Shatin to Central Link which shall, in accordance with
the Existing Integrated Operating Agreement, enable
the Company to earn a commercial rate of return from
its operation of the Shatin to Central Link (and that
new supplemental service concession agreement for
the Shatin to Central Link is intended to supersede
and replace the TML SSCA, except for any provisions
of the TML SSCA that are expressly agreed to remain
in effect thereafter pursuant to the terms of such new
supplemental service concession agreement).

• Return requirements

If the Concession Period (TML) expires or is
terminated, and no supplemental service concession
agreement is entered into for the Shatin to Central
Link, the Company shall, at no cost to KCRC, redeliver
possession of the TML concession property (which, for
the avoidance of doubt, excludes such parts of the TML
that were previously known as MOSR or West Rail).

IV-2 Shatin to Central Link as a whole

The second part of the Shatin to Central Link, extends
from Hung Hom Station to Admiralty Station with a
station at Exhibition Centre, and it integrates with the
railway lines connecting Lo Wu Station and Lok Ma Chau
Station to Hung Hom Station (excluding such portion
of the Hung Hom Station designed and constructed
pursuant to certain entrustment agreements and those
assets set out in certain assignment agreements between
KCRC and Government) (the “East Rail Line (Original)”)
into a single railway line. This, together with the TML,
forms the entire Shatin to Central Link.

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Business Review and AnalysisFinancials and Other InformationOverviewCorporate GovernanceA Amendment Operating Agreement and
Supplemental Operating Agreement
On 10 May 2022, the Company and the then Secretary for
Transport and Housing, for and on behalf of Government,
entered into the Amendment Operating Agreement (the
“SCL AOA”) and the Company and the Commissioner for
Transport, for and on behalf of Government, entered into
the Supplemental Operating Agreement (the “SCL SOA”)
to amend and supplement, respectively, the Existing
Integrated Operating Agreement in order to prescribe
the operational requirements that will apply to the Shatin
to Central Link as a whole, such as service standards.
The intent and effect of the SCL AOA and the SCL SOA
together is that the operational requirements that are
applicable to the existing railway network will apply in
substantially the same manner to the Shatin to Central
Link as a whole.

The SCL AOA and the SCL 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 the Shatin to
Central Link as a whole is properly regulated under the
MTR Ordinance.

The principal terms of the SCL AOA and the SCL SOA have
the effect of bringing the Shatin to Central Link as a whole
within the legal and regulatory regime for the operation
of railways in Hong Kong contained in the Existing
Integrated Operating Agreement, as explained in the
paragraphs above. The amendments under the SCL AOA
and the SCL SOA took effect on 10 May 2022.

B Supplemental Service Concession
Agreement
On 10 May 2022, the Company and KCRC entered into
the Supplemental Service Concession Agreement No. 4
(the “SCL SSCA”) relating to the Shatin to Central Link, to
supplement the Existing Service Concession Agreement
and to supersede and replace the TML SSCA in order for
KCRC to grant a concession to the Company in respect of
the Shatin to Central Link as a whole and to prescribe the
operational and financial requirements that will apply to
the Shatin to Central Link as a whole. The intent and effect
of the SCL 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 Shatin to Central Link as a whole,
save where any amendments are necessary to reflect the
particular characteristics of, and arrangements for, the
Shatin to Central Link as a whole. The financial provisions
in the SCL SSCA have been designed to reflect the
principles contained in the Existing Integrated Operating
Agreement that relate to new concession projects, such
as the Shatin to Central Link other than as set out below.

The SCL 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 the Shatin to Central Link as a
whole is properly regulated under the MTR Ordinance.

Principal Terms of the SCL SSCA

The terms of the SCL SSCA are based substantially on
the terms of the Existing Service Concession Agreement,
as explained in the paragraphs above. The SCL SSCA
was made on 10 May 2022 and the term of the service
concession and licence granted by KCRC to the Company
pursuant to the terms of the SCL SSCA commenced on
13 May 2022 (the “New Project Effective Date (NSL)”) and
the commercial operation of the part of the railway line
connecting such portion of the Hung Hom Station, the
Exhibition Centre Station and the Shatin to Central Link
Portion (as defined in the assignment deed in relation
to Inland Lot No. 9070 dated 13 May 2022) (“NSL”)
commenced on 15 May 2022 (the “Commercial Operation
Date (NSL)”), which will terminate automatically on and
from the earlier of (being the “Termination Date (SCL)”):

(i) the effective date of the revocation of the franchise
pursuant to the MTR Ordinance as it relates to the
KCRC railway;

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MTR Corporation Limited

REPORT OF THE MEMBERS OF THE BOARD(iii) any date designated as a Termination Date (SCL)
for the purposes of the SCL SSCA in any legally
binding agreement for any extension of the period
commencing on the New Project Effective Date (NSL)
and ending on the day prior to the Termination Date
(SCL) (the “Concession Period (SCL)”) beyond the
Natural Expiry Date (SCL) (as defined in (iv) below) on
such terms and conditions as the Company on the one
hand, and KCRC (or a nominee of Government and/
or any third party designated by Government) on the
other may agree by way of an agreement to follow
the SCL SSCA (including, without limitation, that the
Company shall operate the Shatin to Central Link
pursuant to a service concession as defined in the
MTR Ordinance) (the “SCL Concession Extension”)
(which shall supersede and replace the SCL SSCA); and

(iv) the day falling immediately before the tenth

anniversary of the Commercial Operation Date (NSL),
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 tenth anniversary of the Commercial Operation
Date (NSL) or prior to the last extended date (where
applicable) (the “Natural Expiry Date (SCL)”).

Certain principal terms of the SCL SSCA that are specific to
the Shatin to Central Link include:

• Concession payments

The concession payments under the SCL SSCA
consists of variable annual payments (payable by
the Company to KCRC) and fixed annual payments
(payable by KCRC to the Company).

(i) Variable annual payments and fixed annual

payments

include the actual revenue from the TML and the
East Rail Line (including the NSL) fares received
or retained by the Company and revenue derived
from businesses related to the TML and the East
Rail Line (including the NSL) which may include,
without limitation, telecommunications and kiosk
rental, subject to certain agreed adjustments.

In light of the variable annual payments described
in the paragraph above and in order for the
Company to be able to earn a commercial return,
the fixed annual payments shall comprise payments
from KCRC to the Company over the Concession
Period (SCL). 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.

(ii) Estimated net amount of the concession payments

Based on the Concession Period (SCL) terminating
on the Natural Expiry Date (SCL), the estimated
net amount of the concession payments under
the SCL SSCA (taking into account both the
estimated variable annual payments and the fixed
annual payments for the Shatin to Central Link)
payable by the Company to KCRC is expected, in
aggregate, to be approximately HK$1,036 million
(subject to certain agreed adjustments) over the
Concession Period (SCL).

•

Equalisation payment

If the Termination Date (SCL) occurs prior to
31 December 2028, 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 Shatin to Central Link.

Annual Report 2022

193

Business Review and AnalysisFinancials and Other InformationOverviewCorporate Governance• A new legally binding agreement in relation to an SCL
Concession Extension for the Shatin to Central Link

On and from 1 January 2029 (or such earlier date as
may be agreed in writing by the Company, KCRC and
Government) up to and including the date that is
twelve months before the Natural Expiry Date (SCL)
(prior to any extension) or such later date as may
be agreed in writing by the Company, KCRC and
Government, Government, the Company and KCRC
shall commence exclusive negotiations in good faith
with a view to agreeing the terms of a legally binding
agreement in relation to a SCL Concession Extension
(including, without limitation, that the Company
shall operate the Shatin to Central Link pursuant to a
service concession as defined in the MTR Ordinance)
which shall apply to the Shatin to Central Link the
Existing Integrated Operating Agreement and which
should in accordance with the Existing Integrated
Operating Agreement, enable the Company to earn
a commercial rate of return from its operation of the
Shatin to Central Link.

• Return requirements

If the Concession Period (SCL) expires or is terminated,
and there has been no SCL Concession Extension, the
Company shall, at no cost to KCRC, redeliver possession
of the Shatin to Central Link concession property
(which, for the avoidance of doubt, excludes the MOSR,
the West Rail Line and the East Rail Line (Original)).

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 and the Continuing Connected Transactions relating
to the Operation of the Shatin to Central Link (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; and (iv) in the case of the Continuing Connected
Transactions relating to the Operation of the Shatin

to Central Link, paragraph B(I)(i) of the Merger-related
Waiver and paragraph B(I)(iii)(a) of the Waiver, the
Company confirms that the Independent Non-executive
Directors of the Company have reviewed and confirmed
that each of the Transactions was entered into:

(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 (Revised) “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; and (iv) in the case of
the Continuing Connected Transactions relating to the
Operation of the Shatin to Central Link, paragraph B(I)(ii) of
the Merger-related Waiver and paragraph B(I)(iii)(b) of the
Waiver, the auditors have provided letters 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; and

(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.

194

MTR Corporation Limited

REPORT OF THE MEMBERS OF THE BOARDAdditional 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 F 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

an upfront payment of HK$7.79 billion payable under
the Merger Framework Agreement (as described
on page 177) in consideration for the execution of
the Property Package Agreements (as described in
paragraph C on page 178 and in paragraph F 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);

Annual Report 2022

195

Business Review and AnalysisFinancials and Other InformationOverviewCorporate Governance• 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 TML1 of the
Shatin to Central Link and to prescribe the operational
and financial requirements that will apply to the TML1.
On 21 June 2021, the Company and KCRC further entered
into the TML SSCA in order for KCRC to grant a concession
to the Company in respect of the TML and to prescribe
the operational and financial requirements that will
apply to the TML, which shall supersede the TML1 SSCA.
On 10 May 2022, the Company and KCRC entered into
the SCL SSCA in order for KCRC to grant a concession to
the Company in respect of the Shatin to Central Link as
a whole and to prescribe the operational and financial
requirements that will apply to the Shatin to Central
Link as a whole, which shall supersede the TML SSCA.
Further details are set out in the sub-section headed
“IV Continuing Connected Transactions relating to the
Operation of the Shatin to Central Link” 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 F 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 F
below in this section).

D Operating Agreement

The Operating Agreement was entered into on 9 August
2007 between the Company and the then 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.

196

MTR Corporation Limited

REPORT OF THE MEMBERS OF THE BOARDUnder 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 then
Secretary for Transport and Housing, for and on behalf
of Government, entered into the AOA to amend and
supplement the 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 then
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 TML1 of
the Shatin to Central Link. On 21 June 2021, the Company
and the then Secretary for Transport and Housing, for
and on behalf of Government, further entered into the
TML AOA and the Company and the Commissioner for
Transport, for and on behalf of Government, further
entered into the TML SOA and the Memorandum
Amendment to amend and supplement, respectively,
the Existing Integrated Operating Agreement in order to
prescribe the operational requirements that will apply to
the TML of the Shatin to Central Link. On 10 May 2022,

the Company and the then Secretary for Transport and
Housing, for and on behalf of Government, entered into
the SCL AOA and the Company and the Commissioner
for Transport, for and on behalf of Government, entered
into the SCL SOA to amend and supplement, respectively,
the Existing Integrated Operating Agreement, in order
to prescribe the operational requirements that will apply
to the Shatin to Central Link as a whole. Further details
are set out in the sub-section headed “IV Continuing
Connected Transactions relating to the Operation of the
Shatin to Central Link” in the section headed “Continuing
Connected Transactions”.

E Memorandum on Performance
Requirements

The Memorandum on Performance Requirements was
signed by the Company and the Commissioner for
Transport for and on behalf of Government on 9 August
2007. It sets out the prescribed formulae for calculating
the Performance Requirements. Further details are set
out in paragraph A “Amendment Operating Agreements,
Supplemental Operating Agreements and Amendment
No.1 to Memorandum on Performance Requirements”
under paragraph “IV-1 First Part of the Shatin to Central
Link – Tuen Ma Line” in the sub-section headed “IV
Continuing Connected Transactions relating to the
Operation of the Shatin to Central Link” in the section
headed “Continuing Connected Transactions”.

F 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 “Category 1A 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.

Annual Report 2022

197

Business Review and AnalysisFinancials and Other InformationOverviewCorporate GovernanceCategory 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.

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.

G 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 OPERATING
EXPENDITURE
There are defined procedures for the appraisal, review
and approval of major capital and operating expenditure.
During the year ended 31 December 2022, the
employment of consultancy services over 0.1% of the
net assets of the Group and other capital and operating
expenditure over 0.3% of the net assets of the Group
required the approval of the Board.

198

MTR Corporation Limited

REPORT OF THE MEMBERS OF THE BOARDREPORTING 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
Group’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
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 Information Technology Executive

Management 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
2022 and on 9 March 2023 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 Financial Statements on pages 207 to
294 have been prepared on a going concern basis. The
Board has reviewed the Group’s budget for 2023, 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 Board of Directors to fix
their remuneration.

For and on behalf of the Board

Gillian Elizabeth Meller
Company Secretary
Hong Kong, 9 March 2023

Annual Report 2022

199

Business Review and AnalysisFinancials and Other InformationOverviewCorporate GovernanceDIRECTORS 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
Astrand, Anna Caroline
Dr Auyeung Pak-kuen, Rex
Bailie, William Paul
Butcher, Stephen Anthony
Chan Chi-hung
Chan Hing-keung
Chan Ting-bond, Michael
Chan Wai-man, Raymond
Dr Chan Yuen Tak-fai, Dorothy
Chen Lei
Cheng Lok-ching, Clarence
Cheng Wai-ching, Margaret
Cheng Yan-kee
Cheng Yiu-lam, Elaine
Chim Edwin
Chiu Man
Chow Chiu-wai
Chow Chun-ling
Chu Fung-kuen, Margaret
Collis, Charles Grant Ross
Dalin, Bengt Carl Harald Henrik
Damm, Bo Fredrik
Downie, Brian Francis
Dr Fong Ching, Eddy
Fu Oi-yu
Fung Ching-ting, Teresa
Fung Wai-yee
Hellners, Karl Erik Hjalmar
Ho Ka-wa
Holness, Nigel Graham
Hui Chun-sing, Thomas
Hui Leung-wah, Herbert
Jensen, Frederik Mark
Jia Jun
Jim Kwok-wah
Johannesson, Mats Göran
Jones, Niel Leonard
Jubian, Albert
Dr Kam Chak-pui, Jacob
Kenny, Michael John
Kershaw, Phillip John
Kiang Yee-wing
King, Andrew Lewis
Kong Yuk-foon, Doreen
Kwok Lai-kay, Lena
Kwong Chung-hing
Lai Ching-kai
Lai Kai-shing
Lau Kwai-hin, Kenneth

√

√
√
√

√
√
√
√
√
√(Resigned)
√(Resigned)
√
√
√

√

√
√
√
√
√
√
√(Resigned)
√
√
√(Resigned)
√
√
√(Resigned)
√
√
√(Resigned)
√
√
√(Resigned)

√
√

√
√
√

√

√
√

√(Resigned)

√

√(Resigned)

√

√
√

√
√
√
√

Lau Tin-shing, Adi
Lau Wai-ming
Dr Lee Kar-yun, Tony
Lee Wai-kwong, Sunny
Lee Yuen-ling
Leung Yiu-fai, David
Li Sau-lin, Linda
Lung Tze-ho
McCusker, Andrew
Meller, Gillian Elizabeth
Meyer, Peter
Moros, Tony Antonio
Murphy, Stephen John
Mylvaganam, Deva Rajan
Ng Isaac
Ng Lup-nung, Leo
Ng Yuen-fan, Hannah
Nilsson, Per Håkan Lennart
O'Flaherty, Raymond Anthony
Ortner, Ruben Daniel Johannes
Pagliarini, Stefan Michael
Pang Hoi-hing
Poon Kai-chung
Qabli, Amina Sofie
Quarrie, Ian Roger
Restrepo Suarez, Soraya
Sin Pik-kwan
Soo Tsung-lee, Gene
Suen Yiu-tat
Tam Ka-yee, Irene
Tam Lup-kwan
Tang Chi-fai, David
Wan Wai-yin
Wei Li-ping
Wei Yan
Williams Daniel
Wong Daniel
Wong Hin-cheong
Wong Kin-wai
Wong Kwan-wai, Sammy
Wong O-cheung, Ernest
Wong Wing-kin
Xia Jing
Xu Muhan
Yam Pak-nin
Yeung Mei-chun, Jeny
Yip Chun-to
Young Ka-fan, Glen
Yuen Lai-ki
Yuen Lap-hang
Zhang Ling

√
√
√
√
√
√(Resigned)

√
√
√
√
√
√
√(Resigned)
√
√

√(Resigned)
√
√

√
√

√

√(Resigned)
√(Resigned)
√(Resigned)
√
√
√
√
√
√
√
√
√(Resigned)
√
√
√(Resigned)
√
√
√
√
√
√

√
√
√

√(Resigned)
√

√

√(Resigned)

√(Resigned)
√
√

√

200

MTR Corporation Limited

REPORT OF THE MEMBERS OF THE BOARD202 Independent Auditor’s Report

260 31

Stores and Spares

Consolidated Financial Statements

207 Consolidated Statement of Profit or Loss

260 32

Debtors and Other Receivables

262 33

Amounts Due from Related Parties

208 Consolidated Statement of Comprehensive Income

262 34

Cash, Bank Balances and Deposits

209 Consolidated Statement of Financial Position

210 Consolidated Statement of Changes in Equity

211 Consolidated Statement of Cash Flows

263 35

Loans and Other Obligations

265 36

Creditors, Other Payables and Provisions

267 37

Amounts Due to Related Parties

Notes to the Consolidated Financial Statements

267 38

Obligations under Service Concession

267 39

Loans from Holders of Non-controlling Interests

268 40

269 41

Income Tax in the Consolidated Statement of Financial
Position

Share Capital, Shares Held for Executive Share Incentive
Scheme, Reserves, Company-level Movements in
Components of Equity and Capital Management

272 42

Other Cash Flows Information

274 43

Fair Value Measurement

276 44

Share-based Payments

278 45

Retirement Schemes

280 46

Defined Benefit Retirement Scheme

283 47 Material Related Party Transactions

287 48

Commitments

290 49

Non-adjusting Event after the Reporting Period

291 50

Company-level Statement of Financial Position

292 51

Accounting Estimates and Judgements

294 52

Possible Impact of Amendments, New Standards and
Interpretations Issued but Not Yet Effective for the Year
Ended 31 December 2022

294 53

Approval of the Consolidated Financial Statements

212 1

Statement of Compliance

212 2

Principal Accounting Policies

224 3

Rail Merger with Kowloon-Canton Railway Corporation
and Operating Arrangements for the High Speed Rail
and the Shatin to Central Link

225 4

Revenue from Hong Kong Transport Operations

226 5

226 6

226 7

Revenue from Hong Kong Station Commercial
Businesses

Revenue from Hong Kong Property Rental and
Management Businesses

Revenue and Expenses Relating to Mainland China and
International Subsidiaries

227 8

Revenue from Other Businesses

227 9

Segmental Information

231 10

Operating Expenses

232 11

236 12

236 13

Remuneration of Members of the Board and the
Executive Directorate

Hong Kong Property Development Profit from Share of
Surplus and Interest in Unsold Properties

Loss from Fair Value Measurement of Investment
Properties

236 14

Depreciation and Amortisation

237 15

Interest and Finance Charges

238 16

Income Tax in the Consolidated Statement of Profit or
Loss

239 17

Dividends

240 18

Earnings Per Share

240 19

Other Comprehensive (Loss)/Income

241 20

Investment Properties and Other Property, Plant and
Equipment

245 21

Service Concession Assets

247 22

Railway Construction Projects under Entrustment by
the HKSAR Government

251 23

Railway Construction in Progress

252 24

Property Development in Progress

252 25

Deferred Expenditure

253 26

Investments in Subsidiaries

254 27

Interests in Associates and Joint Ventures

255 28

Investments in Securities

255 29

Properties Held for Sale

256 30

Derivative Financial Assets and Liabilities

Annual Report 2022

201

CONTENTS OF CONSOLIDATED FINANCIAL STATEMENTS AND NOTESBusiness Review and AnalysisFinancials and Other InformationOverviewCorporate GovernanceIndependent auditor’s report to the members of MTR Corporation Limited
(incorporated in Hong Kong with limited liability)

Opinion
We have audited the consolidated financial statements of MTR Corporation Limited (“the Company”) and its subsidiaries (“the Group”) set out on
pages 207 to 294, which comprise the consolidated statement of financial position as at 31 December 2022, the consolidated statement of profit
or loss, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement
of cash flows for the year then ended and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial position of the Group as at
31 December 2022 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 financial statements 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 financial
statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole,
and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Railway construction projects under entrustment by the HKSAR Government

Refer to note 22 to the consolidated financial statements and the accounting policies in note 2Z

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 project management fees payable to the Group.

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.

In September 2018, construction of the HSR was completed following
which commercial operations commenced.

Based on the information available including the progress of finalising
construction contracts, management does not currently believe there is
any need to revise further the total project costs of HK$84.42 billion. No
provision for project costs has been made in this respect.

Our audit procedures in relation to railway construction projects 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 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 projects for
the Group;

• assessing the design and implementation of management’s key

internal controls over the project cost assessment;

• 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;

• assessing the provisions made for the Hung Hom Incidents

Related Costs and Project Management Costs by inspecting, on a
sample basis, the relevant underlying documentation and, where
applicable, the actual amounts incurred during the year;

202

MTR Corporation Limited

INDEPENDENT AUDITOR’S REPORTRailway construction projects under entrustment by the HKSAR Government (continued)

Refer to note 22 to the consolidated financial statements and the accounting policies in note 2Z (continued)

The Key Audit Matter

How the matter was addressed in our audit

• 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 financial statements

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. 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. 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. 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 have been completed.

The Group 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 of the Tuen Ma Line
(“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 statement of profit or loss 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 statement of profit or loss for the year ended
31 December 2020.

In May 2022, construction of the SCL was completed following which
commercial operations commenced.

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 projects 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.

Annual Report 2022

203

Business Review and AnalysisFinancials and Other InformationOverviewCorporate GovernanceValuation of investment properties (“IP”)

Refer to note 20A to the consolidated financial statements 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 2022 was
HK$91,671 million, with a loss from fair value remeasurement for
the year ended 31 December 2022 recorded in the consolidated
statement of profit or loss of HK$3,076 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 financial
statements 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 status
and market rents, provided by the Group to the external property
valuers with underlying contracts and documentation, on a sample
basis.

Assessing impairment of fixed assets other than assets carried at revalued amounts

Refer to notes 20B and 21 to the consolidated financial statements and the accounting policies in note 2I(ii)

The Key Audit Matter

How the matter was addressed in our audit

Our audit procedures to assess the 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 patronage and fare
assumptions, with reference to the actual patronage levels
achieved in the current year, latest developments of fare
adjustment mechanism and implementation procedures, future
operating plans and broader city specific developments;

• involving our internal valuation specialists to assess the

methodology and significant assumptions including discount rates
adopted by management in its impairment assessment for SZL4;

• 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.

The carrying value of the Group’s fixed assets other than assets
carried at revalued amounts as at 31 December 2022 totalled
HK$134,174 million and the related depreciation and amortisation
charge for the year ended 31 December 2022 amounted to
HK$5,885 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.

Shenzhen Metro Line 4 (“SZL4”)
In July 2020, the Shenzhen Municipal Government announced that a
fare adjustment framework for the Shenzhen Metro network would
come into effect on 1 January 2021. The framework was expected
to enable the establishment of a mechanism for fare setting and the
implementation procedures for fare adjustments.

Up to 31 December 2022, there has been no increase in SZL4’s
fare since the operations started in 2010 whilst the operating costs
continue to rise. The Group anticipated that the mechanism and
procedures for fare adjustments will take longer time to implement
and patronage will remain at a lower level for a period of time.
Based on the impairment assessment performed by management,
impairment losses of HK$962 million were recognised on fixed assets
for the year ended 31 December 2022 related to the SZL4’s service
concession assets.

We identified the assessment of 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.

204

MTR Corporation Limited

INDEPENDENT AUDITOR’S REPORTInformation other than the consolidated financial statements 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 financial statements and our auditor’s report thereon.

Our opinion on the consolidated financial statements 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 financial statements, our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with the consolidated financial statements 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 financial statements
The directors are responsible for the preparation of the consolidated financial statements 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 financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, 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 & Risk Committee in discharging their responsibilities for overseeing the Group’s financial reporting
process.

Auditor’s responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements 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 financial statements.

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 financial statements, 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 financial statements 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 financial statements, including the disclosures, and whether
the consolidated financial statements 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 financial statements. 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 & Risk 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.

Annual Report 2022

205

Business Review and AnalysisFinancials and Other InformationOverviewCorporate GovernanceWe also provide the Audit & Risk 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 & Risk Committee, we determine those matters that were of most significance in the audit of the
consolidated financial statements 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

9 March 2023

206

MTR Corporation Limited

INDEPENDENT AUDITOR’S REPORTfor 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 China and international railway,
property rental and management subsidiaries
Revenue from other businesses

Revenue from Mainland 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
– Stores and spares consumed
– Railway support services
– 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 China and international railway,
property rental and management subsidiaries
Expenses relating to other businesses
Project study and business development expenses

Expenses relating to Mainland China property development
Operating expenses before depreciation, amortisation and
variable annual payment
Operating profit before Hong Kong property development,

fair value measurement of investment properties,

depreciation, amortisation and variable annual payment
– Arising from recurrent businesses
– Arising from Mainland China property development

Hong Kong property development profit from share of surplus and

interest in unsold properties

Loss from fair value measurement of investment properties
Operating profit before depreciation, amortisation and
variable annual payment
Depreciation and amortisation
Impairment loss
Variable annual payment
Share of profit of associates and joint ventures
Profit before interest, finance charges and taxation
Interest and finance charges
Profit before taxation
Income tax
Profit for the year
Attributable to:
– Shareholders of the Company
– Non-controlling interests
Profit for the year
Profit/(loss) for the year attributable to shareholders of the Company:
– Arising from recurrent businesses

– in Hong Kong
– outside Hong Kong

– Arising from property development

– in Hong Kong
– outside Hong Kong

– Arising from underlying businesses
– Arising from fair value measurement of investment properties

Earnings per share:
– Basic
– Diluted

The notes on pages 212 to 294 form part of the consolidated financial statements.

Note

4
5
6

7
8

10A

12
13

14
21B

2022

13,404
3,077
4,779

26,016
363
47,639
173
47,812

(6,341)
(2,221)
(1,991)
(878)
(636)
(186)
(155)
(305)
(12,713)
(522)
(964)

(24,751)
(511)
(326)
(39,787)
(114)

(39,901)

7,852
59
7,911

11,589
(810)

18,690
(5,769)
(962)
(323)
1,095
12,731
(982)
11,749
(1,608)
10,141

9,827
314
10,141

384
(227)
157

10,413
67
10,480
10,637
(810)
9,827

HK$1.59
HK$1.59

2021

13,177
3,208
5,036

25,045
383
46,849
353
47,202

(6,155)
(2,339)
(1,801)
(838)
(588)
(244)
(156)
(222)
(12,343)
(480)
(970)

(24,155)
(570)
(312)
(38,830)
(224)

(39,054)

8,019
129
8,148

11,097
(1,616)

17,629
(5,430)
–
(260)
968
12,907
(967)
11,940
(2,261)
9,679

9,552
127
9,679

979
829
1,808

9,277
66
9,343
11,151
(1,599)
9,552

HK$1.55
HK$1.54

Annual Report 2022

207

CONSOLIDATED STATEMENT OF PROFIT OR LOSSBusiness Review and AnalysisFinancials and Other InformationOverviewCorporate Governance

for the year ended 31 December in HK$ million

Profit for the year

Other comprehensive (loss)/income for the year

(after taxation and reclassification adjustments):

Items that will not be reclassified to profit or 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 ventures outside Hong Kong

– non-controlling interests

– Cash flow hedges: net movement in hedging reserve

Total comprehensive income for the year

Attributable to:

– Shareholders of the Company

– Non-controlling interests

Total comprehensive income for the year

Note

2022

10,141

(117)

(74)

(1,713)

(11)

(1,642)

(1,716)

8,425

8,122

303

8,425

2021

9,679

119

253

372

279

(143)

139

511

10,190

10,060

130

10,190

The notes on pages 212 to 294 form part of the consolidated financial statements.

208

MTR Corporation Limited

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

in HK$ million

Assets

Fixed assets

– Investment properties

– Other property, plant and equipment

– Service concession assets

Goodwill and property management rights

Railway construction in progress

Property development in progress

Deferred expenditure

Interests in associates and joint ventures

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 9 March 2023

Rex P K Auyeung
Chairman

Jacob C P Kam
Chief Executive Officer

Herbert L W Hui
Finance Director

The notes on pages 212 to 294 form part of the consolidated financial statements.

Note

At 31 December
2022

At 31 December
2021

20A

20B

24A

40B

35A

40A

35A

40B

91,671

102,297

35,523

229,491

–

41,269

2,540

12,338

606

959

1,888

216

2,261

13,889

5,429

16,134

327,081

1,592

69,692

2,953

592

46,254

10,142

1,104

140

14,700

147,169

179,912

60,547

(262)

119,001

179,286

626

179,912

84,801

101,517

34,714

221,032

–

11,215

1,964

12,442

599

1,479

639

363

2,129

14,797

4,384

20,970

292,082

1,650

40,077

2,381

479

42,102

10,231

561

146

14,418

112,045

180,037

60,184

(245)

119,775

179,714

323

180,037

Annual Report 2022

209

CONSOLIDATED STATEMENT OF FINANCIAL POSITIONBusiness Review and AnalysisFinancials and Other InformationOverviewCorporate Governancefor 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

2022
Balance as at 1 January 2022

Changes in equity for the year
ended 31 December 2022:

– Profit for the year

– Other comprehensive income/

(loss) for the year

– Total comprehensive income/

(loss) for the year

– Amounts transferred from
hedging reserve to

initial carrying amount of

hedged items

– 2021 final ordinary dividend

41A

41B

– Shares issued in respect of scrip

dividend of 2021 final
ordinary dividend

– 2022 interim ordinary dividend

– Shares issued in respect of scrip
dividend of 2022 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

Balance as at 31 December 2022
2021
Balance as at 1 January 2021

Changes in equity for the year
ended 31 December 2021:

– Profit for the year

– Other comprehensive income/

(loss) for the year

– Total comprehensive income/

(loss) for the year

– Amounts transferred from
hedging reserve to

initial carrying amount of

hedged items

– 2020 final ordinary dividend

– Shares issued in respect of scrip

dividend of 2020 final
ordinary dividend

– 2021 interim ordinary dividend

– Shares issued in respect of scrip
dividend of 2021 interim
ordinary dividend

– Shares purchased for Executive

Share Incentive Scheme

– Vesting and forfeiture of

award shares of Executive
Share Incentive Scheme

41A

41B

– Employee share-based

payments

– Employee share options

exercised

60,184

(245)

3,781

–

246

–

113

–

(2)

–

(1)

(109)

–

60,547

(262)

3,824

124

429

115,439

179,714

323 180,037

–

(96)

118

146

–

9,827

314

10,141

(1,713)

(117)

(1,705)

(11)

(1,716)

(1,713)

9,710

8,122

303

8,425

–

(6,317)

(2,604)

–

(3)

–

(6,317)

246

(2,604)

113

(109)

–

118

–

(6,317)

246

(2,604)

113

(109)

–

118

(1,284)

116,228

179,286

626 179,912

59,666

(262)

3,662

148

181

150

113,243

176,788

193

176,981

–

369

–

(1)

–

(1)

(116)

135

–

119

–

(143)

(3)

–

(135)

(5)

124

–

9,552

127

9,679

279

253

9,805

508

511

10,060

130

10,190

–

(6,060)

(1,548)

–

(3)

–

(3)

(6,060)

369

(1,548)

(116)

–

(3)

(6,060)

369

(1,548)

(116)

–

429

115,439

179,714

323

180,037

Balance as at 31 December 2021

60,184

(245)

3,781

41A

The notes on pages 212 to 294 form part of the consolidated financial statements.

210

MTR Corporation Limited

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the year ended 31 December in HK$ million

Note

2022

2021

Cash flows from operating activities

Cash generated from operations

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

– Shenzhen Metro Line 13 project

– 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, and structured bank deposits

Investments in associates and joint ventures

Redemption/(purchase) of investments in securities

Dividends received from associates

Others

7,830

(57)

(506)

(510)

(7,370)

(1,465)

(956)

(769)

(248)

(1,010)

14,162

(9,245)

4,325

(431)

480

351

189

8,333

(57)

(342)

(462)

6,757

7,472

(5,720)

(716)

(925)

(280)

(144)

(988)

17,779

(1,137)

(1,191)

(23)

(982)

361

(60)

Net cash (used in)/generated from investing activities

(1,987)

5,974

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

Net cash used in financing activities

Net increase/(decrease) in cash and cash equivalents

Cash and cash equivalents at 1 January

Effect of exchange rate changes

Cash and cash equivalents at 31 December

–

(109)

41,646

(36,729)

(961)

293

(149)

(8,562)

(116)

16,532

(22,909)

(910)

176

(206)

(7,165)

(4,571)

199

10,752

(710)

10,241

(14,531)

(1,085)

11,879

(42)

10,752

The notes on pages 212 to 294 form part of the consolidated financial statements.

Annual Report 2022

211

CONSOLIDATED STATEMENT OF CASH FLOWSBusiness Review and AnalysisFinancials and Other InformationOverviewCorporate Governance1 Statement of Compliance
These financial statements 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
financial statements 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 2022. 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. The Group has not applied any new standard or amendment to standards that is not yet effective for the
current accounting period (note 52).

2 Principal Accounting Policies
A Basis of Preparation of the Consolidated Financial Statements
(i)
following assets and 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 financial statements is the historical cost basis except that the

•
•
•
•

investment properties (note 2E(i));

self-occupied buildings (note 2E(ii));

investments in securities (note 2O); and

derivative financial instruments (note 2V).

The preparation of the consolidated financial statements in conformity with HKFRSs requires management to make judgements,

(ii)
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 financial statements and
estimates are discussed in note 51.

B Basis of Consolidation
The consolidated financial statements include the financial statements of the Company and its subsidiaries (together referred to as the “Group”)
and the Group’s interest in associates and joint ventures (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 statement of profit or loss from or to the date of their acquisition or disposal, as
appropriate.

C Subsidiaries and Non-controlling Interests
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 financial statements 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 financial statements. Unrealised losses resulting from intra-group transactions are eliminated in
the same way as unrealised profits, 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 statement of profit or loss,
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 statement of profit or loss. 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)).

212

MTR Corporation Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS2 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 financial statements 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 statement of profit or loss, 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 ventures 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 statement of profit or loss.

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 statement of profit or loss. 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 ventures are stated at cost less impairment losses (note 2I(ii)).

E Fixed Assets
Investment Properties
(i)

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 statement of profit or loss 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
professionally 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 statement of profit or loss; and

where a revaluation deficit had previously been charged to the consolidated statement of profit or loss and a revaluation surplus
(b)
subsequently arises, this surplus is firstly credited to the consolidated statement of profit or loss to the extent of the deficit previously charged to
the consolidated statement of profit or loss, 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. The cost of abnormal amounts of wasted material, labour, or other resources incurred is not included
in the costs of the asset and charged as an expense in the consolidated statement of profit or loss when incurred. 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.

In the event any assets under construction are no longer held for use and it is not probable that future economic benefits associated with
these assets will flow to the Group, the associated cost capitalised by then will be charged to profit or loss in the reporting period when such
conditions met.

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Business Review and AnalysisFinancials and Other InformationOverviewCorporate Governance2 Principal Accounting Policies (continued)
E Fixed Assets (continued)
(iii)

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 statement of profit or loss 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 statement of profit or loss 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 in which the service concession
assets are expected to be available for use by the Group.

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 statement
of profit or loss.

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 statement of profit or loss 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 statement of profit or loss 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 statement of profit or loss.

F Leased Assets
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.

214

MTR Corporation Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS2 Principal Accounting Policies (continued)
F Leased Assets (continued)
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”) and 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

(i)
value 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
statement of profit or loss 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 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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Business Review and AnalysisFinancials and Other InformationOverviewCorporate Governance2 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;

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 statement of profit or loss 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 statement of profit or loss in the year in which the
reversals are recognised.

J Depreciation and Amortisation
(i)

Investment properties are not depreciated.

Fixed assets other than investment properties, assets under construction and service concession assets which are amortised over the

(ii)
entire or 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

216

MTR Corporation Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSPlant and Equipment

2 Principal Accounting Policies (continued)
J Depreciation and Amortisation (continued)
•
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 of Railway Construction Projects
(i)
and overheads) are dealt with as follows:

Costs incurred by the Group in respect of proposed railway related construction projects (including consultancy fees, in-house staff costs

•

where the proposed projects are at a preliminary review stage and are not yet considered probable of materialising, the costs concerned
are charged to the consolidated statement of profit or loss; and

where the proposed projects are at a detailed study stage, having been supported by 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 which is stated at cost less impairment losses (note 2I(ii)). In the event the project agreement cannot be reached
and the costs concerned are not considered recoverable, the costs concerned are charged to the consolidated statement of profit or loss
immediately.

(ii)
After entering into a project agreement, all costs (including construction costs, consultancy fees, inhouse staff costs and overhead)
incurred in the construction of the railway are dealt with as railway construction in progress which is stated at cost less impairment losses
(note 2I(ii)). Upon commissioning of the railway line, the relevant costs are transferred to fixed assets.

L Joint Operations
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 costs of development rights, costs of enabling works
(including any interest accrued) and land costs (including any land premiums) incurred 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 statement of
profit or loss 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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Business Review and AnalysisFinancials and Other InformationOverviewCorporate Governance2 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,

(ii)
Payments received from developers in respect of Hong Kong property developments under joint operations arrangement are offset
against the amounts in property development in progress 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 under joint operations arrangement are recognised in the

(iii)
consolidated statement of profit or loss as follows:

•

where the Group receives payments from developers in excess of the balance in property development in progress (i.e. resulting in
deferred income), 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, property development in progress relating to that development is charged to the consolidated statement of profit or
loss, if any.

Revenue arising from sales of properties not under joint operations arrangement is recognised when the legal assignment is completed,

(iv)
which is the point in 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 costs are incurred for the construction and/or the related fitting out costs for the properties under construction to be received from
a development, those costs are initially capitalised in deferred expenditure before the receipt of such properties, and subsequently recognised as
the respective assets upon receipt.

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 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 statement of profit or loss.

218

MTR Corporation Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS2 Principal Accounting Policies (continued)
O
Investments in securities (other than investments in subsidiaries, associates and joint ventures) 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 statement of profit or loss as they arise.

P Stores and Spares
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 statement of cash flows.

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 statement of profit or loss 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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Business Review and AnalysisFinancials and Other InformationOverviewCorporate Governance2 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 statement of profit
or loss, 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 statement of profit or loss.

Amounts previously recognised in other comprehensive income and accumulated in equity are transferred to the consolidated statement of
profit or loss in the periods when the hedged item is recognised in the consolidated statement of profit or loss. 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 statement of profit or loss.

(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 statement of profit or loss.

Amounts previously recognised in other comprehensive income and accumulated in equity are transferred to the consolidated statement of
profit or loss 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
statement of profit or loss.

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 statement of profit or loss 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 statement
of profit or loss, 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.

220

MTR Corporation Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS2 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 statement of profit or loss 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 statement of profit or loss 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

(iv)
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

(v)
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 statement of profit or loss 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

(ii)
the 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).

Annual Report 2022

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Business Review and AnalysisFinancials and Other InformationOverviewCorporate GovernanceIncome Tax (continued)

2 Principal Accounting Policies (continued)
X
Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries and interests in associates
and joint ventures, 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.

Y Financial Guarantee Contracts
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 statement of profit or loss 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 statement of profit or loss 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 Provisions, Contingent Liabilities and Onerous Contracts
(i)

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.

Where some or all of the expenditure required to settle a provision is expected to be reimbursed by another party, a separate asset is recognised
for any expected reimbursement that would be virtually certain. The amount recognised for the reimbursement is limited to the carrying amount
of the provision.

(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 fulfilling the contract. The cost of fulfilling the contract includes
both the incremental costs of fulfilling that contract and an allocation of other costs that relate directly to fulfilling that contract.

222

MTR Corporation Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS2 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.

Rental income from investment properties, station kiosks and other railway premises under operating leases is recognised in profit or

(ii)
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 statement of profit or loss 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 statement
of profit or loss.

Finance charges on lease liabilities are charged to the consolidated statement of profit or loss 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 statement of profit or loss.

The results of foreign entities 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.

AD Segment Reporting
Operating segments, and the amounts of each segment item reported in the consolidated financial statements, 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 financial statements, 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.

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223

Business Review and AnalysisFinancials and Other InformationOverviewCorporate Governance2 Principal Accounting Policies (continued)
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 the High Speed Rail and the Shatin
to Central Link

A 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.

B Operating Arrangements for the 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.

224

MTR Corporation Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS3 Rail Merger with Kowloon-Canton Railway Corporation and

Operating Arrangements for the High Speed Rail and the Shatin
to Central Link (continued)

C Operating Arrangements for the Shatin to Central Link
The Shatin to Central Link (“SCL”) was commissioned in two parts:

The first part of the SCL extended the previously existing Ma On Shan Railway from Tai Wai Station to the West Rail Line via East Kowloon

(a)
to form the Tuen Ma Line. The Tuen Ma Line was in turn commissioned in two phases:

The First Phase of Tuen Ma Line extended the previously existing Ma On Shan Railway from Tai Wai Station to Kai Tak Station with two new

(i)
stations at Hin Keng and Kai Tak, and incorporating one existing station at Diamond Hill, and was commissioned on 14 February 2020.

The Second Phase of Tuen Ma Line extends from Kai Tak Station to Hung Hom Station with two new stations at Sung Wong Toi and To

(ii)
Kwa Wan and incorporating one existing station at Ho Man Tin, and it integrated the existing First Phase of Tuen Ma Line with the West Rail Line
into a single railway line known as the Tuen Ma Line, and was commissioned on 27 June 2021.

The second part of the SCL extended the East Rail Line (Original) from Hung Hom Station to Admiralty Station via the new Exhibition

(b)
Centre Station.

Relevant agreements with the HKSAR Government and KCRC to supplement and amend the current agreements are detailed below.

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 the First Phase of Tuen Ma Line 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 (“SSCA1-SCL”) with
KCRC.

On 21 June 2021, 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 the Tuen Ma Line, in substantially the same manner as the existing railway network for a period
of two years from 27 June 2021 including the supplemental service concession agreement (“SSCA2-SCL”) signed with KCRC. The SSCA2-SCL
replaced the SSCA1-SCL.

On 10 May 2022, 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 the SCL as a whole in substantially the same manner as the existing railway network but for a
period of ten years from 15 May 2022, being the date of commissioning and commercial operation of the second part of the SCL, including the
supplemental service concession agreement (“SSCA3-SCL”) signed with KCRC. The SSCA3-SCL superseded and replaced the SSCA2-SCL. Prior to
the expiry of this ten-year period, the parties are obliged to commence exclusive negotiations in good faith with a view to agreeing the terms
of a legally binding agreement in relation to an extension of SCL concession (including, without limitation, that the Company shall operate the
SCL pursuant to a service concession as defined in the Mass Transit Railway Ordinance (Cap. 556 of the Laws of Hong Kong) (“MTR Ordinance”)),
which shall apply to the SCL the Operating Agreement dated 9 August 2007 and which should in accordance with the Operating Agreement
dated 9 August 2007, enable the Company to earn a commercial rate of return from its operation of the SCL.

Details of the SSCA1-SCL, SSCA2-SCL and SSCA3-SCL are disclosed in the Company’s announcements dated 11 February 2020, 21 June 2021 and
10 May 2022 respectively.

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

2022

11,245

1,401

128

561

–

2021

11,067

1,363

583

–

13,404

13,177

Domestic Service comprises the Kwun Tong, Tsuen Wan, Island, South Island, Tung Chung, Tseung Kwan O, Disneyland Resort, East Rail
(excluding Cross-boundary Service) and Tuen Ma Lines. Others include mainly by-law infringement surcharge, Octopus load agent fees and other
rail-related income.

Annual Report 2022

225

Business Review and AnalysisFinancials and Other InformationOverviewCorporate Governance5 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

2022

1,544

836

616

3,077

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

2022

4,525

254

4,779

2021

1,594

894

631

3,208

2021

4,787

249

5,036

7 Revenue and Expenses Relating to Mainland China and

International Subsidiaries

Revenue and expenses relating to Mainland China and international subsidiaries comprise:

in HK$ million

Melbourne Train

Sydney Metro North West

Sydney Metro City & Southwest

MTR Nordic**

London Elizabeth Line

Shenzhen Metro Line 4 (“SZL4”)

Shenzhen Metro Line 13 (“SZL13”) (note 21C)

Others

Property development in Mainland China

Total Mainland China and international subsidiaries

2022

Revenue

12,812

662

2,234

5,232

2,721

651

956

748

26,016

173

26,189

Expenses*

11,815

632

2,099

5,307

2,648

675

956

619

24,751

114

24,865

2021

Revenue

12,324

Expenses*

11,992

660

1,376

5,489

2,510

805

925

956

25,045

353

25,398

619

1,361

5,325

2,388

744

925

801

24,155

224

24,379

Expenses include staff costs of HK$10,506 million (2021: HK$10,083 million) (note 10A), maintenance and related work costs of HK$3,607 million
(2021: HK$3,081 million) and energy and utilities of HK$779 million (2021: HK$640 million).

** MTR Nordic comprises the Mälartåg, MTR Tech, MTRX, Stockholm Commuter Rail (“Stockholms pendeltåg”) and Stockholm Metro operations in Sweden.

226

MTR Corporation Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS8 Revenue from Other Businesses
Revenue from other businesses comprises income from:

in HK$ million

Ngong Ping 360

Consultancy business

Miscellaneous businesses

2022

175

105

363

2021

103

222

383

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, and other businesses (collectively referred to as “recurrent businesses in
Hong Kong”), and Mainland China and international railway, property rental and management businesses (referred as “recurrent businesses
outside of Hong Kong”), and both excluding fair value measurement of investment properties) 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
(i)
in 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 Mainland 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 China.

Hong Kong station commercial businesses: Commercial activities including the letting of advertising, retail and car parking spaces at

(ii)
railway stations, the provision of telecommunication, bandwidth and data centre services in railway and other 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 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 China.

(vi) Mainland China property development: Property development activities in the Mainland China.

(vii) Other businesses: Businesses not directly relating to transport services 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, investment in Octopus
Holdings Limited and the provision of project management services to the HKSAR Government.

Annual Report 2022

227

Business Review and AnalysisFinancials and Other InformationOverviewCorporate Governance9 Segmental Information (continued)
The results of the reportable segments and reconciliation to the corresponding consolidated totals in the consolidated financial statements are
shown below:

Hong Kong transport services

Hong Kong
transport
operations

Hong Kong
station
commercial
businesses

Hong Kong
property
rental and
management
businesses

Hong Kong
property
development

Mainland China and
international affiliates

Mainland
China and
international
railway,
property
rental and
management
businesses

Mainland
China
property
development

Other
businesses

Un-allocated
amount

Total

13,404
12,163
1,241
–

–

–
–

13,404
(12,713)

–

1,543
19
1,524
1,534

333
–
333
4,446

1,520

4,335

14
–

3,077
(522)

–

111
–

4,779
(964)

–

691

2,555

3,815

–
–
–
–

–

–
–

–

25,886
4,819
21,067
130

128

2
–

26,016
(24,751)

(255)

173
173
–
–

–

–
–

173
(114)

–

323
122
201
40

–
36

363
(511)

–

–
–
–
–

–

–
–

41,662
17,296
24,366
6,150

5,987

127
36

47,812
(39,575)

(71)

(326)

1,010

(148)

(71)

7,911

–

691
(5,151)
–
(273)

–

(4,733)
–
–

(4,733)

127,055
7,451

–
–
–
2,428
–
–
–

–
136,934

24,050

9,976
34,026

7,678
1,480

–

2,555
(237)
–
(48)

–

2,270
–
–

2,270

3,689
486

–
–
–
–
–
–
–

–
4,175

1,834

–
1,834

582
–

–

11,589

(814)

–

1,014
(303)
(962)
–

695

444
(59)
(294)

6,875
10,499

50
–
–
–
569
12
–

10,737
28,742

11,589
–
–
–

–

11,589
–
(1,176)

10,413

–
3,117

–
–
41,269
49
–
–
1,877

–
46,312

31,962

10,884

–
31,962

166
11,050

–
25

–

9,843

1,245
–

–

3,001
(13)
–
(2)

–

2,986
–
–

2,986

91,316
818

11
–
–
63
–
–
–

–
92,208

2,526

–
2,526

578
34

–

59
–
–
–

–

59
79
(71)

49
4,678

–
–
–
–
9
619
11

–
5,366

834

–
834

–
–

–

(148)
(65)
–
–

400

187
–
–

187

507
954

–
–
–
–
–
328
–

1,601
3,390

1,886

–
1,886

26
–

–

(71)
–
–
–

–

(71)
(1,002)
(67)

11,589

(810)

18,690
(5,769)
(962)
(323)

1,095

12,731
(982)
(1,608)

(1,140)

10,141

–
9,926

229,491
37,929

–
–
–
–
28
–
–

61
–
41,269
2,540
606
959
1,888

–
9,954

12,338
327,081

63,051

137,027

–
63,051

10,142
147,169

–
–

–

10,109
1,539

9,843

in HK$ million

2022
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

– Others

Total revenue
Operating expenses
Project study and business
development expenses
Operating profit/(loss)
before Hong Kong property
development, fair value
measurement of investment
properties, depreciation,
amortisation and variable
annual payment
Hong Kong property
development profit from
share of surplus and interest

in unsold properties
(Loss)/gain from fair value
measurement of investment
properties
Operating profit/(loss) before
depreciation, amortisation and
variable annual payment
Depreciation and amortisation
Impairment loss
Variable annual payment
Share of profit of associates and

joint ventures

(Loss)/profit before interest,

finance charges and taxation

Interest and finance charges
Income tax
(Loss)/profit for the year ended
31 December 2022
Assets
Fixed assets
Other segment assets
Goodwill and property
management rights
Railway construction in progress
Property development in progress
Deferred expenditure
Deferred tax assets
Investments in securities
Properties held for sale
Interests in associates and

joint ventures

Total assets
Liabilities
Segment liabilities
Obligations under service
concession
Total liabilities
Other information
Capital expenditure on:
Fixed assets
Deferred expenditure
Railway construction

in progress

Property development

in progress

228

MTR Corporation Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

9 Segmental Information (continued)

Hong Kong transport services

Hong Kong
transport
operations

Hong Kong
station
commercial
businesses

Hong Kong
property
rental and
management
businesses

Hong Kong
property
development

Mainland China and
international affiliates

Mainland
China and
international
railway,
property
rental and
management
businesses

Mainland
China
property
development

Other
businesses

Un-allocated
amount

Total

13,177
12,424
753
–

–

13,177
(12,343)

–

1,633
30
1,603
1,575

329
–
329
4,707

1,566

4,573

3,208
(480)

–

134

5,036
(970)

–

834

2,728

4,066

–
–
–
–

–

–
–

–

24,901
3,876
21,025
144

143

25,045
(24,155)

(219)

353
353
–
–

–

353
(224)

–

378
129
249
5

–

383
(570)

–

–
–
–
–

–

–
–

40,771
16,812
23,959
6,431

6,287

144

47,202
(38,742)

(93)

(312)

671

129

(187)

(93)

8,148

–

834
(4,882)
(214)

–

(4,262)
–
–

(4,262)

124,952
6,828

–
–
994
–
–
–

–
132,774

8,205

10,047
18,252

5,478
671

–

2,728
(195)
(45)

–

2,488
–
–

2,488

3,209
559

–
–
–
1
–
–

–
3,769

1,643

–
1,643

478
–

–

11,097

(1,362)

–

2,704
(17)
(1)

–

2,686
–
–

2,686

84,449
796

12
–
194
–
–
–

–
85,451

2,645

–
2,645

831
174

–

11,097
–
–

–

11,097
–
(1,820)

9,277

–
4,320

–
11,215
22
–
–
544

–
16,101

17,137

–
17,137

–
19

600

–

(254)

417
(268)
–

736

885
(78)
(9)

798

7,818
9,639

57
–
–
570
7
–

11,327
29,418

10,945

184
11,129

1,120
–

–

129
–
–

–

129
78
(141)

58
4,841

–
–
–
8
701
95

–
5,703

950

–
950

1
–

–

(187)
(68)
–

232

(23)
–
–

(23)

546
494

–
–
754
20
272
–

1,115
3,201

2,357

–
2,357

29
–

–

(93)
–
–

–

(93)
(967)
(291)

11,097

(1,616)

17,629
(5,430)
(260)

968

12,907
(967)
(2,261)

(1,351)

9,679

–
15,166

–
–
–
–
499
–

–
15,665

221,032
42,643

69
11,215
1,964
599
1,479
639

12,442
292,082

57,932

101,814

–
57,932

10,231
112,045

–
–

–

7,937
864

600

in HK$ million

2021
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

in unsold properties

Loss from fair value measurement
of investment properties
Operating profit/(loss) before
depreciation, amortisation and
variable annual payment
Depreciation and amortisation
Variable annual payment
Share of profit of associates and

joint ventures

(Loss)/profit before interest,

finance charges and taxation

Interest and finance charges
Income tax
(Loss)/profit for the year ended
31 December 2021
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 ventures

Total assets
Liabilities
Segment liabilities
Obligations under service
concession
Total liabilities
Other information
Capital expenditure on:
Fixed assets
Deferred expenditure
Property development

in progress

Annual Report 2022

229

Business Review and AnalysisFinancials and Other InformationOverviewCorporate Governance

9 Segmental Information (continued)
Profit attributable to shareholders of the Company arising from recurrent businesses in Hong Kong of HK$384 million (2021: HK$979 million)
represents (i) the profit for the year of HK$1,524 million (2021: HK$2,251 million) arising from recurrent businesses in Hong Kong (after excluding
loss from fair value measurement of investment properties of HK$814 million (2021: HK$1,362 million)) and (ii) un-allocated expenses of
HK$1,140 million (2021: HK$1,272 million) in Hong Kong (after excluding income tax relating to fair value measurement of investment properties
of HK$nil (2021: income tax expenses of HK$79 million)).

Loss attributable to shareholders of the Company arising from recurrent businesses outside Hong Kong of HK$227 million (2021: profit of
HK$829 million) represents the profit for the year of HK$87 million (2021: HK$956 million) arising from recurrent business outside Hong Kong (after
excluding gain from fair value measurement of investment properties of HK$4 million (2021: loss of HK$254 million) and related income tax of
HK$nil (2021: income tax credit of HK$96 million)), net of profit attributable to non-controlling interests of HK$314 million (2021: HK$127 million).

Loss attributable to shareholders of the Company arising from fair value measurement of investment properties of HK$810 million
(2021: HK$1,599 million) represents loss from fair value remeasurement on investment properties of HK$3,076 million (2021: HK$2,161 million),
gain from fair value measurement of investment properties on initial recognition from property development of HK$2,266 million
(2021: HK$545 million) and related income tax of HK$nil (2021: related income tax credit of HK$17 million).

Unallocated assets and liabilities mainly comprise cash, bank balances and deposits, investment in bank medium-term notes, tax reserve
certificates, derivative financial assets and liabilities, interest-bearing loans and borrowings, current taxation, as well as deferred tax assets and
liabilities.

Other segment assets mainly include debtors, stores and spares, cash, bank balances and deposits and other assets employed in the operations
of individual business segments.

For the year ended 31 December 2022, revenue from one customer (2021: two customers) of the Mainland China and international railway,
property rental and management businesses segment has exceeded 10% of the Group’s revenue. Approximately 17.21% of the Group’s total
revenue was attributable to the customer (2021: 15.10% and 11.75% was attributable to each of the two customers respectively).

During the year ended 31 December 2022, profit before tax attributable to joint operations of HK$13,739 million (2021: HK$11,595 million) was
recognised.

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, railway construction in progress, property development in progress, deferred expenditure
and interests in associates and joint ventures (“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, railway construction in progress 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 interests in associates and joint ventures.

in HK$ million

Hong Kong SAR (place of domicile)

Australia

Mainland China and Macao SAR

Sweden

United Kingdom

Revenue from external customers

Specified non-current assets

2022

21,586

15,708

2,553

5,232

2,733

26,226

47,812

2021

21,755

14,360

3,077

5,489

2,521

25,447

47,202

2022

267,988

918

16,229

557

17,711

285,699

2021

227,462

1,169

17,360

696

19,260

246,722

As at 31 December 2022, the aggregated amount of the transaction price allocated to the remaining performance obligation under the Group’s
existing contracts is HK$45,510 million (2021: HK$45,131 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 and in relation to Shatin to Central Link under
SSCA3-SCL, 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 or as the services are rendered 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.

230

MTR Corporation Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS10 Operating Expenses
A

Total staff costs include:

in HK$ million

Amounts charged to consolidated statement of profit or 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 China and international subsidiaries

– expenses relating to other businesses

– project study and business development expenses

– Hong Kong property development profit from share of surplus and interest in

unsold properties

Amounts capitalised in the consolidated statement of financial position under:

– assets under construction and other projects

– service concession assets

– railway construction in progress before offset by government grant

– property development in progress

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

Auditors’ remuneration charged to the consolidated statement of profit or loss include:

in HK$ million

Audit services

Other audit related services

Tax services

Other non-audit services

Loss on disposal of fixed assets of HK$148 million (2021: HK$53 million) is included in operating expenses.

2022

6,341

100

164

119

173

10,506

545

202

1,386

500

242

606

2021

6,155

110

277

112

170

10,083

852

213

942

450

–

241

576

20,934

20,188

2022

118

1,115

398

1,631

2022

2021

1,052

413

1,548

2021

–

Annual Report 2022

231

Business Review and AnalysisFinancials and Other InformationOverviewCorporate Governance

11 Remuneration of Members of the Board and the Executive

Directorate

A Remuneration of Members of the Board and the Executive Directorate
(i)

The emoluments of Members of the Board and the Executive Directorate of the Company were as follows:

in HK$ million

2022
Members of the Board
– Rex Auyeung Pak-kuen
– Andrew Clifford Winawer Brandler
– Bunny Chan Chung-bun
– Walter Chan Kar-lok
– Pamela Chan Wong Shui
– Dorothy Chan Yuen Tak-fai
– Cheng Yan-kee
– Anthony Chow Wing-kin (retired on 25 May 2022)**
– Eddy Fong Ching (retired on 25 May 2022)**
– Hui Siu-wai
– Sunny Lee Wai-kwong (appointed on 25 May 2022)*
– Rose Lee Wai-mun
– Jimmy Ng Wing-ka
– Benjamin Tang Kwok-bun (retired on 25 May 2022)**
– Carlson Tong (appointed on 25 May 2022)*
– Adrian Wong Koon-man
– Johannes Zhou Yuan
– Christopher Hui Ching-yu
– Former Secretary for Transport and Housing∆
– Secretary for Transport and Logistics#
– Permanent Secretary for Development (Works)
– Commissioner for Transport

Members of the Executive Directorate
– Jacob Kam Chak-pui***
– Adi Lau Tin-shing (retired on 1 January 2023)
– Roger Francis Bayliss (retired on 1 August 2022)****
– Margaret Cheng Wai-ching
– Linda Choy Siu-min
– Carl Michael Devlin (appointed on 1 August 2022)*****
– Herbert Hui Leung-wah
– Tony Lee Kar-yun
– Gillian Elizabeth Meller
– David Tang Chi-fai
– Jeny Yeung Mei-chun

Base pay,
allowances and
benefits in kind

Retirement
scheme
contributions

Fees

Variable
remuneration
related to
performance

Total

1.7
0.5
0.4
0.4
0.5
0.5
0.5
0.2
0.2
0.5
0.2
0.4
0.4
0.2
0.3
0.5
0.5
0.4
0.2
0.2
0.5
0.5

–
–
–
–
–
–
–
–
–
–
–
9.7

–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–

10.1
7.9
5.6
5.6
4.3
2.3
5.3
4.6
4.7
6.1
6.1
62.6

–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–

1.3
–~
–~~

0.7
0.6

–~~~

0.7
0.7
0.7
0.9
0.9
6.5

–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–

5.4
2.0
1.2
1.9
1.5
0.6
1.7
1.5
1.7
2.2
2.2
21.9

1.7
0.5
0.4
0.4
0.5
0.5
0.5
0.2
0.2
0.5
0.2
0.4
0.4
0.2
0.3
0.5
0.5
0.4
0.2
0.2
0.5
0.5

16.8
9.9
6.8
8.2
6.4
2.9
7.7
6.8
7.1
9.2
9.2
100.7

Sunny W K Lee and Carlson Tong were appointed as Members of the Board on the date shown in the above table. The amounts of their emoluments shown in
the above table covers the period from the respective dates of their appointment to 31 December 2022.

** Anthony W K Chow, Eddy C Fong and Benjamin K B Tang retired as Members of the Board on the date shown in the above table. The amounts of their

emoluments shown in the above table cover the period from 1 January 2022 to the respective dates of their retirement.

*** Jacob C P Kam, being the Chief Executive Officer of the Company, also serves as a Member of the Board.

**** Roger F Bayliss 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 2022 to the date immediately before his retirement.

***** Carl M Devlin 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 his date of appointment to 31 December 2022.

The total contributions paid by the Company attributable to the financial year ended 31 December 2022 for Adi T S Lau, who participated in MTR Retirement
Scheme (as described in note 45A(i)) was HK$41,734, pursuant to the requirement of the scheme.

~ ~ The total contributions paid by the Company attributable to the financial year ended 31 December 2022 for Roger F Bayliss, who participated in MTR Mandatory

Provident Fund Scheme (as described in note 45A(iii)) was HK$4,500.

~ ~ ~ The total contributions paid by the Company attributable to the period from his date of appointment to 31 December 2022 for Carl M Devlin, who participated in

MTR Mandatory Provident Fund Scheme (as described in note 45A(iii)) was HK$7,500.

∆

The office of the former Secretary for Transport and Housing (held by Frank Chan Fan until 30 June 2022) ceased to be a Member of the Board with effect from
1 July 2022. The amount of his emolument shown in the above table covers the period from 1 January 2022 to the date immediately before his date of cessation.

The office of the Secretary for Transport and Logistics (held by Lam Sai-hung) was appointed by the Chief Executive of the HKSAR pursuant to Section 8 of the
MTR Ordinance as a Member of the Board with effect from 1 July 2022. The amount of his emolument shown in the above table covers the period from his
appointment to 31 December 2022.

232

MTR Corporation Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS11 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

2021
Members of the Board
– Rex Auyeung Pak-kuen
– Andrew Clifford Winawer Brandler
– Bunny Chan Chung-bun
– Walter Chan Kar-lok
– Pamela Chan Wong Shui
– Dorothy Chan Yuen Tak-fai
– Cheng Yan-kee
– Anthony Chow Wing-kin
– Eddy Fong Ching
– Hui Siu-wai (appointed on 26 May 2021)*
– James Kwan Yuk-choi (retired on 26 May 2021)**
– Rose Lee Wai-mun
– Lucia Li Li Ka-lai (retired on 26 May 2021)**
– Jimmy Ng Wing-ka
– Benjamin Tang Kwok-bun
– Adrian Wong Koon-man (appointed on 26 May 2021)*
– Johannes Zhou Yuan
– Christopher Hui Ching-yu
– Former 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
– Peter Ronald Ewen (retired on 22 February 2021)****
– Herbert Hui Leung-wah
– Tony Lee Kar-yun
– Gillian Elizabeth Meller
– David Tang Chi-fai
– Jeny Yeung Mei-chun

Base pay,
allowances and
benefits in kind

Retirement
scheme
contributions

Fees

Variable
remuneration
related to
performance

1.7
0.5
0.4
0.4
0.5
0.5
0.5
0.5
0.5
0.3
0.2
0.5
0.2
0.5
0.4
0.3
0.5
0.4
0.4
0.4
0.4

–
–
–
–
–
–
–
–
–
–
–
10.0

–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–

8.7
6.0
5.1
5.6
4.2
1.6
5.1
4.5
4.7
5.7
5.3
56.5

–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–

1.2
–~
–~~

0.7
0.6

–~~~

0.7
0.6
0.7
0.8
0.8
6.1

–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–

2.4
1.4
1.2
1.2
1.0
0.2
1.2
1.1
1.1
1.4
1.4
13.6

Total

1.7
0.5
0.4
0.4
0.5
0.5
0.5
0.5
0.5
0.3
0.2
0.5
0.2
0.5
0.4
0.3
0.5
0.4
0.4
0.4
0.4

12.3
7.4
6.3
7.5
5.8
1.8
7.0
6.2
6.5
7.9
7.5
86.2

S W Hui and Adrian K M Wong were appointed as Members of the Board on the date shown in the above table. The amounts of their emoluments shown in the
above table covers the period from the respective dates of their appointment to 31 December 2021.

James Y C Kwan and Lucia Li Li Ka-lai retired as Members of the Board on the date shown in the above table. The amounts of their emoluments shown in the
above table cover the period from 1 January 2021 to the respective dates of their retirement.

*** Jacob C P Kam, being the Chief Executive Officer of the Company, also serves as a Member of the Board.

**** Peter R Ewen 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 2021 to the date immediately before his retirement.

The total contributions paid by the Company attributable to the financial year ended 31 December 2021 for Adi T S Lau, who participated in MTR Retirement
Scheme (as described in note 45A(i)) was HK$16,380, pursuant to the requirement of the scheme.

~ ~ The total contributions paid by the Company attributable to the financial year ended 31 December 2021 for Roger F Bayliss, who participated in MTR Mandatory

Provident Fund Scheme (as described in note 45A(iii)) was HK$18,000.

~ ~ ~ The total contributions paid by the Company attributable to the period from 1 January 2021 to the date of retirement for Peter R Ewen, who participated in

MTR Provident Fund Scheme (as described in note 45A(ii)) was HK$87,374.

Annual Report 2022

233

Business Review and AnalysisFinancials and Other InformationOverviewCorporate Governance11 Remuneration of Members of the Board and the Executive

Directorate (continued)

A Remuneration of Members of the Board and the Executive Directorate

(continued)

Sammy Wong Kwan Wai was appointed as a Member of the Executive Directorate with effect from 1 January 2023.

The above emoluments do not include the share-based payments which arose from the Executive Share Incentive Scheme as disclosed in
note (ii) below.

The director’s fees in respect of the office of the former Secretary for Transport and Housing (Frank Chan Fan for the period from 1 January 2021
to 30 June 2022), the office of the Secretary for Transport and Logistics (Lam Sai-hung for the period from 1 July 2022 to 31 December 2022), the
office of the Permanent Secretary for Development (Works) (Lam Sai-hung for the period from 1 January 2021 to 7 October 2021 and Ricky Lau
Chun-kit for the period from 8 October 2021 to 31 December 2022) and the office of the Commissioner for Transport (Rosanna Law Shuk-pui),
each of whom was appointed Director by the Chief Executive of the HKSAR pursuant to Section 8 of the MTR Ordinance, were received by the
HKSAR Government rather than by the individuals personally.

The director’s fee in respect of Christopher Hui Ching-yu, being the Secretary for Financial Services and the Treasury of Government, was received
by the HKSAR Government rather than by the individual 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 2022 and 2021, if any, are as follows:
•

Jacob C P Kam was granted 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, 89,300 Restricted Shares on 8 April 2020,
52,750 Restricted Shares and 199,800 Performance Shares on 8 April 2021, 132,000 Contract-end Restricted Shares on 1 April 2022, and
133,700 Restricted Shares on 8 April 2022, of which a total of 183,149 Restricted Shares were vested in 2022 (2021: 54,084 Restricted
Shares and 98,117 Performance Shares), and the respective fair value of the share-based payments recognised for the year ended
31 December 2022 was HK$8.8 million (2021: HK$5.6 million). No award shares were lapsed/forfeited in 2022 (2021: 44,083 shares);
Adi T S Lau was granted 16,450 Restricted Shares and 50,450 Performance Shares on 10 April 2018, 16,250 Restricted Shares on
8 April 2019, 39,100 Restricted Shares on 8 April 2020, 19,700 Restricted Shares and 47,850 Performance Shares on 8 April 2021, and
43,000 Restricted Shares on 8 April 2022, of which a total of 94,185 Restricted Shares were vested in 2022 (2021: 23,933 Restricted Shares
and 34,810 Performance Shares), and the respective fair value of the share-based payments recognised for the year ended 31 December
2022 was HK$4.2 million (2021: HK$1.2 million). No award shares were lapsed/forfeited in 2022 (2021: 15,640 shares);
Roger F Bayliss was granted 30,150 Performance Shares on 8 April 2019, 30,250 Restricted Shares on 8 April 2020, 15,050 Restricted Shares
and 47,850 Performance Shares on 8 April 2021, and 35,400 Restricted Shares on 8 April 2022, of which a total of 70,617 Restricted Shares
were vested in 2022 (2021: 10,083 Restricted Shares and 20,803 Performance Shares), and the respective fair value of the share-based
payments recognised for the year ended 31 December 2022 was HK$3.6 million (2021: HK$1.0 million). No award shares were lapsed/
forfeited in 2022 (2021: 9,347 shares);
Margaret W C Cheng was granted 17,600 Restricted Shares and 50,450 Performance Shares on 10 April 2018, 16,550 Restricted Shares
on 8 April 2019, 32,450 Restricted Shares on 8 April 2020, 17,450 Restricted Shares and 47,850 Performance Shares on 8 April 2021, and
39,500 Restricted Shares on 8 April 2022, of which a total of 22,150 Restricted Shares were vested in 2022 (2021: 22,200 Restricted Shares
and 34,810 Performance Shares), and the respective fair value of the share-based payments recognised for the year ended 31 December
2022 was HK$2.0 million (2021: HK$1.0 million). No award shares were lapsed/forfeited in 2022 (2021: 15,640 shares);
Linda S M Choy was granted 13,500 Restricted Shares and 47,850 Performance Shares on 8 April 2021, and 32,200 Restricted Shares on
8 April 2022, of which a total of 4,500 Restricted Shares were vested in 2022 (2021: nil), and the respective fair value of the share-based
payments recognised for the year ended 31 December 2022 was HK$1.5 million (2021: HK$0.8 million). No award shares were lapsed/
forfeited in 2022 (2021: nil);
Carl M Devlin was granted 7,700 Restricted Shares and 7,300 Performance Shares on 8 April 2022, of which no award shares were vested in
2022, and the respective fair value of the share-based payments recognised for a period from his appointment as Member of the Executive
Directorate to 31 December 2022 was HK$0.2 million. No award shares were lapsed/forfeited in 2022;
Herbert L W Hui was granted 14,200 Restricted Shares and 50,450 Performance Shares on 10 April 2018, 13,800 Restricted Shares on
8 April 2019, 29,050 Restricted Shares on 8 April 2020, 15,600 Restricted Shares and 47,850 Performance Shares on 8 April 2021, and
37,850 Restricted Shares on 8 April 2022, of which a total of 19,483 Restricted Shares were vested in 2022 (2021: 19,017 Restricted Shares
and 34,810 Performance Shares), and the respective fair value of the share-based payments recognised for the year ended 31 December
2022 was HK$1.9 million (2021: HK$0.9 million). No award shares were lapsed/forfeited in 2022 (2021: 15,640 shares);
Tony K Y Lee was granted 7,900 Restricted Shares and 10,500 Performance Shares on 10 April 2018, 8,300 Restricted Shares on
8 April 2019, 15,500 Restricted Shares on 8 April 2020, 13,550 Restricted Shares and 47,850 Performance Shares on 8 April 2021, and
34,050 Restricted Shares on 8 April 2022, of which a total of 12,450 Restricted Shares were vested in 2022 (2021: 10,566 Restricted Shares
and 7,245 Performance Shares), and the respective fair value of the share-based payments recognised for the year ended 31 December
2022 was HK$1.7 million (2021: HK$0.8 million). No award shares were lapsed/forfeited in 2022 (2021: 3,255 shares);
Gillian E Meller was granted 16,050 Restricted Shares and 50,450 Performance Shares on 10 April 2018, 13,400 Restricted Shares on
8 April 2019, 27,000 Restricted Shares on 8 April 2020, 14,250 Restricted Shares and 47,850 Performance Shares on 8 April 2021, and
34,600 Restricted Shares on 8 April 2022, of which a total of 18,218 Restricted Shares were vested in 2022 (2021: 18,816 Restricted Shares
and 34,810 Performance Shares), and the respective fair value of the share-based payments recognised for the year ended 31 December
2022 was HK$1.8 million (2021: HK$0.9 million). No award shares were lapsed/forfeited in 2022 (2021: 15,640 shares);

•

234

MTR Corporation Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS11 Remuneration of Members of the Board and the Executive

Directorate (continued)

A Remuneration of Members of the Board and the Executive Directorate

•

(continued)
David C F Tang was granted 16,850 Restricted Shares and 50,450 Performance Shares on 10 April 2018, 17,200 Restricted Shares on
8 April 2019, 31,350 Restricted Shares on 8 April 2020, 17,200 Restricted Shares and 47,850 Performance Shares on 8 April 2021, and
46,000 Restricted Shares on 8 April 2022, of which a total of 21,917 Restricted Shares were vested in 2022 (2021: 21,801 Restricted Shares
and 34,810 Performance Shares), and the respective fair value of the share-based payments recognised for the year ended 31 December
2022 was HK$2.1 million (2021: HK$0.9 million). No award shares were lapsed/forfeited in 2022 (2021: 15,640 shares);
Jeny M C Yeung was granted 17,350 Restricted Shares and 50,450 Performance Shares on 10 April 2018, 16,350 Restricted Shares on
8 April 2019, 32,650 Restricted Shares on 8 April 2020, 17,200 Restricted Shares and 47,850 Performance Shares on 8 April 2021, and
46,000 Restricted Shares on 8 April 2022, of which a total of 22,066 Restricted Shares were vested in 2022 (2021: 22,117 Restricted Shares
and 34,810 Performance Shares), and the respective fair value of the share-based payments recognised for the year ended 31 December
2022 was HK$2.1 million (2021: HK$1.0 million). No award shares were lapsed/forfeited in 2022 (2021: 15,640 shares); and
Peter R Ewen was granted 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 a total of 38,918 Restricted Shares and 34,810 Performance Shares
were vested in 2021, and the respective fair value of the share-based payments recognised for the year ended 31 December 2021 was
HK$0.2 million. 15,640 award shares were lapsed/forfeited in 2021.

The details of the interest in the Company’s shares of the Members of the Board and the Members of the Executive Directorate are disclosed in
the Report of the Members of the Board and note 44.

For the year ended 31 December 2022, the five individuals with the highest emoluments were Members of the Executive Directorate of
(iii)
the Company, whose emoluments are shown above. For the year ended 31 December 2021, three Members of the Executive Directorate of the
Company, whose emoluments are shown above, were among the five individuals whose emoluments were the highest. The total emoluments,
including share-based payments, of the other two highest paid individuals for the year ended 31 December 2021 are shown below:

in HK$ million

Base pay, allowances and benefits in kind

Retirement scheme contributions

Variable remuneration related to performance

Share-based payments

2021

12.8

0.1

4.2

0.5

17.6

The emoluments, including share-based payments, of the two highest paid individuals for the year ended 31 December 2021 are within the band
of HK$8,500,001 – HK$9,000,000.

The aggregate emoluments and share-based payments of Members of the Board and the Executive Directorate for the year was

(iv)
HK$130.6 million (2021: HK$100.5 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 and/or Advisory Panel, 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), and was re-appointed by FSI for a term
commencing from 1 January 2022 until 30 June 2024 (both dates inclusive).

B Award Shares
Award Shares granted, vested, lapsed and/or forfeited, and outstanding in respect of each Member of the Executive Directorate for the year
ended 31 December 2022 are set out in the Report of the Members of the Board.

Under the Executive Share Incentive Scheme as described in note 44(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.

Award Shares granted to the Members of the Executive Directorate under the Company’s Executive Share Incentive Scheme are expensed as
share-based payments under staff costs as set out in note 2(W)(iii). In accordance with that policy, 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 and recognised over the relevant
vesting periods, and includes adjustments to reverse amounts accrued in previous years where grants of Award Shares are lapsed/forfeited prior
to vesting.

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.

Annual Report 2022

235

Business Review and AnalysisFinancials and Other InformationOverviewCorporate Governance12 Hong Kong Property Development Profit from Share of Surplus

and Interest in Unsold Properties

Hong Kong property development profit from share of surplus and interest in unsold properties comprises:

in HK$ million

Share of surplus and interest in unsold properties from property development

Agency fee and other income from West Rail property development (note 24C)

Overheads and miscellaneous studies

Hong Kong property development profit (pre-tax)

Hong Kong property development profit (post-tax)

2022

11,473

128

(12)

11,589

10,413

2021

11,048

(18)

11,097

9,277

During the year ended 31 December 2022, profit attributable to shareholders of the Company arising from Hong Kong property development
for the year ended 31 December 2022 of HK$10,413 million (2021: HK$9,277 million) represents Hong Kong property development profit of
HK$11,589 million (2021: HK$11,097 million) and related income tax expenses of HK$1,176 million (2021: HK$1,820 million).

13 Loss from Fair Value Measurement of Investment Properties
Loss from fair value measurement of investment properties comprises:

in HK$ million

Loss from fair value remeasurement on investment properties

Gain from fair value measurement of investment properties on initial recognition

from property development

14 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

2022

(3,076)

2,266

(810)

2022

3,839

342

4,181

1,853

(265)

1,588

5,769

2021

(2,161)

545

(1,616)

2021

3,854

330

4,184

1,627

(381)

1,246

5,430

236

MTR Corporation Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
15 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 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 gain

– transferred from hedging reserve upon discontinuation of

hedge accounting

– Derivatives not qualified for hedge accounting

Interest expenses capitalised

Interest income in respect of:

– Deposits with banks

– Others

2022

2021

1,033

688

(253)

(26)

289

(79)

(13)

(316)

(80)

1,581

(35)

188

(356)

1,378

(396)

982

905

692

(144)

(5)

(11)

156

(93)

(8)

(215)

(58)

1,574

(51)

(322)

1,240

(273)

967

During the year ended 31 December 2022, 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 2.1% to 3.3% per annum (2021: 2.0% to 2.2% per annum).

During the year ended 31 December 2022, interest and finance charges net of interest expenses capitalised in relation to the SZL4 were
HK$43 million (2021: HK$51 million), which was offset by the subsidy received from the Shenzhen Municipal Government of HK$35 million
(2021: HK$51 million).

During the year ended 31 December 2022, the gain resulting from fair value changes of the underlying financial assets and liabilities being
hedged under fair value hedge was HK$497 million (2021: loss of HK$18 million) while the loss resulting from fair value changes of hedging
instruments comprising interest rate and cross currency swaps was HK$514 million (2021: gain of HK$23 million), thus resulting in a net loss of
HK$17 million (2021: net gain of HK$5 million).

Annual Report 2022

237

Business Review and AnalysisFinancials and Other InformationOverviewCorporate Governance

16 Income Tax in the Consolidated Statement of Profit or Loss
A

Income tax in the consolidated statement of profit or loss represents:

in HK$ million

Current tax

– Hong Kong Profits Tax

– Tax outside Hong Kong

Deferred tax

– Origination and reversal of temporary differences on:

– tax losses

– depreciation allowances in excess of related depreciation

– revaluation of properties

– provisions and others

2022

989

413

1,402

(44)

359

(126)

206

1,608

2021

1,803

375

2,178

302

(30)

(225)

2,261

Except for the Company which is a qualifying corporation under the two-tiered Profits Tax rate regime in Hong Kong, the provision for

(i)
Hong Kong Profits Tax for the year ended 31 December 2022 is calculated at 16.5% (2021: 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 2022 and 2021.

Current taxes for subsidiaries outside Hong Kong are charged at the appropriate current rates of taxation ruling in the relevant tax jurisdictions.

The provision of Land Appreciation Tax is estimated according to the requirements set forth in the relevant Mainland China tax laws and
regulations. Land Appreciation Tax has been provided at ranges of progressive rates of the appreciation value, with certain allowable deductions.
During the year ended 31 December 2022, Land Appreciation Tax (before tax effect on deduction of Corporate Income Tax) of HK$51 million
(2021: HK$98 million) was charged to profit or loss.

Provision for deferred tax on temporary differences arising in Hong Kong is calculated at the Hong Kong Profits Tax rate at 16.5% (2021: 16.5%),
while that arising outside Hong Kong is calculated at the appropriate current rates of taxation ruling in the relevant tax jurisdictions.

Since the Rail Merger in 2007, the Company has claimed annual Hong Kong Profits Tax deductions in respect of the amortisation of
(ii)
upfront payment and cut-over liabilities, and fixed annual payments and variable annual payments relating to the Rail Merger (collectively “the
Sums”). The total tax amount in respect of the Sums for the years of tax assessment from 2007/2008 to 2022/2023 amounted to HK$4.6 billion. As
disclosed in previous years, the Inland Revenue Department of Hong Kong (“IRD”) issued notices of profits tax assessments/additional profits tax
assessments for the years of assessment from 2009/2010 to 2017/2018 disallowing deduction of the Sums in the computation of the Company’s
assessable profits. Based on the strength of advice from the external legal counsels and tax advisor, the Company has lodged objections against
these tax assessments (regarding the deductibility of the Sums) 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$2.3 billion. The
Company has purchased the required TRCs and the additional tax demanded has been held over by IRD. 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.

On 20 May 2022, the Commissioner of Inland Revenue issued a determination to the Company disagreeing with the objections lodged by the
Company and confirming profits tax assessment/additional profits tax assessments in respect of the Sums in dispute for the years of assessment
from 2011/2012 to 2017/2018 (i.e. holding that the Sums are not deductible in the computation of the Company’s assessable profits for those
years of assessment). The Company re-affirmed the case with the external legal counsel who advised the Company previously and the tax
advisor, and obtained further advice from another external legal counsel. Based on the advice from the external legal counsels and tax advisor,
the directors of the Company believe that the Company has strong legal grounds and have determined to contest and appeal against the
assessments for the years of assessment from 2011/2012 to 2017/2018. Accordingly, the Company lodged a notice of appeal to the Inland
Revenue Board of Review on 16 June 2022. No additional tax provision has been made as a result of the determination received in respect of the
above notices of profits tax assessments/additional profits tax assessments and other relevant years of assessment. The date of hearing before
the Board of Review is scheduled to be held in early 2024.

238

MTR Corporation Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

16 Income Tax in the Consolidated Statement of Profit or Loss

(continued)

Reconciliation between tax expense and accounting profit or loss at applicable tax rates:

2022

2021

HK$ million

% HK$ million

Profit before taxation

Notional tax on profit before taxation, calculated at the rates
applicable to profits in the tax jurisdictions concerned

Land Appreciation Tax (net of tax effect on deduction of Corporate Income Tax)

Tax effect of non-deductible expenses

Tax effect of non-taxable revenue

Tax effect of unused tax losses not recognised

Utilisation of tax losses previously not recognised

Actual tax expenses

11,749

1,925

869

16.4

0.3

7.4

(1,341)

(11.4)

118

(1)

1,608

1.0

–

13.7

11,940

1,958

505

(274)

(11)

2,261

17 Dividends
Ordinary dividends paid and proposed to shareholders of the Company comprise:

in HK$ million

Ordinary dividends attributable to the year

– Interim ordinary dividend declared and paid of HK$0.42 (2021: HK$0.25) per share

– Final ordinary dividend proposed after the end of the reporting period of HK$0.89

(2021: HK$1.02) per share

2022

2,604

5,520

8,124

16.4

0.6

4.2

(2.3)

0.1

(0.1)

18.9

2021

1,548

6,317

7,865

Ordinary dividends attributable to the previous year

– Final ordinary dividend of HK$1.02 (2021: HK$0.98 per share attributable to year 2020)

per share approved and paid during the year

6,317

6,060

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 2022 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 5 June 2023 (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 FSI are disclosed in note 47P.

Annual Report 2022

239

Business Review and AnalysisFinancials and Other InformationOverviewCorporate Governance

18 Earnings Per Share
A Basic Earnings Per Share
The calculation of basic earnings per share is based on the profit for the year attributable to shareholders of HK$9,827 million
(2021: HK$9,552 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

Weighted average number of ordinary shares less shares held for Executive Share

Incentive Scheme during the year

2022

2021

6,193,462,514

6,180,927,873

3,237,016

–

4,187,108

1,731,074

(5,797,375)

(5,419,380)

6,190,902,155

6,181,426,675

B Diluted Earnings Per Share
The calculation of diluted earnings per share is based on the profit for the year attributable to shareholders of HK$9,827 million
(2021: HK$9,552 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 Executive Share Incentive Scheme (2021: after adjusting for the dilutive effect of the
Company’s share option scheme and Executive Share Incentive Scheme), which is calculated as follows:

Weighted average number of ordinary shares less shares held for Executive Share

Incentive Scheme during the year

Effect of dilutive potential shares under the share option scheme

Effect of shares awarded under Executive Share Incentive Scheme

Weighted average number of shares (diluted) during the year

2022

2021

6,190,902,155

6,181,426,675

–

5,895,643

213,308

5,390,572

6,196,797,798

6,187,030,555

C
shareholders of the Company arising from underlying businesses of HK$10,637 million (2021: HK$11,151 million).

Both basic and diluted earnings per share would have been HK$1.72 (2021: HK$1.80), if the calculation is based on profit attributable to

19 Other Comprehensive (Loss)/Income
A

Tax effects relating to each component of other comprehensive (loss)/income of the Group are shown below:

in HK$ million

Exchange differences on translation of:

– Financial statements of subsidiaries,

associates and joint ventures outside
Hong Kong

– Non-controlling interests

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 19B)

Other comprehensive (loss)/income

2022

Tax
(expenses)/
credit

Before-tax
amount

Net-of-tax
amount

Before-tax
amount

2021

Tax
(expense)/
credit

Net-of-tax
amount

(1,713)

(11)

(1,724)

(155)

(1,728)

–

(9)

(17)

(1,713)

(11)

(1,724)

(117)

(1,716)

279

282

142

296

(171)

549

–

(23)

(43)

(38)

279

282

119

253

(143)

511

240

MTR Corporation Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

19 Other Comprehensive (Loss)/Income (continued)
B

The components of other comprehensive income/(loss) 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 to profit or loss during the year:

– Interest and finance charges (note 15)

– Other expenses

Tax effect resulting from:

– Effective portion of changes in fair value of hedging instruments recognised during the year

– Amounts charged to profit or loss during the year

2022

(111)

184

(35)

2021

(227)

(171)

(9)

(143)

20 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 China and carried at fair
value, are as follows:

Investment Properties

in HK$ million

At 1 January

Additions*

Fair value remeasurement on investment properties (note 13)

Exchange (loss)/gain

At 31 December

2022

84,801

9,977

(3,076)

(31)

91,671

2021

86,058

886

(2,161)

84,801

* Additions for the year include the fair value measurement of investment properties on initial recognition from property development of HK$9,186 million

(2021: HK$545 million) and transfer from deferred expenditure of HK$398 million (2021: HK$nil).

All investment properties of the Group were remeasured at 31 December 2022 and 2021. Details of the fair value measurement are disclosed in
note 43. Investment properties in Hong Kong and Mainland China are remeasured semi-annually by an independent firm of surveyors, Colliers
International (Hong Kong) Limited and Cushman & Wakefield Limited respectively. Future market condition changes may result in further gains
or losses to be recognised through the consolidated statement of profit or loss in subsequent periods.

Included in the Group’s investment properties as at 31 December 2022 was HK$459 million (2021: HK$431 million) relating to properties in
Mainland China.

Annual Report 2022

241

Business Review and AnalysisFinancials and Other InformationOverviewCorporate Governance

20 Investment Properties and Other Property, Plant and Equipment

(continued)

B Other Property, Plant and Equipment

Leasehold
land

Self-
occupied
buildings

Civil works

Plant and
equipment

Assets under
construction

Total

in HK$ million

2022

Cost or Valuation

At 1 January 2022

Additions

Disposals/write-offs

Loss on revaluation

Capitalisation adjustments*

Transfer to Services Concession Assets

(note 21)

Other assets commissioned

Exchange differences

At 31 December 2022

At Cost

At 31 December 2022 Valuation

Aggregate depreciation

At 1 January 2022

Charge for the year

Written back on disposals

Written back on revaluation

Exchange differences

At 31 December 2022

Net book value at 31 December 2022

2021

Cost or Valuation

At 1 January 2021

Additions

Disposals/write-offs

Loss on revaluation

Capitalisation adjustments*

Transfer to Services Concession Assets

(note 21)

Other assets commissioned

Exchange differences

At 31 December 2021

At Cost

At 31 December 2021 Valuation

Aggregate depreciation

At 1 January 2021

Charge for the year

Written back on disposals

Written back on revaluation

Exchange differences

At 31 December 2021

Net book value at 31 December 2021

1,765

4,201

62,275

91,493

–

1,765

–

442

–

476

1,289

(31)

(97)

–

(39)

4,089

443

3,646

234

231

(31)

(149)

(16)

269

3,820

–

1,765

–

408

–

442

1,323

–

(3)

–

(15)

4,201

457

3,744

158

232

(2)

(145)

(9)

234

3,967

–

(1)

–

108

–

555

(618)

–

(6)

2,339

(198)

10,036

4,499

(8)

–

(17)

(2,447)

(4)

169,770

5,109

(657)

(97)

(1)

(23)

–

(241)

62,382

93,565

12,059

173,860

62,382

93,565

12,059

170,214

–

10,429

527

–

10,956

51,426

57,148

3,389

(563)

–

(112)

59,862

33,703

–

3,646

68,253

4,181

(594)

(149)

(128)

71,563

12,059

102,297

–

(1)

–

(192)

–

260

(529)

–

(16)

(9)

1,947

(133)

8,355

3,693

(38)

–

(11)

(1,962)

(1)

166,768

3,953

(571)

(3)

(208)

(20)

–

(149)

62,275

91,493

10,036

169,770

62,275

91,493

10,036

166,026

–

9,909

520

–

10,429

51,846

54,294

3,398

(469)

–

(75)

57,148

34,345

–

10,036

3,744

64,769

4,184

(471)

(145)

(84)

68,253

101,517

1,765

4,222

62,453

89,973

* Capitalisation adjustments related to adjustments on the cost of assets to their final contract values after finalisation of contracts.

242

MTR Corporation Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

20 Investment Properties and Other Property, Plant and Equipment

(continued)

B Other Property, Plant and Equipment (continued)
Assets under construction included cost amounting to HK$3.0 billion (2021: HK$2.4 billion) incurred on a project (“Signalling System Project”) of
replacing the existing signalling system (“SACEM System”) by communication-based train control signalling system (“CBTC System”) along the
Group’s four urban lines (Island, Tseung Kwan O, Kwun Tong and Tsuen Wan Lines) in Hong Kong.

Due to the technical complexity involved and the pandemic situation, the contractor for the Signalling System Project took longer than expected
to complete the software safety assurance processes previously required by the Group. During the year ended 31 December 2022, a revised
technical proposal for the Signalling System Project was developed using established CBTC software with a range of customised functions
essential for the Group’s train operation in Hong Kong. The Group is working closely with the contractor to progress the Signalling System
Project under the revised technical proposal, together with necessary measures to extend the useful lives of certain assets and to equip new
trains with the existing SACEM System, on an interim basis, so as to be able to continue to provide quality and reliable train services in the short
term. Upon the completion of the Signalling System Project, the new trains will be equipped with the new CBTC System for train services.

C Right-of-use Assets
At 31 December 2022 and 2021, the analysis of the net book value of right-of-use assets by class of underlying asset is as follows:

in HK$ million

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 leased, with remaining lease term of:

– between 10 and 50 years

– less than 10 years

Note

(i)

(ii)

(iii)

Ownership interests in leasehold investment properties, 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

2022

1,289

3,646

174

318

379

5,806

91,450

91,464

207

91,671

97,477

2021

1,323

3,744

223

–

451

5,741

84,638

84,652

149

84,801

90,542

The analysis of expense items in relation to leases recognised in profit or loss is as follows:

in HK$ million

2022

2021

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 leased

Interest on lease liabilities

Expense relating to short-term leases

Expense relating to leases of low-value assets, excluding short-term leases of low-value assets

149

342

145

330

During the year, additions to right-of-use assets were HK$10,409 million (2021: HK$920 million). This amount primarily related to additions of
investment properties, including fair value measurement of investment properties on initial recognition from property development (note 13).

Details of total cash outflow for leases and the maturity analysis of lease liabilities are set out in notes 42C and 35D, respectively.

Annual Report 2022

243

Business Review and AnalysisFinancials and Other InformationOverviewCorporate Governance
20 Investment Properties and Other Property, Plant and Equipment

(continued)

C Right-of-use Assets (continued)
(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 47A, 47B and 47C).

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 statement of profit or loss.

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 43.
The revaluation surplus of HK$52 million (2021: HK$142 million) and the related deferred tax expenses of HK$9 million (2021: HK$23 million) has
been recognised in other comprehensive income/loss and accumulated in the fixed assets revaluation reserve (note 41D). The carrying amount
of the self-occupied buildings at 31 December 2022 would have been HK$613 million (2021: HK$639 million) had the buildings been stated at
cost less accumulated depreciation.

(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 statement of profit or loss 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$91,671 million (2021: HK$84,801 million).
The costs of station kiosks of the Group held for use in operating leases were HK$905 million (2021: HK$863 million) and the related accumulated
depreciation charges were HK$576 million (2021: HK$541 million).

Total future minimum lease receipts under non-cancellable operating leases are receivable as follows:

2022

6,355

4,707

3,274

1,448

798

472

2021

7,734

4,549

2,942

2,183

1,074

1,149

17,054

19,631

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

244

MTR Corporation Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS20 Investment Properties and Other Property, Plant and Equipment

(continued)

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 statement of profit or loss 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.

21 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
(Shatin to
Central Link)

Shenzhen
Metro
Line 4

Shenzhen
Metro
Line 13

MTR
Nordic

London
Elizabeth
Line

Total

in HK$ million

2022

Cost

At 1 January 2022

15,226

22,130

249

160

9,212

Net additions during

the year

Disposals

Transfer from other
property, plant
and equipment

(note 20)

Exchange differences

–

2,922

(337)

–

At 31 December 2022

15,226

24,728

Accumulated
amortisation and
impairment loss

At 1 January 2022

4,289

5,015

Amortisation charge

for the year

Impairment loss

Written-off on
disposals

Exchange differences

305

1,185

–

(310)

–

At 31 December 2022

4,594

5,890

Net book value at
31 December 2022

10,632

18,838

–

345

–

294

(7)

–

249

–

(1)

–

(141)

–

(763)

8,403

3,876

317

962

(79)

(370)

4,706

925

956

–

(65)

1,816

–

237

3,697

1,816

48,040

–

(10)

–

(6)

4,156

(485)

(844)

50,890

13,326

–

(9)

–

(5)

1,853

962

(390)

(384)

15,367

35,523

Annual Report 2022

245

Business Review and AnalysisFinancials and Other InformationOverviewCorporate Governance

21 Service Concession Assets (continued)

KCRC Rail Merger

Initial
concession
property

Additional
concession
property

Additional
concession
property (High
Speed Rail)

Additional
concession
property
(Shatin to
Central Link)

Shenzhen
Metro
Line 4

Shenzhen
Metro
Line 13

MTR
Nordic

London
Elizabeth
Line

Total

in HK$ million

2021

Cost

At 1 January 2021

15,226

20,220

Net additions during

the year

Disposals

Transfer from other

property, plant and
equipment
(note 20)

Reclassification within
service concession
assets

Exchange differences

–

2,198

(253)

(44)

–

180

–

At 31 December 2021

15,226

22,130

249

Accumulated
amortisation

At 1 January 2021

3,985

4,321

Amortisation charge

for the year

Written-off on
disposals

Exchange differences

At 31 December 2021

4,289

304

906

–

(212)

–

5,015

–

160

–

8,937

101

(101)

–

275

9,212

3,432

384

(53)

113

3,876

–

925

–

925

–

Net book value at
31 December 2021

10,937

17,115

226

157

5,336

925

44,736

–

(8)

–

(7)

–

3,371

(354)

–

267

48,040

11,861

–

1,624

(265)

106

13,326

34,714

Initial concession property relates to the payments recognised at inception of the Rail Merger with KCRC while additional concession

A
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 (Shatin to Central Link) relate to the expenditures for the upgrade of the
concession property of High Speed Rail and Shatin to Central Link respectively.

SZL4 forms part of the Shenzhen Metro, which is operated by a wholly owned subsidiary, MTR Corporation (Shenzhen) Limited (“MTRSZ”).

B
In July 2020, the Shenzhen Municipal Government announced that a fare adjustment framework for the Shenzhen Metro network would come
into effect on 1 January 2021. The framework was expected to enable the establishment of a mechanism for fare setting and the implementation
procedures for fare adjustments. Up to 31 December 2022, there has been no increase in SZL4’s fare since MTRSZ started operating the line in
2010 whilst the operating costs continue to rise. As disclosed in previous years, if a suitable fare increase and adjustment mechanism are not
implemented soon, the long-term financial viability of this line will be impacted.

As it is anticipated that the mechanism and procedures for fare adjustments will take longer time to implement and patronage will remain at
a lower level for a period of time, an impairment test was performed for SZL4 at 30 June 2022, which carried a book value of HK$4,589 million,
and the corresponding recoverable amount was determined at HK$3,627 million as at 30 June 2022. As such, an impairment provision of
HK$962 million was recognised for the SZL4 service concession assets in the consolidated statement of profit or loss for the six months ended
30 June 2022. The recoverable amount for impairment had been determined based on a value in use calculation covering the remaining service
concession period. An estimated pre-tax discount rate of 9.2% was used in estimating SZL4’s value in use as at 30 June 2022. Based on the review
performed by the Group as at 31 December 2022, no further impairment loss was recognised as at 31 December 2022.

On 30 October 2020, MTR CREC Metro (Shenzhen) Company Ltd., formerly translated as “MTR CREG Metro (Shenzhen) Company Ltd.”

C
a subsidiary of the Company, signed the Project Concession Agreement with the Shenzhen Municipal Government for a Build-Operate-
Transfer (“BOT”) project in respect of the construction of SZL13 and the operation of SZL13 for a term of 30 years. Accordingly, the fair value of
construction services rendered during the year ended 31 December 2022 of HK$956 million (2021: HK$925 million) was capitalised as service
concession assets by reference to the stage of completion at the end of the reporting period.

Total capital cost for the project is estimated at RMB4.9 billion (HK$5.5 billion). As at 31 December 2022, the Group has incurred cumulative
expenditure of RMB1.6 billion (HK$1.8 billion) and has authorised outstanding commitments totalling RMB3.3 billion (HK$3.7 billion)
(2021: RMB4.2 billion (HK$5.7 billion)) in relation to the project which are included in capital commitment (note 48A).

246

MTR Corporation Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

22 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
Entrustment Agreements

(a)

The HKSAR Government and the Company entered into the HSR Preliminary Entrustment Agreement in 2008, and the HSR Entrustment
Agreement in 2010 (together, the “Entrustment Agreements”), in relation to the HSR.

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.

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).

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 Entrustment
Agreements (other than for death or personal injury) is subject to a cap equal to the total of 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 22A(b)(v) below), up to the date of this annual report, no claim has been received
from the HKSAR Government.

(b)

HSR Agreement

In 2015, as a result of the HSR programme being extended to the third quarter of 2018 and the Company and the HKSAR Government reaching
agreement for revising the estimate project cost to HK$84.42 billion (the “Revised Cost Estimate”), the HKSAR Government and the Company
entered into an agreement (the “HSR Agreement”) relating to the further funding and completion of the HSR (and which made certain changes
to the HSR Entrustment Agreement) which was subsequently approved by the Company’s independent shareholders at an extraordinary general
meeting, and the Legislative Council approved the HKSAR Government’s additional funding obligations, during 2016. Pursuant to the HSR
Agreement:

The HKSAR Government will bear and finance the project cost up to HK$84.42 billion, which includes an increase in the project cost by the

(i)
amount of HK$19.42 billion being the “Current Cost Overrun”;

(ii)
The Company will, if the project cost exceeds HK$84.42 billion, bear and finance the portion of the project cost which exceeds that sum (if
any) (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);

(iii)

The Company would pay a special dividend in cash of HK$4.40 in aggregate per share in two tranches in 2016 and 2017;

The HSR Project Management Fee increases from HK$4.59 billion to HK$6.34 billion. Consequently, the Liability Cap increases from up to

(iv)
HK$4.94 billion to up to HK$6.69 billion; and

(v)
The HKSAR Government reserves the right to refer to arbitration the question of the Company’s liability for the Current Cost Overrun (if
any) under the 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. 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.

Annual Report 2022

247

Business Review and AnalysisFinancials and Other InformationOverviewCorporate Governance22 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)
As at 31 December 2022, the Company has not made any provision in its consolidated financial statements in respect of:

(c)

any possible liability of the Company for any Further Cost Overrun (if any), given the Company does not currently believe based on

(i)
information available to date there is any need to revise further the Revised Cost Estimate;

any possible liability of the Company that may be determined in accordance with any arbitration that may take place (as more particularly

(ii)
described in note 22A(b)(v) 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 as of 31 December 2022 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).

B Shatin to Central Link (“SCL”) Project
(a)

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 reimbursable by the HKSAR Government to the Company. During the year ended
31 December 2022, HK$153 million (2021: HK$124 million) of such costs were incurred by the Company, which are payable by the HKSAR
Government. As at 31 December 2022, the amount of such costs which remained outstanding from the HKSAR Government was HK$209 million
(as at 31 December 2021: HK$246 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”) which has been fully received by the Company and recognised in the consolidated
statement of profit or loss in previous years.

248

MTR Corporation Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS22 Railway Construction Projects under Entrustment by the HKSAR

Government (continued)

B Shatin to Central Link (“SCL”) Project (continued)
(b)

SCL EA3 Cost Overrun

(i)

Cost to Complete

The Company has previously announced that, due to the continuing challenges posed by external factors, including issues such as delays
due to the discovery of archaeological relics, the HKSAR Government’s requests for additional scope and late or incomplete handover of
construction sites, 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. After carrying out detailed reviews of the estimated CTC for the main construction works,
on 10 February 2020, the Company submitted a revised estimated total CTC of 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 22B(b)(ii) below but excluding the Hung
Hom Incidents Related Costs in respect of which the Company had already recognised a provision of HK$2 billion in its consolidated statement
of profit or loss for the year ended 31 December 2019 (as detailed in note 22B(c)(ii) below). The 2020 CTC Estimate represents an increase of
HK$12,172 million from the Original Entrusted Amount of HK$70,827 million.

The HKSAR Government obtained the approval from Legislative Council on 12 June 2020 for additional funding required for the SCL Project
amounting to HK$10,801 million (“Additional Funding”) so that the SCL can be completed. 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
22B(c)(ii) below) and Additional PMC of HK$1,371 million for the Company as further detailed in note 22B(b)(ii) below.

(ii)

Provision for Additional PMC

As detailed in note 22B(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.

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 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 will continue, to comply with its project management
obligations under the SCL EA3 and has met, and will 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.

After taking into account the matters described 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 recognised a provision of
HK$1,371 million in its consolidated statement of profit or loss for the year ended 31 December 2020 for the estimated additional cost to the
Company of continuing to comply with its project management responsibilities. During the year ended 31 December 2022, the provision utilised
amounted to HK$314 million (2021: HK$533 million) and no provision was written back (2021: HK$nil). As at 31 December 2022, the provision
of HK$479 million (2021: HK$793 million), 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 statement of profit or loss in
that financial period.

Annual Report 2022

249

Business Review and AnalysisFinancials and Other InformationOverviewCorporate Governance22 Railway Construction Projects under Entrustment by the HKSAR

Government (continued)

B Shatin to Central Link (“SCL”) Project (continued)
(c)

Hung Hom Incidents

As stated in the Company’s announcement dated 18 July 2019, there were allegations in 2018 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.

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 each of the First Hung Hom Incident and the Second Hung Hom Incident, the Company has submitted to the HKSAR Government
proposals for verification of the relevant as-constructed conditions and workmanship quality.

(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). 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.

On 26 March 2019, the HKSAR Government published the redacted interim report of the COI in which the COI 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.

On 18 July 2019, the Company 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.

On 22 January 2020, the HKSAR Government reiterated, in its closing submissions 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 12 May 2020, the HKSAR Government published the final report of the COI in which the COI determined that it is fully satisfied that, with
the suitable measures in place, the station box, NAT, SAT and HHS structures will be safe and also fit for purpose. The suitable measures for
these structures were completed in 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)

Provision for the Hung Hom Incidents Related Costs

In order to progress the SCL Project and to facilitate the phased opening of the Tuen Ma Line 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 22B(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
statement of profit or loss for the year ended 31 December 2019. During the year ended 31 December 2022, the provision utilised amounted
to HK$117 million (2021: HK$206 million) and no provision was written back (2021: HK$nil). As at 31 December 2022, the provision of
HK$827 million (2021: HK$944 million), 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 statement of profit or loss in that financial period.

250

MTR Corporation Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS22 Railway Construction Projects under Entrustment by the HKSAR

Government (continued)

B Shatin to Central Link (“SCL”) Project (continued)
(d)

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
22B(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 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 2022 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.

23 Railway Construction in Progress
The railway construction costs of Oyster Bay Station are as follows:

in HK$ million

2022

Oyster Bay Station

Construction costs

Consultancy fees

Staff costs and other expenses

Finance costs

Utilisation of government grant (note 47H)

Total

Balance at
1 January

Additions

Balance at
31 December

–

(98)

–

(98)

–

The additions represent capital expenditure incurred and transferred from deferred expenditure for Oyster Bay Station.

The project is targeted to complete in 2030. Total capital cost for the project based on the defined scope of works and programme is estimated
at HK$6.5 billion. As at 31 December 2022, the Company has incurred cumulative expenditure of HK$98 million, which was wholly offset by the
government grant, and has authorised outstanding commitments totalling HK$6,366 million in relation to the project which are included in
Capital Commitments (note 48A).

Annual Report 2022

251

Business Review and AnalysisFinancials and Other InformationOverviewCorporate Governance24 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 2022, the outstanding Hong Kong Property Development Projects of the Company mainly include Oyster Bay Project at depot
site in Siu Ho Wan, the Tseung Kwan O Extension Property Project at the depot sites in Tseung Kwan O Area 86 (LOHAS Park), South Island Line
Property Project at sites in Wong Chuk Hang (THE SOUTHSIDE), Kwun Tong Line Extension Property Project at sites in Ho Man Tin, and East Rail
Line/Light Rail Property Projects at sites along the related railway lines.

A Property Development in Progress

in HK$ million

2022

Balance at
1 January

Net additions*

Transfer out to
profit or loss

Balance at
31 December

Hong Kong Property Development Projects

11,215

41,088

(11,034)

41,269

2021

Hong Kong Property Development Projects

11,942

(234)

(493)

11,215

* The net additions represent expenditure incurred for Hong Kong property development projects, including the amount of land premium, capital expenditure and

construction costs transferred from deferred expenditure, and be offset by payments received from developers and utilisation of government grant.

The lease terms of leasehold land in Hong Kong included under property development in progress are between 10 and 50 years.

B Stakeholding Funds
Being the stakeholder under certain Airport Railway, Tseung Kwan O Extension, South Island Line 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 have not been included in the consolidated statement of
financial position. As at 31 December 2022, the balance of the stakeholding funds was HK$23,715 million (2021: HK$36,320 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
2022, HK$128 million (2021: HK$67 million) of agency fee and other income in respect of West Rail property development was recognised
(note 12). During the year ended 31 December 2022, the reimbursable costs incurred by the Company including on-cost and interest accrued
were HK$55 million (2021: HK$59 million).

25 Deferred Expenditure
As at 31 December 2022, deferred expenditure included costs of HK$2.3 billion (2021: HK$0.9 billion) mainly incurred for certain railway projects
which the project agreements are yet to be reached with the HKSAR Government. The future development of the respective projects is expected
to bring future economic benefits to the Group. In the event that in a future period it is no longer considered probable that the corresponding
project agreements can be reached, and the costs concerned are no longer considered as recoverable, the costs concerned will be charged to
the consolidated statement of profit or loss in that reporting period.

252

MTR Corporation Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS26 Investments in Subsidiaries
The following list contains the particulars of principal subsidiaries of the Company as at 31 December 2022:

Name of company

LOUDER HK Company Limited

MTR Academy (HK) Company Limited

Issued
share capital/
contributed
registered capital

HK$100

HK$10,000

Proportion of ownership interest

Group’s
effective
interest

100%

Held by the
Company

Held by
subsidiary(ies)

–

100%

Place of
incorporation/
establishment
and operation

Hong Kong

Principal activities

Retail

Administering
the operation of
MTR Academy

MTR Lab Company Limited

MTR Telecommunication Company
Limited

HK$100

HK$100,000,000

100%

Ngong Ping 360 Limited

HK$2

100%

Pierhead Garden Management
Company Limited

HK$50,000

100%

TraxComm Limited

HK$15,000,000

100%

V-Connect Limited

HK$1,000

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

MTR Corporation (Sydney) SMCSW
Pty Limited

AUD2

100%

AUD1

100%

–

Hong Kong Holding of investments

Hong Kong

Australia

Mobile
telecommunication
services

Operating the Tung
Chung to Ngong Ping
cable car system and
theme village in
Ngong Ping

Property investment
and management

Fixed
telecommunication
network and
related services

Mobile
telecommunication
services

Railway operations
and maintenance

–

100% on
ordinary
shares;

100% on
Class A
shares

60%

Australia

Railway operations
and maintenance

Australia

Design and delivery of
railway related systems

Australia

MTR Corporation (C.I.) Limited

US$1,000

100%

–

Cayman Islands/
Hong Kong

MTR Consultadoria (Macau) Sociedade
Unipessoal Lda.

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 Mälartåg AB

SEK10,050,000

100%

MTR Tech AB

MTR Tunnelbanan AB

SEK30,000,000

SEK40,000,000

100%

MTR (Beijing) Commercial Facilities
Management Co., Ltd.^ @

HK$93,000,000

100%

MTR Corporation (Shenzhen) Limited^ @

HK$2,636,000,000

100%

MTR CREC Metro (Shenzhen) Company
Limited# @

RMB868,600,000

83%

–

100%

Design, delivery and
integration of railway
related systems

Financing

Railway consultancy
services

Railway operations
and management

Railway operations
and maintenance

Railway operations,
maintenance and
station management

Railway operations
and maintenance

Macao

Sweden

Railway maintenance

Sweden

The People’s
Republic of China

83%

The People’s
Republic of China

Railway operations
and maintenance

Property leasing
and management

Railway construction,
operations and
management

Annual Report 2022

253

Business Review and AnalysisFinancials and Other InformationOverviewCorporate Governance26 Investments in Subsidiaries (continued)

Proportion of ownership interest

Name of company

MTR Property Development (Shenzhen)
Company Limited# @

Issued
share capital/
contributed
registered capital

HK$2,180,000,000

Group’s
effective
interest

100%

MTR Corporation (Crossrail) Limited

GBP1,000,000

100%

Held by the
Company

Held by
subsidiary(ies)

Place of
incorporation/
establishment
and operation

–

100%

The People’s
Republic of China

100% United Kingdom

Principal activities

Property development,
operation, leasing,
management and
consultancy services

Railway operations
and maintenance

Subsidiaries not audited by KPMG

^ Wholly foreign owned enterprise registered under the People’s Republic of China (PRC) Law

Sino-foreign equity joint venture registered under PRC Law

@ English translation for identification purpose only

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.

27 Interests in Associates and Joint Ventures
The following list contains the particulars of material associates and joint venture as at 31 December 2022, all of which are unlisted corporate
entities whose quoted market price is not available:

Proportion of ownership interest

Group’s
effective
interest

Held by the
Company

Held by
subsidiary

Place of
incorporation/
establishment and
operation

Name of company

Associates

Octopus Holdings Limited (“OHL”)#

64.02%

–

Hong Kong

Beijing MTR Corporation Limited~ @

Beijing MTR L16 Corporation Limitedα @

Hangzhou MTR Corporation Limited

(“HZMTR”)*~ @

First MTR South Western Trains Limited*

NRT Pty Ltd*

Joint Venture

Hangzhou MTR Line 5 Corporation
Limited~ @

49%

30%

27.55%

60%

–

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

Railway operations
and management

49%

The People’s
Republic of China

49%

The People’s
Republic of China

30%

United Kingdom

The People’s
Republic of China

Metro investment, construction
and operations

27.55%

Australia

Financing, railway operations
and maintenance

60%

The People’s
Republic of China

Railway electrical and
mechanical construction,
operations and management

In January 2022, the Company acquired a total of 6.62% additional shares of OHL from Citybus Limited and New World First Bus Services Limited (subsidiaries
of Bravo Transport Services Limited). After the acquisition, the Company’s shareholding in OHL increased from 57.40% to 64.02%. The Group regards OHL and
its subsidiaries (the “OHL Group”) as associates as the Company cannot control the OHL Group’s activities unilaterally taking into account the Company’s voting
rights at the board meetings of OHL.

* 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

@ English translation for identification purpose only

All the associates and joint ventures are accounted for using the equity method in the consolidated financial statements and considered to be
not individually material.

254

MTR Corporation Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
27 Interests in Associates and Joint Ventures (continued)
The summary financial information of the Group’s effective interests in associates and joint ventures is as follows:

in HK$ million

Income

Expenses and others

Profit before taxation

Income tax

Net profit

Other comprehensive (loss)/income

Total comprehensive income

Assets

Liabilities

Net assets

Group’s share of net assets of the associates and joint ventures

Goodwill

Carrying amount in the consolidated statement of financial position

2022

7,713

(6,077)

1,636

(541)

1,095

(887)

208

34,690

(22,659)

12,031

307

12,338

2021

7,906

(6,494)

1,412

(444)

968

304

1,272

33,179

(20,789)

12,390

12,442

HZMTR, a 49% owned associate of the Group, operates Hangzhou Metro Line 1 (“HZL1”), the HZL1 Xiasha Extension and HZL1 Airport Extension.
HZMTR has been suffering from losses for most of the time during the past years due to slow growth of patronage. In the last few years, the
patronage level has been further impacted by the pandemic. As there is no patronage protection mechanism under this project agreement, the
long-term financial viability of this line will be impacted if patronage remains at a low level over a period of time.

28 Investments in Securities
Investments in securities are measured at fair value and comprise of:

in HK$ million

Unlisted equity securities held by subsidiaries

Listed debt securities held by an overseas insurance underwriting subsidiary

Bank medium-term notes held by the Company

2022

669

290

–

959

2021

708

272

499

1,479

As at 31 December 2022, all debt securities were expected to mature within one year except for HK$235 million (2021: HK$225 million)
which were expected to mature after one year. During the year ended 31 December 2022, net fair value gain on investments in securities of
HK$20 million (2021: HK$28 million) was recognised.

29 Properties Held for Sale

in HK$ million

Properties held for sale

– at cost

– at net realisable value

Representing:

Hong Kong property development

Mainland China property development

2022

2021

1,307

581

1,888

1,876

1,888

614

639

543

639

Properties held for sale represent the Group’s interest in unsold properties or properties received by the Group as sharing-in-kind in Hong Kong,
and the Group’s unsold properties in Mainland China.

For Hong Kong property development, the net realisable values as at 31 December 2022 and 2021 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,
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$43 million (2021: HK$4 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.

Annual Report 2022

255

Business Review and AnalysisFinancials and Other InformationOverviewCorporate Governance30 Derivative Financial Assets and Liabilities
A Fair Value
The contracted notional amounts, fair values and maturities based on contractual undiscounted cash flows of derivative financial instruments
outstanding are as follows:

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

2022
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

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

178

152

1,213

12,915

5,392
4,442
2,534
26,826

39
26
71
216

1,475

(6)

– cash flow hedges:

383

(30)

– inflow
– outflow

– not qualified for hedge accounting:

223

(18)

– inflow
– outflow
Cross currency swaps
– fair value hedges:

– inflow
– outflow

4,565

(261)

– cash flow hedges:

9,649

(600)

– inflow
– outflow

Net settled:

Interest rate swaps
– fair value hedges
– not qualified for hedge accounting

Total

2,401
300
18,996

45,822

(142)
(47)
(1,104)

256

MTR Corporation Limited

98
(95)

157
(152)

257
(249)

265
(249)

(37)
30
26
51

1,475
(1,481)

223
(237)

137
(146)

749
(841)

464
(559)

(48)
(10)
(274)

20
(19)

–
–

11
(13)

265
(250)

49
17
12
92

–
–

86
(96)

10
(11)

65
(64)

–
–

183
(178)

157
(152)

317
(295)

706
(698)

1,291
(1,255)

6,309
(6,234)

10,381
(10,289)

17,220
(17,022)

37
(21)
24
138

–
–

44
(50)

58
(66)

–
–
20
120

49
26
82
401

–
–

1,475
(1,481)

353
(383)

205
(223)

2,324
(2,363)

941
(996)

826
(867)

4,840
(5,067)

183
(203)

1,589
(1,815)

8,507
(8,794)

10,743
(11,371)

(35)
(9)
(114)

(36)
(20)
(351)

(33)
(17)
(378)

(152)
(56)
(1,117)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

30 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

2021
Derivative Financial Assets
Gross settled:
Foreign exchange forwards

– fair value hedges:

– inflow
– outflow

– cash flow hedges:

– inflow
– outflow

– not qualified for hedge accounting:

– inflow
– outflow
Cross currency swaps
– fair value hedges:

– inflow
– outflow

498

128

111

4,969

159

– cash flow hedges:

12,742

145

– 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

2,400
500
2,034
23,382

26
17
12
363

3,450

(10)

– cash flow hedges:

424

(15)

– inflow
– outflow

– not qualified for hedge accounting:

276

(15)

– inflow
– outflow
Cross currency swaps
– fair value hedges:

– inflow
– outflow

783

(5)

– cash flow hedges:

9,654

(515)

– inflow
– outflow

Net settled:

Interest rate swaps
– not qualified for hedge accounting

Total

300
14,887

38,269

(1)
(561)

499
(498)

33
(32)

104
(103)

2,078
(1,917)

262
(240)

26
(3)
(2)
207

–
–

97
(96)

8
(8)

972
(904)

262
(240)

6
1
2
100

1,974
(1,980)

1,476
(1,480)

197
(203)

206
(218)

13
(5)

202
(217)

3
(28)

57
(59)

20
(21)

13
(11)

485
(561)

1
(80)

–
–

1,513
(1,496)

6,210
(6,150)

2
8
6
93

–
–

151
(158)

35
(37)

38
(41)

720
(817)

(2)
(111)

–
–

499
(498)

130
(128)

112
(111)

707
(698)

5,270
(5,015)

10,871
(10,760)

17,605
(17,390)

(1)
12
7
138

–
–

4
(4)

–
–

837
(840)

33
18
13
538

3,450
(3,460)

409
(424)

261
(276)

901
(897)

9,365
(9,660)

10,772
(11,255)

(3)
(301)

(1)
(520)

Annual Report 2022

257

Business Review and AnalysisFinancials and Other InformationOverviewCorporate Governance

30 Derivative Financial Assets and Liabilities (continued)
A Fair Value (continued)
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 2022 and 2021 were used to discount the cash flows of financial
instruments. Interest rates used ranged from 3.63% to 4.99% (2021: 0.16% to 1.68%) for Hong Kong dollars, 3.81% to 5.16% (2021: 0.21% to
1.70%) for United States dollars, 3.01% to 4.62% (2021: 0.02% to 2.12%) for Australian dollars and 0.07% to 1.14% (2021: -0.04% to 0.26%) 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 43.

B Financial Risks
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. 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 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.

As at 31 December 2022, the Group had undrawn committed banking facility of HK$14,512 million (2021: HK$15,523 million).

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 (as detailed in note 35D below), 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:

in HK$ million

instruments Bank loans

Others

Total

instruments Bank loans

Others

Total

2022

2021

Capital
market

Loans and other obligations

Amounts repayable beyond 5 years

28,382

1,153

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

11,905

804

–

29,535

30,068

1,040

–

31,108

12,709

9,368

710

620

10,698

8,254

3,843

52,384

202

3,302

5,461

619

–

9,075

7,145

619

58,464

1,992

6,698

48,126

1,758

1,843

5,351

–

3,750

8,541

620

54,097

Others represent obligations under lease out/lease back transaction (note 20E).

258

MTR Corporation Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS30 Derivative Financial Assets and Liabilities (continued)
B Financial Risks (continued)
The Group’s exposure to liquidity risks in respect of Derivative Financial Liabilities (note 30A), Lease Liabilities (note 35D), Creditors, Other
Payables and Provisions (note 36), Amounts Due to Related Parties (note 37), Obligations under Service Concession (note 38), and Loans from
Holders of Non-controlling Interests (note 39) are disclosed in the respective notes.

(ii)

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 risks 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 80% (2021: 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 2022, 70% (2021: 70%) 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 2022, it is estimated that a 100 basis points increase/100 basis points decrease in interest rates, with all other variables held
constant, would decrease/increase the Group’s profit after tax and decrease/increase the Group’s retained profits by approximately HK$6 million/
HK$7 million. Other components of consolidated equity would increase/decrease by approximately HK$144 million/HK$145 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 2021, a similar analysis was performed based on the assumption of a 100 basis points increase/25 basis points decrease in interest rates,
which would increase/decrease the Group’s profit after tax and increase/decrease the Group’s retained profits by approximately HK$76 million/
HK$15 million. Other components of consolidated equity would increase/decrease by approximately HK$99 million/HK$14 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 investment and procurement activities
outside Hong Kong.

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
outside Hong Kong. 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.

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.

Annual Report 2022

259

Business Review and AnalysisFinancials and Other InformationOverviewCorporate Governance30 Derivative Financial Assets and Liabilities (continued)
B Financial Risks (continued)
(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 20E). 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 Group also manages and controls its exposure to credit risk in respect of receivables as stated in note 32.

31 Stores and Spares
As at 31 December 2022, stores and spares net of provision for obsolete stock of HK$25 million (2021: HK$23 million) amounted to
HK$2,261 million (2021: HK$2,129 million), of which HK$1,607 million (2021: HK$1,452 million) is expected to be consumed within 1 year
and HK$654 million (2021: HK$677 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.

32 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 32(ii)

(i)
below) is collected either through Octopus Cards and QR code 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 30 days.

In respect of the High Speed Rail, tickets are sold by the Company and other Mainland train operators. The clearance centre of China

(ii)
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

(iii)
day or in cash for other ticket types. Fare revenue from MTRX in Sweden 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. Service fees from Macao Light Rapid Transit Taipa Line are
billed monthly with due dates in accordance with the terms of the service agreement.

(iv)
Franchise revenue in Australia is collected either daily or monthly depending on the revenue nature. The majority of the franchise revenue
from operations in Sweden is collected in the transaction month with the remainder being collected in the following month. Concession revenue
for London Elizabeth Line is collected once every 4 weeks.

Rentals, advertising and telecommunication service fees are billed monthly with due dates ranging from immediately due to 60 days.

(v)
Tenants of the Group’s investment properties and station kiosks are generally required to pay three to six months’ rental deposit upon the
signing of lease agreements.

260

MTR Corporation Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS32 Debtors and Other Receivables (continued)
(vi)
the respective agreements.

Amounts receivable under interest rate and currency swap agreements with financial institutions are due in accordance with the terms of

(vii) Consultancy service income is 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

(ix)
sale and purchase agreements.

The ageing of debtors by due dates is analysed as follows:

in HK$ million

Amounts not yet due

Overdue by within 30 days

Overdue by more than 30 days but within 60 days

Overdue by more than 60 days but within 90 days

Overdue by more than 90 days

Total debtors

Other receivables and contract assets

2022

3,715

210

284

4,310

9,579

13,889

2021

3,779

283

139

4,297

10,500

14,797

Included in other receivables as at 31 December 2022 was HK$2,962 million (2021: HK$4,300 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.

In addition, the Company purchased the tax reserve certificates of Hong Kong Profits Tax in respect of certain payments relating to the Rail
Merger. Details are set out in note 16A(ii).

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 (HK$1.8 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 2022, all debtors and other receivables were expected to be recovered within one year except for amounts relating to
deposits and other receivables of HK$4,735 million (2021: HK$4,910 million) 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

2022

2021

Annual Report 2022

261

Business Review and AnalysisFinancials and Other InformationOverviewCorporate Governance33 Amounts Due from Related Parties

in HK$ million

Amounts due from:

– HKSAR Government

– KCRC

– associates

2022

1,017

4,157

255

5,429

2021

757

3,507

120

4,384

As at 31 December 2022, 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, 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 24C), 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 and Shatin to Central Link.

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 2022, all amounts due from related parties were expected to be recovered within one year except for HK$2,788 million
(2021: HK$2,273 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.

34 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 35E)

Less: Structured bank deposits

Cash and cash equivalents in the consolidated statement of cash flows

2022

9,369

6,765

16,134

(4,175)

(1,718)

10,241

2021

15,769

5,201

20,970

(10,218)

–

10,752

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:

2022

770

193

2021

826

321

in million

Australian dollars

Euros

Japanese yen

Pound sterling

Renminbi

United States dollars

262

MTR Corporation Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

35 Loans and Other Obligations
A By Type

in HK$ million

Capital market instruments

Listed or publicly traded:

Debt issuance programme notes due

during 2023 to 2047 (2021: due during
2023 to 2047)

Unlisted:

Debt issuance programme notes due

during 2023 to 2055 (2021: due during
2022 to 2055)

Total capital market instruments

Bank loans

Lease liabilities

Others

Loans and other obligations

Short-term loans

Total

2022

2021

Carrying
amount

Fair value

Repayable
amount

Carrying
amount

Fair value

Repayable
amount

20,206

18,797

20,680

21,654

23,468

21,715

20,588

40,794

3,773

1,113

574

46,254

1,592

47,846

20,063

38,860

3,773

1,117

574

44,324

1,592

45,916

21,365

42,045

3,773

1,113

574

47,505

1,592

49,097

15,373

37,027

3,501

1,026

548

42,102

1,650

43,752

17,634

41,102

3,501

1,060

603

46,266

1,650

47,916

15,792

37,507

3,501

1,026

548

42,582

1,650

44,232

Others include non-defeased obligations under lease out/lease back transaction (note 20E).

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 are 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 43.

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:

in million

Australian dollars

Japanese yen

Renminbi

United States dollars

Before hedging activities

After hedging activities

2022

431

15,000

3,840

2,230

2021

431

15,000

3,610

2,230

2022

2021

–

Annual Report 2022

263

Business Review and AnalysisFinancials and Other InformationOverviewCorporate Governance

35 Loans and Other Obligations (continued)
B By Repayment Terms

2022

2021

Capital
market
instruments

Bank
loans

Lease

liabilities Others

Total

Capital
market
instruments

Bank
loans

Lease

liabilities Others

Total

in HK$ million

Loans and other obligations

Amounts repayable beyond 5 years

22,235

1,289

203

–

23,727

23,260

938

–

24,207

9,929

688

204

574

11,395

7,271

667

141

548

8,627

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

2,726

1,648

7,155

148

202

504

–

7,505

4,878

1,226

1,735

5,750

161

299

577

–

3,260

6,488

Short-term loans

–

1,592

–

1,592

–

1,650

–

1,650

42,045

5,365

1,113

574

49,097

37,507

5,151

1,026

548

44,232

42,045

3,773

1,113

574

47,505

37,507

3,501

1,026

548

42,582

Less: Unamortised discount/

premium/finance charges
outstanding

Adjustment due to fair value change
of financial instruments

(246)

(1,005)

–

(246)

(266)

(1,005)

(214)

–

(266)

(214)

Total carrying amount of debt

40,794

5,365

1,113

574

47,846

37,027

5,151

1,026

548

43,752

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 2022 and 2021 comprise:

in HK$ million

2022

2021

Principal
amount

Net consideration
received

Principal
amount

Net consideration
received

Debt issuance programme notes

10,288

10,282

5,225

During the year ended 31 December 2022, the Company issued RMB510 million (HK$571 million) of listed debt securities (2021: RMB2,600 million
(HK$3,097 million)), and HK$8,193 million and RMB1,320 million (HK$1,524 million) of unlisted debt securities in the respective currency
(2021: HK$1,418 million and RMB600 million (HK$710 million) in the respective currency).

During the year ended 31 December 2022, the Group redeemed RMB1,350 million (HK$1,606 million) of its listed debt securities and
redeemed HK$3,848 million (2021: HK$nil) and RMB250 million (HK$296 million) of its unlisted debt securities in the respective currency
(2021: HK$2,813 million, RMB720 million (HK$783 million) and USD60 million (HK$465 million) in the respective currency).

As at 31 December 2022 and 2021, 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.

264

MTR Corporation Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

35 Loans and Other Obligations (continued)
D Lease Liabilities
At 31 December 2022 and 2021, the Group had lease liabilities as follows:

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

2022

2021

Present value of
the minimum
lease payments

Total minimum
lease payments

Present value of
the minimum
lease payments

Total minimum
lease payments

504

202

204

203

609

1,113

519

214

220

219

653

1,172

(59)

1,113

577

299

141

449

1,026

603

317

149

475

1,078

(52)

1,026

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 2022 and 2021.

As at 31 December 2022, MTR Corporation (Shenzhen) Limited has pledged the fare and non-fare revenue and the benefits of insurance

(ii)
contracts in relation to Phase 2 of Shenzhen Metro Line 4 as security for the RMB856 million (HK$960 million) bank loan facility granted to it.

As at 31 December 2022, MTR CREC Metro (Shenzhen) Company Ltd. has pledged the fare and non-fare revenue in relation to Shenzhen

(iii)
Metro Line 13 as security for the RMB3.20 billion (HK$3.59 billion) bank loan facility granted to it.

Save as disclosed above and those disclosed elsewhere in the consolidated financial statements, none of the other assets of the Group was
charged or subject to any encumbrance as at 31 December 2022.

36 Creditors, Other Payables and Provisions

in HK$ million

Creditors and accrued charges

Other payables, deferred income and provisions (notes 22B(b)(ii)&(c)(ii))

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.

The nominal values of creditors and accrued charges are not significantly different from their fair values.

2022

19,583

47,522

2,587

69,692

2022

8,143

2,012

886

4,544

15,585

2,459

1,539

19,583

2021

18,620

18,583

2,874

40,077

2021

7,631

1,754

730

4,088

14,203

2,818

1,599

18,620

Annual Report 2022

265

Business Review and AnalysisFinancials and Other InformationOverviewCorporate Governance36 Creditors, Other Payables and Provisions (continued)
A Creditors and Accrued Charges (continued)
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

Canadian dollars

Euros

Japanese yen

Pound sterling

Renminbi

United States dollars

2022

2021

–

280

102

B Other Payables, Deferred Income and Provisions
Other payables included contract retentions. 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 grant of HK$31,522 million (2021: HK$343 million).

C Contract Liabilities
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

2022

2,874

386

(576)

(97)

2,587

2021

2,444

1,283

(859)

2,874

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.

D As at 31 December 2022, except for unutilised government grant included in deferred income, contract liabilities and others of
HK$52,075 million (2021: HK$21,369 million) which were expected to be settled or recognised as income after one year, all remaining creditors
and other payables were expected to be settled or recognised as income within one year. The amounts due after one year for the Group as at
31 December 2022 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/refunded within three years. The Group considers the effect of discounting would be immaterial.

266

MTR Corporation Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS37 Amounts Due to Related Parties

in HK$ million

Amounts due to:

– HKSAR Government

– KCRC

– associates

2022

2021

145

387

592

333

479

The amount due to the HKSAR Government as at 31 December 2022 relates to land administrative fees in relation to railway extensions.

The amount due to KCRC as at 31 December 2022 mainly relates to the accrued portion of the fixed annual payment and variable annual
payment that is expected to be settled within 12 months.

38 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

2022

10,231

(75)

(14)

2021

10,295

(70)

10,142

10,231

The outstanding balances as at 31 December 2022 and 2021 are repayable as follows:

in HK$ million

2022

Interest
expense
relating
to future
periods

Present
value of
payment
obligations

Total
payment
obligations

Present
value of
payment
obligations

2021

Interest
expense
relating
to future
periods

Total
payment
obligations

Amounts repayable beyond 5 years

9,689

13,016

22,705

9,806

13,682

23,488

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

289

1,995

2,284

272

2,015

2,287

678

682

762

683

688

762

10,142

16,371

26,513

10,231

17,068

27,299

39 Loans from Holders of Non-controlling Interests
Loans from holders of non-controlling interests as at 31 December 2022 represents the portion of total shareholder loan of AUD60 million
(HK$317 million) (2021: AUD60 million (HK$340 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.

Annual Report 2022

267

Business Review and AnalysisFinancials and Other InformationOverviewCorporate Governance40 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

2022

2,833

120

2,953

2021

2,359

2,381

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:

in HK$ million

2022

Balance as at 1 January 2022

Charged/(credited) to profit or loss

Charged/(credited) to other comprehensive

income

Exchange differences

Balance as at 31 December 2022

2021

Balance as at 1 January 2021

Charged/(credited) to profit or loss

Charged/(credited) to other comprehensive

income

Exchange differences

Balance as at 31 December 2021

in HK$ million

Net deferred tax assets

Net deferred tax liabilities

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

13,669

359

–

14,033

13,365

302

–

13,669

716

752

723

(30)

–

716

(463)

(126)

(38)

(574)

(314)

(225)

(463)

–

(28)

–

(104)

(44)

–

13,819

206

(12)

(135)

14,094

(148)

–

13,655

(104)

13,819

2022

(606)

14,700

14,094

2021

(599)

14,418

13,819

C
The Group has not recognised deferred tax assets in respect of some of its subsidiaries’ cumulative tax losses of HK$844 million
(2021: HK$416 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.

268

MTR Corporation Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

41 Share Capital, Shares Held for Executive Share Incentive Scheme,
Reserves, Company-level Movements in Components of Equity
and Capital Management

A Share Capital

2022

2021

Number of shares

HK$ million

Number of shares

HK$ million

Ordinary shares, issued and fully paid:

At 1 January

6,193,462,514

60,184

6,180,927,873

59,666

Shares issued in respect of scrip dividend of

2021/2020 final ordinary dividend

Shares issued in respect of scrip dividend of

2022/2021 interim ordinary dividend

Vesting of shares of Executive Share Incentive

Scheme

Shares issued under the share option scheme

5,772,961

2,825,309

–

246

113

–

8,510,398

1,676,743

–

2,347,500

369

At 31 December

6,202,060,784

60,547

6,193,462,514

60,184

In accordance with section 135 of the Companies Ordinance, the ordinary shares of the Company do not have a par value.

B Shares Held for Executive Share Incentive Scheme
During the year ended 31 December 2022, the Company awarded Performance Shares and Restricted Shares under the Company’s Executive
Share Incentive Scheme to certain eligible employees of the Group (note 44(ii)). In this regard, 132,000 Restricted Shares were awarded and
accepted by a grantee on 1 April 2022, and a total of 240,700 Performance Shares and 2,507,250 Restricted Shares were awarded and accepted
by the grantees on 8 April 2022 (2021: a total of 1,558,050 Performance Shares and 1,955,950 Restricted Shares were awarded and accepted by
the grantees on 8 April 2021). The fair values of these Award Shares were HK$42.35 per share at 1 April 2022 and HK$42.05 per share at 8 April
2022 (2021: HK$44.05 per share at 8 April 2021).

During the year ended 31 December 2022, 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 2,560,000 Ordinary Shares
(2021: 2,650,000 Ordinary Shares) of the Company for a total consideration of approximately HK$109 million (2021: HK$116 million). During
the year ended 31 December 2022, 62,581 Ordinary Shares (2021: 45,520 Ordinary Shares) of the Company were issued to the Executive Share
Incentive Scheme in relation to scrip dividend issued amounting to HK$3 million (2021: HK$2 million).

During the year ended 31 December 2022, 2,172,518 Award Shares (2021: 2,996,112 Award Shares) were transferred to the awardees under
the Executive Share Incentive Scheme upon vesting. The total cost of the vested shares was HK$95 million (2021: HK$135 million). During
the year ended 31 December 2022, HK$4 million (2021: HK$3 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 2022, 255,491 award shares
(2021: 878,626 award shares) were lapsed/forfeited.

As at 31 December 2022, taking into account the shares acquired out of the dividends from the shares held under the trust, there were
6,097,136 shares (2021: 5,647,073 shares) 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 ended 31 December

2021 comprise:

Employee share options exercised:

– 2007 Share Option Scheme

Number of shares

Weighted average
exercise price
HK$

2,347,500

28.65

As at 31 December 2021, all outstanding share options granted under the 2007 Share Option Scheme had been exercised and/or lapsed.

Annual Report 2022

269

Business Review and AnalysisFinancials and Other InformationOverviewCorporate Governance

41 Share Capital, Shares Held for Executive Share Incentive Scheme,
Reserves, Company-level Movements in Components of Equity
and Capital Management (continued)

D Reserves
The fixed assets revaluation reserve is used to deal with the surpluses or deficits arising from the revaluation of self-occupied buildings
(note 2E(ii)).

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 award shares under the
Executive Share Incentive Scheme granted which are yet to be vested (2021: also including share options under the share option scheme which
are yet to be exercised), as explained in the accounting policy under note 2W(iii).

The exchange reserve of the Group comprises all foreign exchange differences arising from the translation of the financial statements of foreign
entities. 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 fair value measurement of investment properties of HK$65,237 million
(2021: HK$66,033 million) included in retained profits of the Company are non-distributable as they do not constitute realised profits. As at
31 December 2022, the Company considers that the total amount of reserves of the Company available for distribution to shareholders
amounted to HK$43,684 million (2021: HK$41,830 million).

Included in the Group’s retained profits as at 31 December 2022 is an amount of HK$3,837 million (2021: HK$3,263 million), being the retained
profits attributable to the associates and joint ventures.

E Capital Management
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 FSI of the HKSAR Government is the majority shareholder of the Company holding 4,634,173,932 shares as at 31 December
2022, representing 74.72% 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, bank balance and deposits (2021: also net of bank medium-term notes). As at 31 December
2022, the Group’s net debt-to-equity ratio is 23.3% (2021: 18.1%).

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 2022, 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.

270

MTR Corporation Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS41 Share Capital, Shares Held for Executive Share Incentive Scheme,
Reserves, Company-level Movements in Components of Equity
and Capital Management (continued)

F Company-level Movements in Components of Equity
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

Fixed
assets
revaluation
reserve

Employee
share-
based
capital
reserve

Hedging
reserve

Note

Share
capital

Retained
profits

Total
equity

in HK$ million

2022

Balance as at 1 January 2022

60,184

(245)

3,781

(172)

124

108,035

171,707

Profit for the year

Other comprehensive income/(loss) for

the year

Total comprehensive income for the year

Amounts transferred from hedging reserve
to initial carrying amount of hedged
items

2021 final ordinary dividend

Shares issued in respect of scrip dividend
of 2021 final ordinary dividend

2022 interim ordinary dividend

Shares issued in respect of scrip dividend
of 2022 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

Balance as at 31 December 2022
2021

Balance as at 1 January 2021

Profit for the year

Other comprehensive income/(loss) for

the year

Total comprehensive income/(loss) for

the year

Amounts transferred from hedging reserve
to initial carrying amount of hedged
items

2020 final ordinary dividend

Shares issued in respect of scrip dividend
of 2020 final ordinary dividend

2021 interim ordinary dividend

Shares issued in respect of scrip dividend
of 2021 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

–

246

–

113

–

(2)

–

(1)

(109)

–

110

–

(96)

118

10,056

(190)

(37)

9,866

10,019

–

(6,317)

246

(2,604)

–

(3)

–

113

(109)

–

118

60,547

(262)

3,824

(59)

146

108,980

173,176

59,666

(262)

3,662

–

369

–

(1)

–

(1)

(116)

135

–

119

–

(52)

–

(117)

(3)

–

181

106,334

169,529

–

(135)

(5)

9,093

217

219

9,310

9,312

–

(3)

(6,060)

369

(1,548)

–

(3)

–

(116)

–

Balance as at 31 December 2021

60,184

(245)

3,781

(172)

124

108,035

171,707

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Business Review and AnalysisFinancials and Other InformationOverviewCorporate Governance

2021

8,019

169

8,188

813

(153)

(515)

8,333

Total

42 Other Cash Flows Information
A
depreciation, amortisation and variable annual payment from recurrent businesses to cash generated from operations is as follows:

Reconciliation of the Group’s operating profit before Hong Kong property development, fair value measurement of investment properties,

in HK$ million

Operating profit before Hong Kong property development, fair value measurement of investment
properties, depreciation, amortisation and variable annual payment from recurrent businesses

Adjustments for non-cash items

Operating profit before working capital changes

(Increase)/decrease in debtors and other receivables

Increase in stores and spares

Decrease in creditors, other payables and provision

Cash generated from operations

Reconciliation of the Group’s liabilities arising from financing activities is as follows:

2022

7,852

527

8,379

(307)

(185)

(57)

7,830

in HK$ million

2022

At 1 January 2022

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 paid

Exchange differences

Other changes:

– Adjustment due to fair value change

of financial instruments

– Recognition of lease liabilities

– Interest and finance charges

– Reclassification

Loans and other obligations

Capital
market
instruments

Bank
loans

Lease
liabilities

Others

Short-term
loans

Interest and
finance
charges
payables

37,027

3,501

1,026

548

1,650

139

43,891

10,287

3,053

(5,750)

(2,549)

–

4,537

504

–

(149)

–

(149)

–

(159)

(51)

(770)

–

(770)

–

(73)

–

287

–

287

1,113

–

28,306

(28,430)

–

(124)

(7)

–

574

1,592

–

(961)

–

41,646

(36,729)

(149)

(961)

3,807

(217)

(770)

287

1,027

1,053

–

1,027

205

–

570

48,051

At 31 December 2022

40,794

3,773

272

MTR Corporation Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

42 Other Cash Flows 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

35,996

9,287

1,180

520

3,357

150

50,490

in HK$ million

2021

At 1 January 2021

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 paid

Exchange differences

Other changes:

– Adjustment due to fair value change

of financial instruments

– Recognition of lease liabilities

– Interest and finance charges

– Reclassification

5,225

4,381

(4,061)

(10,210)

–

1,164

(5,829)

–

(206)

–

(206)

(57)

(134)

–

(134)

–

(5)

–

109

–

109

1,026

–

548

6,926

(8,638)

–

(1,712)

–

1,650

–

(910)

–

899

–

899

139

At 31 December 2021

37,027

3,501

C Total Cash Outflows for Leases
Amounts included in the consolidated statement of cash flows 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

2022

264

310

2022

214

116

330

16,532

(22,909)

(206)

(910)

(7,493)

(11)

(128)

109

924

–

905

43,891

2021

257

298

2021

193

105

298

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Business Review and AnalysisFinancials and Other InformationOverviewCorporate Governance

43 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

A Fair Value Measurements of Fixed Assets
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 2022 and 2021, 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 2022 and 2021 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 2022 was 3.5% – 5.75% (2021: 3.5% – 5.75%) with a weighted average of 4.8%
(2021: 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 2022 are shown in note 20A. All the fair value adjustment
related to remeasurement on investment properties held as at 31 December 2022 was recognised under “Loss from fair value measurement of
investment properties” in the consolidated statement of profit or loss.

B Fair Value Measurements of Financial Instruments
(i)

Financial Assets and Liabilities Carried at Fair Value

Included in the Group’s investments in securities as at 31 December 2022, there were HK$290 million (2021: HK$272 million) of listed debt
securities carried at fair value using Level 1 measurements and HK$669 million (2021: HK$708 million) of unlisted equity securities carried at fair
value using Level 3 measurements (2021: there were also HK$499 million of investment in bank medium-term notes carried at fair value using
Level 2 measurements).

The Group’s derivative financial instruments were carried at fair value using Level 2 measurements. As at 31 December 2022, the fair
values of derivative financial assets and derivative financial liabilities were HK$216 million (2021: HK$363 million) and HK$1,104 million
(2021: HK$561 million) respectively.

Included in the Group’s cash, bank balances and deposits as at 31 December 2022, there were HK$1,718 million (2021: HK$nil) of structured bank
deposits carried at fair value using Level 3 measurements. The fair values of structured bank deposits are based on the statements provided by
the counterparty financial institutions.

274

MTR Corporation Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS43 Fair Value Measurement (continued)
B Fair Value Measurements of Financial Instruments (continued)
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 (2021: also investment in bank
medium-term notes). 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.

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 less liabilities (recognised and unrecognised). The fair value measurement is
positively correlated to the fair value of the individual assets less liabilities (recognised and unrecognised). The movements of the investments in
unlisted equity securities during the year are as follows:

in HK$ million

At 1 January

Additions

Disposal

Changes in fair value recognised in profit or loss

Exchange differences recognised in other comprehensive income

At 31 December

2022

708

(57)

(58)

670

2021

254

421

–

708

As at 31 December 2022, it is estimated that a 5-percent increase/decrease (2021: 5-percent increase/decrease) in fair value of the total individual
assets less liabilities (recognised and unrecognised), with all other variables held constant, would increase/decrease the Group’s profit after tax
by approximately HK$25 million/HK$25 million (2021: HK$27 million/HK$27 million).

During the year ended 31 December 2022, the additions to structured bank deposits amounted to HK$1,718 million (2021: HK$nil). As at
31 December 2022, the fair value of structured bank deposits was HK$1,718 million (2021: HK$nil). The fair value is determined by discounting
the estimated future cash inflows considering the interest rates and exchange rates linked to the deposits. Sensitivity analysis for structured bank
deposits with fair value measurement are not disclosed as the effect is considered insignificant.

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 2022 and 2021, 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.

(ii)

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 2022 and 2021 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 2022

At 31 December 2021

Carrying amount

Fair value

Carrying amount

Fair value

40,794

1,687

38,860

1,691

37,027

1,574

41,102

1,663

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.

Annual Report 2022

275

Business Review and AnalysisFinancials and Other InformationOverviewCorporate Governance44 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 2022 and 2021, the Group maintained the Executive Share Incentive Scheme
(2021: all outstanding share options granted under the 2007 Share Option Scheme had been exercised and/or lapsed as at 31 December 2021).
Details of the schemes are as follows:

(i)

2007 Share Option Scheme

Following the expiry of the New Joiners Share 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 and no options have been granted thereafter. All the share options
granted were vested prior to 2018.

Movements in the number of share options outstanding and their related weighted average exercise prices in 2021 were as follows:

Outstanding as at 1 January*

Exercised during the year*

Outstanding as at 31 December

Exercisable as at 31 December

2021

Number of
share options

Weighted average
exercise price
HK$

2,347,500

(2,347,500)

–

28.650

–

* Out of the outstanding share options as at 1 January 2021 and exercised share options during the year ended 31 December 2021, 47,500 options were included

and exercised by a Member of the Executive Directorate.

The weighted average closing price in respect of the share options exercised during the year ended 31 December 2021 was HK$44.516.

During the year ended 31 December 2021, no expense was recognised for the equity-settled share-based payments relating to the 2007 Share
Option Scheme.

276

MTR Corporation Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS44 Share-based Payments (continued)
Equity-settled Share-based Payments (continued)
(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.

The following awards of shares with vesting period falling in the years ended 31 December 2022 and 2021 were offered to Members of the
Executive Directorate and selected employees of the Group under the Executive Share Incentive Scheme:

Number of
Award Shares granted

Fair value
per share

Vesting period

Date of award

10 April 2018

1 April 2019

8 April 2019

Restricted
Shares

Performance
Shares

2,208,950

1,772,900

120,000

1,942,150

–

244,650

8 April 2020

2,334,750

6,950

8 April 2021

1,955,950

1,558,050

1 April 2022

8 April 2022

132,000

–

2,507,250

240,700

HK$

42.80

48.90

48.40

41.90

44.05

42.35

42.05

Movement in the number of Award Shares outstanding was as follows:

Outstanding as at 1 January

Awarded during the year

Vested during the year

Forfeited during the year

Outstanding as at 31 December

From

3 April 2018

1 April 2019

1 April 2020

1 April 2021

1 April 2022

8 April 2022

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)

1 April 2024 (Restricted Shares)
1 April 2024 (Performance Shares)

31 March 2025

1 April 2025 (Restricted Shares)
1 April 2024 (Performance Shares)

2022

2021

Number of
Award Shares

5,372,867

2,879,950

(2,172,518)

(255,491)

5,824,808

5,733,605

3,514,000

(2,996,112)

(878,626)

5,372,867

Annual Report 2022

277

Business Review and AnalysisFinancials and Other InformationOverviewCorporate Governance44 Share-based Payments (continued)
Equity-settled Share-based Payments (continued)
Award Shares outstanding at 31 December 2022 had the following remaining vesting periods:

Award Shares

Restricted Shares

8 April 2020

8 April 2021

1 April 2022

8 April 2022

Performance Shares

8 April 2021

8 April 2022

Remaining vesting period
years

Number of Award Shares

0.25

1.25

2.25

1.25

581,732

1,087,626

132,000

2,323,350

1,467,150

232,950

The details of the Executive Share Incentive Scheme are also disclosed in the Remuneration Report.

During the year ended 31 December 2022, the equity-settled share-based payments relating to the Executive Share Incentive Scheme recognised
as an expense amounted to HK$118 million (2021: HK$83 million) (note 10A).

45 Retirement Schemes
The Group operates or participates in a number of retirement schemes in Hong Kong, the Mainland China, Macao, the 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 2022, 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 had 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 years of 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 2022,
the total number of members was 2,571 (2021: 2,844). In 2022, members contributed HK$55 million (2021: HK$59 million) and the Company
contributed HK$25 million (2021: HK$36 million) to the MTR Retirement Scheme. The fair value of scheme assets of the MTR Retirement Scheme
excluding the portion attributable to members’ voluntary contributions as at 31 December 2022 was HK$7,500 million (2021: HK$9,294 million).

The actuarial valuations as at 31 December 2022 and 2021 to determine the accounting obligations in accordance with HKAS 19, Employee benefits,
were carried out by an independent actuarial consulting firm, Towers Watson Hong Kong Limited (“WTW”), 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 46.

The actuarial valuations as at 31 December 2022 and 2021 to determine the cash funding requirements were also carried out by Ms Wing Lui of
WTW using the Attained Age Method. The principal actuarial assumptions used for the valuation as at 31 December 2022 included a long-term
rate of investment return net of salary increases of 2.50% (2021: 0.50%) per annum, together with appropriate allowances for expected rates of
mortality, turnover and retirement.

As at the valuation date of 31 December 2022, under the situation that the value of members’ voluntary contributions was included:

the MTR Retirement Scheme was solvent, covering 100.2% (2021: 113.4%) of the aggregate vested liability had all members left service

(a)
with their leaving service benefits secured, resulting in a solvency surplus of HK$19 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 100.2% (2021: 113.2%), representing a past service surplus of HK$16 million.

278

MTR Corporation Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS45 Retirement Schemes (continued)
A Retirement Schemes Operated by the Company in Hong Kong (continued)
(ii) MTR Provident Fund Scheme

The MTR Provident Fund Scheme is a defined contribution scheme registered under the ORSO and has been granted with 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, investment returns on these contributions, together with year of services. Both members’ and the Company’s
contributions are based on fixed percentages of members’ base salary.

As at 31 December 2022, the total number of employees participating in the MTR Provident Fund Scheme was 10,397 (2021: 10,411). In 2022,
total members’ contributions were HK$164 million (2021: HK$158 million) and total contributions from the Company were HK$374 million
(2021: HK$366 million). HK$48 million of contributions forfeited by employees leaving the scheme were utilised to offset contributions during
the year (2021: HK$nil). As at 31 December 2022, forfeited contributions of HK$70 million (2021: HK$99 million) were available to reduce the
contributions payable in future years. The net asset value as at 31 December 2022 was HK$6,583 million (2021: HK$7,804 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 2022, the total number of employees participating in the MTR MPF Scheme was 4,773 (2021: 4,660). In 2022, total members’
contributions were HK$51 million (2021: HK$47 million) and total contribution from the Company were HK$55 million (2021: HK$51 million).
No contributions forfeited by employees leaving the scheme were utilised to offset contributions during the year (2021: HK$nil). As at
31 December 2022, there were no forfeited contributions (2021: HK$nil) available to reduce the contributions payable in future years.

(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 2022, the total number of employees participating in the KCRC MPF Scheme was 257 (2021: 290). In 2022, total members’
contributions were HK$3 million (2021: HK$4 million) and total contribution from the Company were HK$3 million (2021: HK$4 million).
No contributions forfeited by employees leaving the scheme were utilised to offset contributions during the year (2021: HK$nil). As at the end of
the reporting period, no forfeited contributions (2021: HK$nil) available to reduce the contributions payable in future years.

B Retirement Schemes for Employees of Mainland China and Overseas Offices

of the Company 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 Mainland China and overseas offices or 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 2022, total number of the Group’s
employees participating in this scheme was 451 (2021: 503). In 2022, total members’ contributions were HK$20 million (2021: HK$23 million) and
total contribution from the Group was HK$60 million (2021: HK$69 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 2022, total number of the Group’s employees
participating in this scheme was 717 (2021: 754). In 2022, total contribution from the Group was HK$17 million (2021: HK$22 million).

Annual Report 2022

279

Business Review and AnalysisFinancials and Other InformationOverviewCorporate Governance45 Retirement Schemes (continued)
B Retirement Schemes for Employees of Mainland China and Overseas Offices

of the Company and Subsidiaries (continued)

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 2022, total number of the Group’s employees participating in this
scheme was 820 (2021: 791). In 2022, total members’ contributions were HK$33 million (2021: HK$33 million) and total contribution from the
Group was HK$50 million (2021: HK$50 million). Pension expense of HK$128 million (2021: HK$95 million) was recognised in profit or loss and
actuarial gain of HK$72 million (2021: HK$36 million) was recognised in the consolidated 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 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 China, Macao or overseas employees, these schemes are operated in accordance with the
respective local laws and regulations. As at 31 December 2022, the total number of employees of the Group participating in these schemes
was 16,717 (2021: 16,248). In 2022, total members’ contributions were HK$122 million (2021: HK$113 million) and total contribution from the
Group was HK$683 million (2021: HK$631 million). During the years ended 31 December 2022 and 2021, the amount of contributions forfeited in
accordance to the schemes’ rules, if applicable, is not significant.

46 Defined Benefit Retirement Scheme
The Company makes contributions to and recognises defined benefit liabilities in respect of the MTR Retirement Scheme which provides
employees with benefits upon retirement or termination of services for other reasons (note 45). 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

2022

(7,488)

7,500

2021

(8,887)

9,294

407

The net assets are recognised under “Debtors and other receivables” 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$75 million in contribution to the MTR Retirement Scheme in 2023.

280

MTR Corporation Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS46 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

2022

223

2,016

2,239

1,448

1,371

2,819

2,645

7,703

(203)

7,500

2021

283

2,456

2,739

1,339

2,234

3,573

3,207

9,519

(225)

9,294

The scheme assets did not include any ordinary shares of the Company as at 31 December 2022 and 2021. Also, there were no investment in
other shares and debt securities of the Company as at 31 December 2022 and 2021. 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 performed in 2021, the investment strategy was changed in 2021 to about 30% of the scheme assets held in cash and the
remaining 70% invested according to a long-term strategic asset allocation of 42.5% in equities and 57.5% in bonds. The 30% of the scheme
assets held in cash will be used to pay benefits and expected to be depleted within three years from 2021. After depletion, the long-term strategy
asset allocation is expected to return to 42.5% in equities and 57.5% in bonds and cash. There was no change in the investment strategy during
the year ended 31 December 2022.

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 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

2022

8,887

(55)

–

(713)

(768)

(1,004)

196

122

7,488

2021

9,517

–

(5)

(1,031)

226

104

8,887

The weighted average duration of the present value of the defined benefit obligations was 4.5 years as at 31 December 2022 (2021: 5.3 years).

Annual Report 2022

281

Business Review and AnalysisFinancials and Other InformationOverviewCorporate Governance46 Defined Benefit Retirement Scheme (continued)
D Movements in Fair Value of 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

2022

9,294

(1,004)

(3)

128

(995)

7,500

2021

9,855

(1,031)

(5)

108

272

9,294

E Expenses Recognised in Profit or Loss and Other Comprehensive Income

in HK$ million

Current service cost

Net interest on net defined benefit asset

Administrative expenses paid from scheme assets

Less: Amount capitalised

Net amount recognised in profit or loss

Actuarial (gains)/losses

Return on scheme assets, excluding interest income

Amount recognised in other comprehensive income

2022

196

(6)

193

(42)

151

(768)

995

227

The retirement scheme expense is recognised under staff costs and related expenses in the consolidated statement of profit or loss.

F Significant Actuarial Assumptions and Sensitivity Analysis

Discount rate

Future salary increase

Unit value increase

2022

4.78%

4.00%

6.50%

2021

226

(4)

227

(39)

188

(272)

(260)

2021

1.49%

3.00%

3.50%

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 increase

Unit value increase

2022

2021

Increase in 0.25%
HK$ million

Decrease in 0.25%
HK$ million

Increase in 0.25%
HK$ million

Decrease in 0.25%
HK$ million

(80)

(59)

(20)

(113)

116

(79)

(30)

The above sensitivity analysis is based on the assumption that changes in these actuarial assumptions are not inter-correlated and therefore the
sensitivity estimated does not take into account the correlations between the actuarial assumptions.

282

MTR Corporation Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS47 Material Related Party Transactions
The Financial Secretary Incorporated, which holds approximately 74.72% of the Company’s issued share capital on trust for the HKSAR
Government as at 31 December 2022, 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 consolidated financial statements.

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 47C 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 47A 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.

D Other than the OA described in note 47C above, the Company also entered into principal agreements with KCRC and the HKSAR
Government 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 2022, amount recoverable or invoiced by the Company under West Rail Agency Agreement is HK$53 million (2021: HK$61 million)
and the net amounts payable or paid by the Company in relation to the Service Concession is HK$1,073 million (2021: HK$1,010 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
of the High Speed Rail:

The Company entered into the following principal agreements with KCRC and the HKSAR Government in connection with the operation

An amendment operating agreement, which was entered into with the HKSAR Government on 23 August 2018, to amend and

(i)
supplement the OA, in order to prescribe the operational requirements that will apply to the High Speed Rail.

A supplemental service concession agreement, which was entered into with KCRC on 23 August 2018, to supplement the SCA, in order for

(ii)
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 2022, net revenue received or receivable from KCRC in respect of the High
Speed Rail amounted to HK$1,476 million (2021: HK$1,422 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.

Annual Report 2022

283

Business Review and AnalysisFinancials and Other InformationOverviewCorporate Governance47 Material Related Party Transactions (continued)
F
of the Shatin to Central Link (“SCL”):

The Company entered into the following principal agreements with KCRC and the HKSAR Government in connection with the operation

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 First
Phase of the Tuen Ma Line.

A supplemental service concession agreement no. 2, which was entered into with KCRC on 11 February 2020, to supplement the SCA,

(ii)
in order for KCRC to grant a concession to the Company in respect of the First Phase of the Tuen Ma Line and to prescribe the operational and
financial requirements that will apply to the First Phase of the Tuen Ma Line.

(iii)
An amendment operating agreement, a supplemental operating agreement and the Amendment No.1 to Memorandum on Performance
Requirements, which were entered into with the HKSAR Government on 21 June 2021, to amend and supplement, respectively, the OA, in order
to prescribe the operational requirements that will apply to the Tuen Ma Line, being the first part of the SCL.

(iv)
A supplemental service concession agreement no. 3, which was entered into with KCRC on 21 June 2021 and superseded and replaced
the supplemental service concession agreement no. 2 dated 11 February 2020 (note 47F(ii)), to supplement the SCA, in order for KCRC to grant
a concession to the Company in respect of the Tuen Ma Line, being the first part of the SCL, and to prescribe the operational and financial
requirements that will apply to the Tuen Ma Line.

An amendment operating agreement and a supplemental operating agreement, which were entered into with the HKSAR Government on

(v)
10 May 2022, to amend and supplement, respectively, the OA, in order to prescribe the operational requirements that will apply to the SCL as a
whole.

(vi)
A supplemental service concession agreement no. 4, which was entered into with KCRC on 10 May 2022 and superseded and replaced
the supplemental service concession agreement no. 3 dated 21 June 2021 (note 47F(iv)), to supplement the SCA, in order for KCRC to grant a
concession to the Company in respect of SCL as a whole, and to prescribe the operational and financial requirements that will apply to the SCL as
a whole.

During the year ended 31 December 2022, net revenue received or receivable from KCRC in respect of Tuen Ma Line and Shatin to Central Link
under SSCA2-SCL and SSCA3-SCL amounted to HK$496 million (2021: net revenue received or receivable from KCRC in respect of Tuen Ma Line
under SSCA1-SCL and SSCA2-SCL amounted to HK$205 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 the agreements (iii) to (vi) above 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

G
activities, construction, testing and commissioning of HSR and SCL. Detailed description of the agreements are provided in notes 22A and
22B. In addition, an amount of HK$636 million was paid/payable to the HKSAR Government (net of amount received/receivable) in 2022
(2021: HK$263 million) under SCL EA3’s payment arrangement with the HKSAR Government and relevant contractors.

284

MTR Corporation Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS47 Material Related Party Transactions (continued)
H On 23 September 2022, (i) the Company accepted the HKSAR Government’s Land Exchange Offer for development of the Company’s
existing Siu Ho Wan depot and (ii) the Company also entered into the Project Agreement with the HKSAR Government for the financing, design,
construction, pre-operation, operation and maintenance of the Oyster Bay Station to cater for the transportation needs of the new community,
together referred to as Oyster Bay Project. The land exchange documents for the Oyster Bay Project was executed by both the Company and the
HKSAR Government on 25 November 2022.

The Oyster Bay Project involves, inter alia, re-provision of the existing Siu Ho Wan depot and provision of property enabling works (including roof
deck over the depot for top-side property development) to enable property development on the depot site, as well as the construction of a new
station, Oyster Bay Station, to serve the future community.

During the year ended 31 December 2022, land premium of HK$8.6 billion was paid by the Company to the HKSAR Government for Oyster
Bay Project. When determining the land premium for the Land Exchange, costs in relation to the construction of the new Oyster Bay Station,
re-provision of the depot, property enabling works (including roof deck over the depot for top-side property development) and site formation
were accepted by the HKSAR Government as deductible costs and were deducted from the land premium assessment on a full market basis
for the Land Exchange. The amount deducted is accounted for as government grant and included in Creditors, Other Payables and Provisions
(note 36B), after offsetting against the respective capital expenditure in Other Property, Plant and Equipment (note 20B), Railway Construction in
Progress (note 23) and Property Development in Progress (note 24) during the year ended 31 December 2022.

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 lot by the HKSAR

Property development site

Pak Shing Kok Ventilation Building

Tung Chung Traction Substation

Land grant/land premium
offer acceptance date

Total
land premium
in HK$ million

Land premium
settlement date

27 April 2022

9 August 2022

1,101

3,548

8,603

27 April 2022 and
8 July 2022

9 August 2022 and
20 October 2022

23 September 2022 and
21 November 2022

Siu Ho Wan Depot

23 September 2022

On 18 May 2018, the Company provided a sub-contractor warranty to the Hong Kong Airport Authority (“HKAA”) as a result of obtaining

J
a subcontract from a third party for the modification works of the existing Automated People Mover system at the Hong Kong International
Airport (“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.

On 2 July 2020, the Company entered into a 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$133 million was recognised as consultancy income during the year ended 31 December
2022 (2021: HK$146 million).

K During the year ended 31 December 2022, the Group incurred HK$94 million (2021: HK$99 million) of expenses for the central clearing
services provided by Octopus Cards Limited (“OCL”), a wholly-owned subsidiary of OHL. OCL incurred HK$31 million (2021: HK$26 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 declared HK$300 million (2021: HK$178 million) and distributed HK$150 million
(2021: HK$178 million) of dividends to the Group.

Annual Report 2022

285

Business Review and AnalysisFinancials and Other InformationOverviewCorporate GovernanceDuring the year ended 31 December 2022, MTR Corporation (Sydney) NRT Pty Ltd, through its joint operation, provided services in respect

47 Material Related Party Transactions (continued)
L
of the design and delivery of electrical and mechanical systems and rolling stock to NRT Pty Ltd, an associate of the Group, at a total amount
of AUD1 million (HK$5 million) (2021: AUD3 million or HK$19 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 AUD110 million (HK$600 million) (2021: AUD103 million or
HK$605 million) and mobilisation services in respect of Sydney Metro City & Southwest to NRT CSW Pty Ltd, an associate of the Group, at a total
amount of AUD6 million (HK$34 million) (2021: AUD6 million or HK$35 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 AUD407 million (HK$2,222 million) (2021: AUD233 million or HK$1,376 million).

M During the year ended 31 December 2022, the Group has provided delivery of software licenses as well as maintenance and support
services to Beijing MTR Corporation Limited at a total amount of HK$25 million (2021: HK$nil).

N Other than those stated in notes 47A to 47M, the Company has business transactions with the HKSAR Government, entities related to
the 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 33 and 37.

O
The Group has paid remuneration to Members of the Board and the Executive Directorate. Details of these transactions are described in
note 11A. In addition, Members of the Executive Directorate were granted award shares under the Executive Share Incentive Scheme. Details of
the terms of these award shares are disclosed in note 11B and the Report of the Members of the Board. Their gross remuneration charged to the
consolidated statement of profit or loss is summarised as follows:

in HK$ million

Short-term employee benefits

Post-employment benefits

Share-based payments

The above remuneration is included in staff costs and related expenses disclosed in note 10A.

During the year, the following dividends were paid to the FSI of the HKSAR Government:

in HK$ million

Ordinary dividends

– Cash dividends paid

2022

94.2

6.5

29.9

130.6

2022

6,673

2021

80.1

6.1

14.3

100.5

2021

5,700

286

MTR Corporation Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS48 Commitments
A Capital Commitments
(i)

Outstanding capital commitments as at 31 December not provided for in the consolidated financial statements were as follows:

Hong Kong
transport
operations,
station
commercial
and other
businesses

30,961

18,699

49,660

10,741

19,670

30,411

Hong Kong
railway
extension
projects
(note a)

Hong Kong
property
rental and
development

Mainland
China and
overseas
operations
(note b)

7,819

3,752

11,571

5,773

1,413

7,186

8,097

1,037

9,134

2,242

1,364

3,606

1,123

2,574

3,697

2,845

2,299

5,144

Total

48,000

26,062

74,062

21,601

24,746

46,347

in HK$ million

At 31 December 2022

Authorised but not yet contracted for

Authorised and contracted for

At 31 December 2021

Authorised but not yet contracted for

Authorised and contracted for

Note:

(a) As at 31 December 2022, capital commitments of Hong Kong railway extension project included costs of HK$6.4 billion in respect of which the project agreement
has been signed, remaining costs of HK$5.2 billion in relation to certain projects with the HKSAR Government in respect of which the project agreements are
yet to be reached. These costs are approved by the Board of Directors but yet to be incurred as at 31 December 2022. The costs concerned are dealt with in
accordance with the accounting policy set out in note 2K.

(b) As at 31 December 2022, capital commitment of Mainland China and overseas operations included the authorised outstanding commitments totalling

HK$3.7 billion (2021: HK$5.1 billion) for the capital expenditure in relation to the SZL13 project.

In addition to the above, the Group has the following commitments in respect of its investments in subsidiary and associate:

In respect of Shenzhen Metro Line 13, the Group is responsible to contribute equity injection of up to RMB1,428 million (HK$1,602 million). Up to
31 December 2022, the Group has contributed RMB785 million (HK$916 million) equity to the project.

In respect of Sydney Metro City & Southwest, the Group is expected to further contribute equity of approximately AUD12.7 million
(HK$67.2 million) and loans of approximately AUD13.3 million (HK$70.3 million) to the project for the share of investment.

Annual Report 2022

287

Business Review and AnalysisFinancials and Other InformationOverviewCorporate Governance48 Commitments (continued)
A Capital Commitments (continued)
(ii)
commercial and other businesses comprise the following:

The capital commitments not provided for in the consolidated financial statements under Hong Kong transport operations, station

in HK$ million

At 31 December 2022

Authorised but not yet contracted for

Authorised and contracted for

At 31 December 2021

Authorised but not yet contracted for

Authorised and contracted for

Improvement,
enhancement and
replacement works

Acquisition of
property, plant
and equipment

Additional
concession
property

24,352

15,379

39,731

5,990

16,044

22,034

2,165

983

3,148

1,168

659

1,827

4,444

2,337

6,781

3,583

2,967

6,550

Total

30,961

18,699

49,660

10,741

19,670

30,411

B Liabilities and Commitments in respect of Property Management Contracts
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 2022, the Group had total outstanding liabilities and contractual commitments of HK$3,433 million (2021: HK$3,510 million)
in respect of these works and services. Cash funds totalling HK$3,485 million (2021: HK$3,230 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.

In respect of the lease out/lease back transaction (“Lease Transaction”) (note 20E), the Group has provided standby letters of credit

C Material Financial and Performance Guarantees
(i)
(“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$63 million (HK$492 million) as at 31 December 2022. 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$69 million (HK$544 million) as at 31 December 2022.

In respect of the Melbourne train system Franchise, the Group has provided to the Public Transport Victoria a parent company

(ii)
guarantee of AUD164 million (HK$865 million) and a performance bond of AUD59 million (HK$312 million) on joint and several basis with other
shareholders for Metro Trains Melbourne Pty. Ltd.’s performance and other obligations under the franchise agreement. In respect of the lease
of the office premises, MTM has provided bank guarantees of AUD5 million (HK$25 million) as at 31 December 2022 for the monthly rental
payments to the landlords.

288

MTR Corporation Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSIn respect of the Sydney Metro North West Franchise, the Group has provided to NRT Pty Ltd, an associate of the Group, a parent company

48 Commitments (continued)
C Material Financial and Performance Guarantees (continued)
(iii)
guarantee with a liability cap of AUD1,526 million (HK$8,071 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
AUD18 million (HK$94 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 AUD148 million (HK$781 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 million (HK$134 million) as at 31 December 2022 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 a parent company guarantee with

(iv)
a liability cap of AUD602 million (HK$3,184 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) and performance bonds of AUD109 million (HK$576 million) for integrator works under the integrator contract. The Group has also
provided a parent company guarantee with a liability cap of AUD28 million (HK$145 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 AUD221 million (HK$1,169 million) and a parent company guarantee to MTR Corporation (Sydney) SMCSW Pty Limited with a
liability cap of AUD221 million (HK$1,169 million) for the interface works under Sydney Metro North West and Sydney Metro City & Southwest.
The Group has also provided standby LC’s for the Group’s equity interest in Sydney Metro City & Southwest project, and such standby LC’s
amounted to AUD26 million (HK$137 million) as at 31 December 2022.

(v)
In respect of the debt securities issued by MTR Corporation (C.I.) Limited (note 35C), the Company has provided guarantees to the
investors of approximately HK$16,131 million (in notional amount) as at 31 December 2022. 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 various lines of the Macao Light Rapid Transit, the Group has provided to Macao Light Rapid Transit Corporation Limited
(vi)
and the Macao SAR Government a number of bank guarantees amounting to MOP236 million (HK$229 million) as at 31 December 2022 for the
performance and other obligations under the project.

In respect of the Mälartåg Franchise in Sweden, the Group has provided to the Sweden transport authority a bank guarantee of

(vii)
SEK300 million (HK$224 million) as at 31 December 2022, which can be called if the franchise is terminated early as a result of default by
MTR Mälartåg AB, the wholly owned subsidiary of the Group to undertake the franchise.

(viii)
In respect of the Stockholm metro Franchise, the Group has provided to the Stockholm transport authority a guarantee of
SEK1,000 million (HK$746 million) as at 31 December 2022, 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 authority a guarantee of

(ix)
SEK1,000 million (HK$746 million) as at 31 December 2022, 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 respect of the lease on the shopping centre in Beijing, the Group provided a bank guarantee of RMB13 million (HK$14 million) and a

(x)
parent company guarantee of RMB53 million (HK$59 million) in respect of the quarterly rental payments to the landlord.

(xi)
In respect of the investment in Hangzhou West Station property development project, the Group has provided a financial guarantee of
RMB150 million (HK$169 million) to the banks participating in the syndication loan for the repayment of interest and/or loan principal by the
consortium.

(xii)
In respect of the Hangzhou Metro Line 1 and Hangzhou Metro 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.

Annual Report 2022

289

Business Review and AnalysisFinancials and Other InformationOverviewCorporate Governance48 Commitments (continued)
C Material Financial and Performance Guarantees (continued)
In respect of the SZL4 concession, the Group has provided to the Shenzhen Municipal Government a parent company guarantee in
(xiii)
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 Shenzhen Metro Line 13 concession, the Group is required to provide handover bank bonds to the Shenzhen Municipal

(xiv)
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.

In respect of the London Elizabeth Line Franchise in London, the Group has provided to the Rail for London Limited a parent company

(xv)
guarantee of GBP80 million (HK$753 million) and a performance bond of GBP25 million (HK$235 million) for MTR Corporation (Crossrail)
Limited’s performance and other obligations under the franchise agreement. The Group has also provided a performance bond of GBP1 million
(HK$9 million) as at 31 December 2022 for minor infrastructure improvement works under London Rail Infrastructure Improvement Framework.

(xvi)
In respect of the South Western Trains Franchise, the Group has provided to the Secretary of State for Transport a parent company
guarantee of GBP1.8 million (HK$17 million) and an early termination indemnity of GBP1.8 million (HK$17 million) as at 31 December 2022
for the performance and other obligations under the National Rail Contract. The Group has provided a funding deed bond of GBP0.9 million
(HK$8 million) and an early termination indemnity agreement bond of GBP0.9 million (HK$8 million) as at 31 December 2022 for aforementioned
obligations.

No provision was recognised in respect of the above financial and performance guarantees as at 31 December 2022.

D Service Concession in respect of the Rail Merger and Operating

Arrangements for HSR and SCL

Pursuant to the Rail Merger and Operating Arrangements for HSR and SCL, 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 and recognised as obligations under service concession in the
statement of financial position. 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 (including HSR & SCL) above certain thresholds. Furthermore,
under the SCA, SSCA-HSR and SSCA3-SCL, the Company is obliged to maintain, repair, replace and/or upgrade the KCRC system over the periods
of the service concession which is to be returned at the expiry of the service concession.

49 Non-adjusting Event after the Reporting Period
On 28 February 2023, the Company entered into a project agreement with the HKSAR Government for the financing, design, construction,
completion, pre-operation, operation and maintenance of the Tung Chung Line Extension. Pursuant to the project agreement, total amount of
land premium payable by the Company in respect of the proposed property development at new Tung Chung East Station shall be assessed by
the Government as the full market value of the site (taking into account the presence of the railway) less a total amount of HK$18,365 million
(“Reduction Amount”) for the purpose of bridging the funding gap of the Tung Chung Line Extension project. The proposed property
development site will be developed in portions and the land premium assessment for each portion will be carried out, at the time of the relevant
tender, with a specified tranche of the Reduction Amount being deducted.

290

MTR Corporation Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS50 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

Railway construction in progress

Property development in progress

Deferred expenditure

Investments in subsidiaries

Interests in associates

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

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 9 March 2023

Rex P K Auyeung
Chairman

Jacob C P Kam
Chief Executive Officer

Herbert L W Hui
Finance Director

At 31 December
2022

At 31 December
2021

89,335

100,180

29,959

219,474

–

41,269

2,540

3,123

410

–

1,876

216

1,570

8,050

22,330

7,124

307,993

1,500

60,505

2,827

16,901

27,497

9,976

1,104

14,507

134,817

173,176

60,547

(262)

112,891

173,176

82,492

99,513

28,393

210,398

–

11,215

1,964

2,479

499

543

363

1,483

9,287

20,978

12,304

271,549

1,599

30,442

2,356

19,179

21,395

10,047

561

14,263

99,842

171,707

60,184

(245)

111,768

171,707

Annual Report 2022

291

Business Review and AnalysisFinancials and Other InformationOverviewCorporate Governance51 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 and amortisation are 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 (including service concession assets of SZL4 (note 21B)) 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 and the 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 Group, which are disclosed in notes 45A(i) and 46F.

(iv)

Profit Recognition on Hong Kong Property Development

Recognition of profits from Hong Kong property development (including fair value measurement of investment properties on initial recognition)
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 29) 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 engages independent qualified surveyors 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 fair value measurement of its investment properties by independent qualified surveyors 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, except for HSR and SCL which the concession periods are detailed in note 3. 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 Logistics 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.

292

MTR Corporation Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS51 Accounting Estimates and Judgements (continued)
A

Key sources of accounting estimates and estimation uncertainty include the following (continued):

(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 financial statements, 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 16A(ii), there are tax queries from the IRD with the Company on tax deductibility of the Sums for which the ultimate tax
determination is uncertain up to the date of this financial statements. The Group recognises tax provision for these tax matters based on
estimates of whether additional taxes will eventually be due. Where the final 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.

(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.

Critical accounting judgements in applying the Group’s accounting policies include the following:

(i)

Provisions and Contingent Liabilities

The Group recognises provisions 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 as set out in note 22, as at 31 December 2022, 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.

Annual Report 2022

293

Business Review and AnalysisFinancials and Other InformationOverviewCorporate Governance52 Possible Impact of Amendments, New Standards and Interpretations
Issued but Not Yet Effective for the Year Ended 31 December 2022

Up to the date of issue of these consolidated financial statements, the HKICPA has issued a number of new or amended standards, which are
not yet effective for the year ended 31 December 2022 and which have not been adopted in these consolidated financial statements. These
developments include the following which may be relevant to the Group:

Effective for accounting periods
beginning on or after

HKFRS 17, Insurance contracts

Amendments to HKFRS 17, Insurance contracts:

Initial application of HKFRS 17 and HKFRS 9 – Comparative information

Amendments to HKAS 1, Presentation of financial statements and
HKFRS Practice Statement 2, Making materiality judgements:
Disclosure of accounting policies

Amendments to HKAS 8, Accounting policies, changes in accounting
estimates and errors: Definition of accounting estimates

Amendments to HKAS 12, Income taxes: Deferred tax related to assets
and liabilities arising from a single transaction

Amendments to HKAS 1, Presentation of financial statements:
Classification of liabilities as current or non-current

Amendments to HKAS 1, Presentation of financial statements:
Non-current liabilities with covenants

Amendments to HKFRS 16, Leases:
Lease liability in a sale and leaseback

Hong Kong Interpretation 5 (Revised), Presentation of Financial Statements:
Classification by the borrower of a term loan that contains a repayment on demand clause

1 January 2023

1 January 2024

The Group is in the process of making an assessment of what the impact of these new or amended standards 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 consolidated
financial statements.

53 Approval of the Consolidated Financial Statements
The consolidated financial statements were approved by the Board on 9 March 2023.

294

MTR Corporation Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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 Tuen Ma 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

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) and Tuen Ma lines

EBITDA

Operating profit/loss before fair value measurement of investment properties, depreciation,
amortisation, impairment loss, variable annual payment, share of profit of associates and joint ventures,
interests, finance charges and taxation

EBITDA Margin

EBITDA (excluding Hong Kong property development profit from share of surplus and interest in unsold
properties) as a percentage of revenue

EBIT

Profit/loss before fair value measurement of investment properties, interest, finance charges and
taxation and after variable annual payment

EBIT Margin

EBIT (excluding Hong Kong property development profit from share of surplus and interest in unsold
properties, and share of profit of associates and joint ventures) 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

Annual Report 2022

295

GLOSSARYBusiness Review and AnalysisFinancials and Other InformationOverviewCorporate GovernanceHong 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 Mainland China such
as Beijing, Shanghai and Guangzhou

Interest Cover

Operating profit before fair value measurement of investment properties, depreciation, amortisation,
impairment loss, variable annual payment, share of profit of associates and joint ventures, interests,
finance charges and taxation 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 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 loans 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 Mainland China and Overseas, service concession refers to the concession
granted by the government or relevant public sector entity to a subsidiary, associate or joint venture
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

296

MTR Corporation Limited

GLOSSARY.

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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