2004 - MTR

Document Sample
2004 - MTR Powered By Docstoc
					                                  ABOUT THIS REPORT




‘MTR Corporation
                                  LAYING TRACKS
                                  Herein is the fourth report of the MTR Corporation’s (MTRC) work in progress towards best practice in
                                  sustainable development. In the following pages we review our performance, mark achievements and
produces what                     reflect on our shortfalls for the 2004 financial year. We address the road ahead both within our operations,
                                  in transforming our mindset to develop a world-class enterprise, and, externally, as a growing corporation
must be the top                   expanding both business disciplines and operations in mainland China and in Europe.

report series in                  It has been a learning year for us and a time to pause and deliberate on our future strategy. We are
Southeast Asia.’                  faced with events and opportunities that will significantly alter the company's footprint as we know
                                  it today. To evolve our programme for corporate citizenship and sustainable business practices, we
Global Reporters 2004 Survey of   have focused this past year on reviewing and strengthening the necessary corporate strategy and
Corporate Sustainability          supporting management infrastructure to meet the opportunities and risks in the years ahead.


                                  The 2004 report has been revamped to allow our readers better comparability as well as a focus on
                                  specific rail transport industry issues in sustainable development. As in previous years, we have applied
                                  GRI Guidelines in the preparation of this report. We have structured the online version of this report
                                  to interface with other corporate documents available on our website, www.mtr.com.hk. This format
                                  gives a snapshot of our sustainability strategy and activities supported by interactive page links that
                                  bring in-depth treatment and measurable indicators on our progress for the year.


                                  Continuing the improvement of the data collection and the reporting systems that underpin our
                                  identified priority risk areas has been the principal undertaking in our assurance programme during
                                  2004. This is the second of our four-year programme engaging PricewaterhouseCoopers as our
                                  assurance provider. The statements and data in the report marked with the symbol            are the subject
                                  of the assurance work. Their report is presented at the end of this document.

                                  By compiling this report we benchmark ourselves against the best in international market practices
                                  and against our peers in the rail services industry. Just as importantly, we use this exercise as a
                                  means to measure and focus on our own internal framework for building a sustainable future. This
                                  past year has proved an opportune time to review our progress and strengthen the underlying
                                  systems that deliver best practice. These systems are the tools with which we will address our
                                  future opportunities and risks.


                                  The MTRC welcomes comments from and dialogue with readers of this report. Previous years' feedback
                                  has provided invaluable insight into our reporting standards and we look forward to your
                                  continued correspondence in helping us to improve ourselves and ultimately, the world in which
                                  we operate. Contact the Sustainability Development Manager at sdmngr@mtr.com.hk with any
                                  comments or questions.




                                                                                                                SUSTAINABILITY REPORT 2004   01
CHIEF EXECUTIVE OFFICER’S LETTER




Dear Readers,


In this fourth year of reporting to you on MTRC’s commitment to sustainability, I am pleased to say that we made
substantial progress in establishing a solid framework for our continued advancement along this path. Company-wide
efforts and measurable progress have brought us in line with benchmarked international practice as described in the
GRI Guidelines and World Economic Forum initiatives. Gratifyingly, we have been recognised for our achievements by
industry, our peers and most recently, by our stakeholders. We have been named Hong Kong’s most socially responsible
listed company in a survey conducted among local university students.


In 2004, we further aligned sustainable development with our corporate strategy. Sustainability is no longer a process
objective but rather a source of competitive advantage for business. This shift in strategic positioning is pivotal to our
future as we move into new markets and business opportunities.


In terms of our work in progress for the year, I am pleased to report that once again we have met most service and
environmental targets set and have maintained our international ratings as a global business and industry leader.
We have again been included in the DJSI and FTSE4Good Indices and are ranked among the top 100 companies in
the annual Global Initiatives Survey. We have achieved laudable success with no environmental fines across all six
company divisions for the year and have again rewarded our shareholders with dividends reflecting our success as
a value-driven business.


However, we anticipate a challenging future, in particular with market opportunities outside Hong Kong. We face
complex business environments that require wider stakeholder engagement, proactively managing supply chain
and sub-contractor impacts and working within local environments that may adopt a different approach to
sustainable development.


We are moving into an exciting future for the company. It is one that will take us towards a broader mindset and work
practice, open new horizons for business and our employees, and enshrine sustainability as the core principle
underpinning all that we do.




C.K. Chow
Chief Executive Officer
April 2005




02   MTR CORPORATION
SUSTAINABILITY REPORT 2004   03
ABOUT MTRC




‘This rail + property business   The MTR Corporation is in the business of building and
                                 managing mass transit railway systems and providing
model provides the means         related rail services. Combined with the rights to develop
                                 and own property adjacent to the rail network, we are
for sustained profitability      positioned to actively participate in the sustainable
                                 development of the communities we serve.
while investing in and
                                 The MTR network operates six railway lines (including the
building future rail lines.’     Airport Express line) comprising 88 km of rail lines
                                 connected by 50 stations. Within this network 16 stations
                                 serve as interchange stations, including those linking the
                                 MTR system to Hong Kong’s other major rail operator, the
                                 Kowloon-Canton Railway Corporation (KCRC). In 2003,
                                 with our continued participation in the CoMET Group,
                                 www.comet-metros.org, we ranked as the world’s most
                                 densely utilised mass transit system in their annual best
                                 practice benchmarking exercise. In 2004, MTR network
                                 patronage averaged 2.4 million passengers per weekday,
                                 demonstrating a substantial increase over the previous
                                 year's figures.


                                 The company leverages its core mass transit services to
                                 operate further businesses in rail systems consulting and
                                 building, rail product sourcing and value-added customer
                                 services, such as telecommunications and in-station retail.
                                 These businesses, specifically rail consultancy, have led
                                 our expansion into the international marketplace
                                 including mainland China, India, Singapore, Thailand,
                                 Malaysia and, in Europe, the UK and the Netherlands.


                                 MTR Corporation has the negotiated rights to develop and
                                 own property. This rail + property business model provides
                                 the means for sustained profitability while investing in and
                                 building future rail lines. Our portfolio of investment
                                 properties includes mainly shopping centres and
                                 commercial properties, with a land bank for future
                                 development of 2.5 million sq. m., mainly along our most
                                 recently completed Tseung Kwan O (TKO) line.


                                 We pride ourselves on our rail and customer services
                                 innovation. Broadly recognised are the new and diversified
                                 applications of the Octopus smart-card. As a widely used
                                 transport ticketing mechanism, it now covers fare systems
                                 for most local public and franchised transport services, as
                                 well as acting as a payment system for retail purchases in
                                 shops across Hong Kong. It has come into service more

04   MTR CORPORATION
recently as an access control system for buildings and
workplaces. More than 11.8 million cards are in circulation,
with a daily average of 8.8 million transactions.


Our expertise in both rail services and the business of rail
is helping to shape China's sustainable future. Our rail
consulting business is engaged in advising on and project
managing a number of mass transit projects in major
urban centres of mainland China. In 2004, we entered into
an agreement in principle to develop the Shenzhen Metro
Line 4 (Guangdong Province) based on our rail + property
model. More recently, in Beijing under a Public Private
Partnership (PPP) joint venture arrangement, we were
granted a 49% shareholding and the right to equip and
provide rolling stock to a subway line within the greater
Beijing metro system, inclusive of a 30-year operating
contract. We continue to seek further opportunities for                     In February 2004, the Hong Kong SAR Government
investment in China’s transit systems, albeit operating                     announced the invitation to the Company and the
under a business model based on an internal set of                          Kowloon-Canton Railway Corporation (KCRC) to
investment criteria and risk/reward assessments.                            commence discussions on the possible merger between
                                                                            the two entities. The Company and KCRC submitted a joint
Corporate Structure                                                         merger report to the Government on the possible merger
The Mass Transit Railway Corporation, a statutory                           between the Company and the KCRC in September 2004.
corporation, was established in 1975 under the Mass                         In the event that this proposed merger takes place,
Transit Railway Corporation Ordinance and commissioned                      significant changes in the structure and operations of the
to build and operate Hong Kong’s underground mass                           Company will unfold. As in all major corporate mergers,
transit system. In 2000, the MTR Corporation Limited                        we face the critical issues of integrating operations,
(MTRCL, the Company) listed on the Hong Kong Stock                          management and workforce. Our strategy is to achieve
                                                           1
Exchange. At year-end 2004, approximately 76% of the                        the key parameters set by Government while assuring
Company’s shares was held by the Financial Secretary                        stakeholders of responsible investment, maintaining
Incorporated in trust on behalf of the Hong Kong SAR                        transparency when communicating with our stakeholders,
Government. The Company operates under the Mass                             and assuming best practice for long-term sustainability
Transit Railway Ordinance (cap.556 of the Laws of Hong                      of the new entity.
Kong) which oversees the framework for our business and
operations. Being a publicly listed company, we are
subject to the Rules Governing the Listing of Securities
on the Stock Exchange of Hong Kong Limited. Further
information on the corporate structure and governance
is available in the 2004 Annual Report and through the
Investor Relations Department, investor@mtr.com.hk.




Note:
(1) In addition, the Company was informed by the Hong Kong SAR Government that, as at 31 December 2004, approximately 1.37% of the Company’s
    shares 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 of the Government.

                                                                                                                 SUSTAINABILITY REPORT 2004     05
STAKEHOLDER ENGAGEMENT




‘As we progress our           As we progress our corporate strategy in international
                              markets, we recognise that stakeholder responsibility is
corporate strategy in         growing exponentially. Our existing base of customers,
                              employees, shareholders, project contactors, Government,
international markets,        NGOs, the media and the greater Hong Kong community
                              is expanding to include international business partners,
we recognise that             national government bodies, rail materials supply chains,
                              and in future, the global communities and individuals who
stakeholder responsibility    will use our services.


is growing exponentially. ’   In anticipation of structuring orderly growth for an
                              engagement strategy, separate exercises were undertaken
                              during the year to lay the groundwork for a more formalised
                              Corporate Social Responsibility (CSR) policy and governance
                              structure. These focused on identifying our broadening
                              universe of stakeholders and their priorities in sustainability.
                              Formal interviews and focus groups were undertaken to
                              field major current stakeholder groups, including our
                              directors and Board members, representative employees,
                              non-affiliated NGOs and government departments.
                              Subsequent gap analysis findings comparing results of
                              these exercises to existing MTRC documents identified our
                              shortcomings, risks and the priority areas for future action.


                              In a parallel move, stakeholder engagement has been
                              identified as a key component and driver for the current
                              restructuring of the Enterprise-Wide Risk Management
                              strategy (EWRM) currently under review. Embedding the
                              stakeholder engagement process into this strategy will
                              necessitate the monitoring and auditing of relevant
                              sustainable practices across all divisions and at all levels
                              of the company. This provisions a future of accountability
                              and clear processes for engagement.


                              In a move to further the agenda in understanding the
                              CSR/stakeholder/EWRM link, a new series of private
                              information exchange sessions with stakeholders addressing
                              CSR risks for global business practice will be conducted.
                              Subjects will include priority areas such as supply chain and
                              materials sourcing, sub-contracting and environmental
                              impact monitoring. Our purpose is to identify and prioritise
                              our own risks and learn through case history and market
                              experience the best practice for our needs. In addition to
                              creating an international benchmarking process, the
                              conclusions will influence internal policy direction and
                              critical components of the EWRM strategy.

06   MTR CORPORATION
The community has stated its case in terms of expectations       Our planning for rail projects in mainland China takes into
as stakeholders, in particular in the areas of comfort, safety   account our experience in building in and around high-
and reliability. Better, more frequent engagement as             density residential zones and our vision to build
exemplified by the award-winning public communications           communities, not just railways. As part of our master brief,
exercise staged in response to an attempted arson attack         we allocate in the design and planning of stations and
serves as a blueprint for future engagement. To better           built rail line environs numerous community-minded
gauge and track customer expectations, two surveys               features, such as noise barriers, green belts and efficient
were undertaken in 2004 for the purpose of identifying           public transport modal links. These features are integrated
and taking action on the gaps in our passenger services.         into the master plan but allow flexibility for execution
Notwithstanding overall perceived improvement, steps             when budget and demand are demonstrated.
in the areas of crowding, air-conditioning and incident
recovery are being undertaken to bring us in line with           Our responsibility to the customer and community
best practice.                                                   extends beyond rail transport. We play a pivotal role in
                                                                 establishing and shaping new communities through
                                                                 active participation in property developments along our
   FOCUS
                                                                 transit routes. This involves our participation in the

   As part of MTRC’s community efforts, the public was
                                                                 design and project delivery of MTR stations and
   involved and consulted at the preliminary planning            surrounding built environment. We own retail and
   stages of a rail project. The proposed Western and            commercial space as well as manage residential estates
   Southern Island lines, with 11 planned stations and 16.2      and commercial facilities adjacent to our stations. In all
   rail km, will serve nine regional districts. To engage the    phases of property development and management we
   stakeholder groups, a roving exhibition of “virtual”          anticipate and design for integrated community living and
   stations and trains toured the districts, inviting
                                                                 society’s working and cultural aspirations, with the support
   feedback and input from the community on their future
                                                                 of a world-class infrastructure.
   local rail services. Overwhelming public support was
   received and the numerous suggestions put forward
   with regard to design and services will contribute to the
   final product. When the projects are underway, a
   sustainability advisory committee, based on the SAB
   model used for the Tung Chung cable-car project, will
   be established to keep the community involved and
   active in the development of these lines.


In mainland China, spearheaded by national awareness
of environmental issues, our stakeholder engagement
strategy is taking root. In Shanghai, dialogue with the
community of factories and businesses situated in
proximity to the rail lines under MTRC’s project
management has prompted the installation of floating
slab tracks. Because many of these businesses are hi-tech
manufacturers, vibrations caused by trains would severely
affect operations. This change in design specification,
despite increased budgeted costs, will mitigate potential
downstream environmental liabilities and related
stakeholder issues.




                                                                                               SUSTAINABILITY REPORT 2004   07
PARTNER OF CHOICE




‘While not the complete          We aspire to be a global industry leader and partner of
                                 choice in rail development and management of mass transit
solution to all transport        systems and their related built environment. Our experience
                                 of and capacity for building rail projects on time and within
issues, rail is the foundation   budget, of developing modern, integrated communities
                                 along our rail routes and our reputation in performance
of viable sustainability for     and best practice management attract worldwide attention.
                                 Our pioneering efforts to create sustainable systems have
congested cities faced with      introduced ground-breaking technological innovations,
                                 profitable business models and management efficiencies
the pressures of growing         to an industry experiencing a resurgence in growth and
                                 modernisation worldwide.
urban populations, ageing
                                 Our corporate horizons are broadening in scope and
and unsustainable                geographical operation. The inherent risks and rewards
                                 require a substantial shift in mindset and flexibility in
transport systems and            adapting the technologies, business models and rail
                                 services and systems to any one local market. In 2004
a shrinking pool of              we embarked on major undertakings in mainland China,
                                 with 16 consultancy and formal project development
natural resources.’              contracts in progress. Acknowledging that each project
                                 poses a different set of challenges and risks that
                                 necessitate innovation in planning and delivery, we
                                 approach each opportunity within a framework of “best
                                 solution for purpose” business model. This gives rise to
                                 an internal flexibility in how we negotiate and structure
                                 investment in mainland China, while delivering the
                                 optimal solution for our business partners.


                                 Our strategy to be the partner of choice is underpinned
                                 by our vision of being a world-class enterprise. We
                                 continually transform our work practices to achieve
                                 excellence in global standards and apply knowledge-
                                 management systems to remain competitive, responsive
                                 and flexible in our enterprise. Moving the company
                                 forward to meet these challenges is about engaging our
                                 people. A new core value, enterprising spirit, was
                                 introduced in 2004. This value complements our “MTRC
                                 Diamond” strategic vision of community, process,
                                 strategy and people. This vision encourages the thinking-
                                 learning organisation, empowering our employees to
                                 take the initiative, experiment, overcome obstacles, find
                                 creative solutions and manage risk. Integrating this
                                 mindset into established practice is one of our primary
                                 near-term objectives in transforming us into a world-
                                 class enterprise.

08   MTR CORPORATION
Our corporate mission is to embrace and reward our                 Risk Management Strategies
stakeholders through service excellence and the                    The corporation is entering new stages of opportunity both
delivery of quality in all that we do. This begins with            on the home front and internationally. In a timely response,
the planning and building of profitable railway systems            we are developing an appropriate programme for the
and related built environment under best practice and              strategy and process of identifying, prioritising and
ends with safe, reliable and affordable services for               measuring business risk from a sustainability position. To
commuters and customers.                                           further this programme on a formalised basis, our work
                                                                   focuses on strengthening the underlying systems and
As we embark on the journey of internationalising our              controls that track and measure the risk-to-business
business, and the possible doubling of our rail operations         relationship. The objective is to bring a margin of comfort
within Hong Kong, new dimensions and demands on                    to stakeholders in the veracity and materiality of the
our stakeholder engagement strategy are emerging.                  information provided and reflect enterprise cost and impact.
Identifying our expanding base of stakeholders, the issues         In this programme’s second year, our four-stage approach
they represent and what really matters to them lie at the          framework continues to dictate process. However, with
core of our current review. This year we have developed an         external influences and the integration into the EWRM,
analysis tool linking our priority business risks to stakeholder   some priorities and related indicators have changed.
engagement to understand and better manage the                     Regardless, the four-stage approach and the processes of
process. This tool and its related processes are key               assessment remain consistent, thus establishing a framework
components in the revision of our EWRM strategy.                   for measurement of variable future risks.

                                                                                                  SUSTAINABILITY REPORT 2004   09
PARTNER OF CHOICE




Our internal sustainability accounting methodology links       Chung cable-car project into the proposals for developing
sustainable business risks to financial consequence. This      the West and South Island lines. These endeavours create
framework was formulated based on MTRC’s prioritised           substantial headway in formalising our stakeholder
business risk model and the Corporate Sustainability           engagement strategy. Other achieved targets include our
Assessment questionnaire developed by the independent          continued membership of and commitment to global
Sustainable Asset Management research group. It is used        initiatives mentored by the DJSI, FSTE4Good Indices and
principally as a tool to measure and systemise the actual      WEF programmes, participation in AccountAbility impact
financial costs in managing identified risks and further       reporting projects, and our contributions to international
sustainability costs. The framework employs MTRC’s             organisations sponsoring sustainable rail transport
Activity Based Costing system for data comprising staff        projects and programmes.
and departmental operating expenses. Added to the
input data for the year are non-risk capital costs of HKD136   We are on a steep learning curve on a number of fronts,
million, mainly generated through the asset improvement        with expanding international and regional activities, in
programme. Excluded, as in 2003, are most capital and          particular in mainland China. In undertaking sustainable
projects works and extension works, which cover the            practices in the planning, building and operating of world-
majority of costs incurred in rail project and property        class rail systems in PRC cities, we have adopted and
development activities. While not presenting a 360° view       subscribe to international standards and conventions for
of the company, this nonetheless enables us to utilise a       environmental impact, human rights and labour practices.
common base for year-on-year measurement and analysis          However, in view of widespread international opinion on
of quantified risk on a passenger-services basis. We           weak local sustainability practices, we accept that further
anticipate a three-year process in order to establish trends   investigative and assessment work is needed in terms of
and a database from which to draw comparable                   our own management and overall project delivery
conclusions. Preliminary comparison in this second year        practices. By taking initial steps to assess the risks and
indicates a mild increase in overall costs, owing mainly to    examining current proactive measures undertaken by
increased resources employed for operational safety            other multinationals, the MTRC will commence the
improvement and management activities related to the           learning dialogue via a series of workshops in 2005 to
proposed rail merger.                                          discuss and learn how to address these issues.


Management and Reporting Systems                               Further afield, we recently established an office in London
While we have rooted best practice in management               to oversee European market opportunities that stem
strategy and instituted numerous systems and procedures        mainly from the Public Private Partnerships emerging with
to implement strategy, through sustainability reporting        the deregulation of the transport industry. Because the
we voluntarily solicit outside opinion to benchmark            European Union functions under a more developed
our performance. To this end we have engaged                   framework for sustainability practice, our base in London
PricewaterhouseCoopers (PwC) in a four-year programme          serves as the frontline in assisting the company in local
which is aimed at improving independent assurance. The         sustainability practices and in taking an active role in
2004 year has again focused on the priority business risks     stakeholder engagement for our projects.
identified in 2003 and are charted on page 12.
                                                               Leadership
Sustainability Progress                                        The MTRC’s reputation for best practice in rail transport
The sustainable targets for 2004 have been largely             and our hybrid business model of rail + property attracts
accomplished. Most noteworthy are the introduction of          global interest from the industry, professional bodies and
a new core value and the revision and dissemination of         government representatives from across Asia, the Middle
the Code of Conduct and accompanying guidebook for             East and Europe. Regular visits cover information sharing
employees. We have incorporated the Sustainability             with our experts and the personal experience of the MTR
Advisory Board (SAB) model developed for the Tung              system in operation. Our executive directors pointedly

10   MTR CORPORATION
participate in worldwide public forums that promote        presented by Next Magazine, and the 2003 Eco-Business
best practice. We are active members in several industry   Gold Award for Best Environmental Reporting from the
organisations, and to stay abreast of global market        Hong Kong Environmental Campaign Committee.
trends and experience, we belong to several broader
business organisations. Among them are the UITP, WEF,
Chambers of Commerce and International Council of
Shopping Centres.


We view sustainability as a corporate-wide endeavour
and seek systematically to embed international
standards and practice across the organisation. To this
end we have maintained ISO14001 certification, are
restructuring the EWRM strategy and have assumed a
leadership role in the 2003 inaugurated UITP Charter on
Sustainable Development, which is specific to our rail
industry practices.


The awards we receive, while honouring our strengths,
also benchmark our industry and corporate performance.
From these we learn and develop our skills. Among our
most distinguished awards in 2004 were inclusion in the
top 100 companies of the Global Reporters 2004 survey,
the Good People Management Award from the Hong
Kong SAR Government, given for the third consecutive
time, the Top Service Award 2004 - Public Transport,

                                                                                      SUSTAINABILITY REPORT 2004   11
PARTNER OF CHOICE




 SELECTED PRIORITY BUSINESS RISK, TARGETS AND PROVISIONAL PERFORMANCE INDICATORS

     Priority Business Risk                                     Provisional Performance Indicator


     Economics

     Growth of shareholder value in developed market            Total shareholder return as compared to Hang Seng Index

     Clarity of roles between Government as regulator
     and shareholder and the central provider                   –

     Ensure continued impartiality of the Board                 Compliance to HKSE Code of Best Practice


     Social Responsibility

     Maintaining passenger numbers                              Passenger numbers

                                                                % Customer service pledges achieved:
                                                                - Train service delivery
                                                                - Passenger journeys on time (MTR, Airport Express)
                                                                - Train punctuality (MTR, Airport Express)
                                                                - Train reliability (train car-km per train failure
                                                                  causing delay≥5 min)

     Developing and retaining motivated and skilled staff for
     the corporation’s diversification in Hong Kong and
     international acquisitions                                 Staff turnover rate

     Ensuring the health and safety of passengers,              Passenger safety - fatality
     staff and contractors
                                                                Passenger safety - number serious injuries per 100 million PAX

                                                                Staff safety on the operating railway
                                                                - Fatality
                                                                - Loss Time Injury (LTI) frequency rate
                                                                  per 200,000 man-hours worked

                                                                Contractor safety on the operating railway
                                                                - Fatality
                                                                - Reportable accident rate per 100,000 man-hours worked

                                                                Construction safety for railway projects
                                                                - Fatality
                                                                - Reportable accident rate per 100,000 man-hours worked


     Environment

     Breaches of statutory environmental requirements           Legal compliance (MTR) - number of successful prosecutions

                                                                Self-monitoring results (operations) - % self-monitoring noise
                                                                samples within criteria set out in the Noise Control Ordinance

                                                                Self-monitoring results (operations) - % self-monitoring
                                                                waste water samples within the discharge limits stipulated in
                                                                the effluent discharge licences

                                                                Legal compliance (project contractors) - number of
                                                                successful prosecutions

     Long-term energy supply without renewables                 GHG emissions (tonnes CO2 equivalent)

     Management of assets                                       –



12     MTR CORPORATION
                               INDICATOR NUMBER                                                 PAGE/S                 WEF             REMARK
                                                                                                             ( FRAMEWORK INDICATOR )




  SUSTAINABILITY ACCOUNTING
 Costs of Managing Priority Social Responsibility and                                                          2003                       2004
 Environmental Business Risks
 Ensuring passenger safety                                                                                 HK$42m                       HK$59m

 Maintaining passenger numbers*                                                                            HK$76m                       HK$66m
 Developing and retaining motivated and skilled staff                                                     HK$161m                      HK$163m
 Ensuring environmental compliance and improvement                                                         HK$13m                       HK$11m

 Total                                                                                                   HK$292m **                    HK$299m **

Notes:
(*) This is an indicative sum representing activities related to the maintenance of the customer service pledges.
(**) This figure is estimated to be accurate to 5%.




                                                                                                                      SUSTAINABILITY REPORT 2004   13
GRI GLOBAL PERFORMANCE INDICATORS CHART




                          INDICATOR NUMBER                                             PAGE/S                WEF                REMARK*
                                                                                                     ( FRAMEWORK INDICATOR )




 Vision and Strategy

                          1.1   Statement of the organisation’s vision and
                                strategy regarding sustainable development             IFC, 2, 8-9             1

                          1.2   Statement from the CEO describing key
                                elements of the report                                     2                   1



 Profile

 Organisational Profile   2.1   Name of reporting organisation                           BC, 4                 4

                          2.2   Major products and/or services,
                                                                                                                                               1
                                including brands if appropriate                           4-5                  4               Annual Report

                                                                                                                                               1
                          2.3   Operational structure of the organisation                 4-5                  2               Annual Report

                          2.4   Description of major divisions, operating
                                                                                                                                               1
                                companies, subsidiaries and joint ventures                4-5                  2               Annual Report

                          2.5   Countries in which the organisation’s
                                                                                                                                               1
                                operations are located                                     4                   2               Annual Report

                                                                                                                                               1
                          2.6   Nature of ownership; legal form                            5                   2               Annual Report

                          2.7   Nature of markets served                                  4-5                  2

                                                                                                                                               1
                          2.8   Scale of the reporting organisation                    4-5, 35-36              2               Annual Report

                          2.9   List of stakeholders, key attributes of each
                                and relationship to the reporting organisation         6-7, 21-22              2

 Report Scope             2.10 Contact person(s) for the report, including
                               e-mail and web addresses                                    1                   4

                          2.11 Reporting period                                           IFC                  4

                          2.12 Date of previous report                                    IFC                  4

                          2.13 Boundaries of report (countries/regions,
                               products, services etc.) and any specific limitations      IFC                  4

                                                                                                                                               1
                          2.14 Significant changes in size, structure, ownership           5                   4               Annual Report

                          2.15 Basis for reporting on joint ventures etc.
                                                                                                                                               1
                               affecting comparability from period to period              40                   4               Annual Report

                          2.16 Explanation/nature of any re-statements of
                               earlier reports (e.g. mergers/acquisitions)                40                   4               Annual Report
                                                                                                                                               1




 Report Profile           2.17 Decisions not to apply GRI principles/protocols
                               in the preparation of the report                         1, 14-19              NA



14   MTR CORPORATION
                   INDICATOR NUMBER                                            PAGE/S                  WEF                        REMARK*
                                                                                              ( FRAMEWORK INDICATOR )




Report Profile      2.18 Criteria/definitions used in accounting
                        for costs/benefits                                       10, 40                  4

                   2.19 Significant changes in measurement methods                                       4                        No Changes

                   2.20 Policy and internal practices to enhance accuracy,
                        completeness and reliability                             9-10                  3, 4

                   2.21 Policy and current practice on
                        independent assurance                                   10, 37                 2, 4

                   2.22 Means by which report users can obtain
                        additional information                                     1                    4



Governance Structure and Management Systems

Structure and      3.1    Governance structure of the organisation
                                                                                                                                                   1
Governance                (incl. major committees)                              38-39                  2, 3                    Annual Report

                   3.2    Percentage of the Board of Directors
                          (Supervisory Board) that are independent/
                                                                                                                                                   1
                          non-executive directors                                 38                    2                      Annual Report

                   3.3    Process for determining the expertise Board
                                                                                                                                                   1
                          members need to guide strategic direction               38                    2                      Annual Report

                   3.4    Board-level processes for overseeing economic/
                                                                                                                                                   1
                          environmental/social risks and opportunities          38-39                  2, 3                    Annual Report

                   3.5    Linkages between executive compensation and
                          achievement of non-financial goals                                            3, 4                     Not Included

                   3.6    Organisational structure/responsibilities for
                          oversight, implementation and
                          audit of relevant policies                            38-39                  2, 3

                    3.7   Mission/values/codes of conduct/principles and
                                                                                                                                                       2
                          status of implementation                            8-13, 25-26               1                     Code of Conduct

                   3.8    Mechanisms for shareholders to provide
                          recommendations to Board of Management                                        2                       Not Included

Stakeholder        3.9    Basis for identification and selection of
Engagement                major stakeholders                                     6-7                    2

                   3.10 Approaches to stakeholder consultation
                                                                                                                                      3        5
                        in terms of frequency of consultations by type       6-7, 21-22, 28            2, 3                      Staff , SAB

                   3.11 Type of information generated by
                                                                                                                                           3
                        stakeholder consultations                             6-7, 26, 28               3                           Staff

                   3.12 Use of information resulting from                     6-7, 9, 20,
                        stakeholder engagements                               26, 28-29                 3                        Staff , SAB
                                                                                                                                      3        5




                                                                                                                        SUSTAINABILITY REPORT 2004         15
GRI GLOBAL PERFORMANCE INDICATORS CHART




                        INDICATOR NUMBER                                              PAGE/S                 WEF                REMARK*
                                                                                                     ( FRAMEWORK INDICATOR )




 Overarching Policies   3.13 Explanation of how the precautionary principle
 and Management              is addressed by the organisation’s policies                9-13                  2, 4
 Systems
                        3.14 Subscription to externally developed/
                             voluntary charters/principles/initatives            10-11, 24-26, 29, 31          4

                        3.15 Principal industry and business
                             association membership                                   10-11, 24                4

                        3.16 Policies/systems for supply chain                        6-7, 10,
                             management and product stewardship                   22-23, 28-31, 34           2, 3, 4

                        3.17 Approach to managing indirect impacts
                             resulting from activities                                10, 34, 36              2, 4

                        3.18 Major decisions regarding locations or
                                                                                                                                           3
                             changes of operations                                      5, 10                 2, 4                 Staff

                        3.19 Programme and procedures for                               8-11,
                                                                                                                                           3
                             improvement programme/actions                        13, 22-26, 29-31           2, 3, 4               Staff

                        3.20 Status of certification of environmental, labour,
                             social accountability management systems                  29, 37                 3, 4



 GRI Content Index

                        4.1   GRI table                                                 14-19



 Economic Performance Indicators

                                                                                                                                               1
 Customers              EC1 Net sales                                                  33, 35                                  Annual Report

                                                                                                                                               1
                        EC2 Geographical breakdown of key markets                        4-5                                   Annual Report

 Suppliers              EC3 Cost of all goods, materials and
                                                                                                                                               1
                            services purchased                                        33, 35-36                                Annual Report

                        EC4 Percentage of contracts paid in accordance
                            with agreed terms                                            26

 Employees              EC5 Total payroll and benefits broken down by
                            country/region                                                                                      Not Included

 Providers of Capital   EC6 Distribution to providers of capital broken down by
                                                                                                                                               1
                            interest/dividend on all classes of shares                   35                                    Annual Report

                                                                                                                                               1
                        EC7 Increase/decrease in retained earnings (ROACE)               33                                    Annual Report

                                                                                                                                               1
 Public Sector          EC8 Total sum of taxes per geographical region                   36                                    Annual Report

                                                                                                                                               1
                        EC9 Subsidies received per geographical region                   36                                    Annual Report



16   MTR CORPORATION
                        INDICATOR NUMBER                                         PAGE/S               WEF                        REMARK*
                                                                                             ( FRAMEWORK INDICATOR )




Public Sector           EC10 Donations to community/civil society,
                             broken down in terms of cash/in-kind                   25



Environmental Performance Indicators

Materials               EN1 Total materials used, other than fuel and
                                                                                                                                         6
                            water, by type                                          31                                             EMS

                        EN2 Percentage of materials used that are waste from
                            sources external to the reporting organisation                                                      Not Included

Energy                  EN3 Direct energy use segmented by primary source           31

                        EN4 Indirect energy use                                                                                Not Included

Water                   EN5 Total water use                                         31

                        EN17 Initiatives for renewable energy                       30

Biodiversity            EN6 Location and size of land owned,
                            leased or managed in biodiversity-rich habitats                                                     Not Included

                        EN7 Description of the major impacts on biodiversity
                            in terrestrial, freshwater and marine environments                                                  Not Included

                        EN27 Objectives, programmes for protecting/
                                                                                                                                         5
                             restoring native environment                         28-29                                            SAB

                        EN29 Business operating in and around
                             protected areas                                        29

Emissions, Effluents      EN8 Greenhouse gas emissions                              30-31
and Waste
                        EN9 Use and emissions of ozone-depleting sustances                                                     Not Included

                        EN10 NOX, SOX and other significant
                             air emissions by type                                                                             Not Included

                        EN11 Total amount of waste by type and destination          31

                                                                                                                                         6
                        EN12 Significant discharges to water by type               30-31                                            EMS

                        EN13 Significant spills of chemicals/oils/fuels
                             in terms of total number and total volume              31

Products and Services   EN14 Significant environmental impact of
                             principal products and services                     26, 28-31

                        EN15 Percentage of weight of products sold
                             reclaimable/reclaimed after use                        31

Compliance              EN16 Incidents of and fines for non-compliance
                             associated with environmental issues                 29-30


                                                                                                                       SUSTAINABILITY REPORT 2004   17
GRI GLOBAL PERFORMANCE INDICATORS CHART




                        INDICATOR NUMBER                                          PAGE/S                WEF                     REMARK*
                                                                                               ( FRAMEWORK INDICATOR )




 Social Performance Indicators Labour Practices and Decent Work

 Employment             LA1 Geographical breakdown of workforce,
                            where possible by region/country/status                                                           Not Included

                        LA2 Net employment creation and average
                                                                                                                                         3
                            turnover segmented per region/country                   21                                           Staff

                                                                                                                                         3
                        LA12 Employee benefits beyond legally mandated              21-22                                          Staff

 Labour/Management      LA3 Percentage of employees represented by
                            independent trade union per region/country                                                        Not Included

                                                                                                                                         3
                        LA13 Provision for formal representation                   21-22                                         Staff

 Relations              LA4 Policy and procedure on information,
                                                                                                                                                         2
                            consultation with employees (e.g. restructuring)    21-22, 25-26                                Code of Conduct

 Health and Safety      LA5 Practices on recording/notification of
                                                                                                                                             4
                            occupational accidents/diseases (relation to ILO)                                                    Safety

                        LA6 Description of formal joint H&S committees/
                                                                                                                                             4
                            proportion of workforce represented in committees                                                    Safety

                        LA7 Standard injury, lost day and absent rates and
                                                                                                                                             4
                            work-related fatalities                                                                              Safety

                        LA8 Description of policies or programmes
                                                                                                                                         3
                            (for the workplace and beyond) on HIV/AIDS                                                           Staff

 Training and Education LA9 Average hours of training per year
                                                                                                                                         3
                            per category of employee                                22                                           Staff

 Diversity and          LA10 Description of equal opportunities
                                                                                                                                                 2           3
 Opportunity                 policies or programmes                                 26                                   Code of Conduct , Staff

                        LA11 Composition of senior management and
                             corporate governance bodies
                                                                                                                                                     1
                             (including Board of Directors)                        38-39                                     Annual Report

                        LA17 Policy and programmes
                             for skills management/life learning                    22



 Human Rights

 Strategy and           HR1 Description of policies, corporate structure
 Management                 on human rights and monitoring
                            mechanism and results                                  25-26

                        HR2 Evidence of consideration of human rights
                            (investment/procurements/suppliers/contractors)                                                   Not Included




18   MTR CORPORATION
                                INDICATOR NUMBER                                            PAGE/S                   WEF                        REMARK*
                                                                                                             ( FRAMEWORK INDICATOR )




  Strategy and                  HR3 Description of policy on human rights for supply
  Management                        chain and contractors; monitoring systems/results                                                          Not Included

  Non-Discrimination            HR4 Description of global policies preventing all forms
                                                                                                                                                                   2
                                    of discrimination and monitoring systems/results                                                         Code of Conduct

  Freedom of Association/ HR5 Description of policies on freedom of
  Collective Bargaining       association and programmes                                                                                       Not Included

  Child Labour                  HR6 Desciption of policy excluding child labour,
                                                                                                                                                           3
                                    monitoring systems and results                                                                                 Staff

  Forced and                    HR7 Description of policies on forced and compulsory
  Compulsory Labour                 labour, monitoring systems and results                                                                     Not Included



  Society

  Community                     SO1 Description of policy on community impact,
                                    programmes and monitoring systems and results         7, 10, 26, 28-29

                                SO4 Awards for social, ethical,
                                    environmental performance                                 11, 22

  Bribery and Corruption SO2 Description of policy on bribery and corruption
                                                                                                                                                                   2
                             and compliance mechanisms                                        25-26                                          Code of Conduct

  Political Contributions       SO3 Description of policy for managing political
                                    and lobbying contributions
                                    and compliance mechanisms                                                                                  Not Included



  Product Responsibility

  Customer Health and           PR1 Description of policy on customer health and
                                                                                                                                                               4
  Safety                            safety through products and services, and results       22-24, 27                                             Safety

  Products and Services         PR2 Description of policy on product information and
                                    labelling, and compliance mechanisms                                                                       Not Included

  Respect for Privacy           PR3 Description of policy and management system for
                                    consumer privacy and compliance mechanisms                                                                 Not Included

Notes:
(*) Refers to on-line link where appropriate
(1, 2) Published documents (available on MTRC’s website)
(3, 4) Supporting on-line information, Sustainability Report 2004 (Staff, Safety)
(5) Sustainability Advisory Board
(6)   Environmental Management System, Sustainability Report 2004




                                                                                                                                       SUSTAINABILITY REPORT 2004      19
Our programme to implement modern and socially
responsible business practices continues to raise the bar
for our performance goals. Of principal interest now are
the risks and opportunities inherent in our expansion into
international markets. Changes are being initiated in the
areas of stakeholder engagement, corporate culture and
Code of Conduct that spearhead the drive to remould
corporate work practices, supply chain/contractor
relationships and business partnering arrangements.


Developing Social Capital
Through a deliberate strategy to nurture and train a
highly skilled, motivated and professional workforce we
are able to deliver our world-class services. This strategy
involves best practice in remuneration, training and
training facilities, and maintaining open and fair
communication channels with staff. We can track our
success through the marked trend in increased
productivity levels across all company divisions, the low
voluntary turnover rates (1.3% 1 compared with the
10.9% 2 Hong Kong corporate average in 2004), high
levels of job satisfaction and, most importantly, the
sustained high ratings in our customer services pledges.


Our commitment to staff reflects our four core values in
how we undertake human-resource practices in Hong
Kong and other geographical areas in which we operate.
Our hiring and remuneration practices exceed those
stipulated by law and are competitive with other large,
reputable Hong Kong companies. Staff regularly
participate in surveys and are informed of any changes
or decisions relevant to their careers through a system
of timely newsletters, web alerts and department                                managerial staff to raise discussions with their supervisors
management briefings. Employees have the opportunity                            on work-related issues and to resolve local matters of
to consult openly with senior management through our                            common interest. The SCC, the members of which are
system for consultation and dialogue.                                           elected by JCC representatives, provides the channel for
                                                                                communicating and working directly with senior
The staff consultation mechanism, encompassing the                              management on the policies and principles relating to
Joint Consultative Committee (JCC) and Staff Consultative                       terms and conditions of employment, and any other
Council (SCC), established in the early 1980s, enhances                         matters of corporate interest. Most recently the SCC has
communication between management and non-                                       taken a central role in communications with senior
managerial staff. The JCC provides the avenue for non-                          management on issues of job security arising from the


Notes:
(1)   Sum of monthly turnover rate: [(monthly number of voluntary leavers/total staff at month end)*100].
      The number does not include temporary staff, part time staff and UK staff.
(2)   Institute of Human Resources Management, Manpower Statistics.

                                                                                                              SUSTAINABILITY REPORT 2004   21
SOCIAL RESPONSIBILITY




merger and refining the performance pay system.                and management training programmes conducted in
                                                               Hong Kong, we are embedding a CSR culture and
Other mechanisms to encourage dialogue and to identify         transferring the technologies and skills to implement and
issues well before crisis stage include informal staff         sustain long-term good corporate citizenship. Three major
meetings with the CEO and senior management,                   training programmes have been completed or have been
encouraging the culture of enterprising spirit among work      underway since 2003. We are also conducting similar best
groups and providing training to enhance communication         practice training programmes for rail operators in Delhi,
skills at supervisory and management levels. Of particular     Bangkok and Singapore. In 2004 our leadership in
relevance in 2004 has been the campaign to communicate         sustainable practices was honoured with numerous
with all employees regarding the development and               awards in the fields of corporate management, training,
subsequent impact of the possible rail companies merger.       ethics and eco-business.
A dedicated task force is in place with the agenda to
monitor events, initiate dialogue on a timely basis with
                                                                  FOCUS
department heads and the SCC and to maintain continual
communication with all staff on the progress of the merger.       The year 2004 marks the 15th anniversary of the Work
                                                                  Improvement Teams (WIT) programme. Designed to
Our training policy is designed to develop fully an               help staff work smarter, increase productivity and
individual’s potential and meet career aspirations. Our           encourage innovation and teamwork in the workplace,
goals are to employ a multi-skilled workforce, ensure             WIT now embraces nearly 40% of staff and since 2002
                                                                  has been extended to external project contractors.
succession of the next generation of MTRC leaders and
                                                                  Many WIT proposals have been adopted across the
foster a learning culture at all levels of the company.
                                                                  company and exemplify sustainability in practice.
Training courses’ content is shifting focus towards               These include a systemised computer disposal
achieving the spirit of enterprise, thus embracing the new        programme to benefit charities, the introduction of
mindset in corporate strategy.                                    numerous pro-environment operational and
                                                                  maintenance efficiency systems, and time-and
Our learning culture extends to our contractual partners          resource-saving administration procedures. Six finalist
for better efficiency in rail project delivery through on-        projects are under consideration for the best 2004 WIT
                                                                  proposal out of 355 submitted. Total savings from WIT
site training, information sharing seminars and co-
                                                                  projects in 2004 were HK$13.5 million.
organised tertiary institution construction management
courses. Partner productivity, environmental compliance
and on-site safety practices have measurably improved          Service Excellence
since the introduction of the partner training scheme. The     Central to the social contract with our customers and
early (four months) completion in 2003 of the TKO line         stakeholders is service excellence. Thirteen Customer
with construction costs reduced by 48%, minimal                Service Pledges, underpinned by structured management
contractual disputes and a total of 54 minor environmental     and operational systems, embody this social contract and
convictions for contractors demonstrates the results of this   continue to set demanding targets for best practice. These
scheme in practice.                                            pledges set the best practice model for our performance
                                                               as a world-class rail operator as well as serve as indicators
Our global expansion efforts have created new avenues          in our business risk model. In 2004 the company again
for training and skills enhancement. We have accelerated       exceeded all targets set. Detailed discussions and year-
in-house courses to support operational staff deployment       on-year comparison of customer pledge targets and
and nurture a new generation of management leaders in          achievements are provided on page 23.
our overseas operations. A notable breakthrough has been
in mainland China, with training programmes for suppliers,     On an international basis, we continued to benchmark our
contractors, designers and operators. From on-site             operations with participation in the CoMET Group for
environmental workshops to long-term technical                 performance and sustainability. In 2003, MTRC ranked third

22   MTR CORPORATION
CUSTOMER SERVICE PLEDGES (2003-2004)

Service Performance Item                   2003                   2003     2004                        2004
                                          Target    Actual Performance    Target         Actual Performance

Train Service Delivery                     99.5%                 99.9%     99.5%                        99.9%

Passenger Journeys on Time

MTR                                        99.5%                 99.9%     99.5%                        99.9%

Airport Express                              99%                 99.9%       99%                        99.9%

Train Punctuality

MTR                                          99%                 99.6%       99%                        99.7%

Airport Express                              99%                 99.9%       99%                        99.9%

Add Value Machine Reliability              97.5%                 99.2%       98%                        99.4%

Ticket Issuing Machine Reliability         97.5%                 99.4%       98%                        99.5%

Ticket Gate Reliability                      99%                 99.7%       99%                        99.8%

Escalator Reliability                        99%                 99.9%       99%                        99.9%

Passenger Lift Reliability                   99%                 99.8%       99%                        99.8%

Temperature and Ventilation

Trains:
To maintain a cool, pleasant and
comfortable train environment
generally at or below 26oC                   97%                 99.9%       97%                        99.9%

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                      90%                 99.5%       90%                        99.3%

Cleanliness

Train compartment:
Cleaned daily                                98%                 99.9%     98.5%                         100%

Train exterior:
Washed every 2 days                          98%                 99.9%       98%                        99.9%

Train Reliability
(Train car-km per train failure causing
delays ≥ 5 min)                           500,000             1,213,247   500,000                    1,027,233

Ticket Reliability
(Magnetic ticket transactions per
ticket failure)                             7,000               14,437      8,000                      10,125

Passenger Enquiry Response Time
within 7 working days                          –                     –       99%                        99.9%

                                                                                    SUSTAINABILITY REPORT 2004   23
SOCIAL RESPONSIBILITY




in 11 of the 25 CoMET key performance indicators. Among                      service planning and delivery. The guidelines, tools and
the top ratings, the MTR ranked as the world’s most densely                  communication mechanisms for health and safety are
utilised metro system. In 2004, our network carried on                       embodied in the Code of Conduct, 10 safety objectives,
average of 2.4 million passengers per weekday .                              customer safety campaigns, on-site training programmes
                                                                             and contractual compliance procedures. These are
The MTRC plays a pivotal role in establishing global                         devised and managed through a hierarchy of committees
industry standards and practices. We are one of 19                           that start with the Executive Directorate policy committee
founding corporate signatories to the UITP Charter on                        and are subsequently imposed through a seven-step
Sustainable Development launched in 2003. As a full                          cyclic management process to implement, monitor and
charter member we actively commit to the development                         audit procedures with a view to improvement on a
of the public transport sector for long-term sustainability                  continuous basis.
in terms of managing social, economic and environmental
impacts. For full details, refer to www.uitp.com for the                         FOCUS
initiatives and pledges we undertake as a member.
                                                                                 Alert staff prevented serious harm to passengers and
Safe, Reliable Transport                                                         damage to train cars when professionally handling
The company’s safety standards, while outstanding in the                         an attempted rush-hour arson attack. This incident,
                                                                                 while averted, prompted an internal review of safety
global CoMET ratings, continue to improve against our
                                                                                 and security procedures, resulting in a series of
own internal targets. In 2004, three passengers committed
                                                                                 improvements in our emergency protocol and safety
suicide on the MTR network. However, no accidents                                planning. Additional courses in emergency and
resulting in fatalities among passengers, staff or                               preventive safety training for station teams, a
contractors occurred, and injuries among staff and                               change in the window design of rail car interiors to
contractors were at the lowest accident rate in more than                        allow for easier opening, and a series of in-station
five years, at 0.050 per every one million passengers. With                      customer videos were among the immediate
the progressive completion of platform screen doors, it is                       measures implemented.

expected that suicide attempts and track tresspassing will
be reduced. All safety targets for 2004 were again achieved                  Our responsibility to the customer and community
and a more stringent set for 2005 established, again                         extends beyond rail transport. We play a pivotal role in
seeking further internal improvement in performance.                         establishing and shaping new communities through
                                                                             active participation in property developments along our
The health and safety not only of customers but of staff,                    transit routes. This involves our sharing in the planning,
contractors and the wider community are central to our                       design and project delivery of MTR stations and the


 CoMET KEY PERFORMANCE INDICATORS

 MTR Performance vs Best Performance (%) (Best Performance = 100)                                                    2002                2003

 Density - Capacity km per route km                                                                                    100                100
 Service Reliability - Percentage passenger journeys on time                                                          99.8                100
 Cost Effectiveness - Fare revenue per total operating costs                                                           100                100

 Passenger Cost - Operating costs per passenger                                                                        100                100
 Staff Efficiency - Passenger per staff hours                                                                           71                  70
 Safety - Fatality per million passengers                                                                               59                  91

Note: The other metros in the comparison are Berliner Verkehrsbetriebe, London Underground Limited, New York City Transport, Sistema de Transporte
Colectivo, Regie Autonome de Transports Parisiens Metro, Regie Autonome de Transports Parisiens Regional Express Railway, Metroplitano de Sao Paulo,
Tokyo Metro, Moscow Metro and Metro de Madrid. The benchmarking agreement prohibits specifically identifying the data by metro system.

24   MTR CORPORATION
design and project delivery of MTR stations and the
surrounding built environment. Under our business model
of rail + property we own retail and commercial space as
well as manage residential estates and commercial facilities
adjacent to our stations. In all phases of property
development and ownership we integrate our learning
culture and CSR initiatives, incorporate established
sustainability practices, undertake best practice in service
and train our staff to implement corporate best practices.
The recently completed TKO line reflects this vision with
several innovative measures incorporated into the final
design of the project. These include use of natural light in
stations, sound mitigating track construction, temperature-
control air curtains inside stations and state of the art aids
for the disabled, including audio/visual communications,
tactile floor guides and specialised access facilities.


Community Initiatives
We envisage the MTR to be a system of natural community
centres for social interaction as well as public enjoyment.
Our long-standing tradition of community partnering
through in-kind support for numerous charities and NGOs
helps to raise funds and social awareness in the broader
community. We have offered our shopping malls, station
spaces and staff volunteers to help stage local community
activities, special events, advertising and exhibitions for a
wide variety of special needs and charitable causes across
Hong Kong. We donate cash raised through company-
generated activities (HK$ 2.85 million in 2004) along with
useable office equipment and supplies to charities. We
also worked hand in hand with the community to aid the
tsunami disaster relief campaign. We donated, on behalf
of the company and staff, HK$ 2 million in cash and                as representatives of the MTRC. The Code of Conduct,
opened our stations to charitable organisations for the            which dictates our current practices in business ethics
collection of monies from the public.                              and behaviour, has been revised to align with the latest
                                                                   developments in corporate governance standards,
For our customers, lifestyle is part of the journey. During the    including the corporate governance standards under
past six years, under our Art in Stations programme, we have       the Sarbanes-Oxley Act. All employees are given a
supported and nurtured Hong Kong’s artistic community.             guidebook on the Code in addition to briefings and
By 2006, 23 works, ranging from large-scale wall mosaics to        seminars that exemplify application of conduct to the
hanging installations to traditional oil and ink paintings, will   workplace. Areas covered include bribery, sexual
adorn spaces in and around our stations.                           orientation, disability discrimination, family status and
                                                                   other ethical behaviour.
Code of Conduct
The company clearly communicates to all staff                      Hong Kong is a well-developed service industry economy
expectations on how employees conduct themselves                   and as such works within a strict regulatory environment

                                                                                                SUSTAINABILITY REPORT 2004   25
SOCIAL RESPONSIBILITY




                                                                 in process monitoring. As such, we have yet fully to absorb
     FOCUS
                                                                 and assess the risks and consequences. With so many
     The MTR system seeks to be the preferred mode of            unknowns, our immediate agenda is internally to
     public transport for all members of society, including      formulate policy basics beyond the current Code of
     the physically disabled. The outcomes of our recent         Conduct standards, and to gather and observe the best
     Customer Satisfaction Surveys and the CSR dialogue          practice of companies already established in China and
     with various NGOs will influence planning. The asset        elsewhere on their framework for CSR. The planned series
     improvement and service management programmes               of information exchange forums and meetings to be held
     will incorporate suggestions to enhance journeys,
                                                                 in the next year will help to define best-practice strategies
     notably, to provide better accessibility within stations,
                                                                 and procedures to adopt and employ within our own
     smooth interchanges for feeder services, offer seamless
     train to street-level access, and improve car crowding      business model.
     levels and air-conditioning.

                                                                    FOCUS

and under common law principles, where human rights,
                                                                    Sustainable practices in the planning and development
child-labour laws and worker-protection law violations are
                                                                    of the Shenzhen No. 4 Line underpin our first direct
rare. Further to this, where we have controlling interest           investment and application of the rail + property model
with contractors in projects and supply, we include                 in mainland China. In a proposal supported by provincial
contractual obligations for workers’ safety and fair                authorities, we seek to change existing design and
employment with strict compliance procedures. The Code              planning to create a cohesive project that transforms
of Conduct is made available to all contractors and they            current development plans for a series of single land
are encouraged to work within our guidelines. In respect            parcels serviced by multi-lane highways into a unified
                                                                    greenbelt area, in which new satellite communities are
of our contractual obligations, we pay according to terms
                                                                    linked via a primary rail line supported by a series of
negotiated and hold on-site inspections and meetings to
                                                                    secondary transport roads. The urban planning, design
anticipate any contract deviation. In 2004, all direct              and development of this project are being watched
contracts were paid according to terms agreed, and no               closely by other provincial town planners across the PRC.
sub-contractor employed on our sites was fined for breach
of employment practices.
                                                                 Moving the social sustainability agenda forward during
We are an equal opportunity employer operating under             the year proved challenging. Our efforts focused on the
an employment policy that formalises non-discrimination          review and assessment of practices and targets that were
against race, sex, creeds and economic status. Employees         prioritised according to the corporate growth strategy. The
and prospective employees are assessed on their ability          targets for 2004, nonetheless, have been largely attained,
and suitability for meeting the specified job requirements.      providing a degree of progress, in particular on the Code
Our policy is monitored regularly to maintain compliance         of Conduct and employee buy-in to the change in
with local legislation and international conventions with        corporate culture. Our 2005 targets link to the broader
regard to equal opportunity, child labour and other              planning and necessary marshalling of resources to
human rights issues.                                             implement our newly formulated competitive advantage
                                                                 strategy in sustainable practices.
With our growing international business, in particular with
developing economies such as China, we are at the
threshold of a paradigm shift in our sustainability practices
and broader stakeholder engagement processes. Issues
with supply chain management, sub-and sub-sub-
contractors, and the up/downstream impacts on our
businesses are complex, legally opaque and at best weak

26   MTR CORPORATION
  PERFORMANCE AGAINST THE QUANTITATIVE SAFETY TARGETS FOR 2004

  Objective                                                     Description                                           Target            Performance
                                                                                                                                                          1
  Passenger Safety                                              Fatality                                                     0                        0

                                                                No. of serious injuries
                                                                per 100 million passengers                      7.2 or below                      4.99


  Staff Safety on the Operating Railway                         Fatality                                                     0                        0
                                                                                                     2
                                                                Lost time injury frequency rate
                                                                per 200,000 man-hours worked                  0.62 or below                       0.59


  Contractor Safety on the Operating Railway                    Fatality                                                     0                        0

                                                                Reportable accident rate
                                                                per 100,000 man-hours worked                  0.38 or below                       0.22


  Management of Construction Activities                         No. of events causing serious
  on the Operating Railway                                      injury to passengers or public,
                                                                damage to the operating
                                                                railway, or major incidents affecting
                                                                train services arising from
                                                                interface construction activities                            0                        0


  Risk Management of the Operating Railway                      Reduce the number of significant
                                                                hazards currently identified                 10% reduction            19.4% reduction


  Construction Safety for                                       Fatality                                                     0                        0
  Railway Extension Projects3
                                                                Reportable accident rate
                                                                per 100,000 man-hours worked                    1.2 or below                      0.18

Notes:
(1)   This figure does not take into account fatalities owing to passenger suicide, passengers’ own medical conditions or trespass.
(2)   LTI Frequency Rate = (Number of lost time injuries/Total Number of manhours worked) * 200,000.
      Lost time injury (LTI) is defined as an accident affecting a staff member, who, as a result of the accident while on duty,
      is unable to work for one complete work shift or more.
(3)   Railway extension projects include all civil and electrical and mechanical works for the following projects:
      West Rail interface works, Tsim Sha Tsui Station modifications, Exit C3 modifications at Mong Kok, Tung Chung cable-car and the Disneyland Resort line.




                                                                                                                           SUSTAINABILITY REPORT 2004         27
Rail is an acknowledged preferred choice in public urban
                                                                      FOCUS
transport. Reductions in traffic congestion, fossil fuel
emissions, noise and air pollution are a few of the many              The need for conservation of the natural resources
significant benefits that the MTR network brings to Hong              affected by the Tung Chung cable-car project in North
Kong. Our environmental strategy reaches beyond rail to               Lantau Country Park has initiated a new, holistic
the planning and development of green communities                     approach to managing biodiversity in the projects we
                                                                      undertake. Under the stewardship of the SAB, this model
around our stations and routes, bringing quality of life to
                                                                      comprehensively includes management and monitoring
our city and often, in the process, reviving aged and
                                                                      systems to prevent unnecessary loss in the ecological
environmentally neglected regional community centres.                 habitat and ensures the re-use of vegetation cleared as
                                                                      a consequence of project delivery. The programme
MTRC’s Environmental Management System (EMS),                         reaches beyond the strict borders of the project,
formalised in 1997, now operates under ISO 14001                      encouraging the protection of adjacent areas in North
international standards. The systems used to monitor,                 Lantau and the prevention of damage to rare or
audit and improve performance are based around                        protected species in the park area. It also provides the
                                                                      training of project employees in the implementation of
challenging and quantitative targets that link all six
                                                                      daily work practices designed for minimal disturbance
divisions of the company, providing a uniform framework
                                                                      to the local flora and fauna.
for managing major resources usage. In 2004 we achieved
95.62% of the 137 corporate-wide environmental and social
targets set for the year, which compares favourably to our        We assume environmental responsibility for normal rail
strong 2003performance rating of 91% of 121 targets.              operations and the maintenance works inside and outside
                                                                  the stations and along our rail lines. With our contractors,
Compliance Architecture                                           we set targets internally that exceed those required under
Under our best practice culture, we are in strict compliance      law. We operate under a contractual framework on our
with all Hong Kong environmental legislation. No                  construction sites that requires certain achievements
prosecutions were recorded for the year . Similarly, in           linked to a milestones payment system for environmental
international projects, we adhere to local regulatory             management covering wastage, re-cycling and disposal
compliance procedures for the environment. No prosecution         of resources and materials. Regular site inspections,
for our work in these markets was incurred.                       progress reports and audits are conducted, with any
                                                                  environmental hazard identified and the subsequent
                                                                  remedial work followed up immediately.




 PROGRESS AGAINST 2004 EMS TARGETS
 Division                                            No. of Targets                  No. of Fully                 % of Fully
                                                                                Achieved Targets            Achieved Targets
 Corporate                                                      23                              20                        87%

 Finance                                                        10                              10                       100%
 Human Resources                                                 7                               7                       100%
 Legal and Procurement                                          13                              13                       100%

 Operations                                                     16                              14                        88%
 Projects                                                       14                             14                        100%
 Property Development                                           13                              12                        92%

 Property Management                                            41                              41                       100%
 Total                                                         137                            131                         96%

                                                                                                     SUSTAINABILITY REPORT 2004   29
ENVIROMENTAL RESPONSIBILITY




Constructions sites by nature produce large volumes of
                                                                      FOCUS
waste materials and environmental disruption. The
company’s EMS governs how our sites and contractors                   Electricity is an expensive resource and heavily relied
are managed and audited for strict environmental                      upon for our operations. In our efforts to find energy
procedures and compliance. Working experience has                     alternatives, Hong Kong’s first hybrid solar and wind
identified dust and noise levels, water and construction              power turbine was developed by the company to run
                                                                      the streetlights at one of our largest train depots,
materials wastage, site management and re-cycling
                                                                      which services the Airport Express and Tung Chung
programmes as the key areas of continuous inspection.
                                                                      lines. Electricity generated during the day is stored in
However, contractors employed by our divisions are                    a retired locomotive lead-acid battery powerful
responsible for their own compliance with environmental               enough to operate the streetlights of the depot for
regulations and are encouraged and trained through our                several years. In addition to eliminating the need
partnering system to exceed standards. In 2004, the                   for additional cable installation the company saves
several dozen contractors engaged on our railway                      3,504 kWh/year and more than 2,000 kg of CO 2 in
construction sites collectively incurred no prosecutions              greenhouse gas emissions annually. This project is a
                                                                      small yet innovative step in the pursuit of integrating
for breaches of environmental regulations         .
                                                                      renewable resources into our operations.

The architecture for our compliance with environmental
protection regulations is embodied in regulatory and self-         state inverters on the urban line railway cars are some of the
initiated programmes that monitor and measure our                  significant programmes in progress that have reduced
environmental performance. Noise, water, greenhouse                electricity consumption in recent years. Under the Scheme
gas emissions and waste generation rank as primary                 of Control set by the Government, we are restricted in our
targets for performance tracking.                                  choice of suppliers, neither of whom generates electricity
                                                                   from renewable sources. As a result, controls on greenhouse
The urban density of Hong Kong requires stringent                  gas emissions are specific to our operations. New supply
noise abatement measures. We are co-operating with                 sources will be investigated in anticipation of the 2008 expiry
the Government to monitor noise levels along our                   of the Scheme of Control. Nonetheless, alternative energies
routes to ensure compliance and, as policy, we respond             are being explored and tested where applicable, but we
immediately to public complaints with regard to                    acknowledge their limited contribution to our broader
our operations. Internally, our self-monitoring results            operational needs at this juncture.
achieved 97% within the criteria set out under the Noise
Control Ordinance . During 2004 no noise abatement
prosecutions were brought against the company .                      FOCUS

Similarly with water consumption, wastage and re-cycling,
                                                                      Under the WIT programme, the installation of a
we monitor usage at more than 150 discharge points and                compost machine at a main train depot canteen has
achieved a 97% rate of discharge limits . In 2004, we                 provided a successful pilot programme for organic
were compliant with the effluent discharge licenses. In a             waste processing and disposal. Up to 20kg of food
further move towards improvement, we initiated a                      waste is processed daily and converted to organic
programme that substantially reduces water consumption                fertilizer, which in turn is used to nurture plants in and
through the introduction of automatic taps at selected                around the MTRC’s properties. It is estimated that with
                                                                      the installation of further machines at all five depot
rail maintenance stations.
                                                                      canteens, the company could eliminate 30 tonnes of
                                                                      food waste annually and benefit from an oxygen-rich
Electricity fuels our operations. As one of our most significant      environment of healthy, thriving plants.
direct operating costs, more efficient management and
monitoring to mitigate costs and greenhouse gas emissions
are pursued. Traction energy management, installation of           Leadership Initiatives
platform screen doors in stations and the installation of solid    We take into consideration the extended life of a rail asset

30   MTR CORPORATION
and its components when working with contractors and                         The Environmental Management System serves as the starting
under contractual obligations. While able to work                            point in how we transfer broader sustainability practices when
successfully with the targets achieved on a year to year                     approaching new markets. By leveraging our expertise in
basis, the long-term management of responsible recycling                     systems, procedures and accountability in managing
and waste disposal by contractors is impractical owing to                    environmental impacts, we have developed a roadmap to
factors such as time liability limits under contract and                     evolving social, economic and environmental best practice in
materials procurement and disposal time gaps. In addition                    projects and with project partners. Current activities in
to the current legislated management programmes, we                          mainland China demonstrate this agenda. With measurable
have taken steps through internally developed protocols                      and encouraging results on the environmental and stakeholder
to re-cycle and manage construction materials wastage                        engagement fronts in Shanghai, we are formulating a model
from our projects. Through selected mechanisms such as                       that will have viable applications for future projects where
the WIT and project-specific environmental targets, we                       we have substantial input into the management, and more
continue to explore our capabilities in managing the                         importantly, the planning and development of projects
longer term up and downstream effects of our operations.                     such as those in Beijing and Shenzhen.


 KEY ENVIRONMENTAL DATA (2001-2004)
 Issue                                    Division                   2001                  2002                    2003 1              2004
 Greenhouse Gas Emissions
 Greenhouse gas emissions          Corporate Wide                        –                     –               570,110               631,700
 (CO2 equivalent)
 Electricity consumption                                   709,170 MWh            726,390 MWh            782,273 MWh          785,273 MWh
                                        Operations
                                                        6.10 kWh/car km        5.92 kWh/car km       6.11 kWh/car km        6.02 kWh/car km
 Traction energy                        Operations     2.50kWh/train km      2.46kWh/train km       2.29kWh/train km        2.4kWh/train km
 Waste Generation
 Metals recycled                        Operations               720 tons              941 tons              1,204 tons           1,231 tons
 Spent oil recycled (% total)           Operations       20% 3,154 Litres      50% 9,414 Litres 100% 15,800 Litres 100% 18,654 Litres
 Water Usage
 Water consumption                      Operations             211,073 m 3            187,031 m 3           253,579 m 3           324,751 m 3
Note:
(1) Operations commenced on TKO line.



 MTRC GREENHOUSE GAS EMISSIONS INVENTORY (2003-2004)
 Activity                                                                                                    CO2 Equivalent (Tonnes)
                                                                                                               1
                                                                                                          2003                   2004
 Electricity - train operation                                                                         436,508                       438,182
 Electricity - HQ                                                                                         6,791                        6,381
 Electricity - managed properties                                                                      114,979                       157,846
 Fuel                                                                                                     1,324                         1,860
 Waste disposed to landfill – operation and projects                                                      9,623                       26,421
 Staff flights                                                                                             885                          1,010
 Total                                                                                                570,110                       631,700
Note:
(1) GHG emissions are calculated by applying to the consumption of resources different emission factors which are based on the WBCSD/WRI Protocol.
    Certain figures are changed from 2003 due to changes in emission factors.

                                                                                                                  SUSTAINABILITY REPORT 2004    31
The year 2004 is a financial story of recovery and
growth. Net profits grew by 1% bolstered by a record
year for passenger journeys and the continued flow of
property and related services income. Full discussions
of the year’s financial performance are available in the
2004 Annual Report.


The MTR Corporation operates under a unique hybrid
business model that acknowledges the need for public
transport infrastructure, while operating as a commercial
organisation under prudent financial principles.
Accordingly, the company derives its revenue streams
from mass transit operations augmented by the financial
opportunity of development rights to those properties
attached to the rail infrastructure. In using these
negotiated cross-subsidised sources in public transport
infrastructure, the company operates as a profitable
business. Since listing in 2000, MTRCL’s share price has
outperformed the Hang Seng Index and returned to
shareholders an average 9.8% ROI. We consistently pay
dividends and in 2004 announced a full- year dividend of
HK$ 0.42 per share, on a par with previous years.

Our credit ratings align with Hong Kong’s sovereign risk
profile and we rank among the corporate business leaders
of Asia. Internationally, the MTRCL is a member of the MSCI
and FSTE All-World Hong Kong Indices as well as the DJSI,
FSTE4Good and the Ethibel Stock Indices.


We do not underestimate our position as a community
asset. We build and operate a world-class rail infrastructure
and develop adjacent properties that underpin Hong
Kong’s status as a global business centre. In addition to
providing safe, reliable transport for Hong Kong residents,
we support tourism and Hong Kong’s services based
economy. Our dedicated airport railway, urban transport
network, smart-card technologies and residential and retail
developments facilitate modern lifestyle expectations, while
enhancing the quality of life for our stakeholders and society
as a whole. We rank as an employer of choice in Hong Kong,
engaging more than 6,500 staff and a substantially larger
indirect workforce currently employed on our various rail,
property and consultancy projects.




                                                                 SUSTAINABILITY REPORT 2004   33
ECONOMIC RESPONSIBILITY




The broader economic benefit of the company is most
observable at the community level. In Hong Kong, our
rail system has significantly reduced the loss of land and
prime community space to roads and their negative
impacts. Our network also substantially raises property
values in its station environs and has acted as the catalyst
for reviving or initiating new local economic activity. It is
our agenda to build modern, thriving communities. By
taking this holistic approach, we create modern transport
hubs that maximise social and economic potential. The
Tsing Yi station and surrounding residential community
of Tierra Verde bring this agenda to life. Linked to greater
Hong Kong by rail, a modern waterside regional centre
encompasses retail, leisure and community amenities in
what was formerly a redundant fuel storage facility site.
Since completion in 1999, the area has grown into a
prosperous local community.


In our global activities we leverage our industry expertise
and business acumen through project consultancy and,
where opportune, investment in the development of
public transport systems. As the partner of choice, we
transfer efficient industry technologies, embed best
practice in project and environmental management and,
with the design, delivery and operation of rail systems
and their environs rooted in sustainability, we transform
communities and the businesses that build them. This
strategy generates economic benefits for our
stakeholders and the urban areas in which our projects
are located.




34   MTR CORPORATION
  SUMMARY OF MTRCL’s FINANCIAL PERFORMANCE (2002-2004)

  Profit and Loss Account (HK$ million)                                          2002                             2003                         2004

  Turnover (fare and non-fare)                                                   7,686                            7,594                        8,351
  Operating profit before depreciation                                           4,014                            3,747                        4,546
  Depreciation                                                                 (2,470)                           (2,402)                      (2,521)

  Interest and finance charges                                                 (1,125)                           (1,539)                      (1,450)
  Profit attributable to shareholders                                            3,579 *                          4,450                        4,496
  Dividend                                                                       2,161                            2,215                        2,259

  Balance Sheet (HK$ million)
  Total assets                                                                101,119 *                         102,366                      106,674
  Loans, obligations under financial leases and bank overdrafts                 33,508                           32,025                       30,378

  Deferred income                                                                6,226                            5,061                        4,638
  Shareholders’ funds                                                           53,574 *                         57,292                       63,499
  Financial Ratios

  Operating profit from railway and related operations
  before depreciation as a % of turnover                                        52.2%                            49.3%                         54.4%
  Non-fare revenue as a % of turnover                                           25.6%                            27.7%                         29.0%

  Gross debt/equity ratio**                                                     62.5% *                          55.9%                         47.8%
  Interest cover (in times)                                                         4.5                             5.6                           6.1

(*) Restated to include retrospective adjustments on deferred income tax provided in accordance with a revised accounting standard.
(**) Loans, obligations under financial leases and bank overdrafts as a percentage of the shareholders’ fund.



  SUMMARY OF MTRCL’s TOTAL SHAREHOLDER RETURN (2000-2004)
                                                                                                                                                        2
                                                                                                        MTRCL                     Hang Seng Index
                                                                                             Total Shareholder 1
                                                                                                        Return
  Total shareholder return as a %                                                                           48.7%                             -2.35%

  Total shareholder return
  annual equivalent                                                                                             9.8%                           -0.6%

Notes:
(1) Total shareholder return is calculated based on the movement of the MTRCL’s share price and the dividends paid during the period from the IPO date
      (HK$ 9.38) to 31 Dec 2004.
(2)   The comparison for the Hang Seng Index is obtained using the movement of the Hang Seng Index and the dividends paid by the indexed stocks
      during the same period.




                                                                                                                           SUSTAINABILITY REPORT 2004       35
ECONOMIC RESPONSIBILITY




  ECONOMIC CONTRIBUTION (2002-2004)
  Financial Performance                                             2002                               2003                             2004

 Turnover (HK$ million)                                             7,686                              7,594                            8,351
  Profit for the year attributable to
  shareholders (HK$ million)                                        3,579                              4,450                            4,496
  Shareholders (HK$ million)
  Return on shareholder’s fund                                       6.7% **                           8.0%                              7.4%
  Interaction with Hong Kong,
  Asian and Global Economics
  Number of staff                                                   6,891                              6,629                            6,555
  Staff costs and related expenses (HK$ million)                    1,579                              1,643                            1,542

  Energy and utilities (HK$ million)                                  502                                546                              544
  Repairs and maintenance (HK$ million)                               435                                477                              517
  Stores and spares consumed (HK$ million)                            121                                128                              128

  Railway capital expenditure (HK$ million)                         5,196                              2,582                              859
  Total number of passengers (MTR and AEL)                    786 million                       777 million                        842 million
  Share of franchised public transport in HK                       23.5%                              24.3%                             24.8%
  Interest payments on borrowings (HK$ million)                     1,153                              1,551                            1,457

  Dividend payment (HK$ million)                                    2,161                              2,215                            2,259
  Taxes paid (HK$ million) overseas                                      1                                 4                                4
  Subsidies received (HK$ million)                                    219 *                              675                               37

Notes:
(*)   Pursuant to the financing arrangement under the Disneyland Resort Line project agreement between the MTRC and Government, interim cash
      dividend declared and payable to the Government during the year was waived.
(**) Restated to include retrospective adjustments on deferred income tax provided in accordance with a revised accounting standard.




36    MTR CORPORATION
Supporting information

ASSURANCE STATEMENT




To the Directors of MTR Corporation                            approved in December 2003 by the International
                                                               Auditing and Assurance Standards Board. However, we
Introduction                                                   have not performed an audit according to International
MTR Corporation (“MTRC”) has issued a Sustainability           Standards on Auditing. Accordingly, we do not express
Report 2004 (“the Report”) covering its approach to            such an opinion.
corporate sustainability and detailing the social
responsibility, environment and economic contributions         Considerations and Limitations
it has made during 2004. We have been asked to consider        It is important to read the statements and data in the
selected statements made and data reported in the              context of the reporting policies and limitations in the
Report. The objectives of our assurance, the scope of our      Report. Environment and social responsibility data is
work and our findings are detailed below.                      subject to many more inherent limitations than financial
                                                               data given both their nature and the methods used for
The Directors are solely responsible for the contents of       data determination, calculation or estimation.
the Report, the reliability of the information presented
and its maintenance and integrity on the internet. Our         We have not provided assurance over all contents of this
responsibility is only to the management of the company        report, nor have we undertaken work to confirm that all
and is to report on the statements and data indicated          relevant issues are included.
based on our assurance work and on the terms agreed
with management for this purpose. The work described           We have not carried out any work on data reported in
below has been carried out solely for the Directors and        respect of targets or future projections. We have not
was not planned in contemplation of any third party            provided assurance over previous years’ data.
relying on it. Accordingly, PricewaterhouseCoopers will
accept no responsibility for the use or interpretation of      We have not performed work on the maintenance and
the results of its work by any third parties.                  integrity of information in the Report published on the
                                                               MTRC website.
Our objectives
The overall objectives of our procedures were to:              It is also important that, in order to obtain a thorough
- Assess whether the selected statements and data in the       understanding of the financial results and financial
  Report are supported by underlying evidence;                 position of MTRC, the reader should consult the MTRC
- Read the Report to assess the consistency of the             Annual Report for the year ended 31December 2004.
  information presented with the findings of our work.
                                                               Conclusion
Assurance work performed                                       We have reported to management that:
Our procedures were limited to:                                - based on the work completed, the statements and
- Interviews with management and personnel in the                data in the paragraphs in the Report marked with the
  sustainable development, operations, property, project         symbol      are supported by underlying evidence.
  and human resources divisions, involved in providing           Nothing has come to our attention to indicate that the
  information for inclusion in the Report in relation to the     statements require any material adjustment or that the
  selected statements and data;                                  data is materially misstated;
- Examination on a test basis of documentary evidence          - the information presented in the Report relating to the
  relating to the selected statements and data on which          selected statements and data are consistent with the
  we report;                                                     findings of our work.
- Assessment of the relevant sections of the Report
  relating to the selected statements and data to check
  for consistency with the findings of our work.

Basis of our work
We planned and performed our evidence-gathering
procedures to obtain a basis for our conclusions in
accordance to the International Standard on Assurance          PricewaterhouseCoopers
Engagements (ISAE) 3000 “Assurance Engagements                 Certified Public Accountants
other than Audits or Reviews of Historical Information”,       Hong Kong, 23 March 2005

                                                                                              SUSTAINABILITY REPORT 2004   37
Supporting Information

CORPORATE GOVERNANCE




As a publicly listed company, The MTR Corporation Limited     The framework that links risk strategy and governance
(the Company) is subject to the Rules Governing the Listing   is embedded in the policies that govern the five areas
of Securities on The Stock Exchange of Hong Kong Limited      of management: construction and insurance, finance,
(the Listing Rules). Additionally, as a US SEC reporting      treasury risk, safety and security. These polices, while
company, we are generally bound by the regulations set        formulated and implemented at management level, are
out in the Sarbanes-Oxley Act of 2002. Internally, the        under direct supervision of the Board, whose approval
Company has established and maintains a hierarchy and         is required for enactment and any changes to policies.
system of governance that promotes transparency and the       In terms of sustainability governance, a dedicated
mechanisms for checks and balances to ensure                  committee, the Corporate Sustainability Coordinating
accountability at all levels of the Company.                  Committee (CSCC), ensures the implementation of policy
                                                              and initiatives pertaining to sustainable practices.
Governance is implemented through a two-tier                  Chaired by the Managing Director (Operations and
management structure, being the Board of Directors            Business Development), the committee supervises the
and the Executive Directorate. The Board comprises an         corporate-wide CSR, Environmental Management
11-member panel, the majority (six) being independent         System, and all subsequent related directives,
non-executive directors who bring a wealth of business,       programmes and proposals. The committee meets every
industry and financial acumen to the company. The             six months and remains informed on matters through
Board directly oversees the Nominations, Audit and            a regular circulation of papers. The committee reports
Remuneration Committees. A person may be appointed            directly to the Executive Directorate on a timely basis.
as a member of the Board at any time either by the
shareholders in general meeting or by the Board upon
                                                                 FOCUS
recommendation of the Nominations Committee.
Directors who are appointed by the Board must retire
                                                                 Under the Listing Rules and, as the Hong Kong SAR
at the first annual general meeting after their
                                                                 Government owns approximately 76% 1 of the MTRCL
appointment. In either case, the Directors so elected            and 100% of the KCRC, the terms of any merger between
and appointed are eligible for re-election and re-               the two rail operators will be subject to the approval
appointment. At each annual general meeting of the               of the independent shareholders of the MTRCL.
Company, one third of the Directors (or such number
as is nearest to and less than one third) are required to        Shareholder expectations and the community-wide
retire from office by rotation.                                  and media interests are expected to be at critical levels
                                                                 throughout the debates and approval stages for the
                                                                 merger. The accountable, transparent and responsible
The Executive Committee comprises the CEO, the
                                                                 actions undertaken by all parties involved will set the
Executive Directorate and the General Manager of                 precedent for governance, stakeholder engagement
Marketing and Station Business. The Executive Committee          and the management style in which the merged entity
is responsible for the implementation of strategy and            will move forward.
policies as decided by the Board. It also manages the day
to day business of the Company and reports regularly to
the Board on the performance of the principal activities      As a publicly listed company, we subscribe to transparency,
of the Company. Further information on the roles and          particularly in connected party transactions and minority
responsibilities of the Board and the Executive Directorate   shareholder interests, according to the Listing Rules. Public
and our corporate governance structure is available in the    debate may arise in connection with these issues and the
2004 Annual Report.                                           role of the Hong Kong SAR Government, both as the
                                                              industry regulator and the majority shareholder 1 of the
                                                              Company. To create a careful balance in relationships,

Note:
(1)   Refer to Corporate Structure p.05 of this report.

38    MTR CORPORATION
the Company enacts a policy and establishes procedures      material to the Company’s sustainability. Current issues
for best practice under relevant local and international    range from the fare-setting policy mechanism to land
regulations in respect of the protection of minority        development rights and, possibly in the near future, the
shareholder interests, and seeks to maintain transparency   approval process for the merger of Hong Kong’s two
and full disclosure when conducting transactions            major rail operators.




                                                                                        SUSTAINABILITY REPORT 2004   39
Supporting information

BASIS OF REPORTING




Accounting Policies
The financial and economic contribution data covered in this report includes the accounts of MTRCL and all its subsidiaries
except Octopus Cards Limited, a non-controlled subsidiary of the company. The data has been prepared in accordance
with the accounting policies set out in the corporation’s financial statements.


The environmental and social responsibility data is aggregated from various divisions within MTRC, principally operations,
projects, property and human resources. Where applicable and verifiable the source of the data is specified accordingly
throughout the report.


Sustainable Targets and Projections
The corporate targets are set through discussions with senior executives and directors based on past performance and
measured expectations. Divisional targets are set through discussions within individual divisions and are based on the
principle of continual improvement. Environmental targets for operations and project divisions are set in accordance
with the ISO14001 certified Environmental Management System.


Limitations
The measurement, calculation and estimation of some of the environmental and social responsibility data carry some
limitations that cause a degree of uncertainty in relation to the data reported. These include:


- Different interpretations of the reporting guidelines, such as those used for greenhouse gases and sustainability accounting
- Measuring, calculating or estimating the data according to the methods used, accuracy and sampling by environmental
  measuring equipment
- Data sourced from external entities and/or business partners where the company has no controlling interest in projects
  or contracts




40   MTR CORPORATION

				
DOCUMENT INFO
Shared By:
Categories:
Tags:
Stats:
views:32
posted:11/9/2011
language:English
pages:47