The Company was incorporated on 20 August 1997 with an authorised share capital of HK$100,000 divided into 100,000 shares of HK$1 each. On 18 November 1997, the authorised share capital was increased to 600,000,000 shares of HK$1 each.

Pursuant to the Scheme of Arrangement, KMB, the former holding company of the Group, became a wholly owned indirect subsidiary of the Company by the cancellation of all the 403,639,413 shares of HK$1 each and re-issuing them to the Company via KMB Public Bus Services Holdings Limited and KMB Resources Limited. The Company in turn issued the same number of shares of HK$1 each to KMB's original shareholders. The excess of the consolidated net assets represented by the shares in KMB acquired by the Company via KMB Public Bus Services Holdings Limited and KMB Resources Limited over the nominal value of the new shares of the Company issued pursuant to the Scheme has been credited to the contributed surplus account of the Company.

Included in the figure for the retained profits of the Group is a loss of HK$155,000 (1996: HK$113,000) attributable to associated companies.

The distributable reserves of the Company as at 31 December 1997 amounted to HK$1,300,000,000.

This provision represents amounts set aside annually by the Company to meet liabilities which may arise from third party claims in connection with the Company's bus operations and to cover potential losses which may be caused by fire damage to the bus fleet.

Pursuant to a new franchise granted on 22 August 1997 to the subsidiary, KMB, which became effective on 1 September 1997, no development fund account is required to be maintained in the Group's accounts.

At 31 December 1997, the bank loans and overdrafts were repayable as follows:

The above fund represents the provision for the improvement of the retirement benefits to employees.

The title deeds of certain of the Group's properties, with a net book value of HK$151,244,000 at 31 December 1997 (1996: HK$147,241,000), have been deposited with certain banks together with agreements of undertaking to execute a legal mortgage in an event of default of the Group's obligations under the respective loan agreements.

At 31 December 1997, the Group's liabilities covered by the above agreements of undertaking amounted to HK$45,714,000 (1996: HK$81,429,000).

(a) At 31 December, the Group had commitments under operating leases for properties to make payments in the next year as follows:

(b) Capital commitments of the Group outstanding at 31 December not provided for in the accounts were as follows:

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