2016 — Page 15

REPORT OF

THE DIRECTORS

The directors have pleasure in submitting their Annual Report together with the audited financial statements for the year ended 31 December 2016.

PRINCIPAL PLACE OF BUSINESS

Hong Kong Ferry (Holdings) Company Limited (the "Company") is a company incorporated and domiciled in Hong Kong and has its registered office and principal place of business at 98 Tam Kon Shan Road, TYTL 102, Ngau Kok Wan, North Tsing Yi, New Territories, Hong Kong.

PRINCIPAL ACTIVITIES

The principal activity of the Company is investment holding and the principal activities of its subsidiaries are property development, property investment, ferry, shipyard and related businesses and securities investment.

The analysis of the principal activities of the Company and its subsidiaries (the "Group") during the financial year are set out in

note 3 to the financial statements.

BUSINESS REVIEW

A review of the business of the Group during the year is provided in Management Discussion and Analysis on page 12 and Chairman's Statement on pages 10 and 11 of this Annual Report. A discussion on the Group's future business development is provided in the Chairman's Statement on pages 10 and 11 of this Annual Report. Description of the principal risks and uncertainties that the Group may be facing can be found in the Chairman's Statement on pages 10 and 11 and the section of Risk Management and Internal Controls on pages 32 to 35 of Corporate Governance Report of this Annual Report. Financial risk management of the Group can be found in note 26 to the financial statements on pages 130 to 134 of this Annual Report. An analysis of the Group's performance during the year using financial key performance indicators is provided in the Financial Highlights on page 9 and Ten Years' Financial Summary on pages 146 and 147 of this Annual Report respectively.

Discussions on the Group's environmental policies and performance, relationships with its key stakeholders which have a significant impact on the Group are contained in Environmental, Social and Governance Report on pages 38 to 59 of this Annual Report. These discussions form part of this Report of the Directors.

Discussion on Environmental Policies and

Performance

The Hong Kong Ferry Group pursues environmental stewardship with a great sense of responsibility and drive. The Group effectively assesses and manages our environmental footprint in a systematic manner which drives continuous improvement. An Energy and Carbon Management Programme has been implemented since 2011, while we also conduct carbon audits for our two fuel-intensive shipyard subsidiaries in 2014. Further contributing to our efforts to curb our emissions of greenhouse gases and other air pollutants, we have successfully completed the Engine and Generator Replacement Programme which has been in progress since 2005.

Our principal office and subsidiaries continue to make substantial investment in energy retrofits ensuring measureable energy-savings which are monitored by commissioned consultants. As a result, our Year 2016 Energy Baseline has been established and is expected to report our target-setting for the coming years. The Group's efforts in water preservation were enhanced through the installation of an on-site rainwater harvesting tank at The Hong Kong Shipyard Limited. Each of our subsidiaries continue to make efforts in environmental mitigation through various waste management practices.

Account of Key Relationships with Employees, Customers and Suppliers

The highest standard of business ethics underlies the Group's relationship with our key stakeholders. We take the needs and interests of our employees, customers and suppliers into account at all times.

Employees

Our employees are fundamental to our success. The Group seeks to reward our staff with competitive remuneration and welfare packages, and provides opportunities for career progression through a fair annual appraisal exercise. As an equal opportunity employer, our talent acquisition process is conducted with impartiality, ensuring compliance to all relevant anti-discriminatory and privacy regulations. The continuous development and education of our employees is a top concern, and both internal and external training courses are utilized to fulfil this need.

To safeguard the health and safety of our employees, the Group has established a Safety Committee governing the management of all potential risks at The Hong Kong Shipyard Limited. Routine safety inspections ensure all established protocols are subject to review and rectify as necessary.

Hong Kong Ferry (Holdings) Company Limited Annual Report 2016

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