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Chairman and CEO' s Message

2016 marked Pacific Basin’s thirtieth year in business over which time we have built a strong name as a leading owner and operator of modern Handysize and Supramax dry bulk ships. Driving our success and reputation are a sustainable business model and culture, and the support of our customers and other stakeholders.

A Sustainable Business Model

We are focused on a specific ship segment that offers benefits of diversification in terms of geography, customers and cargoes, which means we don’t experience the degree of earnings volatility that other segments do. That said, we have in recent years seen extraordinarily weak market conditions through which we have navigated safely.

We are passionate about our customers and we value long-term relationships over short-term gain. These are values that underpin a customer-focused business model. We invest our time and personalised, innovative efforts to offer a tailored, flexible and reliable service to customers, making it easier for them to do business with us. This is what earns us the customer support that is so valuable in this challenging market and throughout the cycles.

We are passionate about our people, and are caring, fair and treat everybody with dignity and respect. Safety comes first, and our investment in the development and training of our staff underpins our safety performance while also driving knowledge, productivity, engagement, loyalty and a deeper sense of belonging to the company.

Our large fleet comprises high-quality, modern ships of efficient design, which delivers operational efficiencies for the benefit of our customers while generating lower atmospheric emissions than the average ship in our segment. We have long been early adopters of technological and operational measures to minimise our impact on the environment, and we continue to invest in technologies, systems and processes that reduce our environmental footprint not only because of the moral obligation to do so, but also because of the strong business case for taking action.

Staying on Top of Regulatory Challenges

New regulations for greener shipping will no doubt be good for the environment, but they pose potentially significant technical, operational and financial burdens of compliance on shipowners.

The Ballast Water Management Convention of 2004 enters into force in September 2017 requiring ballast water treatment equipment to be fitted on all our ships over the next several years subject to the outcome of implementation schedule discussions of the IMO’s Marine Environment Protection Committee in July 2017. We are well positioned for the implementation of this “BWMC” legislation (see the sidebar for more on the Ballast Water Management Convention).

The International Maritime Organization’s global 0.5% sulphur cap which enters into force in January 2020 – in addition to the 0.1% sulphur limit in the North American, US Caribbean, North Sea and Baltic Emission Control Areas – could be met by retrofitting ships with scrubbers costing millions of dollars which is practically not feasible. We expect to meet the requirements by using cleaner fuel, even if such distillate fuel oil currently costs more than higher sulphur heavy fuel oil (used in conjunction with scrubbers).

Ballast Water Management Convention

Shipowners’ compliance with the ballast water management convention is complicated by the fact that not all ballast water treatment systems (BWTS) approved under the IMO’s convention will receive type approvals from the US Coast Guard or comply with United States’ own ballast water management regulations.

While the US Coast Guard has currently approved only three makes of ballast water treatment system, they have established a system of approvals of alternate management systems (AMS) valid for five years from the retrofit date. They have also implemented a programme that allows for extended compliance dates for BWTS retrofits on a ship by ship basis, so global shipping does not need to grind to a halt. This also represents a practical approach to not penalising shipowners who fit equipment proactively, but there remains a technical risk that equipment fitted may not eventually obtain US Coast Guard approval and therefore become redundant five years after the retrofit date, with a considerable cost impact.

We have selected a ballast water equipment maker whose technology is well on the path to securing US Coast Guard approval, and which will enable us to manage our BWTS compliance in line with the IMO’s eventual implementation schedule. In the meantime, we are installing test units on two of our ships in 2017-18.

The implementation of an Electronic Chart Display and Information System (ECDIS) for paperless navigation will be mandatory for our ships from July 2017. We commenced retrofitting ECDIS across our fleet in 2014, have trained our navigation officers in its use and rolled out ECDIS as a primary means of navigation on all our ships well in advance of the implementation date.

New EU regulations on Carbon Dioxide (CO2) Monitoring, Reporting and Verification (MRV) for shipping came into force in July 2015, and the first reporting cycle commences in 2018 as the European Commission takes the first step towards setting reduction targets by mandating the collection and public reporting of CO2 emissions data. We are liaising with recognised organisations for developing and integrating MRV procedures into our existing management system for compliance.

Meanwhile we are also monitoring closely the IMO’s drafting of a roadmap for developing a comprehensive strategy on reduction of Green-house Gas emissions from ships. This roadmap will build on and consolidate the IMO’s various streams of GHG emissions reduction activity to date, including the technical and operational measures (EEDI and SEEMP) in force since 2013, the adoption of a data collection system (DCS) and other technical cooperation activities and projects.

We are fortunate to have an excellent team of people who endow our company with world-class expertise and professionalism right across our business. Thanks in particular to our award-winning in-house technical operations, we are fully prepared to meet the challenges of new environmental and other maritime regulations.



This CSR Report

We have decided this year to produce our first standalone CSR Report, which is a more comprehensive CSR reference document to better satisfy the growing interest in the details of our CSR responsibilities and performance. It also serves to more clearly address the amended disclosure requirements of the Environmental, Social and Governance Reporting Guide (“ESG Guide”) of The Stock Exchange of Hong Kong.

The focus of these pages is on how we tackle our responsibilities for the safety and wellbeing of our staff and ethical business practice, and our responsibilities towards the environment and the communities in which we operate.

As a large player in our sector with an ambitious vision for the future, we recognise our responsibilities in these areas which have a bearing on the long-term sustainability of our business.

Commentary relating to our economic sustainability and a detailed account of our corporate governance continue to feature in our Annual Report. We remain committed to the concepts of “Integrated Reporting”, and provide clear linkage between sections in our 2016 Annual Report and this CSR Report (and vice versa). We continue to publish a short summary of our CSR performance highlights for the year in our Annual Report.

We welcome any feedback from our stakeholders on our CSR programme and the scope and materiality of the contents of this report. Please click here for the feedback form.


David Turnbull

Chairman

Mats Berglund

Chief Executive Officer

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