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Managing Financial Sustainability

Our railway and other businesses are closely connected to the lives of the communities in which we operate. The nature of our business is long-term and capital-intensive. Ensuring the best experience for our customers relies on stable and sustainable financing streams to fund our ongoing services, maintenance and upgrades. This is closely related to our corporate responsibility commitment to operate safely and responsibly in all aspects of our business and contribute positively to community development – a commitment supported by our sustainable financing model. We generate economic value through our transport, property and other services provided for customers and the contributions we make go beyond the profit we generate for our shareholders. Revenue generated from our services is also distributed to a wide range of stakeholders including suppliers, employees, capital providers, shareholders, Government and the community at large.

Details of our Value Added and Distribution Statement can be found in our Sustainability Report.

Taskforce on Climate Related Financial Disclosures

The June 2017 report of the Taskforce on Climate Related Financial Disclosures (‘TCFD’) recommends that large companies evaluate how their businesses may be affected in short, medium and long term by both the physical risks and transition risks. We have in place a governance structure for climate change issues to be discussed at the board level, regular assessment on our climate related risk through the Enterprise Risk Framework, and we have conducted assessment on climate resilience on our key operating assets. We also have energy reduction targets in place for our railway and property divisions. We are continuing our effort and will report progress through our sustainability reporting framework. Please refer to our sustainability report for our performance and latest initiatives.

Fare Adjustment Mechanism

Fare revenue is one of the major sources of stable and sustainable income for MTR, enabling us to support the significant capital investments required to maintain, replace and upgrade our assets to continue providing the level of service our customers have come to expect of us in the long term. To maintain our service affordability for all passengers, the Fare Adjustment Mechanism (FAM) which is based on economic data released by Goverment is applied to ensure fair, objective and transparent fare adjustments over time. Every five years, we are scheduled to review the FAM under our Operating Agreement with the Government. The FAM is an essential element enabling us to achieve financial sustainability for providing passengers with safe, reliable and efficient railway services.

Rail plus Property Model

Since the opening of MTR’s first railway line in 1979, our “Rail plus Property” model has brought significant benefits in optimising the integration between our property development and the railway network as well as capturing new property development opportunities along our railway network. The land development rights granted along railway alignments, upon payment of the relevant land premiums, allow us to generate income. The resources are in turn used to support railway operations and help fill funding gaps when building new railway lines. It integrates development with the transit hub to create seamless connectivity and builds many vibrant communities in Hong Kong where housing is in short supply. Our heavy rail network now covers all 18 districts in Hong Kong which improved accessibility to and enhanced development opportunities of many locations. Our Rail plus Property video provides a more detailed account.