Corporate
Governance Report

Corporate Governance Report

The Company is committed to upholding high standards of corporate governance which, it believes, is crucial to the development of the Company and protection of the interests of the shareholders of the Company. The Company has adopted sound governance and disclosure practices, and will continuously improve these practices and create a highly ethical corporate culture.

Composition of the Board

As at the date of this report, the Board consists of 14 directors (the “Director(s)”), including one executive Director, Mr. Li Zhiming; eight non-executive Directors, namely Mr. Chen Qiyu, Mr. She Lulin, Mr. Wang Qunbin, Mr. Ma Ping, Mr. Deng Jindong, Mr. Li Dongjiu, Mr. Lian Wanyong and Mr. Wu Yijian; and five independent non-executive Directors, namely Ms. Li Ling, Mr. Yu Tze Shan Hailson, Mr. Tan Wee Seng, Mr. Liu Zhengdong and Mr. Zhuo Fumin. To the knowledge of the Company, there is no financial, business and family relationships or material/relevant relationships among members of the Board or between the Chairman and the President.

Biographical details of the Directors are set out in the section headed “Biographies of Directors, Supervisors and Senior Management” of this annual report.

Major Responsibilities of the Board

The Board is the core of the Company’s corporate governance framework and it takes several roles in representing interests, supervising resources and coordinating interests. The main functions of the Board are strategic planning, guidance on operation management and inspection and supervision. The responsibilities of the Board include formulating operation plans as well as investment proposals of the Company, preparing the proposed annual budgets and final accounts of the Company, assessing the performance of the Company and overseeing the work of senior management; formulating and reviewing the corporate governance policies and practices of the Company.

The Board shall represent the long term interest of the Company and the interest of shareholders and related party when making scientific and strategic decisions, be effectively supervised and evaluated when controlling corporate resources and conducting operation management and maintain effective stimulation and supervision over the senior management when duly delegating its power to the senior management. The Board is the core of the Company’s corporate governance framework and its role is clearly separated from that of senior management. Being different from the function and duties of the Board, the senior management of the Company are mainly in charge of the Company’s production, operation and management; organizing the implementation of the Company’s annual business plan and investment proposal; drafting plans for the establishment of the Company’s internal management structure; drafting plans for the establishment of the Company’s branch offices; drafting the Company’s basic internal management system and formulating basic rules and regulations of the Company; within the authority delegated by the Board, appointing, changing or recommending shareholder representatives, directors and supervisors in its holding subsidiary or joint stock subsidiary; deciding on the establishment of the Company’s branches; and other powers delegated by the Board.

The Company has separated the roles of Chairman and President, with Mr. Wei Yulin and Mr. Li Zhiming serving as the Chairman and the President of the Company during the Reporting Period, respectively. Upon Mr. Wei Yulin retired from the positions of Chairman and executive Director on 24 March 2017 due to his retirement, Mr. Li Zhiming was elected as the Chairman and concurrently serves as the President as the new President has not been appointed yet. The Chairman is responsible for managing the Board, steering the Board to formulate overall strategies and business development plans, ensuring the receipt of sufficient, complete and reliable information by each Director and the receipt of reasonable explanations for all the issues raised in the Board meetings. The President is responsible for managing the business of the Company and implementing policies, business objectives and plans formulated by the Board, and is accountable to the Board for the Company’s overall operation.

The Board has established an audit committee, a remuneration committee, a nomination committee and a strategy and investment committee. Please see below for the composition and responsibilities of the audit committee, the remuneration committee, the nomination committee and the strategy and investment committee. Each committee shall provide its recommendations to the Board based on its respective terms of reference. The decisions of the Board on such recommendations shall be final, unless otherwise clearly stated in the terms of reference of these committees.

During the Reporting Period, the Board made a lot of efforts in improving the corporate governance system of the Company and enhancing the corporate governance standards, including amending the articles of association of the Company (the “Articles of Association”) in accordance with the requirements of relevant laws, regulations and regulatory rules as amended from time to time, as well as the practice of the Company; monitoring and organising the Directors and company secretary to participate in relevant training courses; regularly reviewing the Company’s compliance with the domestic and overseas regulatory requirements and its implementation of various internal corporate governance rules and policies, and reviewing the Company’s compliance with the Corporate Governance Code and the disclosures in the corporate governance report.

Changes of Directors, Supervisors and Senior Management

During the Reporting Period, changes of Directors, Supervisors and Senior Management are as follows:

  • As considered and approved by the 2016 first extraordinary general meeting of the Company held on 29 January 2016, Mr. Lian Wanyong was appointed as non-executive Director of the third session of the Board, his term of office was from 29 January 2016 to 20 September 2017. Ms. Li Xiaojuan was appointed as a shareholder representative Supervisor (the “Supervisor(s)”) of the third session of the supervisory committee of the Company (the “Supervisory Committee”), her term of office was from 29 January 2016 to 20 September 2017. On 4 January 2016, Mr. Zhou Bin tendered his resignation as a non-executive Director due to work arrangement. On 8 January 2016, Mr. Lian Wanyong tendered his resignation as a shareholder representative Supervisor.
  • As considered and approved by the 2016 second extraordinary general meeting of the Company held on 8 March 2016, Mr. Zhuo Fumin was appointed as an independent non-executive Director of the third session of the Board, his term of office was from 8 March 2016 to 20 September 2017.
  • As considered and approved by the 2015 annual general meeting of the Company held on 16 June 2016, Mr. Wu Yijian was appointed as a non-executive Director of the third session of the Board, with a term of office from 16 June 2016 to 20 September 2017. On 25 March 2016, Mr. Liu Hailiang ceased to serve as non-executive Director due to retirement, with effect on the same day.
  • As considered and approved by the 2016 third extraordinary general meeting of the Company held on 18 October 2016, Mr. Ma Ping was appointed as a non-executive Director of the third session of the Board with a term of office was from 18 October 2016 to 20 September 2017. On the same day Mr. Li Yuhua tendered his resignation as non-executive Director due to work arrangement.
  • On 8 March 2016, the resolutions regarding the election of the members and chairman of each of the special committees under the third session of the Board were considered and approved at the 2016 third extraordinary Board meeting. Their composition is as follows:
    Board Committee Chairman Members
    Audit Committee Mr. Tan Wee Seng Mr. Deng Jindong, Mr. Li Dongjiu, Mr. Liu Zhengdong and Mr. Zhuo Fumin
    Remuneration Committee Mr. Liu Zhengdong Mr. Tan Wee Seng, Mr. Zhuo Fumin, Mr. Liu Hailiang and Mr. Lian Wanyong
    Nomination Committee Mr. Wei Yulin Mr. She Lulin, Mr. Wang Qunbin, Ms. Li Ling, Mr. Yu Tze Shan Hailson, Mr. Liu Zhengdong and Mr. Zhuo Fumin
    Strategy and Investment Committee Mr. Wei Yulin Mr. She Lulin, Mr. Wang Qunbin, Mr. Chen Qiyu, Mr. Li Yuhua, Mr. Li Dongjiu, Ms. Li Ling, Mr. Tan Wee Seng and Mr. Lian Wanyong
  • As considered and approved by 11th meeting of the third session of the Board held on 19 August 2016, the composition of remuneration committee was changed as follows:
    Members of remuneration committee of the third session of the Board were changed from “Mr. Liu Zhengdong (Chairman), Mr. Tan Wee Seng, Mr. Zhuo Fumin, Mr. Lian Wanyong (Mr. Liu Hailiang resigned on 16 June 2016)” to “Mr. Liu Zhengdong (Chairman), Mr. Yu Tze Shan Hailson, Mr. Zhuo Fumin, Mr. Lian Wanyong, Mr. Wu Yijian”, the term of office of above members of remuneration committee was the same as their term of office as Directors.
  • As considered and approved by the 13th extraordinary Board meeting in 2016 of the Company held on 18 October 2016, Mr. Ma Ping was appointed as a member of strategy and investment ceased to serve as committee of the third session of the Board, his term of office was the same as his term of office as a director. Mr. Li Yuhua as a member of strategy and investment committee of the third session of the Board due to resignation.
  • As considered and approved by the 14th extraordinary Board meeting in 2016 of the Company held on 28 October 2016, Mr. Liu Yong was appointed as secretary to the Board, joint company secretary and authorised representative of the Company, which took effect on the same day. Mr. Ma Wanjun ceased to serve as secretary to the Board, joint company secretary and authorised representative due to work arrangement.
  • On 25 April 2016, Mr. Guo Junyu tendered his resignation as vice president of the Company.

Changes upon the Reporting Period:

On 24 March 2017, Mr. Wei Yulin, due to the fact that he has reached retirement age, has tendered his resignation as the Chairman of the Board (legal representative), the executive Director and the chairman of each of the Nomination Committee and Strategy and Investment Committee of the Board with immediate effect. Mr. Wei Yulin has confirmed that he has no disagreement with the Board and there is no other matter relating to his resignation that needs to be brought to the attention of the shareholders or creditors of the Company. The Board wishes to express its heartfelt appreciation for Mr. Wei Yulin’s remarkable contribution during his tenure of service.

On 24 March 2017, Mr. Li Zhiming, the executive Director and President of the Company, and a member of the Investment Committee of the Board, was elected as the Chairman of the Board (legal representative) and appointed as the chairman of the Nomination Committee and the chairman of the Strategy and Investment Committee of the Board. The term of office of Mr. Li Zhiming begins from the date of approval of the election at this Board meeting, and will last until the expiry of the term of the current the Board. Mr. Li Zhiming will serve as the President until the appointment of the new President by the Board.

Board Meetings and General Meetings

The Board convened twenty meetings, fifteen of which were by voting through communications during the Reporting Period and notices for regular Board meetings were given to each Director at least 14 days prior to the meetings.

During the Reporting Period, the attendance record of each of the Directors at the meetings of the Board was as follows:

Directors Attendance/No. of meetings held
Executive Director
Mr. Wei Yulin (resigned) 20/20
Mr. Li Zhiming 20/20
Non-executive Directors
Non-executive Directors(1) 19/20
Mr. She Lulin 20/20
Mr. Wang Qunbin(2) 17/20
Mr. Li Yuhua(3)(resigned) 15/16
Mr. Ma Ping(4) 4/4
Mr. Deng Jindong(5) 18/20
Mr. Li Dongjiu 20/20
Mr. Lian Wanyong(6) 16/17
Mr. Liu Hailiang(7) (resigned) 9/10
Mr. Wu Yijian(8) 10/10
Independent non-executive Directors
Ms. Li Ling(9) 19/20
Mr. Yu Tze Shan Hailson 20/20
Mr. Tan Wee Seng(10) 19/20
Mr. Liu Zhengdong(11) 18/20
Mr. Zhuo Fumin(12) 16/17

Notes:

(1) Mr. Chen Qiyu attended one meeting not in person but by his proxy, which was not included in the attendance;
(2) Mr. Wang Qunbin attended three meetings not in person but by his proxy, which were not included in the attendance;
(3) Mr. Li Yuhua attended one meeting not in person but by his proxy, which was not included in the attendance; a total of sixteen meetings were held during his term of office as a Director during 2016;
(4) A total of four meetings were held during Mr. Ma Ping’s term of office as a Director;
(5) Mr. Deng Jindong attended two meetings not in person but by his proxy, which were not included in the attendance;
(6) Mr. Lian Wanyong attended one meeting not in person but by his proxy, which was not included in the attendance; A total of seventeen meetings were held during his term of office as a Director during 2016;
(7) Mr. Liu Hailiang attended one meeting not in person but by his proxy, which was not included in the attendance; a total of ten meetings were held during his term of office as a Director during 2016;
(8) A total of ten meetings were held during Mr. Wu Yijian’s term of office as a Director;
(9) Ms. Li Ling attended one meeting not in person but by her proxy, which was not included in the attendance;
(10) Mr. Tan Wee Seng attended one meeting not in person but by his proxy, which was not included in the attendance;
(11) Mr. Liu Zhengdong attended two meetings not in person but by his proxy, which were not included in the attendance;
(12) Mr. Zhuo Fumin attended one meeting not in person but by his proxy, which was not included in the attendance; a total of seventeen meetings were held during his term of office as a Director during 2016.

At Board meetings, the Company’s senior management reported the information of business activities and data of development of the Company to all Directors on a timely basis. The executive Directors also met with and consulted the non-executive Directors for their opinions on the Company’s business development and operations regularly. If any Director has conflict of interest in any proposed resolution to be considered at the Board meeting, such Director shall abstain from voting on such resolution.

During the Reporting Period, the attendance record of each Director at the general meetings was as follows:

Directors Attendance/No. of meetings held
Executive Director
Mr. Wei Yulin (resigned) 5/5
Mr. Li Zhiming 2/5
Non-executive Directors
Mr. Chen Qiyu 3/5
Mr. She Lulin 0/5
Mr. Wang Qunbin 1/5
Mr. Li Yuhua (resigned) 0/4
Mr. Ma Ping 1/1
Mr. Deng Jindong 0/5
Mr. Li Dongjiu 5/5
Mr. Lian Wanyong 4/4
Mr. Liu Hailiang (resigned) 2/3
Mr. Wu Yijian 1/2
Independent non-executive Directors
Ms. Li Ling 5/5
Mr. Yu Tze Shan Hailson 5/5
Mr. Tan Wee Seng 5/5
Mr. Liu Zhengdong 4/5
Mr. Zhuo Fumin 2/3

Training for Directors

On 30 December 2016, DLA Piper UK LLP, the Hong Kong legal advisers of the Company, provided training materials to all the Directors, and all the Directors have completed the review and study of these materials.

Training for Joint Company Secretaries

On 15 November 2016, Mr. Liu Yong attended the training of company secretary provided by the Company’s Hong Kong legal adviser, DLA Piper UK LLP. Both Mr. Liu Yong and Dr. Liu Wei attended 42nd seminar on Enhanced Continuing Professional Development programme provided by The Hong Kong Institute of Chartered Secretaries from 19 December 2016 to 21 December 2016. Mr. Liu Yong and Dr. Liu Wei had attended relevant professional training for no less than 15 hours during the Reporting Period.

Audit Committee

At the date of this report, the audit committee of the Company comprises five Directors, including three independent non-executive Directors, being Mr. Tan Wee Seng, Mr. Liu Zhengdong and Zhuo Fumin and two non-executive Directors, being Mr. Deng Jindong and Mr. Li Dongjiu. Mr. Tan Wee Seng currently serves as the chairman of the audit committee. The primary responsibilities of the Company’s audit committee are to inspect, review and supervise the Company’s financial information and reporting process for financial information as well as the systems for risk management and internal control. These responsibilities include, among others:

  • making recommendations to the Board on the appointment, re-appointment and removal of the external auditor;
  • reviewing and monitoring the external auditor’s independence and objectivity and the effectiveness of the audit process in accordance with applicable standards;
  • formulating and implementing policies on the engagement of an external auditor to supply non-audit services; and
  • monitoring integrity of the Company’s financial statements and annual report and accounts, half-year report and, if prepared for publication, quarterly reports, and to review significant financial reporting judgments contained in the statements and reports.

During the Reporting Period, five meetings were held by the audit committee, which mainly reviewed and considered auditor’s report to the audit committee for 2015, audit fee for 2015, the appointment of auditors for 2016, the 2016 first quarterly financial report, the 2016 interim financial report, the 2016 third quarterly financial report and the annual audit plans for 2016, etc.

The attendance record of the committee members at the meeting during the Reporting Period was as follows:

Directors Attendance/No. of meetings held
Mr. Tan Wee Seng 5/5
Mr. Deng Jindong(1) 4/5
Mr. Li Dongjiu 5/5
Mr. Liu Zhengdong(2) 4/5
Mr. Zhuo Fumin 5/5

Notes:

(1) Mr. Deng Jindong attended one meeting by proxy instead in person, which was not included in the attendance;
(2) Mr. Liu Zhengdong attended one meeting by proxy instead in person, which was not included in the attendance.

The audit committee has reviewed the audited consolidated financial statements of the Group for the year ended 31 December 2016. The audit committee believes that the Company has complied with all applicable accounting standards and regulations and made sufficient disclosures. The audit committee has reviewed all material internal control rules, including the financial and operational and compliance controls, as well as risk management in 2016. The audit committee was satisfied with the effectiveness and sufficiency of the internal control mechanism in its operations. In addition, the audit committee has also reviewed the adequacy of resources, qualification and experiences of employees in relation to the accounting and financial reporting function of the Company and the adequacy of training courses taken by the employees and the relevant budgets.

The audit committee has reviewed the remuneration of the auditors for 2016 and recommended the Board to re-appoint Ernst & Young as the international auditor for 2017 and Ernst & Young Hua Ming LLP as the domestic auditor for 2017, subject to the approval of shareholders at the forthcoming annual general meeting.

Nomination Committee

At the date of this report, the nomination committee of the Company comprises seven Directors, including four independent non-executive Directors, being Ms. Li Ling, Mr. Yu Tze Shan Hailson, Mr. Liu Zhengdong and Mr. Zhuo Fumin; two non-executive Directors, being Mr. She Lulin and Mr. Wang Qunbin; and one executive Director Mr. Li Zhiming. Mr. Li Zhiming currently serves as the chairman of the nomination committee. The primary responsibilities of the Company’s nomination committee are to formulate the nomination procedures and standards for candidates for Directors. These responsibilities include, among others:

  • reviewing the structure, size and composition of the Board on a regular basis and making recommendations to the Board regarding any proposed changes;
  • assessing the independence of independent non-executive Directors;
  • making recommendations to the Board on relevant matters relating to the appointment or reappointment of Directors, and the succession plans for Directors (in particular the Chairman and the President); and
  • formulating, implementing and reviewing from time to time the policy concerning diversity of Board members.

The nomination procedures of the Directors are as follows: the nomination committee shall firstly propose a list of candidates for Directors, which shall then be submitted by the committee to the Board for review; the Board shall then submit the relevant proposal to the general meeting for shareholders’ approval.

The examination procedures of the candidates for Directors are: (1) to collect, or require relevant department of the Company to collect the particulars of the occupation, education, designation, detailed work experience and all part-time jobs of the candidates and summarize the same in written materials; (2) to hold nomination committee meetings to examine the qualifications of the candidates in accordance with the requirements applicable to a Director and to state the opinion and recommendations on appointments in the form of proposals; and (3) to carry out other relevant work according to decisions of or feedback from the Board.

During the Reporting Period, four meeting was held by the nomination committee which mainly reviewed considered the proposals to appoint Mr. Lian Wanyong as a non-executive Director of third session of the Board of the Company, to appoint Mr. Zhuo Fumin as an independent non-executive Director of third session of the Board of the Company, to appoint Mr. Wu Yijian as a non-executive Director of third session of the Board of the Company, and to appoint Mr. Ma Ping as a non-executive Director of third session of the Board of the Company.

In order to ensure a diversity on the Board and improve the Company’s corporate governance, the Board has approved the Board diversity policy formulated by the nomination committee, which summarized as: other than complying with relevant requirements under the relevant laws, regulations and rules (including but not limited to Company Law of the PRC, the Listing Rules and the Articles of Association), the Company should also consider various diversity factors, including professional skills, industry experience, culture and education background, ethnicity, gender, age, etc. when designing the Board’s composition. The selection of candidates will finally be determined based on their merits and contribution to the Board. Meanwhile, the Company’s diversity policy also includes monitoring, reporting and reviewing system to ensure the effectiveness and successful implementation of the policy. The Company will set measurable objectives to implement the Board diversity policy and will review such objectives from time to time to ensure the suitableness and the progress on achieving these objectives.

The attendance record of the committee members at the meeting during the Reporting Period was as follows:

Directors Attendance/No. of meetings held
Mr. Wei Yulin (resigned) 4/4
Mr. She Lulin 4/4
Mr. Wang Qunbin 4/4
Ms. Li Ling 4/4
Mr. Yu Tze Shan Hailson 4/4
Mr. Liu Zhengdong 4/4
Mr. Zhuo Fumin(1) 2/2

Note:

(1) Mr. Zhuo Fumin was appointed as a member of nomination committee of the third session of the Board on 8 March 2016, a total of two meetings of nomination committee were held during his term of office in 2016.

Remuneration Committee

At the date of this report, the remuneration committee of the Company comprises five Directors, including three independent non-executive Directors, being Mr. Liu Zhengdong, Mr. Yu Tze Shan Hailson and Mr. Zhuo Fumin, and two non-executive Directors, being Mr. Lian Wanyong and Mr. Wu Yijian. Mr. Liu Zhengdong currently serves as the chairman of the remuneration committee. The primary responsibilities of the Company’s remuneration committee are to formulate and review the remuneration policies and schemes for the Directors and senior management of the Company. These responsibilities include, among others:

  • making recommendations to the Board on the Company’s remuneration policies and structure for Directors and senior management of the Company;
  • determining the specific remuneration packages of all executive Directors and senior management, and making recommendations to the Board in relation to the remuneration of non-executive Directors; and
  • reviewing and approving performance-based remuneration by reference to corporate goals determined by the Board from time to time.

During the Reporting Period, five meetings were held by the remuneration committee, which mainly considered the specific assessment regarding treatment of unprofitable subsidiaries for 2015, the performance appraisal measures of the senior management for 2016, the report on assessment and incentive settlement of the senior management for 2015, determination of remuneration for the third session of the Board for 2016, the report on assessment and annual remuneration settlement of the senior management for 2015, the remuneration standards of the senior management for 2016 and filing of annual remuneration settlement of departed personnel, incentive targets of the senior management for 2016, Sinopharm H share stock incentive scheme, the revision of the Regulations on Relevant Expenses and Treatment Standards due to Work Needs for Sinopharm’s Directors and Supervisors, implementation details of restricted share of H share, etc.

The attendance record of the committee members at the meeting during the Reporting Period was as follows:

Directors Attendance/No. of meetings held
Mr. Liu Zhengdong(1) 4/5
Mr. Yu Tze Shan Hailson(2) 2/2
Mr. Liu Hailiang(3)(resigned) 3/3
Mr. Zhuo Fumin(4) 4/4
Mr. Lian Wanyong(5) 4/4
Mr. Wu Yijian(6) 2/2

Notes:

(1) Mr. Liu Zhengdong attended one meeting not in person but by his proxy, which was not included in the attendance;
(2)、(6) Mr. Yu Tze Shan Hailson and Mr. Wu Yijian were appointed as members of remuneration committee of the third session of the Board on 19 August 2016, a total of two meetings of remuneration committee were held during their terms of office in 2016;
(3) Mr. Liu Hailiang resigned due to retirement reason on 16 June 2016, a total of three meetings of remuneration committee were held during his term of office in 2016;
(4)、(5) Mr. Zhuo Fumin and Mr. Lian Wanyong were appointed as members of remuneration committee of the third session of the Board on 8 March 2016, a total of four meetings of remuneration committee were held during their terms of office in 2016.

Strategy and Investment Committee

As at the date of this report, the strategy and investment committee of the Company comprises nine Directors, including one executive Director, namely Mr. Li Zhiming, six non-executive Directors, namely Mr. Chen Qiyu, Mr. She Lulin, Mr. Wang Qunbin, Mr. Ma Ping, Mr. Li Dongjiu and Mr. Lian Wanyong, and two independent non-executive Directors, namely Ms. Li Ling and Mr. Tan Wee Seng. Mr. Li Zhiming currently serves as the chairman of the strategy and investment committee.

The strategy and investment committee is a special organization under the Board. It is mainly responsible for conducting research and making recommendations on the long-term development strategies and major investment decisions of the Company, and supervising and reviewing the implementation of annual operation plans and investment proposals under the authorization of the Board.

During the Reporting Period, eight meetings were held by the strategy and investment committee, which were mainly about discussing various strategies of the Company; making decision on and giving guidance to the projects, such as asset restructuring, financing, equity investment, project constructions, assets projects.

The attendance record of the committee members at the meeting during the Reporting Period was as follows:

Directors Attendance/No. of meetings held
Mr. Wei Yulin (resigned) 8/8
Mr. Chen Qiyu(1) 7/8
Mr. She Lulin 8/8
Mr. Wang Qunbin(2) 3/8
Mr. Li Yuhua(3)(resigned) 6/7
Mr. Ma Ping(4) 1/1
Mr. Li Zhiming 8/8
Mr. Li Dongjiu 8/8
Ms. Li Ling(5) 7/8
Mr. Tan Wee Seng(6) 7/8
Mr. Lian Wanyong(7) 6/7

Notes:

(1) Mr. Chen Qiyu attended one meetings not in person but by his proxy;
(2) Mr. Wang Qunbin attended five meetings not in person but by his proxy;
(3) Mr. Li Yuhua attended one meeting not in person but by his proxy; a total of seven meetings of strategy and investment committee were held during his term of office in 2016;
(4) Mr. Ma Ping was appointed as a member of strategy and investment committee of the third session of the Board on 18 October 2016, a total of one meeting of strategy and investment committee was held during his term of office in 2016;
(5) Ms. Li Ling attended one meeting not in person but by her proxy;
(6) Mr. Tan Wee Seng attended one meeting not in person but by his proxy;
(7) Mr. Lian Wanyong attended one meeting not in person but by his proxy, a total of seven meetings of strategy and investment committee were held during his term of office in 2016.

Term of Office of the Non-Executive Directors

Names Position Commencement Date Expiry Date
Chen Qiyu non-executive Director 21 September 2014 20 September 2017
She Lulin non-executive Director 21 September 2014 20 September 2017
Wang Qunbin non-executive Director 21 September 2014 20 September 2017
Ma Ping non-executive Director 18 October 2016 20 September 2017
Deng Jindong non-executive Director 21 September 2014 20 September 2017
Li Dongjiu non-executive Director 21 September 2014 20 September 2017
Lian Wanyong non-executive Director 29 January 2016 20 September 2017
Wu Yijian non-executive Director 16 June 2016 20 September 2017
Li Ling independent non-executive Director 21 September 2014 20 September 2017
Yu Tze Shan Hailson independent non-executive Director 21 September 2014 20 September 2017
Tan Wee Seng independent non-executive Director 21 September 2014 20 September 2017
Liu Zhengdong independent non-executive Director 21 September 2014 20 September 2017
Zhuo Fumin independent non-executive Director 8 March 2016 20 September 2017

Compliance with the Corporate Governance Code

The Company has adopted all the code provisions contained in the Corporate Governance Code set out in Appendix 14 of the Hong Kong Listing Rules (the “Corporate Governance Code”) as the Company’s code on corporate governance. On 9 December 2015, Mr. Lyu Changjiang resigned as an independent non-executive director and the member of nomination committee and the appointment of Mr. Zhuo Fumin as an independent non-executive Director and the member of nomination committee was considered and approved at the 2016 second extraordinary general meeting held on 8 March 2016. Save for the disclosed above, during the Reporting Period, the Company had complied with the code provisions set out in the Corporate Governance Code.

Securities Transactions by Directors and Supervisors

The Board has adopted the Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 to the Listing Rules (the “Model Code”) as the standards for governing the transactions of the Company’s listed securities by the Directors and the Supervisors. Having made specific enquiries with all Directors and Supervisors, all of them confirmed that they had complied with the requirements set out in the Model Code during the Reporting Period.

Remuneration of Auditors

The Company’s domestic auditor, Ernst & Young Hua Ming LLP and international auditor, Ernst & Young are the independent external auditors of the Group. The remuneration paid and payable by the Group to Ernst & Young Hua Ming LLP and Ernst & Young in respect of the services provided during the Reporting Period is as follows:

Services provided Fee paid and payable
Statutory audit service provided for 2016 RMB20,574,855.33
Non-statutory audit service provided for 2016 RMB1,760,600.00
Non-audit service – tax consultancy services RMB5,625,000.00

Confirmation by the Directors and Auditors

The Directors have reviewed the effectiveness of the risk management and internal control system of the Group. The review covered all the material aspects of its internal controls, including the supervision of the financial and operational and compliance affairs, as well as risk management.

The Directors are responsible for supervising the preparation of annual accounts in order to give a true and fair view of the financial position, operating results and cash flow of the Company during the year. For the purpose of the preparation of the financial statements for the Reporting Period, the Directors have selected appropriate accounting policies, adopted applicable accounting principles, made judgments and assessments that are prudent and reasonable and ensured the financial statements were prepared on a going concern basis. The Directors have confirmed that the Group’s financial statements were prepared in accordance with the requirements of laws and applicable accounting principles.

The Directors are not aware of any material uncertainties relating to events or conditions that may cast significant doubt upon the ability of the Company to operate as a going concern. The statement of auditors about their reporting responsibilities on the financial statements is set out in the independent auditor’s report.

Shareholders’ Rights

Two or more shareholders representing a total of over 10% (inclusive) shares carrying the right to vote at the meeting to be convened may sign one or more written requests of the same format and contents, and submitted to the Board for the convening of an extraordinary general meeting or a class meeting. The Board shall furnish a written reply stating its agreement or disagreement to convene the extraordinary general meeting or a class meeting within ten days upon receipt of such requisition.

When the Company convenes an annual general meeting, shareholders who individually or jointly hold five percent (5%) or more (inclusive) of the shares carrying on voting rights of the Company shall be entitled to propose new resolutions in writing to the Company. The Company shall include resolutions falling within the scope of power of the general meeting into the agenda of such meeting. Shareholders who individually or jointly hold three percent (3%) or more of the shares of the Company shall be entitled to propose resolutions and submit the same in writing to the Board ten (10) days prior to the date of the general meeting.

The shareholders may put enquiries to the Board via the office phone number and email address of the Board office as stated in this annual report.

Amendments to the Articles of Association

Upon approval by shareholders of the Company at the shareholders’ general meeting convened on 29 January 2016, the Company resolved to, in accordance with the requirements of relevant laws, regulations and regulatory rules, as well as the practice of the Company, make certain amendments to the Articles of Association in relation to the rules of procedure of the Board of Directors, internal audit regulations and the Communist Party of China organisation. For details, please refer to the announcements dated 13 October 2015, 16 December 2015 and 29 January 2016, and the circulars dated 15 October 2015 and 14 January 2016 of the Company.

Effective Communications with Investors

The Group had made remarkable improvements in investor relations in 2016 under the leadership and support of the Board and management. The Group has participated in a number of investment forums and successfully communicated with many fund management companies through various means. The Group organized onsite visits to its logistics centers, distribution centers and retail drug stores for a number of fund management companies to facilitate investors’ direct understanding of and contact with the Company. The Company and its subsidiaries also received various fund investors for on-site visits. In the future, the Company will maintain effective communications with investors through road shows after the issuance of annual reports and interim reports as well as through general meetings.

Implementation of Non-Competition Agreement

The independent non-executive Directors have reviewed the compliance by CNPGC of the “Non-Competition Agreement” and confirmed that CNPGC has complied with the terms of such agreement during the year ended 31 December 2016. At the same time, CNPGC also confirms to the Company that it has complied with the terms of the Non-Competition Agreement.

The independent non-executive Directors are not aware of any breach of the terms of the “Non-Competition Agreement” by CNPGC and therefore, no remedy action was taken by the Company during the year ended 31 December 2016.

In accordance with the “Non-Competition Agreement” entered into between the Company and CNPGC, if CNPGC or any of its subsidiaries (other than the Company) is aware of any business opportunity to own, invest in, participate in, develop, operate or engage in any business or company which directly or indirectly competes with the core business of the Company (the “Business Opportunity”), it will inform the Company of the Business Opportunity in writing immediately in the first place. Whether to take up the Business Opportunity is up to the independent non-executive Directors.

Save as disclosed above, during the Reporting Period, Directors (including independent non-executive Directors) did not make any decisions in relation to whether to exercise or terminate an option or a right of first refusal and take up or waive any Business Opportunity.

EN
Top