SOHO China is China’s largest and the only pure prime office developer, which is also acclaimed in China and internationally for iconic, landmark design with a strong track record of profitability. As one of the earliest and most profitable industry leaders focused on central Beijing and Shanghai, SOHO China covers a full range of business of development, leasing, property management and property investment.
The Company has a development portfolio of 5.4 million square meters, above 3.0 million square meters completed. Shifting from “build to sell” to “build to hold” to seize the long-term value of its properties, the Company is holding 1.7 million square meters of prime office spaces in Beijing and Shanghai for investment.
Founded in 1995 by Chairman Pan Shiyi and CEO Zhang Xin, SOHO China focuses on developing and holding high-profile branded commercial properties in Beijing and Shanghai. The Company rolled out high-quality, innovative products in prime locations and translated the innovative designs into iconic real estate which possesses strong appeal to property investors and the local businesses and customer bases. SOHO China’s properties have already become landmark buildings in the city’s modern skyline. As the largest prime office developer in Beijing and Shanghai, SOHO China developed commercial property of 54 million square feet. In 2015, the Company launched SOHO 3Q, and now it has become the largest shared office community in China.
On October 8, 2007, SOHO China was successfully listed on the Stock Exchange of Hong Kong (Stock Code: 410), raising proceeds of USD 1.9 billion. It has the distinction of being Asia’s largest commercial real estate IPO as of today. The Company was also named as one of the "Most Admired Companies" in China by FORTUNE (China edition) Magazine for six times since 2006.
During 2011, China’s real estate industry experienced unprecedented challenges and tests. Starting from January, a series of tightening policies were implemented. In particular, policies aiming to restrict purchases and prices extended from first-tier cities to more than 40 cities throughout the country. To further curb the currency liquidity, the People’s Bank of China raised the reserve requirement ratio (RRR) six times in a row and the RMB benchmark deposit and loan interest rates of financial institutions three times during the Year. The accumulative effects of various control policies became obvious and the transaction volume of properties dropped substantially during the second half of the Year. According to the figures announced by the CREIS, as compared with the same period in 2010, the overall transaction volume of real estate market of first-tier cities decreased by approximately 19.49% and the overall transaction volume of real estate market of the second-tier cities dropped by approximately 18.01% in 2011. This further tightened the capital of developers.
Under this stern condition, the Group witnessed that there were more companies starting to sell their high-quality assets in the market. These high-quality assets, including land and completed commercial properties, provided ample opportunities for the Group to enrich its land reserve. 2011 was a year of harvest for SOHO China. Supported by the prudent financial principles and healthy capital position, the Group had accomplished acquisitions with total amount exceeding RMB15 billion during the Period, marking a record high annual acquisition amount. The new land and projects acquired during the Year were all concentrated in superior locations with convenient transportation in Shanghai. Within merely two years, the Group has obtained 10 projects in Shanghai, including two in the prime precincts on the Bund. Thanks to these two prime properties, SOHO China will become the largest landlord on the Bund of Shanghai. Currently, the Group has accomplished balanced development between Beijing and Shanghai, and laid down solid foundation for further expansions in these areas. The successful expansion of SOHO China is not mere coincidence with more availability of land and projects resulting from market liquidity crunch; it is, to a larger extent, attributable to the Group’s long-held stable and healthy financial principles and prudent acquisition strategies, which have kept the Group ready to seize any favorable opportunities.
Highly appreciated by the capital market, the Group successfully secured a syndicated loan amounting to US$605 million at a relatively low cost from 11 banks in mid-2011, while most developers worried about their capital conditions and funding channels. The abundant capital provided strong and solid support to the Group for future acquisitions, development and operations.
In regard to property sales, the Group achieved a total contract sales amount of approximately RMB10.9 billion in 2011. Though the commercial sector was not touched by any curbing measures applied to the residential sector, the Group did not have any new available-for-sale properties in the first half of the Year. There were three new projects launched in the second half of 2011, among which Danling SOHO was launched in July, with approximately 91% of the total area being sold out on the opening day and all offices were sold out, clinching sales of approximately RMB1.45 billion. Wangjing SOHO was launched in August with sales amounting to RMB2.6 billion within a week. Nevertheless, entering September, the market liquidity began to shrink, which affected the Group’s sales.
On the other hand, the Group has observed that demand for commercial properties in Beijing and Shanghai is very strong. According to the market data released by CB Richard Ellis, for the fourth quarter of 2011, the rent of prime offices in Beijing and Shanghai increased by approximately 50.8% and 16.9%, respectively year on year, recording a historical high rental level. Occupancy rate also surged at the same time with certain offices located in prime locations in Beijing and Shanghai nearly fully rented. The sizzling rental market once again proved that the value of commercial properties was well recognized by the market. Notwithstanding such huge demand, market supply was still limited, especially the supply for strata titled commercial properties.
The Group believes that once the liquidity loosens or market regains its confidence, the sales of commercial properties will quickly return, driven by the demand for commercial properties. Although the market liquidity remains tight, the Group anticipates that the situation will improve within this year. The Group has strong confidence in 2012 contract sales and is more prepared. Unlike in 2011, the Company is well equipped with sales projects in 2012. Currently, the total saleable amount of the projects is approximately RMB24 billion, and in the second half of 2012, the Group expects to obtain sale permits for another two projects (namely, Sky SOHO and SOHO Century Plaza), and the total saleable property amount for 2012 is expected to exceed RMB30 billion.
The Group believes that there will be more acquisition opportunities in 2012. The Group will continue to focus on the best commercial opportunities in Beijing, Shanghai and other first-tier cities. With RMB15.7 billion capital in hand and with SOHO China’s net cash position, SOHO China is still the only serious buyer.
The Company’s acquisition target for 2012 is RMB10 billion and the Group will adhere to its existing business model, make due and careful choices and continue to acquire assets with high quality to increase the value of the Company.
Innovation has always been the soul of SOHO China. We have been cooperating with world-renowned architects so as to create the most unique and functional buildings. In terms of project construction, we have applied advanced system and techniques. Specifically, we introduced the BIM system and apply it in the areas of design, construction and project management, thus enhancing efficiency and ensuring construction qualities through more effective cooperation between design, budgeting, procurement, construction and sales departments. Advanced techniques are indispensable for realizing innovative design, being well equipped with innovative idea and state-of-the-art technology makes our products become more unique and stylish.
Temporary difficulties and tests will not shake our confidence in and focus on commercial properties. SOHO China will utilize its advantages to seize market opportunities and create more material and spiritual wealth for the Company and the society through constant innovations and developments.
14 March 2012
Mr. Pan Shiyi (Chairman)
Mrs. Pan Zhang Xin Marita (Chief Executive Officer)
Ms. Yan Yan (President)
Ms. Tong Ching Mau (Chief Financial Officer)
Members of the Audit Committee
Sun Qiang Chang (Chairman)
Cha Mou Zing, Victor
Xiong Ming Hua
Members of the Nomination Committee
Pan Shiyi (Chairman)
Cha Mou Zing, Victor
Xiong Ming Hua
Principle Place of Business in Hong Kong
1 Matheson Street
Hong Kong Branch Share Registrar and Transfer Office
Computershare Hong Kong Investor Services Limited
17th Floor Hopewell Centre
183 Queen’s Road East
22/F, Prince’s Building
10 Chater Road
Agricultural Bank of China Limited
Bank of China Limited
Bank of Communications Co., Ltd.
China Everbright Bank Company Limited
China Merchants Bank Corporation Ltd.
Industrial and Commercial Bank of China Ltd.
Standard Chartered Bank(Hong Kong) Ltd.
The Hong Kong and Shanghai Banking Corporation Limited
Independent non-executive Directors
Mr. Sun Qiang Chang
Mr. Cha Mou Zing, Victor
Mr. Xiong Ming Hua
Members of the Remuneration Committee
Cha Mou Zing, Victor (Chairman)
Sun Qiang Chang
Xiong Ming Hua
Pan Zhang Xin Marita
Mok Ming Wai
Hutchins Drive P.O. Box 2681
Grand Cayman, KY1-1111
Mok Ming Wai
11F, Section A
No. 6B Chaowai Street
Beijing 100020, China
Cayman Islands Principal Share Registrar and Transfer Office
Royal Bank of Canada Trust Company (Cayman) Limited
4th Floor, Royal Bank House
24 Shedden Road, George Town
Grand Cayman KY1-1110
Hong Kong Legal Advisor
18th Floor, United Centre
Directors and Senior Management
Our Directors are appointed by ordinary resolutions of our Shareholders or by the Board of Directors to fill vacancies on the Board or to add to the existing Board. At each annual general meeting one-third (or, if the number is not a multiple of three, the number nearest to but not greater than one-third) of the Directors in office at the relevant time shall retire by rotation but are eligible for re-election and re-appointment.
Our Board of Directors is responsible and has general powers for the management and conduct of our business.
Under Cayman Islands law, each of our Directors owes fiduciary duties to the Company to act in good faith in what he considers is the best interests of the Company as a whole and his power must be exercised for a proper purpose.
The following table sets forth certain information concerning our Directors and executive officers.
Chairman of the Board
Mr. Pan Shiyi
Mr. Pan Shiyi, aged 52, is an executive Director and Chairman of the Board. Mr. Pan co-founded Redstone Industry Co., Ltd., the predecessor of the Company, in 1995. Since then he has led, together with his wife, Mrs. Pan Zhang Xin Marita, the development of all of the Company’s projects. Before that, Mr. Pan co-founded Beijing Vantone Co., Ltd. in 1992.
Mr. Pan was selected as “Real Estate Person of the Year” by sina.com in 2009 and 2010, Ernst & Young Entrepreneur of the Year China 2008, one of the “Top Ten Influential Figures in Real Estate Industry” by sina.com in 2004 and 2006, one of the “25 most influential business leaders” in China by Fortune (China) Magazine in 2005. In 2011, Mr. Pan was selected again as “Real Estate Person of the Year” by sina.com and in 2012, he was selected as “China Real Estate Leader of the Year on Weibo” by sina.com. In June 2013, Mr. Pan was awarded the “Jury’s special” of the 5th SEE-TNC Ecology Award. In December 2013, Mr. Pan was selected as “The Most Social Responsible Person in Real Estate” by Tencent.com.
In 2005, Mr. Pan and his wife Mrs. Pan Zhang Xin Marita established the SOHO China Foundation, a charity organization guided by the mission of advancing education as a means for alleviating poverty. In 2014, the SOHO China Foundation launched the SOHO China Scholarships, a USD100 million initiative supporting financial aid for Chinese students at leading international universities.
Chief Executive Officer
Mrs. Pan Zhang Xin Marita
Mrs. Pan Zhang Xin Marita, aged 50, is an executive Director and the Chief Executive Officer of the Company. Ms. Zhang co-founded Redstone Industry Co., Ltd., the predecessor of the Company, in 1995 and has since led, together with her husband Mr. Pan Shiyi, the development of all of the Company’s projects.
Ms. Zhang was selected by the Davos World Economic Forum as a Young Global Leader in 2005, and her efforts to promote the development of architecture in Asia, earned her the Special Prize to an Individual Patron of Architectural Award at la Biennale di Venezia in 2002. Ms. Zhang has been listed repeatedly among the world’s most powerful women in business by publications including Forbes Magazine, Fortune and the Financial Times Newspaper. Recognized as a key opinion leader in business, design and architecture, Ms. Zhang sits on the Council on Foreign Relations Global Board of Advisors and the Harvard University Global Advisory Council.
In 2005, Ms. Zhang and her husband Pan Shiyi established the SOHO China Foundation, a charity organization guided by the mission of advancing education as a means to alleviate poverty. In 2014, the SOHO China Foundation launched the SOHO China Scholarships, a USD100 million initiative supporting underprivileged Chinese students who wish to pursue education at leading international universities.
Ms. Yan Yan
Ms. Yan Yan, aged 52, is an executive Director and the Company’s President. She is responsible for the business development and overall management of the Company. Ms. Yan joined the Company in December 1996 and had acted as Chief Operating Officer and Chief Financial Officer prior to her present position. Ms. Yan received a Bachelor of Civil Engineering degree from Tianjin University in 1986. She has over 20 years of relevant experience in the real estate development industry in China.
CHIEF FINANCIAL OFFICER
Ms. Tong Ching Mau
Ms. Tong Ching Mau, aged 46, is an executive Director and the Company’s Chief Financial Officer. She holds a Master of Business Administration degree from Yale University, and a Master and a Bachelor degree of Economics from Fudan University in Shanghai. Prior to rejoining the Group, Ms. Tong was the vice general manager and financial consultant of the board of directors of Red Star Macalline Group Corporation Ltd. (a company listed on the Stock Exchange, stock code: 1528). From 2002 to 2014, Ms. Tong acted as the director of corporate finance and investor relations and then financial controller prior to her promotion as the Chief Financial Officer of the Company, during which period Ms. Tong was responsible for financial management, investor relations and corporate finance of the Company. During 2001 to 2002, she worked in the investment banking division of Credit Suisse First Boston in New York.
Independent Non-executive Directors
Mr. SUN Qiang Chang
Mr. Sun, aged 59, is an independent non-executive Director. He is the founder and current chairman of the China Venture Capital and Private Equity Association, and founder and executive vice chairman of the China Real Estate Developers and Investors Association. He is also a member of the Asia Executive Board of the Wharton School, a member of the Asia Pacific Council of the Nature Conservancy and the founder and chairman of Black Soil Group Ltd., an agriculture investment and operating company. Prior to founding Black Soil Group Ltd., he was the chairman, Asia Pacific and member of the executive management group at Warburg Pincus, a global private equity firm. Mr. Sun has over 25 years of experience in the field of private equity investment in the United States and in Asia. Mr. Sun obtained his Bachelor of Arts degree from the Beijing Foreign Studies University and completed a post-graduate program offered by the United Nations, where he worked as a staff translator in New York for 3 years. Mr. Sun earned a joint degree of MA/MBA from the Joseph Lauder Institute of International Management and the Wharton School of the University of Pennsylvania.
Mr. Cha Mou Zing Victor
Mr. Cha Mou Zing Victor, aged 66, is an independent non-executive Director. He is the executive director, deputy chairman and managing director of HKR International Limited (a company listed on the Stock Exchange, Stock Code: 480) and an alternate independent non-executive director of New World Development Company Limited (a company listed on the Stock Exchange, Stock Code: 0017). Mr. Cha graduated from Stanford University with a Master of Business Administration degree and University of Wisconsin with a Bachelor of Science degree.
Mr. XIONG Ming Hua
Mr. Xiong Ming Hua, aged 51, is an independent non-executive Director. Mr. Xiong is the founder and chairman of Seven Seas Ventures, a venture capital firm focusing on investing cross border technology companies in the United States and China. Mr. Xiong was the former Chief Technology Officer for Tencent Holdings Limited (a company listed on the Stock Exchange, Stock Code: 700) from 2005 to 2013, where he was responsible for product strategy planning of the overall platform, new product innovation, research and development of core technologies, and management for engineering excellence. Previously he worked at Microsoft Corporation for 9 years as program management in Internet Explorer, Windows and MSN product groups, and as founding director of MSN China Development Center. Prior to that, Mr. Xiong worked as staff programmer of internet division of IBM Corporation in New York. Mr. Xiong received his Bachelor of Engineering Degree in Information System Engineering from National University of Defense Technology in 1987 and a Master of Science Degree in Information Retrieval from Chinese Defense Science and Technology Information Center in Beijing in 1990.
Mr. Yin Jie
Mr. Yin Jie, aged 48, is our Senior Vice President and Chief Architect and is responsible for the overall project design. He joined the Company in 2009. Mr. Yin received his Bachelor degree from University of Washington in 1992 and is a registered architect in Washington State of the U.S. Prior to joining the Company, Mr. Yin practiced in a major U.S. architectural firm for seventeen years.
Mr. Wei Gu, Victor
Mr. Wei Gu, Victor, aged 44, is our Vice President and General Counsel in charge of legal affairs, compliance and risk management. He joined the Company in 2013. Mr. Gu received a Juris Doctor degree from the University of California, Los Angeles in 2002. Before joining the Company, Mr. Gu was a partner with a world well-known international law firm.
Mr. Xu Qiang
Mr. Xu Qiang, aged 43, is our Vice President in charge of property construction and development. He joined the Company in July 1999. Mr. Xu acted as the project manager, project director and Vice President of our Company. During his 16 years of service with our Company, he has been in charge of project management of SOHO New Town, Jianwai SOHO, Guanghualu SOHO, Sanlitun SOHO and Wangjing SOHO. Mr. Xu received a bachelor of Heating Ventilation and Air Conditioning Engineering from Beijing Institute of Civil Engineering and Architecture in 1994.
Ms. Ni Kuiyang
Ms. Ni Kuiyang, aged 38, is our Vice President and is responsible for accounting and cash management of the Company. Ms. Ni joined the Company in July 2008 and since then has acted as our finance manager, finance director and Vice President. Ms. Ni received her Bachelor Degree in Accounting from China University of Petroleum in 1999 and is a CPA holder. Prior to joining the Company, Ms. Ni worked for a listed company and an asset management company. Ms. Ni has extensive experience in accounting and financial management.
Mr. Qian Ting
Mr. Qian Ting, aged 39, is our Vice President and is responsible for property leasing of the Company. Mr. Qian joined the Company in October 2002 and has acted as the director of our leasing department. Mr. Qian received his Bachelor Degree in Trade and Economy from Renmin University of China in 2000. Mr. Qian has 16 years’ experience in property leasing in China.
Ms. Xu Jin
Ms. Xu Jin, aged 44, is our Vice President and is responsible for property management of the Company. Ms. Xu joined the Company in February 2001 and since then has acted as director of human resources department, director of procurement department and Vice President. Ms. Xu received a Bachelor of Engineering Management degree from Beijing Wuzi University in 1994. She has over twenty years of relevant experience in the real estate development industry in China.
Ms. Mok Ming Wai
Ms. Mok Ming Wai, the company secretary of the Company. Ms. Mok was appointed as the company secretary of the Company on 20 December 2013. Ms. Mok is a director of KCS Hong Kong Limited (a company secretarial services provider), she has over 20 years of professional and in-house experience in the company secretarial field. Ms. Mok is a fellow member of the Hong Kong Institute of Chartered Secretaries and the Institute of Chartered Secretaries and Administrators in the United Kingdom. She currently acts as the company secretary and joint company secretary of several listed companies.
The Company is committed to upholding high standards of corporate governance which, it believes, is crucial to the development of the Company and safeguarding the interests of the shareholders of the Company. The Company has adopted sound governance and disclosure practices, and is committed to continuously improve these practices and inculcate an ethical corporate culture.
Under the terms of reference, the duties of the Board in respect of corporate governance are as follows:
1. to develop and review the policies and practices on corporate governance of the Group;
2. to review and monitor the training and continuous professional development of Directors and senior management;
3. to review and monitor the Group’s policies and practices on compliance with legal and regulatory requirements;
4. to develop, review and monitor the code of conduct and compliance manual (if any) applicable to Directors and employees;
5. to review the Company’s compliance with the Corporate Governance Code and disclosure in the corporate governance report of the Company.
In the opinion of the Directors, the Company had been in compliance with the code provisions of the Corporate Governance Code (the “Corporate Governance Code”) as set out in Appendix 14 to the Listing Rules during the Year.
COMPLIANCE WITH THE MODEL CODE FOR SECURITIES TRANSACTIONS BY DIRECTORS OF LISTED ISSUERS (THE “MODEL CODE”)
The Company has adopted the Model Code as set out in Appendix 10 to the Listing Rules as the code of conduct for securities transactions carried out by the Directors. The Company had made specific enquiry to all Directors and all Directors confirmed that they had complied with the required standard as set out in the Model Code throughout the Year.
BOARD OF DIRECTORS
The Board is responsible for the leadership and control of the Company and is collectively responsible for promoting the success of the Company by directing and supervising the Company’s affairs. Under the leadership of the Chairman, the Board is also responsible for approving and overseeing the overall strategies and policies of the Company, approving the annual budget and business plans, assessing the Company’s performance and supervising the work of the senior management.
The running of the day-to-day businesses of the Company is delegated by the Board to the management who is working under the leadership and supervision of the Board committees except that authority is reserved for the Board to approve interim and annual financial statements, dividend policy, annual budgets, business plan and significant operational matters.
The Board currently comprises six Directors, including three executive Directors, namely Mr. Pan Shiyi (Chairman), Mrs. Pan Zhang Xin Marita (Chief Executive Officer) and Ms. Yan Yan; and three independent non- executive Directors, namely Mr. Sun Qiang Chang, Mr. Cha Mou Zing, Victor and Mr. Xiong Ming Hua.
Regular Board meetings are held at least four times a year (at quarterly intervals) and any ad hoc meeting will be held when necessary. At least fourteen days notice will be given to all the Directors prior to any regular Board meeting and any relevant materials to be presented to a Board meeting will be provided to Directors at least three days before such Board meeting. The Directors are appointed by shareholders of the Company through ordinary resolutions or appointed by the Board to fill any existing vacancies on the Board or for new additions to the Board. At each AGM, one-third (or, if the number is not a multiple of three, the number nearest to but not less than one-third) of the Directors for the time being shall retire from office by rotation but are eligible for re- election and re-appointment.
The Chairman of the Board, Mr. Pan Shiyi, is the husband of Mrs. Pan Zhang Xin Marita, an executive Director and the Chief Executive Officer. Except for disclosed above, the Board members have no financial, business, family or other material/relevant relationships with each other.
The Board is established in accordance with the provisions of Rules 3.10 and 3.10A of the Listing Rules. Of the three independent non-executive Directors appointed, at least one or more are equipped with financial expertise and the number of independent non-executive Directors representing at least one-third of the Board.
The Board’s composition demonstrates a balance of core competence with regard to the business of the Company, so as to provide effective leadership and the required expertise to the Company.
Liability insurance for Directors and senior management officers was maintained by the Company with coverage for any legal liabilities which may arise in the course of performing their duties.
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
The Chairman of the Board and the Chief Executive Officer are currently two separate positions held by Mr. Pan Shiyi and Mrs. Pan Zhang Xin Marita respectively with clear distinction in responsibilities. The Chairman of the Board is responsible for the management and leadership of the Board to formulate overall strategies and business development directions for the Company, to ensure adequate, complete and reliable information is provided to all Directors in a timely manner, and to ensure the issues raised at the Board meetings are explained appropriately. The Chief Executive Officer is responsible for the day-to-day management of the business of the Company, implementation of the policies, business objectives and plans set by the Board and is accountable to the Board for the overall operation of the Company.
INDEPENDENT NON-EXECUTIVE DIRECTORS
The independent non-executive Directors were appointed for a term of three years, subject to retirement by rotation at AGM and being eligible, to offer themselves for re-election.
Pursuant to the guidelines provided in Rule 3.13 of the Listing Rules, the Company has received the confirmation of independence from each of the independent non-executive Directors, and thus the Board considers such Directors to be independent persons. The Board believes that the independent non-executive Directors are able to offer independent opinions on the Company’s development strategy, risk management and management process, etc. so that the interests of the Company and all shareholders will be taken into consideration and duly safeguarded.
During the Year, seven Board meetings were held and below is the attendance of each of the Directors at Board meetings:
|Directors||Attendance/No. of Meetings|
|Pan Zhang Xin Marita||7/7|
|Jim Lam (appointed on 20 August 2015 and resigned on 11 September 2015)||N/A (Note)|
|Yin Jie (appointed on 22 October 2012)||5/6|
|Independent non-executive Directors|
|Ramin Khadem (retired on 8 May 2015)||1/1|
|Cha Mou Zing, Victor||4/7|
|Yi Xiqun (retired on 8 May 2015)||1/1|
|Sun Qiang Chang (appointed on 8 May 2015)||5/5|
|Xiong Ming Hua (appointed on 8 May 2015)||5/5|
Note: No Board meeting was held during Mr. Lam’s term of office.
During the Board meetings, the senior management of the Company provided each Director with timely information regarding the business activities and developments of the Company and met with independent non- executive Directors to seek their views on the business development and operational matters of the Company.
PROVISION AND USE OF INFORMATION
• Minutes of all Board meetings and meetings of the Board committees are kept by designated secretaries, and will be available for inspection by any Director after giving reasonable notice.
• All Directors are entitled to receive advice and services from the Company Secretary to ensure due compliance with the terms of reference of the Board.
• Directors may have recourse to seek independent advice from professionals as appropriate and such fees incurred shall be borne by the Company.
The Audit Committee comprises three independent non-executive Directors, namely Mr. Sun Qiang Chang, Mr. Cha Mou Zing, Victor and Mr. Xiong Ming Hua. The Audit Committee is chaired by Mr. Sun Qiang Chang, who has the appropriate accounting and financial management expertise as required under Rule 3.10(2) of the Listing Rules.
The Audit Committee is authorized by the Board to review the relevant financial reports and to give recommendations and advices, its duties include:
1. Relationship with the Company’s auditors
The duty to make recommendations to the Board on the appointment, re-appointment or removal of external auditor(s); to review and monitor the external auditors’ independence and objectivity and the effectiveness of the audit process; to develop and implement policies on the engagement of the external auditors for providing audit services; to meet with the external auditors and discuss matters relating to the audit, if necessary, in the absence of the management of the Company.
2. Review of financial information of the Company
The duty to monitor the integrity of financial statements of the Company as set out in the Company’s annual reports and accounts and the half-yearly reports, and to review any significant views of financial reporting contained in them.
3. Monitor the Company’s financial reporting system, risk management and internal control systems
Each of the Company’s operational departments has established internal audit and supervisory functions for its operating procedures. The Audit Committee will also review the financial control, internal control and risk management systems to ensure adequate resources, including that sufficient staff with qualifications and experience in accounting and financial reporting, as well as training programs and budgets are allocated to operate the internal control procedures effectively.
In 2015, two meetings were held by the Audit Committee and below is the attendance of each of the committee members:
|Committee Members||Attendance/No. of Meetings|
|Ramin Khadem (Chairman) (retired on 8 May 2015)||1/1|
|Cha Mou Zing, Victor||2/2|
|Sun Qiang Chang (Chairman) (appointed on 8 May 2015)||1/1|
|Xiong Ming Hua (appointed on 8 May 2015)||1/1|
The Audit Committee had reviewed the internal audit plan report submitted by the internal audit department and the risk management and internal control systems, and recommended the Board on risk management and internal control matters. The Audit Committee has also reviewed the adequacy of resources, the interim results for the period ended 30 June 2015 and the audited consolidated annual results of the Company for the year ended 31 December 2015 and considered that the Company had complied with all applicable accounting standards and requirements and had made adequate disclosure.
The Audit Committee has reviewed the auditors’ fee for the year 2015, and recommended the Board to re-appoint PwC as the auditors of the Company for the year 2016, which is subject to the approval of shareholders of the Company at the forthcoming 2016 AGM.
The remuneration committee of the Company (the “Remuneration Committee”) comprises three independent non-executive Directors, namely Mr. Cha Mou Zing, Victor, Mr. Sun Qiang Chang, and Mr. Xiong Ming Hua. The Remuneration Committee is chaired by Mr. Cha Mou Zing, Victor. The Remuneration Committee is mainly responsible for determining remuneration packages of individual executive Directors and senior management of the Company, appraising the performance of the executive Directors and senior management of the Company and making recommendations for their remuneration arrangements, as well as for assessing and making recommendations for staff benefits to the Board.
During the Year, one meeting was held by the Remuneration Committee and below is the attendance of each of the committee members:
|Committee Members||Attendance/No. of Meeting|
|Cha Mou Zing, Victor (Chairman)||1/1|
|Ramin Khadem (retired on 8 May 2015)||1/1|
|Yi Xiqun (retired on 8 May 2015)||1/1|
|Sun Qiang Chang (appointed on 8 May 2015)||N/A (Note)|
|Xiong Ming Hua (appointed on 8 May 2015)||N/A (Note)|
A complete record of the minutes of the Remuneration Committee meetings is kept by the Company Secretary. The Remuneration Committee had reviewed the Company’s remuneration policies, the terms of the service contracts and the performance of all executive Directors and the senior management. In the opinion of the Remuneration Committee, the remuneration payable to all executive Directors and the senior management is in accordance with the terms of the service contracts, such remuneration is fair and reasonable, and does not create any additional burden for the Company.
Remuneration details of each Director for the year of 2015 are set out in the section headed “Directors’ remuneration” of the Directors’ Report and the Note 31 to the audited consolidated financial statements.
The nomination committee of the Company (the “Nomination Committee”) comprises two independent non- executive Directors and one executive Director, namely Mr. Pan Shiyi, Mr. Cha Mou Zing, Victor and Mr. Xiong Ming Hua. The committee is chaired by Mr. Pan Shiyi. Details of the authorities and duties of the Nomination Committee are set out in its terms of reference. Its roles are highlighted as follows:
(1) review the structure, size and composition (including the skills, knowledge and experience) of the Board at least annually and make recommendations to the Board on any proposed changes to the Board to complement the Company’s corporate strategy;
(2) identify individuals suitably qualified to become members of the Board and select or make recommendations to the Board on the selection of individuals nominated for directorships;
(3) assess the independence of the independent non-executive Directors;
(4) make recommendations to the Board on the appointment or re-appointment of Directors and succession planning for Directors in particular the chairman and chief executive of the Company;
(5) conform to any requirement, direction, and regulation that may from time to time be prescribed by the Board or contained in the constitution of the Company or imposed by the Listing Rules or applicable law; and
(6) ensure the chairman of the Committee, or in the absence of the chairman, another member of the Committee or failing this his duly appointed delegate, to be available to answer questions at the annual general meeting of the Company.
During the Year, three meetings were held by the Nomination Committee and below is the attendance of each of the committee members:
|Committee Members||Attendance/No. of Meeting|
|Cha Mou Zing, Victor (Chairman) (redesignated as member on 8 May 2015)||3/3|
|Pan Zhang Xin, Marita (ceased to be member on 8 May 2015)||0/1|
|Ramin Khadem (retired on 8 May 2015)||1/1|
|Pan Shiyi (Chairman) (appointed on 8 May 2015)||2/2|
|Xiong Ming Hua (appointed on 8 May 2015)||2/2|
The Nomination Committee has discussed the structure, number of employees and composition of the Company.
PROCEDURE FOR NOMINATION OF DIRECTORS
1. When there is a vacancy in the Board, the Board evaluates the balance of skills, knowledge and experience of the Board, and identifies any special requirements for the vacancy (e.g. independence status in the case of an independent non-executive Director).
2. Prepare a description of the role and capabilities required for the particular vacancy.
3. Identify a list of candidates through personal contacts/recommendations by Board members, senior management, business partners or investors.
4. Arrange interview(s) with each candidate for the Board to evaluate whether he/she meets the established written criteria for nomination of directors. One or more members of the Board will attend the interview.
5. Conduct verification on information provided by the candidate.
6. Convene a Board meeting to discuss and vote on which candidate to nominate or appoint to the Board.
CRITERIA FOR NOMINATION OF DIRECTORS
1. Common criteria for all Directors
(a) Character and integrity.
(b) The willingness to assume board fiduciary responsibility.
(c) Present needs of the Board for particular experience or expertise and whether the candidate would satisfy those needs.
(d) Relevant experience, including experience at the strategy/policy setting level, high level managerial experience in a complex organization, industry experience and familiarity with the products and processes used by the Company.
(e) Significant business or public experience relevant and beneficial to the Board and the Company.
(f) Breadth of knowledge about issues affecting the Company.
(g) Ability to objectively analyse complex business problems and exercise sound business judgement.
(h) Ability and willingness to contribute special competencies to Board activities.
(i) Fit with the Company’s culture.
2. Criteria applicable to non-executive Directors/independent non-executive Directors
(a) Willingness and ability to make a sufficient time commitment to the affairs of the Company in order to effectively perform the duties of a director, including attendance at and active participation in Board and committee meetings.
(b) Accomplishments of the candidate in his/her field.
(c) Outstanding professional and personal reputation.
(d) The candidate’s ability to meet the independence criteria for directors established in the Listing Rules.
BOARD DIVERSITY POLICY
The Company adopted the Board Diversity Policy (“Policy”) on 20 August 2013.
The Policy sets out the approach to achieve diversity on the Board, the details of which are set out below.
The Company is committed to equality of opportunity in all aspects of its business and does not discriminate on the grounds of race, gender, disability, nationality, religious or philosophical belief, age, sexual orientation, family status or any other factor.
The Company continuously seeks to enhance the effectiveness of its Board and to maintain the highest standards of corporate governance and recognizes and embraces the benefits of having a diverse Board. The Company believes that a diversity of perspectives can be achieved through taking into account a range of factors, including but not limited to gender, age, cultural and educational background, ethnicity, professional experience, skills, knowledge and length of service. The Company sees promoting diversity of perspectives at the Board level as an essential element in supporting the achievement of its business and strategic objectives and maintaining its sustainable development.
The Nomination Committee has primary responsibility for identifying qualified candidates to become members of the Board and, in carrying out this responsibility, will give adequate consideration to this Policy. Board appointments will continue to be made on a merit basis and candidates will be considered against objective criteria, with due regard for the benefits of diversity on the Board.
DIRECTORS’ RESPONSIBILITY FOR THE FINANCIAL STATEMENTS
The Directors are responsible for supervising the preparation of the annual accounts, which give a true and fair view of the state of affairs, the operating results and the cash flows of the Group for the year. In preparing the accounts for the year ended 31 December 2015, the Directors have selected suitable accounting policies and adopted appropriate accounting standards. Based on judgements and estimates that are prudent and reasonable, the Directors had ensured that the accounts are prepared on the going concern basis. The Directors have confirmed that the consolidated financial statements of the Group are prepared in compliance with the statutory requirements and appropriate standards of accounting.
INTERNAL CONTROL AND RISK MANAGEMENT
The Board has the responsibility to maintain and review the Company’s internal control system to ensure that the Company’s assets and shareholders’ interests are safeguarded. The Board also reviews the internal control and risk management systems on a regular basis to ensure their effectiveness.
The Company has set up an internal audit department, which is an important part of its internal control system. In 2015, the internal audit department adopted a risk oriented top-down approach to review the internal control of the important processes. Meanwhile, the Company conducted special audit on important operation units and business procedures including but not limited to cost management, construction project planning and progressing management, leasing management and property management. The internal audit department also worked on financial monitoring, operation monitoring, compliance monitoring and risk management, and ensured a sound and effective internal control system.
The Board is responsible for the internal control and risk management systems of the Company and conducts regular reviews on the effectiveness of the systems through the internal audit department. The Board considers that, during the Period, the existing internal control system has been operating in a healthy and effective manner in the finance, operation, compliance and risk management aspects.
PwC is the independent external auditors of the Company. The remuneration amounts paid and payable by the Company to PwC for their services rendered for the year ended 31 December 2015 are set out below:
|Services rendered||Fees paid/payable|
|Audit services for 2015 RMB4.01 million||RMB4.01 million|
|Hong Kong and Macau tax compliance service||RMB0.18 million|
|Due diligence services|
EFFECTIVE COMMUNICATION WITH THE INVESTMENT COMMUNITY
The Company attaches great importance to the effective and close communication with investors. The investor relations team of the Company seeks to provide the most efficient and effective channel for our shareholders, bondholders and the investment community to gain information about the Company. In addition to the regular interim and annual result announcement and daily communicates through emails and phone calls, the investor relations team also takes frequent and active participation in global investment conferences.
During the Year, we attended more than ten global investor conferences held in Beijing, Shanghai, Hong Kong and Singapore, meeting institutional investors from global investment community and providing update of the Company. We held three corporate access events in Beijing and Shanghai, inviting investors and analysts to join the opening ceremonies of newly completely Hongkou SOHO, Bund SOHO and SOHO 3Q flagship center in Guanghualu SOHO II. In March and August 2015, the Company arranged road shows to visit investors spreading across the United States, the United Kingdom, Singapore and Hong Kong.
During the Year, the Company held an annual general meeting on 8 May 2015 (“2015 AGM”) and an extraordinary general meeting on 13 November 2015 (“2015 EGM”) and below is the attendance of each Director:
|Attendance/No. of Meeting|
2015 AGM 2015 EGM
|Mr. Pan Shiyi||1/1||1/1|
|Mrs. Pan Zhang Xin Marita||0/1||0/1|
|Ms. Yan Yan||0/1||1/1|
|Independent Non-Executive Directors|
|Dr. Ramin Khadem (retired on 8 May 2015)||1/1||N/A|
|Mr. Cha Mou Zing, Victor||0/1||0/1|
|Mr. Yi Xiqun (retired on 8 May 2015)||0/1||N/A (Note)|
|Mr. Sun Qiang Chang (appointed on 8 May 2015)||N/A||0/1|
|Mr. Xiong Ming Hua (appointed on 8 May 2015)||N/A||0/1|
The 2015 AGM provided an ideal chance for communication between the Board and the shareholders of the Company. The chairmen of the Board and the Audit Committee and the external auditors were all present at the 2015 AGM to answer shareholders’ inquiries.
The 2015 EGM was convened by the Board and held to consider the declaration and payment of special dividend and re-election of Mr. Sun Qiang Chang and Mr. Xiong Ming Hua as independence non-executive directors of the Company.
The Company engages Ms. Mok Ming Wai, a director of KCS Hong Kong Limited, as its company secretary. Her primary corporate contact person at the Company is Mr. Gu Wei, Victor, the Vice President and General Counsel of the Company. In compliance with rule 3.29 of the Listing Rules, Ms. Mok, has undertaken no less than 15 hours of relevant professional training during the Year.
Convening of extraordinary general meeting and putting forward proposals
Under the articles of association of the Company, any one or more shareholders holding at the date of deposit of the requisition not less than one-tenth (1/10) of the paid up capital of the Company which carries the right of voting at general meeting can require an extraordinary general meeting (“EGM”) to be called by the Board for the transaction of any business specified in such requisition. The procedures for shareholders to convene and put forward proposals at an EGM are stated as follows:
(1) The requisitionist(s) should sign a written request stating the objects of the meeting to be convened, and deposit the same at the principal place of business of the Company in Hong Kong situated at 36/F, Tower Two, Times Square, 1 Matheson Street, Causeway Bay, Hong Kong for the attention of the Company Secretary.
(2) Where, within 21 days from the date of deposit of the requisition, the Directors do not proceed to convene an EGM, the requisitionist(s) himself (themselves) may convene the general meeting in the same manner, as that in which meetings may be convened by the Board, and all reasonable expenses incurred by the requisitionist(s) as a result of the failure of the Board shall be reimbursed to the requisitionist(s) by the Company.
Enquiries to the Board
Shareholders of the Company who intend to put forward their enquiries about the Company to the Board could email their enquiries to firstname.lastname@example.org.
Amendments to the Company’s memorandum and articles of association
There was no significant change in the Company’s constitutional documents during the Year.
TRAINING FOR DIRECTORS
The Company will provide a comprehensive, formal and tailored induction to each newly appointed Director on his or her first appointment in order to enable he/she has appropriate understanding of the business and operations of the Company that he/she is fully aware of his/her responsibilities and obligations under the Listing Rules and relevant regulatory requirements.
All the Directors namely Mr. Pan Shiyi, Mrs. Pan Zhang Xin Marita, Ms. Yan Yan, Mr. Sun Qiang Chang, Mr. Cha Mou Zing, Victor and Mr. Xiong Ming Hua were provided with regular updates on the Group’s business, operations, and financial matters as well as regulatory updates on applicable legal and regulatory requirements. In addition, all Directors also participated in other courses relating to the roles, functions and duties of a listed company director or further enhancements of their professional development by way of attending training courses or via on-line aids or reading relevant materials.