Corporate Governance

Corporate Governance Report

Business Model and Development Strategies

The principal businesses of the Group include water resources, property investment and development, department store operation, hotel operation and management and investments in other infrastructure projects. The Group is committed to consolidating the operational development of its existing businesses and expanding its core businesses in order to generate continuous and steady investment returns for shareholders. By optimising the asset portfolio, strengthening the capital operation, enhancing management standard and corporate governance, the Group endeavours to further increase its competitive strengths and enhance its market influence, providing strong support for the long-term, steady and sustainable development of the enterprise.

According to its strategic development plan, the Group will continue to develop its water resources business in a proactive and prudent manner. The Group continues to explore market investment opportunities in areas such as untreated water, urban water supply, sewage treatment, and construction of water supply projects. The Group will fasten the pace of project acquisitions in an effort to further expand its scale, while continuing to optimize its asset structure and facilitate further business integration.

Faced with the trend of globalization, the Group will continue to capitalize on Hong Kong’s status as an international financial centre, improve its capital utilization efficiency and strengthen its capital management capabilities. Meanwhile, the Group will optimize its human resources operations and further improve the professionalism of its management. The Group will step up its efforts in strengthening corporate culture and increase corporate core competitiveness.

Corporate Governance Code

The Group recognizes the importance of achieving the highest standard of corporate governance consistent with the needs and requirements of its businesses and the best interest of all its stakeholders and is fully committed to doing so. It is also with these objectives in mind that the Group has applied the principles of the code provisions of the Corporate Governance Code (the “CG Code”) contained in Appendix 14 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”).

In the opinion of the directors of the Company (the “Directors”), the Company had complied with the code provisions set out in the CG Code for the year ended 31 December 2015 and, where appropriate, the applicable recommended best practices of the CG Code.

Directors' Securities Transactions

The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers (the “Model Code”) as set out in Appendix 10 to the Listing Rules as its own code of conduct for dealing in securities of the Company by the Directors and also implemented internal policy to govern the dealings in securities by employees of the Group.

Having made specific enquiry to all the Directors, all Directors confirmed that they had complied with the required standards of dealings as set out in the Model Code during the year.

Board of Directors

The board of Directors (the “Board”) is responsible for the leadership and control of the Company and oversees the Group’s businesses, strategic decisions and performances. The management is entrusted by the Board with the authority and responsibility for the day-to-day management of the Group. Major corporate matters that are specifically delegated by the Board to the management include the preparation of interim and annual reports and announcements for the Board’s approval before publishing, execution of business strategies and initiatives adopted by the Board, implementation of adequate systems of internal controls and risk management procedures, and compliance with relevant statutory and regulatory requirements, rules and regulations. It is the responsibility of the Board to determine the appropriate corporate governance practices applicable to the Company’s circumstances and to ensure processes and procedures are in place to achieve the Company’s corporate governance objectives.

Board Composition

There were a couple of changes to the Company’s Board during the year and up to the date of the annual report. Mr. Lan Runing and Mrs. Ho Lam Lai Ping, Theresa were appointed as a Non-Executive Director and an Executive Director with effect from12 January 2015 and 30 October 2015, respectively. Ms. Xu Wenfang and Mr. Huang Zhenhai resigned as Non-Executive Directors with effect from 30 January 2015 and 27 January 2016, respectively.

As at the date of the annual report, the Board comprises four Executive Directors, being Mr. Huang Xiaofeng, Mr. Wen Yinheng, Mrs. Ho Lam Lai Ping, Theresa and Mr. Tsang Hon Nam, five Non-Executive Directors, being Mr. Wu Jianguo, Mr. Zhang Hui, Ms. Zhao Chunxiao, Mr. Lan Runing and Mr. Li Wai Keung, and five Independent Non-Executive Directors, being Dr. Chan Cho Chak, John, Dr. Li Kwok Po, David, Mr. Fung Daniel Richard, Dr. Cheng Mo Chi, Moses and Mr. Wu Ting Yuk, Anthony.

During the year, the Non-Executive Directors (including the Independent Non-Executive Directors) provided the Company with a diverse range of expertise and a balance of skills, and brought independent judgements on issues pertinent to strategic direction, development, performance and risk management through their contribution at Board meetings and committee meetings.

Chairman and Managing Director

The Chairman of the Board is Mr. Huang Xiaofeng and the Managing Director is Mr. Wen Yinheng. The roles of the Chairman and the Managing Director of the Company are clearly defined and segregated to ensure independence, proper checks and balances. The Chairman has executive responsibilities, provides leadership for the Board and ensures a proper and effective functioning of the Board in discharge of its responsibilities. The Managing Director is accountable to the Board for the overall implementation of the Company’s strategies and the coordination of overall business operations.

Non-Executive Directors

All Directors, including Non-Executive Directors, appointed to fill a casual vacancy or as an addition to the existing Board, shall hold office only until the first general meeting after his or her appointment and shall then be eligible for re-election.

Moreover, all Non-Executive Directors (including Independent Non-Executive Directors) of the Company are appointed for a term of not more than approximately three years expiring on the earlier of either (i) the conclusion of the annual general meeting of the Company in the year of the third anniversary of the appointment or re-election of that Director, or (ii) the expiration of the period within which the annual general meeting of the Company is required to be held in the year of the third anniversary of the appointment or re-election of that Director and in any event, subject to earlier determination in accordance with the Articles of Association of the Company and/or any applicable laws and regulations.

Independence of Independent Non-Executive Directors

The Company has complied with the requirements under Rules 3.10(1), 3.10(2) and 3.10A of the Listing Rules. The Company has received confirmation of independence from the five Independent Non-Executive Directors, namely Dr. Chan Cho Chak, John, Dr. Li Kwok Po, David, Mr. Fung Daniel Richard, Dr. Cheng Mo Chi, Moses and Mr. Wu Ting Yuk, Anthony in accordance with Rule 3.13 of the Listing Rules.

Dr. Chan Cho Chak, John, Dr. Li Kwok Po, David, Mr. Fung Daniel Richard and Dr. Cheng Mo Chi, Moses have served the Board of the Company for more than nine years. They have clearly demonstrated their willingness to exercise independent judgement and to provide objective challenges to the management. There is no evidence that length of tenure is having an adverse impact on their independence. The Board therefore considers that Dr. Chan, Dr. Li, Mr. Fung and Dr. Cheng remain independent, notwithstanding the length of their tenure.

The Board as well as the Nomination Committee have reviewed the independence of all Independent Non-Executive Directors and have concluded that all of them are independent within the definition of the Listing Rules. Further, up to the date of this report, the Board is not aware of the occurrence of any events, which would cause it to believe that the independence of any of the Independent Non-Executive Directors has been impaired.

Board Meeting

The Board meets regularly to discuss the overall strategy as well as the operation and financial performance of the Company, and to review and approve the Company’s annual, interim and quarterly results. During the year, seven Board meetings were held and attendance of each Director at the Board meetings is set out in the section headed “Board and Committees Meetings” of this report.

Regular Board meetings in each year are scheduled in advance to facilitate maximum attendance of Directors. At least fourteen days’ notice of a Board meeting is normally given to all Directors who are provided with an opportunity to include matters for discussion in the agenda. The Company Secretary  assists the Chairman in preparing the agenda for meetings to comply with all applicable rules and regulations. The agenda and the accompanying Board papers are normally sent to Directors at least three days before the intended date of a Board meeting. Draft minutes of each Board meeting are circulated to Directors for their comment before being tabled at the next Board meeting for approval. All minutes are kept by the Company Secretary and are open for inspection at reasonable time on reasonable notice by any Director.

According to the current Board practice, if a Director has a conflict of interest in a matter to be considered by the Board, which the Board has determined to be material, the matter will be dealt with by the Board at a duly convened Board Meeting. The Articles of Association of the Company also stipulate that save for the exceptions as provided therein, a Director shall abstain from voting and not be counted in the quorum at meetings for approving any contract or arrangement in which such Director or any of his/her associates has a material interest. Every Director is entitled to have access to the Board papers and related materials as well as to the advice and services of the Company Secretary.

Relationship amongst Directors

The Board members do not have any financial, business, family or other material/relevant relationships with each other. Such balanced board composition also ensures that strong independence exists across the Board. The biographies of the Directors as at the date of this report as set out in pages 23 to 26 to the annual report, demonstrate a diversity of skills, expertise, experience and qualifications.

Directors' Induction and Continuous Professional Development

Upon appointment to the Board, each new Director receives an induction package covering business operations, policy and procedures of the Company as well as the general, statutory and regulatory obligations of being a Director to ensure that he/she is sufficiently aware of his/her responsibilities under the Listing Rules and other relevant regulatory requirements.

The Directors are briefed on the amendments to or updates on the relevant laws, rules and regulations. In addition, the Company encourages the Directors to enrol in a wide range of professional development courses and seminars relating to the Listing Rules, Hong Kong ordinances and corporate governance practices so that they can continuously update and further improve their relevant knowledge and skills. Some Directors attended seminars and conferences organized by government authorities, professional bodies and industrial organizations in relation to corporate governance, updates on laws, rules and regulations, accounting, financial, management or other professional skills. The Company has organized seminars in April 2015 and October 2015 to brief the Directors on the topics of “Evaluation Report on GDI’s Budget Management” and “Directors’ Training on Environmental, Social and Governance (ESG) Reporting”, respectively. Reading materials have also been provided to the Directors to develop and refresh their professional skills.

According to the records kept by the Company, the Directors attended the following trainings during the year ended 31 December 2015:

Name of DirectorSeminar in April 2015Seminar in October 2015Seminars and ConferencesReading Materials
Executive Directors    
Huang Xiaofeng
Wen Yinheng
Ho Lam Lai Ping, Theresa
(appointed on 30 October 2015)
N/AN/A
Tsang Hon Nam
Non-Executive Directors    
Wu Jianguo
Zhang Hui
Zhao Chunxiao 
Lan Runing
(appointed on 12 January 2015)
 
Li Wai Keung
Huang Zhenhai
(resigned on 27 January 2016)
 
Xu Wenfang
(resigned on 30 January 2015)
N/AN/AN/AN/A
Independent Non-Executive Directors
Chan Cho Chak, John
Li Kwok Po, David
Fung Daniel Richard 
Cheng Mo Chi, Moses
Wu Ting Yuk, Anthony

 

Board Diversity Policy

The Board has adopted a board diversity policy (the “Policy”) on 28 August 2013 which sets out the approach to achieve diversity on the Board.

The Company recognizes and embraces the benefits of having a diverse Board and sees increasing diversity at Board level as an essential element in supporting the attainment of the Company’s strategic objectives and sustainable development.

The Company seeks to achieve Board diversity through the consideration of a number of factors, including but not limited to gender, age, cultural and educational background, professional experience, skills, knowledge and length of service. The Company also takes into consideration its own business model and specific needs from time to time. All Board appointments are based on meritocracy, and candidates are considered against objective criteria, having due regard to the benefits of diversity on the Board.

The Nomination Committee has set the measurable objectives based on five focused areas: gender, age, length of service, professional experience and skills and knowledge for the implementation of board diversity of the Company. The Nomination Committee reviews the Policy, as appropriate, to ensure its continued effectiveness from time to time.

As at the date of this report, the Board comprises 14 directors. Five of them are Independent Non-Executive Directors, thereby promoting critical review and control of the management process. The Board has maintained a balanced composition in terms of gender, age, professional experience, skills and knowledge, and has performed effectively.

Having reviewed the implementation of the Policy and the structure, size and composition of the Board, the Nomination Committee of the Board considered that the requirements of the Policy had been met.

Board Committees

The Board has established various committees, including the Audit Committee, the Remuneration Committee and the Nomination Committee. Terms of Reference of those committees detailing their respective authorities and responsibilities are available on the Company’s website at www.gdi.com.hk (the “Company’s Website“).

Remuneration Committee

The Remuneration Committee comprises all five Independent Non-Executive Directors, being Dr. Chan Cho Chak, John, Dr. Li Kwok Po, David, Mr. Fung Daniel Richard, Dr. Cheng Mo Chi, Moses and Mr. Wu Ting Yuk, Anthony. Dr. Chan Cho Chak, John is the Chairman of the Remuneration Committee. The remuneration of the Directors shall be determined by the members of the Company at the general meetings. Approval has been granted by the shareholders at the annual general meeting in 2015 to authorise the Board to fix the remuneration of the Directors.

Emoluments of the Executive Directors and senior management shall be determined by the Remuneration Committee with reference to their duties, responsibilities and performance, and the results of the Group. No Director shall be involved in deciding his/her own remuneration.

The meeting of the Remuneration Committee shall be held at least once a year and when necessary. During the financial year ended 31 December 2015, the Remuneration Committee had held three meetings and had passed one written resolution to approve the annual review of the remuneration of the Executive Directors as well as the remuneration package of the newly appointed Executive Director and their performance bonuses that came up for determination. The attendance of each member of the Remuneration Committee is set out in the section headed “Board and Committees Meetings” of this report.

Details of the amount of Directors’ emoluments for the year 2015 are set out in note 8 to the financial statements.

Nomination Committee

The Nomination Committee comprises Mr. Huang Xiaofeng, Chairman of the Board, and all five Independent Non-Executive Directors, being Dr. Chan Cho Chak, John, Dr. Li Kwok Po, David, Mr. Fung Daniel Richard, Dr. Cheng Mo Chi, Moses and Mr. Wu Ting Yuk, Anthony. Mr. Huang Xiaofeng is the Chairman of the Nomination Committee.

The Nomination Committee is responsible for, amongst other things, identifying individuals suitably qualified to become Board members, considering the re-appointment of Directors and the succession planning for Directors and making recommendations to the Board in respect of the aforesaid matters.

The meeting of the Nomination Committee shall be held at least once a year and when necessary. During the financial year ended 31 December 2015, the Nomination Committee held three meetings to evaluate the structure, size and composition of the Board, to review the Company’s Board Diversity Policy and its implementation, to assess the independence of the Independent Non-Executive Directors and to make recommendations to the Board on the appointment of a Non-Executive Director and an Executive Director and the re-election of Directors.

The attendance of each member of the Nomination Committee is set out in the section headed “Board and Committees Meetings” of this report.

Audit Committee

The Audit Committee comprises all five Independent Non-Executive Directors, being Dr. Li Kwok Po, David, Dr. Chan Cho Chak, John, Mr. Fung Daniel Richard, Dr. Cheng Mo Chi, Moses and Mr. Wu Ting Yuk, Anthony. Dr. Li Kwok Po, David is the Chairman of the Audit Committee.

The meetings of the Audit Committee shall be held at least twice a year and when necessary. During the financial year ended 31 December 2015, the Audit Committee had held four meetings to review, inter alia, the 2014 annual results, the 2015 quarterly and interim results of the Company before their submission to the Board as well as to monitor the integrity of such financial statements/financial information. The Audit Committee oversees matters concerning the external auditors including making recommendations to the Board regarding the appointment of the external auditors, reviewing the nature and scope of their work and approving their fees. In addition to the four meetings as aforesaid, the Audit Committee also held a private meeting with the external auditors to discuss any area of their concern. To be consistent with the CG Code, revised terms of reference of the Audit Committee were reviewed and submitted to the Board for approval. The Audit Committee further ensures that the management has put in place an effective system of internal control and risk management and maintains an overview of the Group’s risk assessment, control and management processes. It reviews the adequacy of resources, qualifications and experience of staff of the Company’s accounting and financial reporting functions and their training programmes and budget. In addition, it reviews the internal audit schedules of the Group, considers the Group’s internal audit reports and monitors the effectiveness of the internal audit and risk management functions. The attendance of each member of the Audit Committee is set out in the section headed “Board and Committees Meetings” of this report.

Board and Committees Meetings

The individual attendance records of each Director at the meetings of the Board, Remuneration Committee, Nomination Committee, Audit Committee and general meetings during the year ended 31 December 2015 are set out below:
 
Name of DirectorBoardRemuneration CommitteeNomination CommitteeAudit CommitteeAnnual General MeetingExtraordinary General Meeting on 29 September 2015
Executive Directors
Huang Xiaofeng7/7-3/3-1/11/1
Wen Yinheng7/7---1/11/1
Ho Lam Lai Ping, Theresa (appointed on 30 October 2015)N/A---N/AN/A
Tsang Hon Nam7/7---1/11/1
Non-Executive Directors
Wu Jianguo6/7---1/10/1
Zhang Hui7/7---1/11/1
Zhao Chunxiao7/7---1/11/1
Lan Runing (appointed on 12 January 2015)5/6---1/11/1
Li Wai Keung7/7---1/11/1
Huang Zhenhai (resigned on 27 January 2016)7/7---1/10/1
Xu Wenfang (resigned on 30 January 2015)0/1---N/AN/A
Independent Non-Executive Directors
Chan Cho Chak, John7/73/33/34/41/11/1
Li Kwok Po, David7/73/33/34/41/10/1
Fung Daniel Richard7/73/33/34/41/10/1
Cheng Mo Chi, Moses7/73/33/34/41/10/1
Wu Ting Yuk, Anthony7/73/33/34/41/11/1

 

Accountability and Audit

Financial Reporting

The Board is responsible for overseeing the preparation of financial statements for the year ended 31 December 2015, which give a true and fair view of the state of affairs of the Group and of the results and cash flows for that financial year. In preparing the financial statements for the year ended 31 December 2015, the Board has selected appropriate accounting policies, applied them consistently in accordance with the Hong Kong Financial Reporting Standards and Hong Kong Accounting Standards which are pertinent to its operations and relevant to the financial statements, made judgements and estimates that are prudent and reasonable, and ensured the preparation of the financial statements on the going concern basis.

The Group endeavours to present a balanced, clear and comprehensible assessment of the Group’s performance, position and prospects. The annual and interim results of the Company are announced in a timely manner within the limit of three months and two months respectively after the end of the relevant periods in accordance with the Listing Rules. To further enhance the Company’s level of corporate governance and transparency, the Company has announced its unaudited quarterly financial information during the financial year ended 31 December 2015, and will continue to publish unaudited financial information quarterly in the future.

The Directors have acknowledged their responsibility for preparing all information and representations contained in the financial statements of the Company for the year ended 31 December 2015.

Auditors' Remuneration

During the year under review, the remuneration paid/payable to the Company's auditors, Ernst & Young is set out as follows:

Services renderedFee paid/payable
HK$'000
Audit of financial statements9,239
Review of interim results1,430
Agreed-upon procedures on quarterly results1,120
Total11,789

 

Risk Management and Internal Control

The Board is responsible for the Group’s system of risk management and internal controls and their effectiveness. Such a system is designed to prudently manage the Group’s risks within an acceptable risk profile. The Board has delegated to management the implementation of such system of risk management and internal controls as well as the review of relevant financial, operational and compliance controls and risk management procedures. 

The management under the supervision of the Board has established an on-going process for identifying, evaluating and managing the significant risks faced by the Group and this process includes updating the systems of risk management and internal controls when there are changes to business environment or regulatory guidelines.

The management assists the Board with the implementation of all relevant policies and procedures on risk and control by identifying and assessing the risk faced and designing, operating and monitoring suitable internal controls to mitigate and control these risks. The key processes that have been established in reviewing the adequacy and integrity of the system of risk management and internal controls include the following:

A defined management structure is maintained with specified limits of authority and control responsibilities, which is designed to (a) safeguard assets from inappropriate use; (b) maintain proper accounts; (c) ensure compliance with regulations; and (d) identify, manage and mitigate key risks to the Group.

In addition to the duties of the Audit Committee as mentioned above, the Audit Committee, inter alia, reviews the financial controls, risk management and internal control systems of the Group and any significant internal control issues identified by the internal audit department, external auditors and management. It also conducts review of the internal audit functions with particular emphasis on the scope and quality of the internal audits and independenceof the internal audit department. During its annual review, the Audit Committee also considers the adequacy of resources, qualifications and experience of staff of the Group’s accounting and financial reporting function, and their training programmes and budgets.

The internal audit department monitors compliance with policies and procedures and the effectiveness of the risk management and internal control systems and highlights significant findings in respect of any non-compliance. It plays an important role in the Group’s internal control framework, and provides objective assurance to the Board that a sound internal control system is maintained and operated in compliance with the established processes and standards by performing periodic checking. The internal audit department issues reports to the Board and relevant management covering various operational and financial processes of the Group and provides summary reports to the Audit Committee together with the status of implementation of their recommendation in each Audit Committee meeting.

The Board is satisfied that the internal control system in place covering all material controls including financial, operational and compliance controls and risk management functions for the year under review and up to the date of issuance of the annual report and accounts is reasonably effective and adequate.

Company Secretary

Mrs. Ho Lam Lai Ping, Theresa has been the Company Secretary of the Company since December 1992. She is a full time employee of the Company and has day-to-day knowledge of the Company. Mrs. Ho reports to the Chairman and the Managing Director of the Company and is responsible for advising the Board on corporate governance matters. For the year under review, Mrs. Ho has confirmed that she has taken over 15 hours of relevant professional training.

Shareholders' Rights

Shareholders Convening an Extraordinary General Meeting

Pursuant to the Hong Kong Companies Ordinance, shareholders of the Company holding not less than 5% of the total voting rights of all the members having a right to vote at general meeting may request the Directors to call a general meeting of the Company. The request must state the general nature of the business to be dealt with at the meeting and may include the text of a resolution that may properly be moved and is intended to be moved at the meeting. The request may be sent to the Company in hard copy form or in electronic form; and must be authenticated by the person or persons making it. Directors of the Company must call a meeting within 21 days after the date on which they become subject to the requirement. The meeting being called must be held on a date not more than 28 days after the date of the notice convening the meeting. If the Directors fail to call the meeting, the shareholders who requested the meeting, or any of them representing more than one half of the total voting rights of all of them, may themselves call a general meeting. The meeting must be called for a date not more than 3 months after the date on which the Directors become subject to the requirement to call a meeting.

Details of the procedures for shareholders to propose a person for election as a Director of the Company are available on the Company’s Website.

Shareholders' Enquiries and Proposals

Shareholders should direct their enquiries about their shareholdings to the Company’s share registrar, Tricor Tengis Limited, at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong, or call its customer service hotline at (852) 2980 1333.

To foster regular and contribute two-way communications amongst the Company, the shareholders and the potential investors, the Chief Financial Officer or the Company Secretary of the Company are designated to respond to enquiries and proposals from the shareholders as well as the public. Enquires and proposals can be made by mail or by phone. The contact details of the Company are set out in the subsection headed “IR Contact” under the “Investor Relations” section of the Company’s Website. In addition, the Company is committed to maximizing the use of its website as a channel to provide updated information in a timely manner and to strengthen the communications with both the public and the shareholders. The Company has formulated the “Shareholders Communication Policy” which enables shareholders to exercise their rights in an informed manner.

Investor Relations

During the year under review, there are no changes in the Company’s Articles of Association. An up-to-date consolidated version of the Company’s Articles of Association is available on the Company’s Website.

Environmental Issues

The Company is committed to the sustainable development of the environment and our society. The Group has endeavoured to comply with laws and regulations regarding environmental protection and adopted effective environmental technologies to ensure its projects meet the required standards and ethics in respect of environmental protection.

Relationships with Stakeholders

The Company recognizes that our employees, customers and suppliers and business associates are key stakeholders to the Company’s success. We strive to achieve corporate sustainability through engaging our employees, providing quality services to our customers, collaborating with business partners (including suppliers and contractors) to deliver quality sustainable products and services and supporting our community.

By Order of the Board
HUANG Xiaofeng
Chairman

Hong Kong, 23 March 2016