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8: Annual Report on the Performance of Duties by the Company’s Independent Directors for 2012
Document No. 8 of the 2012 Annual General Meeting
Annual Report on the Performance of Independent Directors for 2012
Dear Shareholders:
In 2012, as independent directors of Dalian Refrigeration Co., Ltd. (hereinafter referred to as the “Company”), we attended the Company’s board meetings and annual general meetings on schedule in accordance with the Company Law, the Corporate Governance Guidelines for Listed Companies, the Guiding Opinions on Establishing an Independent Director System in Listed Companies, the Several Provisions on Strengthening the Protection of the Rights and Interests of Public Shareholders, and other relevant requirements. With a focus on safeguarding the legitimate rights and interests of all shareholders, particularly public shareholders, we conducted regular on-site visits and carried out thorough investigations and research into the Company’s operations, closely monitored its development trends, rigorously reviewed proposals on significant matters, and exercised our voting rights and expressed independent opinions with due care and prudence.
I. Attendance at the 2012 Board of Directors Meetings
|
Name
|
Should participate this year
Number of board meetings
|
Attend in person
(occasion)
|
Attendance by Proxy
(occasion)
|
Absence
(occasion)
|
|
Wang Huiquan
|
7
|
7
|
0
|
0
|
|
Xing Tiancai
|
7
|
7
|
0
|
0
|
|
Liu Caiping
|
7
|
7
|
0
|
0
|
II. Status of Independent Opinions Issued in 2012
1. On February 24, 2012, prior approval was granted for the Company’s proposed routine related-party transactions, the appointment of the Company’s 2012 audit firm, the capital increase in Dalian Sanyo Refrigeration Co., Ltd., and the transfer of equity in Dalian Sanyo Air-Conditioning Equipment Co., Ltd., among other material matters, with the recommendation that these items be submitted for consideration at the 14th Meeting of the 5th Board of Directors.
2. On March 6, 2012, the following independent opinion was expressed on the significant matters deliberated at the 14th Meeting of the 5th Board of Directors and other significant matters of the Company:
(1) Opinion on the Company’s Cumulative External Guarantees, Current External Guarantees, and Compliance with Relevant Regulations
Upon review, the Company has not provided any guarantees for its controlling shareholder, other related parties in which the Company holds less than 50% of the equity, or any unincorporated entities or individuals; the total amount of the Company’s external guarantees is zero. Currently, the Company’s Articles of Association stipulate the approval procedures for external guarantees and the creditworthiness criteria for guaranteed parties. In light of the foregoing, we are of the view that the Company has duly complied with the relevant regulations.
(2) Opinion on the Company’s Routine Related-Party Transactions for the Year 2011 and the Estimated Routine Related-Party Transactions for the Year 2012
The aforementioned routine related-party transactions of the Company are normal and necessary, comply with the relevant provisions of the Stock Listing Rules and the Company’s Articles of Association, adhere to the principles of openness, fairness, and impartiality, are consistent with the Company’s actual operations and development needs, involve reasonable transaction prices, and do not prejudice the interests of the Company or its non-affiliated shareholders.
(3) Opinion on the Compensation of Company Executives for the Year 2011
The determination of the 2011 executive compensation was made after a comprehensive review of the Company’s 2011 operating plan performance, as well as its financial condition, operating results, and cash flows. We unanimously approve the Board of Directors’ report on the 2011 executive compensation.
(4) Opinions on the Company’s Internal Control Self-Evaluation Report
In accordance with the Basic Norms for Internal Control, the Guidelines for Internal Control Evaluation, and other relevant laws and regulations, the Company conducted a self-assessment of the effectiveness of its internal control design and operation as of December 31, 2011, and based on this assessment prepared the Company’s 2011 Annual Internal Control Evaluation Report.
We believe that the current state of the company’s internal control system complies with applicable requirements and is consistent with the company’s actual circumstances; that the internal controls established by the company have been effectively implemented throughout the production and business operations; and that the Company’s 2011 Internal Control Evaluation Report accurately reflects the aforementioned facts.
In summary, we concur with the Company’s 2011 Internal Control Evaluation Report.
(5) Opinions on the Company’s Cash Dividends
The Company’s Articles of Association stipulate that the annual cash dividend shall be no less than 10% of the Company’s net profit for the year, or that the cumulative cash dividends over the most recent three years shall be no less than 30% of the average annual net profit realized during those three years.
The 2011 profit distribution proposal submitted by the Company’s Board of Directors is in compliance with the relevant provisions of the Company’s Articles of Association and takes into account both the Company’s long-term development needs and the need to provide shareholders with a reasonable return. We unanimously approve this profit distribution proposal.
(6) Report on the Capital Increase for Dalian Sanyo Refrigeration Co., Ltd.
This related-party transaction is fair and does not prejudice the interests of the Company or its minority shareholders. Moreover, it will strengthen the overall competitiveness of Dalian Sanyo Refrigeration Co., Ltd., a significant equity-method investee of the Company, enhance its market share, and thereby increase the Company’s investment income. The voting procedure for this related-party transaction was lawful, and the related directors duly recused themselves. We unanimously approve this capital increase.
(7) Report on the Transfer of Equity in Dalian Sanyo Air-Conditioner Co., Ltd.
This related-party transaction is fair and does not prejudice the interests of the Company or its minority shareholders. It will facilitate the swift establishment of an integrated operating structure for the large-air-conditioning business, enabling optimal allocation of resources through business integration. This, in turn, will enhance production efficiency and further strengthen the Company’s overall competitiveness in the face of market challenges. The voting procedures for this related-party transaction were lawful, and the related directors duly recused themselves. We unanimously approve this equity transfer.
3. On August 20, 2012, an in-depth review was conducted on the Company’s external guarantees for the first half of 2012 and on the misappropriation of the Company’s funds by the controlling shareholder and other related parties, resulting in the issuance of the following special statement and independent opinion:
Upon review, during the reporting period the Company did not provide any guarantees for its controlling shareholder, other related parties in which the Company holds less than 50% of the equity, or any unincorporated entities or individuals; nor did the Company enter into any external guarantees. The Company’s Articles of Association currently set forth the approval procedures for external guarantees and the creditworthiness criteria for guarantors. Furthermore, upon review, no instances were found during the reporting period of the controlling shareholder or other related parties misappropriating the Company’s funds. In light of the foregoing, we are of the view that the Company has adequately complied with the relevant regulations.
4. On December 13, 2012, prior approval was granted for the Company’s proposed transfer of its 10% equity interest in Shenyang Sanyo Air-Conditioning Co., Ltd., and it was agreed to submit the matter for consideration at the 20th Meeting of the 5th Board of Directors.
5. On December 24, 2012, the Company’s Fifth Board of Directors, at its 20th meeting, adopted the following independent opinion regarding the proposed transfer of equity in Shenyang Sanyo Air Conditioning Co., Ltd.:
From January to October 2012, Shenyang Sanyo Air Conditioning, despite having faced challenging operating conditions in recent years, saw its sales performance deteriorate further. The company responded by lowering prices, resulting in substantial year-on-year declines in both domestic and export revenues and incurring severe losses, to the point where it has been forced to operate at near-idle capacity. In light of these circumstances, Daling Shares plans to transfer its entire 10% equity stake in Shenyang Sanyo Air Conditioning to Sanyo Electric. To ensure the fairness of this transaction, an accounting firm and an appraisal agency qualified to conduct securities and futures-related business have conducted an audit and valuation of Shenyang Sanyo Air Conditioning.
This related-party transaction is fair and does not prejudice the interests of the Company or its minority shareholders; it is conducive to optimizing the Company’s long-term equity investment structure and further reinforcing the Company’s core business in large- and medium-sized refrigeration and air-conditioning systems. The voting procedures for this related-party transaction were lawful, and the related directors duly recused themselves. We unanimously approve this equity transfer.
III. Work of the Company’s Board Committees
1. Status of Work on the Company’s Board of Directors Audit Committee
As members of the Audit Committee established under the Company’s Board of Directors, we discharge our duties in accordance with the Company’s Implementing Rules for the Board Audit Committee and the Audit Committee Annual Report Work Procedures, overseeing the Company’s internal audit system and its implementation, reviewing the Company’s financial information and disclosures, and evaluating the work of external auditing firms.
In the development and evaluation of the company’s internal control framework, the Audit Committee has actively exercised its organizational, leadership, and oversight responsibilities. We believe that the current state of the company’s internal control system is in compliance with applicable requirements, aligns with the company’s actual operations, and has been effectively implemented. The Company’s 2012 Internal Control Evaluation Report accurately reflects these facts.
During the Company’s 2012 audit engagement, we maintained active communication and coordination with the auditing firm, Zhongzhun Certified Public Accountants, through the Audit Committee. Prior to the auditors’ on-site engagement, we discussed and reached consensus with the engagement partner of the auditing firm on the audit plan, schedule, and other matters relevant to the audit period. Throughout the audit process, we kept abreast of progress and repeatedly urged the auditing firm to carry out the audit in a timely manner while maintaining high quality and ensuring that all deliverables met the required standards. Upon completion of the audit, we conducted a thorough review of the Company’s annual financial statements and annual report.
2. Work performed on the Company’s Board of Directors’ Compensation and Assessment Committee
As members of the Compensation and Assessment Committee established under the Company’s Board of Directors, we have fulfilled our duties in accordance with the Company’s Implementing Rules for the Board of Directors’ Compensation and Assessment Committee, reviewing the annual compensation of the Company’s directors, supervisors, and senior management personnel and ensuring that the decision-making procedures and remuneration standards for such individuals are in compliance with applicable laws and regulations as well as the Company’s internal policies.
The above report is submitted for your review.
Independent Directors: Wang Huiquan, Xing Tiancai, Liu Caiping
May 21, 2013
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