Q：When the controlling parent China National Petroleum Company (CNPC) holds more than an 80% interest in the Company, how can minority interests be effectively protected? (2)
A：2. From the perspective of protecting minority shareholders' interests, we ensure all shareholders have equal standing and can effectively exercise their rights.
a. Specifically on related party transactions, when the Company first became a listed company, in order to ensure production operations between the Company and CNPC can continue without disruption, both parties entered into a "Continuous Connected Party Transaction Agreement". Under the agreement, the Company and CNPC should discuss and agree the scope and amount of continuous connected transactions once every three years. The arrangement should be submitted to the Board and Shareholders meeting for approval. Continuous connected transactions Volume the Company and CNPC over the years have been well kept in those shareholders' approval. These transactions have been disclosed in our annual report over the years. In order to ensure that connected party transactions are conducted fairly, at the shareholders' meetings where connected party transactions are tabled for voting, CNPC as a related party shareholder abstains from voting. b. From 2018 onwards, when electing Board of Directors and Supervisory Boards, the Company adopts a "Cumulative Voting System" where minority shareholders' say could be further enhanced.
c. For significant asset restructuring like the pipeline restructuring transaction in 2020, the Company strictly abides by regulatory requirements, conforms with market-oriented principles, proactively preserves shareholders' and the Company's interests. The pipeline restructuring transaction was passed at the shareholders' meeting with a very high approval rate of 99.94% from the minority shareholders.
d. We focus on communicating with our minority shareholders. We have established communication mechanisms that cover multiple level, uses multiple formats that cuts across multiple channels. Examples of these mechanism include our periodic reporting system, results announcements, extra-ordinary meetings, communication with the media, interviews and visits, as well as interactive sessions with our management team, etc. Public shareholders at large can obtain in-depth understandings of the Company's operations or can dialogue with the Company on topics they are interested in. 3. Relating to information disclosure, the Company strictly complies with its information disclosure obligation. The Company has relevant policy and procedures to ensure disclosures of significant events are complete and accurate. The Company strives to enhance transparency of its disclosures. For seven years in a roll, the Company's information disclosure work has been granted an A grade by the Shanghai Stock Exchange.
Q：When the controlling parent China National Petroleum Company (CNPC) holds more than an 80% interest in the Company, how can minority interests be effectively protected? (1)
A：The Company focuses significantly on protecting shareholders' rights, especially on minority shareholders' legal rights. The ways in which minority shareholders' rights are protected ranges from way how the Company set ups its own governance structure, our voting mechanism and the information that we disclose, etc.1. From the corporate governance perspective, we have an established policy that the board of directors must have diversified background. The composition of the board of directors fully considers specific circumstance of the Company, size of our operations and business needs. The board encompasses members with different nationality, gender, age group, cultural and education background and professional experience. The Board of directors comprise of 12 members, of which 5 are independent non-executive directors. Independent directors proactively carry out their role. Through meetings and other communication channels, they gain understandings of the Company's operations, financial performances as well as development of significant project undertakings. In addition, Board members conduct periodic dialogue with management on areas of focus and requests from stakeholders including regulators, investors, media and the public. They resolute to safeguard interests of minority shareholders.(To be continued)
Q：Would you please describe the handling of "Accounting irregularities uncovered by the National Audit Office in 2017" and "National Audit Office found misconduct and disciplinary violations in 2017" mentioned in the MSCI ESG rating report?
A：The National Audit Office of the PRC (NAO) announced in June 2017 that it has uncovered certain irregularities in accounting practice in PetroChina Company Limited and its subsidiaries. The NAO has communicated with PetroChina on the matter.
1. As for the incident relating to soliciting investment from the public and payment of compensation without proper budgeting or filing with the SASAC for record, our company takes this matter very seriously. It has conducted an internal investigation and has undertaken remedial action. For significant investment decisions, we will strictly abide by good corporate governance-related decision-making procedures in accordance with the relevant provisions on "Three Importance and One Greatness" principles. We will seek approval timely and prior to making such decisions in accordance with the regulations on state-owned assets supervision. We will also enhance the process to undertake feasibility studies and strengthen the decision-making process for significant joint venture arrangements in order to mitigate default risks.
2. As for the incident relating to the acquisition of 35% interests in an offshore project where the collective decision-making procedures was by-passed, our company will strengthen the timeliness of project approvals while strictly keeping the project confidential. We will further clarify the key milestones of project decision-making process, perform the internal collective decision-making procedures in accordance with the provisions on "Three Importance and One Greatness" and ensure compliance of project decision-making process in the future.
Note 1: Three Importance and One Greatness – "Three Importance" refers to (1) the decision-making on significant matters (2) the appointment of key management personnel and (3) the decision-making on significant investments. "One Greatness" refers to use of funds of significant value.
For details, please refer to the official website of our parent company, CNPC, below:
http://www.cnpc.com.cn/cnpc/gonggao/201706/1533b86b37f94cef9ad6f5c41c00c395.shtml
Q：How does the company protect whistleblowers?
A：We have a dedicated telephone hotline and an email box for reporting irregularities. Anyone can file complaints of irregularities using their own name or anonymously. We treat investigations seriously and provide feedback in a timely manner. We ensure the identity of the whistleblower is kept confidential, strictly complying with the Working Rules on Handling Complaints and Allegations. We punish any retaliation against whistleblowers to safeguard their personal rights and interests. For complaints filed anonymously, we prohibit the use of any means to trace to the identity of the whistleblower, including tracing to mailing addresses and email addresses. We fully respect the whistleblower's willingness to report anonymously. For complaints filed by named person, we follow up and provide feedback on a timely manner. We also ensure that the name of the informant, employer, address and other relevant information of the whistleblowers as well as the reported content is kept strictly confidential. We do not disclose the identity of any whistleblower in the process of accepting whistleblowing and conducting investigations. We handle each matter with the highest degree of confidentiality. If any retaliation action is uncovered, the individuals concerned will be prosecuted in accordance with the relevant laws and regulations.
Whistle blowing hotline: 8610-62094741
Whistle blowing email: jcbjb@petrochina.com.cn