Rici Healthcare : 2020 Annual Report

April 28, 2021 at 06:17 pm EDT

2020年報

CONTENTS

Definitions	2
Corporate Profile	6
Milestones	8
Financial Highlights	9
Financial Summary	10
Chairman's Statement	11
Profiles of Directors and Senior Management	13
Management Discussion and Analysis	17
Corporate Governance Report	29
Environmental, Social and Governance Report	53
Directors' Report	73
Independent Auditor's Report	89
Financial Statements and Notes to the Financial	95
Statements

Definitions

In this annual report, unless the context otherwise requires, the following expressions shall have the following meanings.

"2021 AGM"	the AGM to be held on June 18, 2021
"AGM"	annual general meeting of the Company
"Articles of Association" or "Articles"	the memorandum and articles of association of our Company, as amended from
	time to time
"Audit Committee"	the audit committee of the Board
"Beijing Rich"	Beijing Rich Ruitai Clinic Co., Ltd. (北京瑞慈瑞泰綜合門診部有限公司), a
	company incorporated in the PRC with limited liability on May 20, 2015 and an
	indirectly wholly-owned subsidiary of the Company
"Board of Directors" or "Board"	our board of Directors
"BVI"	British Virgin Islands
"CG Code"	the "Corporate Governance Code" as contained in Appendix 14 to the Listing
	Rules
"Changzhou Rich Hospital"	Changzhou Rich Obstetrics & Gynecology Hospital Co., Ltd. (常州瑞慈婦產醫
	院), a company incorporated in the PRC with limited liability on July 12, 2016,
	which operates a high-end obstetrics, gynecology and pediatrics hospital
	incorporated in Changzhou City, Jiangsu Province
"Chelsea Grace"	Chelsea Grace Holdings Limited (翠慈控股有限公司), a company incorporated in
	the BVI with limited liability on July 11, 2014, which is entirely owned by Dr. Mei
"Chengdu Rich"	Chengdu Jinjiang Rich Clinic Co., Ltd. (成都錦江瑞慈門診部有限公司), a
	company incorporated in the PRC with limited liability on November 6, 2013,
	which is an indirectly wholly-owned subsidiary of our Company
"China" or "PRC"	the People's Republic of China, which for the purpose of this annual report and
	for geographical reference only, excludes Hong Kong, Macau and Taiwan
"Company", "our Company", "Rici",	Rici Healthcare Holdings Limited (瑞慈醫療服務控股有限公司), a company
"Group", "our Group", "we" or "us"	incorporated under the laws of the Cayman Islands with limited liability on July
	11, 2014 and except where the context indicated otherwise, (i) our subsidiaries
	and (ii) with respect to the period before our Company became the holding
	company of our present subsidiaries, the businesses operated by such
	subsidiaries or their predecessors (as the case may be)
"Company Secretary"	the secretary of the Company
2	RICI HEALTHCARE HOLDINGS LIMITED

Definitions

"Controlling Shareholder(s)"	Dr. Mei and Chelsea Grace or any one of them
"Director(s)"	the director(s) of our Company or any one of them
"Dr. Fang"	Dr. Fang Yixin, our chairman, executive Director and the spouse of Dr. Mei
"Dr. Mei"	Dr. Mei Hong, our executive Director, Controlling Shareholder and the spouse of
	Dr. Fang
"Grade A, Grade B and Grade C"	hospitals in China can be categorized into Class I, II and III in terms of service
	quality, management level, medical equipment, hospital size and medical
	technology. Each class can be further divided into Grade A, Grade B and Grade
	C. Class III Grade A hospitals are the top level hospitals in China
"Hangzhou Rich"	Hangzhou Rich Medical Clinic Co., Ltd. (杭州瑞慈醫療門診部有限公司), a
	company incorporated in the PRC with limited liability on December 1, 2016 and
	an indirectly wholly-owned subsidiary of the Company
"Hefei Rich"	Hefei Shushan Rich Clinic Co., Ltd. (合肥蜀山瑞慈健康體檢門診部有限公司), a
	company incorporated in the PRC with limited liability on June 29, 2015, which
	is an indirectly wholly-owned subsidiary of the Company
"HK$" or "Hong Kong dollars"	Hong Kong dollars and cents, each being the lawful currency of Hong Kong
"HKFRS"	Hong Kong Financial Reporting Standards
"Hong Kong"	the Hong Kong Special Administrative Region of the PRC
"IPO"	the initial public offering of the Company, having become unconditional in all
	aspects on October 6, 2016
"Listing"	the listing of the Shares on the Main Board of the Stock Exchange
"Listing Date"	October 6, 2016, on which the Shares were listed and from which dealings
	therein were permitted to take place on the Stock Exchange
"Listing Rules"	the Rules Governing the Listing of Securities on The Stock Exchange of Hong
	Kong Limited (as amended from time to time)
"Model Code"	the "Model Code for Securities Transactions by Directors of Listed Issuers" set
	out in Appendix 10 to the Listing Rules
"Nanjing Rich"	Nanjing Rich Clinic Co., Ltd. (南京瑞慈門診部有限責任公司),	a company
	incorporated in the PRC with limited liability on December 1, 2008, which is an
	indirectly wholly-owned subsidiary of our Company
	2020 Annual Report	3

Definitions

"Nantong Meidi"	Nantong Rich Meidi Elderly Care Center Co., Ltd. (南通瑞慈美邸護理院有限
	公司), a company incorporated in the PRC with limited liability on August 19,
	2014, which is a subsidiary of joint venture of our Group
"Nantong Rich Hospital"	Nantong Rich Hospital Co., Ltd. (南通瑞慈醫院有限公司), a company
	incorporated in the PRC with limited liability on August 14, 2000, which is an
	indirectly wholly-owned subsidiary of our Company
"NHC"	the National Health Commission of the PRC (中華人民共和國國家衛生健康委員
	會)
"Nomination Committee"	the nomination committee of the Board
"OGP"	obstetrics, gynecology and pediatrics
"Prospectus"	the prospectus of the Company dated September 26, 2016
"Pre-IPO Share Option Scheme"	the pre-IPO share option scheme adopted by the Company on September 19,
	2016
"Remuneration Committee"	the remuneration committee of the Board
"RMB"	Renminbi, the lawful currency of the PRC
"Rici Shuixian"	Shanghai Shuixian Obstetrics & Gynecology Hospital Co. Ltd. (上海瑞慈水仙
	婦兒醫院有限公司), a company incorporated in the PRC with limited liability
	on October 17, 2016 and an indirectly non-wholly-owned subsidiary of the
	Company
"SFO"	the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong),
	as amended, supplemented or otherwise modified from time to time
"Shanghai Rich"	Shanghai Rich Clinic Co., Ltd. (上海瑞慈門診部有限公司), a company
	incorporated in the PRC with limited liability on February 14, 2007, which is an
	indirectly wholly-owned subsidiary of our Company
"Share(s)"	ordinary share(s) of US$0.0001 each in the issued share capital of the Company
"Shareholder(s)"	holder(s) of Shares
"Share Option Scheme"	the share option scheme conditionally adopted by our Company on September
	19, 2016

4	RICI HEALTHCARE HOLDINGS LIMITED

Definitions

"Shenzhen Rich Medical Exam"	Shenzhen Rich Medical Examination Management Co., Ltd. (深圳瑞慈健康體
	檢管理有限公司), a company incorporated in the PRC with limited liability on
	September 17, 2010, which is an indirectly wholly-owned subsidiary of our
	Company
"Stock Exchange"	The Stock Exchange of Hong Kong Limited
"Wuhan Rich"	Wuhan Rich Clinic Co., Ltd. (武漢瑞慈門診部有限公司), a company incorporated
	in the PRC with limited liability on January 29, 2015, which is an indirectly
	wholly-owned subsidiary of our Company
"Wuxi Rich Obstetrics & Gynecology	Wuxi Rich Obstetrics & Gynecology Hospital (無鍚瑞慈婦產醫院)
Hospital"
"%"	per cent.

2020 Annual Report

Corporate Profile

BOARD OF DIRECTORS

Executive Directors

Dr. Fang Yixin (Chairman and Chief Executive Officer) Dr. Mei Hong

Mr. Fang Haoze

Ms. Lin Xiaoying

Non-executive Directors

Ms. Jiao Yan

Mr. Yao Qiyong (retired with effect from June 19, 2020)

Independent Non-executive Directors

Dr. Wang Yong

Ms. Wong Sze Wing

Mr. Jiang Peixing

COMPANY SECRETARY

Mr. Chen Kun (Solicitor of HKSAR)

AUTHORISED

REPRESENTATIVES

Dr. Fang Yixin

Mr. Chen Kun

AUDIT COMMITTEE

Ms. Wong Sze Wing (Chairlady)

Ms. Jiao Yan

Dr. Wang Yong

REMUNERATION COMMITTEE

Mr. Jiang Peixing (Chairman)

Ms. Wong Sze Wing

Dr. Mei Hong

NOMINATION COMMITTEE

Dr. Fang Yixin (Chairman)

Dr. Wang Yong

Mr. Jiang Peixing

AUDITOR

PricewaterhouseCoopers

Certified Public Accountants Registered Public Interest Entity Auditor

22/F, Prince's Building

Central, Hong Kong

REGISTERED OFFICE

4th Floor, Harbour Place 103 South Church Street P.O. Box 10240

Grand Cayman KY1-1002 Cayman Islands

HEADQUARTERS AND PRINCIPAL PLACE OF BUSINESS IN THE PRC

20/F, Building 1

Donghang Binjiang Center

No. 277 Longlan Road

Xuhui District

Shanghai, PRC

PRINCIPAL PLACE OF BUSINESS IN HONG KONG

Unit 2413A, 24/F.

Tower One, Lippo Center

89 Queensway, Admiralty

Hong Kong

6	RICI HEALTHCARE HOLDINGS LIMITED

PRINCIPAL BANKERS

Standard Chartered Bank (Hong Kong) Limited

4-4A Des Voeux Road Central

Hong Kong

Shanghai Pudong Development Bank

Zhangjiang Hi-Tech Park Branch

151 Keyuan Road

Pudong New District

Shanghai

PRC

China Merchants Bank

Jinshajiang Road Branch

1759 Jinshajiang Road

Putuo District

Shanghai

PRC

Bank of Communications

Shanghai Zhang Jiang Sub-branch

560 Songtao Road

Pudong New District

Shanghai

PRC

Bank of Shanghai

Zhangjiang Sub-branch

No.665 Zhang Jiang Road

Pudong New District

Shanghai

PRC

HONG KONG LEGAL ADVISER

Wilson Sonsini Goodrich & Rosati

Suite 1509, 15/F, Jardine House

1 Connaught Place, Central

Hong Kong

Corporate Profile

PRINCIPAL SHARE REGISTRAR AND TRANSFER OFFICE

Harneys Services (Cayman) Limited 4th Floor, Harbour Place

103 South Church Street P.O. Box 10240

Grand Cayman KY1-1002 Cayman Islands

HONG KONG BRANCH SHARE REGISTRAR

Computershare Hong Kong Investor Services Limited

Shops 1712-1716, 17th Floor

Hopewell Center

183 Queen's Road East

Wanchai

Hong Kong

STOCK CODE AND BOARD LOT

Stock Code: 1526

Board Lot: 1,000

WEBSITE

www.rich-healthcare.com

2020 Annual Report

Milestones

	Year	Events

2000	•	We established our first operating entity, Nantong Rich Hospital
2002	•	Nantong Rich Hospital came into operation
2007	•	Our first medical examination center, Shanghai Rich, was established
2008	•	We expanded our medical examination business into Jiangsu Province by establishing Nanjing Rich
2010	•	We expanded into Guangdong Province by establishing Shenzhen Rich Medical Exam
2013	•	We expanded our medical examination business into Sichuan Province by establishing Chengdu Rich
2015	•	We expanded our medical examination business into Hubei Province, Anhui Province and Beijing by
			establishing Wuhan Rich, Hefei Rich and Beijing Rich, respectively
2016	•	Our Shares are listed on the Main Board of the Stock Exchange on October 6, 2016 with stock code:
			1526
2017	•	We expanded our medical examination business into Zhejiang Province by establishing Hangzhou
			Rich
		•	We have finished establishment of Changzhou Rich Hospital and Rici Shuixian
2018	•	We expanded our medical examination business into Fujian Province and Shandong Province by
			establishing Jinjiang Rich and Jinan Rich, respectively
		•	We expanded our general hospital business through the expansion project of Nantong Rich Hospital
			Phase II, which is still in progress
		•	Nantong Rich Hemodialysis Center commenced operation
2019	•	Rich Women's and Children's Hospital commenced operation
		•	With cooperation with a team of experts, Nantong Rich Hospital established "Rich Shanghai Cancer
			Center (瑞慈上海腫瘤中心)", introducing advanced medical technologies
		•	"XMEDIC International Health Examination", a high-end health examination brand officially landed, and
			the first XMEDIC commenced operation in Nanjing
2020	•	Nantong Rich Hospital was officially branded as Nantong University Affiliated Rich Hospital (南通大學
			附屬瑞慈醫院) and Nantong Rich Oncology Hospital (南通瑞慈腫瘤醫院)
			The second XMEDIC center commenced operation in Shanghai
8			RICI HEALTHCARE HOLDINGS LIMITED

Financial Highlights

Revenue for the year ended December 31, 2020 amounted to RMB1,925.2 million, representing an increase of 11.5% from revenue of RMB1,726.2 million for the year ended December 31, 2019.
Gross profit for the year ended December 31, 2020 amounted to RMB580.7 million, representing an increase of 20.0% from gross profit of RMB484.0 million for the year ended December 31, 2019.
Loss attributable to owners of the Company for the year ended December 31, 2020 amounted to RMB7.9 million, as compared to loss attributable to owners of the Company of RMB69.2 million for the year ended December 31, 2019.
Adjusted EBITDA for the year ended December 31, 2020 was RMB468.2 million, representing an increase of 15.7% from RMB404.7 million for the year ended December 31, 2019.

2020 Annual Report

Financial Summary

		For the Year Ended December 31,
	2016	2017	2018	2019	2020
	RMB'000	RMB'000	RMB'000	RMB'000	RMB'000
Revenue	935,383	1,080,149	1,373,936	1,726,206	1,925,190
Gross profit	354,131	401,154	386,203	483,982	580,664
Profit/(loss) before income tax	90,982	(108,914)	(175,747)	(168,248)	(108,823)
Income tax (expense)/credit	(36,593)	6,234	39,470	(2,250)	16,326
Profit/(loss) for the year	54,389	(102,680)	(136,277)	(170,498)	(92,497)
Profit/(loss) attributable to:
Owners of the Company	58,924	(62,166)	(53,836)	(69,163)	(7,876)
Non-Controlling interests	(4,535)	(40,514)	(82,441)	(101,335)	(84,621)
Adjusted EBITDANote	249,922	153,721	170,708	404,665	468,214


		As at December 31,
	2016	2017	2018	2019	2020
	RMB'000	RMB'000	RMB'000	RMB'000	RMB'000
Total assets	1,579,792	2,063,347	2,362,676	4,070,577	4,210,994
Total liabilities	629,037	1,133,293	1,655,614	3,507,641	3,878,554
Equity attributable to the owners of the
company	947,301	902,247	694,501	644,235	505,809

Note:

To supplement our consolidated financial statements which are presented in accordance with HKFRS, we also use adjusted EBITDA as an additional financial measure to evaluate our financial performance by eliminating the impact of items that we do not consider indicative of the performance of our business.

10	RICI HEALTHCARE HOLDINGS LIMITED

Chairman's Statement

To the Shareholders,

On behalf of the Board, I would like to present this annual report of the Group for the year ended December 31, 2020.

During 2020, the private healthcare industry continued to develop steadily under the guidance of national policies. In October 2020, the NHC issued the "Guiding Opinions on Accelerating the Development and Application of Electronic Licenses in the Health Care Industry" (關於加快推進衛生健康行業電子證照建設與應用的指導意見), which is expected to benefit private hospitals with the popularisation of electronic medical licenses in the future and make multi-site practition easier. In September 2020, the NHC issued the "Circular on Launching "Year of Private Hospital Management" Campaign" (關於開展"民營醫院管理年"活動的通知), which will bring private hospitals under the same level of supervision as public hospitals in terms of medical quality and hospital management, leading private hospitals to further eliminate the bad ones and keep the good ones and promote the healthy development of the private healthcare industry in the future.

As for the capital market, the pandemic has prompted an influx of capital into the healthcare industry, and more attention has been drawn to medical services industry. According to the report "China Equity Investment Market Review and Outlook 2020" issued by ZeroIPO Research Center, biotechnology and healthcare are the sectors with the highest number of investment cases in China's equity investment market in 2020, with investment amounts second only to the IT industry. In the secondary market, the healthcare sector is hugely favoured, both domestically and abroad. The strong capital support is expected to facilitate the good development of the healthcare industry.

Under such policy background and capital market environment, the Group continued to maintain its original vision, focus on its principal activities and achieve quality development. During 2020, the Group's three major business segments, on the one hand, persevered in enhancing medical technology, equipment and services to deliver on its promise of high-quality healthcare, and on the other hand, continued to improve internal management and made effective adjustments quickly during the pandemic period, successfully achieved growth in business volume for the year.

The year 2020 was a challenging but fruitful year for the general hospital business. The general hospital business was the most stable business segment among the Group's three major segments during the 2020 pandemic. Nantong Rich Hospital was officially branded as Nantong University Affiliated Rich Hospital (南通大學附屬瑞慈醫院) in May 2020 and Nantong Rich Oncology Hospital as its second title in September 2020, laying the foundation for the next phase of its business development. During 2020, Nantong Rich Hospital also took the lead in the establishment of the Medical Consortium of Nantong Economic and Technological Development Zone, and established a provincial/municipal level stroke center. At the same time, the hospital's second phase expansion project also progressed smoothly. While expanding its infrastructure, Nantong Rich Hospital is paying more attention to the training of medical talents and the improvement of service quality. In addition to the development of its business, Nantong Rich Hospital, as a regional Class III general hospital, has also taken up its social responsibility. In 2020, Nantong Rich Hospital had inpatient visits of 25,587 (2019: 26,352) and outpatient visits of 331,813 (2019: 366,821), boosting its revenue to RMB579.9 million.

2020 Annual Report

Chairman's Statement

For the medical examination business, the decline in revenue in the first half of the year due to the pandemic was quickly reversed in the second half of 2020. Moreover, the segment even achieved a modest increase in revenue during 2020, which was mainly attributable to the rapid recovery of the Chinese economy as well as the determination and execution of Rici people to address challenges through working together. During 2020, the medical examination business continued to promote its dual branding strategy with the mid-to-high-end brand "Rici Medical Examination" and the high-end brand "XMEDIC International Medical Examination". The second XMEDIC center was officially launched in Shanghai in the second quarter of 2020, and started to build recognition from high-net-worth consumers in Shanghai and surrounding markets. At the same time, the medical examination segment has implemented a key market strategy, exploring the Greater Bay Area and other key cities while continuing to holistically develop two key markets, Shanghai and Jiangsu. In 2020, the number of customers in the medical examination business reached 2.532 million, and the revenue reached RMB1,278,598 million, representing an increase of 9.2% as compared with 2019.

During 2020, our specialty hospital business, namely the Rici's OGP segment, achieved rapid growth. Currently, there are three OGP specialty hospitals under this segment, which are located respectively in Shanghai, Changzhou and Wuxi. Rici Shuixian officially launched the second phase of its maternity care center in the first half of 2020, and VIP outpatient vaccination services for adults and children in the second half of the year, while keeping introducing well-known and popular expert doctors. All of these efforts have laid the foundation for the future development of more services. Following Changzhou Rich Hospital, Wuxi Rich Obstetrics & Gynaecology Hospital was officially approved as a designated medical institution under the medical insurance scheme in 2020. In 2020, Changzhou Rich Hospital successfully passed the accreditation of the provincial level sterile supply center and started to explore the development of specialties. In 2020, the number of births under Rici's specialty hospital segment reached 799 (2019: 517), an increase of 54.5% compared to 2019, and the revenue reached RMB95.0 million, an increase of 72.5% compared with 2019.

Finally, on behalf of the Board, I would like to express my sincere gratitude to our shareholders, investors and partners for their trust and support during this remarkable year. When the pandemic hit, we at Rici joined the medical service team supporting Wuhan, and participated in the pandemic fight teams in Wuhan and other cities, shouldering the Group's responsibility for the community and fighting against the pandemic hand in hand. Thanks to the efforts of all of the staff at Rici, the Group was able to overcome the downturn in business due to the pandemic and achieve hard-earned growth in all segments. Rici will continue to build on healthcare services as its foundation and is certain to thrive over time. In the future, the Rici people will continue to uphold our original vision, create value for our shareholders and provide higher quality medical services to the people of China.

Fang Yixin

Chairman

March 30, 2021

12	RICI HEALTHCARE HOLDINGS LIMITED

Profiles of Directors and

Senior Management

Below are the brief profiles of the current Directors and senior management of the Group.

DIRECTORS

The Board currently consists of eight Directors, comprised of four executive Directors, one non-executive Director and three independent non-executive Directors. The following table sets forth information regarding the Directors.

			Date of Appointment
Name	Age	Position	as Director
Executive Directors
Dr. Fang Yixin (方宜新)	56	Chairman, executive Director and	February 3, 2016
		chief executive officer
Dr. Mei Hong (梅紅)	56	Executive Director	July 11, 2014
Mr. Fang Haoze (方浩澤)	32	Executive Director	June 24, 2019
Ms. Lin Xiaoying (林曉穎)	43	Executive Director	June 24, 2019
Non-executive Director
Ms. Jiao Yan (焦焱)	43	Non-executive Director	February 3, 2015
Independent non-executive Directors
Dr. Wang Yong (王勇)	55	Independent non-executive Director	June 23, 2016
Ms. Wong Sze Wing (黃斯穎)	42	Independent non-executive Director	June 23, 2016
Mr. Jiang Peixing (姜培興)	53	Independent non-executive Director	June 6, 2017

Executive Directors

Dr. Fang Yixin (方宜新), aged 56, is the chairman of the Board, an executive Director and the chief executive officer of our Company. Dr. Fang is responsible for managing the overall business operations and strategic planning of our Group. Dr. Fang has over 26 years of experience in the healthcare industry and is a founder of our Group. Prior to establishing our Group, Dr. Fang served as a medical doctor in the Affiliated Hospital of Nantong University (南通大學附屬醫院) from September 1986 to July 1992. In 1992, Dr. Fang first ventured into the healthcare industry and set up Jiangsu Tayoi Cosmetics Co., Ltd. (江蘇東洋之花化妝品股份有限公司) and has been its director since then. Dr. Fang established the first company of our Group, Nantong Rich Hospital, in August 2000. He has also served as an executive director of the majority of our Group companies. Dr. Fang is not and has not been a director of any other listed company in Hong Kong or overseas in the past three years. Dr. Fang graduated from Yangzhou College of Medicine (揚州醫學院) (currently known as Yangzhou University School of Medicine) majoring in medicine in August 1986 and an EMBA from Tsinghua University in July 2006, and obtained a doctor degree of business administration from University of Minnesota in 2018.

2020 Annual Report

Profiles of Directors and Senior Management

Dr. Mei Hong (梅紅), aged 56, is an executive Director. Dr. Mei is responsible for logistics management, information management engineering management and internal audit of our Group. Prior to establishing our Group, Dr. Mei served as a medical doctor in Nantong Women and Children Health Clinic (南通市婦幼保健院) from September 1986 to December 1999. Dr. Mei, as a co-founder of our Group, has been a director of Nantong Rich Hospital since its inception and as director of the majority of our Group companies. Dr. Mei is not and has not been a director of any other listed company in Hong Kong or overseas in the past three years. Dr. Mei graduated from Yangzhou College of Medicine (揚州醫學院) (currently known as Yangzhou University School of Medicine) majoring in clinical medicine in August 1986.

Mr. Fang Haoze (方浩澤), aged 32, is an executive Director, executive vice president of the Company and the general manager of the medical examination business department of the Company. Mr. Fang is responsible for the overall operation and management of the medical examination business department and the brand management. Mr. Fang received a bachelor's degree in economics from Penn State University in 2014 and joined the Group in August 2014. Mr. Fang is the son of Dr. Fang, the chairman, an executive Director and chief executive officer of the Company, and Dr. Mei, an executive Director.

Ms. Lin Xiaoying (林曉穎), aged 43, is an executive Director, vice president, chief operating officer, director of the president office and the general manager of human resources center of the Company, and is responsible for the financial and legal affairs of the Group. Ms. Lin joined the Group in July 2017 as the assistant to president, general manager of human resources center and director of the president office, and was appointed as a vice president of the Company in January 2018. Prior to joining the Group, Ms. Lin served in several positions in ZTE Corporation (中興通訊股份有限公司, a company listed on The Stock Exchange of Hong Kong Limited (stock code: 0763) and Shenzhen Stock Exchange (stock code: 000063)), including the chief of operation management department of the handset division, the chief of commercial department and the chief commercial officer of the international sales division from July 1999 to July 2017. Ms. Lin received a bachelor's degree in international economics from Renmin University of China (中國人民大學) in 1999 and a master's degree in business administration from University of Management and Technology in the United States of America in June 2006.

Non-executive Director

Ms. Jiao Yan (焦焱), aged 43, is the non-executive Director. Ms. Jiao is responsible for overseeing the corporate development and strategic planning of our Group. Prior to joining our Group, Ms. Jiao was an analyst of Credit Suisse First Boston, LLC from July 1999 to June 2001, and subsequently a corporate strategy and development associate of Borden Chemical, Inc. from August 2001 to July 2002. Between September 2004 and November 2005, Ms. Jiao was a consultant of the Boston Consulting Group. Ms. Jiao joined Baring Private Equity Asia Limited in November 2005 and is currently holding a position as a managing director. Ms. Jiao is not and has not been a director of any other listed company in Hong Kong or overseas in the past three years. Ms. Jiao received a bachelor of science in economics and a bachelor of science in chemical engineering, from Massachusetts Institute of Technology in June 1999 and subsequently an MBA from the Wharton School of the University of Pennsylvania in May 2004.

14	RICI HEALTHCARE HOLDINGS LIMITED

Profiles of Directors and Senior Management

Independent Non-executive Directors

Dr. Wang Yong (王勇), aged 55, is an independent non-executive Director. Dr. Wang is responsible for supervising and providing independent judgment to our Board. Dr. Wang has extensive experience in EMBA education research, particularly in the area of innovation and business growth management. Dr. Wang served as the project director of the Institute of Mechanical and Electrical, and the manager of Water and Power Equipment Plant and Exhibition Model Plant of China Institute of Water Resources and Hydropower Research (中國水利水電科學研究院) in charge of scientific research and operation management from July 1988 to July 2002. Since August 2002, Dr. Wang has been the executive deputy director, executive director and director of Tsinghua University School of Economics and Management EMBA Center (清華大學經濟管理學院 EMBA 教育中心) in succession. Dr. Wang served as an independent director of Shenzhen Clou Electronics Co., Ltd. (深圳市科陸電子科技股份有限公司) and Ocean's King Lighting Science and Technology Co., Ltd. (海洋王照明科技股份有限公司), both of which are listed on the Shenzhen Stock Exchange, from November 2009 to February 2013, and from August 2011 to August 2014, respectively. Save as disclosed above, Dr. Wang is not and has not been a director of any other listed company in Hong Kong or overseas in the past three years. Dr. Wang received a bachelor of science degree in hydraulic machinery from Huazhong University of Science and Technology (華中科技大學) in July 1988, a master of business administration and a doctor of business administration degree from Tsinghua University in January 2001 and January 2009, respectively.

Ms. Wong Sze Wing (黃斯穎), aged 42, is an independent non-executive Director. Ms. Wong is responsible for supervising and providing independent judgment to our Board. Prior to joining our Group, Ms. Wong was an associate and later an audit manager of PricewaterhouseCoopers from September 2001 to December 2006. From January 2007 to April 2008, Ms. Wong was the chief finance director of Orange Sky Golden Harvest Entertainment (Holdings) Limited (橙天嘉禾娛樂(集團)有限公司) (stock code: 1132), a company listed on the Stock Exchange, and has been its independent non-executive director since April 2010, responsible for advising on strategic and financial planning in the China market. Ms. Wong was also previously the chief finance director of Avex Music and Imaging Production (China) Co., Ltd. (艾迴音樂影像製作(中國)有限公司), a joint venture company under Orange Sky Entertainment (International) Holdings Limited, from January 2007 to April 2008. Ms. Wong was the deputy chief financial officer of Yingde Gases Company Limited (盈德氣體集團有限公司) (stock code: 2168), a company listed on the Stock Exchange since joining in July 2008, and has been the chief finance officer and joint company secretary since February 2009, responsible for its investor relations, financial, investment and internal control. Ms. Wong Sze Wing was appointed as an independent director of Wangsu Science & Technology Co., Ltd. (網宿科技股份有限公司), a company listed on Shenzhen Stock Exchange (stock code: 300017) in April 2017. Save as disclosed above, Ms. Wong is not and has not been a director of any other listed company in Hong Kong or overseas in the past three years. Ms. Wong received a bachelor's degree in business administration from the University of Hong Kong in November 2001 and an EMBA from the China Europe International Business School (中歐國際商學院) in July 2012. Ms. Wong has been a certified public accountant of the Hong Kong Institute of Certified Public Accountants since February 2005.

2020 Annual Report

Profiles of Directors and Senior Management

Mr. Jiang Peixing (姜培興), aged 53, is an independent non-executive Director. Mr. Jiang is responsible for supervising and providing independent judgment to our Board. Prior to joining our Group, Mr. Jiang has been the chairman of the board of directors of Huade Capital Management Group Co., Ltd. (華德資本管理集團有限公司) since May 2017, an independent non- executive director of Hebei Tangshan Rural Commercial Bank Co., Ltd. (河北唐山農村商業銀行股份有限公司) since 2015 and an independent non-executive director of Sinvo Fund Management Co., Ltd. (新沃基金管理有限公司) since 2017. Mr. Jiang has extensive experience in corporate finance. Mr. Jiang served as the chief executive officer of Zhong De Securities Company Limited (中德證券有限責任公司) from August 2011 to April 2017 and the managing director thereof from June 2011 to April 2017. Mr. Jiang served as the deputy chief executive officer of CCB International (Holdings) Limited (建銀國

際(控股)有限公司) from July 2009 to June 2011. Mr. Jiang served as the general manager of the investment management department of the head office of China Merchant Bank Co., Ltd. (招商銀行股份有限公司), a company listed on the Shanghai Stock Exchange (stock code: 600035) and the Main Board of the Stock Exchange (stock code: 3968), from September 2008 to July 2009, and the general manager of the investment bank department thereof from 2006 to 2007. Mr. Jiang acted as the president of CMB International Capital Corporation Limited (招銀國際金融有限公司) from January 2005 to September 2008. Mr. Jiang served as an assistant of the president of China Galaxy Securities Co., Ltd. (中國銀河證券有限責任公司), a company listed on the Shanghai Stock Exchange (stock code: 601881) and the Main Board of the Stock Exchange (stock code: 6881), from July 2000 to January 2005, and the general manager of its Shanghai headquarters from October 2002 to April 2004. Mr. Jiang acted as the general manager of Shenzhen Yangguang Fund Management Co., Ltd. (深圳陽光基金管理有限公司) from March 1996 to February 2000. Mr. Jiang was a deputy general manager of futures business department of PICC Trust Investment Corporation (中國人保信託投資公司) from January 1994 to March 1996. Mr. Jiang received a bachelor's degree in information system management from Tsinghua University (清華大學) in July 1991, a master's degree in business administration from Tsinghua University in July 1999 and a master's degree in public administration from Columbia University in June 2002, and obtained a doctor degree of business administration from University of Minnesota in 2018.

Senior Management

Dr. Fang Yixin (方宜新), please refer to the section headed "- Executive Directors" for biographical details.

Mr. Fang Haoze (方浩澤), please refer to the section headed "- Executive Directors" for biographical details.

Ms. Lin Xiaoying (林曉穎), please refer to the section headed "- Executive Directors" for biographical details.

Dr. Zhao Lin (趙林), aged 66, is a vice president of our Company and the general manager of hospital business department. Dr. Zhao is responsible for operation and management of general hospitals, specialty hospitals and elderly care business of our Group. Dr. Zhao acted as a vice president of our Group and general manager of hospital construction business department from June 2017 to December 2017, the vice president of our Group and general manager of hospital business department from December 2014 to June 2017, and a president of Nantong Rich Hospital from April 2000 to June 2017. Prior to joining our Group, Dr. Zhao was the director of traumatology department and emergency surgery department of the hospital affiliated to Nantong Medical School (南通醫學院) from December 1982 to April 2000. Dr. Zhao is not and has not been a director of any listed company in Hong Kong or overseas in the past three years. Dr. Zhao received a bachelor's degree in medicine and a master's degree in surgery from Nantong Medical School in 1982 and 1988, respectively, and a doctoral degree in business administration from American University in California (加利福利亞美洲大學) in September 2010.

16	RICI HEALTHCARE HOLDINGS LIMITED

Management

Discussion and Analysis

BUSINESS OVERVIEW AND STRATEGIC OUTLOOK

Industry Overview

In 2020, a pandemic brought the healthcare service industry back into the spotlight. Many healthcare practitioners on the frontline of the fight against the pandemic made a significant contribution to its effective control. Similar to many other sectors, the healthcare service sector as a whole was inevitably hit in the first half of the year, but revived in its second half as the pandemic mitigated.

With respect to general hospital business, the pandemic severely impacted the day-to-day operations of many hospitals during the first half of the year. According to the official website of the NHC, by the end of November 2020, there were 35,000 hospitals in the country, including 12,000 public hospitals and 23,000 private hospitals, a decrease of 6 public hospitals and an increase of 1,146 private hospitals compared to those as at the end of November 2019. In the first 11 months of 2020, there were 2.98 billion hospital visits nationwide, representing a year-on-year decrease of 12.5%, of which 2.51 billion took place in public hospitals, representing a year-on-year decrease of 13.0% and 470 million in private hospitals, representing a year-on-year decrease of 9.4%.

2020 was a tough year for the medical examination industry. In the first half of 2020, due to the sudden outbreak of the pandemic, the number of onsite medical examination visits inevitably declined. The second half of a year is usually traditional peak season for medical examination, and as the impacts of the pandemic gradually subsided and Chinese consumers became more health conscious, the lagging demand was gradually released and the volume of medical examination picked up rapidly, with some centers even experiencing a shortage of capacity at peak times.

With respect to gynecology and pediatric specialty business, the pandemic did not dampen demand for high-end gynecology and pediatric services and the demand is still growing in the Yangtze River Delta region. Although the birth rate will still tend to decline in the short future, the new generation of consumers is increasingly demanding a better service experience, while there is still a shortage of supply in terms of high-end specialty gynecology and pediatric products in the market. It is expected that there are still room for the consumer demand for private high-end specialty gynecology and pediatric products to grow.

2020 Annual Report

Management Discussion and Analysis

General Hospital Business

Nantong Rich Hospital is the only high-level general hospital in the Nantong Economic and Technological Development Zone (currently Class III Grade B general hospital). It was celebrating its 20th anniversary in 2020. On the occasion of the outbreak of the pandemic, the hospital fulfilled its social responsibility to control the local pandemic and sent three medical staff to join the second batch of medical team from Nantong for supporting Huangshi, Hubei. The hospital was officially branded as Nantong University Affiliated Rich Hospital in May 2020 and Nantong Rich Oncology Hospital as its second name in September 2020. In addition, in 2020, the hospital also took the lead in setting up a medical consortium for the Nantong Economic and Technological Development District, and built a provincial and municipal-level stroke center. Nantong Rich Hospital expansion II project is progressing smoothly. As of December 31, 2020, the main structure of the Rehabilitation Center (now renamed as OGP Building of Nantong Rich Hospital) has passed acceptance and is expected to commence operation in October 2021. The Integrated Ward Building and the Storage and Event Center have been structurally closed and are expected to commence operation in July 2022. While expanding its infrastructure, the hospital is paying more attention to the training of medical talents and the improvement of service quality. The hospital attaches great importance to the development of clinical scientific research capabilities. In 2020, the hospital vigorously carried out research for new technologies at national, provincial and municipal levels, including 2 new projects and 42 ongoing research subjects. The hospital also places emphasis on quality control. In 2020, the quality of anti-tumour drug testing data from the hospital was among the highest in the country and the hospital has won awards for its pharmacy administration. As at December 31, 2020, the hospital had 964 staff on duty, including 293 doctors, 113 medical technicians and 433 nurses. At present, the hospital has one Construction Project for National Key Clinical Specialty (pediatric surgery) (國家臨床重點專科建設項目（小兒外科)), one Provincial Key Clinical Specialty under Construction (pediatrics) (省級重點建設專科（兒科)), five Municipal Key Clinical Disciplines Specialties (市級臨床重點專科) (including pediatrics, orthopedics, cardio-thoracic surgery, cardiovascular medicine, nursing (pediatrics)) and two Municipal Key Clinical Specialty under Construction (general surgery and ophthalmology) (市級臨床重點建設專科), and one Municipal Key Discipline under Construction (pediatrics general medicine) (市級重點建設學科（小兒內科)).

Nantong Rich Hospital was negatively influenced to a certain extent by the COVID-19 pandemic in the first half of the year, but as the pandemic subsided in the second half of the year, the hospital made positive adjustments to strengthen quality control, develop its departments with unique strength and optimise its business structure. Therefore, Nantong Rich Hospital has achieved revenue growth despite the decline in outpatient and inpatient visits. In 2020, Nantong Rich Hospital provided services for a total of 331,813 outpatient visits (2019: 366,821), representing a year-on-year decrease of 9.5% and 25,587 inpatient visits (2019: 26,352), representing a year-on-year decrease of 2.9%.

The Group established Nantong Meidi and Nantong Rich Hemodialysis Center, leveraging on the medical resources of Nantong Rich Hospital for synergy. As of December 31, 2020, the Nantong Meidi served 103 elderly people (2019: 106) with an occupancy rate of 97.2% (2019: 100%). The occupancy rate decreased by 2.9% in 2020 compared to last year as the Nantong Meidi implemented the pandemic prevention requirements for fully closed management, by discharging but not admitting elderly people during the pandemic. In 2020, Nantong Rich Hemodialysis Center provided dialysis treatment 16,601 times (2019: 13,469), representing an increase of 23.3% compared to last year.

18	RICI HEALTHCARE HOLDINGS LIMITED

Management Discussion and Analysis

Medical Examination Business

The medical examination business is the Group's largest revenue-generating business. In 2020, the medical examination segment continued to promote its dual branding strategy with the mid-to-high-end brand "Rich Medical Examination" and the high-end brand "XMEDIC International Medical Examination". The second XMEDIC center was officially opened in Shanghai in the second quarter of 2020. At the same time, the medical examination segment has implemented a key market strategy, exploring the Greater Bay Area and other cities in between while continuing to holistically develop two key markets, Shanghai and Jiangsu.

As of December 31, 2020, the Group had 61 medical examination centers in China (2019: 59), representing a year-on-year

growth of 3.4%, among which 57 centers were in operation (2019: 51), representing a year-on-year growth of 11.8%, covering 28 cities. Their presence was mainly concentrated on first tier, new first tier and second tier cities.

Although the pandemic had a negative impact on the medical examination business, especially in the first half of the year when some centers were unable to operate normally in accordance with the local pandemic prevention policy thus the volume of medical examinations decreasing, the volume of medical examinations rebounded quickly in the second half of the year and therefore the medical examination business still achieved a modest growth in 2020. In 2020, the total number of visits of customers with respect to our medical examination business was 2,531,668 (2019: 2,306,195), representing a year-on-year increase of 9.8%; where corporate clients comprise the main customer base of the Group for medical examination services, accounting for approximately 77.6% in terms of visits. In 2020, the numbers of corporate and individual customers were 1,964,457 and 567,211 respectively (2019: 1,891,616 and 414,579 respectively), an increase of 3.9% and 36.8% respectively. Per capita spending was RMB504 (2019: RMB504) in 2020.

Specialty hospital business

Rici's OGP specialty hospital segment has established a strategic cooperation with Children's Hospital of Fudan University (復旦大學附屬兒科醫院), Obstetrics and Gynecology Hospital of Fudan University (復旦大學附屬婦產科醫院) and Children's Hospital of Shanghai Jiao Tong University (上海交通大學附屬兒童醫院). Currently, there are three OGP specialty hospitals under this segment, which are located respectively in Changzhou, Shanghai and Wuxi. All of these three hospitals are aimed at high-net-worth individuals and are specialized in OGP as well as medical-graded maternity care, which are rare in the market.

During 2020, the sterile supply center of Changzhou Rich Hospital successfully passed the acceptance and started the operation and development of specialty departments. Rici Shuixian officially launched the second phase of its maternity care center in the first half of 2020, and VIP outpatient vaccination services for adults and children in the second half of the year, while keeping introducing well known and popular expert doctors. All of these efforts have laid the foundation for the future development of more services. Wuxi Rich Obstetrics & Gynecology Hospital has partnered with Wuxi branch of People's Insurance of China (中國人民財產保險有限公司無錫分公司) to launch a customized high-end medical insurance product, "Wuxi Rich Baby", and was officially approved as a designated medical institution under the medical insurance scheme of Wuxi City in the second half of 2020.

2020 Annual Report

Management Discussion and Analysis

During the pandemic, our three OGP hospitals strengthened their prevention and control measures, providing a more optimized and safer medical environment for high-net-worth individuals. All the three OGP hospitals achieved varying degrees of growth in terms of outpatient visits and inpatient stays in 2020. Changzhou Rich Hospital received 23,728 outpatient visits (2019: 22,265) in total in 2020, representing a year-on-year increase of 6.6%. As a consequence of the pandemic, the pediatric department, one of the core departments of Changzhou Rich Hospital, was unable to operate normally, resulting in a drop to 583 inpatient stays (2019: 674) in 2020, representing a decrease of 13.5% compared to last year. Its postpartum care center had 530 admissions (2019: 508), representing an increase of 4.3% compared to last year. In total, Rici Shuixian received 13,706 outpatient visits (2019: 5,887) in 2020, representing an increase of 132.8% and 282 inpatient stays (2019: 174), representing an increase of 62.1%. Its maternity care center had 137 admissions (2019: 105), representing an increase of 30.5%. Wuxi Rich Obstetrics & Gynecology Hospital, who has the shortest operating duration among our three OGP hospitals, received 5,508 outpatient visits (2019: 950) in 2020, representing an increase of 479.8% compared to last year and 168 inpatient stays (2019: 8), representing an increase of 2,000.0% compared to last year. Its postpartum care center had 248 admissions (2019: 87), an increase of 185.1% compared to last year.

Prospects

In the post-pandemic era, private hospitals will meet more social expectations and take more social responsibilities. Subsequently, Nantong Rich Hospital will develop under the theme of "Building, Development and Accumulation", by optimising its structure, strengthening its implication, enhancing its core competitiveness, increasing its popularity and talent pool to ensure the success of the second expansion project of Nantong Rich Hospital. The hospital will take vascular intervention (large blood vessels), neurovascular center, traditional Chinese care rehabilitation and atrial fibrillation center as new growth points, strengthening the penetration of large-scale equipment, broadening the scope of their application, adjusting its revenue structure, improving its clinical support and promoting the rapid growth of key supporting departments and partner departments. The long-term goal of Nantong Rich Hospital is to become a general hospital with high technical expertise and high reputation in the region. With the recent launch of the Hu-Su-Tong Connection High Speed Rail (滬蘇通高鐵) and the coming construction of the new Nantong Airport, the hospital is expected to capture the benefits arising from the enhanced geographical advantage of the region, while further strengthening its technical capabilities. The second expansion project of Nantong Rich Hospital is now well in progress. Upon its completion, the number of beds is expected to increase significantly, addressing the current shortage.

Although the medical examination industry in China has been developed for many years, the current coverage of medical examinations in China is still lower than that in developed markets such as Japan, and the average per capita price of medical examinations still has more room for growth compared to developed markets such as Japan. Against this backdrop, the Group's medical examination chain segment will continue to implement the dual-brand strategy with the mid-to-high-end brand "Rich Medical Examination" and the high-end brand "XMEDIC International Medical Examination" to meet the demand of Chinese consumers for more accurate and personalised medical examination services. On the other hand, we will continue to develop the Shanghai and Jiangsu markets, explore Zhejiang and Greater Bay Area markets, and strategically establish our presence in other key cities.

20	RICI HEALTHCARE HOLDINGS LIMITED

Management Discussion and Analysis

The Yangtze River Delta region is the core region for the Group's business development, and the choice to place the hospitals under the OGP segment in the Yangtze River Delta is made with a view to leverage the Group's brand strength and accumulated resource in the region. The goal of Rici's OGP specialty hospital segment is to become a leading brand of private OGP hospitals in the Yangtze River Delta region. In the short term, Rici's OGP segment will implement the development strategy of "Strong General Hospitals with Excellent Specialty Departments" and further strengthen the brand, reputation and influence of the hospital by expanding the front, middle and back end of the obstetrics business and meanwhile developing new general-purpose technologies and projects. The long-term goal of Rici Shuixian is to serve as the flagship hospital of Rici's OGP specialty hospital segment and to become a service platform that gathers renowned doctors in Shanghai; Changzhou Rich Hospital will strive to become a specialty hospital with local characteristics; and Wuxi Rich Obstetrics & Gynecology Hospital will strive to build up its brand influence in the region as soon as possible.

FINANCIAL REVIEW

Revenue

We derive revenue mainly from our general hospital business and medical examination business. The following table sets forth the components of our revenue by operating segments for the periods indicated:

	Year ended December 31,
	2020	2019	Change (%)
	(RMB'000)	(RMB'000)
General hospital business	579,927(1)	522,384(1)	11.0%
Medical examination business	1,278,598(2)	1,170,496(2)	9.2%
Specialty hospital business	94,959	55,041	72.5%
Inter-segment	(28,294)	(21,715)	30.3%

Total	1,925,190	1,726,206	11.5%

Notes:

Included the revenue from hemodialysis business.
Included the revenue from embedded clinic business in medical examination centers.

Our revenue increased by 11.5% from RMB1,726.2 million in 2019 to RMB1,925.2 million in 2020.

Revenue from the general hospital business in 2020 amounted to RMB551.6 million, representing an increase of 10.1% from the revenue of RMB501.2 million in 2019, excluding the inter-segment revenue of RMB28.3 million and RMB21.2 million in 2020 and 2019, respectively. Such increase was mainly attributable to the increase in the revenue per inpatient by 15.9%, leading to an increase of the revenue from inpatients by RMB48.9 million, and meanwhile, the increase in the revenue per outpatient by 10.6%, leading to an increase in outpatient revenue of RMB1.5 million.

2020 Annual Report

Management Discussion and Analysis

Revenue from the medical examination business for 2020 amounted to RMB1,278.6 million, representing an increase of 9.3% from RMB1,170.0 million for 2019, excluding the inter-segment revenue of RMB0.5 million for 2019, while there is no inter-segment revenue for the year ended December 31, 2020.

Revenue from the specialty hospital business for 2020 amounted to RMB95.0 million (2019: RMB55.0 million). For 2020, the numbers of outpatients and inpatients served by our specialty hospital services were 42,942 and 1,948, respectively. Revenue generated from outpatient and inpatient visits were RMB29.0 million and RMB66.0 million, respectively.

Cost of sales

Cost of sales primarily consists of pharmaceutical and medical consumables costs, staff costs and depreciation and amortization. The following table sets forth a breakdown of cost of sales by operating segments for the years indicated:

	Year ended December 31,
	2020	2019	Change (%)
	(RMB'000)	(RMB'000)
General hospital business	415,322(1)	370,143(1)	12.2%
Medical examination business	772,780(2)	723,044(2)	6.9%
Specialty hospital business	184,718	167,978	10.0%
Inter-segment	(28,294)	(18,941)	49.4%

Total	1,344,526	1,242,224	8.2%

Notes:

Included the cost of sales of hemodialysis business.
Included the cost of sales of embedded clinic business in medical examination centers.

Our cost of sales increased by 8.2% from RMB1,242.2 million in 2019 to RMB1,344.5 million in 2020.

Cost of sales of the general hospital business during 2020 amounted to RMB415.3 million, representing an increase of 12.2% from RMB370.1 million in 2019. The increase was mainly attributable to the increase in the cost caused by the expansion of revenue scale in 2020.

Cost of sales of our medical examination business in 2020 amounted to RMB772.8 million, representing an increase of 6.9% from RMB723.0 million in 2019, mainly attributable to the increase in the cost caused by expansion of revenue scale in 2020. However, fixed costs such as depreciation and amortization were relatively stable, so the growth rate of costs was lower than that of revenue.

Cost of sales of our specialty hospital business in 2020 amounted to RMB184.7 million, representing an increase of 10.0% from RMB168.0 million in 2019. This was mainly due to that (i) with the growth of revenue scale, variable costs, such as pharmaceutical costs and medical consumables costs, have increased; and (ii) specialty hospitals were at the early stage of operation, and their business volumes were not yet saturated, while fixed costs, such as staff costs, depreciation and amortization, were relatively stable. Therefore, the growth rate of costs was much lower than that of revenue.

22	RICI HEALTHCARE HOLDINGS LIMITED

Management Discussion and Analysis

Gross profit

Our gross profit increased from RMB484.0 million in 2019 to RMB580.7 million in 2020. Gross profit margin increased by 2.2 percentage points from 28.0% in 2019 to 30.2% in 2020.

Distribution costs and selling expenses

Our distribution costs and selling expenses amounted to RMB226.3 million in 2020, as compared to RMB237.6 million in 2019. The decline was mainly due to the slight decrease of advertising expenses as affected by the pandemic.

Administrative expenses

Our administrative expenses amounted to RMB294.2 million in 2020, as compared to RMB305.4 million in 2019.

Other income

Our other income, which mainly represented government subsidies, rental income and income from short-term wealth investment product, amounted to RMB23.3 million in 2020 (2019: RMB30.3 million).

Other losses

Our other losses in 2020 amounted to RMB9.1 million, as compared to the other loss of RMB0.8 million in 2019. The other losses mainly represented the losses from disposal of fixed assets and the closure of Yantai Rich Ruigao Clinic Co., Ltd., a subsidiary of the Group in 2020, for which a provision of RMB4.8 million was made as liquidated damages for lease of property.

Finance costs - net

We had net finance costs of RMB185.4 million in 2020, as compared to net finance costs of RMB141.0 million in 2019. The interest expenses amounted to RMB167.6 million in 2020, representing an increase of RMB8.2 million from RMB159.4 million in 2019. The net exchange losses amounted to RMB26.2 million in 2020, representing an increase of RMB32.6 million from RMB6.4 million net exchange gains in 2019.

Share of results of investments accounted for using equity method

In 2020, the Group recognized a share of profit of RMB0.8 million from investments accounted for using equity method (2019: RMB0.2 million) in its consolidated results, mainly due to the operating profit of RMB0.7 million of Nantong Meidi, a subsidiary of a joint venture of the Group, whose business operation has been stable since its establishment in the second half of 2014, and the operating profit of RMB0.1 million of Neijiang Rich Ruichuan Clinic Co., Ltd., an associate of the Group primarily engaged in providing medical examination services.

Income tax credit/expense

For 2020, income tax credit amounted to RMB16.3 million (2019: income tax expense of RMB2.3 million). Such decrease in income tax was mainly due to the increase in deferred income tax assets which related to temporary differences and tax losses as at December 31, 2020 and the Group's assessment of future taxable profits.

Loss for the year

For the foregoing reasons, in 2020, we recorded net loss of RMB92.5 million (2019: net loss of RMB170.5 million), mainly due to the fact that losses decreased as revenues from various segments increased by different degrees.

2020 Annual Report

Management Discussion and Analysis

Adjusted EBITDA

To supplement our consolidated financial statements which are presented in accordance with HKFRSs, we adopted adjusted EBITDA as an additional financial measure. We defined adjusted EBITDA as loss/profit for the year before certain expenses and depreciation and amortization as set out in the table below. Adjusted EBITDA is not an alternative to (i) loss/profit before income tax or loss/profit for the year (as determined in accordance with HKFRSs) as a measure of our operating performance; (ii) cash flows from operating, investing and financing activities as a measure of our ability to meet our cash needs; or (iii) any other measures of performance or liquidity. The following table reconciles our loss for the years under HKFRSs to our definition of adjusted EBITDA for the years indicated.

	Year ended December 31,
	2020	2019
	(RMB'000)	(RMB'000)
Adjusted EBITDA calculation
Loss for the period	(92,497)	(170,498)
Adjusted for:
Income tax (credit)/expense	(16,326)	2,250
Finance costs - net	185,378	141,008
Depreciation and amortization	371,540	354,922
Pre-opening expenses and EBITDA
loss of soft-opening(1)	2,768	51,349
Share option expenses	17,351	25,634

Adjusted EBITDA	468,214	404,665

Adjusted EBITDA margin (2)	24.3%	23.4%

Notes:

Primarily represents (a) the pre-opening expenses, such as staff costs and rental expenses, incurred in the applicable period in connection with the construction of medical examination centers; and (b) EBITDA loss of newly-operated medical examination centers and a specialty hospital incurred during the period from which they commence operation.
The calculation of adjusted EBITDA margin is based on adjusted EBITDA divided by revenue and multiplied by 100%.

The adjusted EBITDA amounted to RMB468.2 million in 2020, representing an increase of 15.7% from RMB404.7 million in 2019, mainly due to the increase of profits as a result of the enlarged scale of revenue for the year.

24	RICI HEALTHCARE HOLDINGS LIMITED

Management Discussion and Analysis

FINANCIAL POSITION

Property and equipment

Property and equipment primarily consist of buildings, medical equipments, general equipments, leasehold improvements and construction in progress. As at December 31, 2020, the property and equipment of the Group amounted to RMB1,242.7 million, representing an increase of RMB82.2 million as compared to RMB1,160.5 million as at December 31, 2019. The increase of property and equipment was primarily due to the second expansion project of Nantong Rich Hospital, and the acquisition of equipments as well as the renovation for new medical examination centers.

Trade receivables

As at December 31, 2020, the trade receivables of the Group were RMB282.7 million, representing a decrease of RMB7.3 million as compared to RMB290.0 million as at December 31, 2019.

Net current liabilities

As at December 31, 2020, the Group's current liabilities exceeded its current assets by RMB737.7 million (as at December 31, 2019: the Group's current liabilities exceeded its current assets by RMB657.5 million). The increase of the Group's net current liabilities was mainly due to (i) a significant increase in prepayments received from sales of medical examination cards as at December 31, 2020; and (ii) the increase in borrowings as at December 31, 2020.

Liquidity and capital resources

As at December 31, 2020, the Group had cash and cash equivalents of RMB561.8 million (as at December 31, 2019: RMB329.6 million), with available unused bank facilities of RMB162.4 million (as at December 31, 2019: RMB558.1 million). As at December 31, 2020, the Group had outstanding borrowings of RMB1,285.2 million (as at December 31, 2019: RMB922.8 million), including non-current portion of long-term borrowings of RMB546.3 million (as at December 31, 2019: RMB259.3 million). Based on the Group's past experience and good credit standing, the Directors are confident that such bank facilities could be renewed or extended for at least another twelve months upon maturity. We adopt prudent treasury policies in cash and financial management to achieve better risk control, manage financial resources efficiently and minimise the cost of funds. For the currency in which cash and cash equivalents are denominated, please refer to Note 16 to the consolidated financial information.

2020 Annual Report

Management Discussion and Analysis

Significant investments, material acquisitions and material disposals

For the year ended December 31, 2020, save as disclosed below, the Group did not have any significant investment, material acquisition or material disposal:

On July 17, 2020, Shanghai XDWYS Asset Management Co., Ltd. (上海新東吳優勝資產管理有限公司) (the "Vendor"), a company incorporated under the laws of the PRC on February 25, 2013 with limited liability and a licensed financial institution under the supervision of China Securities Regulatory Commission, entered into equity transfer agreements with Shanghai Rich Medical Investment Group Co., Ltd. (上海瑞慈醫療投資集團有限公司) (the "Purchaser"), an indirect wholly-owned subsidiary of the Company, in respect of transfer of 30% equity interest in each of Guangzhou Rich Zhongxin Clinic Co., Ltd. (廣州瑞慈中信門診部有限公司), Suzhou Rich Ruihe Clinic Co., Ltd. (蘇州瑞慈瑞禾門診部有限公司), Nanjing Rich Ruixiang Clinic Co., Ltd. (南京瑞慈瑞祥門診部有限公司), Nantong Rich Ruifeng Clinic Co., Ltd. (南通瑞慈瑞峰健康體檢中心有限公司), Wuxi Rich Ruixi Clinic Co., Ltd. (無錫瑞慈瑞錫門診部有限公司), Yangzhou Rich Ruiyang Integrated Chinese and Western Medicines Clinic Co., Ltd. (揚州瑞慈瑞揚中西醫結合門診部有限公司) and Xuzhou Rich Ruixu Clinic Co., Ltd. (徐州瑞慈瑞徐體檢門診部有限公司) (collectively as the "Target Companies", and each a "Target Company") from the Vendor to the Purchaser, at total consideration of RMB155.0 million (the "Transactions"). Upon completion of the Transactions, the Vendor ceases to hold any equity interest in the Target Companies, and the Company indirectly holds 81% equity interest through its subsidiaries in each of the Target Companies.

For details of the Transactions, please refer to the announcements of the Company dated July 17, 2020 and September 3, 2020.

Capital expenditure and commitments

For the year ended December 31, 2020, the Group incurred capital expenditures of RMB296.9 million (2019: RMB568.4 million), primarily due to (i) the Nantong Rich Hospital Expansion II ; (ii) purchases of medical equipment as well as renovation for our medical examination centers, general hospital and specialty hospitals; and (iii) the lease of business premises for new medical examination centers.

As at December 31, 2020, the Group had a total capital commitment of RMB74.7 million (as at December 31, 2019: RMB229.0 million), mainly comprising the related contracts of Nantong Rich Hospital Expansion Phase II and the Group's system upgrade.

Borrowings

As at December 31, 2020, the Group had total bank and other borrowings of RMB1,285.2 million (as at December 31, 2019: RMB922.8 million). Please refer to Note 22 to the consolidated financial information for more details.

Contingent liabilities

The Group had no material contingent liability as at December 31, 2020 (as at December 31, 2019: Nil).

Financial instruments

The Group did not have any financial instruments as at December 31, 2020 (as at December 31, 2019: Nil).

26	RICI HEALTHCARE HOLDINGS LIMITED

Management Discussion and Analysis

Gearing ratio

As at December 31, 2020, on the basis of net debt divided by total capital, the Group's gearing ratio was 87.1% (as at December 31, 2019: 80.1%). Such increase of gearing ratio was mainly due to the acquisition of minority equity in some medical examination centers at a premium in 2020, which led to a decrease in capital reserve.

Cash flow and fair value interest rate risk

Our exposure to changes in interest rates is mainly attributable to our borrowings and lease liabilities.

Borrowings obtained at variable rates expose us to cash flow interest rate risk. Borrowings obtained at fixed rates expose us to fair value interest rate risk. As at December 31, 2020, borrowings of RMB934,692,000 were with floating interest rate. We did not hedge our cash flow and fair value interest rate risk during the year ended December 31, 2020.

Foreign exchange risk

For the year ended December 31, 2020, the Group was not exposed to significant foreign currency risk, except for the remaining bank deposits from the IPO, which were denominated in Hong Kong dollar, and the bank deposits denominated in United States dollar. The Group currently does not have a foreign currency hedging policy. However, the management closely monitors foreign exchange exposure and will consider hedging significant foreign exchange exposure should the need arise.

Credit risk

We have no significant concentration of credit risk. The carrying amount of cash and cash equivalents, trade and other receivables, amount due from related parties and deposits from long-term leases represent our maximum exposure to credit risk in relation to our financial assets. The objective of our measures to manage credit risk is to control potential exposure to recoverability problem.

Cash and cash equivalents were deposited in the major financial institutions, which the Directors believe are of high credit quality.

The Group has policies in place to ensure that receivables with credit terms are made to counterparties with an appropriate credit history and management performs ongoing credit evaluations of the counterparties. The credit period granted to the customers and the credit quality of these customers are assessed, which takes into account their financial position, past experience and available forward-looking information. The Group considers the probability of default upon initial recognition of a financial asset and whether there has been a significant increase in credit risk on an ongoing basis throughout each reporting period. For evaluating whether there has been a significant increase in credit risk, the Group considers available reasonable and supportive forward-looking information.

The credit risk of hospital business is related to the recoverability of trade receivables and other receivables. The credit risk of medical examination business is related to the length of the overdue period of trade receivables from corporate customers and other receivables.

2020 Annual Report

Management Discussion and Analysis

Liquidity risk

Our finance department monitors rolling forecasts of our liquidity requirements to ensure we have sufficient cash to meet operational needs while maintaining sufficient headroom on our undrawn borrowing facilities at all times so that we do not breach borrowing limits or covenants (where applicable) on any of our borrowing facilities. We expect to fund the future cash flow needs through cash flows generated from operations, borrowings from financial institutions and issuing debt instruments or capital contribution from the Shareholders, as necessary. Based on contractual undiscounted payments, our financial liabilities were RMB4,224.3 million as at December 31, 2020 (as at December 31, 2019: RMB3,946.0 million).

Pledge of assets

As at December 31, 2020, the Group had assets with a total carrying amount of RMB159,314,000 (as at December 31, 2019: assets of RMB123,160,000) and restricted deposits with an amount of USD38,650,000 (as at December 31, 2019: USD48,500,000) pledged for the Group's borrowings.

Besides, the Group had 22.06% equity interest in Nantong Rich Hospital (as at December 31, 2019: 22.06%) secured to guarantee the exercise of the option right granted to Everbright (Haimen) Senior Healthcare Investment Fund (Limited Partnership) (海門光控健康養老產業投資合夥企業(有限合夥)). For details, please refer to the announcement of the Company dated September 3, 2018.

28	RICI HEALTHCARE HOLDINGS LIMITED

Corporate Governance Report

The Board is pleased to present this corporate governance report in the annual report of the Company for the year ended December 31, 2020.

1. CORPORATE GOVERNANCE PRACTICES

The Group is committed to maintaining high standards of corporate governance to safeguard the interests of shareholders and to enhance corporate value and accountability. The Company has adopted the CG Code. The Company has applied the principles and complied with the code provisions as set out in the CG Code for the year ended December 31, 2020. The Company will continue to review and enhance its corporate governance practices to ensure compliance with the CG Code.

2. THE BOARD

Responsibilities

The Board is responsible for the overall leadership of the Group, oversees the Group's strategic decisions and monitors business and performance. The Board has delegated the authority and responsibility for day-today management and operation of the Group to the senior management of the Group. To oversee particular aspects of the Company's affairs, the Board has established three Board Committees including the Audit Committee, the Remuneration Committee and the Nomination Committee. The Board has delegated to the Board Committees responsibilities as set out in their respective terms of reference. All Board Committees are provided with sufficient resources to perform their duties.

All Directors shall ensure that they carry out duties in good faith, in compliance with applicable laws and regulations, and in the interests of the Company and its shareholders at all times.

Directors' and Senior Management's Liability Insurance and Indemnity

The Company has arranged appropriate liability insurance to indemnify the Directors and senior management of the Company for their liabilities arising out of corporate activities. The insurance coverage will be reviewed on an annual basis and the Board has reviewed the insurance coverage for the year ended December 31, 2020.

Board Composition

During the year ended December 31, 2020 and as at the date of this annual report, the composition of the Board is as follows:

Executive Directors

Dr. Fang Yixin (Chairman and Chief Executive Officer)

Dr. Mei Hong

Mr. Fang Haoze

Ms. Lin Xiaoying

Non-Executive Directors

Ms. Jiao Yan

Mr. Yao Qiyong (retired on June 19, 2020)

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Corporate Governance Report

Independent Non-Executive Directors

Dr. Wang Yong

Ms. Wong Sze Wing

Mr. Jiang Peixing

Except that Dr. Fang is the spouse of Dr. Mei and Mr. Fang Haoze is the son of Dr. Fang and Dr. Mei, there is no other relationship (including financial, business, family or other material/relevant relationship(s)) among the Board members.

For the year ended December 31, 2020 and up to the date of this annual report, the Board at all times met the requirements of Rules 3.10(1), 3.10(2) and 3.10(A) of the Listing Rules relating to the appointment of at least three independent non-executive Directors with at least one independent non-executive Director possessing appropriate professional qualifications or accounting or related financial management expertise and the appointment of independent non-executive Directors representing at least one-third of the Board. Among the three independent non-executive Directors, Ms. Wong Sze Wing has appropriate professional qualifications or accounting or related financial management expertise as required by Rule 3.10(2) of the Listing Rules.

Board Diversity Policy

Pursuant to Rule 13.92 of the Listing Rules, the Nomination Committee (or the Board) shall have a policy concerning diversity of board members, and shall disclose the policy on diversity or a summary of the policy in the corporate governance report. The policy specifies that in designing the composition the Board, Board diversity shall be considered from a number of aspects, including but not limited to age, cultural and educational background, professional experience, skills and knowledge. The appointment of Directors will be based on meritocracy, and candidates will be evaluated against objective criteria, having due regard for the benefits of diversity of the Board. Selection of candidates will be based on a range of diversity perspectives, including but not limited to gender, age, cultural and educational background, professional experience, knowledge and skills.

The composition of the Board will be disclosed in the Corporate Governance Report every year and the Nomination Committee will supervise the implementation of this policy. The Nomination Committee will review the effectiveness of this policy, as appropriate, discuss any revisions that may be required, and recommend any such revisions to the Board for consideration and approval.

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As at the date of this annual report, the diversity of the Board is illustrated as below. Further details on the biographies and experience of the Directors are set out in the section headed "Profiles of Directors and Senior Management" of this annual report.

Position	Number (%)
Executive Directors	4 (50%)
Non-Executive Directors	1 (12.5%)
Independent Non-Executive Directors	3 (37.5%)

Gender	Number (%)
Male	4 (50%)
Female	4 (50%)

Age	Number (%)
30-40	1 (12.5%)
41-50	3 (37.5%)
51-60	4 (50%)

The Nomination Committee has reviewed the membership, structure and composition of the Board, and is of the opinion that the structure of the Board is reasonable, and the experiences and skills of the Directors in various aspects and fields can enable the Company to maintain high standard of operation.

Confirmation of Independence by the Independent Non-executive Directors

The Company has received written annual confirmation from each independent non-executive Director of his/her independence pursuant to the requirements of the Listing Rules. The Company considers all independent non-executive Directors to be independent in accordance with the independence guidelines as set out in the Listing Rules. All Directors, including independent non-executive Directors, have brought a wide spectrum of valuable business experience, knowledge and professionalism to the Board for its efficient and effective functioning. Independent non-executive Directors are invited to serve on the Audit Committee, the Remuneration Committee and the Nomination Committee.

As regards the CG Code provision requiring directors to disclose the number and nature of offices held in public companies or organisations and other significant commitments as well as their respective identity of the public companies or organisations and the time involved to the issuer, Directors have agreed to disclose, and already disclosed their commitments to the Company in a timely manner.

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Induction and Continuous Professional Development

Pursuant to the code provision A.6.5 of the CG Code, all Directors should participate in continuous professional development to develop and refresh their knowledge and skills to ensure that their contribution to the Board remains informed and relevant. Pursuant to the code provision A.6.1 of the CG Code, each newly appointed Director should be provided with necessary induction and information to ensure that he/she has a proper understanding of the Company's operations and businesses as well as his/her responsibilities under relevant statues, laws, rules and regulations. For the year ended December 31, 2020, the Directors were regularly briefed on the amendments to or updates on the relevant laws, rules and regulations.

Directors are encouraged to participate in continuous professional development to develop and refresh their knowledge and skills. During the year of 2020, all Directors participated in continuous professional development to develop and refresh their knowledge and skills. The Company's external lawyers have facilitated directors' training by the provision or recommendation of presentations, briefings and materials for the Directors primarily relating to the roles, functions and duties of a listed company director. All Directors received training as at the date of this annual report. The Directors are asked to submit a signed training record to the Company on an annual basis.

According to the records kept by the Company, the attendance of the Directors for continuous professional development activities during the year ended December 31, 2020 was as follows:

	Type(s) of
	continuous professional
Name of Director	development activities
Dr. Fang Yixin	A, B
Dr. Mei Hong	A, B
Mr. Fang Haoze	A, B
Ms. Lin Xiaoying	A, B
Ms. Jiao Yan	A, B
Mr. Yao Qiyong (retired on June 19, 2020)	A, B
Dr. Wang Yong	A, B
Ms. Wong Sze Wing	A, B
Mr. Jiang Peixing	A, B

Attending briefing(s) and/or training session(s)
Reading articles, journals, newspapers and/or other materials

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Chairman and Chief Executive Officer

Pursuant to code provision A.2.1 of the CG Code, the responsibility between the chairman and the chief executive officer should be segregated and should not be performed by the same individual. However, Dr. Fang was appointed as the chief executive officer of the Company on March 20, 2019, and upon his new appointment, the Company does not have a separate chairman and the chief executive officer and Dr. Fang performs these two roles. The Board considers that vesting the roles of the chairman and the chief executive officer in Dr. Fang is beneficial to the Group for implementing its new business strategies given his abundant experience in the healthcare industry and longtime and substantive involvement in the day to day management and operation of the Group. In addition, the balance of power and authority is ensured by the operation of the Board and the senior management, which comprises experienced and capable individuals independent from Dr. Fang (except his spouse, Dr. Mei, and Mr. Fang Haoze, his son). The Board comprised four executive Directors (including Dr. Fang, Dr. Mei, Ms. Lin and Mr. Fang Haoze), one non-executive Director and three independent non-executive Directors as at the date of this annual report and therefore has a fairly strong independence element in its composition.

The Board and the senior management, which comprises experienced and high calibre individuals can ensure the balance of power and authority. As at the date of this report, the Board comprises four executive Directors, one non-executive Director and three independent non-executive Directors.

Change of Directors

Save and except the retirement of Mr. Yao Qiyong as a non-executive Director at the annual general meeting of the company held on June 19, 2020, there had not been any changes of the composition of the Board during the year ended December 31, 2020. The Company entered into a letter of appointment with each of the non-executive Director and the independent non-executive Directors, namely Ms. Jiao Yan, Dr. Wang Yong, Ms. Wong Sze Wing and Mr. Jiang Peixing, setting out the terms and conditions governing the appointment and ancillary matters, as amended and supplemented from time to time.

None of the Directors has a service contract which is not determinable by the Group within one year without payment of compensation (other than statutory compensation).

In accordance with the Articles of Association, all Directors are subject to retirement by rotation at least once every three years and any new Director appointed to fill a causal vacancy shall submit himself/herself for election by shareholders at the first general meeting of the Company after appointment and any new Director appointed as an addition to the Board shall submit himself/herself for re-election by the Shareholders at the next following annual general meeting of the Company after appointment.

The procedures and process of appointment, re-election and removal of directors are set out in the Articles of Association. The Nomination Committee is responsible for reviewing the Board composition, monitoring and making recommendations to the Board on the appointment, re-election and succession planning of Directors, in particular the Chairman and the Chief Executive Officer.

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Corporate Governance Report

Board Meetings and Committee Meetings

The Company adopts the practice of holding Board meetings regularly, at least four times a year, and at approximately quarterly intervals. Both the Nomination Committee and the Remuneration Committee shall meet at least once every year and the Audit Committee shall meet at least twice a year. Notices of not less than fourteen days are given for all regular Board meetings to provide all Directors with an opportunity to attend and include matters in the agenda for a regular meeting. For other Board and committee meetings, reasonable notice is generally given. The agenda and accompanying board papers are dispatched to the Directors or committee members at least three days before the intended date of the meeting to ensure that they have sufficient time to review the papers and be adequately prepared for the meeting. When Directors or committee members are unable to attend a meeting, they will be advised of the matters to be discussed and given an opportunity to make their views known to the chairman of the Board or the committee members prior to the meeting. Minutes of meetings are kept by the Company Secretary with copies circulated to relevant Board or Board Committee for comments and records.

Minutes of the Board meetings and committee meetings are recorded in sufficient detail the matters considered by the Board and the committees and the decisions reached, including any concerns raised by the Board or committee members and dissenting views expressed. Draft minutes of each Board meeting and committee meeting are sent to the relevant Board or committee members for comments within a reasonable time after the date on which the meeting is held. The minutes of the Board meetings are open for inspection by Directors.

Apart from the regular Board meetings, the Chairman also held a meeting on March 31, 2020 with all independent non-executive Directors without the presence of executive Directors.

For the year ended December 31, 2020, 4 Board meetings were held and the attendance of the individual Directors at these meetings is set out in the table below:

	Attended/
Directors	Eligible to attend
Dr. Fang Yixin (Chairman, Executive Director and Chief Executive Officer)	4/4
Dr. Mei Hong (Executive Director)	4/4
Mr. Fang Haoze (Executive Director)	4/4
Ms. Lin Xiaoying (Executive Director)	4/4
Ms. Jiao Yan (Non-executive Director)	4/4
Mr. Yao Qiyong (Non-executive Director, retired on June 19, 2020)	2/2
Dr. Wang Yong (Independent Non-executive Director)	4/4
Ms. Wong Sze Wing (Independent Non-executive Director)	4/4
Mr. Jiang Peixing (Independent Non-executive Director)	4/4

Model Code for Securities Transactions

The Company has adopted the Model Code as its own code of conduct regarding Directors' securities transactions. Specific enquiry has been made of all the Directors and each of the Directors has confirmed that he/she has complied with the Model Code for the year ended December 31, 2020.

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Corporate Governance Report

Delegation by the Board

The Board reserves for its decision all major matters of the Company, including: approval and monitoring of all policy matters, overall strategies and budgets, internal control and risk management systems, material transactions (in particular those that may involve conflict of interests), financial information, appointment of Directors and other significant financial and operational matters. Directors could have recourse to seek independent professional advice in performing their duties at the Company's expense and are encouraged to access and to consult with the Company's senior management independently.

The daily management, administration and operation of the Group are delegated to the senior management. The delegated functions and responsibilities are periodically reviewed by the Board to ensure that they remain appropriate to the Company's needs. Approval has to be obtained from the Board prior to any significant transactions entered into by the management on the Company's behalf.

Corporate Governance Function

The Board recognizes that corporate governance should be the collective responsibility of Directors and has delegated the corporate governance duties to the Audit Committee which include:

to develop and review the Group's policies and practices on corporate governance and make recommendations to the Board;
to review and monitor the training and continuous professional development of Directors and senior management of the Company;
to review and monitor the Group's policies and practices on compliance with legal and regulatory requirements;
to develop, review and monitor the code of conduct and compliance manual (if any) applicable to the Directors and employees of the Group; and
to review the Group's compliance with the CG Code from time to time adopted by the Group and the disclosure in the Corporate Governance Report to be contained in the Company's annual reports.

3. BOARD COMMITTEES

Nomination Committee

As at the date of this report, the Nomination Committee currently comprises three members, namely Dr. Fang Yixin (chairman), Dr. Wang Yong and Mr. Jiang Peixing (each being an independent non-executive Director). The majority of the committee members are independent non-executive Directors. Dr. Fang is the chairman of this committee.

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Corporate Governance Report

The principal duties of the Nomination Committee include the following:

To review the structure, size and composition of the Board and make recommendations regarding any proposed changes;
To identify suitable candidates for appointment or re-appointment as Directors for the Board;
To make recommendations to the Board on appointment or re-appointment of and succession planning for Directors;
To assess the independence of independent non-executive Directors; and
To regularly review and report to the Board on the performance and suitability of the senior management and make recommendations to the Board on the re-appointment or replacement of any senior management.

The Nomination Committee will assess the candidate or incumbent on criteria such as integrity, experience, skill and ability to commit time and effort to carry out the duties and responsibilities. The recommendations of the Nomination Committee will then be put to the Board for decision. Their written terms of reference are available on the respective website of the Stock Exchange and the Company.

One meeting of the Nomination Committee was held for the year ended December 31, 2020 and the attendance record of the Nomination Committee members is set out in the table below:

	Attended/
Directors	Eligible to attend
Dr. Fang Yixin (Chairman)	1/1
Dr. Wang Yong	1/1
Mr. Jiang Peixing	1/1

In the meeting held on March 31, 2020, the Nomination Committee reviewed and discussed the policy, procedure and criteria for nomination of the Directors, reviewed and discussed the Board diversity policy, assessed the independence of independent non-executive Directors, considered the re-appointment of the retiring Directors and the appointment of new executive directors, reviewed the time commitment required from the non-executive Director and fulfilled duties as required aforesaid.

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Corporate Governance Report

Nomination Policy

The Board has adopted the following policy with regard to nomination of Directors.

Objective
1. The Nomination Committee is committed to ensuring the Board has a balance of skills, experience and diversity of perspectives appropriate to the requirements of the Company's business and shall identify, consider and nominate suitable candidates to the Board for it to consider and make recommendations to shareholders for election or re-election as the Directors at general meetings or appoint as Directors to fill casual vacancies or as an addition to the Board.
2. The Nomination Committee may, as it considers appropriate, nominate a number of candidates more than the number of Directors to be appointed or re-appointed at a general meeting, or the number of casual vacancies to be filled.
3. The Nomination Committee shall make recommendations to the Board on the succession planning for Directors, in particular, the chairman of the Board and the chief executive officer of the Company.
Selection Criteria
1. The factors listed below would be used as reference by the Nomination Committee in assessing the suitability of a proposed candidate.
2. - Reputation for integrity;
  - Accomplishment and experience;
  - Commitment in respect of available time and relevant interest;
  - Diversity in all its aspects, including but not limited to gender, age (18 years or above), cultural and educational background, ethnicity, professional experience, skills, knowledge and length of service; and
  - In the case of independent non-executive Directors, the independence of the candidate.

These factors are for reference only, and not meant to be exhaustive and decisive. The Nomination Committee has the discretion to nominate any person, as it considers appropriate.

2.2 Subject to the provisions of the Articles of Association, retiring Directors are eligible for nomination by the Board to stand for re-election at a general meeting.

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Proposed candidates will be asked to submit the necessary personal information in a prescribed form, together with their written consent to be appointed as a Director and to the public disclosure of their personal data on any documents or the relevant websites for the purpose of or in relation to their standing for election as a Director.
The Nomination Committee may request candidates to provide additional information and documents, if considered necessary.

3 Nomination Procedures

The Secretary of the Nomination Committee shall call a meeting of the Nomination Committee, and invite nominations of candidates from Board members if any, for consideration by the Nomination Committee prior to its meeting. The Nomination Committee may also put forward candidates who are not nominated by Board members.
For filling a casual vacancy, the Nomination Committee shall make recommendations for the Board's consideration and approval. For proposing candidates to stand for election at a general meeting, the Nomination Committee shall make nominations to the Board for its consideration and recommendation.
Until the issue of the shareholder circular, the nominated persons shall not assume that they have been proposed by the Board to stand for election at the general meeting.
In order to provide information of the candidates nominated by the Board to stand for election at a general meeting, and to invite nominations from shareholders, a circular will be sent to shareholders. The circular will set out the lodgment period for shareholders to make the nominations. The names, brief biographies (including qualifications and relevant experience), independence, proposed remuneration and any other information, as required pursuant to the applicable laws, rules and regulations, of the proposed candidates will be included in the circular to shareholders.
A shareholder can serve a notice to the Company Secretary within the lodgment period of its intention to propose a resolution to elect a certain person as a Director, without the Board's recommendation or the Nomination Committee's nomination, other than those candidates set out in the shareholder circular. The particulars of the candidates so proposed will be sent to all shareholders for information by a supplementary circular.
A candidate is allowed to withdraw his candidature at any time before the general meeting by serving a notice in writing to the Company Secretary.
The Board shall have the final decision on all matters relating to its recommendation of candidates to stand for election at any general meeting.

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1. Confidentiality
  4.1 Unless required by law or any regulatory authority, under no circumstances shall a member of the Nomination Committee or a staff member of the Company disclose any information to or entertain any enquiries from the public with regard to any nomination or candidature before the circular to shareholders, as the case may be, is issued. Following the issue of the circular, the Nomination Committee or Company Secretary or other staff member of the Company approved by the Nomination Committee may answer enquiries from the regulatory authorities or the public but confidential information regarding nominations and candidates should not be disclosed.
2. Monitoring and Reporting
  The Nomination Committee will report annually a summary of the nomination policy including the nomination procedures, criteria for selection, the diversity policy and the progress made towards achieving these objectives in the Company's corporate governance report.
3. Review of the Policy
  The Nomination Committee will review the nomination policy as appropriate and recommend revisions, if any, to the Board for consideration and approval.
Remuneration Committee

As at the date of this report, the Remuneration Committee comprises three members, namely Mr. Jiang Peixing (an independent non-executive Director), Dr. Mei (an executive Director) and Ms. Wong Sze Wing (an independent non-executive Director), the majority of whom are independent non-executive Directors. Mr. Jiang Peixing is the chairman of this committee.

The Remuneration Committee has adopted the second model described in paragraph B.1.2(c) under Appendix 14 to the Listing Rules (i.e. make recommendation to the Board on the remuneration packages of individual executive Director and senior management member).

The principal duties of the Remuneration Committee include making recommendations to the Board on and approving the Company's remuneration policy and structure and the remuneration packages of the executive Directors and the senior management of the Company. The Remuneration Committee is also responsible for establishing transparent procedures for formulating such remuneration policy and structure to ensure that no Director or any of his/her associates will participate in deciding his/her own remuneration, which remuneration will be determined by reference to the performance of the individual and the Company as well as market practice and conditions. It also makes recommendation to the Board on the remuneration of non-executive Directors including independent non-executive Directors.

Their written terms of reference are available on the respective website of the Stock Exchange and the Company.

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Corporate Governance Report

One meeting of the Remuneration Committee was held for the year ended December 31, 2020 and the attendance record of the Remuneration Committee members is set out in the table below:

	Attended/
Directors	Eligible to attend
Mr. Jiang Peixing (Chairman)	1/1
Ms. Wong Sze Wing	1/1
Dr. Mei Hong	1/1

In the meeting held on March 31, 2020, the Remuneration Committee discussed and reviewed the remuneration policy for Directors and senior management of the Company, assessed performance of executive Directors, made recommendations to the Board on the remuneration packages of individual executive Directors and senior management and fulfilled duties as required aforesaid.

Details of the remuneration by band of the members of the senior management of the Company for the year ended December 31, 2020 are set out below:

	Number of
Remuneration band (HK$)	individual
1,000,000 and below	5

Audit Committee

As at the date of this report, the Audit Committee comprises three members, namely Ms. Wong Sze Wing (an independent non-executive Director), Ms. Jiao Yan (a non-executive Director) and Dr. Wang Yong (an independent non-executive Director), the majority of whom are independent non-executive Directors. Ms. Wong Sze Wing is the chairlady of this committee. The main duties of the Audit Committee include the following:

To review the financial statements and reports and consider any significant or unusual items raised by the internal audit division or external auditor before submission to the Board;
To review the relationship with the external auditor by reference to the work performed by the auditor, their fees and terms of engagement, and make recommendations to the Board on the appointment, re-appointment and removal of external auditor;
To review the adequacy and effectiveness of the Company's financial reporting system, internal control system and risk management system and associated procedures, including the adequacy of the resources, staff qualifications and experience, training programmes and budget of the Company's accounting, risk management and internal control and financial reporting functions, on an annual basis;

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To review the adequacy and effectiveness of the Company's and its subsidiaries' internal control systems, covering all material controls, including financial, operational and compliance controls and risk management functions including financial, business, operational and other risks of the Company and its subsidiaries, and to undertake any related investigations; and
To perform the Company's corporate governance functions with details set out in the paragraph headed "2. THE BOARD - (13) Corporate Governance Function" above.

Two meetings of the Audit Committee were held for the year ended December 31, 2020 and the attendance record of the Audit Committee members is set out in the table below:

	Attended/
Directors	Eligible to attend
Ms. Wong Sze Wing (Chairlady)	2/2
Ms. Jiao Yan	2/2
Dr. Wang Yong	2/2

For the year ended December 31, 2020, the Audit Committee reviewed the Group's policies on corporate governance and discussed the same with the Board, reviewed the financial reporting system, compliance procedures, internal control and risk management systems (including the adequacy of resources, staff qualifications and experience, training programmes and budget of the Company's accounting, internal audit and financial reporting functions) and associated processes and the reappointment of the external auditor and fulfilled duties as required aforesaid. The Board had not deviated from any recommendation given by the Audit Committee on the selection, appointment, resignation or dismissal of external auditor.

The Audit Committee also reviewed the interim results for the six months ended June 30, 2020, the annual results of the Company and its subsidiaries for the year ended December 31, 2020 as well as the audit report prepared by the external auditor relating to accounting issues and major findings in course of audit.

There are proper arrangements for employees, in confidence, to raise concerns about possible improprieties in financial reporting, internal control and other matters. Their written terms of reference are available on the respective website of the Company and the Stock Exchange.

4. DIRECTORS' RESPONSIBILITIES FOR FINANCIAL REPORTING IN RESPECT OF FINANCIAL STATEMENTS

The Directors acknowledge their responsibility for preparing the consolidated financial statements of the Company for the year ended December 31, 2020 which give a true and fair view of the affairs of the Company and the Group's results and cash flows.

The management has provided to the Board such explanation and information as are necessary to enable the Board to carry out an informed assessment of the Company's financial statements, which are put to the Board for approval. The Company provides all members of the Board with monthly updates on Company's performance, positions and prospects.

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The Directors were not aware of any material uncertainties relating to events or conditions which may cast significant doubt upon the Group's ability to continue as a going concern.

The statement by the external auditor of the Company regarding their reporting responsibilities on the consolidated financial statements of the Company is set out in the Independent Auditor's Report in this annual report.

5. RISK MANAGEMENT AND INTERNAL CONTROL

Rici defines the risk as effects of different uncertainties on the achievement of strategic, operating and governance goals in the course of operation and development. Rici adopts comprehensive risk management and internal control structure to manage risks proactively. The structure is developed by the Board and the Audit Committee in order to assist the Board to monitor risk management conditions, design and enhance the effectiveness of related risk management and internal control systems.

Description on Major Risks, Risk Changes and Risk Control Measures of the Company

SN	Major Risk	Main Risk Description	Changes Since 2020
1	Business Expansion and	1.	There is insufficient support from	•	Unchanged
	Standardization Risk		head office for new expansions
			due to rapid expansion of the
			company's business;
		2.	The lack of adequate expansion
			system that promotes corporate
			control system and standardized
			operational procedures would
			result in the risks of deterioration
			of quality of the newly expanded

business and incapability to meet corporate standard.

Major Monitoring Measures and

Risk Control Strategies

The Company has established management and control mechanism and standardized operating procedures for business expansion, and will further streamline the standardization procedures within the Group;
The Company assessed internal business development plans on a regular basis, and adjusted the development plans based on the macro environment and the Company's own position;
During the business adjustment period, the Company will engage relevant external professional consultants as far as possible, and take meticulous consideration from the strategic, financial, legal and commercial perspectives
to significantly increase the income brought by each time of business expansion; and
The Company enters strategic partnership with Health.JD to initiate online and offline brand linkage, traffic attraction and promote the growth of new users.

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						Major Monitoring Measures and
SN	Major Risk	Main Risk Description	Changes Since 2020	Risk Control Strategies
2	Competitor Risk	1.	Low entry barrier for products/	•	Unchanged	•	To establish a dedicated team, enhance
			services of the Company,				backend health service for medical examination
			severe homogeneousness				and promote product upgrade;
			with products/ services of
			competitors as well as the risk			•	To categorize product market and carry out
			of how to develop products				centralized marketing;
			that cannot be replicated with
			competitive advantages (for			•	To allocate further resources to enhance
			example, mid-to-high-end				customer services in order to provide medium-
			customer orientation).				to-high-end quality services;
		2.	How to build our own big data			•	To enhance investment in mining and analysis of
			to integrate health resource				existing health data, and provide forward-looking
			pool and establish a platform to				services such as health warnings;
			respond to industry competition;

3. Competitors rely on large platform advantages to continuously expand their business reach to squeeze the Company's market share.

The Company has established an investor relations department, dedicated to the management, development and maintenance of the relationship with external investors, and strives to attract interested investors to inject capital to achieve better development of the Company;
To be combined with biotechnologies for continuous innovation;
To focus on ultra-high net worth individuals and launch dually branded operation for the medical examination chain.

3	Investment Risk	1.	Irrational investment decision	•	Unchanged	•	Based on the investment management
			making procedures and				measures, the Company optimizes the
			insufficient investment				investment model, enhanced investment
			assessment would result in the				forecast, and continued to strictly control
			outweighing of investment scale				investment approval, project budget, project
			over the enterprise capacity or				management, post- investment evaluation;
			lack of investment effectiveness.
						•	Return of investment is considered as one of
							the indicators for management performance
							evaluation.

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SN	Major Risk	Main Risk Description	Changes Since 2020
4	Information Construction	1.	The failure of IT construction and	•	Unchanged
	Risk		planning to meet future operation
			development requirements of

the Company which may cast limitations to the development of the Company and impact the achievement of the Company's strategic goals.

Major Monitoring Measures and

Risk Control Strategies

The Company increased investment in IT, streamlined business scenarios and integrated business data to effectively support financial and operational analysis;
To strengthen the research on the impact of and increase the input into artificial intelligence, healthcare services and 5G on medical equipment, and develop new systems and functions to meet the data needs of existing network and equipment;
To enhance the investment in mobile client development, and improve mobile terminal functionality, stability and user experience;
To establish health big data and apply data mining technology to develop forward-looking products and services to provide better services to customers;
While collecting and using a large amount of data, strengthen the management of data, especially the sensitive information of customers;
To establish a data maintenance team and increase the investment in data security and network security. To implement information stratification and access control through the system, and ensure customer data protection and information security;
To coordinate and plan for the development of new information systems or technology application to ensure the security and stability of daily operations while optimizing and enhancing information construction by segment.

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SN	Major Risk	Main Risk Description	Changes Since 2020
5	Human Resources Risk	1.	The failure of the structure of	•	Increased

staffing/quality of staff to satisfy the Company's requirements for its current development, as evidenced by the failure to timely adjust staffing structure and

to timely adjust the appraisal system and update the training content to satisfy the Company's requirements for its current development, or the failure of the Company to timely acquire talents (through internal training or external recruitment) that satisfy the requirements for

the Company's current stage of development, which may result in the slowdown of the overall development scale of the Company and the failure of the achievement of expected strategic planning and gradual loss of industry position.

2. The high turnover rate of personnel may result in the increase of corporate operating costs, leakage of commercial confidentiality and vacancies in key positions, and may harm the overall corporate image.

Major Monitoring Measures and

Risk Control Strategies

To enhance the establishment of a diversified recruitment channel system, especially the recruitment channels of medical personnel that are closely related to the Group's business; to enhance the training and education of administrators and other professional medical personnel (including physicians, nurses
and pharmacists, etc.) and to improve their occupational skills and administration quality and provide customers and patients with services of better quality;
To strengthen the inter-relationship between business department, personnel department, finance department and the management. To make timely, forward-looking and predictive overall plans for personnel adjustments;
To provide competitive remuneration and benefits, and strengthen the sense of belonging of the staff, encourage the staff to improve efficiency and provide different promotion opportunities based on the performance of the employees;
To cooperate with external resources, and build and cultivate our own professional team, core team and backup support;
To strengthen corporate culture, enhance humanistic care and enhance the cohesiveness of corporate culture;
To enter a cross-institutional collaboration with Nantong University and be branded as Nantong University Affiliated Rich Hospital.

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SN	Major Risk	Main Risk Description	Changes Since 2020
6	Capital Management Risk	1.	The existence of unauthorized	•	Unchanged

transactions of capital operation would affect the safety and integrity of the Company's capital; unreasonable fund positions, inappropriate capital commitment or capital backlogs would not leverage the advantages of centralized capital management and result in a decrease in profitability of the Company or insufficient capital and payment difficulties, which would affect the reputation of the Company or damage the Company's interests.

Major Monitoring Measures and

Risk Control Strategies

The Company has developed and distribute its fund management policy and further sort out standardisation processes within the Group；
To establish a mechanism for separation of approval authority and responsibility in relation to capital operations to ensure the security and integrity of capitals;
To optimize the efficiency of the use of idle capital;
To strategically adjust the pace of operations and reasonably control cash flows;
To develop plans for funds and perform unified management of the funds of each subsidiary; and To have the management regularly monitor, analyse, estimate and track the funds on a weekly basis;
To consider using a pool of funds or direct linkage between banks and businesses to manage the funds of the subsidiaries.

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SN	Major Risk	Main Risk Description	Changes Since 2020
7	Medical Dispute Risk	1.	The Company is exposed to	•	Unchanged

inherent risks of medical disputes and legal proceedings against the Company arising from its operation which may result in significant cost and have material adverse impact on our business operation and reputation.

Major Monitoring Measures and

Risk Control Strategies

The Company has established a comprehensive customer complaint management system, which gives effective, prompt and continuous feedback to customers' opinions in the early stage, improves customer satisfaction and mitigates the possibility of causing disputes.
The Company formulates standardized operational procedures for business workflow and enhances the training, education and monitoring of current medical staff (including physicians, nurses and pharmacists, etc.) in accordance with laws and regulations and industry norms in order to reduce the risk of medical disputes between the Company and customers due to the failure to be strictly in compliance with internal control procedures;
The Company cooperates with external public relations companies to communicate the Company's products, services, values and other information to the public in a positive image, with a view to improving corporate awareness and public trust, and also to protecting the Company's reputation, brand image and word of mouth to the greatest extent during special times;
The Company has set up relevant internal departments to deal with medical disputes, effectively take follow-up actions for any disputes and protect the Company's interests to the greatest extent, and analyze the causes and ensure accountability on responsible person after the occurrence of incidents, which will be improved in future operations.

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SN	Major Risk	Main Risk Description	Changes Since 2020
8	Control and Compliance	1.	The defective standard operation	•	Decreased
	Risk		procedure of the Company and
			the failure of operation staff

to strictly meet the operation requirements would result in the failure of business undertaken to satisfy the workflow settings of the Company that in turn would affect the operation effectiveness of the Company and hinder the completion of transformation from the "rule of man" to "rule of law".

9	License Management	1.	The Company conducts business •	Decreased
	Risk		in a strictly regulated industry.
			If the Company fails to obtain

or renew any licenses, permits, approvals and certificates required for our operations, or are found to be non-compliant with such licenses, permits, approvals and certificates or any applicable laws or regulations, the Company may face penalties, suspension of operations or even revocation of such licenses, depending on the results of such events. Any of such events could materially and adversely affect the results of operations of the Company.

Major Monitoring Measures and

Risk Control Strategies

The Company established a specialized function department, being responsible for collecting laws and regulations and industry standards, and formulating operation procedures of various operating business and regularly conducting training and monitoring of operation staff.
The Company improved the compliance system, sorted out compliance risks and developed non-compliance plan to clarify the follow-up procedures, the responsible persons and the rewards and punishments. The Company also conducted regular checks on medical hygiene, health and safety aspects;
The Company formulated an operational manual on medical- related business standards to clarify the standards for all business processes, and strictly assessed the qualifications of the relevant employees;
The Company published the regulation of advertising terms and interpretation of laws and regulations, with a view to optimizing the release process of advertising documents, and effectively preventing advertising violations.
The headquarter of the Company established a license database to perform unified electronic management of the licenses of all organizations;
A specialized stocktaking and examination mechanism for licenses was also established to enhance the control over the integrity and effectiveness of licenses.

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Corporate Governance Report

SN	Major Risk	Main Risk Description	Changes Since 2020
10	Litigation Risk	1.	The non-compliance in respect	•	Decreased
			of fraud caused by the practice
			of the Company would result
			in risks of legal sanctions,
			regulatory penalties or material
			financial loss or reputation loss.
		2.	The ineffective execution of
			various contracts, commitments
			and other legal documents
			signed by the Company would

result in litigation and actual operating losses.

11 Pandemic (Systemic Risk) 1. Our day-to-day operation is • Increased staggering against the current

backdrop of pandemic control and prevention. Revenue is significantly impacted with losses increased as labor costs and medical consumption are not effectively controlled. Certain credit risks emerge due to increased financing costs. Our business portfolio is not diversified enough.

Major Monitoring Measures and

Risk Control Strategies

The Company has established anti-fraud systems and conduct staff training in order to enhance antifraud awareness;
The Company has set up whistleblowing channels including mailbox and phone number in order to encourage whistleblowing from staff against fraudulent practices and provide protection for whistle-blowers;
The Company further clarified the duties and authorities of each department. The legal department made early intervention in major transactions and prevented corruptions.
The Company conducts overall management of the signed contracts in order to effectively and promptly perform its due responsibilities and obligations to avoid potential legal disputes. For legal proceedings incurred by liabilities caused by human error or failure to perform obligations, cause analysis would be conducted afterwards, the responsible person would be held accountable, and future operations would be improved.
Under the guidance of the competent authorities, the Company implements preventive and control measures to strengthen quality and safety management.

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Internal Control

The Company has set up an internal audit department that is responsible for conducting audit for the Company and its subsidiaries. Such duties of the department are with the aim of ensuring the normal operation of internal monitoring and its due effectiveness. The Company attaches full importance to the reports from external auditors on their findings regarding the deficiencies and inadequacies of the internal monitoring and accounting procedures of the Group and makes respective improvements. The internal audit department directly reports to the Audit Committee on all audit matters.

The internal control system of the Company is established in accordance with the principles of the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Meanwhile, the Company conducted independent audit (including interviews, walkthrough tests and risk-oriented testing on sample basis) during the year ended December 31, 2020 on the business segments that had material impacts on corporate strategies and internal control and monitoring and prepared the internal control and monitoring report submitted for the approval of the Audit Committee and the Board. During the year ended December 31, 2020, under the assistance of the Audit Committee and taking into consideration of the confirmation of evaluation on the effectiveness of the risk management and internal control systems conducted by the management and the Audit Committee and the assessment results, the Board confirmed that the risk management and internal control systems of the Company were effective and adequate.

Inside Information

The legal affairs center of the Company is responsible for establishing standards to assess and identify inside information pursuant to Rules 13.09 and 13.10 of the Listing Rules and the provisions in relation to inside information under Part XIVA of the Securities and Futures Ordinance, communicating to all relevant staff on the policies of inside information reporting and disclosure and providing related training and timely disclosing inside information in accordance with the requirements set out in the Securities and Futures Ordinance and the Listing Rules.

6. AUDITOR'S REMUNERATION

Audit fees of the Group for the year ended December 31, 2020 payable to the external auditors were approximately RMB2.3 million. And the Group incurred approximately RMB0.6 million in 2020 for non-audit services related to the provision of consultation services in respect to internal control systems pursuant to the CG Code and tax planning, etc.

7. COMPANY SECRETARY AND PRIMARY CONTACT OF THE COMPANY

During the year ended December 31, 2020, the Company engaged Mr. Chen Kun, a practicing solicitor in Hong Kong, as the company secretary of the Company. His primary contact at the Company is Ms. Cao Zhi, general manager of the legal affairs center of the Company.

In compliance with Rule 3.29 of the Listing Rules, Mr. Chen Kun undertook not less than 15 hours of relevant professional training during the year ended December 31, 2020.

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Corporate Governance Report

8. GENERAL MEETING

For the year ended December 31, 2020, one general meeting of the Company, being the annual general meeting of the Company held on June 19, 2020, was held. The attendance record of the Directors is set out in the table below:

	Attended/
Directors	Eligible to attend
Dr. Fang Yixin (Chairman, Executive Director and Chief Executive Officer)	1/1
Dr. Mei Hong (Executive Director)	1/1
Mr. Fang Haoze (Executive Director)	1/1
Ms. Lin Xiaoying (Executive Director)	1/1
Ms. Jiao Yan (Non-executive Director)	1/1
Mr. Yao Qiyong (Non-executive Director, retired on June 19, 2020)	1/1
Dr. Wang Yong (Independent Non-executive Director)	1/1
Ms. Wong Sze Wing (Independent Non-executive Director)	1/1
Mr. Jiang Peixing (Independent Non-executive Director)	1/1

Certain Director did not attend the annual general meeting due to other business commitments. The Director who did not attend the annual general meeting had followed-up with the other Directors to understand and discuss the subject matters.

9. COMMUNICATION WITH SHAREHOLDERS AND INVESTOR RELATIONS

The Company considers that effective communication with Shareholders is essential for enhancing investor relations and understanding of the Shareholders and potential investors on the Group's business, performance and strategies. The Company also recognizes the importance of timely and non-selective disclosure of information, which will enable Shareholders and investors to make the informed investment decisions.

The AGM provides opportunity for Shareholders to communicate directly with the Directors. The Chairman of the Board and the chairmen/chairlady of the Board Committees will attend the AGM to answer Shareholders' questions. The external auditors of the Company will also attend the AGM to answer questions about the conduct of the audit, the preparation and content of the auditor's report and auditor independence.

To promote effective communication, the Company adopts a Shareholders' communication policy which aims at establishing a two-way relationship and communication between the Company and its Shareholders and maintains

website at http://www.rich-healthcare.com, where up-to-date information on the Company's business operations and developments, financial information, corporate governance practices and other information are available for public access. The Board will review the Shareholders' communication policy regularly to ensure its effectiveness.

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10. SHAREHOLDERS' RIGHTS

To safeguard Shareholders' interests and rights, a separate resolution will be proposed by the chairman of that meeting for each substantially separate issue at Shareholder meetings, including nomination and election of individual directors.

All resolutions put forward at Shareholder meetings will be voted on by poll pursuant to the Listing Rules and poll results will be posted on the websites of the Company and the Stock Exchange in a timely manner after each Shareholder meeting in accordance with the Listing Rules.

Procedures for Shareholders to convene an extraordinary general meeting

In accordance with Article 17.3 of the Articles of Association, any one or more Shareholders holding at the date of deposit of the requisition not less than one-tenth of the paid up capital of the Company carrying the right of voting at general meetings of the Company shall at all times have the right, by written requisition to the Board or the secretary of the Company, to require an extraordinary general meeting to be called by the Board for the transaction of any business specified in such requisition; and such meeting shall be held within two months after the deposit of such requisition. If within twenty-one days of such deposit the Board fails to proceed to convene such meeting, the requisitionist(s) himself (themselves) may do so in the same manner, 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.

Procedures for putting forward proposals at general meeting

There are no provisions allowing Shareholders to propose new resolutions at the general meetings under the Companies Law of the Cayman Islands. However, Shareholders who wish to propose resolutions may follow Article 17.3 of the Articles of Association for requisitioning an extraordinary general meeting and including a resolution at such meeting. The requirements and procedures of Article 17.3 are set out above.

As regards proposing a person for election as a Director, the procedures are available on the website of the Company.

Enquiries to the Board

Shareholders and investors may send written enquiries or requests to the Company as follows:

Address: 20/F, Building 1, Donghang Binjiang Center, No. 277 Longlan Road, Xuhui District, Shanghai, PRC

Attention: Board of Directors Office

Tel: 021-50623902

Fax: 021-68865390

Enquiries will be dealt with in a timely and informative manner.

11. CHANGE IN CONSTITUTIONAL DOCUMENTS

No changes were made to the Articles of Association during the year ended December 31, 2020.

52	RICI HEALTHCARE HOLDINGS LIMITED

Environmental, Social and

Governance Report

In 2020, the Group continues to improve its environmental, social and governance system in accordance with the relevant laws and regulations of the PRC and the Environmental, Social and Governance Reporting Guide set out in Appendix 27 to the Listing Rules. The Group adheres to the sustainable development strategy, and is committed to providing high-quality healthcare services for the society. The purpose of this report is to provide stakeholders with objectives, performance and future plans of the Group in respect of the environment and the society, including the impacts of the Group's operations on the environment, society and economy.

The Group attaches great importance to the transparency of information, and reports annually on its environmental and social practices and aspects and manages its results in a responsible manner. This report also helps the Group to establish standards for environmental and social work, identify areas where the performance can be enhanced, and make adjustments based on the progress of each year and the opinions collected from stakeholders.

The Group is primarily engaged in three major businesses, namely general hospital, specialty hospital and medical examination. This report focuses on the Group's specific guidelines and performance in environmental and social work for the year ended December 31 2020, covering the relevant performance and measures of the headquarters, the general hospital segment (Nantong Rich Hospital), the specialty hospital segment (Changzhou Rich Hospital, Rici Shuixian and Wuxi Rich Obstetrics & Gynecology Hospital) and the medical examination segment (including 55 medical examination centers in operation).

ENVIRONMENTAL PROTECTION

To operate in compliance with laws and regulations, the Group has taken all necessary measures on protecting the environment and preventing pollution, actively reduced the consumption of various resources and increased the recycling rate of resources, in order to reduce the negative impacts of corporate business activities on the environment. Also, the Group strived to reduce emissions of various pollutants such as atmospheric emissions and solid wastes, continuously improved corporate environmental management, and vigorously promoted the concept of green office and low-carbon travel, in order to create an environmentally friendly society.

The Group, on the aspect of its organizational structure, has commenced the construction of its environmental health and safety management system which has gradually formed a top-to-bottom management mechanism covering the Board to each business segment, so that every employee on each level has its own responsibility for the implementation of environmental health and safety work. Each segment is staffed with specialists being responsible for the management and exercise of environmental health and safety work, who form working groups with clearly defined responsibilities and capabilities in exercise of the duties delegated.

The major impacts of the Group's business activities on the environment and natural resources is mainly the consumption of relevant resources, such as water resources, electricity and fuel required in daily operations. The main sources of environmental pollution are atmospheric emissions (emissions of greenhouse gases, vehicle exhausts, etc.), and the main pollution factors are carbon dioxide, nitrogen oxides, sulphur oxides, particulates and solid wastes (hazardous wastes include medical wastes from hospital and medical examination services, and harmless wastes include domestic and kitchen wastes from living quarters and offices).

2020 Annual Report

Environmental, Social and Governance Report

COMPLIANCE OF ENVIRONMENTAL PROTECTION MANAGEMENT

The Group attached great importance to adherence to the compliance of environmental protection laws and regulations. All subsidiaries and branches have timely been registered upon pollutant discharge reporting registration with local environmental management authorities in accordance with the environmental protection laws and regulations for admitting themselves into the scope of legal supervision of the local environmental protection institutions. In the area where the pollutant discharge license system is implemented, all subsidiaries have applied for and obtained the pollutant discharge permit (排污許可證) from the local environmental protection departments, or are in the process of applying for the wastewater discharge permit. The results of the environmental monitoring report of the subsidiaries of the Group issued by the local environmental monitoring authorities or third parties show that, in 2020, all subsidiaries met the requirements for comprehensively controlling the emissions of the three wastes.

PROMOTION OF ENVIRONMENTAL PROTECTION

In the design of office environment and actual operation, the Group has always adhered to the requirements of protecting the environment under the laws and regulations, endeavoured to carry out its operations under the standards required for energy-saving, emission reduction and recycling of resources, with an objective to integrate the concept and action of environmental protection into the daily operations of the enterprise. The Group has taken the following environmental protection measures to reduce the impact of business operations to the environment:

In terms of the use of electricity and water

Turning off all unnecessary electricity consumption equipment (such as computers, air conditioners, lighting, etc.) during non-working hours
Increasing the number of lighting switches or changing the lightings to sensor-based lightings, and replacing lighting tubes with LED lightings
Inspecting water supply facilities on a regular basis, checking whether the response to the shutting-down instruction is timely and whether there are faults, in order to prevent water leakage and eliminate water evaporation, emission, drip and leakage
Water is consumed for office use and used by healthcare workers in medical/medical examination centers during working hours. The healthcare industry requires healthcare workers to wash their hands and clean their tools frequently to prevent the spread of diseases, and thus water consumption (especially the water consumption of hospital segment) is required for medical needs and infection prevention and control measures

In terms of the use of paper

Printing double-sided and reducing the amount of paper use to half by certain office floors
Designating a responsible person to record the usage amount for each printer
Careful checking is required before printing to avoid error and duplicate printing
Sharing documents among staff, and if not necessary, performing internal communications through e-mails and instant communication tools instead of issuing paper documents

In terms of low-carbon transportation

Encouraging employees to commute by public transportation and providing commuting shuttle buses for hospital employees in order to reduce the use of private cars
Whenever the use of private cars for business trip is required, asking the relevant persons to share personal cars in order to reduce fuel consumption

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Use and consumption of resources

Different from manufacturers, the Group (the headquarters, the general hospital segment consisting of Nantong Rich Hospital, the specialty hospital segment consisting of Changzhou Rich Hospital, Rici Shuixian and Wuxi Rich Obstetrics & Gynecology Hospital, and the medical examination segment consisting of 55 medical examination centers in operation) does not engage in production, and so no packaging materials are consumed. The Group strictly abides by Water Conservancy Law of the People's Republic of China 《( 中華人民共和國水利法》), Electric Power Law of the People's Republic of China 《( 中華人民共和國電力法》), Energy Law of the People's Republic of China 《( 中華人民共和國能源法》), Energy Conservation Law of the People's Republic of China 《( 中華人民共和國能源節約法》) and other relevant laws and regulations. The statistics of water, electricity, fuel and paper consumed generated during operations in 2020 are as follows:

	WATER CONSUMPTION IN 2020
Medical Examination Segment
108,304.55


Special Hospital Segment	64,745.00


General Hospital Segment	287,420.00
Headquarters
1,454.00

0.00 100,000.00 200,000.00 300,000.00 (M3/year)

ELECTRICITY CONSUMPTION IN 2020

Medical Examination Segment		11,817,986.58


Special Hospital Segment		6,870,987.35


General Hospital Segment		8,471,304.00
	165,656.56
Headquarters
0.00	6,000,000.00	12,000,000.00
		(kWh/year)

In 2020, the Group consumed a total of 462,923.55 cubic metres of water, with the intensity of 1.40 cubic meters per square metre of gross floor area. The water consumption in the headquarters is 1,454.00 cubic metres, 287,420.00 cubic metres in the General Hospital segment, 65,745.00 cubic metres in the Specialty Hospital segment, and 108,304.55 cubic metres in the Medical Examination segment.

In 2020, the Group consumed a total of 27,325,934.48 kWh of electricity, with the intensity of 82.40 kWh per square metre of gross floor area. The electricity consumption in the headquarters is 165,656.56 kWh, 8,471,304.00 kWh in the General Hospital segment, 6,870,987.35 kWh in the Specialty Hospital segment, and 11,817,986.58 kWh in the Medical Examination segment.

			PAPER CONSUMPTION IN 2020
Medical Examination Segment
29,891.92

Special Hospital Segment			2,896.87



General Hospital Segment	38,865.00
Headquarters		1,320.00

0.00 10,000.00 20,000.00 30,000.00 40,000.00 (kg/year)

In 2020, the Group consumed a total of 72,973.78 kg of paper, with the intensity of 0.22 kg per square metre of gross floor area. The paper consumption in the headquarters is 1,320.00 kg, 38,865.00 kg in the General Hospital segment, 2,896.87 kg in the Specialty Hospital segment, and 29,891.92 kg in the Medical Examination segment.

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Environmental, Social and Governance Report

	FUEL RESOURCES CONSUMPTION IN 2020
Medical Examination Segment

39,340.25
Special Hospital Segment
24,711.79
General Hospital Segment
				131,423.00


0.00	50,000.00	100,000.00	150,000.00
					(L/year)

In 2020, the Group consumed a total of 195,475.04 litres of fuel, with the intensity of 0.59 litres per square metre of gross floor area. The fuel consumption in the General Hospital segment is 131,423.00 litres, 24,711.79 litres in the Specialty Hospital segment, and 39,340.25 litres in the Medical Examination segment.

Environmental Pollutant Control and Discharge

In 2020, the Group (the headquarters, the general hospital segment consisting of Nantong Rich Hospital, the specialty hospital segment consisting of Changzhou Rich Hospital, Rici Shuixian and Wuxi Rich Obstetrics & Gynecology Hospital, and the medical examination segment consisting of 55 medical examination centers in operation) mainly offered healthcare services. The hazardous pollutants generated during operations are mainly medical wastes and medical wastewater. In strict compliance with the Measures for Management of Medical Wastes 《( 醫療廢物管理辦法》), the Measures for Management of Medical Wastes from Medical and Health Institutions 《( 醫療生物機構醫療廢物管理辦法》) and other relevant laws and regulations, the Group signed a cooperation agreement with local medical waste disposers for waste disposal. The statistics of medical wastes generated are as follows:

General Hospital segment: 171,875.69 kg/year
Specialty Hospital segment: 16,802.98 kg/year
Medical examination segment 222,002.16 kg/year

The non-hazardous pollutants generated during operations are non-medical wastes. In strict compliance with the Environmental Protection Law of the People's Republic of China, Measures for Management of Urban Domestic Waste and other relevant laws and regulations, the Group signed a cooperation agreement with local environmental management centers for waste disposal. The statistics of non-hazardous wastes generated are as follows:

General Hospital segment: 600,910.00 kg/year
Specialty Hospital segment: 346,677.25 kg/year
Medical examination segment 7,662.20 kg/year

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As the Group is different from players in heavy industries, air and direct greenhouse gas emissions are mainly from vehicles owned by the Group, while indirect greenhouse gas emissions mainly come from the consumption of electricity, paper and business travel. In 2020, the statistics of greenhouse gas emissions generated during operations are as follows:

	Emissions	Business Segment	Emissions in 2020
Greenhouse gas	Carbon dioxide (ton)	Headquarters	122.88
(GHG)
	"Equivalent	General Hospital segment	6,500.67
	emissions"
		Specialty Hospital segment	8,230.07
		Medical examination segment	4,914.56

		Total	19,768.18
		Scope 1: Direct greenhouse gas emissions	523.45
		Scope 2: Energy indirect greenhouse gas emissions	19,244.72

Air	Nitrogen oxides (kg)	General Hospital segment	898.99
		Specialty Hospital segment	204.71
		Medical examination segment	269.11

	Sulphur oxides (kg)	General Hospital segment	2.09
		Specialty Hospital segment	0.54
		Medical examination segment	0.59

	Particulate matter (kg)	General Hospital segment	85.74
		Specialty Hospital segment	16.12
		Medical examination segment	25.66

2020 Annual Report

Environmental, Social and Governance Report

HIGH-QUALITY SERVICE PRACTICE

Bringing prolonging and healthier lives for people is the mission of the Group. The Group is persistently committed to providing high-quality services to customers and creating values for employees, customers and Shareholders while pursuing integration of economic benefits and social benefits.

PROVISION OF HIGH-QUALITY SERVICES

Healthcare quality is the core content and eternal subject of the Group's healthcare service management. The Group gives the top priority to healthcare quality, and incorporates the target of continuously enhancing healthcare quality and improving service level in its work.

In order to regulate healthcare practices, strengthen the quality control on healthcare services, ensure healthcare security, protect the rights and interests of service objects, comprehensively improve the healthcare quality level and enhance the quality of healthcare services, the Group has established the leading group of service of the medical examination division for the Medical Examination segment, and set up the quality and safety management committee, the medical records management committee, the pharmacy management committee, the hospital infection management committee and the blood transfusion management committee in the hospital segments. All quality control and enhancement activities are organised by full-time or part-time employees responsible for service quality control.

At the same time, we have established a green channel emergency rescue mechanism in hospitals to regulate the matters in relation to charges, admission, examination, rescue and treatment of patients from cooperated units or "120" emergency medical center, in order to provide timely, standardised, efficient and considerate medical services, increasing the success rate of rescue and reducing medical risks.

The Group has made written records of its service quality control work, based on which a report is generated by the quality control department and submitted to the superior department on a regular basis. Through measures such as inspection, analysis, evaluation and feedback, the Group continuously enhances the healthcare quality and service level.

The Group has set up assessment and evaluation criteria for relevant full-time or part-time staff, and carried out whole- process monitoring and continuous improvement on the healthcare service quality and standard. At the end of 2020, the Group conducted a comprehensive performance evaluation centring on healthcare quality, the results of which showed that the healthcare quality level of the Group's subsidiaries significantly improved as compared with 2019.

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SOCIAL HONOURS

Some of the significant awards and certifications received by the Group in 2020 are set out as follows:

Tribute to Fang Yixin on the 20th anniversary of the establishment of

the Private Hospital Branch of the Chinese Hospital Association 中國醫院協會民營醫院分會20週年致敬人物 - 方宜新

Private Hospital Branch of the Chinese Hospital Association (中國醫院協會民營醫院分會)

2020 JD.Com Annual Cooperating Partner Award

2020年京東健康年度戰略合作夥伴

Health.JD (京東健康)

Anti-pandemic contribution award granted by Nantong Youth

Entrepreneurs Association 南通市青年民營企業商會抗疫貢獻獎

Nantong Youth Entrepreneurs Association (南通市青年民營企業家商會)

Medal of honour for ght against the pandemic awarded to Nantong

Rich Hospital 南通瑞慈醫院抗疫榮譽獎牌

People's Government of Yangxin County, CPC Yangxin County Committee

(中共陽新縣委陽新人民政府)

Honorary certicate awarded to Rici by Red Cross Society of China

Nanjing Branch 瑞慈醫療集團捐贈南京紅十字會榮譽證書

Red Cross Society of China Nanjing Branch (南京紅十字會)

Caring donator supporting ght against the pandemic 抗擊疫情同心同行愛心單位

United Front Work Department of CPC Hefei Municipal Committee (中共合肥市委統一戰線工作部)

DXY.INDEX certicate for Rici Shuixian 上海瑞慈水仙婦兒醫院丁香園

品牌指數認證證書

Dingxiangyuan (丁香園)

2020 Annual Report

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MEDICAL COMPLAINTS AND MEDICAL DISPUTES

The Group attaches great importance to the handling of medical complaints. A designated team is responsible for claim process, such as claim registration, handling and detailed documentation, patiently explains to complainants, and gives satisfactory replies to complainants.

Medical examination business
The medical examination business follows the "Customer Satisfaction and Communication Mechanism" 《( 客戶滿意與溝通機制》). The customer service department of each medical examination center is responsible for responding to various kinds of complaints and disputes related to medical examination, while the customer service department of the headquarters is responsible for collecting records on various kinds of complaints and disputes in relation to medical examination received by each medical examination institution on a regular basis and following up the status of complaints handled at the early stage, and summarising and preparing the "Standing Book of Management of Complaints from Institutional Customers" 《( 全國機構客戶投訴管理台帳》) in China.
Hospital segment
Complaints of the hospital segment are mainly handled by the doctor-patient communication office, with the involvement of relevant functional departments. Hospitals established the handling procedures and management systems for medical accidents, including "Preplan for Prevention and Handling of Medical Disputes and Medical Accidents by Rici's Hospital Business" 《( 瑞慈醫療集團醫院事業部醫療糾紛、醫療事故防範與處理預案》), "Opinions on Assessment and Punishment of Doctor-patient Disputes (Accidents) Involving Economic Losses of Rici's Hospital Business" 《( 瑞慈醫療集團醫院事業部涉及經濟損失醫患糾紛（事故）的考核及處罰意見》), "Litigation Management Measures of Rici's 《( 瑞慈醫療集團訴訟管理辦法》), "Registration Form of Complaint Reception and Handling in xx Hospital of Rici's Hospital Business" 《( 瑞慈醫療集團醫院事業部××醫院投訴接待、處理登記表》) , "Request Form of Compensation for Medical Disputes (Accidents) in xx Hospital of Rici's Hospital Business" 《( 瑞慈醫療集團醫院事業部××醫院醫療糾紛(事故)賠償或補償請示單》), "Responsibility Determination Form of Medical Disputes (Accidents) in xx Hospital of Rici's Hospital Business" 《( 瑞慈醫療集團醫院事業部××醫院醫療糾紛(事故)責任認定單》), as well as "Doctor-patient Communication System" 《( 醫患溝通制度》), which cover collection of information on medical disputes, communication channels, time limit requirements for follow-up handling, the punishment standard after the identification of responsibilities and clarification of responsibilities of relevant departments. The doctor-patient communication office is responsible for the collection, handling and follow-up of medical disputes and establishes a standing book to record the handling and follow-up procedures. The medical department and the head of each department discuss and analyse all recent medical disputes during meetings, and discuss the follow-up solutions regarding irreconcilable medical disputes.

As Rici are engaged in the provision of healthcare services instead of the manufacture of products, there are neither recalls of the products sold or shipped for safety and health reasons, nor product manufacturing quality assurance and recall procedures.

During 2020, there were a total of 76 service disputes with the Group, with 63 about the medical examination segment, 8 about the general hospital segment and 5 about the specialty hospital segment. The responsible departments, after- sales service team and special team for doctor-patient relationship shall timely record the incidents, communicate with customers/patients, and if necessary, identify and determine the responsibilities of medical incidents, in order to handle the incidents properly as soon as possible.

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CUSTOMER PRIVACY PROTECTION

The Group attaches great importance to customer privacy and strictly complies with relevant national laws and regulations (such as the Regulation on Medical Records Management in Medical Institutions 《( 醫療機構病歷管理規定》), Law on Medical Practitioners of the People's Republic of China 《( 中華人民共和國執業醫師法》), Measures for the management of nurses of the People's Republic of China 《( 中華人民共和國護士管理辦法》), and Tort Liability Law of the People's Republic of China 《( 中華人民共和國侵權委任法》) and Information Data Security Management System 《( 信息數據安全管理制度》). It strictly protects customer data and privacy while serving customers. In terms of customer data security management, the Group focuses on ensuring the safe storage and use of customer data, including personal data, medical records, diagnostic data, prescriptions and other data. The Group designated a person to keep customer data and regularly maintain the relevant system database for data storage. It has implemented confidential information security systems and rules. All employees must keep all customer information confidential and receive mandatory training on data security policies. Security measures should be taken in the transmission, storage and disposal of customer data. Customer information should be used only for the purpose of providing services to customers or for the research purpose anonymously.

Although the employer wants to know the medical exam information of an individual in a medical exam group, the Group will no longer provide the employer a medical exam report (including electronic version) without legal authorisation or the individual's permission. In order to comply with the national laws and regulations under the premise of meeting the needs of the employer that customers work for, if the employer or its cooperative manufacturer requires medical exam report of customers or positive results of tests; statistics of positive results, personal disease condition and a certain disease of an individual in a summary report of the medical exam group, the employer must submit a commitment letter signed by the individual (a letter of authorisation is required if another individual is entrusted to sign the commitment letter). If the underwriter requires a relevant report or information, it should stamp on the underwriting notice and attach the signature of the individual.

The Group took multiple measures to ensure network and data security, including installing a web application firewall system to block attacks and malicious visits from external sources; installing a database review system to monitor and analyse all internal data access requests and proactively identify and reject suspicious data access requests; installing access gateways in medical examination centers and hospitals to control and ensure the safe exchange of data between medical examination centers, hospitals and the central database; and installing gateways and firewalls to restrict internal computer network from accessing the external network.

During 2020, the Group did not receive any valid complaints in relation to the breach of customer privacy or leaking of customer information.

2020 Annual Report

Environmental, Social and Governance Report

SUPPLIER MANAGEMENT

In the healthcare industry, supplier management is an important part of quality control. Supplier selection directly affects the quality and level of healthcare services of the Group. Therefore, the Group has always adhered to an open and transparent supplier screening and review process, and would select qualified suppliers which commensurate with our standards, on the basis of providing high-quality services to the community, and giving priority to cooperate with suppliers that are environment-friendly and with the commitment to social responsibilities.

		Number of Suppliers by region
Southwest China,				Northwest China,
86					19
Central China,				Northeast China,
			8
143

North China,
168
Southwest China,
264
					East China,
					4,501
	East China	Southwest China		North China
		Central China		Southwest China
		Northwest China		Northeast China

The segments of the Group adopt a unified procurement strategy. As of December 31 2020, the total number of suppliers to the Group's headquarters, the Medical Examination segment, the General Hospital segment and the Specialty Hospital segment was 5,189, of which 4,501 were in East China, 264 in South China, 168 in North China, 143 in Central China, 86 in Southwest China, 19 in Northwest China and 8 in Northeast China.

SUPPLIER SELECTION MECHANISM

Based on the standardised supplier assessment screening criteria, the Group, taking into account of its peculiarity and complexity of the medical industry, has established a mature procurement system. In terms of supplier screening, the Group has developed stringent access requirements: suppliers must have a positive sense of service and reputation, and must be selected with preference to manufacturers and strong regional agents. For the procurement management of pharmaceuticals, the Group requires strict inspection on the qualifications and reputation in respect of quality of suppliers, in order to ensure the reasonability and safety of procurement. First-time suppliers/varieties are subject to the assessment and approval by the procurement department and the pharmacy committee. Through the comprehensive consideration of quality assurance, supply capacity, technical capability and product price, the Group ensures that the selected suppliers meet the Group's standards.

In addition, for all procurements, in order to prevent and combat unfair competition and reflect the spirit of fair cooperation between the two parties, the Group enters into "corruption-free agreements"(《廉潔協議》) with suppliers.

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PERIODIC ASSESSMENT OF SUPPLIERS

The Group has established a supplier review system under which all materials used are procured from suppliers with legitimacy, relevant qualifications and quality assurance capabilities. In supplier management, the Group's procurement department, together with the warehouse department and the departments that consume the materials, assesses the performance of suppliers annually and rates them according to the materials' usage, supply capacity and after-sales service, etc., based on which the "Supplier Evaluation Record Form" 《( 供應商考核評價紀錄表》) is generated. The management reviews the annual evaluation results, and the qualified suppliers will be registered on the "Qualified Supplier List" 《( 合格供應商名單》), which will be used as the basis for subsequent procurement. The newly added suppliers need to be rated according to the "New Supplier Evaluation Form" 《( 新供應商評估考核表》), and the results will be recorded in the Supplier Evaluation Record Form.

OUR EMPLOYEES

CORPORATE CULTURE

The Group's corporate culture includes two main aspects, namely values and culture.

Values	•	Being Rici for a lifetime, building health assets for society, enterprise,
		employees, and customers
	•	Creating healthy homes, innovation, integrity, dedication and
		environmental protection, together setting up enterprise energy
Culture	•	Reverence for life is the basis of faith
	•	Caring for life is the basis of moral
	•	Engaging in life is the basis for happiness
	•	Enhancing life is the basis for development

2020 Annual Report

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SUSTAINABLE DEVELOPMENT OF TALENTS

The Group firmly believes that excellent talents are valuable assets of the enterprise and the cornerstone of the sustainable development of the Company. Through the combination of external recruitment and internal trainings, the Group actively attracts external talents, and at the same time strengthens internal trainings and enhancement, building a high-calibre pool of talents for the Group. As at December 31 2020, the total number of employees of the Group's headquarters, Medical Examination segment, General Hospital segment and Specialty Hospital segment was 7,208, of which 230 were from the headquarters, 5,471 from the Medical Examination segment, 1,019 from the General Hospital segment and 488 from the Specialty Hospital segment. The ratio of male to female employees is about 1:4.

Staff Structure By Gender

Male

1,442

Female

5,766

Female		Male

PIONEER EMPLOYER

The Group adheres to nurture staff through excellent corporate culture, conscientiously building a comprehensive and caring platform for the employees. The Group never employs child labor or forced labor. Despite the absence of similar problems, the Group still regularly reviews the employment policies to ensure that all employment practices are strictly implemented and incorporated into the human resources policies. The step is not applicable when it needs to stop irregularities if any. In 2020, the total number of employees aged under 50 in the Group's headquarters, Medical Examination segment, General Hospital segment and Specialty Hospital segment was 5,405, accounting for 75% of its total employees. More and more young talents have become the backbone of the development of the Group.

The in-service staff of the Group can be divided into employees in East China, South China, North China, Central China and Northwest China, with the number being 5,817, 628, 129, 546 and 88 respectively.
The staff of the Group can be divided into full-time employees and part-time employees according to the employment type, with the number being 7,162 and 46 respectively.
The total employee turnover rate in 2020 was 24.44%.

Chart title Structure

50+

1,803名

31-50				30 or below
2,955
			2,450

	30 or below	31-50		50+


	Staff Structure by Region
Central China,
546				Northeast China,
				88

North China,

129

South China,

628

			East China,
		5,817
East China	South China		North China

Central China	Northeast China

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		Staff Structure by Position					Employee Turnover Rate by Region
Part-time
46										Northeast China		29.03%


											Central China		33.09%

											North China				42.36%

											South China		30.00%

											East China		21.77%
								Full-time			0.00%	10.00% 20.00%	30.00% 40.00%	50.00%
					7,162
			Full-time		Part-time

			Employee turnover rate						Employee turnover rate


											50+				22.48%
Female					23.35%



											31-50				22.18%
Male

				28.42%			30 and below
												27.73%



0.00%	10.00%	20.00%		30.00%	0.00%	10.00%			20.00%			30.00%

HEALTH AND SAFETY

The Group regards human resources as the most valuable asset and is committed to providing a safe, healthy and harmonious working environment for all employees. From aspects such as system construction, formulation of technical standards, enhancement of employees' risk awareness and supervision and evaluation management, the Group has conducted prevention and control on the health and safety risks of the employees. Four employees in the Group's headquarters, Medical Examination segment, General Hospital segment and Specialty Hospital segment were injured at work in 2020, leading to the loss of 275 days due to work-related injuries. There were no work-related deaths in 2018, 2019 and 2020.

1. System construction

The Group laid down 20 protection standards, including "Disinfection and Isolation System" 《( 消毒隔離制度》), "Monitoring and Reporting System of Infected Cases" 《( 感染病例監測與報告制度》), and "Occupational Protection System for Medical Personnel" 《( 醫務人員職業防護制度》) based on the Law on the Prevention and Treatment of Infectious Diseases of the PRC 《( 中華人民共和國傳染病防治法》), and revised the code of safe practices for employees that are easily exposed to infectious substances. Through the systemisation of the occupational health and safety management and the clarification of responsibilities, the Group became active instead of passive on infection management and switched from post-handling to prevention. With systematic and complete safety management standards in place, the Group reduced the infection rate and the incidence of infections caused by inadequate surveillance and prevention, ensuring the safety of employees and patients.

2020 Annual Report

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2. Raising personnel's risk awareness

At the beginning of each year, the Group organizes infection management annual training programs for personnel at all levels, and in such training programs, conducts trainings and examinations for the employee on the knowledge and skills related to policies and regulations in respect infection, medical wastes disposal and occupational protection, assisting employees to become familiar with the rules and regulations and operation process on occupational health and safety, in order to enhance the ability to prevent infection incidents and control occupational hazards.

DEVELOPMENT AND TRAINING

The Group actively supports employees' development of professional skills, and through the enhancement of employees' knowledge and skills, promotes the healthy development of the Group's business. Supported by its corporate culture, the Group has carried out four series of training courses: "new staff training", "leadership development training", "professional development training" and "general working skills training".

New staff training
In order for new staff to quickly adapt to the new working environment and to integrate better into the team, the Group provides a variety of induction training activities for new staff. Medical examination centers provide induction training for new recruits, including company profile, employee instructions, sales and customer-related guidance, etc., so as to improve their theoretical level and competence. The business department of the respective company under the Group also organises field visit for new recruits, assisting them in having a better understanding of the corporate culture and system. In hospitals, new staff training comprises internal training and external training. Hospitals first carry out a week-long group training for newly recruited employees, and then turn to professional pre- job skills training, so that new employees can quickly understand and master job responsibilities and specific work processes.
Leadership development training
In January each year, the Group conducts a series of seminars and conference on leadership training for general managers, institution heads and department heads. Management staff with certain experience and seniority are provided with training programs targeting the enhancement of management ability and leadership.
Professional development training
Integrating specific needs of different professional lines, the Group has developed systematic and advanced professional courses for staff at key positions, in particular, doctors and nurses. In 2020, different professional lines actively carried out professionalised learning activities, and through exchanges and visits to and from domestic and foreign advanced enterprises, advanced skills were introduced and taken as reference.
General working skills training
The "Customer-oriented" services model is one of the core corporate cultures of the Group, hence the Group's human resources center and corporate culture department regularly carry out "service etiquette" training. In 2020, through methods such as lectures and role simulation, the Group actively conveyed the common knowledge and skills of service etiquette to its employees.

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Performance evaluation
The Group stresses "to assess the personnel through their performances", and adheres to the allocation principles of prioritising performance, working harder and earning more, allocating jobs according to workload and taking into account of fairness, in order to stimulate the enthusiasm and creativity of employees. The design, implementation and results of the performance management system of the Group focus on the comprehensive and objective evaluation of the overall performance of employees, in order to enhance the matching of employees' quality, ability, performance, and position requirements.

The Group (the headquarters, the General Hospital segment, the Specialty Hospital segment and the Medical Examination segment) carried out appropriate job training for all employees (including middle and senior management) in 2020. Employees are classified as follows:

Trainee Demographics	Staff-Trained Demographics
Managers	Male
5%	20%

Non-managers		Female
95%				80%
	Managers		Non-managers		Male	Female

EMPLOYEE CARE

The Group always adheres to the principle of fairness, opposes discrimination, achieves equal pay for employees, abided by the same minimum wage standard and equal pay for equal work. In respect of employee composition of 2020, female employees accounted for 80%.

The Group strictly abides by the local labour laws and regulations to provide all full-time employees with statutory benefits and paid holidays. It provides leave and benefits in line with national and local laws for all female employees during pregnancy, maternity and lactation, and male workers with pregnant spouse can also enjoy paternity leave.

	Average Training Duration (hours)						Average Training Duration (hours)


Non-managers					310				Female			309
Managers									Male

		237								295


0	100	200	300	400	285	290	295	300	305	310	315

2020 Annual Report

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As an "in-depth medical examination" advocate and practitioner, the Group always concerns about the health of its employees. The Group formulated the Employee Care Program 《( 員工關懷計劃》) to provide employees and their families with free medical examinations for RMB1,500 each year, or to provide discounted medical examination gift cards, in order to enhance employees' sense of identity and belonging to the Group, so that employees can grow up and develop together with the Group.

In 2020, the Group held a number of activities to improve employees' sense of happiness and honour. Nantong Rich Hospital held a ceremony to welcome the returned medical assistance team supporting Hubei on April 17, 2020 and honoured three team members as progressive individuals in the prevention and control of COVID-19 pandemic. On the Medical Workers' Day, Nantong Rich Clinic sent gifts to medical examiners who gathered together and took part in a training activity.

SOCIAL INVESTMENT

On the pledge of the continuously performing corporate citizenship responsibility and the concept of sincerely serving the society, the Group actively participates in various community activities such as charity donation, voluntary medical services, continuously bringing positive changes to the society. In 2020, the Group held many social charity activities, including anti-pandemic activities, Shanghai-Nantong famous doctor promotion association's activities and voluntary diagnosis and treatment services.

Anti-pandemic efforts

Supporting frontline workers, standing side by side with them

With intensified efforts on pandemic prevention and control and strict traffic restrictions, Zou Yangyang (鄒揚揚), general manager of Wuhan Rich Clinic, set off from Hefei with emergency materials on January 27, 2020 and arrived in Wuhan after a thousand-mile journey. He sent emergency medical supplies to various district governments, community health service centers and frontline workers in Wuhan by contacting the Government of Qiaokou District, the Wuhan Municipal Headquarters for COVID-19 Pandemic Prevention and Control, sub-district offices, etc.

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On February 24, 2020, Nantong Rich Hospital selected three medical workers from relevant key departments with rich clinical experience and good physical fitness to form a medical team to assist Huangshi, Hubei. After the three medical professionals arrived in Hubei, they fought for more than 30 days and nights in Huangshi Central Hospital (黃石市中心醫院) and Yangxin County People's Hospital (陽新縣人民醫院) to treat local critically ill patients.

Voluntary anti-pandemic services

In February-March 2020, the Group dispatched medical workers from Qingpu Rich Clinic under the Shanghai subsidiary of Rici Healthcare to Jiangsu-Shanghai Expressway toll stations, medical workers from Nantong subsidiary to the expressway exit in Nantong Economic and Technological Development Zone, medical workers from Hefei subsidiary to the Hefei Shushan Center for Disease Control and Prevention (合肥蜀山疾控中心), medical workers from Suzhou subsidiary to Suzhou Industrial Park, medical workers from Changzhou subsidiary to provincial highways and a community in Tianning District, and medical workers from Yantai subsidiary to Expressway Traffic Police Detachment of Yantai Public Security Bureau (烟台市公安局高速公路及警支隊) to be responsible for temperature measurement and information registration for people coming in and going out.

Anti-pandemic donations

Rici actively made donations to support the fight against the pandemic in 2020. Hefei Rich Clinic donated 1,600 disposable medical masks, 12,000 pairs of disposable medical exam gloves, 2,000 medical latex gloves, 140 bottles of medical alcohol and 10 bottles of medical disinfectant. All employees of Qingpu Rich Clinic donated 10,000 pairs of disposable medical gloves, 8 bottles of hand sanitiser, 17 cases of disinfectant alcohol and other medical supplies. Changzhou Rich Hospital organised a voluntary blood donation activity in April 2020, during which its employees donated 5,300 mL of blood in total. Rici teamed up with the Shanghai Medical and Health Development Foundation (上海市醫藥發展基金會) and the Red Cross Society of China Nanjing Branch (南京紅十字會) to donate high-end physical examination service worth RMB10 million to members of medical assistance teams and their families.

2020 Annual Report

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Promoting Renowned Doctors Conference (名醫促進會)

Medical assistance activities in Hanzhong

A delegation of more than 40 members from the Shanghai- Nantong famous doctor promotion association went to Hanzhong, Shaanxi on September 18, 2020 to carry out activities, including patient rounds, academic exchanges and group consultations on difficult and complicated cases. Besides, a framework agreement on cooperation in health and medical care was signed, which will facilitate the creation of a new model of health poverty alleviation. This is the first time for the association to carry out activities outside Jiangsu, Zhejiang and Shanghai since its establishment, which is of great significance for the association's future development and the provision of quality healthcare services to the central and western regions and even more regions. Since its establishment in 2012, the conference has gathered 115 senior medical experts with" Nantong Blood". Over the years, the conference has carried out academic discussions, large-scale free medical consultations, medical research and teaching in Nantong and Jiangsu, which has effectively promoted the exchange and cooperation between Nantong Hospital and Shanghai Class III Grade A hospitals, and has vigorously promoted the development of Nantong's medical and health industry, benefiting the public.

Voluntary diagnosis and treatment services

Large voluntary diagnosis and treatment activity on Medical Workers' Day

On August 19, 2020, Hefei Rich Clinic led a three-member expert team to a community in Dawei Town to offer voluntary diagnosis and treatment services for residents and people at the flood embankments. The voluntary diagnosis and treatment activity served more than 500 residents, including over 200 blood pressure measurements, over 100 ECG measurements and over 200 consultations. It warmed the local community residents and strengthened their health awareness.

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Rici's 20th anniversary celebration

Rici Healthcare held a 20th anniversary celebration on September 26, 2020 and announced that it would organise 100 voluntary diagnosis and treatment activities in communities. Experts will screen for cataracts, breast cancer, thyroid, intestinal tumours and other diseases. A health poverty alleviation plan will be launched to help patients with esophageal cancer. It will collaborate with Red Cross Society of China Nantong Branch to initiate a "brightness action" program to help impoverished patients with cataracts receive free operations. Nantong Rich Hospital held a large voluntary diagnosis and treatment activity that very day along with 15 experts from 14 departments, namely oncology, radiation oncology, surgical oncology, general surgery, orthopedics, thoracic surgery, cardiovascular surgery, pediatrics, neurology, cardiology, gastroenterology, endocrinology, respiratory medicine and medical imaging, to give answers to citizens in Nantong.

ANTI-CORRUPTION

The Group has always been implementing strict policies to prevent corruption, and has set "striving to uphold integrity and believing that integrity is the basis for establishment" as its core values, and embedded such value in the daily operation.

On the basis of strict adherence to the laws and regulations such as the Criminal Law of the PRC 《( 中華人民共和國刑法》) and the Anti-unfair Competition Law of the PRC 《( 中華人民共和國反不正當競爭法》), and in accordance with the internal management needs of the Company, the Group has formulated the Regulations on Fraud and Violation of the Group 《( 集團舞弊及違規行為條例》) and Rici Internal Audit Management System 《( 瑞慈醫療集團內部審計管理制度》), which has defined the fraud and violation monitoring mechanism.

The Group has published a formal staff handbook with clear guidelines on aspects such as conflicts of interest, privacy and confidentiality, prevention of bribery and corruption. All employees must comply with the relevant system and code of conduct issued by the Group. The staff handbook is also an important part of the new staff induction training, and all new employees must pass the code of conduct assessment before they can be officially posted.

In order to strengthen the ideological education of honesty and integrity in practice and improve the awareness of business ethics, the Group has conducted online and offline promotion and trainings related to anti-corruption for all directors and employees. On the Group's web portal, the legal department of the Medical Examination segment organised online training on anticorruption. At the same time, in respect of offline practice, its hospital segments have extended the objects of anticorruption training from medical staff to management staff, and through weekly meetings, carried out anticorruption training and promotion themed on corruption warning and education cases to medical and logistics staff. Jing'an People's Procuratorate and Rici held an exchange meeting on work functions and prevention and control of duty-related crimes on 30 June 2020. A prosecutor of the procuratorate gave training on duty-related crimes at Rici's 2020 mid-year meeting on 15 August 2020.

2020 Annual Report

Environmental, Social and Governance Report

The Group has set up anti-fraud and anti-commercial bribery provisions in procurement contracts, requiring third parties to be honest and incorruptive and law-abiding in the process of dealing with the Company in order to improve business ethics and the integrity of the management culture.

The Group has established and implemented a series of anticorruption reporting and monitoring mechanisms. Employees can report directly through an email and a hotline, and all reports are handled in a prudent and confidential manner. Through departmental self-monitoring and internal audit, the Company ensures timely detection and handling of matters on anticorruption and anti-fraud, and hence reduces the negative impact of corruption and fraud.

During 2020, the Group was not served with any lawsuit on corruption involving Rici or employees of the Group.

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Directors' Report

The Board is pleased to present the annual report together with the audited consolidated financial statements of the Group for the year ended December 31, 2020.

PRINCIPAL ACTIVITIES

The Company was incorporated in the Cayman Islands on July 11, 2014 as an exempted company with limited liability under the Companies Law of the Cayman Islands. The Company is an investment holding company, and its subsidiaries incorporated in the PRC are primarily engaged in the operating general hospital, specialty hospital, medical examination centers and clinics in the PRC.

The activities and particulars of the Company's subsidiaries are shown under Note 42 to the consolidated financial statements. An analysis of the Group's revenue and net results for the year by principal activities is set out in the section headed "Management Discussion and Analysis" in this annual report.

BUSINESS REVIEW

A review of the Group's business during the year, which includes a discussion of the principal risks and uncertainties facing by the Group, an analysis of the Group's performance using financial key performance indicators and an indication of likely future developments in the Group's business, can be found in the sections headed "Chairman's Statement", "Management Discussion and Analysis" and "Corporate Governance Report" in this annual report. In addition, a discussion on relationships with its key stakeholders is included in the sections headed "Management Discussion and Analysis" and "Environmental, Social and Governance Report". The review and discussion form part of this directors' report.

RESULTS AND DIVIDEND

The consolidation results of the Group for the year ended December 31, 2020 are set out on pages 89 to 190 of this annual report.

The Board has resolved not to declare any final dividend for the year ended December 31, 2020.

CLOSURE OF THE REGISTER OF MEMBERS

The register of members of the Company will be closed from June 15, 2021 to June 18, 2021, both days inclusive and during which period no share transfer will be effected, for the purpose of ascertaining shareholders' entitlement to attend and vote at the 2021 AGM on June 18, 2021. In order to be eligible to attend and vote at the 2021 AGM, all transfer documents accompanied by the relevant share certificates must be lodged for registration with the Company's Hong Kong branch share registrar, Computershare Hong Kong Investor Services Limited, at Shops 1712-1716, 17th Floor, Hopewell Center, 183 Queen's Road East, Wanchai, Hong Kong, not later than 4:30 p.m. on June 11, 2021.

2020 Annual Report

Directors' Report

FINANCIAL SUMMARY

A summary of the published results and assets, liabilities and non-controlling interests of the Group for the last five financial years is set out on page 10 of this report.

PROPERTY AND EQUIPMENT

Details of the movements in property and equipment of the Group during the year ended December 31, 2020 are set out in Note 7 to the consolidated financial statements of this annual report.

SHARE CAPITAL

Details of the movements in share capital of the Company during the year ended December 31, 2020 are set out in Note 18 to the consolidated financial statements of this annual report.

RESERVES

Details of the movement in the reserves of the Group and of the Company during the year ended December 31, 2020 are set out in Note 20 to the consolidated financial statements on page 155 of this annual report.

DISTRIBUTABLE RESERVES

As at December 31, 2020, the Company's distributable reserves were RMB827.0 million.

BORROWINGS

As at December 31, 2020, the Group had outstanding borrowings of RMB1,285.2 million. Details of the borrowings are set out in the section headed "Management Discussion and Analysis" in this annual report and Note 22 to the consolidated financial statements.

PURCHASE, SALE OR REDEMPTION OF THE COMPANY'S LISTED SECURITIES

Neither the Company, nor any of its subsidiaries purchased, sold or redeemed any of the Company's listed securities during the year ended December 31, 2020.

PRE-EMPTIVE RIGHTS

There are no provisions for pre-emptive rights under the articles of association of the Company or the laws of Cayman Islands, which would oblige the Company to offer new Shares of the Company on a pro-rata basis to the existing Shareholders.

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USE OF NET PROCEEDS FROM THE IPO

The net proceeds from the IPO amounted to RMB682.7 million after deducting share issuance costs and listing expenses. During the year 2020, the net proceeds from the listing were utilized in accordance with the proposed applications set out in the section headed "Future Plans and Use of Proceeds" in the Prospectus, with the balance amounted to approximately RMB185.3 million. As disclosed in the announcement of the Company dated February 18, 2020, the remaining unutilized net proceeds from the IPO will be used in accordance with the Group's development strategies, market conditions and intended use of such proceeds, which has been changed by the Board from "establishment of our multi-function facility" to "establishment of new medical examination centers and upgrading and renovation of existing medical examination centers", and are expected to be fully utilized on or before December 31, 2022. Details are set out in the following table:

	Net amount	Actual	Unutilized
	available as at	amount utilized	amount as at
	December	during the	December 31,
	31, 2019	year 2020	2020
	RMB'000	RMB'000	RMB'000
Establishment of new medical examination centers
and upgrading and renovation of existing medical
examination centers	220,808	(35,552)	185,256

DIRECTORS

The Board currently consists of the following eight Directors:

Executive Directors

Dr. Fang Yixin (Chairman and Chief Executive Officer)

Dr. Mei Hong

Ms. Lin Xiaoying

Mr. Fang Haoze

Non-executive Director

Ms. Jiao Yan

Independent Non-executive Directors

Dr. Wang Yong

Ms. Wong Sze Wing

Mr. Jiang Peixing

2020 Annual Report

Directors' Report

BIOGRAPHICAL DETAILS OF THE DIRECTORS AND THE SENIOR MANAGEMENT

Biographical details of the Directors and the senior management of the Group as at the date of this annual report are set out in the section headed "Profile of Directors and Senior Management" in this annual report.

DIRECTORS' SERVICE CONTRACTS

Details of the executive Directors' service contracts and the non-executive Directors' and independent non-executive Directors' appointment letters are set out in the section headed "Corporate Governance Report - 2. The Board - (8) Appointment and re-election of Directors" in this annual report.

The appointment of the Directors is subject to the provisions of retirement and rotation of Directors under the Articles.

Save as disclosed in this annual report, none of the Directors has entered into any service contract with the Company or any of its subsidiaries (excluding contracts expiring or determinable by the Company within one year without payment of compensation, other than statutory compensation).

CONTRACT WITH CONTROLLING SHAREHOLDERS

Other than disclosed in the sections headed "- Connected Transaction", "- Related Party Transactions" and "Management Discussion and Analysis" and Note 41 to the consolidated financial statements contained in this annual report, no contract of significance was entered into between the Company or any of its subsidiaries and the Controlling Shareholders or any of its subsidiaries during the year ended December 31, 2020 or subsisted at the end of the year and no contract of significance for the provision of services to the Company or any of its subsidiaries by a Controlling Shareholder or any of its subsidiaries was entered into during the year ended December 31, 2020 or subsisted at the end of the year.

DIRECTOR'S INTEREST IN TRANSACTIONS, ARRANGEMENT OR CONTRACT OF SIGNIFICANCE

Other than disclosed in the sections headed "- Connected Transaction", "- Related Party Transactions" and "Management Discussion and Analysis" and Note 41 to the consolidated financial statements contained in this annual report, no transaction, arrangement or contract of significance to the business of the Group which the Company or any of its subsidiaries was a party, and in which a Director or any entity connected with such a Director had a material interest, whether directly or indirectly, subsisted at the end of the year or at any time during the year ended December 31, 2020.

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COMPENSATION OF DIRECTORS AND SENIOR MANAGEMENT

The emoluments of the Directors and senior management of the Group are decided by the Board with reference to the recommendation given by the Remuneration Committee, having regard to the Group's operating results, individual performance and comparable market statistics.

Details of the Directors' emoluments and emoluments of the five highest paid individual in the Group are set out in Note 33 to the consolidated financial statements on pages 168 to 170 of this annual report.

For the year ended December 31, 2020, no emoluments were paid by the Group to any Director or any of the five highest paid individuals as an inducement to join or upon joining the Group or as compensation for loss of office. None of the Directors has waived or agreed to waive any emoluments for the year ended December 31, 2020.

The Company has also adopted the Pre-IPO Share Option Scheme and the Share Option Scheme as incentive for Directors and eligible employees. Details of the said schemes are set out under the section headed "Pre-IPO Share Option Scheme and Share Option Scheme" in this annual report and in Note 19 to the consolidated financial statements on page 154 of this annual report.

Except as disclosed above, no other payments have been made or are payable, for the year ended December 31, 2020, by our Group to or on behalf of any of the Directors.

DIRECTORS' INTERESTS IN COMPETING BUSINESS

During the year ended December 31, 2020, none of the Directors or their respective close associates (as defined in the Listing Rules) had any interest in a business that competed or was likely to compete, either directly or indirectly, with the business of the Group, other than being a director of the Company and/or its subsidiaries.

CONTINUING DISCLOSURE OBLIGATIONS PURSUANT TO THE LISTING RULES

The Company does not have any other disclosure obligations under Rules 13.20, 13.21 and 13.22 of the Listing Rules.

DEED OF NON-COMPETITION

On June 23, 2016, Dr. Mei, the Company's ultimate Controlling Shareholder, and Chelsea Grace, through which Dr. Mei holds equity interest in the Company entered into the deed of non-competition ("Deed of Non-competition") in favor of the Company, pursuant to which the Controlling Shareholders have irrevocably, jointly and severally given certain non- competition undertakings to the Company. Details of the Deed of Non-competition are set out in the section headed "Relationship with our Controlling Shareholders - Deed of Non-competition" in the Prospectus.

The Controlling Shareholders confirmed that they have complied with the Non-competition Deed for the year ended December 31, 2020. The independent non-executive Directors have conducted such review for the year ended December 31, 2020 and also reviewed the relevant undertakings and are satisfied that the Deed of Non-competition has been fully complied with.

2020 Annual Report

Directors' Report

MANAGEMENT CONTRACTS

Other than the Directors' service contracts and appointment letters as disclosed in the section headed "- Directors' service contracts" and the section headed "Corporate Governance Report - 2. The Board - (8) Appointment and re-election of Directors" in this annual report, no contract concerning the management and administration of the whole or any substantial part of the business of the Group was entered into or in existence as at the end of the year or at any time during the year ended December 31, 2020.

MATERIAL LEGAL PROCEEDINGS

The Group was not involved in any material legal proceeding during the year ended December 31, 2020.

LOAN AND GUARANTEE

During the year ended December 31, 2020, the Group had not made any loan or provided any guarantee for loan, directly or indirectly, to the Directors, senior management of the Company, the Controlling Shareholders or their respective associates (as defined in the Listing Rules).

PRE-IPO SHARE OPTION SCHEME AND SHARE OPTION SCHEME

Pre-IPO Share Option Scheme

The Company conditionally approved and adopted the Pre-IPO Share Option Scheme pursuant to the resolutions of the Shareholders passed on September 19, 2016.

The purpose of the Pre-IPO Share Option Scheme is to attract, retain and motivate employees and Directors, and to provide a means of compensating them through the grant of options for their contribution to the growth and profits of the Group, and to allow such employees and Directors to participate in the growth and profitability of the Group.

On September 19, 2016, options (exercisable for 10 years subject to vesting schedule as set out below) to subscribe for an aggregate of 47,710,500 Shares were conditionally granted by the Company under the Pre-IPO Share Option Scheme to a total of three grantees, including two executive Directors. Such options were granted based on the performance of the grantees that have made important contributions or are important to the long term growth and profitability of the Group. The exercise price is HK$1.60 per Share as determined by the Board taking into account of the grantees' contribution to the development and growth of the Group. Apart from the above share options, no options were granted under the Pre- IPO Share Option Scheme. In addition, no further options can be granted under the Pre-IPO Share Option Scheme on or after the Listing Date. The total number of Shares currently available for issue under the Pre-IPO Share Option Scheme is 47,710,500 Shares, representing approximately 3.0% of the issued share capital of the Company as at the date of this annual report.

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Directors' Report

Subject to the Pre-IPO Share Option Scheme, each option shall be vested in the following manner:

Tranche	Vesting Date
five percent (5%) of the Shares subject to an option so granted	third (3rd) anniversary of the offer date for an option
ten percent (10%) of the Shares subject to an option so granted	fourth (4th) anniversary of the offer date for an option
fifteen percent (15%) of the Shares subject to an option so granted	fifth (5th) anniversary of the offer date for an option
seventy percent (70%) of the Shares subject to an option so	sixth (6th) anniversary of the offer date for an option
granted

Details of movement of the share options granted under the Pre-IPO Share Option Scheme for the year ended December 31, 2020 are set out below:

			Number of options
	Outstanding				Outstanding
	as at	Exercised	Cancelled	Lapsed	as at
	January 1,	during the	during the	during the	December 31,	Exercise
Name of option holder	2020	year	year	year	2020	Price
Directors of the Company
Dr. Fang	15,903,500	-	-	-	15,903,500	HK$1.60
Dr. Mei	15,903,500	-	-	-	15,903,500	HK$1.60
Senior management and other
employees of the Group
Cao Ying	15,903,500	-	-	-	15,903,500	HK$1.60

Total	47,710,500	-	-	-	47,710,500

The Directors who have been granted options under the Pre-IPO Share Option Scheme, have undertaken that they will not exercise the options granted to them under the Pre-IPO Share Option Scheme if as a result of which the Company would not be able to comply with the public float requirements of the Listing Rules.

A summary of the terms (including the terms of the scheme, the calculation method of the exercise price and vesting periods and conditions) of the Pre-IPO Share Option Scheme has been set out in the section headed "E. Pre-IPO Share Option Scheme" in Appendix IV of the Prospectus.

The Pre-IPO Share Option Scheme does not fall within the ambit of, and is not subject to, the regulations under Chapter 17 of the Listing Rules. Details of the impact of options granted under the Pre-IPO Share Option Scheme on the consolidated financial statements since the date of grant of such options and the subsequent financial periods are set out under Note 19 to the consolidated financial statements in this annual report.

2020 Annual Report

Directors' Report

Share Option Scheme

On September 19, 2016, the Company adopted the Share Option Scheme, which falls within the ambit of, and is subject to, the regulations under Chapter 17 of the Listing Rules. The purpose of the Share Option Scheme is to attract, retain and motivate employees, Directors and other participants, and to provide a means of compensating them through the grant of options for their contribution to the growth and profits of the Group, and to allow such employees, Directors and other persons to participate in the growth and profitability of the Group.

The Shares which may be issued upon exercise of all Options to be granted under the Share Option Scheme and other share option schemes of our Company (and to which the provisions of the Listing Rules are applicable) shall not exceed 79,517,500 Shares (i.e. 5% of the aggregate of the Shares in issue on the Listing Date) ("Scheme Mandate Limit"), representing approximately 5% of the total issued shares as at the date of this annual report. Options lapsed in accordance with the terms of the Share Option Scheme shall not be counted for the purpose of calculating this Scheme Mandate Limit.

The total number of Shares issued and to be issued upon the exercise of the options granted to or to be granted to each eligible person under the Share Option Scheme (including exercised, cancelled and outstanding options) in any 12-month period shall not exceed 1% of the Shares in issue.

The Share Option Scheme will remain in force for a period of 10 years from September 19, 2016 and the options granted have a 10-year exercise period. Options may be vested over such period(s) as determined by the Board in its absolute discretion subject to compliance with the requirements under any applicable laws, regulations or rules.

The exercise price of the option shall be such price as determined by the Board in its absolute discretion at the time of the grant of the relevant option (and shall be stated in the letter containing the offer of the grant of the option), but in any case the subscription price shall not be less than the higher of (a) the closing price of the Shares as stated in the daily quotation sheet of the Stock Exchange on the date of grant, which must be a business day, (b) the average closing price of the Shares as stated in the daily quotation sheets of the Stock Exchange for the five (5) business days immediately preceding the date of grant, and (c) the nominal value of a Share.

On November 24, 2017, the Company granted share options to certain then Directors and employees of the Company and its subsidiaries to subscribe for a total of 79,517,500 ordinary shares in the share capital of the Company, at the price of HK$2.42 per Share. The closing price of the Shares before the date of grant of such options was HK$2.35 per Share. As of December 31, 2020, among the Options granted as described above, options in respect of a total of 700,000 Shares were granted to an associate (as defined under the Listing Rules) of a Director and the acceptance letter was signed. Details of such options granted to the associate of a Director are set out as follows:

		Number of
Name	Position	options granted
Mr. Mei Ye(1)	Deputy General Manager of Medical Examination Business Department	700,000

Total		700,000

Note:

Mr. Mei Ye is an associate of Dr. Mei.

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Details of the options granted under the Share Option Scheme and those remained outstanding as at December 31, 2020 are as follows:

					Number of Options
					Exercised	Cancelled
			Outstanding	Granted during	during the	during the	Lapsed during	Outstanding
			as at	the year ended	year ended	year ended	the year ended	as at
Name and Class		January 1,	December 31,	December 31,	December 31,	December 31,	December 31,	Exercise
of Grantees	Date of Grant	2020	2020	2020	2020	2020	2020	Price
(1)	Associate of Director
Mr. Mei Ye(1)	November 24, 2017	700,000	-	-	-	-	700,000	HK$2.42
(2)	Other Employees	November 24, 2017	74,617,500	-	-	(10,957,500)	-	63,660,000	HK$2.42

Total			75,317,500	-	-	(10,957,500)	-	64,360,000

Note:

Mr. Mei Ye is an associate of Dr. Mei.

20% of the options granted will be exercisable from the date falling on the 3rd anniversary of the date of grant of such options; 20% of the options granted will be exercisable from the date falling on the 4th anniversary of the date of grant of such options; 20% of the options granted will be exercisable from the date falling on the 5th anniversary of the date of grant of such options; and the remaining 40% of the options granted will be exercisable from the date falling on the 6th anniversary of the date of grant of such options.

Details of the impact of the options granted under the Share Option Scheme on the consolidated financial statements since the date of grant of such options and the subsequent financial periods are set out under Note 19 to the consolidated financial statements in this annual report.

A summary of the terms of the Share Option Scheme has been set out in the section headed "F. Share Option Scheme" in Appendix IV of the Prospectus.

2020 Annual Report

Directors' Report

INTERESTS OF DIRECTORS AND CHIEF EXECUTIVE IN SECURITIES

As at December 31, 2020, the interests or short positions of the Directors and chief executive of the Company in the shares, underlying shares and debentures of the Company and its associated corporations (within the meaning of Part XV of the SFO), which (a) were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which he/she was taken or deemed to have under such provisions of the SFO); or (b) were required, pursuant to section 352 of the SFO, to be recorded in the register referred to therein; or (c) were required to be notified to the Company and the Stock Exchange pursuant to the Model Code, were as follows:

Long/Short position in ordinary shares of the Company

				Approximate
				percentage+ of
			Number of	the Company's
			ordinary shares	issued share
Name of Director	Long position	Capacity	interested(1)	capital
Dr. Mei(2)	Long position	Interest in controlled corporation;	872,550,000 (L)	54.87%
	Short position	Interest in controlled corporation	294,492,000 (S)(4)	18.52%
Dr. Fang(3)	Long position	Interest of spouse	872,550,000 (L)	54.87%
	Short position	Interest of spouse	294,492,000 (S)(4)	18.52%

Long position in underlying shares of the Company - physically settled unlisted equity derivatives

		Number of	Approximate
		underlying shares	percentage+ of
		in respect of the	the Company's
		share options	issued share
Name of Director	Capacity	granted(1)(2)	capital
Dr. Mei(2)	Beneficial owner; Interest of spouse	31,807,000 (L)	2.00%
Dr. Fang(3)	Beneficial owner; Interest of spouse	31,807,000 (L)	2.00%

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Notes:

The letter "L" denotes the person's long position in the Shares and the letter "S" denotes the person's short position in the Shares.
Chelsea Grace was beneficially interested in the 872,550,000 Shares as at December 31, 2020. Under the SFO, Dr. Mei is deemed to be interested in all the Shares held by Chelsea Grace by reason of her 100% interest in its issued share capital and is also deemed to be interested in all the interests held by Dr. Fang as she is the wife of Dr. Fang who is granted an option to subscribe for 15,903,500 Shares under the Pre-IPO Share Option Scheme. Dr. Mei is granted an option to subscribe for 15,903,500 Shares under the Pre-IPO Share Option Scheme.
Dr. Fang is the husband of Dr. Mei. Therefore, Dr. Fang is deemed to be interested in Dr. Mei's interests in our Company who is granted an option to subscribe for 15,903,500 Shares under the Pre-IPO Share Option Scheme. Dr. Fang is granted an option to subscribe for 15,903,500 Shares under the Pre-IPO Share Option Scheme.
Such number of shares are subject to certain security arrangement.

The percentage represents the number of ordinary shares/underlying shares interested divided by the number of the Company's issued shares as at December 31, 2020.

Details of the above share options granted by the Company are set out in the section headed "Pre-IPO Share Option Scheme and Share Option Scheme" in this report.

Interest in associated corporation

				Percentage of
	Associated	Capacity/	Number of	shareholding
Name of Director	corporation	nature of interest	shares	interest
Dr. Mei(1)	Chelsea Grace(2)	Beneficial owner	1	100%
Dr. Fang(1)	Chelsea Grace(2)	Interest of spouse	1	100%

Notes:

Dr. Fang is the husband of Dr. Mei. Therefore, under the SFO, Dr. Fang is deemed to be interested in Dr. Mei's interests in Chelsea Grace.
Under the SFO, a holding company of the listed corporation is regarded as an "associated corporation". As at December 31, 2020, Chelsea Grace held 54.87% of our issued share capital and thus was our associated corporation.

Save as disclosed in this annual report and to the best knowledge of the Directors, as at December 31, 2020, none of the Directors or the chief executive of the Company has any interests and/or short positions in the shares, underlying shares or debentures of the Company or its associated corporations (within the meaning of Part XV of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they are taken or deemed to have under such provisions of the SFO) or which were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein or which were required, pursuant to the Model Code, to be notified to the Company and the Stock Exchange.

2020 Annual Report

Directors' Report

SUBSTANTIAL SHAREHOLDERS' INTERESTS IN SECURITIES

So far as is known to any Director or chief executive of the Company, as at December 31, 2020, the following corporations/ persons (other than Directors or the chief executive of the Company) had interests of 5% or more in the issued shares of the Company according to the register of interests required to be kept by the Company under section 336 of the SFO:

Long/Short position in ordinary shares of the Company

				Approximate
				percentage+ of
		Number of	the Company's
		ordinary shares	issued share
Name	Capacity	interested(1)	capital
Chelsea Grace(2)	Beneficial owner	872,550,000 (L)	54.87%
	Beneficial owner	294,492,000 (S)	18.52%
Renaissance Healthcare Holdings Limited	Beneficial owner	268,286,800 (L)	16.87%
("Baring Investor")
The Baring Asia Private Equity Fund V, L.P.(3)	Interest of a controlled corporation	268,286,800	(L)	16.87%
Baring Private Equity Asia GP V, L.P.(3)	Interest of a controlled corporation	268,286,800	(L)	16.87%
Baring Private Equity Asia GP V Limited(3)	Interest of a controlled corporation	268,286,800	(L)	16.87%
Jean Eric Salata(3)	Interest of a controlled corporation	268,286,800	(L)	16.87%
Haitong International Investment Solutions	Person having a security interest in shares	294,492,000	(L)	18.52%
Limited(2)
Haitong International Holdings Limited(2)	Interest of a controlled corporation	304,771,000	(L)	19.16%
		10,279,000 (S)	0.65%
Haitong International Securities Group	Interest of a controlled corporation	304,771,000	(L)	19.16%
Limited(2)
		10,279,000 (S)	0.65%
Haitong Securities Co., Ltd.(2)	Interest of a controlled corporation	304,771,000	(L)	19.16%
		10,279,000 (S)	0.65%

Notes:

The letter "L" denotes the person's long position in the Shares and the letter "S" denotes the person's short position in the Shares.
On January 23, 2019, September 19, 2019 and February 10, 2020, Chelsea Grace provided an interest in 164,000,000 shares, 88,200,000 shares and 42,292,000 Shares as security, respectively. Such security interest is directly held by Haitong International Investment Solutions Limited. In addition, Haitong International Financial Solutions Limited held long positions in 10,279,000 shares and short positions in 10,279,000 shares. Each of Haitong International Investment Solutions Limited and Haitong International Financial Solutions Limited is a wholly-owned subsidiary of Haitong International (BVI) Limited, a wholly-owned subsidiary of Haitong International Securities Group Limited. Haitong International Securities Group Limited is held as to 64.40% by Haitong International Holdings Limited, a wholly-owned subsidiary of Haitong Securities Co., Ltd. Each of Haitong International Securities Group Limited, Haitong International Holdings Limited and Haitong Securities Co., Ltd. is deemed to be indirectly interested in such interest held by each of Haitong International Investment Solutions Limited and Haitong International Financial Solutions Limited under the SFO.
Baring Investor is held as to 99.35% by The Baring Asia Private Equity Fund V, L.P. Baring Private Equity Asia GP V, L.P. is the general partner of The Baring Asia Private Equity Fund V, L.P. Jean Eric Salata is the sole shareholder of Baring Private Equity Asia GP V Limited (the general partner of Baring Private Equity Asia GP V, L.P.). Jean Eric Salata disclaims beneficial ownership of such Shares, except to the extent of his economic interest in such entities. Each of The Baring Asia Private Equity Fund V, L.P., Baring Private Equity Asia GP V, L.P., Baring Private Equity Asia GP V Limited and Jean Eric Salata is therefore deemed to be interested in the Shares held by Baring Investor under the SFO.

The percentage represents the number of ordinary Shares interested divided by the number of the issued Shares as at December 31, 2020.

84	RICI HEALTHCARE HOLDINGS LIMITED

Directors' Report

Save as disclosed above and to the best knowledge of the Directors, as at December 31, 2020, no person (other than the Directors or chief executives of the Company) had registered an interest or a short position in the Shares or underlying shares of the Company as recorded in the register required to be kept by the Company under section 336 of the SFO.

ARRANGEMENTS TO PURCHASE SHARES OR DEBENTURES

Other than the Pre-IPO Share Option Scheme and the Share Option Scheme, at no time during the year under review was the Company, its holding company, or any of its subsidiaries, a party to any arrangement to enable the Directors to acquire benefits by means of the acquisition of Shares in, or debt securities including debentures of, the Company or any other body corporate.

MAJOR SUPPLIERS AND CUSTOMERS

In the year under review, the Group's largest customers accounted for 6.7% of the Group's total revenue. The Group's five largest customers accounted for 9.9% of the Group's total revenue.

In the year under review, the Group's largest suppliers accounted for 14.4% of the Group's total purchase. The Group's five largest suppliers accounted for 44.4% of the Group's total purchase.

None of the Directors or any of their close associates (as defined under the Listing Rules) or any Shareholders (which, to the best knowledge of the Directors, owns more than 5% of the Company's issued share capital) has any beneficial interest in the Group's five largest suppliers or the Group's five largest customers.

TAX RELIEF AND EXEMPTION OF HOLDERS OF LISTED SECURITIES

The Company is not aware of any tax relief or exemption available to the Shareholders of the Company by reason of their holding of the Company's securities.

HUMAN RESOURCES

The Group had 7,162 employees as at December 31, 2020, as compared to 7,254 employees as at December 31, 2019. The Group enters into employment contracts with its employees to cover matters such as position, term of employment, wage, employee benefits and liabilities for breaches and grounds for termination.

Remuneration of the Group's employees includes basic salaries, allowances, bonus, share options and other employee benefits, and is determined with reference to their experience, qualifications and general market conditions. The emolument policy for the employees of the Group is set up by the Board on the basis of their merit, qualification and competence. We provide regular training to our employees in order to improve their skills and knowledge. The training courses range from further educational studies to skill training to professional development courses for management personnel, including a management trainee program.

2020 Annual Report

Directors' Report

RETIREMENT BENEFITS SCHEME

The Group does not have any employee who is required to participate in the Mandatory Provident Fund in Hong Kong. The employees of the PRC subsidiaries are members of the state-managed retirement benefits scheme operated by the PRC government. The employees of the PRC subsidiaries are required to contribute a certain percentage of their payroll to the retirement benefits scheme to fund the benefits. The only obligation of the Group with respect to this retirement benefits scheme is to make the required contributions under the scheme.

Details of the pension obligations of the Company are set out in Note 33 to the consolidated financial statements in this annual report.

CONNECTED TRANSACTION

Save as disclosed in the announcements dated July 17, 2020 and September 3, 2020, during the year ended December 31, 2020, the Group has not entered into any connected transaction or continuing connected transaction which should be disclosed pursuant to the requirements of Rule 14A.71 of the Listing Rules.

RELATED PARTY TRANSACTIONS

Details of the related party transactions of the Group for the year ended December 31, 2020 are set out in Note 41 to the consolidated financial statements contained herein.

None of the related party transactions constitutes a connected transaction or continuing connected transaction subject to independent Shareholders' approval, annual review and all disclosure requirements in Chapter 14A of the Listing Rules.

MODEL CODE FOR SECURITIES TRANSACTIONS

The Company has adopted the Model Code as its code of conduct regarding dealings in the securities of the Company by the Directors and the Group's senior management who, because of his/her office or employment, is likely to possess inside information in relation to the Group or the Company's securities. Upon specific enquiry, all Directors confirmed that they have complied with the Model Code during the year under review. In addition, the Company is not aware of any non-compliance of the Model Code by the senior management of the Group during the year under review.

86	RICI HEALTHCARE HOLDINGS LIMITED

Directors' Report

SUFFICIENCY OF PUBLIC FLOAT

According to the information that is publicly available to the Company and within the knowledge of the Board, as at the date of this annual report, the Company has maintained the public float as required under the Listing Rules.

INDEMNITY OF DIRECTORS

A permitted indemnity provision (as defined in the Hong Kong Companies Ordinance) in relation to the director's and officer's liability insurance is currently in force and was in force during the year.

CORPORATE GOVERNANCE

The Company recognizes the importance of good corporate governance for enhancing the management of the Company as well as preserving the interests of the Shareholders as a whole. The Company has adopted the code provisions set out in the Corporate Governance Code (the "CG Code") as contained in Appendix 14 to the Listing Rules as its own code to govern its corporate governance practices.

In the opinion of the Directors, the Company has complied with the relevant code provisions contained in the CG Code during the year, save for deviation from code provision A.2.1 of the CG Code.

Pursuant to code provision A.2.1 of the CG Code, the responsibility between the chairman and the chief executive officer should be segregated and should not be performed by the same individual. However, Dr. Fang was appointed as the chief executive officer of the Company on March 20, 2019, and upon his new appointment, the Company does not have a separate chairman and the chief executive officer and Dr. Fang performs these two roles. The Board considers that vesting the roles of the chairman and the chief executive officer in Dr. Fang is beneficial to the Group for implementing its new business strategies given his abundant experience in the healthcare industry and longtime and substantive involvement in the day to day management and operation of the Group. In addition, the balance of power and authority is ensured by the operation of the Board and the senior management, which comprises experienced and capable individuals independent from Dr. Fang (except his spouse, Dr. Mei, and Mr. Fang Haoze, his son). The Board comprises four executive Directors, one non-executive Director and three independent non-executive Directors as at the date of this annual report and has a fairly strong independence element in its composition.

The Board will continue to review and monitor the practices of the Company with an aim to maintaining a high standard of corporate governance.

2020 Annual Report

Directors' Report

DONATIONS

During the year ended December 31, 2020, the Group did not make any charitable donations (2019: RMB5.0 million).

AUDITOR

The Shares were only listed on the Stock Exchange on October 6, 2016, and there has been no change in auditors since the Listing Date. The consolidated financial statements for the year ended December 31, 2020 have been audited by PricewaterhouseCoopers, Certified Public Accountants, who are proposed for reappointment at the forthcoming AGM.

COMPLIANCE WITH LAWS AND REGULATIONS

For the year ended December 31, 2020, the Company is in compliance with the relevant laws and regulations that have a significant impact on the Company.

On behalf of the Board

Fang Yixin

Chairman and Chief Executive Officer

Shanghai, March 30, 2021

88	RICI HEALTHCARE HOLDINGS LIMITED

Independent Auditor's Report

To the Shareholders of Rici Healthcare Holdings Limited (incorporated in the Cayman Islands with limited liability)

Opinion

What we have audited

The consolidated financial statements of Rici Healthcare Holdings Limited (the "Company") and its subsidiaries (the "Group") set out on pages 95 to 190, which comprise:

the consolidated balance sheet as at 31 December 2020;
the consolidated statement of profit or loss for the year then ended;
the consolidated statement of comprehensive income for the year then ended;
the consolidated statement of changes in equity for the year then ended;
the consolidated statement of cash flows for the year then ended; and
the notes to the consolidated financial statements, which include a summary of significant accounting policies.

Our opinion

In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial position of the Group as at 31 December 2020, and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards ("HKFRSs") issued by the Hong Kong Institute of Certified Public Accountants ("HKICPA") and have been properly prepared in compliance with the disclosure requirements of the Hong Kong Companies Ordinance.

Basis for Opinion

We conducted our audit in accordance with Hong Kong Standards on Auditing ("HKSAs") issued by the HKICPA. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Consolidated Financial Statements section of our report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence

We are independent of the Group in accordance with the HKICPA's Code of Ethics for Professional Accountants ("the Code"), and we have fulfilled our other ethical responsibilities in accordance with the Code.

2020 Annual Report

Independent Auditor's Report

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Key audit matters identified in our audit are summarised as follows:

Recognition of deferred tax assets arising from tax losses
Impairment assessment of property and equipment and right-of-use assets

Key Audit Matter	How our audit addressed the Key Audit Matter

Recognition of deferred tax assets arising from tax losses

Refer to Note 5 (b) (Critical accounting estimates and judgements - Current and deferred income tax) and Note 12 (Deferred income tax) to the consolidated financial statements.

As at 31 December 2020, the Group had deferred tax assets amounting to RMB167.6 million in respect of recoverable tax losses, representing 4.0% of the Group total assets. Meanwhile, the Group did not recognise deferred tax assets of RMB82.4 million in relation to tax losses of RMB329.6 million incurred by certain subsidiaries within the Group.

In assessing the amounts of deferred tax assets arising from tax losses that should be recognised, management exercised significant judgement to assess the probability that future taxable profit would be available against which the tax losses could be utilised. These included judgement on the amount and timing of future taxable profits to be generated by those subsidiaries that are currently recording tax losses.

We focused on this area due to the significance of the amount and the subjectivity of significant assumptions used and judgement involved, especially in assessing the reasonableness of the profit forecasts for the relevant subsidiaries, which form the bases to assess whether future taxable profit would be available and eligible to utilise against these tax losses.

We obtained an understanding of the management's internal control and assessment process of recognition of deferred tax assets arising from tax losses and assessed the inherent risk of material misstatement by considering the degree of estimation uncertainty and level of other inherent risk factors such as complexity, subjectivity, changes and susceptibility to management bias or fraud.

We tested the deferred tax assets calculation schedule for mathematical accuracy, and agreed the future taxable profit projection and available tax loss information to underlying supporting evidence.

In regard of the availability and eligibility of tax losses already incurred, we tested on a sample basis the tax loss information (including the respective expiry periods) to accounting records and supporting evidence including the tax filings and correspondence with the tax authorities.

In regard of the taxable profit to be generated in the future periods, we obtained the profit forecasts of the relevant subsidiaries prepared by management and checked the mathematical accuracy. We tested on a sample basis management's reconciliation of the profit forecasts to taxable profit calculations.

With regards to the above profit forecasts:

We assessed the reasonableness of the key input data and the underlying assumptions adopted in the profit forecasts, especially the long-term revenue growth rates (which are the most significant assumption in the forecasts), by comparing them with management's approved budgets, recent actual performances and future business plans;
We challenged management on the adequacy of their sensitivity calculations as these calculations were most sensitive to assumptions of the revenue growth rates. We calculated the degree to which these assumptions would need to move in order to result in future taxable profits being insufficient to utilise the current tax losses, and assessed management's assertions that such a movement is unlikely.

We found that the Group's key estimates and judgements used in recognising deferred tax assets arising from tax losses were supported by the evidence we gathered.

90	RICI HEALTHCARE HOLDINGS LIMITED

Independent Auditor's Report

Key Audit Matter

How our audit addressed the Key Audit Matter

Impairment assessment of property and equipment and right-of-use assets

Refer to Note 5 (e) (Critical accounting estimates and judgements - Impairment of property and equipment and right-of-use assets), Note 7 (Property and equipment) and Note 8 (Right-of-use assets) to the consolidated financial statements.

As at 31 December 2020, the carrying amount of property and equipment and right-of-use assets of the Group was RMB1,242.7 million and RMB1,357.4 million respectively. The amount of RMB2,600.1 million in total represented 61.7% of the Group's total assets.

Management is required to perform impairment review if a potential impairment is indicated. Management concluded that there was no indication of impairment of property and equipment and right-of-use assets of the Group other than those related to certain medical examination centres which have been in operation for more than two years as at 31 December 2020 but incurred operating losses in recent years, and those related to specialty hospitals which started operation recently, but which incurred operation loss larger than budgeted loss.

For the purpose of performing the recoverability assessment on the property and equipment and right- of-use assets for these medical examination centres and specialty hospitals, as these assets do not generate cash flow independently, management identified each of medical examination centre and specialty hospital as a Cash Generating Unit ("CGU"). The recoverable amount of the underlying CGU was determined based on the value-in-use calculations. No provision for impairment was made based on management's assessment.

We focused on this area as these assets are significant to the consolidated financial statements of the Group and the inherent risk in relation to management's assessment is considered significant due to the subjectivity of assumptions used and judgements involved in selecting data including revenue growth rate and discount rate.

We obtained an understanding of the management's internal control and assessment process of impairment assessment of property and equipment and right-of-use assets and assessed the inherent risk of material misstatement by considering the degree of estimation uncertainty and level of other inherent risk factors such as complexity, subjectivity, changes and susceptibility to management bias or fraud.

We obtained an understanding of and evaluated the management's procedures in identifying the CGUs having impairment indicators.

With regard to calculation of the recoverable amounts obtained from management:

we worked with our in-house valuation specialist to assess the appropriateness of the valuation methodology adopted by management. We also evaluated the appropriateness of the discount rate adopted by management by comparing it with the costs of capital of comparable companies as well as considering territory specific and other factors.
we corroborated the key input data and major assumptions of the future cash flows projection adopted in the valuation model, including revenue growth rate, by comparing them with historical actual operating results, budgets approved by management and future business projections.
we tested the mathematical accuracy of the underlying value-in-use calculations.
we also evaluated management's sensitivity analysis around the key assumptions adopted to ascertain the extent of changes in these assumptions required to trigger an impairment of the relevant assets, and considered the likelihood of such changes in those key assumptions.

Based on our work performed, we considered the valuation methodology used by the management was appropriate and the key assumptions applied in the value-in-use calculations were supported by the evidence we gathered.

2020 Annual Report

Independent Auditor's Report

Other Information

The directors of the Company are responsible for the other information set out in the 2020 Annual Report. The other information comprises the information included in the Management Discussion and Analysis (but does not include the consolidated financial statements and our auditor's report thereon), which we obtained prior to the date of this auditor's report, and the Definitions, Chairman's Statement, Corporate Profile, Milestones, Financial Highlights, Financial Summary, Profiles of Directors and Senior Management, Corporate Governance Report, Environmental, Social and Governance Report, and Directors' Report, which are expected to be made available to us after that date.

Our opinion on the consolidated financial statements does not cover the other information and we do not and will not express any form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.

If, based on the work we have performed on the other information that we obtained prior to the date of this auditor's report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

When we read the Definitions, Chairman's Statement, Corporate Profile, Milestones, Financial Highlights, Financial Summary, Profiles of Directors and Senior Management, Corporate Governance Report, Environmental, Social and Governance Report, and Directors' Report, if we conclude that there is a material misstatement therein, we are required to communicate the matter to the Audit Committee and take appropriate action considering our legal rights and obligations.

Responsibilities of Directors and Audit Committee for the Consolidated Financial Statements

The directors of the Company are responsible for the preparation of the consolidated financial statements that give a true and fair view in accordance with HKFRSs issued by the HKICPA and the disclosure requirements of the Hong Kong Companies Ordinance, and for such internal control as the directors determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, the directors are responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.

The Audit Committee are responsible for overseeing the Group's financial reporting process.

92	RICI HEALTHCARE HOLDINGS LIMITED

Independent Auditor's Report

Auditor's Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. We report our opinion solely to you, as a body, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with HKSAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with HKSAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.
Conclude on the appropriateness of the directors' use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

2020 Annual Report

Independent Auditor's Report

We communicate with the Audit Committee regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide the Audit Committee with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied.

From the matters communicated with the Audit Committee, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partner on the audit resulting in this independent auditor's report is Mang, Kwong Fung Frederick.

PricewaterhouseCoopers

Certified Public Accountants

Hong Kong, 30 March 2021

94	RICI HEALTHCARE HOLDINGS LIMITED

Consolidated Balance Sheet

		As at December 31, 2020
		As at December 31,
	Note	2020	2019
		RMB'000	RMB'000
ASSETS
Non-current assets
Property and equipment	7	1,242,707	1,160,468
Right-of-use assets	8	1,357,374	1,554,771
Intangible assets	9	11,078	14,019
Investments accounted for using equity method	10	7,900	7,125
Financial assets at fair value through profit or loss		4,500	4,500
Deposits for long-term leases	11	39,589	41,926
Deferred tax assets	12	235,022	179,764
Prepayments	17	105,270	55,266
		3,003,440	3,017,839

Current assets
Inventories	13	43,712	44,383
Trade receivables	14	282,653	290,027
Other receivables	15	33,159	33,181
Prepayments	17	28,152	16,270
Amounts due from related parties	41	5,872	980
Cash and cash equivalents	16	561,819	329,551
Restricted cash	16	252,187	338,346

		1,207,554	1,052,738

Total assets		4,210,994	4,070,577

EQUITY
Equity attributable to owners of the Company
Share capital	18	1,065	1,065
Reserves	20	504,744	643,170

		505,809	644,235
Non-controlling interests	21	(173,369)	(81,299)

Total equity		332,440	562,936

2020 Annual Report

Consolidated Balance Sheet

As at December 31, 2020

		As at December 31,
	Note	2020	2019
		RMB'000	RMB'000
LIABILITIES

Non-current liabilities
Borrowings	22	546,279	259,276
Lease liabilities	25	1,257,170	1,409,877
Other financial liabilities	23	129,879	115,927
Other long-term liabilities	24	-	12,303
		1,933,328	1,797,383
Current liabilities
Borrowings	22	738,913	663,486
Lease liabilities	25	266,784	267,211
Contract liabilities	26	292,690	229,157
Trade and other payables	27	599,848	515,540
Amounts due to related parties	41	134	1,500
Income tax payables		23,237	19,941
Deferred income	28	23,620	13,423
		1,945,226	1,710,258
Total liabilities		3,878,554	3,507,641

Total equity and liabilities		4,210,994	4,070,577

The notes on pages 101 to 190 are an integral part of these consolidated financial statements.

The consolidated financial statements on pages 95 to 190 were approved by the Board of Directors on March 30, 2021 and were signed on its behalf by:

Fang Yixin	Mei Hong
Director	Director

96	RICI HEALTHCARE HOLDINGS LIMITED

Consolidated Statement of Profit or Loss

For the year ended December 31, 2020

		Year ended December 31,
	Note	2020	2019
		RMB'000	RMB'000
	29		1,726,206
Revenue	1,925,190
Cost of sales	32, 33	(1,344,526)	(1,242,224)
Gross profit		580,664	483,982
Distribution costs and selling expenses	32, 33	(226,319)	(237,575)
Administrative expenses	32, 33	(294,154)	(305,449)
Net impairment reversals on financial assets	32	1,340	2,131
Other income	30	23,325	30,319
Other losses	31	(9,076)	(847)
Operating profit/(loss)		75,780	(27,439)
Finance costs	34	(193,842)	(159,351)
Finance income	34	8,464	18,343
Finance costs - net	34	(185,378)	(141,008)
Share of results of investments accounted for using equity method	10	775	199
Loss before income tax		(108,823)	(168,248)
Income tax credit/(expense)	35	16,326	(2,250)
Loss for the year		(92,497)	(170,498)

Loss attributable to:
Owners of the Company		(7,876)	(69,163)
Non-controlling interests		(84,621)	(101,335)
		(92,497)	(170,498)

Loss per share for loss attributable to owners of the Company
- Basic and diluted	36	RMB(0.00)	RMB(0.04)

The notes on pages 101 to 190 are an integral part of these consolidated financial statements.

2020 Annual Report

Consolidated Statement of Comprehensive Income

For the year ended December 31, 2020

	Year ended December 31,
	2020	2019
	RMB'000	RMB'000
Loss for the year	(92,497)	(170,498)
Other comprehensive income, or losses	-	-
Total comprehensive loss for the year	(92,497)	(170,498)

Total comprehensive loss attributable to:
Owners of the Company	(7,876)	(69,163)
Non-controlling interests	(84,621)	(101,335)
	(92,497)	(170,498)

The notes on pages 101 to 190 are an integral part of these consolidated financial statements.

98	RICI HEALTHCARE HOLDINGS LIMITED

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