Pharmesis International : Sustainablity Report 2023

PHARMESIS INTERNATIONAL LTD

SUSTAINABILITY REPORT 2023

TABLE OF CONTENTS

1. Reader's Guide ………………………………………….………………….…3
2. Sustainability Governance………..…………………………….……...……..4
3. Stakeholders Engagement.………...…………………………….…………..5
4. Materiality Assessment………………………………………….………….…6
5. ESG Sustainability Review………………..…………………….…………….7
6. GRI Standards Content Index.………………………………….…………….9
7. Task Force On Climate-Related Financial Disclosures (TCFD)
   Index…………..………………………………………………………………..11

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1. READER'S GUIDE

1.1 About Pharmesis

Listed on the Main Board of the Singapore Exchange in October 2004, Pharmesis International Ltd. ("Pharmesis") specialises in the manufacture of pharmaceutical products, including western medicine and Traditional Chinese Medicine ("TCM"). Under our two subsidiaries, Chengdu Kinna Pharmaceutical Co., Ltd and Sichuan Longlife Pharmaceutical Co., Ltd, we specialise in the manufacturing of pharmaceutical products in the form of tablets, granules, pills, etc, including TCM formulated products for the treatment of illnesses relating to the liver and gall bladder, jaundice and clears heat toxic etc. Additionally, our business also includes the research and development, production, sale and marketing of pharmaceutical products.

Our pharmaceutical products are sold in the People's Republic of China ("PRC") under the "国嘉" brand. Our main products are ATT, Gulin Gansu and Er Ding granules. Our Gulin Gansu is under the National TCM Protection List and also the first TCM formulated products to be awarded the "Product of Designation of Origin and Geographical Indications of the PRC". Leveraging our strong research and development capabilities and in-house expertise in pharmaceutical products for the treatment of illnesses relating to the liver and gall bladder, we successfully improved the coating technology of ATT tablets and had received several awards in recognition of this achievement.

1.2 Report Scope

The Group issues a Sustainability Report on an annual basis, and had published its Sustainability Report 2023 ("SR") for the financial year ended 31 December 2023 in April 2024. This is the Sustainability Report 2023 published by the Group and will cover the period from 1 January 2023 to 31 December 2023 ("FY2023").

In line with our environmental conservation efforts, hard copies of this Report will not be printed. An electronic version of this report is made available on the SGXNET and company's website.

1.3 Methodology

This report has been prepared in compliance with Listing Rule 711A and 711B of the Singapore Exchange Securities Trading Limited ("SGX"), and with reference to the Global Reporting Initiative Sustainability Reporting Standards ("GRI" Standards) and the Task Force for Climate-Related Financial Disclosures ("TCFD") as set out in Listing Rule 711B on a 'comply or explain' basis (other than as required under Listing Rule 711B(2)). We continue to take steps to fully integrate the TCFD recommendations in our report.

The Company has chosen the GRI Standards as it is the most established international sustainability reporting standard. In this report, we focus on the key material issues for our business. Please refer to the GRI Content Index on page 9 and the TCFD Index on page11 for relevant references. The Sustainability Report is published annually as part of our Report to Shareholders and is available on both SGX website and our website.

We have relied on internal data monitoring and verification to ensure accuracy of this Report. Our Sustainability Report 2023 has been subject to internal review. We have not sought external assurance for our Sustainability Report 2023 but may consider it in the future. The Group endeavours to continuously improve the content and quality of our non-financial disclosures in alignment with the reporting principles of SGX, GRI Standards and TCFD. We welcome feedback from our stakeholders on this report at: [e-mail]

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2. SUSTAINABILITY GOVERNANCE 2.1 Board Statement

The Board of Directors (the "Board") of Pharmesis International Ltd has considered sustainability issues as part of its overall strategy formulation and has determined the environmental, social and governance ("ESG") factors identified as material to the business of the Group. The Board has provided direct guidance to the Company's management (the "Management") in the preparation of this report. Based on the guidelines of GRI Standards, the Board and the Management determined the material ESG factors relevant to the Group. The Management then further assesses, monitors and documents the Group's efforts in managing the identified material ESG factors. The Board has overseen the management and monitoring of the material ESG factors. The Board and the Management will continue to work closely to ensure that the Group has a structured and functioning sustainability reporting framework. We hope this report will help our stakeholders to understand the Group and its business decisions, and allow the Group to be sustainable in the long run.

Board members have also undergone training on sustainability matters to equip themselves with the right knowledge to lead the Company towards sustainability.

2.2 Risk Management

The Risk Management Committee ("RMC") comprising senior representatives from different business units and functions, led by the Chief Executive Officer ("CEO"), is responsible to address all risk management issues (including sustainability issues) concerning the Group. The CEO reports to the Board, on the risk management of the Group, including climate- related risks.

The Group's current risk management process takes into account overall business risks, including climate-related risks. The RMC also keeps abreast of specific emerging risk trends such as climate-related risks.

In 2023, the RMC conducted an initial risk assessment concerning climate-related risks and their potential impact. The "Climate-related Risks" was entered into the Group's Risk Register for annual review. The Audit Committee and the Board were updated about Climate-related Risks being added as a new risk under the Enterprise Risk Management framework. Disclosure of climate-related risks and opportunities will be a consideration for our future reports, following a more extensive and in-depth risk assessment.

The RMC will continue to assess the materiality of ESG and related risks to the Group as the ESG landscape continues to evolve.

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Figure 1: Pharmesis Sustainability Governance Structure

Board of

Directors

Chief

Executive

Officer

KinnaLonglife

RMCRMC

3. STAKEHOLDERS ENGAGEMENT

Our key stakeholders are our business associates, employees, regulators, and investors.

Key stakeholder Methods of engagement

Our Key
Stakeholders	Forms of Engagement	Key Topics
Business Associates	One-on-one meetings	Marketing and distribution
		Manufacturing and product
	Conferences	quality
	Site visits	Supply and logistics
	Email and phone communication	Financials
	Marketing and distribution	Business opportunities
	Manufacturing and product quality	Market conditions
		Regulatory landscape
	Goals determination and work
Employees	plans	Work safety awareness
	Messages from management	Productivity measures
	Performance appraisals	Promoting teamwork
	Team briefings
Regulators	Email and phone communication	Compliance
	Formal applications and approvals	Permits and licences
		Regulatory landscape
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Investors

AGM / EGM

Email and phone communication

SGXNET announcements Corporate website

Company performances Future directions

4. MATERIALITY ASSESSMENT

The Risk Management committee undertook a materiality assessment process based on GRI Standards to identify our material factors that are significant to our businesses and our stakeholders and ultimately form the content of this report.

This process included reviewing our corporate commitments, policies, risks and regulation requirements and engagement with staff and external stakeholders in order to continue to improve our sustainability performance by strategically focusing on material topics which span the ESG aspects over the coming years.

We have worked through GRI's 4 steps of materiality - identification, prioritisation, validation and review - to determine an indicative list of material factors. Pharmesis undertook an internal assessment to better understand the impacts from our business activities, reviewing our internal risk assessments, strategy and policy commitments, and considered the sustainability disclosure of our peers. Senior management and select members of the Board were involved and engaged in this identification and prioritisation process. We have prioritised three Material Factors, Economic Performance, Product Quality and Safety & Occupational Health and Safety.

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5. ESG SUSTAINABILITY REVIEW

We believe the following factors are relevant for the long term sustainability of the Group:

Focus		Objective & Target		Policies, Performance and Practices
Economic		Objective: To ensure
			(RMB million)	FY2023	FY2022
Performance		the Group is in good
		financial health and is			Total revenue	45.6	50.4
		poised for sustainable
		generation of			Loss before tax	(4.9)	(3.2)
		shareholder value.
				Total Equity	54.2	57.0
				FY2023 was the most challenging year for
				Pharmesis Group in our history. In December
				2022, China ended its zero Covid policy, which
				led to a sudden spike in orders for Er Ding,
				(which is used to alleviate flu-like symptoms)
				and Shu Ling Hou (which is used to alleviate
				sore throat symptoms) in the first two months
				of 2023. However, on 26 July 2023, severe
				flash flooding arising from the torrential rain
				damaged the production equipment and
				inventory at Longlife Plant, and production was
				temporarily disrupted for over two months.
				Despite the above challenges, the Group
				managed to minimise the decrease in revenue
				in FY2023 as compared to FY2022.
				Other costs of RMB4.8 million were losses
				arising from the flood incident, comprising of
				RMB3.5 million inventories written off and
				RMB1.3 million repair costs.
				As a result of the above, the Group recorded a
				loss before tax RMB 4.9 million for FY2023
				compared to a loss before tax of RMB 3.2
				million for FY2022.
		Target: To achieve		Did not achieved positive profit before tax in
		profitability (positive
		profit before tax) for		FY2023.
		the current year.
		Mid-term target: To		Did not achieved positive profit before tax in
		maintain profitability		FY2022 and FY2023.
		(positive profit before
		tax) for 3 years.

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Focus		Objective & Target		Policies, Performance and Practices
Product		Objective: To ensure		Product quality and safety are core to our
Quality and		that product quality		commercial	reputation	and	consumers'
Safety		and safety is never		expectations. We are committed to
		compromised.		responsible sourcing as it helps assure safety
				and quality of our end products. We have
				always stressed the importance of drug quality
				and safety in our operations in each stage of
				our production process as evidenced by the
				GMP certifications over our production
				facilities.
		Short-term target: To
		achieve zero drug		Achieved zero drug safety incident in FY2023.
		safety incident for the
		current year.
		Mid-term target: To
		achieve zero drug		Achieved zero drug safety incident in FY2023,
		safety incident for 3		FY2022 and FY2021.
		years.
Occupational		To ensure that our		Commitment to the safety of our people and
Health and		manufacturing facilities		of those we work with.
Safety		remain free from risk		Our safety	practices	outlines	the work
		to employees, or any
			procedures such that workers can carry out
		other persons on our
			their jobs effectively.
		premises.
			Review of safety practices.
		Short-term target: To
		achieve zero		Achieved zero workplace injuries in FY2023.
		workplace injuries for
		the current year.
		Mid-term target: To
		achieve zero		Achieved zero workplace injuries in FY2023,
		workplace injuries for 3		FY2022 and FY2021.
		years.

We welcome your views and feedback on our sustainability practices and reporting at [e-mail].

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GRI Content Index

The GRI Content Index references the Pharmesis International Ltd's Sustainability Report 2023 ("SR"), and the Annual Report 2023 ("AR").

Statement of	Pharmesis has reported the information cited in this GRI content index for the period
Use	of 1 January 2023 to 31 December 2023 with reference to the GRI Standards.
GRI 1 used	GRI 1: Foundation 2021

GRI
Standard	Disclosure Title

General Disclosures

Page Reference

2-1	Organisational details	SR, pg. 2
		Annual Report: Corporate Profile, pg. 1, Corporate
		Information, pg. 15
2-2	Entities included in the organisation's	SR, pg. 2
	sustainability reporting
2-3	Reporting period, frequency and	SR, pg. 2
	contact point
2-4	Restatements of Information	Not applicable
2-5	External assurance	SR, pg. 4
2-9	Governance structure and composition	SR, pg. 4,5
		Annual Report: Board of Directors, pg. 12, Corporate
		Information, pg. 15
2-10	Nomination and selection of the	Annual Report: Corporate Governance Statement, pg. 17
	highest governance body
2-11	Chair of the highest governance body	Annual Report: Board of Directors, pg. 12
2-12	Role of the highest governance body in	SR, Sustainability Governance, pg. 4
	overseeing the management of impacts	Annual Report: Corporate Governance Statement, pg. 17
2-13	Delegation of responsibility for	Sustainability Governance, pg. 3
	managing impacts	Annual Report: Corporate Governance Statement, pg. 17
2-14	Role of the highest governance body in	SR, pg. 4, 5, 6
	sustainability reporting
2-15	Conflicts of interest	Annual Report: Corporate Governance Statement, pg. 17
2-16	Communication of critical concerns	Annual Report: Corporate Governance Statement, pg. 17

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2-17	Collective knowledge of the highest	Sustainability Governance, pg. 3
	governance body
2-18	Evaluation of the performance of the	Annual Report: Corporate Governance Statement, pg. 17
	highest governance body
2-19	Remuneration policies	Annual Report: Corporate Governance Statement, pg. 17
2-20	Process to determine remuneration	Annual Report: Corporate Governance Statement, pg. 30
2-25	Processes to remediate negative	Annual Report: Corporate Governance Statement, pg. 36
	impacts
2-29	Approach to stakeholder engagement	Annual Report: Corporate Governance Statement, pg. 38

Material Topics

3-1	Process to determine material topics	Materiality Assessment, pg. 6
3-2	List of material topics
		Materiality Assessment, pg. 6

Economic Performance

3-3 Management of material topics

SR, ESG Sustainability Review, Economic Performance, pg. 7 Annual Report, Operations Review, pg. 9

Product Quality and Safety

3-3	Management of material topics	SR, ESG Sustainability Review, Product Quality and Safety, pg.
8
417-2	Incidents of non-compliance	SR, ESG Sustainability Review, Product Quality and Safety, pg.
8

concerning product and service information and labelling

Occupational Health and Safety

3-3	Management of material topics
	ESG Sustainability Review, Occupational Health and Safety,
	pg. 8
403-9	Work-related injuries

ESG Sustainability Review, Occupational Health and Safety, pg. 8

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