Corporate Governance Practices
TThe Company is committed to complying with all the code provisions as set out in the Code on Corporate Governance Practices (the “Code”) contained in Appendix 14 to the Rules Governing the Listing of Securities
(the “Listing Rules”) on the Stock Exchange for the year ended 30 June 2010 (the “Financial Year“), except for the deviations discussed below.
Directors' Securities Transactions
The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers (the “Model Code”) as set out in Appendix 10 to the Listing Rules as the code of conduct regarding Directors’ securities transactions. All the Directors have confirmed that they have fully complied with the Model Code throughout the Financial Year.
Board of Directors
The Board was served by three executive Directors and five independent non-executive Directors during the Financial Year as follows:
Executive Directors
Mr. Qin Yilong (Chairman) (appointed on 9 September 2009)
Mr. Shen Xiaodong
Mr. Jiang Jian
Independent non-Executive Directors
Dr. Leung Wai Cheung (resigned on 6 November 2009)
Dr. Zhang Huiming
Dr. Zhu Lijun (resigned on 9 June 2010)
Ms. Chen Weijun (appointed on 6 November 2009)
Ms. Jiang Di (appointed on 9 June 2010)
The Board considers the balance between executive Directors and independent non-executive Directors adequate to safeguard the Shareholders’ interests. Independent non-executive Directors can also provide the Group with diversified expertise and valuable experience. Their independent advice can bring independent judgment to the decision making of the Board and bring new ideas to the formulation of corporate strategy.
The Directors oversee the financial performance and formulate business strategies of the Group, as well as discuss on any significant matters relating to the Group at the Board meetings. Daily operational matters are delegated to the management.
Chairman and Chief Executive Officer
The positions of the Chairman and the Chief Executive Officer are held by the same individual. The Company is aware of the deviation from A.2.1 of the Code which requires that the roles of the Chairman and Chief Executive Officer should be separate and should not be performed by the same individual.
The Company currently cannot comply with this Code provision and is looking for a suitable person to act as the Chief Executive Officer with a hope to comply with the requirement in the near future.
Non-Executive Directors
Code provision A.4.1 stipulates that non-executive Directors should be appointed for a specific term and should be subject to re-election.
The Company has deviated from the Code provision A.4.1. The independent non-executive Directors were not appointed for specific terms but are subject to retirement by rotation and re-election at least once every three years in accordance with the provision of the Company’s articles of association. As such, the Company considers that sufficient measures have been taken to serve the purpose of this Code provision. The Board believes that, despite the absence of specified term of non-executive Directors, the Directors are committed to representing the long-term interests of the Company and the shareholders.
Remuneration Of Directors
The Company formulated written terms of reference for the remuneration committee of the Company (the “Remuneration Committee”) in accordance with the requirements of the Listing Rules. The Remuneration Committee was set up on 30 June 2008 comprising one executive Director and two independent nonexecutive Directors.
The primary functions of the Remuneration Committee are as follows:
(a) to advise Shareholders on whether the terms of service contracts that require Shareholder’s approval are fair and reasonable;
(b) to make recommendation on the Group’s remuneration policy and structure;
(c) to establish guidelines for recruitment of members of the senior management;
(d) to determine the remuneration of members of the senior management; and
(e) to formulate remuneration policy and make recommendations on annual remuneration review.
Remuneration of the Directors is reviewed and fixed by the Remuneration Committee, with reference to competition and industry norms, having regard to the expertise, performance and experience possessed by individual Directors.
During the Financial Year, the Remuneration Committee held two meetings. The attendance of each member at the committee meetings is set out as follows:
Director Meetings attended/Total
_____________________________________________________________________________
Executive Director
Mr. Shen Xiaodong (resigned from the Remuneration Committee
on 9 September 2009) 1/2
Mr. Qin Yilong (appointed to the Remuneration Committee
on 9 September 2009) 1/2
Independent non-Executive Directors
Dr. Zhang Huiming (appointed as the chairman of the Remuneration Committee on 27 September 2010) 2/2
Dr. Zhu Lijun (appointed as the chairman of the Remuneration Committee on 9 September 2009 and resigned on 9 June 2010) 2/2
Ms. Jiang Di (appointed to the Remuneration Committee on 9 June 2010) 0/2
Nomination of Directors
The Company has not established a nomination committee. To maintain the Board with a balance of skills and experience, the Board will identify individuals suitably qualified to become Directors when necessary. In evaluating whether a candidate is suitable to act as a Director, the Board would normally take into consideration of the candidate’s past experience, qualifications and other factors that are relevant to the Company’s business.
The Board appointed the Directors during the Financial Year on the basis of the aforementioned nomination policy.
Directors' Responsibility for the Financial Statements
The Directors acknowledge their responsibility for preparing the financial statements of the Group. The Directors confirm that the preparation of the financial statements of the Group is in accordance with statutory requirements and applicable accounting standards. The Directors also confirm that the financial statements of the Group are published in a timely manner.
The Directors confirm that, to the best of their knowledge, information and belief, having made all reasonable enquiries, they are not aware of any material uncertainties relating to events or conditions that may cast significant doubts upon the Company’s ability to continue as a going concern.
Auditor's Remuneration
The Group’s external auditors are ANDA Certified Public Accountants. For the Financial Year, the auditors of the Company charged a total amount of approximately HK$711,000 for the interim review, annual audit and other professional services of the Group.
Audit Committee
The Company formulated written terms of reference for the audit committee of the Company (the “Audit Committee”) in accordance with the requirements of the Listing Rules. The Audit Committee consists of three independent non-executive Directors.
The primary functions of the Audit Committee are as follows:
(a) to serve as a focal point for communication between the Directors and external auditors;
(b) to assist the Board in fulfilling its responsibility by providing an independent review and supervision of financial reporting, and monitoring and reviewing the effectiveness of the Group’s internal control and the adequacy of the external audit;
(c) to review the appointment of external auditors on an annual basis as well as to ensure continuing auditors independence; and
(d) to develop and monitor the applications of the policies on the engagement of the external auditors to perform non-audit services (other than tax-related services).
The Group’s audited financial statements for the Financial Year have been reviewed by the Audit Committee.
During the year under review, the Audit Committee held two meetings with the Company’s external auditors to review the interim and annual financial statements. The attendance of each member of the Audit Committee at the committee meetings is set out as follows:
Director Meetings attended/Total
_____________________________________________________________________________
Independent non-Executive Directors
Dr. Leung Wai Cheung (chairman of the Audit Committee and resigned on 6 November 2009) 1/2
Dr. Zhang Huiming 2/2
Dr. Zhu Lijun (resigned on 9 June 2010) 2/2
Ms. Chen Weijun (appointed as chairman of the Audit Committee
on 6 November 2009) 1/2
Ms. Jiang Di (appointed on 9 June 2010) 0/2
Internal Control
The Board has an overall responsibility for maintaining a sound and effective internal control system to safeguard the Shareholders’ interests, and to review the effectiveness of this system. The Board conducts regular reviews of the Group’s internal control system. The system includes defined management structure with limits of authority set at various levels, which is designed to safeguard assets, ensure the maintenance of proper records, provide reliable financial information for internal use or publication, and ensure compliance with regulations.
During the Financial Year, the Board has reviewed the internal control procedures of the Group and findings and considers the internal control system effective and adequate.
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