Corporate Governance Practices
The 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 Listing Rules, except for the deviations discussed below. The board of directors (the "Board") believes that good corporate governance can enhance performance of the Group and improve accountability and transparency to all shareholders.
As the Shares have resumed trading on the Stock Exchange from 18 July 2008, and with the appointment of the compliance advisor, the Company and the directors will strive to follow the internal control manuals and put in place sufficient resources to comply with the Code. As at the date of this report, save for the separation of the roles of the Chairman and the Chief Executive Officer and the non-specific term for the appointment of non-executive directors, the Company has rectified all the deviations from the Code by appointing Executive Directors, Independent Non-Executive Directors and the company secretary, all in compliance with the Code.
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 year ended 30 June 2009.
Board of Directors
The Board comprises of four Executive Directors and five Independent Non-Executive Directors during the year ended 30 June 2009 as follows:
Executive Directors
Mr. Shen Xiaodong (Chairman) (appointed on 19 November 2008 and resigned as
Chairman on 9 September 2009)
Mr. Jiang Jian (appointed on 19 November 2008)
Mr. Tai Kai Hing (resigned on 9 February 2009)
Ms. Choi Suk Ching (appointed on 9 July 2008 and resigned on
18 December 2008)
Independent non-Executive Directors
Dr. Leung Wai Cheung (appointed on 9 July 2008)
Dr. Zhang Huiming (appointed on 13 May 2009)
Dr. Zhu Lijun (appointed on 13 May 2009)
Mr. Chung Wai Man (resigned on 13 May 2009)
Mr. Chiu Koon Shou, Victor (resigned on 13 May 2009)
Further details of the composition of the Board are set out in the section headed “Management Profile” on pages 9 and 10.
The Board believes that the balance between Executive Directors and Independent Non-Executive Directors is adequate to safeguard Shareholders’ value. Independent Non-Executive Directors can also provide the Group with diversified expertise and valuable experience. Their independent advice can bring independent judgment to decision making and add varieties in strategy formulation.
The Directors oversee financial performance and formulate business strategies of the Group, as well as discuss on any significant matters relating to the Group at Board meetings. Daily operational matters are delegated to the management.
During the year, the Board held twenty-one meetings. The attendance of each member at the Board meetings is set out as follows:
Director Meetings attended/Total
_____________________________________________________________________________
Executive Directors
Mr. Shen Xiaodong 17/21
Mr. Jiang Jian 16/21
Mr. Tai Kai Hing 11/21
Ms. Choi Suk Ching 6/21
Independent non-Executive Directors
Dr. Leung Wai Cheung 17/21
Dr. Zhang Huiming 3/21
Dr. Zhu Lijun 3/21
Mr. Chung Wai Man 13/21
Mr. Chiu Koon Shou, Victor 13/21
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
A.4.1 of the Code requires that non-executive directors should be appointed for a specific term and should be subject to re-election. The Independent Non-Executive Directors are 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.
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 and keeps the composition of one Executive Director, and two Independent Non-Executive 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 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. Tai Kai Hing (resigned on 9 February 2009) 2/2
Mr. Shen Xiaodong (appointed as Chairman of the Remuneration Committee
on 9 February 2009 and resigned on 9 September 2009) 0/2
Independent non-Executive Directors
Mr. Chung Wai Man (resigned on 13 May 2009) 2/2
Mr. Chiu Koon Shou, Victor (resigned on 13 May 2009) 2/2
Dr. Zhang Huiming (appointed on 13 May 2009) 0/2
Dr. Zhu Lijun (appointed on 13 May 2009 and as the Chairman of
the Remuneration Committee on 9 September 2009) 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 year which are based on 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 ensure the preparation of the financial statements of the Group is in accordance with statutory requirements and applicable accounting standards. The directors also ensure the financial statements of the Group are published timely.
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 year ended 30 June 2009, the auditors of the Company will charge the total amount of HK$980,000 for the interim and annual audit 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 year ended 30 June 2009 have been reviewed by the Audit Committee.
During the year, the Audit Committee held three meetings with the Company’s external auditor to review the interim and annual audited financial statements. The attendance of each member 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) 3/3
Mr. Chung Wai Man (resigned on 13 May 2009) 2/3
Mr. Chiu Koon Shou, Victor (resigned on 13 May 2009) 3/3
Dr. Zhang Huiming (appointed on 13 May 2009) 0/3
Dr. Zhu Lijun (appointed on 13 May 2009) 0/3
Internal Control
The Board has overall responsibility for maintaining sound and effective internal control system to safeguard Shareholders’ value, 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 ready for internal use or publication, and ensure compliance with regulations.
During the year, the Board reviewed internal control procedures of the Group and findings and considered that the internal control system is effective and adequate.
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