cmcdi.com.hk - China Merchants China Direct Investments Limited

Corporate Governance

The Company is committed to maintaining high standards of corporate governance. The Company has been complying with all the code provisions set out in Appendix 14 Code on Corporate Governance Practices (the "Code") of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the "Listing Rules"), except for the deviations as stated in the annual report.

At present, the Board consists of five Executive Directors, one Non-executive Director and four Independent Non-executive Directors as defined by the Listing Rules. The Company has appointed an Investment Manager to manage its investment portfolio and day-to-day administration of the Company. According to an Investment Management Agreement entered into between the Company and the Investment Manager, the Investment Manager is responsible for identifying and researching prospective investments for the Company. The Board is responsible for formulating the Company's overall investment strategy and guidelines that the Investment Manager shall follow to make the investment.

The Board has established two committees, namely the Audit Committee and the Investment Committee, to monitor the management of the Company. The details of the Committees are as below:

Audit Committee

The Board has established an Audit Committee with specific written terms of reference which follows the guidelines set out by the Hong Kong Institute of Certified Public Accountants and the requirements of the Code. The terms of reference of the Audit Committee are available on the Company's website. All Committee members including the chairman are Independent Non-executive Directors. The functions of the Audit Committee include but not limited to the following:

considering and reviewing the appointment, resignation and removal of independent auditor;
considering the audit fees;
reviewing the interim and annual results;
reviewing internal control and risk management systems;
discussing the potential audit issues with the independent auditor.

Investment Committee

The Board has established an Investment Committee, of which currently has four members, to approve transactions (investments or realisations) of over US$20 million each (effective from 5 February 2010) and to supervise the day-to-day management functions of the Investment Manager.

Internal Control

The Board recognises its responsibility for maintaining an adequate system of internal control for the Company. The Board has regularly reviewed the internal control policy so as to safeguard the Company's assets. As requested by the Board, the Investment Manager has established an internal control system setting out the policies and procedures on investments, securities dealing, and financial reporting. The Investment Manager is required to regularly update such policies and procedures.

Investor Relationship and Communication

The Company endeavours to maintain a high level of transparency when communicating with shareholders and the investment community at large. The Company is committed to maintaining an open and effective communication policy, and updates its shareholders and investors on relevant information on our business through general meetings, annual and interim reports, notices, announcements and circulars.

The general meetings, including annual general meetings, provide a useful forum for shareholders to exchange their views with the Board. Separate resolutions are proposed at the general meetings on each substantially separate issue, including the election of Directors and very substantial disposals.