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 below:

According to the Investment Management Agreement, the portfolio and day-to-day administration of the Company are handled by the Investment Manager. Except the qualified accountant whose remuneration packages are borne by the Investment Manager, the Company has no salaried employees. Thus, no remuneration committee has been established by the Company.

At present, the Board consists of five Executive Directors and three Non-executive Directors of whom all are independent 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 the 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, which currently consists of four members, to approve transactions (investments or realisations) of over US$5 million each 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. The Board also requires the Investment Manager to establish 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.