Corporate Governance Report
The Board of Directors (the “Board”) and themanagement of the Company believe that corporategovernance is important to ensure the transparency andsafeguard the interests of the shareholders. Since theCompany’s listing on the Stock Exchange in October2006, the Board and the management of the Companyhave devoted in achieving a high standard of corporategovernance and maintaining a high level oftransparency.The Company’s corporate governance practices arebased on the principles and the code provisions (the“Code Provisions”) as set out in the Code on CorporateGovernance Practices (the “CG Code”) contained inAppendix 14 to the Rules Governing the Listing ofSecurities on the Stock Exchange (the “Listing Rules”).Since the listing, the Company has, throughout the yearended 31 December 2006 and up to the date ofpublication of the result announcement, complied withmost of the Code Provisions save for the certaindeviations from the Code Provisions that are discussedlater in this report. The following summarizes theCompany’s corporate governance practices and explainsdeviations, if any, from the CG code.BOARD OF DIRECTORSTo be accountable to the shareholders, the Board iscollectively responsible for formulating the strategicbusiness direction of the Group and setting objectivesfor management, overseeing its performance andassessing the effectiveness of management strategies.1013THE DIRECTORSCurrently, the Board comprises seven Directors,including four executive Directors and threeindependent non-executive Directors. The biographicaldetails of the Directors are set out on pages 10 to 13 ofthis annual report. The composition of the Board is wellbalanced with each Director having sound knowledge,experience and/or expertise relevant to the businessoperations and development of the Group. All theDirectors are aware of their collective and individualresponsibilities to the shareholders and have exercisedtheir duties with care, skill and diligence, contributingto the successful performance of the Group.There is no financial, business and family relationshipamong members of the Board and the Chairman. Allof them are free to exercise their independentjudgment.342006
Corporate Governance Report (continued)
87(1)THE DIRECTORS (continued)In accordance with the Article 87(1) of the Company’sArticles and Association, at each annual generalmeeting, one-third of the Directors for the time being,or if their number is not a multiple of three, then thenumber nearest to but not less than one third, arerequired to retire from office by rotation provided thatevery Director shall be subject to retirement at leastonce every three years. A retiring Director shall beeligible for re-election and shall continue to act as aDirector throughout the meeting at which he retires.The Directors to retire by rotation will be those whohave been longest in office since their last re-electionor appointment but as between persons who becomeor were last re-elected Directors on the same day thoseretire will (unless they otherwise agree amongthemselves) be determined by lot.In accordance with the Article 86(3), new Directorsappointed by the Board during the year are required toretire and submit themselves for re-election at the firstannual general meeting immediately following theirappointments.Currently, all Directors are appointed for a specific termof three years and subject to retirement by rotation,and barring unforeseen resignation or retirement duringa year, each such Director is effectively appointed for aterm of three years.The Company has received from each independent non-executive Director a written annual confirmation of theirindependence and is satisfied with their independencein accordance with the Listing Rules.The Company has not yet adopted code provision A.2.1of the CG Code pursuant to which the roles of chairmanand chief executive officer (“CEO”) should be separateand should not be performed by the same person. Thedivision of responsibilities between the Chairman andCEO should be clearly established and set out in writing.86(3)A.2.1Tiande Chemical Holdings LimitedAnnual Report 200635
Corporate Governance Report (continued)
THE DIRECTORS (continued)The Company does not presently have any officer withthe title of CEO. At present, Mr. Liu Hongliang, beingthe Chairman and general manager of the Company,is responsible for the strategic planning, formulationof overall corporate development policy and runningthe business of the Group as well as the duties ofChairman. Due to the nature and extent of the Group’soperations, the Group considers that Mr. Liu is the mostappropriate chief executive because he possesses in-depth knowledge and experience in fine chemicalbusiness and is able to ensure the sustainabledevelopment of the Group. Besides, he is the founder,the chairman and the controlling shareholder of theGroup since its establishment and till now.Notwithstanding the above, the Board will review thecurrent structure from time to time. When at theappropriate time and if candidate with suitableleadership, knowledge, skills and experience can beidentified within or outside the Group, the Companymay make the necessary arrangements.RESPONSIBILITIES OF THE BOARDThe Board reviews the performance of the operatingdivisions against their agreed targets and budgets on aregular basis and also exercises a number of reservedpowers, including:••••••formulating long-term strategy;approving annual budget;approving public announcements including theinterim and annual financial statements;setting dividend policy;approving material borrowings and treasury policy;andcommitting to major acquisitions, disposal,formation of joint ventures and capitaltransactions.The Directors are responsible for the preparation of thefinancial accounts of the Company for each financialyear and ensuring that these accounts give a true andfair view of the state of affairs of the Group, its resultsand cash flows for that period. The Directors are alsoresponsible for ensuring that proper accounting recordsof the Company which disclose the financial positionof the Group are kept at all times.The Board has delegated the day-to-day operationresponsibility to the management under the supervisionof the general manager.362006
Corporate Governance Report (continued)
BOARD MEETINGSRegular Board meetings are scheduled in advance tofacilitate fullest possible attendance. The CompanySecretary assists the Chairman in setting the agenda ofBoard meetings and each Director is invited to presentany businesses that he wishes to discuss or propose atsuch meetings.Code provision A.1.3 stipulates that notice of at least14 days should be given of a regular board meetingand reasonable notice should be given for all otherboard meetings. During the year, the Directorsconsented to a shorter notice on one of the regularBoard meetings.Board papers are circulated to all Directors not less thanthree days before the Board meetings to ensure timelyaccess to relevant information. Directors may chooseto take independent professional advice if necessary.Draft and final versions of minutes are circulated to allDirectors for comments.The Company Secretary takes and keeps minutes of allBoard and Committees meetings. Draft minutes arenormally circulated to the Directors for comments withina reasonable time after each meeting. Each Boardmember is entitled to have access to the Board papers.The Company held a total of three regular Boardmeetings in 2006, which did not fully comply with codeprovision A.1.1 of the Code. The Board will improvethe relevant meeting arrangements to comply with therelevant code provision of the Code in coming years.Individual attendance of each Director at the meetingsis set out below:A.1.3143A.1.1Member of the BoardNumber of Boardmeetings attendedExecutive DirectorsMr. Liu Hongliang (Chairman)Mr. Wang ZijiangMr. Guo XitianMr. Guo YuchengIndependent Non-Executive DirectorsMr. Chak Kwan (resigned on 1 March 2007)Mr. Gao BaoyuMr. Liu ChenguangAttendancerate3/33/32/32/3100%100%67%67%2/32/32/367%67%67%Tiande Chemical Holdings LimitedAnnual Report 200637
Corporate Governance Report (continued)
BOARD COMMITTEESThe Board has established three committees, namelythe Safety and Environment Protection Committee,Audit Committee and the Remuneration Committee,for overseeing particular aspects of the Company’saffairs. All Board Committees of the Company areestablished with defined written terms of referencewhich deal clearly with their authority and duties. Theterm of reference of the Board Committees are postedon the Company’s website and are available toshareholders upon request.SAFETY AND ENVIRONMENTALPROTECTION COMMITTEEThe Board has established the Safety and EnvironmentalProtection Committee to enhance the security ofproduction effectiveness. The Safety and EnvironmentalProtection Committee comprised three members,namely Mr. Guo Yucheng, an executive Director andthe Chairman of the Committee, Mr. Gao Baoyu, anindependent non-executive Director and Mr. Fu Anxu,a chief engineer of the Group. The Committee isdelegated by the Board to perform mainly the followingduties:•formulate the Group’s overall safety andenvironmental protection production plans andregulations for the approval by the Board;examine and supervise the production operationsat the subsidiary level to ensure they are followedto the Group’s safety and environmental protectionregulations;ensure that the production of the Group has beencomplied with all rules and regulations as a safetyproduction enterprise promulgated by the relevantPRC government authorities;handle all complaints regarding safety andenvironmental production aspect of the Group.•••AUDIT COMMITTEEThe Audit Committee comprises the three independentnon-executive Directors, namely, Mr. Gao Baoyu, Mr.Liu Chenguang and Mr. Leung Kam Wan. Mr. Leung isthe Chairman of the Audit Committee and he possessesrecognised professional qualifications in accountingrequired by the Listing Rules.382006
Corporate Governance Report (continued)
AUDIT COMMITTEE (continued)The main duties of the Audit Committee include:•reviewing the Group’s financial information,overseeing the Group’s financial reporting systemsand internal control procedures;discussing with the Board the system of internalcontrol and ensure that the Board has dischargedits duty to have an effective internal control system;making recommendation to the Board on theappointment, re-appointment and removal of theexternal auditors, and approving the remunerationand terms of engagement of the external auditors;evaluating the fairness and reasonableness of anyconnected transactions and the impact of suchtransactions on the profitability of the Group;reviewing the external auditors’ managementletter and management’s response.••••The Audit Committee held one meeting with fullattendance in 2006 since the listing and had attendedto the following matters:••review the management financial statements;review the connected transactions of the Group;andreview and discuss with the Board in respect ofinternal controls system.•Full members of the Board and the Financial Controllerof the Company also attended this meeting.3,100,000AUDITORS’ REMUNERATIONThe external auditors of the Company receivedapproximately RMB3.1 million for audit and non-auditservices provided to the Group.Tiande Chemical Holdings LimitedAnnual Report 200639
Corporate Governance Report (continued)
AUDITORS’ REMUNERATION (continued)During the year under review, the remuneration paidto the Company’s external auditors is set out as follows:RMB’000Audit servicesNon-audit services2,874200REMUNERATION COMMITTEEThe Remuneration Committee is chaired by Mr. LiuHongliang, a executive Director with Mr. Leung KamWan, Mr. Gao Baoyu and Mr. Liu Chenguang as thethree other members, all being independent non-executive Directors.The primary role of the Remuneration Committeeinclude:•reviewing the terms of the remuneration packageof each executive Director and member of seniormanagement and making recommendations tothe Board regarding any adjustment thereof;reviewing and evaluating the performance ofindividual executive Directors for determining theamount of bonus (if any) payable to them; andmaking recommendations to the Board on theCompany’s policy and structure for allremuneration of the Directors and seniormanagement of the Company and on theestablishment of a formal and transparentprocedure for developing policy on suchremuneration.••No Director shall participate in any discussion abouthis own remuneration.The emoluments paid to each Director for the yearended 31 December 2006 are set out in note 9 to theaccounts.Since the Listing, there has not been any change to theremuneration packages granted to the existing Directorsand therefore the Remuneration Committee did nothold any meeting in 2006.The Remuneration Committee will meet at least oncea year. Additional meetings should be held if theCommittee shall so request.9402006
Corporate Governance Report (continued)
NOMINATION OF DIRECTORSSince the full Board is involved in the appointment ofnew Directors, the Company has not established aNomination Committee. The Board will take intoconsideration criteria such as expertise, experience,integrity and commitment when considering newdirector appointments.Since the Listing, one new independent non-executiveDirector has been nominated for appointment and oneindependent non-executive Director has resigned.INTERNAL CONTROLThe Board has overall responsibilities for the Group’ssystem of internal control and evaluation of itseffectiveness through the review by the AuditCommittee. The Board plays a key role in maintaininga sound and effective internal control system of theGroup to safeguard the Group’s assets and theshareholders’ investment. The Chairman and theFinancial Controller, in joint effort with the AuditCommittee, regularly review the Group’s operations atfinancial and operational levels, ensuring thatcompliance controls and risk management measuresand procedures are properly implemented.The Group has implemented control systems like clearlydefined lines of responsibilities, capital expenditure andinvestment system, treasury, budgeting and monitoringsystems for performance measurement etc. Besides, theBoard takes a constant review of the Group’s financialand operational procedures to ensure its effectiveness.All executive Directors monitor the business activitiesdirectly and review monthly financial results operations.Management meetings are held as and when requiredto address irregularities immediately. During the yearunder review, the full Board has reviewed the keyoperations of the Group, identified areas of concernand held constructive communications with the AuditCommittee, and reviewed the effectiveness of theinternal controls procedures.Up to the date of publication of the annual report, theBoard appointed an external consultant to conduct areview of the effectiveness of the operating system ofthe Group. Upon completion of the review report, theGroup shall make improvement according to therecommendations of the report in order to optimizeand minimize operational risks and areas ofirregularities.Tiande Chemical Holdings LimitedAnnual Report 200641
Corporate Governance Report (continued)
DIRECTORS’ SECURITIES TRANSACTIONSThe Company has adopted the Model Code forSecurities Transactions by Directors of Listed Issuers setout in Appendix 10 to the Listing Rules (the “ModelCode”) as its own code governing securities transactionsof the Directors. After specific enquiry by the Company,all the Directors have confirmed that they have compliedwith all requirements as set out in the Model Code forthe financial year ended 31 December 2006.SHAREHOLDERS’ RIGHTSUnder the Company’s articles of association, any oneor more shareholders holding not less than one-tenthof the paid up capital of the Company carrying the rightof voting at general meetings of the Company shall atall times have the right, by written requisition to theBoard to require an extraordinary general meeting tobe called by the Board for the transaction of anybusiness specified in such requisition.Pursuant to Article 66 of the Company’s Articles ofAssociation, at any general meeting a resolution put tothe vote of the meeting shall be decided on a show ofhands unless a poll is (before or on the declaration ofthe result of the show of hands or on the withdrawalof any other demand for a poll) demanded:(i)(ii)by the chairman of such meeting; orby at least three members present in person (or inthe case of a member being a corporation by itsduly authorised representative) or by proxy for thetime being entitled to vote at the meeting; or66(i)(ii)(iii)(iii)by any member or members present in person (orin the case of a member being a corporation byits duly authorised representative) or by proxy andrepresenting not less than one-tenth of the totalvoting rights of all the members having the rightto vote at the meeting; or(iv)by a member or members present in person (or inthe case of a member being a corporation by itsduly authorised representative) or by proxy andholding shares in the Company conferring a rightto vote at the meeting being shares on which anaggregate sum has been paid up equal to not lessthan one-tenth of the total sum paid up on all theshares conferring that right; or(v)if required by the rules of the designated stockexchange, by any Director or Director who,individually or collectively, hold proxies in respectof shares representing five per cent. (5%) or moreof the total voting rights at such meeting ifrequired by the rules of the designated stockexchange.(iv)(v)(5%)422006
Corporate Governance Report (continued)
SHAREHOLDERS’ RIGHTS (continued)The poll is conducted by the Company’s share registrarand the results of the poll will be published on theGroup’s website. Financial and other information ismade available on the Group’s website and updateregularly.Shareholders may send their enquiries requiring theBoard’s attention to the Company Secretary at theCompany’s principal place of business in Hong Kong.COMMUNICATION WITH SHAREHOLDERSAND INVESTORSThe Board recognises the importance of maintainingclear, timely and effective communication with theshareholders and investors. To promote effectivecommunication, extensive information about theCompany business is provided in its interim and annualreports, which are generally sent to shareholders,analysts and other interested parties if they have sorequested. The Company also maintains a corporatewebsite, at which, comprehensive information, updateson the Company’s business developments andoperations, financial information, corporate governancepractices and other information of the Group areprovided.The Company apprizes its annual general meeting asan important channel for having face-to-face dialoguewith shareholders. The first annual general meeting ofthe Company after the Listing will be held on 18 May2007. There, the Directors and key executives of theGroup will answer and explain to shareholders issuesrelating to the Group’s business strategies and financialresults.The Company believes that effective communication isessential for enhancing investors’ knowledge andunderstanding of the Company’s business performanceand strategies. The Company will continuously promoteinvestor relations and communications in order toenable investors to have access, on a fair and timelybasis, to information that is reasonably required formaking the best investment decisions.By order of the BoardLiu HongliangChairmanHong Kong, 13 April, 2007Tiande Chemical Holdings LimitedAnnual Report 200643
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