ND Paper continued to incorporate the essence of corporate governance into its management structure and internal control procedures, as we strove to maintain the highest standard in integrity and ethics in all aspects of our business activities, and to ensure the full compliance of our operations with applicable laws and regulations.

Corporate Governance Practices

The Company followed the principles and complied with all applicable provisions under the Code on Corporate Governance Practices ("CG Code") as set out in Appendix 14 to the Rules Governing the Listing of Securities ("Listing Rules") of The Stock Exchange of Hong Kong Limited ("Stock Exchange").

Compliance with the Model Code Set out in Appendix 10 to the Listing Rules

The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers ("Model Code") set out in Appendix 10 to the Listing Rules as its code.

Corporate Governance Structure

The Board, as the core of the Company's corporate governance structure, and the management are distinct and separate. The Board is responsible for giving guidance to and exercising effective checks on the management. In general, the duties of the Board are:

• formulating the long-term strategies of the Group and supervising their implementation;
• reviewing and approving, if thought fit, the business plans and financial budgets of the Group;
• approving, if thought fit, the annual and interim results of the Group;
• reviewing and supervising the risk management and internal control of the Group;
• ensuring a high standard of corporate governance and compliance; and
• overseeing the performance of the management.

The Board delegates on specific terms for the management to carry out defined strategies and report to the Board in respect of day to day operations. For such purposes, the Board has laid down clear terms of reference which specify those circumstances under which the management shall report to the Board and those decisions and commitments for which prior approval of the Board is required.

Board

Currently, the Company has nine directors, including four executive directors, one non-executive director and four independent non-executive directors. Ms. Cheung Yan, Chairman of the Company, is the spouse of Mr. Liu Ming Chung, Deputy Chairman and Chief Executive Officer of the Company. Besides, Mr. Zhang Cheng Fei, Deputy Chief Executive Officer of the Company, is a brother of Ms. Cheung Yan, and Mr. Lau Chun Shun is the son of Ms. Cheung Yan and Mr. Liu Ming Chung, and a cousin of Mr. Zhang Cheng Fei.

The posts of Chairman and the Deputy Chairman cum Chief Executive Officer are distinct and separate. The Chairman is responsible for supervising the functions and performance of the Board, while the Deputy Chairman cum Chief Executive Officer is responsible for the management of the businesses of the Group.More than one third of the members of the Board are independent non-executive directors, which exceeds the minimum requirement of the Listing Rules. The Company has received confirmation from each of the independent non-executive directors about his/her independence and therefore considers each of them to be independent.

More than one third of the members of the Board are independent non-executive directors, which exceeds the minimum requirement of the Listing Rules. The Company has received confirmation from each of the independent non-executive directors about his/her independence and therefore considers each of them to be independent.

All of the directors of the Company are appointed for a specific term. In accordance with Articles 87(1) and (2) of the Company's Bye-laws, at each annual general meeting, all the directors shall retire but shall be eligible for re-election. The term of service of non-executive directors is one year.

Executive Committee

The Board has established the Executive Committee, which is responsible for the management and administration of the business of the Company and any matters which are within the ordinary course of the Company's business under the control and supervision of the Board and in accordance with the provisions of the Bye-laws.

The members of the Executive Committee shall be executive directors, but the Executive Committee shall not at any time consist of more than four members. No change shall be made to the composition of the Executive Committee except with the approval of all the directors in writing. The Chairman of the Board shall be the Chairman of the Executive Committee.

Currently, the members of the Executive Committee include:
Ms. Cheung Yan (Chairman)
Mr. Liu Ming Chung
Mr. Zhang Cheng Fei

Remuneration Committee

The Remuneration Committee has been established mainly for the purpose of ensuring that the Company can recruit, retain and motivate high-calibre staff in order to reinforce the success of the Company and create value for our shareholders. The Remuneration Committee is responsible for overseeing the determination of directors' remuneration and benefits and establishing a formal and transparent procedure for developing policy on remuneration.

In addition, the Remuneration Committee also supervises and enforces the share option schemes of the Company in an effective manner. Details of the authority and duties of the committee are clearly set out in its terms of reference, which also specify that the committee shall consist of at least three members and the majority shall be independent non-executive Members.

The objective of the Company's remuneration policy is to maintain fair and competitive remuneration packages in line with business requirements and industry practices. In determining the level of directors' remuneration and fees, the Company takes into account market rates and other factors, such as the workload, duties and job complexity of individual directors. The factors for consideration in determining directors' remuneration include:

• business requirements;
• individual performance and contribution to business results;
• retention considerations and personal potential;
• market changes, such as fluctuations in demand and supply and variations in the competition landscape; and
• general economic situation.

Currently, the members of the Remuneration Committee include:
Ms. Tam Wai Chu, Maria (Chairman)
Mr. Chung Shui Ming, Timpson
Dr. Cheng Chi Pang
Mr. Liu Ming Ching
Mr. Zhang Cheng Fei

Audit Committee

The scope of duties of the Audit Committee mainly covers overseeing the Company's relationship with its external auditors, reviewing the preliminary results, interim results and annual financial statements, monitoring the compliance with statutory requirements and Listing Rules, reviewing the scope, extent and effectiveness of the Group's internal audit functions, and, where necessary, commissioning independent investigations by legal advisers or other professionals.

Financial Reports
The Audit Committee met with the Chief Financial Officer and other senior management of the Group to consider its interim report, annual report, and interim and annual results announcements. The committee reviewed and considered the report and statement of the management to ensure that the consolidated financial statements of the Group have been prepared in accordance with the accounting principles generally accepted in Hong Kong. The committee also met with the external auditors of the Group, PricewaterhouseCoopers, to consider the scope and results of their independent audit in respect of the interim report and consolidated financial statements.

Meanwhile, the committee highlighted the importance of disclosure of the continuing connected transactions of the Group.

Review of Internal Control and Risk Management Systems
The committee assisted the Board to perform its duties to maintain an effective internal control system for the Group. The committee reviewed the Group's procedure and workflow for environmental and risk assessment and its initiatives for business risks management and control.

Currently, the members of the Audit Committee include:
Dr. Cheng Chi Pang (Chairman)
Ms. Tam Wai Chu, Maria
Mr. Chung Shui Ming, Timpson
Mr. Wang Hong Bo

Risk Control Committee

In accordance with the Company's commitment to establishing and effectively maintaining a continuous high standard in corporate governance, the Board places particular emphasis on professional ethics and clear definition of rank, authority and responsibilities to establish a good environment for the internal control activities of the Company.

The management is responsible for the design of the Company's internal control organisation structure and hierarchy. To implement the risk management policy of the Company, the Risk Control Committee has been established. Its chairman is the Deputy Chief Executive Officer of the Company and other members are the Supervision and Management Department, Finance Department and Internal Audit Department of the Group. The primary duties of the committee are:

• strengthening the control environment; assessing relevant risks and carrying out necessary control activities;
• ensuring seamless information exchange;
• exercising appropriate supervision to ensure the effectiveness and efficiency of control over activities within and between different departments;
• identifying risks and analysing such risks which may impede the achievement of corporate objectives (including such risks associated with constant changes in the regulatory and operating environments);
• establishing internal control measures for minimising and eliminating risks;
• reviewing and reporting to the Board in respect of the effectiveness of internal control; and
• maintaining contact with external auditors for maintaining the quality of the Group's internal control system.

The Risk Control Committee meets at least once each year to report to the Audit Committee and the Board in respect of the critical control measures for evaluation of corporate objectives, finances, operations and checks and balances. The Risk Control Committee will also evaluate the significant risks faced by the Company, as well as the scopes and results of its internal and external audits. It will analyse the causes of any failure before making recommendations for remedial measures. It will also identify isolated cases and inherent deficiencies in the internal control system, and will make timely adjustments and remedies for the latter to avoid repeated failures.

In carrying out its duties, the Board seeks to raise the risk awareness of all departments of the Group. It also works to lay a solid foundation for the development of a risk management system by way of establishing appropriate policies and programmes, including the formulation of authorisation criteria. In respect of the work on review and reporting, the executive directors and the Board are responsible for the review and approval of the detailed operational and financial reports, budgets and business plans prepared by the management. Besides, the Board will compare the budgets with the actual results and oversee the ongoing work of the Risk Control Committee. The executive directors and the management team of all core business departments will carry out business reviews from time to time.