沙隆达B：2010年年度报告(英文版) 2011-03-18(18)

沙隆达B：2010年年度报告(英文版) 2011-03-18

General Meeting into full play in governance systems, smoothly completed self-inspection of special campaigns for corporate governance improvement and rectification work of the Company. There’s no governance problem unsolved of the Company at present.

VI. Horizontal competition and related transactions

In the reporting period, the Company, in accordance with requirements of document of Notice on Conducting Special Activities of Solving Horizontal Competition and Reducing Related Transactions (E-Zheng-Jian-Ju-Zi [2010] No.24), seriously inspected related cases such as related transactions and horizontal competition, which are as followings:

1. Explanation on related transactions and horizontal competition

In Apr. 2005, China National Agrochemical Corporation signed Agreement on Equity Transfer with Jingzhou State-owned Assets Administration Bureau (the original controller of the Company), received 100% equity of Sanonda Group Co., Ltd. that had been held by the Bureau, and became the actual controller of the Company. In line with characteristics of pesticide and chemical industry, China National Agrochemical Corporation strengthened its group-purchasing advantage for chemical raw materials and formed local monopolized control over partial chemical raw materials, which formulated daily related transaction events such as purchase of raw materials to Sanonda Group Co., Ltd. and its actual controller by the Company.

At the same time, China National Agrochemical Corporation, the Company’s actual controller, soon purchased Shandong Dacheng Pesticide Co., Ltd., of which products such as DDVP and paraquat constructed horizontal competition against correspondent products of the Company.

2. Influence of related transactions and horizontal competition on corporate operation Most related transactions between Sanonda Group Co., Ltd. and the Company were fair and lawful transactions normally occurred in routine production of the Company with market-based purchase prices and no harm to equity of Hubei Sanonda Co., Ltd. and shareholders. Besides, guarantee costs provided for Sanonda Group Co., Ltd. and its actual controller in the purpose of ensuring financing funds for the Company needed joint liability guarantees offered by Sanonda Group Co., Ltd., China National Agrochemical Corporation and China National Chemical Corporation. It was executed in light of Management Method for Financing Guarantees in China National Chemical Corporation and charging standard of credit-guarantee limited companies. It was rational to pay guarantee costs, of which the pricing is fair, with no harm to equity of the Company and all shareholders, especially minority shareholders.

The amount concerning horizontal competition against Shandong Dacheng Pesticide Co., Ltd., the affiliated party controlled by the same controller of the Company, accounted for low proportion to operating revenue of the Company. Meanwhile, key sales regions of the Company differed from Shandong Dacheng, as a result, there’s no significant influence on the Company caused by evident competition.

3. Relevant measures to solve horizontal competition and reduce related transactions In respect of existence of horizontal competition, the Company has events relating to horizontal competition and relevant requirements of regulators to China National Agrochemical Corporation, the actual controller of the Company, and cooperated with the actual controller to do well to solve such problems.