The remuneration committee (the “RC”) is responsible for setting and monitoring the remuneration policy for all Directors and senior management of the Group. The RC comprises Mr. Fung, Yuk Kan Peter (Chairman of the RC), Mr. Yao Xiangjun, Ms. Ko Wing Yan, Samantha, Mr. Chu, Howard Ho Hwa and Mr. Hou Ziqiang. Among the 5 members of the RC, 3 members are Independent Non-Executive Directors. The terms of reference of the RC are available at the websites of the Company and the Stock Exchange.
The roles and functions of the RC include consulting the Chairman of the Board about their remuneration proposals for other Executive Directors, making recommendation to the Board on the Company’s remuneration policy and structure for all Directors’ and senior management of the Group.
The RC has adopted the approach under B.1.2(c)(ii) of the CG Code to make recommendations to the Board on the remuneration packages of individual Executive Director and senior management of the Group.
The Company’s remuneration policy is to link remuneration packages for Executive Directors with the achievement of annual and long-term performance goals. By providing competitive and performance-linked compensation, the Company seeks to attract, motivate and retain key executives, which is essential to its long-term success.
1 meeting was held in 2017. During the meeting, the RC reviewed the Company’s remuneration policy and fixed the remuneration packages for the Executive Directors and senior management of the Group. No change has been proposed to the remuneration policy and the Directors’ remuneration.
The number of RC meeting held during the year and record of individual attendance of members, on a named basis, at the meeting held is set out in section headed “BOARD OF DIRECTORS” above in this report.
Remuneration of Directors and Senior Management
The Directors’ remuneration is set out in note 7 to the consolidated financial statements of this Annual Report.
The remuneration paid to the members of the senior management by bands in 2017 is set out below:
Remuneration Bands Number of Individuals
HK$100,001 to HK$500,000 2
HK$500,001 to HK$1,000,000 7
HK$1,000,001 to HK$1,500,000 1
HK$1,500,001 to HK$2,000,000 1
Nomination Committee
The nomination committee (the “NC”) comprises Mr. Yao Xiangjun (Chairman of the NC), Mr. Su Ning, Mr. Fung, Yuk Kan Peter, Mr. Chu, Howard Ho Hwa and Mr. Hou Ziqiang. Among the 5 members of the NC, 3 members are Independent Non-executive Directors. The terms of reference of the NC are available at the websites of the Company and the Stock Exchange.
re-appointment of directors and succession planning for the Directors, in particular the Chairman of the Board and the Chief Executive Officer. New Directors are sought mainly through referrals. In evaluating whether an appointee is suitable to act as a Director of the Company, the Board will review the independence, experience and expertise of the appointee as well as personal ethics, integrity and time commitment of the appointee.
The Board adopted the board diversity policy (the “Board Diversity Policy”) which to comply with the CG Code on board diversity. The Board Diversity Policy was adopted to ensure that diversity in its broadest sense continues to remain a feature of the Board. The NC’s assessment of the candidates includes, but is not limited to, consideration of the relevant knowledge and diversity of backgrounds, skills, experience and perspectives that would complement the existing Board.
1 meeting was held in 2017. Issues concerning the structure, size and composition of the Board were discussed and reviewed. The number of NC meeting held during the year and record of individual attendance of members, on a named basis, at the meeting held during is set out in section headed
“BOARD OF DIRECTORS” above in this report.
Audit Committee
The audit committee (the “AC”) comprises 3 Independent Non-executive Directors: Mr. Fung, Yuk Kan Peter (Chairman of the AC), Mr. Chu, Howard Ho Hwa and Mr. Hou Ziqiang.
The AC is responsible for appointment of external auditors, review of the Group’s financial information and oversight of the Group’s financial reporting system, risk management and internal control systems. It is also responsible for reviewing the interim and annual results of the Group prior to recommending them to the Board for approval. It meets regularly to review financial reporting and internal control matters and to this end has unrestricted access to both the Company’s internal and external auditors. The terms of reference of the AC are available at the websites of the Company and the Stock Exchange.
The AC held 2 meetings in 2017, in which the Committee
Corporate Governance Report
The AC also made its recommendation to the Board that the external auditors should be reappointed and approved the remuneration and the terms of engagements of the external auditors.
The internal and external auditors have unrestricted access to the AC, which ensures that their independence remains unimpaired.
There are no disagreement between the Board and the AC on the selection, appointment, resignation or dismissal of the external auditors.
The AC meets and holds discussions with the Executive Directors and other senior management of the Group on the interim results, preliminary results announcement and annual reports. The AC reviews and discusses the management’s report and representations with a review to ensure that the Group’s consolidated financial statements and prepared in accordance with accounting principles generally accepted in Hong Kong. It also considers reports from the Company’s external auditors, KPMG, on the scope and the outcome of their annual audit of the consolidated financial statements.
Accountability and Audit
Financial ReportingThe management provides such explanation and information to the Board and reports regularly to the Board on financial position and prospects of the business of the Company so as to enable the Board to make an informed assessment of the financial and other information put before the Board for approval.
The Directors acknowledge their responsibilities (as set out in the Report of the Independent Auditor) for preparing the financial statements for each financial period with a view to ensuring such financial statements give a true and fair view of the state of affairs of the Group and of the results and cash flows for that period. The Company’s financial statements are prepared in accordance with all relevant statutory requirements and applicable accounting standards.
The Directors are responsible for ensuring that appropriate accounting policies are selected and applied consistently;
and that judgments and estimates made are prudent and reasonable. The Board was not aware of any material uncertainties relating to events or conditions that might cast significant doubt upon the Group’s ability to continue as a going concern and the Board has prepared the financial statements on a going concern basis. The responsibility of the external auditor is to form an independent opinion, based
on their audit, on those consolidated financial statements prepared by the Board and to report their opinion to the shareholders of the Company. The reporting responsibilities of KPMG are set out in the Report of the Independent Auditor on pages 47 to 52 of this Annual Report.
Internal Control and Risk Management
The Board has overall responsibility for evaluating and determining the nature and extent of the risks they are willing to take in achieving the Group’s strategic objectives, overseeing the risk management and internal control systems including reviewing their effectiveness through the AC to ensure appropriate and effective risk management and internal control systems are in place. The Company has established an Internal Audit Department and the Risk Management Committee (the “RMC”). The RMC consists of representatives from operations departments, the Finance Department and the Internal Audit Department of the Company.
The AC assists the Board in meeting its responsibility for maintaining effective systems of risk management and internal control. The AC reviews all significant aspects of risk management and internal control, including financial, operational and compliance controls; the adequacy of resources, qualifications and experience, training programmes and budgets of the staff of the Group’s accounting, internal audit, and financial reporting functions. It reviews the process by which the Group evaluates its control environment and its risk assessment process, and the way in which business and control risks are managed. These reviews and reports are considered by the AC before it makes its recommendation to the Board for approval of the annual consolidated financial statements.
In the meeting held in December 2017, the AC has reviewed the effectiveness of the risk management and internal control systems of the Group and considered the systems are effective and adequate.
Effective risk management is fundamental to the achievement of the Group’s strategic objectives, and an enterprise risk management framework is in place to provide top-down and bottom-up approaches to identify, assess, mitigate and monitor key risks in a pro-active and structured manner.
The Company’s management encourages a risk aware and control conscious environment, setting objectives, performance targets or policies for the management of key risks including strategic planning, business operations, acquisitions, investments, legal and regulatory compliance, expenditure control, treasury, environment, health and safety, and customer service. The Company has a well-established organisational structure with defined levels of responsibility and authority and reporting procedures. There are inherent limitations in any systems of risk management and internal control and accordingly the Group’s risk management and internal control systems are designed to manage rather than eliminate the risk of failure to achieve business of objectives, and can only provide reasonable and not absolute assurance against material misstatement or loss.
The Executive Directors review operational and financial reports and key operating statistics and hold regular meetings with the management to review their reports.
Budgets are prepared annually by the management and are subject to review and approval by the Co-chief Executive Officers and then by the Executive Directors. Re-forecasts of operating results for the current year are prepared regularly, reviewed and approved by the Executive Directors.
The Group has established guidelines and procedures for the approval and control of expenditure. Operating expenditure is subject to overall budget control. Capital expenditure is subject to overall control within the approved budget of individual projects with more specific controls and approvals being required for overspending, unbudgeted expenditure and material expenditure within the approved budget.
Regular reports of actual versus budgeted and approved expenditure are also reviewed.
The treasury function, overseeing the Group’s investment and funding activities, regularly reports to the Executive Directors on the Group’s cash and liquid investments, borrowings, outstanding contingent liabilities and financial derivatives commitments. The Board has reviewed and adopted a treasury policy governing the management of the financial risks of the Group (including interest rate risk, foreign
The internal audit department reports to the AC of the existence and effectiveness of the risk management activities and controls in the operations of the Group. Using risk assessment methodology and taking into account the scope and nature of the Group’s activities and changes in operating environment, Internal Audit prepares its yearly audit plan which is reviewed and approved by the AC.
Internal Audit’s reports on the Group’s operations are also reviewed and considered by the AC. The scope of work on the Group performed by Internal Audit includes financial and operations review, recurring and unscheduled audits, fraud investigation, productivity and efficiency review and laws and regulations compliance review. Internal Audit follows up audit recommendations on implementation and the progress is reported to the AC.
With the assistance of Internal Audit, the Co-chief Executive Officers and the Executive Directors review, among other things, the profile of the significant risks and how these risks have been identified, evaluated and managed, the changes since the last semi-annual assessment in the nature and extent of significant risks, and the Group’s ability to respond to changes in its business and the external environment, the scope and quality of management’s ongoing monitoring of the risk management and internal control systems. In addition, they review the work of internal audit department and other assurance providers, the extent and frequency of communication of monitoring results to the AC which enables it to assess control of the Group and the effectiveness of risk management, any significant failing or weaknesses in internal control that have been reported, the necessary actions that are being taken promptly to remedy any significant failings or weaknesses, and the effectiveness of the Group’s processes for financial reporting and Listing Rules compliance.
R e p o r t s f r o m t h e e x t e r n a l a u d i t o r o n m a t e r i a l non-compliance with procedures and significant internal control weakness, if any, are presented to the AC. These reports are considered and reviewed and the appropriate action is to be taken if required.
There are also procedures including pre-clearance on
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Auditors’ Remuneration
Total auditors’ remuneration in relation to audit and non-audit services provided to the Group amounted to HK$4 million (2016: HK$4 million), of which a sum of HK$3 million (2016: HK$3 million) was paid to KPMG. Details of the external auditor’s fees are set out in note 5(c) to the consolidated financial statements of this Annual Report.
Company Secretary
Mr. Lam Cheuk Yin, Kenneth was appointed as the Company Secretary of the Company in March 2017. The biographical details of Mr. Lam are set out under the section headed
“Board of Directors and Senior Management” in this Annual Report.
According to the Rule 3.29 of the Listing Rules, Mr. Lam has taken no less than 15 hours of relevant professional training during the financial year ended 31 December 2017.
Shareholders’ Rights
The general meetings of the Company provide an opportunity for communication between the shareholders of the Company and the Board. The Company holds an annual general meeting (“AGM”) every year, and may hold a general meeting known as an extraordinary general meeting (“EGM”) whenever necessary.
– Right to convene EGM
Members of the Company holding at the date of deposit of the requisition not less than one-tenth of the paid-up capital of the Company carrying the right of voting at general meetings of the Company shall at all times have the right, by written requisition sent to the Company’s registered office at Clarendon House, 2 Church Street, Hamilton HM11, Bermuda (the “Registered Office”) and its principal office at Units A – F, 35th Floor, Legend Tower, No. 7 Shing Yip Street, Kwun Tong, Kowloon, Hong Kong (the “Principal Office”), for the attention of the company secretary of the Company, to require an EGM to be called by the Board for the transaction of any business specified in such requisition;
and such meeting shall be held within two months after the deposit of such requisition.
The written requisition must state the purposes of the general meeting, signed by the member(s) concerned and may consist of several documents in like form, each signed by one or more of those members.
If the requisition is in order, the company secretary of the Company will ask the Board to convene an EGM by serving sufficient notice in accordance with the statutory requirements to all the registered members. On the contrary, if the requisition is invalid, the members concerned will be advised of this outcome and accordingly, an EGM will not be convened as requested.
The notice period to be given to all the registered members for consideration of the proposal raised by the member(s) concerned at an EGM varies according to the nature of the proposal, as follows:
– At least 21 clear days’ and not less than 10 clear business days’ notice in writing if the proposal constitutes a special resolution of the Company, which cannot be amended other than to a mere clerical amendment to correct a patent error; and – At least 14 clear days’ and not less than 10 clear
business days’ notice in writing if the proposal constitutes an ordinary resolution of the Company.
– Right to put enquiries to the Board
Members of the Company do not generally have any right to put forward enquiries to the Board. There is no procedure set out in the Bermuda Companies Act 1981 or in the Bye-Laws of the Company available for any member to put forward an enquiry to the Board. A member of the Company may, of course, at any time write to the Board and it is up to the Board to decide whether or not to entertain any request made by a member of the Company.
Members of the Company who have enquiries about the above procedures or have enquiries to put to the Board may write to the company secretary of the Company at Units A – F, 35/F., Legend Tower, No. 7 Shing Yip Street, Kwun Tong, Kowloon, Hong Kong.
– Right to put forward proposals at shareholders’
meetings
Member(s) of the Company holding (i) not less than one-twentieth of the total voting rights of all members having the right to vote at the shareholders’ meeting; or (ii) not less than 100 members, can submit a written request stating the resolution intended to be moved at an AGM; or a statement of not more than 1,000 words with respect to the matter referred to in any proposed resolution or the business to be dealt with at a particular shareholders’ meeting.
The written request/statements must be signed by the member(s) concern and deposited at the Registered Office and the Principal Office, for the attention of the company secretary of the Company, not less than six weeks before the AGM in the case of a requisition requiring notice of a resolution and not less than one week before the shareholders’ meeting in the case of any other requisition.
If the written request is in order, the company secretary of the Company will ask the Board (i) to include the resolution in the agenda for an AGM; or (ii) to circulate the statement for the shareholders’ meeting, provided that the member(s) concerned have deposited a sum of money reasonably determined by the Board sufficient to meet the Company’s expenses in serving the notice of the resolution and/or circulating the statement submitted by the member(s) concerned in accordance with the statutory requirements to all the registered members. On the contrary, if the requisition is invalid or the member(s) concerned have failed to deposit sufficient money to meet the Company’s expenses for the said purposes, the member(s) concerned will be advised of this outcome and accordingly, the proposed resolution will not be included in the agenda for the AGM; or the statement will not be circulated for the shareholders’ meeting.
The procedures for shareholders of the Company to propose a person for election as a director is posted on the Company’s website.
INVESTOR RELATIONS
The Company attaches great importance to communicate with shareholders of the Company and a number of means, including regular group meetings and plant tours, are used to promote greater understanding and dialogue with investment community. This also includes the annual general meeting, the annual and interim reports, notices, announcements and circulars. Key executives maintain regular dialogue with institutional investors and analysts to keep them abreast of the Company’s development.
The Group’s website www.boevx.com contains an “Investor
& Media Relations” section which offers timely access
The AGM is an important opportunity for communicating with shareholders. The Company’s Chairman and Directors are available at the AGM to answer questions from shareholders of the Company.
– Change of Company Name
According to the circular published by the Company dated 27 April 2017, the Board proposed to change the English name of the Company from “Varitronix International Limited” to “BOE Varitronix Limited”, and to adopt “京 東方精電有限公司” as the secondary name in Chinese of the Company to replace “精 電 國 際 有 限 公 司” which had been used for identification purpose only (the “Change of Company Name”).
The Change of Company Name was approved by the shareholders of the Company at the annual general meeting of the Company held on 5 June 2017.
The Certificate of Incorporation on Change of Name and the Certificate of Secondary Name were issued by the Registrar of Companies in Bermuda on 28 June 2017, certifying that the Company had changed its name and was registered as “BOE Varitronix Limited” and was registered with the secondary name “京東方精電有限公司” on 6 June 2017.
The Company had carried out all necessary filing procedures with the Companies Registry in Hong Kong under Part 16 of the Companies Ordinance (Chapter 622, The Laws of Hong Kong).
Save as disclosed above, during the year ended 31 December 2017, there had been no significant change in the Company’s constitutional documents.