All along, the Company is committed to maintain a high standard of corporate governance practices to safeguard the interests of its shareholders and enhance the performance of the Group. From time to time, the board of Directors (the “Board”) reviews and improves its corporate governance practices in order to ensure that the Group is under the leadership of an effective board so as to optimise return for its shareholders.
Corporate Governance Code
Throughout the year ended 30 June 2021, the Company has complied with all the applicable code provisions of the Corporate Governance Code (the “CG Code”) as set out in Appendix 14 of the Listing Rules, with the exception of code provisions A.6.4 and E.1.2.
Code provision A.6.4 is in relation to guidelines for securities dealings by relevant employees. Under code provision A.6.4, the Board should establish written guidelines on no less exacting terms than the Model Code for Securities Transactions by Directors of Listed Issuers (the “Model Code”) set out in Appendix 10 of the Listing Rules for its relevant employees in respect of their dealings in the securities of the Company. Instead of following the Model Code strictly, the Board has established its own guidelines which are not on no less exacting terms than the Model Code. Such deviation from the CG Code is considered necessary because of the huge size of employees of the Group which is around 30,000 and the Group’s diversified businesses. For these reasons, to follow the exact guidelines of the Model Code will cause immense administrative burden to the Company in processing written notifications from the relevant employees who deal in the securities of the Company, which can be avoided under the Company’s own guidelines.
Code provision E.1.2 provides that the chairman of the board should attend the annual general meeting. Dr. Cheng Kar-Shun, Henry, the Chairman of the Board, was unable to attend the annual general meeting of the Company held on 26 November 2020 (the “AGM”) due to his other engagement. Mr. Sitt Nam-Hoi, Executive Director of the Company who took the chair of the AGM, together with other members of the Board who attended the AGM, were of sufficient calibre for answering questions at the AGM and had answered questions at the AGM competently.
Directors’ Securities Transactions
The Company has adopted the Model Code as its own code of conduct for securities transactions by its Directors.
Specific enquiries have been made with all Directors who confirmed that they had complied with the required standard set out in the Model Code during the year ended 30 June 2021.
Board of Directors
Ms. Ki Man Fung, Leonie resigned as Non-executive Director with effect from 1 October 2020. Further, Mr. Cha Mou-Sing, Payson (“Mr. Cha”), Independent Non-executive Director, passed away on 6 November 2020 (PST) and following the passing away of Mr. Cha, Mr. Cha Mou-Zing, Victor ceased to be the Alternate Director of Mr. Cha on the same day. Further, Mr. Chan Johnson Ow was appointed as Independent Non-Executive Director (the “New Appointment”) with effect from 10 September 2021.
As at 30 September 2021, the Board comprises a total of 15 Directors, being seven Executive Directors, two Non-executive Directors and six Independent Non-executive Directors. The number of Independent Non-executive Directors represents more than one-third of the Board as required by Rule 3.10A of the Listing Rules. The biographies of the Directors are set out from pages 28 to 36 of this annual report. Dr. Cheng Kar-Shun, Henry is the father of Dr. Cheng Chi-Kong, Adrian and Ms. Cheng Chi-Man, Sonia, the brother-in-law of Mr. Doo Wai-Hoi, William, the brother of Mr. Cheng Kar-Shing, Peter and the uncle of Mr. Cheng Chi-Heng. Save as aforesaid, none of the members of the Board is related to one another.
All Directors have entered into formal letters of appointment with the Company, each for a term of three years, subject to retirement by rotation in accordance with the articles of association of the Company (the “Articles of Association”).
Article 103(A) of the Articles of Association provides that at each annual general meeting, one-third of the Directors for the time being (or if their number is not a multiple of three, the number nearest to but not less than one-third) shall retire from office by rotation, provided that every Director (including those appointed for a specific term) shall be subject to retirement by rotation at least once every three years. Also, pursuant to Article 94 of the Articles of Association, any Director appointed to fill a casual vacancy or as an addition to the Board is subject to re-election at the next following general meeting or next following annual general meeting of the Company respectively.
To ensure that Directors have spent sufficient time on the affairs of the Company, all Directors have annually disclosed to the Company the level of time involved in performing the duties of his/her position held in the Company and other public companies or organisations or other major appointments.
Chairman, Executive Vice-chairman & Chief Executive Officer and Other Executive Directors
Dr. Cheng Kar-Shun, Henry, the Chairman, has led the Board and ensured that the Board works effectively and that all important issues are discussed in a timely manner. Dr. Cheng Chi-Kong, Adrian, the Executive Vice-chairman & Chief Executive Officer, oversees the Company’s day-to-day businesses and the implementation of major strategies and policies of the Company. Each of the other Executive Directors takes up different responsibilities according to their own expertise. The responsibilities of the Chairman, the Executive Vice-chairman & Chief Executive Officer, and the other Executive Directors are clearly set out in their respective letters of appointment. The positions of the Chairman and the Executive Vice-chairman & Chief Executive Officer, are held by separate individuals so as to maintain an effective segregation of duties.
Non-executive Directors (including the Independent Non-executive Directors) serve the relevant function of bringing independent judgement on the development, performance and risk management of the Company. They have the same duties of care and skill and fiduciary duties as the Executive Directors.
Independence of Independent Non-executive Directors
The Company has received confirmation of independence from all Independent Non-executive Directors in accordance with Rule 3.13 of the Listing Rules. The Board is of the view that all Independent Non-executive Directors are independent in accordance with the Listing Rules.
During the year, Independent Non-executive Directors met regularly with members of senior management and representatives from major business units, which provided a good opportunity for Independent Non-executive Directors to better understand the businesses of the Group and to discuss a wide range of issues concerning the business of the Group.
Role of the Board
The Board oversees the management, businesses, strategic directions and financial performance of the Group. It is collectively responsible for the management and operation of the Company. The Board is the ultimate decision making body of the Company except for matters requiring the approval of the shareholders in accordance with the Articles of Association, the Listing Rules or other applicable laws and regulations.
Day-to-day businesses of the Company are delegated to the management team which works under the leadership and supervision of the Executive Vice-chairman & Chief Executive Officer and the Executive Committee of the Board as discussed in sections below.
Corporate Governance Functions
The Board is responsible for performing the corporate governance duties of the Company including:
|(a)||to develop and review the Company’s policies and practices on corporate governance;|
|(b)||to review and monitor the training and continuous professional development of the Directors and senior management;|
|(c)||to review and monitor the Company’s policies and practices in compliance with legal and regulatory requirements;|
|(d)||to develop, review and monitor the code of conduct and compliance manual (if any) applicable to employees and the Directors; and|
|(e)||to review the Company’s compliance with Appendix 14 of the Listing Rules (Corporate Governance Code and Corporate Governance Report).|
During the year, the Board reviewed the Company’s compliance with the CG Code and the applicable statutory and regulatory requirements.
The Group complied with all major aspects of laws and regulations that are significant to its business operations, and there were no threatened or concluded cases of material nature in connection with legal compliance during the year.
Regular Board meetings are held at least four times a year with at least 14 days’ notices and additional meetings with reasonable notices are held as and when the Board considers appropriate. The Board held four regular meetings during the year ended 30 June 2021. The Company Secretary assists the Chairman in preparing agenda for each meeting. Draft agenda for each regular Board meeting is circulated to all Directors to enable them to include other matters into the agenda. Agenda accompanying board papers are sent to all Directors at least three days before each regular Board meeting. Board decisions are voted upon at the Board meetings. The Company Secretary records all matters considered by the Board, decisions reached and any concerns raised or dissenting views expressed by the Directors. Minutes of meetings are kept by the Company Secretary with copies circulated to all Directors for information and records.
Each newly appointed Director is provided with the necessary induction and information to ensure that he/she has a proper understanding of the Company’s operations and businesses as well as his/her responsibilities under the relevant statues, laws, rules and regulations. From time to time, the Company Secretary also provides the Directors with updates on the latest development and changes in the Listing Rules and other relevant legal and regulatory requirements.
The Executive Vice-chairman & Chief Executive Officer reports the Group’s business activities including operations review, segment performance, strategies and new initiatives at regular Board meetings. In addition, all Directors are provided with monthly updates on major business segments performance and year-to-date financials. All these give the Board a balanced and understandable assessment of the Group’s performance, position and prospects and enable the Board as a whole and each Director to discharge their duties.
All Directors are encouraged to participate in continuous professional development activities to develop and refresh their knowledge and skills. From time to time, the Company has arranged in-house trainings for the Directors in the form of seminars and reading materials. A summary of training received by the Directors for the year ended 30 June 2021 according to the records provided by the Directors is as follows:
|Type of Continuous Professional Development|
|Name of Directors||Training on corporate governance, regulatory development and other relevant topics||Attending corporate events or visits|
|::: Executive Directors :::|
|Dr. Cheng Kar-Shun, Henry||✓||-|
|Dr. Cheng Chi-Kong, Adrian||✓||✓|
|Mr. Cheng Chi-Heng||✓||-|
|Ms. Cheng Chi-Man, Sonia||✓||✓|
|Mr. Sitt Nam-Hoi||✓||✓|
|Ms. Huang Shaomei, Echo||✓||-|
|Ms. Chiu Wai-Han, Jenny||✓||✓|
|::: Non-executive Directors :::|
|Mr. Doo Wai-Hoi, William||✓||-|
|Mr. Cheng Kar-Shing, Peter||✓||✓|
|Ms. Ki Man-Fung, Leonie*||-||-|
|::: Independent Non-executive Directors :::|
|Mr. Yeung Ping-Leung, Howard||✓||✓|
|Mr. Cha Mou-Sing, Payson**||-||-|
|Mr. Cha Mou-Zing, Victor** (Alternate Director to Mr. Cha Mou-Sing, Payson)||✓||-|
|Mr. Ho Hau-Hay, Hamilton||✓||✓|
|Mr. Lee Luen-Wai, John||✓||✓|
|Mr. Liang Cheung-Biu, Thomas||✓||✓|
|Mr. Ip Yuk-Keung, Albert||✓||✓|
|*||resigned as Director with effect from 1 October 2020|
|**||Mr. Cha Mou-Sing, Payson (“Mr. Cha”) passed away on 6 November 2020 (PST). Following the passing away of Mr. Cha, Mr. Cha Mou-Zing, Victor ceased to be the Alternate Director of Mr. Cha|
The Board discharges some of its responsibilities through delegation to respective Board-level committees, namely the Executive Committee, the Audit Committee, the Remuneration Committee, the Nomination Committee and the Sustainability Committee. All the Board committees are empowered by the Board under their own terms of reference which have been posted on HKEx’s website and/or the Company’s website.
|Executive Directors||Dr. Cheng Kar-Shun, Henry (Chairman)|
|Dr. Cheng Chi-Kong, Adrian|
|Mr. Cheng Chi-Heng|
|Ms. Cheng Chi-Man, Sonia|
|Mr. Sitt Nam-Hoi|
|Ms. Huang Shaomei, Echo|
|Ms. Chiu Wai-Han, Jenny|
The Board has delegated to the Executive Committee comprising all Executive Directors with authority and responsibility for handling the management functions and day-to-day operations of the Company, while reserving certain key matters such as the declaration of interim dividend, making recommendation of final dividend or other distributions for the approval by the Board. The Executive Committee monitors the execution of the Company’s strategic plans and the operations of all business units of the Company, and manages and develops generally the businesses of the Company. The Executive Committee meets regularly as and when necessary.
|Independent Non-executive Directors||Mr. Lee Luen-Wai, John (Chairman)|
|Mr. Yeung Ping-Leung, Howard|
|Mr. Cha Mou-Sing, Payson*|
|Mr. Ho Hau-Hay, Hamilton|
|Mr. Liang Cheung-Biu, Thomas|
|Mr. Ip Yuk-Keung, Albert|
|Mr. Chan Johnson Ow#|
|*||passed away on 6 November 2020 (PST)|
|#||became member with effect from 10 September 2021|
The Audit Committee, which comprises of all Independent Non-executive Directors, is responsible for reviewing the Group’s financial controls, its risk management and internal control systems (both covering ESG topics), financial and related ESG disclosure. The Audit Committee is empowered to review and monitor the external auditor’s independence and objectivity and the effectiveness of the audit process in accordance with applicable standards. It also reviews the internal audit programme and ensures the internal audit function is adequately resourced and effective.
During the year, the Audit Committee met twice and reviewed the audited financial statements of the Company for the year ended 30 June 2020 and the unaudited interim financial statements of the Company for the six months ended 31 December 2020 with recommendations to the Board for approval, reviewed reports on risk management and internal control systems of the Group, and discussed with the management and the external auditors on the accounting policies and practices which may affect the Group and the financial reporting matters. Furthermore, the Audit Committee reviewed the framework and policy of risk management, the system of internal control and the financial statements for the year ended 30 June 2021 of the Company with recommendation to the Board for approval.
|Independent Non-executive Directors||Mr. Ho Hau-Hay, Hamilton (Chairman)|
|Mr. Yeung Ping-Leung, Howard|
|Mr. Cha Mou-Sing, Payson*|
|Mr. Lee Luen-Wai, John|
|Executive Director||Dr. Cheng Kar-Shun, Henry|
|*||passed away on 6 November 2020 (PST)|
The Remuneration Committee is responsible for making recommendations to the Board on the Company’s policy and structure on the remuneration of all Directors and senior management of the Company and on the establishment of a formal and transparent procedure for developing remuneration policy for the Company for approval by the Board. It shall also make recommendations to the Board on the remuneration packages of individual Executive Director and senior management.
The remuneration of individual Executive Director and senior management is determined with reference to his/her duties and responsibilities with the Company, the Company’s performance as well as remuneration benchmarks in the industry and the prevailing market condition. The Company’s Human Resources Department provides materials on relevant remuneration data, remuneration benchmarks, market analysis and proposals to the Remuneration Committee for consideration. The remuneration package is performance-based and linked to the Company’s profitability, aimed to be competitive to attract and retain talented employees.
During the year, the Remuneration Committee met once and reviewed the remuneration policy of the Company, including that for the Directors and senior management of the Company. The remuneration for the Executive Directors comprises basic salary, pensions and discretionary bonus. Share options have been granted to all Directors and senior management to subscribe for shares in the Company under the Company’s share option scheme. Details of the remuneration paid to the Directors and members of senior management for the financial year ended 30 June 2021 are disclosed in the notes to the financial statements.
|Executive Director||Dr. Cheng Kar-Shun, Henry (Chairman)|
|Independent Non-executive Directors||Mr. Lee Luen-Wai, John|
|Mr. Liang Cheung-Biu, Thomas|
|Mr. Ip Yuk-Keung, Albert|
The Nomination Committee is responsible for reviewing the structure, size and composition of the Board, assessing the independence of Independent Non-executive Directors taking into account the independence requirements set out in Rule 3.13 of the Listing Rules, and making recommendations to the Board on appointment and re-appointment of Directors.
The Board has adopted a Board Diversity Policy (the “Diversity Policy”) since August 2013 which sets out the approach by the Company to achieve diversity on the Board. Under the Diversity Policy, the Company recognises and embraces the benefits of having a diverse Board and sees increasing diversity at Board level as an essential element in maintaining its competitive advantage and supporting its sustainable development. In determining an optimum composition of the Board, the Company will consider all aspects of diversity and will also take into account factors based on its own business model and specific needs from time to time. Board members’ appointment will be based on meritocracy and candidates will be considered against objective criteria, having due regard for the benefits of diversity on the Board. Selection of candidates will be based on a range of diversity perspectives, including but not limited to gender, age, skills, regional and industry experience and expertise, cultural and educational background, and professional experience. The ultimate decision will be based on merit and contribution that the selected candidates will bring to the Board.
The Board has also adopted a Nomination Policy (the “Nomination Policy”) since November 2018 which sets out the criteria and procedures to be adopted when considering candidates to be appointed as Directors and re- appointment of existing Directors. In the case of identifying candidate(s) to be appointed as Director, the Nomination Committee shall hold a meeting to consider the candidate(s) identified or selected pursuant to the nomination criteria and make recommendation to the Board if appropriate. The Board shall deliberate and decide on the appointment based upon the recommendation of the Nomination Committee. In the case of re-appointment of existing Director, the Nomination Committee shall review the overall contribution and service of the retiring Director to the Company and determine whether the retiring Director continues to meet the nomination criteria set out in the Nomination Policy, and if appropriate, recommend the retiring Director to the Board for consideration and recommendation to shareholders for the proposed re-election of Director at a general meeting. The factors considered in assessing the suitability of a proposed candidate for appointment as Director or re-appointment of existing Director are as follows:
|•||Contribution to the Board with due regard to the Board’s Diversity Policy;|
|•||Reputation for integrity;|
|•||Commitment to devote sufficient time to discharge duties as a Board member;|
|•||Potential conflicts of interest with the Company; and|
|•||Satisfaction of independence requirements of the Listing Rules in the case of a candidate for Independent Non-executive Director.|
The Nomination Committee met once during the year and reviewed the structure, size and composition of the Board in accordance with the Listing Rules, Diversity Policy and Nomination Policy and considered that the Board consists of a diverse mix of members and has provided a good balance of skills and experience appropriate to the business needs of the Group. It also made recommendation to the Board for the re-election of the retiring Directors at 2020 annual general meeting of the Company.
In August 2021, the Nomination Committee reviewed again the Board structure and the biographical details of the retiring Directors standing for re-election at the forthcoming annual general meeting of the Company (the “Retiring Directors”), and considered the New Appointment of Mr. Chan Johnson Ow (the “New Director”) in accordance with the criteria under the Nomination Policy and the Diversity Policy. The Nomination Committee considered that the Retiring Directors have the required character, integrity and professional knowledge and experience to continue fulfilling their role and contributing to the Company and that the New Director is of sufficient caliber and experience appropriate for the requirements of the Company’s businesses. The Nomination Committee made the recommendations regarding the nominations of the Retiring Directors and New Director to the Board. The Nomination Committee also assessed the independence of the Independent Non-executive Directors and considered that each of them has satisfied all the independence criteria as set out in Rule 3.13 of the Listing Rules and be considered as independent having regard to the independence of confirmation provided by the Independent Non-executive Directors.
In addition, Mr. Yeung Ping-Leung, Howard and Mr. Ho Hau-Hay, Hamilton (being two of the retiring Independent Non-executive Directors at the forthcoming annual general meeting of the Company) have served the Company for more than nine years, and the Nomination Committee considered that they had exercised impartial judgment and given independent guidance to the Company during their tenure of office. The Nomination Committee also considered that their long service would not affect their exercise of independent judgment. They are beneficial to the Board with diversity of their comprehensive business experience that contributes to invaluable expertise, continuity and stability to the Board and the Company has benefited greatly from their contribution and valuable insights derived from their in-depth knowledge of the Company.
|Executive Directors||Dr. Cheng Chi-Kong, Adrian (Chairman)|
|Mr. Sitt Nam-Hoi|
|Independent Non-executive Directors||Mr. Cha Mou-Sing, Payson*|
|Mr. Liang Cheung-Biu, Thomas#|
|Mr. Ip Yuk-Keung, Albert#|
|Mr. Chan Johnson Ow##|
|*||passed away on 6 November 2020 (PST)|
|#||became member with effect from 25 January 2021|
|##||became member with effect from 10 September 2021|
The Sustainability Committee is responsible for the oversight of the Company’s sustainability and environmental, social and governance (“ESG”) issues and risks. Supported by the Group Sustainability Steering Committee which comprises heads of business units, the Board-level Committee oversees the ESG management approach and policies, the processes of identifying and evaluating material ESG-related issues to internal and external stakeholders (including risks to the issuer’s businesses) and delivering Green, Wellness and Caring targets under “New World Sustainability Vision 2030” to manage ongoing performance. The Sustainability Committee monitors the integrity of the Company’s sustainability and ESG information in annual sustainability reporting and advises the Board on the matters in the applicable code provision(s) of the Environmental, Social and Governance Reporting Guide (Appendix 27) of the Listing Rules.
The Sustainability Committee met twice during the year. It discussed and endorsed the Group’s sustainability strategy, policies and targets set under the “New World Sustainability Vision 2030”. It also reviewed the process of sustainability reporting and ESG disclosures and monitored the progress of targets achievement and sustainability performance. In addition, the Sustainability Committee discussed relevant global trends including sustainable finance, climate risks and the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), and governance of sustainability matters.
Attendance at Board Meetings, Board Committee Meetings and General Meetings
The attendance records of the Directors at the Board meetings, Board committee and general meetings held during the year ended 30 June 2021 are set out below:
|Number of Meetings Attended/
Eligible to attend for the year ended 30 June 2021
|Name of Directors||Board Meeting||Audit Committee Meeting||Remuneration Committee Meeting||Nomination Committee Meeting||Sustainability Committee Meeting||Annual General Meeting|
|::: Executive Directors :::|
|Dr. Cheng Kar-Shun, Henry||4/4||-||1/1||1/1||-||0/1|
|Dr. Cheng Chi-Kong, Adrian||4/4||-||-||-||2/2||0/1|
|Mr. Cheng Chi-Heng||4/4||-||-||-||-||0/1|
|Ms. Cheng Chi-Man, Sonia||4/4||-||-||-||-||0/1|
|Mr. Sitt Nam-Hoi||4/4||-||-||-||2/2||1/1|
|Ms. Huang Shaomei, Echo||3/4||-||-||-||-||0/1|
|Ms. Chiu Wai-Han, Jenny||4/4||-||-||-||-||1/1|
|::: Non-executive Directors :::|
|Mr. Doo Wai-Hoi, William||3/4||-||-||-||-||0/1|
|Mr. Cheng Kar-Shing, Peter||4/4||-||-||-||-||0/1|
|Ms. Ki Man-Fung, Leonie*||1/1||-||-||-||-||0/1|
|::: Independent Non-executive Directors :::|
|Mr. Yeung Ping-Leung, Howard||4/4||2/2||1/1||-||-||0/1|
|Mr. Cha Mou-Sing, Payson**||0/2||0/1||0/0||-||0/1||0/0|
|Mr. Ho Hau-Hay, Hamilton||4/4||2/2||1/1||-||-||0/1|
|Mr. Lee Luen-Wai, John||4/4||2/2||1/1||1/1||-||0/1|
|Mr. Liang Cheung-Biu, Thomas||4/4||2/2||-||1/1||1/1||0/1|
|Mr. Ip Yuk-Keung, Albert||4/4||2/2||-||1/1||2/2||1/1|
|*||resigned as Director with effect from 1 October 2020|
|**||passed away on 6 November 2020 (PST)|
During the year ended 30 June 2021, the total fee paid/payable in respect of audit and non-audit services provided by the Group’s external auditors is set out below:
|Fee paid/payable for the year ended 30 June|
|Type of services||2021
Non-audit services comprise primarily accounting advisory, tax advisory, internal control review, circular works related to capital market transactions, due diligence and transaction advisory related to various acquisition and disposal activities, services on system enhancement, as well as other related services.
Directors' Responsibility for the Financial Statements
The Board, supported by the finance and accounts department, is responsible for the preparation of the financial statements of the Company and the Group. The Board has prepared the financial statements in accordance with the Hong Kong Financial Reporting Standards issued by the Hong Kong Institute of Certified Public Accountants. Appropriate accounting policies have also been used and applied consistently except the adoption of revised standards, amendments to standards and interpretation. The Directors have not been aware of any material uncertainties relating to events or conditions which may cast significant doubt upon the Group’s ability to continue as a going concern.
The statement by the auditor of the Company and the Group regarding its reporting responsibilities on the financial statements of the Company and the Group is set out in the Independent Auditor’s Report in this annual report.
Risk Managemnet And Internal Control
Governance, Risk and Control
Robust and effective management of risks is an essential and integral part of corporate governance. The management of the Group proactively manages the risks by establishing an Enterprise Risk Management (“ERM”) framework to assist the Audit Committee and the Board in discharging its risk management responsibilities and individual business units in managing their key risks. With reference to the “Internal Control – Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), the main features of our risk management and internal control systems are illustrated below:
The Board has the overall responsibility for evaluating and determining the nature and extent of the risks it is willing to take in achieving the Group’s strategic objectives, and ensuring that the Group establishes and maintains appropriate and effective risk management and internal control systems. The Audit Committee is delegated with the authority from the Board to oversee the Group’s management in the design, implementation and monitoring of the risk management and internal control systems. It also advises the Board on the Group’s risk-related matters.
Sound and effective risk management and internal control systems have been established and maintained for safeguarding assets against unauthorised use or disposition, ensuring the maintenance of proper accounting records for the provision of reliable financial information for internal use or for publication, and ensuring compliance of applicable laws, rules and regulations. It should be acknowledged that such systems are designed to manage rather than eliminate the risk of failure to achieve business objectives, and can only provide reasonable and not absolute assurance against material misstatement or loss.
The Risk Management Committee assists the Audit Committee in discharging its corporate governance responsibilities for risk management. It is responsible for ensuring that the risk management system is adequate and effective and that the ERM framework is implemented consistently throughout the Group. It also monitors the Group’s overall risk profiles by reviewing the key risks relating to individual business units and the key risks that are enterprise-wide, and ensures alignment with the approved risk appetite.
An internal audit department has been established to conduct internal audit of the Company and its subsidiaries, joint ventures and associated companies. The internal audit department performs risk-based audits to review the effectiveness of the Group’s material internal controls so as to provide assurance that all key risks are identified and managed, and to ensure that the risk management and internal control measures are carried out appropriately and functioning as intended. Major audit findings and recommendations are reported to the Audit Committee, which in turn reports to the Board. The implementation of the agreed actions in response to the identified audit issues are tracked and followed up regularly, and the status is reported to the Audit Committee.
The Audit Committee receives the report from the internal audit department and takes such report into consideration when it makes recommendation to the Board for approval of the half-yearly or annual results of the Group.
|Policies, Guidelines and Practices
Risk Management Policy
|–||The policy describes the Group’s risk management framework and methodology and provides guidance to business and corporate office departments of the Group in implementing risk management.|
|–||The Company has established the “Whistleblowing Policy” for employees to directly report to the internal audit function for any serious concerns about suspected fraud, corruption, malpractice, misconduct or irregularity of the Group. The internal audit function will investigate the reported cases in a confidential and timely manner and report the results of investigations to the Executive Committee and the Audit Committee.|
|–||The policy references principles embodied in the UN Global Compact, World Economic Forum’s Partnering Against Corruption Initiative, and Transparency International’s Business Principles for Countering Bribery to set a tone-at-top on anti-fraud commitment and relevant reporting channels.|
|Conflict of Interest Policy|
|–||The policy offers guidance to all employees on reporting and handling (potential) conflict of interest, raises directors’ and employees’ awareness and promotes good corporate governance practices.|
|Guide on Disclosure of Price-Sensitive Information|
|–||The Company had adopted a Price-Sensitive Information Policy and Procedure Manual (the “PSI Policy”) and established the Disclosure Committee to oversee internal controls over price-sensitive inside information. The PSI Policy contains the principles and procedures for handling and dissemination of price-sensitive information with reference to the requirements and principles set out in the Listing Rules and the Guide on Disclosure of Price-Sensitive Information published by the Stock Exchange. All Directors and employees are bound by the PSI Policy to safeguard confidential information.|
Risk Governance Structure
The Group’s risk governance structure is guided by the “Three Lines” governance model. As the first line, risk owners of all corporate departments and business units of the Group identify and evaluate the risks which may potentially impact the achievement of their business objectives, mitigate and monitor the risks (including but not limited to business, operation as well as environmental, social and governance (“ESG”) risks) by designing and executing control procedures in their day-to-day operations. They conduct risk assessment and control self- assessment on a regular basis to evaluate the adequacy and effectiveness of controls that are in place to mitigate the identified risks.
As the second line, the Group establishes specific functions to effectuate risk management and ensure proper controls are put in place by the first line and operating as intended. The responsibilities of these functions include but not limited to financial control, risk management and internal control, compliance, data privacy and information security, sustainability, and so forth. The Risk Management Committee also oversees and monitors the overall operation of the risk management and internal control systems.
As the third line, the internal audit department acts as an independent assessor. It is responsible for reviewing the major operational, financial, compliance and risk management controls of the Group on a continuous basis. It schedules its work in an annual audit plan which is reviewed by the Audit Committee every year. The audit plan is derived from risk assessment basis and is aimed at covering each significant corporate department and business unit in which the Group involves in day-to-day management within a reasonable period. The internal audit department also carries out independent and timely review or investigation works, where and when necessary, on risks and control related incidents identified from time to time.
On top of the “Three Lines” governance model, through independent audit and review, the external auditor provides reasonable assurance on the effectiveness of the risk management and internal control systems. Whistleblowing System is established for staff and other relevant parties to report misconduct cases. Every reported case will be handled in confidentiality and followed through in accordance with the Whistleblowing Policy and its related procedures.
Risk Management Approach
The Group adopts both top-down and bottom-up approaches in relation to risk management. It involves collating and appraising bottom-up inputs from risk owners of key departments and business units of the Group, with refinements and adjustments through top-down inputs from senior management and the Board in an iterative manner.
The risk management process is integrated into our daily operations and is an ongoing process involving all parts of the Group from the Board down to each individual staff. The risk owners and risk oversight parties are clearly defined across the Group. They are required to identify, analyse and evaluate the risks (including but not limited to business, operation as well as ESG risks) facing their businesses with proper management execution to avoid, reduce or transfer those risks accordingly.
Risk Management Policy is established for enhancing the effective implementation of risk management and internal control exercises within the Group, based on latest guidance from COSO and World Business Council for Sustainable Development (“WBCSD”). To ensure that all major risks (including ESG related risks) are properly identified, evaluated and monitored for achieving a sound and effective risk management system, risk owners across the Group are required to report the risk review exercises to the internal audit department by submitting both risk management questionnaire (with risk identification and assessment) and “Integrated Internal Control Self-Assessment Certificate” half-yearly on the effectiveness of risk management and internal control systems.
The Group’s risk profile is categorised into six areas: Strategic, Operational, Sustainability, Financial, Technology, Political and Regulatory. Our risk management process allows management to identify new and emerging risks, including medium- to long-term sustainability risks (such as climate risks). The interconnectivity of sustainability risks have also been taken into account, in which sustainability factors have been integrated in all key risk areas. Management also needs to assess and report the nature and priority of risks identified by providing details of risk description, risk levels and existing risk response strategies.
Besides, an early risk flagging mechanism is established which enables the Group to proactively identify and assess emerging risks and broad areas of changes, emanating from both internal and external factors (including but not limited to business, operation as well as ESG risks), and act on them in a timely manner. Risk owners have to flag and report immediately to the corresponding risk oversight parties when a potential risk is perceived and significant impact is expected in any business areas.
After consolidation with a holistic review of the Group, the internal audit department submits a written report on the effectiveness of the Group’s risk management and internal control systems to the Risk Management Committee and the Audit Committee for review on a half-yearly basis. The Board, through the Risk Management Committee and the Audit Committee, has put in place effective risk management and internal control systems which will enable the Group to respond appropriately to significant business, operational, financial, compliance, ESG related and other risks in achieving its objectives. The Group strives to continually improve its ERM framework in order to keep pace with the dynamic business environment. The Board, therefore, considers that the risk management and internal control systems of the Group are effective and adequate.
Key Risks of the Group^
Through our combined top-down and bottom-up risk review processes, the Group has identified the following key risks of various business segments for the year:
|Risk Description||Key Risk Treatments|
Adverse changes in macroeconomic environment due to the uncertainties associated with the US- China trade war, impact of pandemics and global financial conditions.
Keen industry competition and the need to transform existing business models to cope with adverse changes in the environment and market.
New trends in operation and working mode demands optimal workforce and human capital management as well as greater market expectation on sustainability needs to cater for the Group’s latest strategic plans.
Strategic Execution Risk
Our group has launched different strategic initiatives (operations and sustainability vision) with an aim to transform the business and create shared value not just for shareholders but also the community and different stakeholders. New strategic plans along with agile adaptation to market needs which may expose us to medium- term execution risk on our aspirations’ realisation, cross-business unit alignment and performance tracking.
Climate change risks are embedded in our risk management process.
Acute event-driven climate change or long-term climate shifts may pose additional challenges to our climate resilience business model and our ability to address stakeholders/regulator/investors’ expectations in ESG performance, measures and disclosures.
Our sustainability vision and the commitment to transit to a carbon-neutral business may bring associated impacts on strategic planning, financial arrangement, operational changes, technological adoption and potentially reputation.
Climate risks may expose us to possible health and safety threats, business disruptions, insurance costs spike and affect strategic plans execution.
Please refer to the “Corporate Sustainability” section on pages 38 to 77 of this Annual Report for details.
Product and Service Safety and Quality Risk
Changing market landscape, current regulatory requirements, growing customer needs and our constant strive for excellence may have amplified the impacts of possible sub-optimal product and/ or service safety and quality.
Pandemic/Disaster/Crisis Management Risk
Threats to public health and daily operations due to unexpected outbreak of pandemic diseases (such as coronavirus disease) or happenings of critical incidents (e.g. health and safety issues, business disruptions and natural disasters such as acute climate change events).
Supply Chain Management Risk
Cyber Security and Disruption Risk
Cyber-attacks on networks and systems which may cause business interruption, leakage of confidential information, etc.
|Political and Regulatory Risks|
Regulatory Compliance and Legal Risk
Given our wide business scope across the group and possible uncertainty in the environment, there might be greater likelihood for us to face unfavourable changes of government policies/ regulatory requirements, litigation and legal claims in normal course of business.
|^||We enhanced our risk management framework in FY2021 so risks under different categories have been re-defined. Changes over historical trends are not applicable for this financial year.|
|Risks including sustainability considerations|
The Company Secretary is a full time employee of the Company and has day-to-day knowledge of the Company’s affairs. The Company Secretary reports to the Chairman and is responsible for advising the Board on governance matters. For the year under review, the Company Secretary has confirmed that he has taken no less than 15 hours of relevant professional training. The biography of the Company Secretary is set out on page 37 of this annual report.
For the purpose of providing flexibility to the Company in relation to the conduct of general meetings to be held as a hybrid meeting where shareholders may attend by electronic means in addition to as a physical meeting where shareholders attend in person, the Company adopted a new articles of association (the “New Articles of Association”) during the year. The adoption of the New Articles of Association was approved by the shareholders of the Company at the annual general meeting held on 26 November 2020. The New Articles of Association is available on both the Company’s website and the Stock Exchange’s website. Details of the major and other changes brought about by the adoption of the New Articles of Association are set out in the circular of the Company dated 28 October 2020.
Environmental, Social and Governance
The “Corporate Sustainability” section from pages 38 to 77 in this annual report was prepared in accordance with the Core option of the Global Reporting Initiative (“GRI”) Sustainability Reporting Standards, as well as the Environmental, Social and Governance Reporting Guide issued by the Stock Exchange, which provides an overview of the Group’s efforts and performance in pursuing corporate sustainability. Supplementary information is available on the Company’s website under Sustainability section.
The section also references the recommendations of the Task Force on Climate-related Financial Disclosures (“TCFD”), the United Nations Global Compact (“UNGC”) and the standard for real estate industry set by the Sustainability Accounting Standards Board (“SASB”).
Convening Extraordinary General Meeting (“EGM”) and Putting Forward Proposals at General Meetings
Shareholders representing at least 5% of the total voting rights of all the shareholders of the Company having a right to vote at general meetings can deposit a written request to convene an EGM at the registered office of the Company for the attention of the Company Secretary. Such requisition, signed by the shareholders concerned, must state the general nature of the business to be dealt with at the meeting and may include the text of a resolution that may properly be moved and is intended to be moved at the meeting. If the Directors do not within 21 days from the date of the deposit of a request (after being verified to be valid) proceed to convene an EGM on a day not more than 28 days after the date on which the notice convening the EGM is given, the shareholders concerned, or any of them representing more than one-half of the total voting rights of all of them, may themselves convene an EGM, but any EGM so convened shall not be held after the expiration of three months after the date on which the Directors become subject to the requirement to call a meeting.
To put forward proposals at general meeting, a request in writing must be made by:
|(i)||shareholders representing at least 2.5% of the total voting rights of all shareholders of the Company having the right to vote at general meeting; or|
|(ii)||at least 50 shareholders of the Company having the right to vote at the meeting,|
to the Company to give to shareholders notice of any resolution which may properly be moved and is intended to be moved at an annual general meeting, or to circulate to shareholders any 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 any general meeting.
The written request must be signed by all the shareholders concerned in one or more documents in like form and deposited at the registered office of the Company for the attention of the Company Secretary not less than six weeks before the meeting in the case of a requisition requiring notice of a resolution at annual general meeting, and not less than seven days before the meeting in the case of requiring circulation of statement. Upon the request verified to be valid, the Company will give notice of the resolution or circulate the statement.
If a shareholder of the Company intends to propose a person other than a Director of the Company for election as a Director of the Company at any general meeting, the shareholder concerned shall lodge with the registered office of the Company for the attention of the Company Secretary (i) a written notice of his intention to propose that person for election as a Director; and (ii) a written notice by that person of his/her willingness to be elected as a Director together with the necessary information within the period commencing no earlier than the day after the dispatch of the notice of the general meeting and ending no later than seven days prior to the date of such general meeting.
Detailed procedures can be found in the following documents which are available on the Company’s website:
|•||“Procedures for Shareholders to convene Extraordinary General Meetings and putting forward proposals at General Meetings”; and|
|•||“Procedures for Shareholders to propose a person for election as a Director”.|
Enquiries to the Board
Enquiries may be put to the Board through the Company’s investor relations department at 30/F., New World Tower, 16-18 Queen’s Road Central, Hong Kong (email: firstname.lastname@example.org).
The Board adopted a Dividend Policy in November 2018 which sets out the guidelines for the Board to determine the frequency of dividend payment and target dividend payout ratio for a financial year. The Company would distribute to its shareholders funds surplus to the operating needs of the Company and its subsidiaries twice for each financial year as determined by the Board, subject to its shareholders’ approval, where applicable. In general, it is the policy of the Company to maintain a balance between meeting shareholders’ expectations and prudent capital management with a sustainable dividend policy. The following factors will be taken into account for determining the Company’s target dividend payout ratio:
|•||Any restrictions under the Hong Kong Companies Ordinance;|
|•||Any banking or other funding covenants by which the Company is bound from time to time;|
|•||The capital expenditure and operating requirements of the Group; and|
|•||The external economic and market situation.|
Communication with Shareholders
The Board and management maintain a continuing dialogue with the Group’s shareholders and investors through various channels. The Chairman, Chief Executive Officer, other members of the Board and the external auditor attend the annual general meeting to meet the shareholders. The Directors will answer questions raised by the shareholders on the performance of the Group. The Group holds press conferences and analyst briefings at least twice a year following the release of interim and annual results announcements at which the executive directors and management of the Group are available to answer questions and listen feedbacks regarding the performance of the Group. Our corporate websites which contain corporate information, interim and annual reports, announcements and circulars issued by the Group as well as the recent developments of the Group enables the Group’s shareholders to have timely and updated information of the Group. Shareholders can refer to the “Shareholders’ Communication Policy” posted on the Group’s websites for more details.
To ensure that the investors have a comprehensive and thorough understanding of the Group, with the establishment of timely and effective two-way communications, the management and the investor relations department of the Group participate in different international investment conferences and arrange local and overseas non-deal roadshows on a regular basis to elaborate the Group’s business development and market movement to investors in different locations. For details, please refer to the “Investor Relations”section from pages 104 and 105 of this annual report.