Producing Energyfor a Prosperous Future

Corporate Governance Report

(As of 31 December 2015 – Extracted from EPI (Holdings) Limited's Annual Report 2015

COMPLIANCE WITH THE CODE ON CORPORATE GOVERNANCE PRACTICES

The Board recognises the importance of incorporating elements of good corporate governance into the management structure and the internal control procedures of the Group so as to ensure that all business activities of the Group and the decision making processes are properly regulated. During the year under review, the Company has applied the principles and has complied with the code provisions set out in the Corporate Governance Code (the “CG Code”) in Appendix 14 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited with deviations from the code provision A.4.1 of the CG Code as summarized below.

The code provision A.4.1 of the CG Code stipulates that non-executive directors should be appointed for a specific term, subject to reelection. Currently the non-executive directors are not appointed for a specific term. However, all non-executive directors are subject to retirement and can offer themselves for re-election in accordance with the Company’s Bye-laws.

In accordance with Article 99(A) of the Company’s bye-laws, all Directors, except the Managing Director, shall retire and, being eligible, offer themselves for re-election at the forthcoming Annual General Meeting of the Company in accordance with the Company’s byelaws.

 

MODEL CODE FOR SECURITIES TRANSACTIONS BY DIRECTORS

The Company has adopted a code of conduct rules (the “Model Code”) regarding securities transactions by Directors on terms no less exactly than the required standard set out in the Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 of the Listing Rules, and that having made specific enquiry of all Directors, the Company confirms that all the Directors have complied with the Model Code throughout the year.

 

BOARD OF DIRECTORS

The central role of the Board is to set the Company’s strategic direction and to oversee the Company’s management and business activities. The Board is also responsible for the promotion of the success of the Company by directing and guiding its affairs in an accountable and effective manner. Board members have a duty to act in good faith, with due diligence and care, and in the best interests of the Company and of its shareholders.

 

CORPORATE GOVERNANCE

Types of decisions taken by the Board include the following:

1.  formulating strategic direction of the Company;

2.  setting the Company’s mission and values;

3.  reviewing and guiding corporate strategies; setting performance objectives, monitoring implementation and corporate performance;

4.  monitoring and managing potential conflicts of interests between the Board members and the management of the Company; and

5.  ensuring the integrity of the Company’s accounting and financial reporting systems, including the independent audit, and that appropriate systems of control are in place, in particular, systems for monitoring risk, financial control and compliance with the law.

The Board is accountable to shareholders for the performance of the Company. The day-to-day management of the Company is the responsibility of the Chief Executive Officer (the “CEO”), as delegated by the Board. The CEO has been given clear guidelines and directions as to his powers and, in particular, the circumstances under which he should report back to, and obtain prior approval from, the Board before making commitments on behalf of the Company. The Board reviews these arrangements on a periodic basis to ensure that they remain appropriate to the needs of the Company.

For the year ended 31 December 2015, the Board:

1.  reviewed and approved the audited annual results of the Group for the year ended 31 December 2014 and the unaudited interim results of the Group for the six months ended 30 June 2015;

2.  reviewed the performance of and formulated the business strategies of the Group;

3.  reviewed the internal controls of the Group;

4.  reviewed and approved the price-sensitive transactions;

5.  reviewed and approved the capital reorganisation, the open offer of 242,617,879 shares at HK$0.50 per share and the rights issue on the basis of five rights shares for every one existing share of the Company at the subscription price of HK$0.14 per rights share; and

6.  reviewed and approved the prospectus regarding the rights issue of 3,639,268,185 shares at a subscription price of HK$0.14 per rights share. The prospectus was published on 31 December 2015 and the rights issue was completed after the year end. Please also refer to Note 36 to the consolidated financial statements.

Regular Board meetings are scheduled in advance to give all directors an opportunity to attend. All directors are kept informed on a timely basis of major changes that may affect the Group’s businesses, including relevant rules and regulations. Directors have full access to information on the Group and are able to obtain independent professional advice whenever deemed necessary. No request was made by any director for such independent professional advice in 2015. The company secretary prepares minutes and keeps records of matters discussed and of decisions resolved at all Board meetings, which are available for inspections by any director upon request.

 

BOARD COMPOSITION

The Board currently comprises one Non-executive Chairman, three Executive Directors, one Non-executive Director and three Independent Non-executive Directors, whose biographical details are set out in “Directors and Senior Management Profile” on page 18. The composition of the Board is well balanced with each director having sound knowledge, experience and expertise relevant to the business operations and developments of the Group. The Company has also adopted the recommended best practice under the CG Code for having at least one-third of its Board members being independent non-executive directors.

All directors are aware of their collective and individual responsibilities to the shareholders and have exercised their duties with care, skill and diligence contributing to the successful performance of the Group.

 

BOARD MEETING AND GENERAL MEETING RECORDS

There were nine board meetings and four general meetings held during the financial year 2015 and the attendance summary of each Board member is as follows:

 

                                                                                                                                                       Number of               Number of

                                                                                                                                             board meetings        general meetings

 Name of Directors                                                                                                          attended in 2015         attended in 2015

 Mr. Ho King Fung, Eric (non-executive Chairman)                                                                              9/9                           4/4

 Mr. Tse Kwok Fai, Sammy (executive Director)                                                                                     9/9                           4/4

 Mr. Chan Chi Hung, Anthony (executive Director)                                                                                9/9                           4/4

 Mr. Zou Feng (appointed on 7 March 2016) (executive Director)                                                      n/a                           n/a

 Mr. Phen Chun Shing Vincent (appointed on 15 February 2016) (non-executive Director)          n/a                           n/a

 Mr. Qian Zhi Hui (independent non-executive Director)                                                                       7/9                          0/4

 Mr. Teoh Chun Ming (independent non-executive Director)                                                                  9/9                          2/4

 Mr. Zhu Tiansheng (independent non-executive Director)                                                                     8/9                         0/4

 

CHAIRMAN AND CHIEF EXECUTIVE OFFICER

The CG Code requires the roles of Chairman and Chief Executive Officer be separate and not performed by the same individual to ensure there is a clear division of responsibilities between the running of the Board and the executives who run the business.

The Chairman’s responsibility is to provide leadership to the Board and to formulate the Group’s business strategies. Mr. Ho King Fung, Eric (“Mr. Ho”) is the Non-executive Chairman of the Company. The Chief Executive Officer is responsible for the day to day operation of the Company and the implementation of the development strategy adopted by the Board. Mr. Tse Kwok Fai, Sammy (“Mr. Tse”) is the Chief Executive Officer of the Company.

The code provision A.2.2 of the CG Code stipulates that the chairman should ensure that all directors are properly briefed on issues arising at board meetings and the code provision A.2.3 of the CG Code stipulates that the chairman should be responsible for ensuring that directors receive adequate information, which must be complete and reliable, in a timely manner. Both Mr. Ho and Mr. Tse had complied with the relevant CG Code.

 

INDEPENDENT NON-EXECUTIVE DIRECTORS

Independent Non-executive Directors serve the relevant function of bringing independent judgment on the development, performance and risk management of the Group. The Independent Non-executive Directors of the Company have been appointed to hold office until the next Annual General Meeting and shall retire and offer themselves for re-election according to the Company’s Byelaws.

All Independent Non-executive Directors are independent from the Company and from any of its subsidiaries.

Each of the Independent Non-executive Director has provided semiannually a written confirmation to the Company confirming that he has met the criteria as set out in Rule 3.13 of the Listing Rules regarding the guidelines for the assessment of the independence of being an independent non-executive director.

 

BOARD COMMITTEES

The Board has established the following committees with defined terms of reference:

1.  Corporate Governance Committee

2.  Audit Committee

3.  Remuneration Committee

4.  Nomination Committee

Each board committee makes decisions on matters within its terms of reference and applicable limit of authority. The terms of reference as well as the structure and membership of each committee will be reviewed from time to time.

(1)  Corporate Governance Committee

      (a) Members of the Corporate Governance Committee

           Mr. Ho King Fung, Eric (Chairman of the Committee), non-executive Director

           Mr. Chan Chi Hung, Anthony, executive Director

 

     (b) Role and function

          The Corporate Governance Committee is mainly responsible for:

i.  developing and reviewing the Company’s policies and practices on corporate governance and making recommendations to the Board;

ii.  reviewing and monitoring the training and continuous professional development of Directors and senior management;

iii.  reviewing and monitoring the Company’s policies and practices on compliance with legal and regulatory requirements;

iv.  developing, reviewing and monitoring the code of conduct and compliance manual (if any) applicable to Directors and employees; and

v.  reviewing the Company’s compliance with the code provision of Appendix 14 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong.

 

     (c) Meeting records

One meeting was held during the financial year 2015 and the attendance summary of each committee member is as follows:

 

                                                                                                                                                               Number of

                                                                                                                                                               committee meeting(s)

            Members of the Committee                                                                                                   attended in 2015

            Mr. Ho King Fung, Eric                                                                                                                1/1

            Mr. Chan Chi Hung, Anthony                                                                                                      1/1

 

During the meeting, the Corporate Governance Committee reviewed the duties and responsibilities of the Chairman and the Chief Executive Officer, Directors’ attendance at Board meetings, the independence of the Independent Nonexecutive Directors and the training and professional development of the Directors.

 

(2) Audit Committee

     (a) Members of the Audit Committee

           Mr. Teoh Chun Ming (Chairman of the Committee), independent non-executive Director

           Mr. Qian Zhi Hui, independent non-executive Director

           Mr. Zhu Tiansheng, independent non-executive Director

 

     (b) Role and function

          The Audit Committee is mainly responsible for:

i.  reviewing the financial statements and annual reports and considering any significant or unusual items raised by the external auditor before submission to the Board;

ii.  reviewing the relationship with the external auditor by reference to the work performed by the auditor, their fees and terms of engagement, and making recommendations to the Board on the appointment, reappointment and removal of external auditor;

iii.  reviewing the adequacy and effectiveness of the Company’s financial reporting system, internal control and risk management system and associated procedures:

iv.  reviewing the Group’s financial and accounting policies; and

v.  reviewing the external auditor’s management letter and ensuring a timely response to the issues raised there.

 

     (c) Meeting records

Two meetings were held during the financial year 2015 and the attendance summary of each committee member is as follows:

 

                                                                                                                                                                  Number of

                                                                                                                                                                  committee meetings

            Members of the Committee                                                                                                      attended in 2015

            Mr. Teoh Chun Ming                                                                                                                     2/2

            Mr. Qian Zhi Hui                                                                                                                           1/2

            Mr. Zhu Tiansheng                                                                                                                        2/2

 

           During the meetings, the Audit Committee discussed the following matters:

           I.       Financial Reporting

The Audit Committee reviewed with the Chief Executive Officer and the financial controller of the Company the audited results for the year ended 31 December 2014 and the unaudited interim results for the six months ended 30 June 2015.

           II.      External Auditors

The Audit Committee reviewed the audit fee for the year ended 31 December 2014 and recommended it to the Board.

The Audit Committee reviewed the Audit Committee Report prepared by PricewaterhouseCoopers for the year ended 31 December 2014 and made recommendation to the Board as to the appointment of Deloitte Touche Tohmatsu as the new auditors of the Company on 24 December 2015.

 

(3) Remuneration Committee

     (a) Members of the Remuneration Committee

           Mr. Qian Zhi Hui (Chairman of the Committee), independent non-executive Director

           Mr. Ho King Fung, Eric, non-executive Director

           Mr. Tse Kwok Fai, Sammy, executive Director

           Mr. Zhu Tiansheng, independent non-executive Director

 

     (b) Role and function

           The Remuneration Committee is mainly responsible for:

i.  reviewing and approving the management’s remuneration proposals with reference to the corporate goals and objectives of the Board;

ii.  determining the remuneration packages of individual executive directors and senior management, or recommending to the Board on the remuneration packages of individual executive directors and senior management;

iii.  recommending to the Board the remuneration of non-executive directors;

iv.  making recommendations to the Board on the Company’s policy and the structure of all remuneration of the directors and senior management as well as on the establishment of formal and transparent procedures for developing policy on such remuneration;

v.  reviewing and approving the compensation payable to executive directors and senior management in connection with any loss or termination of their office or appointment to ensure that such compensation is determined in accordance with relevant contractual terms and that such compensation is otherwise fair and not excessive for the Company; and

vi.  ensuring that no director or any of his associates is involved in deciding his or her own remuneration.

 

     (c) Meeting records

One meeting was held during the financial year 2015 and the attendance summary of each committee member is as follows:

 

                                                                                                                                                                 Number of

                                                                                                                                                                 committee meetings

            Members of the Committee                                                                                                    attended in 2015

            Mr. Qian Zhi Hui                                                                                                                            0/1

            Mr. Ho King Fung, Eric                                                                                                                 1/1

            Mr. Tse Kwok Fai, Sammy                                                                                                            1/1

            Mr. Zhu Tiansheng                                                                                                                         1/1

 

During the year under review, the Remuneration Committee reviewed the policies for the remuneration of the directors and senior management of the Group, the staff costs and the headcount of the Group. The Remuneration Committee also reviewed the remuneration package of the directors and senior management to ensure they were in line with the market.

 

(4) Nomination Committee

     (a) Members of the Nomination Committee

           Mr. Qian Zhi Hui (Chairman of the Committee), independent non-executive Director

           Mr. Ho King Fung, Eric, non-executive Director

           Mr. Tse Kwok Fai, Sammy, executive Director

           Mr. Zhu Tiansheng, independent non-executive Director

 

     (b) Role and function

           The Nomination Committee is mainly responsible for:

i.  reviewing the structure, size and composition (including the skills, knowledge and experience) of the Board on a regular basis and making recommendations to the Board regarding any proposed changes;

ii.  identifying individuals suitably qualified to become Board members and selecting or making recommendations to the Board on the selection of individuals nominated for directorships;

iii.  assessing the independence of the independent non-executive directors; and

iv.  making recommendations to the Board on relevant matters relating to the appointment or re-appointment of directors and succession planning for directors, in particular the chairman and the chief executive officer.

 

     (c) Meeting Records

One meeting was held during the financial year of 2015 and the attendance summary of each committee member is as follows:

 

                                                                                                                                                      Number of

                                                                                                                                                      committee meetings

            Members of the Committee                                                                                         attended in 2015

           

            Mr. Qian Zhi Hui                                                                                                                0/1

            Mr. Ho King Fung, Eric                                                                                                     1/1

            Mr. Tse Kwok Fai, Sammy                                                                                                1/1

            Mr. Zhu Tiansheng                                                                                                             1/1

 

During the year under review, the Board has not dealt with nomination of director since there has been no change to the Board composition. However Nomination Committee reviewed the board diversity policy to ensure there was an appropriate balance of knowledge and experience, skills, cultural background and gender on the Board.

 

DIRECTORS’ RESPONSIBILITY FOR THE FINANCIAL STATEMENTS

The directors are responsible for preparing the accounts of each financial year, which give a true and fair view of the state of affairs of the Group. The directors also ensure that the financial statements of the Group are prepared in accordance with the statutory requirements and applicable accounting policies.

In preparing the financial statements, the directors consider that the financial statements of the Group are prepared on a going concern basis and appropriate accounting policies have been consistently applied. The directors have also made judgments and estimates that are prudent and reasonable in the preparation of the financial statements.

 

INTERNAL CONTROL AND RISK MANAGEMENT

The Board is responsible for the Group’s systems of internal control so as to maintain sound and effective controls to safeguard the shareholders’ investments and the assets of the Group.

The Board has established an on-going process for identifying, evaluating and managing the significant risks faced by the Group. This process includes continuous updating of the internal control systems of the Group in response to the changing business environment and regulatory requirements. The Board is also conducting a review of the internal controls of the Group to ensure that the policies and procedures in place are adequate.

 

CONTINUOUS PROFESSIONAL DEVELOPMENT

From 1 July 2013 onwards, upon appointment to the Board, Directors receive an induction package including “A Guide on Directors’ Duties” issued by the Companies Registry, “Good Governance and Internal Control — A Corruption Prevention Guide for Listed Companies” issued by Independent Commission Against Corruption, Hong Kong, “A Guide for Effective Audit Committees” issued by HKSA Corporate Governance Committees and information regarding the duties and responsibilities of a director of a company listed on the Stock Exchange of Hong Kong Limited, from the Company’s legal adviser on directors’ legal role and responsibilities.

The Directors are encouraged to participate in continuous professional development to develop and refresh their knowledge and skills for discharging their duties and responsibilities as Directors. For the year ended 31 December 2015, all Directors have attended the training session arranged by the Company.

 

INSURANCE ARRANGEMENT

The Company has arranged appropriate insurance cover in respect of potential legal actions against its Directors and Senior Management.

 

AUDITOR’S REMUNERATION

For the year ended 31 December 2015, the Company engaged Deloitte Touche Tohmatsu, auditor of the Company, to perform audit service. Their reporting responsibilities on the financial statements of the Group are set out in the Independent Auditor’s Report on page 44 of this annual report.

During the year under review, the services provided by Deloitte Touche Tohmatsu and the fees thereof were as follows:

 

                                                                                                                                          2015

 Nature of services                                                                                                  HK$’000

 Audit services                                                                                                               2,400

 Non-audit related services                                                                                            673

                                                                                                                                          3,073

 

COMPANY SECRETARY

The Company Secretary directly reports to the Board and is responsible for facilitating the Board’s processes and communications among Board members, with shareholders and with management. For the year ended 31 December 2015, the Company Secretary undertook 23 hours of professional training to keep abreast of latest legislative and regulatory changes.

 

COMMUNICATION WITH SHAREHOLDERS AND INVESTORS

The principal methods used to communicate with shareholders include the following:

1.  through publication of interim and annual reports;

2.  through the Company’s website including public announcements, interim and annual announcements, financial reports and general information about the businesses of the Group; and

3.  through the Annual General Meeting.

 

The Annual General Meeting provides a useful forum for shareholders to exchange views with the Board. The most recent Annual General Meeting was held on 22 June 2015. The Non-executive Chairman, the Executive Directors, the Chairman of the Audit Committee and the external auditor were available to answer questions at the meeting.

The procedures for conducting a poll at each shareholders’ meeting were explained at the meeting prior to the polls being taken. Poll voting results of each shareholders’ meeting are available on the websites of the Stock Exchange and the Company in the evening after the relevant meetings.

Shareholders and investors may also write their written enquiries and concerns to the Company at its principal place of business in Hong Kong. Contact details are as follows:

Address:  Room 1108-09, 11th Floor, Harbour Centre, 25 Harbour Road, Wanchai, Hong Kong (For the attention of the Investor Relations Director)

Hotline:    2116 8396

Email:      enquiries@epiholdings.com

 

EMPLOYMENT

The Group is committed to equal-opportunity employment practices. Employees shall not be differentiated due to their nationality, sex and cultural backgrounds. The Group is in full compliance with all the relevant laws and regulations governing fair employment practices. The number of female employees in the Group accounts for 33% of the total. In addition 41% of the employees of the Group attended trainings in the year 2015.

 

ENVIRONMENT

The Group has implemented green office practices including but not limited to the use of recycled paper, the switching off of lights, computers and photocopiers when not in use. Employees in Argentina follow the relevant local regulations and utilize energy-saving devices in the workplace. The Group ensures that it complies with all regulations in carrying out its operations and is not aware of any breach of the environmental regulations.