Board Committees

The board has appointed a number of committees to discharge the board functions. Sufficient resources are provided to enable the board committees to undertake their specific roles. The respective role, responsibilities and activities of each board committee are set out below:

Executive committee

The board has established a new executive committee on 26 September 2014 to assist the board in the business operations and management of the Company, thereby replacing the existing executive committee and the investment committee. The principal role of the executive committee is to select suitable candidates for senior management, to review/provide advice to the board on material investment plans and feasibility studies and proposed disposals/divestments, mergers and acquisitions and other significant transactions of the Company, strategy and planning of the Group.

The functions and powers of the Executive Committee are

1. to formulate the Company’s material strategic plans;

2. to formulate the Company’s annual material investment and financing plans (including reviewing material investment plans, feasibility studies, proposed disposals/divestments, mergers and acquisitions and other significant transactions of the Company);

3. to review the Company’s annual business plan and finance plans;

4. to review monthly reports of the Company, and to submit to the board before each month-end the monthly report for the previous month;

5. to manage and monitor the Company’s core activities;

6. to appoint and remove mid-level and above key personnel (other than personnel above the rank of assistant to the president, and those appointed and removed by the board);

7. to approve rules and systems on the day-to-day operations of the Company;

8. to review and approve proposals to establish and adjust the Company’s management and organisational structure; and

9. to discharge other powers and functions conferred on it by the board.

Items (i), (ii) and (iii) and other matters within the authority of the board should be submitted for approval by the board, and thereafter implemented by the executive committee.

The former executive committee was chaired by Mr Zhang Jijing and its membership included three former directors, Messrs Vernon Francis Moore, Liu Jifu and Zeng Chen, and leaders of major businesses and key head office functions. The committee met nine times before the establishment of the new executive committee. Full minutes of the meetings are kept at the company secretary’s office, which are sent to the committee members after each meeting.

The new executive committee is chaired by the chairman of the board and its membership includes two executive directors, Messrs Wang Jiong (being the vice chairman and president of the Company also serves as a vice chairman of the committee) and Dou Jianzhong (being the vice president of the Company). Other members are Mr Zhu Xiaohuang (who serves as a vice chairman of the committee), Mr Ju Weimin (being the chief financial officer and vice president of the Company), Mr Feng Guang, Ms Li Qingping (being the vice president of the Company) and Mr Pu Jian (being the vice president of the Company).

Asset and liability management committee

CITIC Limited has established the asset and liability management committee as a committee under the Executive Committee to be in charge of monitoring and controlling the financial risks of CITIC Limited. The principal responsibilities of the asset and liability management committee are to:

• monitor and control the asset and liability financial position of the Group and its members on a regular basis;
• monitor and control the following issues of the Group and its members and set limits on exposure
  • asset and liability structure
  • counterparties
  • currencies
  • interest rates
  • bulk commodity
  • commitments and contingent liabilities;
• approve financing plans of CITIC Limited and manage the cash flow of the Group on the basis of annual budget;and
• establish hedging policies and approve the use of new financial instruments for hedging.

The committee is chaired by the chief financial officer of the Company. Other members are officers with responsibility for financing, use of funds, risk management, financial control and subsidiary and project management.

Audit and risk management committee

The audit committee was renamed as audit and risk management committee with effect from 26 September 2014, to better reflect its functions and responsibilities, and continue to oversee the risk management functions at the Company. The committee acts on behalf of the board in providing oversight of the Company’s financial reporting, annual audit and interim review, risk management, internal control as well as corporate governance. It consists of two independent non-executive directors and a non-executive director. Mr Francis Siu Wai Keung (chairman) and Mr Alexander Reid Hamilton are independent non-executive directors having the relevant professional qualification and expertise in financial reporting matters whilst Ms Cao Pu is a non-executive director having over 20 years’ experience in financial management. The audit and risk management committee holds at least four regular meetings each year (at least two of which with the Company’s external auditor). By invitation of the audit and risk management committee, other directors, senior management and other relevant persons, as well as experts or consultants with relevant experience or expertise may also attend the meetings. The audit and risk management committee members also meet in separate private sessions with the external and internal auditors without the presence of executive directors and management at least once a year.

Duties of the audit and risk management committee

The authority, role and responsibilities of the audit and risk management committee are set out in written terms of reference. The committee reviews its terms of reference at least once a year to ensure they remain in line with the requirements of the CG Code. Amendments to the terms of reference are submitted to the board for approval.

After renaming audit committee as audit and risk management committee, its terms of reference are revised to embrace both risk management and internal control functions. The revised full terms of reference are available on the Company’s website and the Stock Exchange’s website.

Under its terms of reference, the audit and risk management committee shall

• review and monitor the integrity of the Company’s financial information and provide oversight of the financial reporting system;

• monitor the effectiveness of external audit and oversee the appointment, remuneration and terms of engagement of the Company’s external auditor, as well as its independence;

• oversee the Company’s internal audit, risk management and internal control systems, including the resources for the Company’s internal audit, risk management and internal control function, staff qualifications and experience, as well as arrangements for concerns raised by staff on financial reporting, internal control and other matters (“whistle-blowing”);

• undertake corporate governance functions delegated from the board, including:

1. reviewing the Company’s policies and practices on corporate governance and making recommendations to the board as well as the Company’s compliance with the CG Code and disclosure in the corporate governance report;

2. reviewing and monitoring:

1. the training and continuous professional development of directors and senior management;

2. the Company’s policies and practices on compliance with legal and regulatory requirements;

3. the code of conduct and compliance manual (if any) applicable to employees and directors; and

4. the Company’s whistle-blowing policy and system.

• undertake other authorities delegated by the board

Committee composition and meeting attendance

The composition of the audit and risk management committee during the year as well as the meeting attendance are as follows:

The joint company secretary, Mr Choy Wing Kay, Ricky acts as the secretary to the committee. The committee is supported by a working group which consists of representatives from the finance, auditing, risk management and other departments of the Company. The working group provides services to the committee to ensure that sufficient resources are made available for the committee to perform its duties. An agenda and accompanying committee papers are sent to the committee members at least three days prior to each regular meeting. The draft and final version of minutes are circulated to all committee members for their comments and records within a reasonable time after the meeting.

The chairman of the committee summarises the activities of the committee and highlights issues arising and reports to the board after each audit and risk management committee meeting.

Work done in 2014

The audit and risk management committee performed the following in 2014:

In the meeting of [17] March 2015, the audit and risk management committee reviewed and approved the Company’s annual financial statements and annual report for the year ended 31 December 2014, and considered reports from the external and internal auditors. The audit and risk management committee recommended that the board approve the 2014 annual report.

In the same meeting, the audit and risk management committee also recommended to the board the appointment of Messrs PricewaterhouseCoopers which is subject to the approval of the shareholders at the annual general meeting to be held on 2 June 2015 as the new auditor of the Company to hold office until the conclusion of the next annual general meeting of the Company.

Nomination committee

The nomination committee was established by the board with written terms of reference in compliance with the CG Code. The full terms of reference are available on the Company’s website and the Stock Exchange’s website.

The nomination committee reports directly to the board and its primary functions are:

• to determine the policy for the nomination of directors and set out the nomination procedures and the process and criteria adopted to select and recommend candidates for directorship which shall take into consideration the principle of diversity;

• to review the structure, size, composition and diversity of the board at least annually and make recommendations on any proposed changes to the board;

• to assess the independence of independent non-executive directors;

• to make recommendations to the board on the appointment or re-appointment of directors; and

• to review the board diversity policy and make recommendations on any required changes to the board.

The board diversity policy sets out the approach to achieve diversity on the board which includes and makes good use of the difference in skills, experience and background, geographical and industry experience, ethnicity, gender, knowledge and length of service and other qualities of the members of the board. These differences will be considered in determining the optimum composition of the board and all board appointments will be based on merit, having due regard to the overall effective function of the board as a whole. The Company believes that diversity can strengthen the performance of the board, promote effective decision-making and better corporate governance and monitoring. The nomination committee discusses and agrees annually the relevant measurable objectives that the board has set for implementing this policy and makes recommendations to the board for adoption. It also monitors the implementation of this policy and reports to the board on the achievement of the measurable objectives for achieving diversity under this policy.

The nomination committee currently comprises two executive directors and three independent non-executive directors, and is chaired by the chairman of the board. The nomination committee meets at least annually and at such other times as it shall require. The joint company secretary acts as the secretary to the committee. The committee is provided with sufficient resources enabling it to perform its duties, and it can seek independent professional advice at the Company’s expense if necessary.

During the year, two nomination committee meetings were held. The joint company secretaries prepared full minutes of the nomination committee meetings and the draft minutes were sent to all committee members. One set of written resolutions was passed by all the committee members in December 2014.

The composition of the nomination committee during the year as well as the meeting attendance are as follows:

Work done in 2014

The nomination committee completed the following work in 2014:

1. reviewed the structure, size, composition and diversity of the board; and

2. recommended the appointment of non-executive directors and independent non-executive directors to the board for approval taking into account of the relevant measurable objectives that the board has set under the board diversity policy

In February 2015, the nomination committee recommended the re-election of (a) those directors appointed during the year 2014 at the extraordinary general meeting held on 16 March 2015; and (b) the retiring directors at the forthcoming annual general meeting to be held on 2 June 2015.

Remuneration committee

The principal role of the remuneration committee is to determine and review the remuneration packages of individual executive directors and senior management, including salaries, bonuses, benefits in kind, share options and other plans. The remuneration committee reviews and approves the management’s remuneration proposals with reference to the board’s corporate goals and objectives and considers salaries paid by comparable companies, time commitment and responsibilities and employment conditions elsewhere at the Group, so as to align management incentives with shareholder interests.

The committee currently comprises a non-executive director and two independent non-executive directors with Mr Francis Siu Wai Keung as the chairman. Mr Tang Zhenyi, the joint company secretary serves as the secretary of the committee. The secretary prepares full minutes of the meetings and sends them to the committee members within a reasonable time after the meetings. The full terms of reference are available on the Company’s website and the Stock Exchange’s website.

The composition of the remuneration committee during the year is as follows:

Work done in 2014

There was no physical meeting held during the year. The remuneration committee completed the following in 2014:

1. reviewed and approved the salaries of newly appointed executive directors in February and September 2014; and

2. reviewed and approved the salaries of senior executives of its subsidiaries in July 2014.

Details of the Company’s remuneration policies are set out in the Environmental, Social and Governance Report on page 131 and directors’ remuneration and retirement benefits are disclosed on pages 206 to 207. Share options granted under the CITIC Pacific Share Incentive Plan 2000 which ended on 30 May 2010 are disclosed on pages 114 to 116.

The remuneration paid to the directors, by name, for the year ended 31 December 2014 is set out in Note [12] to the consolidated financial statements.

After the acquisition of CITIC Corporation Limited, there are changes to the senior management with effect from 26 September 2014. The remuneration of senior management, by band, for the year ended 31 December 2014 is set out below.

Remuneration of senior management other than directors for the full year of 2014

Special committee to deal with matters relating to investigations of the Company

A special committee to deal with matters relating to the investigations of the Company was established in April 2009 to

• approve communications between the Company and any relevant authorities or third parties in relation to the investigations by the Securities and Futures Commission and the Commercial Crime Bureau of the Hong Kong Police Force;
• consider the issue of legal professional privilege and to make decisions on behalf of the Company in connection therewith; and
• seek legal and professional advice on behalf of the Company as well as approve their fees.

The committee comprises three members, namely, Mr Zhang Jijing (executive director), Mr Francis Siu Wai Keung (independent non-executive director) and Mr Ju Weimin (chief financial officer). No physical committee meetings were held during the year, and the committee members dealt with certain administrative matters concerning the protection of legal professional privilege by way of circulation.

On 28 March 2012, the Court of Appeal handed down judgment, overturning the Court of First Instance’s judgment of 18 March 2011, ruling that the six documents voluntarily handed to the Securities and Futures Commission were protected by legal professional privilege. The Court of Appeal’s judgment is final and conclusive as no appeal has been made to the Court of Final Appeal, and the Company has recovered part of its legal costs of this part of the proceedings and is seeking return of the relevant privileged documents.

The Company filed a notice of appeal on 9 January 2012 against the judgment in relation to approximately 1,600 further items handed down by the Court of First Instance on 19 December 2011. The hearing dates of this part of the proceedings has been fixed for May 2015.