REPORT ON CORPORATE GOVERNANCE

Transcription

1 REPORT ON CORPORATE GOVERNANCE RENAISSANCE Corporate governance is an internal system encompassing policies, processes and people, which serves the needs of shareholders and other stakeholders, by directing and controlling management activities with good business savvy, objectivity, accountability and integrity. Sound corporate governance is not only about structure and clarity in management and areas of responsibility, but it also encourages good transparency so that shareholders can understand and monitor the development of the company. The Board and the Management of Renaissance Services SAOG (the Company ) are committed to adopt the best practices of corporate governance that promote ethical standards and individual integrity. The Company will continue to focus on its resources, strengths and strategies for creating, safeguarding and enhancing shareholders value while at the same time protecting the interests of its stakeholders. This report illustrates how the Principles of Corporate Governance and the provisions of the Code of Corporate Governance, set out in the Capital Market Authority s (CMA) Code of Corporate Governance for companies listed on the Muscat Securities Market (MSM), and the Provisions for Disclosure stipulated in the Executive Regulations of the Capital Market Law, are adhered to by the Company. In July 2015, the Capital Market Authority promulgated a new Code of Corporate Governance which will come into force and effect as of July The new Code features changes with regard to the independence of directors, related parties transactions, Board performance, development of policies and other corporate governance requirements. In demonstrating our commitment to good practice in corporate governance, both in letter and spirit, Renaissance Services has started implementing the requirements of the new Code of Corporate Governance, and will be fully compliant with the Code within the prescribed timeframe. The Company believes that the Code prescribes a minimum framework for governance of a business. The Company s philosophy is to develop this minimum framework and institutionalise its principles as an ingredient of its corporate culture. This will lay the foundation for further development of a model of governance with superior governance practices, which are vital for growing a successful business. The Company recognises that transparency, disclosure, financial controls and accountability are the pillars of any good system of corporate governance. In accordance with the provision for disclosure stipulated in the Executive Regulation of the Capital Market Law, PricewaterhouseCoopers (PwC) has issued a separate Factual Findings Report on the Company s Corporate Governance Report for the year ended 31 December Company s Philosophy The Company upholds a governance philosophy that aims at enhancing long term shareholder value while at the same time adheres to the law and observes the ethical standards of the business environment within which it operates. According to the Company s governance paradigm the management assumes accountability to the Board, and the Board assumes accountability to the Shareholders. The Board s role is to be an active participant and a decision-maker in fostering the overall success of the Company by enhancing Shareholder value, selecting and evaluating the top management team, approving and overseeing the corporate strategy and management s business plan, and acting as a resource for management in matters of planning and policy. The Board monitors corporate performance against the strategic and business plans, and evaluates on a regular basis whether those plans pay off in terms of operating results. In order that it can effectively discharge its governance responsibilities, the Board ensures that the majority of Board members are non-executive. Furthermore, the Board accesses independent legal and expert advice of professionals who also assist the management. The Board also encourages active participation and decision-making on the part of shareholders in General Meeting proceedings. The Board maintains a positive and ethical work environment that is conducive to attracting, retaining and motivating a diverse group of top quality employees at all levels. The Board, through the Compensation Committee, reviews and decides the parameters for assessment and compensation of key personnel. The Board ensures ethical behaviour and compliance with all laws and regulations and has developed a Code of Ethics that promotes values among its employees. The Company s Manuals of Procedures (internal regulations) cover a wide range of functions including but not limited to Corporate Information & Disclosure Policy, Rules for Related Party Transactions, Procurement Manual and Financial Authority, IT Policies and HR Manuals. 26

2 2. Board of s During 2015, the Board consisted of seven directors. Five directors on the Board are Shareholders / representatives of Shareholders and two s are non-shareholder s. According to CMA s Code of Corporate Governance, issued by Circular No. 11/2002, as amended by Circular No. 1/2003, all the s of the Company are independent and non-executive. 2.1 The Composition and Category of s, Attendance of Board Meetings No. Name of Position Category No. of Board meetings held during the year No. of Board meetings attended Whether attended last AGM 1 Samir J Fancy Chairman Shareholder 5 5 Yes 2 Ali bin Hassan Sulaiman Deputy Chairman Shareholder 5 4 No 3 Sayyid Tarik bin Shabib bin Taimur Shareholder 5 5 No 4 Sunder George 5 Yeshwant C Desai 6 Colin Rutherford Non-Shareholder Non-Shareholder Shareholder 5 3 Yes 5 5 Yes 5 5 No 7 Saleh bin Nasser Al Habsi, Representative of a shareholder 5 4 Yes The above board members were elected on the 26th of March 2014 for a tenure of three years which will expire in Statement of the Names & Profiles of s and Top Management The Renaissance Board brings together core competencies of directors with vision, strategic insight, and industry knowledge, who provide direction to the executive management. Samir J Fancy - Chairman Mr. Samir J Fancy is the Chairman of the Board of s since He has held senior positions and undertaken leading roles such as: Founder and Vice Chairman of Tawoos Group since 1983, and Chairman of Tawoos Group since Chairman of Topaz Energy & Marine SAOG since foundation and up to its acquisition by the Company in May Chairman of Amani Financial Services SAOC since Chairman of Topaz Energy & Marine Ltd. of Renaissance Duqm Holding SAOC. of Renaissance Duqm Accommodation Company SAOC. of Renaissance International Ltd. of Samena Capital. He has acted as a of National Bank of Oman, Muscat Finance Company and Vision Insurance in the past. Mr. Samir Fancy is also recognized for his philanthropy and charitable works in Oman. ANNUAL REPORT

3 RENAISSANCE REPORT ON CORPORATE GOVERNANCE Ali bin Hassan Sulaiman - Deputy Chairman Mr. Ali bin Hassan Sulaiman is a member of the Board of s of the Company since 1996 and is Deputy Chairman since March He is a founder of Ali and Abdul Karim Group and director in the following companies: Topaz Energy & Marine SAOG for several years up to its acquisition by the Company in May Majan Glass Co SAOG. Topaz Energy & Marine Ltd. Renaissance Duqm Holding SAOC. Renaissance Duqm Accommodation Company SAOC. HH Sayyid Tarik bin Shabib bin Taimur - HH Sayyid Tarik bin Shabib bin Taimur is a member of the Board of s of the Company since Other positions held by him include the following: Founder and of Tawoos Group. Chairman of Marina Bander Al Rowdha SAOG for six years until its takeover by the Government of the Sultanate of Oman in April Chairman of Renaissance Duqm Holding SAOC. Chairman of Renaissance Duqm Accommodation Company SAOC. Chairman of National Hospitality Institute SAOG since in Amani Financial Services SAOC. Sunder George Mr. Sunder George is a member of the Board of s of the Company since He has extensive experience in Banking & Finance and has held several senior executive positions in Oman & abroad until he retired from Bank Muscat on 31 December 2012 as its Deputy Chief Executive. He was Chief Adviser to the bank for a year until the end of Mr. Sunder George sits on the Board of s of the following companies: Topaz Energy & Marine Ltd. Halcyon Capital SAOC. Yeshwant C Desai - Mr. Yeshwant C Desai is a member of the Board of s of the Company since 2001 and is the Chairman of the Audit Committee and also Chairman of the Compensation Committee. He has had a successful career and extensive experience in Banking & Finance and has held senior executive positions in Oman & abroad, which include: Ex-CEO of Bank Muscat SAOG. of Topaz Energy & Marine SAOG for several years up to its acquisition by the Company in May Ex- of Topaz Energy & Marine Ltd. Colin Rutherford Mr. Colin Rutherford has been a member of the Board since 2005 and was formerly Chairman of BUE Marine Holdings Limited prior to its acquisition by Renaissance Group SAOG. He has diverse experience of public and private companies having served on many International Boards. He is a Chartered Accountant and former Corporate Financier, and currently enjoys the following positions within his portfolio: Executive Chairman and CEO of Teachers Media PLC. Non-Executive and Audit Committee Chairman of Mitchells & Butlers PLC. Non-Executive Chairman of Brookgate Limited. Mr. Rutherford holds further positions in retail, specialist building products and real estate, amongst others. Saleh bin Nasser Al Habsi - Mr. Saleh Al Habsi is the General Manager of Pension Fund of the Ministry of Defence. He holds an MBA and M.Sc in Finance from the University of Maryland (USA) and BSBA and BA from Boston University (USA). He also attended a senior executive programme at London Business School and High Performance Boards Program at IMD, Switzerland. Mr. Al Habsi is also member of the Board of GrowthGate Capital, a regional private equity company and also a former member of the Board of Al Suwadi Power Company SAOG. Previously, he served as Chairman of Muscat Fund, Deputy Chairman of Gulf Custody Company Oman SAOC. He was a Board member of Bank Dhofar SAOG, Board member of National Bank of Oman and Al Omaniya Financial Services SAOG. Stephen R Thomas OBE Chief Executive Officer Mr. Stephen R Thomas joined Tawoos Group as General Manager of Tawoos Industrial Services Co. LLC in He took over as Chief Executive Officer of Renaissance Services SAOG in In the 2010 United Kingdom New Year s Honours List, Mr. Thomas was appointed an Officer of the Most Excellent Order of the British Empire (OBE) for services to business abroad and services to the community in Oman. He also held senior positions in the Group including the following positions: of Renaissance Hospitality Services SAOG since foundation and until its merger with Renaissance Services SAOG in April Founder and former Chairman of Oman Society for Petroleum Services ( OPAL ). of Topaz Energy & Marine Ltd. 28

4 2.3 Membership of Other Boards/ Board Committees (SAOG Companies in Oman) No. Name of ship in other SAOG companies Membership in Board Committees of other companies 1 Samir J Fancy Ali bin Hassan Sulaiman HH Sayyid Tarik bin Shabib bin Taimur Sunder George Yeshwant C Desai Colin Rutherford Saleh bin Nasser Al Habsi Number & Dates of Meetings of the Board of s The Board held five meetings during 2015 on the following dates:- 15 January 2015, 25 February 2015, 19 May 2015, 10 August 2015 and 15 November Audit Committee & Other Sub-committees Audit Committee The Audit Committee is a sub-committee of the Board comprising of three s, all of whom are independent non-executive s. 3.1 Brief Description & Terms of Reference The functions of the Audit Committee are as follows: Recommends to the Board the appointment of the Statutory Auditors and determine their independence, fee and terms of engagement for approval by the Shareholders. Review the audit plan and results of the audit and whether Statutory Auditors have full access to all relevant documents. Oversee the Internal Audit function in general and with particular reference to reviewing the scope of internal audit plan for the year, reports of internal auditors pertaining to critical areas, efficacy of internal auditing and whether the internal auditors have full access to relevant documents. Oversee the adequacy of internal control systems and Internal Audit Reports. Review any non-compliance with disclosure requirements prescribed by CMA. Oversee the Company s financial reporting process and the disclosure of its financial information to ensure accuracy, sufficiency and credibility of the financial statements. Ensure that proper system is in place for adoption of appropriate accounting policies and principles leading to fairness in financial statements. Review annual and quarterly financial statements and recommend to the Board. Serve as a channel of communication between Statutory & Internal Auditors and the Board. Review risk management policies. Review proposed specific related party transactions for making appropriate recommendations to the Board. Make recommendations to the Board for entering into small value transactions with related parties without securing prior approval of Audit Committee & the Board. Accord prior approval to the Statutory Auditors to provide non-audit services, in accordance with CMA Circular E/12/ Composition of Audit Committee and Attendance of Meetings In 2015 the Audit Committee of the Company was comprised of three non-executive s. During 2015, the committee held four meetings on 24 February 2015, 11 May 2015, 10 August 2015 and 08 November 2015 respectively. The following table shows the composition of the Audit Committee and the attendance of its meetings:- No Name Yeshwant C Desai Ali bin Hassan Sulaiman Sunder George Position Meetings held during the year Meetings attended during the year Chairman 4 4 Member 4 4 Member 4 3 During its meetings the Audit Committee discussed and approved the annual internal audit plan. The Committee reviewed and recommended to the Board the audited and quarterly accounts and the related party transactions. The Committee had recommended the appointment of the Statutory Auditors for the year The Committee ANNUAL REPORT

5 REPORT ON CORPORATE GOVERNANCE also looked into certain specific areas of the Company s operations and reported on these to the Board. 3.3 The Compensation Committee The Compensation Committee was formed as a Board Committee to lay down and update the parameters for assessment and compensation of key personnel, undertake their performance assessment and report to the Board on the compensation and personnel policies. The Committee, which consists of the following s, held two meetings on 31 March 2015 and 11 May 2015: No Name Yeshwant C Desai Ali bin Hassan Sulaiman Colin Rutherford Position Meetings held during the year Meetings attended during the year Chairman 2 2 Member 2 1 Member Process of Nomination of the s In nominating and screening candidates to fill a casual vacancy, the Board seeks candidates with the skills and capacity to provide strategic insight and direction, encourage innovation, conceptualise key trends and evaluate strategic decisions. The Board focuses on professionalism, integrity, accountability, performance standards, leadership skills, professional business judgment, financial literacy and industry knowledge as core competencies of the candidates. While nominating competent candidates, the Board ensures that the Shareholders retain the power of electing any candidate, irrespective of his candidature being recommended by the Board or otherwise and that any Shareholder has the full right of nominating himself. 5. Remuneration Matters As per the approval accorded by the AGM held on 31 March 2015, the Chairman is paid OMR 1,000/- for attending Board meetings, and other s are paid OMR 500/- as sitting fees per meeting. Sitting fees of OMR 750/- are paid to Committee Chairmen and sitting fees of OMR 650/- are paid to Committee Members. The remuneration, sitting fees and travelling expenses relating to the attending of the meetings paid to the Chairman and s for 2015 are as follows: Sitting Fees Paid for Board & No. Name of Position Sub-committee Meetings for 2015 (OMR) Travel Expenses (OMR) 1 Samir J Fancy Chairman 5,000 5,849 2 Ali bin Hassan Sulaiman Deputy Chairman 5,250-3 HH Sayyid Tarik bin Shabib bin Taimur 2,500-4 Sunder George 3,450-5 Yeshwant C Desai 7,000 5,188 6 Colin Rutherford 3,800 17,230 7 Saleh bin Nasser Al Habsi 2,000 - Total 29,000 28,267 RENAISSANCE 30

6 For the financial year 2015, it is proposed to pay remuneration of OMR 21,000/- for the s. Total remuneration paid to the five senior executives of the Company (including its subsidiaries) during the year was OMR 1,405,518/-. This includes salary and benefits paid in cash, monetary value of all benefits calculated as per Company rules and a variable amount based on performance as recommended by the Compensation Committee of the Board. The majority of the top 5 officers of the Company have been with the Company for a lengthy period of time. The employment contracts are usually entered into for an initial period of 2 years which are automatically renewed unless terminated in accordance with the terms mentioned therein. The notice period for termination of employment contracts for all the key personnel is a minimum of 2 months and the gratuity is computed and paid in accordance with the applicable Labour Laws. The Company has a Senior Management Incentive Plan (SMIP). Under the Plan, the Company has created an overseas based trust structure under the name of Renaissance Services SMIP Limited, and uses trustees from an independent professional firm to oversee and administer the employees long-term benefit scheme independently from the Company. The scheme is a rolling programme that allows a part of the Company s senior management bonus payments every year to be paid into the independent trust and the underlying structure. The proceeds are invested by the trustees in the shares of the Company through the MSM. The shares are directly released to the employees by the trustees proportionately over a period of 3 years. The structure and the operation mechanism ensure independency and transparency so that the employees are fully aware of the management and liquidity of their long-term employment benefits. 6. Details of non-compliance by the Company There were no penalties or strictures imposed on the Company by the MSM/CMA or any statutory authority for the last three years. There are no areas in which the Company is not compliant with the Code of Corporate Governance. 7. Means of Communication 7.1 The Company has been sending financial results and material information to MSM Website via the MSM Electronic Transmission System. The Company has also been publishing annual audited & quarterly unaudited financial results and material information in English and Arabic newspapers. The annual audited accounts and Chairman s Report are despatched to all shareholders by mail, as required by law. 7.2 The financial results and information on the Company are posted at as well as on the Muscat Securities Market website, Meetings are held with analysts and members of the financial press in line with internal guidelines of disclosure. 7.4 The CEO s Report, provided in the Annual Report, includes the Management Discussion and Analysis of the year s performance. 8. Stock Market Data 8.1 High/ Low share prices during each month of 2015: Month High/Low share price movement High (OMR) Low (OMR) January February March April May June July August September October November December (Source: Muscat Securities Market) ANNUAL REPORT

7 REPORT ON CORPORATE GOVERNANCE 8.2 Renaissance Share Price movement in comparison to the MSM Index and MSM Services Index Share Price in OMR RS Closing Price MSM Index MSM Index Apr 2015 Mar 2015 Feb 2015 Jan 2015 Aug 2015 July 2015 June 2015 May 2015 Dec 2015 Nov 2015 Oct 2015 Sep RS Closing Price MSM Service Index Share Price in OMR MSM Services Index Feb 2015 Jan 2015 Apr 2015 Mar 2015 June 2015 May 2015 Nov 2015 Oct 2015 Sep 2015 Aug 2015 July 2015 Dec Distribution of Shareholding as on 31 December 2015 Source of Statistics: Muscat Clearing & Depository Company (SAOC) No. Category Number of Shareholders No. of shares % Shareholding 1 Less than 100,000 shares 4,034 14,846, % 2 100, ,000 shares 35 4,724, % 3 200, ,000 shares 44 13,339, % 4 500,001 2,820,944 shares 41 54,314, % 5 1% % of share capital 9 35,184, % 6 2% % of share capital ,703, % RENAISSANCE 7 10% of share capital & above 1 42,538, % Total 4, ,651, % 32

8 8.4 The Company has issued 423,141,678 mandatory convertible bonds (MCBs) at OMR each on 25 July 2012 and listed on Muscat Securities Market (MSM) on 6 August The MCBs carry a coupon rate of 3.75% per annum and shall be converted at face value (OMR 0.100) through conversion into shares of the Company at the conversion price. In accordance with the issue prospectus, the conversion would be carried out in three tranches, 33.33% at the end of third and fourth year each and 33.34% at the end of fifth year, commencing from the third anniversary and ending on the fifth anniversary from the issue date. However in order to safeguard the interests of all stakeholders including MCB holders, the Company offered a repurchase option to MCB holders wishing to tender their MCBs to the Company prior to the first conversion date. To date, the Company has repurchased the first tranche of MCBs in July 2015, and the second tranche in September 2015 from MCB holders who offered to tender their MCBs. Following the repurchase of the second tranche of MCBs, the remaining MCBs have been reclassified for trading on MSM under two categories as Renaissance Services Bonds (A) and (B). This reclassification is for identification purposes only. Renaissance Services Bonds (A) are due for conversion in 2016 and 2017 and represents those MCB holders who did not opt to participate in the second repurchase. All MCBs under this category will be converted into shares in 2016 and 2017 as set out in Section VII of the Terms and Conditions of the MCB Prospectus issued in Renaissance Services Bonds (B) are due for conversion into shares in 2017 only, and represents those MCB holders who participated in the second repurchase. The Company also has the option, to repurchase the remaining MCB tranche upon notice to MCB holders, prior to the final conversion date in August Professional Profile of the Statutory Auditors PwC is a global network of firms operating in 157 countries with more than 184,000 people who are committed to delivering quality in assurance, tax and advisory services. PwC also provides corporate training and professional financial qualifications through PwC s Academy. the firm comprises 3 partners, including one Omani national, and over 135 professionals and support staff. Expert assurance, tax and advisory professionals are able to combine internationally acquired specialist consulting and technical skills with relevant local experience. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see for further details. As per article 9 (para b) of the Code of Corporate Governance pertaining to the rotation of external auditors, PwC have completed four years as statutory auditors of the Company by the end of 2015 and therefore, are not eligible for re-appointment as statutory auditor of the Company for the financial year Audit Fees paid to the Auditors During the year 2015, aggregate professional fees in the amount of OMR 503,942/- were paid by the Company to PwC Oman and other PwC offices in respect of the services provided. The amount paid includes OMR 366,498/- for audit (of which OMR 303,668 relates to 2015 and the balance of RO 62,830/- relates to 2014), OMR 16,961/- for tax and OMR 120,482/- for other services. 11. Confirmation by the Board of s Renaissance is committed to conducting business legally and professionally under the highest standards of business ethics and moral code. This same high standard is expected and required of all Renaissance subsidiary companies and people working at every level throughout the group. The Board of s confirms its accountability for the preparation of the financial statements in accordance with the applicable standards and rules. The Board of s confirms that it has reviewed the efficiency and adequacy of the internal control systems of the Company. The Board is pleased to inform Shareholders that adequate and efficient internal controls are in place, and that they are in full compliance with the internal rules and regulations. The Board of s also confirms that there are no material matters that affect the continuation of the Company, and its ability to continue its operations during the next financial year. Established in the Middle East for 40 years, PwC employs over 2,780 people and has 21 offices across 12 countries: Bahrain, Egypt, Iraq, Jordan, Kuwait, Lebanon, Libya, Oman, Qatar, Saudi Arabia, the Palestinian Territories and the United Arab Emirates. PwC has been established in Oman for 40 years and Chairman ANNUAL REPORT