2011 - Li & Fung Limited

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CORPORATE GOVERNANCE (CONTINUED) RISK MANAGEMENT AND SUSTAINABILITY COMMITTEE The Risk Management Committee was re-named as the Risk Management and Sustainability Committee on 24 March 2011. It was established in August 2001 and is chaired by the Group Non-executive Chairman. Its written terms of reference include offering recommendations to the Board on the Group’s risk management and internal control systems, and had been further updated in 2011 to authorize the Committee to review the Group’s practices and strategies on corporate responsibility and sustainability. The Committee reports to the Board in conjunction with the Audit Committee. The Risk Management and Sustainability Committee met four times in 2011 (with an average attendance rate of 89%) to review risk management procedures pertinent to the Group’s significant investments and operations. The scope of review covers receivables management, credit risk management, inventory management, goodwill assessment, tax compliance issues, litigation exposures, acquisitions and integration, other operational and financial risk management as well as corporate responsibility and sustainability. REMUNERATION COMMITTEE The Compensation Committee was renamed as the Remuneration Committee on 22 March 2012. It was formed in 1993 and is chaired by an Independent Non-executive Director. The Committee’s responsibilities as set out in its written terms of reference include approving the remuneration policy for all Directors and senior executives, and the grant of share options to employees under the Company’s Share Option Scheme. It annually reviews the Group’s remuneration policy. The Committee met three times in 2011 (with a 100% attendance rate) to review and approve all Executive Directors’ and Senior Management’s remuneration packages and the grant of share options under the Three-Year Plan 2011–2013. Details of Directors’ and Senior Management’s emoluments of the Company are set out in Note 11 to the accounts on pages 101 to 104. 30 LI & FUNG LIMITED | ANNUAL REPORT 2011 REMUNERATION POLICY FOR EXECUTIVE DIRECTORS AND SENIOR MANAGEMENT The primary goal of the remuneration policy on executive remuneration packages is to enable Li & Fung to motivate Executive Directors and Senior Management by linking their compensation to performance with reference to corporate and operating groups’ objectives. Under the policy, a Director or a member of Senior Management is not allowed to approve his own remuneration. The principal elements of Li & Fung’s executive remuneration package include: • basic salary; • discretionary bonus without capping; and • share options granted under a shareholders’ approved option scheme. In determining guidelines for each compensation element, Li & Fung refers to remuneration surveys conducted by independent external consultants on companies operating in similar industry and scale. BASIC SALARY All Executive Directors’ and Senior Management’s remuneration packages including their basic salary were approved by Remuneration Committee at the beginning of the Group’s Three-Year Plan 2011–2013. Under the service contracts between the Group and Executive Deputy Chairman as disclosed under Directors’ Service Contracts section on page 59, Executive Deputy Chairman is entitled to a fixed basic salary which is subject to review by the Committee.
DISCRETIONARY BONUS Li & Fung implements a performance-based discretionary bonus scheme for each Executive Director (excluding Executive Deputy Chairman) and Senior Management. Under this scheme, the computation of discretionary bonus (without capping) is based on measurable performance contributions of operating groups headed by the respective Executive Directors and Senior Management. Executive Deputy Chairman is entitled to a profit share of the Company’s consolidated results after adjustment of interest, tax and minority interests under the above service contracts between the Group and Executive Deputy Chairman. SHARE OPTIONS The Remuneration Committee approves all grants of share options under the shareholders’ approved share option scheme to Executive Directors and Senior Management, with regard to their individual performances and achievement of business targets in accordance with the Company’s objectives of maximizing long-term shareholder value. REMUNERATION POLICY FOR NON-EXECUTIVE DIRECTORS The remuneration, comprising Directors’ fees, of Non-executive Directors is subject to annual assessment with reference to remuneration surveys conducted by independent external consultants and a recommendation by the Remuneration Committee for shareholders’ approval at the Annual General Meeting. CORPORATE GOVERNANCE (CONTINUED) Reimbursement is allowed for out-of-pocket expenses incurred in connection with the performance of their duties including attendance at Company meetings. RISK MANAGEMENT AND INTERNAL CONTROL The Board is responsible for maintaining a sound and effective system of risk management and internal controls in Li & Fung and for reviewing its effectiveness. Such system is designed to manage the risk of failure to achieve corporate objectives. It aims to provide reasonable but not absolute assurance against material misstatement, loss or fraud. The Board has delegated to executive management the design, implementation and ongoing assessment of such systems of internal controls, while the Board through its Audit Committee oversees and reviews the adequacy and effectiveness of relevant financial, operational and compliance controls and risk management procedures that have been in place. Qualified personnel throughout the Group maintain and monitor these systems of controls on an ongoing basis. Set out below are the main characteristics of our risk management and internal control framework. LI & FUNG LIMITED | ANNUAL REPORT 2011 31
Page 1: LI & FUNG LIMITED (Incorporated in
Page 4 and 5: CORPORATE INFORMATION NON-EXECUTIVE
Page 6 and 7: THE AMERICAS Guatemala City Lima Ma
Page 8 and 9: CHAIRMAN’S STATEMENT Victor Fung
Page 10 and 11: CHAIRMAN’S STATEMENT (CONTINUED)
Page 12 and 13: CONSUMER NEEDS THE SUPPLY CHAIN CON
Page 14 and 15: MANAGEMENT DISCUSSION & ANALYSIS Wi
Page 16 and 17: MANAGEMENT DISCUSSION & ANALYSIS (C
Page 26 and 27: CORPORATE GOVERNANCE The Board of D
Page 28 and 29: CORPORATE GOVERNANCE (CONTINUED) In
Page 30 and 31: CORPORATE GOVERNANCE (CONTINUED) LI
Page 34 and 35: CORPORATE GOVERNANCE (CONTINUED) CO
Page 36 and 37: CORPORATE GOVERNANCE (CONTINUED) As
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Page 40 and 41: CORPORATE GOVERNANCE (CONTINUED) CO
Page 42 and 43: SUSTAINABILITY OVERVIEW In 2011, we
Page 44 and 45: SUSTAINABILITY (CONTINUED) A summar
Page 46 and 47: SUSTAINABILITY (CONTINUED) WELL-BEI
Page 48 and 49: DIRECTORS AND SENIOR MANAGEMENT DIR
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Page 55 and 56: REPORT OF THE DIRECTORS The directo
Page 57 and 58: Number of Share Options REPORT OF T
Page 59 and 60: SUBSIDIARIES Details of the Company
Page 61 and 62: DIRECTORS The directors during the
Page 63 and 64: REPORT OF THE DIRECTORS (CONTINUED)
Page 65 and 66: REPORT OF THE DIRECTORS (CONTINUED)
Page 67 and 68: OPINION INDEPENDENT AUDITOR’S REP
Page 69 and 70: CONSOLIDATED PROFIT AND LOSS ACCOUN
Page 71 and 72: CONSOLIDATED BALANCE SHEET As at 31
Page 73 and 74: BALANCE SHEET As at 31 December 201
Page 75 and 76: CONSOLIDATED STATEMENT OF CHANGES I
Page 77 and 78: NOTES TO THE ACCOUNTS 1 BASIS OF PR
Page 79 and 80: NOTES TO THE ACCOUNTS (CONTINUED) 1
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NOTES TO THE ACCOUNTS (CONTINUED) 1
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2 CRITICAL ACCOUNTING ESTIMATES AND
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3 SEGMENT INFORMATION (CONTINUED) Y
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3 SEGMENT INFORMATION (CONTINUED) N
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4 OPERATING PROFIT (CONTINUED) The
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6 TAXATION (CONTINUED) NOTES TO THE
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10 STAFF COSTS INCLUDING DIRECTORS
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11 DIRECTORS’ AND SENIOR MANAGEME
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12 INTANGIBLE ASSETS Brand Buying a
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12 INTANGIBLE ASSETS (CONTINUED) NO
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13 PROPERTY, PLANT AND EQUIPMENT (C
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17 AVAILABLE-FOR-SALE FINANCIAL ASS
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19 DUE FROM/(TO) RELATED COMPANIES
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21 TRADE AND OTHER RECEIVABLES (CON
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22 CASH AND CASH EQUIVALENTS NOTES
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24 BANK BORROWINGS (CONTINUED) The
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26 RESERVES (a) THE GROUP NOTES TO
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26 RESERVES (CONTINUED) (b) THE COM
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27 LONG-TERM LIABILITIES NOTES TO T
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27 LONG-TERM LIABILITIES (CONTINUED
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28 POST-EMPLOYMENT BENEFIT OBLIGATI
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29 DEFERRED TAXATION (CONTINUED) NO
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30 NOTES TO THE CONSOLIDATED CASH F
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30 NOTES TO THE CONSOLIDATED CASH F
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31 BUSINESS COMBINATIONS (CONTINUED
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31 BUSINESS COMBINATIONS (CONTINUED
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36 FINANCIAL RISK MANAGEMENT NOTES
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36 FINANCIAL RISK MANAGEMENT (CONTI
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38 FAIR VALUE ESTIMATION NOTES TO T
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41 PRINCIPAL SUBSIDIARIES AND ASSOC
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LIFUNG TOWER 888 Cheung Sha Wan Roa
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2011 - Li & Fung Limited

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