Under the Singapore Companies Act, Chapter 50, the Company is not required to follow the Singapore Corporate Governance Code.
The Company has voluntarily agreed to the principles of corporate governance contained in the UK Corporate Governance Code (the "Code") as required under the Listing Rules of the Financial Services Authority of the United Kingdom.
Throughout the year ended 31 December 2012 the Company has been in full compliance with the provisions of the Code.
For the benefit of shareholders who are not familiar with the Code we have set out the main principles of the Code and how we have addressed them.
Every company should be headed by an effective board which is collectively responsible for the long-term success of the Company.
The directors have considered the composition and structure of the Board and have concluded that it is appropriate for a Company of the size and complexity of XP Power. The involvement of Larry Tracey (Chairman) and James Peters (Deputy Chairman) as founders and substantial shareholders is considered of benefit to shareholders in general.
The following matters are specifically reserved for the Board's decision:
There should be a clear division of responsibilities at the head of the Company between the running of the Board and the executive responsibility for the running of the Company's business. No one individual should have unfettered power of decision.
The roles of Chairman (Larry Tracey) and Chief Executive (Duncan Penny) are separate and clearly defined. The Chairman is responsible for the running of Board Meetings and certain other key executive meetings as well as taking the lead on strategy. The Chief Executive is responsible for the day to day running of the Company.
The chairman is responsible for the leadership of the Board and ensuring its effectiveness on all aspects of its role.
The Chairman sets the calendar and agenda of the Board and facilitates the discussions. The Chairman also initiates and coordinates the processes defined below which evaluate the effectiveness of the Board and of the individual directors.
As part of their role as members of a unitary board, non-executive directors should constructively challenge and help develop proposals on strategy.
Other than their normal attendance and participation in discussions at Board meetings the non-executive directors actively participate in the Company's strategy meetings and are able to question, challenge and coach the managers attending these meetings.
David Hempleman-Adams is the senior independent non-executive director.
The Board and its committees should have the appropriate balance of skills, experience, independence and knowledge of the Company to enable them to discharge their respective duties and responsibilities effectively.
The directors consider that the Board and committees have the appropriate balance of skills, experience, independence and knowledge to discharge their duties effectively.
The Board considers that John Dyson and David Hempleman-Adams to be independent. While certain corporate governance organisations have expressed a view that John Dyson should not be considered independent by virtue of his long length of service, the Board's view is that he is independent in character and judgement and that there are no relationships or circumstances which are likely to affect his judgement. In addition, John Dyson's length of service and knowledge of the Company are considered to be of significant benefit.
The Corporate Governance guidelines do not consider Larry Tracey or James Peters to be independent by virtue of their previous executive roles. However, they are both founders and as substantial shareholders their membership of the Board is considered beneficial to shareholders as a whole.
There should be a formal, rigorous and transparent procedure for the appointment of new directors to the Board.
The Nomination Committee consists of Larry Tracey, James Peters, John Dyson and David Hempleman-Adams. It is chaired by John Dyson and reviews and considers the appointment of new directors. All non-executive directors are given the opportunity to interview any proposed candidates. Any appointment of a new director is voted on by the whole Board.
The Nomination Committee met once during the year on 13 December 2012 and all members of the committee were present.
All directors should be able to allocate sufficient time to the Company to discharge their responsibilities effectively.
There were eight Board Meetings during the year. The attendees were as follows:
|6 January 2012||All|
|17 February 2012||All except David Hempleman-Adams|
|4 April 2012||All|
|5 July 2012||All except Mike Laver|
|20 July 2012||All|
|18 September 2012||All|
|3 October 2012||All except Michael Hafferty|
|13 December 2012||All except Michael Hafferty|
All directors should receive induction on joining the Board and should regularly update and refresh their knowledge and skills.
Directors receive an induction on joining the Board. Non-executive directors are introduced to senior managers below Board level and participate
in strategy meetings. They are also able to meet with managers on an informal basis to help them gain a deeper understanding of the business and contribute ideas.
The Board should be supplied in a timely manner with information in a form and of a quality appropriate to enable it to discharge its duties.
The Board receives detailed management accounts and detailed financial forecasts on a monthly basis to enable it to review trading performance, forecasts and strategy implementation. Board meeting materials are provided in advance of Board meetings to allow directors sufficient time to prepare adequately.
The Board should undertake a formal and rigorous annual evaluation of its own performance and that of its committees and individual directors.
The Board has a process for performance evaluation that has been applied to the Board and its Committees for 2012.
This process was based on completion of a questionnaire by the directors in relation to the Board and each of the Committees of which they were members and to the performance of individual directors. The responses were collated and reviewed by the Chairman and distributed to all Directors for discussion at a Board meeting. In addition, the senior non-executive director conducted individual reviews with each non-executive director concerning the functioning of the Board and the performance of each individual director and reported back to the Chairman.
All directors should be submitted for re-election at regular intervals, subject to continued satisfactory performance.
All directors offer themselves for election every three years.
The Board should present a balanced and understandable assessment of the Company's position and prospects.
The Board considers that the both the Interim Report and Annual Report and Accounts, supported by quarterly trading updates which are timetabled at the beginning of each year, comprehensively fulfil this requirement. The Annual Report includes a detailed description of the Group's strategy and business model which has enabled it to generate significant value over a prolonged period of time.
The Directors, after making enquiries, are of the view, as at the time of approving the accounts, that there is a reasonable expectation that the Company will have adequate resources to continue operating for the foreseeable future and therefore the going concern basis has been adopted in preparing these accounts.
The Board is responsible for determining the nature and extent of the significant risks it is willing to take in achieving its strategic objectives. The Board should maintain sound risk management and internal control systems.
The Board acknowledges that it is responsible for the Group's internal controls and for reviewing their effectiveness. The Group's internal controls are designed to manage rather than eliminate the risk of failure to meet business objectives, and can only provide reasonable not absolute assurance against material misstatement or loss.
An ongoing process for identifying, evaluating and managing the significant risks faced by the Group was in place during the entire financial year and has remained in place up to the approval date of the Annual Report and Financial Statements. The identified risks and the processes by which these are addressed are documented, reviewed and updated at Board meetings. The risk management process and internal control systems are regularly reviewed by the Board and Audit Committee.
The Board should establish formal and transparent arrangements for considering how it should apply the corporate reporting and risk management and internal control principles, and for maintaining an appropriate relationship with the Company's auditor.
As might be expected in a group of this size, a key control procedure is the day to day supervision of the business by the executive directors supported by managers within the Group companies and internal audits. Authority matrices are in place to clearly define who is able to authorise particular transactions, transfer funds, commit Company resources and enter into particular agreements.
The Audit Committee consists of non-executive directors David Hempleman-Adams (chairman) and John Dyson. Despite not being considered independent by certain corporate governance institutions the Board considers that John Dyson's financial background, public company experience and knowledge of the business gained over a number of years make him well equipped to serve on the Audit Committee.
The Audit Committee met three times during 2012, the attendees were as follows:
|16 February 2012||All|
|19 July 2012||All|
|8 November 2012||All|
The Committee is responsible for, amongst other things, ensuring that the financial performance of the Group is properly reported and monitored, focusing particularly on compliance with legal requirements, accounting standards, and the requirements of the UK Listing Authority. The Committee also meets with the auditors and reviews the reports from the auditors without executive Board members present. No significant internal control failings or weaknesses were reported in 2012.
As part of its remit, the Audit Committee also keeps under review the nature and extent of audit and non-audit services provided to the Group by the auditors. The Committee has formalised its policy and approved a set of procedures in relation to the appointment of external auditors to undertake audit and non-audit work. Under this policy:
During the year, the Audit Committee reviewed its performance. The Committee considered it had the skills to perform its responsibilities, particularly through John Dyson's financial and audit experience. Actions for improvement focused on review of the scope of the activity of the Internal Audit Reviews and their findings.
The finance group conduct regular peer to peer balance sheet reviews, the results of which are reported to the Audit Committee as well as the Finance Director and Chief Executive. In addition the Audit Committee reviews and approves the scope and schedule for these reviews. The Board considers that this process fulfils the internal audit function for a Group of the size and complexity of XP Power. No significant internal control failings have been reported as a result of internal audits during 2012.
Levels of remuneration should be sufficient to attract, retain and motivate directors of the quality required to run the Company successfully, but a company should avoid paying more than is necessary for this purpose. A significant proportion of executive directors' remuneration should be structured so as to link rewards to corporate and individual performance.
Our approach to remuneration is set out in detail in the Report of the Remuneration Committee in the 2012 Annual Report.
There should be a formal and transparent procedure for developing policy on executive remuneration and for fixing the remuneration packages of individual directors. No director should be involved in deciding his or her own remuneration.
Our policy regarding remuneration is set out in detail in the Report of the Remuneration Committee in the 2012 Annual Report. No director participates in the deciding of their own remuneration. James Peters is chairman of the Remuneration Committee.
There should be a dialogue with shareholders based on the mutual understanding of objectives. The Board as a whole has responsibility for ensuring that a satisfactory dialogue with shareholders takes place.
The Group engages in two-way communication with both its institutional and private investors and responds quickly to all queries received. The Group uses its website www.xppower.com to give private investors access to the same information that institutional investors receive in terms of investor presentations and research where it is permitted to be distributed. Interested parties are also able to register for the Group's email alert service on this website to receive timely announcements and other information published from time to time.
The Board members receive any feedback prepared by brokers or our financial PR company following meetings with shareholders in order to keep in touch with shareholder opinion.
The Board should use the AGM to communicate with investors and to encourage their participation.
The Annual General Meeting is used as an opportunity to communicate with shareholders and Directors are available to answer any questions.