Corporate Governance - HKMC Annuity

Corporate Governance Practices

HKMC Annuity Limited (HKMCA) operates on prudent commercial principles and is committed to ensuring a high standard of corporate governance to improve the overall accountability, transparency and long-term sustainability of its operations. The HKMCA’s corporate governance practices are set out in its Corporate Governance Code approved by the Board. The Corporate Governance Code is premised on the principles of fairness, transparency, accountability and responsibility to all stakeholders and has been issued to the shareholders, Directors and staff members.

Corporate Governance Code

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Shareholder

The HKMCA’s sole shareholder is The Hong Kong Mortgage Corporation Limited (all shares of which are beneficially owned by the Financial Secretary of Hong Kong as Controller of the Exchange Fund).

The Board

The Board is responsible for leading the HKMCA and promoting its success in an accountable and effective manner. To provide strategic leadership and effective control of the HKMCA, the Board meets in person at least four times a year to oversee the HKMCA’s business strategy and policies, budgeting and planning, organisational and financial performance, risk management as well as human resources.

Directors are requested to declare their or their respective connected entities’ material interests in any matter to be considered by the Board. If a Director or any of his or her connected entities has a conflict of interests in a matter to be considered by the Board, such Director will abstain from, and not be counted in the quorum in respect of, voting on such matter at the Board meeting.

A directors’ and officers’ liability insurance policy is maintained for the HKMCA’s Directors and officers against legal proceedings and other claims arising in the course of discharge of their duties in respect of the HKMCA.

Chairman and Chief Executive Officer

The roles of Chairman and Chief Executive Officer are separate and not performed by the same individual, which ensures a clear division of responsibilities between the Board and the executive functions of the HKMCA’s Management. The Board is responsible for laying down strategic direction and business guidelines, approving financial objectives and closely monitoring the HKMCA’s performance on an ongoing basis. The Chief Executive Officer, who is accountable to the Board, is responsible for leading Management in implementing the Board’s decisions in a proper and efficient manner. The Chief Executive Officer also ensures that adequate information relating to the HKMCA’s business is reported to the Board on a regular basis.

Company Secretary

The Company Secretary is accountable to the Board and her main duty is to ensure that all company secretarial procedures are followed by the HKMCA and the Board. In addition, the Company Secretary ensures that Board Papers are provided to Directors in a timely manner prior to each Board meeting. Directors have access to the advice and services of the Company Secretary with a view to ensuring that applicable laws, rules and regulations are complied with in respect of Board proceedings.

Audit Committee

The Audit Committee is responsible for reviewing the HKMCA’s financial statements, the composition and accounting principles adopted in such statements, the results of the financial audits, and the HKMCA’s management procedures to ensure the adequacy and effectiveness of its internal controls systems.

Internal Auditor

The Internal Audit Function operates independently of Management and plays a major role in assessing the internal controls systems of the HKMCA. The Internal Audit Function is led by the Head of Internal Audit who reports directly to the Chairman of the Audit Committee on all matters relating to the HKMCA’s internal controls. The Head of Internal Audit also reports to the Chief Executive Officer on day-to-day administrative matters of the Internal Audit Function, and has authority to communicate directly with the Chairman of the Audit Committee without reference to Management.

External Auditor

The external auditor is allowed to communicate freely with the Internal Auditor and the Audit Committee. The auditor would issue a letter to the Audit Committee on an annual basis to confirm its independence with respect to the HKMCA.

Financial Reporting

The HKMCA aims to present a clear, balanced and comprehensible assessment of its performance, financial position and prospects to its stakeholders. Directors are responsible for the preparation of the financial statements, and there is a statement by the auditor regarding its reporting responsibilities in the Independent Auditor’s Report on such financial statements. Directors are to ensure that financial statements are prepared so as to give a true and fair view of the financial status of the HKMCA.

Internal Controls and Risk Management

The Board has the overall responsibility for the HKMCA’s internal controls systems and, through the Audit Committee, conducts periodic reviews on the effectiveness and efficiency of the systems.

The Board, through the Risk Committee, oversees the risks of the HKMCA from an enterprise-wide perspective, and Management has established the Risk Management Committee to ensure the efficient operation and prudent risk management of the HKMCA.

Compliance Reporting

The Compliance Function is responsible for better management of regulatory and compliance risks, and is led by the Head of Compliance who reports to the Chief Executive Officer. In accordance with the Group Compliance Policy and the Group Compliance Manual adopted by the HKMCA, the Compliance Function monitors and advises departments and functions of the HKMCA on their compliance practices with a focus on conflict of interests, anti-corruption, anti-discrimination, competition, privacy and personal data protection, and anti-money laundering and counter-terrorist financing matters. To provide transactional support, the Compliance Function reviews and participates in the sign-off of key transactions and projects. To enhance staff knowledge on compliance matters, the Compliance Function also organises compliance training to staff and implements an annual compliance test with different modules for the relevant staff from different departments and functions.

Code of Conduct

The HKMCA requires the highest standards of integrity and conduct from its staff members. The requirements and the relevant legal obligations are clearly set out in the Code of Conduct which forms part of the Group Staff Handbook and is applicable to the HKMCA’s staff. The Code of Conduct sets out, in particular, provisions in regard to potential conflict of interests that may arise between the personal interests of staff members and the interests of the HKMCA, and other provisions designed to ensure that staff carry out their job duties properly, ethically, impartially and free from any suggestion of improper influence. Staff members are required to give written confirmation of their compliance with the Code of Conduct on an annual basis.

Conclusion

The HKMCA will continue to review its corporate governance framework and improve those practices as appropriate in the light of ongoing experience, regulatory changes, international trends and developments in order to enhance the efficiency and effective management of its business operation.