Sarine's shares were listed for trade in the SGX-ST in April 2005.
The Company's corporate governance practices are described with specific reference to the Code.
BOARD OF DIRECTORS
Principle 1: Board's Conduct of its Affairs
The Board of Directors of the Company (the "Board") is entrusted with the responsibility for the overall management of our Com pany. The Board's primary roles are to set the Company's goals and policies and supervise the performance of the CEO's duties. Among other things, the Board sets the Company's goals (giving proper weight to all groups of the Company's concerned parties, e.g. business partners, customers, employees etc., and in view of the Company's responsibility to its shareholders), approves the Company's action plans and budget (proposed by the Company's management), and reports to the Annual General Meeting about the state of the Company's matters and about the Company's business results.
In line with applicable law, the Board is entrusted with all issues related to the Company's share capital, assumes the responsibility for the approval of the Company's financial statements and sets the Company's goals and policies. The Board also appoints the CEO and oversees the performance of his duties.
Within this framework, the Board discusses and resolves any matters which require the Board's approval under any applicable law (including, without limitation, interested persons' transactions) and/or under the guidelines set by the Board. In general any material issue concerning Sarine (e.g. material research and development milestones, material market and/or business development issues, potential material transactions, substantial capital investments, etc.) is brought to the attention of the Executive Directors and to the Board in its entirety.
The Board meets regularly and in any event no less frequently than four times every calendar year. The Company's Articles of Association (the "Articles") and the Israeli Companies law allow the convening of meetings of the Board using conference calls or any other device allowing each Director participating in such meeting to hear all the other Directors participating in such meeting.
The Directors are provided with written and oral guidance with regard to the performance of their duties as directors prior to, and following, their appointment as directors.
Principle 2: Board Composition and Guidance
As of the date of this report, the Board of Directors comprises nine directors, three of whom are independent (all three also qualify as "External Directors", under the Israeli law).
Mr. Chan Kam Loon has been appointed by the Board as the lead independent director.
With the exception of Mr. Avraham Eshed (who joined the Board on 24 April, 2006) and Mr. Uzi Levami (who joined the Board on 11 December, 2008), all of the directors joined the Board of Directors in March 2005, prior to the listing of the Company.
All of the current directors of the Company were re-elected for an additional three-year period, in the Company's Annual General Meeting on 29 April, 2014.
The Nominating Committee reviews the independence of each director annually and applies the Code's definition (as well as the definitions of the Israeli law) of independent director qualifications in its review.
The directors of the Company in office at the date of this report are:
* Mr. Blum is also a member of the Executive Committee of the Board since February 28, 2016.
There are no permanent alternate directors (alternate directors have been appointed in the past in very few cases and only for specific meetings; no alternate directors were appointed in 2015).
The Board draws from a broad spectrum of competencies and disciplines: from the diamond and gemstones industry, the high-tech industry, the business community, capital markets, legal practice and management. The Board is of the opinion that its size and composition address the Company's needs and plans.
The members of the Board are informed periodically (whether during Board meetings or otherwise) of any developments and updates, concerning their powers and duties under applicable laws. Directors also consult with the Company's general counsel and company secretary on an ongoing basis, with regard to the performance of their duties.
Principle 3: Chairman and Chief Executive Officer
The Executive Chairman and the CEO of the Company are separate individuals. They are not related.
According to the resolution of the Board:
"The Company is of the view that a distinct separation of responsibilities between the Chairman and the CEO will indeed ensure an appropriate balance of power, increased accountability and greater capacity of the Board for independent decision making.
As the most senior executive in the Company, the CEO bears executive responsibility for the Company's day-to-day business according to the policies set by the Board and subject to the Board's directives, and works with the Board on strategic planning, business development and generally charting the growth of the Company.
The CEO shall report to the Executive Committee of the Board (comprised of the Executive Directors and of Mr. Yehezkel Pinhas Blum, an External Director) on a continuous and frequent basis and shall seek the Executive Committee's advice and consent. The Executive Committee may instruct the CEO with regard to the implementation of the Board's policies and with regard to the strategic aspects of the Company's activities and such instructions shall be deemed as given by the Board.
The Chairman bears responsibility for the proper functioning of the Board and the Board's committees (and of the non-executive directors in particular), maintains on-going supervision over the management of the Company and over the flow of information from the Company's management to the Board, and assists in promoting high standards of corporate governance and ensuring compliance with the Company's guidelines of corporate governance.
The Chairman ensures that Board meetings are held when necessary and sets the Board meetings agenda in consultation with the CEO.
The Chairman ensures effective communication between the Board and the Company's shareholders."
Principle 4: Board Membership
According to the Articles, each director shall serve, unless the Annual General Meeting appointing him or her provides otherwise, until the third Annual General Meeting following the Annual General Meeting at which such director was appointed, or his or her earlier resignation or removal pursuant to the provisions of the Articles. A director who has completed his or her term of service or has been removed as aforesaid shall be eligible for re-election. The directors who qualify as "External Directors" may be removed from office only if they no longer qualify to serve as such.
The Nominating Committee comprises five directors, a majority of whom, including the Chairman, is independent. As at the date of this Report, the Nominating Committee members are:
Our Nominating Committee is responsible for the:
- re-nomination of directors (including independent directors of our Company) taking into consideration each director's contribution and performance;
- determining on an annual basis whether or not a director is independent; and
- deciding whether or not the members of the Board are able to and have been adequately carrying out their duties as directors
Principle 5: Board Performance
Our Nominating Committee decides how the Board's performance is to be evaluated and proposes objective performance criteria, subject to the approval of the Board, which are used to assess the degree to which the Board enhances longterm shareholder value. The performance evaluation also takes into consideration our share price performance over a five-year period vis-á-vis the Straits Times Index. The Board implemented a process to be carried out by our Nominating Committee for assessing the effectiveness of the Board as a whole and for assessing the contribution of each individual director to the effectiveness of the Board. Such assessment is to be conducted prior to the end of the term of service of such directors.
Throughout 2015, the Board was convened 4 times.The attendance (in person) of the directors in the Board meetings held in 2015 was as follows:
The attendance of the directors in the Audit Committee meetings held in 2015 is as follows (in addition, a written resolution was passed on one occasion):
The attendance of the directors in the Remuneration Committee meetings held in 2015 is as follows:
Principle 6: Access to Information
The management of the Company provides the Board with interim and periodical (quarterly/annual) financial reports, budget control reports and additional financial and operational information. The Board has separate and independent access to senior management of the Company. Requests for information from the Board are dealt with promptly. The Board, acting through its Executive Committee, is informed on all material events and transactions as and when they occur. Professional advisors may be appointed to advise the Board, or (in special circumstances - as provided by Israeli law) any of its members, if the Board or any individual member thereof needs independent professional advice.
The Company Secretary (who also serves as an external legal counsel to the Company) attends all Board and Board committees' meetings and is responsible for ensuring that Board procedures are followed and for the recording of the minutes. Together with the Chairman and the management staff of the Company, the Company Secretary is responsible for compliance with the applicable laws, rules and regulations in this regard.
Principles 7, 8 & 9: Procedures for Developing Remuneration Policies, Level and Mix of Remuneration, and Disclosure of Remuneration
The Remuneration Committee comprises 4 directors, a majority of whom, including the Chairman, is independent. As at the date of this report, the Remuneration Committee members are:
Our Remuneration Committee recommends to our Board of Directors a framework of remuneration for our directors and key executives, and recommends specific remuneration packages for each Executive Director. All aspects of directors' and key executives' remuneration, including but not limited to directors' fees, salaries, allowances and bonuses, options and benefits in kind are dealt with by our Remuneration Committee. Each member of our Remuneration Committee shall abstain from voting on any resolutions in respect of his/her remuneration package. The remuneration of our Independent Directors, who are deemed also as "External Directors" according to the provisions of the Israeli Companies, is also subject to the limitations set by Israeli law.
The Company's overall three-year remuneration policy and specific remuneration packages for the directors and key executives were presented to the General Meeting and approved by it on the Annual General Meeting held on 30 April 2013. As per the requirements of the Israeli Companies' Law, the Company's updated remuneration policy (as well as specific remuneration packages for the directors) shall be brought to the Annual General Meeting, scheduled to be held on 19 April 2016.
Our Non-Executive Directors received for their services during 2015 participation fees - based on their actual participation in the meetings of the Board of Directors, the Audit Committee, and the Remuneration Committee - amounting in the aggregate (for the three Non-Executive Directors) of less than S$ 20,000 (excluding the impact of non-cash option compensation. The participation fees paid to our Non-Executive Directors are equal to the fees paid to our Independent Directors per meeting (which participation fees are subject to the limitations set by Israeli law - as aforesaid). Our Independent Directors received (in the aggregate) less than S$ 173,000 (excluding non-cash option compensation) for their services in 2015 (the cash remuneration of our Independent Directors is comprised of annual fees and participation fees). The Executive Directors, one of whom was also remunerated as Chief Executive Officer during 2015, received (together) approximately S$ 632,000 for their services (excluding non-cash compensation expense which was negative in 2015). The remuneration arrangements of our Executive Directors include performance-based incentives, including non-cash option compensation.
The remuneration (including performance cash-based incentives and non-cash option compensation) paid and accrued by us and our subsidiaries to each of our directors and our top five (in terms of amount of remuneration) employees (not being directors) for services rendered to us in all capacities during 2015, were as follows:
1Not meaningful, as non-cash compensation expense was negative in 2015
2Non-cash compensation expense based on fair value of time-based optionsm.
Top Five Key Management Personnel:
* Not meaningful, as non-cash compensation expense was negative in 2015.
Band 1: remuneration of up to S$ 250,000 per annum.
Band 2: remuneration of between S$ 250,001 to S$ 500,000 per annum.
The aggregate remuneration paid to the top five key management personnel (who are not directors or the CEO) for the year ended 31 December 2015 was S$ 1,627,000 (including the aggregate fair value of non-cash option compensation).
Any future arrangements concerning the remuneration of our directors shall be brought to the approval of our Remuneration Committee, Board of Directors and General Meeting.
Any future arrangements concerning the remuneration of our key executives shall be brought to the review of the Remuneration Committee and Board of Directors.
Incentive-based compensation which is linked to the Company's business results, is based on audited financial results and may be corrected after the fact (and reimbursed by the beneficiary), if subsequent audits find errors which call for restatements of results.
Since its listing on the SGX-ST, the Company has been granting share options to its employees under its 2005 Share Option Plan (the "2005 Plan"). The 2005 Plan is described in the Company's prospectus and a copy thereof is attached to the said prospectus. Given the expiry of the Plan, following the lapse of its ten-year term, the Company's General Meeting, held on 20 April, 2015 has approved a new Share Option Plan, substantially similar to the 2005 Plan (the "2015 Plan"). The Board of Directors has set guidelines concerning, among other things, eligibility to receive share options (based on performance and time of service with the Company), vesting periods (typically over four years from the date of grant; three years for executive directors, the CEO and senior officers) and the minimum and maximum amounts of share options to be granted (based on seniority and expertise). Executive Directors, senior officers and key employees are also granted performance-based options, to be vested over three years, based upon the achievement of business goals - as discussed in greater detail in the Company's remuneration policy - which was approved by the Company's AGM held on 30 April, 2013 and in the Company's new remuneration policy - which will be brought to the Company's AGM scheduled for 19 April 2016. During 2015, all share options granted under the 2005 Plan were granted at the Market Price (as such term is defined in the Plan). No Options have been granted in 2015 under the 2015 Plan. Further details with regard to the options granted by the Company may be found in the "Directors Report" section of the annual report.
The Company has no employees who are immediate family members of a director or the CEO, and whose remuneration exceeded S$ 50,000 during the year.
Principle 10: Accountability
The Board is accountable to the Company's shareholders. The Board provides the shareholders with periodical, and to the extent necessary and/or required - immediate, reports with regard to the business, financial and other aspects of the Company's activities.
The management of the Company provides the Board in general, and the Executive Directors in particular, with management accounts regarding the Company's performance. Such accounts are provided to the Executive Directors on an ongoing basis and to the Directors on a periodical basis (and where needed - as warranted by the circumstances).
Principles 11, 12 & 13: Audit Committee, Internal Controls and Internal Audits
The Audit Committee comprises three directors, all of whom, including the Chairman, are independent. As at the date of this Report, the Audit Committee members are:
The members of our Audit Committee possess vast and diverse accounting, financial, commercial and legal expertise and experience. Mr. Chan Kam Loon has a degree in accountancy and is qualified as a chartered accountant with the Institute of Chartered Accountants in England and Wales, Mr. Yehezkel Pinhas Blum has a degree in economics and business administration and Ms. Ong heads the Corporate Finance practice in the Singapore law firm of Rodyk and Davidson. Each of them has more than twenty years' financial/business experience. Further details with regard to expertise and experience of the members of our Audit Committee may be found in the "Board of Directors" section of the annual report.
Our Audit Committee assists our Board in discharging its responsibility to safeguard our assets, maintain adequate accounting records, and develop and maintain effective systems of internal control, with the overall objective of ensuring that our management creates and maintains an effective control environment in our Company, in consultation with the internal auditor. Under its terms of reference, our Audit Committee may seek any information it requires from any employee and all employees are directed to co-operate with any requests made by our Audit Committee. Our Audit Committee also provides a channel of communications between our Board, our management and our internal and external auditors on matters relating to audit.
The Audit Committee meets periodically and performs the following functions:
- reviews the scope and results of the audit and its cost effectiveness, and the independence and objectivity of the external auditors;
- reviews with the internal and external auditors the audit plan, their evaluation of the system of internal accounting controls, their letter to management and the management's response;
- reviews the quarterly and annual financial statements and statement of financial position and statements of comprehensive income and the Appendix 7.2 report thereon before submission to our Board for approval, ensuring the integrity of the financial statements of the company and any formal announcements relating to the company's financial performance, and focusing in particular on changes in accounting policies and practices, major risk areas, significant adjustments resulting from the audit, compliance with accounting standards and compliance with the Listing Manual and any other relevant statutory or regulatory requirements;
- reviews the internal control procedures and recommends to the Board ways and means to ensure the adequacy of the Group's Internal Control Procedures (including financial, operational, compliance and information technology controls, and risk management systems); indeed, the Audit Committee and Board are of the opinion, upon consultation with the Company's external auditors and the internal auditor of the Company (who conducted a follow up review, based on previous findings) and based on ongoing discussions with the management of the Company, that the Internal Control procedures of the Group are adequate;
- Ensures co-ordination between the external auditors and our management, and reviews the assistance given by our management to the auditors, and discusses problems and concerns, if any, arising from the interim and final audits, and any matters which the auditors may wish to discuss (in the absence of our management, where necessary);
- reviews and discusses with the external auditors any suspected fraud or irregularity, or suspected infringement of any relevant laws, rules or regulations, which has or is likely to have a material impact on our Company's operating results or financial position, and our management's response;
- considers and recommends to the Board to appoint and re-appoint the internal and external auditors and
matters relating to the resignation or dismissal of the auditors; consider and recommends to the Board with
regard to the fees of the internal and external auditors;
indeed, based on the review of the external auditors' credentials and their registration with and reporting to the Public Company Accounting Oversight Board (PCAOB), a member of the International Forum of Independent Audit Regulators, independent of the accounting profession and directly responsible for the system of recurring inspection of accounting firms, the Board and the Audit Committee have confirmed the external auditors' suitability and their ability to meet their audit obligations. The Board and the Audit Committee further satisfied themselves that the external audit firms possess the adequate resources, experience and expertise and that the audit engagement partners and the supervisory and professional staff assigned to the particular audit possess the necessary skills and experience required for such task;
- reviews interested person transactions (if any) falling within the scope of Chapter 9 of the Listing Manual or within the scope of those interested persons transactions that require the approval of the Audit Committee pursuant to Israeli Companies Law;
- reviews potential conflicts of interest, if any;
- reviews the remuneration packages of employees who are related to our directors and/or substantial shareholders, if any;
- undertakes such other reviews and projects as may be requested by our Board, and reports to our Board its findings from time to time on matters arising and requiring the attention of our Audit Committee;
- generally undertakes such other functions and duties as may be required by statute or the Listing Manual, or by such amendments as may be made thereto from time to time; and
- sets an arrangement by which staff of the company may, in confidence, raise concerns about possible improprieties in matters of financial reporting or other matters.
Apart from the duties listed above, our Audit Committee communicates and reviews the findings of internal investigation into matters where there is any suspected fraud or irregularity, or failure of internal controls or infringement of any law, rule or regulation which has or is likely to have a material impact on our Company's operating units and/or financial position.
The Group's internal controls and systems are designed to provide reasonable assurance to the integrity and reliability of the financial information.
The Board has received assurance from the Company's CEO and CFO:
- that the financial records have been properly maintained and the financial statements give a true and fair view of the Company's operations and finance; and
- regarding the effectiveness of the company's risk management and internal control systems.
Based on the recommendations of the Audit Committee, the Board of Directors appointed, in August 2009, Mr. Doron Cohen, CPA, CIA, of Fahn Kanne Control Management, Ltd., subsidiary of Fahn Kanne and Co., Certified Public Accountants (Isr.) (Member firm of Grant Thornton International), as the Internal Auditor of the Company. The role of the Internal Auditor is to independently examine, among other things, whether our activities comply with the law and orderly business procedures. Our Internal Auditor submits his work plans to the prior approval of the Audit Committee and presents his findings to the Audit Committee and to the Board of Directors.
The external auditors of the Group are Somekh Chaikin Certifed Public Accountants (Isr.), member firm of KPMG International (partner in charge, Ehud Lev, appointed with effect 1 January 2013) and Chaikin, Cohen, Rubin and Company (partner in charge, Ilan Chaikin, appointed with effect 1 January, 2012). The Group engages a suitable auditing firm, BSR & Co., member firm of the KPMG network of independent member firms affiliated with KPMG International, for the statutory audit of its significant foreign-incorporated subsidiary, namely Sarin Technologies India Private Limited.
The Company has complied with Rule 712 and Rules 715/716 of the Listing Manual.
The Company has paid to its external auditors an aggregate amount of US$ 273,000 for services rendered in 2015, out of which amount, US$ 190,000 (approximately 70%) were paid as audit fees, US$ 68,000 (approximately 25%) were paid as tax fees and US$ 15,000 (approximately 5%) were paid for other audit related services.
The Audit Committee confirms that it has undertaken a review of all non-audit services provided by the external auditors and is satisfied that given the scope and nature of the non-audit related services, such services should not, in the Audit Committee's opinion, affect the independence of the external auditors.
Principles 14 & 15: Communication with Shareholders and Greater Shareholder Participation
The Company's results are published through the SGXNET and news releases. The Company does not practice selective disclosure. Price-sensitive information is first publicly released, either before the Company meets with any group of analysts or simultaneously with such meetings. Results and annual reports are announced or issued within the mandatory period.
The Company's Chairman and senior management meet and discuss frequently with analysts and investors, and presentations made by the Company in such events are generally shared with the public at large.
All shareholders of the Company are provided with the annual report and notice of the convening of the Annual General Meeting. At the Annual General Meeting shareholders are given the opportunity to air their views and ask directors or management questions regarding the Company. The Company uses audio conference and video conference facilities in order to enable and encourage greater participation in its meetings.
The Articles were amended in 2015, so to allow a member of the Company to appoint more than two proxies to attend and vote instead of such member.
DEALINGS IN SECURITIES
The Company has complied with the following best practices on dealings in securities: -
- The Company has adopted its own internal compliance code to provide guidance to its officers with regard to dealing by the Company and its officers in its securities;
- According to such code an officer of the Company should not deal in the Company's securities on short-term considerations; and
- According to such code the Company and its officers and employees do not deal in the Company's securities during the period commencing two weeks before the announcement of the Company's financial statements for each of the first three quarters of its financial year and one month before the announcement of the Company's full year financial statements.
Throughout the financial year under review the Company was not a party to any Material Contracts involving the Chief Executive Officer, directors or controlling shareholders.
INTERESTED PERSON TRANSACTIONS
All interested person transactions are considered and reviewed by the Board of Directors, and to the extent required by the Listing Manual and/or the Israeli Companies Law, also by the Audit Committee and the General Meeting.
Our internal control procedures are designed to ensure that all interested person transactions, including interested person transactions involving companies related to our Company, are conducted at arm's length and on commercial terms.
Throughout the financial year under review the Company was not a party to any interested party transaction the financial scope of which exceeded S$ 100,000, except as noted below:
On 15 September, 2013, and later on in 2015, the Company extended the lease of 224 square meters of office space in the Israeli Diamond Exchange building, from a company controlled by Mr. Avraham Eshed, a director of the Company, through 31 December 2015. The monthly rent for the first year period following renewal in 2013 was US$ 10,069 per month, and thereafter was US$ 10,875 per month. For the year ended 31 December, 2015, the annual rent paid was approximately US$ 131,000. In addition the Company paid in 2016, approximately US$ 10,000 for repairs and restoration upon conclusion of the lease period.