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Remuneration Report

REMUNERATION REPORT

This Remuneration Report sets out the Group’s remuneration policies and amounts for all staff including Executive Directors and Non-executive Directors. Pages 39 to 40 comprise the auditable part of the Remuneration Report and form an integral part of the Group’s financial statements. At 31 December 2016, the Group employed a total of 331 shore-based staff (2015: 334).

GROUP’S REMUNERATION POLICY

The Board, through the Remuneration Committee, seeks to attract and retain staff with the skills, experience and qualifications needed to manage and grow the business successfully. We achieve this by providing remuneration packages, including bonuses, which are competitive, consistent with market practice, and reward performance and align employees and shareholders’ interests.

When considering remuneration adjustments and annual bonuses, the Board makes reference to the prevailing market conditions, local market practice, the levels of emolument of existing staff of the Company and, very importantly, the performance of individuals and the market demand for their skills. The business of shipping is highly cyclical. It is inappropriate to impose straight financial measures for both salary adjustments and bonus determination as to do so would likely generate meaningless results and potentially damaging consequences. The Board seeks to obtain a balance of all the above mentioned factors.

Equity awards are provided through the Company’s Share Award Scheme which is designed to provide Executive Directors and other employees with long-term financial benefits that are aligned to and consistent with the creation of shareholder value as an incentive and recognition for their contribution to the Group. The number of share awards granted each year is based on the value of a predetermined number of months of each awardee’s basic salary divided by the prevailing share price at the time of the award. The Board has not granted, and currently has no intention to grant any equity awards to Independent Nonexecutive Directors as they administer the scheme at their sole discretion.

The Group’s principal retirement benefit scheme is the Mandatory Provident Fund Scheme, a defined contribution scheme provided under the Hong Kong Mandatory Provident Fund Schemes Ordinance for those staff employed under the jurisdiction of the Hong Kong Employment Ordinance. Other locations provide pension contributions in line with the local regulations.

Below sets out the key components of remuneration:

Key remuneration
components
Executive Directors and All staff Non-executive Directors
Fixed base salary Salaries are reviewed annually. Prevailing market conditions
and local market practice, as well as the individual's role, duties,
experience, responsibilities and performance are taken into
account when assessing salaries.
No
Annual discretionary cash
bonus
Bonuses are determined based on the overall performance of
the individual and the Group. Bonuses for Executive Directors
are assessed by the Remuneration Committee and those of all
other staff are assessed by the Chief Executive Officer. Bonuses
to Directors and employees are expected to be no more than 12 months' salary equivalent.
No
Long-term equity incentives Awards typically vest annually over a three year period. New
Awards for existing awardees are considered each year by the
Remuneration Committee to maintain the incentive period, in
which case they vest at the end of the third year.
No
Retirement benefit In line with market practice No
Fixed annual director's fee No Yes and in line with market practice

REMUNERATION FOR THE YEARS ENDED

31 December 2016 Directors'
fee
US$'000
Salaries
US$'000
Bonuses
US$'000
Pension
US$'000
Total
Payable
US$'000
Share-based
compensation
US$'000
Total
payable and
charged
US$'000
Executive Directors
David M. Turnbull - 378 32 2 412 219 631
Mats H. Berglund - 1,131 144 2 1,277 469 1,746
Andrew T. Broomhead1 - 514 82 2 598 283 881
Chanakya Kocherla2 - 468 59 2 529 256 785
- 2,491 317 8 2,816 1,227 4,043
Independent Non-executive Directors
Patrick B. Paul 97 - - - 97 - 97
Robert C. Nicholson 90 - - - 90 - 90
Alasdair G. Morrison 84 - - - 84 - 84
Daniel R. Bradshaw 84 - - - 84 - 84
Irene Waage Basili 95 - - - 95 - 95
Stanley H. Ryan3 46 - - - 46 - 46
496 - - - 496 - 496
Five highest paid individuals:
    Total Directors'remuneration 496 2,491 317 8 3,312 1,227 4,539
    Other - 333 76 31 440 120 560
Other Employees - 27,593 3,307 2,188 33,088 2,860 35,948
Total remuneration 496 30,417 3,700 2,227 36,840 4,207 41,047
31 December 2015 Directors'
fee
US$'000
Salaries
US$'000
Bonuses
US$'000
Pension
US$'000
Total
Payable
US$'000
Share-based
compensation
US$'000
Total
payable and
charged
US$'000
Executive Directors
David M. Turnbull - 379 32 2 413 195 608
Mats H. Berglund - 1,153 144 2 1,299 539 1,838
Andrew T. Broomhead - 514 41 2 557 266 823
Chanakya Kocherla - 469 39 2 510 263 773
- 2,515 256 8 2,779 1,263 4,042
Independent Non-executive Directors
Patrick B. Paul 102 - - - 102 - 102
Robert C. Nicholson 95 - - - 95 - 95
Alasdair G. Morrison 89 - - - 89 - 89
Daniel R. Bradshaw 89 - - - 89 - 89
Irene Waage Basili 93 - - - 93 - 93
496 - - - 468 - 468
Five highest paid individuals:
Total Directors'remuneration 468 2,515 256 8 3,247 1,263 4,510
Other - 313 75 62 468 94 562
Other Employees - 28,285 3,650 2,165 34,100 3,392 37,492
Total remuneration 468 31,131 3,981 2,235 37,815 4,749 42,564

For the year 2016, the five individuals whose emoluments were the highest in the Group were the four Executive Directors and one employee (2015: four Executive Directors and one employee). The emoluments of the one employee fell within the band of HK$4,000,001 to HK$4,500,000.

During the year, the Group did not pay the Directors any inducement to join or upon joining the Group. No Directors waived or agreed to waive any emoluments during the year. The median salary of employees excluding the Chief Executive Officer during the year was US$55,524 (2015: US$57,902).

ACCOUNTING POLICIES ON EMPLOYEE BENEFITS

Bonuses

The Group recognises a liability and expense for bonuses when there is a contractual or constructive obligation or where there is a past practice that created a constructive obligation.

Retirement Benefit Obligations

Mandatory Provident Fund Scheme

The Group operates the Mandatory Provident Fund Scheme (the “MPF Scheme”) under the Hong Kong Mandatory Provident Fund Schemes Ordinance for those employees employed under the jurisdiction of the Hong Kong Employment Ordinance. The MPF Scheme is a defined contribution scheme, the assets of which are held in separate trustee-administered funds.

Under the MPF scheme, the employer and its employees are each required to make regular mandatory contributions to the scheme at 5% of the employees’ relevant income, subject to a cap of monthly relevant income of HK$25,000. The Group also makes voluntary contribution in addition. The Group’s contributions to the scheme are expensed as incurred. When employees leave the scheme prior to the full vesting of the employer’s voluntary contributions, the amount of forfeited contributions is used to reduce the contributions payable by the Group.

Other defined contribution Schemes

The Group also operates a number of defined contribution retirement schemes outside Hong Kong in accordance with local statutory requirements. The assets of these schemes are generally held in separate administered funds and are generally funded by payments from employees and by the relevant group companies. The Group’s contributions to the defined contribution retirement schemes are expensed as incurred and are reduced by contributions forfeited by those employees who leave the schemes prior to contributions being fully vested.

Share-Based Compensation

The Group operates an equity-settled, share-based compensation scheme. Restricted share awards are recognised as an expense in the income statement with a corresponding credit to reserves, based on the fair value of the shares.

The total amount to be expensed is calculated by reference to the fair value of the equity instruments on the grant date, excluding the impact of any non-market vesting conditions (for example, requirement of an employee to remain in employment for a specified time period). The number of equity instruments that are expected to vest takes into account non-market assumptions, including expectations of an employee remaining in the Group during the vesting period. The total amount expensed is charged through the vesting period. The Company reviews its estimates of the number of equity instruments that are expected to vest based on the non-market vesting conditions if necessary. It recognises the impact of the revision of the original estimates, if any, in the consolidated income statement with a corresponding adjustment to equity.

The grant by the Company of share-based compensation to the employees of subsidiary undertakings in the Group is treated as a capital contribution by the company to the subsidiaries. The fair value of employee services received, measured by reference to fair value of the shares on the grant date is recognised over the vesting period as an increase in investment in subsidiary undertakings, with a corresponding credit to equity in the Company’s account. In the accounts of the subsidiaries, such fair value is recognised as an expense in the income statement with corresponding credit to reserve.


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