UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a)
of the Securities
Exchange Act of
1934
S
Filed by the Registrant
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by a Party other than the Registrant
Check the appropriate box:
¨ Preliminary Proxy Statement
¨ Confidential, for Use of the Commission Only (as
permitted by Rule 14a-6(e)(2))
S Definitive
Proxy Statement
¨ Definitive Additional Materials
¨ Soliciting Material Pursuant to §240.14a-12
China
Automotive Systems, Inc.
(Name of Registrant as Specified In Its
Charter)
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S
No fee required.
¨ Fee computed on table below per Exchange Act Rules
14a-6(i)(4) and 0-11.
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. |
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CHINA AUTOMOTIVE SYSTEMS, INC.
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Notice of Annual Meeting of Stockholders
To Be Held On July 16, 2015
The Annual Meeting of Stockholders of China Automotive Systems,
Inc. (the “Company”) will be held on July 16, 2015 (Thursday) at 10 am local time at the Fourth Floor Meeting
Room, D8 Henglong Building, Optics Valley Software Park, No. 1 Guanshan First Avenue, Wuhan City, Hubei Province, the People’s
Republic of China for the following purposes, as more fully described in the accompanying proxy statement, to:
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1. |
elect five directors of the Company, to hold office until the 2016 annual meeting of stockholders and until their successors are elected and qualified; |
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2. |
approve an advisory (non-binding) proposal concerning the Company’s named executive officer compensation program; |
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3. |
ratify the appointment of PricewaterhouseCoopers Zhong Tian LLP as the Company’s independent auditors for the fiscal year ending December 31, 2015; and |
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transact such other business as may properly come before the meeting or any adjournments or postponements thereof. |
Only stockholders of record at the close
of business on May 22, 2015 will be entitled to notice of, and to vote at, such meeting or any adjournments or postponements thereof.
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BY ORDER OF THE BOARD OF DIRECTORS |
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/s/ Chen Hanlin |
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Chen Hanlin
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Chairman |
Hubei, the People’s Republic of China
May 28, 2015
YOUR VOTE IS IMPORTANT!
WHETHER OR NOT YOU PLAN TO ATTEND THE
MEETING, PLEASE EXECUTE THE PROXY FOLLOWING THE INSTRUCTIONS SET FORTH IN THE NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIALS
MAILED TO YOU. THIS WILL ENSURE THE PRESENCE OF A QUORUM AT THE MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU
WISH TO DO SO EVEN IF YOU HAVE PREVIOUSLY EXECUTED THE PROXY.
CHINA AUTOMOTIVE SYSTEMS, INC.
D8 Henglong Building, Optics Valley Software
Park
No. 1 Guanshan First Avenue, Wuhan City
Hubei Province, the People’s Republic
of China
(86) 27-8757-0028
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PROXY STATEMENT
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2015 ANNUAL MEETING OF STOCKHOLDERS
China Automotive Systems, Inc. (the “Company”)
is furnishing this proxy statement in connection with the solicitation of proxies by the board of directors of the Company (the
“Board of Directors”) for use at the annual meeting of Stockholders to be held on July 16, 2015 (Thursday) at
10 am local time at the Fourth Floor Meeting Room, D8 Henglong Building, Optics Valley Software Park, No. 1 Guanshan First Avenue,
Wuhan City, Hubei Province, the People’s Republic of China and at any adjournments or postponements thereof (the “Annual
Meeting”). This proxy statement and the Company’s annual report will be made available on internet on or before
May 28, 2015.
Important Notice Regarding the Availability
of Proxy Materials for the Annual Stockholders Meeting to be Held on July 16, 2015 - the Company’s Annual Report for the
year ended December 31, 2014 (the “Annual Report”) and this Proxy Statement are available at http://www.caasauto.com.
Only holders of the Company’s common
stock as of the close of business on May 22, 2015 (the “Record Date”) are entitled to vote at the Annual Meeting.
Stockholders who hold shares of the Company in “street name” may vote at the Annual Meeting only if they hold a valid
proxy from their broker. As of the Record Date, there were 32,121,019 shares of common stock outstanding.
A majority of the outstanding shares of
common stock entitled to vote at the Annual Meeting must be present in person or by proxy in order for there to be a quorum at
the Annual Meeting. Stockholders of record who are present at the meeting in person or by proxy and who abstain from voting, including
brokers holding customers’ shares of record who cause abstentions to be recorded at the meeting, will be included in the
number of stockholders present at the meeting for purposes of determining whether a quorum is present.
Each stockholder of record is entitled
to one vote at the Annual Meeting for each share of common stock held by such stockholder on the Record Date. Stockholders do not
have cumulative voting rights. Stockholders may vote their shares by executing the proxy following the instructions on the notice
of internet availability of proxy materials (“Notice of Internet Availability”) mailed to the stockholders.
All proxies received by the Company that are properly executed and have not been revoked will be voted in accordance with the instructions
contained in the proxies. If a paper copy of the proxy materials is requested by a stockholder and a signed proxy card is received
by the Company that does not specify a vote or an abstention, the shares represented by that proxy card will be voted for (i) the
nominees to the Board of Directors listed on the proxy card and in this proxy statement; (ii) the approval, on an advisory (non-binding)
basis, of the proposal concerning the Company’s named executive officer compensation program; and (iii) the ratification
of the appointment of PricewaterhouseCoopers Zhong Tian LLP (“PwC”), as the Company’s independent auditors
for the fiscal year ending December 31, 2015. The Company is not aware, as of the date hereof, of any matters to be voted upon
at the Annual Meeting other than those stated in this proxy statement and the accompanying Notice of Annual Meeting of Stockholders.
If any other matters are properly brought before the Annual Meeting the proxy gives discretionary authority to the persons named
as proxies to vote the shares represented by the proxy in their discretion.
Under Delaware law and the Company’s
Certificate of Incorporation and Bylaws, if a quorum exists at the meeting, the affirmative vote of a plurality of the votes cast
at the meeting is required for the election of directors. A properly executed proxy marked “Withhold authority” with
respect to the election of one or more directors will not be voted with respect to the director or directors indicated, although
it will be counted for purposes of determining whether there is a quorum. For each other item, the affirmative vote of the holders
of a majority of the shares represented in person or by proxy and entitled to vote on the item will be required for approval. A
properly executed proxy marked “Abstain” with respect to any such matter will not be voted, although it will be counted
for purposes of determining whether there is a quorum. Accordingly, an abstention will have the effect of a negative vote.
For shares held in “street name”
through a broker or other nominee, the broker or nominee may not be permitted to exercise voting discretion with respect to some
of the matters to be acted upon. Thus, if stockholders do not give their broker or nominee specific instructions, their shares
may not be voted on those matters and will not be counted in determining the number of shares necessary for approval. Shares represented
by such “broker non-votes” will, however, be counted in determining whether there is a quorum.
A stockholder of record may revoke a proxy
at any time before it is voted at the Annual Meeting by (a) following the instructions on the website hosting proxy materials and
voting as specified in the Notice of Internet Availability, (b) if a proxy is executed in paper form, delivering another duly executed
proxy bearing a later date or (c) attending the Annual Meeting and voting in person. Attendance at the Annual Meeting will not
revoke a proxy unless the stockholder actually votes in person at the meeting.
The proxy is solicited by the Board of
Directors. The Company will pay all of the costs of soliciting proxies. In addition to solicitation by mail or through the internet,
officers, directors and employees of the Company may solicit proxies personally, or by telephone, without receiving additional
compensation. The Company, if requested, will also pay brokers, banks and other fiduciaries who hold shares of common stock for
beneficial owners for their reasonable out-of-pocket expenses of forwarding these materials to stockholders.
BOARD OF DIRECTORS
The name, age and year in which the term
expires of each member of the Board of Directors is set forth below:
Name |
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Age |
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Position |
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Term Expires on the
Date of the Annual Meeting
Held in the Year |
Hanlin Chen |
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58 |
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Chairman |
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2015 |
Qizhou Wu |
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51 |
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CEO and Director |
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2015 |
Arthur Wong |
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55 |
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Director |
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2015 |
Guangxun Xu |
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64 |
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Director |
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2015 |
Robert Tung |
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59 |
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Director |
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2015 |
The Board of Directors has determined that
the following directors for fiscal year 2015 are “independent” under the current rules of the Nasdaq Stock Market:
Arthur Wong, Guangxun Xu and Robert Tung.
At the Annual Meeting, the stockholders
will vote on the election of Hanlin Chen, Qizhou Wu, Arthur Wong, Guangxun Xu and Robert Tung as directors to serve for a one-year
term until the annual meeting of stockholders in 2016 and until their successors are elected and qualified. All directors will
hold office until the annual meeting of stockholders at which their terms expire and the election and qualification of their successors.
NOMINEES AND CONTINUING DIRECTORS
The following individuals have been nominated
for election to the Board of Directors or will continue to serve on the Board of Directors after the Annual Meeting.
Hanlin Chen
Hanlin Chen has served as the chairman
of the board of directors and an executive officer since March 2003. Since January 2013, Mr. Chen has been a standing committee
member of the Chinese People’s Political Consultative Conference and vice president of Foreign Investors Association of Hubei
Province. From 1993 to 1997, Mr. Chen was the general manager of Shashi Jiulong Power Steering Gears Co., Ltd. Since 1997, he has
been the chairman of the Board of Henglong Automotive Parts, Ltd. Mr. Hanlin Chen is the brother-in-law of the Company’s
senior vice president, Mr. Andy Tse.
As chairman of the Board of Directors,
Mr. Chen oversees the implementation of the Company’s business plan.
The Board of Directors believes that
Mr. Chen’s leadership and extensive knowledge of the Company are essential to the development of the Company’s strategic
vision.
Qizhou Wu
Qizhou Wu has served as a director since
March 2003 and as the chief executive officer of the Company since September 2007. He served as chief operating officer from 2003
to 2007. He was the executive general manager of Shashi Jiulong Power Steering Gears Co., Ltd. from 1993 to 1999 and the general
manager of Henglong Automotive Parts Co., Ltd. from 1999 to 2002. Mr. Wu graduated from Tsinghua University in Beijing with a Master’s
degree in automobile engineering.
The Board of Directors believes that
Mr. Wu’s experience and extensive knowledge of the Company are essential to the implementation of the Company’s strategic
vision.
Arthur Wong
Arthur Wong has been an independent
director of the Company since May 2012 and is the chairman of the audit committee and a member of the compensation and nominating
committees of the Board of Directors. Mr. Wong is currently the chief financial officer of Beijing Radio Cultural Transmission
Company Limited, a music production and music data management service company. Mr. Wong serves as the independent director
of Xueda Education Group (NYSE: XUE). He also serves as a board member and chairman of the audit committees for VisionChina Media
Inc. (NASDAQ:VISN), Daqo New Energy Corp. (NYSE: DQ), YOU On Demand Holdings, Inc., (NASDAQ:YOD) and Termbray Petroking Oilfield
Services Limited (HKSE: 2178), Sky Solar Holdings, Ltd. (NASDAQ: SKYS) and China Maple Leaf Educational Systems Limited (HKSE:
1317). Mr. Wong was formerly the chief financial officer of GreenTree Inns Hotel Management Group, Nobao Renewable Energy and Asia
New-Energy. Prior to that, he worked at Deloitte Touche Tohmatsu from 1982 to 2008, in that firm’s San Jose, Hong Kong and
Beijing offices, and most recently as a partner in the Beijing office. Mr. Wong received a Bachelor of Science degree in Applied
Economics from the University of San Francisco and was awarded a Higher Diploma of Accountancy from Hong Kong Polytechnic. His
professional affiliations include being a member of the American Institute of Certified Public Accountants, the Hong Kong Institute
of Certified Public Accountants and the Chartered Association of Certified Accountants.
The Board of Directors believes that
Mr. Wong’s many years of experience in public accounting and working with public companies in the PRC and abroad provides
perspective and global vision to the Company’s development.
Guangxun Xu
Guangxun Xu has served as an independent
director of the Company since December 2009. He is a member of the audit and compensation committees, and the chairman of the nominating
committee of the Board of Directors. Mr. Xu has been the Chief Representative of NASDAQ in China and a managing director of the
NASDAQ Stock Market International, Asia for over ten (10) years. With a professional career in the finance field spanning over
twenty-five (25) years, Mr. Xu’s practice focuses on providing package services on U.S. and U.K. listings, advising on and
arranging for private placements, PIPEs, IPOs, pre-IPO restructuring, M&A, corporate and project finance, corporate governance,
post-IPOIR compliance and risk control.
The Board of Directors believes that
Mr. Xu’s many years of experience in working with public companies and financial markets in Asia provides value to the Board
of Directors and the Company.
Robert Tung
Robert Tung has been an independent
director of the Company since September 2003. He is a member of the audit and nominating committees, and the chairman of the compensation
committee of the Board of Directors. Mr. Tung is currently the president of Multi-Media Communications, Inc. and vice president
of Herbal Blends International, LLC. Mr. Tung holds a Master’s degree in chemical engineering from the University of Virginia.
At present, Mr. Tung is the China operation vice president of Iraq Development Company of Canada, a leading North American corporation
engaging in oilfield and infrastructure development in the Republic of Iraq. In addition, Mr. Tung holds the Grand China sales
representative position of TRI Products, Inc., a well-known North American iron ore and scrap metals supplier. Currently, Mr.
Tung acts as the managing director of North-South Resource International Ltd. which consults on the trading of copper cathodes,
crude, fuel oil, diesel and jet fuels.
The Board of Directors believes that
Mr. Tung’s many years of experience working with companies in the PRC and abroad provides perspective and global vision to
the Company’s development.
Other than as noted above, there are no
family relationships among any of the Company’s directors or executive officers.
DIRECTOR NOMINATION
Criteria
for Board Membership.
In recommending candidates for appointment
or re-election to the Board of Directors, the nominating committee of the Board of Directors (the “Nominating Committee”)
considers the appropriate balance of experience, skills and characteristics required of the Board of Directors. It seeks to ensure
that a majority of the directors are independent under the rules of the Nasdaq Stock Market, that the members of the Company’s
audit committee of the Board of Directors (the “Audit Committee”) meet the financial literacy and sophistication
requirements under the rules of the Nasdaq Stock Market and that at least one member of the Board of Directors qualifies
as an “audit committee financial expert” under the rules of the Securities and Exchange Commission (the “SEC”).
Nominees for director are recommended on the basis of their depth and breadth of experience, integrity, ability to make independent
analytical inquiries, understanding of the Company’s business environment and willingness to devote adequate time to Board
of Directors duties.
Process
for Identifying and Evaluating Nominees.
The Nominating Committee believes the Company
is well served by its current directors. In the ordinary course, absent special circumstances or a material change in the criteria
for membership to the Board of Directors, the Nominating Committee will re-nominate incumbent directors who continue to be qualified
for service and are willing to continue as directors. If an incumbent director is not standing for re-election, or if a vacancy
on the Board of Directors occurs between annual stockholder meetings, the Nominating Committee will seek potential candidates for
appointment to the Board of Directors who meet the criteria for selection as a nominee and have the specific qualities or skills
being sought. Director candidates will be selected based on input from members of the Board of Directors, senior management of
the Company and, if the Nominating Committee deems appropriate, a third-party search firm. The Nominating Committee will evaluate
each candidate’s qualifications and check relevant references; in addition, such candidates will be interviewed by at least
one member of the Nominating Committee. Candidates meriting serious consideration will meet with all members of the Board of Directors.
Based on this input, the Nominating Committee will evaluate whether one of the prospective candidates is qualified to serve as
a director and whether the committee should recommend to the Board of Directors that such candidate be appointed to fill a then
current vacancy or presented for the approval of the stockholders, as appropriate.
Stockholder
Nominees.
The Nominating Committee will consider
suggestions from stockholders regarding possible director candidates for election at the annual meeting to be held in 2016. Any
such nominations should be submitted to the Nominating Committee, c/o Mrs. Wei Na (secretary to the Board of Directors), and should
include the following information: (a) all information relating to such nominee that is required to be disclosed pursuant to Regulation
14A under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), including such person’s
written consent to being named in the proxy statement as a nominee and to serving as a director if elected; (b) the names and addresses
of the stockholders making the nomination and the number of shares of the Company’s common stock that are owned beneficially
and of record by such stockholders; and (c) appropriate biographical information and a statement as to the qualifications of the
nominee, and should be submitted in the time frame described in the bylaws of the Company and under the caption “Stockholder
Proposals for 2016 Annual Meeting” below. Each director nominated in this Proxy Statement was recommended for election by
the Nominating Committee and by the Board of Directors. The Board of Directors did not receive any notice of a Board of Directors
nominee recommendation in connection with this proxy statement from any security holder. The Company has never received a proposal
from a stockholder to nominate a director.
Board
Nominees for the 2015 Annual Meeting.
The nominees listed in this proxy statement
are the current five directors standing for re-election.
BOARD LEADERSHIP STRUCTURE
Mr. Hanlin Chen is the chairman of the
Board of Directors and Mr. Qizhou Wu is the chief executive officer and a director of the Company. The Company’s leadership
structure of a separate chairman of the Board of Directors and chief executive officer has historically proven effective for it
in the areas of performance and corporate governance, among others. The Company does not have a lead independent director. The
Company, in consideration of the size of the Board of Directors and the presence of three independent directors who constitute
a majority, believes that it is not necessary to appoint a lead independent director. The Board of Directors has determined that
its current structure is in the best interests of the Company and its stockholders. The Company believes that the independent
nature of the audit, compensation and nominating committees of the Board of Directors also ensures that the Board of Directors
maintains a level of independent oversight of management that is appropriate for the Company. The Board of Directors will review
from time to time the appropriateness of its leadership structure and implement any changes it may deem necessary.
RISK OVERSIGHT
The Board of Directors has the ultimate
oversight responsibility for the risk management process. A fundamental part of risk management is not only understanding the risks
the Company faces and what steps management is taking to manage those risks, but also understanding what level of risk is appropriate
for the Company. In setting the Company’s business strategy, the Board of Directors assesses the various risks being faced
by management and determines what constitutes an appropriate level of risk for the Company. While the ultimate risk oversight rests
with the Board of Directors, the Board of Directors has delegated the responsibility for the management of certain types of risks
to its committees. For example, the Audit Committee focuses on financial risk, including internal controls, and receives financial
risk assessment reports from management, and risks related to the compensation programs are reviewed by the compensation committee
of the Board of Directors (the “Compensation Committee”). The Board of Directors is advised by these committees
of significant risks and management’s response via periodic updates.
DIRECTOR COMPENSATION
Based on the number of years of service
to the Board of Directors, workload and performance, the Board of Directors determines directors’ compensation. The Board
of Directors believes that the compensation of the members of the Board of Directors was appropriate as of December 31, 2014. The
independent directors receive a director fee from the Company for their services as members of the Board of Directors and any committee
of the Board of Directors in the amount of $10,000 to $11,000 per quarter. The chairman of the Audit Committee additionally receives
an allowance of $6,000 per year. The directors are reimbursed for certain expenses in connection with attending meetings of the
Board of Directors and committees of the Board of Directors. The Company has also granted, and expects to continue to grant, to
non-employee directors options to purchase shares of the Company’s common stock. The stockholders of the Company approved
certain director grants at the annual meeting of the stockholders in 2005, which grants were included in the 2004 stock option
plan (the “2004 Stock Option Plan”). At the 2014 Annual Meeting of Stockholders, the stockholders of the Company
approved an amendment to the 2004 Stock Option Plan that extended its term for an additional ten (10) years. Pursuant to such amendment,
the 2004 Stock Option Plan will expire on June 27, 2025.
The options granted to non-employee directors that are currently
outstanding or were outstanding during the past three (3) years are as follows:
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* |
On July 8, 2010, the Company issued additional options to purchase 7,500 shares of common stock to each of its then three independent directors. Such stock options were vested immediately upon grant and are exercisable at $16.80 per share over a period of five (5) years. The exercise price represented the fair market value based on the grant date of the stock options. |
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On October 12, 2011, the Company issued additional options to purchase 7,500 shares of common stock to each of its then three independent directors. Such stock options were vested immediately upon grant and are exercisable at $4.84 per share over a period of five (5) years. The exercise price represented the fair market value based on the grant date of the stock options. |
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* |
On August 15, 2012, the Company issued additional options to purchase 7,500 shares of common stock to each of its then three independent directors. Such stock options were vested immediately upon grant and are exercisable at $3.71 per share over a period of five (5) years. The exercise price represented the fair market value based on the grant date of the stock options. |
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* |
On August 13, 2013, the Company issued additional options to purchase 7,500 shares of common stock to each of its then three independent directors. Such stock options were vested immediately upon grant and are exercisable at $10.00 per share over a period of five (5) years. The exercise price represented the fair market value based on the grant date of the stock options. |
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* |
On September 16, 2014, the Company issued additional options to purchase 7,500 shares of common stock to each of its then three independent directors. Such stock options were vested immediately upon grant and are exercisable at $10.31 per share over a period of five (5) years. The exercise price represented the fair market value based on the grant date of the stock options. |
Based on the number of the board of directors’
service years, workload and performance, the Board of Directors determines directors’ compensation. The Board of Directors
believes that the compensation paid to the members of the Board of Directors was appropriate as of December 31, 2014. The compensation
that directors received for serving on the Board of Directors for fiscal year 2014 was as follows (figures in the chart are in
thousands of USD):
Name | |
Fees earned or paid in cash | | |
Option awards (1) | | |
Total | |
Robert Tung | |
$ | 44 | | |
$ | 64 | | |
$ | 108 | |
Guangxun Xu | |
$ | 40 | | |
$ | 64 | | |
$ | 104 | |
Arthur Wong | |
$ | 50 | | |
$ | 64 | | |
$ | 114 | |
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(1) |
Other than the cash payment based
on a director’s number of service years, workload and performance, the Company grants 7,500 option awards to each director
every year. In accordance with ASC Topic 718, the cost of the above mentioned stock options issued to directors was measured
on the grant date based on their fair value. The fair value is determined using the Black-Scholes option pricing model and certain
assumptions. Please see Note 19 to the consolidated financial statements of the Company in the Annual Report on Form 10-K for the
year ended December 31, 2014 for more details.
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The cost of the above mentioned compensation
paid to directors was measured based on investment, operating, technology and consulting services they provided. No other directors
had received any compensation for their service on the Board of Directors.
BOARD MEETINGS AND COMMITTEES
The Board of Directors has standing audit,
compensation and nominating committees. The Board of Directors met six (6) times during 2014. The Audit Committee met five (5)
times, the Compensation Committee met four (4) times and the Nominating Committee met four (4) times during 2014. Each member of
the Board of Directors attended 75% or more of the aggregate of (i) the total number of Board meetings held during the period
of such member’s service and (ii) the total number of meetings of committees on which such member served, during the period
of such member’s service. The audit, compensation and nominating committees’ charters are available on the Company’s
website at www.caasauto.com.
Audit
Committee.
The Audit Committee currently consists
of Arthur Wong (chairman), Robert Tung and Guangxun Xu. The Board of Directors has determined that all members of the Audit Committee
are independent directors under the rules of the Nasdaq Stock Market and each of them is able to read and understand fundamental
financial statements. The Board of Directors has determined that Arthur Wong qualifies as an “audit committee financial expert”
as defined by the rules of the SEC. The purpose of the Audit Committee is to oversee the accounting and financial reporting processes
of the Company and audits of its financial statements. The responsibilities of the Audit Committee include appointing and providing
for the compensation of the independent auditors.
Nominating
Committee.
The Nominating Committee currently consists
of Guangxun Xu (chairman), Robert Tung and Arthur Wong, each of whom the Board of Directors has determined is an independent director
under the rules of the Nasdaq Stock Market. The Nominating Committee’s responsibilities include recommending nominees for
possible election to the Board of Directors and providing oversight with respect to corporate governance.
Compensation
Committee.
The Compensation Committee currently consists
of Robert Tung (chairman), Guangxun Xu and Arthur Wong. The Board of Directors has determined that all members of the Compensation
Committee are independent directors under the rules of the Nasdaq Stock Market. The Compensation Committee administers the Company’s
benefit plans, reviews and administers all compensation arrangements for executive officers and establishes and reviews general
policies relating to the compensation and benefits of our officers and employees.
COMPENSATION COMMITTEE INTERLOCKS AND
INSIDER PARTICIPATION
For the year ended December 31, 2014, none
of our executive officers had a relationship that would constitute an interlocking relationship with executive officers or directors
of another entity or insider participation in compensation decisions.
COMMUNICATIONS WITH DIRECTORS
Stockholders interested in communicating
directly with our directors may email the chairman Mr. Hanlin Chen at chenhanlin@chl.com.cn. Mr. Chen will review all such correspondence
and will regularly forward to the other members of the Board of Directors copies of all such correspondence that deals with the
functions of the Board of Directors or committees thereof or that he otherwise determines requires their attention. Directors may
at any time review all of the correspondence received that is addressed to members of the Board of Directors and request copies
of such correspondence. Concerns relating to accounting, internal controls or auditing matters will immediately be brought to the
attention of the Audit Committee and handled in accordance with procedures established by the Audit Committee with respect to such
matters.
The Company has a policy of encouraging
all directors to attend the annual stockholders meetings. Last year, four (4) directors attended the annual meeting.
CODE OF CONDUCT AND ETHICS
The Company has adopted a code of conduct
and ethics that applies to all directors, officers and employees, including its principal executive officer, principal financial
officer and controller. This code of conduct and ethics was filed as Exhibit 99.1 to the Company’s Annual Report on Form
10-KSB/A for the fiscal year ended December 31, 2003 filed with the SEC.
SECURITY OWNERSHIP OF DIRECTORS AND OFFICERS
AND CERTAIN BENEFICIAL OWNERS
The following table sets forth certain
information known to the Company with respect to the beneficial ownership of the Company’s common stock as of December 31,
2014 by (i) each person who is known by the Company to own beneficially more than 5% of the Company’s common stock, (ii)
each of the Company’s directors and Named Executive Officers (defined below) and (iii) all executive officers and directors
as a group. Except as otherwise listed below, the address of each person is c/o China Automotive Systems, Inc., D8 Henglong Building,
Optics Valley Software Park, No. 1 Guanshan First Avenue, Wuhan City, Hubei Province, the People’s Republic of China. Percentage
ownership is based upon 32,121,019 shares outstanding as of December 31, 2014 (exclusive of 217,283 shares of treasury stock).
Name/Title | |
Total Number of Shares | | |
Percentage Ownership | |
Hanlin Chen, Chairman (1) | |
| 17,849,014 | | |
| 55.57 | % |
Qizhou Wu, CEO and Director | |
| 1,325,136 | | |
| 4.13 | % |
Jie Li, CFO (2) | |
| 83,403 | | |
| 0.26 | % |
All Directors and Executive Officers (8 persons)
| |
| 19,682,457 | | |
| 61.28 | % |
(1) |
These 17,849,014 shares of common stock include: (i) 13,322,547 shares of common stock beneficially owned by Mr. Hanlin Chen; (ii) 1,502,925 shares of common stock beneficially owned by Ms. Liping Xie, Mr. Hanlin Chen’s wife; and (iii) 3,023,542 shares of common stock beneficially owned by Wiselink, a company controlled by Mr. Hanlin Chen. |
|
|
(2) |
Includes 50,000 shares held as nominee for Jiulong Machinery Electricity. On October 13, 2014, the Company issued 4,078,000 of its common shares in a private placement to nominee holders of Jiulong Machinery Electricity for the acquisition of the 19.0% and 20.0% equity interest in Jiulong and Henglong held by Jiulong Machinery Electricity, respectively. All of the nominee holders of Jiulong Machinery Electricity are unrelated parties except for Mr. Jie Li (CFO). |
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following related parties are related
through common ownership with the major stockholders of the Company:
| • | Jingzhou Henglong Fulida Textile Co., Ltd. (“Jingzhou”) |
| • | Xiamen Joylon Co., Ltd. (“Xiamen Joylon”) |
| • | Shanghai Tianxiang Automotive Parts Co., Ltd. (“Shanghai Tianxiang”) |
| • | Shanghai Fenglong Materials Co., Ltd. (“Shanghai Fenglong”) |
| • | Changchun Hualong Automotive Technology Co., Ltd. (“Changchun Hualong”) |
| • | Jiangling Tongchuang Machining Co., Ltd. (“Jiangling Tongchuang”) |
| • | Beijing Hualong Century Digital S&T Development Co., Ltd. (“Beijing Hualong”) |
| • | Shanghai Hongxi Investment Inc. (“Hongxi”) |
| • | Hubei Wiselink Equipment Manufacturing Co., Ltd. (“Hubei Wiselink”) |
| • | Jingzhou Derun Agricultural S&T Development Co., Ltd. (“Jingzhou Derun”) |
| • | Jingzhou Tongyi Special Parts Co., Ltd. (“Jingzhou Tongyi”) |
| • | Jingzhou Tongying Alloys Materials Co., Ltd. (“Jingzhou Tongying”) |
| • | Wuhan Dida Information S&T Development Co., Ltd. (“Wuhan Dida”) |
| • | Hubei Wanlong Investment Co., Ltd. (“Hubei Wanlong”) |
| • | Jiangling Yude Machining Co., Ltd. (“Jiangling Yude”) |
| • | Wiselink Holdings Limited (“Wiselink”) |
| • | Beijing Hainachuan Henglong Automotive Steering System Co., Ltd. (“Beijing Henglong”) |
| • | Honghu Changrun Automotive Parts Co., Ltd. (“Honghu Changrun”) |
| • | Jingzhou Henglong Real Estate Co., Ltd. (“Henglong Real Estate”) |
| • | Xiamen Joylon Automotive Parts Co., Ltd. (“Xiamen Automotive Parts”) |
| • | Jingzhou Jiulong Machinery and Electronic Trading Co., Ltd. (“Jiulong Machinery”) |
| • | Wuhan Tongkai Automobile Motor Co., Ltd. (“Wuhan Tongkai”) |
| • | Jingzhou Natural Astaxanthin Inc. (“Jingzhou Astaxanthin”) |
| • | Hubei Asta Biotech Inc. (“Hubei Asta”) |
Related
Party Transactions.
The Company’s related party transactions
include product sales, material purchases and purchases of equipment and technology. These transactions were consummated at fair
market price and under similar terms as those with the Company's customers and suppliers. On some occasions, the Company’s
related party transactions also include purchase/sale of capital stock of the joint ventures and sale of property, plant and equipment.
Related sales and purchases: During the
years ended December 31, 2014 and 2013, the joint ventures entered into related party transactions with companies with common directors
as shown below (figures are in thousands of USD):
Merchandise Sold to Related Parties
| |
Year Ended December 31, | |
| |
2014 | | |
2013 | |
Xiamen Joylon | |
$ | 7,159 | | |
$ | 6,152 | |
Xiamen Automotive Parts | |
| 4,327 | | |
| 2,757 | |
Shanghai Fenglong | |
| 384 | | |
| 406 | |
JingzhouYude | |
| 3 | | |
| 583 | |
Jingzhou Tongying | |
| 1,321 | | |
| - | |
Beijing Henglong | |
| 37,176 | | |
| 27,283 | |
Other Related Parties | |
| 72 | | |
| 272 | |
Total | |
$ | 50,442 | | |
$ | 37,453 | |
Technology Sold to Related Parties
| |
Year Ended December 31, | |
| |
2014 | | |
2013 | |
Beijing Henglong | |
$ | 88 | | |
$ | 88 | |
Rental income obtained from related parties
| |
Year Ended December 31, | |
| |
2014 | | |
2013 | |
Total rental income | |
$ | 111 | | |
$ | - | |
Materials sold to related parties
| |
Year Ended December 31, | |
| |
2014 | | |
2013 | |
Jingzhou Tongying | |
$ | 638 | | |
$ | - | |
Jiangling Tongchuang | |
| 204 | | |
| - | |
Jingzhou Yude | |
| 910 | | |
| - | |
Other Related Parties | |
| 92 | | |
| - | |
Total | |
$ | 1,844 | | |
$ | - | |
Materials Purchased from Related Parties
| |
Year Ended December 31, | |
| |
2014 | | |
2013 | |
Honghu Changrun | |
$ | 891 | | |
$ | 1,258 | |
Jiangling Tongchuang | |
| 7,243 | | |
| 9,025 | |
Jingzhou Tongying | |
| 11,206 | | |
| 12,622 | |
Hubei Wiselink | |
| 1,629 | | |
| 1,106 | |
Wuhan Tongkai | |
| 2,536 | | |
| 1,897 | |
Other Related Parties | |
| 1 | | |
| 8 | |
Total | |
$ | 23,506 | | |
$ | 25,916 | |
Technology and Services Purchased from Related
Parties
| |
Year Ended December 31, | |
| |
2014 | | |
2013 | |
Changchun Hualong | |
$ | 407 | | |
$ | 422 | |
Jingzhou Derun | |
| - | | |
| 492 | |
Honghu Changrun | |
| - | | |
| 285 | |
Beijing Hualong | |
| 287 | | |
| 432 | |
Hubei Asta | |
| 204 | | |
| - | |
Total | |
$ | 898 | | |
$ | 1,631 | |
Equipment Purchased from Related Parties
| |
Year Ended December 31, | |
| |
2014 | | |
2013 | |
Hubei Wiselink | |
$ | 3,365 | | |
$ | 5,373 | |
Related receivables, advance payments and
account payable: As at December 31, 2014 and 2013, accounts receivables, advance payments and account payable between the Company
and related parties are as shown below (figures are in thousands of USD):
Accounts and Notes Receivable from Related Parties
| |
December 31, | |
| |
2014 | | |
2013 | |
Xiamen Joylon | |
$ | 4,916 | | |
$ | 4,076 | |
Xiamen Automotive Parts | |
| 929 | | |
| 843 | |
Shanghai Fenglong | |
| 332 | | |
| 298 | |
Jingzhou Yude | |
| 1,953 | | |
| 2,008 | |
Jingzhou Tongying | |
| 349 | | |
| 485 | |
Beijing Henglong | |
| 14,252 | | |
| 9,426 | |
Other Related Parties | |
| 29 | | |
| 58 | |
Total | |
$ | 22,760 | | |
$ | 17,194 | |
Other Receivables from Related Parties
| |
December 31, | |
| |
2014 | | |
2013 | |
Wuhan Dida | |
$ | 48 | | |
$ | 62 | |
Jiulong Machinery | |
| 667 | | |
| 621 | |
Other Related Parties | |
| 10 | | |
| 46 | |
Total | |
| 725 | | |
| 729 | |
Less: provisions for bad debts | |
| (649 | ) | |
| (621 | ) |
Balance at end of year | |
$ | 76 | | |
$ | 108 | |
Other receivables from related parties are primarily unsecured
demand loans, with no stated interest rate or due date.
Accounts payable to Related Parties
| |
December 31, | |
| |
2014 | | |
2013 | |
Shanghai Tianxiang | |
$ | 176 | | |
$ | 341 | |
Jiangling Tongchuang | |
| 584 | | |
| 891 | |
Hubei Wiselink | |
| 1,815 | | |
| 755 | |
Jingzhou Tongying | |
| 1,645 | | |
| 1,911 | |
Wuhan Tongkai | |
| 576 | | |
| 620 | |
Honghu Changrun | |
| 58 | | |
| 94 | |
Other Related Parties | |
| 3 | | |
| 22 | |
Total | |
$ | 4,857 | | |
$ | 4,634 | |
Advanced equipment payments to Related Parties
| |
December 31, | |
| |
2014 | | |
2013 | |
Hubei Wiselink | |
$ | 2,085 | | |
$ | 2,097 | |
Other advance payments to Related Parties
| |
December 31, | |
| |
2014 | | |
2013 | |
Jiangling Tongchuang | |
$ | 30 | | |
$ | 176 | |
Changchun Hualong | |
| 82 | | |
| 86 | |
Wuhan Tongkai | |
| 4 | | |
| 181 | |
Honghu Changrun | |
| 511 | | |
| 423 | |
Other Related Parties | |
| 114 | | |
| - | |
Total | |
$ | 741 | | |
$ | 866 | |
Loans to Related Parties
During the year ended December 31, 2013,
certain of the Company’s subsidiaries provided short-term loans to related parties of the Company in the aggregate principal
amount of approximately $22.9 million (RMB140.8 million). The contractual period of each loan was three months or less from the
date of the extension of the loan. Out of the total amount, loans of approximately US$15.8 million (RMB97.0 million) bore an interest
rate of 5.6% per annum, which were entered into for the purpose of generating returns for the Company’s idle cash resulting
from the seasonality of its business and assisting the borrowing entities in addressing certain cash flow needs. For loans of approximately
US$7.1 million (RMB43.8 million) to related parties which primarily consisted of loans with repayment terms of less than 3 days,
the Company did not charge interest due to their short-term maturity.
All of these loans qualify for net reporting
in accordance with ASC 230 “Statement of Cash Flows”. As of December 31, 2013, all of these loans have been repaid
to the Company. For the year ended December 31, 2013, the Company received $0.2 million in interest income from these loans to
the related parties.
For the years ended December 31, 2014 and
2013, the loans to related parties were comprised of the following:
| |
For the Year Ended December 31, | |
| |
2014 | | |
2013 | |
Henglong Real Estate (1) | |
$ | - | | |
$ | 18,309 | |
Hubei Wiselink (2) | |
| - | | |
| 3,253 | |
Xiamen Joylon (2) | |
| - | | |
| 943 | |
Juilong Machine (3) | |
| - | | |
| 399 | |
Total | |
$ | - | | |
$ | 22,904 | |
(1) |
Mr. Hanlin Chen, Chairman of the Company, Mr. Wu Qizhou, the CEO of the Company, and the spouse of Mr. Andy Tse, Senior Vice President of the Company, collectively own 59.2% of the equity interest of Henglong Real Estate. |
(2) |
Hubei Wiselink and Xiamen Joylon are directly and indirectly controlled by Mr. Hanlin Chen, Chairman of the Company. |
(3) |
Jiulong Machine was a non-controlling interest shareholder that owned 20% and 19% of the equity interest of Henglong and Jiulong, subsidiaries of the Company, respectively, until September 26, 2014. |
The Company has no ongoing commitments
for the loans to related parties.
The Company's related parties, such as
Jingzhou Derun and Wuhan Dida, pledged certain land use rights and buildings as security for the Company’s comprehensive
credit facility.
As of March 26, 2015, the date the
Company issued the financial statements, Hanlin Chen, Chairman, owns 55.6% of the common stock of the Company and has the
effective power to control the vote on substantially all significant matters without the approval of other stockholders.
SECTION 16(a) BENEFICIAL OWNERSHIP COMPLIANCE
Section 16(a) of the Exchange Act requires
the Company’s executive officers and directors and persons who own more than 10% of a registered class of the Company’s
equity securities to file with the SEC initial statements of beneficial ownership, reports of changes in ownership and annual reports
concerning their ownership of the Company’s common stock and other equity securities on Forms 3, 4 and 5, respectively. Executive
officers, directors and greater than 10% stockholders are required by the SEC’s regulations to furnish the Company with copies
of all Section 16(a) reports they file. To the best of the Company’s knowledge, based solely upon a review of the Forms 3,
4 and 5 filed with the SEC, no officer, director or greater than 10% stockholder failed to file on a timely basis any reports required
by Section 16(a) of the Exchange Act for the year ended December 31, 2014.
EXECUTIVE COMPENSATION
Compensation Discussion
and Analysis.
The Compensation Committee is responsible
for setting the Company’s policies regarding compensation and benefits and administering the Company’s benefit plans.
At the end of fiscal year 2014, the Compensation Committee consisted of Robert Tung (chairman), Guangxun Xu and Arthur Wong. The
members of the Compensation Committee approved the amount and form of compensation paid to executive officers of the Company and
set the Company’s compensation policies and procedures during these periods.
The primary goals of the Company’s
compensation committee with respect to executive compensation are to attract and retain highly talented and dedicated executives
and to align executives’ incentives with stockholder value creation.
The Compensation Committee will conduct
an annual review of the aggregate level of the Company’s executive compensation, as well as the mix of elements used to compensate
the Company’s executive officers. The Company compares compensation levels with amounts currently being paid to executives
at similar companies in the same area and the same industry. Most importantly, the Company compares compensation levels with local
practices in China. The Company believes that its compensation levels are competitive with local conditions.
Elements
of Compensation.
The Company’s executive compensation
consists of the following elements.
Base Salary
Base salaries for the Company’s executives
are established to be amounts of compensation that are similar to those paid by other companies to executives in similar positions
and with similar responsibilities. Base salaries are adjusted from time to time to realign salaries with market levels after taking
into account individual responsibilities, performance and experience. The Compensation Committee established a salary structure
to determine base salaries and is responsible for initially setting executive officer compensation in employment arrangements with
each individual. The base salary amounts are intended to reflect the Company’s philosophy that the base salary should attract
experienced individuals who will contribute to the success of the Company’s business goals and represent cash compensation
that is commensurate with the compensation of individuals at similarly situated companies.
The Company’s Board of Directors
and Compensation Committee have approved the current salaries for executives: RMB1.5 million (equivalent to approximately $0.24)
million) for the Chairman, RMB1.0 million (equivalent to approximately $0.16 million) for the CEO, and RMB0.6 million (equivalent
to approximately $0.09 million) individually for other officers in 2014.
Performance Bonus
The Company awards performance bonuses
to certain executives based on the achievement of set goals.
a. Grantees: Mr. Hanlin Chen,
Mr. Qizhou Wu, Mr. Andy Tse, Mr. Jie Li, Mr. Yijun Xia, and Mr. Daming Hu.
b. Conditions: (i) based on
the Company’s consolidated financial statements, the year over year growth rates of sales, net profits and earnings per share
for 2014 must exceed 15%; and (ii) the average growth rate of the foregoing indicators must exceed that of China auto industry
in 2014 published by CAAM.
c. Bonus: 50% of each officer’s
annual salary in 2014.
The Company accrued performance bonuses
for Named Executive Officers in 2014 as the Company reached the above conditions for awarding performance bonuses.
Stock Option Awards
The stock option plan proposed by management,
which aims to incentivize and retain core employees, to meet employees’ benefits, the Company’s long term operating
goals and stockholder benefits, was approved at the Annual Meeting of Stockholders held on June 28, 2005, and extended for ten
years at the Annual Meeting of Stockholders held on September 16, 2014. The maximum common shares available for issuance under
the plan is 2,200,000. The term of the plan was extended to June 27, 2025.
There were no stock options granted to
management in 2014.
Other Compensation
Other than the base salary for the Company’s
Named Executive Officers, the performance bonus and the stock option awards referred to above, the Company does not have any other
benefits and perquisites for its Named Executive Officers. However, the Compensation Committee in its discretion may provide benefits
and perquisites to these executive officers if it deems advisable to do so.
Option Exercises and Stock Vested.
During fiscal year 2014, no shares were
acquired by the Named Executive Officers of the Company under the 2004 Stock Option Plan.
Role of Executives in
Executive Compensation Decisions.
The Compensation Committee seeks input
from the Company’s chairman and chief executive officer when discussing the performance of, and compensation levels for,
executives other than the chairman or the chief executive officer. None of our executives participates in deliberations relating
to his own compensation. In particular, the Compensation Committee seeks input from the Company’s chairman and chief executive
officer in assessing the performance of individual executive officers, assessing competitive conditions in the market for retaining
key employees and establishing the Company’s business goals and financial objectives which are used by the Compensation Committee
in setting compensation levels.
Employment Contracts
and Termination of Employment.
All of the Company’s executive officers
have executed standard employment agreements with the Company, which are governed by PRC law. Other than the amounts of compensation
to be paid by the Company, the terms and conditions of the employment agreements with the executive officers are substantially
the same as those of the Company’s standard employment agreements with non-executive employees. The Company’s standard
employment agreements are for a fixed period of five (5) years and may be renewed upon notice from the employee and consent of
the Company. The Company may terminate an employment agreement upon thirty days’ notice if an employee is no longer suitable
for the job due to medical or other reasons. An employee may terminate his or her employment agreement without cause upon one month’s
notice to the Company. The compensation stated in the agreement is the base salary and is subject to adjustment on an annual basis.
Compensation of Executive
Officers.
The following describes the compensation
arrangements under the employment contracts of our Named Executive Officers.
|
* |
Hanlin Chen, the Company’s Chairman, has a renewed employment agreement that became effective as of September 25, 2012. The agreement is for an indefinite term pursuant to the PRC employment law. Mr. Chen received an annual salary of approximately $237,000 during the fiscal year ended December 31, 2014. |
|
* |
Qizhou Wu, the Company’s CEO, has an employment agreement that became effective as of September 25, 2012. The agreement is for an indefinite term pursuant to the PRC employment law. Mr. Wu received an annual salary of approximately $158,000 during the fiscal year ended December 31, 2014. |
|
* |
Haimian Cai, the Company’s Vice President, has an employment agreement that became effective as of July 8, 2010. The agreement is for an indefinite term pursuant to the local rules and regulations. Mr. Cai received an annual salary of approximately $150,000 during the fiscal year ended December 31, 2014. |
Summary Compensation
Table.
The compensation that the Company’s
CEO and two most highly compensated executive officers other than the CEO (collectively, the “Named Executive Officers”)
received for their services for fiscal years ended 2014 and 2013 were as follows (figures are in thousands of USD):
Name and principal position | |
Year | |
Salary (1) | | |
Bonus (2) | | |
Option Awards (3) | | |
Total | |
Hanlin Chen (Chairman) | |
2014 | |
$ | 237 | | |
$ | 119 | | |
$ | - | | |
$ | 356 | |
| |
2013 | |
$ | 210 | | |
$ | - | | |
$ | - | | |
$ | 210 | |
| |
| |
| | | |
| | | |
| | | |
| | |
Qizhou Wu (CEO) | |
2014 | |
$ | 158 | | |
$ | 79 | | |
$ | - | | |
$ | 237 | |
| |
2013 | |
$ | 140 | | |
$ | - | | |
$ | - | | |
$ | 140 | |
| |
| |
| | | |
| | | |
| | | |
| | |
Haimian Cai (Vice President) | |
2014 | |
$ | 150 | | |
$ | - | | |
$ | - | | |
$ | 150 | |
| |
2013 | |
$ | 150 | | |
$ | - | | |
$ | - | | |
$ | 150 | |
|
(1) |
Salary – Please refer to Base Salary disclosed under the “Elements of Compensation” section above for further details. |
|
(2) |
Bonus – Please refer to Performance Bonus disclosed under the “Elements of Compensation” section above for further details. |
|
(3) |
Option Awards – Please refer to Stock Option Awards disclosed under the “Elements of Compensation” section above for further details. |
For detailed information on option exercises
and stock vested, please see Note 19 to the consolidated financial statements of the Company in the Annual Report on Form 10-K
for the year ended December 31, 2014.
REPORT OF THE AUDIT COMMITTEE
Under the guidance of a written charter
adopted by the Board of Directors, the purpose of the Audit Committee is to oversee the accounting and financial reporting processes
of the Company and audits of its financial statements. The responsibilities of the Audit Committee include appointing and providing
for the compensation of the independent auditors to conduct the annual audit of our accounts, reviewing the scope and results of
the independent audits, reviewing and evaluating internal accounting policies and approving all professional services to be provided
to the Company by its independent auditors. Each of the members of the Audit Committee meets the independence requirements of the
Nasdaq Stock Market.
Management has primary responsibility for
the system of internal controls and the financial reporting process. The independent auditors have the responsibility to express
an opinion on the financial statements based on an audit conducted in accordance with generally accepted auditing standards.
In this context and in connection with
the audited financial statements contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014,
the Audit Committee:
* |
reviewed and discussed the audited financial statements as of and for the year ended December 31, 2014 with the Company’s management and PwC, the Company’s independent auditors; |
* |
discussed with the Company’s independent auditors the matters required to be discussed by Statement of Auditing Standards No. 61, Communication with Audit Committees, as amended by Statement of Auditing Standards No. 90, Audit Committee Communications; |
* |
reviewed the written disclosures and the letter from PwC required by the Independence Standards Board Standard No. 1, Independence Discussions with Audit Committees, discussed with the auditors their independence and concluded that the non-audit services performed by PwC are compatible with maintaining their independence; |
* |
based on the foregoing reviews and discussions, recommended to the Board of Directors that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 filed with the SEC; and |
* |
instructed the independent auditors that the Audit Committee expects to be advised if there are any subjects that require special attention. |
|
AUDIT COMMITTEE |
|
Arthur Wong (chairman), Robert Tung and Guangxun Xu |
Audit Committee’s
Pre-approval Policy.
During the fiscal years ended December
31, 2014 and 2013, the Audit Committee of the Board of Directors adopted policies and procedures for the pre-approval of all audit
and non-audit services to be provided by the Company’s independent auditor and for the prohibition of certain services from
being provided by the independent auditor. The Company may not engage the Company’s independent auditor to render any audit
or non-audit service unless the service is approved in advance by the Audit Committee or the engagement to render the service is
entered into pursuant to the Audit Committee’s pre-approval policies and procedures. On an annual basis, the Audit Committee
may pre-approve services that are expected to be provided to the Company by the independent auditor during the fiscal year. At
the time such pre-approval is granted, the Audit Committee specifies the pre-approved services and establishes a monetary limit
with respect to each particular pre-approved service, which limit may not be exceeded without obtaining further pre-approval under
the policy. For any pre-approval, the Audit Committee considers whether such services are consistent with the rules of the Securities
and Exchange Commission on auditor independence.
Principal Accountant
Fees and Services.
The following table sets forth the aggregate
fees for professional audit services rendered by PwC for the audit of the Company’s annual financial statements and fees
billed for other services for the years 2014 and 2013. The Audit Committee has approved all of the following fees (figures are
in thousands of USD).
| |
Fiscal Year Ended | |
| |
2014 | | |
2013 | |
Audit Fees | |
$ | 863 | | |
$ | 844 | |
Audit-Related Fees | |
| - | | |
| - | |
Tax Fees | |
| - | | |
| - | |
Total Fees Paid | |
$ | 863 | | |
$ | 844 | |
[INTENTIONALLY LEFT BLANK]
PROPOSAL 1 — ELECTION OF DIRECTORS
At the Annual Meeting, the stockholders
will vote on the election of five directors to serve for a one-year term until the 2016 annual meeting of stockholders and until
their successors are elected and qualified. The Board of Directors has unanimously approved the nomination of Hanlin Chen, Qizhou
Wu, Arthur Wong, Guangxun Xu and Robert Tung for election to the Board of Directors. The nominees have indicated that they are
willing and able to serve as directors. If any of these individuals becomes unable or unwilling to serve, the accompanying proxy
may be voted for the election of such other person as shall be designated by the Board of Directors. The directors will be elected
by a plurality of the votes cast, in person or by proxy, at the Annual Meeting, assuming a quorum is present. Stockholders do not
have cumulative voting rights in the election of directors.
The Board of Directors recommends
a vote “For” the election of Hanlin Chen, Qizhou Wu, Arthur Wong, Guangxun Xu and Robert Tung as directors.
Unless otherwise instructed, it is the
intention of the persons named in the proxy to vote shares represented by properly executed proxy for the election of Hanlin Chen,
Qizhou Wu, Arthur Wong, Guangxun Xu and Robert Tung.
PROPOSAL 2 — APPROVAL, ON AN ADVISORY
BASIS, OF THE COMPANY’S NAMED
EXECUTIVE OFFICER COMPENSATION
The Dodd-Frank Wall Street Reform and Consumer
Protection Act of 2010 (the “Dodd-Frank Act”) enables the Company’s stockholders to vote to approve, on
an advisory (non-binding) basis, the compensation of the named executive officers as disclosed in this proxy statement in accordance
with the SEC’s rules, commonly referred to as a “Say-on-Pay.” At the 2011 Annual Meeting of Stockholders, the
Board of Directors proposed and the Company’s stockholders approved, on an advisory basis, a frequency of every two years
for advisory votes on the compensation of our Named Executive Officers. In accordance with this vote, this year the board of directors
is again implementing an advisory vote on the compensation of our Named Executive Officers. The next required vote on the frequency
of advisory votes on the compensation of our Named Executive Officers will occur no later than the 2017 annual meeting.
As described under the “Executive
Compensation - Compensation Discussion and Analysis” section of this proxy statement, the Company’s executive compensation
program is designed to attract, motivate and retain our Named Executive Officers who are critical to the Company’s success.
The Company believes that the various elements of its executive compensation program work together to promote its goal of ensuring
that total compensation should be related to both the Company’s performance and individual performance.
Stockholders are urged to read the “Executive
Compensation - Compensation Discussion and Analysis” section of this proxy statement, which discusses how the Company’s
executive compensation policies implement its compensation philosophy. The “Executive Compensation - Compensation of Executive
Officers” section and the “Executive Compensation - Summary Compensation Table” section of this proxy statement
contain narrative discussion and tabular information about the compensation of the Company’s named executive officers, including
information about fiscal year 2014 compensation of the Company’s Named Executive Officers. The Compensation Committee and
the Board of Directors believe that these policies are effective in implementing the Company’s compensation philosophy and
in achieving its goals.
You are invited to review the compensation
of the Named Executive Officers, as disclosed in this proxy statement pursuant to the compensation disclosure rules of the SEC,
including the “Executive Compensation - Compensation Discussion and Analysis” section and the other related tables
and disclosures, and to vote to approve, on an advisory (non-binding) basis, the compensation of our Named Executive Officers through
the adoption of the following resolution at the Annual Meeting:
“Resolved, that the compensation
paid to the Company’s Named Executive Officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation
Discussion and Analysis, compensation tables and narrative discussion, is hereby approved.”
The Say-on-Pay vote is advisory and, therefore,
not binding on the Company, the Compensation Committee or the Board of Directors. However, the Company’s Board of Directors
and its Compensation Committee value the opinions of the stockholders and, to the extent there is any significant vote against
the Named Executive Officer compensation as disclosed in this proxy statement, the Company will consider the stockholders’
concerns and the Compensation Committee will evaluate whether any actions are necessary to address those concerns.
The Board of Directors recommends
voting “For” the approval, on an advisory basis, of the Company’s named executive officer compensation program,
as described in the “Executive Compensation - Compensation Discussion and Analysis” and “Executive Compensation
- Compensation of Executive Officers” sections of this proxy statement.
PROPOSAL 3 — RATIFICATION OF INDEPENDENT
AUDITORS
At the Annual Meeting, the stockholders
will be asked to ratify the appointment of PwC as the Company’s independent auditors for the fiscal year ending December
31, 2015. Representatives of PwC are expected to be present at the Annual Meeting and will have the opportunity to make statements
if they desire to do so. Such representatives are also expected to be available to respond to appropriate questions.
The Board of Directors recommends
a vote “For” the ratification of the appointment of PwC as the Company’s independent auditors for the fiscal
year ending December 31, 2015.
INCORPORATION BY REFERENCE
The SEC allows the Company to “incorporate
by reference” information into this proxy statement, which means that the Company can disclose important information to you
by referring you to other documents that we have filed separately with the SEC and made available to you with the copy of this
proxy statement. The information incorporated by reference is deemed to be part of this proxy statement. This proxy statement incorporates
by reference the financial statements of the Company as contained in the Company’s Annual Report on Form 10-K for the year
ended December 31, 2014 filed by the Company on March 26, 2015, which is made available together with this proxy statement on the
website specified above to all stockholders in connection with the Annual Meeting.
OTHER MATTERS
As of the time of preparation of this proxy
statement, neither the Board of Directors nor management intends to bring before the meeting any business other than the matters
referred to in the Notice of Annual Meeting and this proxy statement. If any other business should properly come before the meeting,
or any adjournment thereof, the persons named in the proxy will vote on such matters according to their best judgment.
STOCKHOLDER PROPOSALS FOR 2016 ANNUAL
MEETING
Under the rules of the SEC, stockholders
who wish to submit proposals for inclusion in the proxy statement of the Board of Directors for the 2016 Annual Meeting of Stockholders
must submit such proposals so as to be received by the Company at China Automotive Systems, Inc., D8 Optics Valley Software Park,
No. 1 Guanshan First Avenue, Wuhan City, Hubei Province, The People’s Republic of China on or before February 5, 2016.
|
By Order of the Board of Directors |
|
|
|
/s/ Chen Hanlin |
|
Chen Hanlin
Chairman |
Hubei, People’s Republic of China
May 28, 2015
YOUR VOTE IS IMPORTANT!
WHETHER OR NOT YOU PLAN TO ATTEND THE
MEETING, PLEASE EXECUTE THE PROXY FOLLOWING THE INSTRUCTIONS SET FORTH IN THE NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIALS
MAILED TO YOU. THIS WILL ENSURE THE PRESENCE OF A QUORUM AT THE MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU
WISH TO DO SO EVEN IF YOU HAVE PREVIOUSLY EXECUTED THE PROXY.
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