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Corporate Governance

 

The Board of Directors (the “Board”) and Management of Hanwell Holdings Limited (the “Company”) and its subsidiaries (collectively referred to as the “Group”) place great importance on high standard of corporate conduct to uphold good corporate governance. This commitment and continuous support of the Code of Corporate Governance which was revised in May 2012 (the “Code”) can be seen from the Board and Management efforts to promote and maintain values which emphasize transparency, accountability, integrity and proper conduct at all times in the business operations and dealings of the Group whilst pursuing sustainable growth and enhancement of corporate performance so as to create value for its stakeholders and safeguard the Group’s assets.

This Statement describes the practices the Company has undertaken with respect to each of the principles and guidelines and the extent of its compliance with the Code and should be read as a whole, instead of being read separately under the different principles of the Code. The Company has complied in all material aspects with the principles and guidelines set out in the Code and any deviations are explained in this report. 

 

1      BOARD MATTERS

The Board’s Conduct of Affairs

Principle 1: Every company should be headed by an effective Board to lead and control the company. The Board is collectively responsible for the long-term success of the company. The Board works with Management to achieve this objective and Management remains accountable to the Board.

1.1    Role of the Board

The Company is headed by an effective Board, comprising individuals with diversified backgrounds and who collectively brings with them a wide range of experience, to lead and control the Group. The Board is responsible for the overall management and success of the Group. The primary role of the Board is to oversee the Group’s business performance and affairs, and to protect and enhance long-term shareholder value. To fulfil this, apart from its statutory responsibilities, the Board performs the following roles and functions:

  • providing entrepreneurial leadership, setting strategic directions and objectives of the Group; 
  • approving major funding proposals, investment and divestment proposals of the Group;           
  • reviewing the performance of management by establishing management’s goals and monitoring the achievement of such goals; 
  • reviewing and endorsing the remuneration framework as may be recommended by the Remuneration Committee; 
  • supervising management in ensuring that the Company has the necessary resources to meet its goals and establish a framework of prudent and effective controls to assess and manage risks; 
  • overseeing the processes of risk management, financial reporting and compliance and evaluates the adequacy of internal controls; 
  • considering sustainability issues, such as environmental and social factors, as and when necessary, as part of its strategic formulation; and 
  • assuming the responsibilities for corporate 

All Directors discharge their duties and responsibilities objectively at all times as fiduciaries in the interests of the Company.

1.2     Board Processes

 To ensure that specific issues are subject to consideration and review before the Board makes its decision, the Board has established a number of Board Committees to assist the Board in carrying out more effectively its oversight function. These Board Committees consist of Audit Committee (“AC”), Nominating Committee (“NC”), Remuneration Committee (“RC”) and Risk Management Committee (“RMC”) (collectively the “Board Committees”).

 The composition of the Board Committees are as follows: 

Directors

Audit Committee

Nominating Committee

Remuneration Committee

Risk Management Committee

John Chen Seow Phun

Member

Chairman

Chairman

-

Lien Kait Long

Chairman

Member

Member

Chairman

Lee Po On Mark

Member

Member

Member

-

Tang Cheuk Chee

-

-

-

Member

 

These Board Committees function within clear Board approved written terms of reference. Such terms of reference will be reviewed by the Board and Board Committees on a regular basis to ensure their continued relevance and to enhance the effectiveness of these Board Committees. The minutes of all Board and Board Committees meetings which provide a fair and accurate record of the discussion and key deliberations and decisions taken during the meetings, are circulated and available to the Board and Board Committees. 

The roles and responsibilities and these Board Committees are set out in subsequent sections of this Corporate Governance Statement of the Company. 

1.3     Board and Board Committees Meetings held in Financial Year 2017

The attendance of the Directors at scheduled meetings of the Board and Board Committees during financial year ended 31 December 2017 is disclosed below: 

 

Board

Board Committees

 

 

Audit

Nominating

Remuneration

Risk Management

Number of scheduled meetings held

4

4

1

1

1

Name of Directors

 

Allan Yap

2

2*

-

-

-

Tang Cheuk Chee

4

4*

1*

1*

1

John Chen Seow Phun

4

4

1

1

-

Lien Kait Long

4

4

1

1

1

Lee Po On Mark

4

4

1

1

-

Goi Kok Ming (Wei Guoming)

4

-

-

-

-

 

 *  Attendance by invitation of the relevant committee

The schedules of the Board and Board Committees meetings are given to all Directors well in advance. The Board meets at least four (4) times in a year. Besides the scheduled quarterly Board meetings, the Board also meets on an ad-hoc basis as warranted by circumstances. Board meetings will be convened when they are deemed necessary, to review the Group’s business operations, conduct strategic review of the business affairs and address other specific significant matters that arise. 

The Company’s Constitution provides for the convening of the Board meetings by way of telephonic, video conferencing or other similar means of electronic communication. The Board also approves material and significant transactions by way of written resolutions which are circulated to the Board together with all relevant and supporting information. 

The agendas for meetings are prepared in consultation with the Executive Chairman and the Executive Director and/or the Chairman of the respective Board Committee. The agendas and meeting materials are circulated in advance of the scheduled meetings to the members of the Board and/or Board Committees. 

The Directors were appointed based on their experience, stature and potential to contribute to the proper guidance of the Group and its businesses. As such, we believe that each individual Director’s contributions can be reflected in ways other than the reporting of attendances at Board meetings and/or Board Committee meetings. 

1.4    Matters Requiring Board Approval

 The Directors have identified a few areas for which the Board has direct responsibility for decision making (which are embodied in its internal guidelines) such as the following: 

  • annual budgets and financial plans of the Group; 
  • approval of the annual and quarterly results announcements; 
  • approval of the annual report and financial statements; 
  • declaration of interim dividends and proposal of final dividends; 
  • convening of shareholders’ meetings; 
  • approval of corporate strategy; 
  • authorisation of major transactions; 
  • approval of Board changes and appointments to Board Committees; 
  • investments and divestments decisions including the Group’s capital commitment; and 
  • commitments to term loans and lines of credit from banks and financial institutions by the Group. 

While matters relating in particular to the Company’s objectives, strategies and policies require the Board’s direction and approval, Management is responsible for the day to day operation and administration of the Company in accordance with the objectives, strategies and policies set by the Board. 

1.5    Board Development and Training

 Our Directors are provided with extensive background information about our Group’s history, mission, values and business operations. The NC ensures all Directors are equipped with the appropriate skills and relevant industry knowledge to perform their roles on the Board and Board Committees effectively. 

The Directors also have the opportunity to visit the Group’s operations facilities and meet with the Management for further explanations, briefing or discussions on key aspects to gain insight for a better understanding of the Group’s business and operations. 

The Company will prepare appointment letters setting out Directors’ duties and obligations. Newly appointed Directors are also briefed on the business and organisational structure of the Group and its strategic directions and are encouraged to go for site visits of the Group’s operating units to familiarise themselves with the Group’s business practices. 

Directors are updated periodically on industry trends and development of sustainability issues, relevant laws, regulations and changing business risks during Board meetings/committee meetings or at specifically-convened sessions so as to enable them to properly discharge their duties effectively. In the year under review, the Board has been briefed by the Company’s external consultant on the compliance and disclosure requirements of sustainability reporting prescribed by the Singapore Exchange Securities Trading Limited (“SGX-ST”). 

The Company Secretary regularly informs the Directors of any upcoming conferences, training and seminars relevant to their roles as directors of the Company. The external auditors would update the AC and the Board on new and revised accounting standards that are applicable to the Company or the Group annually. 

The Directors and key management personnel of the Company are encouraged to attend relevant training programmes, courses, conference and seminars on new laws, regulations and updates on commercial areas conducted by relevant professional organisation from time to time. Changes to regulations and accounting standards are monitored closely by the Management. In order to keep pace with such laws and regulatory changes, the Company will provide and fund the appropriate trainings and development programmes for the Directors and/or key management personnel of the Company, where relevant. 

1.6     Board Composition and Guidance

Principle 2: There should be a strong and independent element on the Board, which is able to exercise objective judgement on corporate affairs independently, in particular, from Management and 10% shareholders. No individual or small group of individuals should be allowed to dominate the Board’s decision making.

The present Board Composition consists of six (6) Directors of whom one (1) is Executive Chairman, one (1) is Executive Director, one (1) is Non-Executive Director and Non-Independent and three (3) are Non-Executive and Independent Directors. All Directors exercise independent judgement and make decisions objectively and in the best interest of the Company. 

As at the date of this report, the Board comprises six (6) suitably qualified members:

 

Name of Director

Functions

Date of First Appointment as Director 

Date of last re-election as Director

Present Directorships in other listed companies

Past Directorships in listed companies held over the preceding three years

Allan Yap

Executive Chairman

10 May 2002

21 April 2017

·   Burcon NutraScience Corporation (Chairman, CEO and Director)

·   China Enterprises Limited (Chairman, Chief Executive Officer and Director)

·   Master Glory Group Limited (f.k.a. Hanny Holdings Limited) (Chairman and Executive Director)

·   Rosedale Hotel Holdings Limited (Chairman and Executive Director)

·   Tat Seng Packaging Group Ltd (Executive Chairman)

 

·   Shaw Brothers Holdings Limited (f.k.a. Meike International Holdings Limited) (Chairman and Executive Director)

·   Television Broadcasts Limited (Alternate Director)

·   SMI Holdings Group Limited (Chairman and Independent Non-Executive Director)

 

John Chen Seow Phun

·   Deputy Chairman, Non-Executive and Independent Director  

·   Chairman of Nominating and Remuneration Committees

·   Member of Audit Committee

09 Jun 2003

 

22 April 2016

·   Fu Yu Corporation Limited (Non-Executive Chairman and Independent Director)

·   Hiap Seng Engineering Ltd (Independent Director)

·   HLH Group Limited (Independent Director)

·   Matex International Limited (Non-Executive Chairman and Independent Director)

·   OKP Holdings Limited (Lead Independent Director)

·   Pavillon Holdings Ltd (Executive Chairman)

·   Tat Seng Packaging Group Ltd (Deputy Chairman, Non-Executive Director and Independent Director)

 

-

Tang Cheuk Chee

·   Executive Director

·   Member of Risk Management Committee

 

 

 

01 Aug 2011

24 April 2015

·   Tat Seng Packaging Group Ltd (Executive Director)

-

Lien Kait Long

·   Non-Executive and Lead Independent Director

·   Chairman of Audit and Risk Management Committees

·   Member of Nominating and Remuneration Committees

01 Jun 2005

24 April 2015

·   China Enterprises Limited (Director)

·   China Jishan Holdings Limited (Lead Independent Director)

·   Falcon Energy Group Limited (Lead Independent Director)

·   IPC Corporation Limited (Independent Director)

·   Renewable Energy Asia Group Limited (Independent Director)

·   Tat Seng Packaging Group Ltd (Lead Independent Director)

 

·   Viking Offshore and Marine Limited (Independent Director)

·   Pacific Healthcare Holdings Ltd (Non-Independent Non-Executive Director)

·   8Telecom International Holdings Co., Ltd (Lead Independent Director)

 

Lee Po On Mark

·   Non-Executive and Independent Director

·   Member of Audit, Nominating and Remuneration Committees

10 Aug 2012

22 April 2016

·   Tat Seng Packaging Group Ltd (Non-Executive and Independent Director)

·   Television Broadcasts Limited (Executive Director and Group Chief Executive Officer)

-

Goi Kok Ming (Wei Guoming)

·   Non-Executive Director

10 Aug 2012

21 April 2017

·   GSH Corporation Limited (Executive Director)

-

Profiles of the Directors are found in the “Board of Directors” section of the Annual Report.

 

The composition of the Board is reviewed on annual basis by the NC to ensure that the Board has the appropriate mix of expertise and experience to enable Management to benefit from a diverse perspective of issues that are brought before the Board. The Board also regularly examines its size and, with a view to determining the impact of its number upon effectiveness, decides on what it considers an appropriate size for itself taking into account the scope and nature of the Company’s operations. The NC is of the view that the Board comprises Directors with diverse expertise and experience in business and management, accounting and financial and are capable of exercising objective judgment on the corporate affairs of the Company independently of Management are appropriate. Furthermore, no individual or small group of individuals dominate the Board’s decision making process. 

When a vacancy exists, the NC, in consultation with the Board, determines the selection criteria for the position based on the skills and knowledge deemed necessary for the Board to best carry out its responsibilities. Candidates may be suggested by Directors or Management or sourced from external sources. The NC will interview the candidates and assess them based on objective criteria approved by the Board such as integrity, independent mindedness, possession of the relevant skills required or skills needed to complement the existing Board members, ability to commit the time and effort to carry out his responsibilities, good decision making track record, relevant experience and financial literacy. The NC will make a recommendation to the Board on the appointment. The Board then appoints the most suitable candidate who must stand for re-election at the next Annual General Meeting (“AGM”) of shareholders. Particulars of interests of Directors who held office at the end of the financial year in shares and share options in the capital of the Company and in related corporations (other than wholly-owned subsidiaries) are set out in the Directors’ Statement. 

1.7     Independent Members of the Board of Directors

 Currently, the Board consists of six (6) Directors, three (3) of whom are Non-Executive and Independent Directors. There is a strong element of independence with Independent Directors make up at least half of the Board. The NC is of the opinion that given that there is an equal number of directors who are non-executive and independent of Management in terms of character and judgement, objectivity on issues deliberated is assured. Matters requiring the Board’s approval are discussed and deliberated with participation from each member of the Board and all major decisions are made collectively. The criteria for independence are based on the definition given in the Code, which considers an Independent Director as one who has no relationship (direct or indirect) with the Company, its related corporations, its ten percent (10%) shareholders or its officers that could interfere, or be reasonably perceived to interfere, with the exercise of the Director’s independent business judgement in the best interest of the Company. The independence of each Director is reviewed annually by the NC. Each Independent Director is required to complete a Director’s Independence Checklist annually to confirm his independence based on the guidelines as set out in the Code. 

The NC reviews annually, and as and when circumstances require, if a Director is independent. The independence of each Director is assessed based on their business relationships with the Group, relationships with members of Management, relationships with the Company’s substantial shareholder as well as the Director’s length of service. RHT Capital Pte. Ltd. an independent professional consultant (the “Consultant”) was engaged in 2016 to conduct a rigorous review of self-assessment as well as evaluation on the independence of Dr John Chen Seow Phun, Mr Lien Kait Long and Mr Lee Po On Mark (“Independent Evaluation”). A similar review was carried out internally in 2017 and the NC is satisfied that there has been no change to the circumstance since the findings and documents presented by the Consultant and unanimously agree and confirm that Dr John Chen Seow Phun (“Dr John Chen”), Mr Lien Kait Long (“Mr Lien”) and Mr Lee Poh On Mark (“Mr Mark Lee”) are independent. The factors that were taken into consideration in determining the independence of Dr John Chen, Mr Lien (who have served on the Board beyond nine (9) years) and Mr Mark Lee are set out under Principle 2 of the Code on page 21 of this report. The NC will review from time to time the need to have such rigorous review. Each member of the NC has abstained from voting on any resolution related to their re-election and/or re-designation.

Dr John Chen, Mr Lien and Mr Mark Lee sit on the board of Tat Seng Packaging Group Ltd (“Tat Seng”), a listed subsidiary from which the Company has received payment of less than S$50,000/- for the provision of consultancy services to Tat Seng in FY2017. The Board believes that their directorships in Tat Seng have not and will not interfere, or be reasonably perceived to interfere, with their ability to exercise independent judgement and act in the best interest of the Company. Further, having gained in-depth understanding of the business and operating environment of the Group, they provide much needed experience and knowledge of the industry. 

Non-Executive and Independent Directors of the Board exercise no management functions but have equal responsibility for the performance of the Group. The role of the Non-Executive and Independent Directors is particularly important in ensuring that the strategies proposed by the Management are constructively challenged, taking into account the long-term interests, not only of the shareholders but also of employees, customers, suppliers and the many communities in which the Group conducts business. The Independent Directors also help to evaluate proposals on strategy, various policies and review the performance of the Management and the Company in meeting agreed goals and objectives and monitor the reporting performance. For example, review and establish investments, succession planning and business continuity planning policies of the Company. 

The Non-Executive and Independent Directors meet periodically without the presence of the Management to discuss and facilitate a more effective check on the Management. The Executive Chairman will act on the feedback, take necessary steps to advise Management on the way forward to improve and implement recommendation submitted by the Non-Executive and Independent Directors. 

1.8    Chairman and Chief Executive Officer

Principle 3: There should be a clear division of responsibilities between the leadership of the Board and the executives responsible for managing the company’s business. No one individual should represent a considerable concentration of power.

 There is a distinct separation of responsibilities between the Chairman and the Chief Executive Officer (“CEO”), which ensures that there is an appropriate balance of power and authority, increased accountability and greater capacity of the Board for independent decision-making. Dr Allan Yap is the Executive Chairman of the Company. Presently, the Executive Director of the Company is subsuming the duties and responsibilities of the CEO to oversee, plan, direct, control the activities; and to develop and execute the Group’s strategies and business objectives. The Company will endeavor to source for a suitable candidate to fill the vacancy of the CEO. Since FY2016, the Company has appointed Mr Yeo See Liang Eugene as the Chief Operating Officer of the Company responsible for the overall daily operations, growth and development of the Company. As the Executive Chairman, Dr Allan Yap provides close oversight, guidance, advice and leadership to the Executive Director, Chief Operating Officer and Management. His responsibilities include: 

  • determining the Group’s strategies; 
  • with the assistance of the Company Secretary, scheduling of meetings to enable the Board to perform its duties while not interfering with the flow of the Group’s operations; 
  • with the assistance of the Company Secretary, approving the meeting agenda of the Board and ensures adequate time is available for discussion of all agenda items; 
  • with the assistance of the Company Secretary, ensuring that Board meetings are held when necessary; 
  • facilitating effective contributions from the Non-Executive Directors and encouraging constructive relationships within the Board and between the Board and the Management; 
  • exercising control over the quality, quantity and timeliness of information flow from the Management to the Board, promoting effective communication with the Company’s shareholders; 
  • ensuring, fostering constructive and effective communication with shareholders; and 
  • promoting high standards of corporate governance with full support of the Directors and the Management.

 

In view that the Executive Chairman and the Executive Director are immediate family members, the Board has appointed Mr Lien Kait Long as the Lead Independent Director of the Company since FY2016 to lead and coordinate the meetings and activities of the Independent Directors. Hence, Mr Lien will contribute to a balance of views from the Board. He is the principal liaison on Board issues between the Independent Directors and the Chairman of the Board. The Lead Independent Director is available to Shareholders if they have concerns and where contact through the normal channels of the Executive Chairman or the Executive Director has failed to resolve or such contact is inappropriate. 

The Independent Directors, led by the Lead Independent Director, meet amongst themselves without the presence of the other Directors when required, and the Lead Independent Director will provide feedback to the Executive Chairman after such meetings. The Executive Chairman will act on the feedback and deal with the issues, where appropriate. 

Members of the AC, NC and RC of the Company are all Independent and Non-Executive Directors. Major proposals and decisions made by the Board are subject to majority approval by the members of the Board and reviewed by the relevant Board Committee. 

The NC conducts annual Board performance appraisal including review of any changes to the Board members. On the other hand, remuneration packages are reviewed periodically by the RC. The Board believes that there are adequate safeguards to ensure an appropriate balance of power and authority within the spirit of good corporate governance. In addition, all Directors take decisions objectively and in the interests of the Company. 

1.9     Board Membership

Principle 4: There should be a formal and transparent process for the appointment and re-appointment of directors to the Board.

 In appointing Directors, the Board considers the range of skills and experience required in the light of: 

  • geographical spread and diversity of the Group’s businesses; 
  • the strategic direction and progress of the Group; 
  • the current composition of the Board; and 
  • the need for independence. 

The Board has delegated to the NC the functions of developing and maintaining a transparent and formal process for the appointment and re-appointment of Directors, making recommendations for Directors who are due for retirement by rotation to seek re-election at a general meeting and determining the independent status of each Director. 

The NC comprises three (3) members all of whom are Independent: 

Dr John Chen Seow Phun (Chairman, Non-Executive and Independent Director)

Mr Lien Kait Long (Member, Non-Executive and Lead Independent Director)

Mr Lee Po On Mark (Member, Non-Executive and Independent Director) 

The NC Chairman has no relationship with the Company, its related corporations, its ten percent (10%) shareholders or its officers that could interfere, or be reasonably perceived to interfere, with the exercise of his independent judgement in the best interest of the Company. 

The principal responsibilities of the NC are set out in the terms of reference and its key functions include: 

  • reviewing the Board structure, size and composition having regard to the scope and nature of the operations and the core competencies of the directors as a group; 
  • reviewing, assessing and recommending nominees or candidates for appointment or election to the Board and the various Board Committees; 
  • assessing the effectiveness and contributions of the Board as a whole and its Board Committees; 
  • assessing the contribution of each individual Director to the effectiveness of the Board, in particular when a Director has multiple listed company board representations and having regard to the Director’s contribution and performance; 
  • reviewing the independence of the Directors on an annual basis; 
  • reviewing the performance of the Directors and recommending on the re-election and re-appointments of the Board at the Annual General Meetings; 
  • conducting a rigorous review and determining whether an Independent Director who has served on the Board for a period exceeding nine (9) years from date of his first appointment, can still consider as independent; 
  • deciding a Director is able to and has been adequately carrying out his duties as Director of the Company based on internal guidelines such as attendance, contractibility and responsiveness; and 
  • reviewing the training and development programmes for the Board. 

The Company’s Constitution provide that, at each AGM, one-third of the Directors for the time being (or, if their number is not a multiple of three (3), the number nearest to but not greater than one-third) shall retire from office by rotation. A retiring Director is eligible for re-election by the shareholders of the Company at the AGM, and prior to nominating a retiring Director for re-election, the NC will evaluate the Director’s contribution and performance taking into consideration factors such as attendance, preparedness, participation, candour and any other factors as may be determined by the NC. 

Despite some of the Directors having multiple Board representations, the NC had reviewed the Directorship of the Directors and is satisfied that these Directors are able to and have adequately carried out their duties as Directors of the Company after taking into consideration the number of listed company Board representations and other principal commitments of these Directors. 

The NC and Board agreed that as a guide, the maximum number of the listed company board representation which any Independent Director may hold should not exceed ten (10), and both the NC and the Board will review and determine the maximum number of listed company Board representations as and when they deem appropriate. 

The NC is also responsible to determine the independence of Directors annually by taking into account the circumstances set forth in Guidelines 2.3 and 2.4 of the Code and any other salient factors. In considering the independence of an Independent Director who has served on the Board beyond nine (9) years, the NC has taken into consideration the following factors: 

  • There were changes to the composition of the Board and Board Committees in FY2016; 
  • The extensive knowledge and experience contributed by the Independent Directors to the Company; 
  • The attendance, preparedness, participation and contribution in the meetings of the Board and Board Committees; 
  • Provision of continuity and stability to the new Management at the Board level by facilitating smooth communication between old and new Management; 
  • Provision of reasonable checks and balances for the Management; 
  • The Independent Directors have devoted adequate attention and sufficient time to the affairs of the Group; and 
  • The Independent Directors provide overall guidance to the Management and acts as safeguard for the protection of Company’s assets and shareholders’ 

The Board and the NC had developed a process of evaluation of performance of the Board and Board Committees and individual Directors through establishment of quantifiable performance criteria. The evaluation performance checklist is drawn up based on the guidelines provided in the Code. 

Taking into account, among others, these Directors’ participation during and outside the formal Board and Board Committees meetings as well as other contributions, the Board has accepted the NC’s nomination of the retiring Directors, who have given their consent for re-election at the forthcoming AGM of the Company. The retiring Directors are Dr Tang Cheuk Chee and Mr Lien Kait Long who will retire pursuant to Regulation 87 of the Constitution of the Company. 

Currently, the Company does not appoint any alternate directors.

 

1.10     Board Performance

Principle 5: There should be a formal annual assessment of the effectiveness of the Board as a whole and its board committees and the contribution by each Director to the effectiveness of the Board.

We believe that Board performance is ultimately reflected in the performance of the Group and the Company. The Board should ensure compliance with applicable laws and Board members should act in good faith, with due diligence and care in the best interest of the Group and the shareholders. In addition to these fiduciary duties, the Board is charged with two (2) key responsibilities of setting strategic direction and ensuring that the Group is ably led. The Board, through the delegation of its authority to the NC, will review the Board’s composition annually to ensure that the Board has the appropriate mix of expertise and experience to lead the Group. 

Based on the recommendations of the NC, the Board has an annual performance evaluation process, carried out by the NC, to assess the effectiveness of the Board, Board Committees and each Director’s contributions. This annual assessment process consists principally of evaluation by and feedback from each Director. 

  • Assessment of the effectiveness of the Board as a whole - The NC uses an objective performance criteria to conduct Board assessments via the circulation of assessment evaluation forms to the Directors annually for their evaluation of various Board issues and processes such as the Board structure, conduct of Board meetings, review of the Company’s corporate strategy and planning, ensuring and reviewing the Company’s risk management and internal control processes, review of the Company’s performance, review of the Board’s compensation evaluations and communication with the Company’s The NC has reviewed and is satisfied with the performance and effectiveness of the Board as a whole for the financial year ended 31 December 2017. 
  • Assessment of the effectiveness of the Board Committees - The NC has implemented a process to be carried out by the NC via the circulation of assessment evaluation forms to assess the effectiveness of the respective Board Committees annually. The NC has recommended that the members of the respective Board Committees complete the evaluation form adopted by the NC. The results of the Board and Board Committees assessments are reviewed and discussed by the NC and, any recommendation and suggestion arising from the evaluation exercise are circulated to the Board for consideration of the appropriate measures to be taken. The NC has reviewed and is satisfied with the performance and effectiveness of the respective Board Committees for the financial year ended 31 December 2017. 
  • Assessment of the contribution of individual Directors to the effectiveness of the Board - The Individual Director’s assessments implemented by the NC are based on the Director’s self-assessment which is evaluated annually and informally on a continual basis by the N The criteria taken into consideration by the NC and the Chairman include contribution and performance based on factors such as attendance, preparedness and participation. The evaluations are discussed by the NC and any appropriate action taken. The NC has reviewed and is satisfied with the contribution by individual Directors to the effectiveness of the Board for the financial year ended 31 December 2017. 

The NC is of the view that such assessments by the Directors are useful and constructive and this collective process has provided an opportunity to obtain insightful feedback from each Director on suggestions to enhance the effectiveness of the Board and has helped Directors to be more focused on their duties, responsibilities and contributions to the effectiveness of the Board. The assessments also help the NC to determine whether the Directors with multiple Board representations are able to and have adequately discharged their duties as Directors of the Company. 

In general, the selected performance criteria will not change from year to year unless they are deemed necessary and the Board is able to justify the changes. In consultation with the NC, the Executive Chairman will act on the results of the Board performance and propose, where appropriate, new members to be appointed to the Board or propose changes to the Board. 

1.11     Access to Information

Principle 6: In order to fulfil their responsibilities, directors should be provided with complete, adequate and timely information prior to Board meetings and on an on-going basis so as to enable them to make informed decisions to discharge their duties and responsibilities.

As a general rule, the Management provides the Board with comprehensive, complete and adequate information in a timely manner for the Board to be effective in discharging its duties. The Board papers which include the background and/or explanatory information to matters to be brought before the Board for each meeting are normally prepared and circulated in advance to all Directors prior to the scheduled meetings.  This is to give Directors sufficient time to review and consider the matters to be discussed so that discussion can be more meaningful and productive. A presentation is made to the Directors at the Board meeting on budgets, forecasts and variances.  In respect of budgets, any material variance between the projections and actual results would be disclosed and explained during the meeting. Directors are also informed of any significant developments or events relating to the Group. Occasionally, external consultants engaged on specific projects may also be invited to brief the Board. The Board and Board Committees have unfettered access to information which the Company is in possession of or has access to, for the purpose of carrying out their responsibilities. However, sensitive matters may be table at the meeting itself or discussed without any papers being distributed. 

The Directors have separate and independent access to the advice and services of the Company Secretary and the key management personnel at all times. Further, there is no restriction of access to the key management personnel when the Directors have to carry out their duties. The Management ensures that any information or materials requested by the Directors to make informed decisions will be provided in a timely manner. 

The role of the Company Secretary is clearly defined and includes attendance of Board and Board Committees meetings and ensuring that the appropriate procedures are followed and that applicable rules and regulations are complied with as well as ensuring good information flow within the Board and its committees, between the Management and the Non-Executive Directors, facilitating orientation and assisting with professional development as required. The Company Secretary and the Management also facilitate the orientation of new Directors and professional development of Directors as required and also the channel of communications between the Company and the SGX-ST. The Company Secretary and/or his representatives attend all Board and Board committee meetings, and assists the Chairman of the Board and Board committees in ensuring that the relevant procedures are followed and reviewed such that the Board and Board committees function effectively. The appointment and removal of the Company Secretary is a matter approved by the Board. 

Each Director has the right, at the Company’s expense, to seek independent legal and other professional advice concerning any aspect of the Group’s operations or undertakings when necessary in order to discharge their duties and responsibilities. 

2          REMUNERATION MATTERS

2.1       Procedure for Developing Remuneration Policies

Principle 7:    There should be a formal and transparent procedure for developing policy on executive remuneration and for fixing the remuneration packages of individual Directors. No Director should be involved in deciding his own remuneration.

The Group’s remuneration policy is to provide compensation packages at market rates which reward successful performance and attract, retain and motivate Directors and key management personnel. 

The RC comprises three (3) members all of whom are Independent: 

Dr John Chen Seow Phun (Chairman, Non-Executive and Independent Director)

Mr Lien Kait Long (Member, Non-Executive and Lead Independent Director)

Mr Lee Po On Mark (Member, Non-Executive and Independent Director) 

The principal responsibilities of the RC are set out in the terms of reference and its key functions include: 

  • reviewing and recommending to the Board a general framework of remuneration for the Board and key management personnel (including the Executive Chairman, Executive Director and other persons having authority and responsibility for planning, directing and controlling activities of the Company and Group), and the specific remuneration packages and terms of employment (where applicable) for each Director as well as key management personnel. The RC’s recommendations should cover all aspects of remuneration including but not limited to directors’ fees, salaries, allowances, bonuses, options, share-based incentives and awards, and benefits-in-kind; 
  • functioning as the committee to administer Hanwell Executive’ Share Option Schemes or any long-term incentive schemes which may be set up from time to time; 
  • carrying out its duties in the manner that it deems expedient. Subject always to any regulations or restriction that may be imposed upon the RC by the Board from time to time; 
  • ensuring that all aspects of remuneration are covered, taking into consideration Principle 8 of the Code; 
  • the remuneration packages of employees related to Executive Directors and controlling shareholders of the Group are in line with the Group’s staff remuneration guidelines and are commensurate with their respective job scopes and levels of responsibility; and 
  • reviewing and recommending to the Board, the terms of renewal of service agreements of Executive Directors and/or key management personnel and ensuring the service agreements contain fair and reasonable termination clauses which are not overly generous in the event of termination. 

The RC members are knowledgeable in the field of executive compensation and also have access to independent expert advice from external consultants, where necessary. 

The RC reviews the fairness and reasonableness of the termination clauses of the service agreements of the Executive Directors and key management personnel. The RC will have access to independent expert advice from external consultants, where necessary. 

The RC is responsible for recommending to the Board a framework of remuneration for the Directors and key management personnel which is submitted to the whole Board for endorsement. The RC reviews recommendations on remuneration policies and packages for Directors and key management personnel in the interests of improved corporate performance. The RC’s review of remuneration packages takes into consideration pay and employment conditions within the industry and in comparable companies, the Company’s relative performance, the performance of the individual Directors and key management personnel, the long-term interests of the Group and ensures that the interests of the Directors align with that of the shareholders. The review covers all aspects of remuneration, including but not limited to Directors’ fees, salaries, allowances, bonuses, options, profit sharing (where applicable) and benefits-in-kind. 

The RC’s recommendations are submitted to the Board for endorsement. Each member of the Board shall abstain from voting on any resolution concerning or making any recommendation and/or participating in any deliberations of the RC in respect of his own remuneration. 

The RC, in considering the remuneration of all directors, has not sought external advice or appointed remuneration consultants.

2.2     Level and Mix of Remuneration

Principle 8: The level and structure of remuneration should be aligned with the long-term interest and risk policies of the company, and should be appropriate to attract, retain and motivate (a) the directors to provide good stewardship of the company, and (b) key management personnel to successfully manage the company. However, companies should avoid paying more than is necessary for this purpose.

The remuneration packages of the Executive Directors are determined based on the framework recommended by the RC. In doing so, the RC reviews the length of appointment period, the notice period for termination and the terms of the compensation package in the event of termination of any Executive Directors’ service agreements to ensure that the terms of such clauses are not onerous to the Company. The Executive Directors’ framework of remuneration includes a fixed element as well as a variable element in the form of a bonus and a profit sharing incentive which is linked to the Company’s performance. In setting remuneration packages, the Company takes into consideration the remuneration and employment conditions within the same industry and in comparable companies, as well as the Group’s relative performance and the performance of the individuals. 

The Company has an existing Hanwell Executives’ Share Option Scheme (“Scheme”) adopted on 8 July 2003 which has expired on 8 July 2013. However, the expiry of the Scheme will not affect any options granted and duly accepted but not exercised or vested, whether in whole or in part by the Directors or the employees of the Group. The share options previously granted will expire on 21 January 2019. The RC will explore a suitable incentive plan/scheme as and when it deems necessary. 

All Non-Executive and Independent Directors have no service agreements with the Company. They are paid Directors’ fees, with additional fees paid for serving as the Chairman or members of Board Committees as well as attendance at each Board and Board Committees meetings. These fees are recommended by the RC and submitted to the Board for endorsement. Directors’ fees are recommended by the Board for approval at the Company’s AGM. The remuneration of Non-Executive and Independent Directors should be appropriate to the level of contribution, taking into account factors such as effort and time spent, and responsibilities of the Directors. The Non-Executive and Independent Directors should not be over-compensated to the extent that their independence may be compromised and no Director is involved in deciding his own remuneration. 

In February 2018, the RC has reviewed and approved the renewal of service agreement of the Executive Director. Each of the Executive Chairman and Executive Director has a separate formal service agreement with the Company and they do not receive Directors’ fees. The remuneration packages of the Executive Chairman, Executive Director and the key management personnel comprise primarily a basic salary component and a variable component which is the bonuses and other benefits. The service agreements of the Executive Chairman and Executive Director are for a period of three (3) years. These service agreements are subject to review by the RC and provide for termination by either party giving to other an appropriate prior written notice. 

The RC is of the view that the variable component of the remuneration packages of the Executive Chairman, Executive Director and key management personnel, where applicable are moderate. At present, there is no necessity for the Company to institute contractual provisions in the service agreements or employment agreements to reclaim incentive components of remuneration paid in prior years from the Executive Chairman, Executive Director and key management personnel unless incidents occur in exceptional circumstances such as misstatement of financial statements, or of misconduct resulting in financial loss to the Company. 

2.3       Disclosure on Remuneration

Principle 9: Every company should provide clear disclosure of its remuneration policies, level and mix of remuneration, and the procedure for setting remuneration in the company’s Annual Report. It should provide disclosure in relation to its remuneration policies to enable investors to understand the link between remuneration paid to directors and key management personnel, and performance.

Summary compensation table of the Directors receiving remuneration from the Group for the financial year ended 31 December 2017 is set out below: 

 

Directors

 

Base Salary (%)

 

Bonus

(%)

 

Profit Sharing (%)

 

Directors’ Fee

(%)

 

Allowance(2)

(%)

 

Share Options (%)

 

TOTAL (S$)

 

Range S$1,500,001 to S$1,750,000

 

Allan Yap

49.78

6.47

42.63

-

1.12

-

1,639,000

 

Range S$750,001 to S$1,000,000

 

Tang Cheuk Chee

56.23

7.93

31.28

-

4.56

-

772,000

 

Range S$250,000 and below

 

John Chen Seow Phun

 

 

 

 

100(1)

 

 

156,500(3)

 

Lien Kait Long

 

 

 

 

100(1)

 

 

 

143,000(3)

 

Lee Po On Mark

 

 

 

 

100(1)

 

 

 

     128,500(3)

 

Goi Kok Ming

(Wei Guoming)

 

 

 

 

100

 

 

 

40,000

 

  • Directors’ Fee from the Company and Tat Seng Packaging Group Ltd, its listed subsidiary.
  • Employer’s CPF contribution and other compensation are included.
  • Directors’ Fee was approved on 21 April 2017 at the respective AGMs of:
  • the Company; and
  • Tat Seng Packaging Group Ltd.

Shareholders’ approval will be sought at the forthcoming AGM of the Company on 20 April 2018 for the payment of Directors’ Fee proposed (to be paid quarterly in arrears) for the financial year ending 31 December 2018 amounting to an aggregate of S$279,000. 

           

2.4     Remuneration of Employees Related to Directors

As at 31 December 2017, Mr Tang Chi Ming Danny (“Mr Tang”), who is the Group Vice President and Assistant to the Executive Director, is related to the Executive Chairman and Executive Director of the Company and his remuneration is reviewed by RC.  In this respect, the Executive Chairman and Executive Director shall abstain from all matters relating to the remuneration of Mr Tang.  The basis of determining the remuneration of Mr Tang is the same as the basis of determining the remuneration of other unrelated employees. 

Summary compensation table of the employee who is related to the Directors for the financial year ended 31 December 2017 is set out below: 

 

Key Management

Personnel

 

Base Salary (%)

 

Bonus

(%)

 

Profit Sharing (%)

 

Directors’ Fee (%)

 

Allowance(1)

(%)

 

Share Options (%)

 

TOTAL (%)

 

Range S$150,001 to S$200,000

 

Tang Chi Ming Danny(2)

 

 

79.25

 

9.90

 

   -

  

-

 

10.85

 

-

 

100

(1)    Employer’s CPF contribution and other compensation are included.

(2)    Mr Tang Chi Ming Danny (“Mr Tang”) is the brother-in-law of Dr Allan Yap, the Executive Chairman and the brother of Dr Tang Cheuk Chee, the Executive Director of the Company. Currently, Mr Tang is the Group Vice President and Assistant to the Dr Tang Cheuk Chee, the Executive Director. Mr Tang’s remuneration is reviewed exclusively by the RC. The Executive Chairman and Executive Director do not participate in the decision-making process of Mr Tang’s remuneration. From February 2018, Mr Tang is responsible for and in charge of Business Development of the Group.  

Save as disclosed above, there are no employees of the Group who are immediate family members of any Director or the CEO of the Company and whose remuneration exceed S$50,000 for the financial year ended 31 December 2017.

2.5   Remuneration of Top Five (5) Key Management Personnel

The Group has five (5) key management personnel (who are not Directors of the Company). A breakdown showing the level and mix remuneration of each of the key management personnel (who are not Directors of the Company) in the financial year ended 31 December 2017 is as follows:

 

 

Key Management

Personnel

 

Base Salary (%)

 

Bonus

(%)

 

Profit Sharing (%)

 

Directors’ Fee (%)

 

Allowance(2)

(%)

 

Share Options (%)

 

TOTAL (%)

 

Range S$250,001 to S$500,000

 

Yeo See Liang Eugene

  46.21(3)

  11.66

 27.64

 0.71(1)   

 13.78

 -

 100

 

Tong Ying Ling Denise

 

 

64.63(3)

 

5.39

 

20.15

 

 

        -

 

9.83

 

-

 

100

 

Range S$250,000 and below

 

Wong Yuen May Sandy

 

 

69.82

 

20.37

 

   -

  

-

 

9.81

        -

 

 100

 

Sim See Hiang Richard

 

 

68.91(3)

 

5.74

 

9.69

  

 -

 

15.66

       

-

 

100

 

Tang Chi Ming Danny(4)

 

 

79.25(3)

 

9.90

 

   -

  

-

 

10.85

 

-

 

100

 

The aggregate total remuneration paid to the top five (5) key management personnel and employees related to directors (who are not Directors or the CEO) for the financial year ended 31 December 2017 was S$1,325,000 (FY2016: S$1,465,000). 

(1)    Directors’ Fee from the subsidiary.

(2)    Employer’s CPF contribution and other compensation are included.

(3)    Including remuneration from subsidiary.

(4)    Mr Tang Chi Ming Danny (“Mr Tang”) is the brother-in-law of Dr Allan Yap, the Executive Chairman and the brother of Dr Tang Cheuk Chee, the Executive Director of the Company. Currently, Mr Tang is the Group Vice President and Assistant to the Dr Tang Cheuk Chee, the Executive Director. Mr Tang’s remuneration is reviewed exclusively by the RC. The Executive Chairman and Executive Director do not participate in the decision-making process of Mr Tang’s remuneration.  From February 2018, Mr Tang is responsible for and in charge of Business Development of the Group.  

The Company adopts a remuneration policy for staff comprising both a fixed and variable component. The fixed component is in the form of a base salary and allowances. The variable component is in the form of a variable bonus that is linked to the Company and each individual’s performance.

 

3        ACCOUNTABILITY AND AUDIT

Principle 10: The Board should present a balanced and understandable assessment of the company’s performance, position and prospects.

The Board is accountable to the shareholders and announces the Company’s quarterly and full year financial results that present a balanced and understandable assessment of the Company’s performance, position and prospects. 

The Company believes that prompt compliance with statutory reporting requirements is imperative to maintaining shareholders’ confidence and trust. In line with the requirements of the Listing Manual of SGX-ST, negative assurance statements are issued by the Board in respect of the interim financial statements. For the financial year under review, the Executive Chairman, Executive Director, Chief Operating Officer and Group Financial Controller have provided assurance to the Board on the integrity of the Group’s financial statements. 

Further, the Company has procured undertakings in the format set out in Appendix 7.7 of all its Directors and executive officers pursuant to Rule 720(1) of the Listing Manual of SGX-ST. 

Financial reports and other price-sensitive information are disseminated to shareholders through announcements via SGXNet, press release and/or posted on the Company’s website. The Company’s Annual Report is sent to all shareholders and accessible on the Company’s website. 

The Board is updated with significant events that have occurred or material to the Group during the year. The Management provides the Board with financial updates on the performance and position of the Group to keep Board members informed and updated on a monthly basis to enable the Board effectively discharge their duties. 

3.1     Risk Management and Internal Controls

Principle 11: The Board is responsible for the governance of risk. The Board should ensure that Management maintains a sound system of risk management and internal controls to safeguard shareholders’ interests and the company’s assets, and should determine the nature and extent of the significant risks which the Board is willing to take in achieving its strategic objectives.

The Board recognises that it is responsible for the overall risk management and internal control framework, but acknowledges that no cost-effective risk management and internal control system will preclude all errors and irregularities, as the system is designed to manage rather than eliminate the risk of failure to achieve business objectives, and can only provide reasonable and not absolute assurance against material misstatement or loss. 

The AC will: 

  • satisfy itself that adequate measures are in place to identify and mitigate any material business risks associated with the Group; 
  • ensure that a review of the effectiveness of the Group’s material internal controls, including financial, operating and compliance controls, information technology controls and risk management, is conducted at least annually. Such reviews can be carried out by internal auditors/external auditors; 
  • ensure that the internal control recommendations made by internal and external auditors have been implemented by the Management; and 
  • ensure the Board is in a position to comment on the adequacy of the risk management and internal controls of the Group. 

Risk assessment and evaluation has become an essential part of business planning and monitoring process. The Management having identified the risks to the achievement of the Group’s strategic objectives, each business unit is required to document the mitigating actions in respect of each significant risk. Risk awareness and ownership of risk treatments are also continuously fostered across the organisation.

Risk Management Committee (“RMC”)

The Group has in place a RMC chaired by Mr Lien Kait Long (Lead Independent Director) and a member comprising the Executive Director to assist the Board in its oversight of risk governance, risk management framework and policies of the Group. The RMC is regulated by its terms of reference. Together with the AC, the RMC helps to ensure that Management maintains a sound system of risk management and internal controls to safeguard the interests of shareholders and the assets of the Group. 

The RMC oversees the risk management framework and policies of the Group and report to the Board. Together with the Management, RMC has established various policies in place including but not limited to (i) Business Continuity Policy, (ii) Succession Planning Policy and (iii) Investment Policies in relation to the Financial Assets Investments and Strategic Investment. These policies are essential part of the business planning and monitoring process. 

The meetings of the RMC are attended not only by members but also Management and it serves as a forum to review and discuss material risks and exposures of the Group’s business and the strategy to mitigate risks in general. 

The risk management process that is in place covers, inter alia, financial, operational, compliance and information technology risks faced by the Group. The key risks identified are deliberated by Management, and reported to the RMC on an annual basis or such other period as may be determined by RMC. 

The Group has put in place a system of internal controls, which includes the Code of Conduct, documented policies and procedures, proper segregation of duties, approval procedures and authorities, as well as checks-and-balances built into the business processes. During the financial year 2017, the Group has engaged PricewaterhouseCoopers Risk Services Pte. Ltd. as internal auditors to assess annually the effectiveness of such a system in ensuring that the Company has adequate safeguards as well as an effective robust risk management framework (including policies, procedures and processes) embedded within the Company’s infrastructure that could support the Group’s operations, IT system and financial reporting structure. 

The AC, RMC and Board recognise the need for a robust and effective system of internal control. To ensure that the risk management and internal controls and risk management processes are adequate and effective, the AC has access to independent professional consultants. With the assistance of the RMC, internal and external auditors, AC has carried out assessments of the adequacy and effectiveness of key internal controls during the year. Any material non-compliance or weaknesses in internal controls or recommendations from the internal and external auditors to further improve the internal controls are regularly reported to AC. The AC will also follow up on the actions taken by the Management on the recommendations made by the internal and external auditors. 

For FY2017, the Board has received assurances from Dr Allan Yap (Executive Chairman), Dr Tang Cheuk Chee (Executive Director), Yeo See Liang Eugene (Chief Operating Officer) and Wong Yuen May Sandy (Group Financial Controller) that (a) the financial records have been properly maintained and the financial statements give a true and fair view of the Group’s operations and finances; and (b) the Group’s risk management and internal control systems are effective and sufficient. 

During the course of audit by the internal and external auditors, their recommendations, the various management controls and the reports from the internal and external auditors have been taken into consideration by the Company.  The Board, with the concurrence of the AC and RMC, is of the opinion that the Group’s system of internal controls and risk management procedures in addressing financial, operational, compliance and information technology controls and risk management systems maintained by the Group during the year are adequate and effective as at 31 December 2017. 

The Board will also continue to enhance and improve the existing internal control framework to identify and mitigate these risks from time to time. 

3.2     Audit Committee

Principle 12: The Board should establish an Audit Committee with written terms of reference which clearly set out its authority and duties.

The AC comprises three (3) members all of whom are Independent: 

Mr Lien Kait Long (Chairman, Non-Executive and Lead Independent Director)

Dr John Chen Seow Phun (Member, Non-Executive and Independent Director)

Mr Lee Po On Mark (Member, Non-Executive and Independent Director). 

The AC members were selected based on their expertise and prior experience in the area of financial Management and at least two (2) of the AC members have the relevant accounting or financial management expertise and/or experience. The Board is of the view that all members of the AC have the relevant accounting or related financial management expertise and experience to discharge their responsibilities as members of the AC. 

The AC’s main objective is to assist the Board in fulfilling its fiduciary responsibilities relating to internal controls, overseeing the external audit process, reviewing the financial information to be disclosed to the public and ensuring that arrangements are in place for the independent investigation and follow up of reports by staff of improprieties in financial reporting and other matters. To achieve this, the AC ensures that its members have the appropriate qualifications to provide independent, objective and effective oversight. 

The principal responsibilities of the AC are set out in the terms of reference and its key functions include: 

  • reviewing the audit plans of the external and internal auditors; 
  • reviewing the external and internal auditors’ reports; 
  • reviewing the co-operation given by the Company’s officers to the external and internal auditors; 
  • reviewing the adequacy of the internal audit function; 
  • evaluating the effectiveness of the Group’s system of internal controls, including financial, operational and compliance controls, information technology controls, and risk management, by reviewing written reports from internal and external auditors, and Management responses and actions to correct any deficiencies; 
  • reviewing the financial statements of the Company and the Group before their submission to the Board; 
  • reviewing non-audit services provided by the external auditors to satisfy itself that the nature and extent of such services will not prejudice the independence and objectivity of the external auditors; 
  • nominating external auditors for appointment or re-appointment and approve the remuneration and terms of engagement of the external auditors; 
  • reviewing the Group’s compliance with such functions and duties as may be required under the relevant statutes or the Listing Manual of SGX-ST, and by such other amendments made thereto from time to time; 
  • reviewing interested person transactions (as defined in Chapter 9 of the Listing Manual of the SGX- ST) to ensure that they are on normal commercial terms and arms’ length basis and not prejudicial to the interests of the Company or its shareholders in any way; and 
  • reviewing whistleblowing policy and arrangements. 

Apart from the duties listed above, the AC may commission and review the findings of internal investigations into matters where there is suspected fraud or irregularity, or failure of internal controls or infringement of any Singapore or other applicable law, rule or regulation which has or is likely to have material impact on the Company’s or Group’s operating results and/or financial position. 

The AC met four (4) times in the financial year ended 31 December 2017 and the Executive Chairman and Executive Director were invited to attend the meetings, as and when necessary. The AC also meets from time to time with the Group’s external and internal auditors and the Management to review accounting, auditing and financial reporting matters so as to provide the necessary checks and balances to ensure that an effective control environment is maintained in the Group. 

The AC continuously studies proposed changes in accounting policies, examines the internal audit functions and discusses the accounting implications of major transactions. Furthermore, the AC advises the Board regarding the adequacy of the Group’s internal controls and the contents and presentation of its interim and annual reports. Based on the information provided to the AC, nothing has come to the AC’s attention indicating that the system of internal controls and risk management is inadequate. 

The AC has explicit authority to investigate any matter within its terms of reference and has full access to and co-operation of Management and full discretion to invite any Director or executive officer to attend its meetings, and reasonable resources to enable it to discharge its functions properly. 

The AC meets annually with the internal auditors and the external auditors, without the presence of the Company’s Management to review the adequacy of audit arrangements, with particular emphasis on the scope and quality of their audits, and the independence and objectivity of the internal and external auditors. 

The AC also makes recommendations on the appointment, re-appointment of external auditors, and their remuneration. 

The AC had reviewed all the non-audit services carried out by the external auditors to the Group and confirmed that such services would not, in its opinion prejudice the independence and objectivity of the external auditors. The fees that are charged to the Group by the external auditors for audit and non-audit services were approximately S$575,750 and S$82,712 respectively for the financial year ended 31 December 2017. 

The AC has undertaken a review of the services, scope, independence and objectivity of the external auditors.  KPMG LLP, the external auditors of the Company, has confirmed that they are a Public Accounting Firm registered with Accounting & Corporate Regulatory Authority (“ACRA”) and provided a confirmation of their independence to the AC. Apart from this, the AC also received feedback from Management on their evaluation of the performance and effectiveness of the work of the external auditors. Having assessed the external auditors based on its own interactions with the external auditors, ,Management’s evaluation and on factors such as performance and quality of their audit partners and auditing team, their overall qualification and their independence status, the AC is satisfied that KPMG LLP is able to meet the audit requirements and statutory obligation of the Company. 

Accordingly, KPMG LLP is recommended for re-appointment as the Company’s external auditors at the forthcoming AGM. 

Furthermore, AC noted that in appointing the external auditors of the Company, its subsidiaries and significant associated companies, it is satisfied that the appointment of auditors did not compromise the standard and effectiveness of the audit of the Group. Therefore, the Company has complied with Rules 712 and 715 of the Listing Manual of SGX-ST. 

Changes to accounting standards and accounting issues which have a direct impact on the financial statements were reported to the AC, and highlighted by the external auditors in their meetings with the AC. 

No former partner or director of the Company’s existing auditing firm has acted as a member of the AC. 

With the introduction of the new and revised Auditor Reporting Standards applicable to the audit of financial statements for periods ending on or after 15 December 2016, the external auditors are required to include the Key Audit Matters (“KAM”) in the Company’s Annual Report. KAM typically include significant risk areas of the financial statements most susceptible to misstatements, involving key judgements and estimates, as well as major transactions that require extensive auditing efforts. 

In line with the recommendations by ACRA, Monetary Authority of Singapore and SGX-ST, the AC can help to improve transparency and enhance the quality of corporate reporting by providing a commentary on key financial reporting matters as follows: 

AC’s commentary on key financial reporting matters

The AC has discussed the KAM for FY2017 with Management and the external auditors. The AC concurs with the basis and conclusions included in the Independent Auditors’ Report with respect to the KAM. 

For more information on the KAM, please refer to page 52 to 54 of this Annual Report. 

3.3    Whistle-Blowing Policy

The Group has adopted a constructive whistle-blowing policy and guideline in order to detect and deter any fraud or deliberate error in the preparation, evaluation, review or audit of any financial statements, financial reports and records of the Company. 

Demonstrating its pledge to good corporate governance, the Group provides an avenue for employees to raise their concerns to report any possible improprieties in matters of financial reporting or other matters that they may encounter to the AC or any other committees established by the AC for such purpose without fear of reprisal. The establishment of the whistle-blowing structure also augments the Group’s ability to detect potential fraud, providing another level of comfort and assurance to investors. 

There were no reported incidents pertaining to whistle-blowing for FY2017. 

3.4    Internal Audit

Principle 13: The Company should establish an internal audit function that is adequately resourced and independent of the activities it audits.

The AC selects and approves the appointment of internal auditors. The Group has outsourced its internal audit function to PricewaterhouseCoopers Risk Services Pte. Ltd. (“Internal Auditors”) during the financial year ended 31 December 2017. The Internal Auditors serves to provide the Board and Management with an independent appraisal in terms of the reliability, adequacy and effectiveness of the internal controls established by Management. Its aim is to promote internal control in the Group and to monitor the performance and the effective application of internal audit procedures. Apart from this, Internal Auditors supports the AC and the Board in assessing key internal controls through a structured review programmed. The Internal Audit has unfettered access to the Board, the AC and Management, where necessary, and has the right to seek information and explanations. The AC is satisfied that, though the Internal Audit function has been outsourced, it is adequately and effectively managed by persons with the relevant qualifications and experience. 

The Internal Auditors reports functionally to the Chairman of the AC. On an annual basis, AC assesses the effectiveness of the Internal Audit function by examining: 

  • the scope of the internal auditors’ work; 
  • the quality of the reports; 
  • the relationship with the external auditors; and 
  • the independence of the areas reviewed. 

During the year, the Internal Audit’s summary of key audit findings, recommendations and Management’s related responses were discussed at the AC meetings. The AC ensures that procedures are in place to follow up on the recommendations by Internal Audit in a timely manner and to monitor any outstanding issues. 

The AC is satisfied that the function is adequately resourced and has appropriate standing within the Company and the Group. 

The Internal Auditors plans its internal audit schedules in consultation with, but independent of, the Management. The audit plan is submitted to the AC for approval prior to the commencement of the internal audit work. Internal Auditors has a direct and primary reporting line to the AC and assist the AC in overseeing and monitoring measures that have been implemented to detect and correct internal control weaknesses that have been identified. 

The AC has reviewed and approved the annual internal audit plan FY2017 and is satisfied that the Internal Audit has been adequately and effectively carried out in line with the International Standards for the Professional Practice of Internal Auditing set by the Institute of Internal Auditors. 

The AC reviews the activities of the Internal Audit on a regular basis, including overseeing and monitoring the implementation of the improvement required on internal control weakness identified. 

4          SHAREHOLDER RIGHTS AND RESPONSIBILITIES

SHAREHOLDER RIGHTS

Principle 14: Companies should treat all shareholders fairly and equitably, and should recognise, protect and facilitate the exercise of shareholders’ rights, and continually review and update such governance arrangements.

In line with the continuous disclosure obligations of the Company pursuant to the Listing Manual of SGX-ST, the Company is committed that all shareholders should be equally informed of all major developments of the Group which would be likely to materially affect the price or value of the Company’s shares. 

The Company does not practice selective disclosure as all material and price-sensitive information is released through SGXNet and the Company recognises that regular, effective, timely and fair communication with shareholders is essential to enable its shareholders to make informed decisions about the Company. 

The information is disseminated to shareholders of the Company on a timely basis through: 

  • annual reports that are prepared and sent to all shareholders. The Board ensures that the annual report includes all relevant information about the Company and the Group, including future developments and other disclosures required by the Singapore Companies Act and Singapore Financial Reporting Standards; 
  • quarterly announcements containing a summary of the financial information and affairs of the Group for that period; 
  • notices of and explanatory memoranda for AGMs and Extraordinary General Meetings; 
  • press releases on major developments of the Company and the Group; 
  • disclosure to the SGX-ST; and 

Principle 15: Companies should actively engage their shareholders and put in place an investor relation policy to promote regular, effective and fair communication with shareholders.

The Company recognises the important of actively engaging with stakeholders to promote effective and fair communication. 

Although the Company does not have an investor relations team, the Company’s Executive Chairman and Executive Director are responsible for the Company’s communication with shareholders. The Board acknowledges that not only does the Company has to fulfill its obligation to furnish timely and material information to shareholders but also to ensure that full and appropriate disclosure of such information is made for complying with statutory requirements as well as rules prescribed under the Listing Manual of SGX-ST. Any price sensitive information will be publicly released through on SGXNet. 

To keep all shareholders of the Company informed on various announcements of the Company, the shareholders can access the Company’s announcements and annual reports through the Company’s website at http://www.hanwell.com.sg.

Dividend Policy

The Company does not have a dividend policy at present. The frequency, form and amount of dividend to be declared and paid are dependent on the Group’s profit, cash flow, capital requirements for investment and growth, general business conditions and other factors as the Board deems appropriate. 

Principle 16: Companies should encourage greater shareholder participation at general meetings of shareholders, and allow shareholders the opportunity to communicate their views on various matters affecting the company.

All registered shareholders are invited to participate at shareholders’ meetings. 

Board members, senior Management and the Company Secretary are present at shareholders’ meeting to respond to questions from shareholders. The Company’s external auditors are also present to address shareholders’ queries about the conduct of audit and the preparation and content of the auditors’ report. 

The Company is not implementing absentia voting methods such as voting via mail, email or fax until security, integrity and other pertinent issues are satisfactorily resolved. 

The Company disseminates information on general meetings through notices in its annual reports or circulars (if required) to all its shareholders. These notices are also released via SGXNet, published in local newspapers and posted in the Company’s website ahead of the meetings to give ample time for shareholders to review the documents. The annual reports and circulars (if required) may also be viewed on the Company’s website. However, we are mindful that some shareholders may prefer to receive a printed copy and we have arranged for printing of the annual reports to all shareholders for the time being. The printing of annual reports will be under review in the future. 

The Company’s Constitution allows (a) each shareholder who is not a relevant intermediary (as defined in the Companies Act, Chapter 50) the right to appoint up to two proxies and (b) each shareholder who is a relevant intermediary to appoint more than two proxies to attend and vote on their behalf in shareholders’ meetings. At general meetings, the Company ensures that separate resolutions are proposed for substantially separate issues. 

The Company has conducted electronic poll voting at shareholders’ meeting for greater transparency in the voting process. The total number of votes cast for or against each resolution is tallied and displayed live on-screen to shareholders immediately after the vote has been cast and is also announced after the meetings via SGXNet. 

The notice of the AGM is sent to our shareholders, together with explanatory notes, appendices or a circular on items of special business, at least fourteen (14) days before the meeting and/or twenty-one (21) days before the meeting for special resolutions. The Chairmen of the AC, NC, RC and RMC are normally present and available to address questions relating to the work of their respective committees at general meetings. Furthermore, the external auditors are also invited to attend the AGM and are available to assist the Board in addressing any relevant queries by the shareholders relating to the conduct of the audit and the preparation and content of the auditor’s report. 

Every matter requiring shareholders’ approval is proposed as a separate resolution at the general meeting to address each distinct issue and all the resolutions to vote by poll. The Company has implemented the system of voting by poll at its upcoming AGM. Results of each resolution put to vote at the AGM will be announced with the detailed voting results, including the total number and/or percentage of votes cast for or against each resolution tabled in the AGM, were announced immediately at the AGMs and via SGXNet. 

The Company Secretary and/or his representatives prepares minutes of general meetings that include substantial and relevant comments or queries from shareholders relating to the agenda of the meeting, and responses from the Board and Management. These minutes are available to shareholders upon their request. 

5      DEALINGS IN SECURITIES

In compliance with Rule 1207(19) of the Listing Manual of the SGX-ST, the Company has adopted its own internal Code of Conduct to provide guidance to all officers of the Company and its subsidiaries with regard to dealings in the Company’s securities. 

The Directors and key management personnel of the Company and of the Group are advised, and periodically reminded, not to deal in the Company’s shares for the period commencing one (1) month before the Company’s announcement of financial results for the year and for the period of two (2) weeks before the announcement of the Company’s quarterly results during the year (“close window period”). The Company will notify Directors and employees of the commencement date for each close window period. 

The Company has also issued a policy on Insider Trading to all employees which sets out the principles of relevant laws relating to insider trading which are applicable at all times. 

Directors, key management personnel and connected persons are expected to observe insider-trading laws at all times even when dealing with securities within the permitted trading period and they are not to deal in the Company’s securities on short-term considerations.         

6      INTERESTED PERSON TRANSACTIONS

The Company is required to comply with the requisite rules under Chapter 9 of the Listing Manual of the SGX-ST for interested person transactions. To ensure compliance with Chapter 9, the AC meets quarterly to review if the Company will be entering into an interested person transaction in order to ensure that the interested person transactions are carried out on normal commercial terms and will not be prejudicial to the interests of the shareholders. There were no interested person transactions entered into by the Group during the year under review. 

When a potential conflict of interest arises, the director concerned does not participate in discussions and refrains from exercising any influence over other members of the Board.

7       MATERIAL CONTRACTS

There were no material contracts entered into by the Company or any of its subsidiaries involving the interests of any Director or controlling shareholders subsisting at the end of FY2017.