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The Company recognises the importance of upholding a high standard of corporate governance to ensure the long-term sustainability of the Group's business and performance and accountability to protect shareholders' interests.
The SGX-ST Listing Manual requires an issuer to describe its corporate governance practices with specific reference to the principles of the Code of Corporate Governance 2012 ("the Code") in its annual report, as well as disclose and explain any deviation from any guideline of the Code.
This statement outlines the policies adopted and practised by the Group during FY2016 with specific reference to the relevant provisions of the Code. The Company has generally adopted principles and practices of corporate governance in line with the recommendations of the Code, save as disclosed in relation to Principle 8 Guidelines 8.2 and 8.4, and Principle 14 Guideline 14.3.
The board of directors of the Company (the "Board") works with the senior management of the Group (the "Management") to achieve the business and corporate objectives of the Group and the Management remains accountable to the Board.
The Board's principal functions include:-
The Board has adopted a set of internal guidelines setting forth matters that require its approval. Matters which are specifically reserved to the Board for approval include but are not limited to the following:
The Board has adopted a policy where Directors who are interested in any matter being considered, recuse themselves from deliberations and abstain from voting in relation to any such resolution(s) relating to such matter.
Newly appointed Directors, if any, will be issued a letter of appointment or service contract setting out their duties and obligations when they are appointed.
Directors are briefed by Management or, if necessary, by the appropriate professional advisers on salient industry trends or updates and changes or updates to relevant legal or regulatory or accounting requirements, where applicable. Directors are also encouraged to attend relevant training programmes, seminars and workshops organized by various professional bodies and organisations to equip themselves to effectively discharge their duties and to enhance their skills and knowledge, either as part of their own professional practice or skills upgrading, or through the Company.
The Board is supported by three sub-committees, namely the Audit Committee, the Nominating Committee and the Remuneration Committee, each with specific terms of reference where their powers, functions and duties as well as procedures governing their operation and decision-making are described. The Board and sub-committees of the Board ("Committees") meet regularly throughout the year. Ad hoc meetings and/or discussions (including via email correspondences) are convened when circumstances require. Details relating to the number of Board and Committee meetings held during FY2016 and the attendance of the Directors are set out on page 41 of this Report.
The Company takes up directors' and officers' (D&O) liability insurance of an appropriate quantum to cover the Board in the discharge of their duties.
The Board exercises objective judgment independently from Management on corporate affairs of the Group and no individual or small group of individuals dominate the decisions of the Board.
As at the date of this Report, the Board comprises eight Directors, three of whom are independent nonexecutive Directors ("Independent Non-Executive Directors"), one of whom is a non-executive Director ("Non-Executive Director") and the remainder are executive Directors ("Executive Directors").
The Directors in office at the date of this Report are:
Apart from the foregoing, further information on each Director are set out on pages 12 to 14 of this Report. In addition, information on the shareholding held by each Director in the Company and its related corporations is found on page 59 of this Report.
The Nominating Committee determines on an annual basis whether or not a Director is independent. As and when circumstances require, the Nominating Committee will also assess and determine a Director's independence.
The guidelines for independence adopted by the Company is based on the Code. The Board considers an Independent Non-Executive Director as one who, inter alia, has no relationship with the Company, its related corporations, its 10% shareholders or its officers that could interfere, or be reasonably perceived to interfere, with the exercise of the Director's independent business judgment with a view to the best interests of the Company. In line with the guidance in the Code, the Board takes into account the existence of relationships or circumstances that are relevant in its determination as to whether a Director is independent, including the employment of a Director by the Company or any of its related corporations during the financial year in question or any of the previous three financial years; the employment of an immediate family member by the Company or any of its related corporations during the financial year in question or any of the past three financial years and whose remuneration is determined by the Remuneration Committee; the acceptance by a Director of any significant compensation from the Company or any of its related corporations for the provision of services during the financial year in question or the previous financial year, other than compensation for board service; and a Director being related to any organisation from which the Company or any of its subsidiaries received significant payments or material services during the financial year in question or the previous financial year; a Director who is a 10% shareholder of the Company or is an immediate family member of a 10% shareholder; and a Director who is or has been associated with a 10% shareholder of the Company in the financial year in question or the previous financial year.
The Nominating Committee carried out the review on the independence of each Independent Non-Executive Director in November 2016 based on the foregoing considerations, the respective Directors' self-declaration in the Director's Independence Checklist and their actual performance on the Board and Committees, and is satisfied that the Independent Non-Executive Directors are able to act with independent judgment.
Independence of Directors who have served more than nine years
The Board recognises that Independent Directors may over time develop significant insights into the Group's businesses and operations and can continue to provide significant and valuable contributions to the Board. Where there are such Directors, the Nominating Committee and the Board will review vigorously their continuing contributions and independence and may exercise its discretion to extend the tenure of these Directors where appropriate.
Three of our Independent Directors, namely Mr Low Beng Tin, Mr Jovenal Santiago and Ms Tan Siok Chin, having been first appointed to the Board on 9 November 2005, 28 March 2007 and 28 March 2007 respectively, have all served on the Board for more than nine years.
In view of this, apart from taking into consideration, inter alia, the guidelines for independence as provided for under the Code, the absence of potential conflicts of interest for the Independent Directors which may arise through, inter alia, a shareholding interest in the Company and/or business dealings directly or indirectly with the Group, as part of the process in the individual evaluation and assessment of Directors for FY2016, the other Directors have been asked to particularly review and assess the continued independence of each of the Independent Directors.
After due consideration and with the recommendation of the Nominating Committee, the Board continues to regard Mr Low Beng Tin, Mr Jovenal Santiago and Ms Tan Siok Chin as independent notwithstanding the length of tenure of their service as they have demonstrated independence in character and judgment, through, inter alia, their contributions to Board discussions and deliberations and ability and preparedness to exercise independent business judgment and/or decisions with the view to the best interests of the Company, without undue reliance, influence or consideration of the Group's interested parties such as the CEO, the other non-independent Directors, controlling shareholders and/or their associates.
Notwithstanding the foregoing, the Board will continue to review the composition of the Board and consider the appropriateness of Board renewal should the opportunity arise.
The Board is of the view that given the nature and scope of the Group's operations, the present Board size of eight members is appropriate to facilitate effective decision-making to meet the needs and demands of the Group's business. Given the diverse qualifications, experience, background, gender and profile of the Independent Non- Executive Directors, the Board collectively possesses core competencies in areas such as accounting or finance, legal and regulatory matters, risk management, business or management experience and industry knowledge. As such, the Board is of the opinion that the current Board members as a group provides an appropriate balance and diversity of the relevant skills, experience and expertise required for effective management of the Group.
Management regularly puts up proposals or reports for the Board's consideration and approval (where appropriate), for instance, proposals on the annual budget of the Group, proposals relating to specific proposed transactions or general business direction or strategy of the Group, as well as regular reports or updates on the Group's inventory management and risk management. Independent Non-Executive Directors, when presented with these proposals or reports for their consideration, evaluate the proposals or reports made by Management and these Directors also review the performance of Management in meeting agreed goals and objectives and monitor the reporting of performance and, where appropriate, provide guidance to Management on relevant aspects of the Group's business and assist in the development of proposals on the Group's business strategy. In addition, Independent Non-Executive Directors meet regularly without the presence of Management, in the meetings with the external auditors and internal auditors at least annually and on such other occasions as may be required.
The Independent Non-Executive Chairman and the Chief Executive Officer of the Company are separate individuals. As the most senior executive in the Company, the Chief Executive Officer, Mr Ong Chin Sum, assumes executive responsibilities for the Group's performance and the Group's business. As the Chairman, Mr Low Beng Tin leads the Board, ensures that the Directors receive accurate, timely and clear information, encourages constructive relations between the Board and Management, as well as between Board members, facilitates contributions from Board members, including Non-Executive Directors, ensures effective communication with shareholders and endeavours to promote a high standard of corporate governance.
The Chairman also ensures that Board meetings are held regularly and on an ad hoc basis where required and, when necessary, sets the Board meeting agendas in consultation with the Management and the Company Secretary. The Chairman presides over each Board meeting and ensures full discussion of agenda items. Management staff, as well as external experts who can provide additional insights into the matters to be discussed, are invited when necessary, to attend at the relevant time during the Board meetings.
The Company has established a Nominating Committee. The Nominating Committee comprises three Directors, two of which, including its Chairman, are Independent Non-Executive Directors. As at the date of this Report, the members of the Nominating Committee are:
Ms Tan Siok Chin / Chairman
Mr Hiroshi Ebihara
Mr Jovenal R. Santiago
The Nominating Committee is governed by written terms of reference under which it is responsible for:
The Company has established certain criteria to evaluate the performance of the Board, the Committees and the Directors. The performance criteria which has been adopted include the adequacy and timeliness of information provided to the Board and the Committees, adequacy of process for monitoring and reviewing Management's performance, timeliness and adequacy of disclosures and communications with shareholders and other stakeholders.
In addition, the Nominating Committee will have regard to whether a Director has adequate time and attention to devote to the Company, in the case of Directors with multiple board representations and other principal commitments. As a guide, Directors should not have more than six listed company board representations.
During FY2016, the following process was undertaken in relation to the evaluation of the performance of the Board, the Committees and the Directors:
Each of the Directors has completed a Board Performance Evaluation Checklist, giving their individual assessment and evaluation of the Board's ability and Committees' ability to meet the relevant criteria stated in the Board Performance Evaluation Checklist. In addition, each of the Directors has completed an Individual Directors' Evaluation Checklist, giving their assessment and review of other Directors' performance and, in the case of Independent Directors who have served more than 9 years, to consider their continued independence despite the tenure of their office.
The results of such assessment and evaluation were collated by the Company Secretary and reviewed and considered by the Nominating Committee, with the appropriate reports or recommendations (including on follow-up actions, if any) provided to the Board.
Each Independent Non-Executive Director of the Company has completed a checklist to confirm his/her independence. The checklist is drawn up based on the guidelines provided in the Code. The Nominating Committee has reviewed and was satisfied with the independence of the Independent Non-Executive Directors as mentioned in relation to Guidelines 2.3 and 2.4 above.
The Nominating Committee has reviewed each Director's outside directorships, which is in line with the Board's policy on the maximum number of listed company board representations which any Director may hold as mentioned above, and their principal commitments. Despite the multiple directorships of some Directors, the Nominating Committee was satisfied that such Directors spent adequate time on the Company's affairs and have carried out their responsibilities and duties as a director of the Company.
Currently, the Company does not have any alternate Director.
The Company has in place a process for selecting and appointing new Directors, and nominating existing Directors for re-appointment. Such process includes, in the case of a new Director to be appointed, inter alia, an evaluation of a candidate's qualifications and experience with due consideration being given to ensure that the Board consists of members who as a whole will collectively possess the relevant core competencies in areas such as accounting or finance, legal and regulatory matters, risk management, business or management experience and industry knowledge. The search for new Directors, if any, will, if considered necessary, be made through executive search companies, contacts and recommendations and shortlisted persons will be evaluated by the Nominating Committee before being recommended to the Board for consideration.
The Company's Constitution ("Constitution") require at least one-third of the Directors, or if their number is not a multiple of three, the number nearest to but not less than one-third of the Directors, to retire from office by rotation once every three years and shall then be eligible for re-election at the meeting at which he retires.
Existing Directors are put up for retirement and re-election in accordance with the foregoing requirement, and the Nominating Committee will recommend the nomination of a Director for re-election after considering, inter alia, the Director's competencies, commitment, contribution and performance, as well as the need for progressive renewal of the Board.
The Nominating Committee considers the need for Board renewal as and when necessary or appropriate, as part of succession planning. At the Management level, action plans and training programmes are in place to build-up the next level of management team to support senior management.
Each member of the Nominating Committee will abstain from voting on any resolution (if applicable) in respect of the assessment of his/her performance or re-nomination as Director.
The Nominating Committee, working in conjunction with the Management, keeps a constant lookout for appropriate training and professional development programmes from time to time offered by professional bodies such as the Singapore Institute of Directors and external training institutes and service providers, and recommends them to Board members for attendance or participation. Individual Directors may from time to time attend separate training and professional development programmes, in connection with their own profession or work or other directorships which they may hold.
The Nominating Committee has, with the approval of the Board, established performance criteria and evaluation procedures for evaluation and assessment of the effectiveness and performance of the Board, the Committees and the Directors, as elaborated under the section "Principle 4: Board Membership" above.
During FY2016, a peer to peer review was, for the first time, adopted by the Board in addition to evaluating the performance of the Board and the Committees as a whole. The performance of all Directors were individually reviewed by their fellow Directors, taking into consideration inter alia, the Director's competencies, commitment, contributions and performance at Board and Committee meetings and discussions, including attendance, preparedness, participation and candour.
The record of the Directors' attendance at meetings of the Board and Committees in the financial year under review is set out below:
|Number of Meetings@|
|Low Beng Tin||4||3||4||3||1||-||2||1*|
|Ong Chin Sum||4||4||4||4*||1||1*||2||1*|
|Ong Tong Yang||4||4||4||4*||1||1*||2||1*|
|Ong Tong Hai||4||4||4||4*||1||1*||2||1*|
|Jovenal R. Santiago||4||4||4||4||1||1||2||2|
|Tan Siok Chin||4||4||4||4||1||1||2||2|
* The Directors are not members of the respective Committees but have attended the meetings by invitation.
@ Regular Board and Committee meetings comprise four Board meetings, four Audit Committee meetings, one Nominating Committee meeting and one Remuneration Committee meeting. There were two Remuneration Committee meetings held in FY2016, which comprises one regular Remuneration Committee meeting and one ad-hoc Remuneration Committee meeting.
Board papers for Board meetings were sent to Directors in advance in order for Directors to be adequately prepared for meetings including all relevant documents, materials, background or explanatory information relating to matters to be brought before the Board and copies of disclosure documents, budgets and forecasts. In addition to the annual budget submitted to the Board for approval, the Board was provided with regular reports and updates on specific matters such as inventory management, risk management and any material variance between the budgeted and actual results. The Board is informed and its approval sought on the matters which require its approval under the internal guidelines set by the Board, including material events and transactions. Requests for other information by the Board were also dealt with promptly. The Board, the Committees and the Directors have separate and independent access to Management of the Company and are entitled to request from Management such additional information or clarification as required.
The Company Secretary attends all Board and Committee meetings and is responsible for ensuring that Board procedures are followed and recording and the minutes of all Board and Committees meetings are recorded and circulated to the Board and the Committees and also advises the Board on all governance matters.
Under the direction of the Chairman, the Company Secretary facilitates the information flow within the Board and its Committees and between Management and Non-Executive Directors. The Board has independent access to the Company Secretary. The appointment and the removal of the Company Secretary are decisions taken by the Board as a whole.
Professional advisors may be invited to advise the Board, or any of its members, if the Board or any individual member thereof needs independent professional advice.
The Company has established a Remuneration Committee which comprises three Directors, all of whom are non-executive and the Chairman is an Independent Non-Executive Director. As at the date of this Report, the Remuneration Committee members are:
Ms Tan Siok Chin / Chairman
Mr Jovenal R. Santiago
Mr Hiroshi Ebihara
The Remuneration Committee is governed by written terms of reference under which it is responsible for:
The Company had engaged the assistance of independent remuneration consultants, Mercer (Singapore) Pte Ltd in February 2016, to carry out a review of the remuneration package of the Executive Directors in conjunction with the renewal of their service contracts. Such benchmarking exercise will be carried out once every three years or in line with the general tenure of their service contracts.
The Remuneration Committee sets the level and structure of remuneration for the Directors and key management personnel. All aspects of remuneration, including but not limited to Directors' fees, salaries, allowances, bonuses, options and benefits-in-kind (including any changes thereto) are subject to the review and approval of the Remuneration Committee for recommendation to the Board. If required, the Remuneration Committee will seek expert professional advice.
Following the remunderation benchmarking exercise conducted by Mercer (Singapore) Pte Ltd in February 2016, the Remuneration Committee is of the view that level and structure of remuneration for the Directors and key management personnel are aligned with the long-term interests and risk management policies of the Company.
The Remuneration Committee's recommendations are submitted for approval by the Board. Each member of the Remuneration Committee will abstain from reviewing and approving his own remuneration and the remuneration packages of persons related to him.
Remuneration Structure of Executive Directors
The remuneration for the Executive Directors is based on the terms of their respective service contracts entered into with the Company. Based on the terms of their service contracts which were applicable for FY2016, the majority of the Executive Directors are entitled to (i) a basic monthly salary; (ii) a share of an annual incentive bonus pool ("Incentive Bonus"), which is based on a certain percentage of the consolidated net profit before tax of the Group (on a tiered basis and tied to the profitability of the Group, as further elaborated below); and (iii) a discretionary bonus, to be recommended by the Remuneration Committee and approved by the Board, while a remaining Executive Director's remuneration is based on a basic monthly salary and a fixed annual bonus.
The aggregate Incentive Bonus is calculated and based on the consolidated net profit before tax, extraordinary items, exceptional items and minority interests and excluding any expenses to be incurred for the Incentive Bonus ("NPBT") of the Group (as shown in the audited consolidated accounts of the Company and its subsidiary or subsidiaries and/or associated companies from time to time) as follows:-
|NPBT Attained||Incentive Bonus (amount as determined below to be apportioned amongst the Company’s Executive Directors entitled to the Incentive Bonus)|
|(i) For the first S$5 million||8% of the NPBT|
|(ii) More than S$5 million but up to and including S$7 million||8% of S$5 million plus 10% of the NPBT exceeding S$5 million|
|(iii) More than S$7 million||8% of S$5 million plus 10% of S$2 million plus 12% of the NPBT exceeding S$7 million|
The discretionary bonus payable to the eligible Executive Directors is generally awarded based on a certain number of months of their basic monthly salary, and will only be given if recommended by the Remuneration Committee and approved by the Board. It is intended as an additional remuneration tool, to recognise the efforts and contributions and performance of the Executive Directors, whether as a whole and/or on an individual basis, in particular where such efforts and contributions and/or performance may not be directly or immediately reflected in or attributable to the financial performance of the Company and the Group.
Remuneration Structure of Key Management Personnel
The remuneration of the key management personnel generally comprises primarily a basic salary component and a variable component which is the bonuses, based on the performance of the Company and the Group as a whole and individual performance.
The Company currently does not have any long-term incentive scheme(s) or contractual provisions to reclaim incentive components of remuneration from Executive Directors and key management personnel, as the Company has generally been profitable since its Listing, save for FY2015 and FY2016, but will review the feasibility of having such arrangements when appropriate.
Remuneration Structure of Non-Executive Directors
The Independent Non-Executive Directors receive directors' fees of varying amounts taking into account factors such as their respective roles and responsibilities, effort and time spent for serving on the Board and Committees. The Board may, if it considers it necessary, consult experts on the remuneration of Non-Executive Directors. Currently, the Non-Executive Directors' fees are determined based on the following fee structure:
|Fee Structure for Non-Executive Directors||$|
|Other committee chairmanship||10,000|
|Other committee membership||5,000|
|Attendance fee 1||1,500|
1 The attendance fee is applicable for attendance at Board and Board Committee meetings other than the regular Board and Board Committee meetings comprising four Board meetings, four Audit Committee meetings, one Nominating Committee and one Remuneration Committee meeting annually.
The payment of Directors' fees is subject to the approval of shareholders, and the Board will recommend the remuneration of the Non-Executive Directors for approval by shareholders at the Annual General Meeting ("AGM"). The Executive Directors do not receive directors' fees.
Details on the remuneration of Directors and key management personnel for the year under review are reported below. During the year, there was no termination, retirement or post-employment benefits granted to any Director or key management personnel.
Details of the remuneration paid to the Directors for the financial year ended 30 September 2016 are as follows.
|Remuneration of Directors||Directors' Fees||Salary 2||Bonus 1,2||Allowances and Others||Total Compensation|
|Mr Ong Chin Sum||-||74.4||6.2||19.4||613,306|
|Mr Ong Tong Yang||-||72.0||6.0||22.0||399,810|
|Mr Ong Tong Hai||-||72.0||6.0||22.0||399,810|
|Mr Seiji Usui||-||87.0||7.4||5.6||427,660|
|Mr Hiroshi Ebihara||100||-||-||-||55,000|
|Independent Non-Executive/Independent Directors|
|Mr Low Beng Tin||100||-||-||-||83,000|
|Mr Jovenal R. Santiago||100||-||-||-||83,000|
|Ms Tan Siok Chin||100||-||-||-||83,000|
For the financial year ended 30 September 2016, the top five key management personnel (who are not also Directors) (in terms of remuneration paid) of the Group are Mr Loh Ngiap Boon, Mr Lim Kim Seng, Ms Laura Ng Ying Shu, Ms Tan Bee Kheng and Ms Chong Siew Kuen.
A breakdown of the remuneration of the top five key management personnel of the Group (in terms of remuneration paid) for the financial year ended 30 September 2016 is set out below:
|Remuneration of Top Five Key Management Personnel||Salary1||Bonus1||Allowances and Others||Total Compensation|
|Mr Loh Ngiap Boon||86.2||7.0||6.8||100|
|Mr Lim Kim Seng||69.2||5.6||25.2||100|
|Ms Chong Siew Kuen||69.0||5.6||25.4||100|
|Ms Tan Bee Kheng||82.9||6.8||10.3||100|
|Between S$250,000 and S$499,999|
|Ms Laura Ng Ying Shu2||87.9||7.0||5.1||100|
The annual aggregate remuneration paid to the top five key management personnel of the Group (who are not directors or the CEO) for FY2016 is S$898,995. As all of the top five key management personnel (in terms of remuneration paid) of the Group, other than Ms Laura Ng Ying Shu, drew remuneration of below S$250,000 and Ms Laura Ng Ying Shu drew remuneration between S$250,000 and S$499,000, and given the disclosure of the annual aggregate remuneration of the Company as aforesaid, the Company has accordingly not disclosed the specific remuneration of each of the top five key management personnel for confidentiality reasons.
Mr Ong Chin Sum is the father of Mr Ong Tong Yang and Mr Ong Tong Hai, and they are Executive Directors of the Company. Ms Teoh Bee Choo, the spouse of Mr Ong Chin Sum and the mother of Mr Ong Tong Yang and Mr Ong Tong Hai, is an employee of the Company whose remuneration was more than S$150,000 but below S$250,000 for FY2016. Further details of Ms Teoh's remuneration are set out below:
||Allowances and Others
Executive Directors are entitled to participate in the Cosmosteel Employee Share Option Scheme, the Company's employees' share option scheme which was approved by Shareholders in general meeting held on 28 March 2007 (the "ESOS").
The objective of the ESOS is to motivate and retain employees to optimize their performance standards and efficiency to maintain a high level of contribution to the Group. It was therefore intended that the Executive Directors and their immediate family members be excluded from participating in the ESOS. Where the options granted under the ESOS have exercise prices that are set at a price equal to the average of the last dealt prices for the Shares on the Official List of the SGX-ST for the five consecutive market days immediately preceding the relevant date of grant of the relevant option, such options may be exercised after the first anniversary of the date of grant of that option. Alternatively, where options granted under the ESOS have exercise prices that are set at a discount to the market price (subject to a maximum discount of 20%), these options may only be exercised after the second anniversary from the date of grant of the option. In determining whether to give a discount and the quantum of the discount, the Remuneration Committee shall be at liberty to take into consideration factors including the performance of the Company, the Group, the performance of the participant concerned, the contribution of the participant to the success and development of the Group and the prevailing market conditions as a means of aligning the grant of options under the ESOS to the financial performance of the Company and the Group and the individual's performance. More details on the ESOS may be found on pages 60 to 61 of the Report. During FY2016, no option to take up unissued shares of the Company or any corporation in the Group was granted to the Executive Directors.
Save for the ESOS, the Company does not have any employee share schemes.
As at the date hereof, there are no options granted by the Company which are not in line with the relevant rules of the SGX-ST as set out in Chapter 8 of the SGX-ST Listing Manual.
In presenting the annual financial statements and announcements of financial results to shareholders, it is the aim of the Board to provide shareholders with a balanced and understandable assessment of the Company's and Group's performance, position and prospects. Management provides the Board with regular updates and as and when the Board may require from time to time to enable the Board to make a balanced and informed assessment of the Group's performance, position and prospects. The Board has taken adequate steps to ensure compliance with legislative and regulatory requirements.
The Company carries out its risk management by working within the framework of a series of identified risks or risk factors, as set out in a risk register ("Risk Register"). The Risk Register of the Group sets out (i) the key risk factors that are faced by the Company and the Group in its business and operations and categorised according to compliance, financial and operational risks (including information technology); (ii) ranking of the risk factors in terms of their relative importance or implications for the Company and the Group should such risks materialise; and (iii) the risk mitigating practices (where applicable) which may be in place to address such risks.
A risk management team comprising members from Management (the "Risk Management Team") is responsible for the effective implementation of risk management strategy, policies and processes to facilitate the achievement of business plans and goals within the risk tolerance set by the Board. The Risk Management Team provides quarterly updates to the Audit Committee and the Board where there may be areas of concern arising in relation to any of the identified key risks factors, if any, which the Audit Committee and the Board should take note of. All members of the Risk Management Team are required to submit an Annual Statement of Compliance, confirming the Group's compliance with the policies and procedures in place.
The responsibility of overseeing the Company's risk management framework and policy is undertaken by the Audit Committee with the assistance of the internal auditors.
The Company has requested its internal auditors to take such risk factors into consideration in drawing up the annual internal audit plan, so that there is a system and process review on the identified key risk areas. In the event that the Company intends to enter into any new markets, business venture or business sector, the Company may, where necessary or appropriate, appoint and commission the appropriate professional parties to review or advise on, inter alia, any additional areas of risk factors to consider in connection with such forays.
The Chief Executive Officer and Chief Financial Officer have at the financial year-end provided a letter of assurance to the Audit Committee confirming, inter alia, that:-
Based on the internal controls established and maintained by the Group, work performed by external auditors and internal auditors and reviews performed by Management, the various Board Committees and the Board, the Audit Committee and the Board are of the opinion, pursuant to Rule 1207(10) of the SGX-ST Listing Manual, that the Group's internal controls, addressing financial, operational, compliance and information technology risks, were adequate as at 30 September 2016.
The Board notes that the system of internal controls and risk management established by the Company provides reasonable, but not absolute, assurance that the Company will not be adversely affected by any event that could be reasonably foreseen as it strives to achieve its business objectives. In this regard, the Board also notes that no system of internal controls and risk management can provide absolute assurance against the occurrence of material errors, poor judgment in decision making, human error, losses, fraud or other irregularities.
The Audit Committee comprises three Directors, all of whom, including its Chairman, are Independent Non-Executive directors. As at the date of this Report, the Audit Committee members are:
Mr Jovenal R. Santiago / Chairman
Ms Tan Siok Chin
Mr Low Beng Tin
The Audit Committee members bring with them professional expertise and experience in the accounting, business and legal domains and the Board is satisfied that the Audit Committee members are appropriately qualified to discharge their responsibilities.
The Audit Committee is governed by written terms of reference under which is responsible for:
The duties and responsibilities of the Audit Committee in relation to interested person transactions shall be as follows:-
The Audit Committee has explicit authority to investigate any matter within its terms of reference and has full access to and co-operation from Management and has full discretion to invite any director or executive officer to attend its meetings to enable it to discharge its functions properly. The Audit Committee meets with the external and internal auditors of the Company, in each case, without the presence of Management, at least once a year.
In the event that a member of the Audit Committee is interested in any matter being considered by the Audit Committee, he will abstain from reviewing or voting on that particular resolution.
The Group's existing external auditors, Messrs RSM Chio Lim LLP, have been the auditors of the Group since 30 September 2006 and Mr Peter Jacob is the current audit partner in charge, effective from the financial year ended 30 September 2013.
The aggregate amount of fees paid to the external auditors of the Company for FY2016 is S$213,000, of which S$147,000 is paid for audit services and S$66,000 is paid for non-audit services. The Audit Committee, having reviewed the range and value of non-audit services performed by the external auditors, is satisfied that the nature and extent of such services will not prejudice the independence and objectivity of the external auditors.
The Audit Committee has also reviewed and confirmed that Messrs RSM Chio Lim LLP is a suitable audit firm to meet the Company's audit obligations, having regards to the adequacy of resources and experience of the firm and the assigned audit engagement partner, other audit engagements, size and nature of the Group, number and experience of supervisory and professional staff assigned to the audit. Notwithstanding the aforesaid, as the external auditors are currently providing a range of non-audit services to the Group, the Audit Committee is keeping the nature and extent of such non-audit services under review, seeking to maintain objectivity.
The Audit Committee is satisfied that Rules 712 and 715 of the SGX-ST Listing Manual are complied with and has recommended to the Board that, Messrs RSM Chio Lim LLP be nominated for re-appointment as external auditors at the forthcoming AGM.
The Company has put in place a whistle blowing policy and has implemented relevant procedures, as approved by the Audit Committee and adopted by the Board, for the purposes of handling complaints, concerns or issues relating to activities or affairs relating to the business, customers, suppliers, partners or associates, activities or affairs of the Group or conduct of any officer, Management or employee of the Group. Staff of the Group has access to the Company Secretary and may, in confidence, raise concerns about possible improprieties in any such corporate matters by sending an email or a letter in writing to the Company Secretary, who would re-direct and/ or send such email or letter in writing to the Audit Committee (in the event such concerns relates to any of the Directors or the chief financial officer of the Company) or the whistle blowing committee (for all other concerns), as the case may be. During FY2016, there were no complaints, concerns or issues received.
The Audit Committee is kept abreast by Management, the external and internal auditors on changes and updates to accounting standards, and other issues which could have a direct impact on the financial statements of the Group, if any. During the financial year in question, the Audit Committee has, inter alia, undertaken reviews of the financial statements, the results of the internal and external audit of the Company, and the Group, with particular focus on significant areas such as inventory policy and inventory management controls.
None of the members of the Audit Committee is a former partner or director of the Company's external or internal auditors.
The Audit Committee's responsibilities over the Group's internal control and risk management are complemented by the work of the internal auditors.
The Company has outsourced its internal audit function to Nexia TS Public Accounting Corporation ("IA"). The IA is a corporate member of the Institute of Internal Auditors Singapore, and staffed with professionals with relevant qualifications and experience. The IA's primary line of reporting would be to the Chairman of the Audit Committee, although the IA would also report administratively to the CEO.
The IA performs the internal audit functions in accordance with standards set by internationally and locally recognised professional bodies including the International Standards for the Professional Practice of Internal Auditing issued by the Institute of Internal Auditors. The IA carries out its internal audit functions based on a predetermined cyclical work plan, where different aspects of internal controls are rotated for review every three years, and also take into consideration key risk factors identified under the Risk Register. The Internal Auditors have submitted a report dated 27 April 2016 to the Audit Committee, reporting, inter alia, that (i) having performed the system review procedures of the Company's internal controls and (ii) save for certain matters highlighted to the Company which have been duly noted by Management, based on their review of the adequacy and effectiveness of the Company's system of internal controls and measures, they did not identify any significant deficiencies or non-compliance of controls or measures implemented by Management under such procedures and systems.
The Audit Committee reviews the adequacy of the internal audit function to ensure that the internal audits are conducted effectively and that Management provides the necessary cooperation to enable the Internal Auditor to perform its function. The Audit Committee also reviews the internal audit reports as well as the remedial measures recommended by the Internal Auditor and adopted by Management to addresses any issues or inadequacies identified.
Shareholders are informed of general meetings through reports/circulars sent to all shareholders in addition to notices published in the newspapers, the Company's announcements via SGXNET and the Company's website. In conjunction with the notices of general meetings included in the circulars sent to all shareholders, shareholders are also provided with the proxy forms which include the instructions on voting. In addition, shareholders are also provided with instructions on voting during the general meetings, where voting is conducted by poll.
The Company will be reviewing its Articles to remove the limit on the number of proxies which may be appointed by nominee companies in conjunction with the corresponding proposed amendments to the Companies Act (Cap. 50) in relation thereto.
The Company communicates with Shareholders and the investment community through timely release of announcements to the SGX-ST via SGXNET, including the Company's financial results announcements which are published through the SGXNET on a quarterly basis. Financial results announcements and annual reports are announced or issued within the mandatory period prescribed. All shareholders of the Company with an address in Singapore will be able to receive a copy of the Company's annual report and notices of general meetings.
At general meetings, shareholders are given the opportunity to air their views and ask Directors or Management questions regarding the Company and the Group.
The Board and Management are present at these meetings to address any questions that shareholders may have. External auditors are also present to assist the Board in addressing queries by shareholders.
Minutes of general meetings, which include substantial comments or queries from shareholders and responses from the Board are available to shareholders upon written request.
Management also holds briefings with analysts to coincide with the release of the Group's financial results announcements, and related presentation slides and press releases are also made available on SGXNET.
Separate resolutions on each distinct issue are tabled at general meetings. All resolutions at general meetings of the Company are put to vote by poll so as to better reflect shareholders' shareholding interest and ensure greater transparency. The results of the poll voting on each resolution tabled at general meetings are announced after the said meetings via SGXNET.
The Company has formalised its dividend policy which aims to provide its shareholders with a target annual dividend payout of at least 10% of the net profit attributable to shareholders of the Company in any financial year, whether as interim and/or final dividends, provided always that such dividend payout for any financial year is subject to and conditional upon (a) the net profit attributable to shareholders of the Company for such financial year being equal to at least S$3 million, and (b) if the net profit referred to in (a) is less than S$3 million, the declaration and payment of dividends being determined at the sole discretion of the Board.
The total dividend recommended, declared or paid in any financial year shall not exceed 50% of the total net profit attributable to shareholders, unless otherwise approved by the Board.
In proposing any dividend payout and/or determining the form, frequency and/or the amount of such dividend payout, the Board will also take into account, inter alia, the Group's financial position, retained earnings, results of operation and cash flow, the ability of the Company's subsidiaries to make dividend payments to the Company, the Group's expected working capital requirements, the Group's expected capital expenditure and future expansion and investment plans and other funding requirements, general economic conditions and other internal or external factors that may have an impact on the business or financial performance and position of the Group.
The Board endeavours to maintain a balance between meeting shareholders' expectations and prudent capital management with a sustainable dividend policy. The Board will continually review the dividend policy and reserves the right in its sole and absolute discretion to update, amend, modify and/or cancel the dividend policy at any time.
The Board is recommending a final dividend payout of S$0.005 per share, to be approved by shareholders in the forthcoming AGM, despite the loss in FY2016. This is in view of the Company's healthy financial position with adequate cashflow for the sound operation of its business and to show the Company's appreciation for its shareholders' long term support.
In line with the rules of the SGX-ST Listing Manual, the Company has adopted a policy prohibiting its Directors and officers from dealing in the Company's shares whilst they are in possession of unpublished material price sensitive information and during the period commencing two weeks before the announcement of the Company's financial statements for the first and third quarters of its financial year and one month before the announcement for each of its full year and half year financial statements.
The Company also discourages trading on short-term considerations.
|Use of Proceeds||Estimated percentage allocation of net proceeds as set out in the Circular||Allocation of net proceeds||Proceeds utilised as at the date of this report||Balance of the proceeds as at the date of this report|
|Financing the construction of a new building and acquisition of machinery and equipment at 90 Second Lok Yang Road||24.0%||3,400||-||3,400|
|Acquisition of machinery and equipment at 36 Tuas Crescent||8.0%||1,100||318||782|
|Repayment of short term loans||35.0%||5,000||3,500||1,500|
|General working capital purposes||33.0%||4,800||4,800||-|
There were no material contracts of the Company or any of its subsidiaries involving the interests of the Chief Executive Officer or any Director or controlling shareholder, either still subsisting at the end of the financial year or if not then subsisting, entered into since the end of the previous financial year.
The Audit Committee reviews, on a quarterly basis, all interested person transactions, including transactions falling under the terms of the Company's general mandate (the "IPT Mandate") authorizing the Group to enter into certain interested person transactions with Hanwa Co., Ltd and its associates (the "Hanwa Group"), to ensure that the prevailing rules and regulations of the SGX-ST (in particular, Chapter 9 of the Listing Manual) are complied with. Interested person transactions which are not within the ambit of the IPT Mandate will be subject to Rules 905 and 906 of the Listing Manual.
The IPT Mandate covers the following categories of interested person transactions:
(collectively, the "Mandated Interested Person Transactions")
An interested person being a director, chief executive officer or controlling shareholder of the listed company or an associate of any such director, chief executive officer or controlling shareholder ("Interested Person").
Guidelines and Review Procedures for the Mandated Interested Person Transactions
The considerations in Paragraphs (a)(i) to (a)(iv) above will allow for variations in prices and terms of the comparative offers or sales so long as the volume of trade, credit-worthiness of the buyer, differences in service, reliability or such other relevant factors justify such variations and so long as such comparative offer or sale incorporates modifications that account for volatility of the market for the goods and services in question.
The above approval thresholds are adopted after taking into account, inter alia, the nature, volume, recurrent frequency and transaction size as well as the Group's day-to-day operations, administration and businesses. The approval thresholds act as an additional safeguard to supplement the review procedures to be implemented for the Mandated Interested Person Transactions.
Disclosure according to Rule 907 of the SGX-ST Listing Manual in respect of interested person transactions for FY2016 are stated in the following table:
|Name of Interested Person||Aggregate value of all interested person transactions during the financial year under review (excluding transactions less than S$100,000 and transactions conducted under shareholder's mandate pursuant to Rule 920 of the SGX-ST Listing Manual)||Aggregate value of all interested person transactions during the financial year conducted under shareholder's mandate pursuant to Rule 920 of the SGX-ST Listing Manual (excluding transactions less than S$100,000)|
|Hanwa Co., Ltd||-||S$10,827,233|