Extracted from Annual Report 2017
The Board of Directors (the "Board" or the "Directors") of Yongmao Holdings Limited (the "Company") recognises the importance of sound corporate governance in protecting the interest of its shareholders as well as strengthening investors' confidence in its management and financial reporting.
The Company, together with its subsidiaries (the "Group"), continue to be committed to setting in place corporate governance practices to provide the structure through which the objectives of protection of shareholders' interests and enhancement of long term shareholders' value are met.
This report outlines the Company's corporate governance practices with specific reference made to the Code of Corporate Governance 2012 (the "Code"), undertaken with respect to each of the principles and guidelines; and the extent of its compliance with the Code.
The Board's Conduct of its 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.
The Company is headed by an effective Board comprising seven Directors of whom three are Executive Directors and four are Non-Executive with three Independent Directors. Their combined wealth and diversity of skills, experience, gender and knowledge of the Company enables them to contribute effectively to the strategic growth and governance of the Group.
The Board's primary role is to protect and enhance long-term shareholders' value and returns for the shareholders. It strives to achieve this by providing the leadership and guidance to the Management to develop and drive business directions and goals.
The principal functions of the Board, apart from its statutory responsibilities, include:-
All Directors objectively discharge their duties and responsibilities at all times as fi duciaries in the interests of the Company.
The Board provides shareholders with a balanced and clear assessment of the Group's performance, position and prospects on a quarterly basis.
Our Directors recognise the importance of good corporate governance and in offering high standards of accountability to our shareholders. In order to provide an independent oversight and discharge its responsibilities more efficiently and to ensure that specific issues are subject to considerations and review before the Board makes its decisions, the Board has delegated certain functions to various Board Committees. The Board Committees consist of Audit Committee ("AC"), Nominating Committee ("NC") and Remuneration Committee ("RC"). These Board Committees have been constituted with clearly defined terms of reference. These terms of reference are reviewed on a regular basis to ensure their continued relevance. The Chairman of the respective Committee will report to the Board on the outcome of the Committee meetings and their recommendations on the specific agendas mandated to the Committee by the Board.
Matters which are specifically reserved to the Board for decision includes material acquisitions and disposals of assets, corporate or financial restructuring, shareholders' matters, share issuances, dividends, and other returns to shareholders.
The Board is free to request for further clarification and information from the Management on all matters within their purview. The schedule of all the Board Committees' meetings for the financial year is usually given to all the Directors well in advance. The Board conducts at least four meetings on a quarterly basis to review the Group's financial results and where necessary, additional Board meetings are held to address significant issues or transactions.
The Company's Constitution (the "Constitution") provide for Directors to conduct meetings by teleconferencing or by means of similar communication equipment whereby all Directors participating in the meeting are able to hear each other clearly. When a physical meeting is not possible, timely communication with members of the Board can be achieved through electronic means. The Board and Board Committees also approve transactions through circular resolutions, which are circulated to the Board and Board Committees together with all the information relating to the proposed transactions.
As at the date of this report, the number of meetings held by the Board and Board Committees and attendance of Directors at the meetings for the financial year ended 31 March 2017 ("FY2017") is set out as follows:-
* By invitation
1 Alternate Director to Sun Zhao Lin
The Company has adopted a set of Approving Authority and Limit, setting out the level of authorisation required for specified transactions, including those that require Board's approval.
No new Director was appointed by the Company during FY2017. All new Directors will undergo comprehensive and tailored orientation programme to provide them with extensive background information about the Group's business structure and core values, its strategic direction and corporate governance practices as well as industry-specific knowledge. The aim of the orientation program is to give Directors a better understanding of the Company's business and allow them to assimilate into their new roles. Any new Director who has no prior experience as a Director of a listed company will have to undergo intensive training and briefing on the roles and responsibilities of a Director of a listed company. Where appropriate, the Company will provide training for fi rst-time Directors in areas such as accounting, legal and industry-specifi c knowledge.
New Directors are also informed about matters such as the Code of Dealing in the Company's shares. Changes to regulations and accounting standards are monitored closely by the Management. To keep pace with such regulatory changes, the Company provides opportunities for on-going education on Board processes and best practices as well as updates on changes in legislation and financial reporting standards, regulations and guidelines from the Singapore Exchange Securities Trading Limited ("SGX-ST") that affect the Company and/or the Directors in discharging their duties.
Directors also have the opportunity to visit the Group's operational facilities, including overseas offi ces, and meet with the Management to facilitate a better understanding of the Group's business operations.
The Board as a whole is updated regularly on risk management, corporate governance, insider trading and key changes in the relevant laws and regulations, changing commercial risks and business conditions to enable them to make well-informed decisions to properly discharge their duties as Board or Board Committee members.
New releases issued by the SGX-ST and Accounting and Corporate Regulatory Authority ("ACRA"), which are relevant to the Directors are circulated to the Board. The Company Secretary also informs the Directors of upcoming conferences 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 financial reporting standards annually.
The Company has an on-going budget for all Directors to attend appropriate courses, conferences and seminars for them to stay abreast of relevant business developments and outlook. These include programmes conducted by the Singapore Institute of Directors or other training institutions.
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.
As of the date of this report, the Board comprises the following Directors:-
|Mr Sun Zhao Lin||Executive Director and Chairman|
|Ms Tian Ruo Nan||Executive Director and Chief Executive Officer|
|Mr Sun Tian||Executive Director and Group General Manager|
|(Alternate Director to Mr Sun Zhao Lin)|
|Mr Ng San Tiong||Non-Executive Director and Deputy Chairman|
|Mr Chua Kee Lock||Lead Independent Director|
|Mr Ho Chew Thim||Independent Director|
|Dr Steve Lai Mun Fook||Independent Director|
The Board's structure, size and composition are reviewed annually by the NC with a view to determine the impact of its number upon effectiveness. The NC is of the view that the Board is of the appropriate size and with the right mix of skills and diverse expertise and experience given the nature and scope of the Group's operations. The Executive Directors have extensive experience in the crane manufacturing industry while the Non-Executive Directors are well established and competent in their respective professions. This balance is important in ensuring that the strategies proposed by the Management are fully discussed and examined, taking into account the long-term interests of the Company.
All Directors are required to disclose any relationships or appointment which would impair their independence to the Board timely. The independence of each Director will be reviewed on an annual basis by the NC in accordance with the Code's definition of what element constitutes an Independent Director. The NC is of the view that the three Non-Executive Directors (who represent at least one-third of the Board) are independent, i.e, they have no relationship with the Company, its related companies, its shareholders with shareholdings of 10% or more in the voting shares of the Company, or their officers that could interfere, or be reasonably perceived to interfere, with the exercise of the Director's independent business judgement with a view to the best interests of the Group, and they are able to exercise objective judgement on corporate affairs independently from the Management and the shareholders with shareholdings of 10% or more in the voting shares of the Company.
Although the Independent Directors of the Company do not make up half of the Board, there is a strong and independent element. Matters requiring the Board's approval are discussed and deliberated with participation from each member of the Board. The decisions are based on collective decision without any individual or small group of individuals infl uencing or dominating the decision making process.
The NC is in the process of assessing and making transition changes to the board composition so that the number of Independent Directors will make up at least half of the Board before the FY2018.
In line with Guideline 2.4 of the Code, the NC with the assistance of the Management and the Company Secretary had conducted a rigorous review on the independence of the Non-Executive and Independent Directors, Mr Ho Chew Thim, Mr Chua Kee Lock and Dr Steve Lai Mun Fook who have served the Board beyond 9 years. The relevant factors that were taken into consideration in determining the independence of the Non-Executive and Independent Directors are set out under Principle 4 in page 25.
The Non-Executive and Independent Directors actively participated during the Board and Board Committee meetings to discuss matters such as the Group's financial performance, corporate governance initiatives, board processes, succession planning as well as leadership development and the remuneration of the Executive Directors. Where necessary, the Company would coordinate at least one informal meeting sessions for the Non-Executive and Independent Directors to meet without the presence of the Management before the quarterly meetings.
To-date, none of the Independent Directors of the Company has been appointed as Director of the Company's principal subsidiary, which is based in Singapore.
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 balance of power and authority in the Company, such that no one individual represents a concentration of power. The roles and responsibilities between the Chairman and the Chief Executive Officer ("CEO") are held by separate individuals to ensure an appropriate distribution of power.
Mr Sun Zhao Lin, one of the founders of the Group, is our Executive Chairman of the Company. He is responsible for the formulation and execution of overall business strategies and policies and future directions as well as the overall Management of the Group.
As the Chairman, he is also responsible for representing the Board to shareholders, ensuring that Board meetings are held when necessary and Board members are provided with adequate and timely information. He approves the Board meeting agendas in consultation with the CEO, Chief Financial Officer ("CFO") and Company Secretary, who act as facilitators at the Board meetings, ensures the agenda items are adequately debated at Board meetings and maintains regular dialogues with the CEO on operational matters. In the absence of the Chairman, the Deputy Chairman, Mr Ng San Tiong will chair the Board meetings.
Ms Tian Ruo Nan, spouse of Mr Sun Zhao Lin, is the CEO of the Company. She is also one of the founders of the Group and is responsible for and oversees the day-to-day operations of the Group.
In view that the Chairman and the CEO are immediate family members and part of the Executive Management team, Mr Chua Kee Lock has been appointed as our Lead Independent Director of the Company pursuant to the recommendation in Guideline 3.3 of the Code. Where a situation arises that may involve confl ict of interests between the roles of the Chairman and the CEO, it is the Lead Independent Director's responsibility, together with the other Independent Directors to ensure that shareholders' rights are protected. As the Lead Independent Director of the Company, Mr Chua Kee Lock is available to shareholders where they have concerns, which contact through the normal channels of the Chairman, the CEO or the CFO has failed to resolve or for which such contact is inappropriate.
All the Independent Directors including the Lead Independent Director, meet at least once annually without the presence of the other Executive and Non-Independent Directors to discuss matters of signifi cance, which are thereon reported to the Chairman accordingly.
Hence, the Board believes that notwithstanding the close family ties between the Chairman and the CEO, the current composition of the Board is able to make precise objective and prudent judgement on the Group's corporate affairs. The Board is of the view that there are suffi cient safeguards and checks to ensure that the process of decision making by the Board is independent and are based on collective decisions without any individual exercising any considerable concentration of power or influence.
Principle 4: There should be a formal and transparent process for the appointment and re-appointment of Directors to the Board.
Currently, the NC comprises three members all of whom, including the Chairman, are Independent Directors.
As at the date of this report, the members of the NC are:-
|Dr Steve Lai Mun Fook||Chairman|
|Mr Chua Kee Lock||Member|
|Mr Ho Chew Thim||Member|
In accordance with the definition in the Code, the Chairman of the NC has no relationship with the Company, its related corporations, its shareholders with shareholdings of 10% or more in the voting shares of the Company or its officer.
The main role of the NC is to make the process of Board appointments and re-appointments of Directors more transparent and to assess the effectiveness of the Board as a whole and the contribution of individual Director to the effectiveness of the Board.
The NC is regulated by its terms of reference and its key functions include:-
The NC meets at least once a year. Regulation 117 of the Company's Constitution requires the number nearest to one-third of the Directors to retire by rotation and subject themselves to re-election by the shareholders at the Annual General Meeting ("AGM") of the Company. In addition, each Director of the Company shall retire from office once every three years. Directors who retire are eligible to stand for re-election. Regulation 121 of the Company's Constitution provides that additional Directors appointed during the year shall only hold office until the next AGM and shall then be eligible for re-election at that AGM.
The dates of initial appointment and last re-election of each Director are set out below:-
The NC has also adopted internal guidelines addressing the commitments that are faced when Directors serve on multiple boards. For the current financial year, the NC has reviewed the multiple Directorships disclosed by each Director of the Company and their other principal commitments. The NC is satisfied that each Director has allocated sufficient time and attention to the affairs of the Group to adequately discharge their duties as Director of the Company. Currently, the Board has not determined the maximum number of listed board representations which any Director may hold. The NC and the Board will review the requirement to determine maximum number of listed board representations as and when it deems fit.
The Group has in place, policies and procedures for the appointment of new Directors, including the description on the search and nomination procedures. Each member of the NC shall abstain from voting on any resolutions and making recommendations and/or participating in any deliberations of the NC in respect of his/her re-nomination as a Director.
The NC does not have a practice of appointing alternate Directors to Independent Directors except for limited periods in exceptional cases such as when a Director has a medical emergency. There were no alternate Directors appointed in this financial year except that Mr Sun Tian, the Executive Director and Group General Manager, is the alternate Director to Mr Sun Zhao Lin, Executive Director and Chairman.
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 Mr Sun Zhao Lin, Mr Sun Tian and Mr Ng San Tiong who will retire pursuant to Regulation 117 of the Company's Constitution.
In view of the Independent Directors, Mr Ho Chew Thim, Mr Chua Kee Lock and Dr Steve Lai Mun Fook who have served the Board of the Company for more than 9 years from the date of their fi rst appointment and the recommendation of Guideline 2.4 of the Code, the NC has conducted a rigorous review on their independence together with the Management and the Company Secretary.
Each of the NC members who are subject for the rigorous review is required to complete a detail assessment and evaluation form before the rigorous review is conducted with the Management and the Company Secretary. Throughout the process of review, each of the NC members abstained from participating in the discussion and voting on any resolutions related to his independence.
The NC with the concurrence of the Board has assessed the independence of Mr Ho Chew Thim, Mr Chua Kee Lock and Dr Steve Lai Mun Fook individually, and is satisfi ed that there are no relationships which would deem them not to be independent.
In considering whether an Independent Director who has served on the Board for more than nine (9) years is still independent, the Board has taken into consideration the following factors:-
In this regard, the NC with the concurrence of the Board, has reviewed the suitability of Mr Ho Chew Thim, Mr Chua Kee Lock and Dr Steve Lai Mun Fook being the Independent Directors having served on the Board for beyond nine (9) years and considered that Mr Ho Chew Thim, Mr Chua Kee Lock and Dr Steve Lai Mun Fook remain independent.
Principle 5: There should be a formal assessment of the effectiveness of the Board as a whole and its board committees and the contribution by each Directors to the effectiveness of the Board.
The NC reviews the criteria for evaluating the Board's performance and recommends to the Board a set of objective performance criteria focusing on enhancing long-term shareholders' value. Based on the recommendations of the NC, the Board has established a formal process for assessment of the effectiveness of the Board as a whole and its Board Committees. The NC had decided unanimously, that the Directors will not be evaluated individually but factors taken into consideration for the re-nomination are the extent of their attendance, participation and contributions in the proceeding of the meetings.
The NC undertakes a process to assess the effectiveness of the Board as a whole and its Board Committees for FY2017. The appraisal parameters focused on evaluation of factors such as the size and composition of the Board and its Committees, the Board's access to information, Board's processes and accountability, Board's performance in relation to discharging its principal responsibilities, communication with the Management and the standards of conduct of the Directors. The performance measurements ensure that the mix of skills and experience of the Directors continue to meet the needs of the Group.
During the financial year, the NC met to discuss and assess the evaluation of the Board's performance as a whole and its Board Committees and the results of the assessment has been communicated to and accepted by the Board. The current performance criteria will not change from year to year unless they are deemed necessary and that the Board is able to justify the changes.
The NC, in considering the re-nomination of any Director, had considered factors including their performance in the Board as a whole, its Board Committees and individual performance including his attendance, preparedness, participation and contributions in the proceedings of the meetings.
Access to Information
Principle 6: In order to fulfi ll 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.
To assist the Board in fulfi lling its responsibility, the Management strives to provide the Board with a management report containing comprehensive, complete and adequate information in a timely manner prior to the Board meetings for the Board to be effective in discharge of 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 suffi cient time to review and consider the matters to be discussed so that discussion can be more meaningful and productive. 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.
The Board has a separate and independent access to the key management personnel, including the Company Secretary at all times. The Company Secretary and/or his representatives attends all Board and Board committees meetings, and assists the Chairman in ensuring that proper procedures and all other rules and regulations applicable to the Company are complied with. The decision to appoint or remove the Company Secretary is made by the Board as a whole.
The Management keeps the Board informed of the Company's operations and performance through quarterly meetings, regular updates and reports as well as through separate meetings and discussions. The Management will present reports and updates on the Group's performance, financial position, prospects and other relevant information for review at each Board meeting. The Board is entitled to request from Management any additional information needed to make informed decision. In addition, all other relevant information on material events and transactions are circulated by electronic mail and facsimile to the Directors for review and approval. The key management staff may be invited to attend the Board and the AC meetings to answer queries and to provide insights into its Group's operations.
The Board takes independent professional advices as and when necessary to enable it or the Independent Directors to discharge its or their responsibilities effectively. Each Director has the right to seek independent legal and other professional advice, at the Company's expenses, to assist them in performing their duties.
Procedures for Developing Remuneration Policies
Principle 7: There should be a formal and transparent procedure for developing policy on executive remuneration and for fi xing the remuneration packages of individual Directors. No Director should be involved in deciding his/her own remuneration.
The RC currently comprises of three members, all of whom including the Chairman are Non-Executive Independent Directors.
During FY2017, the members of the RC are:-
|Mr Chua Kee Lock||Chairman|
|Dr Steve Lai Mun Fook||Member|
|Mr Ho Chew Thim||Member|
The RC is regulated by its terms of reference and its key functions include:-
The recommendations of the RC would be submitted to the Board for endorsement. The RC has full authority to engage any external professional to advise on matters relating to remunerations as and when the need arises. No individual Director shall be involved in deciding his/her own remuneration.
Each member of the RC shall abstain from making any recommendations on or voting on any resolutions in respect of his/her own remuneration package.
The Directors' fees to be paid to the Directors are subject to shareholders' approval at the forthcoming AGM.
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 annual reviews of the compensation are carried out by the RC to ensure that the remuneration of the Executive Directorsand senior management commensurate with their performance and that of the Company, giving due regard to the financial and commercial health and business needs of the Group. The performance of the CEO (together with other key management personnel) is reviewed periodically by the RC and the Board.
The Non-Executive and Independent Directors receive Directors' fees in accordance with their level of contributions, taking into account factors such as efforts and time spent, as well as responsibilities and obligations of the Directors. Directors' fees are recommended by the Board, subject for approval by the shareholders at the AGM of the Company.
The Executive Directors do not receive Directors' fees. The remuneration of the Executive Directors and the key management personnel comprise primarily a basic salary component and a variable component which is inclusive of bonuses and other benefits.
The service agreements entered into with the three Executive Directors are subject to review by the RC, namely, (1) Mr Sun Zhao Lin is for a period of two years with effect from 1 January 2017 and will continue for a further term of two years unless otherwise terminated by either party giving not less than six months' notice in writing to the other; (2) Ms Tian Ruo Nan is for a period of two years with effect from 1 January 2017 and will continue for a further term of two years unless otherwise terminated by either party giving not less than six months' notice in writing to the other; and (3) Mr Sun Tian is for a period of two years with effect from 12 October 2016 and will continue for a further term of two years unless otherwise terminated by either party giving not less than three months' notice in writing to the other.
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 terms of the contracts of services of Executive Directors and the key management personnel, including termination clauses, are in line with market practices and are not overly generous.
The Company does not use contractual provisions to allow the Company to reclaim incentive components of remuneration from Executive Directors and key management personnel in exceptional circumstances of misstatement of financial results or misconduct resulting in financial loss to the Company. The Executive Directors owe a fiduciary duty to the Company. The Company should be able to avail itself to remedies against the Executive Directors in the event of such breach of fiduciary duties.
The Company currently has no employee share option schemes or other long-term incentive scheme in place. 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.
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.
A breakdown of the remuneration of the Directors and key management personnel (who are not Directors), in percentage terms showing the level and mix, for FY2017 falling within the bands is set out below:-
The aggregate total remuneration paid to the top 6 key management personnel (who are not Directors or the CEO) for FY2017 is approximately S$594,000.
The Board believes that it is for the benefi t of the Company and the Group that the remuneration of each individual Director and CEO of the Company is kept confidential due to its sensitive nature and the long-term performance of the Group, especially in a highly competitive industry. Similarly, the remuneration of the top key management personnel was shown in bands of S$250,000 due to the Company's concern over poaching of these executives by competitors.
Shareholders' approval will be sought at the forthcoming AGM of the Company on 24 July 2017, for the payment of Directors' fees proposed for FY2017 amounting to an aggregate of S$222,000.
No termination, retirement and post-employment, share option, share-based incentive and awards or other long-term incentive has been granted to the Directors or key management personnel during FY2017.
Save as disclosed, there is no employee of the Group who is an immediate family member of any Directors or the CEO or a controlling shareholder and whose remuneration has exceeded S$50,000 during FY2017. ("Immediate family member" means the spouse, child, adopted child, step-child, brother, sister and parent.)
ACCOUNTABILITY AND AUDIT
Principle 10: The Board should present a balanced and understandable assessment of the company's performance, position and prospects.
The Board understands its accountability to shareholders on the Group's position, performance and progress. The Board will update shareholders on the operations and financial position of the Company through quarterly and full year financial results announcements as well as timely announcements of other matters as prescribed by the relevant rules and regulations to provide the shareholders with a balanced and understandable analysis and explanation of the Group's financial performance, position and prospects.
In line with the SGX-ST Listing Rules, the Board provides a negative assurance statement to the shareholders in respect of the interim financial statements. For the financial year review, the CEO and CFO have provided assurance to the Board on the integrity of the Group's financial statements.
The Management provides the Board on a quarterly basis, financial reports and other information on the Group's performance, financial position and prospects for their effective monitoring and decision-making.
The Directors and executive officers of the Company have provided undertakings of compliance with the requirements of the SGX in accordance with Rule 720(1) of the Listing Manual of SGX-ST.
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, with assistance from the Enterprise Risk Management Committee ("ERMC") and the AC, is responsible for the governance of risk by ensuring that Management maintains a sound system of risk management and internal controls to safeguard shareholders' interests and the Group's assets, and determines the nature and extent of the significant risks which the Board is willing to take in achieving strategic objectives. The Board acknowledges that no cost-effective internal control system will preclude all errors and irregularities. The system is designed to manage rather than eliminate the risk of failure to achieve business objectives and can provide only reasonable and not absolute assurance against material misstatement or loss.
The ERMC, which comprises of Senior Management of the Group, was formed in year 2012 to assist Management in its role of managing risks, as part of the Group's efforts to strengthen its risk management processes and enable accountability for its adequacy and effectiveness. The ERMC reports to the AC which, in turn, reports to the Board.
An Enterprise Risk Management ("ERM") programme has been implemented to identify, prioritise, assess, manage and monitor key risks. The risk management process in place covers, inter alia, financial, operational (including information technology) and compliance risks faced by the Group. From year 2012 to year 2015, the Group has engaged Messrs Mazars LLP to assist in enhancing the ERM programme over the identifi cation, prioritisation, assessment, management and monitoring of key risks. The Management continued to adopt the risk management framework established in FY2016 and FY2017. Key risks identifi ed are deliberated by Senior Management, and reported to the AC on a regular basis. The AC reviews the adequacy and effectiveness of the ERM programme against identified significant risks vis-à-vis changes in the Group's operating environment.
Relying on the reports from the Internal and External Auditors, the AC carried out assessment of the effectiveness of key internal controls during the financial year. Any material non-compliance or weaknesses in internal controls or recommendations from the Internal and External Auditors to further improve the internal controls were reported to the 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 assurance from the CEO and CFO that:-
Based on the various management controls in place, the reports from the Internal and External Auditors, as well as reviews conducted by the Management, the Board, with the concurrence of the AC, is of the opinion that the Group's system of internal controls and risk management procedures in addressing the financial, operational, compliance and information technology controls, and risk management systems maintained by the Group during the FY2017 are adequate and effective.
Principle 12: The Board should establish an AC with written terms of reference which clearly set out its authority and duties.
The AC comprises entirely Independent Directors and the members of the AC are:
|Mr Ho Chew Thim||Chairman|
|Mr Chua Kee Lock||Member|
|Dr Steve Lai Mun Fook||Member|
The Board is of the view that the members of the AC are appropriately qualified in that they have sufficient accounting or related financial management expertise and experience to discharge its responsibilities properly.
The AC is regulated by its terms of reference and its key functions include:-
Apart from the above functions, the AC shall commission and review the findings of internal investigations into matters where there is any suspected fraud or irregularity, or failure of internal controls or infringement of any Singapore laws, rules or regulations which has or is likely to have a material impact on the Group's operating results and/or financial position. Each member of the AC shall abstain from voting on any resolutions in respect of matters in which he is interested.
The AC has full access to and cooperation of the Management, external auditors and internal auditors. It also has the discretion to invite any Director and/or key management personnel to attend its meetings. The AC has adequate resources to enable it to discharge its responsibilities properly.
The AC has reviewed all Interested Person Transactions for FY2017 and is of the opinion that Chapter 9 of the Listing Manual of the SGX-ST has been complied with.
Each member of the AC shall abstain from voting on any resolutions and making any recommendations and/or participating in any deliberations of the AC in respect of matters in which he is interested.
For FY2017, the AC met once with the External Auditors and Internal Auditors without the presence of the Management. The AC, having reviewed the scope and value of non-audit services provided to the Group by the External Auditors, which comprise of the tax advisory services and is satisfi ed that the nature and extent of such services will not prejudice and affect the independence and objectivity of the External Auditors. The audit and non-audit fees paid/payable to the External Auditors for FY2017 would be S$190,000 and S$2,500 respectively.
The Company has complied with Rule 715 of the Listing Manual of the SGX-ST as all principal subsidiaries of the Company are audited by Messrs Foo Kon Tan LLP. All other foreign-incorporated subsidiaries are audited by suitable auditing fi rms for the purposes of the consolidated financial statements of the Group and audited by Messrs Foo Kon Tan LLP for consolidation purposes.
The AC undertakes a review of the scope of services provided by the External Auditors, the independence and the objectivity of the External Auditors on an annual basis. Messrs Foo Kon Tan LLP, the External Auditors of the Company, has confi rmed that they are a Public Accounting Firm registered with ACRA and provided a confi rmation of their independence to the AC. The AC had assessed the External Auditors based on factors such as performance, adequacy of resources and experience of their audit engagement partner and auditing team assigned to the Group's audit, the size and complexity of the Group. Accordingly, the AC is satisfi ed that Rule 712 of the Listing Manual of the SGX-ST is complied with, and has recommended to the Board that Messrs Foo Kon Tan LLP be nominated for reappointment as External Auditors at the forthcoming AGM of the Company.
In July 2010, the Singapore Exchange Limited and ACRA had launched the "Guidance to Audit Committees on Evaluation of Quality of Work performed by External Auditors" which aims to facilitate the AC in evaluating the External Auditors. In October 2015 with the support from SGX-ST and Singapore Institute of Directors, ACRA issued the "Audit Quality Indicators ("AQIs") disclosure framework to assist the AC in the said evaluation. Accordingly, the AC had evaluated the performance of the External Auditors based on the AQIs, such as performance, adequacy of resources and experience of their audit engagement partner and auditing team assigned to the Group's audit, taking into account the size and complexity of the Group.
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 fi rm has acted as a member of the AC.
No former partner or director of the Company's existing auditing fi rm has acted as a member of the AC.
In the review of the financial statements, the AC has discussed with management and the external auditor the accounting principles that were applied and their judgment of items that might affect the true and fair view of the financial statements. In particular, the following signifi cant matters impacting the financial statements were discussed with management and the external auditor and were reviewed by the AC.
|Significant matters||How the AC reviewed these matters and what decisions were made|
|Impairment of trade receivables||The AC is regularly updated on the status of trade receivables and their aging. The collectability of long outstanding debts and the reasonableness of impairment provisions made were reviewed by the AC and the Management.|
|Valuation of available-for-sale financial asset ("AFS")||The AC is satisfi ed that Management had relied on independent reputable external valuer for the AFS valuation exercise.|
The AC had reviewed, approved and implemented a whistle-blowing framework which provides well-defined and accessible channels in the Group through which employees of the Group may, in confi dence, raise concerns about possible corporate improprieties in matters of financial reporting or other matters within the Group. The framework includes arrangements for independent investigations and appropriate follow-up of such matters. Details of the whistle-blowing policies and arrangements have been made available to the employees. As at the date of this report, there was no report received through the whistle-blowing mechanism.
The AC had reviewed the Company's key financial risk areas and noted that apart from the foreign exchange rate differences which arise when transactions are denominated in foreign currencies, the Group has not entered into any financial derivatives contracts which will give rise to financial risks.
The AC has explicit authority to investigate any matter within its terms of reference. The AC has, within its terms of reference, the authority to obtain independent professional advice at the Company's expenses as and when the need arises.
Principle 13: The company should establish an effective internal audit function that is adequately resourced and independent of the activities it audits.
The Board recognises the importance of maintaining a system of internal controls in order to safeguard the shareholders' investments and the Company's assets. The Company has outsourced its internal audit functions of the Group to Messrs Mazars LLP, a professional firm to perform the review and test of controls of its processes. As recommended by the AC, the Board approved the re-appointment of Messrs Mazars LLP as Internal Auditors of the Group. The internal audit function is expected to meet the standard set by internationally recognized professional bodies including the International Standards for the Professional Practice of Internal Auditing set by The Institute of Internal Auditors. The Internal Auditors has unfettered access to all the Company's documents, records, properties and personnel, including access to the Board, the AC and Management, where necessary, and has the right to seek information and explanation.
The appointed Internal Auditors reports directly to the AC and is responsible for assessing the reliability, adequacy and effectiveness of the system of internal controls are in place to protect the fund and assets of the Group to ensure control procedures are complied with, assessing the operations of the business processes under review are conducted effi ciently and effectively and identifying and recommending improvement to internal control procedures, where required.
The Internal Auditors plan its internal audit schedules in consultation with, but independent of, the Management. The internal audit plan is submitted to the AC for approval prior to the commencement of the internal audit. The AC will review the activities of the Internal Auditors, including overseeing and monitoring of the implementation of improvements required on internal control weaknesses identified.
For FY2017, the AC met once with the Internal Auditors without the presence of the Management. The AC is of the opinion that Messrs Mazars LLP is adequately resourced with qualifi ed personnel to discharge its responsibilities. The AC has reviewed the internal audit reports based on the controls in place and is satisfi ed that the internal audit functions have been adequately carried out.
SHAREHOLDER RIGHTS AND RESPONSIBILITIES
Shareholder Rights, Communication with Shareholders and Conduct of Shareholder Meetings
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.
The Group is committed to providing shareholders with adequate, timely and sufficient information pertaining to changes in the Group's business which could have a material impact on the share price or value.
The Company firmly believes in high standards of transparent corporate disclosure, in line with the continuous obligations of the Company under the SGX-ST Listing Manual and the Companies Act, the Board's policy is that all shareholders should equally and on a timely basis be informed of all major developments that impact the Group. Quarterly results and news releases (if any) will be published through the SGXNet.
Where there is inadvertent disclosure made to a selected group, the Company will make the same disclosure publicly to all others as soon as practicable.
All shareholders of the Company will receive the Annual Report with the notice of AGM by post and published in a newspaper and via SGXNet within the mandatory period, which is held within four months after the close of financial year. Together with the Annual Report, the Company also attaches a copy of the proxy form to shareholders in order that shareholders can appoint up to 2 proxies to attend, vote and voice any question relating to the resolutions tabled in a general meeting and/or company affairs, for and on behalf of those shareholders in the event that such shareholders are not able to attend the said general meeting personally.
In view of the above, all shareholders are given an opportunity to participate and vote at the general meetings.
Principle 15: Companies should actively engage their shareholders and put in place an investor relations 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.
The Company does not have a dedicated investor relations team. However, the Company's CEO and CFO are responsible for the Company's communication with shareholders. The Board also acknowledges its obligation to furnish timely information to shareholders and ensure that full disclosure of material information to comply with statutory requirements and the Listing Manual of the SGX-ST is made. Any price sensitive information will be publicly released on SGXNet fi rst before being announced to any group of investors or analysts.
To keep all stakeholders of the Company updated on the latest announcements, press releases, and stock details of the Company, stakeholders have 24-hour access to the Company's website http://www.yongmaoholdings.com/ and http://www.yongmao.com.cn/.
The Company does not have a policy on payment of dividends. The issue of payment of dividends is deliberated by the Board annually having regarded to various factors.
Principle 16: Companies should encourage greater shareholder participation at general meetings of shareholders, and allow the shareholders the opportunity to communicate their views on various matters affecting the company.
Our shareholders are encouraged to attend the general meetings of shareholders to ensure a high level of accountability and for them to be updated on the Company's strategies and goals.
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. The Chairmen of the AC, NC and RC 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 our 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.
The Company's Constitution allows corporations and members of the Company to appoint one (1) or two (2) proxies to attend and vote at general meetings. A Relevant Intermediary1 may appoint more than 2 proxies, but each proxy must be appointed to exercise the rights attached to a different share or shares held by him (which number and class of shares shall be specified). An investor who holds shares under the Central Provident Fund Investment Scheme ("CPF Investor") and/or the Supplementary Retirement Scheme ("SRS Investors") (as may be applicable) may attend and cast his vote(s) at the Meeting in person. CPF and SRS Investors who are unable to attend the Meeting but would like to vote, may inform their CPF and/or SRS Approved Nominees to appoint the Chairman of the Meeting to act as their proxy, in which case, the CPF and SRS Investors shall be precluded from attending the Meeting.
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.
Each item of special business included in the notice of the meeting is accompanied, where appropriate, by an explanation for the proposed resolution. Separate resolutions are proposed for substantially separate issues at the meeting.
The Company Secretary 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.
DEALINGS IN SECURITIES
The Group has adopted its Code of Best Practices on dealings in securities by setting out the implications of insider trading and its regulations with regard to dealings in the Company's securities by its Directors and officers, that is modeled, with some modification, on Rule 1207(19) of the Listing Manual of the SGX-ST. The Group's Code of Best Practices provides guidance for Directors, officers and employees on their dealings in the Company's securities.
1 A Relevant Intermediary is:
The Group's Code of Best Practices prohibits the Company and its officers and employees who have access to unpublished material price sensitive information from dealing in the Company's securities. The Company and its officers and employees are advised not to deal in the Company's securities during the period commencing two weeks immediately preceding the announcement of the Company's quarterly financial results and one month immediately preceding the announcement of the Company's full year financial results and ending on the date of the announcement of such results on the SGX-ST, or when they are in possession of any unpublished price sensitive information of the Group. In addition, the Directors, key management personnel and employees are expected to observe insider trading laws at all times even when dealing in securities within the permitted trading period. They are also discouraged from dealing in the Company's shares for short term considerations.
INTERESTED PERSON TRANSACTIONS
The Company has established internal control policy to ensure that transactions with interested persons are properly reviewed, approved and conducted at arms' length basis.
The AC has reviewed the Interested Person Transactions ("IPTs") for FY2017 and noted that the transactions have been conducted in accordance with the IPT Mandate obtained at the Company's AGM held on 29 July 2016 and that the transactions were on normal commercial terms and not prejudicial to the interests of the Company and its minority shareholders.
The following is the aggregate value of all transactions with interested persons (as defined in Chapter 9 of the Listing Manual of the SGX-ST) for FY2017:-
The current IPT Mandate will be expiring on 24 July 2017, being the date of the forthcoming AGM of the Company. The Company is proposing to seek shareholders' approval at the AGM of the Company to be held on 24 July 2017 to renew the IPT Mandate pursuant to Chapter 9 of the Listing Manual of the SGX-ST. The IPT Mandate shall, unless revoked or varied by the Company in a general meeting, continue to be in force until the next AGM of the Company.
Save as disclosed in the Directors' report and financial statements, there were no material contracts entered into by the Company or any of its subsidiaries, involving the interest of the CEO, any Director or the controlling shareholder subsisting at the end of the FY2017.
The Management reviews regularly the Group's business and operational activities to identify areas of signifi cant business risks as well as appropriate measures to control and mitigate these risks within the Group's policies and strategies. In addition, both the Internal and External Auditors conducted the annual review of effectiveness of the Company's material internal controls, including financial, operational and compliance, and information technology controls and risk management. Any material non-compliance and internal control weaknesses noted during their audit are reported to the AC together with their recommendations. The Management will follow up on the auditors' recommendations so as to strengthen the Group's risk management procedures.
Information in relation to the risks arising from the Group's financial operations is disclosed in the notes to the accompanying Audited Financial Statements on pages 101 to 108.