The Board of Directors of the Group is committed to maintaining the highest standards of Corporate Governance and fully appreciates the Best Practice Guide issued by the Singapore Exchange-Stocks Trading Limited (“SGX-ST?. This statement highlights the Corporate Governance practices established by the Group.
 
BOARD MATTERS

Principle 1 : The Board's Conduct of its Affairs

The principal functions of the Board are to establish the corporate and strategic policies of the Group and to monitor the Group's performance. Matters which are specifically reserved for the Board include acquisition and disposal proposals, strategic business initiatives, approving nominations of directors and appointment of key executives, approval for the release of quarterly and full year results, approval of annual audited accounts for the Group and the Directors' Report thereto and other significant corporate actions.

Additionally, the Board delegates and entrusts certain of its functions and powers to Board Committees such as Executive Committee (“EC?, Audit Committee (“AC?, Remuneration Committee (“RC?, and Nominating Committee (“NC?.

The EC comprises of Mr Lim Kim Thor (Chairman), Mr Lim Boh Chuan, Mr Lim Yee Kim and Mr Lim Beo Peng.

The EC is established principally to assist the Board in making decisions expeditiously and is mainly responsible for planning and strategy, Group policy review, attending to urgent and important business or business of an unusual and extraordinary nature, and any other functions delegated by the Board.

The Board comprises of members with strong business credentials, industry knowledge and from various professions such as banking, IT and the legal profession.

The Management regularly furnishes the Board with updates concerning the changes in laws, regulations or accounting standards where they may be applicable and relevant in enabling the Board to carry out its duties and responsibilities properly.

Newly appointed directors are given briefings by the Management on the business activities of the Group and its strategic directions.

The Board is scheduled to meet at least four times a year and where necessary, hold additional meetings to address significant issues that may arise. The attendance of the directors at Board and Board committees meetings is as follow.

  Board
Meeting
Executive Committee Audit Committee Remuneration
Committee
Nominating
Committee
  Held Attend Held Attend Held Attend Held Attend Held Attend
Tang See Chim(1) 5 5 - - 4 4 3 3 2 2
Lim Kim Hock(2) 5 2 20 11 - - 3 1 - -
Lim Kim Thor(3) 5 5 20 20 - - 3 3 - -
Lim Boh Chuan 5 5 20 19 - - - - - -
Lim Yee Kim 5 5 20 20 - - - - - -
Lim Eng Chong 5 5 - - - - 3 3 2 2
Lim Puay Koon 5 1 - - 4 3 - - - -
Lim Beo Peng 5 5 20 19 - - - - - -
Lim Teck Hui(4) 5 5 - - 4 4 3 3 2 2
Ong Kian Min(5) 5 5 - - - - 3 3 - -
Chua Hoo Tai(6) 5 1 - - 4 1 3 1 - -

  1. Mr Tang See Chim was appointed as the Non-Executive Chairman of the Board of Directors on 21 st February 2005. On 28 th July 2005, he was appointed as the Chairman of the NC and stepped down as Chairman of the RC. Mr Tang remains as a member of the RC.
  2. Dr Lim Kim Hock resigned as Chairman of the Board and Director with effect from 21 st February 2005.
  3. Mr Lim Kim Thor was appointed as Chairman of the Executive Committee on 21 st February 2005.
  4. Mr Lim Teck Hui passed away on 19 th July 2005.
  5. Mr Ong Kian Min was appointed as the Chairman of the RC and a member of the AC and NC on 28 th July 2005.
  6. Mr Chua Hoo Tai retired as a Director with effect from 23 rd November 2004.

Principle 2 : Board’s Composition and Balance

The Board of Directors comprises 8 directors, 2 of whom are independent and 2 of whom are non independent and non-executive. Due to the recent demise of one of its Independent Directors, the Board does not have one third of its Directors whom are independent as recommended. The Board is currently looking for suitable candidate to be appointed as Independent Director. The NC reviews the independence of each director annually. At each annual general meeting, one-third of the directors are subject to retirement by rotation. However, a Managing Director shall not while he continues to hold that office be subject to retirement by rotation. Directors who have attained the age of 70 and above are subject to annual retirement and re-appointment in accordance with Section 153(6) of the Companies Act, Cap. 50. Key information about the directors is detailed in the “Board of Directors? section.

Principle 3 : Role of Chairman and Chief Executive Officer

Mr Tang See Chim was appointed as the Non Executive Chairman of the Board of Director on 21 February 2005. Mr Lim Kim Thor is the Chief Executive Officer of the Group.

The Chairman is responsible for board proceedings in the best interests of the Group. The Chairman ensures that the Board members work together with the Management and that the Board engages Management in constructive discussions on various matters, including strategic issues and business planning processes.

The Chief Executive Officer (‘CEO') bears executive responsibility for the Group's business. The CEO oversees the daily running of the Group's operations and is responsible to execute strategies and policies adopted by the Board.

Principle 4 : Board membership

The NC is made up of members all of whom are non-executive and the majority of whom are independent. The NC ensures that appointment and re-election of directors are formal and transparent. All directors to be appointed or re-elected are recommended by the NC before submission for Board approval. The NC also determines annually whether or not a director is independent.

Principle 5 : Board Performance

The NC assesses the effectiveness of the Board as a whole and the contribution by each director to the effectiveness of the Board on an annual basis.

In its assessment of the Board effectiveness, the NC takes into consideration the frequency of the Board meetings, the rate at which issues raised are adequately dealt with and the reports from the various committees. In the like manner, the NC is able to assess the contribution of each individual director to the effectiveness of the Board.

Principle 6 : Access to Information

The Board has separate and independent access to the Management. Requests for information from the Board are dealt with promptly. The Board is informed of all material events and transactions as and when they occur.

The company secretary attends all board meetings and is responsible for ensuring that board procedures are followed.
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Principle 7 : Procedures for Developing Remuneration Policies
Principle 8 : Level and Mix of Remuneration
Principle 9 : Disclosure on Remuneration

The RC comprises of 4 directors, of which 2 are independent, 1 non executive and 1 executive. The RC recommends a framework of remuneration for key executives and to determine specific remuneration packages for all the executive directors. The RC is also responsible for administering the Company's Employee Stock Options Scheme. The RC is chaired by an independent non-executive director and the committee has access to expert advice inside and outside the Company for knowledge on executive compensation.

The RC's recommendations are made in consultation with the Chairman of the Board and are submitted for endorsement by the entire Board. The RC takes into account the pay and employment conditions within the industry and in comparable companies, as well as the Company's relative performance and the performance of the individual directors when setting remuneration packages so as to attract, retain and motivate the directors needed to run the Company successfully. All aspects of the remuneration, including but not limited to directors' fees, salaries, allowances, bonuses, profit sharing incentives, and benefits in kind are covered in the review by the RC. A proportion of the executive directors' remuneration is linked to performance.

Remuneration Report


Base

Variable

Other

   

Share

Salary

Payments

Benefits

Fees

Total

Options

Name of director

(%)

(%)

(%)

(%)

(%)

Granted

$500,000 and above

           

Lim Kim Hock (1)

21.9

76.5

0.2

1.4

100

-

Lim Kim Thor (2)

19.9

71.4

7.0

1.7

100

-

Lim Boh Chuan

24.1

62.4

11.1

2.4

100

-

Lim Yee Kim

26.7

57.8

13.2

2.3

100

-

             

$250,001 and $500,000

           

Lim Beo Peng

29.0

62.0

1.9

7.1

100

100,000

             

Below $250,000

           

Lim Eng Chong

-

-

-

100

100

-

Lim Puay Koon

-

-

-

100

100

-

Tang See Chim (3)

-

-

-

100

100

-

Lim Teck Hui (4)

-

-

-

100

100

-

Chua Hoo Tai (5)

-

-

-

100

100

-

Ong Kian Min (6)

-

-

-

100

100

-


Notes

  1. Dr Lim Kim Hock retired as Executive Chairman & Director on 21 st February 2005.
  2. Mr Lim Kim Thor was appointed as Chairman of the Executive Officer on 21 st February 2005.
  3. Mr Tang See Chim was appointed as the Non-Executive Chairman of the Board of Directors on 21 st February 2005. On 28 th July 2005, he was appointed as the Chairman of the NC and stepped down as Chairman of the RC. Mr Tang remains as a member of the RC.
  4. Mr Lim Teck Hui passed away on 19 th July 2005.
  5. Mr Chua Hoo Tai retired as Director on 23 rd November 2004.
  6. Mr Ong Kian Min was appointed as the Chairman of the RC and a member of the AC and NC on 28 th July 2005.

The Group adopts a remuneration policy for staff comprising a fixed component and a variable component. The fixed component is in the form of a base salary. The variable component is in the form of a variable bonus that is linked to the performance of the Group and of the individual staff. Staff appraisals are conducted once a year. The Hup Seng Huat Employees' Share Option Scheme is another element of the variable component to align the interests of staff with that of the shareholders. Details of options granted can be found in the Directors' Report.

The Board is of the view that disclosure of the remuneration of key management staff who are not directors will be detrimental to the Group's interest because of the very competitive nature of the industry the Group operates in.

There is no employee in the Group, being an immediate family member of a director, whose remuneration exceeded S$150,000 during the year.
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Principle 10 : Accountability

The Board account to the shareholders through providing timely information relating to the financial and operations of the Group as well as any issues faced by the Group regularly and as and when required through announcement releases to the SGX-ST.

Principle 11 : Audit Committee
Principle 12 : Internal Controls

The AC comprises 3 directors of whom 2 are independent and 1 non executive and all members have accounting or financial management expertise. Details of the functions and responsibilities of the AC are found in the Directors Report.

The AC has full access to and co-operation from Management and it meets external and internal auditors without the presence of Company's Management.

With the assistance of the external and internal auditors, the AC conducts annual review of all material internal controls. The AC is satisfied that the Company's material internal controls are adequate.

The AC confirmed that it has undertaken a review of all non-audit services provided by the external auditors and is satisfied that such services would not, in the AC's opinion, affect the independence of the auditors.

Principle 13 : Internal Audit

The Group has outsourced the internal audit functions to Messrs Ernst & Young. The internal auditors undertake the following functions and responsibilities in line with the Standards for the Professional Practice of Internal Auditing:

  • review the effectiveness of the Company's material internal controls;
  • provide assurance that key business and operational risks are identified and managed;
  • ensure internal controls are in place and functioning as intended; and
  • ensure operations are conducted in an effective and efficient manner.

The Internal Auditor reports directly to the Chairman of the Audit Committee and make recommendations on their findings.

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Principle 14 : Regular, effective and fair communication with shareholders

The Board strives to ensure that all material information is disclosed to the shareholders in an adequate and timely basis. The Board informs and communicates with shareholders through annual reports, announcement releases through SGX-ST, advertisement of notice of meetings and at General Meetings.

Principle 15 : Greater shareholder participation

Chairmen of the EC, AC, NC and RC, or members of the respective committees standing in for them, as well as external auditors will be present and available to address questions at General Meetings

SECURITIES TRANSACTIONS

The Company has clear policies and guidelines for dealings in the securities of the Company by Directors and employees which are in conformity with the SGX-ST Best Practices Guide.

INTERESTED PERSON TRANSACTIONS

The Company monitors all its interested person transactions closely and [all interested person transactions are subject to review by the Audit Committee.

The aggregate value of interested person transactions entered into during the year were as follows:-

 

Name of interested person

Aggregate value of all interested person transactions during the financial year under review (excluding transactions less than $100,000 and transactions conducted under shareholders' mandate pursuant to Rule 920

Aggregate value of all interested person transactions conducted under shareholders' mandate pursuant to Rule 920 (excluding transactions less than $100,000)

Dr Lim Kim Hock - Service

105,638

-

Mdm Teo Ah Leng (Widow of the late Mr Lim Boon Wan) - Gratuity

180,000

-

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