To facilitate effective management, certain functions have been delegated to various Board Committees, each of which has its own written terms of reference and whose actions are reported to and monitored by the Board.With the Company Secretary’s assistance, the Board and Management are kept continually apprised of their compliance obligations and responsibilities arising from regulatory requirements and changes.

The Company’s Articles of Association (“Articles”) allow Board meetings to be conducted by way of teleconferencing to facilitate Board participation.

The Company also has in place a budget for Directors’ training programmes. This is utilised for Directors’ participation in industry conferences and seminars and application to courses of instruction/training programmes in connection with their duties as Directors. The budget may be utilised by each Director subject to the approval of the Chairman.
The Board works closely with Management ensuring that obligations to shareholders and other stakeholders are complied with.
The Board meets at least quarterly, and more frequently when required, to review and evaluate the Group’s operations and performance and to address key policy matters, where necessary.


Principle 2: Board Composition and Balance

As at year end, the Board had comprised 3 Independent Directors and 4 Executive Directors. The Board complies with the recommendation in the Code for at least one-third of the Board to comprise Independent Directors.
The independence of each Director is reviewed annually by the Company’s Nominating Committee (“NC”). The NC adopts the Code’s definition of what constitutes an Independent Director in its review, and further ensures that no individual or group of individuals dominate the Board’s decision-making process.

The Non-executive Directors contribute to the Board process by monitoring and reviewing Management’s performance against goals and objectives. Their views and opinions provide alternative perspectives to the Group’s business and they bring independent judgement to bear on business activities and transactions involving conflicts of interest and other complexities. Where the need arises, Non-executive Directors will meet without the presence of Management.

Key information regarding the Directors is set out on page 6 & 7 of the Annual Report. The NC is of the view that the size, composition, range of experience and the varied expertise of the current Board provides core competencies necessary to meet the Company’s needs.

Principle 3: ROLE OF CHAIRMAN AND CHIEF EXECUTIVE OFFICER (“CEO”)

Mr Koh Kian Kiong is the Executive Chairman and CEO of the Company. As one of the founders of the Group, Mr Koh has been for leading the Board and has assumed full executive responsibilities over the directions and operational decisions of the Group since 1974.

The Board is of the view that having Mr Koh assume the roles of both Chairman and CEO has not compromised accountability and independent decision-making as there is a sufficient number of Independent Directors on the Board to exercise objective judgement on decisions. Notwithstanding that the Company has benefited from having an Executive Chairman who is knowledgeable about the businesses and operations of the Company, the Board is looking into the issue of CEO succession and the segregation of the two positions. In compliance with the Code, Mr Heng Lee Seng has been appointed Lead Independent Director to address shareholders’ concerns, if any.

The Chairman ensures that Board meetings are held when necessary. The Chairman reviews most Board papers before they are presented to the Board and ensures that Board members are provided with complete, adequate and timely information. Members of Management who can provide additional insight into the matters to be discussed are invited to attend the relevant Board or Board Committee meetings.

Principle 6: Access to Information

The Company recognizes that the flow of accurate and timely information is important for the Board to be effective in the discharge of its duties. Accordingly, it endeavours to meet the information needs of the Directors, such as requests for further explanations, briefings or informal discussions on any aspect of the Company’s operations or business issues. The Directors are provided with the contact details of the Company’s Key Management and Company Secretary to facilitate access to information.

The Board seeks independent professional advice as and when necessary to enable it to discharge its responsibilities effectively. Subject to the approval of the Chairman, Directors, whether as a group or individually, may seek and obtain independent professional advice to assist them in their duties, at the expense of the Company.

The Company Secretary or her representative attends and prepares minutes of all Board and Board Committee meetings. She assists the Chairman in ensuring that Board procedures are followed and that all relevant statutes, rules and regulations, including requirements of the Singapore Exchange Securities Trading Limited (“SGX-ST”), are complied with. She is also the primary channel of communication between the Company and the SGX-ST.

The appointment and the removal of the Company Secretary is a Board matter.

Executive Committee

The Executive Committee (“EC”) comprises the following Directors:

Mr Koh Kian Kiong
Ms Koh Maggie
Ms Chng Geok(resigned on 5 February 2010)
Mr Lim Joo Suan

The EC meets regularly and performs the following functions:

• Approves investment/divestment proposals within 5% of NTA;
  
• Reviews and submits the Group’s business plans to the Board;
  
• Establishes guidelines and approval limits for the management and operation of the Group’s businesses;
  
• Reviews budget against the performance of each business unit; and
  
• Ensures that interested person transactions are undertaken at arm’s length and on commercial terms.
  
• Oversees and implements appropriate systems to manage risks.

The AC is empowered to investigate any matter relating to the Group’s accounting, auditing, internal controls and financial practices brought to its attention, with full access to records, resources and personnel, to enable it to discharge its functions properly. It has full access to and the co-operation of Management, including the internal auditors, and has full discretion to invite any Director and executive officer to attend its meetings.

The Group has an Internal Audit department which reports primarily to the Chairman of the AC. The AC ensures that the team is adequately resourced and has the appropriate standing within the Group. It also reviews and approves the annual internal audit plan proposed by the Internal Audit department.

The Group also out-sourced certain internal audit projects to BDO Raffles Consultants Pte Ltd (“BDO”) to strengthen the internal audit function to meet the growing global emphasis on corporate governance, compliance and risk assessment. The Internal Audit department and BDO report independently their findings and recommendations to the AC.

In performing its functions, the AC reviews the overall scope of both internal and external audits, and the assistance given by Management to the auditors. The AC also meets with the internal and external auditors annually, without the presence of Management to discuss the results of their respective audit findings and their evaluation of the Group’s system of accounting and internal controls.

The AC has reviewed the Group’s risk management policies and, based on the audit reports and management controls in place except for certain areas which improvement is needed, is satisfied that there are adequate internal controls in the Group.

The AC has adopted a whistle-blowing programme to encourage and to provide a channel for Group employees to report and to raise, in good faith and in confidence, their concerns about possible improprieties in matters of financial reporting or other matters.

The AC is also satisfied with the independence and objectivity of the external auditors and has recommended to the Board the re-appointment of Ernst & Young LLP as the Company’s external auditors at the forthcoming AGM.

Remuneration Committee
Principle 7: Procedures for Development of Remuneration Policies
Principle 8: Level and Mix of Remuneration
Principle 9: Disclosure of Remuneration

The members of the Company’s Remuneration Committee (“RC”) are:

Mr Heng Lee Seng (Chairman)
Mr Hoon Tai Meng
Mr Chan Lay Ho
Mr Yee Kee Shian Leon (appointed on 23 March 2010)

The RC comprises entirely Independent Directors.

The RC has access to external professional advice on remuneration matters, if required.

The RC, through a competitive and appropriately structured framework of remuneration, aims to motivate and retain executives and ensure that the Company is able to attract talents in the market in order to maximise shareholder value. In consultation with the Chairman of the Board, the RC will:

The Company adopts a remuneration policy for Executive Directors and Key Management Executives comprising a fixed component and a variable component. The fixed component is in the form of a base salary and fixed bonus. The variable component is in the form of profit-sharing or a variable bonus that is linked to the performance of the Company and the individual. The Executive Directors’ service contracts are renewed annually.

As part of its review, the RC covers all aspects of remuneration, including but not limited, to Directors’ fees, salaries, allowance, bonuses and benefits-in-kind.

The RC ensures that the remuneration packages of employees related to Executive Directors and controlling shareholders of the Group are in line with the Group’s staff remuneration guidelines and commensurate with their respective job scopes and levels of responsibilities.

There is one Key Management Executive of the Group who is an immediate family member of the CEO and whose remuneration exceeds S$150,000 in 2009.

Non-executive Directors’ fees are set in accordance with a remuneration framework comprising a basic fee and increment fixed fee for the level of responsibilities such as chairing Board Committees. The Non-executive Directors’ fees proposed are subject to shareholders’ approval at the AGM.
The Company does not have a long-term incentive or share option scheme in place.

The following information relates to the remuneration of Directors for the year ended 31 December 2009:

In view of the confidentiality of remuneration matters, the Board is of the opinion that it is in the best interests of the Company not to disclose the names and exact remuneration of Key Management Executives in the Annual Report.

There is 1 key executive of the Group who is an immediate family member of the CEO and whose remuneration exceeded S$150,000 in 2009.

Communication with Shareholders
Principle 14: Communication with Shareholders
Principle 15: Effective Shareholders’ Participation

The Board is mindful of its obligation to provide timely disclosure of material information. The Board is accountable to the shareholders while Management is accountable to the Board.

The Company does not practise selective disclosure. Announcements, including quarterly, half-year and full-year results, are released through SGXNET and news releases. The Company has engaged the services of a public relations company to facilitate the dissemination of information to investors and the public since becoming publicly listed in 2000. All shareholders of the Company receive a copy of the Annual Report of the Company and the Group.

At general meetings, shareholders are given the opportunity to express their views and ask questions regarding the Group and its businesses.

Resolutions on each distinct issue are tabled separately at general meetings.

The Chairmen of the AC, NC and RC are available to address questions at the Company’s AGMs. The Company’s external auditors are also present to assist the Directors in addressing any relevant queries from shareholders.

Dealings in Securities
The Company has adopted a policy for securities transactions which provide guidance to its Directors and officers of the Group. Under this policy, Directors and officers are not permitted to deal in the Company’s securities while in possession of price-sensitive information and for the periods commencing 2 weeks before the release of quarterly results and 1 month before the release of full-year results.

Interested Person Transactions
The Company has adopted an internal policy in respect of any transactions with interested persons and has set out the procedures for review and approval of the Company’s interested person transactions. All interested person transactions are subject to review by the AC.

The Company confirms that the aggregate value of all interested person transactions during the financial year under review is less than S$100,000.

Material Contracts
No material contracts were entered between the Company and any of its subsidiaries with any Director or controlling shareholder during the financial year ended 31 December 2009.

Enterprise Risk Management Steering Committee
The Company had on January 2010 established an Enterprise Risk Management Steering Committee (“ERM Steering Committee”), to provide an appropriate formal framework to monitor risks and threats faced by the Company and its Group subsidiaries. The ERM Steering Committee comprises members of the EC and certain Key Management Executives (e.g. internal auditor, internal legal counsel, business development director, finance personnel).

The ERM Steering Committee has the authority of the Board to investigate any aspect of the Company or of any of its controlled entities. The ERM Steering Committee has explicit access to Key Management Executives and other employees of the Company, in order to carry out its functions and duties adequately.

The terms of reference of the ERM Steering Committee had been reviewed and adopted by the Board.

Enterprise Risk Management Programme
The AC provides oversight to the risk management procedures of the Company and supported by a Risk Management Committee chaired by a nominated Chief Risk Officer. The Risk Management Committee comprises key management personnel including Head of Finance, Legal, Operations and other Executive Directors of the Company.

The purpose of risk management is to identify risks that may have significant impact on the organisation, implement countermeasures or warning systems for the detection of risks at the onset. Risk management procedures are designed to facilitate regular and timely reporting of key risk events and to call to action specific action plans where necessary.

The Company has completed the pilot phase of an enterprise-wide risk management programme which focuses on development of a robust risk reporting structure, a structured risk management process and a risk monitoring system that requires key projects, investments or events to be subjected to an ongoing risk assessment from inception stages.

Risk Reporting Structure
The ERM Steering Committee submit quarterly reports to the AC on the key risks being managed by the Company and on trends of risk indicators. The following chart provides an overview of the risk reporting structure:

Risk Management Process
The Company has adopted the following risk management framework:

Risk Identification
Risk questionnaires are disseminated to key personnel across the Group to obtain their inputs on the key risks affecting their areas of responsibilities. The risks are further consolidated by the ERM Steering Committee and recorded as part of the Group risk register.

Risk Assessment
A uniform grading methodology is used to provide a quantitative assessment of the identified risks by the risk respondents. The risk register contains the countermeasures to identified risks and the person responsible for monitoring the risk. Where applicable, action plans are developed to cover deficiencies in the current risks monitoring system.

Risk Mitigation
The countermeasures to risks identified by the programme are documented and risks accepted as part of inherent business risks are subject to review and acceptance process.

An important part of the Company’s business is in large scale overseas projects involving different fields of expertise. As part of internal risk reporting procedures, all projects that exceed an internally set limit will have to submit detailed risks assessment reports to the Executive Directors before the Company can commit to the projects.

Risk Monitoring
The ERM Steering Committee will meet at least quarterly and also whenever the need arises to discuss risk management-related issues. They provide the first line of monitoring risks that could have an impact on the Company. In addition, the risk reports are mapped to the internal audit plan to ensure that applicable risks are covered and assessed in the course of internal audits conducted during the year.