The Board of Directors (the "Board") of Pacific Andes Resources Development Limited (the "Company") is committed to maintaining a high standard of corporate governance through effective transparency and disclosures. This report sets out the Company's corporate governance processes and structures that were in place throughout the financial year, with specific reference made to the principles and guidelines of the Code of Corporate Governance 2005 (the "Code") and the best practices issued by the Singapore Exchange Securities Trading Limited (the "SGX-ST").
The Board is pleased to confirm that for the financial year ended 28 September 2010 ("FY2010"), the Company has generally adhered to the framework as outlined in the Code and where there are deviations from the Code, the reasons for which deviations are explained accordingly.
BOARD OF DIRECTORS
Principle 1: Effective Board to lead and control the Company
The Board's primary role is to protect and enhance long-term shareholders' value. Apart from its fiduciary duties, the Board oversees the business affairs of the Company and assumes responsibility for the Group's overall strategic plans, key operational initiatives, major funding and investment proposals, financial performance reviews and corporate governance practices.
To assist in the execution of its responsibilities, the Board has established the Audit Committee ("AC"), the Nominating Committee ("NC") and the Remuneration Committee ("RC"). These Board Committees function within clearly defined terms of reference, which are reviewed on a regular basis.
The Board conducts scheduled meetings at least four times a year and meets as and when warranted by particular circumstances between these scheduled meetings. The Company's Bye-Laws provide for meetings to be held via telephone and video conferencing.
The Company has in place orientation programmes for newly appointed Directors to ensure that they are familiar with the Group structure, its business and operations, governance policies, policies on disclosure of interests in securities, rules relating to disclosure of any conflict of interest in a transaction involving the Company, prohibitions in dealing in the Company's securities and restrictions on disclosure of price sensitive information. Newly appointed directors will participate in orientation programmes, which include meetings with the Executive Chairman/Managing Director and the Financial Controller to obtain insight information and an understanding of the business.
Matters which specifically require Board approval are those involving material acquisitions, disposal of assets, corporate or financial restructuring and share issuances, dividends and other returns to shareholders and matters which require Board approval as specified under the Company's interested person transaction policy.
To facilitate effective management, certain functions have been delegated by the Board to various Board Committees. Each Board Committee operates under clearly defined terms of reference. The Chairman of the respective Committees will report to the Board the outcome of the Committee meetings.
Details of directors' attendance at Board and Board committees meetings held in FY2010 are summarised in the table below:
All directors are provided with regular updates on changes in the relevant laws and regulations to enable them to make well-informed decisions. Where possible and when the opportunity arises, the non-executive directors will be invited to the Group's key locations of operations to enable them to obtain a better perspective of the business and enhance their understanding of the Group's operations.
Principle 2: Strong and independent element on the Board
As at the date of this report, the Board comprises the following Directors:
Executive Directors:
Ng Joo Siang (Chairman)
Ng Joo Puay, Frank (Managing Director)
Teh Hong Eng
Ng Joo Kwee
Independent Non-Executive Directors
Bertie Cheng Shao Shiong
Lt-Gen (Ret) Ng Jui Ping
Chew Hai Chwee
Alternate Directors
Ng Puay Yee (Alternate Director to Teh Hong Eng)
Chan Tak Hei (Alternate Director to Ng Joo Kwee)
The independence of each director is reviewed annually by the Nominating Committee ("NC"), which has adopted the Code's definition of what constitutes an independent director in its review. As a result of the NC's review the non-executive directors are considered independent.
The executive directors have extensive experience in the frozen seafood and shipping industry and the independent non-executive directors are well established in their respective professions and possess the relevant expertise and experience in areas such as accounting, finance and business management.
It was stated in the Annual Report 2009 that the NC was in the process of considering a third Independent non-executive Director. The NC is pleased to report that it has reviewed and recommended the appointment of Mr Chew Hai Chwee as the third Independent non-executive Director, taking into account the Board size and composition, core competencies of the Board, the nature and scope of the Group's operations. Mr Chew was appointed by the Board on 22 November 2010.
The Independent non-executive Directors do constructively challenge Management and assist in the development of proposals on strategies. The NC is satisfied that the Board comprises directors who as a group provide core competencies such as industry knowledge, strategic planning experience and customer-based experience and knowledge, finance, accounting, business and management experience necessary to meet the Company's performance targets and to facilitate effective decision-making.
Details of directors' qualifications and experiences.
Principle 3: Clear division of responsibilities at the top of the Company
The Executive Chairman of the Company is Mr Ng Joo Siang, who is one of the founders of the Group and plays a key role in developing the business of the Group and provides the Group with strong leadership and vision. Mr Ng is responsible for the workings of the Board and ensures the integrity and effectiveness of the governance process of the Board.
The Company's Managing Director ("MD"), is Mr Ng Joo Puay, Frank, who is responsible for the day-to-day running of the Group as well as the exercise of strategic goals and control of the quality, quantity and timeliness of information flow between the Board and Management.
Mr Ng Joo Siang and Mr Frank Ng are brothers. There is a clear division of responsibilities between the Chairman and the MD. This ensures a balance of power and authority at the top, as no one individual represents a considerable concentration of power. The roles of Chairman and MD are separate to ensure an appropriate balance of power, increased accountability and greater capacity to the Board for independent decision-making.
All major decisions made by the Executive Chairman and MD are endorsed by the Board. Their performance and appointments to the Board are reviewed periodically by the NC and their remuneration packages are reviewed periodically by the RC. As such, the Board believes that there are adequate safeguards in place against an imbalance concentration of power and authority in single individuals.
Principle 4: Formal and transparent process for appointment of new directors to the Board
The Board, through the delegation of its authority to the NC has used its best efforts to ensure that Directors appointed to the Board possess the relevant background, experience and knowledge in business, legal, finance and management skill critical to the Group's business to enable the Board to make sound and well-considered decisions.
Nominating CommitteeThe NC, regulated by a set of written terms of reference, comprises 3 members, a majority of whom are Independent non-executive Directors, as follows:
Lt-Gen (Ret) Ng Jui Ping (Chairman)
Bertie Cheng Shao Shiong
Ng Joo Siang
The NC is chaired by Lt-Gen (Ret) Ng Jui Ping, an Independent non-executive Director, who is not associated, directly or indirectly, with a substantial shareholder.
The primary function of the NC is to determine the criteria for identifying candidates and to review nominations for the appointment of Directors to the Board, to consider how the Board's performance may be evaluated and to propose objective performance criteria for the Board's approval. Its duties and functions are outlined as follows:
In accordance with the Company's Bye-laws, each Director (other than the Chairman and/or Managing Director) will have to retire at least once every three years by rotation and all newly appointed Directors will have to retire at the next Annual General Meeting. The retiring Directors who are eligible will offer themselves for re-election. Accordingly, Mr Ng Joo Kwee and Mr Chew Hai Chwee, who are eligible, will be offering themselves for re-election at the forthcoming Annual General Meeting. The Board has accepted the NC recommendation that they be re-elected at the coming Annual General Meeting.
Principle 5: Formal assessment of the effectiveness of the Board and contribution by each Director
While the Code recommends that the NC be responsible for assessing the effectiveness of the Board as a whole and the contribution by each director to the effectiveness of the Board, the NC felt that it is more appropriate and effective to assess the Board as a whole, bearing in mind that each member of the Board contributes in different way to the success of the Company. Board decisions are also made on a collective basis.
The NC has adopted a formal system of evaluating the Board performance as a whole. This process entails the completion of a questionnaire by Board Members. A summary of the findings is prepared following the return of the completed questionnaire for review and deliberation by the NC. The NC Chairman then reports the findings to the Board so that appropriate course of actions are agreed. The NC in conducting the appraisal process to assess the performance and effectiveness of the Board as a whole, focuses on a set of performance criteria which includes the evaluation of the size and composition of the Board, the Board's access to information, Board processes and accountability, Board performance in relation to discharging its principal responsibilities, CEO/top management succession planning and the directors' standards of conduct.
During FY2010, the Board adopted the recommendation of using quantitative financial indications. The measures are :-
Principle 6: Board members to have complete, adequate and timely information
All Directors have independent access to the Group's senior management and the Company Secretary and External Auditors at all times. All Directors are provided with adequate and timely information prior to Board meetings and on an ongoing basis. The Company Secretary provides secretarial support to the Board and ensures adherence to Board procedures and relevant rules and regulations, which are applicable to the Company. The Company Secretary attends all Board and Board committees meetings. Should Directors, whether as a group or individually, need independent professional advice to fulfill their duties, such advice will be obtained from a professional firm of the director's choice, the cost of which will be borne by the Company.
Principle 7: Formal and transparent procedure for fixing remuneration packages of Directors and key management executives
Remuneration Committee
The RC, regulated by a set of written terms of reference, comprises 3 members. On 22 November 2010, Mr Chew Hai Chwee was appointed to the RC
replacing Mr Ng Joo Siang. As at the date of this report, the composition of the RC is as follows:
Lt-Gen (Ret) Ng Jui Ping (Chairman)
Bertie Cheng Shao Shiong
Chew Hai Chwee
The RC reviews and recommends to the Board the following matters:
The Board will table the RC's recommendation of S$150,000 as Directors' fees for the financial year ending 28 September 2011 at the forthcoming Annual General Meeting for approval.
Other than the Independent non-executive Directors' fees, which are set in accordance with a remuneration framework, the Board has decided that the policy on annual remuneration will not be tabled at the forthcoming AGM.
Principle 8: The level of remuneration for Directors should be adequate, not excessive, and linked to performance.
The remuneration policy of the Company is to provide compensation packages at market rates, which rewards successful performance and attract, retain and motivate Directors and senior management.
The Executive Directors do not receive Directors' fees. The Executive Directors' and key senior management remuneration packages are based on service contracts and their remuneration are determined by having regard to the performance of the Group as well as individuals and market trends. Service contracts for the Executive Directors do not contain onerous removal clauses. Non-Executive and Independent Directors are paid yearly Directors' fees of an agreed amount set at a competitive level based on their contributions, taking into account factors such as effort, time spent and their respective responsibilities. Directors' fees are recommended by the Board for shareholders' approval at the Company's Annual General Meeting.
The Company has in place a share option scheme known as the Pacific Andes Resources Development Limited Employees' Share Option Scheme and a share awards scheme known as the PARD Share Awards Scheme. These two schemes are administered by the RC.
The Company's shareholders have approved at the Special General Meeting ("SGM") held on 30 July 2008 to amend the Company's Articles of Association to include provisions on treasury shares. With this amendment, the Company would be able to acquire its own shares either through market purchase or off-market purchase and thereafter and hold them as treasury shares. These treasury shares may be offered to the Group's employees through the share award scheme, where applicable.
Principle 9: Clear disclosure of remuneration policy, level and mix of remuneration, and the procedure for setting the remuneration
The remuneration for the FY2010 is shown as below:
The RC and the Board are of the view that the remuneration of the directors is adequate but not excessive in order to attract, retain and motivate them to run the Company successfully.
There are no immediate family members of Directors in employment with the Company and whose remuneration exceeds S$150,000 during FY2010 except for Mr. Ng Joo Siang (Executive Chairman), Mr Ng Joo Puay Frank (Managing Director), Mdm Teh Hong Eng (Executive Director) and Mr Ng Joo Kwee (Executive Director). Mdm Teh Hong Eng is the mother to Ng Joo Siang, Ng Joo Puay Frank and Ng Joo Kwee.
Principle 10: Board should present a balanced and understandable assessment of the Company's performance, position and prospects
The Board is accountable to shareholders for the management of the Group. The Board updates shareholders on the operations and financial position of the Company through, quarterly, half yearly and full year results announcements as well as timely announcements of other matters as prescribed by the relevant rules and regulations. The Managements is accountable to the Board by providing the Board with the necessary financial information for the discharge of its duties.
Principle 11: Establishment of Audit Committee with written terms of reference
The Company has adopted and has complied with the principles of corporate governance under the Code in relation to the roles and responsibilities of the AC. On 22 November 2010, Mr Chew Hai Chwee was appointed to replace Mr Chan Tak Hei (Group Financial Controller and Alternate Director) as the other AC Member. The Board is of the view that the members of the AC are appropriately qualified, having the necessary accounting or management expertise and experience to discharge their responsibilities.
The AC, regulated by a set of written terms of reference, comprises three members who are Independent non-executive Directors.
As at the date of this Report, the members of the AC are:
Bertie Cheng Shao Shiong (Chairman)
Lt-Gen (Ret) Ng Jui Ping
Chew Hai Chwee
The AC meets at least four times a year and as and when deemed appropriate to carry out its functions.
The AC has full access to and the co-operation of Management. The AC also has full discretion to invite any Director or executive officer to attend its meetings and has been given adequate resources to enable it to discharge its functions.
The functions of the AC are as follows:
The AC reviews arrangements by which the staff may, in confidence, report possible improprieties, which may cause financial or non-financial loss of the Company. The objective is to ensure that arrangements are in place, for the independent investigation of such concerns and for appropriate follow-up action.
The AC had reviewed the non-audit services provided by the external auditors, Deloitte & Touche LLP and is of the opinion that the provision of such services does not affect their independence.
Annually, the AC meets with the external auditors without the presence of Management. The AC had recommended the re-appointment of Deloitte & Touche LLP at the forthcoming AGM.
Principle 12:The Board to ensure that the management maintains a sound system of internal controls to safeguard the shareholders' investments and the company's assets, AC to review the adequacy of financial, operational and compliance controls and risk management policies.
The AC is fully aware of the need to put in place a system of internal controls within the Group to safeguard the shareholders' interests and the Group's assets, and to manage risks. The system is intended to provide reasonable but not absolute assurance against material misstatements or loss, and to safeguard assets and ensure maintenance of proper accounting records, reliability of financial information, compliance with appropriate legislation, regulation and best practices, and the identification and containment of business risks.
The Group regularly reviews and improves its business and operational activities to identify areas of significant business risks as well as taking appropriate measures to control and mitigate these risks. The Group reviews all significant control policies and procedures and highlights all significant matters to the AC and the Board. The financial risk management objectives and policies are outlined in the financial statements. Risk Management alone does not guarantee that business undertakings will not fail. However, by identifying and managing risks that may arise, the Group can make more informed decisions and benefit from a better balance between risk and reward. This will help protect and also create shareholders' value.
Based on the information provided to the AC, nothing has come to the AC's attention to cause the AC to believe that the system of internal controls and risk management is inadequate.
Principle 13: Setting up independent internal audit function
The Company has set up an internal audit function, which reports directly to the AC. The internal auditor has adopted the Standards for the Professional Practice of Internal Auditing set by The Institute of Internal Auditors.
The AC, on an annual basis, will assess the effectiveness of the IA by examining the scope of the IA work and its independence of areas reviewed and the internal auditor's report. The AC is satisfied that the IA function has adequate resources and appropriate standing within the Company to undertake its activities independently and objectively.
The AC will also meet the internal auditor without the presence of Management, annually.
Principle 14: Regular, effective and fair communication with shareholders
Principle 15: Shareholders' participation at AGM
The Board is accountable to the shareholders and the Company is in regular, effective and fair communication with shareholders. The Company has invested in external & internal resources to ensure timely, fair and detailed disclosure of information is made to the public in compliance with SGX-ST guidelines.
Material information is disseminated to the SGX-ST. The Company has participated in a leading external investor relations program on www.shareinvestor.com where shareholders are encouraged to sign up for regular updates about the Company.
In addition to the communication channels described above, the Company has made quarterly report of its financial results since financial year 2004 in compliance with new disclosure requirements.
All shareholders of the Company receive the Annual Report of the Company and notice of AGM within the mandatory period. Participation of shareholders is encouraged at the Company's general meetings. Each item of special business included in the notices of annual general meeting and extraordinary general meeting is accompanied, where appropriate, by an explanation for the proposed resolution. Separate resolutions are proposed for substantially separate issues at the meeting. The Board (including the Chairman of the respective Board Committees), management, as well as the external auditors will attend the Company's AGM to address any question that shareholders may have.
The Company has adopted an internal code on dealings in securities by officers of the Company and its subsidiaries to provide guidance to its officers on dealing in the Company's securities. All directors and officers of the Group who have access to unpublished price sensitive information are required to observe this code and are required to confirm their compliance annually.
The Directors and officers have been informed not to deal in the Company's securities whilst in possession of unpublished price sensitive information and during the periods commencing at least two weeks before the announcement of the Company's full-year results and results for first three quarters.
The Company has adopted an internal policy governing procedures for the identification, approval and monitoring of interested person transactions. All interested person transactions are subject to review by the AC. The AC reviews the Shareholders' Mandate at regular interval to ensure that the IPTs are transacted on normal commercial terms and will not be prejudicial to the interests of the Company and its minority shareholders.
The following are details of the aggregate value of interested person transactions for FY2010 undertaken pursuant to the Shareholders' Mandate under Rule 920(2) of the Listing Manual of the SGX-ST and approved by the AC.
The current Shareholders' Mandate will be expiring on 28 January 2011, being the date of the forthcoming SGM of the Company. The Company is proposing to seek shareholders' approval at a SGM to be held on 28 January 2011 to renew the Shareholders' Mandate pursuant to Chapter 9 of the SGX-ST Listing Manual. IPTs approved by shareholders at the SGM and the Shareholders' Mandate shall, unless revoked or varied by the Company in a general meeting, continue to be in force until the next AGM.
Save for the service agreements entered with the Executive Directors and the interested person transactions conducted under the Company's Shareholders' Mandate, no material contract involving the interests of any director or controlling shareholders of the Company has been entered into by the Company or any of its subsidiary companies in FY2010.
The Board has not delegated the oversight responsibility of risk management to a separate committee. However, the Executive Directors and Management regularly review the Company's business and operational activities to identify areas of significant business risks as well as appropriate measures to control and mitigate these risks. Management, with the assistance of the internal auditor and external auditor, reviews all significant control policies and procedures and highlights all significant matters to the directors and AC.