Corporate Governance

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. The Board and Management have used their best endeavour to align the Company’s governance framework with the recommendations of the Code of Corporate Governance 2012 (the “2012 CG Code”).

This report describes the Company’s main corporate governance policies and practices. The Company confirms that it is substantially in compliance with the 2012 CG Code and reasons for any deviation are explained below.

Board of Directors (As at the date of the publication of the last Annual Report)

Board’s Conduct of its Affairs
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 delegated specific responsibilities to three board committees namely, 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. These terms of reference had been amended to be in line with the recommendations of the 2012 CG Code. The Chairman of the respective committees will report to the Board on the outcome of the committee meetings.

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.

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. Details of Directors’ attendance at Board and Board committees meetings held in FY2014 are summarised in the table below:

Letters of appointment will be issued to new Directors setting out the director’s duties and obligations. Orientation programmes for newly appointed Directors are in place to ensure that they are familiar with the Group structure, 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.

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 Independent 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.

Board Composition and Guidance

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 Directors
Lt-Gen (Ret) Ng Jui Ping (Lead Independent Director)
Bertie Cheng Shao Shiong
Chew Hai Chwee

Alternate Directors
Ng Puay Yee (Alternate Director to Teh Hong Eng)
Chan Tak Hei (Alternate Director to Ng Joo Kwee)

The Board currently comprises 7 Directors with 3 Independent Directors. The Board is aware of the timeline to comply with the 2012 CG Code’s recommendation that independent directors should make up at least half of the Board where the Chairman and Managing Director are immediate family members.

The independence of each Director is reviewed annually by the NC, which has adopted the 2012 CG Code’s definition of what constitutes an independent director in its review. As a result of the NC’s review, the Independent Directors are considered independent.

The Executive Directors have extensive experience in the frozen seafood and shipping industry and the Independent Directors are well established in their respective professions and possess the relevant expertise and experience in areas such as accounting, finance and business management.

The Independent 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. In addition to the scheduled meetings, the Independent Directors meet annually as well as held informal discussions without the presence of Management and Executive Directors.

Details of Directors’ qualifications and experiences are set out on pages 9 to 11 (Profile of Directors and Key Management Personnel) of this Annual Report.

Chairman and Managing Director

Principle 3: Clear division of responsibilities at the top of the Company

The 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 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.

Taking cognisance of the non-separation of the roles of the Chairman of the Board and the Executive Chairman, Lt-Gen (Ret) Ng Jui Ping, an independent director who is also the Chairman of the NC and RC as well as a member of the AC, has been appointed as the Lead Independent Director with effect from 7 February 2014 in line with the recommendation of the 2012 CG Code. The role of the Lead Independent Director is set out under the written terms of reference, which has been approved by the Board. In addition to the scheduled board meetings, he leads meetings of Independent Directors annually as well as held informal discussions without the presence of Management and Executive Directors. He will also be available to shareholders if they have concerns relating to matters which contact through the normal channels of the Chairman, MD or CFO has failed to resolve, or where such contact is inappropriate.

Board Membership

Principle 4: Formal and transparent process for appointment of new directors to the Board

The Directors who held office during the financial year end and up to the date of this report are disclosed on page 12 (Report of the Directors) of this Annual Report. Their profiles are disclosed on page 3 (Corporate Information) and pages 9 to 11 (Profile of Directors and Key Management Personnel) of this Annual Report.

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 Committee

The NC, regulated by a set of written terms of reference, comprises three members, a majority of whom are Independent 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, the Lead Independent Director, who is not associated, directly or indirectly, with a substantial shareholder.

The terms of reference for NC was amended to be in line with the recommendations of the 2012 CG Code. 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 principal duties and functions are outlined as follows:

1. to review board succession plans for directors, in particular, the Chairman and for the MD;
2. to review, assess and make recommendations to the Board on the appointment and re-nomination having regard to the Director’s contribution and performance (e.g. attendance, preparedness, participation, candour, and any other salient factors);
3. to recommend Directors who are retiring by rotation to be put forward for re-election;
4. to determine annually whether a Director is independent in accordance with the independence guidelines contained in the 2012 CG Code;
5. to review whether a Director is able to and has adequately carried out his duties as a Director in particular where the Director concerned has multiple board representations and/or principal commitments;
6. to consider how the Board’s performance may be evaluated and propose objective performance criteria; and
7. to recommend comprehensive induction training programmes for new directors and to review training and professional development programmes for the Board.

In accordance with the Company’s Bye-laws, one-third of the Directors (other than the Chairman and/or MD) will have to retire by rotation and all newly appointed Directors will have to retire at the next Annual General Meeting (“AGM”). The retiring Director who is eligible will offer himself/herself for re-election. Accordingly, Mr Ng Joo Kwee, who is eligible will be offering himself for re-election at the forthcoming AGM.

The following Directors would have served on the Board for nine years or more by the next AGM to be held on 26 January 2015 as Independent Directors:

1. Mr Bertie Cheng, who has been an Independent Director since 29 December 1997, and
2. Lt-Gen (Ret) Ng Jui Ping who has been an Independent Director since 27 January 2006.

Nominating Committee – continued

The NC had rigorously reviewed Mr Bertie Cheng and Lt-Gen’s independence at the last NC meeting. Based on both the verbal and written confirmations given by Mr Cheng and Lt-Gen, the NC found no reason to understand that their length of services has in any way dimmed their independence. Given their combined strength of characters, objectivity and wealth of business, working experience and professionalism in carrying out their duties, the NC had found them suitable to continue to act as Independent Directors. The Board concurred with the NC’s view, and acknowledges and recognises the benefits of the experience and stability brought by these long-serving Independent Directors.

The NC has assessed that although some Directors have other board representations and principal commitments, they have devoted sufficient time and attention to their role as Directors and to the affairs of the Group. The NC believes that setting a limit on the number of directorships and principal commitments will not be meaningful as the contributions of the Directors should be determined through qualitative factors on top of quantitative factors as to whether he/she has the ability to discharge his/her duties as Directors.

Board Performance

Principle 5: Formal assessment of the effectiveness of the Board and its board committees and contributions by each Director

While the 2012 CG 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. For FY2014, the NC had extracted salient recommendations from the 2012 CG Code and incorporated these recommendations into the board evaluation form. Each of the AC, RC and NC has also reviewed its performance against the terms of reference to ensure that it has carried out its responsibilities.

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 an appropriate course of action is 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, MD/top management succession planning and the Directors’ standards of conduct.

Access to Information

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 fulfil 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.

Procedures for Developing Remuneration Policies

Principle 7: Formal and transparent procedure for developing policy on executive remuneration and for fixing remuneration packages of individual Directors

Remuneration Committee

The RC, regulated by a set of written terms of reference, comprises three members. All the members including the Chairman are Independent Directors. 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 terms of reference for RC was amended to be in line with the recommendations of the 2012 CG Code. The RC reviews and recommends to the Board the following matters:

1. the remuneration packages of all Directors and key management personnel of the Group;
2. fees for Independent Directors, subject to shareholders’ approval at the AGM;
3. the share-based incentives or awards or long term incentive schemes for Directors and key management personnel; and
4. all service contracts and terms of employment of the Executive Directors and key management personnel. The RC also has access to external professional advice on remuneration matters, if required.

The Board will table the RC’s recommendation of S$150,000 as Directors’ fees for the financial year ending 28 September 2015, to be paid yearly in arrears, at the forthcoming AGM for approval.

Other than the Directors’ fees for the Independent Directors, 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.

Level and Mix of Remuneration

Principle 8: The level of remuneration for Directors and key management personnel 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 key management personnel.

The Executive Directors do not receive Directors’ fees. The Executive Directors’ and key management personnel’s 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 and allows the Company to reclaim, where appropriate incentive components of remuneration in exceptional circumstances of misstatement of financial results, or of misconduct resulting in financial loss to the Company.

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 AGM.

The Company has in place the 2012 Option Scheme and the Share Awards Scheme, details of which are disclosed on pages 14 to 17. 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 Bye-Laws 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 hold them as treasury shares. These treasury shares may be offered to the Group’s employees through the Share Awards Scheme, where applicable. As at the date of this report, no shares has been repurchased or held as treasury shares.

Disclosure on Remuneration

Principle 9: Clear disclosure of remuneration policy, level and mix of remuneration, and the procedure for setting the remuneration

We believe that the disclosure in bands of S$250,000 provides sufficient overview of the remuneration of the Directors. The remuneration for the financial year ended FY2014 is shown as below:

We have provided a Group-wide cross-section of top five key management personnel’s remuneration and their names in bands of S$250,000. This disclosure, which provides sufficient overview of the remuneration of the Group while maintaining confidentiality of staff remuneration matters, is in the best interests of the Group given the competitive conditions in our industry.

Top 5 Key Management Personnel (who are not Directors)*

The aggregate remuneration of the top key management personnel (who are not Directors) paid in FY2014 amounted to S$1,305,000.

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$50,000 during FY2014 except for Mr Ng Joo Siang (Chairman), Mr Ng Joo Puay Frank (MD), Mdm Teh Hong Eng (Executive Director) and Mr Ng Joo Kwee (Executive Director).

Mdm Teh Hong Eng is the mother of Ng Joo Siang, Ng Joo Puay Frank and Ng Joo Kwee.

Accountability

Principle 10: The 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. Management is accountable to the Board by providing the Board with the necessary financial information for the discharge of its duties.

Risk Management and Internal Controls

Principle 11: The Board to ensure that Management maintains a sound system of risk management and internal controls to safeguard the shareholders’ interests and the Company’s assets, and determine the nature and extent of the significant risks which the Board is willing to take in achieving its strategic objectives

The Company maintains an effective system of internal controls addressing financial, operational, compliance and information technology risks. These controls are designed to provide reasonable assurance on the effectiveness and efficiency of operations, reliability of financial reporting and compliance with applicable laws and regulations.

The effectiveness of these controls is subject to review by the Group’s Internal Audit department and is monitored by the AC. In addition, the Company’s external auditors also review the effectiveness of the Group’s key internal controls as part of their audit for the year with respect to financial reporting. Significant non-compliance in internal controls, together with recommendations for improvement, is reported to the AC. A copy of this report is also issued to the relevant department for follow-up action.

The Company has established in FY2014 a risk management committee (“RMC”), comprising key management personnel from various business functions, to oversee the implementation of the enterprise risk management framework through continuous comprehensive review of the Group’s key risk areas and identification of internal controls, in particular, financial, operational, compliance and information technology risks. The RMC reports directly to the AC on a quarterly basis to keep the AC apprised on the Group’s risk management progress.

The Board, through the AC, will continuously identify, review and monitor the key risks, control measures and management actions as part of the risk management process.

The Board has received assurance from the Executive Chairman and Group Financial Controller:

• That the financial records of the Group have been properly maintained and the financial statements for FY2014 give a true and fair view of the Group’s operations and finances; and
• Regarding the effectiveness of the Group’s risk management systems and internal control systems.

Based on the internal controls established and maintained by the Group, work performed by the Internal and External Auditors, and reviews performed by Management, various Board Committees and the Board; the Board with the concurrence of the AC, is of the opinion that the internal controls in place are adequate in addressing the Group’s financial, operational, compliance and information technology risks in its current business environment.

Audit Committee

Principle 12: Establishment of Audit Committee with written terms of reference

The Company has adopted and has complied with the principles of corporate governance under the 2012 CG Code in relation to the roles and responsibilities of the AC. The AC comprises all Independent Directors. 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.

Profile of the AC members is set out on pages 10 and 11 (Profile of Directors and Key Management Personnel) of this Annual Report. 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 is authorised to investigate any matters within its terms of reference, 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 terms of reference for AC was amended to be in line with the recommendations of the 2012 CG Code. The functions of the AC are as follows:

1. assists our Board in discharging its statutory responsibilities on financial and accounting matters;
2. reviews the financial and operating results and accounting policies of the Group;
3. reviews significant financial reporting issues and judgments relating to financial statements for each financial year, interim and annual results announcement before submission to the Board for approval;