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The Cornerstones of Sustainability
Samko Timber : Unlimited Possibilities
The Board of Directors (the “Board” or the “Directors”) of Samko Timber Limited (the “Company”) is committed to setting and maintaining high standard of corporate governance to ensure greater corporate transparency, accountability, performance and integrity. The Company has substantially complied with the revised Code of Corporate Governance 2012 (the “Code”) through effective self-regulatory corporate practices to protect and enhance the interests and value of its shareholders.
This report describes the Company’s corporate governance practices with specific reference to the Code in its Annual Report. Unless otherwise stated, the principles and guidelines of the Code have been complied with.
Principle 1: Effective Board to lead and control the Company
The Board oversees the business affairs of the Company and its subsidiaries (collectively the “Group”) and is responsible for setting the strategic direction of the Group establishing goals for Management. In addition, the Board works with Management to achieve these goals set for the Group. To ensure smooth operations, facilitate decision-making and ensure proper controls, the Board has delegated some of its powers to its Committees and Management. The Board Committees and Management remain accountable to the Board.
Apart from the statutory responsibilities, the Board is responsible for the overall management of the Group and the review and monitoring of the Group’s operations, including:
1. The review of the Group’s financial performance;
2. The approval of the nomination/appointment of Directors and key management personnel;
3. The review and approval of annual budgets, major funding proposals, potential investment and divestment proposals, including material capital investments;
4. Responsibility for corporate governance; and
5. To ensure that the Group maintains a sound system of risk management and internal controls to safeguard shareholders’ interests and the Group’s assets.
The following matters are specifically reserved for the Board’s decision and approval:
1. Financial results announcements;
2. Annual Reports and accounts;
3. Corporate strategies and financial restructuring; and
4. Major investment or acquisition/disposal proposals, including any other transactions of a material nature requiring announcement under the listing rules of the Singapore Exchange Securities Trading Limited (“SGX-ST”).
The Board is supported by four Board Committees, namely, the Audit Committee (“AC”), the Nomination Committee (“NC”), the Remuneration Committee (“RC”) and the Board Risk Committee (“BRC”). Each Committee has its own specific Terms of Reference or Charter setting out the scope of its duties and responsibilities, rules and regulations, and procedures governing the manner in which it is to operate and how decisions are to be taken. The Chairman of the 26 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.
The Board is free to request for further clarification and information from 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.
During the financial year ended 31 December 2014 (“FY2014”), the Board met four times to review the Company’s quarterly and full-year results and to consider proposed corporate actions by the Company. Ad-hoc meetings are held to address significant issues or transactions. The Company’s Articles of Association (“Articles”) allow a Board meeting to be conducted by way of a telephone conference and/or by means of similar communication equipment where all Directors participating in the meeting are able to hear each other. Decision of the Board and Board Committees may also be obtained through circular resolutions.
The number of meetings held by the Board and Board Committee and attendances of Directors at the meetings during FY2014 is set out as follows:
* Attendance by invitation of the relevant Board Committee
The Board is of the view that the contribution of each Director should not be focused only on his attendance at meetings of the Board and/or Board Committees. A Director's contribution may also extend beyond the confines of the formal environment of such meetings, through the sharing of views, advices, experiences and strategic networking relationships which would further the interests of the Company.
The Company has adopted internal guidelines setting forth matters that require the Board's approval. Under the guidelines, all new investments, any increase in investment in businesses and subsidiaries, and any divestments by any of the Group's companies, and all commitments to term loans and lines of credit from banks and financial institutions by the Company require the approval of the Board.
Generally, a formal letter of appointment is provided to the newly appointed Directors setting out their duties and obligation as a Director in respect of potential conflicts of interest, their interested person transactions and disclosure of Director's interests.
The Board recognises the importance of appropriate orientation training and continuing education for its Directors. All the Directors are encouraged to attend seminars, conferences or any courses in connection to new laws, regulations and risk management (including management of commercial, financial, operational and compliance risks) conducted by professional bodies, including active participation in the Singapore Institute of Directors.
Where required, the Company Secretaries and external professionals bring to the Directors' attention relevant updates in the industry and changes in accounting standards and regulations.
Newly appointed Directors are given orientation briefings by Management on the business activities of the Group and its strategic directions, so as to familiaris them with the Group's operations and encourage effective participation in Board discussions. All Directors are updated on major milestones of the Group.
The Board consists of eight Directors, seven of whom are Non-Executive Directors of which three are Independent Directors:
Koh Boon Hong
Aris Sunarko @ Ko Tji Kim: Chief Executive Officer ("CEO")
Michael Joseph Sampoerna
Eka Dharmajanto Kasih
Koh Tji Kiong @ Amir Sunarko
Ng Cher Yan: Lead Independent Director
Sim Idrus Munandar
Wee Ewe Lay Laurence John
The profiles of the Directors are set out on pages 12 to 15 of this Annual Report. The Directors of the Company come from diverse backgrounds and possess core competencies, qualifications and skills, all of whom as a group, provides the Board with a good mix of the necessary experience and expertise to direct and lead the Group. Their combined wealth and diversity of experience enable them to contribute effectively to the strategic growth and governance of the Group. The Board is of the view that the current Board size and composition is appropriate, taking into account the scope, nature and size of operations of the Group.
In addition, the Company benefited from Management's ready access to its Directors for guidance and exchange of views both within and outside of the formal environment of the Board and Board Committees meetings. The NC conducted its annual review of the Directors' independence in accordance with the Code's definition of what constitutes an Independent Director. In its deliberation as to the independence of a Director, the NC take into consideration whether a Director has any business relationships with the Group, and if so, whether such relationships could interfere, or be reasonably perceived to interfere, with the exercise of the Director's independent judgement. The Independent Directors constructively challenge and assist in the development of proposals on strategy, and assist the Board in reviewing the performance of Management in meeting agreed goals and objectives, and monitor the reporting of performance.
None of our Independent Directors has served on our Board beyond nine years from the date of his first appointment. The Independent Directors meet amongst themselves without the presence of Management when necessary.
Different individuals assumed the Chairman's and the CEO's roles and the division of responsibilities between the Chairman and the CEO have been clearly established:
(a) To maintain effective supervision and ensure a balance of power and authority; and
(b) To ensure an appropriate balance of power, increased accountability and greater capacity of the Board for independent decision-making.
The Non-Executive Chairman, Mr Koh Boon Hong, brings with him a wealth of experience, leads the Board and bears responsibility for the working of the Board. Mr Koh ensures that the Board receives accurate, timely and clear information and that the Board meetings are held as and when necessary, and sets agenda of the Board meetings in consultation with the other Directors and Management. He assists in ensuring compliance with the Group's guidelines on corporate governance and facilitating the effective contribution of Non-Executive Directors.
The CEO, Mr Aris Sunarko @ Ko Tji Kim, is responsible for the day-to-day operations of the Group and steering the strategic direction and growth of the Group's business. Mr Aris regularly communicates with the Chairman and the Board to update them on corporate issues and developments.
The Lead Independent Director, Mr Ng Cher Yan, is responsible for leading and coordinating the activities of the Non-Executive and Independent Directors and serve as a principal liaison on Board issues between the Non-Executive and Independent Directors and the Chairman of the Board. The Lead Independent Director is available to shareholders who have concerns for which contact through the normal channels of the Chairman, CEO, Executive Directors or Chief Financial Officer ("CFO") have failed to resolve or for which such contact is inappropriate.
Objectivity and independence of the Board decisions are maintained through the professionalism of each member of the Board, including the Non-Executive and Independent Directors, who have demonstrated a high level of commitment in their roles as Directors of the Company.
The NC comprises the following three members, all of whom are Non-Executive and Independent Directors. The NC Chairman is not associated in any way with the 10% shareholders of the Company.
Sim Idrus Munandar: Chairman
Ng Cher Yan: Member
Wee Ewe Lay Laurence John: Member
The NC is regulated by a set of written Terms of Reference and is responsible for making recommendations to the Board on all Board appointments and re- appointments through a formal and transparent process, which includes internal guidelines to address the conflict of competing time commitments that are faced by Directors with multiple board representations. In respect of re-nominations, the NC will consider the individual Director's contribution and performance and whether the Director has adequate time and attention to devote to the Company, in the case of Directors with multiple board representations.
The responsibilities and principal functions of the NC, as set out in its Terms of Reference, include:
(a) Reviewing board succession plans for Directors, in particular, the Chairman and the CEO;
(b) Conducting a formal assessment on the effectiveness of the Board as a whole and to assess the contribution by each individual Director to the effectiveness of the Board, particularly when a Director serves on multiple Boards;
(c) Reviewing and assessing candidates for directorships (including executive directorships) before making recommendations to the Board for the appointment and re-appointment of Directors;
(d) Reviewing and recommending to the Board the retirement or re-election of Directors in accordance with the Articles of the Company at each annual general meeting ("AGM");
(e) Recommending to the Board the re-appointment of any Director, who is over 70 years of age, at each AGM;
(f) Reviewing the structure, size and composition of the Board annually to ensure that the Board has an appropriate balance of independent and non- independent Directors and ensuring an appropriate balance of expertise, skills, attributes and ability among the Directors;
(g) Establishing procedures for evaluation of the performance of the Board, it's Board Committees and Directors, and proposes objective performance criteria which shall be approved by the Board;
((h) Determining annually the independence of Directors, in accordance with applicable codes and guidelines; and
(i) Deciding whether the Directors have been and will continue to contribute effectively and demonstrate commitment to their roles and duties as a Director of the Company adequately, taking into consideration each Director's number of listed company board representations and other principal commitments.
In accordance with Article 94 of the Company's Articles, every Director shall retire from office once every three years and at each AGM, one-third of the Directors shall retire from office by rotation. In addition, Article 95 provides that the retiring Directors are eligible to offer themselves for re-election and Article 100 provides that all newly appointed Directors shall hold office only until the next AGM and are eligible to offer themselves for re-election.
During FY2014, the NC had met once to:
(a) Assess and review the Board size and competency mix;
(b) Assess and evaluate effectiveness of the Board and the Board's performance as a whole;
(c) Assess and review the independence of each Independent Director, including those with multiple directorships in other companies; and
(d) Review and recommend the re-election and re-appointment of Directors retiring pursuant to the Articles and Section 153(6) of the Companies Act, Cap. 50 ("Act").
Accordingly, 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 Messrs Koh Tji Kiong @ Amir Sunarko, Eka Dharmajanto Kasih and Sim Idrus Munandar who will retire pursuant to Article 94 of the Articles at the forthcoming AGM of the Company.
The Board has also accepted the NC's nomination of the re-appointment of Mr Koh Boon Hong, who is over 70 years of age, as Director of the Company pursuant to Section 153(6) of the Act at the forthcoming AGM of the Company.
The NC has reviewed the independence of Messrs Ng Cher Yan, Wee Ewe Lay Laurence John and Sim Idrus Munandar, and is satisfied that there are no relationships which would deem any of them not to be independent. In reviewing the independence, the NC has considered the relationships identified by the Code and additionally, the Independent Directors are also independent of the substantial shareholders of the Company.
When a Director has multiple board representations, the NC also considers whether or not the Director is able to and has adequately carried out his duties 32 as a Director of the Company, taking into consideration the Director's number of listed company board representations and other principal commitments. Based on the individual Director's confirmation to the NC on his ability to carry out his duties as a Director of the Company and to address any competing time commitments that may arise, the NC believes that it would not be necessary to put a maximum limit on the number of listed company board representations of each Director.
The NC has evaluated the competing time commitments faced by Directors serving on multiple boards during the year and is satisfied that the Directors have spent adequate time on the Group's affairs to fulfil their responsibilities.
Information in respect of the academic and professional qualification, and directorship or chairmanship, both present and those held over the preceding three years in other listed companies, is set out in the "Board of Directors" section of the Annual Report. In addition, information on shareholdings in the Company and its related companies held by each Director is set out in the "Directors' Report" section of the Annual Report.
The NC, guided by its Terms of Reference, had decided on how the Board's performance is to be evaluated and has developed objective performance criteria, which address how the Board has enhanced long-term shareholders' value. The NC has also implemented a process for assessing the effectiveness of the Board as a whole, as well as the contribution of each Director to the effectiveness of the Board.
The evaluation of the Board's performance is carried out on an annual basis, and the performance criteria for the Board evaluation covers amongst other criteria, Board composition, Board processes, Board accountability, CEO performance and succession planning and standard of conduct of the Board. Each Director assesses the Board's performance as a whole by providing feedback to the NC.
The NC is of the view that each individual Director has contributed to the effectiveness of the Board as a whole. During FY2014, the NC has conducted the assessment by preparing a performance evaluation questionnaire to be completed by each Director, of which were then collated and the findings were analysed and discussed with a view to implementing certain recommendations to further enhance the effectiveness of the Board. The results of the NC's assessment for FY2014 has been communicated to and accepted by the Board.
The NC reviewed the mix of skills and experiences of the Directors that the Board requires to function competently and efficiently in achieving the Group' strategic objectives. When reviewing the Board's performance for FY2014, the NC is 33 satisfied that the Board has a good mix of skills and expertise to meet the needs of the Group and noted the following points:
(a) Feedback received from the Directors and acted on their comments accordingly; and
(b) Individual Director's attendance at meetings of the Board, Board Committees and general meetings, individual Director's functional expertise and his commitment of time to the Company.
The Chairman, in consultation with the NC, will, if necessary, propose steps to be undertaken to strengthen the Board's leadership so as to improve the effectiveness of the Board's oversight of the Company.
To enable the Board to function effectively and to fulfil its responsibilities, Management recognises its obligation to supply the Board and the Board Committees with complete, adequate information in a timely manner. In addition, all relevant information on the Group's annual budgets, financial statements, material events and transactions complete with background and explanations are circulated to Directors as and when they arise. A system of communication between Management and the Board has been established and will improve over time.
Each Director has been provided with the up-to-date contact particulars of the Company's key management personnel and the Company Secretaries to facilitate access to any required information. The Company Secretaries attends all meetings of the Board and the Board Committees and are responsible in ensuring that Board procedures and all other rules and regulations applicable to the Company are complied with. The appointment and removal of the Company Secretaries are subject to approval of the Board as a whole.
In furtherance of their duties, the Directors, individually or as a group, may seek independent professional advice on matters relating to the businesses of the Group, at the Company's expense, subject to approval by the Board.
The RC comprises the following three members, all of whom are Non-Executive and Independent Directors.
Wee Ewe Lay Laurence JohnChairman
Ng Cher Yan: Member
Sim Idrus Munandar: Member
The RC is regulated by a set of written Terms of Reference. Its key functions include:
(a) Reviewing and recommending to the Board a framework of remuneration for each Director and key management personnel that are competitive and sufficient to attract, retain and motivate key management personnel of the required quality to run the Company successfully;
(b) Reviewing and determining specific remuneration packages and terms of employment for each Director and key management personnel, which cover all aspect of remuneration including Directors' fees, salaries, allowances, bonuses and benefits-in-kind;
(c) Determining the appropriateness of the remuneration of the Independent Directors takings into consideration the level of their contribution; and
(d) Reviewing and recommending to the Board the terms of renewal of the service contracts of Directors.
During FY2014, the RC had met twice to review, determine, and recommend to the Board:
(a) A framework of remuneration and the specific remuneration packages and terms of employment for each Director and key management personnel, to ensure that Directors are adequately but not excessively remunerated; and
(b) The payment of Directors' fees for the financial year ending 31 December 2015, payable quarterly in arrears, which are subject to the shareholders' approval at the AGM of the Company.
The RC also considered, in consultation with the CEO, amongst other things, their responsibilities, skills, expertise and contributions to the Group's performance and whether the remuneration packages are competitive and sufficient to ensure that the Group is able to attract and retain the best available executive talent.
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 is involved in fixing his own remuneration. Independent Directors are paid Directors' fees annually on a standard fee basis.
Each member of the RC abstains from making any recommendation on or voting on any resolutions in respect of his own remuneration package, except for providing information and documents specifically requested by the RC to assist it in its deliberations.
The RC reviews the terms and conditions of service agreements of the CEO before their execution. In the course of such review, the RC will consider the Group's obligations arising in the event of termination of Executive Director and key management personnel, to ensure that the service agreements contain fair and reasonable termination clauses and are not overly generous so as to avoid rewarding poor performance.
The annual reviews of the compensation are carried out by the RC to ensure that the remuneration of the CEO and key management personnel 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 remuneration of the CEO and the key management personnel comprises primarily a basic salary component, an annual supplement equivalent to one month basic salary during each Muslim Hari Raya month and a variable component which is inclusive of bonuses and other benefits.
Currently, the Company does not have any long-term incentive schemes.
Directors' fees are set in accordance with a remuneration framework based on the level of responsibility and scope of work. The CEO does not receive any Directors' fee, whilst the Non-Executive Directors are paid 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 for approval by the shareholders at the AGM of the Company. The Board has endorsed the remuneration framework.
The Company does not use contractual provisions to allow the Group to reclaim incentive components of remuneration from the CEO and key management personnel in exceptional circumstances of misstatement of financial results, or of misconduct resulting in financial loss to the Company. The CEO owes a fiduciary duty to the Company. The Company should be able to avail itself to remedies against the CEO in the event of such breach of fiduciary duties.
The service agreement entered into with the CEO is for a period of three years effective from 1 May 2014 and will continue for a further term of three years unless otherwise terminated by either party upon giving not less than six months' notice in writing to the other.
None of the Non-Executive Directors is on a service contract with the Company.
The Board has not included a separate annual remuneration report to shareholders in the Annual Report on the remuneration of Directors and the top five key management personnel (who are not Directors or the CEO) as the Board is of the view that the matters which are required to be disclosed in such annual remuneration report have already been sufficiently disclosed in this report and in the financial statements of the Company.
During the financial year, there were no termination, retirement and post- employment benefits granted to Directors (including the CEO) and the top five key management personnel (who are not Directors or the CEO) of the Company and the Group.
The remuneration of each individual Director and key management personnel of the Group and the aggregate total remuneration to key management personnel are however not disclosed as the Company believes that disclosure may be prejudicial to its business interests given the highly competitive environment it is operating in. The RC has reviewed the practice of the industry in this regard, weighing the advantages and disadvantages of such disclosure.
A breakdown of the level and mix of the remuneration payable to each individual Director for FY2014 are set out below:
Remuneration of Key Management Personnel (who are not Directors or the CEO)
The Company advocates a performance-based remuneration system taking into account the performance of individuals and the Company's performance.
A breakdown of the ranges of gross remuneration paid in FY2014 to the Group's key management personnel (who are not Directors or the CEO) in the Company and in the Group's subsidiaries, excluding any associated companies, are set out below:
(1) Resigned on 5 January 2015
The total remuneration paid to the key management personnel is set out on page 123 of this Annual Report.
There are no employees who are immediate family members of any of the Directors and/or the CEO whose remuneration exceeded S$50,000 for FY2014. No remuneration or compensation was paid or is to be paid in the form of share options, since the Company does not currently have any plan to implement share option or share incentive plans. However this does not rule out the possibility of the Company doing so in the future.
The Board recognises that it is accountable to shareholders for the performance of the Group. In discharging this responsibility, the Board ensures the timely release of the Group's financial results and that the results provide a balanced and understandable assessment of the Group's performance, financial position and prospects.
To assist the Board in discharging its responsibility, the Company has established a system whereby business and finance heads of individual subsidiaries and business units provide written representations, to Management who would in turn furnish an overall representation to the AC and the Board confirming, inter alia, the integrity of the Group's financial statements.
Management keeps the Board regularly updated on the Group's business activities and financial performance by providing operations reports on a regular basis. Such reports include information on:
- The Group's actual performance against the approved budget and where appropriate, against forecast; and
- Key business indicators and major issues that are relevant to the Group's performance.
The Board is responsible for the governance of risk and sets the direction for the Group in the way risks are managed in the Group's businesses. The Board believes in the importance of maintaining a sound system of internal controls, including financial, operational, compliance and information technology controls, and risk management systems to safeguard the interests of the shareholders and the Group's assets. To achieve this, internal reviews are constantly being undertaken to ensure that the system of internal controls maintained by the Group is sufficient to provide reasonable assurance that the Group's assets are safeguarded against loss from unauthorised use or disposition, transactions are properly authorised and proper financial records are being maintained.
The Board had established a BRC to assist the Board to ensure that the Group maintains a robust and effective system of internal controls and to evaluate the adequacy of the Group's internal controls that address the Group's financial, operational, compliance and information technology controls, and risk management systems.
The BRC comprises the following five members, of whom one CEO, two Independent Directors and two key management personnel:
Trenggono Purwosuprodjo: Chairman
Aris Sunarko @ Ko Tji Kim: Member
Ng Cher Yan: Member
Sim Idrus Munandar: Member
Sujoko Martin (appointed on 26 February 2015): Member
The BRC had adopted a set of written Board Risk Committee Charter defining its membership and its duties and responsibilities, which include:
(a) Monitoring of all material enterprise risks within the framework of enterprise risk management as approved by the Board. The BRC recognises that there are responsibilities delegated by the Board to its Board Committees and understands that the Board Committees may emphasise specific risk monitoring through their respective activities;
(b) Reviewing and discussing with Management the Company's risk assessment and risk management practices and related guidelines, policies and processes, as well as the adequacy of resources to perform its risk management responsibilities under the risk governance;
(c) Reviewing and discussing with Management the Company's risk appetite and strategy relating to key risks, including credit risk, liquidity and funding risks, market risk, operational risk, compliance risk and information technology risk, as well as the guidelines, policies and processes for their control, monitor and mitigating actions;
(d) Overseeing the standards in relation to risk tolerances adopted by the Company. The standards will be reviewed annually to take into account changes in the internal and external environments as well as reports of the AC and findings from the internal auditors;
(e) Meeting with the Chairman and/or other members of the Board Committees to discuss the Company's corporate risk management framework and internal control areas;
(f) Reviewing and recommending to the Board the approval of any major transactions or decisions affecting the Company's risk profile or exposure (if any); and
(g) Reporting to the Board regarding the BRC's regular findings and recommendations, including any major transactions covered by the BRC at each BRC meeting, and providing additional reports to the Board as the BRC may determine appropriate.
The BRC met four times during FY2014 to review the enterprise risk management which focused on the operational, financial, compliance and information technology aspects of the Group. The Chairman of the BRC had reported the findings and recommendations to the Board during the Board meetings.
The BRC has reviewed the Group's financial controls and risk management policies and processes, and based on its assessment and reports of the external auditors and internal auditors, the BRC is assured that adequate internal controls are in place.
As for the operational and compliance controls, the Group has periodically reviewed these control areas through the various heads of department, and has continuously made improvements with the assistance of the internal auditors.
For FY2014, the Board has received assurance from the CEO, the CFO and the internal auditor of the Company that:
(a) the financial records have been properly maintained and the financial statements give a true and fair view of the Group's operations and finances; and
(b) The system of risk management and internal control in place within the Group (including financial, operational, compliance and information technology controls) are sufficiently adequate and effective in addressing the material risks in the Group in its current business environment.
Based on the internal controls maintained by the Group, work performed by the internal audit team and the BRC during the financial year under review, as well as the statutory audit by the external auditors, and the reviews performed by Management, the Board, with the concurrence of the AC, is of the opinion that the system of internal controls in place by the Group, is adequate and effective to address all material aspects of the financial, operational, compliance and information technology controls, and the risk management systems, are adequate and effective to meet the needs of the Group for the type and volume of businesses conducted in the current business environment.
The system of internal controls and risk management established by the Group provides reasonable, but not absolute, assurance that the Group will not be adversely affected by any event that can be reasonably foreseen as the Group strives to achieve its' business objectives. However, the Board also notes that no system of internal controls and risk management can provide absolute assurance in this regard, or absolute assurance against the occurrence of material errors, poor judgment in decision-making, human error, losses, fraud or other irregularities.
Information in relation to the Group's risk management objectives and policies is disclosed in the notes to the financial statement on pages 124 to 127.
The AC comprises the following three members, all of whom are Non-Executive and Independent Directors.
Ng Cher Yan
Wee Ewe Lay Laurence John
Sim Idrus Munandar Chairman
The Board is of the opinion that the AC members are appropriately qualified to discharge their responsibilities. Two of the members, Messrs Ng Cher Yan and Sim Idrus Munandar, have accounting or related financial management background, while Wee Ewe Lay Laurence is the Managing Partner of a law firm. All members are familiar with financial statements.
As the Lead Independent Director and the AC Chairman, Mr Ng Cher Yan's scope of work also include leading the AC in its' role in reviewing interested person transactions undertaken by the Group and being available to shareholders where they have concerns which have been raised through the normal channels of the Chairman or the CFO but have not been resolved or for which such contact is inappropriate.
None of the AC members is a former partner or Director of the Company's existing auditing firm or auditing corporation within a period of twelve months commencing on the date of his ceasing to be partner of the auditing firm or a Director of the auditing corporation; and in any case, a person has any financial interest in the auditing firm or auditing corporation.
The AC is regulated by a set of written Terms of Reference. The principal functions of the AC include:
(a) Reviewing the financial reporting process including but not limited to the audit plans of the external auditors and, where applicable, the internal auditors, including the results of the auditors' review and evaluation of the Group's system of internal accounting, operational and compliance controls and risk management policies and systems and ensuring co-ordination between the internal and external auditors and Management at least annually. The AC also ensures that a review of the effectiveness of the Group's internal controls is conducted at least annually;
(b) Reviewing the Group's financial results announcements before submission to the Board for approval prior to release to the SGX-ST;
(c) Reviewing the consolidated financial statements and the external auditors' report on those financial statements, and discussing any significant adjustments, major risk areas, changes in accounting policies, compliance with Financial Reporting Standard, concerns and issues arising from their audits including any matters which the external auditors may wish to highlight and discuss in the absence of Management, where necessary, before submission to the Board for approval;
(d) Reviewing and discussing with the external auditors any suspected fraud, irregularity or infringement of any relevant laws, rules or regulations, which has or is likely to have a material impact on the operating results and/or financial position and Management's response;
(e) Reviewing the co-operation of Management with the auditors;
(f) Reviewing the non-audit services provided by the external auditors as part of the AC's assessment of the external auditors' independence;
(g) Considering the appointment, re-appointment and removal, approving the remuneration and engagement of the external auditors and reviewing the independence and objectivity of the external auditors annually;
(h) Reviewing any transactions falling within the scope of Chapters 9 and 10 of the SGX-ST Listing Manual;
(i) Reviewing all hedging policies of, and instruments used for hedging by, the Group (if any);
(j) Undertaking other reviews and projects as may be requested by the Board and reporting to the Board its findings from time to time on matters arising and requiring the attention of the AC;
(k) Reviewing potential conflicts of interest (if any);
(l) Ensuring that arrangements are in place for employees to raise concerns, in confidence, about possible improprieties in matters of financial reporting or other matters; and
(m) Undertaking such other functions and duties as may be required by applicable law or the SGX-ST Listing Manual, and by such amendments made thereto from time to time.
Apart from the duties listed above, the AC will:
i. Commission and review the findings of internal investigations into any matters where there is any suspected fraud or irregularity, or failure of internal controls or infringement of any Singapore law, rule or regulation which has or is likely to have a material impact on the Company's operating results and/or financial position; and
ii. Ensure that the appropriate follow-up actions are taken.
The AC met four times during FY2014 to review the audit plan/report, the audit findings, the reports on interested person transactions, the reports on internal audit activities for the year (including updates on the findings in relation thereto) and the announcements of the quarterly and full-year results before being approved by the Board for release to the SGX-ST.
The AC is authorised by the Board to investigate any matters within its Terms of Reference. It has unrestricted access to information pertaining to the Group, to both internal and external auditors, and to all employees of the Group. Reasonable resources have been made available to the AC to enable it to discharge its duties properly.
The AC has met with the external auditors and internal auditor, without the presence of the Company's Management. As there are no non-audit services provided by the external auditors for the year under review, the AC is of the view that the objectivity and independence of the external auditors in 2014 were not prejudiced. The fees payable to auditors is set out on page 95 of this Annual Report.
The AC will undertake a review of the scope of services provided by the external auditors, the independence and the objectivity of the external auditors on annual basis. Messrs Ernst & Young LLP, the external auditors of the Company, has confirmed that they are a Public Accounting Firm registered with Accounting and Corporate Regulatory Authority and provided a confirmation 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, given the size and complexity of the Group. The AC is satisfied that the appointment of external auditors is in compliance with the requirements of Rule 712 of the SGX-ST Listing Manual. Accordingly, the AC has recommended the re-appointment of Messrs Ernst & Young LLP as external auditors for the ensuing year at the forthcoming AGM of the Company.
In accordance with the requirements of Rule 715 of the SGX-ST Listing Manual, the AC and the Board, having reviewed the appointment of different auditors for the Company's subsidiaries, are satisfied that these appointments would not compromise the standard and effectiveness of the audit of the Group.
The Company has put in place a whistle-blowing policy in August 2008 to provide employees with an avenue to raise concerns about possible improprieties in financial reporting of other matters, and the AC is satisfied that arrangements are in place for the independent investigation of such matters and for appropriate follow-up action. Details of the policy and arrangements have been made available to the employees.
The Board recognises the importance of maintaining a sound system of risk management and internal controls to safeguard the shareholders' investments and the Group's assets. The AC has been assigned to oversee and ensure that such a system has been appropriately implemented and monitored.
The Company has an in-house internal audit team to review the effectiveness of the Group's internal controls, including the adequacy of the Group's internal financial, operational, compliance and information technology controls. Internal 45 audit findings, recommendations and actions taken by Management on the recommendations were reported to the AC. The in-house internal audit team is independent of the activities of it audits. The internal auditor's ("IA") primary line of reporting is to the AC Chairman and the AC will continue on an annual basis:
• To review the adequacy of the Group's internal controls;
• To review the adequacy of the internal audit function, its activities and organizational structure to ensure that no unjustified restrictions or limitations are imposed;
• To review and approve the annual internal audit plan to ensure that there is sufficient coverage of the Group' activities; and
• To oversee the implementation of the internal audit plan and ensure that Management provides the necessary co-operation to enable the IA to perform his functions and duties. All improvements to controls recommended by the IA and accepted by the AC will be monitored for implementation.
The AC is satisfied that the IA is a qualified and experienced personnel.
The IA plans its internal audit schedules in consultation with, but independent of, Management. The audit plan is submitted to the AC for approval prior to the commencement of the internal audit work.
The AC reviews the activities of the IA on a regular basis, including overseeing and monitoring the implementation of the improvements required on internal control weaknesses identified. The AC reviews the adequacy and effectiveness of the internal audit function on an annual basis and is satisfied with its adequacy and effectiveness.
In line with the continuous disclosure obligations of the Company, under the SGX-ST Listing Manual and the Act, the Board has established a policy to inform shareholders promptly of all major developments that may impact materially on the Company and/or the Group.
The Board embraces openness and transparency in the conduct of the Group's affairs, whilst safeguarding the commercial interests of the Group. The Company does not practice selective disclosure.
The Group's results and other material information are released through the SGXNet on a timely basis for dissemination to shareholders and the public in accordance with the listing requirements of the SGX-ST. Copies of the Annual Report, the Circular and the Notices of the AGM and/or Extraordinary General Meeting ("EGM"), where applicable, are sent to every shareholder of the Company. The Notices of the general meetings are also published in a major local newspaper and announced via SGXNet and made available on the Company's website at http://www.samkotimber.com/web/html/index.php.
Each distinct issue requiring shareholders' approval is proposed as a separate resolution at the general meetings. In addition, shareholders' participation is encouraged at the general meetings to ensure a high level of accountability and to be informed of the Group's strategy and goals. The AGM and/or EGM are the principal forum for dialogue with shareholders. The Board welcomes questions from shareholders who have an opportunity to raise issues either informally or formally before or at the general meetings. The Board including the Chairmen of the AC, RC, NC and BRC, as well as the key management of the Company are present and available to address questions of the shareholders with the assistance of the external auditors, when necessary.
The Company allows any shareholder, who is unable to attend the general meetings in person, to appoint not more than two proxies to attend and vote in his/her place at the general meetings via proxy forms submitted in advance (i.e. not less than forty-eight (48) hours before the time appointed for holding the general meeting). The proxy form is sent with the notice of general meetings to all shareholders. The Company is not implementing absentia voting methods such as by mail, e-mail or fax until security, integrity and other pertinent issues are satisfactorily resolved.
The Company records minutes of all general meetings and questions and comments from shareholders together with the responses of the Board and Management. These are available to shareholders at their request.
The Board noted that with effect from 1 August 2015, the Company is required by the SGX-ST Listing Rules to conduct the voting of all resolutions put to general meetings by poll. Until such time, voting at general meetings will be by show of hands unless a poll is demanded. Voting on show of hands enables the Company and shareholders to deal with the businesses of general meetings expeditiously as the result of the vote is instantly available.
The Company does not have a formal dividend policy. The form, frequency and amount of dividends will depend on the Group's earnings, financial position, results or operations, capital needs, plans for expansion, and other factors as the Board may deem appropriate.
DEALINGS IN SECURITIES
The Company has adopted an internal Code of Best Practices on dealings in the securities to provide guidance to the officers, including Directors, of both the Company and its subsidiaries with regard to dealings in the Company's securities.
The Code of Best Practices prohibits the officers of the Group from dealing in the Company's securities during the period commencing two weeks before the announcement of each of the Company's quarterly financial results and one month before the announcement of the Company's full-year financial results and ending on the date of announcement of such results on the SGX-ST, or when they are in possession of the unpublished price sensitive information of the Group. Notifications of the 'closed window' periods are sent to all officers concerned.
The Directors are also required to notify the Company of any dealings in the Company's securities within two (2) days of the transaction and to submit an annual confirmation on their compliance with the Code of Best Practices.
In addition, the Directors and Officers of the Group are discouraged from dealing in the Company's securities on short-term considerations.
INTERESTED PERSON TRANSACTIONS
The Company has established internal control procedures to ensure the transactions with interested persons are properly reviewed and approved by the AC and conducted at arm's length basis, on normal commercial terms and will not be 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 SGX-ST Listing Manual) for FY2014:
The Company does not have any shareholders' mandate for interested person transactions.
Prior to entering into an interested person transactions by the Group, the Board and the AC will review such a transaction to ensure that the relevant rules under Chapter 9 of the SGX-ST Listing Manual are complied with.
Save as disclosed in the financial statements, there were no other material contracts of the Company or any of its subsidiaries, involving the interests of the CEO, Directors or controlling shareholders subsisting at the end of FY2014 or have been entered into since the end of the previous financial year.
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