corporate governance

The Board of Directors is accountable to the shareholders and oversees the management of the business and affairs of the Group. Key roles of the Board include approving the Group’s objectives, strategic directions and major corporate policies; monitoring and reviewing financial and operating performance; approving annual budgets and major funding and investment proposals; ensuring an effective risk management framework is in place; and appointing Board Directors and key managerial personnel. Material transactions that require Board approval are capital expenditure in excess of S$5 million and operating expenditure in excess of S$3 million.

Currently the Board comprises eleven Directors, all of whom are non-executive except for the Chief Executive Officer, and seven of whom are independent. The Board consists of respected individuals from different backgrounds and whose core competencies, qualifications, skills and experience are extensive and complementary. Details of the Directors’ academic and professional qualifications and other appointments are set out on pages 50 to 55 of the Annual Report.

To facilitate effective management, certain functions have been delegated to various Board committees, namely the Nominating Committee, Remuneration Committee and Audit Committee, each of which has its own written terms of reference. The Board members and Board committee members are set out below:

N: Non-independent
I: Independent
¹   Mr. Kannan Ramesh was appointed as a Director with effect from 11 February 2011
²   Mr. Kannan Ramesh was appointed to the Audit Committee with effect from 25 February 2011
³   Mr. Alan Ow Soon Sian was appointed to the Remuneration Committee with effect from 19 January 2011

At least one-third of the Directors retire at the Annual General Meeting each year. The dates of initial appointment and most recent re-election of the Directors are set out below:

¹   Mr. Kannan Ramesh was appointed as a Director with effect from 11 February 2011

To enable the Board to fulfill its responsibilities, Directors are provided with monthly management financial statements setting out actual against budget, as well as previous year’s comparatives and explanations on any material variances. In addition, management provides the Board with financial and operating reports reviewing performance in the most recent quarter, and papers containing relevant background or explanatory information required to support the decision-making process on a regular and timely basis.

All Directors have separate and independent access to senior management and to the Company Secretary. The Company Secretary administers, attends and prepares minutes of Board meetings, and assists the Chairman in ensuring that Board procedures are followed and reviewed so that the Board functions effectively, and the Company’s Memorandum and Articles of Association and relevant rules and regulations, including requirements of the Companies Act and SGX-ST, are complied with. The Company Secretary also acts as the primary channel of communication between the Company and the SGX-ST.

Should Directors, whether as a group or individually, need independent professional advice in the furtherance of their duties, the cost of such professional advice is borne by the Company.

Regular quarterly Board meetings are scheduled yearly in advance. Additional meetings are scheduled in between to provide technical updates and to facilitate discussion or to deliberate on strategic or compliance issues where necessary. During the year, eight Board meetings were held. The Company’s Articles of Association provide for telephonic and video conference meetings. The number of applicable Board meetings held in 2010, as well as the attendance of every Board member at those meetings applicable to them is as follows:

¹   Mr. Yusof Annuar Yaacob resigned as a Director with effect from 31 October 2010

Mr. Teo Soon Hoe is the Chairman of the Company and Ms. Karen Kooi is the Chief Executive Officer. They each perform separate functions to ensure that there is an appropriate balance of authority and responsibilities, and that accountability and independent decision-making are not compromised.

The NC comprises entirely independent Directors, namely Dr. Thio Su Mien (NC Chairman), Mr. Reggie Thein and Mr. Patrick Yeoh Khwai Hoh.

The NC, which has written terms of reference approved by the Board, performs the following functions:

The number of applicable NC meetings held in 2010 and the attendance of each member at those meetings is
as follows:

The NC reviewed the independence of the Directors and arrived at its conclusions regarding each Director as set out in Section 1 (“Board of Directors”).

The NC supervised an exercise to evaluate the Board’s and individual Director’s performance. The objective of the exercise was to identify and prioritise areas for continuous improvement to the Board’s effectiveness.

For this purpose, an independent consultant was appointed to conduct the evaluation process. The evaluation of the Board as a whole and evaluation of individual Directors were based on the framework established and used in the previous year and as updated by the NC. The consultant provided summarised findings, interpretation of findings and preliminary recommendations for the Board’s consideration.

All Directors assessed the Board as a whole on each of the following parameters:

• Board composition and independence
• Board role and functioning
• Board processes
• Information management
• Monitoring company performance
• Board Committee effectiveness
• Managing risk and adversity
• CEO performance and succession planning
• Corporate integrity and social responsibility
• Director development and management
• Overall perception of the Board

In addition, the contribution of each individual Director to the effectiveness of the Board was assessed by their peers on the Board. The evaluation was based on the following five parameters:

• Contribution
• Knowledge and abilities
• Teamwork
• Integrity
• Overall effectiveness

The Board expects to carry out evaluation of the Board as a whole and self-evaluation exercises annually to identify areas of improvement and as a form of good Board management practice.

The RC comprises Mr. Roger Barlow as Chairman, Mr. Low Huan Ping, Mr. Teo Soon Hoe, Mr. Chow Kok Kee and Mr. Alan Ow Soon Sian, all of whom are non-executive Directors. Mr. Roger Barlow, Mr. Chow Kok Kee and Mr. Alan Ow Soon Sian are the independent Directors on the RC.

The Director of Human Resource assists the RC in the execution of its functions and the RC has access to external expert advice, if required.

The RC, which has written terms of reference approved by the Board, performs the following functions:

The number of applicable RC meetings held in 2010 and the attendance of each member at those meetings is as follows:

¹   Mr. Alan Ow Soon Sian was appointed to the Remuneration Committee with effect from 19 January 2011

The Company sets remuneration packages to ensure that they are competitive and sufficient to attract, retain and motivate Directors and senior management of the required experience and expertise to run the Group successfully.

In setting remuneration packages for Directors and officers of the Group, the pay and employment conditions within the industry and in comparable companies are taken into consideration.

Directors’ fees are subject to shareholder approval at the Annual General Meeting. Each non-executive Director is paid a fixed fee, the amount of which takes into account the level of responsibilities held. The framework for determining fees payable to each non-executive Director for 2010 is as follows:

The annual remuneration of non-executive Directors payable for 2010 is as follows:

For each non-independent non-executive Director, fees are paid to the relevant shareholder nominating him.

In setting the remuneration packages of the Company’s CEO and senior management, performance-related elements are incorporated in order to align interests with those of shareholders and link rewards to corporate and individual performance. In 2010, the level and mix of the annual remuneration of the Company’s CEO and Executive Director, and each of the top five members of senior management (who are not also Directors), in bands of S$250,000, are set out below:

In 2010, options were granted to the above members of the senior management team as part of the Company’s Share Option Scheme, further details of which can be found on pages 59 to 60 of the Annual Report.

The AC comprises Mr. Reggie Thein as Chairman, Mr. Alan Ow Soon Sian, Dr. Thio Su Mien, Mr. Patrick Yeoh Khwai Hoh and Mr Kannan Ramesh as members, all of whom, including the Chairman, are independent Directors. Three of the members, including the Chairman, have accounting, tax or related financial management expertise or experience.

The AC, which has written terms of reference approved by the Board, performs the following delegated functions:

The number of applicable AC meetings held in 2010 and the attendance of each member at those meetings is as follows:

¹   Mr. Kannan Ramesh was appointed to the Audit Committee with effect from 25 February 2011

During the year, the AC had full access to and cooperation from the Company’s management, and internal and external auditors. The Chief Executive Officer, Chief Financial Officer and Deputy Director or General Managers from the Finance Department, as well as the internal and external auditors, attended the meetings of the AC. The AC also had full access to the internal and external auditors without the presence of Management.

During the year, the AC reviewed the financial statements of the Group quarterly before submitting them to the Board for its approval and the announcement of the financial results. The AC also reviewed and monitored the Group’s financial condition, internal and external audits, exposure to risks and the effectiveness of the Group’s system of accounting, internal controls and risk management programme.

The AC considered the volume of non-audit services provided by the external auditors to the Group, and being satisfied that the nature and extent of such services will not prejudice the independence and objectivity of the external auditors, confirmed their re-nomination.

M1 has an integrated risk management framework designed to provide assurance of achieving the Company’s business objectives, safeguarding and enhancing shareholder’s investment and value. The framework entails a systematic and proactive identification of threats and risks, and the development of appropriate strategies and controls to protect against downside risks and optimise upside risks. It is an integral part of the Company’s overall planning process and is closely aligned to the Company’s performance objectives and business strategy.

The Board, via the Audit Committee, has general oversight through an executive team, comprising members of senior management who are responsible for driving the risk management processes and controls. Risk accountability is clearly assigned across all departments and functional units.

During the year, the risk reporting processes and methodology were reviewed to include environmental risk scanning and a quantitative risk evaluation methodology, aimed to enhance risk assessment and comparisons. Business continuity and crisis management plans were further fine-tuned to enhance emergency response capabilities, key threat analysis and facilitate staff deployment during emergency or crisis management operations. Regular risk training programmes and workshops were organised to foster a risk-aware culture throughout the organisation.

Overall, M1 adopts a prudent and proactive approach to achieve an optimal balance between risks and returns. Resources are channelled to mitigate key risks through a structured risk reporting framework and control measures, thereby enhancing our decision making capabilities and organisational resilience.

The Board believes that, in the absence of any evidence to the contrary, the system of internal controls maintained by the Group’s management and in place throughout the year, as reviewed regularly, and up to and as of the date of this report is adequate to meet the needs of the Group in its current business environment. The Audit Committee has reviewed the effectiveness of the Group’s internal controls.

The system of internal controls provides reasonable, but not absolute, assurance that the Group will not be adversely affected by any event that could be reasonably foreseen as it strives to achieve its business objectives.

However, the Board notes that no system of internal controls could provide absolute assurance in this regard, or absolute assurance against the occurrence of material errors, poor judgement in decision-making, human errors, losses, fraud or other irregularities.

The Group has an internal audit function that is independent of the activities it audits.

The Internal Auditor reports primarily to the Chairman of the AC and administratively to the CEO. The Internal Auditor meets the standards set by internationally recognised professional bodies including the Standards for the Professional Practice of Internal Auditing set by the Institute of Internal Auditors.

The AC reviews, on an annual basis, the adequacy of the internal audit function. The AC has reviewed and is satisfied that the Company’s internal audit function is adequately resourced and has appropriate standing within the Company.

Communications with shareholders and the investment community form an integral part of the Group’s corporate governance and commitment to transparent, comprehensive and prompt disclosure. A number of communication channels are used to account to shareholders for the performance of the Company and to provide updates on pertinent developments. These include the annual report, quarterly results and other announcements made through the SGXNET, press releases and the Company’s website, as well as through the Annual General Meeting (AGM). Presentations given at appropriate intervals to representatives of the investment community and audio webcasts of quarterly results presentations, including question and answer sessions are also made available on the Company’s website.

During the year, the Company continued to release its quarterly and full year results within one month from the end of the relevant financial period, in the form of a press release, financial statements containing management’s discussion and analysis of performance and outlook, and a presentation containing highlights and a review of financial and operating performance. All press releases, financial statements and presentation slides relating to results announcements are posted on both the SGXNET and the Company’s corporate website. Conference calls with media and analysts were held jointly immediately after the release of quarterly results, while an in-person briefing was conducted for the full year results announcement. Audio webcasts of these events were made available on the Company’s website. Information on major new initiatives by the Group was also made public as soon as feasible. The Company participated in several investor conferences and roadshows during the year, and discussions were based on publicly available materials and information. The Company does not practise selective disclosure. The Company is mindful of the remedial action required to make public disclosure as soon as practicable, should there be an event of inadvertent disclosure.

The Group views the AGM as an important platform for shareholders to engage in interactive and open dialogue with the Board and senior management. As such, all Board members and senior management of the Group make their best effort to attend each AGM. During the year, the Annual Report and notice of the AGM were sent to all shareholders three weeks prior to the AGM which was held on 8 April 2010. This gave shareholders sufficient time to review the information. During the AGM, shareholders had the opportunity to voice their views and direct questions regarding the Group to Directors, including the Chairman and the chairmen of the Board committees, as well as to the Company’s senior management.

In addition, through a dedicated Investor Relations team, the Company managed ongoing communication with the investment community throughout the year and responded diligently and promptly to all enquiries from shareholders, analysts and other interested parties.

The Group has issued a Code for Dealings in M1 Shares for the guidance of Directors, management and officers. The said Code, which is based on SGX-ST Listing Rule 1207(18) with respect to dealings in securities, stipulates that Directors, management and officers of the Group who have access to price-sensitive and confidential information are not permitted to deal in the Company’s shares during the periods commencing one month before the announcement of the Group’s half and full-year results and two weeks before the announcement of the Group’s first and third quarter results and ending after the announcement of such results; and when they are in possession of price-sensitive and confidential information, in accordance with the laws of insider trading. The said Code is incorporated as part of the Group’s Human Resources Manual and is available on the Intranet accessible by all staff. A reminder is also circulated to Directors, management and officers every quarter before the commencement of the period during which dealings in shares are prohibited and to those with access to price-sensitive and confidential information.

Interested person transactions carried out during the financial year ended 31 December 2010 by the Group are as follows:

¹   As defined in Chapter 9 of the Listing Manual of the SGX-ST

Save for the interested person transactions disclosed above, there were no other material contracts entered into by the Company and its subsidiaries involving the interests of its CEO, Directors or controlling shareholders, which are either still subsisting at the end of the financial year or, if not then subsisting, entered into since the end of the previous financial year.