Annual Report 2011

(Code of Corporate Governance Principles 1, 2, 4, 6 & 10)

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 nine Directors, all of whom are non-executive except for the Chief Executive Officer, and five 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 56 to 58 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 Roger Barlow was appointed to the Nominating Committee with effect from 15 April 2011
2 Mr Chow Kok Kee was appointed as the Chairman of the Nominating Committee with effect from 15 April 2011
3 Mr Kannan Ramesh was appointed as a Director with effect from 11 February 2011 and re-elected at the Annual General Meeting on 7 April 2011
4 Mr Kannan Ramesh was appointed to the Audit Committee with effect from 25 February 2011
5 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 last re-election or re-appointment of the Directors are set out below:

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To enable the Board to fulfil 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 relevant background or explanatory information required to support the decision-making process on a regular and timely basis. In line with advancements in technology, Directors and senior management can securely access and read Board and Board Committee papers prior to and at meetings via tablet devices.

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 the 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 discuss or deliberate on strategic or compliance issues where necessary. During the year, seven Board meetings were held. The Company’s Articles of Association provide for telephonic and videoconference meetings. The number of applicable Board meetings held in 2011, as well as the attendance of every Board member at those meetings applicable to them was as follows:

1 Mr Kannan Ramesh was appointed as a Director with effect from 11 February 2011 and re-elected at the Annual General Meeting on 7 April 2011
2 Dr Thio Su Mien retired as a Director with effect from 7 April 2011
3 Mr Patrick Yeoh Khwai Hoh retired as a Director with effect from 7 April 2011

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(Code of Corporate Governance Principle 3)

Mr Teo Soon Hoe is the Chairman of the Company and Ms Karen Kooi Lee Wah 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.

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(Code of Corporate Governance Principles 4 & 5)

The NC comprises entirely independent Directors, namely Mr Chow Kok Kee (NC Chairman), Mr Roger Barlow and Mr Reggie Thein.

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

The number of applicable NC meetings held in 2011 and the attendance of each member at those meetings were
as follows:

1 Mr Chow Kok Kee was appointed as the Chairman of the Nominating Committee with effect from 15 April 2011
2 Mr Roger Barlow was appointed to the Nominating Committee with effect from 15 April 2011
3 Dr Thio Su Mien retired as a Director with effect from 7 April 2011
4 Mr Patrick Yeoh Khwai Hoh retired as a Director with effect from 7 April 2011

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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. In addition, on 25 August 2011, the Company also appointed an independent advisor to provide valuable insight to the Chairman and the Board on the results of the evaluation.

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 risks 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.

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(Code of Corporate Governance Principles 7 & 8)

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 2011 and the attendance of each member at those meetings were as follows:

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

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(Code of Corporate Governance Principles 8 & 9)

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 2011 is as follows:

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The annual remuneration of non-executive Directors payable for 2011 is as follows:

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

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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 2011, 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 2011, 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 62 to 63 of the Annual Report.

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(Code of Corporate Governance Principles 11, 12 & 13; Listing Manual Rule 1207(6))

The AC comprises Mr Reggie Thein as Chairman, Mr Kannan Ramesh and Mr Alan Ow Soon Sian as members, all of whom, including the Chairman, are independent Directors. Two 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:

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The number of applicable AC meetings held in 2011 and the attendance of each member at those meetings were as follows:

1 Mr Kannan Ramesh was appointed to the Audit Committee with effect from 25 February 2011 and re-elected at the Annual General Meeting on
7 April 2011
2 Dr Thio Su Mien retired as a Director with effect from 7 April 2011
3 Mr Patrick Yeoh Khwai Hoh retired as a Director with effect from 7 April 2011

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

The AC reviewed the financial statements of the Group quarterly before submitting them to the Board for its approval and subsequent public release. The AC also reviewed and monitored the Group’s financial condition, external and internal 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.

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(Listing Manual Rule 1207(4)(b)(iv))

Risk management continues to be an integral part of the Company’s overall business planning, decision-making, strategic and operational management processes, to ensure the Company can achieve its business objectives and enhance shareholders’ value. Key practices employed in managing risks and opportunities include environmental scans, clear policies and accountabilities, monitoring of key performances, operational indicators and management reporting.

The Board, via the AC, 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 methodology and processes were reviewed to improve consistency in our risk identification and assessment across the Company. Business continuity and crisis management plans were further fine-tuned to ensure readiness to handle unforeseen events that could affect business operations. Risk training programmes are also conducted on an on-going basis to inculcate and reinforce a proactive risk management culture within the Company.

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.

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(Code of Corporate Governance Principle 12)

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 address the financial, operational and compliance risks of the Group in its current business environment. The AC has reviewed the effectiveness of the 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.

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(Code of Corporate Governance Principle 13)

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.

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(Code of Corporate Governance Principles 10, 14 & 15)

Communication with shareholders and the investment community forms 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 SGX website, 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. Conference calls with media and analysts were held jointly immediately after the release of 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, and 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 two weeks prior to the AGM which was held on 7 April 2011. 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.

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(Listing Manual Rule 1207(19))

The Group has issued a Code for Dealings in M1 Shares (M1 Code) for the guidance of Directors, management and officers. The M1 Code, which is based on the SGX-ST Listing Rule 1207(19) 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 two weeks before the announcement of the Group’s first and third quarter results and one month before the announcement of the Group’s half and full year results and ending on the date of 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 M1 Code is incorporated as part of the Group’s Human Resource 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.

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(Listing Manual Rule 907 & 1207(8))

Interested person transactions carried out during the financial year ended 31 December 2011 by the Group were 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.

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