CODE OF CORPORATE GOVERNANCE

– BOARD MATTERS
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BOARD MATTERS

THE BOARD'S CONDUCT OF ITS AFFAIRS

Principle:

1 Every company should be headed by an effective Board to lead and control the
company.

Guidance Notes:

1.1 The Board should meet regularly and as warranted by particular circumstances, as
deemed appropriate by the board members. Companies are encouraged to amend their Articles of
Association to provide for telephonic and videoconference meetings. The number of board meetings
held in the year, as well as the attendance of every board member at those meetings and meetings of
specialised committees established by the Board, should be disclosed in the company's annual report.

1.2 Companies should adopt internal guidelines setting forth matters that require board
approval, and specify in their corporate governance disclosures the type of material transactions that
require board approval under such guidelines.

1.3 Every director should receive appropriate training (including his or her duties as a
director and how to discharge those duties) when he is first appointed to the Board. This should
include an orientation-training program to ensure that incoming directors are familiar with the
company's business and governance practices. It is equally important that directors should receive
further relevant training, particularly on relevant new laws, regulations and changing commercial risks,
from time to time.

BOARD COMPOSITION AND BALANCE

Principle:

2 There should be a strong and independent element on the Board, which is able to
exercise objective judgement on corporate affairs independently, in particular, from Management. No
individual or small group of individuals should be allowed to dominate the Board's decision making.

Guidance Notes:

2.1 There should be a strong and independent element on the Board, with independent
directors making up at least one-third of the Board. An "independent" director is one who has no
relationship with the company, its related companies1 or its officers that could interfere, or be
reasonably perceived to interfere, with the exercise of the director's independent business judgement
with a view to the best interests of the company. Examples of such relationships, which would deem a
director not to be independent, include:

a) a director being employed by the company or any of its related companies for
the current or any of the past three financial years;

b) a director who has an immediate family member2 who is, or has been in any of
the past three financial years, employed by the company or any of its related

1 A related company in relation to a company includes its subsidiary, fellow subsidiary, or parent
company.
2 As defined in the Listing Manual of the Singapore Exchange to mean the spouse, child, adopted child,
step-child, brother, sister and parent.
CODE OF CORPORATE GOVERNANCE
– BOARD MATTERS
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companies as a senior executive officer whose remuneration is determined by the

remuneration committee;

c) a director accepting any compensation from the company or any of its related
companies other than compensation for board service for the current or
immediate past financial year; or

d) a director being a substantial shareholder of or a partner in (with 5%

or more stake), or an executive officer of, any for-profit business
organisation to which the company made, or from which the
company received, significant payments in the current or immediate
past financial year. As a guide, payments3 aggregated over any
financial year in excess of S$200,000 should generally be deemed
significant.
2.2 The four relationships set out above are not intended to be exhaustive, and are
examples of situations which would deem a director to be not independent. If the company wishes, in
spite of the existence of one or more of these relationships, to consider the director as independent, it
should disclose in full the nature of the director's relationship and bear responsibility for explaining
why he should be considered independent.

2.3 The Board should examine its size and, with a view to determining the impact of the
number upon effectiveness, decide on what it considers an appropriate size for the Board, which
facilitates effective decision making. The Board should take into account the scope and nature of the
operations of the company.

2.4 The Board should comprise directors who as a group provide core competencies such
as accounting or finance, business or management experience, industry knowledge, strategic planning
experience and customer-based experience or knowledge.

CHAIRMAN AND CHIEF EXECUTIVE OFFICER

Principle:

3 There should be a clear division of responsibilities at the top of the company – the
working of the Board and the executive responsibility of the company's business – which will ensure a
balance of power and authority, such that no one individual represents a considerable concentration of
power.

Guidance Notes:

3.1 The roles of chairman and chief executive officer ("CEO") should in principle be
separate, to ensure an appropriate balance of power, increased accountability and greater capacity of
the Board for independent decision making. In addition, companies should disclose the relationship
between the chairman and CEO where they are related to each other (i.e. be of the same immediate
family, as defined in footnote 2).

3.2 The chairman should:

3 Payments for transactions involving standard services with published rates or routine and retail
transactions and relationships (for instance credit card or bank or brokerage or mortgage or insurance
accounts or transactions) will not be taken into account, unless special or favourable treatment is
accorded.
CODE OF CORPORATE GOVERNANCE
– BOARD MATTERS
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a) schedule meetings that enable the Board to perform its duties responsibly while
not interfering with the flow of the company's operations;

b) prepare meeting agenda in consultation with the CEO;

c) exercise control over quality, quantity and timeliness of the flow of information
between Management and the Board; and

d) assist in ensuring compliance with company's guidelines on corporate

governance.

3.3 The responsibilities set out in the above guidelines pertain only to the chairman's role
in respect of board proceedings. It should not be taken as a comprehensive list of all the duties and
responsibilities of a chairman.

BOARD MEMBERSHIP

Principle:

4 There should be a formal and transparent process for the appointment of new
directors to the Board. As a principle of good corporate governance, all directors should be required to
submit themselves for re-nomination and re-election at regular intervals.

Guidance Notes:

4.1 Companies should establish a Nominating Committee ("NC") to make

recommendations to the Board on all board appointments. The NC should comprise at least three
directors, a majority of whom, including the chairman, should be independent. The NC should have
written terms of reference that describes the responsibilities of its members, and its membership is
disclosed annually.

4.2 The NC should be charged with the responsibility of re-nomination having regard to
the director's contribution and performance (e.g. attendance, preparedness, participation and candour)
including, if applicable, as an independent director. As a principle of good corporate governance, all
directors should be required to submit themselves for re-nomination and re-election at regular intervals
and at least every three years.

4.3 The NC is also charged with determining annually whether or not a director is
independent, bearing in mind the circumstances set forth in paragraph 2.1 and any other salient factors.
If the NC determines that a director who has one or more of the relationships mentioned therein is in
fact independent, the company should make such disclosure as stated in paragraph 2.2.

4.4 When a director has multiple board representations, he or she must ensure that
sufficient time and attention is given to the affairs of each company. The NC should decide whether or
not a director is able to and has been adequately carrying out his/her duties as director of the company.
Internal guidelines should be adopted that address the competing time commitments that are faced
when directors serve on multiple boards.

4.5 Key information regarding directors, such as academic and professional

qualifications, shareholding in the company and its subsidiaries, board committees served on (as a
member or chairman), date of first appointment as a director, date of last re-election as a director,
directorships or chairmanships both present and those held over the preceding three years in other listed
companies and other major appointments, should be disclosed in the annual report. In addition, the
company's annual disclosure on corporate governance should indicate which directors are executive,
non-executive or considered by the NC to be independent. The names of the directors submitted for
election or re-election should also be accompanied by such details and information to enable
shareholders to make informed decisions.
CODE OF CORPORATE GOVERNANCE
– BOARD MATTERS
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BOARD PERFORMANCE

Principle:

5 There should be a formal assessment of the effectiveness of the Board as a whole and
the contribution by each director to the effectiveness of the Board.

Guidance Notes:

5.1 The NC should decide how the Board's performance may be evaluated
and propose objective performance criteria. Such performance criteria, that allow
comparison with its industry peers, should be approved by the Board and address how
the Board has enhanced long term shareholders' value. These performance criteria
should not be changed from year to year, and where circumstances deem it necessary for
any of the criteria to be changed, the onus should be on the Board to justify this decision.

5.2 In addition to any relevant performance criteria which the Board may
propose, the performance evaluation should also consider the company's share price
performance over a five-year period vis-à-vis the Singapore Straits Times Index and a
benchmark index of its industry peers. Other performance criteria that may be used
include return on assets ("ROA"), return on equity ("ROE"), return on investment
("ROI"), economic value added ("EVA") and profitability on capital employed.

5.3 Every Board should implement a process to be carried out by the NC for
assessing the effectiveness of the Board as a whole and for assessing the contribution by
each individual director to the effectiveness of the Board. This assessment process
should be disclosed annually.

ACCESS TO INFORMATION

Principle:

6 In order to fulfil their responsibilities, board members should be provided with

complete, adequate and timely information prior to board meetings and on an on-going basis.

Guidance Notes:

6.1 Management has an obligation to supply the Board with complete, adequate
information in a timely manner. Reliance purely on what is volunteered by Management is unlikely to
be enough in all circumstances and further enquiries may be required if the particular director is to
fulfil his or her duties properly. Hence, the Board should have separate and independent access to the
company's senior management.

6.2 Information provided should include background or explanatory information relating

to matters to be brought before the Board, copies of disclosure documents, budgets, forecasts and
monthly internal financial statements. In respect of budgets, any material variance between the
projections and actual results should also be disclosed and explained.

6.3 Directors should have separate and independent access to the company secretary.
The role of the company secretary should be clearly defined and should include responsibility for
ensuring that board procedures are followed and that applicable rules and regulations are complied
with. The company secretary should attend all board meetings.
CODE OF CORPORATE GOVERNANCE
– BOARD MATTERS
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6.4 The Board should have a procedure for directors, either individually or as a group, in
the furtherance of their duties, to take independent professional advice, if necessary, at the company's
expense.
CODE OF CORPORATE GOVERNANCE
– REMUNERATION MATTERS
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REMUNERATION MATTERS

PROCEDURES FOR DEVELOPING REMUNERATION POLICIES

Principle:

7 There should be a formal and transparent procedure for fixing the remuneration
packages of individual directors. No director should be involved in deciding his own remuneration.

Guidance Notes:

7.1 The Board should set up a remuneration committee ("RC") comprising a majority of
non-executive directors who are independent of Management and free from any business or other
relationships, which may materially interfere with the exercise of their independent judgement. This is
to minimise the risk of any potential conflict of interest.

7.2 The RC should be chaired by an independent non-executive director, and have at

least one member who is knowledgeable in the field of executive compensation, failing which the
committee should have access to expert advice inside and/or outside the company.

7.3 The RC will recommend to the Board a framework of remuneration for the Board
and key executives, and to determine specific remuneration packages for each executive director and
the CEO (or executive of equivalent rank) if the CEO is not an executive director. The committee's
recommendations should be made in consultation with the chairman of the Board and submitted for
endorsement by the entire Board. The committee should cover all aspects of remuneration, including
but not limited to director's fees, salaries, allowances, bonuses, options, and benefits in kind.

LEVEL AND MIX OF REMUNERATION

Principle:

8 The level of remuneration should be appropriate to attract, retain and motivate the
directors needed to run the company successfully but companies should avoid paying more for this
purpose. A proportion of the remuneration, especially that of executive directors, should be linked to
performance.

Guidance Notes:

8.1 In setting remuneration packages, the company should be aware of pay and
employment conditions within the industry and in comparable companies. The remuneration packages
should take into account the company's relative performance and the performance of individual
directors.

8.2 The performance-related elements of remuneration should form a significant

proportion of the total remuneration package of executive directors and should be designed to align
their interests with those of shareholders and link rewards to corporate and individual performance.
There should be appropriate and meaningful measures for the purpose of assessing executive directors'
performance.

8.3 The remuneration of non-executive directors should be appropriate to the level of

contribution, taking into account factors such as effort and time spent, and responsibilities of the
directors. Non-executive directors should not be over-compensated to the extent that their
independence may be compromised. The Board may, if it considers necessary, consult experts on the
remuneration of non-executive directors. The Board should recommend the remuneration of the non-
executive directors for approval at the AGM.
CODE OF CORPORATE GOVERNANCE
– REMUNERATION MATTERS
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8.4 In the case of service contracts, there should a fixed appointment period for all
directors, after which they are subject to re-election. In any case, service contracts should not be
excessively long or with onerous removal clauses. The RC should consider what compensation
commitments the directors' contracts of service, if any, would entail in the event of early termination.
The committee should aim to be fair and avoid rewarding poor performance.

8.5 Long-term incentive schemes, including share schemes, are generally

encouraged. The RC should consider whether directors should be eligible for benefits
under long-term incentive schemes. The use of share schemes, including share option
schemes, should be weighed against other kinds of long-term incentive scheme. In
normal circumstances, offers of shares or granting of options or other forms of deferred
remuneration should vest over a period of time. The use of vesting schedules, whereby
only a portion of the benefits can be exercised each year, is also strongly encouraged.
Directors should be encouraged to hold their shares beyond the vesting period, subject
to the need to finance any costs of acquisition and associated tax liability.

DISCLOSURE ON REMUNERATION

Principle:

9 Each company should provide clear disclosure of its remuneration policy, level and
mix of remuneration, and the procedure for setting remuneration, in the company's annual report.

Guidance Notes:

9.1 The Board should report to the shareholders each year on the remuneration of
directors and at least the top 5 key executives (who are not also directors) of the company. This annual
remuneration report should form part of, or be annexed to the company's annual report of its directors.
It should be the main vehicle through which the company reports to shareholders on remuneration
matters. The members of the RC should be listed in the report.

9.2 The report should set out the names of directors and at least the top 5 key executives
(who are not also directors) earning remuneration which falls within bands of S$250,000. There will
be no upper limit. Within each band, there will be a breakdown (in percentage terms) of each
director’s remuneration earned through base/fixed salary, variable or performance-related
income/bonuses, benefits in kind, and stock options granted and other long-term incentives.
Companies are however encouraged, as best practice, to fully disclose the remuneration of each
individual director.

9.3 For transparency, the report should disclose the same details of the remuneration of
employees who are immediate family members4 of a director or the CEO, and whose remuneration
exceed S$150,000 during the year. This can be done on a no-name basis with clear indication of which
director or the CEO the employee is related to.

9.4 The report should also contain details of employee share schemes to enable their
shareholders to assess the benefits and potential cost to the companies. The important terms of the
share schemes, including the potential size of grants, methodology of valuing stock options, exercise
price of options that were granted as well as outstanding, whether the exercise price was at the market
or otherwise on the date of grant, market price on the date of exercise, the vesting schedule, and the
justifications for the terms adopted, should be disclosed.

4 As defined in the Listing Manual of the Singapore Exchange to mean the spouse, child, adopted child,
step-child, brother, sister and parent.
CODE OF CORPORATE GOVERNANCE
– REMUNERATION MATTERS
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9.5 The Board's annual remuneration report need not be a standard term of agenda for
AGMs. The Board should, however, consider each year whether the circumstances are such that the
AGM should be invited to approve the policy set out in the report and should minute their conclusions.
CODE OF CORPORATE GOVERNANCE
– ACCOUNTABILITY AND AUDIT
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ACCOUNTABILITY AND AUDIT

ACCOUNTABILITY

Principle:

10 The Board is accountable to the shareholders while the Management is accountable

to the Board.

Guidance Notes:

10.1 The Board should provide the shareholders with a balanced and understandable
assessment of the company's performance, position and prospects on a quarterly basis. This
responsibility extends to interim and other price sensitive public reports, and reports to regulators (if
required).

10.2 The Management should provide all members of the Board with a balanced and
understandable management accounts of the company's performance, position and prospects on a
monthly basis.

AUDIT COMMITTEE

Principle:

11 The Board should establish an Audit Committee ("AC") with written terms of
reference which clearly set out its authority and duties.

Guidance Notes:

11.1 The AC should comprise at least three directors, all non-executive, the majority of
whom, including the chairman, should be independent.

11.2 The Board should ensure that the members of the AC are appropriately qualified to
discharge their responsibilities. At least two members should have accounting or related financial
management expertise or experience, as the Board interprets such qualification in its business
judgement.

11.3 The AC should have explicit authority to investigate any matter within its terms of
reference, full access to and co-operation by Management and full discretion to invite any director or
executive officer to attend its meetings, and reasonable resources to enable it to discharge its functions
properly.

11.4 The duties of the AC should include keeping under review the scope and results of
the audit and its cost effectiveness and the independence and objectivity of the external auditors.
Where the auditors also supply a substantial volume of non-audit services to the company, the
committee should keep the nature and extent of such services under review, seeking to balance the
maintenance of objectivity and value for money.

11.5 The AC should meet with the external auditors, and with the internal auditors,
without the presence of the company's Management, at least annually.

11.6 The AC should review the independence of the external auditors annually.

11.7 The Board should disclose the names of the members of the AC, details of the
Committee's activities, the number of Committee meetings held in that year, and the attendance of
individual directors at such meetings in the company's annual report.
CODE OF CORPORATE GOVERNANCE
– ACCOUNTABILITY AND AUDIT
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INTERNAL CONTROLS

Principle:

12 The Board should ensure that the Management maintains a sound system of internal
controls to safeguard the shareholders' investments and the company's assets.

Guidance Notes:

12.1 The AC should ensure that a review of the effectiveness of the company's material
internal controls, including financial, operational and compliance controls, and risk management, is
conducted at least annually. Such review can be carried out by the internal and/or external auditors.

12.2 The Board should comment on the adequacy of the internal controls in the company's
annual report.

INTERNAL AUDIT

Principle:

13 The company should establish an internal audit function that is independent of the
activities it audits.

Guidance Notes:

13.1 The Internal Auditor's primary line of reporting should be to the chairman of the AC
although the Internal Auditor would also report administratively to the CEO.

13.2 The Internal Auditor should meet or exceed the standards set by nationally or
internationally recognised professional bodies including the Standards for the Professional Practice of
Internal Auditing set by The Institute of Internal Auditors.

13.3 The AC should ensure that the internal audit function is adequately resourced and has
appropriate standing within the company. For the avoidance of doubt, the internal audit function can
either be in-house, outsourced to a reputable accounting/auditing firm, or performed by a major
shareholder, holding company, parent company or controlling enterprise with an internal audit staff.

13.4 The AC should, at least annually, ensure the adequacy of the internal audit function.
CORPORATE GOVERNANCE COMMITTEE
– MEMBERS OF THE COMMITTEE
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COMMUNICATION WITH SHAREHOLDERS

Principle:

14 Companies should engage in regular, effective and fair communication with

shareholders.

Guidance Notes:

14.1 Companies should regularly convey pertinent information, gather views or inputs,
and address shareholders' concerns. In disclosing information, companies should be as descriptive,
detailed and forthcoming as possible, and avoid boilerplate disclosures.

14.2 Companies should disclose information on a timely basis. Where there is inadvertent
disclosure made to a selected group, companies should make the same disclosure publicly to all others
as soon as practicable. This could be through the use of modern technology such as Internet websites.

Principle:

15 Companies should encourage greater shareholder participation at AGMs, and allow

shareholders the opportunity to communicate their views on various matters affecting the company.

Guidance Notes:

15.1 Shareholders should have the opportunity to participate effectively and to vote in
AGMs. They should be allowed to vote in person or in absentia, and equal effect should be given to
votes whether cast in person or in absentia. In this regard, companies are encouraged to make the
appropriate provisions in their articles of association to allow for absentia voting methods such as by
mail, email, fax, etc, if the shareholders so consent.

15.2 There should be separate resolutions at general meetings on each distinct issue.

15.3 The chairpersons of the audit, nomination and/or remuneration committees should be
present and available to address questions at general meetings. The external auditors should also be
present to assist the directors in addressing any relevant queries by shareholders.