Email This Print ThisCorporate Governance

The Board of Directors (the "Board") of Ryobi Kiso Holdings Ltd. (the "Company") together with its subsidiary corporations (the "Group") are committed to maintaining a high standard of corporate governance by complying with the principles and guidelines of the Code of Corporate Governance 2012 (the "Code") issued in May 2012.

This report describes corporate governance processes and activities of the Group with specific reference made to the principles and guidelines of the Code. Unless otherwise stated, these practices were in place throughout the financial year ended 30 June 2016.

THE CODE

The Code is divided into four main sections:

  1. Board Matters
  2. Remuneration Matters
  3. Accountability and Audit
  4. Shareholder Rights and Responsibilities

(A) BOARD MATTERS

The Board's Conduct of Affairs
Principle 1: Every company should be headed by an effective Board to lead and control the company. The Board is collectively responsible for the long-term success of the company. The Board works with Management to achieve this objective and Management remains accountable to the Board.

The Board oversees the business affairs of the Group. The Board carries out this oversight function by assuming responsibility for effective stewardship and corporate governance of the Company and the Group.

The key roles of the Board are:

Board Committees

In order to provide an independent oversight and to discharge its responsibilities more efficiently, the Board has delegated certain functions to various Board Committees. The Board Committees consist of Audit Committee ("AC"), Nominating Committee ("NC") and Remuneration Committee ("RC"). These Board Committees operate under clearly defined terms of reference established by the Board. These terms of reference are reviewed on a regular basis, along with the structures and membership of the Board Committees, to ensure their continued relevance with the Code. The Chairman of the respective Board Committees will report to the Board on the proceedings of the Board Committee meetings and their recommendations on the specific agendas mandated to the Board Committees by the Board.

Matters which are specifically reserved to the Board for decision are those including but not limited to corporate plans and budgets, material acquisitions and realisations of assets, share issuances, dividends and other returns to shareholders of the Company. The Management is responsible for the day-to-day operations and administration of the Group and is accountable to the Board. Clear directions have been given out to the Management that such reserved matters must be approved by the Board.

The Board conducts regular Board meetings, with at least four (4) Board meetings scheduled 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 of the Group. The Board held four (4) meetings during the financial year ended 30 June 2016. The Company's Constitution allow a meeting of Board or Board Committees to be conducted by means of a telephone conference or similar communication equipment pursuant to which all Directors participating in the meeting are able to hear each other, without the Directors being in physical presence in the meeting.

The attendance of the Directors' and Board Committees' meetings held during the financial year ended 30 June 2016 is as follows:

* By invitation

Notwithstanding the above disclosures, the Board is of the view that the contribution of each Director should not be focused only on his/her 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, advice, experiences and strategic networking relationships which would further the interests of the Group.

The Board as a whole is updated regularly on risk management, corporate governance, insider trading and the key changes in the relevant regulatory requirements and financial reporting standards, so as to enable them to properly discharge their duties as Board and/or Board Committee members.

Key new releases issued by Monetary Authority of Singapore, Singapore Exchange Securities Trading Limited (the "SGXST"), Accounting and Corporate Regulatory Authority (the "ACRA") and/or such relevant authorities or regulators which are relevant to the Directors are circulated to the Board on timely basis.

The Company Secretaries inform the Directors of upcoming conferences and seminars relevant to their roles as Directors of the Company. The Company has on-going budget for all Directors to attend appropriate courses, conferences and seminars to enable them to stay abreast of relevant business developments and outlook of the Group.

Board Composition and Guidance
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 and 10% shareholders. No individual or small group of individuals should be allowed to dominate the Board's decision making.

The Board comprises of five (5) Directors, of whom two (2) are Executive Directors and three (3) are Non-Executive Directors (including two (2) Independent Directors). The list of the Directors is as follows:

Executive Directors
Mr Ong Tiong Siew - Chief Executive Officer
Mr Ong Teng Choon

Non-Executive Directors
Mr Lee Yiok Seng @ Lee Geok Seng @ Lee Yok Seng ("Mr Lee Yiok Seng") - Chairman
Ms Lai Chin Yee - Lead Independent Director
Dr Lau Teik Soon - Independent Director

The profiles of each Director are set out on pages 10 and 11 of this Annual Report.

Two (2) out of the three (3) Non-Executive Directors, namely Ms Lai Chin Yee and Dr Lau Teik Soon, are considered independent by the Board at the recommendation of the NC pursuant to the definition of independence recommended by the Code, pursuant to which, an independent director is one who has no relationship with the Company, its related corporations, its 10% shareholders 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. Further, none of the Independent Directors has served on the Board beyond nine years from the date of their first appointment.

The Board is satisfied that there is a strong and independent element on the Board as Independent Directors and Lead Independent Director make up more than one-third of the Board. The Independent Directors provide the Board with independent and objective judgement on the corporate affairs of the Group and together with the Non-Executive Director, have the necessary expertise and experience to assist the Board in decision-making and to provide a check and balance to the Board as they are not involved in the day-to-day operations of the Group. The Non-Executive Directors have met with the internal and external auditors without the presence of the Management to discuss issues such as those in relation to internal control and audit report. Feedback is provided to the Chairman after such meetings.

The composition of the Board is reviewed on an annual basis by the NC to ensure that there is an appropriate mix of expertise and experience to enable management to benefit from a diverse perspective of issues that are brought before the Board. The NC adopts the Code's definition of what constitutes an Independent Director.

The Board has examined its Board size and is of the view that the current Board size is appropriate, taking into account the nature and scope of the Group's operations. The Board consists of respected individuals from different backgrounds whose core competencies, qualifications, skills and experiences are extensive and complementary to the Group. The Board believes that their combined wealth and diversity of experiences enable the Board to contribute effectively to the strategic growth and governance of the Group.

Chairman and Chief Executive Officer
Principle 3: There should be a clear division of responsibilities between the leadership of the Board and the executives responsible for managing the company's business. No one individual should represent a considerable concentration of power.

The Group has established a clear division of responsibilities with clearly defined lines of reporting between the Board and executive functions of the Management of the Company's business.

The roles and responsibilities of the Chairman and the Chief Executive Officer (the "CEO") are assumed by separate individuals to ensure an appropriate distribution of power within the Group. Mr Lee Yiok Seng is our Non-Executive Chairman and Mr Ong Tiong Siew is our CEO. In view of the fact that the Chairman and the CEO are related by close family ties, Ms Lai Chin Yee has been appointed as our Lead Independent Director pursuant to the Guideline 3.3 of the Code. Where a situation arises that may result in conflicts of interest, the Lead Independent Director together with the other Independent Director discharge their duties objectively and independently to ensure that the interest of minority shareholders are not prejudiced. Ms Lai Chin Yee, being the Lead Independent Director of the Company, is also available to shareholders where they have concerns, when contact through the normal channels of the Chairman, the CEO or the Financial Controller (the "FC") has failed to resolve such concerns or when such normal channels of contact are inappropriate.

Hence, the Board believes that notwithstanding the close family ties between the Chairman and the CEO or the Management, the current composition of the Board is able to make objective and prudent judgement on the Group's corporate affairs. The Board is of the view that there are sufficient safeguards and checks put in place to ensure that the process of decision-making by the Board is independent and based on collective decisions without any individual exercising any considerable concentration of power or influence.

The Chairman, who is a Non-Executive Director, oversees the Group's corporate governance structure and conduct, in particular, the effective functioning of the Board and Board Committees. The Chairman also ensures that shareholders' questions and concerns are addressed properly at the general meetings of the Company. The Chairman is committed to act in the best interests of the Group and shareholders of the Company. The CEO leads the Management team by providing entrepreneurial leadership and strategic guidance on the operations of the Group. The CEO is responsible for the formulation of the Group's strategic direction and expansion plans and the management of the Group's overall business development as well as oversees the business operations and affairs of the Group.

The Chairman is assisted by the Company Secretaries or their representatives to schedule and prepare agendas for Board meetings. The Chairman ensures that the members of the Board have the capability and authority to engage the Management in constructive views on various matters, including strategic issues and business planning. The CEO ensures the quality and timeliness of the information exchanged between the Board and the Management, which consists of key management personnel of the Group.

Board Membership
Principle 4: There should be a formal and transparent process for the appointment and re-appointment of directors to the Board.

The NC was formed in January 2010 and had adopted the written terms of reference duly established and approved by the Board. The NC held one (1) meeting during the financial year ended 30 June 2016. The NC comprises three (3) Non-Executive Directors, two (2) of whom, including the Chairman of the NC, are considered independent pursuant to the definition of independence recommended by the Code.

The members of the NC are:

Dr Lau Teik Soon - Chairman
Ms Lai Chin Yee - Member
Mr Lee Yiok Seng - Member

The Lead Independent Director, Ms Lai Chin Yee, is also a member of the NC. The key roles and authorities of the NC are:

Each member of the NC shall abstain from making any recommendation or voting on any resolutions in respect of nomination for his/her re-appointment or re-election as a director and other matters concerning him/her except for providing information and documents specifically requested by the NC to assist it in its deliberations.

Article 91 of the Constitution of the Company requires the number nearest to but not less than one-third of the Directors for the time being to retire from office by rotation and subject themselves for re-election by shareholders at the annual general meeting (the "AGM") of the Company. It is also provided in Article 97 of the Constitution of the Company that any Director appointed during financial year shall hold office only until the next AGM and shall then be eligible for re-election at that AGM.

The dates of initial appointment and last re-election or re-appointment date of each Director are set out below:

Although the Non-Executive Directors hold directorships in other public listed companies, the NC is of the view that such multiple listed company board representations do not hinder them from carrying out their duties as Directors. Thus, the NC believes that putting a maximum limit on the number of listed company board representation which a Director can hold is arbitrary, given that time requirements for each vary, and thus should not be prescriptive.

During the financial year ended 30 June 2016, Non-Executive Directors have contributed their invaluable views and provided a broader perspective on the board affairs of the Company. The NC, after taking into account the multiple board representations and principal commitments disclosed by each Non-Executive Director, is satisfied that each Non-Executive Director has allocated sufficient time and attention to the affairs of the Group to adequately discharge their duties as Directors of the Company.

The Board, unless circumstance warrants, generally does not encourage the practice of appointing alternate directors for Directors of the Board. During the financial year ended 30 June 2016, none of the Directors has put forward the appointment of any alternative director representing them on the Board.

The Board has accepted the recommendation of the NC's nomination of the re-election of retiring Directors, who have given their consent for re-election, at the forthcoming AGM of the Company. The retiring Directors are Ms Lai Chin Yee and Mr Ong Teng Choon, who will retire pursuant to Article 91 of the Company's Constitution.

Mr Lee Yiok Seng and Dr Lau Teik Soon, who are both over 70 years of age, were re-appointed as Directors to hold office from the date of the last AGM held on 23 October 2015 until the forthcoming AGM pursuant to Section 153(6) of the Companies Act, Chapter 50. Section 153(6) of the Companies Act, Chapter 50 was repealed when the Companies (Amendment) Act 2014 came into effect on 3 January 2016. As their appointments will lapse at the forthcoming AGM, Mr Lee Yiok Seng and Dr Lau Teik Soon will need to be re-appointed to continue in office. Upon their reappointments at the conclusion of the forthcoming AGM, going forward, Mr Lee Yiok Seng and Dr Lau Teik Soon's re-appointments will no longer be subject to shareholders' approval under Section 153(6) of the Companies Act, Chapter 50 as repealed. Mr Lee Yiok Seng and Dr Lau Teik Soon will then be subjected to retirement by rotation under the Company's Constitution.

The Board has accepted the recommendation of the NC's nomination of the re-appointment of Mr Lee Yiok Seng and Dr Lau Teik Soon, who have given their consent for re-appointment, as Directors of the Company at the forthcoming AGM of the Company.

The Board, to the best of their knowledge, is not aware of any relationships (including immediate family relationships) between Directors retiring at the forthcoming AGM of the Company, namely Ms Lai Chin Yee, Mr Ong Teng Choon, Mr Lee Yiok Seng and Dr Lau Teik Soon, and the other Director other than as follows: Mr Ong Tiong Siew and Mr Ong Teng Choon are brothers, and Mr Lee Yiok Seng is a brother-in-law of Ms Ong Huay Chin. Ms Ong Huay Chin is the sister of Mr Ong Tiong Siew and Mr Ong Teng Choon.

Other key information in relation to the retiring Directors at the forthcoming AGM of the Company pursuant to Guideline 4.7 of the Code is stated on pages 10 and 11 of this Annual Report.

Board Performance
Principle 5: There should be a formal annual assessment of the effectiveness of the Board as a whole and its board committees and the contribution by each director to the effectiveness of the Board.

The Board, through the NC, has used its best effort to ensure that Directors appointed to the Board and the Board Committees, whether individually or collectively, possess the background, experience, knowledge in the business, competencies in finance and management skills critical to the Group's business. The Board has also ensured that each Director, with his/her special contributions, brings to the Board an independent and objective perspective to enable sound, balanced and well-considered decisions to be made.

The NC has established a review process to assess performance and effectiveness of the Board as a whole following the conclusion of each financial year. The assessment criteria for board performance evaluation includes but not limited to board size and composition, board independence, board processes, board information, board accountability and standard of conduct.

For the financial year ended 30 June 2016, all Directors were requested to complete a board evaluation questionnaire designed to seek their views on the various aspects of the Board performance so as to assess the overall effectiveness of the Board. The said board evaluation questionnaires were submitted to the Company Secretaries for collation and the performance result were presented to the NC for assessment before submitting the same to the Board for discussion and determining areas for improvement and enhancement of the Board's effectiveness.

The Board, after taking into consideration the recommendation of the NC, is satisfied that the each Director contributes towards the overall effectiveness of the Board during the financial year ended 30 June 2016.

No external facilitator has been engaged by the Company for the purpose of evaluation of the Board during the financial year ended 30 June 2016.

The NC is of the view that each Director contributes in different areas to the overall success of the Group, and therefore, it would be more appropriate to assess the performance of the Board as a whole, than assessing on an individual basis or on Board Committee basis.

Notwithstanding the foregoing, the performance and contribution of each Director to the Board and Board Committees would be taken into consideration by the NC before putting forward their recommendation on nomination for reappointment or re-election of retiring directors at the forthcoming AGM of the Company.

The NC, when considering the re-appointment or re-election of any Director, had deliberated amongst others, the attendance record at meetings of the Board and Board Committees, the intensity of participation in the proceedings at meetings and quality of contributions made by each retiring director.

Access to Information
Principle 6: In order to fulfill their responsibilities, directors should be provided with complete, adequate and timely information prior to board meetings and on an on-going basis so as to enable them to make informed decisions to discharge their duties and responsibilities.

The Directors have separate and independent access to the Management and the Company Secretaries at all times through electronic mail, telephone and face-to-face meetings. The Company Secretaries or their representatives will attend and prepare minutes of all Board and Board Committees meetings and assist the Directors to ensure that Board procedures, rules and regulations are complied with. The Management keeps the Directors informed of the Group's operation and performance through regular updates and reports as well as through separate meetings and discussions. The Management will present periodic reports and updates on the Group's performance, financial position, prospects and other relevant information for review at each Board and Board Committees meeting. In addition, all other relevant information on material events and transactions are circulated by electronic mail to the Directors for consideration and approval. The key management personnel may be invited to attend Board and Board Committee meetings to answer queries in relation to the Group's operations.

The appointment and removal of Company Secretaries is subject to approval of the Board.

The Board will seek independent professional advice as and when necessary to enable it (including the Independent Directors) to discharge their responsibilities effectively. Each Director has the right to seek independent legal and professional advice, at the Company's expense, to assist him/her in the furtherance of his/her duties and responsibilities in relation to any aspect of the operations or undertakings of the Group.

(B) REMUNERATION MATTERS

Procedures for Developing Remuneration Policies
Principle 7: There should be a formal and transparent procedure for developing policy on executive remuneration and for fixing the remuneration packages of individual directors. No director should be involved in deciding his own remuneration.

The RC was formed in January 2010 and had adopted the written terms of reference duly established and approved by the Board. The RC held two (2) meetings during the financial year ended 30 June 2016. The RC comprises three (3) Non-Executive Directors, two (2) of whom, including the Chairman of the RC, are considered independent pursuant to the definition of independence recommended by the Code.

The members of the RC are:

Dr Lau Teik Soon - Chairman
Ms Lai Chin Yee - Member
Mr Lee Yiok Seng - Member

The key roles and authorities of the RC are:

As part of its review, the RC shall ensure that:

The RC, while carrying its review of remuneration matters, seeks to align interests of Directors with those of the shareholders and link rewards to corporate and individual performance as well as the roles and responsibilities of each Director. The RC also aims to be fair and avoid rewarding poor performance.

The recommendation of the RC would be submitted to the Board for endorsement. The RC is assisted by the Company Secretaries and Human Resource Department of the Group in carrying out the review of remuneration matters as and when necessary. External professional advice may be sought by the RC as and when required in furtherance of their duties and responsibilities. The Company has not engaged any remuneration consultant in respect of the remuneration matters of the Group during the financial year ended 30 June 2016.

Each member of the RC shall abstain from making any recommendation or voting on any resolutions in respect of his/her own remuneration package and other matters concerning him/her, except for providing information and documents specifically requested by the RC to assist it in its deliberations.

Level and Mix of Remuneration
Principle 8: The level and structure of remuneration should be aligned with the long-term interest and risk policies of the company, and should be appropriate to attract, retain and motivate (a) the directors to provide good stewardship of the company, and (b) key management personnel to successfully manage the company. However, companies should avoid paying more than is necessary for this purpose.

The annual reviews of the remuneration packages are carried out by the RC to ensure that the remuneration of the Executive Directors and key management personnel commensurate with their performance in the Group, by taking into account the financial and commercial health and business needs of the Group. The performance of the Executive Directors and key management personnel is reviewed periodically by the RC and the Board respectively in conjunction with the review of their remuneration packages.

The RC will consider the recommendation of the Code to use contractual provision to reclaim incentive components of remuneration from Executive Directors and key management personnel in exceptional circumstances of misstatement of financial results, or of misconduct resulting in financial loss to the Group before the implementation of long term incentive scheme.

The Non-Executive and Independent Directors do not have any service contracts with the Company. They receive Directors' fees, which take into account their level of contribution and responsibilities. The aggregate Directors' fees are recommended by the Board for approval by the shareholders at the forthcoming AGM of the Company.

The Executive Directors do not receive Directors' fees. The remuneration of the Executive Directors and the key management personnel comprises primarily of a basic salary component and a variable component which is inclusive of bonuses and other benefits.

Service contracts for Executive Directors are subject to periodic review by the RC. The Executive Directors' remuneration packages consist of salary and incentive bonuses. The said Executive Directors are entitled to the personal use of Company's cars and reimbursement of expenses relating to the use of the cars. They are also entitled to benefits of membership of not more than two country clubs and the reimbursement of subscription fees and all expenses incurred in the use of such club memberships. Their service contracts will continue for a further term of three (3) years from 27 January 2016 unless otherwise terminated by either party giving not less than six (6) months' notice in writing to the other or in lieu of notice, payment of an amount equivalent to six (6) months' salary based on their last drawn salary. The RC is of the view that the Executive Directors' service contracts are not excessively long nor with onerous removal clauses.

Disclosure of Remuneration
Principle 9: Every company should provide clear disclosure of its remuneration policies, level and mix of remuneration, and the procedure for setting remuneration in the company's Annual Report. It should provide disclosure in relation to its remuneration policies to enable investors to understand the link between remuneration paid to directors and key management personnel, and performance.

A breakdown of the remuneration of the Directors, in percentage terms showing the level and mix, for the financial year ended 30 June 2016 falling within the broad bands are set out below:

The Company adopts a remuneration policy for staff which comprise of a fixed component and a variable component. The fixed component is in the form of a basic salary. The variable component is in the form of a variable bonus that is linked to the Company's and individual's performance. Staff appraisals are conducted once every financial year. The Board will respond to any queries raised at the AGM of the Company pertaining to such policies.

Principle 9 of the Code recommends, inter alia, the full disclosure of remuneration of Directors and the top five (5) key management personnel (who are not Directors or CEO) together with remuneration breakdown in bands of $250,000 in the annual report. The Board believes that the said remuneration disclosure requirements for Directors and key management personnel is disadvantageous to the Group's business interests, given the highly competitive industry conditions, where poaching of Directors and key management personnel is prevalent. Further, the Board is of the view that the total aggregate remuneration paid to the top five (5) key management personnel (who are not directors or the CEO) is not material as the total aggregate remuneration paid amounted to less than 5% of the total operating expenses of the Group.

There were one (1) key management personnel who received remuneration above $250,000 but below $500,000 and four (4) key management personnel who received remuneration below $250,000 for the financial year ended 30 June 2016.

Ms Tan Ghee Hwa, an Executive Officer who works for the Group as the Director, Corporate Development, is the sister-in-law of the spouse of the Executive Director, Mr Ong Teng Choon.

Mr Ong Yee Khong, a director of a subsidiary corporation of the Company, and the brother of the Executive Directors, Mr Ong Tiong Siew and Mr Ong Teng Choon, received remuneration which exceeded $50,000 for the financial year ended 30 June 2016. Save as disclosed, there is no employee of the Group who is an immediate family member of any Director or the CEO and whose remuneration exceeded $50,000 during the financial year ended 30 June 2016. The remuneration of the employees who are related to the Directors and the controlling shareholders shall be subjected to an annual review of the RC.

A breakdown of the remuneration of the employee who is immediate family member of a director or the CEO, and whose remuneration exceed $50,000 per annum in percentage terms for the financial year ended 30 June 2016 is set out below:

Each member of the RC shall abstain from voting on any resolutions in respect of his/her remuneration package or that of employees related to him/her.

The RC also administers the RKSAS. The shareholders of the Company have approved and adopted the RKSAS on 13 January 2010. The RKSAS conforms to the requirements as set out in Chapter 8 Part VIII of the Listing Manual of the SGX-ST. The rationale for adopting the RKSAS is to give the Company greater flexibility to align the interests of employees, especially key management personnel, with those of the shareholders of the Company. It is also intended to reward, retain and motivate employees to achieve superior performance which creates and enhances economic value for the shareholders.

The details of the RKSAS are set out on pages 149 to 159 of the Prospectus dated 18 January 2010, and on page 39 of this Annual Report.

There have been no shares awarded pursuant to under the RKSAS during the financial year ended 30 June 2016.

(C) ACCOUNTABILITY AND AUDIT

Accountability
Principle 10: The Board should present a balanced and understandable assessment of the company's performance, position and prospects.

The Board recognises that it has overall responsibility to provide a balanced and fair assessment of the Group's operations, performance, financial position and prospects in its audited financial statements and quarterly, half-yearly and full-year results announcements. The Management provides the Directors on a quarterly basis, financial reports and other information on the Group's operations, performance, financial position and prospects for their effective monitoring and decision-making. The Board provides the shareholders with quarterly, half-yearly and full-year results announcements and audited financial statements within the statutory period stipulated by laws and regulations.

Risk Management and Internal Controls
Principle 11: The Board is responsible for the governance of risk. The Board should ensure that Management maintains a sound system of risk management and internal controls to safeguard shareholders' interests and the company's assets, and should determine the nature and extent of the significant risks which the Board is willing to take in achieving its strategic objectives.

The Board acknowledges the overall responsibility of the Board for the governance of risks and the overall risk management and internal control systems, but the Board recognises that no cost effective systems will preclude all errors and irregularities, as systems are designed to manage rather than eliminate the risk of failure to achieve business objectives, and can provide only reasonable and not absolute assurance against material misstatement or loss.

The Board has empowered the Management to conduct reviews regularly on the Group's business and operational activities to identify areas of significant business risks as well as appropriate measures to control and mitigate these significant business risks within the Group's policies and strategies. In addition, the AC engages the internal auditors to review the Group's processes and key areas, strengthen its risk management processes and framework, update and maintain an adequate and effective risk management and internal control systems and recommend measures of controls to mitigate risks. The internal auditors will report the internal audit report to the AC, together with their recommendations. The Management will follow up on the internal auditors' recommendations so as to strengthen the Group's risk management procedures.

On an annual basis, the internal auditors prepare the internal audit plan by taking into consideration the risks identified, for approval by the AC and the internal audits are conducted to assess the adequacy and the effectiveness of the Group's risk management and the internal control systems put in place, including financial, operational, compliance and information technology controls. Those material non-compliance or lapses in internal controls, together with recommendation for improvement are reported to the AC. The said internal audit report is forwarded to the relevant departments for their follow-up action. The timely and proper implementation of all procedures requiring corrective, preventive or improvement measures are closely monitored. In addition, major control weaknesses on financial reporting, if any, highlighted by the external auditors during the course of the external audit, will also be rectified by the Management at the advice of the AC.

The Board has received assurance from the CEO and the FC respectively that the financial records of the Group have been properly maintained and the financial statements give a true and fair view of the Group's business operations and finances; and the Group's risk management and internal control systems in place is adequate and effective in addressing the material risks identified by the Group in its current business environment including material financial, operational, compliance and information technology risks.

Based on the Group's risk management and internal control systems put in place, the internal controls policies and procedures established and maintained by the Group, as well as the reviews performed by the external auditors and internal auditors, the Board, with the concurrence of the AC, is of the view that the internal control systems and risk management system of the Group in addressing financial, operational, compliance and information technology risks are adequate and effective as at 30 June 2016.

Audit Committee
Principle 12: The Board should establish an Audit Committee ("AC") with written terms of reference which clearly set out its authority and duties.

The AC was formed in January 2010 and had adopted the written terms of reference established and approved by the Board. The AC held four (4) meetings during the financial year ended 30 June 2016. The AC comprises three (3) Non-Executive Directors, two (2) of whom, including the Chairman of the AC, are considered independent pursuant to the definition of independence recommended by the Code.

The members of the AC are:

Ms Lai Chin Yee - Chairman
Dr Lau Teik Soon - Member
Mr Lee Yiok Seng - Member

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/her ceasing to be partner of the auditing firm or director of the auditing corporation; and in any case, a person having any financial interest in the auditing firm or auditing corporation.

The AC meets regularly with the Group's external auditors and the Management to review auditing and risk management matters and discuss accounting implications of any major transactions including significant financial reporting issues. The AC also reviews internal audit functions to ensure that an effective and adequate system of internal controls is maintained in the Group.

On a quarterly basis, the AC also reviews interested person transactions and quarterly results announcements before the submission to the Board for approval. The AC is kept abreast by the Company Secretaries, the Management and the external auditors in respect of changes to accounting standards, Listing Manual of the SGX-ST and other rules and regulations which could have an impact on the Group's business and financial statements.

The AC reviews the adequacy and effectiveness of the Group's system of internal controls, including financial, operational, compliance and information technology controls and risk management systems through discussion with Management, external and internal auditors before reporting to the Board annually.

The Board considers that the members of the AC are appropriately qualified to fulfill their duties and responsibilities as the AC members, individually or collectively, bringing with them invaluable managerial and professional expertise in the financial, legal and industry domains.

The AC meets at a minimum, on a quarterly basis to perform the following functions:

Each member of the AC shall abstain from making any recommendation or voting on any resolution in respect of matters concerning him/her, if any, except for providing information and documents specifically requested by the AC to assist it in its deliberations.

The external and internal auditors have full access to the AC and the AC has full access to the Management. The AC has the authority to commission investigations on any matters, which has or is likely to have material impact on the Group's operating and financial results. The AC meets with the external and internal auditors without the presence of Management annually. The AC reviews the findings from the external and internal auditors and the assistance given to the external and internal auditors by the Management.

The AC annually reviews the adequacy of the internal audit function to ensure that the internal audit resources are adequate and that the internal audits are performed effectively. The AC examines the internal audit plans, determines the scope of audit examination and approves the internal audit budget. It also oversees the implementation of the improvements required on internal control weaknesses identified and ensures that Management provides the necessary co-operation to enable the internal auditors to perform its function.

The AC reviews the scope and results of the audit carried out by the external auditors, the cost effectiveness of the audit and the independence and objectivity of the external auditors. It always seeks to balance the maintenance of objectivity of the external auditors and their ability to provide value-for-money professional services.

The AC, having reviewed the scope and value of non-audit services provided to the Group by the external auditors, Messrs Nexia TS Public Accounting Corporation, which comprise tax advisory services, is satisfied that the nature and extent of such services will not prejudice and affect the independence and objectivity of the external auditors. The audit and non-audit fees paid/payable to the external auditors of the Company, Messrs Nexia TS Public Accounting Corporation, (including its associated firm) for the financial year ended 30 June 2016 were $150,000 and $5,700 respectively.

The Company has complied with Rule 715 of the Listing Manual of the SGX-ST as all subsidiary corporations of the Company in Singapore and joint ventures are audited by Messrs Nexia TS Public Accounting Corporation for the purposes of the consolidated financial statements of the Group.

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 an annual basis. Messrs Nexia TS Public Accounting Corporation, the external auditors of the Company, has confirmed that they are a Public Accounting Firm registered with ACRA and provided a confirmation of their independence to the AC. The AC had assessed the external auditors based on factors such as their performance, adequacy of resources and experience. Accordingly, the AC is satisfied that Rule 712 of the Listing Manual of the SGX-ST is complied with and has recommended to the Board that Messrs Nexia TS Public Accounting Corporation be nominated for re-appointment as external auditors at the forthcoming AGM of the Company.

The external auditors, during their course of external audit, will evaluate the adequacy and effectiveness of the Group's internal controls and report to the AC, together with their recommendations, on any material weakness and non-compliance.

In July 2010, the Singapore Exchange Limited and ACRA had launched the "Guidance to Audit Committees on Evaluation of Quality of Work performed by External Auditors" which aims to facilitate the AC in evaluating the external auditors. Accordingly, the AC had evaluated the performance of the external auditors based on the key indicators of audit quality set out in the guidance.

The AC recommends to the Board the appointment, re-appointment and removal of external auditors, and approves the remuneration and terms of engagement of the external auditors. The re-appointment of the external auditors is subject to shareholders' approval at the forthcoming AGM of the Company.

The Company has established a Code of Conduct and Business Ethics which applies to all employees of the Group. This code covers areas such as conduct in workplace, business conduct, protection of the Company's assets, confidentiality of information and conflicts of interest, etc. Directors, key management personnel and employees are expected to observe and uphold high standards of integrity which are in compliance with the Group's policies and the law and regulations of the countries in which the Group operates.

The Company has put in place the Whistle-Blowing Procedures, endorsed by the AC, which provides the mechanisms to provide a channel for employees to report in good faith and in confidence, raise concerns or observations about possible fraud, corruption, dishonest acts, improprieties or wrongdoings in connection with Group, to Ms Lai Chin Yee, the Chairman of the AC. Details of the whistle blowing policies and procedures have been made available to all employees of the Group. It has a well-defined process which ensures independent investigation of such matters and appropriate follow-up action and provides the assurance that employees will be protected from reprisal within the limits of the law.

Should the AC receive reports relating to serious offences and/or criminal activities in the Group, the AC and the Board have access to the appropriate external advice where necessary. Where appropriate or requires, a report shall be made to the relevant government authorities for further investigation or action. The Group has not received any reported incidents pertaining to whistle-blowing for the financial year ended 30 June 2016.

Internal Audit
Principle 13: The Company should establish an effective internal audit function that is adequately resourced and independent of the activities it audits.

The AC approves the hiring, removal, evaluation and compensation of the internal auditors. The internal audit function of the Company has been out-sourced to Messrs KPMG Services Pte Ltd, an international public accounting firm, for the financial year ended 30 June 2016. The internal auditors report primarily to the Chairman of the AC and have full access to documents, records, properties and personnel of the Company and the Group.

The Board recognises the importance of maintaining a system of internal controls, procedures and processes for the Group to safeguard the shareholders' investments and the Group's businesses and assets, while the Management is responsible for establishing and implementing the internal control procedures in a timely and appropriate manner. The role of the internal auditors is to assist the AC in ensuring that the controls are effective and functioning as intended, to undertake investigations as directed by the AC and to conduct regular in-depth audits of high risk areas. The AC is satisfied that the internal auditors are suitably qualified and the audit function is adequately resourced and has appropriate standing within the Group.

The internal audit carried out is guided by the International Standards for the Professional Practice of Internal Auditing (IIA Standards) as laid down in the International Professional Practices Framework issued by the IIA.

The internal audit plans and internal audit schedules are planned in consultation with the Management. The internal audit plan is submitted to the AC for approval prior to the commencement of the internal audit. In addition, the internal auditors may be involved in ad-hoc projects undertaken by the Management which require the assurance of the internal auditor in specific areas of concerns.

During the financial year ended 30 June 2016, the internal auditors conducted its risk management review and reported its findings and recommendations to the AC. The AC reviewed the adequacy and effectiveness of the internal controls, including financial, operational, compliance and information technology risks and risk management systems through discussions with Management and internal auditors, and reported the same to the Board.

(D) SHAREHOLDER RIGHTS AND RESPONSIBILITIES

Shareholder Rights
Communication with Shareholders

Principle 14: Companies should treat all shareholders fairly and equitably, and should recognise, protect and facilitate the exercise of shareholders' rights, and continually review and update such governance arrangements.

Principle 15: Companies should actively engage their shareholders and put in place an investor relations policy to promote regular, effective and fair communication with shareholders.

The Company's corporate governance practices promote the fair and equitable treatment of all shareholders. To facilitate shareholders' ownership rights, the Company ensures that all material information is disclosed on a comprehensive, accurate and timely basis via SGXNET, especially information pertaining to the Group's business development and financial performance which could have a material impact on the share price of the Company, so as to enable shareholders to make informed decisions in respect of their investments in the Company.

Shareholders are informed of general meetings through notices contained in annual reports or circulars sent to all shareholders. These notices are also published in The Business Times and released through SGXNET. Shareholders are invited to attend the general meetings to put forth any questions they may have on the motions to be debated on and decided upon. All shareholders are entitled to vote in accordance with the established voting rules and procedures. The Company will conduct voting for all resolutions tabled at the general meetings by poll in accordance with applicable rules of the SGX-ST and Constitution of the Company.

Whilst there is no limit imposed on the number of proxy votes for nominee companies, the Constitution of the Company provides that each shareholder is entitled to appoint up to two proxies to attend general meetings.

The Company is firmly committed to corporate governance and transparency through disclosing to its stakeholders, including its shareholders, as much relevant information as is possible, in a timely, fair and transparent manner as well as listening to its shareholders' views and addressing their concerns.

All material information on the performance and development of the Group is disclosed through SGXNET, supplemented by press release and the Company's website. The Company does not practice selective disclosure of material information. Price sensitive announcements including quarterly, half-yearly and full-year results announcements are released through SGXNET. Shareholders and investors can access essential information on the Company's website at www.ryobi-kiso.com which provides, inter-alia, corporate announcements, press releases and quarterly results announcements disclosed by the Company on SGXNET.

By supplying shareholders with reliable and timely information, the Company is able to strengthen the relationship with its shareholders based on trust and accessibility. The Company has a team of investor relations (the "IR") personnel who focus on facilitating the communications with all stakeholders including shareholders, analysts and media on a regular basis, attending to their queries or concerns as well as keeping the investors updated on the Group's corporate developments and financial performance. To enable shareholders to contact the Company easily, the contact details of the IR personnel are set out in the corporate information of this Annual Report as well as on the Company's website. The IR personnel will attend to investors' queries as soon as applicable.

The Company does not have a formal dividend policy. The dividend that the Directors may recommend or declare in respect of any particular financial year or period will be subject to the factors outlined below as well as any other relevant factors deemed relevant by the Board, including but not limited to the level of the cash and retained earnings; the actual and projected financial performance; the projected levels of capital expenditure and other investment plans; and the restrictions on payment of dividends imposed on the Group by any financing arrangements.

The Board has recommended first and final tax exempt dividend of 0.3 Singapore cent per ordinary share for the financial year ended 30 June 2016 for shareholders' approval at the forthcoming AGM of the Company.

Conduct of Shareholder Meetings
Principle 16: Companies should encourage greater shareholder participation at general meetings of shareholders, and allow shareholders the opportunity to communicate their views on various matters affecting the company.

The Company encourages active shareholders' participation at general meetings. The shareholders are encouraged to attend the general meetings to ensure high level of accountability and to stay informed of the Group's strategies and visions. If shareholders are unable to attend the meetings, the Constitution allow a shareholder of the Company to appoint up to two proxies to attend and vote for and on behalf of the shareholder.

Resolutions tabled at general meetings are on each substantially separate issue.

The Board views the general meetings as the principal forum for dialogue with shareholders, being an opportunity for shareholders to raise issues pertaining to the resolutions tabled for approval and/or ask the Directors or the Management questions regarding the Company and its operations.

At general meetings of the Company, shareholders are given the opportunity to air their views and ask the Directors and the Management questions regarding the Group. The Chairman of the AC, NC and RC are available at the general meetings to answer those questions relating to the function of the respective Board Committees.

The external auditors, Messrs Nexia TS Public Accounting Corporation are also invited to attend the AGM and are available to assist the Directors in addressing any relevant queries by the shareholders relating to the conduct of the external audit and the preparation and content of the auditors' report.

To have greater transparency in the voting process, the Company will conduct the voting of all resolutions by poll at general meeting. The voting results of each of the resolutions tabled are announced immediately at the general meeting. The voting result, together with the total numbers of votes cast for or against the resolutions will be announced via SGXNET after the market close.

Minutes of general meetings will be made available to shareholders upon receipt of their request.

DEALINGS IN SECURITIES

The Group has adopted its own Internal Compliance Code on dealing in securities by setting out its regulations with regard to dealings in the Company's securities by its Directors and officers, that is modeled, with some modifications, on Rule 1207(19) of the Listing Manual of the SGX-ST. The Group's Internal Compliance Code provides guidance for Directors and officers on their dealings in the Company's securities.

The Group's Internal Compliance Code prohibits the Directors and officers who have access to unpublished material price sensitive information from dealing in Company's securities. They are advised not to deal in the Company's securities during the period commencing two (2) weeks before the announcement of the Company's financial statements for each of the first three quarters of the financial year and one (1) month before the announcement of the Company's full year financial statements and ending on the date of the release of the announcement of such results via SGXNET, or when they are in possession of the unpublished price sensitive information of the Group. In addition, the Directors and officers are expected to observe insider trading laws at all times even when dealing in securities within the permitted trading period. They are also discouraged from dealing in the Company's securities on short term consideration.

MATERIAL CONTRACTS

There were no material contracts to which the Company or any of its subsidiary corporation, is a party and which involve the interests of the CEO, any Director or the controlling shareholder, subsisting at the end of the financial year ended 30 June 2016.

INTERESTED PERSON TRANSACTIONS

The Company has established internal control policies to ensure that transactions with interested persons are properly reviewed and conducted at arms' length basis.

The following is the aggregate value of all transactions entered into with interested persons (as defined in Chapter 9 of the Listing Manual of the SGX-ST) for the financial year ended 30 June 2016:

The Company does not have any shareholders' mandate for interested person transactions pursuant to Rule 920 of the Listing Manual of the SGX-ST.

The Board and the AC will review transactions entered into with interested persons to ensure that the relevant rules under Chapter 9 of the Listing Manual of the SGX-ST are complied with.

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