This printed article is located at http://telechoice.listedcompany.com/corporate.html

Corporate Governance

Our Board of Directors and Management are committed to maintaining high standards of corporate governance, to protect the interests of our shareholders and other stakeholders.

This Report describes our corporate governance practices, with reference to the principles set out in the revised Code of Corporate Governance issued by the Monetary Authority of Singapore on 2 May 2012 ("Code 2012").

(A) Board Matters

Principle 1 : Board's Conduct of its Affairs

Our Board is responsible for guiding our overall strategic direction, corporate governance, and providing oversight in the proper conduct of our businesses.

The Board meets regularly to review our key activities and business strategies. Regular Board Meetings are held quarterly to deliberate on strategic matters and policies including significant acquisitions and disposals, the annual budget, review the performance of the business and approve the release of the quarterly and year-end reports. Where necessary, we convene additional Board sessions to address significant transactions or developments. Unless delegated, all transactions of the Company are approved by the Board.

Our Articles of Association provide for Directors to participate in meetings by teleconference or videoconference.

The Board has also established an Executive Committee ("EC") to oversee major business and operational matters. The EC comprises Bertie Cheng, Ronald Seah Lim Siang, Sio Tat Hiang and Lim Chai Hock Clive.

Management regularly consults and updates the EC on all major business and operational issues.

The Board is also supported by other Board committees which are delegated with specific responsibilities, as described under "Principle 4: Board Membership" of this Report.

The Board, upon the recommendation of the Audit Committee ("AC"), has adopted a comprehensive set of internal controls, which sets out the authority and approval limits for capital and operating expenditure, investments and divestments, bank borrowings and cheque signatories arrangements at Board level. Authority and approval sub-limits are also provided at Management levels to facilitate operational efficiency.

Management monitors changes to regulations and accounting standards closely. Updates and briefings on regulatory requirements are conducted either during Board sessions or by circulation of papers. Directors are also encouraged to attend seminars and training that may be relevant to their responsibilities and duties as directors, at the Company's cost.

The Company's practice is to issue a letter of appointment setting out the dutiesThe Company's practice is to issue a letter of appointment setting out the duties and obligations of new Directors upon their appointment. New Directors are given briefings by Management on the business activities of the Group and its strategic directions. New Directors are also given manuals containing, among others, relevant information on the Group and information about their statutory and other responsibilities as Directors.

To help ensure compliance with the applicable securities and insider trading laws, including the best practices set out in the SGX-ST Listing Manual (the "Listing Manual"), we have adopted and implemented our Guidelines on Dealing in Securities of TeleChoice (the "Guidelines"). We send regular compliance notices to all Directors and employees. In accordance with Rule 1207(19) of the Listing Manual, all our Directors and employees are prohibited from dealing in our securities during the period of, two weeks before the respective announcement of our first quarter, second quarter and third quarter financial results, and one month before the announcement of our full year financial results. Restrictions are lifted from the date of the announcement of the respective results. Similar dealing restrictions also apply in the Company's acquisition of its securities pursuant to its share purchase mandate. All our Directors and employees, and those of our subsidiaries and associates, are advised not to deal in our securities on short term considerations and are also advised to comply with the Guidelines and observe applicable insider trading laws at all times.

Principle 2: Board Composition and Guidance

To be effective, we believe our Board should comprise a majority of Non-Executive Directors independent of Management, with the right core competencies and a balance and diversity of skills and experience to enable them to contribute effectively.

Our Board currently comprises seven (7) Directors, all of whom are Non-Executive Directors and independent of Management. Our Board comprises a majority of Independent Directors, namely Bertie Cheng, Yap Boh Pin, Tang Yew Kay Jackson and Ronald Seah Lim Siang, which helps ensure a strong element of independence in all our Board's deliberations.

The composition of our Board enables Management to benefit from an outside diverse and objective perspective of issues that are brought before our Board. It also enables our Board to interact and work with Management through a robust exchange of ideas and views to help shape the strategic directions. This, coupled with a clear separation of the role of our Chairman and our President, provides a healthy professional relationship between our Board and Management, with clarity of roles and robust oversight.

Principle 3: Chairman and President

We believe there should be a clear separation of the roles and responsibilities between our Chairman and President. Our Chairman and the President are separate persons in order to maintain an effective balance of power and responsibilities.

Our Chairman is Bertie Cheng, an Independent Non-Executive Director. Our Chairman leads the Board and ensures that our Board members work together with Management, with the capability and moral authority to engage and contribute effectively and constructively on various matters, including strategic issues and business planning processes.

Our President, Lim Shuh Moh Vincent, is charged with full executive responsibility for the running of our businesses, making operational decisions and implementing business directions, strategies and policies. Our President is supported on major business and operational issues by the oversight of our EC.

Principle 4: Board Membership

We believe that Board renewal must be an ongoing process, to ensure good governance, and maintain relevance to the changing needs of the Company and business. As required by our Articles of Association, our Directors are subject to retirement and re-election by shareholders as part of the Board renewal process. Nominations and election of Board members are the prerogatives and rights of all our shareholders.

In carrying out its functions, our Board is supported by key Board committees, namely the AC, the Remuneration Committee ("RC"), the Nominating Committee ("NC") and the EC. Each of our Board committees has been established with clear charters setting out their respective areas of authority, terms of reference and committee procedures. Other Board committees can be formed from time to time to look into specific areas as and when the need arises. Membership in the different committees is carefully managed to ensure that there is equitable distribution of responsibilities amongst Board members, to maximise the effectiveness of the Board and foster active participation and contribution from Board members. Diversity of experiences and appropriate skills are also considered, along with the need to ensure appropriate checks and balances between the different Board committees.

Details of frequency and participation at our Board, AC, RC, NC and EC meetings for FY15 are set out in Table 1.

Table 1: FY15 - Directors' Attendance at Board and Board Committees Meetings

Director Board Audit Committee Remuneration Committee Nominating Committee Executive Committee
No. of Meetings Held No. of Meetings Attended (% Attendance) No. of Meetings Held No. of Meetings Attended (% Attendance) No. of Meetings Held No. of Meetings Attended (% Attendance) No. of Meetings Held No. of Meetings Attended (% Attendance) No. of Meetings Held No. of Meetings Attended (% Attendance)
Bertie Cheng 4 4 (100%) NA NA 1 1 (100%) NA NA 0 -
Yap Boh Pin 4 4 (100%) 4 4 (100%) NA NA 1 1 (100%) NA NA
Yen Se-Hua Stewart(1) 1 1 (100%) NA NA 1 1 (100%) 1 1 (100%) 0 -
Tang Yew Kay Jackson 4 4 (100%) 4 4 (100%) NA NA NA NA NA NA
Ronald Seah Lim Siang(2) 4 4 (100%) 1 1 (100%) NA NA NA NA NA NA
Sio Tat Hiang 4 3 (75%) NA NA 1 1 (100%) 1 1 (100%) 0 -
Ho Koon Lian Irene(3) 3 2 (67%) 3 2 (67%) NA NA NA NA NA NA
Lim Chai Hock Clive 4 1 (25%) NA NA NA NA NA NA 0 -

Our NC is chaired by an Independent Non-Executive Director, Yen Se-Hua Stewart and also comprises Yap Boh Pin

Notes: -

  1. Yen Se-Hua Stewart resigned as a Director, the Chairman of the NC and a member of the RC and EC with effect from 5 May 2015.
  2. Ronald Seah Lim Siang resigned as a member of the AC and was appointed as a member of the RC with effect from 5 May 2015.
  3. Ho Koon Lian Irene was appointed as a Director and a member of the AC with effect from 5 May 2015.

Our NC is chaired by an Independent Non-Executive Director, Bertie Cheng and also comprises Yap Boh Pin (Independent Non-Executive Director) and Sio Tat Hiang (Non-Executive Director). The members of our NC (including the Chairman) are all Non-Executive Directors independent of Management.

Our NC's responsibilities include:–

  1. recommendations to the Board on the selection, appointment and re-appointment of the Company's Directors;

  2. determining the independence of a Director on an annual basis;

  3. deciding how the Board's performance and the performance of the Chairman, Board committees and each individual Directors are to be evaluated;

  4. recommendations to the Board on the review of board succession plans for Directors and the President; and

  5. recommendations to the Board on training and professional development programs for the Board.

Our Articles of Association require one-third of our Directors to retire and subject themselves to re-election by shareholders at every annual general meeting ("AGM") ("one-third rotation rule"). In other words, no Director stays in office for more than three years without being re-elected by our shareholders.

In addition, a newly-appointed Director is required to submit himself/herself for retirement and re-election at the AGM immediately following his/her appointment. Thereafter, he/she is subject to the one-third rotation rule.

Principle 5: Board Performance

We believe that Board performance is ultimately reflected in our business performance. Our Board should ensure compliance with applicable laws and all Board members should act in good faith, with due diligence and care, in our best interests and the best interests of our shareholders.

Our Board, through the delegation of its authority to the NC, has used its best efforts to ensure that our Directors are equipped with the necessary background, experience and expertise in technology, business, finance and management skills to make valuable contributions and that each Director brings to our Board an independent and objective perspective to enable balanced and well-considered decisions to be made.

Our NC has implemented a framework for assessing Board performance, and undertakes regular reviews of the performance of our Board, our Chairman, our committees and each individual Director, with inputs from our other Board members. The results of the Board appraisal exercise, which is conducted at least once annually, are circulated to all Directors for information and feedback. The information gleaned from the completed Board appraisal exercise(s) are taken into consideration by the NC, in determining whether there are any changes needed to the appraisal system, prior to the commencement of the next Board appraisal cycle. In addition, our NC also reviews the performance of Directors who hold multiple board representations and has established a guideline that (a) a Director holding a full time position should not be a Director of more than four listed companies; and (b) a "professional" Director should not be a Director of more than six listed companies. However, the NC has the discretion to deviate from this guideline on a case-by-case assessment.

As at 31 December 2015, three of our four Independent Directors, namely Bertie Cheng, Yap Boh Pin and Tang Yew Kay Jackson, had served on our Board for more than nine years. Our NC conducts rigorous review of the independence of our non-executive directors particularly for those directors who have served on our Board for more than nine years. Our Board takes the view that the key consideration in ascertaining the effectiveness of a Director's independence is the ability to exercise independent judgement with a view to the best interests of the Company. After due and careful rigorous review, our Board is of the view that Bertie Cheng, Yap Boh Pin and Tang Yew Kay Jackson remain independent in their exercise of Board duties as they have continued to demonstrate independent mindedness and conduct, including expressing their own views on issues and challenging Management. Each of these Independent Directors has declared their independence and has no relationship with Management that could adversely impinge on their independence in the discharge of their duties as Directors on our Board.

One of our Independent Directors, Ronald Seah Lim Siang, has declared that he and his brother, Peter Seah Lim Huat, are both directors in related corporations of the Company which have business transactions with the Group. Ronald Seah Lim Siang continued to demonstrate strong independence in character and judgement in the discharge of his responsibilities as a Director on our Board. He has continued to express his individual view points, debated issues and objectively scrutinised and challenged Management. After taking account the views of the NC, our Board is of the view that Ronald Seah Lim Siang remains independent in his exercise of Board duties.

Principle 6: Access to Information

We believe that our Board should be provided with complete, adequate and timely information prior to Board meetings and as and when the need arises.

Management provides complete, adequate and timely information to our Board, on our affairs and issues requiring our Board's attention, as well as monthly reports providing updates on our key operational activities and financial performance. The monthly flow of information and reports allows our Directors to make informed decisions and also to keep abreast of key challenges and opportunities between our Board meetings.

Frequent dialogue takes place between Management and members of our Board, and our President encourages all Directors to interact directly with all members of our Management team.

Where a physical Board meeting is not possible, timely communication with members of our Board is effected through electronic means, which include electronic mail and teleconference. Alternatively, Management will arrange to personally meet and brief each Director, before seeking our Board's approval.

Our Board has separate and independent access to our senior Management and the Company Secretary at all times. Our Board also has access to independent professional advice, if necessary.

Likewise, our AC has separate and independent access to the external and internal auditors, without the presence of our President and other senior Management members, in order to have free and unfettered access to information that our AC may require.

 

 

(B) Remuneration Matters

Principle 7: Procedures for Developing Remuneration Policies

Principle 8: Level and Mix of Remuneration

Principle 9: Disclosure on Remuneration

We believe that a framework of remuneration for our senior Management and key staff should not be taken in isolation. It should be linked to the development of our senior Management and key staff to ensure that there is a continual development of talent and renewal of strong and sound leadership for our continued success. For this reason, our RC oversees the compensation package for our senior Management and key staff.

Our RC is responsible for reviewing cash and long-term incentive compensation policies for our President, senior Management and key staff. Our RC is chaired by an Independent Non-Executive Director, Bertie Cheng and also comprises Ronald Seah Lim Siang (Independent Non-Executive Director) and Sio Tat Hiang (Non-Executive Director). The members of our RC (including the Chairman) are all Non-Executive Directors independent of Management. From time to time, we may co-opt an outside member into our RC to provide additional perspectives on talent management and remuneration practices.

Our RC has access to expert professional advice on human resource matters whenever there is a need to consult externally. Carrots Consulting Pte Ltd ("Carrots") was appointed to provide professional advice on certain human resource matters. Carrots only provides human resource consulting services to the Company and has no other relationships with the Company. In its deliberations, our RC takes into consideration industry practices and norms in compensation. Our President is not present during the discussions relating to his own compensation, and terms and conditions of service, and the review of his performance. However, our President will be in attendance when our RC discusses the policies and compensations of our senior Management and key staff, as well as major compensation and incentive policies such as share options, stock purchase schemes, framework for bonus, staff salary and other incentive schemes.

All decisions at any RC meeting are decided by a majority of votes of RC members present and voting (the decision of the RC shall at all times exclude the vote, approval or recommendation of any member having a conflict of interest in the subject matter under consideration).

The RC is guided by its Terms of Reference which are aligned with requirements under the Code 2012.

Our RC's responsibilities include:

  1. review and recommend to the Board the cash and long-term incentive compensation policies and framework and fee schedule for Directors and Key Management Personnel of the Company;

  2. administer and review any proposed amendments to the TeleChoice Restricted Share Plan, the TeleChoice Performance Share Plan and such other similar share schemes or plans that may be adopted by the Company from time to time;

  3. review and recommend to the Board for approval, on an annual basis, the specific remuneration packages of each Director and the Key Management Personnel of the Company. Where the RC deems appropriate, it may, in consultation with the Chairman of the Board, make the relevant recommendations in respect of the remuneration of Director or Key Management Personnel, to the entire Board for approval; and

  4. undertake such other reviews and projects as may be requested by the Board and report to the Board its findings from time to time on matters which require the attention of the RC.

The term "Key Management Personnel" shall mean the President and other persons having authority and responsibility for planning, directing and controlling the activities of the Company.

Executive Remuneration for the President and Key Management Personnel

Remuneration for Key Management Personnel comprises a fixed component, a variable cash component, a share-based component and benefits-in-kind.

  • A. Fixed Component:

    The Fixed Component comprises the annual base salary, annual wage supplement and monthly allowances.

  • B. Variable Cash Component:

    The Variable Cash Component, including the Performance Bonus and the Discretionary Bonus, is a remuneration component linked to the achievement of annual performance targets for each key management personnel as agreed with the Board at the beginning of each financial year. Performance objectives aligned to the overall business metrics and strategic goals of the Company are cascaded down throughout the organisation through the use of Performance Scorecards, thereby creating greater alignment between the performance of the Company, business units and the individual employees. These performance objectives could be in the form of both quantitative and qualitative measures which are aligned to the Company's business strategy. In determining the final payout for each Key Management Personnel, the RC considers the overall performance of the Company, funding affordability and individual performance.

  • C. Share-Based Component:

    The aggregate number of new shares to be issued, when aggregated with existing shares (including treasury shares, if any, and cash equivalents) delivered and/or to be delivered pursuant to the TeleChoice Restricted Share Plan (the "TeleChoice RSP") and the TeleChoice Performance Share Plan (the "TeleChoice PSP") (collectively referred to as the "Share Plans") then in force, shall not exceed fifteen per cent (15%) of the total number of issued shares (excluding treasury shares, if any) from time to time. To align the interest of the Key Management Personnel and that of shareholders, the Key Management Personnel are required to retain a certain percentage of shares acquired through the share-based plans, up to the lower of: (1) a percentage of total number of shares acquired under RSP and PSP Plan for FY07 and onwards based on position level; or (2) the number of TeleChoice shares to be retained in order to meet the minimum value, which is set at a percentage of annual base salary based on position level.

    Please refer to the section on Equity Compensation Benefits in the Directors' Statement on pages 48 to 51 of this Annual Report for the details of the Share Plans as well as awards granted under the Share Plans.

    TeleChoice RSP
    Under the TeleChoice RSP, conditional awards vest over a two-year period, once the RC is, at its sole discretion, satisfied that the performance and extended service conditions are attained. The total number of shares to be awarded depends on the level of attainment of the performance targets. No shares will be delivered if the threshold performance targets are not achieved, while up to 1.3 times the number of shares that are the subject of the award will be delivered if the stretched performance targets are met or exceeded. The performance measures used in the TeleChoice RSP grants are Net Profit before Tax and Return on Capital Employed. The Company has attained an achievement factor which is reflective of partially meeting the pre-determined target performance levels based on the performance period from FY14 to FY15.

    TeleChoice PSP
    Under the TeleChoice PSP, conditional awards of shares are granted. Awards represent the right of a participant to receive fully paid shares upon the participant achieving certain pre-determined performance targets which are set based on corporate objectives aimed at sustaining longer-term growth. After the awards vest, the shares comprised in the awards are issued at the end of the performance and/or service period once the RC is, at its sole discretion, satisfied that the prescribed performance targets have been achieved. The actual number of shares given will depend on the level of achievement of the prescribed performance targets over the performance period, currently prescribed to be a three-year period. No shares will be delivered if the threshold performance targets are not achieved, while up to 1.5 times the number of shares that are the subject of the award will be delivered if the stretched performance targets are met or exceeded. The performance measures used in the TeleChoice PSP grants are Total Shareholder Return (the "TSR") against Cost of Equity Hurdles (i.e. measure of absolute performance) and TSR against FTSE ST All-Share Index (i.e. measure of relative performance). The Company has attained an achievement factor which is reflective of partially meeting the pre-determined target performance levels based on the performance period from FY13 to FY15.

  • D. Benefits-In-Kind:

    Benefits provided are comparable with local market practices and include non-cash benefits such as leave, medical benefits and handphones.

In performing the duties as required under its Terms of Reference, the RC ensures that remuneration paid to the President and Key Management Personnel is strongly linked to the achievement of business and individual performance targets. The performance targets as determined by the RC are set at realistic yet stretched levels each year to motivate a high degree of business performance with emphasis on both short-term and long-term quantifiable objectives. The RC also considers the tight talent market for senior Management in setting total compensation levels. The RC engaged our remuneration consultant, Carrots, to conduct a Pay-for-Performance Alignment study. It was found that there was sufficient evidence indicating Pay-for-Performance Alignment for the Company in both absolute and relative terms for the 6-year period from FY09 to FY14.

Under the Code 2012, the compensation system should take into account the risk policies of the Company, be symmetric with risk outcomes and be sensitive to the time horizon of risks. The RC has reviewed the various compensation risks that may arise and introduced mitigating policies to better manage risk exposures identified. The RC will also undertake periodic reviews of the compensation related risks in future.

For FY15, there were no termination, retirement and post-employment benefits granted to the President and Key Management Personnel.

There is no employee who is an immediate family member of a Director or the President, whose remuneration exceeds S$50,000 a year.

Details of remuneration paid to our President and top five (5) Key Management Personnel for FY15 are set out in Table 2 below. For competitive reasons, the Company is only disclosing the band of remuneration of our President and each Key Management Personnel for FY15, within bands of S$250,000.

Table 2: FY15 - President and Top Five (5) Key Management Personnel's Remuneration

Name Fixed Component % Variable Cash Component % Share-Based Component % Benefits-In- Kind % Remuneration Bands(1)
Lim Shuh Moh Vincent 46 35 16 3 C
Lee Yoong Kin 54 24 18 4 B
Pauline Wong Mae Sum 53 24 19 4 B
Wong Loke Mei 62 19 13 6 A
Goh Song Puay 66 18 10 6 A
Raymond Lum Wai Meng 69 19 6 6 A

Notes:-

  1. Remuneration Bands:
    "A" refers to remuneration between S$250,001 and S$500,000.
    "B" refers to remuneration between S$500,001 and S$750,000.
    "C" refers to remuneration between S$1,000,001 and S$1,250,000.

For FY15, the aggregate total remuneration paid to the President and top five (5) Key Management Personnel (who are not Directors) amounted to approximately S$3,636,628.

Remuneration for Directors

We remunerate our Directors with Directors' fees which take into account the nature of their responsibilities and frequency of meetings. The remuneration structure is based on a scale of fees divided into basic retainer fees as Director and additional fees for attendance and serving on Board Committees as set out in Table 3 below. The Directors' remuneration for the financial year ended 31 December 2015 will be subject to shareholders' approval at the forthcoming AGM.

Table 3: FY15 - Scale of Fees

Basic Retainer Fee S$
Board Chairman(1)
Board Member
70,000
35,000
Fee for appointment to the Audit Committee  
Committee Chairman(1)
Committee Member
20,000
14,000
Fee for appointment to the Remuneration Committee, Nominating Committee and Executive Committee  
Committee Chairman(1)
Committee Member
14,000
7,000
Attendance Fee for Board/Committee Meetings (per Meeting)  
Meeting in Physical
Teleconference
Off-hour Teleconference
1,000
500
1,000

Notes:-

  1. Board and Committee Chairman Fee includes Annual Basic Retainer as Board Member or Committee Member (as the case may be)

To align the interests of the Directors to that of the shareholders, Directors who served on the Board during FY15 will be remunerated as to approximately 70 percent (70%) of his total Directors' remuneration in cash and approximately 30 percent (30%) of his total Directors' remuneration in the form of a restricted share award pursuant to the TeleChoice RSP. The number of shares to be awarded will be based on the volume-weighted average price ("VWAP") of a share listed on the SGX-ST over the 14 trading days commencing on (and including) the ex-dividend date that immediately follows the date of this AGM. The number of shares to be awarded will be rounded down to the nearest thousand shares, and any residual balance settled in cash. The restricted share awards will consist of the grant of fully paid shares, without any performance or vesting conditions attached. However, in order to encourage alignment of interests of the Directors with the interests of shareholders, a Director is required to hold such number of shares equivalent to at least (i) the prevailing annual basic Board retainer fee, based on the VWAP of a share listed on the SGX-ST over the 14 days trading days from (and including) the ex-dividend date (if any) following the date of the Company's last concluded AGM (and in the event that no dividend is declared at such last concluded AGM, the VWAP of a share listed on the SGX-ST over the 14 trading days commencing after the date of such last concluded AGM); or (ii) the total number of shares awarded to that Director under the TeleChoice RSP for FY13 and onwards, whichever is lower. Notwithstanding the foregoing, a Director is permitted to dispose of all of his shares after the first anniversary of the date of his cessation as a Director of the Company.

The following Table 4 shows the total composition of Directors' remuneration for FY15

Table 4: FY15 - Directors' Remuneration

Name Total Directors' Remuneration(1)
Cash-based Share-based Total
Bertie Cheng $72,100 $30,900 $103,000
Yap Boh Pin $49,700 $21,300 $71,000
Yen Se-Hua Stewart(3) $24,150 $10,350 $34,500
Tang Yew Kay Jackson $39,900 $17,100 $57,000
Ronald Seah Lim Siang $30,450 $13,050 $43,500
Sio Tat Hiang $42,700(2) $18,300 $61,000
Ho Koon Lian Irene(4) $28,525(2) $12,225 $40,750
Lim Chai Hock Clive $30,100 $12,900 $43,000

Notes:

  1. The aggregate amount of these fees is subject to approval by shareholders at the upcoming AGM for FY15.
  2. These fees are payable to STT Communications Ltd.
  3. Yen Se-Hua Stewart resigned as a Director, the Chairman of the NC and a member of the RC and EC with effect from 5 May 2015.
  4. Ho Koon Lian Irene was appointed as a Director and a member of the AC with effect from 5 May 2015.

From FY14, the Company has implemented a contractual "Clawback" provision in the event that the executive Director or Key Management Personnel of the Company engages in fraud or misconduct, which results in re-instatement of the Company's financial results or a fraud/misconduct resulting in financial loss to the Company. The Board may pursue to reclaim the unvested components of remuneration from the executive Director or key management personnel from all incentive plans for the relevant period, to the extent such incentive has been earned but not yet released or disbursed. The Board, taking into account the RC's recommendation, can decide whether and to what extent, such recoupment of the incentive is appropriate, based on the specific facts and circumstances of the case.

 

 

(C) Accountability and Audit

Principle 10: Accountability

We have always believed that we should conduct ourselves in ways that deliver maximum sustainable value to our shareholders. We promote best practices as a means to build an excellent business for our shareholders. Our Board has overall accountability to our shareholders for our performance and in ensuring that we are well managed. Management provides our Board members with monthly business and financial reports, comparing actual performance with budget and highlighting key business indicators and major issues that are relevant to our performance, position and prospects.

Principle 11: Risk Management and Internal Controls

The Company and its subsidiaries (the "Group") has in place an Enterprise Risk Management ("ERM") Framework, which governs the process of identification, prioritisation, assessment, management and monitoring of key financial, operational, compliance and IT risks to the Group. The key risks of the Group are deliberated by Management and reported to the AC. Integral to the ERM is a Group-wide system of internal controls.

The Board, with the advice of the AC, determines the Group's level of risk tolerance and risk policies and the AC oversees Management in the design, implementation and monitoring of the risk management and internal control systems. The Board and the AC are supported by Management and various independent professional service providers such as external and internal auditors to review the adequacy and effectiveness of the Group's risk management and internal controls systems.

The Board, with the concurrence of the AC, is of the opinion that the Group's internal controls are adequate and effective in addressing the financial, operational, compliance and IT risks of the Group. The Board acknowledges that it is responsible for the Group's overall risk management and internal control system framework, but recognises that there is no system that will preclude all errors and irregularities, as a system is 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 received assurance from the President and the Chief Financial Officer ("CFO") that:

  1. the financial records have been properly maintained and the financial statements give a true and fair view of the Group's operations and finances; and

  2. the Group's risk management and internal control systems are effective and adequate.

Principle 12: Audit Committee

Our AC consists of three (3) Non-Executive Directors, two of whom including the Chairman are Independent Directors. The AC members are Yap Boh Pin as Chairman, Tang Yew Kay Jackson and Ho Koon Lian Irene. Our AC members bring with them invaluable professional and managerial expertise in the accounting and financial sectors.

Our AC's responsibilities include reviewing our annual audit plan, internal audit processes, the adequacy of internal controls and Interested Party Transactions for which there is a shareholders' mandate renewable annually. In addition, our AC is also responsible for overseeing the Group's risk management framework and policies, including advising the Board on the Group's overall risk tolerance and policies; overseeing Management on the design, implementation and monitoring of the risk management and internal control systems; and reviewing the adequacy and effectiveness of the Group's risk management and internal control systems. Major identified risk categories include strategic, operational, market and compliance risks. The risk management processes are tailored to address these categories of risks.

The AC is supported by senior Management representatives who:–

  1. oversee and ensure that our risk management policies are adequate and remain effective;

  2. conduct regular reviews to ensure that our business units and key functions adequately prioritise and address risk management issues; and

  3. prepare regular updates on risk management issues for the AC.

Our AC has full authority to commission and review findings of internal investigations into matters where there is any suspected fraud or irregularity or failure of internal controls or violation of any law likely to have a material impact on our operating results. Our AC is also authorised to investigate any matter within its charter with the full co-operation of Management. Our AC reviews and approves the quarterly, half-yearly and annual financial statements and the appointment and re-appointment of auditors before recommending them to the Board for approval.

In 2015, our AC held four meetings and meets with the external and internal auditors without the presence of Management, at least once during the year, to discuss matters it believes should be raised privately.

Our AC reviews the nature and extent of non-audit services provided by the external auditors during the year to assess the external auditors' independence. For details of fees payable to the auditors in respect of audit and non-audit services, please refer to Note 25 of the financial statements on page 103 of this Annual Report. Having been satisfied that the independence of the external auditors is not impaired by their provision of non-audit services, and that Rules 712 and 715 of the Listing Manual have been complied with, the AC has recommended to the Board that KPMG LLP be nominated for re-appointment as the external auditors at the next AGM.

In line with our commitment to a high standard of internal controls and its zero tolerance approach to fraud, we have put in place a whistle blower policy (the "Policy") providing employees a direct channel to the AC, for reporting suspected fraud and possible impropriety in financial reporting, unethical conduct, dishonest practices or other similar matters. This Policy aims at protecting employees against discrimination or retaliation as a result of their reporting information regarding, or their participation in, inquiries, investigations or proceedings involving TeleChoice or its agents. With such a policy in place, we are able to take swift action against any fraudulent conduct and minimise any financial losses arising from such conduct. The Policy is available on our intranet and is accessible by all employees.

Management monitors changes to accounting standards and issues which have a direct impact on financial statements closely. Updates and briefings on regulatory requirements are conducted either during AC sessions or by circulation of papers.

Principle 13: Internal Audit

The Group has established an in-house internal audit function. The internal audit is an independent function within the Group. The Head of Internal Audit reports functionally to the AC Chairman and administratively to the President and the CFO. The AC approves the hiring, removal, evaluation and compensation of the Head of Internal Audit. The scope of authority and responsibility of the internal audit function is defined in the Group Internal Audit Charter, which has been approved by the AC.

The professional competence of the internal auditors is maintained or upgraded through training programmes, conferences and seminars that provide updates on auditing techniques, regulations, financial products and services. The internal audit function is staffed with suitably qualified experienced professionals who are at the level of assistant manager and above. The AC is satisfied that the internal audit function has adequate resources to perform its functions effectively.

As a member of the Institute of Internal Auditors Singapore (IIA), the internal audit function adopts the International Standards for the Professional Practice of Internal Auditing (the IIA Standards) issued by IIA. The internal audit function has completed its external Quality Assurance Review in 2013 and continues to meet the IIA Standards in all key aspects.

The primary role of internal audit function is to help to evaluate the adequacy and effectiveness of the Group's controls and compliance processes. The Group's internal audit approach is aligned with the Group's Risk Management Framework by focusing on key financial and compliance risks. The annual internal audit plan is established in consultation with, but independent of Management. The annual internal audit plan is then reviewed and approved by the AC. All internal audit findings, recommendations and status of remediation, are circulated to the AC, the President and relevant senior Management every quarter.

The Head of Internal Audit presents the internal audit findings to the AC each quarter. The AC meets with the Head of Internal Audit at least once a year, without the presence of Management. The internal auditors have unfettered access to all the Group's documents, records, properties and personnel, including access to the AC.

 

 

(D) Communication with Shareholders

Principle 14 : Shareholder Rights

Principle 15 : Communication with Shareholders

Principle 16 : Conduct of Shareholder Meetings

We believe in having regular communication with shareholders and also timely disclosure of information to shareholders through SGXNET.

Our Investor Relations team manages investor relations and has arranged a series of events during the year to brief the media and investment analysts on our performance.

For the release of the respective quarterly and year-end results, the announcement is first released via SGXNET together with our press release. Thereafter, the media and investor analysts meet with Management for briefing(s) within the ambit of our SGXNET announcements to ensure that there is fair and non-selective disclosure of information.

We support the Code 2012's principle to encourage greater shareholders' participation at general meetings of shareholders. Separate resolutions are proposed on each separate issue at our general meetings. To enhance transparency in the voting process, the Company has implemented poll voting for all resolutions tabled at its general meetings. A registered shareholder is entitled to vote in person or by appointing up to two proxies to attend and vote at our general meetings. The Company's Articles of Association do not allow shareholders to vote in absentia at general meetings, except through the appointment of a proxy or proxies to cast their vote in their stead. Hence, our shareholders have the opportunity to direct any queries regarding the resolutions proposed to be passed to our Directors and Management who are present at our general meetings. Our external auditors are also invited to be present at our AGMs to assist our Directors in answering questions from our shareholders relating to the conduct of the audit and the preparation and content of the auditors' report.

Since FY04, the Board has set a benchmark to declare and pay annual dividends of at least 30% of our annual net profit after tax, subject to the Group's earnings, cash flow and capital requirements. Our Company has consistently managed to perform this benchmark in the last few financial years.

Financial and other information (including news releases and SGXNET announcements) are made available on our website at http://www.telechoice.com.sg, which is updated on a regular basis.