(Extracted from Annual Report 2016)
Singapura Finance Ltd ("SFL" or the "Company") is committed to achieving and maintaining high standards of corporate governance in order to safeguard the interest of shareholders. It adopts corporate governance practices in line with the principles and guidelines set out in the Code of Corporate Governance 2012 (the "2012 Code"). Where there is any deviation from 2012 Code, the Company's position in respect of such differences is explained in this report.
The Board's Conduct of Affairs
Principle 1: Effective Board to lead and control the Company
Role of the Board
The Board is collectively responsible for providing overall strategy and direction to Management so as to achieve sustainable and successful performance for the Company and its subsidiaries (the "Group").
The Board's primary functions are to:
All Directors objectively discharge their duties and responsibilities at all times as fiduciaries in the interests of the Company.
To ensure that specific issues are subject to in-depth and timely review, certain functions have been delegated to various Board Committees, which would submit its recommendations or decisions to the Board. The five Board Committees are the Executive Committee, Nominating Committee, Remuneration Committee, Risk Management Committee and Audit Committee.
The Executive Committee ("EXCO") comprises three members, namely, Mr Teo Chiang Long (Executive Chairman), Mr Teoh Eng Hong (Independent & Non-Executive Director) and Mr Jamie Teo Miang Yeow (Executive Director & Chief Executive Officer ("CEO")). The EXCO acts on behalf of the Board in supervising the management of the Company's business and affairs, in particular, the granting of loans, guarantees or credit facilities within the authority limits delegated by the Board, and approving new product proposals. Unanimous decision by EXCO Members is required for a resolution to be effective, which is passed through circulation in writing.
The composition and key functions of the other four committees are described in the other relevant sections of this report.
Board Meetings and Attendance
Regular Board and Board Committee meetings are held. The Board meets at least four times a year. Additional meetings are held as and when circumstances warrant. The Company's Articles of Association provide for Board and Board Committee meetings to be held via teleconferencing.
At its meetings, the Board reviews and approves the strategic plans, annual budget and key operational issues, and reviews the financial performance of the Group. Other matters which are required to be referred to the Board for approval include:
Directors may at any time request further explanations, briefings or informal discussions on any aspect of the Company's operations.
The attendance of the Directors at Board and Board Committee meetings during FY2016 is as follows:
Training of Directors
A formal letter is sent to newly-appointed Directors upon their appointment explaining their duties and obligations as Directors. New Directors receive appropriate training and briefing in areas such as accounting, legal, the roles and responsibilities of his or her duties as a Director of a listed company and how to discharge those duties when they are first appointed to the Board. There is also an orientation programme to ensure that incoming Directors are familiar with the Company's business and governance practices.
All Directors are encouraged by the Company to keep updated with the latest changes to the relevant laws and regulations affecting the Company. The Directors are informed regularly by the Company Secretary of the availability of appropriate courses which include programmes conducted by the Singapore Institute of Directors, Singapore Exchange Securities Trading Limited ("SGX-ST") and professional firms and bodies. The costs of attending such training courses by the Directors are borne by the Company.
Board Composition and Guidance
Principle 2: Strong and independent Board
Currently, the Board comprises eight Directors, all of whom, except for the Executive Chairman and the CEO, are non-executive and independent Directors. The six independent Directors are Mr Phua Bah Lee, Mr Teoh Eng Hong, Mr William Ho Ah Seng, Mrs Yu-Foo Yee Shoon, Mdm Tan Hui Keng, Martha and Mr Adam Tan Chin Han. Mr Adam Tan Chin Han was appointed on 3 January 2017.
Independent Directors make up at least half of the Board at all times. Every year, the Nominating Committee determines the independence of each Director by taking into account the definition of an independent Director and the relevant guidelines under the 2012 Code. The Nominating Committee also takes into account the annual confirmation of independence completed by each Director. Directors are required under the annual confirmation to critically assess their independence.
As non-executive members of the Board, the independent Directors do not exercise management functions in the Company. However, all the Directors have equal responsibility and make contributions towards the performance of the Group.
The Board considers its independent non-executive Directors to be of significant influence and their views to be of sufficient weight such that no individual or small group can dominate the Board's decision-making processes.
Two of the independent Directors, namely, Mr Phua Bah Lee and Mr Teoh Eng Hong have served the Board for more than nine years from the date of their first appointment as an independent Director. The Nominating Committee (with Mr Phua Bah Lee and Mr Teoh Eng Hong abstaining from deliberation on this matter) and the Board have assessed the independence of each of these two Directors using a holistic approach and taking into account of his contribution in terms of experience, expertise, professionalism, integrity, objectivity and independent judgement in his engagement with all relevant parties, rather than solely and arbitrarily on basis of length of service alone. Having performed a rigorous review of their independence, the Nominating Committee (with Mr Phua Bah Lee and Mr Teoh Eng Hong abstaining from deliberation on this matter) and the Board are of the view that each of these two Directors continue to be independent notwithstanding their length of service, because each of them have consistently demonstrated strong independence of judgement and integrity of character in discharging their responsibilities.
Members of the Board are prominent business leaders and professionals with financial, banking and business management backgrounds. Their diverse corporate experiences as a group provide core competencies relevant to the Group's business, and an appropriate balance of skills, experience, gender and knowledge of the Company. The Board has reviewed its composition, and is satisfied that the size of the Board is appropriate and adequate for effective decision-making having regard to its present scale of operations. Details of the Directors' professional qualifications and background can be found on pages 4 to 6.
The Board's non-executive Directors constructively challenge, help develop proposals on strategy, and review the performance of Management in meeting agreed goals and objectives and monitor the reporting of performance. The Independent Directors, led by the Lead Independent Director, Mr Phua Bah Lee meet on a need basis without the presence of Management, in order to facilitate a more effective check on Management.
Chairman and Chief Executive Officer
Principle 3: Clear division of responsibilities between Chairman and CEO
Role of Chairman and CEO
As recommended by the 2012 Code, the Chairman and the CEO are separate persons. Mr Teo Chiang Long is the Executive Chairman of the Company, while his son, Mr Jamie Teo is the CEO.
As the Executive Chairman and the CEO are immediate family members and are both part of the executive management team, the Nominating Committee has appointed Mr Phua Bah Lee as the Lead Independent Director mainly to serve as the principal liaison on Board issues between the non-executive Directors and the Executive Chairman and to address any queries and shareholders' concerns.
There is a clear division of responsibilities between the Executive Chairman and the CEO, which are set out in writing and agreed by the Board. The Executive Chairman leads the Board to monitor and review the general progress and long-term development of the Company. He ensures the members of the Board receive accurate, timely and clear information in particular about the Company's performance, to enable the Board to make sound decisions, monitor effectively and provide advice to promote the success of the Company. He also encourages constructive relations between the Board and Management, and between the executive and non-executive Directors. The CEO manages the daily operations of the Group and implements the Board's policies and decisions.
Principle 4: Formal and transparent process for the appointment and re-appointment of Directors
All five members of the Nominating Committee ("NC") are independent non-executive Directors. The members are Mrs Yu-Foo Yee Shoon (Chairman), Mr Phua Bah Lee, Mr Teoh Eng Hong, Mdm Tan Hui Keng, Martha and Mr Adam Tan Chin Han.
The NC has written terms of reference which clearly set out its authority and duties. The main role of the NC is to assess and recommend candidates for appointment and re-appointment on the Board and Board Committees. The NC also reviews the composition of the Board and assesses annually the effectiveness of the Board as a whole and the contribution by each individual Director.
Criteria and Process for Nomination and Selection of New Directors
The NC identifies and interviews short-listed candidates before formally considering and recommending them for appointment to the Board and where applicable, to the Board Committees.
The NC in reviewing and recommending to the Board any new Director appointment takes into consideration the current Board size and its mix, the competing time commitments faced by Directors with multiple Board representations, the additional skills and experience that will bolster the core competencies of the Board, the search process for the identification of suitable candidates and once identified, the appropriate knowledge, experience and skills of the candidates who in its opinion, are fit and proper and qualified for office. As the Company is a finance company, all new appointments to the Board are subject to the approval of the Monetary Authority of Singapore.
Re-appointment of Directors
As a matter of corporate governance, all Directors submit themselves for re-nomination and re-election. Article 85 of the Articles of Association requires one-third of the Directors, or the number nearest to but not less than onethird, to retire by rotation at every Annual General Meeting ("AGM"). These Directors may offer themselves for re-election, if eligible.
The NC reviews annually the nomination of the relevant Directors for re-election or re-appointments as well the independence of Directors. When considering the nomination of Directors for re-appointment, the NC takes into account their contribution to the effectiveness of the Board as well as their time commitment especially for Directors who have multiple board representations, and also reviews their independence.Directors' Time Commitment
Where a Director has multiple Board representations, the NC also considers if such a Director is able to adequately carry out his/her responsibilities as a Director of the Company. In this regard, the Board has set a general guideline that the maximum number of listed company board representations which a Director may hold (including representation on the Company's Board) should not be more than seven.
Principle 5: Formal annual assessment of the effectiveness of the Board and the contribution by each Director
Board Evaluation Process
The Company has in place a formal process for assessment of the effectiveness of the Board as a whole, the Board Committees and the contribution by each Director to the effectiveness of the Board. The NC assesses the Board's performance as a whole annually using objective and appropriate quantitative and qualitative criteria which were recommended by the NC and approved by the Board. When assessing the overall Board performance, the NC takes into consideration the feedback from individual Directors on areas relating to the Board's competencies and effectiveness. The results of the overall evaluation of the Board by the NC including its recommendations for improvements, if any, are presented to the Board.
The NC assesses the performance of all the Board Committees with the assistance of self-assessment checklists completed by each of the Board Committees.
The annual evaluation process for each individual Director's performance comprises 3 parts: (a) background information concerning the Director including his attendance records at Board and Board Committee meetings; (b) questionnaire for completion by each individual Board member; and (c) the NC's evaluation based on certain assessment parameters. The questionnaires and the assessment parameters were recommended by the NC and approved by the Board. The completed questionnaires are then reviewed by the NC before the NC completes its evaluation of the individual Directors.
The results of the individual evaluation of each of the Directors are also used by the NC, in its consultation with the Board Chairman, to review, where appropriate, the composition of the Board and Board Committees, and to support its proposals, if any, for appointment of new members and its recommendations for the re-appointment and re-election of retiring Directors. Comments from the Directors, if any, concerning the Board as a whole and the general performance of the Directors, are also presented to the Board.
Board Evaluation Criteria
The qualitative criteria are set out in a questionnaire covering three main areas relating to Board composition, roles and responsibilities, conduct of meetings and access to information.
The quantitative criteria used to evaluate the overall Board performance comprises quarterly performance indicators which include a comparison of the Company's performance for the financial period under review against the performance of the Company and industry peers for the corresponding period over the past three years and the longer term indicators such as the Company's total shareholder return over a five-year period.
Board Committee Evaluation Criteria
The qualitative criteria are set out in a questionnaire covering areas relating to composition of the Board Committee, its roles and responsibilities, conduct of meetings and access to information.
Individual Director Evaluation Criteria
Factors taken into account in the assessment of a Director's performance include his abilities and competencies, his objectivity and the level of participation at Board and Board Committee meetings including his contribution to Board processes and the business strategies and performance of the Company.
Access to Information
Principle 6: Board Members to have complete, adequate and timely information
Complete, Adequate and Timely Information
All Directors have separate and independent access to Management, and unrestricted access to the Company's records and information. They receive detailed financial and operational reports from Management during the year to enable them to carry out their duties.
Prior to each Board and Board Committee meeting, the members are provided with the meeting agenda and the relevant papers submitted by Management, containing complete, adequate and timely information to enable full deliberation on the issues to be considered at the meetings. Such information include background or explanatory information relating to matters to be brought before the Board or Board Committee, and copies of disclosure documents, budgets or latest forecasts. In respect of budgets, any material variance between the projections and actual results are disclosed and explained. Management staff and the Company's auditors, who can provide additional insight to the matters for discussion, are also invited from time to time to attend such meetings.
The Directors have separate and independent access to the advice and services of the Company Secretary. The Company Secretary attends all Board meetings and is responsible for, among other things, ensuring that Board procedures are observed and that applicable rules and regulations are complied with. The Company Secretary acts as channel of communication and information within the Board and its Board Committees and between Management and non-executive Directors. The Company Secretary's responsibilities also include facilitating orientation and assisting with professional development as required. Appointment and removal of the Company Secretary require the approval of the Board. Mrs Nguy Jootian, who retired on 31 August 2015, had resigned as Company Secretary on 3 August 2015, and Ms Ngiam May Ling was appointed as the new Company Secretary on 3 August 2015.
Independent Professional Advice
Each Director has the right to seek independent legal and other professional advice, at the Company's expense, concerning any aspect of the Group's operations or undertakings in order to fulfil his duties and responsibilities as Director.
Procedures for Developing Remuneration Policies
Principle 7: Formal and transparent procedure for fixing the remuneration packages of Directors
RC Composition and Role
All five members of the Remuneration Committee ("RC") are independent non-executive Directors. The members are Mr Phua Bah Lee (Chairman), Mr Teoh Eng Hong, Mrs Yu-Foo Yee Shoon, Mdm Tan Hui Keng, Martha and Mr Adam Tan Chin Han.
The RC has written terms of reference which clearly set out its authority and duties. The RC's main responsibilities are to review and make recommendations to the Board with regard to the policies and general framework for the remuneration of executive Directors, non-executive Directors and key management personnel ("KMP") and to ascertain that they are fairly remunerated. The RC also reviews and recommends to the Board the specific remuneration packages for each Director as well as for the KMP. The RC also reviews all aspects of remuneration, including directors' fees, salaries, allowances, bonuses and benefits in kind.
The remuneration packages of executive Directors and KMP are approved by the Board upon recommendations by the RC. The Executive Chairman and the CEO do not participate in meetings to discuss their compensation packages. The two executive Directors and all KMP are on service contracts with fixed appointment periods. The RC reviews the service contracts of Executive Directors and KMP to ensure that they do not contain onerous removal clauses.
Level and Mix of Remuneration
Principle 8: Appropriate remuneration to attract, retain and motivate Directors and key management personnel
Remuneration Policy of Directors and Key Management Personnel ("KMP")
The Group's remuneration policy is to provide compensation packages at market rates which reward successful performance and attract, retain and motivate Directors and managers.
The compensation packages for executive Directors and KMP comprise a fixed component (in the form of a base salary and fixed allowances), a variable component (comprising short-term incentives in the form of year-end and variable bonuses and benefits-in-kind, where applicable). The variable components take into account, amongst other factors, the executive Directors' and KMP's performance, the Company's performance and industry practices.
In determining the variable incentives for an executive Director and a KMP, his/her individual performance and contribution is taken into consideration together with the competitive market practices and information gathered from market surveys conducted by the Company's Human Resources department. This is then reviewed along with the Company's performance, taking into consideration specific indicators tracked over time which align with shareholders' interest, risk policies of the Company which promote the long-term success of the Company. Besides profitability, the quality of the Company's core business is also taken into account with the monitoring of the size and robustness of its loan assets and the level of non-performing loans. the Based on its assessment, the RC believes that the performance conditions used in determining the variable components of executive Director and KMP have been met.
When reviewing the structure and level of Directors' fees, the RC takes into consideration the Directors' respective roles and responsibilities in the Board and Board Committees, effort and time spent, and changes in the business, corporate governance practices and regulatory rules. The RC also compares the Company's fee structure against industry practices. Other factors taken into consideration in the fee review includes frequency of Board and Board Committee meetings, corporate performance for the financial year under review as well as the corporate and economic outlook in the new financial year, and the interval since the last fee review. No Director is involved in deciding his own remuneration.
Staff retirement gratuity is the only long-term incentive scheme. Staff (including executive Directors) who are employed before 28 December 2002 are entitled to the staff retirement gratuity if they have worked for at least 12 continuous years prior to retirement. Apart from the staff retirement gratuity, SFL does not offer shares or grant options with vesting period or employees share scheme.
Disclosure on Remuneration
Principle 9: Clear disclosure on remuneration policies, level and mix
Disclosure of Remuneration
Details of Directors' remuneration in FY2016 are set out below:
The 2012 Code recommends that the Company should fully disclose the remuneration of each individual Director and the CEO on a named basis. After careful deliberation, the Board is of the view that such disclosure would not be in the best interests of the Company or its shareholders, and that the details disclosed in the table above provides an appropriate balance between detailed disclosure and confidentiality in the sensitive area of remuneration. In arriving at its decision, the Board also took into consideration the competitive business environment in which the Group operates, and the negative impact such disclosure may have on the Group.
The 2012 Code recommends that the Company should name and disclose the remuneration of at least the top five KMP (who are not Directors or the CEO) in bands of $250,000/-. In addition, the Company should also disclose in aggregate the total remuneration paid to these KMP. After careful deliberation, the Board is of the view that such disclosure would be disadvantageous to the Group's business interests, given the prevailing highly competitive industry conditions.
Remuneration of Director's Immediate Family Member
The 2012 Code also recommends disclosure of the details of the remuneration of employees who are immediate family members of a Director or the CEO, whose remuneration exceeds $50,000/- during the year, in bands of $50,000/-. Mrs Nguy Jootian, sister of the Executive Chairman, Mr Teo Chiang Long and aunt of CEO Mr Jamie Teo Miang Yeow, was the Company Secretary and a General Manager of the Company. She retired on 31 August 2015 after having served the Company for 22 years. Her remuneration in FY2016 was below $200,000/-, and comprised 19.70% base salary, 3.88% bonus/allowances and 76.42% retirement gratuity.
ACCOUNTABILITY AND AUDIT
Principle 10: Board should present a balanced and understandable assessment of the company's performance, position and prospects
Accountability of Board and Management
The Directors recognise that they have overall responsibility to ensure accurate financial reporting for the Group.
The Board provides shareholders with quarterly and annual financial results. In presenting these statements, the Board aims to provide shareholders with a balanced and understandable assessment of the Group's performance and position with a commentary at the date of announcement of the competitive conditions within the industry in which it operates.
Management provides all Directors periodically with accounts and reports on the Group's financial performance and commentaries on the competitive conditions within the industry in which the Group operates, which are reviewed by the Board at each Board meeting prior to release of the announcements on the quarterly and full-year results of the Group in accordance with the regulatory requirements. Periodic reports covering the Group's financial performance are also provided to all Directors. Apart from the periodic updates provided by Management, the Directors may at any time seek further information from, and discuss with, Management on the Group's operations and performance.
Risk Management and Internal Controls
Principle 11: Sound system of risk management and internal controls
The Board is fully committed to the implementation of sound risk management policies and practices, which are aligned to the Group's overall business strategy and objectives. The Board determines the type and level of business risks that the Group undertakes and, at least annually, reviews the adequacy and effectiveness of the Group's risk management and internal control systems, including financial, operational, compliance and information technology controls.
The Risk Management Committee ("RMC") assists the Board in overseeing risk governance in the Group's business and operations and ensuring that Management maintains a sound system of risk management and internal controls to safeguard shareholders' interests and the Group's assets.
The RMC currently comprises five members. They are independent non-executive Directors Mr Teoh Eng Hong (Chairman), Mdm Tan Hui Keng, Martha, Mr William Ho Ah Seng and Mr Adam Tan Chin Han, and executive Director & CEO, Mr Jamie Teo Miang Yeow. To enhance communications between the Audit Committee and the RMC, Mr Teoh Eng Hong and Mdm Tan Hui Keng, Martha, are members of both committees.
The roles and responsibilities of RMC include the following:
The RMC has in turn appointed the Credit Control Committee, Credit Portfolio Committee, Asset-Liability Committee and Operational & Technology Risk Committee to assist in fulfilling its roles.
The key risks of the Group include credit risk, market risk, liquidity risk and operational & technology risk.
Counter-party and credit risk is defined as potential loss arising from any failure by customers to fulfil their obligations, as and when they fall due. Exposure in credit risks arises primarily from lending activities.
The two management committees assisting in the management of credit risk are the Credit Control Committee and Credit Portfolio Committee.
The Credit Control Committee ("CCC") develops the credit risk management framework, policies and procedures for concurrence by the RMC and approval by the Board. The CCC also reviews delinquent accounts and makes decisions on recovery actions.
The Credit Portfolio Committee ("CPC") manages risk on a portfolio-wide basis and recommends alternative portfolio strategies, analyses results of portfolio management actions, and develops portfolio limits for each portfolio segment for approval by the RMC.
Risk parameters for accepting credit risk are clearly defined, and are supported by written policies and processes in the Lending Guidelines to ensure that the Group maintains a well diversified and high quality loan portfolio.
The credit control functions ensure that credit risks are closely monitored and managed in compliance with the Group's credit policies and guidelines.
Credit reviews are carried out regularly to proactively identify and address potential weakness in the credit process and to pre-empt any unexpected deterioration in credit quality.
Credit stress tests are also conducted regularly to analyse the impact of plausible adverse scenarios on the Group's loan portfolio.
The Group addresses credit concentration risk by setting and monitoring credit portfolio and industry mix limits on a regular basis.
Continuous efforts are being made to further enhance the Group's credit risk management processes.
Market risk encompasses price and interest rate risk, which are inherent in the ordinary course of the Group's business. Market risk is defined as the uncertainty in market value of a given portfolio arising from movements in market factors including interest rates, equity prices and asset values.
The Asset-Liability Committee ("ALCO") manages the balance sheet to achieve an optimal balance between risk and reward, with regard to structural interest rate risk, and liquidity and funding risk, determines the appropriate levels of liquidity and ensures that funding is managed cost effectively, and reviews contingency plans for liquidity crises. ALCO also oversees the investment portfolio of the Company, reviews and recommends the limits of the Company's investments for approval by the Board as well as approves policies and strategies regarding these investments.
The Group has a comprehensive set of policies and monitoring system in place for the management of market risk. This includes limits for funding, maturity, and re-pricing gaps between assets and liabilities. An additional measure used by the Group for the interest rate sensitive investments is Present Value of a Basis Point ("PV01"), which measures the change in value of the interest rate sensitive exposures resulting from one basis point increase across the entire yield curve.
The Group uses an Asset Liability Management System to enhance its capabilities for simulation, scenario analysis and stress testing. Interest rate risk sensitivity analysis can now be performed under various interest rate scenarios using dynamic simulation modelling.
Liquidity risk arises in the general funding of the Group's activities and in the management of its assets and liabilities. It is the Group's policy to maintain adequate liquidity at all times. The Group maintains sufficient liquidity to fund its day-to-day operations, including customers' demands for loan drawdowns, as well as any unanticipated cash funding needs.
Liquidity stress testing is performed to assess and plan for the impact of various scenarios which may put the Company's liquidity at risk.
Liquidity policies, procedures and limits are in place to ensure effective liquidity management and compliance with all regulatory requirements.
Operational & Technology Risk
Operational risk is the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events. Technology risk is any risk related to information technology and information security.
The Operational & Technology Risk Committee ("OPTECH") supports the RMC in its handling of operational and technology risk. The OPTECH develops the operational and technology risk management framework, policies and procedures, and makes recommendations to mitigate risks and improve the efficiency and effectiveness of the operation process and information flows.
To pro-actively manage operational risk, each department undertakes regular operational risk and control selfassessments which involve identifying and assessing inherent risks, as well as assessing the effectiveness of controls to mitigate the identified risks. Where necessary, action plans are formulated based on the severity of the assessed residual risk after considering the mitigating controls. In addition, the internal audit function provides assurance by checking the system of internal controls through regular and ongoing audit procedures and reports on the effectiveness of internal controls to Management and the Audit Committee.
Management provides an attestation to the RMC on the state of business continuity management readiness, extent of alignment to MAS guidelines and declaration of residual risk.
Technology risk is managed in accordance to a Technology Risk Management Framework (which covers risk governance, identification, monitoring, assessment, mitigation and reporting), supported by a set of information technology policies and standards, control processes and risk mitigation programs.
Compliance risk is the risk of impairment to the Group's ability to successfully conduct its business as a result of any failure to comply with applicable regulatory requirements. The Compliance Department is responsible for the Group's satisfactory compliance with the relevant regulatory requirements and internal policies. The Compliance Department is an independent function within the organisation which provides support such as carrying out independent checks upon implementation of new or changes in policies and procedures, as well as providing advice on regulatory requirements to relevant departments.
Risk management is an ongoing process. Continuous efforts are being made to ensure that the Group's risk management system and processes are in line with industry best practices.
The Directors recognise that they have overall responsibility for the Group's system of internal controls.
The Company's external auditors carry out in the course of their statutory audit, a review of the effectiveness of the Company's material internal controls focusing primarily on financial controls, to the extent set out in their audit plan. Material non-compliance and internal control weaknesses noted during their audit, and the external auditor's recommendation to address such non-compliance and weaknesses, are reported to the Audit Committee. Management, with the assistance of internal auditors, follows up on external auditor's recommendations as part of its role in the review of the Company's internal control systems.
Besides that, all business units perform self-assessment of their processes to evaluate and manage the adequacy and effectiveness of their internal controls, as well as their level of compliance with applicable rules and regulations. The results of the evaluations are reviewed by Management.
The Board has received assurance from the CEO and the Chief Financial Officer ("CFO") that as at 31 December 2016:
Based on the internal controls established and maintained by the Group, work performed by internal and external auditors, reviews performed by Management and various Board Committees and the assurance received from the CEO and CFO, the Board, with the concurrence of the Audit Committee and Risk Management Committee, is of the opinion that the Group's system of internal control, including financial, operational, compliance and information technology controls and risk management systems were adequate and effective as at 30 June 2015 to address the risks which the Group considers relevant and material to its operations.
The Board notes that the system of internal controls provides reasonable, but not absolute, assurance that the Group will not be affected by any event that could be reasonably foreseen as it strives to achieve its business objectives. In this regard, the Board also notes that no system can provide absolute assurance against the occurrence of material errors, poor judgement in decision-making, human error, fraud or other irregularities.
The Company manages its business according to the core values of integrity, performance excellence, teamwork, trust and respect to which staff subscribes to and are assessed on. The Company has a comprehensive whistle blowing policy for staff to bring attention to the Audit Committee any concern, suspected breach or fraud, or activity or behaviour that may not be in compliance with the law and Code of Conduct of the Company.
Internal Code on Dealing in Securities
The Company has adopted an internal code on securities trading which provides guidance and internal regulation with regard to dealings in the Company's securities by its Directors and officers. These guidelines prohibit dealing in the Company's securities:
Principle 12: Establishment of an Audit Committee
AC Composition and Role
The Audit Committee ("AC") is chaired by Mdm Tan Hui Keng, Martha and comprises Mr Teoh Eng Hong, Mr Phua Bah Lee and Mrs Yu-Foo Yee Shoon, all of whom are independent non-executive Directors. The Board considers that all the AC members, including the AC Chairman, have recent and relevant accounting or related financial management expertise or experience to discharge their duties as an AC member.
The AC has written terms of reference which clearly set out its authority and duties. The function of the AC is to assist the Board in fulfilling its responsibilities in providing an independent review of the effectiveness of the financial reporting process and internal control system.
The AC has explicit authority to investigate any matter within its terms of reference, full access to and co-operation by Management and full discretion to invite any Director or executive officer to attend its meetings, and reasonable resources to enable it to discharge its functions properly.
Specific functions of the AC include:
The AC keeps abreast of changes to accounting standards and issues which have a direct impact on financial statements during their engagement with the external and internal auditors. The AC meets with the external and internal auditors without the presence of Management at least twice during the year.
The AC also noted and reviewed the nature and extent of the non-audit services provided to the Group by the external auditors. The AC is of the opinion that the provision of such non-audit services did not affect the independence and objectivity of the external auditors. For details of the fees paid to the external auditors in respect of audit and non-audit services during FY2016, please refer to note 16 of the Notes to the Financial Statements
The AC is satisfied that the external auditors have the requisite expertise and resources to perform their duties. Accordingly, the AC has nominated KPMG LLP for re-appointment as the external auditors at the forthcoming AGM. The external auditors have confirmed that they are registered with the Accounting and Corporate Regulatory Authority. The Company is thus in compliance with Rule 712 and Rule 715 of the SGX-ST Listing Manual in relation to the appointment of the Group's auditors.
In line with 2012 Code, the AC has reviewed the Company's comprehensive whistle-blowing policy whereby staff of the Company may, in confidence, bring to the attention of the AC any concern, suspected breach or fraud, or possible improprieties in matters of financial reporting or behaviour that may not be in compliance with the law and Code of Conduct of the Company. The AC is of the opinion that procedures are in place for the independent investigation of such matters and for appropriate follow up action.
Related Party and Interested Person Transactions
The Company has established policies and procedures on related party and interested persons transactions to ensure that such transactions are undertaken on an arm's length basis, on normal commercial terms consistent with the Company's usual business practices and policies, and are not prejudicial to the interest of the Company and its minority shareholders. The AC reviews all related party and interested persons transactions on a quarterly basis.
The interested person transactions and the aggregate value of interested person transactions disclosed as required under Rule 907 of the SGX-ST Listing Manual during FY2016 are as follows:
The interested person transactions above were carried out on normal business engagements on commercial terms which are not prejudicial to the interest of the Company or its minority shareholders.
Principle 13: Effective and independent internal audit function that is adequately resourced
Internal Audit Department
The Group has a well-established Internal Audit function with formal procedures for internal auditors to report their audit findings directly to the AC. The internal auditors report to the Chairman of the AC on audit issues and to the Chief Executive Officer of the Company on administrative matters.
Staffed by suitably qualified executives with relevant qualifications and experience, the primary role of the Internal Audit function is to assist the Board to evaluate the reliability, adequacy and effectiveness of internal controls and risk management processes of the Company. The AC reviews the adequacy of the internal audit function through a review of the internal auditors' programmes on a quarterly basis and ensures that the internal audit function has adequate resources and appropriate authority to perform its functions properly. The AC is also responsible for approving the appointment, remuneration, evaluation, resignation or dismissal of the Head of Internal Audit Department.
The internal auditors have unfettered access to all the Company's documents, records, properties and personnel, including access to the AC.
The AC has appointed Ernst & Young LLP (Singapore) to perform the internal audit functions for the Information Technology Services Department of the Group.
The Group has a separate compliance function to help ensure adherence with applicable legislation, rules and regulations in the conduct of its business.
SHAREHOLDERS RIGHTS AND RESPONSIBILITIES
Principle 14: Fair and equitable treatment of shareholders
The Company treats all shareholders fairly and equitably. Shareholders are informed of any changes in the Company which are likely to materially affect the price or value of the Company's shares via SGXNET announcements on a timely basis.
All shareholders are entitled to attend and vote at general meetings in person or by proxy, and are informed of the rules, including voting procedures, that govern general meetings of shareholders.
Communication with Shareholders
Principle 15: Regular, effective and fair communication with shareholders
The Company endeavours to communicate regularly and effectively with its shareholders. The Company announces its quarterly and full-year results within the mandatory period.
The Company does not practise selective disclosure. Price sensitive announcements are released to the public via SGXNET and such information is also posted on the Company's website at www.singapurafinance.com.sg.
Shareholders and investors may provide feedback or express their views via the enquiry or feedback platform at the Company's website.
In line with our dividend policy which aims to provide shareholders with a predictable and sustainable dividend return over the long term by balancing growth with prudent capital management, the Company is proposing a first and final dividend of 2 cents per share for FY2016.
Conduct of Shareholder Meetings
Principle 16: Greater shareholder participation at general meetings
The Board regards the AGM as a key opportunity to communicate directly with the shareholders and encourages attendance and participation in dialogue. The notice of AGM is dispatched to shareholders, together with explanatory notes on items of special business, at least 14 days before the meeting. The notice, first disseminated via SGXNET, is also published in newspapers.
Shareholders can vote in person or appoint not more than two proxies to attend, speak and vote on their behalf at general meetings of shareholders, with the exception that shareholders, such as nominee companies which provide custodial services for securities, are able to appoint more than two proxies to attend, speak and vote at general meetings, including the forthcoming AGM, notwithstanding the Company's Constitution does not differentiate between the number of proxies which may be appointed by individual shareholders and by nominee companies. As the authentication of shareholder identity information and the integrity of the information transmitted is a concern, the Company has decided, for the time being, not to implement voting in absentia by mail or electronic means.
The Board and Management attending the AGM are available to answer questions from shareholders who are present. External auditors are also present to assist Directors in addressing relevant queries by shareholders.
Separate resolutions on each distinct issue are tabled at the AGM. Detailed information on each resolution is provided in the explanatory notes to the notice of AGM in the Annual Report.
With effect from 1 August 2015, the Company is required by the Listing Rules to conduct the voting of all resolutions put to general meetings by poll. The Chairman of the Meeting will be exercising his rights under Article 62(a) of the Company's Constitution for all resolutions proposed at the Company's forthcoming AGM on 28 April 2017 and at any adjournment thereof to be put to the vote by way of poll. Accordingly, each resolution at the AGM will be voted by way of a poll.
For greater transparency in the voting process, the Company implements electronic poll voting at general meetings. With electronic poll voting, shareholders present in person or represented by proxy at the AGM will be entitled to vote on a 'one-share, one-vote' basis. The voting results of all votes cast in respect of each resolution will also be instantaneously displayed at the meeting and announced via SGXNET after the AGM.
The Company prepares minutes of general meetings that include substantial and relevant comments or queries from shareholders relating to the agenda of the meeting, and responses from the Board and Management.