Report on Corporate Governance

Asia Vets Holdings Ltd. (formerly known as Smartflex Holdings Ltd.) (the “Company”) was admitted to the Official List of the SGX-Catalist on 19 July 2010.

The board of directors of the Company (the Board) believes in having high standards of corporate governance and is committed to ensuring that effective self-regulatory corporate practices exist to protect the interests of shareholders of the Company (the “Shareholders”)  and maximise long term Shareholders’ value.

In accordance with Rule 710 of the Singapore Exchange Securities Trading Limited (SGX-ST) Listing Manual Section B: Rules of Catalist (the “Catalist Rules”), the following report describes the Company’s corporate governance practices for the financial year ended 31 December 2018 (“FY2018”) with specific reference to the principles and guidelines set out in the Code of Corporate Governance 2012 (the Code), with an appropriate explanation for any deviation from the guidelines of the Code.  

The new Singapore Code of Corporate Governance 2018 (the “2018 Code”), which was issued on 6 August 2018, will only take effect for annual reports covering financial years commencing from 1 January 2019. As such, the 2018 Code will not affect the Group for FY2018.

The Board is pleased to report that the Company has complied with the Code for FY2018, except where otherwise explained. In areas where there are deviations from the Code, appropriate explanations are provided and the Company will continue to assess its needs and implement appropriate measures accordingly.

Principle 1: The Board’s Conduct of Affairs

The Company is headed by an effective Board to lead and control the Company. The Board has the overall responsibility for corporate governance, strategic direction and investments of the Company. Each individual director of the Company (“Director”) is obliged to act in good faith and exercise independent judgment in the best interests of Shareholders at all times.

The Board’s principal functions include:

 

  • determining, reviewing and approving the strategic objectives and directions of the Company, annual budgets, major investments, divestments and funding proposals;
  • overseeing the business and affairs of the Company, establishing with the management of the Company (the “Management”) the strategies and financial objectives to be implemented by the Management, and monitoring the performance of the Management;
  • establishing a framework of prudent and effective controls which enables risk to be assessed and managed, including safeguarding of Shareholders’ interests and the Company’s assets;
  • setting the Company’s values and standards (including ethical standards), and ensuring that obligations to Shareholders and other stakeholders are understood and met;
  • reviewing the Management’s performance, the Company’s financial performance, risk management processes and systems, human resource requirements and corporate governance practices;
  • considering sustainability issues, e.g. economic, social and governance factors, as part of its strategic formulating; and
  • identifying the key stakeholder groups and recognising that their perceptions affect the Company’s reputation.

 

All Directors must objectively discharge their duties and responsibilities at all times as fiduciaries in the interests of the Company.  

To assist the Board in the discharge of its functions, the Audit Committee, the Nominating Committee and the Remuneration Committee (collectively, the “Board Committees”) have been constituted with written terms of reference which clearly sets out the authority and duties. Matters which are delegated to the Board Committees for more detailed appraisals are reported to and monitored by the Board.

The Board meets at least two (2) times a year, and as warranted by particular circumstances, as deemed appropriate by the Board members. Directors are free to discuss and voice their concerns on any matter raised at the Board meetings. Telephonic and video-conference meetings of the Board are allowed under the Company’s Constitution. All Directors are provided with the agenda and a set of the Board papers prior to the Board meeting. These are issued in advance to give the Directors sufficient time to better understand the matters to be discussed and to obtain further clarifications or explanations at the Board meeting where necessary. The Company and the Board acknowledge that an unimpeded flow of relevant information in a timely manner is crucial for the Board to be effective in discharging its duties and responsibilities.

The Board has identified, without limitation, the following matters that require its approval:

 

  • declaration of dividends and other returns to Shareholders;
  • major corporate policies on key areas of operation;
  • major funding proposals or bank borrowings;
  • corporate or financial restructuring and share issuances;
  • mergers and acquisitions;
  • material acquisitions and disposals;
  • approval of transactions involving interested persons; and
  • appointments of new Directors.

 

Upon appointment to the Board, a formal letter setting out the Director’s duties and responsibilities will be provided and each Director will be given appropriate briefings by the Management on the business activities of the Company, its strategic directions and the Company’s corporate governance policies and practices. The Company will also arrange for first-time Directors to attend relevant training in relation to the roles and responsibilities of a Director of a listed company and in areas such as accounting, legal and industry specific knowledge as appropriate. The training of Directors will be arranged and funded by the Company. During FY2018, no new Director was appointed to the Board.

Directors will be updated regularly on accounting and regulatory changes by the Company’s auditors, sponsor and company secretary, and are encouraged to attend workshops, seminars and training, to enhance their skills and knowledge, or on relevant new laws, regulations and changing commercial risks, and such training will be funded by the Company.

The details of updates, seminars and training programmes attended by the Directors in FY2018 include, amongst others:-

 

  • updates on developments in financial reporting and governance standards, where relevant, by the external auditors of the Company;
  • updates on amendments to the Catalist Rules and the Code by the continuing sponsor of the Company;
  • seminar titled “Duties and Responsibilities of Directors & CFOs – Impact of Amendments to Code of Corporate Governance” organised by RHT Corporate Advisory Pte. Ltd. and RHTLaw Taylor Wessing LLP; and
  • workshop titled “Sustainability Reporting Workshop for SGX-Listed Companies” organised by the SGX-ST.

 

The attendance of the Directors at meetings of the Board and Board Committees for FY2018 is set out as follows:

 

Name of Director

Board

Audit Committee

Nominating Committee

Remuneration Committee

No. of meetings held while being a member

No. of meetings attended

No. of meetings held while being a member

No. of meetings attended

No. of meetings held while being a member

No. of meetings attended

No. of meetings held while being a member

No. of meetings attended

Tan Tong Guan

2

2

2 *

  1 *

 1 *

Tan Geok Moey

2

2

2

2

1

1

1

1

Chan Kum Kit

2

2

2

2

1

1

1

1

Teo Yi-Dar

2

2

2

2

1

1

1

1

 

        *   Attended by invitation.

Principle 2: Board Composition and Guidance

The Board currently comprises one (1) Executive Director, one (1) Non-Executive Director and two (2) Independent Directors.  

The Board members as of the date of this report are:

 

Tan Tong Guan                                  Executive Chairman and Chief Executive Officer

Tan Geok Moey                                  Non-Executive Director

Teo Yi-Dar                                          Lead Independent Director

Chan Kum Kit                                     Independent Director

 

The Chairman and the Chief Executive Officer is the same person. The Company is in compliance with the requirement of Guideline 2.2 of the Code as the Independent Directors make up at least half of the Board. With this, there is a strong and independent element on the Board, and no individual or group of individuals dominates the Board’s decision making.

The Board is of the view that its current size and composition are appropriate to facilitate effective decision making, and provide sufficient diversity of expertise to lead and govern the Company effectively, considering the scope and nature of the Group’s current operations.

The Company has in place a Nominating Committee which determines the independence of each Director annually based on the definition of independence as set out in the Code and whether the Director falls under any of the circumstance pursuant to Rule 406(3)(d) of the Catalist Rules. The Nominating Committee has reviewed and determined that Mr Teo Yi-Dar and Mr Chan Kum Kit are independent. Mr Chan Kum Kit is due to retire via rotation, and has been nominated for re-election at the forthcoming annual general meeting of the Company (“AGM”). Mr Chan Kum Kit has informed that he is not seeking re-election and will retire at the forthcoming AGM to allow for renewal of the Board as Mr Chan, being an Independent Director appointed to the Board on 15 March 2010, has served on the Board beyond nine (9) years from the date of his first appointment as of the date of this report. Save for Mr Chan Kum Kit, none of the Independent Directors has served on the Board beyond nine (9) years from the date of his first appointment.

The Nominating Committee will also periodically review the competencies of the Directors to ensure effective governance of the Company and contribution to the Board. To address the dynamic business environment, the Nominating Committee will recommend the Board to consider the appointment of new Director(s) that has/ have the required skillset, expertise, experience and knowledge as and when it deems necessary. The Board and the Board Committees comprise persons who as a group provide an appropriate balance and diversity of skills, experience and knowledge to the Company, as well as provide a diversity of gender with one (1) female Director who is a Non-Executive Director. The Directors, as a group, provide core competencies such as accounting or finance, business or management experience, industry knowledge, strategic planning experience and customer-based experience or knowledge required for the Board to be effective. A brief profile of each Director is set out on pages 6 and 7 in the Annual Report. Information of the interests of the Directors who held office at the end of the financial year in shares, debentures and share options in the Company and its related corporations (other than the wholly-owned subsidiaries) are set out in the Directors’ Statement on page 30 of the Annual Report.

The Non-Executive Director and the Independent Directors will assist to develop proposals on strategies and goals for the Company and regularly assess the performance of the Management in meeting the agreed goals and objectives, and monitor the reporting of performance. The Non-Executive Director and the Independent Directors are encouraged to meet, without the presence of the Management, so as to facilitate a more effective check on the Management. They will meet on a need-basis without the presence of the Management to discuss on arising issues.

Principle 3: Chairman and Chief Executive Officer

The roles of the Chairman and the Chief Executive Officer are currently held by Mr Tan Tong Guan. The Board is of the opinion that it is not necessary to separate the roles of the Chairman and the Chief Executive Officer after taking into account the current size, scope and the nature of the operations of the Company, and with the strong presence of Independent Directors on the Board. The Board is of the view that there are sufficient safeguards and checks to ensure that the process of decision making by the Board is independent and based on collective decisions without any individual or group of individuals exercising any considerable concentration of power or influence and there is accountability for good corporate governance. There is an appropriate balance of power and authority given that the majority of the members (including the respective Chairmen) of the Board Committees are independent and that half of the Board comprises Independent Directors.

As Executive Chairman of the Board, Mr Tan Tong Guan leads the Board and is responsible for the management of the Board. The Executive Chairman is also in charge of charting the business direction as well as corporate planning and strategic developments of the Company. When setting the agenda, he ensures that adequate time is available for discussion of all agenda items, in particular strategic matters. The Executive Chairman encourages the Board’s interaction with the Management, facilitates effective contribution of the Non-Executive and Independent Directors, encourages constructive relations among the Directors and promotes high standards of corporate governance. In addition, the Executive Chairman ensures that the Directors receive accurate, timely and clear information and there is effective communication with Shareholders.

As the roles of the Chairman and the Chief Executive Officer are held by the same person, Mr Teo Yi-Dar has been appointed as the Lead Independent Director of the Company as recommended by the Code. As the Lead Independent Director, Mr Teo is available to address the concerns of Shareholders and when contact through the normal channels to the Chairman and Chief Executive Officer or the Chief Financial Officer has failed to satisfactorily resolve their concerns or when such contact is inappropriate.

The Independent Directors led by the Lead Independent Director, are encouraged to meet periodically without the presence of the Management where necessary. The Lead Independent Director will also provide feedback to the Chairman after such meetings. 

Principle 4: Board Membership

The Nominating Committee comprises the following members, all of whom are non-executive and the majority, including the Chairman, are independent:

 

Chan Kum Kit (Independent Director)                       Chairman

Teo Yi-Dar (Lead Independent Director)                    Member

Tan Geok Moey (Non-Executive Director)                 Member

 

The Nominating Committee has written terms of reference that sets out its duties and responsibilities. Amongst them, the Nominating Committee is responsible for:

 

  • reviewing board succession plans for Directors, in particular, the Chairman and the Chief Executive Officer;
  • creating a formal and transparent process for the appointments and re-nominations of members of the Board and to assess the effectiveness of the Board as a whole, its Board Committees and the contribution of individual Directors to the effectiveness of the Board;
  • affirming annually the independence of the Directors; and
  • reviewing training and professional development programs for the Board.

 

The Nominating Committee is scheduled to meet at least once a year. Each member of the Nominating Committee shall abstain from voting on any resolution in respect of the assessment of his/her performance or re-nomination as a Director.

For new appointments to the Board, the Nominating Committee will consider the Company’s current Board size and its composition and decide if the candidate’s background, expertise and knowledge will complement the skills and competencies of the existing Directors on the Board. The candidate must be a person of integrity and must be able to commit sufficient time and attention to the affairs of the Company, especially if he is serving on multiple boards.

If a vacancy arises under any circumstances, or where it is considered that the Board would benefit from the services of a new Director, the Nominating Committee, in consultation with the Board, will determine the selection criteria and select the appropriate candidate for the position. The search for a suitable candidate is drawn from the contacts and networks of existing Directors. The Nominating Committee can also approach relevant institutions such as the Singapore Institute of Directors, professional organisations or business federations to source for a suitable candidate.

In accordance with the Code and Rule 720(4) of the Catalist Rules, all Directors must submit themselves for re-nomination and re-election at least once every three (3) years. One-third of the Directors will retire at the AGM each year. The Nominating Committee is charged with the responsibility of re-nomination having regard to the Director’s contribution and performance (e.g. attendance, preparedness, participation and candour) including, if applicable, as an Independent Director.

The Nominating Committee has recommended to the Board that Mr Tan Tong Guan and Mr Chan Kum Kit, both retiring at the forthcoming AGM via rotation, be nominated for re-election at the upcoming AGM. In making the recommendation, the Nominating Committee had considered the Directors’ contribution and performance to the Board and the Group. Mr Chan Kum Kit, being a member of the Nominating Committee, has abstained from making any recommendation and/or participating in any deliberation of the Nominating Committee in respect of the assessment of his own performance or re-election as a Director.

Mr Tan Tong Guan has consented to the re-election, while Mr Chan Kum Kit has informed the Board that he is not seeking for re-election and will retire at the forthcoming AGM to allow for renewal of the Board. The Board has, with regret, accepted Mr Chan’s decision and recorded its appreciation to Mr Chan for his efforts and contributions during his tenure as a Director. The Nominating Committee will seek to procure suitable candidates and review all nominations for the appointment of a new Director in place of Mr Chan Kum Kit before recommending to the Board for approval.

Pursuant to Rule 720(5) of the Catalist Rules, the information as set out in Appendix 7F to the Catalist Rules relating to Mr Tan Tong Guan, being the Director nominated for re-election at the forthcoming AGM, is set out below:

 

Name of Director

Tan Tong Guan

 

 

Date of first appointment

17 February 2010

 

 

Date of last re-appointment (if applicable)

25 April 2017

 

 

Age

55

 

 

Country of principal residence

Singapore

 

 

The Board’s comments on this re-election (including rationale, selection criteria, and the search and nomination process)

The Board has accepted and approved the Nominating Committee’s recommendation, who has reviewed and considered Mr Tan’s contributions and performance as an Executive Chairman and Chief Executive Officer of the Company.

 

 

Whether appointment is executive, and if so, the area of responsibility

Executive.

 

Responsible for providing the corporate direction and business strategy for the Group

 

 

Job title

Executive Chairman and Chief Executive Officer

 

 

Professional qualifications

Mr Tan holds a Bachelor Degree in Accountancy from the National University of Singapore and is a Fellow Chartered Accountant of Singapore with the Institute of Singapore Chartered Accountants (ISCA).

 

 

Working experience and occupation(s) during the past 10 years

February 2010 to present: Executive Chairman and Chief Executive Officer of the Company

 

February 1991 to present: Executive Director of Tan Gee Beng Private Limited

 

July 2003 to July 2016: Executive Chairman of Smartflex Technology Pte Ltd

 

 

Shareholding interest in the listed issuer and its subsidiaries

As at 13 March 2019:

 

Direct interest – 565,001 ordinary shares of the Company

Deemed interest – 57,139,331 ordinary shares of the Company

 

 

Any relationship (including immediate family relationships) with any existing director, existing executive officer, the

issuer and/or substantial shareholder of the listed issuer or of any of its principal subsidiaries

Mr Tan is the brother of Ms Tan Geok Moey, Non-Executive Director.

 

As at 13 March 2019, Mr Tan is a substantial shareholder of the Company, holding an aggregate shareholding interest (direct and deemed) in 41.54% of the issued share capital of the Company. Mr Tan is also related to the other substantial shareholders of the Company, namely, Tan Gee Beng Private Limited, Ms Tan Geok Moey and Ms Tan Yoke Hong. Mr Tan is a director of Tan Gee Beng Private Limited, and he is the brother of Ms Tan Geok Moey and Ms Tan Yoke Hong.

 

As at the date of this Annual Report, Mr Tan is a director of the Company’s wholly-owned subsidiary, AVH Animal Ark Pte. Ltd..

 

 

Conflict of interest (including any competing business)

None

 

 

Undertaking (in the format set out in Appendix 7H) under Rule 720(1) has been submitted to the listed issuer

Yes

 

 

Other Principal Commitments Including Directorships

Past Directorship (for the last 5 years)

Sing Investments & Finance Limited

Orastram Pte Ltd

 

Present Directorships

Sing Holdings Limited

Tan Gee Beng Private Limited

Teck Gee Investments (International) Pte Ltd

TGB Properties Pte Ltd

First Lap (M) Sdn Bhd

Perusahaan TGB Sdn Bhd

Centrepoint Tiara (M) Sdn Bhd

TGB Properties (NZ) Pte Ltd

NZ First Properties Pte Ltd

Cosmos Investment Pte Ltd

Tan Gee Beng (Hong Kong) Limited

Suzhou Hongchang Packing Materials Co. Ltd

Red Blue Development Sdn Bhd

Ningbo Shino Cosmetic Cotton Co. Ltd

D.E. Cosmetics Ningbo Co. Ltd

Wellington First Properties (NZ) Pte Ltd

AVH Animal Ark Pte. Ltd.  

 

Other Principal Commitments

Nil

Disclose the following matters concerning an appointment of director, chief executive officer, chief financial officer, chief operating officer, general manager or other officer of equivalent rank. If the answer to any question is “yes”, full details must be given.

(a)   Whether at any time during the last 10 years, an application or a petition under any bankruptcy law of any jurisdiction was filed against him or against a partnership of which he was a partner at the time when he was a partner or at any time within 2 years from the date he ceased to be a partner?

No

(b)   Whether at any time during the last 10 years, an application or a petition under any law of any jurisdiction was filed against an entity (not being a partnership) of which he was a director or an equivalent person or a key executive, at the time when he was a director or an equivalent person or a key executive of that entity or at any time within 2 years from the date he ceased to be a director or an equivalent person or a key executive of that entity, for the winding up or dissolution of that entity or, where that entity is the trustee of a business trust, that business trust, on the ground of insolvency?

No

(c)   Whether there is any unsatisfied judgment against him?

No

(d)   Whether he has ever been convicted of any offence, in Singapore or elsewhere, involving fraud or dishonesty which is punishable with imprisonment, or has been the subject of any criminal proceedings (including any pending criminal proceedings of which he is aware) for such purpose?

No

(e)   Whether he has ever been convicted of any offence, in Singapore or elsewhere, involving a breach of any law or regulatory requirement that relates to the securities or futures industry in Singapore or elsewhere, or has been the subject of any criminal proceedings (including any pending criminal proceedings of which he is aware) for such breach?

No

(f)    Whether at any time during the last 10 years, judgment has been entered against him in any civil proceedings in Singapore or elsewhere involving a breach of any law or regulatory requirement that relates to the securities or futures industry in Singapore or elsewhere, or a finding of fraud, misrepresentation or dishonesty on his part, or he has been the subject of any civil proceedings (including any pending civil proceedings of which he is aware) involving an allegation of fraud, misrepresentation or dishonesty on his part?

No

(g)   Whether he has ever been convicted in Singapore or elsewhere of any offence in connection with the formation or management of any entity or business trust?

No

(h)   Whether he has ever been disqualified from acting as a director or an equivalent person of any entity (including the trustee of a business trust), or from taking part directly or indirectly in the management of any entity or business trust?

No

(i)    Whether he has ever been the subject of any order, judgment or ruling of any court, tribunal or governmental body, permanently or temporarily enjoining him from engaging in any type of business practice or activity?

No

(j)    Whether he has ever, to his knowledge, been concerned with the management or conduct, in Singapore or elsewhere, of the affairs of:-

 

(i)     any corporation which has been investigated for a breach of any law or regulatory requirement governing corporations in Singapore or elsewhere; or

 

(ii)    any entity (not being a corporation) which has been investigated for a breach of any law or regulatory requirement governing such entities in Singapore or elsewhere; or

 

(iii)  any business trust which has been investigated for a breach of any law or regulatory requirement governing business trusts in Singapore or elsewhere;or

 

(iv)  any entity or business trust which has been investigated for a breach of any law or regulatory requirement that relates to the securities or futures industry in Singapore or elsewhere,

 

in connection with any matter occurring or arising during that period when he was so concerned with the entity or business trust?

No

(k)   Whether he has been the subject of any current or past investigation or disciplinary proceedings, or has been reprimanded or issued any warning, by the Monetary Authority of Singapore or any other regulatory authority, exchange, professional body or government agency, whether in Singapore or elsewhere?

No

Disclosure applicable to the appointment of Director only.

Any prior experience as a director of an issuer listed on the Exchange?

 

If yes, please provide details of prior experience.

 

If no, please state if the director has attended or will be attending training on the roles and responsibilities of a director of a listed issuer as prescribed by the Exchange.

 

Yes

 

Mr Tan is currently a director of Sing Holdings Limited, listed on the SGX-ST.

Please provide details of relevant experience and the nominating committee’s reasons for not requiring the director to undergo training as prescribed by the Exchange (if applicable)

Not applicable. This is a re-election of a Director and Mr Tan has prior experience as a director of an issuer listed on the SGX-ST.

 

Annually, the Nominating Committee is required to determine the independence status of the Directors, bearing in mind the circumstances set forth in the Code, Rule 406(3)(d) of the Catalist Rules and any other salient factors. The Nominating Committee has reviewed and determined that Mr Teo Yi-Dar and Mr Chan Kum Kit are independent.

The Nominating Committee is of the opinion that sufficient time and attention are given by the Directors to the affairs of the Company, notwithstanding that some of the Directors have multiple board representations, and that there is no need to implement internal guidelines (such as implementing a limit on the maximum number of listed company board representation which any Director may hold) to address competing time commitments. The Board believes that each individual Director is best placed to determine and ensure that he is able to devote sufficient time and attention to discharge his duties and responsibilities as a Director, bearing in mind his other commitments.

 

Currently, there is no alternate Director on the Board.

Principle 5: Board Performance

The Board and the Nominating Committee strive to ensure that Directors on the Board possess the experience, knowledge and skills critical to the Company’s business so as to enable the Board to make sound and well-considered decisions.

The Nominating Committee had carried out an annual performance evaluation process to assess the effectiveness of the Board as a whole and its Board Committees. The purpose of the evaluation process is to increase the overall effectiveness of the Board and its Board Committees. Each Director completes an evaluation form to assess the overall effectiveness of the Board as a whole and its Board Committees. The appraisal process for the Board focused on the evaluation of factors such as the composition of the Board, the Board’s accessibility to information, Board procedures and accountability, communication with key management personnel and Directors’ standards of conduct. The appraisal process for the Board Committees, on the other hand, focused on the evaluation of the respective Board Committee structure, conduct of meetings, measurement and monitoring of Board Committee performance. The results of these evaluations are reviewed and used constructively by the Nominating Committee to identify areas of improvements and recommending appropriate course of action to the Board. Based on the results collated from the evaluations, the Nominating Committee is of the view that the overall effectiveness of the Board as a whole and the Board Committees has been satisfactory for the financial year.

The Nominating Committee had decided unanimously, that the Directors will not be evaluated individually as it is more appropriate and effective to assess the overall effectiveness of the Board as a whole, bearing in mind that each Director contributes in different ways to the success of the Company and Board decisions are made collectively. In addition, the factors taken into consideration for each Director’s re-nomination are the extent of his/her attendance, participation and contribution in the proceedings of the meetings.

Principle 6: Access to Information

The Board is provided with complete, accurate, and adequate information in a timely manner, prior to Board meetings and on an on-going basis, to enable it to fulfill its responsibilities. Such information includes background or explanatory information relating to matters to be brought before the Board, copies of disclosure documents, budgets, forecasts and monthly internal financial statements. In respect of budgets, any material variance between the projections and actual results will be disclosed and explained. Such information is provided to the Directors to enable them to keep abreast of the Company’s operational and financial performance and position and to facilitate better-informed decision-making. Board members also have separate and independent access to the Management and the company secretary at all times. Board members may, at the Company’s expense, also obtain independent professional advice as and when necessary in furtherance of their duties.

The company secretary and/or his representatives attend all Board meetings to ensure that Board procedures are followed and that applicable rules and regulations, including the requirements of the Companies Act (Chapter 50) of Singapore and the Catalist Rules are complied with. Under the direction of the Chairman, the company secretary’s other responsibilities include ensuring good information flows within the Board and Board Committees and between the Management, the Non-Executive Director and the Independent Directors, as well as facilitating orientation and assisting with professional development as required. The appointment and the removal of the company secretary is a matter for the Board as a whole.

Principle 7: Procedures for Developing Remuneration Policies

The Remuneration Committee comprises the following members, all of whom are non-executive and the majority, including the Chairman, are independent:

 

Chan Kum Kit (Independent Director)                        Chairman

Teo Yi-Dar (Lead Independent Director)                    Member

Tan Geok Moey (Non-Executive Director)                 Member

 

The Remuneration Committee has written terms of reference that sets out its duties and responsibilities. Amongst them, the Remuneration Committee is responsible for:

 

  • recommending to the Board a general framework of remuneration for the Directors and key management personnel, and determine specific remuneration packages for each Director, and the recommendations of the Remuneration Committee are submitted for endorsement by the entire Board. All aspects of remuneration, including but not limited to Directors’ fees, salaries, allowances, bonuses, options, share-based incentives and awards, and benefits-in-kind will be covered by the Remuneration Committee; and
  • performing an annual review of the remuneration of employees related to the Directors and substantial Shareholders to ensure that their remuneration packages are in line with the Company’s staff remuneration guidelines and commensurate with their respective job scope and level of responsibilities. It will also review and approve any bonuses, pay increases and/or promotions for these employees.
  •  

The Remuneration Committee is scheduled to meet at least once a year. Each member of the Remuneration Committee shall abstain from voting on any resolution in respect of his/her remuneration package or that of employees related to his/her.

For the financial year, the Remuneration Committee has not sought external advice nor appointed remuneration consultants in considering the remuneration of all Directors.

The Remuneration Committee will review the Company’s obligations under the service agreements entered into with the Executive Director and key management personnel that would arise in the event of termination of these service agreements. This is to ensure that such service agreements contain fair and reasonable termination clauses which are not overly generous. The Remuneration Committee aims to be fair and avoid rewarding poor performance.

Principle 8: Level and Mix of Remuneration

As part of its review, the Remuneration Committee ensures that remuneration packages are comparable within the industry and with similar companies. The Remuneration Committee considers the Company’s relative performance and the contributions and responsibilities of the individual Directors.

 

Policy in respect of Executive Director’s and other key management personnel’s remuneration

The Company advocates a performance-based remuneration system that is flexible and responsive to the market, the Company’s and the individual employee’s performance. The total remuneration mix comprises annual fixed cash and annual performance incentive. The annual fixed cash component comprises the annual basic salary plus any other fixed allowances. The Company believes in promoting commitment and motivation by aligning incentives with performance. As the Company had only completed the acquisition of the entire issued share capital of AVH Animal Ark Pte. Ltd. (“AVH Animal Ark”) on 13 August 2018 (the “Acquisition”), the Company will consider expanding the remuneration package with the inclusion of share-based incentive scheme and sets the appropriate performance conditions and targets.

The Company currently does not have any long-term incentive scheme.

The Executive Director does not receive Director’s fees. The Executive Director is paid pursuant to his service agreement, which is for an appointment period of three (3) years. While the Executive Director has entered into a service agreement with the Company, after the initial term of three (3) years, his employment with the Company may be terminated at any time by either party giving to the other party three (3) months’ notice in writing or in lieu of the said three (3) months’ notice, an amount equivalent to three (3) months’ salary based on the Executive Director’s last drawn salary.

The Company’s wholly-owned subsidiary, AVH Animal Ark, has also entered into a service agreement with Dr Lin Chung Chieh Eugene (“Dr Eugene Lin”) (a key management personnel of the Group). Pursuant to the service agreement, Dr Eugene Lin will commit to an employment period of at least 30 months following completion of the Acquisition, with automatic renewals for successive periods of 36 months thereafter on the same terms unless otherwise agreed in writing between the Company and Dr Eugene Lin or terminated in accordance with the service agreement. Dr Eugene Lin will be paid a monthly remuneration, to be reviewed from time to time by the Remuneration Committee, and a discretionary bonus of such amount and at such intervals as AVH Animal Ark may in its absolute discretion determine. The service agreement also provides for, inter alia, use of intellectual property, certain restrictive covenants (including non-compete obligation), and grounds of termination. Except where AVH Animal Ark has the right to terminate Dr Eugene Lin’s employment with immediate effect, either party may terminate the employment by giving the other six (6) months’ notice in writing, provided that Dr Eugene Lin shall not terminate the employment for the first 30 months following completion of the Acquisition, and shall not pay salary in lieu of the required period of notice.

Having reviewed and considered the variable components in the remuneration packages of the Executive Director and key management personnel, the Remuneration Committee is of the view that there is presently no urgent need for the Company to consider the use of contractual provisions to allow the Company to reclaim incentive components of remuneration from Executive Director and key management personnel in exceptional circumstances of misstatement of financial results or misconduct resulting in financial loss to the Company.

 

Policy in respect of remuneration for Non-Executive Director and Independent Directors

Non-Executive Director and Independent Directors do not have service agreements with the Company. They are compensated based on fixed Directors’ fees, which are proposed by the Board, after the recommendation by the Remuneration Committee, based on their contribution, taking into consideration factors such as effort, time spent and responsibilities of the Non-Executive and Independent Directors. The Chairman of each Board Committee is paid an additional fee, and the Chairman of the Audit Committee is paid a higher fee than the Chairman of the other Board Committees in view of the higher responsibility carried by that office. The proposed Directors’ fees are subject to approval by Shareholders at the AGM. Non-Executive and Independent Directors do not receive any other remuneration from the Company.

Principle 9: Disclosure on Remuneration

The level and mix of remuneration of the Company’s Directors and key management personnel (who are not Directors or the Chief Executive Officer) for FY2018 are as follows:

 

Remuneration band and Name of Director

Base/Fixed salary*

(%)

Bonus

 

(%)

Directors’ fees

(%)

Benefits-in-kind

(%)

Total

 

(%)

 

Directors

 

 

 

 

 

 

Between S$250,000 and S$500,000

 

 

 

 

 

 

Tan Tong Guan

89

11

100

 

 

 

 

 

 

 

 

Below S$250,000

 

 

 

 

 

 

Teo Yi-Dar

100

100

 

Chan Kum Kit

100

100

 

Tan Geok Moey

100

100

 

 

 

 

 

 

 

 

 

 

Remuneration band and

Name of Key Management Personnel**

Base/Fixed salary*

(%)

Bonus

 

(%)

Benefits-in-kind

(%)

Total

 

(%)

Below S$250,000

 

 

 

 

Xue Ru

88

12

100

Lin Chung Chieh Eugene***

100

100

 

 

 

 

 

                     

*  These amounts are inclusive of employer’s CPF contribution.

** The Group has only two (2) key management personnel (who are not Directors or the Chief Executive Officer during FY2018.

*** Appointed as Medical Director and General Manager of the Company’s wholly-owned subsidiary, AVH Animal Ark, with effect from 13 August 2018.

 

Following Dr Eugene Lin’s appointment as the Medical Director and General Manager of the Company’s wholly-owned subsidiary, AVH Animal Ark, he is considered a key management personnel of the Company. As the Company has just resumed business and ceased to be a cash company with effect from 13 August 2018, more key management personnel will be recruited in the future. 

The Board believes that it is for the benefit of the Company not to disclose in absolute number and in aggregate, the remuneration breakdown of the Directors as well as the aggregate total remuneration paid to the key management personnel (who are not Directors or the Chief Executive Officer), due to its sensitive nature and concerns of poaching.

There is no employee of the Company who is an immediate family member of any Director and the Chief Executive Officer, and whose remuneration exceeded S$50,000 during FY2018. “Immediate family member” refers to the Director’s spouse, child, adopted child, stepchild, brother, sister and parent.

The Company currently does not have an employee share option scheme or performance share plan in place.

None of the Directors (including the Chief Executive Officer) and the key management personnel (who are not Directors or the Chief Executive Officer) of the Company has received any termination, retirement, post-employment benefits for FY2018.

The Board has not included a separate annual remuneration report to Shareholders in the Annual Report on the remuneration of the Directors and the key management personnel (who are not Directors or the Chief Executive Officer) as the Board is of the view that the matters which are required to be disclosed in such annual remuneration report have already been sufficiently disclosed in the Annual Report and in the financial statements of the Company.

Principle 10: Accountability

The Board is responsible for providing a balanced and understandable assessment of the Company’s performance, position and prospects. Financial reports and other price sensitive information are disseminated to Shareholders through announcements via SGXNet to the SGX-ST and press releases. Following the Acquisition, the Company makes announcement of its financial results on a half yearly basis, and monthly valuation of assets and utilisation of cash in accordance with Rule 1017(1)(b) of the Catalist Rules will no longer apply. The Management provides the Board with management accounts on a monthly basis. Such reports keep the Board informed of, on a balanced and understandable basis, the Company’s performance, position and prospects and enable the Board to discharge its duties effectively and efficiently.

Principle 11: Risk Management and Internal Controls

The Audit Committee will review the reports submitted by the independent internal auditors relating to the adequacy and effectiveness of the Group’s significant internal controls (including financial, operational, compliance and information technology controls), risk management systems. The Audit Committee will also review the effectiveness of the actions taken by the Management on the recommendations made by the independent internal auditors in this respect. 

On an annual basis, the Board will review the adequacy and effectiveness of the internal controls (including financial, operational, compliance and information technology controls) and risk management systems to ensure that they are able to meet the needs of the Group in its current business environment.

For FY2018, the Board has received assurance from the Chief Executive Officer and Chief Financial Officer that the financial records have been properly maintained and the financial statements give a true and fair view of the Company’s operations and finances; and the Company’s risk management and internal control systems are effective.

In FY2018, as part of the due diligence in respect of the Acquisition, the Company had appointed external professional consulting firms, Ernst & Young Solutions LLP to perform financial due diligence and Ernst & Young Advisory Pte. Ltd. to review the adequacy and integrity of the internal control system of the operations of the business of AVH Animal Ark.

Following the Acquisition, the Board and the Audit Committee have reviewed the adequacy and effectiveness of the Group’s internal controls (including financial, operational, compliance and information technology controls) and risk management systems. As part of the annual statutory audit of the financial statements, the external auditors will highlight any material weaknesses in financial controls over the areas that are significant to the audit. Such material internal control weaknesses noted during their audit and recommendations, if any, by the external auditors are reported to the Audit Committee. The Audit Committee will follow up on the actions taken by the Management in response to the recommendations made by the external auditors. The Board will consider the necessity of establishing a separate Board risk committee as and when it deems necessary.

The Board and the Audit Committee note that all internal control systems contain inherent limitations and no systems of internal controls could provide absolute assurance against the occurrence of material errors, poor judgment in decision making, human errors, losses, fraud or other irregularities.

Based on the internal controls established and maintained by the Company, work performed by the external and internal auditors, reviews performed by the Management and assurance received from the Chief Executive Officer and Chief Financial Officer, the Board, with the concurrence of the Audit Committee, is of the opinion that the Group’s internal controls (including financial, operational, compliance and information technology controls) and risk management systems are adequate and effective for FY2018.

Principle 12: Audit Committee

The Audit Committee comprises the following members, all of whom are non-executive and the majority, including the Chairman, are independent:

 

Teo Yi-Dar (Lead Independent Director)                    Chairman

Chan Kum Kit (Independent Director)                        Member

Tan Geok Moey (Non-Executive Director)                 Member

 

All members of the Audit Committee have accounting and related financial management expertise and experience.

The Audit Committee has explicit authority to investigate any matter within its terms of reference, full access to and co-operation by the Management, full discretion to invite any person including a Director or key management personnel of the Company to attend its meetings, and reasonable resources to enable it to discharge its functions properly.

The Audit Committee will assist the Board in discharging its responsibility to safeguard the assets of the Company, maintain adequate accounting records, and develop and maintain effective systems of internal control, with the overall objective of ensuring that the Management creates and maintains adequate and effective control environment in the Company. The Audit Committee will provide a channel of communication between the Board, the Management and the external auditors on matters relating to audit.

The Audit Committee has written terms of reference that sets out its duties and responsibilities. Amongst them, the Audit Committee is responsible for:

  • reviewing the scope and results of the audit and its cost effectiveness;
  • reviewing the significant financial reporting issues and judgments so as to ensure the integrity of the financial statements of the Company and any formal announcements relating to the Company’s financial performance;
  • making recommendations to the Board on the appointment, re-appointment and removal of the external auditors, and approving the remuneration and terms of engagement of the external auditors;
  • reviewing with the external auditors the audit plan, their evaluation of the system of internal accounting controls, their letter to the Management and the Management’s response;
  • reviewing the half yearly and annual financial statements and results announcements before submission to the Board for approval, focusing in particular on changes in accounting policies and practices, major risk areas, significant adjustments resulting from the audit, compliance with accounting standards and compliance with the Catalist Rules and any other relevant statutory or regulatory requirements;
  • reviewing annually the adequacy and effectiveness of the Company’s internal controls (including financial, operational, compliance and information technology controls), as well as risk management policies and systems established by the Management. The Audit Committee will also ensure co-ordination between the external auditors and the Management, and review the assistance given by the Management to the external auditors, and discuss problems and concerns, if any, arising from audits, and any matters which the external auditors may wish to discuss (in the absence of the Management, where necessary);
  • reviewing and discussing with the external auditors any suspected fraud or irregularity, or suspected infringement of any relevant laws, rules or regulations, which have or are likely to have a material impact on the Company’s operating results or financial position, and the Management’s response;
  • reviewing interested person transactions (if any) falling within the scope of Chapter 9 of the Catalist Rules;
  • reviewing potential conflicts of interest (if any);
  • reviewing with the independent internal auditors, their internal audit plans and their evaluation of the adequacy and effectiveness of the internal control and accounting system before submission of the results of such review to the Board for approval;
  • reviewing and establishing procedures for receipt, retention and treatment of complaints received by the Company regarding, inter alia, criminal offences involving the Company or its employees, questionable accounting, auditing, business, safety or other matters that impact negatively on the Company;
  • reviewing key financial risk areas, with a view to providing an independent oversight on the Company’s financial reporting, the outcome of such review to be disclosed in the annual report or, where the findings are material, announced immediately via SGXNet;
  • reviewing the Company’s compliance with relevant government regulations and licensing requirements;
  • undertaking 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 arising and requiring the attention of the Audit Committee; and
  • generally, undertaking such other functions and duties as may be required by statute or by the Catalist Rules, or by such amendments as may be made thereto from time to time.

 

The Audit Committee will meet with the external auditors and the independent internal auditors at least annually, without the presence of the Management. The Audit Committee will review the independence and objectivity of external auditors annually after taking into account all audit and non-audit services provided to the Company. Having considered the breakdown of fees paid to the external auditors as detailed on page 29 and compliance with Singapore Accountants (Public Accountants) Rules, as well as the nature and extent of such services, the Audit Committee is satisfied that such services will not prejudice the independence and objectivity of the external auditors. The external auditors have also confirmed their independence in this respect, and that they are registered with the Accounting and Corporate Regulatory Authority.

After considering the adequacy of the resources and experience of the external auditors’ firm and the audit engagement partner assigned to the audit, the firm’s other audit engagements, the size and complexity of the Group and the number and experience of supervisory and professional staff assigned to the particular audit, the Audit Committee has recommended to the Board the nomination and re-appointment of Ernst & Young LLP as the external auditors for the Company’s audit obligations for the financial year ending 31 December 2019, at the forthcoming AGM.

The Audit Committee shall also commission and review the findings of internal investigations into matters where there is any suspected fraud or irregularity, or failure of internal controls or infringement of any Singapore law, rule or regulation which has or is likely to have a material impact on the operating results and/or financial position of the Company. In the event that a member of the Audit Committee is interested in any matter being considered by the Audit Committee, he will abstain from reviewing that particular transaction or voting on that particular resolution.

The Audit Committee is kept abreast by the external auditors on regulatory changes and updated accounting standards during the Audit Committee meetings.

The Audit Committee has reviewed the key audit matters disclosed in the external auditors’ report and is of the view that there is no material inconsistency between the audit procedures adopted by the external auditors and the Management’s assessment.

The Company has put in place a whistle-blowing policy, whereby anyone may, in good faith and in confidence, raise concerns or observations about possible corporate malpractices and improprieties in financial reporting or other matters directly to Mr Teo Yi-Dar, Chairman of the Audit Committee and the Lead Independent Director. No such whistle-blowing report was received for FY2018.  

The Audit Committee will review the policy and arrangements by which staff of the Company may, in confidence, raise concerns about possible improprieties in matters of financial reporting or other matters. The objective of the Audit Committee will be to ensure that arrangements are in place for the independent investigation of such matters and for appropriate follow-up actions. No such matter was raised by any staff of the Company for FY2018.

In appointing the auditing firms for the Company and its subsidiaries, the Company has complied with Rules 712 and 715 of the Catalist Rules for FY2018.

No former partner or director of the Company’s existing auditing firm is a member of the Audit Committee.

 

In FY2018, the Audit Committee had, among others, carried out the following activities:

  • reviewed the half-year and full-year financial statements announcements of the Group, and recommended to the Board for approval and release via the SGXNet;
  • reviewed the adequacy and effectiveness of the Group’s internal controls (including financial, operational, compliance and information technology controls), and risk management systems;
  • reviewed and approved the annual audit plan of the external auditors;
  • reviewed the independence of the external auditors;
  • reviewed the annual re-appointment of the external auditors and determined their remuneration, and made a recommendation for the Board’s approval; and
  • met with the external auditors once without the presence of the Management.

Principle 13: Internal Audit

The role of internal auditor is to assist the Audit Committee to ensure that the Company maintains a sound system of internal controls. The internal auditor is required to meet the standard required for the Professional Practice of Internal Auditing set by the Institute of Internal Auditors. The internal auditor reports directly to the Audit Committee. The Audit Committee will approve the internal audit plan and ensure sufficiency of internal audit resources to perform its tasks. The internal auditors will be granted unfettered access to all the Group’s documents, records, properties and personnel, including unrestricted direct access to the Audit Committee.

The Audit Committee approves the hiring, removal, evaluation and compensation of the independent internal auditors.

Prior to the completion of the Acquisition on 13 August 2018, the Company was a cash company as defined under the Catalist Rules. In FY2018, as part of the due diligence in respect of the Acquisition, the Company had commissioned Ernst & Young Advisory Pte. Ltd. to review the adequacy and integrity of the internal control system of the operations of the business of AVH Animal Ark. The Audit Committee shall commission an independent internal audit of the Group within one year from the completion of the Acquisition. The Audit Committee will annually, review the independency, adequacy of resources and effectiveness of the internal audit function and ensure that it has appropriate standing within the Company

Principles 14 and 15: Shareholder Rights and Communication with Shareholders

The Board believes in regular, timely and effective communication with Shareholders. Shareholders are kept informed of all important developments concerning the Company through timely dissemination of information via SGXNet announcements, press releases, annual reports and various other announcements made whenever necessary.

Principle 16: Conduct of Shareholder Meetings

All Shareholders of the Company will receive the annual report and notice of the AGM. Shareholders are encouraged to attend the Company’s general meetings and to participate effectively in and vote at general meetings of Shareholders to ensure a high level of accountability and to stay informed of the Company’s strategies and growth plans and establish and maintain regular dialogue between the Company and Shareholders, to gather views and inputs, and address shareholders’ concerns. The chairpersons and/or members of the Board, Audit Committee, Remuneration Committee and Nominating Committee and the external auditors are normally available at Shareholders’ meetings to address any Shareholders’ queries, including those relating to the conduct of audit and the preparation and content of the auditors’ report.

Presently, the Company does not have an investor policy or protocol in place nor a dedicated investor relations team. The Company will assess the need to establish an investor policy or protocol or investor relations team as and when it deems necessary. 

If any Shareholder is unable to attend, he/she is allowed to appoint up to two (2) proxies to vote on his/her behalf at the meeting through proxy forms sent in advance. The Company’s Constitution currently does not allow a member to appoint more than two (2) proxies to attend and vote at the same general meetings and for other absentia voting methods such as by mail, electronic mail, fax and/or other methods. With effect from 3 January 2016, the Companies Act (Chapter 50) of Singapore was amended, amongst others, to allow certain members, defined as “relevant intermediary” to attend and participate in general meetings. Relevant intermediary includes corporations holding licences in providing nominee and custodial services and CPF Board which purchases shares on behalf of the CPF investors.

Each item of special business included in the notice of the general meetings will be accompanied by full explanation of the effects of a proposed resolution. Separate resolutions are proposed for each substantially separate issue at general meetings.

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 the Management. These minutes are available to Shareholders upon their request. 

The Company understands that it should put all resolutions to vote by poll. In the event a poll is conducted, the Company will make an announcement of the detailed results showing the numbers of votes cast for and against each resolution and the respective percentages. 

The Company does not have a policy on payment of dividends. The issue of payment of dividend is deliberated by the Board annually having regard to various factors. The Company has not declared any dividend for FY2018 as the Group recorded net loss in FY2018 and the Board deems it appropriate to conserve cash for the Group’s business activities and growth. 

 

Dealings in Securities

The Company observes closely the best practices on dealings in securities (Securities Dealings Best Practices”) in compliance with Rule 1204(19) of the Catalist Rules. The Securities Dealings Best Practices provide guidance to the Directors and employees of the Company with regard to dealing in the Company’s securities.

The Company issues circulars or electronic mails to its Directors, key management personnel and employees that they must not trade in the shares of the Company during the period commencing one (1) month before the release of the half year and year-end results and ending on the date of such announcements. In addition, Directors and key management personnel are expected to observe insider trading laws at all times even when dealing in securities within the permitted trading period. They are discouraged from dealing in the Company’s shares on short term considerations.

 

Interested Person Transactions

The Company has established procedures to ensure that all transactions with interested persons are reported in a timely manner to the Audit Committee and that the transactions are carried out on normal commercial terms and shall not be prejudicial to the interests of the Company and its minority Shareholders. When a potential conflict of interest arises, the Director concerned takes no part in discussions nor exercises any influences over other members of the Board.

During the financial year under review, there have been no interested person transactions entered into by the Group that requires disclosure pursuant to the Catalist Rules.

  

Material Contracts

Other than disclosed in the audited financial statements and the service agreement between the Executive Director and the Company, there were no material contracts (including loans) entered into by the Company or its wholly-owned subsidiary involving the interests of any Director or controlling Shareholders which are either still subsisting as at the end of FY2018 or if not then subsisting, entered into since the end of the previous financial year.

  

Fees paid to Independent External Auditors

Ernst & Young LLP, the external auditors, rendered the following services (and charged the fees) set out below for FY2018:

   

2018

   

S$’000

Audit fees         

 

80

Non-audit fees:

   

   Agreed upon procedures on half-year review

 

5

   Non-recurring professional services

 

150

   Tax returns compliance service      – Current year

 

8

Total audit and non-audit fees

 

243

 

The Audit Committee has reviewed all non-audit services (described above) provided by Ernst & Young LLP and is of the view that they did not affect the independence of Ernst & Young LLP, as the external auditors, as it has complied with Singapore Accountants (Public Accountants) Rules. As substantial portion of the non-audit fees are fees incurred in relation to the Acquisition and are non-recurring in nature, the Audit Committee is of the view that they did not affect the independence of Ernst & Young LLP.

 

Non-Sponsorship Fees

With effect from 1 May 2018, ZICO Capital Pte. Ltd. was appointed as the Company’s sponsor in place of RHT Capital Pte Ltd.

With reference to Rule 1204(21) of the Catalist Rules, (i) there were no non-sponsorship fees payable or paid to RHT Capital Pte Ltd in FY2018; and (ii) non-sponsorship fees of an aggregate of approximately S$834,000 (comprising S$437,000 in cash and S$397,000 in shares of the Company) were payable or paid to ZICO Capital Pte. Ltd. in FY2018, whereby ZICO Capital Pte. Ltd. acted as the Financial Adviser to the Company in respect of the Acquisition.