Contents. 01 Corporate Profi le. 02 Chairman s Statement. 04 Corporate Information. 05 Operations Review. 06 Board of Directors.

Transcription

1 Annual Report 2008

2 Contents 01 Corporate Profi le 02 Chairman s Statement 04 Corporate Information 05 Operations Review 06 Board of Directors 08 Key Executives 09 Group Structure 10 Financial Highlights 11 Corporate Highlights

3 Annual Report 2008 Corporate Profi le Hartawan Holdings Limited (the Company ) was established in 1998 and was listed on the Catalist Board (formerly known as the Singapore Exchange Securities Trading Dealing and Automated Quotation or SGX Sesdaq) on 27 January Its property leasing and management business comprises 14 strategically located properties in Singapore as at June The Group leases and manages various types of properties, including a dormitory, warehouses, offi ces, retail, a hostel and a boutique hotel. The Group currently owns and charters out fi ve cargo vessels. It provides crew and equipment, technical operation and ship navigation support to charterers. 1

4 Chairman s Statement Dear Shareholders, My appointment as Executive Chairman by the Board of Directors ( Board ) of Hartawan Holdings Limited (the Company and, together with its subsidiaries, the Group ) on 2 July 2008 came during a challenging time for the Group. For this fi nancial year ended ( FY2008 ) the Group s net loss after tax increased to S$22.29 million from S$1.41 million in FY2007. The net asset value per ordinary share of the Group as at 30 June 2008 also dropped to 7.45 cents from cents in FY2007. During the year, the Company made full provision for impairment of the receivable relating to the Shanghai Mall project amounting to S$11.39 million and for impairment of assets held for sale in J. L. Chancellor Pte Ltd of S$3.81 million. Notwithstanding these write-offs, the Company has commenced action to enforce its legal rights in respect of the monies owed to the Group in connection with these 2 investments and shareholders will be kept informed of material developments. The decline of the Company s ship chartering business over the years, coupled with the signifi cant legal and professional fees incurred by the Group in respect inter alia, of its lawsuits in the People s Republic of China, had also affected the Group s results. The Company has therefore, on 2 June 2008, entered into a Conditional Deed of Settlement to settle these lawsuits, the terms of which were approved by shareholders at the Company s Extraordinary General Meeting held on 25 August With the implementation of this settlement, the Group will avoid prolonging litigation and further uncertainties, including enabling the Group to save on related legal expenses. This will free Management to focus on the other business activities of the Group. Time and effort can now be devoted to developing the Group s property leasing and management business, including its fi rst hotel development project - Hotel Pearl s Hill ( Hotel Re! ) which commenced operations on 15 May Due to the substantial investment cost associated with Hotel Re! and the relatively short remaining term of its lease, Hotel Re! has to generate a fairly high occupancy and room rates to sustain itself. Due to the startup costs and delay in opening, Hotel Re! showed a net loss for FY2008. In FY2008, the Group s 13 leased properties were almost fully tenanted as a result of the buoyant commercial property market during that period. We expect the properties leasing operations to remain stable for the fi nancial year ending 30 June Going forward, the Group will focus on expanding its property leasing portfolio and continue with the lease and management of properties as well as the development of properties in Singapore and region. Acknowledgements On behalf of the Board, I extend a warm welcome to Mr Chng Hee Kok who joined our Board as an Independent Director during the fi nancial year and was subsequently appointed as our CEO. The Board will also like to express its appreciation to Mr John De Payva and Mr Fong Heng Boo for their contributions to the Company. Messrs De Payva and Fong, both independent directors, will retire at the forthcoming Annual General Meeting. Last but not least, the Board will like to thank Ms Sim Poh Heok, Mr Loo Woei Harng and Mr Tan Lim Hui for their contributions to the Company. I wish to thank my fellow Board members and staff for their hard work and determination to grow with us through these challenging times. Lastly, I express my appreciation to all our shareholders and business partners for their continuing support. We hope that we will be able to close expeditiously the chapter in relation to the Group s ship chartering, coal mining and Shanghai mall business. We look forward to growing the Group s core business. Cynthia Tan Executive Chairman 3 October

5 Annual Report Hartawan Holdings Limited ,410,000 22,290, ,390,000 J. L. Chancellor Pte Ltd 3,810, Chng Hee Kok John De Payva Fong Heng Boo De Payva Fong Sim Poh Heok Loo Woei Harng Tan Lim Hui Hotel Pearl s Hill Hotel Re! Hotel Re! Hotel Re! Hotel Re! Hotel Re! Cynthia Tan

6 Corporate Information Board of Directors Tan Kwee Hiang Executive Chairman Chng Hee Kok Chief Executive Offi cer Er Kwong Wah Independent Director John De Payva Independent Director Fong Heng Boo Independent Director Wong Kok Hoe Non-Executive Director Audit Committee Fong Heng Boo Chairman Er Kwong Wah John De Payva Remuneration Committee John De Payva Chairman Fong Heng Boo Er Kwong Wah Nominating Committee Er Kwong Wah Chairman Fong Heng Boo Wong Kok Hoe Share Registrar Boardroom Corporate & Advisory Services Pte. Ltd. (formerly known as Lim Associates (Pte) Ltd) 3 Church Street #08-01 Samsung Hub, Singapore Tel: (65) Fax: (65) Auditors Ernst & Young LLP Certifi ed Public Accountants One Raffl es Quay, North Tower Level 18, Singapore Partner in-charge: Shekaran Krishnan (Appointed since fi nancial year ended 2006) Company Secretaries Yvonne Choo Hazel Chia Luang Chew Teo Soo Lin Registered Office and Business Address I Pegu Road #01-01 Singapore Tel: (65) Fax: (65) @hartawanholdings.com.sg Principal Bankers HL Bank DBS Bank Ltd United Overseas Bank Limited Malayan Banking Berhad Overseas Chinese Banking Corporation Bank of China 4

7 Annual Report 2008 Operations Review Property Leasing and Hospitality Offices: 5 Kadayanallur Street 9 Shenton Way 1 Pegu Road Lorong 6 Toa Payoh 32 Wallich Street Warehouses: 20,23,24,25 & 25A Depot Road 163 Pasir Panjang Road (Pasir Panjang Distripark) 82, 84, 86 Jalan Benaan Kapal Dormitory and Hostel: 421 Tagore Avenue 40 & 50 Carlisle Road Others: 1 Pasir Panjang Road 2 Mackenzie Road 135 Jurong East* Hotel: 175A Chin Swee Road * Sold off subsequent to fi nancial year ended. Ship Chartering Name of Vessel Tonnage m.v. Green Island 2,824 m.v. Green Spring 5,773 m.v. Green Water 1,972 m.v. Green Yang 1,972 m.v. Green Mountain 1,968 The Group s net loss after tax increased from S$1.41 million to S$22.29 million due mainly to: 1. impairment loss of S$11.39 million on doubtful other receivable from Shanghai Fu Jie Enterprise Investment Co., Ltd.; 2. impairment loss of S$3.81 million on asset held for sale in J.L. Chancellor Pte Ltd.; 3. provision of S$0.70 million for diminution in value of asset held for sale which referred to the investment property at Jurong East. Subsequent to the balance sheet date, the property located at 135 Jurong East was disposed off for a consideration of S$4.8 million; 4. increase in payroll related expenses from S$1.58 million in FY2007 to S$2.57 million in FY2008 due largely to the increase in headcount for Hotel Pearl s Hill; and 5. a write-off of a motor vehicle amounting to S$0.17 million pursuant to the Conditional Deed of Settlement ( Settlement Deed ) also attributed to the increase in Group s net loss. Another main contributor to the Group s net loss is the shipping operations. Loss after tax from the shipping operations increased from S$1.64 million to S$5.35 million. This was due mainly to: 1. no revenue contribution from the 2 vessels that were detained by the Courts of the People s Republic of China ( PRC ) in connection with the legal suits and which are now in anchorage, while the Group continued to bear certain direct costs such as wages, consumables, insurance and depreciation for these 2 vessels; 2. increasing fuel prices, coupled with high repair and maintenance costs, had added additional cost pressures on the shipping operations; 3. the signifi cant legal and professional fees incurred on the lawsuits in the PRC against the ship agents; and 4. pursuant to the Settlement Deed in relation to the Proposed Settlement and Sale (all terms not otherwise defi ned shall have the same meanings ascribed to them in the circular to shareholders dated 1 August 2008), an amount of US$1.6 million was accrued for as at, being the agreed quantum of the Vita Vessels Liabilities prior to 2 June Pursuant to the Settlement Deed and the Shareholders approval obtained at the Extraordinary General Meeting held on 25 August 2008, the Group had completed the sale of the First Tranche Vessels, namely m.v. Green Forest, m.v. Green Pine and m.v. Green Oasis, on 28 August

8 Board of Directors Ms Tan Kwee Hiang, Cynthia Executive Chairman Ms Cynthia Tan was fi rst appointed as a Non-Executive Director of the Company on 7 May 2007 and was subsequently appointed as a Non-Executive Chairman on 23 April 2008 and then as Executive Chairman of the Company on 2 July Before joining the Group, Ms Tan was the Director of Manhattan Resources Limited (formerly known as Links Island Holdings Limited). She was in-charge of all human resources, administrative and fi nancial affairs. Ms Tan graduated from Ngee Ann Polytechnic with a Diploma in Electrical and Electronics Engineering. Mr Chng Hee Kok Executive Director / Chief Executive Offi cer Mr Chng Hee Kok was fi rst appointed as an Independent Director of the Company on 31 December 2007 and was subsequently appointed as an Executive Director on 23 April 2008 and then as Chief Executive Offi cer of the Company on 2 July Mr Chng has a wide range of experience in industrial and consumer products marketing, property development, hospitality (including hotel and service apartment development and management), and the food and beverage industry. Mr Chng was a Member of Parliament from 1984 to He had served on the board of Sentosa Development Corporation and Public Utilities Board and was a past Director of the Governing Council of the Singapore Institute of Directors. He was formerly Executive Chairman of United Pulp and Paper Ltd and Chief Executive Offi cer of Scotts Holdings Limited and of Yeo Hiap Seng Limited. Mr Chng currently sits on the board of directors of a number of public listed companies which include Luxking Group Holdings Limited, Pacifi c Century Regional Developments Ltd, People s Food Holdings Limited and Samudera Shipping Line Ltd. Mr Chng was awarded a Merit Scholarship by the Singapore government in 1967 and graduated with a Bachelor of Engineering (First Class Honours) degree from the National University of Singapore in He also holds a Master of Business Administration degree from the National University of Singapore. Mr Er Kwong Wah Independent Director Mr Er Kwong Wah was appointed as an Independent Director on 30 November Mr Er is the Chairman of the Nominating Committee and serves as a member of the Audit Committee and Remuneration Committee. He had spent 27 years in the civil service for the Singapore Government and had served in various ministries before his retirement. Mr Er is currently an independent director for several public listed companies, such as Unidux Electronics Holdings Limited, COSCO Corporation (Singapore) Limited, Firstlink Investments Corporation Limited and the Thai Prime Fund Limited. He is also the Chairman of the Toa Payoh Central Citizens Consultative Committee and a member of the Bishan-Toa Payoh Town Council. Mr Er holds a fi rst class honours degree in Electrical Engineering from the University of Toronto, Canada and a Master of Business Administration from the University of Manchester, United Kingdom. 6

9 Annual Report 2008 Board of Directors Mr John De Payva Independent Director Mr John De Payva was appointed as an Independent Director on 30 November Mr John De Payva is the Chairman of the Remuneration Committee and serves as a member of the Audit Committee. He is an active union leader and is currently the President of the National Trades Union Congress ( NTUC ) and a Director/Secretary-General of The Singapore Manual & Mercantile Workers Union. Concurrently, Mr De Payva is also the Chairman, Executive Bureau of the International Trade Union Confederation Asia Pacifi c ( ITUC-AP ), Vice President, General Council ICFTU-APRO and General Council Member, of International Trade Union Confederation ( ITUC ). Presently, he is director of NTUC FairPrice and SBS Transit. Mr De Pavya graduated with a diploma in Industrial Relations at the Singapore Institute of Labour Studies in Mr Fong Heng Boo Independent Director Mr Fong Heng Boo was appointed as an Independent Director on 30 November He is the Chairman of the Audit Committee and serves as a member of the Nominating Committee and Remuneration Committee. Mr Fong is currently the Director (Special Duties) of Singapore Totalistor Board. He was with the Auditor-General s Offi ce of Singapore and left in 1993 as the Assistant Auditor-General. Presently, he is an independent director of Colex Holdings Limited. Mr Fong is a Fellow member of the Institute of Certifi ed Public Accountants of Singapore and holds a Bachelor of Accountancy (Honours) degree from the University of Singapore. Mr Wong Kok Hoe Non-Executive Director Mr Wong was appointed as a Non-Executive Director on 7 May He serves as a member of the Nominating Committee. He is a consultant of Rajah & Tann LLP, a fi rm of advocates and solicitors. Mr Wong has more than 18 years of experience in legal practice. Mr Wong holds a Bachelor of Laws (Honours) degree from the National University of Singapore. Mr Wong is also a director of the following public listed companies: CFM Holdings Limited and K Plas Holdings Limited. 7

10 Key Executives Ms Teo Soo Lin Financial Controller Ms Teo Soo Lin was appointed Financial Controller on 23 January Ms Teo is responsible for managing all fi nancial aspects of the Group. Before joining the Group, Ms Teo was Financial Controller of Manhattan Resources Limited (formerly known as Links Island Holdings Limited). She holds a Bachelor of Accountancy from Nanyang Technological University and is a member of the Institute of Certifi ed Public Accountants of Singapore. Mr Tan Lim Hui Project Manager Mr Tan Lim Hui was appointed Project Manager on 1 August Mr Tan is involved in project evaluation and development, and property management. Mr Tan has accumulated more than 20 years of business experience. He has been involved in the property leasing business since Mr Joseph Ong Hotel General Manager / Hostel Manager Mr Joseph Ong was appointed General Manager for Hotel Pearl s Hill ( Hotel Re ) and Hostel Manager of students hostel ( Hartawan Hostel ) on 1 June He is responsible for overseeing the operations and management of Hotel Re and Hartawan Hostel. Mr Ong also does project evaluation and business development of the Group. Before joining the Group, he was involved in regional projects evaluation and development during his employment with Maersk Singapore. He holds a Bachelor of Business Administration (Honours) from National University of Singapore and is currently pursuing a Masters in Hospitality Management. Ms Yoshiari Wong Property Manager Ms Yoshiari Wong had worked with developers, in Town Councils, as well as with Management Agency before joining the Company as Property Manager on 1 February Ms Wong has more than 15 years of experience in managing, leasing and setting up of offi ces, estate, building security and facilities management including a small scale to a very large scale property development. Ms Wong graduated from the National University of Singapore with a Bachelor of Science (Estate Management). Mr Francis Chng Corporate Security Manager Mr Francis Chng joined our Company on 1 October He is the Corporate Security Manager who is responsible in managing the corporate security of the Group. He also assists in the operations of Hartawan Hostel. Mr Chng has 12 years high profi le security experience of which includes Singapore Police Force, Police Security Command (VVIP Protection Unit), Singapore Post Ltd (Superintendent, Postal Security Department) and Merrill Lynch Investment Bank Ltd (APR Control Center Manager). He holds a Diploma in Mechanical Engineering from Ngee Ann Polytechnic. Ms Margaret Nicole Chia Human Resource Manager Ms Margaret Chia worked in various management positions in several multi-national corporations in Singapore before joining the Company as Human Resource Manager on 1 April She has more than 20 years of accumulated experience and in-depth knowledge of current human resource practices in the various industries in Singapore. Ms Chia is responsible in handling and managing the full spectrum of human resource matters and offi ce administration. She graduated with a Diploma in Human Resource Management from PSB Academy. 8

11 Annual Report 2008 Group Structure Hartawan Holdings Property Leasing and Management Ship Chartering 100% Whitehouse Holdings 100% Dehai Marine Shipping Private Limited (Singapore) Pte Ltd 100% Hotel Re! Pte Ltd 100% Green Forest Marine Shipping Inc. 100% Central Warehouse Service Pte Ltd. 100% Green River Marine Shipping Inc. 100% Hartawan Property 100% Green Pine Marine Management Pte Ltd Shipping Inc. 51% Tada E-Parking (S) Pte Ltd * 100% Green Spring Marine Shipping Inc. 100% Hartawan Dormitory Management Pte Ltd 100% Green Mountain Marine Shipping Pte Ltd 100% Hartawan Hostel Management Pte Ltd 100% Vita Marine Shipping Pte Ltd 100% Wallich Development 100% Green Willow Marine Pte Ltd Shipping Pte Ltd 100% Vita Hospitality Pte Ltd * 100% Green Spring Marine Shipping Pte Ltd *Applied for strike off on 3 October

12 Financial Highlights Revenue % % Revenue ($million) 27.3% % Gross Profi t ($million) % Net Profi t ($million) (1.4) % 44.0% 2006 (22.3) Property Leasing & Management Hotel Ship Chartering 10

13 Annual Report 2008 Corporate Highlights September 2007 Establishment of Hotel Re! Pte Ltd October 2007 Disposal of m.v. Green Willow for US$3.03 million as part of Group s ongoing exercise to maintain an effi cient shipping fl eet to ensure cost savings by reducing maintenance and repair costs, as well as in line with the Group s intention to continue to divest other vessels. October 2007 Annual General Meeting Extraordinary General Meeting November 2007 Lease of property in Shanghai, People s Republic of China November 2007 Draw-down of the S$10 million convertible loan pursuant to the Convertible Loan Agreement which is approved by the Shareholders at the Extraordinary General Meeting held on 26 October December 2007 Termination of Conditional Business Co-operation Contract and Conditional Principles of Stockholders Agreement in relation to proposed development of hotel in Vietnam. December 2007 Conversion of S$3.91 million of the convertible loan to 23 million fully paid new shares in the capital of the Company. January 2008 Conversion of S$6.09 million of the convertible loan to 35,823,529 fully paid new shares in the capital of the Company, thereby triggering a mandatory general offer by Mr Chong Thim Pheng, in compliance with the provisions of the Singapore Takeover Code. June 2008 Entered into Conditional Deed of Settlement between (1) Mr Jiang Haiying, (2) the Company, (3) Qingdao Dehai Shipping Co., Ltd and (4) Qingdao Dehai Marine & Engineering Co., Ltd. in relation to settlement of legal proceedings of the respective parties and proposed sale of certain vessels owned by the Group to Mr Jiang and/or his nominees. June 2008 Entered into a supplemental agreement with Shanghai Fu Jie Enterprise Investment Co., Ltd. ( Fu Jie ) for the termination of the Shanghai Municipality Housing Lease Agreement and the supplemental agreement to the same entered into between the Company and Fu Jie on 7 November 2007 for the lease by the Company of the property in Shanghai, People s Republic of China from Fu Jie. August 2008 Extraordinary General Meeting August 2008 Full year fi nancial statement and dividend announcement for year ended. September 2008 Entered into an Option Agreement to sell a property, a shophouse unit at Jurong East Street 13 for a cash consideration of S$4.8 million. October 2008 Filed a Writ of Summons in the High Court of Singapore in relation to profi t guarantee with respect to J. L. Chancellor Pte Ltd. October 2008 Issued letters of demand to both Fu Jie and to the Guarantor for the payment of the amount of RMB 10 million. 11

14 13 Corporate Governance Report 24 Directors Report 27 Statement by Directors 28 Independent Auditors Report 29 Consolidated Income Statement 30 Balance Sheets 31 Statements of Changes in Equity 32 Consolidated Cash Flow Statement 33 Notes to the Financial Statements 79 Statistics of Shareholdings 81 Statistics of Warrantholdings 82 Notice of Annual General Meeting Proxy Form

15 Annual Report 2008 Corporate Governance Report The Board of Directors (the Board ) and Management of Hartawan Holdings Limited (formerly known as Vita Holdings Limited) (the Company and together with its subsidiaries, collectively the Group ) are committed to maintaining high standards of corporate governance by adopting practices in line with the 2005 Code of Corporate Governance (the Code ). Good corporate governance practices establish and maintain an ethical environment and safeguards the interests of all shareholders. This report outlines the Company s corporate governance framework with specifi c reference to the Code which forms part of the Continuing Obligations in the Listing Manual of the Singapore Exchange Securities Trading Limited ( SGX-ST ). The Company confi rms that it has adhered to the principles and guidelines as set out in the Code, where applicable, and has specifi ed and explained areas of non-compliance. BOARD MATTERS Principle 1: The Board s conduct of its affairs The Board has established three Board Committees to assist in the execution of the Board s responsibilities. The committees are the Nominating Committee ( NC ), Remuneration Committee ( RC ) and Audit Committee ( AC ) which function within clearly defi ned terms of references. The actions and effectiveness of each Board Committee are reported to and reviewed by the Board on a regular basis. The Board s primary role is to protect and enhance long-term shareholders value. It sets the overall corporate strategy and directions of the Group, ensures effective management leadership and proper conduct of the Group s businesses by supervising Management. Besides carrying out its statutory responsibilities, the Board s roles are: Approving Board policies, strategies and fi nancial objectives of the Group and monitoring the performance of Management; Reviewing and approving corporate policies, strategies and fi nancial plans of the Company; Monitoring fi nancial performance including approval of the annual and interim fi nancial reports, material interested person transactions; Overseeing and reviewing the processes for evaluating the adequacy of internal controls, risk management, fi nancial reporting and compliance; Approving major funding proposals, investments, acquisitions and divestment proposals; Assuming responsibility for corporate governance; and Declaring interim dividends and proposing fi nal dividends. Matters that require Board approval include the approval of the Group s strategic plans, appointment of directors and key managerial personnel, annual budgets, major investment proposals, and the review of the fi nancial performance of the Group. The Board also approves the Company s results announcements, declaration of dividends, convening of shareholders meetings, authorisation of merger and acquisition transactions, and authorisation of major transactions. The Board likewise reviews and approves all corporate actions for which shareholder approval is required. The Board holds scheduled meetings at least four times a year. When required, ad-hoc meetings are convened or exchanges of views are held outside the formal environment of Board meetings. The Company s Articles of Association provide for telephonic attendance and conference via audio-visual communication at Board meetings to facilitate Board participation. 13

16 Corporate Governance Report To facilitate the effective and effi cient discharge of duties and responsibilities, the directors are provided with extensive information on the Group s business activities, strategic directions and policies and any new developments via regular and timely updates. The non-executive directors are also welcome to request for more information, briefi ngs or informal discussions on any aspect of the Group s operations or business issues from Management. In addition, the non-executive directors are regularly invited to visit the Group s business premises for a better understanding of the Group s operations. With the Company Secretaries assistance, the Board is kept apprised of its compliance obligations and responsibilities arising from regulatory changes and requirements. The Company also works closely with professional advisers to provide its directors with regular updates on the latest governance and listing policies. The Company had considered the appropriateness of issuing letters of appointment to directors setting out their duties, obligations and terms of appointment. This is being deferred and will be reconsidered when appropriate. Where required, newly-appointed directors are briefed by Management on the business activities of the Group, its corporate governance practices and disclosure policies. The attendance of the directors at meetings of the Board and Board Committees during the fi nancial year is presented below: Board Meetings Audit Committee Meetings ( AC ) Nominating Committee Meetings ( NC ) Remuneration Committee Meetings ( RC ) Name Held Attended Held Attended Held Attended Held Attended Tan Kwee Hiang Chng Hee Kok Er Kwong Wah Fong Heng Boo John De Payva Wong Kok Hoe Loo Woei Harng Sim Poh Heok Tan Lim Hui Appointed on 31 December Resigned on 16 September Resigned on 15 March Resigned on 1 December

17 Annual Report 2008 Corporate Governance Report BOARD COMPOSITION AND BALANCE Principle 2: Strong and independent element on the Board As at the date of this report, the Board comprises the following six directors: Executive Directors Ms Tan Kwee Hiang (Executive Chairman) (appointed on 2 July 2008) Mr Chng Hee Kok (Chief Executive Offi cer) (appointed on 2 July 2008) Non-Executive Director Mr Wong Kok Hoe Independent Directors Mr Er Kwong Wah (Lead Independent Director) Mr Fong Heng Boo Mr John De Payva The independence of each director is reviewed annually by the NC, which confi rms that the independent directors make up at least one-third of the Board. The NC is of the view that there is a good balance between the executive and non-executive directors and a strong independent element on the Board. The NC is also of the opinion that the current Board size and mix of expertise and experience of Board members is appropriate, taking into account the core competencies of the directors which include accounting and fi nance, business management, industry knowledge, legal, strategic planning experience and customer-based experience. The Board, through the NC, examines on an on-going basis the size and the composition of the Board to evaluate whether the Board is effective in carrying out its duties. The independent and non-executive directors meet without the presence of Management, where appropriate. They contribute to the Board process by monitoring and reviewing Management s performance. Their views and opinions provide alternative perspectives to the Group s business and they bring independent judgment to bear on business activities and transactions which may involve confl icts of interest and other complexities. Key information regarding the directors of the Company is set out in the section Board of Directors on pages 6 to 7. CHAIRMAN AND CHIEF EXECUTIVE OFFICER Principle 3: Clear division of responsibilities at the top of the Company The Code requires the roles of Chairman and Chief Executive Offi cer ( CEO ) to be separate. Ms Tan Kwee Hiang was appointed Executive Chairman of the Company on 2 July 2008 and is responsible for the workings of the Board, ensuring that Board members engage Management in constructive debate on various matters including strategic issues and business planning processes. She also exercises control over the quality, quantity and timeliness of information fl ow between the Board and Management, ensures effective communication with shareholders, encourages constructive relations between executive directors and nonexecutive directors and promotes higher standards of corporate governance. Mr Chng Hee Kok was appointed CEO of the Company on 2 July He is responsible for the day-to-day operations and overall management, strategic planning and business development of the Group. 15

18 Corporate Governance Report The Executive Chairman and the CEO have full executive responsibilities for the overall business direction and operational decisions of the Group. The Executive Chairman and the CEO are not related to each other. Notwithstanding, the Company had also appointed Mr Er Kwong Wah as Lead Independent Director on 23 August The Lead Independent Director is available to shareholders where they have concerns and contact through the normal channels of the Chairman or CEO has failed to resolve or for which such contact is inappropriate. BOARD MEMBERSHIP AND PERFORMANCE Principle 4: Formal and transparent process for appointment of new directors Principle 5: Formal assessment of the effectiveness of the Board and contributions of each director The members of the NC comprise the following Directors, a majority of whom, including the Chairman, are independent directors: Er Kwong Wah (Chairman) Fong Heng Boo Wong Kok Hoe The NC meets at least once a year. Under its terms of reference, the responsibilities of the NC include: Making recommendations to the Board on all Board appointments, reviewing all nominations and re-nominations having regard to directors contributions and performance (including attendance, preparedness and participation); Assessing the effectiveness of the Board as a whole and the contributions made by each director to the effectiveness of the Board and to determine on an annual basis, the independence of the directors; Determining how the Board s performance is to be evaluated and proposing objective performance criteria, subject to the Board s approval; and Periodically reviewing the structure, size and composition of the Board to ensure relevance. In recommending a candidate for appointment, the NC ensures that a new director possesses the necessary skills, knowledge and experience. For re-election of directors, the NC considers the individual director s contributions and performance during his tenure in offi ce. For directors who serve on multiple boards, the NC assesses whether these directors are able to adequately carry out their duties. The NC had evaluated the Board s performance as a whole during the year. The assessment parameters are broadly based on the attendance records at the meetings of the Board and the relevant Board Committees, intensity of participation at meetings, sense of independence, quality of contributions and workload requirements. The NC is of the view that each individual director has contributed to the effectiveness of the Board as a whole. The NC had confi rmed the independence of Mr Er Kwong Wah, Mr Fong Heng Boo and Mr John De Pavya. Article 97 of the Company s Articles of Association requires newly-appointed directors to retire at the fi rst Annual General Meeting ( AGM ) following their appointment. Article 91 of the Company s Articles of Association provides for one-third of the Board to retire by rotation at every AGM and directors to retire by rotation at least once every 3 years. 16

19 Annual Report 2008 Corporate Governance Report Name of Director Membership in Board Committees Date of first appointment Date of last re-election Tan Kwee Hiang 7 May October 2007 Chng Hee Kok 31 December 2007 Er Kwong Wah Chairman of NC and 30 November October 2005 member of AC and RC Fong Heng Boo Chairman of AC and 30 November October 2006 member of RC and NC John De Payva Chairman of RC and 30 November October 2007 member of AC Wong Kok Hoe Member of NC 7 May October 2007 At the forthcoming AGM, Mr Chng Hee Kok will retire in accordance with Article 97 of the Company s Articles of Association, while Mr Fong Heng Boo and Mr Er Kwong Wah are due to retire by rotation in accordance with Article 91. Mr Chng Hee Kok and Mr Er Kwong Wah, being eligible for re-election, had given their consent to continue in offi ce. Mr Fong Heng Boo had, on 30 September 2008, notifi ed the Company of his intention not to seek re-election as a director of the Company at the forthcoming AGM. Having served a term of almost 4 years, he is retiring due to other work commitments. Mr John De Payva had, on, notifi ed the Company of his intention to retire at the conclusion of the forthcoming AGM, due to work commitments. Mr De Payva has served a term of almost 4 years. The NC has recommended the re-election of Mr Chng Hee Kok and Mr Er Kwong Wah at the forthcoming AGM. The Board has accepted the NC s recommendation and the two retiring directors have offered themselves for re-election at the coming AGM. The NC has also recommended the appointment of Dr Tan Eng Liang as an independent director of the Company. This recommendation has been accepted by the Board and the appointment of Dr Tan Eng Liang will be tabled for shareholders approval at the forthcoming AGM pursuant to Section 153(6) of the Companies Act, Cap. 50. ACCESS TO INFORMATION Principle 6: Board members to have complete, adequate and timely information To assist the Board in the discharge of its duties and responsibilities, all directors are provided with complete, adequate and timely information prior to Board meetings and have separate and independent access to Management and the Company Secretaries. The executive directors also keep the independent non-executive directors informed of the status of on-going initiatives by the Group. Management provides Board members with monthly management accounts, and information on major developments and material transactions are also circulated to directors as and when they arise. Detailed Board papers are prepared for Board meetings and are normally circulated a week in advance of each meeting. The Board papers include suffi cient information from Management on fi nancial, business and corporate issues to enable the directors to be properly briefed on issues to be considered at Board meetings. 17

20 Corporate Governance Report The Board provides shareholders with a detailed account of the Group s fi nancial position and prospects in the Company s annual and half-year results. Where a decision has to be made before a Board meeting is convened, directors resolution(s) in writing are circulated in accordance with the Articles of Association of the Company and the directors are provided with the necessary information that will allow them to make informed decisions. All independent and non-executive directors have access to Management and are encouraged to communicate with other employees to seek additional information if they so require. The directors are provided with the contact details of the Group s senior Management and Company Secretaries to facilitate access. Where necessary, senior Management staff are invited to attend Board meetings to address queries and provide detailed insights into specifi c areas of operations. The Company Secretaries and/or their representative attend all Board and Board Committee meetings, prepare the minutes of meetings and assist the Chairman in ensuring that Board procedures are followed. The Company Secretaries role is to advise the Board on all governance matters, ensuring that legal and regulatory requirements, as well as Board policies and procedures, are complied with. The Company Secretaries are also the primary channel of communication between the Company and the SGX-ST. The appointment and removal of the Company Secretaries is a matter for the Board as a whole. Aside from access to the advice and services of Management and the Company Secretaries, the directors may, where required, seek independent professional advice concerning the Company s affairs at the Company s expense. REMUNERATION MATTERS Principle 7: Formal and transparent procedure for fi xing remuneration packages of directors Principle 8: Remuneration of directors should be adequate but not excessive Principle 9: Remuneration policy, level and mix of remuneration and procedure for setting remuneration The RC comprises three members who are independent directors. The composition of the RC is as follows: John De Payva (Chairman) Fong Heng Boo (Member) Er Kwong Wah (Member) (appointed on 18 September 2008) The RC meets at least once a year. Under its terms of reference, the RC s primary objectives are to: make recommendations to the Board on the Group s framework of remuneration of directors and key management, taking into consideration the pay and employment conditions within the industry and in comparable companies as well as performance of the Group and the individuals; review the adequacy and form of compensation of the executive directors and key Management executives of the Group, to ensure that the compensation is realistically commensurated with their responsibilities and performance of the individual and the Group; and review the recommendations of executive directors on the fees for non-executive directors before submission to the Board for approval. 18

21 Annual Report 2008 Corporate Governance Report The RC is empowered to seek independent professional advice as appropriate. The RC also oversees the administration of the Hartawan Employee Share Option Scheme (formerly known as Vita Employee Share Option Scheme) (the Share Option Scheme ) upon the terms and conditions as defi ned in the Share Option Scheme. The RC is of the opinion that the executive directors and key executives are not excessively compensated, taking into consideration their responsibilities, skills, expertise and contributions to the Group s performance. The executive directors service agreements with the Company are for a period of three years with effect from 2 July 2008 (unless otherwise terminated by either party giving not less than three months notice to the other). The non-executive directors receive directors fees. The directors fees which are recommended by the Board, are subject to shareholders approval at the AGM. All directors and employees are entitled to participate in the Share Option Scheme. Information on the Share Option Scheme is disclosed in the Directors Report on page 25. To date, no option has been granted to the directors and employees of the Group. A breakdown showing the percentage mix of remuneration payable in the fi nancial year for each of the directors and key executive offi cers of the Company is set out below: Name Salary Bonus Other benefits Fee Total Executive Directors in the band of S$250,001 to S$500,000 Loo Woei Harng 87% 4% 9% 0% 100% (resigned on 16 September 2008) Executive Directors in the band below S$250,000 Chng Hee Kok** 84% 0% 0% 16% 100% Sim Poh Heok 66% 0% 31% 3% 100% (resigned on 15 March 2008) Tan Lim Hui (resigned on 1 December 2007) 70% 0% 30% 0% 100% Independent/Non-Executive Directors in the band below S$250,000 Tan Kwee Hiang* 0% 0% 0% 100% 100% Er Kwong Wah 0% 0% 0% 100% 100% John De Payva 0% 0% 0% 100% 100% Fong Heng Boo 0% 0% 0% 100% 100% Wong Kok Hoe 0% 0% 0% 100% 100% Top 3 executive officers in the band below S$250,000 Teo Soo Lin 92% 8% 0% 0% 100% Tan Lim Hui 80% 15% 5% 0% 100% Margaret Chia 80% 7% 13% 0% 100% Notes: * Ms Tan Kwee Hiang, who was appointed Executive Chairman on 2 July 2008, has entered into a service agreement with the Company for an initial period of 3 years commencing July ** Mr Chng Hee Kok, who was appointed CEO on 2 July 2008, has entered into a service agreement with the Company for an initial period of 3 years commencing July

22 Corporate Governance Report The executive directors remuneration, made up of salary, bonus and other benefi ts, is presented in Note 28 of the notes to the fi nancial statements on page 65. For the fi nancial year ended, the Group does not have employees who are immediate family members (as defi ned in the Listing Rules) of a director or CEO and whose remuneration exceeds $150,000. ACCOUNTABILITY Principle 10: Board should present a balanced and understandable assessment of the Company performance, position and prospects The Board is accountable to shareholders for the management of the Group. The Board updates shareholders on the operations and fi nancial position of the Group through its half-year and full year results announcements as well as timely announcements of other matters as prescribed by the relevant rules and regulations. Management is accountable to the Board by providing the Board with the necessary fi nancial information for the discharge of its duties. AUDIT COMMITTEE Principle 11: Establishment of Audit Committee with written terms of reference The AC comprises three members all of whom are independent directors: Fong Heng Boo (Chairman) John De Payva Er Kwong Wah The Board is of the view that the AC members have suffi cient fi nancial management-related expertise and experience to discharge the AC s functions. The AC performs the functions specifi ed by Section 201B(5) of the Companies Act, the Listing Rules and the Code, and assists the Board in the execution of its corporate governance responsibilities within its terms of reference. The responsibilities of the AC include: to assist the Board in discharging its statutory responsibilities on fi nancial and accounting matters; to review the independence of external auditors annually and consider the appointment or re-appointment of external auditors and matters relating to the resignation or removal of the auditors and approve the remuneration and terms of engagement of the external auditors; to review signifi cant fi nancial reporting issues and judgments relating to fi nancial statements for each fi nancial year, interim and annual results announcements prior to their submission to the Board for approval; to review the fi nancial and operating results and accounting policies of the Group; to review the adequacy of the Company s internal control (including fi nancial, operational and compliance controls) and risk management policies and systems established by Management; to review the legal and regulatory matters that may have a material impact on the fi nancial statements, related compliance policies and programmes and any reports received from regulators; to review interested person transactions (as defi ned in Chapter 9 of the Listing Rules). 20

23 Annual Report 2008 Corporate Governance Report The AC meets the Company s external auditors without the presence of Management at least once a year to discuss the scope of their audit, the results of their examination and evaluation of the Company s overall fi nancial, operational and compliance controls, and the responses from Management. The AC also met Management to review accounting and fi nancial reporting matters so as to ensure that the Group maintains an effective control environment. The AC has full access to Management and is given the resources required for it to discharge its duties. It has full authority and discretion to invite any director or executive offi cer to attend its meetings. The AC may also examine, within its terms of reference, any matters pertaining to the Group s affairs and monitor the Group s compliance with legal, regulatory and contractual obligations. Having reviewed all non-audit services provided by the external auditors, Ernst & Young LLP ( EY ), the AC is of the view that the provision of such services does not affect EY s independence and objectivity, and has recommended the re-appointment of EY as external auditors at the Company s forthcoming AGM. A Whistle-blowing Programme has been put in place to encourage and to provide a channel for staff to report and to raise, in good faith and in confi dence, their concerns about possible improprieties in matters of fi nancial reporting or other matters. The Policy ensures that arrangements are in place for independent investigations of such matters and for appropriate follow up action. INTERNAL CONTROLS AND INTERNAL AUDIT Principle 12: Sound system of internal controls Principle 13: Setting up independent internal audit function The AC is fully aware of the need to put in place a system of internal controls within the Group to safeguard the shareholders interests and the Group s assets, and to manage risks. The system is intended to provide reasonable but not absolute assurance against material misstatements or loss, and to safeguard assets and ensure maintenance of proper accounting records, reliability of fi nancial information, compliance with appropriate legislation, regulation and best practice, and the identifi cation and containment of business risks. The Group regularly reviews its business and operational activities to identify areas of signifi cant business risks as well as takes appropriate measures to manage and mitigate these risks. The Group reviews all signifi cant control policies and procedures and highlights all signifi cant matters to the Board. The fi nancial risk management objectives and policies are outlined in the fi nancial statements. Risk management alone does not guarantee that business undertakings will not fail. However, by identifying and managing risks that may arise, the Group can make more informed decisions and benefi t from a better balance between risk and reward. This will help protect shareholders interest. The internal audit function is outsourced to external audit professionals, Stone Forest Consulting Pte Ltd with effect from fi nancial year These audit professionals report directly to the AC and provide a comprehensive analysis of the business processes and the risks related to each process. An audit plan is also submitted to the AC for review and approval on an annual basis. The audit professionals perform internal audit reviews throughout the fi nancial year covering different business processes. 21

24 Corporate Governance Report COMMUNICATION WITH SHAREHOLDERS Principle 14: Regular, effective and fair communication with shareholders Principle 15: Shareholder participation at General Meetings The Board strives to ensure that clear, useful and timely information is communicated to shareholders with regard to all material matters affecting the Group so as to maintain a high level of transparency. The Company does not practice selective disclosure. All information on the Company is published through SGXNET. The Company is open to meetings with investors and analysts, and in conducting such meetings, the Company is mindful of the need to ensure fair disclosure. Shareholders of the Company will be informed of shareholders meetings through notices published in the newspapers and reports or circulars sent to all shareholders. During general meetings, separate resolutions for each distinct issue are tabled for shareholders approval. The shareholders are also given ample time and opportunities to speak and seek clarifi cation on the Group s affairs and the directors, including the chairman of the Board and the respective Board Committees, are present to answer shareholders questions. The external auditors are also present to address any relevant queries by shareholders. DEALING IN SECURITIES TRANSACTIONS The Company has adopted its own internal code to govern conduct in the dealing of the securities of the Company by its directors and Group employees. The internal code emphasises that the law on insider trading is applicable at all times. Directors and employees with access to price-sensitive information are prohibited from dealing in the securities of the Company during the period commencing one month before the announcement of the Group s half-year or annual results, as the case may be, and until one day after the date of announcement of the relevant results. INTERESTED PERSON TRANSACTIONS ( IPTs ) The Company has established procedures to ensure that all transactions with interested persons are reported in a timely manner to the AC and that the transactions are conducted on an arm s length basis. All IPTs are subject to review by the AC to ensure compliance with established procedures. Currently, the Company is not required to make announcements or have a general mandate from its shareholders relating to IPTs, as the aggregate value of these transactions are within the threshold limits set out under Chapter 9 of the Listing Manual of the SGX-ST. 22