Infinite Opportunities ANNUAL 2012 REPORT
12 PROGEN HOLDINGS LIMITED / ANNUAL REPORT 2012 CONTENTS Corporate Profile 1 Corporate Information 2 Chairman s Statement 3 Board of Directors 5 Key Management 7 Financial Report 8 This document has been prepared by the Company and its contents have been reviewed by the Company s sponsor ( Sponsor ), Asian Corporate Advisors Pte. Ltd., for compliance with the relevant rules of the Singapore Exchange Securities Trading Limited ( Exchange ). The Company s Sponsor has not independently verified the contents of this document including the correctness of any of the figures used, statements or opinions made. This document has not been examined or approved by the Exchange and the Exchange assumes no responsibility for the contents of this document including the correctness of any of the statements or opinions made or reports contained in this document. The contact person for the Sponsor is Ms Foo Quee Yin Telephone number: 6221 0271
ANNUAL REPORT 2012 / PROGEN HOLDINGS LIMITED 1 Progen Holdings Limited is an investment holding company established under the Progen Group of Companies. The Company has more than a decade of experience in the design, supply, installation and maintenance of airconditioning and mechanical ventilation systems. The Group comprises of an extensive network of 8 subsidiaries in Singapore and Malaysia. CORPORATE PROFILE The Group was founded more than three decades ago when Mr Lee Ee @ Lee Eng started the first company in the Group, Progen Pte Ltd, to supply and install air-conditioning systems. Since then, the Group has grown from strength to strength to become one of the leading corporations in the industry. With the different subsidiaries, Progen is a one-stop service provider that provides a full spectrum of services from delivering proficient before-sales consultation to offering quality after-sales service and top maintenance service for our clients relating to a wide variety of cooling systems for industrial, commercial and residential developments in the public and private sectors. Progen s wealth of engineering experience, proficiency and skills as well as strong market positioning has set it apart from the rest of its competitors. Our team of engineers designs systems that meet the precise needs of customers, and together with our after-sales service consultants, assist clients in minimizing long-term maintenance costs and maximizing the working life of their systems. Priding ourselves on our professionalism and engineering expertise, Progen will certainly continue to be in a league of its own in the many years to come.
2 PROGEN HOLDINGS LIMITED / ANNUAL REPORT 2012 CORPORATE INFORMATION Board of Directors Executive Lee Ee @ Lee Eng (Chairman) Mohd Amin Liew Abdullah Non-Executive Tan Eng Liang (Independent) Ch ng Jit Koon (Independent) Chee Wai Pong (Independent) Johnlin Yuwono (Non-Independent) Audit Committee Tan Eng Liang (Chairman) Ch ng Jit Koon Chee Wai Pong Johnlin Yuwono Nominating Committee Chee Wai Pong (Chairman) Tan Eng Liang Ch ng Jit Koon Lee Ee @ Lee Eng Remuneration Committee Ch ng Jit Koon (Chairman) Tan Eng Liang Chee Wai Pong Johnlin Yuwono Investment Review Committee Tan Eng Liang (Chairman) Ch ng Jit Koon Lee Ee @ Lee Eng Company Secretary Yip Ming Fai Registered Office 12 Woodlands Loop Progen Building Singapore 738283 Tel: (65) 6752 7787 Fax: (65) 6752 7797 Email: progen@progen.com.sg Company Registration No. 199605118C Share Registrar Boardroom Corporate & Advisory Services Pte. Ltd. 50 Raffles Place #32-01 Singapore Land Tower Singapore 048623 Auditors Ernst & Young LLP One Raffles Quay North Tower, Level 18 Singapore 048583 Audit Partner-in-charge: Ang Chuen Beng (Appointed from financial year 2008) Bankers United Overseas Bank Limited 80 Raffles Place UOB Plaza 1 Singapore 048624 Malayan Banking Berhad 2 Battery Road #02-01 Maybank Tower Singapore 049907 DBS Bank Ltd 6 Shenton Way DBS Building Singapore 068809 The Hongkong and Shanghai Banking Corporation Limited 21 Collyer Quay #08-01 HSBC Building Singapore 049320
ANNUAL REPORT 2012 / PROGEN HOLDINGS LIMITED 3 CHAIRMAN S STATEMENT For the year under review, the Group s revenue increased marginally by S$0.4 million from S$10.2 million (FY2011) to S$10.6 million (FY2012) with profit before tax of S$1.1 million for FY2012. The Group s revenue for FY2012 was marginally higher than that of FY2011. During the year, some of the projects continued to experience delay which resulted in lower than expected revenue in FY2012. The Group s profit net of tax for FY2012 was S$1.3 million, Group s earnings per share for FY2012 was 0.505 cents and the Group s net asset value improved to 10.593 cents per share as at 31 December 2012. For FY2013, the Group foresees a more competitive environment with profit margins likely to be affected by rising operating and labour costs. The Group will continue to exercise prudence in selecting new projects and enhance its credit risk management in order to maximize profitability. We will continue to capitalize on our core strengths, network and track records to take the Group to the next level and to create sustainable value for our shareholders. The Group also looks forward to its research collaboration with Nanyang Technological University, led by their faculty members from the School of Mechanical & Aerospace Engineering. The research studies, which commenced in February 2013 for a period of fifteen months, are aimed at developing chilled ceiling panels with higher cooling capacity and to derive a set of design guidelines for a chilled ceiling air-conditioning system. The Group is also excited about a new contract awarded in March 2013 worth S$11.381 million for air-conditioning and mechanical ventilation installation which is expected to have a material impact on Group s NTA per Share or EPS for the financial year ending 31 Dec 2013. On behalf of the board, I take this opportunity to express my utmost appreciation to all our shareholders, customers and business associates for their continual support. I would also like to convey my sincere gratitude to our dedicated management and staff for their loyalty, commitment and contributions over the years. Last but not least, I wish to extend my special thanks and appreciation to my fellow Board of Directors for their valuable guidance and advice and to welcome Chee Wai Pong to the Board as an Independent Director. Yours Sincerely, Mr Lee Ee @ Lee Eng, Chairman / Managing Director
4 PROGEN HOLDINGS LIMITED / ANNUAL REPORT 2012 QUALITY AIR FOR THE FUTURE
ANNUAL REPORT 2012 / PROGEN HOLDINGS LIMITED 5 BOARD OF DIRECTORS Mr Lee Ee @ Lee Eng, 62, is the Executive Chairman and Managing Director, and founder of the Group. He is also a member of the Nominating Committee and Investment Review Committee. Mr Lee has more than 40 years of experience in the air-conditioning, refrigeration and climate control industry. He started his career in Amcol Pte Ltd in 1970 and later served as Engineering Sales Manager in Sime Darby (S) Pte Ltd and as Dealer Development Manager in York International. Mr Lee spent 10 years in private companies before setting up his own business, Progen Pte Ltd in 1981. He was appointed a Director when the Company was incorporated on 13 July 1996. Dato Paduka Dr Mohd Amin Liew Abdullah, CFA, 50, was appointed as Finance cum Business Development Director on 6 February 2012 and was re-elected on 26 April 2012. Dr Amin held several key positions during his 14 years of service with the Brunei Government, including being appointed the Permanent Secretary of the Ministry of Industry and Primary Resources, the Permanent Secretary of the Ministry of Finance and the Managing Director of the Brunei Investment Agency. Dr Amin graduated with a Doctorate from Imperial College, University of London. He is a CFA Charterholder and a member of CFA Singapore. Dr Amin is also currently an Independent Director of Yoma Strategic Holdings Limited. Dr Amin will be seeking re-election to the Board at the forthcoming Annual General Meeting. Mr Johnlin Yuwono, 64, was appointed as Non-Executive Director on 8 May 2002 and was last re-elected on 26 April 2012. He is also a member of the Audit Committee and Remuneration Committee. Mr Johnlin has been a Director of several companies across industries such as that of manufacturing, real estate, banking and other financial services. He also has business interests in many countries, including member countries of the ASEAN, the PRC, Hong Kong, Taiwan and the USA. Mr Yuwono holds a Bachelor of Science degree in Aeronautical Engineering from the State University of California, USA.
6 PROGEN HOLDINGS LIMITED / ANNUAL REPORT 2012 BOARD OF DIRECTORS Dr Tan Eng Liang, 75, was appointed as Non-Executive Independent Director on 24 October 1997 and was last re-appointed on 26 April 2012. He is the Chairman of the Audit Committee and Investment Review Committee, and a member of the Nominating Committee and Remuneration Committee. Dr Tan was a Member of Parliament from 1972 to 1980, the Senior Minister of State for National Development from 1975 to 1978, and Senior Minister of State for Finance from 1978 to 1979. He has a Doctorate from Oxford University, England, and has been awarded the Public Service Star (BAR) and the Meritorious Service Medal. Dr Tan is currently the chairman of Sapphire Corporation Limited and SunMoon Food Company Limited. He holds directorships in the following listed companies Hartawan Holdings Limited, HG Metal Manufacturing Limited, Tung Lok Restaurant (2000) Ltd and United Engineers Limited. Mr Ch ng Jit Koon, 79, was appointed as Non-Executive Independent Director on 24 October 1997 and was last re-appointed on 26 April 2012. He is the Chairman of the Remuneration Committee and a member of the Audit Committee, Nominating Committee and Investment Review Committee. Mr Ch ng was a Member of the Singapore Parliament from 1968 to 1996. At the time of his retirement in January 1997, he was the Senior Minister of State for Community Development. Mr Ch ng is also a director of Pan-United Corporation Ltd, Ho Bee Investment Ltd, Tung Lok Restaurants (2000) Ltd and Santak Holdings Limited. He also serves in several community organizations. Mr Chee Wai Pong, 65, was appointed as Non-Executive Independent Director on 16 January 2013. He is the Chairman of the Nominating Committee and a member of the Audit Committee and Remuneration Committee. Mr Chee joined the Legal Service and was appointed a Deputy Public Prosecutor/State Counsel from 1971 to 1973. He was appointed a Magistrate and then District Judge and the State Coroner between 1973 and 1976. Mr Chee then joined M/s Osborne Jones & Co as a partner from August 1976 to December 1978 and was a partner of M/s Ng Ong & Chee from January 1979 to December 2006. Mr Chee started his own practice under the name and style of Chee Wai Pong & Co on 1 January 2007. Mr Chee is currently the honourary legal advisor to the Medical Alumni and Ling Kwang Home for Senior Citizens. He is also a member of the Management Committee of the Students Care Service and a member of the Yishun Centre Advisory Committee of the Students Care Service. Mr Chee also serves as a Disciplinary Panel Member of the Council for Estate Agency. Mr Chee graduated from the University of Singapore with a Bachelor of Law Degree (L.L.B Hons). He holds directorships in SunMoon Food Company Limited and HG Metal Manufacturing Limited as Non-Executive Independent Director. Mr Chee will be seeking re-election to the Board at the forthcoming Annual General Meeting.
ANNUAL REPORT 2012 / PROGEN HOLDINGS LIMITED 7 KEY MANAGEMENT Ms Evelyn Koh is the Senior Project Manager. She joined the Group as Sales Engineer in 1995 and has more than 20 years of experience in the Air-Conditioning and Mechanical Ventilation (ACMV) industry. Prior to joining the Group, Ms Koh had over 10 years of experience in a consulting firm. Ms Koh is currently involved in management and supervision of some projects in the Group. Ms Han Jing is the Business Development Manager. She has been with the Group since 1998. Ms Han graduated with a Master s Degree in Mechanical Engineering in 1984 and is currently involved in securing new projects for the Group. Mr Dong Fagen is the Senior Project Manager. He joined the Group as the Import and Export Manager in 1995. Mr Dong graduated with a Diploma in Mechanical Engineering from Shanghai Jiaotong University, China, and is presently in charge of a few major projects in the Group. Mr Desmond Ling is the Service Manager. He has been with the Group since 1986 and has more than 20 years of hands-on experience in servicing ACMV systems for residential, industrial and commercial developments. He is currently overseeing and managing the servicing arm of the Group.
8 PROGEN HOLDINGS LIMITED / ANNUAL REPORT 2012 CONTENTS Corporate Governance 9 Directors Report 17 Statement by Directors 19 Independent Auditor s Report 20 Balance Sheets 21 Consolidated Statements of Comprehensive Income 22 Statements of Changes in Equity 23 Consolidated Cash Flow Statement 24 25 Shareholders Information 64 Notice of Annual General Meeting 65 Proxy Form
ANNUAL REPORT 2012 / PROGEN HOLDINGS LIMITED 9 Corporate Governance Report Progen Holdings Limited (the Company ) is committed to maintaining a high standard of corporate governance in complying with the revised Code of Corporate Governance 2005 issued in July 2005 (the Code ) except where otherwise stated. The Board further notes the introduction of Code of Corporate Governance 2012 and endeavour to meet the recommended principles and guidelines in this report. The Company is already in the process of employing all available resources to meet the recommended principles and guidelines in the Code of Corporate Governance 2012. Good corporate governance establishes and maintains an ethical environment, which strives to protect the interest of shareholders and to gain investors confidence in management and financial reporting. The Company believes that it is in compliance with most of the guidelines in the Code. Board Matters The Board s Conduct of its Affairs The Board, consisting of members with the right core competence, industry knowledge and experiences, reviews management performance, sets business direction for the Company, monitors and review the financial performance of the Company, safeguards the Company s assets, oversees internal control and sets and approves the Company s strategic plans, values and standards. Every director is expected to act in good faith and in the interest of the Company. To facilitate effective management, certain functions have been delegated to various Board Committees, each of which has its own written Terms of Reference and whose actions are reported to and monitored by the Board. The Board conducts regular scheduled meetings. Ad-hoc meetings are convened when circumstances require. The attendance of the directors at meetings of the Board and Board Committees, as well as the frequency of such meetings, is disclosed as follows :- Investment Meeting of Board Audit Committee Nominating Committee Remuneration Committee Review Committee Total held in FY2012 4 4 2 1 - Tan Eng Liang 4 4 2 1 - Ch ng Jit Koon 4 4 2 1 - Lee Ee @ Lee Eng 4 N.A. 2 N.A. - Johnlin Yuwono 3 3 N.A. 1 N.A. Mohd Amin Liew Abdullah 4 N.A. N.A. N.A. N.A. Chee Wai Pong * - - - - N.A. * Mr. Chee Wai Pong was appointed as an Independent Director, Chairman of the Nominating Committee and a member of the Audit and Remuneration Committees on 16 January 2013. The Company has adopted internal guidelines that require the approval of the Board. The types of material transactions that require Board approval includes the: 1. approval of release of financial results to the Singapore Exchange Securities Trading Limited (the SGX-ST ); 2. approval of annual results and accounts; 3. declaration of interim and proposal of final dividends; 4. approval of corporate strategy; 5. convening of shareholders meetings; and 6. authorization of major transactions. All newly appointed directors will be given briefings by Management on the history and business operations and corporate governance practices of the Company. The Company will, from time to time, organize briefing sessions for the directors to enable them to keep pace with regulatory changes which have a material bearing on the Company. All newly appointed directors will be provided with formal letters setting out their duties and obligations upon appointment. Newly appointed directors without the necessary experience or knowledge are also sponsored to attend relevant courses on compliance, regulatory and corporate governance matters. The directors have separate and independent access to the Company s senior management, who, together with the Company Secretary, are responsible for ensuring that board procedures are followed and that applicable rules and regulations are complied with. The Company Secretary administers, attends and prepares minutes of Board and Board Committee Meetings. He assists the Chairman in ensuring that board procedures are followed and regularly reviewed to ensure effective functioning of the Board, and that the Company s Memorandum and Articles of Association and relevant
10 PROGEN HOLDINGS LIMITED / ANNUAL REPORT 2012 Corporate Governance Report rules and regulations, including requirements of the Companies Act and the SGX-ST, are complied with. He also assists the Chairman and the Board in implementing and strengthening corporate governance practices and processes with a view to enhance long-term shareholder value. The Board takes independent professional advice as and when necessary to enable it to discharge its responsibilities effectively. Subject to the approval of the Chairman, directors, whether as a group or individually, may seek and obtain independent professional advice to assist them in their duties, at the expense of the Company. Board Composition and Balance The Board comprises of 2 executive directors, 1 non-executive and non-independent director and 3 independent directors. The members of the Board at the date of this report are as follows :- Mr. Lee Ee @ Lee Eng Dr. Mohd Amin Liew Abdullah Dr. Tan Eng Liang Mr. Ch ng Jit Koon Mr Chee Wai Pong Mr. Johnlin Yuwono (Chairman and Managing Director) (Finance cum Business Development Director) (Independent) (Independent) (Independent) (Non-Executive and Non-Independent) The independence of each director is reviewed annually by the Nominating Committee (the NC ). The NC adopts the Code s definition of what constitutes an independent director in its review. The Board is supported by various sub-committees, namely, the NC, the Audit Committee, the Remuneration Committee and the Investment Review Committee, whose functions are described below. The Board is able to exercise objective judgment independently from Management and no individual or small group of individuals dominate the decisions of the Board. The Board is of the opinion that, given the scope and nature of the operations of the Group, the present size of the Board is appropriate for effective decision making. The composition is reviewed annually by the NC to ensure that the Board has the appropriate mix of expertise and experience. Accordingly, the current Board comprises of persons who as a group have core competencies necessary to lead and manage the Company. The non-executive directors provide, amongst other things, strategic guidance to the Company based on their professional knowledge, in particular, assisting to constructively challenge and develop proposals on strategy. The non-executive directors also help to review the performance of the management in meeting agreed goals and objectives and monitor the reporting of performance. To this end and where appropriate, they are encouraged to arrange for meetings without the management being present, on a regular basis and at times deemed necessary. The Board has assessed the independence of the two Independent Directors, Tan Eng Liang and Ch ng Jit Koon after considering the recommendations set out in the Code 2012. Notwithstanding that both Tan Eng Liang and Ch ngjit Koon have served the Board since October 1997, the Board is fully satisfied that they demonstrate complete independence, robustness of character and judgement both in their designated role and members of the Board. In addition, the Board confirms that both Tan Eng Liang and Ch ngjit Koon have not been involved in any executive functions as well as day-to-day operations of the Group and that notwithstanding the 9 years time frame they have continued to be and are deemed independent. Chairman and Chief Executive Officer The Chairman and Managing Director of the Company is Mr. Lee Ee @ Lee Eng. He plays a pivotal role in the Group s business development and provides the Group with strong leadership and vision. He supervises the business operations, as well as formulating long-term corporate strategies and policies for the Group. He schedules Board meetings as and when required and sets the agenda for the Board meetings. In addition, he sets guidelines on and ensures quality, quantity, accurateness, and timeliness of information flow between the Board, Management and shareholders of the Company. He encourages and builds constructive relation between the Board and Management, and facilitates the effective contribution of the non-executive directors. He also takes a leading role in ensuring the Company s compliance with corporate governance guidelines. As all major decisions made by Mr. Lee are reviewed by the respective Board Committees and the Company has a simple organization structure and focuses mainly in one core business (other than the investment property), the Board is of the opinion that this arrangement does not undermine the accountability and capacity of the Board for independent decision making. As the Board has demonstrated that it is able to exercise independent decision making, the Board feels that a lead independent director is not required.
11 ANNUAL REPORT 2012 / PROGEN HOLDINGS LIMITED Corporate Governance Report Board Membership Nominating Committee The Nominating Committee (the NC ), at the date of this report, comprises the following directors, a majority of whom, including the Chairman, are independent :- Mr. Chee Wai Pong (Chairman) Dr. Tan Eng Liang Mr. Ch ng Jit Koon Mr. Lee Ee @ Lee Eng The Board has approved the written terms of reference of the NC. The duties of the NC include the following :- 1. to make recommendations to the Board on the appointment of new executive and non-executive directors, including making recommendations on the composition of the Board generally and the balance between executive and nonexecutive directors appointed to the Board; 2. to regularly review the Board structure, size and composition and make recommendations to the Board with regards to any adjustments that are deemed necessary; 3. to assess nominees or candidates for appointment or election to the Board, determining whether or not such nominee has the requisite qualifications and whether he/she is independent; 4. to make plans for succession, in particular for the Chairman and Managing Director; 5. to determine, on an annual basis whether a director is independent; 6. to recommend to the Board for the continuation (or not) in services of any director who has reached the age of seventy years; 7. to recommend directors who are retiring by rotation to be put forward for re-election; 8. to decide whether or not a director is able to and has been adequately carrying out his duties as a director of the Company, particularly when he has multiple board representations; 9. to recommend to the Board internal guidelines to address the competing time commitments faced by directors who serve on multiple boards; 10. to assess the effectiveness of the Board as a whole and the contribution of each individual director to the effectiveness of the Board, and to disclose the assessment process annually; and 11. To review of the training and development program for the Board. The Chairman of the NC acts on the results of the performance evaluation and where appropriate, proposes new members be appointed to the Board or seeks the resignation of directors, in consultation with the NC. In assessing the suitability of a candidate to be appointed to the Board, the NC will consider if he is able to make the appropriate contributions to the Board and the Group. The key factors which the NC will take into considerations are:- 1. Qualifications, industry knowledge and functional expertise which are relevant and beneficial to the Group. 2. Extensive experience and business contacts in the industry in which the Group operates. 3. Willingness and ability to commit time and resources. The NC meets at least once a year. Details of members attendance at meetings are provided on page 9. The Company s Articles of Association require one-third of directors (other than the Managing Director) to retire from office and submit themselves for re-nomination and re-election at the Annual General Meeting, at least once every three years. In addition, the Company s Articles of Association provide that a director newly appointed by the Board must submit himself for re-election at the Annual General Meeting following his appointment. Although several directors hold directorships in other companies which are not part of the Group, the NC is of the view that such multiple board representations do not hinder them from carrying out their duties as directors of the Company. These directors would widen the experience of the Board and give it a broader perspective. The Board members qualifications and experience, as well as the date of initial appointment and date of last re-election or re-appointment are set out on pages 5 to 6.
12 PROGEN HOLDINGS LIMITED / ANNUAL REPORT 2012 Corporate Governance Report Board Performance The NC evaluated the Board s performance as a whole and each director individually in financial year 2012 based on performance criteria set by the Board. The assessment parameters include attendance record at meetings of the Board and Board Committees, special contributions by individual directors, understanding of the Board of its responsibility, efficiency of Board meetings to facilitate organization matters, establishment of succession plan, involvement of each director in Board matters and sufficiency of directors skill mix to meet needs of the Board. The performance criteria do not include the financial indicators set out in the Code as guides for the evaluation of directors, as the Board is of the view that the aforesaid indicators are more appropriate measures of management s performance. The NC is of the view that each individual director has contributed to the effectiveness of the Board as a whole and has recommended the re-election of Dr.Mohd Amin Liew Abdullah pursuant to Article 109 and Mr. Chee Wai Pong pursuant to Article 119 of the Company s Articles of Association and the re-appointments of Mr. Ch ng Jit Koon and Dr. Tan Eng Liang pursuant to Section 153(6) of the Companies Act, Cap. 50. Mr. Chee Wai Pong, Mr. Ch ng Jit Koon and Dr. Tan Eng Liang had abstained from participating in the discussion and recommendation on their respective nominations. Access to Information Management provides, to the Board, timely information relating to the operational and financial performance of the Group and Company, on an on-going basis. The Board has separate and independent access to the senior management and the Company Secretary at all times. The Company Secretary or his representative attends Board and Board Committee meetings and is responsible to ensure that board procedures are followed and applicable rules and regulations are complied with. The appointment and removal of the Company Secretary is a matter that has to be decided for the Board as a whole. The Board also has access to independent professional advice where appropriate. Remuneration Matters Remuneration Committee The Remuneration Committee (the RC ), at the date of this report, comprises the following non-executive directors, the majority of whom, including the Chairman, are independent :- Mr. Ch ng Jit Koon (Chairman) Dr. Tan Eng Liang Mr. Chee Wai Pong Mr. Johnlin Yuwono The Board has approved the written terms of reference of the RC. The duties of the RC include the following :- 1. to review and recommend to the Board, in consultation with the Chairman of the Board, a framework of remuneration and to determine the specific remuneration packages and terms of employment for each of the executive directors and senior executives of the Group including those employees related to the executive directors and controlling shareholders of the Group; 2. to recommend to the Board, in consultation with the Chairman of the Board, any long term incentive schemes which may be set up from time to time and to do all acts necessary in connection therewith; and 3. to carry out its duties in the manner that it deemed expedient, subject always to any regulations or restrictions that may be imposed upon the RC by the Board of Directors from time to time. The RC meets at least once a year. Details of members attendance at meetings are provided on page 9. Each member of the RC abstains from voting on any resolution, participating in any deliberation of the RC, and making any recommendation in respect of his remuneration. In discharging its functions, the RC may obtain independent external professional advice as it deems necessary. The expenses of such advice shall be borne by the Group.
13 ANNUAL REPORT 2012 / PROGEN HOLDINGS LIMITED Corporate Governance Report The Group sets remuneration packages which are competitive and sufficient to attract, retain and motivate directors and senior management with adequate experience and expertise to manage the business and operations of the Group. In fixing the remuneration package, the RC takes into consideration the pay and employment conditions within the industry and comparable companies. The Group adopts a remuneration policy for Executive Directors generally comprising a basic salary component as well as a bonus component, which is performance based and seeks to align the interests of the Executive Directors with those of the shareholders and the Group. The RC ensures that the remuneration packages of employees related to Executive Directors and controlling shareholders of the Group commensurate with their respective job scopes and levels of responsibilities. Executive Directors do not receive directors fees. The remuneration of the Non-Executive Directors is in the form of a fixed fee. Directors fees of Non-Executive Directors are paid only after approval by the shareholders at the Annual General Meeting. Level and Mix of Remuneration A breakdown showing the level and mix of each individual director s remuneration payable for the financial year ended 31 December 2012 is as follows :- 2012 Remuneration bands Fees Salary Bonus Total $500,000 and above Lee Ee @ Lee Eng - 85% 15% 100% $250,000 to below $500,000 Mohd Amin Liew Abdullah - 87% 13% 100% Below $250,000 Tan Eng Liang 100% - - 100% Ch ng Jit Koon 100% - - 100% Johnlin Yuwono 100% - - 100% All Executive Directors have service contracts with fixed appointment period and the RC reviews in particular termination provisions. Their service contracts are not excessively long and do not contain onerous removal clauses. In the event of early termination, the Executive Director or the Company may, inter-alia, terminate the service contract by giving to the other party, inter alia, not less than six months notice in writing or compensation in lieu of notice in writing. Key Executives The remuneration of the top five key executives of the Group for the financial year ended 31 December 2012 is as follows :- $250,000 to below $500,000 NIL Below $250,000 Han Jing Evelyn Koh Dong Fagen Desmond Ling Cindy Lee* Business Development Manager Senior Project Manager Senior Project Manager Service Manager Finance Manager * Cindy Lee has resigned from the position with effect from 23 January 2013 There are no employees, who are immediate family members of a director or the Managing Director, whose remuneration exceed $150,000 during the financial year ended 31 December 2012. Accountability and Audit In presenting the annual and half-yearly financial statements for announcements to shareholders, it is the aim of the Board to provide the shareholders with a balanced and comprehensive assessment of the Group s performance, position and prospects. The management provides the Board with appropriately detailed management accounts of the Group s performance, position and prospects on a monthly basis.
14 PROGEN HOLDINGS LIMITED / ANNUAL REPORT 2012 Corporate Governance Report Audit Committee The Audit Committee (the AC ) comprises the following non-executive directors, the majority of whom, including the Chairman, are independent : - Dr. Tan Eng Liang (Chairman) Mr. Ch ng Jit Koon Mr. Chee Wai Pong Mr. Johnlin Yuwono The AC members have many years of experience in senior management positions in both the financial and industrial sectors. The AC has written terms of reference which define its role as assisting the Board in discharging its responsibility to safeguard the Company s assets, maintain adequate accounting records and develop and maintain effective systems of internal control. The duties of the AC include the following :- 1. to review with the external auditors their audit plan, their evaluation of the system of internal accounting controls, their audit report and their management letter and the Management s response; 2. to ensure co-ordination where more than one audit firm is involved; 3. to review the half-yearly and annual financial statements before submission to the Board for approval; 4. to discuss problems and concerns, if any, arising from the interim and final audits, in consultation with the external auditors where necessary; 5. to meet with the external auditors without the presence of Management, at least annually, to discuss any problems and concerns they may have; 6. to review the assistance given by Management to the external auditors; 7. to review annually the scope and results of the audit and its cost effectiveness as well as the independence and objectivity of the external auditors. Where the auditors also provide non-audit services to the Company, to review the nature and extent of such services, in order to balance the maintenance of objectivity and value for money, and to ensure that the independence of the auditors would not be affected; 8. to review and discuss with the external auditors, any suspected fraud or irregularity, or suspected infringement of any law, rules or regulations, which has or is likely to have a material impact on the Company s operating results or financial position, and Management s response; 9. to investigate any matter within its Terms of Reference, with full access to and co-operation by Management and full discretion to invite any director or executive officer to attend its meetings, and reasonable resources to enable it to discharge its functions properly; 10. to review arrangements by which staff of the Company, may in confidence, raise concerns about possible improprieties in matters of financial reporting or other matters; 11. to report to the Board its findings from time to time on matters arising and requiring the attention of the Board; 12. to review interested person transactions falling within the scope of the SGX-ST s Listing Manual Section B: Rules of Catalist, including transactions that fall within the scope of Rule 912; 13. to recommend to the Board the appointment, re-appointment and removal of the external auditors and approve the remuneration and terms of engagement of the external auditors; 14. to undertake such other reviews and projects as may be requested by the Board; 15. to review and report to the Board the adequacy of internal controls, including financial, operational, compliance and information technology controls, at least annually; 16. to undertake such other functions and duties as may be required by statute or the SGX-ST s Listing Manual, and by such amendments made thereto from time to time; 17. to review the effectiveness of the internal audit function and to coordinate the scope and the audit plan with the internal auditors; and 18. to discuss the results of the internal audit with both the internal auditors and the Management.
15 ANNUAL REPORT 2012 / PROGEN HOLDINGS LIMITED Corporate Governance Report In performing its functions, the AC has explicit authority to investigate any matter within its terms of reference, having full access to and co-operation by management and full discretion to invite any director or executive officer to attend its meetings, and reasonable resources to enable it to discharge its function properly. The AC meets at least twice a year. Details of members attendance at meetings are provided on page 9. The AC has met with the external auditors, without the presence of Management at least once a year. The AC has conducted a review of all non-audit services provided by the external auditors and was satisfied that provision of such services did not prejudice the independence and objectivity of the external auditors. The Company has complied with Rules 712 and 715 of the Listing Manual Section B: Rules of Catalist. The Company has put in place a whistle-blowing framework, endorsed by the AC, which provides the mechanisms where employees of the Company may, in good faith and in confidence, raise concerns or observations about possible improprieties in financial reporting or other matters directly to members of the AC. Copies of the whistle blowing policy and procedures have been made available to all employees. It has well defined process which ensures independent investigation of possible improprieties with appropriate follow up action and provides assurance that complainants will be protected from retaliatory action within the limit of law. Investment Review Committee The Investment Review Committee (the IRC ) comprises the following directors :- Dr. Tan Eng Liang (Chairman) Mr. Ch ng Jit Koon Mr. Lee Ee @ Lee Eng The duties of the IRC include the following :- 1. to review all investment opportunities that may be identified for the purpose of short-listing investments that fit into the overall expansion plan of the Group; 2. to evaluate short-listed investments and table them for the approval of the Board; and 3. to prepare executive summaries on the investments for the Board. The IRC shall be provided with adequate resources to carry out their duties. Internal Controls and Audit In the course of their audit, the external auditors have reviewed the financial controls in areas which could have a material impact on the financial statements with an aim to ensure that these are adequate for the financial statements attestation purpose. They have reported their observations and made recommendations for improvement to the AC. The AC has also reviewed the report and ensures that Management has taken appropriate actions. The Company continues to outsource its internal audit function to the same professional firm, Wensen Consulting Asia (S) Pte. Ltd. The internal auditor reports directly to the AC on audit matters and to the Chairman and Managing Director on administrative matters. The main objective of the internal audit function is to assist the Group in evaluating and assessing the effectiveness of internal controls and consequently to highlight the areas where control weaknesses exist, if any, and thus improvements could be made. In addition, the internal auditor may be involved in ad-hoc projects which require the internal auditor to review and give assurance of specific areas of concern. The AC has reviewed the adequacy of the internal audit function at least annually and ensured that the internal audit function is adequately resourced and has appropriate standing within the Company. The AC has met with the internal auditors, without the presence of Management, at least once a year. The internal auditor meets and exceeds the standards set by nationally or internationally recognized professional bodies including the Standards for the Professional Practice of Internal Auditing set by The Institute of Internal Auditors. The Board acknowledges that it is responsible for the overall internal control framework but notes that no system of internal control could provide absolute assurance against all irregularities. During the financial year 2012, the Company, together with the internal auditor, has structured and formalised the Risk Management Framework to facilitate the Board of Directors in identifying key operational, financial and compliance risk with reference to the business goals, strategies and critical success factors of the Company. The internal auditor had assisted in the execution of the risk management processes with the formalisation of the Risk Management Policy and Procedures,
16 PROGEN HOLDINGS LIMITED / ANNUAL REPORT 2012 Corporate Governance Report facilitated a risk management workshop and carried out discussions with the Board of Directors and Key Management Personnel. In the process, the Board has determined the company s levels of risk tolerance and risk policies, and oversees Management in the design, implementation and monitoring of the risk management and internal control systems. The internal auditor had also evaluated the effectiveness of the internal controls implemented, including information technology controls, to manage the identified risks based on the results of the risk assessment process executed. A risk monitoring, review and reporting framework had also been established to define the on-going monitoring tools and processes of the Company which includes monitoring of risk score changes, on-going assessment of risk treatment action plans and biyearly risk management reporting to the Board of Directors. Based on the reports submitted by the auditors and the various management controls put in place, the Board with the concurrence of the AC is of opinion that the internal controls and risk management systems of the Company are adequate in addressing its financial, operational, compliance and information technology risks. The Board has also received assurance from the CEO and the CFO 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. Communication with Shareholders The Board is accountable to the shareholders and Management is accountable to the Board. The Board s policy is that all shareholders should be equally informed of all major developments that impact the Company in a timely manner. Halfyear and full year results and other major developments of the Company are published through the SGXNET and/or press releases, as required by the SGX-ST. The Company ensures that price-sensitive information is publicly released, and is announced within the mandatory period. Shareholders are informed of shareholders meetings through notices published in the newspapers and Annual Reports or circulars sent to all shareholders and made available on the SGXNET. The Annual General Meeting ( AGM ) is the principal forum for dialogue with shareholders. The Company encourages shareholders participation at AGMs and all shareholders are given the opportunity to voice their views and to direct queries regarding the Group to directors, including the chairperson of each of the Board Committees. At the Company s general meetings, the directors as well as representatives from the external auditors are in attendance to answer queries from shareholders. In the event that the shareholders cannot attend the AGM, the Articles of Association of the Company allow a member to appoint not more than two proxies to attend and vote in his stead. All minutes of general meetings and a summary of the questions and answers raised at general meetings are available to shareholders upon their request. The Company ensures that there are separate resolutions at general meetings on each distinct issue. Dealing in Securities The Company has adopted a code of conduct to provide guidance to its officers in relation to dealings in the Company s securities. The directors, officers and staff of the Company and the Group are not allowed to deal in the Company s securities during the period commencing one month before the announcement of the Company s full year or half-year results and ending on the date of the announcement of such results and at any time they are in possession of unpublished material price sensitive information in relation to these securities. Officers are also advised not to deal in the Company s securities on short-term conditions. During the financial year ended 31 December 2012, the Company has complied with its best practices on dealings in securities which is in line with Rule 1204(19) of the SGX-ST s Listing Manual Section B: Rules of Catalist. Interested Person Transactions There were no interested person transactions entered into by the Group during the financial year ended 31 December 2012. Material Contracts No material contracts were entered between the Company and its subsidiaries involving the interests of the chief executive officer, directors or controlling shareholders at the end of the financial year. Non-sponsorship Fees There is no non-sponsorship fees paid to the Sponsor during the financial year ended 31 Dec 2012.
17 ANNUAL REPORT 2012 / PROGEN HOLDINGS LIMITED DIRECTORS' REPORT The directors present their report to the members together with the audited consolidated financial statements of Progen Holdings Ltd (the Company ) and its subsidiary companies (collectively, the Group ) and the balance sheet and statement of changes in equity of the Company for the financial year ended 31 December 2012. Directors The directors of the Company in office at the date of this report are: Lee Ee @ Lee Eng Mohd Amin Liew Abdullah Tan Eng Liang Ch ng Jit Koon Chee Wai Pong Johnlin Yuwono Arrangements to enable directors to acquire shares and debentures Neither at the end of nor at any time during the financial year was the Company a party to any arrangement whose objects are, or one of whose objects is, to enable the directors of the Company to acquire benefits by means of the acquisition of shares or debentures of the Company or any other body corporate. Directors interests in shares and debentures The following directors, who held office at the end of the financial year, had, according to the register of directors shareholdings required to be kept under section 164 of the Singapore Companies Act, Cap. 50, an interest in shares of the Company and related corporations (other than wholly owned subsidiaries) as stated below: Name of director The Company Ordinary shares At the beginning of the financial year Direct interest At the end of the financial year At the beginning of the financial year Deemed interest At the end of the financial year Lee Ee @ Lee Eng 25,546,690 27,379,690 913,041 913,041 Johnlin Yuwono 10,000,000 10,000,000 4,466,000 4,466,000 Ch ng Jit Koon 200,000 Subsidiary company Progen Media Pte Ltd Ordinary shares Lee Ee @ Lee Eng 1 1 There was no change in any of the above-mentioned interests in the Company between the end of the financial year and 21 January 2013. Except as disclosed in this report, no director who held office at the end of the financial year had interests in shares, share options, warrants or debentures of the Company, or of related corporations, either at the beginning of the financial year, or date of appointment if later or at the end of the financial year and at 21 January 2013. Directors contractual benefits Except as disclosed in the financial statements, since the end of the previous financial year, no director of the Company has received or has become entitled to receive a benefit by reason of a contract made by the Company or a related corporation with the director, or with a firm of which the director is a member, or with a company in which the director has a substantial financial interest.
18 PROGEN HOLDINGS LIMITED / ANNUAL REPORT 2012 DIRECTORS' REPORT Options The Company does not currently have an Employees Share Option Scheme. The previous scheme had lapsed on 31 July 2010 and has since been discontinued. Audit Committee The audit committee carried out its functions in accordance with section 201B (5) of the Singapore Companies Act, Cap. 50. The functions performed are detailed in the Report on Corporate Governance. The Committee recommends to the Board of Directors the nomination of Ernst & Young LLP as external auditors at the forthcoming annual general meeting of the Company. Board s Opinion on Internal Controls Based on the reports submitted by the internal auditor and the various management controls put in place, the Board with the concurrence of the AC is of the opinion that the internal controls and risk management systems of the Company are adequate in addressing its financial, operational, compliance and information technology risks. Auditor Ernst & Young LLP have expressed their willingness to accept reappointment as auditor. On behalf of the board of directors: Lee Ee @ Lee Eng Director tan Eng Liang Director Singapore 15 March 2013
19 ANNUAL REPORT 2012 / PROGEN HOLDINGS LIMITED Statement by directors We, Lee Ee @ Lee Eng and Tan Eng Liang, being two of the directors of Progen Holdings Ltd, do hereby state that, in the opinion of the directors, (i) (ii) the accompanying balance sheets, consolidated statement of comprehensive income, statements of changes in equity, and consolidated cash flow statement together with the notes thereto are drawn up so as to give a true and fair view of the state of affairs of the Group and of the Company as at 31 December 2012 and the results of the business, changes in equity and cash flows of the Group and the changes in equity of the Company for the year ended on that date, and at the date of this statement, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they fall due. On behalf of the board of directors: Lee Ee @ Lee Eng Director tan Eng Liang Director Singapore 15 March 2013