CentraLand Limited (the “Company”) is committed to ensuring and maintaining a high standard of corporate governance within the Group. Good corporate governance establishes and maintains a legal and ethical environment, which strives to preserve and enhance the interests of all shareholders.

This report describes the corporate governance framework and practices of the Company with specific reference made to each of the principles of the Code of Corporate Governance introduced in May 2001 and amended in 2005 (the “2005 Code”).

This Report should be read as a whole, instead of being read separately under the different principles of the 2005 Code.

 

(A) BOARD MATTERS

Board’s Conduct of its Affairs

Principle 1 : Every company should be headed by an effective Board to lead and control the company.

Role of the Board of Directors (the “Board”)

The Board meets regularly to oversee and supervise the management of the business affairs of the Group. Apart from its statutory responsibilities, the Board approves the Group’s strategic plans, key operational initiatives, major investments and funding decisions, identifi es principal risks and ensures the implementation of internal control procedures to manage these risks, reviews the performance of the Group and evaluates the performance and compensation of senior management personnel. Some of these roles are carried out directly or through board committees.

The Board provides shareholders with a balanced and understandable assessment of the Group’s performance, position and prospects on a quarterly basis.

To assist in the execution of its responsibilities, the Board has established a number of Board committees which include an Audit Committee (“AC”), a Nominating Committee (“NC”) and a Remuneration Committee (“RC”), each of which functions within clearly defi ned terms of reference and operating procedures which are reviewed on a regular basis.

Board Meetings and Meetings of Board Committees

The Board meets on a quarterly basis and whenever necessary for the discharge of their duties. Dates of the Board meetings are normally set by the directors well in advance. Meetings of the Board and Board Committees may be conducted by way of telephone and video conferencing if necessary.

The number of meetings held by the Board and Board committees and attendance thereat after the Company’s admission to the Official List of the SGX-ST until the date of this report are as follows:

 

 

 

 

 

 

Training

The Board will constantly examine its size and, with a view to determining the impact of its number upon effectiveness, decide on what it considers an appropriate size for itself. The composition of the Board will be reviewed on an annual basis by the NC to ensure that the Board has the appropriate mix of expertise and experience.

All directors have many years of corporate experience and are familiar with their duties and responsibilities as directors. In addition, the Company has in place a program whereby newly appointed directors will be briefed by the Chief Executive Offi cer and/or top management of the Company on the business activities of the Group and its strategic directions, as well as their duties and responsibilities as directors. The directors are also briefed by professionals either during Board meetings or at separate meetings on regulatory changes which have an important bearing on the Company and the directors’ obligations to the Company.

The Company welcomes Directors to seek explanations or clarifi cations from and/or convene informal discussions with the Management on any aspect of the Group’s operations or business. Necessary arrangements will be made for the informal discussions or explanations as and when required.

 

Board Composition and Balance

Principle 2 : There should be a strong and independent element on the Board, which is able to exercise objective judgement on corporate affairs independently, in particular, from Management. No individual or small group of individuals should be allowed to dominate the Board’s decision making.

The Board consists of eight (8) directors of whom three (3) are independent. The list of directors is as follows:

Directors

Li Wei (appointed on 11 October 2007)	(Non-Executive Chairman)
Yan Tao (appointed on 11 October 2007)	(Executive Director and Chief Executive Officer)
Wang Jian (appointed on 11 October 2007)	(Executive Director and Chief Operating Officer)
Wang Zhimin (appointed on 11 October 2007)	(Executive Director and Finance Director)
Liu Xuemei (appointed on 11 October 2007)	(Executive Director and Sales Director)
Tan Siok Sing (appointed on 12 December 2007)	(Independent Director)
Tan Siok Chin (appointed on 12 December 2007)	(Independent Director)
Li Danny Fui Lung (appointed on 12 December 2007)	(Independent Director)

The size and composition of the Board are reviewed from time to time by the NC to ensure that the size of the Board is conducive to effective discussions and decision making and which is of the view that the current Board size of eight (8) directors of which three (3) are independent directors, is appropriate and effective, taking into account the nature and scope of the Company’s operations.

The current Board comprises persons with diverse expertise and experience in accounting, business and management, finance and risk management who as a group provide core competencies necessary to meet the Company’s requirements. The directors’ objective judgement on corporate affairs and collective experience and knowledge are invaluable to the Group and allows for the useful exchange of ideas and views.

 

Independence of Directors

The NC reviews the independence of each director on an annual basis based on the 2005 Code’s defi nition of what constitutes an independent director.The NC is of the view that the three (3) independent directors (who represent more than one-third of the Board) are independent and that there is a strong and independent element on the Board which is able to exercise objective judgement on corporate matters independently, in particular, from Management, and that no individual or small group of individuals dominate the Board’s decision-making process.

Chairman and Chief Executive Officer

Principle 3 : There should be a clear division of responsibilities at the top of the company – the working of the Board and the executive responsibility of the company’s business – which will ensure a balance of power and authority, such that no one individual represents a considerable concentration of power.

Different individuals assume the roles of the Chairman of the Board and the Chief Executive Offi cer (“CEO”). The Chairman of the Board is Mr Li Wei. As the Chairman, Mr Li is responsible for, among others, the exercise of control over quantity, quality and timeliness of the fl ow of information between the management of the Company and the Board. He also schedules Board meetings, oversees the preparation of the agenda for Board meetings and assists in ensuring compliance with the Group’s guidelines on corporate governance.

He is assisted by the CEO, Mr Yan Tao. Mr Yan, together with the management comprising each subsidiary’s general managers and key senior managers, are responsible for the day-to-day management of the Group.

The separation of the roles of the Chairman and CEO ensures a balance of power and authority such that no one individual represents a considerable concentration of power.

 

Board Membership

Principle 4 : There should be a formal and transparent process for the appointment of new directors to the Board. As a principle of good corporate governance, all directors should be required to submit themselves for re-nomination and re-election at regular intervals.

The NC was established on 22 January 2008. It is chaired by Ms Tan Siok Chin (an independent director) with the following directors as members:

Tan Siok Sing (an independent director)
Li Danny Fui Lung (an independent director)

The principal functions of the NC are as follows:

(a) re-nomination of Directors having regard to the Director’s contribution and performance;

(b) determining annually the independence of the Directors;

(c) with regard to a Director who has multiple representations on various companies, deciding whether or not such Director is able to and has been adequately carrying out his duties as a Director, having regard to the competing time commitments that are faced when serving on multiple boards; and

(d) deciding how the Board’s performance may be evaluated and propose objective performance criteria.

For the year under review, the NC held two (2) meetings.

Pursuant to the Company’s Bye-Laws, one-third of the Board of Directors shall retire from offi ce by rotation. Each member of the NC abstains from making any recommendations and/or participating in any deliberation of the NC and from voting on any resolution, in respect of the assessment of his own performance or re-nomination as a director.

The NC is satisfi ed that suffi cient time and attention are being given by the directors to the affairs of the Company and Group, notwithstanding that some of the directors have multiple board representations.

In its search and nomination process for new directors, the NC has, at its disposal, search companies, personal contacts and recommendations, to cast its net as wide as possible for the right candidates.

The NC had reviewed Mr Yan Tao’s suitability and performance as a CEO of the Group and fi nds it appropriate for Mr Yan Tao to continue as the CEO of the Group. Key information regarding the directors is set out on page 13 to page 15.

 

Board Performance

Principle 5 : There should be a formal assessment of the effectiveness of the Board as a whole and the contribution by each director to the effectiveness of the Board.

The NC reviews the criteria for evaluating the Board’s performance and recommends to the Board a set of objective performance criteria focusing on enhancing long-term shareholders’ value. Based on the recommendations of the NC, the Board has established processes for evaluating the effectiveness of the Board as a whole.

The performance criteria for the Board evaluation includes an evaluation of the size and composition of the Board, the Board’s access to information, accountability, Board processes, Board performance in relation to discharging its principal responsibilities, communication with management and standards of conduct of the directors.

In the course of the year, the NC has conducted the assessment by preparing a questionnaire to be completed by each director, of which were then collated and the fi ndings were analyzed and discussed with a view to implementing certain recommendations to further enhance the effectiveness of the Board.

 

Access to Information

Principle 6 : In order to fulfi l their responsibilities, board members should be provided with complete, adequate and timely information prior to board meetings and on an on-going basis.

To assist the Board in fulfi lling its responsibilities, the management provides the Board with a management report containing complete, adequate and timely information prior to the Board meetings. All directors have separate and independent access to the management, including the Company Secretary at all times. The Company Secretary attends all Board meetings and ensures that Board procedures and all other rules and regulations applicable to the Company are complied with.

Changes to regulations are closely monitored by Management and for changes which have an important bearing on the Company or the Directors’ disclosure obligations, the Directors are briefed either during Board meetings.

The directors and the chairmen of the respective committees, whether as a group or individually are able to seek independent professional advice as and when necessary in furtherance of their duties at the Company’s expense. The appointment of such professional advisor is subject to approval by the Board.

 

(B) REMUNERATION MATTERS

Procedures for Developing Remuneration Policies

Principle 7 : There should be a formal and transparent procedure for fi xing the remuneration packages of individual directors. No director should be involved in deciding his own remuneration.

The RC was established on 22 January 2008, comprises of entirely independent directors. It is chaired by Mr Tan Siok Sing (an independent director), with the following directors as members:

Tan Siok Chin (an independent director)
Li Danny Fui Lung (an independent director)

The members of the RC have many years of corporate experience and are knowledgeable in the fi eld of executive compensation. In addition, the RC has access to expert professional advice on remuneration matters as and when necessary.

The principal functions of the RC are as follows:

(a) recommending to the Board a framework of remuneration for the Board and key executives with the aim of building capable and committed Board and management team through competitive compensation and focused management and progressive policies;

(b) determining specifi c remuneration packages for each executive director; and

(c) reviewing and recommending directors’ fees for non-executive directors, taking into account factors such as their effort and time spent, and their responsibilities.

For the year under review, the RC held two (2) meetings.

The RC reviews all aspects of remuneration including but not limited to directors' fees, salaries, allowances, bonuses, options and benefi ts-in-kind.

No director is involved in determining his own remuneration.

 

Level and Mix of Remuneration

Principle 8 : The level of remuneration should be appropriate to attract, retain and motivate the directors needed to run the company successfully but companies should avoid paying more for this purpose. A proportion of the remuneration, especially that of executive directors, should be linked to performance.

In setting remuneration packages, the RC takes into consideration the prevailing economic situation, the pay and employment conditions within the industry and in comparable companies. As part of its review, the RC ensures that the performance related elements of remuneration form a signifi cant part of the total remuneration package of executive directors and is designed to align the directors’ interests with those of shareholders and link rewards to corporate and individual performance. The RC also reviews all matters concerning the remuneration of non- executive directors to ensure that the remuneration commensurate with the contribution and responsibilities of the directors. The Company submits the quantum of directors’ fees of each year to the shareholders for approval at each Annual General Meeting.

Non-executive directors have no service agreements. The executive directors have entered into service agreements for a period of three years with effect from 1 February 2008.

 

Disclosure on Remuneration

Principle 9 : Each company should provide clear disclosure of its remuneration policy, level and mix of remuneration, and the procedure for setting remuneration, in the company’s annual report.

A breakdown showing the level and mix of each director and the top 5 key executives (who are not directors) for the financial year ended 31 December 2008 are set out below:

 

Note:-
(1) These are under the service agreements.

(2) The directors’ fees are subject to the approval of the shareholders at the Annual General Meeting.

(3) In view of the prevailing challenging economic conditions, Mr Li Wei has decided not to receive director’s fees for the financial year ended 31 December 2008.

There are no employees of the Group who are immediate family members of a director or the CEO and whose remuneration exceeds S$150,000 during the financial year ended 31 December 2008.

 

(C) ACCOUNTABILITY AND AUDIT

Accountability

Principle 10 : The Board is accountable to the shareholders while the Management is accountable to the Board.

The Board endeavors to ensure that the annual audited financial statements and quarterly announcements of the Group’s results present a balanced and understandable assessment of the Group’s position and prospects. The Board embraces openness and transparency in the conduct of the Company’s affairs, whilst preserving the commercial interests of the Company. Financial and other price sensitive information are disseminated to shareholders through announcements via SGXNet.

 

Audit Committee

Principle 11 : The Board should establish an Audit Committee (“AC”) with written terms of reference which clearly set out its authority and duties.

The AC comprises all non-executive and independent directors, namely, Mr Li Danny Fui Lung (who also acts as the Chairman), Mr Tan Siok Sing and Ms Tan Siok Chin. It, inter alia, oversees the quality and integrity of the accounting, auditing, internal controls and financial practices of the Group.

All members of the AC have many years of experience in senior management positions in both financial and industrial sectors. The Board is of the view that the AC members, having accounting and related financial management expertise or experience, are appropriately qualified to discharge their responsibilities.

The AC holds regular meetings with the Management and its auditors and performs the following functions:

(a) review the audit plans of the Company’s external and internal auditors, including the results of the auditors’ review and evaluation of the internal control system of the Company;

(b) review the external auditors’ reports;

(c) review the co-operation given by the offi cers of the Company to the external auditors;

(d) review the financial statements of the Group before submission to the Board for approval;

(e) review and discuss with auditors any suspected fraud, irregularity or infringement of any relevant laws, rules or regulations, which has or likely to have a material impact on the Group’s operating results or financial position and the Management’s response;

(f) consider the appointment and/or re-appointment of the external auditors; (g) review interested person transactions, falling within the scope of Chapter 9 of the Listing Manual, if any;

(h) review any potential conflicts of interests;

(i) review and approve the Group’s hedging policies and instruments, if any;

(j) undertake such other reviews and projects as may be requested by the Board and report to the Board its fi ndings from time to time on matters arising and reguiring the attention of the AC; and

(k) undertake generally such other functions and duties as may be required by law or the Listing Manual, as may be applicable from time to time.

The external and internal auditors have unrestricted access to the AC. The AC has undertaken a review of all the non-audit services provided by the external auditors during the year under review and is satisfi ed that such services would not, in the AC’s opinion, affect the independence of the external auditors. The AC recommends to the Board the re-appointment of Grant Thornton, Hong Kong as the external auditors of the Company at the forthcoming Annual General Meeting.

The AC had reviewed the Group’s insurance coverage for all aspect of its business operations and fi nds it adequate for the time being. The AC will review the insurance coverage for all aspects of the Group’s business operations on an annual basis.

The Company has a whistle blowing policy which provides well-defined and accessible channels in the Group through which employees may raise concerns about improper conduct within the Group.

 

Internal Controls

Principle 12 : The Board should ensure that the Management maintains a sound system of internal controls to safeguard the shareholders’ investments and the company’s assets.

Internal Controls

The Board ensures that the management maintains a sound system of internal controls and effective risk management policies to safeguard the shareholders’ investment and the Company’s assets and in this regard, is assisted by the AC which conducts the reviews.

The Company’s internal and external auditors conduct an annual review of the effectiveness of the Company’s material internal controls, including financial, operational and compliance controls, and risk assessment at least annually to ensure the adequacy thereof. This review is conducted by the Company’s internal auditors which presented their findings to the AC. Any material non- compliance or failures in internal controls and recommendations for improvements are reported to the AC. The AC also reviews the effectiveness of the actions taken by the management on the recommendations made by the internal and external auditors in this respect.

The AC, with the assistance of the internal and external auditors, have reviewed, and the Board is satisfied that, in the absence of any evidence to the contrary, the system of internal controls maintained by the Group’s management throughout the financial year ended 31 December 2008 up to the date of this report is adequate to meet the needs of the Group in its current business environment.

The system of internal control provides reasonable, but not absolute, assurance that the Group will not be adversely affected by any event that could be reasonably foreseen as it strives to achieve its business objective.

However, the Board notes that no system of internal control could provide absolute assurance against the occurrence of material errors, poor judgement in decision-making, human error, losses, fraud or other irregularities.

Risks arising from the Group’s financial operations are separately discussed in Note 34 to the Financial Statements on pages 75 to 78 of the Annual Report.

 

Internal Audit

Principle 13 : The company should establish an internal audit function that is independent of the activities it audits.

A professional accounting fi rm in Hong Kong, Wong Lam Leung & Kwok C.P.A. Limited (“WLLK”) had been appointed to carry out the internal audit functions. WLLK had carried out major internal control checks and compliance tests. The AC had reviewed the external and internal auditors’ reports and to ensure that there are adequate internal controls in the Group.

WLLK reports to the AC on audit matters and reports administratively to the CEO. The AC also reviews and approves the annual internal audit plans and resources to ensure that WLLK has the necessary resources to adequately perform its functions.

The Standards for the Professional Practice of Internal Auditing set by the Institute of Internal Auditors (“Standards”) are used as a reference and guide by the Company’s internal auditors.

Procedures have been put in place to ensure that all transactions entered into with interested persons are dealt with on an arm’s length basis. All such transactions are subject to a review by the Company’s internal auditors to ensure that the procedures adopted are complied with.

 

(D) COMMUNICATION WITH SHAREHOLDERS

Communication with Shareholders

Principle 14 : Companies should engage in regular, effective and fair communication with shareholders.

Principle 15 : Companies should encourage greater shareholder participation at AGMs, and allow shareholders the opportunity to communicate their views on various matters affecting the company.

The Company believes that a high standard of disclosure is key to raising the level of corporate governance. Accordingly, the Company holds analyst briefi ng of its quarterly results. Quarterly results are published through the SGXNET, news releases and the Company’s website. All information of the Company’s new initiatives is fi rst disseminated via SGXNET followed by a news release, which is also available on the website.

The Company does not practise selective disclosure. Price sensitive information is publicly released and results and annual reports are announced or issued within the mandatory period and are available on the Company’s website. All shareholders of the Company receive the annual report and notice of Annual General Meeting (“AGM”). The notice of AGM is also advertised in the newspaper.

The Company welcomes the views of the shareholders on matters concerning the Company and encourages shareholders’ participation at AGMs. The chairmen of the AC, NC and RC of the Company are normally present at the general meetings to answer questions from the shareholders. The external auditors will also be present to assist the directors in addressing any relevant queries by shareholders.

The Company is not implementing absentia voting methods such as voting via mail, e-mail or fax until security, integrity and other pertinent issues are satisfactorily resolved.

Each item of special business included in the notice of the meeting is accompanied, where appropriate, by an explanation for the proposed resolution. Separate resolutions are proposed for substantially separate issues at the meeting.

The chairmen of the AC, NC and RC, and the external auditors of the Company are normally present at the general meetings to answer questions from the shareholders.

The Company Secretary prepares minutes of shareholders’ meetings, which incorporates substantial comments or queries from shareholders and responses from the board and management. These minutes are available to shareholders upon request.

 

(E) DEALINGS IN SECURITIES

The Company has issued a guideline on share dealings to all directors and employees of the Group which sets out the code of conduct on transactions in the Company’s shares by these persons, the implications of insider trading and general guidance on the prohibition against such dealings.

In line with Listing Rule 1207(18) issued by the SGX-ST, the Company issues a notification to all offi cers of the Company informing them that they should not deal in securities of the Company during the periods commencing one month before the announcement of the Company’s full year results and two weeks before the Company’s quarterly or half-year results until after the announcement. They are also discouraged from dealing in the Company’s shares on short term considerations.

The Board confirms that for the financial year ended 31 December 2008, the Company has complied with Listing Rule 1207(18).

 

(F) INTERESTED PERSON TRANSACTIONS

To ensure compliance with Chapter 9 of the Listing Manual of the SGX-ST, the Board and AC will meet regularly to review if the Company will be entering into an interested person transaction and ensures that the relevant rules under chapter 9 of the Listing Manual of the SGX-ST are complied with.

During the year 31 December 2008, the Group sold three commercial units to Mr Li Shu Chen, Mr Zhou Fan and Mr Dong Chuan, senior management of the Group, amounted to approximately RMB244,000, RMB304,000 and RMB164,000 respectively. The sales to Mr Li Shu Chen, Mr Zhou Fan and Mr Dong Chuan gave rise to gross profi ts of approximately RMB157,000, RMB217,000 and RMB113,000 respectively.

The Group’s bank loans of RMB40 million were also guaranteed by Mr Li Wei and Mr Yan Tao whom are directors of the Group.

 

 

(G) MATERIAL CONTRACTS

Save as disclosed under “Material Contracts” on page 154 of the Prospectus dated 22 January 2008 and in the Directors’ Report and these financial statements, no material contracts to which the Company or any subsidiary, is a party and which involve the interests of the chief executive offi cer, directors or controlling shareholders, were subsisted at the end of the financial year or entered into since the end of the previous financial year.