Banyan Tree Holdings Limited ("BTH" or the "Company", and together with its subsidiaries, the "Group") is committed to observing and maintaining high standards of corporate governance and sound corporate practices to promote accountability and transparency.
This report sets out BTH's main corporate governance practices which are substantially in line with the principles set out in the Code of Corporate Governance 2012 (the "Code").
Singapore Exchange ("SGX") has, on 29 January 2015, issued a disclosure guide ("Disclosure Guide") to assist companies listed on the SGX in preparing meaningful disclosure that complies with the requirements of the Code. The Disclosure Guide sets out a list of relevant questions and the SGX has encouraged companies to enclose their answers as part of the Annual Report. The Company's responses to the Disclosure Guide can be found on pages 97 to 99 of the Annual Report.
1 The Board's principal functions include the formulation of the Group's strategic direction, setting its values and standards; reviewing and approving annual budgets and financial plans, and monitoring the Group's performance; approving major investments, divestments and fund-raising exercises; reviewing the Group's financial performance; approving the adequacy and effectiveness of internal controls including financial, operational, compliance and information technology controls, risk management and corporate governance practices; approving remuneration policies and guidelines as well as succession planning for the Board and Management, appointment and re-appointment of Directors; and ensuring the Group's compliance with all laws and regulations as may be relevant to its businesses. The Board also regards sustainable development as a core value of the Group. Please refer to the Sustainability Report 2015 for the continual progress made in the Group's commitment to sustainability.
2 The Group has adopted a set of internal controls and guidelines setting out the financial authorisation and approval limits for borrowings, acquisitions and disposals of investments, operating and capital expenditures. Board's approval is required for transactions where the value of these transactions exceed the approval limits. In addition, matters such as inter alia, the issue of shares, dividend distributions and other returns to shareholders, the Group's strategies and objectives, annual budget, and the announcement of quarterly and full year results also require the Board's approval.
3 Two Board Committees, namely the Audit and Risk Committee ("ARC") and the Nominating and Remuneration Committee ("NRC"), have been constituted with defined Charters to assist the Board in the execution of its responsibilities. These Charters are reviewed on a regular basis to ensure their continued relevance. The members of both the ARC and NRC are all Independent Directors.
4 The Board and the Board Committees conduct regular scheduled meetings on a quarterly basis. Ad-hoc meetings are convened when circumstances require. The Independent Directors also set aside time to meet, without the presence of Management (including the Non-Independent Directors), to review their performance in meeting the goals and objectives of the Company, after which the Lead Independent Director will provide any relevant feedback to the Executive Chairman. Where necessary, the Directors also participate in Board meetings via telephonic attendance and video conferencing, as permitted under the Constitution of the Company (the "Constitution"). Details of each Director's attendance at Board and Board Committee meetings held during the year ended 31 December 2015 are provided in Table 1 below:
|Board||Audit & Risk Committee||Nominating & Remuneration Committee|
|No. of Meetings Held||4||4||3|
|Ariel P Vera||4||*||*|
|Chia Chee Ming Timothy||4||12||3|
|Fang Ai Lian||4||4||13|
|Chan Heng Wing||3||12||3|
|Tham Kui Seng||4||4||13|
|Lim Tse Ghow Olivier2||4||44||*|
5 Upon appointment, each new Director is issued with a formal letter of appointment along with materials pertaining to his obligations in relation to disclosure of interests in securities, conflicts of interest and restrictions on dealings in securities. An orientation programme is also conducted for new Directors to familiarise themselves with the Group's businesses, operations, strategic directions, organisation structure and get acquainted with Management. Each new Director will also receive information on the relevant policies and procedures of the Group and the Board meeting schedule for the year, as well as a brief of the routine agenda for each Board and Board Committee meeting. When a Director is appointed to a Board Committee, he is provided with a copy of the Charter of the Board Committee.
6 For any Director who has no prior experience as a director of a listed company, he/she will be encouraged to attend the Listed Company Director ("LCD") Programme conducted by the Singapore Institute of Directors ("SID"). The Company Secretary will assist such Director with enrolling in the LCD Programme. The Company also provides the Board with updates on developments in laws and regulations or changes in regulatory requirements and financial reporting standards, which are relevant to or may affect the Group's businesses. For FY2015, our lawyers, WongPartnership LLP gave a presentation to the Board on the key changes to the Companies Act pursuant to the Companies (Amendment) Act 2014. Also at ARC meetings, the external auditors, Ernst & Young LLP provide regular updates on developments in accounting and governance standards wherever relevant and applicable to the Group. Also, Directors have been periodically updated on various aspects of the Group's operations through briefings or informal discussions by Management. As part of the Company's continuing education for Directors, the Company Secretary circulates to the Board articles, reports and news releases issued by Singapore Exchange Securities Trading Limited ("SGX-ST") which are relevant to the Group's businesses. Also, wherever applicable, meetings are arranged for the Directors to meet with relevant experts on issues which impact the Group's operating environment. In addition, the Directors are encouraged to attend appropriate relevant external programmes such as those conducted by the SID or seminars organised by SGX-ST or other professional institutes, at the Company's expense. The Directors may also, at any time, request for further information or meetings with Management on the Group's operations.
7 During the year, the Board embarked on a five-day retreat in Thailand and visited various properties, including Banyan Tree Phuket, Angsana Laguna Phuket and the newly opened Cassia Phuket as well as Banyan Tree Samui. During the retreat, both the Boards of BTH and Laguna Resorts & Hotels Public Company Limited ("LRH") had a joint meeting and carried out an in-depth discussion with Management on the strategic review of the hotel operations in Thailand. This enabled the Board to have a better appreciation and familiarisation of the operations and the challenges experienced by these hotels and thus provide comments and guidance accordingly.
PRINCIPLE 2: BOARD COMPOSITION AND GUIDANCE
1 Currently, the Board comprises eight Directors, six of whom are Independent Directors. As such, there is a strong and independent element in the Board. The Independent Directors are Mr Chia, Mrs Fang, Mrs Sam, Mr Chan, Mr Tham and Mr Lim.
2 The two Non-Independent Directors are Mr Ho and Mr Vera. Mr Ho is the Executive Chairman and Mr Vera is a Non-Executive Director.
3 Each year, the NRC reviews the appropriate size, balance and diversity of skills and composition of the Board and Board Committees, and the experience and competencies of their members, to ensure that each member has the appropriate mix of expertise, skills and attributes to discharge his/her responsibilities effectively. The NRC also ensures that there is an appropriate number of independent directors for the Board and each Board Committee. Taking into account the nature and scope of the Group's businesses and the regulatory requirements, the NRC is of the opinion that the current composition and size of the Board, as well as of each Board Committee, are appropriate and adequate.
4 BTH was ranked third in the gender diversity ranking introduced in the Singapore Board Diversity Report 2013, a joint initiative between the Centre for Governance, Institutions and Organisations at the National University of Singapore's Business School and BoardAgender. The ranking took into account, inter alia, the proportion of women and their representation on the Board.
5 The profile of each Director which includes key information regarding academic qualifications, directorship and chairmanship both present and those held over the preceding three years in other listed companies, and other principal commitments, are set out on pages 20 to 22 of the Annual Report. The details of the Directors' shareholdings can be found under the section on Directors' Interests in Shares and Debentures on page 103 of the Directors' Statement in the Annual Report.
PRINCIPLE 3: ROLE OF CHAIRMAN AND CHIEF EXECUTIVE OFFICER
1 The Executive Chairman is responsible for leading the Board in charting the strategic direction and growth of the Group. He also facilitates and ensures active and comprehensive Board discussions on Company matters, monitors the translation of the Board's decisions into executive actions, and fosters constructive dialogue with shareholders at the Company's Annual General Meeting ("AGM"). The Executive Chairman is also responsible for setting the agenda and ensuring that adequate time is available for discussion of all agenda items, in particular, strategic issues and promoting a culture of openness and debate at the Board.
2 The execution of the Company's corporate and business strategies and polices, and the conduct of the Group's businesses have been delegated to a dedicated team of Management comprising the Chief Financial Officer and the Managing Directors of the various Business Units.
3 The Board has appointed Mr Chia as the Lead Independent Director since 28 February 2007 to lead and co-ordinate the activities of the Non-Executive Directors. The Lead Independent Director is also the Chairman of the NRC. He is available to shareholders where they have concerns and for which contact through the normal channels of the Executive Chairman or the Chief Financial Officer and Managing Directors of the Business Units has failed to resolve or is inappropriate. Mr Chia may be contacted at email@example.com.
PRINCIPLE 4: BOARD MEMBERSHIP
1 The NRC, chaired by Mr Chia, comprises Mrs Sam and Mr Chan, all of whom are Independent Directors. Mr Chia is not directly associated with any 10% shareholder (as defined in the Code).
2 The NRC's functions, which are set out in the Charter, include making recommendations to the Board on new Board appointments. The NRC's selection process for candidates to be proposed to the Board for new appointments takes into account various factors including the relevant expertise and experience of the candidates and how these would augment the Board and its existing Directors. Names of potential candidates are sought through networking contacts and recommendations. The NRC makes recommendations to the Board on the re-appointment of Directors based on their competencies, commitment and contributions, a review of the range of expertise, performance, skills and attributes of current Board members and the needs of the Board. The NRC also makes recommendations to the Board on the review of training and professional development programs for the Board. The NRC reviews the succession plans for its Board and Management which also includes leadership plans for its Management. NRC also makes recommendations to the Board on the development of a process for evaluation of the performance of the Board, its Board Committees and Directors.
3 The NRC also determines the independence of the Directors annually as well as when circumstances change. The process includes the use of a self-assessment questionnaire which each Independent Director is required to complete and submit to the NRC for review. In its annual review, the NRC, having considered the guidelines set out in the Code including the requirements under Principle 2 of the Code and its Guidelines has confirmed the status of the Directors as follows:
Mr Ho KwonPing (Non-Independent)
Mr Ariel P Vera (Non-Independent)
Mr Chia Chee Ming Timothy (Independent)
Mrs Fang Ai Lian (Independent)
Mrs Elizabeth Sam (Independent)
Mr Chan Heng Wing (Independent)
Mr Tham Kui Seng (Independent)
Mr Lim Tse Ghow Olivier (Independent)
4 The longest serving Independent Directors since the Company's initial public offering in 2006 ("IPO") are Mr Chia and Mrs Sam who have served on the Board for more than 9 years based on the date of their first appointment. Mr Chia was appointed a Director in 2001 and became the Lead Independent Director in 2007 after the IPO in 2006 whereas Mrs Sam was appointed as an Independent Director in 2004. Mrs Fang joined as an Independent Director in 2008 followed by both Mr Chan and Mr Tham in 2012 and Mr Lim in 2014.
5 The NRC and the Board have given due consideration to the recommendation under Guideline 2.4 of the Code which provides that the independence of any director who has served on the Board beyond 9 years from the date of his/her first appointment should be subject to particularly rigorous review. Having reviewed the NRC's recommendation, the Board has determined that both Mr Chia and Mrs Sam are independent notwithstanding that they have served on the Board beyond 9 years from the date of their first appointment as they continue to demonstrate strong independence in character and judgment in the discharge of their responsibilities as Directors. Further, the NRC and the Board are of the opinion that their detailed knowledge of the Group's businesses continues to be of significant benefit to the Company, and their external experience sitting on the boards of other listed companies provides useful expertise and diversity to the Board. Also, there have been changes to the Board since their first appointment, allowing for progressive refreshing of the Board.
6 The Directors have no affiliations or business relationships with the Company (save as disclosed below in respect of Mr Lim) and hold less than 10% of BTH shares and are not directly associated with a 10% shareholder of the Company, nor do they have any relationships or circumstances which are likely to, or could appear to, interfere with the exercise of their independent business judgment with a view to the best interests of BTH. Mr Lim is a director of Raffles Medical Group ("RMG"). RMG is on the Group's panel of clinics, and was appointed based on an assessment by the Group of the commercial terms offered by RMG, similar to the considerations taken into account in appointing the other panel of clinics. Based on the foregoing reasons, the NRC and the Board have considered Mr Lim as an Independent Director.
7 The Board has implemented a policy whereby the Executive Chairman's external directorships should be approved by the NRC. The Board has not determined the maximum number of listed company board representations which any Director may hold. Based on the 2015 Singapore Board of Directors Survey conducted by the Singapore Institute of Directors ("Survey"), the Company understands that a significant majority of the listed issuers surveyed did not impose any restrictions on the number of listed company directorships that their directors can take on, but for the minority which did, the most commonly imposed limit was six directorships. In this regard, the Board notes that none of the Directors have more than six listed company directorship. The Board has allowed each Director to personally determine the demands of his/her companies' directorships and obligations and assesses how much time he/she must dedicate in order to serve on the Board effectively. Each of the Directors updates the Company of any changes in his/her external appointments and these changes are noted at the Board meetings. Although some Directors have multiple board representations, the NRC monitors and determines annually the number of listed companies and the principal commitments of each of the Directors. For FY2015, the NRC, having reviewed the multiple board representations of the Directors, is satisfied that each of these Directors has dedicated sufficient time and attention to, and is able to perform and has adequately performed his/her duties as a Director of the Company.
8 The Company's Constitution require that every Director retires once every three years and that one-third of Directors shall retire and subject themselves to re-election by shareholders at every AGM. New directors appointed by the Board during the year shall also submit themselves for re-election at the next AGM.
PRINCIPLE 5: BOARD PERFORMANCE
1 The NRC has the responsibility of evaluating the Board's and Board Committees' effectiveness. The Company has in place a formal process for assessment of the effectiveness of the Board as a whole, the various Board Committees and the contribution by each Director to the effectiveness of the Board and the Board Committees. No external facilitator has been used in respect of FY2015. During FY2015, the NRC evaluated the Board's performance based on a set of performance criteria, which is the same as that of the previous year, and which includes factors such as the structure, size and processes of the Board and the Board's access to information, Management and external experts outside meetings, as well as the effectiveness of the Board as a whole, its Board Committees and Board's oversight of the Company's performance. Each Director completed the Board Evaluation Questionnaire seeking his/her views on these factors so as to facilitate the NRC in its assessment of the Board's performance as a whole. The NRC reviewed the feedback received and presented the findings, including its recommendation, if any, for improvements to the Board.
2 The assessment of the performance of the Executive Chairman was undertaken by the NRC based on both qualitative and quantitative performance criteria.
3 The Executive Chairman, together with the Chairman of the NRC, also assessed the performance of individual Directors based on factors which include their attendance, participation at Board and Board Committee meetings and contributions to the Board processes and the business strategies as well as their industry and business knowledge.
4 The Board, having reviewed the feedback from the NRC, was of the view that the Board has met its performance objectives for FY2015.
5 Each member of the NRC abstained from making any recommendations and/or participating in any deliberation of the NRC and voting on any resolution in respect of the assessment of his/her own performance or re-nomination as a Director.
PRINCIPLE 6: ACCESS TO INFORMATION
1 The Directors are provided with Board Papers in advance of each Board and Board Committee meeting to enable them to be properly informed of matters to be discussed and/or approved. These include reports relating to the financial and operational performance of the Group as well as other matters for the decision or information of the Board. The Directors are also given analysts' reports so that they are apprised of analysts' views on the Company's performance. Besides these Board Papers and analysts' reports, the Directors are also provided with additional information and reports (upon request) which will enable them to have a better understanding of the Group's business and strategies, the operating environment and the risks faced by the Group.
2 In line with the Group's continuing commitment to the sustainability of the environment, the Board has opted to receive all its Board Papers electronically for all its Board and Board Committee meetings since August 2013 and has eliminated the need for hard copy Board Papers. The Board Papers are distributed in advance prior to these meetings where the Board can access and read them on their electronic devices.
3 Each Director has separate and independent access to Management and the Company Secretary. The Company Secretary attends all Board and Board Committee meetings and is responsible for, among other things, ensuring that Board procedures are observed and that applicable rules and regulations are complied with and is also responsible for advising the Board on all matters relating to corporate governance. The appointment and the removal of the Company Secretary is a matter for the Board as a whole. The Board takes independent professional advice as and when necessary to enable it or the Independent Directors to discharge their responsibilities effectively and such costs are borne by the Company.
1 The NRC reviews matters concerning remuneration including but not limited to, directors' fees, salaries, allowances, bonuses, options, share-based incentives and awards, and benefits-in-kind of the Board, key management personnel and other employees who are related to the controlling shareholders and/or the Directors. The review of these remuneration packages are submitted to the Board for its endorsement. The NRC has direct access to the Head of Group Human Resources and may also seek expert advice from external consultants on executive compensation. Hay Group Consulting ("Hay Group") was engaged to advise on the Company's share incentive plans to ensure competitive compensation and progressive policies, with suitable and attractive long-term incentives, are in place. Hay Group has no relationship with the Company which could affect their independence and objectivity in this regard. No Director is involved in deciding his/her own remuneration or the remuneration of any employees who are related to them.
1 The employment contract of the Executive Chairman is automatically renewed every year, unless otherwise terminated by either party giving not less than 6 months' notice in writing. The terms of the Executive Chairman's employment contract does not provide for benefits upon termination of employment with the Company. The termination clause of its key management personnel is 3 months which the NRC has reviewed and found to be fair and reasonable. There are no termination, retirement and post-employment benefits granted to the Directors, Executive Chairman and the top 5 key management personnel (who are not directors or the CEO). The Company has adopted the use of contractual provisions to allow it to reclaim incentive components of remuneration from the Executive Chairman and its key management personnel in exceptional circumstances of misstatement of financial results, or of misconduct resulting in financial loss to the Company.
2 The remuneration framework for the Non-Executive Directors is evaluated periodically by Hay Group for appropriateness, taking into consideration the level of contributions, the responsibilities and obligations of these Directors, the prevailing market conditions and referencing the Directors' fees against comparable benchmarks. The most recent review of the remuneration framework for Non-Executive Directors was undertaken by Hay Group in respect of FY2013. In respect of FY2015, the Board agreed with the NRC's recommendation that the existing fee structure for the Non-Executive Directors remains unchanged. The Non-Executive Directors are paid by way of fees in cash only although they are also eligible to participate in the Company's share-based incentive schemes. All Directors' fees are subject to shareholders' approval at the Company's AGM. The framework for determining Non-Executive Directors' fees is set out in Table 2 on page 91 of the Annual Report:
|Basic Retainer Fee|
|Director||S$40,000 per annum|
|Fee for appointment to Audit & Risk Committee ("ARC")|
|ARC Chairman||S$30,000 per annum|
|ARC Member||S$15,000 per annum|
|Fee for appointment to Nominating & Remuneration Committee ("NRC")|
|NRC Chairman||S$20,000 per annum|
|NRC Member||S$10,000 per annum|
|Attendance fee per Board Meeting||S$1,000 per meeting|
3 The Executive Chairman does not receive Directors' fees from the Company. His remuneration comprises a base salary, bonus and the Founder's Grant (as described on page 92 of the Annual Report).
4 Table 3 below shows the gross remuneration of the Executive Chairman, Non-Executive Directors as well as the top 5 key management personnel (who are not Directors or the CEO).
|Name||Salary||Bonus||Other Benefits1||Long-term share-based||Director's Fees||Total|
|Ariel P Vera||-||-||6.58%||26.43%3||66.99%2||105,205|
|Chia Chee Ming Timothy||-||-||0.09%||-||99.91%||66,361|
|Fang Ai Lian||-||-||3.11%||-||96.89%||77,957|
|Chan Heng Wing||-||-||4.68%||-||95.32%||58,015|
|Tham Kui Seng||-||-||3.05%||-||96.95%||62,437|
|Lim Tse Ghow Olivier||-||-||7.13%||-||92.87%||61,096|
|Top 5 Key Management Personnel|
|S$1,000,000 to S$1,250,000|
|S$550,000 to S$600,000|
|S$500,000 to S$750,000|
|Eddy See Hock Lye||57.78%||5.81%||28.94%||4.43%||3.04%2||100%|
|S$450,000 to S$500,000|
5 The aggregate amount of the total remuneration paid to the top 5 key management personnel (who are not Directors or CEO) is S$3,465,706.
6 During the year, there were three employees, namely Mr Ho KwonCjan (brother), Ms Claire Chiang (spouse) and Mr Ho Ren Hua (son) who are immediate family members of the Executive Chairman. The disclosure of the remuneration of Mr Ho KwonCjan and Ms Claire Chiang is made within bands of S$50,000 as shown above. Mr Ho Ren Hua's remuneration for FY2015 fell within the band of S$100,000 to S$150,000. Mr Ho Ren Hua has resigned on 1 July 2015. Mr Ho KwonPing was not involved in the determination of his family members' remuneration.
7 The Company adopts a remuneration framework that is responsive to the market elements and performance of the Company and its various Business Units respectively. The Company adopts a remuneration policy which comprises a fixed component, variable component, provident/superannuation fund, benefits- in- kind and long-term share incentives. The fixed component is in the form of salary whereas the variable component is in the form of various bonus and incentive payments which is linked to the Company's and individual's performance. The provident/superannuation fund comprises the Group's contributions towards the Central Provident Fund or Zurich Provident Fund. The benefits-in-kind component include transport allowances and accommodation, spa and gallery vouchers issued by the Company to its employees. The long-term share incentives include performance shares and the Founder's Grant (as described below).
LONG-TERM SHARE INCENTIVES
8 The NRC sets the remuneration guidelines of the Group for each annual period including the Banyan Tree Share Option Scheme and the Banyan Tree Performance Share Plan (the "Plan"). The Plan comprises the Performance Share Plan ("PSP") and Restricted Share Plan ("RSP"). The PSP and RSP were introduced to strengthen the Company's competitiveness in attracting and retaining talented key executives. The PSP and RSP are also aimed at aligning the interests of key executives with that of shareholders, improving performance and achieving sustainable growth for the Company, and fostering an ownership culture among key executives. The Plan contemplates the award of fully paid shares or their cash equivalent, when and after pre-determined performance or service conditions are met. The selection of a participant and the number of shares to be awarded under the PSP or RSP are determined at the discretion of the NRC. The NRC reviews and sets the performance conditions and targets where it thinks appropriate and after considering prevailing business conditions. Hay Group provided the valuation and vesting computation for the share grants awarded under the Plan. Details of the Plan, including the terms and performance conditions, can be found in the Directors' Statement and Note 41 to the financial statements of the Annual Report.
9 The Company has not issued any options to eligible participants pursuant to the Banyan Tree Share Option Scheme.
10 The Banyan Tree Share Option Scheme and the Plan will be expiring on 27 April 2016. The Company does not intend to extend the duration of, or replace, the Banyan Tree Share Option Scheme. In view of the impending expiry of the Plan, the Company will be seeking Shareholders' approval for the adoption of the Banyan Tree Share Award Scheme 2016 ("Share Award Scheme") at the AGM to be held on 28 April 2016 ("2016 AGM") to replace the Plan. As such, following the conclusion of the 2016 AGM, the Share Award Scheme (if approved) will be the only share incentive scheme of the Company.
11 Prior to official listing on the SGX-ST, as stated in the prospectus dated 26 May 2006 in respect of the IPO, the independent shareholders of the Company approved the incentive for the Executive Chairman, Mr Ho, which has been included in his employment agreement. Pursuant to the incentive, Mr Ho shall be entitled to, for each financial year for a period of 10 years beginning from the financial year ended 31 December 2010, an amount equivalent to 5% of the profit before tax of the Group, such amount to be payable in cash or in shares at the sole discretion of the Company ("Founder's Grant"). The Founder's Grant aims to secure the continuing commitment of Mr Ho to the Group and to reward him for founding, leading and building up the Group. FY2010 was the first financial year in which the Founder's Grant was paid. There was no Founder's Grant paid for FY2015.
12 Details of the Founder's Grant can be found in the Directors' Statement and Note 41 to the financial statements in the Annual Report.
1 The Board, through its announcements of quarterly and full-year results, aims to provide shareholders with a balanced and clear assessment of the Group's performance and prospects on a quarterly basis. The Board also ensures timely and full disclosure of material corporate developments to shareholders.
2 Management provides the Board with detailed management accounts and such explanation and information on a regular basis and as the Board may require from time to time enabling the Board to make a balanced and informed assessment of the Company's and the Group's performance, position and prospects. Such information consist of consolidated profit and loss accounts, operating profit, pre-tax profit by the various business segments comparing BTH's actual performance against the budgets, together with explanations for significant variances.
3 The Board reviews and approves the results as well as the relevant announcements before its release on SGXNet. The Board also reviews legal and regulatory compliance reports from Management to ensure that the Group complies with relevant regulatory requirements.
4 For FY2015, the Executive Chairman and the Chief Financial Officer have provided written assurance to the Board on the integrity of the financial statements of the Company and its subsidiaries and on the adequacy and effectiveness of the Group's risk management and internal control systems, addressing financial, operational, compliance risks including information technology and sustainability risks. In relation to the interim financial statements, the Board provides a negative assurance confirmation to shareholders in line with the requirements of the Listing Rules.
PRINCIPLE 11: RISK MANAGEMENT AND INTERNAL CONTROLS
1 The Board is responsible for the governance of risk and exercises oversight of the material risks involving the Group's businesses. During the year, the ARC assisted the Board in the oversight of the Group's risk management processes and activities to mitigate and manage risk at levels that are determined to be acceptable to the Board. The ARC is assisted by the Group Risk Management Committee, which is not a Board Committee and comprises appropriate members of Management, which reports on the Group's strategic and business risks and the measures taken to address them. On a quarterly basis, all significant risks to the Group and/or properties which have been identified and managed are highlighted at the ARC meetings.
2 The Board has approved a risk framework for the identification of key risks within the business known as the Committee of Sponsoring Organisations of the Treadway Commission Internal Controls Integrated Framework ("COSO Framework") for assessing the adequacy and effectiveness of BTH's internal control systems.
3 Under the COSO Framework, internal controls is broadly defined as a process effected by the Board and its Management, designed to provide reasonable assurance regarding the achievement of objectives in the following categories:
4 Using the COSO Framework, Management, Risk Management and Internal Audit teams assessed the adequacy of internal controls in accordance with the 5 components of COSO, namely,
5 Major incidents and violations, if any, are also reported to the Board to facilitate the Board's oversight of the effectiveness of crisis management and the adequacy of mitigating measures taken by Management to address the underlying risks. The identification and management of risks lies with the respective Business Units and Management who assumes ownership and day-to-day management of these risks. Risk registers are maintained by these operating Business Units that identify the key risks facing the Group's businesses and the internal controls in place to manage such risks. Management is responsible for the effective implementation of risk management strategy, policies and processes to facilitate the achievement of business plans and goals. Key business risks are proactively identified, addressed and reviewed on an ongoing basis. This includes reviewing the level of business risks and the appropriate framework and policies for management that are consistent with the BTH's risk appetite. Certain operating risks are mitigated through insurance management with the assistance of professional global insurance advisers, ensuring adequate coverage for, inter alia, its hotel/resorts and assets.
6 The ARC provides oversight of the financial reporting risk and the adequacy and effectiveness of the Group's internal control and compliance systems. The ARC also reviewed the effectiveness of the measures taken by Management including the review of adequacy and timelines of the actions in response to the recommendations made by the Head of Group Internal Audit and External Auditors. The system of internal control and risk management is continually being refined by Management, the ARC and the Board.
7 Based on the framework established and the reviews conducted by the Management and Head of Group Internal Audit and External Auditors, the Board opines, with the concurrence of the ARC, that the Group's internal controls and risk management systems were adequate and effective to address financial, operational and compliance risks including information technology risk which the Group considers relevant and material to its current business environment.
8 The system of internal controls and risk management established by Management provides reasonable, but not absolute, assurance that BTH will not be adversely affected by any event that can be reasonably foreseen as it strives to achieve its business objectives. However, the Board also notes that no system of internal controls and risk management can provide absolute assurance in this regard, or absolute assurance against poor judgment in decision making, human error, losses, fraud or other irregularities.
9 The Board has received assurance from the Executive Chairman and the Chief Financial Officer that:
PRINCIPLE 12: AUDIT AND RISK COMMITTEE
1 During the year, the ARC, chaired by Mrs Fang, comprised Mr Tham and Mr Lim, all of whom are Independent Directors. Mr Chia, Mrs Sam and Mr Chan ceased to be members of the ARC on 25 February 2015 and Mr Lim was appointed as member of the ARC on 25 February 2015. The Board considers that Mrs Fang, a qualified Chartered Accountant, who has extensive and practical accounting and financial management knowledge and experience, is well qualified to chair the ARC. The members of the ARC collectively have strong accounting and related financial management expertise and experience and are kept abreast of relevant changes to the accounting standards and issues which have a significant impact on the financial statements through regular updates from the External Auditors. The ARC has adopted a Charter that is approved by the Board, the responsibilities of which are detailed under the Directors' Statement on page 104 of the Annual Report.
2 The ARC usually meets with the Head of Group Internal Audit first, followed by the External Auditors, prior to the commencement of each ARC meeting without the presence of Management. These meetings enable both the Head of Group Internal Audit and External Auditors to raise issues encountered in the course of their work directly to the ARC.
3 The ARC reviews, with the Head of Group Internal Audit and External Auditors, their audit plans, the system of internal controls, audit reports, management letter and the Company's management response. The ARC also reviews the quarterly, half-year, and full-year results, as well as financial statements of the Company and the Group before submission to the Board for its approval, focusing in particular on changes in accounting policies and procedures, major operating risk areas and overview of all the Group's risks on an integrated basis, including all matters affecting the Group's performance and the effectiveness of the Group's key internal controls including financial, operational, compliance and information technology controls. The ARC also reviews all interested person transactions.
4 The ARC commissions and reviews the findings of internal investigations into matters on suspected fraud, irregularity, failure of internal controls, and the infringement of any law, rule or regulation which has or is likely to have a material impact on the Company's results and/or financial position.
5 The ARC also oversees the Group's Whistle-Blowing Policy which provides the mechanism by which employees and the public may, in confidence, raise concerns about possible improprieties. The ARC is satisfied that arrangements are in place for the independent investigations of such improprieties and for appropriate follow-up actions and resolutions. The Whistle-Blowing Policy, including the dedicated whistle-blowing hotline at (+65) 6389 1377 and email address at firstname.lastname@example.org, are made available on BTH's website. Anonymous disclosures will be accepted and anonymity and confidentiality will be honoured throughout the process.
6 The ARC has also reviewed the Group's Code of Corporate Conduct Policy which sets out the principles and standards of conduct expected of all its Directors and employees to carry out their duties with honesty, fairness, integrity and professionalism. For example, Directors and employees must not engage in conduct involving fraud or dishonesty, or commit any act that reflects adversely on the Group's integrity and professionalism. Standard operating policies have also been adopted at the various Group's business and operating units to ensure that procedures have been adopted to curb anti-corruption practices such as, by ensuring that, among others:-
7 The ARC has explicit authority to investigate any matters within its Charter and has full access to and the co-operation of Management and full discretion to invite any Director or the Management to attend its meetings. The Company has an Internal Audit team that, together with the External Auditors, reports its findings and recommendations independently to the ARC. The ARC also reviews and considers the performance and compensation of Head of Group Internal Audit as well as his independence from Management. In FY2015, the ARC assessed the strength of the Internal Audit team and confirmed that the team is adequately resourced and suitably qualified to discharge its duty.
8 The ARC has undertaken a review of the nature and extent of all non-audit services performed by the External Auditors during the year and is satisfied that such services have not affected their independence. It recommends the re-appointment of the External Auditors. The ARC approved the remuneration and terms of the engagement of the External Auditors. The details of the aggregate amount of fees paid to the External Auditors for FY2015 and the breakdown of fees paid in total for audit and non-audit services respectively can be found on page 137 of the Annual Report. In addition, the ARC also reviewed the appointment of different auditors for its subsidiaries or significant associated companies to ensure that the appointment would not compromise the standard and effectiveness of the audit of the Company or its subsidiaries or significant associated companies. The date of appointment and name of the audit partner in charge of the Group's audit can be found on page 223 of the Annual Report. Also, the names of the auditing firms for its significant subsidiaries and associated companies can be found on pages 156 and 159 of the Annual Report.
9 In the opinion of the Directors, the Group complies with the Code's guidelines on audit committees as well as Rules 712, 715, 716 and 717 of the SGX-ST Listing Manual.
PRINCIPLE 13: INTERNAL AUDIT
1 The Internal Audit is an independent function within the Company. The Internal Audit Department ("IAD") has unfettered access to all the Company's documents, records, properties and personnel, including access to the ARC. The Head of Group Internal Audit reports directly to the ARC with a dotted-line relationship to the Chief Financial Officer for administrative matters. The ARC approves the hiring, removal, evaluation and compensation of the Head of Group Internal Audit.
2 The IAD is staffed by suitably qualified professional staff with the requisite skill sets and experience with 8 audit executives, including the Head of Group Internal Audit. The Head of Group Internal Audit ensures that the standards as set out by nationally or internationally recognised professional bodies including the Standards for the Professional Practice of Internal Auditing set by the Institute of Internal Auditors are met.
3 The IAD assists the ARC and the Board by performing regular evaluations of the Group's internal controls, information technology, financial and accounting matters, compliance, business and risk management policies and procedures and ensuring that internal controls are adequate to meet the Group's requirement.
4 On a quarterly basis, the ARC reviews the IAD's reports, summary of findings and recommendations at the ARC meetings. The ARC also reviews and approves the annual internal audit plan which is determined in consultation with, but independent of Management. The proposed scope of the internal audit function under the categories of financial audit, operational audit and information technology audit, focuses on the adequacy and effectiveness of internal controls in relation to financial, operational and information technology risks.
5 The Board and Management of the Group attach high importance to having a sound system of internal controls and have been continuously enhancing the Group's internal audit capacities through additional staffing and/or outsourcing.
1 All BTH shareholders are treated fairly and equitably and the Company looks to facilitate the exercise of their ownership rights. Shareholders are given opportunities to participate effectively in and vote at general meetings of shareholders. The Company informs shareholders of the rules, including voting procedures, governing such meetings.
2 The Company has in place an investor relations policy which serves to provide high quality, meaningful and timely information to improve the shareholders and investors understanding of the Company. It adopts the practice of regularly communicating major developments in its businesses and operations through SGXNET and, where appropriate, directly to shareholders, other investors, analysts, the media, the public and its employees. In FY2015, the Company held media and analysts' briefing upon the release of its half year and full-year results. These releases were also made available on the Company's website. It has an investor relations team ("IR Team") that communicates with its shareholders and analysts regularly and attends to their queries. The IR team can be reached via an email address at email@example.com. The IR Team also manages the dissemination of corporate information to the media, the public, as well as institutional investors and public shareholders, and promotes relations with and acts as liaison for such entities and parties. Material information is published on SGXNET and through media releases.
3 Shareholders of the Company receive notices of general meetings which are also advertised in the newspapers and issued via SGXNET. The Board recognises that the AGM is an important forum at which shareholders have the opportunity to communicate their views and raise any queries with the Board and Management regarding the Company and its operations.
4 A registered shareholder may appoint one or two proxies to attend the AGM and vote. The Constitution currently does not allow a shareholder to vote in absentia.
5 At general meetings, separate resolutions will be set out on distinct issues for approval by shareholders. All resolutions are conducted by poll in the presence of independent scrutineers. The results of the poll showing the number of votes cast for and against each resolution and the respective percentages are published on SGXNet. The minutes of the AGM are also made available to shareholders upon their requests.
6 Pursuant to the amendments to the Companies Act, a member which is a relevant intermediary (as defined in the Companies Act), which generally includes Singapore banks and nominee or custodial service providers, as well as the Central Provident Fund Board, may appoint more than two proxies to attend, speak and vote at the AGM, provided that each appointed proxy represents a different share or shares held by such member.
7 The Company is in full support of shareholder participation at AGMs. The Board and Management are in attendance at the Company's general meetings to address questions by shareholders. The External Auditors and legal advisers are also present at the AGM to assist the Board and Management in addressing shareholders' queries.
8 The Company's Dividend Policy seeks to maximise shareholder value and encourage shareholder loyalty with predictable annual growth in dividend payout which is not impacted by profit volatility. With that objective, the Company's Dividend Policy is based on the principles of stability, predictability and managed growth, outlined as follows:
Unless the Company suffers a substantial net loss, it will pay a dividend each year so that shareholders are not negatively affected by annual profit volatility.
Shareholders will be able to better anticipate the appropriate level of dividends to expect each year and therefore may be better able to manage their portfolio investment strategy.
The Company will strive to increase and smooth out the dividends year on year within a broad band but the specific rate will be dependent on the Company's actual profit performance, cash and cash flow projections.
DEALING IN SECURITIES
1 The Company has adopted an internal code on securities trading, which provides guidance and internal regulation with regards to dealings in the Company's securities by its Directors and officers. The Company's internal code is modelled on Rule 1207(19) of the SGX-ST Listing Manual. The Company's internal code prohibits its Directors and officers from dealing in listed securities of the Company while in possession of unpublished, material and price-sensitive information in relation to such securities and during the "closed period", which is defined as two weeks before the date of announcement of results for each of the first three quarters of the Company's financial year, and one month before the date of announcement of the full-year financial results. Directors and officers are also prohibited from dealing with the Company's securities on shortterm considerations. They are also advised to be mindful of the law on insider trading and ensure that their dealings in securities do not contravene the laws on insider trading under the Securities and Futures Act, and the Companies Act. The Company issues quarterly reminders to its Directors, relevant officers and employees on the restrictions in dealing in listed securities of the Company as set out above in compliance with Rule 1207(19) of the SGX-ST Listing Manual.
INTERESTED PERSON TRANSACTIONS
1 Shareholders have adopted a Shareholders' Mandate in respect of interested person transactions of the Company. The Company has established procedures to ensure that all transactions with interested persons are reported in a timely manner to the ARC, and that the transactions are carried out on normal commercial terms and will not be prejudicial to the interests of the Company and its minority shareholders. The Company's disclosure in respect of interested person transactions for the year is set out on page 100 of the Annual Report.