The Board, through its announcements of quarterly and full-year results, aims to provide shareholders with a balanced and understandable assessment of the Company’s performance and prospects.
Qualified personnel are tasked to oversee key laws and regulations for compliance. The Board monitors instances of noncompliance if any and assesses annually whether there is a need for additional review on the applicable laws and regulations.
Management provides all members of the Board with management accounts which comprises the consolidated profit and loss accounts, sales analysis, operating profit, profit before tax and attributable profit by major regions followed by explanations of significant variances for the quarter and year-to-date. Subsequent to the Board’s review, the results are released via SGXNET to SGX-ST and the public.
Negative assurance statements supported by the Co-Chairman, Group CEO / Managing Director and Co-Chairman, President were issued to accompany the Company’s quarterly financial results announcements, giving shareholders confirmation that to the best of its knowledge, nothing had come to its attention which would render the Company’s quarterly results false or misleading.
The Company has also procured undertakings from all its directors and executive officers in compliance with Listing Rule 720(1).
The Board has instituted risk tolerance levels to guide Management in the course of operations and achieving its strategic objectives. These tolerance levels were drafted based on the top risks identified by the Enterprise Risk Management (“ERM”) committee. Board approval is required for initiatives involving greater risk exposures that exceed the predetermined levels.
The ERM committee, comprising the Executive Director and Chief Operating Officer – Mr Huang Ban Chin, department heads and chaired by the Lead Independent Director – Mr Lee Sen Choon assists the Board on risk management. The key components of the Company’s risk management framework include:
Risk assessment - Risks that the Company is exposed to are identified, assessed and updated in the risk register. The risks are rated and ranked according to the likelihood and its impact. Top risks are highlighted for extra emphasis.
Risks monitoring - Risks are monitored through internal audits, internal reviews, questionnaires circulated to subsidiary management and the control self-assessment (“CSA”) programme.
Risk response & risk reporting - The ERM committee holds regular meetings to discuss risk issues, new initiatives and reports material findings uncovered from risk monitoring. These meetings are thoroughly minuted and form part of the Board papers presented to the Board. Key risks exposures and statuses are also compiled in a risk reporting summary and submitted for Board review.
The top 5 risks the company faces are identified below:
The CSA programme established since 2011 provides a framework to obtain feedback on the state of internal controls. The programme requires subsidiaries to review and report annually on the effectiveness of controls and the control environment to HQ and significant findings are reported to the Board. Periodically, internal audit and independent reviews would be conducted to validate the self-assessments.
The Company has in place a whistle-blowing policy to empower employees with avenues to report suspected fraud, corruption, dishonest practices and other acts of misconduct. The Company will follow up on all reports and treat all information received confidentially to protect the identity (if available) and the interest of all whistle-blowers. For incidents of severe nature, the AC will be informed and an independent team reporting directly to the AC will be established accordingly. For incidents with less severity, the ERM committee comprising of the heads of various departments will oversee the matter raised. There has been no reported incident pertaining to whistle-blowing for FY2016.
Based on the system of internal controls established and maintained by the Group, work performed by the internal and external auditors, and reviews performed by Management, various Board Committees and the Board, the Board, with the concurrence of the Audit Committee are of the opinion that the Group’s internal controls, addressing financial, operational, compliance and information technology controls and risk management systems were adequate and effective as at 31 December 2016.
The Board has also received assurances from the Co-Chairman, Group CEO / Managing Director and Senior Group Financial Controller:
As at the date of this report, the AC comprises three independent and non-executive directors:-
The Chairman, Mr Lee Sen Choon, has more than 30 years of experience in accounting, auditing, taxation and corporate secretarial work. The other members of the AC possess experience in finance, legal, business management and are exposed to regular updates from the relevant regulators. They are considered to be well qualified by the Board to discharge their duties in the AC.
The AC assists the Board in discharging its responsibility to safeguard the Company’s assets, maintain adequate accounting records, develop and maintain effective systems of internal control.
The duties of the AC are as follows:
Interested Person Transactions ("IPT")
The AC has the authority to investigate any matter within its terms of reference and enjoys full access to and co-operation from Management to enable it to discharge its function properly.
The AC met with the external auditors without the presence of any executive director and Management personnel at least once in FY2016.
The AC has reviewed the non-audit services provided by the external auditors for FY2016 and is of the opinion that the provision of such services did not affect the independence or objectivity of the external auditors. Total fees amounted to $156,800 out of which $139,000 is for audit services and $17,800 is for non-audit services. As the percentage of fees for non-audit services is less than 50%, the AC has determined that the external auditors are independent.
In appointing the audit firms for the Company, its subsidiaries and significant associated companies, the Audit Committee and the Board are satisfied that the Group has complied with Listing Rules 712 and 715.
The AC has recommended to the Board, and the Board has accepted, the appointment of Ernst & Young LLP as the Group’s external auditors in place of RSM Chio Lim LLP for the current financial year ending 31 December 2017. There are no unresolved differences in opinion on material matters between RSM Chio Lim LLP and the Company or the Group, including matters which would have a material impact on the Group or its financial reporting for the financial year ended 31 December 2016. The proposed change in auditors from RSM Chio Lim LLP to Ernst & Young LLP will be tabled in the forthcoming AGM of the Company, and further information thereto is set out in the Appendix enclosed together with the Annual Report.
The AC members takes measures to keep abreast of the changes to accounting standards and issues which have a direct impact on financial statements through periodic meetings with the external auditors, briefings provided by professionals or external consultants as necessary.
Summary of AC’s activities in 2016
Financial Reporting Matters
In the review of the financial statements, the AC has discussed with management the accounting principles that were applied and their judgement of items that might affect the integrity of the financial statements. The following significant matters impacting the financial statements were discussed with management and the external auditor and were reviewed by the AC:
|Valuation of Inventory – $43 million
(27% of Group’s total assets)
The Audit Committee reviewed the methodology and assumptions used by the management in the valuation of inventory and determination of provision for inventory obsolescence.
The external auditors shared with the Audit Committee on their work performed, including their assessment on the appropriateness of management’s judgments applied in calculating the value of inventory provisions and the accuracy of such provision.
The Audit Committee was satisfied with the appropriateness of key assumptions and methodology adopted by the Group and that the relevant disclosures in the financial statements were appropriate.
|Impairment of intangible assets
– $6.2 million
The judgment in relation to the impairment of intangible assets, including goodwill relates primarily to the assumptions underlying the calculation of the value in use of the cash generating units (CGUs), being the achievability of the long-term business plan and the macroeconomics and related modeling assumptions underlying the valuation process.
The Audit Committee obtained assurance from management that detailed impairment testing had been undertaken using appropriate methodology and assumptions.
The Audit Committee also obtained report from the external auditors detailing their assessment on the methodology and assumptions adopted by management, including sensitivity testing on the determination of the recoverable amount of the goodwill.
The Audit Committee was satisfied with the appropriateness of the methodology and assumptions used and the disclosures in the financial statements of the Group.
The internal audit function of the Company is outsourced to an external consulting firm, who has unfettered access to all the Company’s documents, records, properties and personnel, including access to the AC.
The AC approves the hiring, removal, evaluation and compensation of the consulting firm. Based on risk assessments performed, greater emphasis and appropriate internal reviews are planned for high risk areas and material internal controls, including compliance with the Group’s policies, procedures and regulatory responsibilities. The internal audit plans are reviewed and approved by the AC annually.
The Internal Audit methodology adopted by our internal auditors is consistent with the requirements of The Institute of Internal Auditors.
The AC is satisfied that the internal audit function is adequately resourced and is independent of the activities it audits.
Best World believes in treating all Shareholders fairly and equitably. It aims to keep all Shareholders and other stakeholders informed of its corporate activities, including changes which are likely to materially affect the price or value of its shares, on a timely and consistent manner.
Shareholders are also given the opportunity to participate effectively and vote at general meetings of the Company, where relevant rules and procedures governing such meetings are clearly communicated to attendees.
Any notice of a general meeting of shareholders is issued at least 14 days before the scheduled date of such meeting. The Company’s AoA also allow any shareholder to appoint proxies during his absence, to attend and vote on his behalf at the general meetings.
Best World allows relevant intermediaries such as the Central Provident Fund Board or corporations which provide nominee or custodial services to appoint more than two proxies so that shareholders who hold shares through such bodies can attend and participate in general meetings as proxies.
The Company endeavors to communicate regularly, effectively and fairly with its shareholders.
The Company communicates information to its shareholders on a timely basis through:
In addition, the Company communicates regularly with investors and analysts via half yearly results briefing as well as via ad-hoc meetings and teleconferences in office.
Through its dividend policy, Management has also committed to distribute at least 30% of the company’s annual profit to shareholders in the form of dividends and / or bonus securities each year.
The Annual General Meeting (“AGM”) is the principal forum for dialogue with shareholders. All who wish to attend the AGM are welcome and are not restricted by the two-proxy rule. The Board encourages active Shareholder participation and practices an open question and answer session at which shareholders may raise questions or share their views regarding the proposed resolutions and the Company’s businesses and affairs. The chairman of the respective Board Committees and key management personnel are invited to attend the AGM and are present and available to address questions at general meetings. In addition, the external auditors of the Company are also present to address shareholders’ queries about the conduct of the audit and the preparation and content of the auditors’ report.
Each item of special business included in the notice of the meeting will be accompanied by an explanation of the effects of a proposed resolution. Unless the resolutions proposed at a meeting are interdependent and linked so as to form one significant proposal, separate resolutions shall be proposed for substantially separate issues at the meeting.
Minutes of general meetings that include substantial and relevant comments or queries from shareholders relating to the agenda of the meeting, and responses from the Board and Management will be prepared and made available to shareholders upon their request.
Resolutions are, as far as possible, structured separately and may be voted on independently. All polls are conducted in the presence of independent scrutineers.
For greater transparency and fairness in the voting process, voting at shareholders’ meetings were conducted by poll since 2013. This allows all shareholders present or represented at the meetings to vote on a one-share-one vote basis. Results are announced in detail, showing the number of votes cast for and against each resolution and the respective percentages. Electronic polling is not used due to the small turnout at AGM.