Cerebos

The Board is responsible for the success of the Company and is accountable to the shareholders while the Management is accountable to the Board.

The Board will provide the shareholders with a balanced and understandable assessment of the Company’s performance, position and prospects on a quarterly basis. This responsibility extends to interim and other price sensitive public reports, and reports to regulators (if required).

set values and standards of the Company and ensure that obligations to shareholders are understood;
provide entrepreneurial leadership, approve the strategic and financial objectives of the Company;
oversee the processes for risk management, financial reporting and compliance and evaluate the adequacy of internal controls;
review the performance of Management, approve the nominations to the Board of Directors and appointment of key executives, as may be recommended by the Nominating Committee;
approve the annual budget, major funding proposals, investment and divestment proposals of the Company;
review and endorse the framework of remuneration for the Board and key executives as may be recommended by the Remuneration Committee; and
assume responsibility for corporate governance framework of the Company.

Matters which are specifically reserved for the Board’s decisions are those involving interested person transactions (including, inter alia, conflict of interest issues relating to substantial shareholders of CPL and/or Directors), material acquisitions and disposals of assets, corporate or financial restructuring, issues of shares, dividends and other distributions to shareholders.

Interested person transactions between CPL and its subsidiaries (the “Group”) and Suntory Limited (CPL’s holding company) of a recurring nature and which relate to:

(1) provision of services such as research and development services, marketing services, management and advisory services, consultancy services, technical assistance and support and other related services;

(2) sale and purchase and/or supply of products or materials; and

(3) agreements in relation to trade and other marks, copyright, trade and business names, technology, technical know-how, processes and other intellectual property rights,

are covered under a shareholder’s general mandate which is subject to renewal annually at the General Meeting of CPL.

Specific Board approval is required for any investments and divestments with a gross value greater than S$5 million in total.

There are no material contracts entered into by the Company and its subsidiaries for the benefit of the Chief Executive Officer (“CEO”), or any director or controlling shareholder, either still subsisting at the end of the financial year or if not then subsisting, entered into since the end of the previous financial year.

Further information regarding the Board’s functions and details of the terms of reference of the respective Board committees are set out in the CPL Corporate Governance Policies Manual (“CPL CGM”), which was first approved on 28.2.2002 and subsequently revised on 24.11.2006, with approval of the Board.

The Board conducts regular scheduled meetings on a quarterly basis. Ad-hoc meetings are convened when circumstances require. If necessary, Board meetings may be conducted by way of telephone and video conferencing. The attendance of the Directors at meetings of the Board and Board committees, as well as the frequency of such meetings, are disclosed at the end of this Report.

The Company provides facilities for Directors to meet their relevant training needs. Each Director is provided with the CPL CGM and other procedural and control manuals containing all relevant Board and company policies, which are updated as and when necessary. The Company has a training budget that Directors and employees can tap on to fund participation at any course appropriate to the discharge of their duties.

The Company has adopted a policy, which welcomes Directors to seek explanations or clarifications from and/or convene briefings or informal discussions with the Management on any aspect of the Company’s operations or business. Necessary arrangements will be made for the briefings, informal discussions or explanations as
and when required by any Director.

Principle 2 : Board Composition and Balance

Presently, the Board comprises nine Directors, with six (6) Non-Executive Directors (of which three are independent) and three (3) Executive Directors. The names of the directors and their respective positions and status are:

Non-Executive and Independent Directors
Teo Chiang Long (Chairman)
Raja Tan Sri Muhammad Alias Bin Raja Muhammad Ali (Raja M Alias)
Lucien Wong Yuen Kuai

Non-Executive and Non-Independent Directors
Akinobu Kodaira
Hideo Tsujimura
Hong Sik Park

Executive and Non-Independent Directors
Eiji Koike
Ramlee Bin Buang
Lackana Leelayouthayotin

The Nominating Committee (NC) reviews annually, whether or not a director is independent and adopts the Code’s definition of what constitutes an independent director in its review. As a result of the NC’s review for FY2007, the NC is of the view that the three Non-Executive and Independent Directors of CPL are independent directors within the meaning of the Code, that there is a strong and independent element on the Board which is able to exercise objective judgment on corporate matters independently, in particular, from Management, and that no individual or small group of individuals dominate the Board’s decisionmaking process.

The NC is also of the view that the current Board comprises persons who as a group, provides core competencies in areas such as legal, accounting and finance, research and development expertise, business and management experience, industry knowledge, strategic planning experience and customer-based experience or knowledge necessary to meet the Company’s objectives.

Key information regarding the Directors is provided under the “Board of Directors” section in the annual report.

While the Company’s Articles of Association allow for the appointment of a maximum of 15 Directors, the NC is of the view that the current Board size of 9 Directors out of which 3 are Independent Directors (that is, one third of the Board size) is appropriate and will facilitate effective decisionmaking, taking into account the nature and scope of CPL’s operations.

The Board applies the principle of clear division of responsibilities at the top of the Company – the working of the Board and the executive responsibility of the Company’s business are separated to ensure a balance of power and authority.

The roles of the Chairman and CEO in the Company are separate. The Chairman is a Non-Executive and Independent Director whilst the CEO is an Executive Director. The Chairman, being a Non- Executive Director, leaves the daily running of the business to the CEO although he bears responsibility for the workings of the Board, ensuring its effectiveness in all aspects of its role. The Chairman and the CEO are not related.

The Chairman manages the business of the Board and the Board committees and ensures that procedures are introduced from time to time in accordance with the Code and the CPL CGM. He ensures that Board meetings are held as and when necessary and ensures that Board members are provided with complete, adequate and timely information from the Management. As a general rule, Board papers are sent to Directors at least 8 days in advance in order for Directors to be adequately prepared for the meeting. Management staff who have prepared the papers, or who can provide additional insight into the matters to be discussed, are invited to carry out presentations or attend the Board meeting at the relevant time.

In order to ensure that the Board is able to fulfill its responsibilities, Management provides the Board members with balanced and understandable management accounts and other financial statements of the Company’s performance, position and prospects within 25 days after the end of each calendar month.

Board meetings are also convened to review and approve the Company’s quarterly financial statements, the Annual Budget and Mid-Term Plan. Background or explanatory information relating to matters which require the Board’s approval and/or review, copies of disclosure documents, budget, forecasts and quarterly reports of the Company’s activities are also provided to the Board. In respect of the budget, any material variance between the budget, the latest forecast and the actual results are disclosed and explained. From time to time, the Management will brief the Directors at Board meetings when there are changes in regulations and/or accounting standards, which would have an impact on the disclosure obligations or the financial position of the Company.

Since 2003, all analysts’ reports on the Company have been forwarded to the Directors on an ongoing basis, as and when received by the Company. The Directors have also been provided with the name and contact particulars of the Company’s senior management and Company Secretary to facilitate separate and independent access.

Should the Directors, whether as a group or individually, require independent professional advice in the furtherance of their duties, the Company Secretary or relevant member of the Company’s Management Team will, upon direction by the Board, appoint a professional advisor selected by the Directors or the individual, to render the necessary professional advice. The cost of such professional advice will be borne by the Company.

The Company Secretary attends all Board and Board committee meetings and is responsible for ensuring that Board and Board committee procedures are followed. It is the Company Secretary’s responsibility to ensure that the Company complies with the requirements of the Companies Act, Cap. 50. Together with the other Management staff of CPL, the Company Secretary is also responsible for compliance with the SGX-ST Listing Manual and all other rules and regulations, which are applicable to the Company.

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BOARD COMMITTEES
To facilitate effective management, certain functions have been delegated to various Board committees, each with its own terms of reference.

Nominating Committee (NC)
The NC comprises three Directors, namely, Teo Chiang Long (Chairman), Lucien Wong Yuen Kuai and Hong Sik Park, all of whom are non-executive Directors. A majority of them, including the Chairman of the NC, are independent of Management, not associated with substantial shareholder and free from any business or other relationships, which may interfere with the exercise of their independent judgment.

The rules and regulations governing the NC’s establishment are set out in the CPL CGM.

make recommendations to the Board on appointments or re-appointments of all Board and Board committee members, including to recommend the Chairman for the Board and for each Board committee;
evaluate the effectiveness of the Board as a whole and assess the contribution by each individual Director, to the effectiveness of the Board. (This assessment will also take into consideration whether a Director who has multiple board appointments is able to, and has been adequately carrying out his duties as a Director. Internal guidelines have been adopted that address the competing time commitments that are faced when Directors serve on multiple boards);
determine annually whether or not a Director is independent;
make recommendations to the Board on the appointment of representatives from CPL to directorships on the Boards of subsidiaries and associated companies of CPL; and
review and recommend to the Board on the appointment of key executives, including but not limited to Group and Divisional CEOs.

Directors are presently appointed by way of Board resolutions, after the NC approves their appointment. Such new Directors must submit themselves for re-election at the following AGM of the Company. During the year, the NC met and determined the independence of the Directors in line with the undertakings described in the Code.

New Directors are presently appointed by way of Board resolutions, after the NC has reviewed and nominated them for appointment. The NC considers each candidate for directorship carefully, taking into consideration the qualification and experience of the candidate, his/her ability to increase the effectiveness of the Board and to add value to the Group’s business in line with its strategic objectives.

New Directors who are appointed by Board resolution will submit themselves for re-election at the following AGM of the Company. Article 100 of the Articles requires one third of the Board to retire by rotation at every AGM. This means that no Director stays in office for more than three years, before being subject to re-election by shareholders.

Annually, all Directors will assess the effectiveness of the Board as a whole and the results of each assessment will be considered by the NC, which has the responsibility of assisting the Board in the evaluation of the Board’s effectiveness. Factors such as the structure and size of the Board, the manner in which Board meetings are conducted, the Board’s access to information, the Company’s internal procedure and controls, the performance of Management and shareholders communication are applied in the evaluation of the Board performance as a whole.

The NC, in recommending the re-election/reappointment of Directors, who are subject to retirement at the Annual General Meeting in accordance with the Articles or the Companies Act, Cap. 50, had taken into consideration the contribution of such Director to the effectiveness of the Board, his/her participation and involvement in the Board meetings and Board committees meetings, qualification and experience as well as his/her directorships and major appointments in other companies.

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.

Principle 12 : Internal Controls
The AC comprises four members, namely Lucien Wong Yuen Kuai (Chairman), Teo Chiang Long, Raja M Alias and Hong Sik Park. All the members of the AC are non-executive Directors and a majority of them, including the Chairman, are independent Directors. The members of the AC have experience in managerial positions in the legal, banking and finance industries. The NC is of the view that the members of the AC have sufficient financial management expertise and experience to discharge the AC’s functions.

The AC performs the following functions in accordance with section 201B(5) of the Companies Act, Cap 50 and CPL CGM:

reviews with the external auditors, their audit plan, evaluation of the accounting controls, audit reports and any matters which the external auditors wish to discuss;
reviews with the internal auditors at least annually, the adequacy of the internal audit procedures and their evaluation of the effectiveness of the overall internal control systems, including financial, operational and compliance controls and risk management;
reviews the quarterly and annual financial statements, including announcements to shareholders and the SGX-ST prior to the submission to the Board so as to ensure the integrity of the Company’s financial statements;
reviews any significant findings of internal investigations;
makes recommendations to the Board on the appointment of external auditors, the audit fee and any questions of their resignation or dismissal;
reviews and approves the appointment, replacement, reassignment or the dismissal of the Head of the Group Internal Audit (GIA) department;
reviews the assistance given by the Company’s officers to the external and internal auditors;
reviews interested person transactions to ensure that internal control procedures approved by the shareholders are adhered to;
reports actions and minutes of the AC meetings to the Board of Directors with such recommendations as the AC considers appropriate; and
conducts an annual review of the independence and objectivity of the Company’s external auditors, including the volume of non-audit services supplied by the external auditors, to satisfy itself that the nature and extent of such services will not prejudice the independence and objectivity of the external auditors before confirming their re-nomination.

The AC has the express power to conduct or authorise investigations into any matters within its terms of reference, has full access to and co-operation by Management. It has full discretion to invite any Director or executive officer to attend its meetings, and to ensure that adequate resources are available to enable it to discharge its function properly.

The Company has a whistle blowing policy, which together with the Company’s Code of Ethics, provide well-defined and accessible channels in the Group through which employees may raise concerns about improper conduct within the Group.

Each member of the AC shall abstain from voting on any resolution and making any recommendations and/or participating in any deliberations in respect of matters in which he is interested.

The AC meets with the external auditors, without the presence of Management, at least once a year. Ad-hoc meetings may be carried out from time to time, as circumstances require.

The Company’s externalauditors, PricewaterhouseCoopers (“PwC”), carry out in the course of their statutory audit, a review of the effectiveness of the Company’s material internal controls focusing primarily on financial controls, to the extent set out in their audit plan. Material non-compliance and internal control weaknesses noted during their audit, and the external auditors’ recommendations to address such non-compliance and weaknesses, are reported to the AC. The Management, with the assistance of GIA, follows up on PwC’s recommendations as part of its role in the review of the Company’s internal control systems. The Board is satisfied that the Company’s internal controls are adequate.

The AC has reviewed the independence of PwC including the volume of non-audit services performed by PwC and is satisfied with PwC’s position as an independent external auditor.

The Company has institutionalised the Company’s overall risk management processes under a formal Enterprise Risk Management (“ERM”) Framework. The AC is undertaking the responsibilities of the Board Risk Management Committee (“RMC”) and receives updates from the Company’s risk manager on the progress of the implementation of ERM. The Directors have identified that the recognition and increased awareness of risk management in the operational and business units would be key factors in implementing a successful ERM programme in the Group. During the year, the Group’s key subsidiaries have included risk management as part of their local board meetings, which are attended by certain members of the Board.

There are six (6) staff in GIA department including the Vice President, Group Internal Audit. The GIA department reports directly to the chairman of the AC on audit matters, and to the CEO on administrative matters. The AC reviews GIA’s reports and its activities on a quarterly basis. The AC also approves the annual GIA plans and reviews its resources to ensure that GIA has the capabilities to adequately perform its functions. The AC is of the view that GIA is adequately resourced and has appropriate standing within the Group.

REMUNERATION COMMITTEE (RC)
Principle 7 : Procedures for Developing Remuneration Policies

The RC comprises three Directors, namely Teo Chiang Long (Chairman), Lucien Wong Yuen Kuai and Hong Sik Park. All the members of the RC are non-executive Directors and a majority of them, including the Chairman, are independent of Management and free from any business or other relationships, which may interfere with the exercise of their independent judgment. All three members of the RC are experienced and knowledgeable in executive compensation. RC has access to the Company’s Human Resources Department and, if so required, external consultant for expert advice on executive compensation.

recommend to the Board, base salary levels, benefits and incentive programs, and identify components of salary which can best be used to focus management staff on achieving corporate objectives;
approve the structure of the compensation programme (including but not limited to Directors’ fees, salaries, allowances, bonuses, options and benefits in kind) for Directors and key executives to ensure that the programme is competitive and sufficient to attract, retain and motivate key executives of the required quality to run the Company successfully;
review, on an annual basis, the compensation packages of the Company’s Directors, CEO and key executives and determine appropriate adjustments; and
administer the Company’s Executives’ Share Option Scheme (ESOS) by way of delegation to the Share Option Scheme Committee which is responsible for approving and administering the ESOS according to its Rules.

The chairman of the RC reviews, for recommendation to the Board, the specific remuneration package for an Executive Director or key executives upon recruitment. Thereafter, the RC reviews subsequent increments, awards of share options under the ESOS and variable bonuses where these payments are discretionary. There are
appropriate and meaningful measures in place for the purpose of assessing the performances of Executive Directors and key executives.

In setting remuneration packages, the RC takes into account the respective performances of the Group and the individual. In its deliberations, the RC takes into consideration, remuneration packages and employment conditions within the industry and benchmarked against comparable companies.

The CEO’s remuneration package includes a variable bonus element and share options, both of which are performance-related and which have been designed to align his interests with those of shareholders, and to link rewards to his individual performance together with that of the Group.

Executive Directors do not receive directors’ fees but they are eligible to participate in the ESOS. The RC will review and approve the quantity of share options to be granted based on predetermined performance criteria. The options are exercisable over a ten-year period including a vesting period of two years. Executive Directors are encouraged to hold their shares beyond the vesting period, subject to the individual’s need to finance the costs of acquisition and associated tax liability.

The Chairman, who is non-executive, and all Non- Executive Directors, are paid directors’ fees, subject to shareholders’ approval at the AGM. The RC recommends to the Board, fees payable to Non-Executive Directors that are appropriate to the level of contribution, taking into account the effort and time spent and the responsibilities of the Directors. The fees paid to the Company’s Non-Executive Directors are also benchmarked against nonexecutive directors’ fees paid by companies in the same industry and with similar scale of operation. The RC is of the view that the Company’s Non-Executive Directors are not over-compensated to the extent that their independence may be compromised.

The Board has adopted the policy that the Board’s annual remuneration report shall be made in consultation with the Chairman of the Board and endorsed at Board level, as specified in the CPL CGM.

The Company had adopted quarterly reporting since 2003. The Company currently holds a media and analysts briefing upon release of its half-year and full-year results. This briefing is simultaneously webcast to the public and all shareholders via the Company’s website. Quarterly results will be published through the SGXNET, news releases and the Company’s website. All information on the Company’s new initiatives will be first disseminated via SGXNET followed by a news release, which will also be available on the website. In addition to the media and analyst briefings, the Company has taken part in a road show to several countries in Europe.

The Company does not practise selective disclosure. Price sensitive information is first publicly released, either before the Company meets with any group of investors or analysts or simultaneously with such meetings. Results and annual reports are announced or issued within the period prescribed by the SGXST and are available on the Company’s website.

The Company has a Corporate Affairs Department, which communicates with its investors on a regular basis and attends to their queries. All shareholders of the Company receive a copy of the annual report and notice of AGM. The notice of AGM is also advertised in newspapers and made available on the website. At AGMs, shareholders are given the opportunity to air their views and ask questions in connection with information stated in the annual report of the Company. The Chairman of each of the Board committees will be present and available to address questions at general meetings. The external auditors will also be present to assist the Directors in addressing any relevant queries by shareholders. Separate resolutions are proposed for each distinct issue at general meetings.

The Articles allow a shareholder of the Company to appoint one or two proxies to attend and vote at all general meetings on his/her behalf. The Company has not amended its Articles to provide for absentia voting methods, which requires elaborate and costly implementation of a foolproof- system, because the need for such voting methods does not presently arise.

DEALINGS IN SECURITIES
The Company has issued an Internal Compliance Code on Securities Transaction to all Directors and employees of the Company, setting out a code of conduct on dealings in the Company’s shares by these persons. The code of conduct relates to, inter alia, insider trading prohibitions under the Securities and Futures Act, Cap. 289, the disclosure requirements of the SGX-ST and prohibitions on Directors and employees from dealing in the Company’s shares during the period commencing two weeks before the announcement of the Company’s quarterly results or one month before the announcement of the Company’s full year results, and ending on the date of the announcement of the relevant results.

Directors are required to report to the Company Secretary whenever they deal in the Company’s shares and the latter will make the necessary announcements in accordance with the requirements of the SGX-ST.

With the above in place, the Company has complied, and is committed to comply, with the Best Practices Guide issued by the SGX-ST.

INTERESTED PERSON TRANSACTIONS POLICY
The Company has adopted an internal policy in respect of any transaction with interested persons and has set out the procedures for review and approval of the Company’s interested person transactions, including transactions with Suntory Limited, Kotobuki Realty Company and its associates, which are covered by a Shareholders’ Mandate approved at each General Meeting.

CPL’s disclosure according to Rule 907 of the SGXST Listing Manual in respect of interested person transactions for the financial year ended 30 September 2007 is stated in the following table:-

Over the years Cerebos has built a solid reputation. We have done this by earning the respect of those in our industry and of the business community.

Quite apart from our products' strong credibility and international quality standards, our sterling financial track record and our sound core competencies, there is one extremely crucial business standard that has helped us to remain at the forefront of business standing - that is our commitment to adhere to the highest ethical and professional standards at all times.

We have always conducted our business based on a clear dedication to integrity and transparency. We recognised very early on that companies would be judged not purely on their financial performance alone. That recognition has prompted the Board of Directors and myself to create certain support mechanisms to make sure that our strong reputation not only remains untarnished but also strengthens further.

The Cerebos Code of Ethics is the formal mechanism that we have developed to make an unequivocal and public commitment to what we believe in. In it we have set out Cerebos' six core ethical principles namely : Integrity, Transparency, Social Responsibility, Fairness, Respect for Diversity and Trust.

The Code of Ethics contains practical guidelines for all employees of Cerebos Pacific Limited including its subsidiaries and provides direction on the ethical behaviour that we expect of our people.

I trust that you will familiarise yourself with the Code and to ensure that the spirit of the Code is reflected in our daily behaviour.

Do refer to it whenever you feel unsure and Do use the One Minute Test liberally.
Do approach members of the Ethics Committee to clarify any concerns.

Finally, do sign the acknowledgement letter as a personal declaration that we will conduct our business responsibly and with respect for the needs of all our stakeholders including our employees, customers, shareholders, suppliers as well as the communities and the natural environment within which we operate.

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