EMS Energy Limited Annual Report 2014

8/9/2019 EMS Energy Limited Annual Report 2014

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Seizing Opportunities

A N N U A LR E P O R T 2014


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Corporate Profile 01

Chairman’s Statement 02

Operations & Financial Review 04

Financial Highlights 06

Board of Directors 08

Executive Officers 10

Corporate Structure 12

Corporate Governance Report 13

Directors’ Report 32

Statement by Directors 37

Independent Auditor’s Report 38

Consolidated Statement of 40Comprehensive Income

Balance Sheets 41

Consolidated Statement of Changes 42in Equity

Consolidated Statement of Cash Flows 43

Notes to the Financial Statements 44Analysis of Shareholdings 104

Notice of Annual General Meeting 106

Proxy Form

Contents

This annual report has been prepared by the Company and its contents have been reviewed by the Company’s sponsor, PrimePartners Corporate FinancePte. Ltd. (the “Sponsor”), for compliance with the Singapore Exchange Securities Trading Limited (the “SGX-ST”) Listing Manual Section B: Rules ofCatalist. The Sponsor has not veried the contents of this annual report.

This annual report has not been examined or approved by the SGX-ST. The Sponsor and the SGX-ST assume no responsibility for the contents of thisannual report, including the accuracy, completeness or correctness of any of the information, statements or opinions made or reports contained in thisannual report.

The contact person for the Sponsor is Mr Thomas Lam, Associate Director, Continuing Sponsorship, at 16 Collyer Quay, #10-00 Income at Raffles,Singapore 049318, telephone (65) 6229 8088.


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Dear Shareholders,

On behalf of my fellow Board of Directors, I present toyou the Annual Report for the Financial Year ended 31December 2014 (“FY2014”).

The steep fall in crude oil prices have resulted in nancialand economic uncertainty worldwide and led to delaysand margin pressure in the offshore and marine (“O&M”)sector. Compounding the situation, the restrictions onforeign workers have led to a labour shortage whichhas been particularly felt among Singapore-basedO&M players. Our performance in FY2014 has to beseen against this set of exceptional challenges. At thesame time the year under review is also notable formajor strategic actions being executed, not least thecommencement of construction activity for our newwaterfront facility in Tuas, Singapore. These actions setthe stage for the transformation of EMS Energy to deliverlarge-scale projects as we move up the value chain tobecome an integrated O&M services player.

FY IN REVIEWDuring FY2014 the Group executed its growth strategyannounced in November 2013 that seeks to increasethe size and value of orders, improve prot margins aswell as to improve internal efficiencies within the Group.FY2014 saw some indication that our strategic thrustsare gaining traction. We have implemented policies tostrengthen our core team and also built momentum insecuring larger orders.

Subsequent to the nancial year-end, we won a secondcontract for a Derrick Equipment Set (“DES”) from ourmajor shareholder Koastal Industries Pte Ltd (“Koastal”).The DES will be manufactured and delivered inaccordance to the American Petroleum Institute (“API”)quality standards that we have attained since February

2011, which ensures that our products and services areof the highest quality. The repeat order underscores theGroup’s capabilities and ability to deliver even amidst achallenging operating environment.

Despite the challenging operating environment, theGroup reported a net prot attributable to equity holdersof the Company of S$0.83 million in FY2014.

Earnings per share, on a fully diluted basis, was 0.08Singapore cent while net asset value per share stood at2.54 Singapore cents as at 31 December 2014.

EMS ENERGY LIMITED ANNUAL REPORT 201402

“These actions setthe stage for thetransformation ofEMS Energy to deliverlarge-scale projects as wemove up the value chain to

become an integrated O&Mservices player.”

Chairman’s Statement



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that the entire industry is experiencing project delaysand margin pressure.

Apart from continuing to execute our corporate strategy,our other focus will be to ensure that the Tuas facilitywill be completed on schedule. Indeed, its completionwill provide synergies which will crystallise many of theefforts of our strategy execution.

The Group is concurrently looking out for strategicalliances or possible mergers and acquisitionsleveraging on the strong global network of our parentcompany, Koastal Group. This will allow us access to

new markets while growing our existing business.

Barring any unforeseen circumstances, and in view of thethree strategic thrusts being implemented, we expectthe operational performance in FY2015 to improve fromthat in FY2014.

APPRECIATIONThe Board of Directors would like to take this opportunityto record our sincere thanks to our customers, businesspartners, shareholders and other stakeholders for theircontinued support and trust in this challenging year. Wewould also like to extend our appreciation and gratitude

to the management and employees of the Group fortheir leadership, contribution and commitment to thesuccess of the Group.

TING TECK JINExecutive Chairman & Chief Executive Officer 18 March 2015

WATERFRONT FACILITY IN TUASDuring the year under review we commencedconstruction of our new waterfront facility – a 250,130square foot land parcel in Tuas, Singapore, that isve times bigger than our current facility. Expected tocomplete by 1H2016, the facility will allow the Group toachieve substantial cost savings and a higher capacityto take on larger higher-value projects, leading toenhanced margins. More importantly, the facility allowsus to scale up the value chain as we evolve to becomean integrated O&M services player providing previouslyoutsourced work such as machining, refurbishing andrepairing. Going forward, one of our focus areas will be

on providing maintenance related services.

OTHER CORPORATE DEVELOPMENTSDuring the year under review, the Group completeda one-for-one rights issue at S$0.02 per share on 3October 2014, raising S$14.59 million in net proceeds.The proceeds have allowed us develop our newwaterfront facility as well as nance our order book.

OUTLOOKIn view of the tough operating conditions in Singaporeas outlined earlier, the Group intends to build on itssupply chain capability and sub-contract some activities

to lower-cost locations.

The second DES contract from Koastal secured inFebruary 2015, has lifted our order book to approximatelyS$67 million as I write this message. We are reasonablycondent of securing a third DES contract either fromKoastal or from a third-party in FY2015. This pipeline willbuild momentum in our efforts to increase the size andtype of orders (larger projects) even though we realise

EMS ENERGY LIMITED ANNUAL REPORT 2014 03


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BACKGROUNDThe nancial year ended 31 December 2014 (“FY2014”)was a challenging period as operating environmentof the offshore and marine sector remained underpressure amidst falling oil prices and a tight Singaporelabour market. We continue to meet these challenges byleveraging on our core competencies and proven trackrecord while executing our growth strategy outlined inNovember 2013.

As we seek out larger, higher-value projects whilescaling up the value chain, we concurrently growcapabilities to become an integrated offshore and

marine services player. Our new waterfront facility –targeted to be completed by 1H2016 – will complementthis strategy by allowing us to take on larger orders thattypically have higher margins. In parallel with the questto improve margins, we are exploring to sub-contractcertain activities in cost competitive countries.

FINANCIAL PERFORMANCEThe Group’s revenue grew 131.1% to S$48.81 million inFY2014 from S$21.12 million in FY2013 mainly due toan increase in work done for projects secured betweenthe six months ended 31 December 2013 (“2H2013”)and the six months ended 30 June 2014 (“1H2014”), in

particular, for the Derrick Equipment Set (“DES”) projectas announced on 24 September 2013.

The Group’s cost of sales increased to S$42.69 millionin FY2014 compared to S$16.94 million in FY2013.Despite the increase in revenue, gross prot margindecreased to 12.5% in FY2014 from 19.8% in FY2013reecting higher material prices and higher labourcosts (due to a shortage as well as more competitiverates) in Singapore.

Other income reduced to S$1.23 million in FY2014compared to S$7.88 million in FY2013 in the absence

of a one-time gain on the disposal of a subsidiary ofapproximately S$7.09 million and doubtful debtsrecovered of approximately S$0.52 million recorded inFY2013, partially offset by the foreign exchange gain ofS$0.67 million recorded in FY2014.

Administrative expenses declined 18.24% or S$1.64million to S$7.35 million in FY2014 from S$8.91million in FY2013 in the absence of a provision fordoubtful receivable recorded in the prior year ofS$0.52 million as well as a reduction in staff costs byapproximately S$1.43 million due to lower headcountof administrative staff and the absence of a provision

for doubtful receivable of S$0.52 million recorded inFY2013. These reductions were partially offset by theincrease in approximately S$0.34 million in lease

charges payables for the Group’s new waterfrontfacility.

As a result of the above, the Group’s net prot attributedto equity holders of the Company was S$0.83 million inFY2014 compared to S$4.35 million for FY2013.

CASH FLOWS AND FINANCIAL POSITIONSThe Group’s cash and cash equivalents increased toS$2.43 million as at end FY2014 compared to S$0.44million as at end FY2013. The Group will continueto improve its operating cash ow position whileexploring opportunities for fund raising.

Net cash used in operating activities amounted toS$10.51 million in FY2014 compared to S$12.29 millionin FY2013. The cash used in operating activities forFY2014 were mainly attributed to cash of S$33.89million and S$1.65 million used in the nancing of tradeand other receivables and bills payable respectively,which were offset by the increase in nancing from anincrease of S$24.88 million in trade and other payables.

Net cash used in investing activities was S$3.44million in FY2014 against net cash inow from investingactivities of S$5.56 million in FY2013. The higher cash

used in FY2014 was mainly due to the acquisition ofplant and equipment as well as construction of theGroup’s new waterfront facility whereas the cashprovided by investing activities in FY2013 was mainlyattributed to the net proceeds of S$5.94 million fromthe disposal of a subsidiary.

Net cash inow from nancing activities was S$15.95million in FY2014 compared to S$4.00 million ofnet cash inow in FY2013. The net cash provided bynancing activities in FY2014 was mainly attributedto the net proceeds of approximately S$14.59 millionraised in October 2014 pursuant to the Company’s

issuance of a renounceable non-underwritten RightsIssue and the reduction in xed deposits of S$1.53million pledged with banks for the Group’s borrowings,partially offset by a S$0.17 million repayment of termloan in FY2014.

ALLOTMENT AND ISSUANCE OF THE RIGHTS SHARESOn 3 October 2014, the Group issued 740.4 millionnew ordinary shares from an oversubscribed one-for-one rights issue of S$0.02 per share, which raised netproceeds of S$14.59 million. The proceeds were usedfor the development of the Group’s new waterfrontfacility and to nance its order book and workingcapital. Following the allotment and issuance of theRights Shares, the total number of issued shares hasincreased from 740,354,802 to 1,480,709,604.

Operations & Financial Review



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Overall the net assets position of the Groupimproved by S$15.89 million to S$37.60 millionas at end FY2014 from S$21.71 million as atend FY2013 while the Group’s net asset valueper share as at 31 December 2014 was 2.54Singapore cents, compared to 2.93 Singaporecents as at 31 December 2013.

WATERFRONT FACILITY As announced in February 2014, we haveentered into an agreement to lease from JurongTown Corporation a 23,237.88 square meterparcel of land at Tuas South where we areconstructing our new waterfront facility – whichis ve times bigger than our current premisesand has a 106-meter waterfront boundary.The facility will allow us to take on largerengineering projects and will house previouslyoutsourced services – such as machining,refurbishing, repairing and assembly of largeoffshore and subsea structures. Moreover, thefacility will be integrated and thus reducing ourdependence on third-party sub-contractors.

Apart from additional offerings, this strategicmove sets the stage for the Group to transforminto an integrated offshore and marine servicesplayer with a focus on maintenance-relatedservices. We intend to pursue larger higher-value projects that offer higher margins even aswe grow our capabilities to scale up the valuechain.

Construction on the facility has commencedin November 2014 and as at the latest date,construction of approximately half or 3,000square meters out of a total 6,000 squaremeters testing facility for DES has beencompleted. The completion of the facility willaccelerate the Group’s strategic shift, allowingfor substantial cost savings and a highercapacity to take on larger higher-value projects.Barring any unforeseen circumstances, theGroup expects the facility to be completed in1H2016.

05EMS ENERGY LIMITED ANNUAL REPORT 2014


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“The completion of the facility will accelerate the Group’sstrategic shift, allowing for substantial cost savings and ahigher capacity to take on larger higher-value projects.”

06 EMS ENERGY LIMITED ANNUAL REPORT 2014


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As at 31 December 2014 FY2012 FY2013 FY2014

Total Assets (S$’000) 49,577 38,317 76,604

Total Liabilities (S$’000) 35,136 16,604 39,004

Shareholders Equity (S$’000) 14,441 21,713 37,600

Gearing Ratio (a)

(a) Total borrowings divided by shareholders’ equity

0.52 0.27 0.1

FY2012 FY2013 FY2014

ContinuingOperations

DiscontinuedOperations





Earnings/(loss) per ordinary share

attributable to equity holders of the

Company (Singapore cents) (b) (3.48) 0.66 0.40 0.09 0.08 –

(b) Based on weighted average

number of ordinary shares in issue 600,354,802 600,354,802 829,926,275 829,926,275 1,073,236,829 –

Net assets per share (Singapore cents)(c)

2.41 – 2.93 – 2.54 –(c) Based on number of ordinary

shares in issue as at year end 600,354,802 – 740,354,802 – 1,480,709,604 –

Net Prot(S$’000)Revenue(S$’000) Gross Prot(S$’000)

(19,938)

3594,179

18,68921,115

2012 2013 2014 2012 2013 20142012 2013 2014

6,115

3,616 7383,978 825

48,807

Continuing Operations Discontinued Operations

Financial Highlights



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TING TECK JIN

Executive Chairmanand Chief ExecutiveOfficer

LIM POH BOON

Non-Executive andIndependent Director

Board of Directors


Mr Ting, 47, joined the Board on 6 December 2006 as Executive Chairman and assumedthe role of Chief Executive Officer on 19 June 2007. He was last re-elected in April 2012.

Mr Ting is responsible for the strategic corporate direction and development of theGroup. He also oversees business development and operations in his role as Directorof EMS Energy Solutions Pte Ltd. Mr Ting is also Managing Director of Koastal IndustriesPte Ltd, a Singapore-based group dealing in trading and marine projects in the region,with a network of offices in Vietnam including a subsidiary Koastal Eco Industries CoLtd (in Vietnam) where he is Chairman.

Mr Ting has some 20 years’ experience in the offshore and marine engineeringindustry. He spent a few years in Keppel Group shipyard operations in Singapore andVietnam before founding Koastal Industries Pte Ltd in 1997. An engineer by training,Mr Ting holds a Bachelor of Engineering in Marine Technology (First Class Honours)degree from Newcastle University, United Kingdom.

Mr Lim, 61, joined the Board on 1 June 2007 as Non-Executive and Non-IndependentDirector, and was re-designated as Independent Director since FY2012. He was lastre-elected in April 2014.

Mr Lim is active in many consultancy corporate nance projects and also operates anancial payment service business in Malaysia and Hong Kong. He has more than 30years’ experience in operations as well as compliance and risk management in variousbusiness sectors.

Mr Lim is currently the Honorary Treasurer of the Chinese Chamber of Commercein Batu Pahat, Johor, Malaysia; an associate member of the Malaysian Institute ofChemistry; a National Council Member and Deputy Chairman of Agriculture andPrimary Industries Committee of The Associated Chinese Chambers of Commerceand Industry of Malaysia; a Fellow of the Institute of Chartered Secretaries and

Administrators, United Kingdom; a Fellow of the Institute of Financial Accountants,United Kingdom; and a senior associate member of the Australian and New ZealandInstitute of Insurance and Finance.

Mr Lim holds a Bachelor’s degree in Chemistry from Universiti Sains Malaysia and aMBA from Heriot-Watt University in Edinburgh, United Kingdom.


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UNG GIM SEI


LIM SIONG SHENG



Mr Ung, 75, joined the Board on 31 August 2007 as a Non-Executive and IndependentDirector. He was last re-elected in April 2014. Mr Ung is currently a director of aU.S.-Singapore joint venture law rm, Duane Morris & Selvam LLP, specialising in thepractice of Intellectual Property.

Prior to taking up law, Mr Ung started his career with key positions at Nanyang Siang Pau,Singapore Press Holdings and the Hong Kong Sing Tao Newspaper Group. He is the VicePresident of the Singapore-China Friendship Association, the Aw Boon Haw Foundation(PRC), and Tan Kah Kee Foundation where he is also the Legal Advisor. Mr Ung is alsocurrently an Independent Director of SGX-listed Informatics Education Ltd.

Mr Ung holds a Bachelor of Arts in Economics degree from the National University ofSingapore, a Common Professional Examination in Law from the UK, a graduate Diplomain Singapore Law from the National University of Singapore and a Master of Law from theCity University of Hong Kong.

Mr Lim, 64, joined the Board on 1 June 2008 as a Non-Executive and IndependentDirector. He was last re-elected in April 2013.

Mr Lim is presently a director of the Shangyew Public Accounting Corporation where heis responsible for audit, tax, liquidation, consulting and accounting matters undertakenby the corporation and has over 30 years of experience in the related elds.

Mr Lim is a Fellow of the Association of Chartered Certied Accountants, United Kingdom,and a Fellow of the Institute of Singapore Chartered Accountants. He is also a Fellow ofthe Certied Public Accountant, Australia, and a Fellow of the Insolvency PractitionersAssociation of Singapore. In addition, Mr Lim also holds membership as an AccreditedTax Advisor (Income Tax & GST) in the Singapore Institute of Accredited Tax ProfessionalsLimited (SIATP).


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PATSY MAHChief Financial Officer EMS Energy Limited

Ms Mah, 47, joined the Group as Chief Financial Officer(CFO) on 1 February 2013, and oversees the Company’snancial matters.

Ms Mah has over 20 years of experience dealingwith bankers, auditors and statutory boards and wasalso involved in business mergers and acquisitions,group restructuring matters and securing capital andfunding for businesses. She previously held seniormanagement positions at several publicly-listed andprivately-held companies in Singapore.

Ms Mah is a member of the Institute of SingaporeChartered Accountants.

TING TECK JINExecutive Chairman and Chief Executive Officer EMS Energy Limited

Mr Ting, 47, joined the Board on 6 December 2006as Executive Chairman and assumed the role of ChiefExecutive Officer on 19 June 2007.

Mr Ting is responsible for the strategic corporatedirection and development of the Group. He alsooversees business development and operations inhis role as Director of EMS Energy Solutions Pte Ltd.Mr Ting is also Managing Director of Koastal IndustriesPte Ltd, a Singapore-based group dealing in tradingand marine projects in the region, with a network ofoffices in Vietnam including a subsidiary Koastal EcoIndustries Co Ltd (in Vietnam) where he is Chairman.

Mr Ting has some 20 years’ experience in the offshoreand marine engineering industry. He spent a few yearsin Keppel Group shipyard operations in Singapore andVietnam before founding Koastal Industries Pte Ltd in1997. An engineer by training, Mr Ting holds a Bachelorof Engineering in Marine Technology (First ClassHonours) degree from Newcastle University, United

Kingdom.

Executive Officers



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WONG HON CHENGVice President, Rig SolutionsEMS Energy Solutions Pte Ltd

Mr Wong, 36, was appointed Project Manager on 24May 2010, and Vice President for the Group’s rigsbusiness unit since May 2013. As Vice President,Mr Wong is responsible for sales, cost control andproduct development of the business unit.

Prior to his appointment in EMS Energy, Mr Wongwas an engineer at PPL Shipyard Pte Ltd since 2006,handling drilling packages of jack-up rig projects.

Mr Wong holds a Master degree in PetroleumEngineering from the University of TechnologyPETRONAS in Malaysia.



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EMS OffshorePte Ltd

100%

DSX Systems Pte Ltd

100%

OileldServices &

Supplies Pte Ltd20%

EMS Oil & GasLtd

100%

EMS EnergySolutions Pte Ltd

100%

EMS EnergyServicesSdn Bhd

100%


Corporate Structure


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Corporate Governance Report


The Board of Directors (the “Board”) of EMS Energy Limited (the “Company”) and together with its subsidiaries(the “Group”) recognises the importance of corporate governance in ensuring transparency, protecting theinterests of its shareholders and strengthening investors’ confidence in its management and financial reporting.The Board is responsible for the overall corporate governance of the Group and is committed to maintaining ahigh standard of corporate governance within the Group by establishing stringent internal control measures andmonitoring mechanisms.

Rule 710 of the Listing Manual (Section B: Rules of Catalist) of the Singapore Exchange Securities Trading Limited(the “SGX-ST”) (“Catalist Rules”) requires an issuer to outline the corporate governance practices adopted bythe Company as set out in the Code of Corporate Governance 2012 (the “Code”).

This statement outlines the key corporate governance practices that were in place throughout the financial year,with specific references made to each of the principles of the Code for the financial year ended 31 December2014 (“FY2014”).

In line with the Code, the Board of Directors hereby confirms that the Company has adhered substantially to theprinciples and guidelines of the Code and each area of non-compliance is disclosed and explained.

A. BOARD MATTERS

Principle 1: Board’s Conduct of its Affairs

The Group is led by an effective Board, which comprises one Executive Director and three Independent Directors,all having the right competencies and diversity of experience to effectively lead, control and contribute to theGroup. The Board is collectively responsible for the success of the Group. The Board works with the managementof the Company (“Management”) to achieve this and Management remains accountable to the Board.

The principal functions of the Board include:

1. providing entrepreneurial leadership, setting strategic objectives and ensuring that the necessary financialand human resources are in place for the Group to meet its objectives;

2. setting, reviewing and approving key business goals and strategies, and financial plans and monitoringthe organisational and Management’s performance;

3. establishing a framework of prudent and effective controls which enables risks to be assessed andmanaged, including safeguarding of shareholders’ interests and the company’s assets;

4. reviewing the adequacy and integrity of the Group’s internal controls, risk management systems andfinancial reporting and compliance;

5. approving major investments and divestments, and funding proposals;

6. setting the Group’s values and standards (including ethical standards); and


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7. ensuring accurate, adequate and timely reporting to, and communication with shareholders such thatobligations to shareholders and other stakeholders are understood and met.

The Board meets regularly, with at least four scheduled meetings within each financial year to review the Group’skey activities, business strategies, funding decisions, financial performance and to approve the release of halfyearly and annual results of the Group. When circumstances require, ad-hoc meetings are convened. All Directorsobjectively take decisions in the interests of the Group.

The Company has adopted internal guidelines setting forth matters that require Board approval, examples ofwhich include corporate plans and budgets, material acquisitions and disposals of assets, share issuances,dividends and other returns to shareholders.

To assist in the execution of its responsibilities, the Board is supported by three board committees; namely theNominating Committee (“NC”), Remuneration Committee (“RC”) and Audit & Risk Management Committee (“AC”)(collectively, the “Board Committees”). The Directors are also regularly updated on the Group’s development viaemail correspondence facilitating participation and view sharing. Board meetings are conducted in Singaporeand regularly attended by Directors either in person or via telephone conference if they are unable to attend themeetings in person. The attendances of the Directors at meetings of the Board and Board Committees, as wellas the frequency of such meetings are disclosed in Table 1 below.

Table 1: Attendance of Directors at Board and Board Committee Meetings

Name

Board

Audit & RiskManagement

CommitteeRemuneration

CommitteeNominatingCommittee

No. ofMeetings

Held

No. ofMeetings Attended

No. ofMeetings

Held


No. ofMeetings

Held


No. ofMeetings

Held


Ting Teck Jin 4 4 4 4^ 1 1̂ 1 1̂

Lim Poh Boon 4 4 4 4 1 1 1 1

Ung Gim Sei 4 4 4 4 1 1 1 1

Lim Siong Sheng 4 4 4 4 1 1 1 1

^ Attendance by invitation

Upon appointment of each Director, the Company provides a formal letter to such Director, setting out his dutiesand obligations upon appointment. The Company has in place an orientation program to ensure that new Directorsare familiar with the Company’s business and governance practices, and training for first-time Directors in areassuch as accounting, legal and industry-specific knowledge.

All Directors are updated regularly concerning any changes in company policies, risk management, accountingstandards, relevant new laws, regulations and changing commercial risks. Directors are encouraged to attend, atthe Group’s expense, relevant and useful training or seminars conducted by external organisations. New releases

issued by the SGX-ST and Accounting and Corporate Regulatory Authority (“ACRA”) which are relevant to the


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Directors are circulated to the Board. The Directors were briefed regularly by the Company’s auditors on the keychanges to the Singapore Financial Reporting Standards. The CEO also updates the Board at each meeting onbusiness and strategic developments pertaining to the Group’s business.

Principle 2: Board Composition and Guidance

The Board comprises one Executive Director, Mr. Ting Teck Jin, and three Independent Directors, Mr. Ung Gim Seiand Mr. Lim Siong Sheng and Mr. Lim Poh Boon. Key information regarding the Directors is given in the sectionon “Board of Directors” of this annual report. The independence of each Independent Director is reviewedannually by the Nominating Committee. The Board considers an “independent” director as one who has norelationship with the Company, its related companies, its 10% shareholders or its officers that could interfere

or be reasonably perceived to interfere with the exercise of the Director’s independent business judgment ofthe conduct of the Group’s affairs.

The NC is of the view that the current Board, with Independent Directors making up at least half of the Board,has a strong and independent element to exercise objective judgment on corporate affairs independently fromManagement. The NC is also of the view that no individual or small group of individuals dominates the Board’sdecision making process. Currently none of the Independent Directors has served the Board for more than nineyears from the date of their first appointment.

Principle 3: Chairman and Chief Executive Officer

According to the Code, the Chairman and Chief Executive Officer (“CEO”) should in principle be separate persons.

The Board is of the view that the Group has built up a cohesive management team. The CEO together with theExecutive Officers has full executive responsibilities over the business directions and operational decisions.The CEO is responsible to the Board for all corporate governance procedures to be implemented by the Groupand to ensure conformance by the Management to such practices.

Currently, the Board comprises of four Directors, three of whom are Independent Directors and there is no leadIndependent Director appointed in the Board. This is because the Board is of the view that a strong element ofindependence is present in the Board and all three Independent Directors exercises equal and active influence

in the Board’s affairs.

Our Chairman and CEO is Mr. Ting Teck Jin and his responsibilities include:–

1. leading the Board to ensure effectiveness on all aspects of its role and setting its agenda;

2. ensuring that the Directors receive accurate, timely and clear information;

3. ensuring effective communication with shareholders;

4. encouraging constructive relations within the Board and between the Board and Management;


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The role of the NC also includes the responsibility of reviewing the re-nomination of Directors who retireby rotation, taking into consideration the Director’s integrity, independence mindedness, contribution andperformance (such as attendance, participation, preparedness and candour) and any other factors as maybe determined by the NC. Board recognises the contribution of its Independent Directors who over time havedeveloped deep insight into the Group’s businesses and operations and who are therefore able to provideinvaluable contributions to the Group. As such, the Board has not set a fixed term of office for each of itsIndependent Directors so as to be able to retain the services of the directors as necessary.

The NC recommended to the Board that Mr. Ting Teck Jin and Mr. Ung Gim Sei be nominated for re-election at theupcoming AGM. In making the recommendation, the NC had considered the Directors’ contributions to the Group.Mr. Ting Teck Jin will, upon re-election as a Director, remain as the Executive Chairman and CEO. Mr. Ung Gim Sei

will, upon re-election as a Director, remain as the Independent Director, Chairman of the NC and RC and a memberof the AC. Mr. Ung Gim Sei will be considered independent for the purposes of Rule 704(7) of the Catalist Rules.

Each member of the NC has abstained from voting on any resolution in respect of the assessment of hisperformance or re-nomination as a Director of the Company. In the event any member of the NC has an interest ina matter being deliberated upon by the NC, he will abstain from participating in the review and approval processrelating to that matter. Mr. Ung Gim Sei had abstained from making any recommendation and/or participatingin any deliberation of the NC in respect of the assessment of his own performance or re-election as a Director.

The Directors’ profiles are presented in the “Board of Directors” section of this annual report.

Each of the Independent Directors has completed an independent director’s declaration form and confirmed hisindependence. The independence of each Director has been and will be reviewed on an annual basis and asand when circumstances require, by the NC, with reference to the guidelines as set out in the Code. The NC hasdetermined that the Independent Directors are independent.

When a Director has multiple board representations, he or she ensures that sufficient time and attention isgiven to the affairs of each company. All directors are required to declare their board representations. The NCdetermines annually whether a Director with multiple board representations is able to and has been adequatelycarrying out his or her duties as a Director of the Company. The Board has also determined that the maximumnumber of listed company board representations which any Director may hold is three. The NC takes into account

the results of the assessment of the effectiveness of the individual Director, and the respective Director’s actualconduct on the Board, in making the determination and is satisfied that sufficient time and attention are beinggiven by the Directors to the affairs of the Group, and there is presently no need to implement internal guidelinesto address their competing time commitments.

Succession planning is also an important part of the governance process. The NC reviews the appointment of keyexecutives and conducts annual review of their remuneration, performance and development plans. As part ofthis annual review, the successors to the key executives (whenever necessary) are identified, and developmentplans instituted for them. The Company has put in place a structured succession programme to prepare a teamof future leaders for the Group’s long-term sustainability.


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Principle 5: Board Performance

The NC does its best to ensure that Directors appointed to our Board possess the relevant necessary background,experience and knowledge, and bring to the Board independent and objective perspectives for balanced andwell-considered decisions to be made.

The NC undertakes a formal review of the effectiveness of the Board as a whole, the Board Committees and thecontribution by each Director to the effectiveness of the Board on a yearly basis with inputs from the other Boardmembers and the Chairman.

For the year under review, the NC assessed the effectiveness of the Board, the Board Committees and the

contribution of each individual Director to the effectiveness of the Board. The Board’s performance was measuredby its ability to support Management especially in times of crisis, and to steer the Company towards profitabilityand the achievement of strategic and long-term objectives set by the Board.

The NC has adopted a formal policy to evaluate the Board’s performance. The performances criteria are notchanged from year to year except when deemed necessary and justifiable and include the following:

i. timely guidance to the Management;

ii. attendance at Board/Committee meetings;

iii. participation at Board/Committee meetings;

iv. commitment to Board activities;

v. Board performance in discharging principle functions;

vi. Board Committee performance;

vii. independence of Directors; and

viii. appropriate complement of skill, experience and expertise on the Board.

Where the performance criteria are deemed necessary to be changed, the onus should be on the Board to justifythis decision.

The NC evaluates the Board’s performance as a whole, which takes into consideration the Board’s conduct ofmeetings, maintenance of independence, board accountability, communication with management, etc. The NCalso assesses the performance of individual Directors based on their attendance record at the meetings of theBoard and Board committees, their quality of participation at meetings as well as any special contributions. TheChairman acts on the results of the performance evaluation and, where appropriate and in consultation with theNC, proposes new members be appointed to the Board or seeks the resignation of Directors.


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The NC has assessed the performance of the current Board’s overall performance during the financial year underreview, and is of the view that the performance of the Board as a whole, and that of the Chairman, has beensatisfactory.

Principle 6: Access to Information

All Directors receive a Board report issued prior to any Board meeting and on an on-going basis to providecontextual information and to enable the Directors to obtain further information, where necessary, in order tobe properly briefed before any meeting. Such information provided to the Directors include background andexplanatory information relating to matters to be brought before the Board, copies of disclosure documents,budgets, forecasts and interim financial statements. In respect of budgets, any material variance between the

projects and actual results are also disclosed and explained.

In order to aid the discharge of duties by the Board, Management provided operational reports and managementaccounts on a quarterly basis in FY2014. The Board is able to request for any information from Management atany point in time to satisfy its needs.

The Board has separate and independent access to the senior management and the Company Secretary atall times. Should Directors, whether as a group or individually, need independent professional advice, theCompany Secretary will, upon directions by the Board, appoint a professional advisor selected by the group orthe individual to render the appropriate professional advice. The cost of such professional advice will be borneby the Company.

Under the direction of the Chairman, the Company Secretary’s responsibilities include ensuring good informationflows within the Board and Board Committees and between the senior management and Non-Executive Directorsand advising the Board on al l governance matters The Company Secretary also facilitates orientation and assistswith professional development as required. The Company Secretary attends all meetings of the Board and ensuresthat board procedures, applicable rules and regulations are followed. The Company Secretary also attends allmeetings of the Board Committees. The appointment and removal of the Company Secretary is a matter for theBoard to decide as a whole.

Please refer to the “Corporate Information” section of the annual report for the composition of the Company’s

Board of Directors and Board Committees.

B. REMUNERATION MATTERS

Principle 7: Procedures for Developing Remuneration Policies

Principle 8: Level and Mix of Remuneration

Mr. Ung Gim Sei, an Independent Director, is the Chairman of the RC. The other members of the RC are ourIndependent Directors, Mr. Lim Siong Sheng and Mr. Lim Poh Boon. As such, the risk of potential conflict ofinterest is minimised.


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The function of the RC is to review the procedure for developing the remuneration policy of the Executive Directorsof the Company, to establish the remuneration packages of individual Directors and to provide a greater degreeof objectivity and transparency in the setting of remuneration. No Director is involved in the decision for hisown remuneration.

The responsibilities of the RC are:

a. to recommend to the Board a framework of remuneration for the Executive Directors of the Group (whereapplicable), all aspects of remuneration such as Directors’ fees, salaries, allowance, bonuses, options,share-based incentives and awards, and benefits-in-kind and to submit all such recommendations forendorsement by the entire Board;

b. to determine the remuneration packages and terms of employment for each Executive Director; and

c. to review the remuneration of senior management.

The RC has access to internal and external expert and/or professional advice on human resource and remunerationof all Directors, amongst other matters, whenever there is a need for such consultation.

The RC ensures that the levels of remuneration for all Directors are appropriate to attract, retain and motivatethem to run the Group successfully and in this respect, the RC avoids paying more than necessary. In itsdeliberations, the RC takes into consideration industry practices, practices of comparable companies andnorms in compensation and employment in addition to the Company’s performance and the performance of theindividual Directors. However, any comparisons of practices within the industry and with comparable companiesare done with caution in view of the risk of an upward ratchet of remuneration levels with no correspondingimprovements in performance.

A significant proportion of the Executive Director’s remuneration is structured to link rewards to corporate andindividual performance. Therefore the performance of the Executive Director is measured by the achievement ofcorporate and individual performance targets. The RC is of the view that such measurements are appropriate andmeaningful. The performance-related elements of remuneration are designed to align interests of the ExecutiveDirector with those of shareholders.

The Executive Director has a service contract with a fixed appointment period that the Remuneration Committeereviews, in particular its termination provisions. The service contract is not excessively long and does not containonerous removal clauses. In the event of early termination, the Executive Director or the Company may terminatethe service agreement by giving to the other party not less than three months’ notice in writing, or in lieu of notice,payment of an amount equivalent to three months’ salary based on the Executive Director’s last drawn salary.Compensation is fair and the RC avoids rewarding poor performance. In the next review of Executive Director’sand key management personnel’s service contract, the RC will consider using contractual provisions to allowthe Company to reclaim bonuses or other incentive components (such as Performance Shares and/or Options)of remuneration from the Executive Director and key executives in exceptional circumstances of misstatementof financial results, or of misconduct resulting in financial loss to the Company.


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The remuneration of each Non-Executive Director is determined by his contribution to the Company, taking intoaccount factors such as effort and time spent as well as his responsibilities on the Board. The Non-ExecutiveDirectors are not overcompensated to the extent that their independence may be compromised. The Board willrecommend the remuneration of the Non-Executive Directors for approval at the AGM.

As for long-term incentive schemes, the Group operates “EMS Energy Performance Share Plan” (the “EPSP”) and“EMS Energy Employee Share Option Scheme” (the “ESOS”) for its directors and employees. The Company hasadopted the EPSP and ESOS which were approved by the Shareholders at the Company’s Extraordinary GeneralMeeting dated 22 August 2009. The EPSP and ESOS are administered by the RC.

EPSP

The EPSP provides an opportunity for employees of the Group who have contributed to the growth andperformance of the Group (including Executive and Non-Executive Directors) and who satisfy the eligibilitycriteria as set out under the rules of the EPSP, to reward them with participation in the equity of the Company.Controlling shareholders of the Company and their associates are also eligible to participate in the EPSP. Thetotal number of shares in the capital of the Company (“Shares”) over which the RC may grant shares under theEPSP (“Performance Shares”) on any date, when added to the number of Shares, over which options are grantedunder any other share option scheme of the Company, i.e. the ESOS, shall not exceed 15% of the number ofthe total issued Shares on the day immediately preceding the date on which the Performance Shares shall begranted. Subject to prevailing legislation and rules of the Catalist Rules, the Company, in its sole and absolutediscretion, will deliver Performance Shares to the participants upon vesting of their awards by way of an issueand allotment of new Shares or delivery of existing Shares to the participant.

ESOS

The ESOS provides an opportunity for employees of the Group who have contributed to the growth andperformance of the Group (including Executive and Non-Executive Directors) and who satisfy the eligibility criteriaas set out under the rules of the ESOS, to participate in the equity of the Company. Controlling shareholdersof the Company and their associates are also eligible to participate in the ESOS. The total number of Sharesover which the RC may grant options under the ESOS (“Options”) on any date, when added to the number ofShares issued and issuable in respect of all Options, shall not exceed 15% of the number of the issued Shares

on the day immediately preceding the date on which the Options shall be granted. Under the rules of the ESOS,the Options that are granted may have exercise prices that are, at the RC’s discretion, set at the price (“MarketPrice”) equal to the average of the last dealt prices for the Shares on Catalist for the five consecutive marketdays immediately preceding the relevant date of grant of the relevant Option, or (provided that Shareholders’approval is obtained in a separate resolution) at a discount to the Market Price (subject to a maximum discountof 20%). Options which are fixed at the Market Price may be exercisable at any time by the participant after thefirst anniversary of the date of grant of that Option while Options granted at a discount to the Market Price mayonly be exercised after the second anniversary from the date of grant of the Option. Options granted under theESOS will have a life span of ten years except in the case of Options granted to Non-Executive Directors andIndependent Directors where the exercise period may not exceed five years from the date of grant or such earlierdate as may be determined by the RC.


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Further details on the Performance Shares and Options granted under the EPSP and ESOS respectively can befound in the Directors’ Report in this Annual Report.

Principle 9: Disclosure on Remuneration

The Company adopts a formal procedure in setting remuneration packages of individual Directors, taking intoaccount pay and employment conditions of comparable companies in the same or similar industries, as well asthe Group’s relative performance and the performance of individual Directors.

The performance conditions used to determine the entitlement of the Executive Director and key managementpersonnel under short-term incentive scheme (such as Bonus) and long term incentive scheme (such as EPSP

and ESOS) comprises of qualitative and quantitative conditions. Examples of quantitative conditions aretarget revenue, target profit, sales growth and years of service. Examples of qualitative conditions are on-the-job performance, leadership, teamwork, etc. The performance conditions are set by RC. The inclusion of theperformance conditions in the service agreement of the Executive Director and key management personnelis done in a review conducted prior to the renewal of the service agreement of the Executive Director and keyexecutives. The RC has reviewed and is satisfied that the performance conditions of the Executive Director andkey executives were met for FY2014.

The Company does not have any employee who is an immediate family member of any Director and whoseremuneration exceeded S$50,000 during the financial year under review.

The report on Directors’ Remuneration for FY2014 is disclosed in Table 2.

Table 2: The breakdown of the Directors’ remuneration for FY2014

Name of Directors Remuneration Band Salary % Bonus %Directors'

fee %

Stock-basedremuneration

% Total %

Mr. Ting Teck Jin S$250,000 toS$500,000

87.1% 5.6% – 7.3% 100%

Mr. Lim Poh Boon Below S$100,000 – – 94.4% 5.6% 100%

Mr. Ung Gim Sei Below S$100,000 – – 94.4% 5.6% 100%Mr. Lim Siong Sheng Below S$100,000 – – 94.4% 5.6% 100%

The aggregate total remuneration paid to the Company’s Independent Directors (Mr. Lim Poh Boon, Mr. UngGim Sei and Mr. Lim Siong Sheng) is S$135,000. For competitive reasons, the Company is not disclosing eachindividual Director’s remuneration.

The details of remuneration paid to top 2 key executives (who are not Directors of the Company) of the Groupfor FY2014 are set out below:


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Table 3: Remuneration of Key Employees

Name of Key Executives Remuneration BandSalary

%Bonus

%

Stock-basedremuneration

%Total

%

Mah Peek Sze Patsy Below S$250,000 98.2% – 1.8% 100%

Wong Hong Cheng Below S$250,000 98.6% – 1.4% 100%

Remuneration amounts are inclusive of salary, bonus, allowances and Central Provident Fund contributions.

The aggregate total remuneration paid to the top 2 key executives (who are not Directors or the CEO) was

approximately S$434,000.

There were no termination, retirement and post-employment benefits that may be granted to directors, the CEOand the top 2 key executives in FY2014.

C. ACCOUNTABILITY AND AUDIT

Principle 10: Accountability

The Board believes that it should promote best practices and present a balanced and comprehensible assessmentof the Group’s performance, position and prospects, which extends to interim and price sensitive public reports,as a means to build an excellent business for our shareholders as the Board is accountable to shareholders forthe Company and the Group’s performance.

The Board is mindful of its obligations to provide timely and fair disclosure of material information in compliancewith statutory reporting requirements. Price sensitive information is either first publicly released before theCompany meets with any group of investors or analysts or simultaneously with such meetings. Financial resultsand annual reports will be announced or issued within the mandatory period. The Board also provides reportsto regulators when required. Management provides the Board with quarterly management accounts that presenta balanced and understandable assessment of the Group’s performance, position and prospects.

Principle 11: Risk Management and Internal Controls

The Board is responsible for the governance of risk and sets the tone and direction for the Group in the wayrisks are managed in the Group’s businesses. The Board has ultimate responsibility for approving the strategyof the Group in a manner which addresses stakeholders’ expectations and does not expose the Group to anunacceptable level of risk. The Board approves the key risk management policies and ensures a sound systemof risk management and internal controls and monitors performance against them. In addition to determiningthe approach to risk governance, the Board sets and instils the right risk focused culture throughout the Groupfor effective risk governance.

The Board reviewed the adequacy of the Group’s risk management framework and systems and conducted four

dialogue sessions with the Management to understand the process to identify, assess, manage and monitorrisks within the Group. In addition, the Board also engaged an external risk management consultant, BDO LLP,


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during the year to conduct an independent review on the effectiveness, adequacy and robustness of the Group’srisk management policies and processes and make recommendations to enhance the internal controls over therisk management process.

Management presented semi-annual reports to the AC and the Board on the Group’s risk profile, the status ofrisk mitigation action plans and updates on the following areas:

a. assessment of the Group’s key risks by major business units and risk categories;

b. identification of specific “risk owners” who are responsible for the risks identified;

c. description of the processes and systems in place to identify and assess risks to the business and howrisk information is collected on an ongoing basis;

d. ongoing gaps in the risk management process such as system limitations in capturing and measuringrisks, as well as action plans to address the gaps;

e. status and changes in plans undertaken by Management to manage key risks; and

f. description of the risk monitoring and escalation processes and also systems in place.

Management’s Responsibility in Risk Management

Management is responsible for designing, implementing and monitoring the risk management and internal controlsystems in accordance with the policies on risk management and internal controls. The Group has a Chief RiskOfficer, Ms. Patsy Mah, who co-ordinates the Group’s risk management efforts.

As part of Management’s efforts in promoting a risk-aware culture, risk assessment and evaluation takes place asan integral part of the annual strategic planning cycle conducted at the beginning of each financial year. Havingidentified the risks arising from strategic business objectives, each business unit is required to document themitigating actions to manage each significant risk. New areas are introduced for assessment as the businessrisk profile changes. Information such as the types of risks, the controls and processes for managing risks is

subsequently summarised in a risk map, which is reviewed by Management, Internal Audit and the AC.

Management also conducted an annual training on risk management and a risk discussion forum to heightenrisk awareness for staff at middle management level. Management is responsible for day to day monitoring ofthese risks and highlighting significant events arising thereon to the AC and the Board.

Key Contracts/Projects Execution Risk

The Group's core business segment is currently undertaken by EMS Energy Solutions Pte Ltd (“ESS”) namely thedesign, manufacture, fabrication and installation of engineering solutions and products for the marine, oil and gasindustries. Some of ESS larger turnkey projects may stretch to two or even three years with milestone payments,resulting in the heightened role of cash flow management in such projects. Unexpected delays in project deliveryduring execution or delay in customers’ payment of any such key long-term contracts may have an adverse effect


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on the financial condition and results of operations of the Group. The Group has taken the necessary approach tomitigate this risk by securing project financing for its larger turnkey projects, ensuring adequate bank facilitiesto support its execution of projects, and tight monitoring of its collections from customers. The Group wouldcontinue to pursue diversification strategies to strengthen its operations and financial position.

Product Liability Risk

During the year, the Management has reviewed and deemed adequate its insurance coverage against commonfire, industrial, machinery, building, third party liability risks and so forth. With its range of offshore products,the Management is assessing its potential product liability risks, and suitable insurance coverage for suchproduct liability. The Board believes that such insurance coverage of product liability will manage the Company’s

exposure to such risks.

Financial risks

The nature of the Group businesses and activities exposes the Group to market risks (including currency riskand interest rate risk), credit risk, liquidity risk and capital risk. The Group has a system of controls in placeto ensure an acceptable balance between the cost of risks occurring and the cost of managing such risks. Thesteps taken by the Group to manage its exposure to financial risks are set out in the Financial Report on pages90 to 100 of the Notes to the Financial Statements in this annual report.

Annual Review of the Group’s Risk Management and Internal Control Systems

The Board with the assistance of the AC has undertaken an annual assessment on the adequacy and effectivenessof the Group’s risk management and internal control systems over financial, operational, compliance andinformation technology risks. The assessment considered issues dealt with in reports reviewed by the Boardduring the year together with any additional information necessary to ensure that the Board has taken intoaccount all significant aspects of risks and internal controls for the Group for the financial year ended 31December 2014.

The Board’s annual assessment in particular considered:

a. the changes since the last annual assessment in the nature and extent of significant risks, and theCompany’s ability to respond to changes in its business and the external environment;

b. the scope and quality of Management’s ongoing monitoring of risks and of the system of internal controlsand the work of its internal audit function and other providers of assurance;

c. the extent and frequency of the communica tion of the results of the monitoring to the AC; and

d. the incidence of significant internal controls weaknesses that were identified during the financial year.

In order to obtain assurance that the Group’s risks are managed adequately and effectively, the Boardhad reviewed an overview of the risks which the Group is exposed to, as well as an understanding of whatcountermeasures and internal controls are in place to manage them.


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The Board has also received assurance from the CEO and Chief Financial Officer (“CFO”):

(a) that the financial records have been properly maintained and the financial statements give a true andfair view of the Group’s operations and finances; and

(b) regarding the effectiveness of the Group’s risk management and internal control systems.

Based on the internal controls established and maintained by the Group, work performed by the internal andexternal auditors and reviews performed by Management, various Board Committees and the Board, the AC andthe Board are of the opinion that the Group’s internal controls including financial, operational, compliance andinformation technology controls as well as the risk management systems, were adequate and effective as at 31

December 2014.

Principle 12: Audit & Risk Management Committee

Mr. Lim Siong Sheng, an Independent Director, is the Chairman of the AC. The AC comprises two other IndependentDirectors, Mr. Ung Gim Sei and Mr. Lim Poh Boon. At least two members of the AC have the appropriate accountingor related financial management expertise and experience. The AC has explicit authority to investigate any matterwithin its terms of reference, full access to and co-operation by Management and reasonable resources to enableit to discharge its functions properly, as well as full access to the Directors and Executives and discretion to inviteany of them to attend its meeting. The Board ensures that the members of the AC are appropriately qualified todischarge their responsibilities.

The AC holds periodic meetings and reviews primarily the following:

(a) the audit plan of the Company’s external auditors;

(b) the external auditors’ reports;

(c) the co-operation given by our officers to the external auditors;

(d) the effectiveness of the Group’s internal audit function;

(e) the scope and results of the audit procedures and their cost effectiveness;

(f) the financial statements of the Company and the Group, especially any significant financial reportingissues and judgments so as to ensure their integrity, before submission to the Board;

(g) all formal announcements relating to the Group’s financial performance;

(h) the independence and objectivity of the external auditors on an annual basis;

(i) the remuneration and terms of engagement of the external auditor;

(j) nomination, re-nomination and removal of external auditors for appointment;


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(k) the adequacy and effectiveness of the Group’s internal controls;

(l) the Group’s compliance with such functions and duties as may be required under the relevant statutesor the Catalist Rules, and by such amendments made thereto from time to time;

(m) interested person transactions; and

(n) capital expenditure transactions.

The AC meetings are also attended by the Executive Director and the external and internal auditors. During thisfinancial year, the AC has also met up with the external auditors and the internal auditors, without the presence

of Management.

The AC shall commission and review the findings of internal investigations into matters where there is anysuspected fraud or irregularity, failure of internal controls or infringement of any Singapore laws, rules orregulations which have or are likely to have a material impact on the Group’s operating results and/or financialposition. Each member of the AC shall abstain from voting on any resolutions and making any recommendationsand/or participating in any deliberations of the AC in respect of matters in which he is interested.

The AC assesses the independence of the external auditors annually. The aggregate amount of fees paid for theexternal auditors of the Group for the financial year ended 31 December 2014 was:

S$’000

Audit fees 56Non-audit fees 15Total fees 71

The Audit Committee has reviewed the non-audit services rendered by the external auditors for the financialyear ended 31 December 2014 as well as the fees paid, and is satisfied that the independence of the externalauditors have not been impaired.

The AC has recommended Messrs Nexia TS Public Accounting Corporation for re-appointment as auditors of theCompany at the forthcoming AGM.

The Company confirms that it is in compliance with Rules 712 and 715 of the Catalist Rules in relation to itsexternal auditors.

The Directors of the AC sit on multiple boards (listed public company and private companies) and hence, havethe necessary accounting and financial expertise to deal with the matters that come before them. They will attendcourses and seminars to keep abreast of changes to accounting standards and other issues which may have adirect impact on financial statements, as and when necessary.


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The Company has a “Whistle-Blowing” policy in place which provides a well-defined and accessible channelfor staff of the Group through which the staff may, in confidence, raise concerns about possible fraudulentactivities, malpractices or improprieties in matters of financial reporting or other matters in a responsible andeffective manner (“Complaints”). The staff of the Group may approach (a) his or her direct line manager, operationmanager or Company’s directors; or (b) the AC directly (via email or phone call) to raise his or her Complaints.Arrangements for independent investigation of such matters and appropriate follow up actions were also providedfor in the “Whistle-Blowing” policy. There were no reports of whistle blowing received in FY2014.

Principle 13: Internal Audit

The Group outsourced its Internal Audit (“IA”) function to an external professional firm, BDO LLP, which reports

directly to the Chairman of AC and administratively works with the CEO. The AC’s responsibility in overseeingthat the Company’s internal controls and risk management systems are adequate will be complemented by thework of the IA.

In accordance with Guideline 13.4 of the Code, the IA meets the standards set by nationally or internationallyrecognised professional bodies including the Standards for the Professional Practice of Internal Auditing set byThe Institute of Internal Auditors.

The AC meets with the IA at least twice during the year without the presence of Management, reviews the IA’sreports on a half yearly basis and also reviews and approves the annual IA plans and resources to ensure thatthe IA has the necessary resources and the appropriate standing within the Company to adequately perform itsfunctions. The AC is satisfied that the internal audit function is adequate and effective during FY2014.

D. COMMUNICATION WITH SHAREHOLDERS

Principle 14: Shareholder Rights

Principle 15: Communication with Shareholders

Principle 16: Conduct of Shareholder Meetings

The Board believes in regular, effective, fair and timely disclosure of material information to its shareholders toenhance the standard of corporate governance. To be in line with the provisions of the Catalist Rules and theCompanies Act (Cap. 50) of Singapore, the Board’s policy requires that all shareholders are equally and in atimely manner informed of all major developments that impact the Company or the Group. It is also the Board’spolicy that all corporate news, strategies and announcements be promptly disseminated through the SGXNETsystem as well as the corporate website (http://www.emsenergy.com.sg), including press releases, annual reportsand other various media. If there is inadvertent disclosure made to a selected group, we will make the samedisclosure publicly to all others as soon as practicable. We constantly ensure that all information disclosed isas descriptive, detailed and forthcoming as possible such that boilerplate disclosures are avoided.

The Board supports the Code’s principle to encourage shareholder participation. Shareholders are encouragedto attend, to participate effectively and to vote in the general meetings of the Company and to stay informedof the Company’s strategy and goals, to ensure a high level of accountability. Notice of the general meeting


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is despatched to shareholders, together with explanatory notes or a circular on items of special business (ifnecessary), at least 14 working days before the meeting. Shareholders may vote in person or by proxy. Voting inabsentia and electronic mail may only be possible following careful study to ensure the integrity of the informationand authentication of the identity of members through the web is not compromised and is also subject tolegislative amendment to recognise electronic voting. The Board welcomes questions from shareholders whowish to raise issues either informally or formally before or at the general meeting. The Chairpersons of the Boardand Board Committees, and the external auditors, are normally available at the meeting to answer questionsrelating to the general meetings, work of their committees, conduct of audit and the preparation and contentof the auditors’ report.

Separate resolutions are provided at general meetings on each separate issue and the ‘bundling’ of resolutions

is avoided unless they are interdependent and linked so as to form one significant proposal and unless theCompany explains the reasons and material implications.

The Company’s Articles of Association allows a member of the Company to appoint one or two proxies to attendand vote instead of the member. In addition, there is no limit on the number of proxies for nominee companiesto attend general meetings.

Voting at general meetings will be by show of hands unless a poll is demanded (1) by the Chairman or (2) bynot less than two shareholders or proxies or (3) shareholders or proxies representing an aggregate of not lessthan one-tenth of the total voting rights of all shareholders having the right to attend and vote at the meetingor shares in the Company conferring a right to vote at the meeting being shares on which an aggregate sum hasbeen paid equal to not less than one-tenth of the total sum paid on all the shares conferring that right. Votingby a show of hands enables the Company to deal with the business of the meeting expeditiously.

The Company prepares minutes of general meetings which include substantial comments, queries fromshareholders and responses from the Board and Management. The minutes are available to shareholders uponrequest.

In addition, the Group proactively engages shareholders through analyst/media briefings, investor conferencesand road shows. In these meetings, matters pertaining to business strategy, operational and financialperformance and business prospects were shared by the senior management team. To further enhance its

communication with shareholders, the Company's website (http://www.emsenergy.com.sg) allows the public toaccess timely information on the Group directly and also gather view and inputs from shareholders.

The Company does not have a dividend policy. As the Company still has accumulated losses as at 31 December2014 and its current priority is to achieve long-term growth for the benefit of its shareholders, its profits shalltherefore be retained for investment into the future. As such, no dividends are paid for FY2014. The Board wouldconsider establishing a dividend policy at the appropriate time.

E. DEALING IN SECURITIES

The Company has adopted internal codes of conduct pursuant to Rule 1204(19) of the Catalist Rules applicableto all its officers in relation to dealings in the Company’s securities. The Company refers to the Catalist Rules andis of the opinion that these codes are appropriate. The Company is aware that it, its Directors and its employeesare continuously subject to requirements set out by applicable law. The Company believes that by observing


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these best practices and the applicable law, the standard of corporate governance will be raised and investorconfidence will be enhanced.

The Company and its officers are aware that it is an offence to deal in its securities as well as securities ofother listed issuers when in possession of unpublished material price-sensitive information in relation to thosesecurities.

As required under Chapter 12 of the Catalist Rules, the Company and its officers do not deal in the Company’ssecurities on short-term considerations and they are not allowed to deal in the Company’s shares during theperiod commencing one month before the announcement of half-year or full year results and ending on the dateof the announcement of these results. Directors and executives are also expected to observe insider trading laws

at all times even when dealing with securities within permitted trading period.

F. MATERIAL CONTRACTS

In accordance with Rule 1204(8) of the Catalist Rules, there is no material contracts entered into by the Companyor its subsidiaries for the benefit of the Directors or controlling shareholders, either still subsisting at the end ofthe financial year, or if not then subsisting, which were entered into since the end of the previous financial year.

G. INTERESTED PERSON TRANSACTIONS

The Company has adopted an internal policy in respect of any transaction with interested persons and has setout the procedures for review and approval of the Company’s interested person transactions.

In order to ensure that the Company complies with Chapter 9 of the Catalist Rules on interested persontransactions, the AC meets quarterly to review all interested person transactions of the Company. However, ifthe Company enters into an interested person transaction, the AC seeks to ensure compliance with the relevantrules under Chapter 9 of the Catalist Rules.

The following interested person transactions took place between the Group and interested persons during FY2014:

Name of Interested Person

Aggregate value of all interestedperson transactions (excluding

transactions less than $100,000and transactions conducted undershareholders’ mandate pursuantto Rule 920 of the Catalist Rules)

S$’000

Aggregate value of all interestedperson transactions conducted

under the shareholders’mandate pursuant to Rule 920

of the Catalist Rules (excludingtransactions less than $100,000)

S$’000Koastal Group *

Purchases of materials fromrelated corporation Nil 2Sales to related corporation Nil 30,200Rental charged to relatedcorporation Nil 15Payment made on behalf of

related corporation Nil 155 Aggregate Nil 30,372

* Koastal Industries Pte. Ltd. and Koastal Marine Pte. Ltd. are subsidiaries of Koastal Pte. Ltd (“Koastal Group”). Koastal Industries Pte. Ltd.is the legal and beneficial owner of 41.26% of the shares in the Company. Mr. Ting Teck Jin, being the controlling shareholder and managingdirector of Koastal Group, is deemed to have an indirect interest in the shares of the Company.


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H. USE OF PROCEEDS FROM THE RIGHTS ISSUE

Further to the Company’s rights issue which was completed on 26 September 2014 and as at 31 December 2014,the proceeds from the aforesaid have been applied as follows:

Use of Gross Proceeds Amount allocated

(S$’000) Amount reallocated

(S$’000) Amount utilised

(S$’000)

To fund the order book of the Group 4,397 to 5,863 1,158 (2) 7,021

To fund the capital expenditures ofthe Group including the funding of thedevelopment of the new waterfront facilityin Tuas 4,397 to 5,863 (733) (2) 3,664

To fund the working capital of the Group (1) 2,931 to 4,397 (490) (2) (3) 3,907

Rights Issue expenses 150 65 (3) 215

Total 14,807 14,807

Note 1:Amount of approximately S$1.72 million, S$1.56 million and S$0.63 million have been utilised for payment of operational costs, staff costs andreducing the Group’s bank overdrafts respectively.

Note 2:Proceeds of S$0.73 million and S$0.43 million from Category 2 and Category 3 respectively, were reallocated to Category 1.

Note 3:Proceeds of S$0.065 million from Category 3 were reallocated to Category 4.

I. NON SPONSOR FEES

The Continuing Sponsor of the Company was changed from CNP Compliance Pte. Ltd. (“ CNPC”) toPrimePartners Corporate Finance Pte. Ltd. (“ PPCF ”) with effect from 1 July 2014 (“ Change ”). There were no non-sponsor fees paid to CNPC (and its affiliates) and PPCF during the year under review.


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Directors’ Report


The directors present their report to the members together with the audited financial statements of the Groupfor the financial year ended 31 December 2014 and the balance sheet of the Company as at 31 December 2014.

Directors

The directors of the Company in office at the date of this report are as follows:

Mr Ting Teck JinMr Lim Poh BoonMr Lim Siong ShengMr Ung Gim Sei

Arrangements to Enable Directors to Acquire Shares or Debentures

Neither at the end of nor at any time during the financial year was the Company a party to any arrangementwhose object was to enable the directors of the Company to acquire benefits by means of the acquisition ofshares in, or debentures of, the Company or any other body corporate, other than as disclosed under “ShareScheme” in this report.

Directors’ Interests in Shares or Debentures

(a) According to the register of directors’ shareholdings, none of the directors holding office at the end of thefinancial year had any interest in the shares or debentures of the Company or its related corporations,except as follows:

Holdings registered in name ofdirector or nominee

Holdings in which director isdeemed to have an interest

At 1.1.2014 At 31.12.2014 At 1.1.2014 At 31.12.2014

The Company(No. of ordinary shares)

Mr Ting Teck Jin 9,000,000 18,000,000 247,726,275 495,452,550

Mr Lim Poh Boon 10,000,000 20,000,000 – –

(b) Mr Ting Teck Jin’s deemed interest is derived through shares held by Koastal Industries Pte Ltd. KoastalIndustries Pte Ltd is substantially owned by Mr Ting Teck Jin.

(c) Mr Ting Teck Jin, who by virtue of his interest of not less than 20% of the issued capital of the Company,is deemed to have interests in the share capital of all subsidiaries at the beginning and at the end of thefinancial year.

(d) There were no changes in any of the abovementioned directors’ interests in ordinary shares of the Companybetween the end of the financial year and 21 January 2015.


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Directors’ Contractual Benefits

Since the end of the previous financial year, no director has received or become entitled to receive a benefitby reason of a contract made by the Company or a related corporation with the director or with a firm of whichhe is a member or with a company in which he has a substantial financial interest, except as disclosed in theaccompanying financial statements and in this report.

Share Scheme

The Company has adopted the EMS Energy Employee Share Option Scheme (“the Scheme”) as well as the EMSEnergy Performance Share Plan (“the Plan”) at the Extraordinary General Meeting dated 22 August 2009.

Under the Scheme, the following employees shall be eligible to participate:

(a) full-time employees of the Company and/or its subsidiaries who have attained the age of twenty-one (21)years on or before the offering date;

(b) Executive Directors of the Company; and

(c) Non-Executive Directors (including Independent Directors) of the Company.

Persons who qualify under (a), (b) or (c) under the paragraph above and who are also the Company’s ControllingShareholders can only participate in the Scheme if their participation is approved by independent shareholdersof the Company in separate resolutions for each such person and for each such grant.

Under the Plan, the following employees shall be eligible to participate:

(a) confirmed full-time employees of the Company and/or its subsidiaries and associated companies whohave attained the age of twenty-one (21) years on or before the offering date; and

(b) Executive Directors of subsidiaries or associated companies


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Share Scheme (Continued)

During the financial year, the following options have been granted pursuant to the Scheme:

Name of participant

Date of

grant

Optionsgranted duringfinancial yearunder review

(including

terms)

Aggregateoptions

granted sincecommencement

of schemeto end of

financial year

under review

Aggregateoptions

exercised sincecommencement

of schemeto end of

financial year

under review

Aggregateoptions

outstanding as at end of

financial year

under review

Director Ting Teck Jin (1) 28.04.2014 10,500,000 10,500,000 – 10,500,000Lim Poh Boon (2) 24.02.2014 750,000 750,000 – 750,000Lim Siong Sheng (2) 24.02.2014 750,000 750,000 – 750,000Ung Gim Sei (2) 24.02.2014 750,000 750,000 – 750,000

EmployeesTay Heng Guan

Christopher (3) 24.02.2014 3,000,000 3,000,000 – 3,000,000Mah Peek Sze Patsy (3) 24.02.2014 1,500,000 1,500,000 – 1,500,000Wong Hon Cheng (3) 24.02.2014 1,500,000 1,500,000 – 1,500,000Lin Yoon Shiang (3) (4) 24.02.2014 3,000,000 3,000,000 – –Nah Siang Wei (3) (4) 24.02.2014 1,500,000 1,500,000 – –Qian Li Jian (3) (4) 24.02.2014 1,500,000 1,500,000 – –Teh Kok Hwa (3) (4) 24.02.2014 1,500,000 1,500,000 – –Chong Hooi San (3) (5) 24.02.2014 1,500,000 1,500,000 – –

Total 27,750,000 27,750,000 – 18,750,000

(1) Pursuant to the shareholders’ approval obtained at the Company’s extraordinary general meeting held on 26 April 2014, the Company hadon 28 April 2014, granted a total of 10,500,000 options at an exercise price of S$0.061 per option at the date of the grant, to Mr. Ting TeckJin, an Executive Director and controlling shareholder of the Company. These options are exercisable from 28 April 2015 to 27 April 2024.The exercise price of these options has been revised to S$0.027 on 1 December 2014 as disclosed in Note (6) below.

As at 31 December 2014, the total 10,500,000 options granted to Mr. Ting Teck Jin still remained outstanding and exercisable into 10,500,000ordinary shares. The estimated fair value of these options granted as at 31 December 2014 was approximately S$0.005 calculated usingthe Binomial Option Pricing Model.

(2) These options, which are exercisable from 24 February 2015 to 23 February 2019, were granted at an exercise price of S$0.069 at the dateof the grant and subsequently revised to S$0.027 on 1 December 2014 as disclosed in (6) below.

As at 31 December 2014, the total 2,250,000 options granted to the Independent Directors still remained outstanding and exercisable into2,250,000 ordinary shares. The estimated fair value of these options granted as at end of the financial year was approximately S$0.005per option calculated using the Binomial Option Pricing Model.

(3) On 24 February 2014, a total of 15,000,000 options were granted at an exercise price of S$0.069 per option at the date of grant to employeeswho are not Directors, controlling shareholders or their associates. On 1 December 2014, the exercise price of these options has been revisedto S$0.027 as disclosed in (6) below.


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Share Scheme (Continued)

As at 31 December 2014, out of the total of 15,000,000 options granted, 6,000,000 options still remained outstanding and exercisable into6,000,000 ordinary shares, 1,500,000 options granted were not accepted and another 7,500,000 options were forfeited upon the resignationof certain employees. These options are exercisable from 24 February 2015 to 23 February 2024. The estimated fair value of these optionsgranted as at 31 December 2014 was approximately S$0.0044 per option calculated using the Binomial Option Pricing Model.

(4) The Options granted to Lin Yoon Shiang, Nah Siang Wei, Teh Kok Hwa and Qian Li Jian have been forfeited during the financial year;

(5) The options granted to Chong Hooi San were not accepted.

(6) On 1 December 2014, the Company announced the completion of Rights Issue on 7 October 2014 and pursuant to the rules of the EMSEmployee Share Option Scheme, adjustments had been made to the exercise price of the outstanding Share Options (the “ Adjustments ”)in the following manner:

Share Options Issued ToExercise Price Before

AdjustmentsExercise Price After

Adjustments

Independent Directors S$0.069 S$0.027Employees who are not Directors, Controlling Shareholders or their Associates S$0.069 S$0.027Controlling Shareholder S$0.061 S$0.027

The Adjustments has been made in accordance with the rules of the Scheme. The Adjustments took effect on 1 December 2014.

(7) No participant other than Mr. Ting Teck Jin, Tay Heng Guan Christopher, Mah Peek Sze Patsy, Wong Hon Cheng, Lin Yoon Shiang, Nah SiangWei, Qian Li Jian, Teh Kok Hwa and Chong Hooi San as mentioned above, has received 5% or more of the total options available under theScheme.

Saved as disclosed, there were no other options granted during the financial year.

During the financial year, no performance shares have been granted to the directors and employees of theCompany or its subsidiaries.

No shares have been issued during the financial year by virtue of the exercise of options to take up unissuedshares of

Documents

EMS Energy Limited Annual Report 2014