Corporate Governance

The Board and Management of k1 Ventures Limited (the “Company”) are committed to maintaining a high standard of corporate governance, and firmly believe that a genuine commitment to good corporate governance is essential to the sustainability of the Company’s business and performance. Accordingly, the Company is committed to ensuring that effective self-regulatory corporate practices are in place to protect the interest of its shareholders and maximise long-term shareholder value. In addition, the Company ensures that the corporate practices it adopts are driven by principles rather than form, and takes into account the nature of the Company’s existing businesses and operations.

The following describes the Company’s corporate governance practices that were in place or implemented during the financial year ended 30 June 2008 with specific reference to the principles set out in the Code of Corporate Governance 2005 (the “Code of Corporate Governance”)¹.

Board Matters
Principle 1: Effective Board to Lead and Control the Company
The principal functions of the Board of Directors are to:

• approve and review appropriate strategic plans, key operational and financial matters, major investments and divestments and funding decisions;
• oversee the business and affairs of the Company, including monitoring the performance of management;
• oversee processes for evaluating the adequacy of internal controls, risk management, financial reporting and compliance, and satisfy itself as to the adequacy of such processes; and
• assume responsibility for corporate governance.

The Board is scheduled to meet every quarter. In addition, ad hoc non-scheduled Board Meetings are convened when necessary to deliberate on urgent substantive matters, and telephonic attendance and conferences via audio-visual communication at Board meetings are allowed under Article 112A of the Company’s Articles of Association. To assist the Board in the discharge of its oversight function, various Board Committees namely, the Audit Committee, the Nominating Committee and the Compensation and Share Option Committee, were constituted with clear written terms of reference. The Board and Board Committees also rely on circular resolutions and discussions conducted via telephonic and other forms of correspondence in the discharge of their duties.

The Board has adopted internal guidelines setting forth matters that require Board approval. In this regard, all new investments, divestments, commitment to loans and lines of credit from banks and financial institutions require the approval of the Board.

The number of Board and Board Committee meetings held during the financial year, as well as the attendance of each Board member, are disclosed as follows:

The Directors will, where necessary, receive appropriate training on directors’ duties and responsibilities to assist them in carrying out their expected roles and responsibilities. The Directors are provided with a Director’s tool kit containing information on directors’ duties, relevant Companies Act and Singapore Exchange Securities Trading Limited (“SGX”) Listing Manual requirements, and the Company’s governance policies and practices. They will also, where necessary, receive appropriate training from time to time on other matters which would help them in the discharge of their duties as a Director of the Board or as a member of a Board Committee.

Board Composition And Balance
Principle 2: Strong and Independent Element On The Board
The Company fully appreciates that fundamental to good corporate governance is an effective and robust board whose members engage in open and constructive debate. For this to happen, the Board, in particular the non-executive Directors, must be kept well informed of the Company’s businesses, investments and affairs. Towards this end, the Company has adopted initiatives to ensure that the non-executive Directors are well supported by accurate, complete and timely information, and have unrestricted access to Management. These initiatives include the circulation of relevant information on prospective deals and potential developments at an early stage whenever possible before formal board approval is sought, as well as business initiatives, industry developments and analyst and press commentaries on matters in relation to the Company and/or the industries in which it operates. The non-executive Directors do not normally meet without the presence of Management, but does from time to time communicate via telephonic conferences to discuss issues relating to board processes, corporate governance initiatives and other matters to be discussed during Board meetings.

The Directors believe that the Board is made up of independent Directors who can take a broader view of the Company’s activities and bring independent judgement to bear on issues for the Board’s consideration, particularly in view of the nature of the Company's business and the complex transactions in which it participates.

The Board currently consists of eight Directors, seven of whom are non-executive and out of whom three are considered independent² by the Nominating Committee. The Nominating Committee determines on an annual basis whether or not a Director is independent, bearing in mind the Code of Corporate Governance’s definition of who constitutes an independent Director.

The nature of the current Directors’ appointments on the Board and details of their membership on Board Committees are set out below:

The Nominating Committee has reaffirmed their view that the current Board comprises persons who as a group is representative of the principal shareholders of the Company and who are able to provide the core competencies required for the Board to be effective and to meet the Company's objectives. The Nominating Committee is also of the view that, taking into account the nature and scope of the Company’s activities, a Board size of eight to ten members is appropriate.

Chairman And Chief Executive Officer
Principle 3: Chairman and Chief Executive Officer to be separate to ensure appropriate balance of power, increased accountability and greater capacity of the board for independent decision-making
Mr Steven Jay Green is both the Chairman and Chief Executive Officer ("CEO") of the Company. The Board confirms that this has not unduly concentrated power in the hands of one individual or compromised accountability and independent decision-making. The Board is also of the firm and unanimous view that it is in the best interest of the Company to continue to have an executive Chairman so that the Board, and in particular the non-executive Directors, can have the benefit of a Chairman who is knowledgeable about the businesses of the Company and is thereby better able to guide discussions and ensure that the Board is properly briefed in a timely manner on pertinent issues and developments, and at the same time the benefit of objective and independent views from the independent Directors. The Board believes that it is the person who fills the role that matters, rather than whether the roles are separate or combined per se. In this connection, the Board has considered that it is not necessary, for the time being, to appoint a lead independent director.

The executive Chairman, in consultation with Management and the Company Secretary, schedules meetings and prepares meeting agenda for the Board to perform its duties responsibly with regard to the Company’s business activities.

The executive Chairman monitors compliance with the Company's corporate governance guidelines and the flow of information from Management to the Board to ensure that all material information is provided as promptly as possible for the Board to make informed decisions. In addition, he ensures that relevant information on industry developments and analyst and press commentaries on matters in relation to the Company, its investee companies or the industries in which they operate are circulated to the Board members so as to enable them to be updated and thereby enhance the effectiveness of the non-executive Directors and the Board as a whole.

Access To Information / Accountability
Principle 6: Board Members To Have Complete, Adequate And Timely Information

Principle 10: The Board is Accountable to Shareholders; Management is Accountable to the Board
The Company recognises fully that the continual flow of relevant information on an accurate and timely basis is critical for the Board to be effective in the discharge of its duties. Board papers are circulated to the Directors as early as practicable so that members may better understand the matters prior to the board meeting and discussions may be focused on questions that the Board has about the board papers. However, sensitive matters may be tabled at the meeting itself or discussed without any papers being distributed.

Management provides the Board with management accounts on a monthly basis to keep the Board informed of, on a balanced and understandable basis, the Group’s performance, position and prospects. Such management accounts consist of the consolidated profit and loss accounts, analysis of revenues, operating profit and attributable profit by major subsidiaries and associates compared against the budgets, together with explanations given for significant variances for the month and year-to-date. Board members are also provided with all relevant information on material events and transactions accurately and promptly as and when they arise, as well as the Company’s funding position and investment updates prior to each Board meeting.

The Board is committed to being open and transparent in the conduct of the Company’s affairs, whilst preserving the commercial interests of the Company. The Company started quarterly reporting of its financial results from the first quarter of its financial year ended 2003, and financial reports and other price sensitive information are disseminated to shareholders through announcements via SGXNET to the Singapore Exchange Securities Trading Limited.

To enhance communication with investors, the Company has held several press and analysts’ conferences since 2003 and will continue to do so from time to time as it deems appropriate. The Company’s website was relaunched in early 2005, providing investors with weblinks and other information regarding the Company’s businesses and investments. The website was revamped in December 2005 to enable investors to have better access to information regarding the Company, its businesses and investments.

The Board has separate and independent access to the Management and the Company Secretary at all times. Should the Directors, whether as a group or individually, require access to independent professional advice in the furtherance of their duties, the cost of such advice will be borne by the Company.

Board Committees
Executive Committee
Principle 4: Formal and Transparent Process for Appointment of New Directors
The Nominating Committee ("NC") comprises three Directors, two of whom (including the Chairman) are independent Directors, namely, Lee Suan Yew (Chairman of the NC), Choo Chiau Beng and Tan Teck Meng. The NC had two meetings during the year, which were attended by all members.

The terms of reference of the NC are as follows:

The Directors submit themselves for re-nomination and re-election at regular intervals of at least once every three years. Pursuant to Article 86 of the Company’s Articles of Association, one-third of the Directors retire from office at the Company’s Annual General Meeting. In addition, Article 93 of the Company’s Articles of Association provides that a newly appointed Director must submit himself for re-election at the Annual General Meeting immediately following his appointment.

In 2006, the NC recommended, and the Board approved, a formal process for the selection of new directors to increase transparency of the nominating process in identifying and evaluating nominees for directors. The NC leads the process and makes recommendations to the Board as follows:

Process for appointment of new directors

Criteria for appointment of new directors
All new appointments are subject to the recommendation of the Nominating Committee based on the following objective criteria:

1. Integrity;
2. Independent mindedness;
3. Diversity – possess core competencies that meet the current needs of the Company and complement the skills and competencies of the existing Directors on the Board;
4. Able to commit time and effort to carry out duties and responsibilities effectively – proposed director is on no more than six principal boards;
5. Track record of making good decisions;
6. Experience in high-performing organisations; and
7. Business acumen.

The year of initial appointment and last re-election of the Directors are set out below:

All new appointments and all re-nominations of Directors are subject to the recommendation of the NC.

The NC will consider the competing time commitments faced, if any, when Directors serve on multiple boards, on a case-by-case basis.

Board Performance
Principle 5: Formal Assessment of the Effectiveness of the Board as a whole and the Performance of Individual Directors
The NC meets to assess the performance of the Board as a whole on a regular basis and schedules to meet at least once every six months, and provides feedback to the Chairman of the Board. The Chairman of the NC will then present the findings to the Board at the next Board meeting. The Board intends to continue focusing on collective Board performance and defer individual assessment to a later stage.

The Board has deemed that the current measure of the Board's performance, which focuses on the ability of the Board to lend support to Management and to steer the Group in the right direction, is appropriate, especially in view of the nature of the Company's business. In addition, the Board, through the delegation of its authority to the NC, has used its best efforts to ensure that the Board comprises persons who represent the principal strategic shareholders of the Company as well as independent Directors who enhance governance in the interests of all shareholders and the Company.

The Board considers that financial performance criteria may not be entirely appropriate for tracking Board performance as it was felt that such criteria did not evaluate a crucial element of the Board's role, namely, supervision and oversight. The Board therefore felt that its performance should be judged on the basis of accountability as a whole, rather than strict definitive financial performance criteria.

Audit Committee
Principle 11: Establishment of Audit Committee with Written Terms of Reference
The Audit Committee ("AC") comprises three Directors, with the Chairman being the only independent Director, namely, Tan Teck Meng (Chairman of the AC), Teo Soon Hoe and Kamal Bahamdan. The Chairman of the AC, Prof Tan Teck Meng, is a certified public accountant whilst Messrs Teo Soon Hoe and Kamal Bahamdan both have accounting and/or related financial management expertise and experience. The NC has again recommended, and the Board has reaffirmed that it is not necessary for the AC to comprise a majority of independent directors.

The AC had four meetings during the year, which were attended by all members except Mr Bahamdan, who attended 2 meetings.

The terms of reference of the AC are as follows:

The AC has full access to and co-operation of Management and full discretion to invite any Director or executive officer to attend its meetings.

During the year, the AC performed independent reviews of the financial statements of the Company before the announcement of the financial results. The AC also met with the external auditors separately without the presence of management.

The AC undertook a review of the nature and extent of all non-audit services performed by the external auditors to establish whether their independence has in any way been compromised as a result, and has confirmed that such services would not affect the independence of the external auditors.

During the financial year ended 30 June 2007, the Company adopted a Ethics Reporting Policy (the “Policy”), which provides for the mechanisms by which employees and other persons may, in confidence, raise concerns about possible improprieties in financial reporting or other matters. A set of guidelines, which was reviewed by the AC and approved by the Board, was also issued to assist the AC in managing allegations of fraud or other misconduct which may be made pursuant to the Policy, so that:

• investigations are carried out in an appropriate and timely manner;
• administrative, disciplinary, civil and/or criminal actions that are initiated following completion of investigations, are appropriate, balanced and fair; and
• action is taken to correct the weaknesses in the existing system of internal processes and policies which allowed the perpetration of the fraud and/or misconduct, and to prevent a recurrence.

Internal Audit
Principle 13: Independent internal audit function
The Board believes it is crucial to put in place a system of internal controls of the Group's procedures and processes to safeguard shareholders' interests and the Group's assets, and to manage risks.

The AC reviews, on an annual basis, the adequacy of the internal audit function. During its review in the financial year ended 30 June 2008, the AC again concluded that as all of the Group’s business activities were conducted overseas, and that the Company’s main activities in Singapore related to head office functions and has no operational risks, the appointment of an internal auditor for the Company in Singapore was not necessary. Instead, the Company has put in place certain review procedures to monitor the key controls and procedures and ensure their effectiveness. Such procedures will complement the AC’s oversight and supervision of the Company’s internal controls. As regards the Group’s businesses overseas, all of the Company’s major operating subsidiaries either had their own internal audit functions, or have outsourced their internal audit functions.

The AC is satisfied with the adequacy of the Company’s internal audit function.

Internal controls and risk management
Principle 12: Sound System of Internal Controls
The Company’s external auditors conduct an annual review, in accordance with their audit plans, of the effectiveness of the Company’s material internal controls, including financial, operational and compliance controls, and risk management. Any material non-compliance or failures in internal controls and recommendations for improvements are reported to the AC. The AC also reviews the effectiveness of the actions taken by Management on the recommendations made by the external auditors in this respect.

The risk management process and system of internal controls in the Company are designed to manage, rather than eliminate, the risk of failure to achieve the Group’s strategic objectives. It should be recognised that such systems can only provide reasonable but not absolute assurance against material misstatement or loss.

The AC has reviewed the effectiveness of the procedures described above and is satisfied that the Company’s risk management processes and internal controls are adequate to meet the needs of the Company in its current business environment.

Compensation and Share Option Committee
The Compensation and Share Option Committee ("CSOC") comprises three Directors, two of whom (including the Chairman) are independent Directors, namely, Tan Teck Meng (Chairman of the CSOC), Lim Chee Onn and Yong Pung How. The CSOC has access to expert advice in the field of executive compensation where required. The CSOC did not hold any meeting during the year.

The terms of reference of the CSOC are as follows:

Annual Remuneration Report
Principle 7: Formal and Transparent Procedure for Fixing Remuneration Packages of Directors

Principle 8: Remuneration of Directors should be Adequate But Not Excessive

Principal 9: Disclosure on Remuneration Policy, Level and Mix of Remuneration, and Procedure for Setting Remuneration
The aim of the CSOC is to motivate and retain Directors and executives, and ensure that the Company is able to attract the best talent in the market in order to maximise shareholder value.

Remuneration policy of non-executive directors
The non-executive Directors are paid directors’ fees in arrears, the amount of which is dependent on the level of responsibilities. Each Director is paid a basic fee. In addition, non-executive Directors who perform additional services through Board Committees are paid an additional fee for such services. The Chairman of each Board Committee is also paid a higher fee compared with members of that Committee in view of the higher responsibility carried by that office. The amount of Directors’ fees payable is subject to shareholders’ approval at the Company’s Annual General Meetings. The framework for determining Directors’ fees is as follows:

At the forthcoming Annual General Meeting to be held on 31 October 2008 (the “AGM”), the Board, at the Compensation And Share Option Committee’s recommendation, will be proposing that the remuneration of the non-executive Directors be made partly by way of directors’ fees in cash and partly in a fixed number of shares (the “Remuneration Shares”). The Board believes that the incorporation of an equity component in the total remuneration of the non-executive directors would achieve the objective of aligning the interests of the non-executive directors with those of the shareholders and the long-term interests of the Company. If approved by shareholders, the Company will be able to compensate the non-executive Directors in the form of shares in the Company in addition to directors’ fees in cash.

For the financial year ended 30 June 2008, the Company is proposing to procure the purchase from the market of 210,000 shares in the Company solely for the purpose of the delivery of 30,000 shares to each non-executive Director as part of Directors’ remuneration. This proposal will also be subject to shareholders’ approval at the AGM. The number of Remuneration Shares to be awarded may be reviewed from time to time for subsequent financial years but any change is not expected to be significant.

Remuneration Policy of Executive Directors and other Key Executives
The remuneration of the Directors and other key executives is under the purview of the CSOC.

Pursuant to the Memorandum of Agreement (“MOA”) entered into between the Company and PCG/Greenstreet Venture I, LP, an investment vehicle previously owned and controlled by Steven Jay Green, Gary Winnick and Wong Yip Yan ("PCGG"), the Company issued 230 million warrants to PCGG to subscribe for 230 million new ordinary shares of $0.10 each in the capital of the Company (the "Warrants 2002"), in return for PCGG providing management services and expertise to the Company. Steven Jay Green, Gary Winnick and Wong Yip Yan had each redeemed their interests in PCGG, which was liquidated, and the Warrants 2002 have been divided and transferred to them individually and held by their respective companies.

All of the Warrants 2002 have since been exercised. The MOA has also been terminated, and the rights and obligations contained therein are now reflected in a Management Agreement entered into between the Company and Greenstreet Partners, LP. (“Greenstreet”), an entity controlled by Steven Jay Green.

In May 2005, the Company issued 38 million warrants to Greenstreet to subscribe for 38 million new ordinary shares of $0.10 each in the capital of the Company (the “Warrants 2005”). This was in recognition of the contributions made by Greenstreet, of which Steven Jay Green has played a significant part, to the growth and expansion of the business and profile of the Company, and to compensate Greenstreet for providing management services and expertise to the Group. All of the Warrants 2005 have since been exercised.

The compensation structure is designed such that the interests of the executive Directors are aligned with the interests of shareholders, and linked to the Company's performance.

Level of Remuneration of Directors for the year ended 30 June 2008
The annual remuneration report for Directors is as follows:

Level and Mix of Remuneration of Key Executives (who are not also Directors) for the year ended 30 June 2008
Mr Jeffrey Safchik, the Company's Chief Financial Officer and Chief Operating Officer, is not an employee of the Company and was not paid any remuneration by the Company.

There are no other Key Executives of the Company.

Remuneration of Employees who are Immediate Family Members of a Director or the Executive Chairman
No employee of the Company and its subsidiaries was an immediate family member of a Director or the executive Chairman and whose remuneration exceeded $150,000 during the financial year ended 30 June 2008. “Immediate family member” means the spouse, child, adopted child, step-child, brother, sister and parent.

Details of the k1 Ventures Share Option Scheme 2000 and the Keppel Marine Share Option Scheme 1990
The particulars of share options of the Company granted pursuant to the k1 Ventures Share Option Scheme 2000 and the Keppel Marine Share Option Scheme 1990 are disclosed in the Directors' Report.

Communication with shareholders
Principle 14: Regular, Effective and Fair Communication with Shareholders

Principle 15: Greater Shareholder Participation at Annual General Meetings
The Company believes that a high standard of disclosure is key to raising the level of corporate governance. The Company does not practise selective disclosure, price-sensitive information is publicly released, and results and annual reports are announced or issued within the mandatory periods. The Company has also engaged the Group Corporate Communications Department of Keppel Corporation Limited to improve communication with shareholders, and to receive and attend to their queries and concerns.

Shareholders are informed of shareholders’ meetings through notices published in the newspapers and reports or circulars sent to all shareholders. Shareholders are invited at such meetings to put forth any questions they may have on the motions to be debated and decided upon. If any shareholder is unable to attend, he or she is allowed to appoint up to two proxies to vote on his or her behalf at the meeting through proxy forms sent in advance.

At shareholders’ meetings, each distinct issue is proposed as a separate resolution.

The Company will not be considering implementing absentia voting methods such as voting via mail, email or fax until security, integrity and other pertinent issues are satisfactorily resolved.

Securities Transactions
The Company has issued a policy on dealings in the securities of the Company to its Directors and officers, setting out the implications of insider trading and guidance on such dealings. It has adopted the Best Practices Guide on Dealings in Securities issued by the SGX. In line with the Best Practices Guide on Dealing in Securities issued by the SGX, the Company issues circulars to its Directors and officers informing them that the Company and its officers must not deal in listed securities of the Company one month before the release of the full-year results and two weeks before the release of the quarterly results, as the case may be, and if they are in possession of unpublished material or price-sensitive information.

Notes:

1. The Code of Corporate Governance 2005 issued by the Ministry of Finance on 14 July 2005.
2. The Code of Corporate Governance defines an “independent” director as one who has no relationship with the company, its related companies or its officers that could interfere, or be reasonably perceived to interfere, with the exercise of the director’s independent business judgement with a view to the best interests of the company. A related company in relation to a company includes its subsidiaries, fellow subsidiaries, or parent company.
3. Declined to accept any Directors’ fees for the financial year ended 30 June 2008