(A) BOARD MATTERS

The Board's Conduct of its Affairs

Principle 1: Every company should be headed by an effective Board to lead and control the company. The Board is collectively responsible for the success of the company. The Board works with Management to achieve this and the Management remains accountable to the Board.

Role of the Board of Directors (the “Board”)

The primary role of the Board is to protect and enhance long-term shareholders' value. It sets the corporate strategies of the Group, sets directions and goals for the Management. It supervises the Management and monitors performance of these goals to enhance shareholders' value. The Board is responsible for the overall corporate governance of the Group.

Regular meetings are held to deliberate the strategic policies of the Company, review and approve annual budgets, review the performance of the business and approve the public release of periodic financial results.

The Board has formed a number of Board Committees namely the Audit Committee, the Nominating Committee and the Remuneration Committee to assist in carrying out and discharging its duties and responsibilities efficiently and effectively.

These Committees function within clearly defined terms of references and operating procedures.

The following table discloses the number of meetings held for Board and Board Committees and the attendance of all Directors for the financial year ended 31 March 2008: -

While the Board considers directors' attendance at Board meetings to be important, it should not be the only criterion to measure their contributions. It also takes into account the contributions by board members in other forms including periodical reviews, provision of guidance and advice on various matters relating to the Group.

Board Composition and Balance

Principle 2: There should be a strong and independent element on the Board, which is able to exercise objective judgement on corporate affairs independently, in particular, from Management. No individual or small group of individuals should be allowed to dominate the Board's decision making.

The Board of Directors (the “Board”) comprises seven (7) directors, of whom four (4) are executive directors and three (3) are independent directors. The list of directors is as follows:

Mr Choo Chee Onn	(Executive Chairman and Managing Director)
Mr Kwok Ngat Khow	(Executive Director)
Mr Tok Cheng Hoe	(Executive Director)
Mr Lim Kee Seng	(Executive Director)
Mr Lim Yeow Hua @ Lim You Qin	(Independent Director)
Mr Lai Meng Seng	(Independent Director)
Mr Khua Kian Kheng Ivan	(Independent Director)

The Board is of the view that the current Board members comprise persons whose diverse skills, experience and attributes provide for effective direction for the Group. The composition of the Board is reviewed on an annual basis by the Nominating Committee to ensure that the Board has the appropriate mix of expertise and experience, and collectively possess the necessary core competencies for effective functioning and informed decision-making.

The criterion for independence is based on the definition given in the Code. The Board considers an “independent” director as one who has no relationship with the Company, its related companies or officers that could interfere, or be reasonably perceived to interfere, with the exercise of the director's independent judgement of the conduct of the Group's affairs.

Key information regarding the directors is given in the 'Board of Directors' section of the annual report.

Particulars of interests of Directors who held office at the end of the financial year in shares in the Company and in related corporations (other than wholly-owned subsidiaries) are set out in the Directors' Report on page 29 of this annual report.

Executive Chairman and Group Managing Director

Principle 3: There should be a clear division of responsibilities at the top of the company – the working of the Board and the executive responsibility of the company's business – which will ensure a balance of power and authority, such that no one individual represents a considerable concentration of power.

The Executive Chairman and the Managing Director of the Company is Mr Choo Chee Onn. In view of Mr Choo Chee Onn's concurrent appointment as the Executive Chairman and Managing Director, the Board has appointed Mr Lim Yeow Hua @ Lim You Qin as the lead independent director, pursuant to the recommendations in Commentary 3.3 of the Code. In accordance with the recommendations in the said commentary 3.3, the lead independent director is available to shareholders where they have concerns with contact through the normal channels of the Executive Chairman and Managing Director or Chief Financial Officer has failed to resolve or for which such contact is inappropriate.

As Executive Chairman, Mr Choo bears responsibility for the working of the Board and, together with the AC, ensures the integrity and effectiveness of the governance process of the Board.

As Group Managing Director, Mr Choo bears overall daily operational responsibility for the Group's business.

Board Membership

Principle 4: There should be a formal and transparent process for the appointment of new directors to the Board.

Board Performance

Principle 5: There should be a formal assessment of the effectiveness of the Board as a whole and the contribution by each director to the effectiveness of the Board.

The Nominating Committee (“NC”) comprises the following three (3) independent non-executive directors:

Mr Khua Kian Kheng Ivan – Chairman
Mr Lai Meng Seng
Mr Lim Yeow Hua @ Lim You Qin

The NC functions under the terms of reference which sets out its responsibilities: (a) To recommend to the Board on all board appointments, re-appointments and re-nominations; (b) To ensure that independent Directors meet SGX-ST's guidelines and criteria; and (c) To assess the effectiveness of the Board as a whole and the effectiveness and contribution of each Director to the Board.

The Articles of Association of the Company require one-third of the Board to retire from office at each Annual General Meeting (“AGM”). Accordingly, the Directors submit themselves for re-nomination and re-election at regular intervals of at least once every three years.

The NC examines the Board's size to satisfy that it is appropriate for effective decision making, taking into account the nature and scope of the Company's operations.

Access to Information

Principle 6: In order to fulfill their responsibilities, Board members should be provided with complete, adequate and timely information prior to board meetings and on an on-going basis.

All directors are from time to time furnished with information concerning the Company to enable them to be fully cognisant of the decisions and actions of the Company's executive management. The Board has unrestricted access to the Company's records and information.

Senior members of management staff are available to provide explanatory information in the form of briefings to the directors or formal presentations in attendance at Board meetings, or by external consultants engaged on specific projects.

The Board has separate and independent access to the Company Secretary and to other senior management executives of the Company and of the Group at all times in carrying out their duties. The Company Secretary attends or is represented at all Board meetings and meetings of the Board committees of the Company and ensures that Board procedures are followed and that applicable rules and regulations are complied with. The minutes of all Board committees' meetings are circulated to the Board.

Each director has the right to seek independent legal and other professional advice, at the Company's expense, concerning any aspect of the Group's operations or undertakings in order to fulfill their duties and responsibilities as directors.

(B) REMUNERATION MATTERS

Procedures for Developing Remuneration Policies

Principle 7: There should be a formal and transparent procedure for developing policy on executive remuneration and for fixing the remuneration packages of individual directors. No director should be involved in deciding his own remuneration.

The Remuneration Committee (“RC”) comprises the following 3 independent non-executive directors:

Mr Lai Meng Seng – Chairman
Mr Khua Kian Kheng Ivan
Mr Lim Yeow Hua @ Lim You Qin

The RC recommends to the Board a framework of remuneration for the Directors and Executive Officers, and determines specific remuneration package for each Executive Director. The recommendations are submitted for endorsement by the Board.

All aspects of remuneration, including but not limited to directors' fees, salaries, allowances, bonuses and benefits in kind, are covered by the RC. Each RC member is abstained from voting on any resolution in respect of his remuneration package.

The RC functions under the terms of reference which sets out its responsibilities:

(a) To recommend to the Board a framework for remuneration for the Directors and key executives of the Company;
(b) To determine specific remuneration packages for each Executive Director;
(c) To review the appropriateness of compensation for Non-Executive Directors; and
(d) To review the remuneration of employees occupying managerial positions who are related to directors and substantial shareholders.

The RC is provided with access to expert professional advice on remuneration matters as and when necessary. The expense of such services is borne by the Company.

Level and Mix of Remuneration

Principle 8: The level of remuneration should be appropriate to attract, retain and motivate the directors needed to run the company successfully but companies should avoid paying more than is necessary for this purpose. A significant proportion of executive directors' remuneration should be structured so as to link rewards to corporate and individual performance.

In setting remuneration packages, the Remuneration Committee takes into consideration the pay and employment conditions within the industry and in comparable companies. The remuneration of Non-Executive Directors is also reviewed to ensure that the remuneration is commensurate with the contribution and responsibilities of the Directors.

The Company submits the quantum of directors' fee of each year to the shareholders for approval at each AGM.

The Executive Chairman and Managing Director, Mr Choo Chee Onn has service agreement. The service agreement covers the terms of employment, salaries and other benefits. Non-executive Directors have no service contracts.

Disclosure on Remuneration

Principle 9: Each company should provide clear disclosure of its remuneration policy, level and mix of remuneration, and the procedure for setting remuneration in the company's annual report. It should provide disclosure in relation to its remuneration policies to enable investors to understand the link between remuneration paid to directors and key executives, and performance.

The details of the remuneration of directors of the Group disclosed in bands for services rendered during the financial year ended 31 March 2008 are as follows:

A breakdown of the remuneration of the Directors and top five (5) key executives of the Group for the financial year ended 31 March 2008 is set out below:

Immediate Family Member of Directors or Substantial Shareholders

No employee of the Company and its subsidiaries was an immediate family member of a Director and/or a Substantial Shareholder whose remuneration exceeded S$150,000 during the financial year ended 31 March 2008.

(C) ACCOUNTABILITY AND AUDIT

Accountability

Principle 10: The Board should present a balanced and understandable assessment of the company's performance, position and prospects.

The Board is accountable to the shareholders and is mindful of its obligations to furnish timely information and to ensure full disclosure of material information to shareholders in compliance with statutory requirements and the Listing Manual of the SGX-ST.

Price sensitive information is publicly released either before the Company meets with any group of investors or analysts or simultaneously with such meetings. Financial results and annual reports are announced or issued within legally prescribed periods.

Audit Committee

Principle 11: The Board should establish an Audit Committee with written terms of reference which clearly set out its authority and duties.

The Audit Committee (“AC”) comprises the following 3 independent non-executive directors:

Mr Lim Yeow Hua @ Lim You Qin – Chairman
Mr Lai Meng Seng
Mr Khua Kian Kheng Ivan

The AC functions under the terms of reference which sets out its responsibilities as follows:

(a) To review the audit plans of both the internal and external auditors;
(b) To review the internal auditors' reports and their evaluation of the Company's and the Group's system of internal controls;
(c) To review the effectiveness and adequacy of the internal audit function which is outsourced to a professional firm;
(d) To review the co-operation given by the Company's officers to the internal and external auditors;
(e) To review the financial statements of the Company and the Group before submission to the Board;
(f) To nominate and review appointment of internal and external auditors;
(g) To review with internal auditors and Management on the general internal control procedures;
(h) To review the independence of the internal and external auditors; and
(i) To review interested person transactions, if any.

The AC has the power to conduct or authorise investigations into any matters within the AC's scope of responsibility. The AC is authorised to obtain independent professional advice if it deems necessary in the discharge of its responsibilities. Such expenses are to be borne by the Company. Each member of the AC is abstained from voting any resolutions in respect of matters he is interested in.

The AC has full access to and co-operation of the Management and has full discretion to invite any Director or executive officer to attend its meetings, and has been given reasonable resources to enable it to discharge its functions.

The AC meets with both the external and internal auditors without the presence of the Management at least once a year.

The AC reviews the independence of the external auditors annually. The AC, having reviewed the range and value of non-audit services performed by the external auditors, Ernst & Young was satisfied that the nature and extent of such services have not prejudiced the independence and objectivity of the external auditors. The AC recommends that Ernst & Young be nominated for re-appointment as auditors at the forthcoming AGM.

The Company has in place a whistle-blowing framework where staff of the Company can access the Human Resource Manager to raise concerns about improprieties.

Internal Controls and Risk Management

Principle 12: The Board should ensure that the Management maintains a sound system of internal controls to safeguard the shareholders' investments and the company's assets.

The AC ensures that a review of the effectiveness of the Company's material internal controls, including financial, operational and compliance controls and risk management, is conducted annually. In this respect, the AC reviews the audit plans, and the findings of the internal auditors and ensures that the Company follows up on the internal auditors' recommendations raised, if any, during the audit process.

The Group has in place a system of internal control and risk management for ensuring proper accounting records and reliable financial information as well as management of business risks with a view to safeguarding shareholders' investments and the Company's assets. The risk management framework implemented provides for systematic and structured review and reporting of the assessment of the degree of risk, evaluation and effectiveness of controls in place and the requirements for further controls.

Internal Audit

Principle 13: The company should establish an internal audit function that is independent of the activities it audits.

Principle 13: The company should establish an internal audit function that is independent of the activities it audits.

The primary functions of internal audit are to :

(a) assess if adequate systems of internal controls are in place to protect the funds and assets of the Group and to ensure control procedures are complied with;
(b) assess if operations of the business processes under review are conducted efficiently and effectively; and
(c) identify and recommend improvement to internal control procedures, where required.

The AC reviews the Company's internal control assessment and based on the internal auditors' report and the internal controls in place, it is satisfied that there are adequate internal controls in the Company.

(D) COMMUNICATION WITH SHAREHOLDERS

Communication with Shareholders

Principle 14: Companies should engage in regular, effective and fair communication with shareholders.

Principle 15: Companies should encourage greater shareholder participation at AGM's and allow shareholders the opportunity to communicate their views on various matters affecting the Company.

In line with continuous obligations of the Company pursuant to the SGX-ST's Listing Rules, the Board's policy is that all shareholders be informed of all major developments that impact the Group.

Information is disseminated to shareholders on a timely basis through:

(a) SGXNET announcements and news release;
(b) Annual Report prepared and issued to all shareholders;
(c) Press releases on major developments of the Group;
(d) Notices of and explanatory memoranda for AGM and extraordinary general meetings (“EGM”); and
(e) Company's website at http://www.kimsengheng.com at which shareholders can access information on the Group.

The Company's AGMs are the principal forums for dialogue with shareholders. The Chairmen of the Audit, Remuneration and Nominating Committees are normally available at the meetings to answer any question relating to the work of these committees. The External Auditors are also present to assist the Directors in addressing any relevant queries by the shareholders.

Shareholders are encouraged to attend the AGM/EGM to ensure high level of accountability and to stay appraised of the Group's strategy and goals. Notice of the meeting is advertised in newspapers and announced on SGXNET.

(E) DEALING IN SECURITIES

The Company has in place a policy prohibiting share dealings by Directors and employees of the Company for the period of one month prior to the announcement of the Company's half yearly and yearly results as the case may be, and ending on the date of the announcement of the relevant results. Directors and employees are expected to observe the insider trading laws at all times even when dealing in securities within permitted trading period.

Interested Person Transactions Policy

The Company adopts an internal policy in respect of any transactions with interested person and establishes procedures for review and approval of the interested person transactions entered into by the Group. The AC reviews the rationale and terms of the Group's interested person transactions and is of the view that the interested person transactions are on normal commercial terms and are not prejudicial to the interests of the shareholders.

Material Contracts

There was no material contracts entered into by the Company or any of its subsidiary companies involving the interest of the Managing Director, any Director, or controlling shareholder.

Compliance with Existing Best Practices Guide of the SGX-ST

The Board confirms that for the financial year ended 31 March 2008, the Company has complied with Listing Rule 1207(18).