Remuneration Matters

• Principle 7: Procedures for Developing Remuneration Policies

  
  

  Remuneration Committee ("RC")

  The RC is made up of non-executive Directors, the majority of whom, including its Chairman, are independent Directors.
  
  The RC comprises the following members:

  • Mr Timothy Chia Chee Ming (Chairman)
  • Mrs Siripen Sitasuwan
  • Mr Thapana Sirivadhanabhakdi

  The RC is guided by written Terms of Reference, which are approved by the Board. The Terms of Reference clearly set out the authority and duties of the RC. The RC’s main responsibility is to assist the Board in establishing a formal and transparent process for developing policies on executive remuneration and for fixing the remuneration packages of individual directors. The RC reviews and recommends to the Board, remuneration packages and service terms of individual Directors and each of the CEOs of the Group’s business divisions. When carrying out its duties, the RC also reviews and makes recommendations, for endorsement by the Board, on the remuneration framework which covers all other aspects of remuneration including salaries, allowances, performance bonuses, grant of share awards and incentives.
  
  Remuneration Action Framework
  
  

  The RC reviews on an annual basis, the level and mix of remuneration and benefits policies and practices of the Company, including long-term incentives. When conducting such reviews, the RC takes into account the performance of the Company and employees. It also reviews and approves the framework for salary reviews, performance bonus and incentives for key management of the Group.
  
  The RC also aligns the CEOs’ leadership, through appropriate remuneration and benefits policies and long-term incentives, with the Company’s strategic objectives and key challenges. Performance targets are also set for the CEOs and their performances evaluated yearly.
  
  The RC may from time to time, and where necessary or required, engage external consultants in framing the remuneration policy and determining the level and mix of remuneration for Directors and management. Among other things, this helps the Company to stay competitive in its remuneration packages. During the financial year ended 30 September 2018, Carrots Consulting Pte Ltd, Mercer (Singapore) Pte Ltd and Korn Ferry Hay Group Pte Ltd were appointed as remuneration consultants. The Company does not have any relationship with these remuneration consultants which would affect their independence and objectivity.

• Principle 8: Level and Mix of Remuneration

  In recommending the level and mix of remuneration, the RC seeks to build, motivate and retain Directors and key management. It ensures that competitive remuneration policies and practices are in place to draw and motivate high-performing executives so as to drive the Group’s businesses to greater growth, efficiency and profitability. In its deliberation, the RC takes into consideration industry practices and benchmarks against relevant industry players to ensure that its remuneration and employment conditions are competitive.
  
  The Company’s compensation framework comprises fixed remuneration, annual variable bonuses and long-term incentives. Annual variable bonuses are linked to achievement of financial and non-financial key performance indicators. The Company also uses indicators such as core values, competencies, key result areas, performance rating, and potential of the employees (including key management) to link remuneration to corporate and individual performance. Long-term incentive plans are in place and are conditional upon pre-determined performance targets being met. The long-term incentive plans serve to motivate and reward employees and align their interests to maximise long-term shareholder value.
  
  Long-Term Incentive Plans
  
  The RC administers the Company’s share-based remuneration incentive plans, namely, the F&N Restricted Share Plan (“RSP”) and F&N Performance Share Plan (“PSP”).
  
  Through the RSP and PSP, the Company seeks to foster a greater ownership culture within the Group by aligning more directly the interests of key senior management and senior executives with the interest of shareholders, and for such employees to participate and share in the Group’s growth and success.
  
  The RSP is available to a broader base of senior executives compared to the PSP. Its objectives are to increase the Company’s flexibility and effectiveness in its continuing efforts to attract, motivate and retain talented senior executives and to reward these executives for the performance of the Company and that of the individual. The PSP applies to senior management in key positions who shoulder the responsibility of the Company’s performance and who are able to drive the growth of the Company through superior performance. It serves as further motivation to key senior management in striving for excellence and delivering long-term shareholder value.
  
  Under the RSP and PSP, the Company grants share-based awards (“Base Awards”) conditional upon pre-determined performance targets being met. These targets are set by the RC in its absolute discretion for the performance conditions to be met over the performance period. The performance period for the RSP and PSP are two and three years respectively. For the RSP, the targets set are the achievement of (i) Net Revenue; (ii) Profit Before Interest and Tax; (iii) Attributable Profit Before Fair Value Adjustment and Exceptional Items; and/or (iv) Return On Capital Employed.
  
  For the PSP, the pre-set targets are based on Return On Invested Capital, Total Shareholders’ Return Relative to Straits Times Index and Absolute Total Shareholders’ Return as a multiple of Cost of Equity.
  
  The Base Awards represent the right to receive fully paid ordinary shares, their equivalent cash value or a combination thereof, free of charge, provided certain prescribed performance and service conditions are met. The final number of shares to be released will depend on the achievement of the pre-determined targets at the end of the performance period. If the pre-determined targets are exceeded, more shares than the Base Awards can be delivered, subject to a maximum percentage of the Base Awards. The first grant of Base Awards was made in December 2009.
  
  The aggregate number of new ordinary shares allotted and issued and/or to be allotted and issued, when aggregated with existing ordinary shares (including shares held in treasury) delivered and/or to be delivered, pursuant to the RSP and the PSP, shall not exceed 10% of the total number of issued ordinary shares of the Company (excluding treasury shares).
  
  The RC currently does not intend, in any given year, to grant awards under the RSP and PSP which would comprise more than 1% of the total number of issued ordinary shares from time to time (the “Yearly Limit”). However, if the Yearly Limit is not fully utilised in any given year, the balance of the unutilised Yearly Limit may be used by the Company to make grants of awards in subsequent years.
  
  Senior management participants in key positions are required to hold a minimum number of the shares released to them under the RSP and PSP to maintain a beneficial ownership stake in the Company for the duration of their employment or tenure with the Company.
  
  The RSP and PSP (together, the “Existing Share Plans”) were adopted at an extraordinary general meeting of the Company held on 22 January 2009 and have a duration of 10 years commencing on the date of adoption. The Existing Share Plans are accordingly due to expire on 21 January 2019. The Company is proposing to adopt a new F&N Restricted Share Plan 2019 (the “F&N RSP 2019”) to replace the Existing Share Plans and will be obtaining shareholders’ approval for the new F&N RSP 2019 at the AGM to be held on 29 January 2019.

• Principle 9: Disclosure on Remuneration

  
  

  Remuneration of Directors and Key Management Personnel

  Information on the remuneration of Directors of the Company and top five key management personnel of the Group is set out here.
  
  Directors' Fees

  The remuneration of non-executive Directors takes into account their level and quality of contribution and their respective responsibilities, including attendance and time spent at Board meetings and Board Committee meetings. Directors are paid a basic fee and attendance fees for attending Board meetings. Non-executive Directors who perform services through Board Committees are paid additional basic and attendance fees for such services. No Director decides his own fees. Directors’ fees are reviewed annually to benchmark such fees against the amounts paid by other major listed companies. The Company’s Board fee structure during the year is as set out here. The Board fee structure remains unchanged from that in the preceding financial year i.e. financial year ended 30 September 2017.