ANNUAL REPORT

Middle East Development Singapore ltdannual report 2007 27CORPORATE GOVERNANCESTATEMENTINTERNAL CONTROLSPrinciple 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 Group believes in the importance of maintaining a sound system of internal controls to safeguard the interests of the shareholdersand the Group’s assets. To achieve this, internal reviews are constantly being undertaken to ensure that the system of internal controlsmaintained by the Group is sufficient to provide reasonable assurance that the Group’s assets are safeguarded against loss fromunauthorized use or disposition, transactions are properly authorized and proper financial records are being maintained.The Board is of the opinion that the Group’s existing internal controls are adequate and satisfactory.As part of the statutory audit on financial statements, the external auditors report to the AC and the appropriate level of managementany material weaknesses in financial internal controls over the areas which are significant to the audit.INTERNAL AUDITPrinciple 13: The company should establish an internal audit function that is independent of the activities it audits.At present, the Company has no separate internal audit function. The Board believes that the existing system of internal control isadequate, taking into consideration the corporate structure and scope of the Company’s operations, to safeguard the Group’s assetsagainst loss from unauthorized use or disposition, to ensure that transactions are properly authorized and to ensure that proper financialrecords are being maintained.The key element in the Group’s internal control systems is the control which senior management exercises over contracts and expendituresfor projects and capital spending, and which are also subject to approval by the Board.The AC will continuously review the cost-effectiveness and adequacy of the Group’s internal control system with the external auditorsand shall assess the need for a separate internal audit function when Group grows in size and complexity.(D)COMMUNICATION WITH SHAREHOLDERSCOMMUNICATION WITH SHAREHOLDERSPrinciple 14: Companies should engage in regular, effective and fair communication with shareholders.GREATER SHAREHOLDER PARTICIPATIONPrinciple 15: Companies should encourage greater shareholder participation at AGMs, and allow shareholders the opportunity tocommunicate their views on various matters affecting the company.In line with the continuous disclosure obligations of the Company and pursuant to the Listing Manual of the SGX-ST and the CompaniesAct, Chapter 50 of Singapore, the Board’s policy is that shareholders shall be informed of all major developments of the Company.Information is communicated to shareholders on a timely basis through SGXNET and the press.