STOCK CODE 0002 COMPANY NAME KOTRA INDUSTRIES …kotrapharma.com/pdf/Corporate Governance...

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CORPORATE GOVERNANCE REPORT

STOCK CODE : 0002 COMPANY NAME : KOTRA INDUSTRIES BERHAD FINANCIAL YEAR : June 30, 2019

OUTLINE:

SECTION A – DISCLOSURE ON MALAYSIAN CODE ON CORPORATE GOVERNANCE

Disclosures in this section are pursuant to Paragraph 15.25 of Bursa Malaysia Listing

Requirements.

SECTION B – DISCLOSURES ON CORPORATE GOVERNANCE PRACTICES PURSUANT

CORPORATE GOVERNANCE GUIDELINES ISSUED BY BANK NEGARA MALAYSIA

Disclosures in this section are pursuant to Appendix 4 (Corporate Governance Disclosures)

of the Corporate Governance Guidelines issued by Bank Negara Malaysia. This section is

only applicable for financial institutions or any other institutions that are listed on the Exchange

that are required to comply with the above Guidelines.

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SECTION A – DISCLOSURE ON MALAYSIAN CODE ON CORPORATE GOVERNANCE

Disclosures in this section are pursuant to Paragraph 15.25 of Bursa Malaysia Listing

Requirements.

Intended Outcome

Every company is headed by a board, which assumes responsibility for the company’s

leadership and is collectively responsible for meeting the objectives and goals of the company.

Practice 1.1

The board should set the company’s strategic aims, ensure that the necessary resources are

in place for the company to meet its objectives and review management performance. The

board should set the company’s values and standards, and ensure that its obligations to its

shareholders and other stakeholders are understood and met.

Application : Applied

Explanation on application of the practice

: The Board provides effective leadership, collectively directs the business conduct as well as monitors the business activities, operations and performance of the Group with a view to achieve and sustain long-term success for the Group. The Directors are aware of discharging their fiduciary duties and responsibilities to act in the best interests of the Company, its shareholders and other stakeholders. The roles and responsibilities of the Board are defined in the Board Charter which can be found on the Group’s website at www.kotrapharma.com

Among the major responsibilities of the Board are the following:

a) reviewing and approving financial matters such as the Group’s financial results, budgets, investments, dividends and capital management, including corporate announcements;

b) reviewing and adopting the strategic plan for the Group;

c) identifying principal business risks faced by the Group and ensuring the implementation of appropriate controls to manage these risks to acceptable levels;

d) actively working on succession planning, including appointing, training, fixing the remuneration and replacing Senior Management of the Group; and

e) committing towards achieving high standards of corporate governance, business ethics, integrity and professionalism.

In order to discharge its stewardship role effectively, the Board has delegated part of its responsibilities to the Board Committees, namely the Audit Committee (“AC”), Nomination Committee (“NC”), Remuneration Committee (“RC”) and ESOS Committee (“EC”). The Board Committees perform specific functions and provide the Board with recommendations as well as advices with the decision-making role vested in the Board. The Board Committees’ roles and responsibilities

http://www.kotrapharma.com/

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at discharging their functions are set out in their respective Terms of Reference approved by the Board. Management authorities and responsibility in managing day-to-day business activities have been delegated by the Board to the Managing Director, who is supported by a Management team, to execute decisions, policies and strategies set by the Board.

Explanation for departure

:

Large companies are required to complete the columns below. Non-large companies are encouraged to complete the columns below.

Measure :

Timeframe :

4

Intended Outcome



Practice 1.2

A Chairman of the board who is responsible for instilling good corporate governance practices,

leadership and effectiveness of the board is appointed.



: The Chairman, Datuk Jamaludin bin Nasir, is responsible for providing leadership to the Board to discharge its responsibilities effectively, instilling and promoting good governance practices in the Company as well as ensuring all pertinent issues are on the Board meeting’s agenda and that the Board members receive the necessary information on a timely basis. The Chairman acts as a facilitator during meetings of the Board to encourage Board members to participate actively in discussions and express their views or opinions openly that lead to informed decisions for the Company. The Chairman also ensures effective communication via General Meetings with the shareholders and other stakeholders and that their views are communicated to the Board as a whole after the meetings. The roles and responsibilities of the Chairman are set out in the Board Charter, available on the Group’s website at www.kotrapharma.com


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Measure :

Timeframe :


5

Intended Outcome



Practice 1.3

The positions of Chairman and CEO are held by different individuals.



: The positions of Chairman and Managing Director are held by two (2) different individuals with a clear division of responsibilities between them. Their roles are distinct, separated and clearly defined to ensure a balance of power and authority within the Company to facilitate an independent decision-making process. The Board Chairman is Datuk Jamaludin bin Nasir, an Independent Non-Executive Director, who is responsible in leading the Board and monitoring the overall conduct of the Board’s activities. The Managing Director, Piong Teck Onn, leads the executive management of the Group and is responsible for overseeing the day-to-day business activities and operations of the Group. He is also responsible for implementing policies and strategies for the Group as approved by the Board. The separation of responsibilities of the Board Chairman and the Managing Director is clearly outlined in the Board Charter.


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Measure :

Timeframe :

6

Intended Outcome



Practice 1.4

The board is supported by a suitably qualified and competent Company Secretary to provide

sound governance advice, ensure adherence to rules and procedures, and advocate adoption

of corporate governance best practices.



: The Board is supported by two (2) Company Secretaries with qualifications which accord with the requirements of the Companies Act 2016. Besides being professionally qualified, they are experienced, capable and competent at carrying out their duties and responsibilities enshrined in the Companies Act 2016 and the Main Market Listing Requirements of Bursa Malaysia Securities Berhad. The roles and responsibilities of the Company Secretaries include the following:

1) Act as the Secretary of all Board and Board Committee Meetings;

2) Responsible for recording and keeping the minutes of meetings as well as ensuring all deliberations, decisions and resolutions passed are recorded accurately;

3) Attend all meetings and ensure the meetings are convened in a proper manner;

4) Maintain the statutory registers and records of the Company;

5) Advise and update the Board on matters regarding compliance with regulatory requirements, Principles and Practices on corporate governance promulgated by the Malaysian Code on Corporate Governance, and policies and procedures of the Board.

The Directors have unlimited and unrestricted access to the Company Secretaries’ advices and services that enable them to discharge their duties effectively. The Board is aware of the importance of disseminating information adequately in a timely manner. The Directors meet every quarterly according to the meeting schedule set in advance at the beginning of the year to discuss on quarterly financial results, business operations, regulatory compliance, business plans, risk management and internal controls, and other related areas of the Group’s business and operations.


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7


Measure :

Timeframe :

8

Intended Outcome



Practice 1.5

Directors receive meeting materials, which are complete and accurate within a reasonable

period prior to the meeting. Upon conclusion of the meeting, the minutes are circulated in a

timely manner.



: The meeting materials consisting of meeting agenda, previous meeting minutes, financial reports and other relevant reports are furnished to the Directors. The Board and Board Committee papers are circulated to the Directors by the Company Secretaries at least seven (7) days prior to the meeting. This is to ensure there is sufficient time to allow the Directors to study the meeting materials in order to have a conducive meeting, facilitate decision-making and to interact with Management to provide additional explanations or clarifications on any matter arising. All proceedings of the Board and Board Committee meetings are documented in the minutes of meetings by the Company Secretaries. The minutes of meetings, which are circulated to all Directors, are tabled for confirmation at the subsequent meeting, with corrections made, as the case may be.


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Measure :

Timeframe :

9

Intended Outcome

There is demarcation of responsibilities between the board, board committees and

management.

There is clarity in the authority of the board, its committees and individual directors.

Practice 2.1

The board has a board charter which is periodically reviewed and published on the company’s

website. The board charter clearly identifies–

▪ the respective roles and responsibilities of the board, board committees, individual

directors and management; and

▪ issues and decisions reserved for the board.



: The Board has formalised a Board Charter that clearly sets out the roles, responsibilities and functions of the Board Chairman, Managing Director, Non-Executive Directors as well as the Board Committees in discharging their duties to the Company. In the Board Charter, there are also a formal schedule of matters reserved to the Board for its consideration and decision and Terms of Reference of the Audit Committee (“AC”), Nomination Committee (“NC”) and Remuneration Committee (“RC”).

The schedule of matters reserved to the Board for collective decision comprises, inter-alia, the following salient items:

• Appointment and recommendation for removal of Directors;

• Appointment and removal of Company Secretary and Board Committee members;

• Approval or recommendation, as the case may be, of Directors’ remuneration, including fees and remuneration policies and procedures dictating the structure of Executive Directors’ remuneration;

• Business strategy, operational plan and annual budget;

• Capital expenditure beyond prescribed threshold;

• Investment and/or divestiture in company, business, property or undertaking;

• Treasury policies and bank mandate;

• Financial reporting, comprising quarterly financial reports and annual financial statements;

• Approval of interim dividend and recommending final dividend;

• Granting of power of attorney; and

• Issuance of guarantee and indemnity.

The Board Charter and Terms of Reference of the AC, NC and RC, which are periodically reviewed to align with changes to regulatory

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requirements, were last reviewed, updated and approved by the Board on 7th October 2018 and are made available on the Group’s website at www.kotrapharma.com


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Measure :

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11

Intended Outcome

The board is committed to promoting good business conduct and maintaining a healthy

corporate culture that engenders integrity, transparency and fairness.

The board, management, employees and other stakeholders are clear on what is considered

acceptable behaviour and practice in the company.

Practice 3.1

The board establishes a Code of Conduct and Ethics for the company, and together with

management implements its policies and procedures, which include managing conflicts of

interest, preventing the abuse of power, corruption, insider trading and money laundering.

The Code of Conduct and Ethics is published on the company’s website.



: The Board has established a Code of Conduct (“Code”) for the Directors that sets out the standards of conduct for Directors to strictly observe and abide by. The Code sets out high ethical business standards, honesty, personal as well as professional integrity expected from Directors in all aspects of the Group’s business and activities. The Directors are required to declare any personal, professional or business interest that may conflict with their responsibilities. The Code has been incorporated in the Board Charter which is available on the Group’s website at www.kotrapharma.com To foster good ethical conduct and corporate culture that reflects the core values of the Group, a Code of Conduct has also been established for employees, including Executive Directors, to comply in the best interest of the Company and its stakeholders.


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Measure :

Timeframe :


12

Intended Outcome

The board is committed to promoting good business conduct and maintaining a healthy

corporate culture that engenders integrity, transparency and fairness.

The board, management, employees and other stakeholders are clear on what is considered

acceptable behaviour and practice in the company.

Practice 3.2

The board establishes, reviews and together with management implements policies and

procedures on whistleblowing.



: The Board has formalised a Whistle Blowing Policy that is applicable to all employees of the Group. The Whistle Blowing Policy provides an avenue for employees to raise any concerns and disclose in good faith any unethical conduct or malpractice within the Group. Concerns or complaints reported in good faith by employees are addressed and investigated. Management ensures that an employee’s identity and report are treated with highest confidentiality with the employee concerned not facing any risk of reprisal.

Employees are encouraged to approach any or a combination of the following designated personnel to voice their concerns or complaints:

a) Managing Director;

b) General Manager;

c) Chief Operating Officer/Chief Financial Officer;

d) Human Resource Manager;

e) Each Head of Department;

f) Group’s Company Secretary;

g) Audit Committee Members; and

h) Independent Non-Executive Director.


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Measure :

Timeframe :

13

Intended Outcome

Board decisions are made objectively in the best interests of the company taking into account

diverse perspectives and insights.

Practice 4.1

At least half of the board comprises independent directors. For Large Companies, the board

comprises a majority independent directors.

Application : Departure


:


: At the end of the financial year under review, the Board comprised six (6) members, consisting of two (2) Executive Directors, including the Managing Director, two (2) Independent Non-Executive Directors and two (2) Non-Independent Non-Executive Directors. The composition complies with Paragraph 15.02 of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad which sets out that at least two (2) Directors or one-third (1/3) of the Board must be Independent Non-Executive Directors. The Board is of view that the composition of its members provides an appropriate blend of knowledge, industry experience, background and skills that are necessary to lead and oversee the Group. The independence of each Independent Non-Executive Directors is evaluated via an annual assessment by the Nomination Committee. Based on the evaluation results, the Board is satisfied with the level of independence demonstrated by them through their involvement, independent views and judgements at Board and Board Committee meetings during the financial year as well as their ability to act in the best interest of the Company.

Whilst the Board is mindful of the Practice that requires half of its number of members to comprise Independent Non-Executive Directors, it is also cognisant that the Board should not be overly large in size for want of additional Independent Non-Executive Directors vis-à-vis the complexity of its business operations. The current composition of the Board which is made up of majority Non-Executive Directors provides the relevant checks and balances on the roles of the Executive Directors. Nonetheless, the Board shall keep in view the need to increase its independent composition as the need arises.


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Measure :

Timeframe :

15

Intended Outcome



Practice 4.2

The tenure of an independent director does not exceed a cumulative term limit of nine years.

Upon completion of the nine years, an independent director may continue to serve on the

board as a non-independent director.

If the board intends to retain an independent director beyond nine years, it should justify and

seek annual shareholders’ approval. If the board continues to retain the independent director

after the twelfth year, the board should seek annual shareholders’ approval through a two-tier

voting process.

Application : Not applicable - Step Up 4.3 adopted


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Measure :

Timeframe :

16

Intended Outcome



Practice 4.3 - Step Up

The board has a policy which limits the tenure of its independent directors to nine years.

Application : Adopted

Explanation on adoption of the practice

: It is the Board’s policy for the tenure of an Independent Non-Executive Director to be limited to a cumulative period of nine (9) years.

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Intended Outcome



Practice 4.4

Appointment of board and senior management are based on objective criteria, merit and with

due regard for diversity in skills, experience, age, cultural background and gender.



: The Board is fully committed to ensure boardroom diversity that includes industry experience, background, age and gender of the Directors without any form of discrimination in selecting a Board member. Although the Board encourages diversity, the appointment of a Board member is solely based on merit of the candidate in meeting the needs of the Company. The Nomination Committee (“NC”) is responsible for considering and assessing suitable candidates before recommending to the Board for appointment. Among the criteria considered in selecting the best candidate available are:

a) required skills, knowledge, expertise and experience;

b) time commitment, character, professionalism and integrity;

c) number of directorships outside the Group; and

d) specialist knowledge or technical skill.

As for the appointment of Senior Management, it is also based on merit and criteria such as work experience, skill set, commitment and integrity, which are identified before recommending the prospective candidate to be recruited.


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Measure :

Timeframe :

18

Intended Outcome



Practice 4.5

The board discloses in its annual report the company’s policies on gender diversity, its targets

and measures to meet those targets. For Large Companies, the board must have at least 30%

women directors.



: The Board comprises six (6) members, five (5) of whom are male Directors and the other female Director. The Board has formalised a Board Diversity Policy which is available on the Group’s website at www.kotrapharma.com The Board believes that an appointment of a Director should not be merely guided by gender but merit by considering the candidate’s experience, knowledge, skills, time availability and performance in order to achieve effectiveness in the Board. Accordingly, the Board Diversity policy does not discriminate on gender composition with a view to achieve a pre-set target even though the Board already has one (1) female member to provide the needed skills on Information Technology.


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Measure :

Timeframe :


19

Intended Outcome



Practice 4.6

In identifying candidates for appointment of directors, the board does not solely rely on

recommendations from existing board members, management or major shareholders. The

board utilises independent sources to identify suitably qualified candidates.



: The Nomination Committee (“NC”) is responsible for recommending suitable candidates for directorships to the Board. In identifying suitable candidates, the NC accepts recommendations from shareholders and existing Board members. The NC may also seek external source via independent recruitment firms for sourcing suitable candidates. Upon receiving recommendations from these sources, the NC evaluates the suitability of each candidate before recommending to the Board. The final decision on the appointment of candidate solely lies with the Board as a whole.


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Measure :

Timeframe :

20

Intended Outcome



Practice 4.7

The Nominating Committee is chaired by an Independent Director or the Senior Independent

Director.



: The Nomination Committee (“NC”) is chaired by Datuk Jamaludin bin Nasir, an Independent Non-Executive Director. This is in line with the Terms of Reference of NC which stipulate that an Independent Non-Executive Director shall be the Chairman of the NC.


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Measure :

Timeframe :

21

Intended Outcome

Stakeholders are able to form an opinion on the overall effectiveness of the board and

individual directors.

Practice 5.1

The board should undertake a formal and objective annual evaluation to determine the

effectiveness of the board, its committees and each individual director. The board should

disclose how the assessment was carried out and its outcome.

For Large Companies, the board engages independent experts periodically to facilitate

objective and candid board evaluations.



: During the financial year, the Nomination Committee (“NC”) conducted an annual evaluation via questionnaire to evaluate the effectiveness of the Board as a whole, each individual Director’s performance as well as to assess on the effectiveness of the Board Committees. The evaluations were facilitated by the Company Secretary. For the assessment of the Board and Board Committees, the criteria used included the process, composition, accountability and effectiveness. As for the individual Director’s assessment, peer performance evaluation was undertaken based on key performance indicators such as time commitment, interaction and involvement in meetings. Based on the assessment carried out for the financial year ended 30 June 2019, the NC has reviewed and is satisfied with the existing Board’s and Board Committees’ composition as well as the performance of Directors at discharging their roles and responsibilities whether individually or collectively. The NC was also satisfied with the level of independence demonstrated by the Independent Non-Executive Directors and their ability to perform in the best interest of the Company.


:


Measure :

Timeframe :

22

Intended Outcome

The level and composition of remuneration of directors and senior management take into

account the company’s desire to attract and retain the right talent in the board and senior

management to drive the company’s long-term objectives.

Remuneration policies and decisions are made through a transparent and independent

process.

Practice 6.1

The board has in place policies and procedures to determine the remuneration of directors

and senior management, which takes into account the demands, complexities and

performance of the company as well as skills and experience required. The policies and

procedures are periodically reviewed and made available on the company’s website.



: The Board has formalised pertinent Policies and Procedures for the remuneration of Directors and Senior Management to provide a fair and competitive remuneration package. In this regard, the Board has adopted Policies and Procedures for the remuneration of Directors and Senior Management with the primary view of attracting, motivating and retaining talents. The Remuneration Committee (“RC”) has been entrusted to review annually the individual performance and contributions of the Directors, including the Non-Executive Directors, and make recommendation to the Board on the proposed remuneration packages by also considering the financial performance of the Group and relevant market benchmarks. The Directors are not allowed to and they do not participate in making decisions regarding their own remuneration. For Non-Executive Directors, their remuneration packages reflect their experience and level of responsibilities entrusted. Their remuneration package components consist of Director’s fees and meeting allowances for attending Board and Board Committee meetings. They are not entitled to and they do not receive any performance related remuneration. As for the Executive Directors and Senior Management, their remuneration packages include fixed salary, performance based annual bonus and other emoluments which are pegged to their performance as well as the performance of the Group.


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23

Measure :

Timeframe :

24

Intended Outcome

The level and composition of remuneration of directors and senior management take into

account the company’s desire to attract and retain the right talent in the board and senior

management to drive the company’s long-term objectives.

Remuneration policies and decisions are made through a transparent and independent

process.

Practice 6.2

The board has a Remuneration Committee to implement its policies and procedures on

remuneration including reviewing and recommending matters relating to the remuneration of

board and senior management.

The Committee has written Terms of Reference which deals with its authority and duties and

these Terms are disclosed on the company’s website.



: The Board has established the Remuneration Committee (“RC”) to review and recommend the remuneration of Directors and Senior Management. The RC comprises four (4) members where two (2) are Independent Non-Executive Directors, one (1) Non- Independent Non-Executive Director and the Managing Director. The Terms of Reference of the RC set out the roles and responsibilities regarding matters related to remuneration and they are available on the Group’s website at www.kotrapharma.com


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Measure :

Timeframe :


25

Intended Outcome

Stakeholders are able to assess whether the remuneration of directors and senior

management is commensurate with their individual performance, taking into consideration the

company’s performance.

Practice 7.1

There is detailed disclosure on named basis for the remuneration of individual directors. The

remuneration breakdown of individual directors includes fees, salary, bonus, benefits in-kind

and other emoluments.



: Details of Directors’ remuneration on a named basis from both the Company and Group for the financial year ended 30 June 2019 are set out in the table below:-

Category

Fees

(RM)

Salaries

(RM)

Bonus

(RM)

Defined

Contribution

Plan

(RM)

Other

Emoluments

&

Benefits-

in-kind

(RM)

Total

(RM)

Company

Executive Directors

Piong

Teck Onn

5,500 - - - - 5,500

Chin

Swee

Chang

- - - - - -

Non-Executive Directors

Datuk

Jamaludin

bin Nasir

84,000 - - - 2,700 86,700

Lee Min

On

76,800 - - - 2,700 79,500

Piong

Chee Kien

18,798 - - - 900 19,698

Datuk

Piong

Teck Yen

18,000 - - - 600 18,600

Piong

Teck

Min*

33,402 - - - 1,800 35,202

Total

236,500 - - - 8,700 245,200

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Category

Fees

(RM)

Salaries

(RM)

Bonus

(RM)

Defined

Contribution

Plan

(RM)

Other

Emoluments

&

Benefits-

in-kind

(RM)

Total

(RM)

Group

Executive Directors

Piong

Teck Onn

6,000 1,260,000 250,000 181,200 885 1,698,085

Chin

Swee

Chang

- 475,320 95,175 68,463 885 639,843

Non-Executive Directors

Datuk

Jamaludin

bin Nasir

84,000 - - - 2,700 86,700

Lee Min

On

76,800 - - - 2,700 79,500

Piong

Chee Kien

18,798 - - - 900 19,698

Datuk

Piong

Teck Yen

18,000 348,327 124,402 56,732 1,090 548,551

Piong

Teck

Min*

33,402 - - - 1,800 35,202

Total

237,000 2,083,647 469,577 306,395 10,960 3,107,579

Note: * Mr. Piong Teck Min resigned as the Non-Independent Non-Executive Director on 19 February 2019.


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Measure :

27

Timeframe :

28

Intended Outcome




Practice 7.2

The board discloses on a named basis the top five senior management’s remuneration

component including salary, bonus, benefits in-kind and other emoluments in bands of

RM50,000.



:


: It is the practice of the Group to hire the best talents to run its operations by offering competitive remuneration packages to such personnel in alignment with the Group’s strategies for growth. This initiative is to spur the attraction, motivation and retention of talents to feed the strategic needs of the Group towards realising its corporate objectives. The Remuneration Committee (“RC”) and the Board are of the view that it is disadvantageous to the Group’s interest if the remuneration of its top 5 Senior Management are disclosed on a named basis, notwithstanding that the disclosure is limited to bands of RM50,000 in terms of their salaries, bonus, benefits-in-kind and others. Such disclosure makes the Group vulnerable to the loss of its personnel as the industry and the geographical location the Group operates in are competitive where poaching of executives and talents is commonplace. As an alternative practice, the Board has disclosed the information on Senior Management’s remuneration, which the Board believes would enable the intended outcome for Practice 7.2 to be achieved. Remuneration paid to Senior Management consisting of Senior Manager position and above (excluding Executive Directors) for the financial year ended 30 June 2019 is tabulated below:

Average Number of Senior Management Personnel for the

financial year under review

Total Remuneration (RM) paid for the financial year

under review

4

1,406,852

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Measure :

Timeframe :

30

Intended Outcome





Companies are encouraged to fully disclose the detailed remuneration of each member of

senior management on a named basis.

Application : Not Adopted


: N/A

31

Intended Outcome

There is an effective and independent Audit Committee.

The board is able to objectively review the Audit Committee’s findings and recommendations.

The company’s financial statement is a reliable source of information.

Practice 8.1

The Chairman of the Audit Committee is not the Chairman of the board.



: The Chairman of the Audit Committee (“AC”) is Mr. Lee Min On, an Independent Non-Executive Director, who is not the Chairman of the Board. The AC consists of three (3) members, two (2) of whom are Independent Non-Executive Directors and one (1) Non-Independent Non-Executive Director.


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Measure :

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32

Intended Outcome




Practice 8.2

The Audit Committee has a policy that requires a former key audit partner to observe a cooling-

off period of at least two years before being appointed as a member of the Audit Committee.



: Although it does not have any former key audit partner as its member, the Audit Committee (“AC”) has adopted a policy that requires a former key audit partner to observe a cooling-off period of at least two (2) years before being appointed as a member of the Audit Committee. The Terms of Reference of the AC have incorporated this policy. The said Terms of Reference are available on the Group’s website at www.kotrapharma.com


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Measure :

Timeframe :


33

Intended Outcome




Practice 8.3

The Audit Committee has policies and procedures to assess the suitability, objectivity and

independence of the external auditor.



: As stipulated in its Terms of Reference, the Audit Committee (“AC”) carries out annual assessment to evaluate the performance, capabilities and independence of the external auditors. A written assurance is provided by the external auditors confirming that they are and have been independent throughout the conduct of audit engagement in accordance with the By-Laws of Professional Ethics, Conduct and Practice of the Malaysian Institute of Accountants. Based on the annual assessment conducted, the AC was satisfied with the quality of services, professionalism and independence of Crowe Malaysia PLT as the external auditors of the Company for the financial year ended 30 June 2019. The AC then recommended to the Board for their re-appointment for the ensuing financial year ending 30 June 2020, subject to shareholders’ approval at the forthcoming Annual General Meeting of the Company.


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Measure :

Timeframe :

34

Intended Outcome





The Audit Committee should comprise solely of Independent Directors.



: N/A

35

Intended Outcome




Practice 8.5

Collectively, the Audit Committee should possess a wide range of necessary skills to

discharge its duties. All members should be financially literate and are able to understand

matters under the purview of the Audit Committee including the financial reporting process.

All members of the Audit Committee should undertake continuous professional development

to keep themselves abreast of relevant developments in accounting and auditing standards,

practices and rules.



: All the members of the Audit Committee (“AC”) are financially literate, i.e. they are able to understand and interpret financial statements as well as possess an understanding of audit processes. They are responsible for assisting the Board in reviewing the financial reports of the Group and ensuring they are in compliance with approved financial reporting standards and the Companies Act 2016. The AC members have attended various training programmes and professional development courses to keep themselves abreast of the relevant developments in accounting and auditing standards, practices and rules. Details of such training can be seen in the Corporate Governance Overview Statement included in the Annual Report 2019 of the Company.


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Measure :

Timeframe :

36

Intended Outcome

Companies make informed decisions about the level of risk they want to take and implement

necessary controls to pursue their objectives.

The board is provided with reasonable assurance that adverse impact arising from a

foreseeable future event or situation on the company’s objectives is mitigated and managed.

Practice 9.1

The board should establish an effective risk management and internal control framework.



: Being cognizant of the importance of maintaining a sound system of risk management and internal control, the Board has established and formalised in writing an Enterprise Risk Management (“ERM”) framework with the assistance of an independent professional service firm, namely KPMG Management & Risk Consulting Sdn Bhd (“KPMG”). The Audit Committee (“AC”) is entrusted with the responsibilities of reviewing the adequacy and operating effectiveness of the Group’s system of risk management and internal control which are designed to manage and mitigate risks in all material aspects. The findings gathered from internal audit as well as recommendations to rectify weaknesses in the system are presented to the AC by KPMG. The AC further discusses any significant or major findings with the Management for their responses. The AC continues to monitor closely the risk management activities, risk profile and the appropriate internal control measures taken by the Management to manage the Group’s risks to acceptable levels. A document summarising the Group’s Risk Management Policy and Procedures has been adopted by the Board to provide guidance to operating personnel so as to manage risks towards safeguarding the Group assets and to sustain financial stability.


:


Measure :

Timeframe :

37

Intended Outcome





Practice 9.2

The board should disclose the features of its risk management and internal control framework,

and the adequacy and effectiveness of this framework.



: The overarching methodology that girds the Group’s risk management framework accords largely with the promulgations of ISO31000:2018, an internationally recognized risk management methodology. The Board believes that maintaining a sound system of risk management and internal control is founded on a clear understanding and appreciation of the following key elements of the Group’s risk management framework which were implements during the financial year under review:

- A formalised Risk Management Policy and Procedures

document to streamline the Group’s risk management

activities;

- A risk management structure which outlines the lines of

reporting and establishes the responsibility of personnel at

different levels, i.e. the Board, AC and Management;

- Key risk indicators assigned and monitored on periodic basis

against pre-determined threshold levels to provide an early

warning signal of increasing risk exposures; and

- Quarterly update of principal business risks (present and

potential) faced by the Group and formalization of

Management’s action plans to mitigate these risks to

acceptable levels, considering the established risk appetite and

parameters (qualitative and quantitative) of the Group.

For further details of the Group’s risk management and internal control

system, refer to the Statement on Risk Management and Internal

Control which is included in the Company’s Annual Report 2019.


:

38


Measure :

Timeframe :

39

Intended Outcome






The board establishes a Risk Management Committee, which comprises a majority of

independent directors, to oversee the company’s risk management framework and policies.



: N/A

40

Intended Outcome

Companies have an effective governance, risk management and internal control framework

and stakeholders are able to assess the effectiveness of such a framework.

Practice 10.1

The Audit Committee should ensure that the internal audit function is effective and able to

function independently.



: The Audit Committee (“AC”) is responsible for monitoring and reviewing the effectiveness of the Group’s Internal Audit Function. The Internal Audit Function is outsourced to KPMG Management & Risk Consulting Sdn Bhd (“KPMG”). The internal auditors report directly to the AC and have full unrestricted access to the Group’s records and employees. The internal auditors independently review the adequacy and operating effectiveness of the system of internal control implemented by the Management, identify the key risk areas and weaknesses in the system. During the financial year under review, the internal audit findings, results of work done and the Management’s responses as well as recommendations were tabled to the AC for their review, including the need for Management’s to clarify the observations raised by the internal auditors. An assessment is conducted on a yearly basis by the AC to evaluate the independence and effectiveness of KPMG at discharging their internal audit function. Based on the assessment’s results, the AC is satisfied at the level of independence and professionalism demonstrated by KPMG at effectively carrying out their functions. Further details of the internal audit function, including its scope of work and costs, are presented in the Statement on Risk Management and Internal Control of the Annual Report 2019.


:


Measure :

Timeframe :

41

Intended Outcome

Companies have an effective governance, risk management and internal control framework

and stakeholders are able to assess the effectiveness of such a framework.

Practice 10.2

The board should disclose–

▪ whether internal audit personnel are free from any relationships or conflicts of interest,

which could impair their objectivity and independence;

▪ the number of resources in the internal audit department;

▪ name and qualification of the person responsible for internal audit; and

▪ whether the internal audit function is carried out in accordance with a recognised

framework.



: The internal audit function of the Group is outsourced to KPMG Management & Risk Consulting Sdn Bhd (“KPMG”). The internal audit function is independent from the activities of the Group it audits and carries out its work in accordance with the International Professional Practices Framework as promulgated by the Institute of Internal Auditors. None of the internal auditors has any relationships or conflicts of interest that may impair their objectivity and independence at discharging their internal audit function. The internal audit team consists of five (5) qualified professionals, led by Ms. Phoon Yee Min. The head of Internal Audit function in KPMG is Dato’ Ooi Kok Seng who is a member of the Malaysian Institute of Accountants whilst KPMG is a corporate member of the Institute of Internal Auditors, Malaysia.


:


Measure :

Timeframe :

42

Intended Outcome

There is continuous communication between the company and stakeholders to facilitate

mutual understanding of each other’s objectives and expectations.

Stakeholders are able to make informed decisions with respect to the business of the

company, its policies on governance, the environment and social responsibility.

Practice 11.1

The board ensures there is effective, transparent and regular communication with its

stakeholders.



: The Board is aware of the importance of effective communication in a timely and transparent manner to shareholders, investors as well as the community at large. The Board has formalised pertinent Corporate Disclosure Policies and Procedures (“CDPP”) which act as a guide and reference to the Company to communicate and disseminate material information in a complete, accurate and timely manner, in accordance with the Main Market Listing Requirements of Bursa Malaysia Securities Berhad. The CDPP also stipulates the authorised persons responsible in reviewing, approving and releasing material information to the media, investment community and other external parties. Announcements such as quarterly results, annual financial statements, annual reports, press releases and other corporate announcements are also made via Bursa LINK and the Group’s website. All relevant information pertaining to the Company is included in the Investor Relations (“IR”) section of the Group’s website. Mr. Daniel Chua Chong Liang, a member of the Senior Management, is responsible for all IR related queries. The Annual General Meeting serves as an important platform for Board members to meet the shareholders whereby the shareholders are given the opportunity to interact directly with the Board members to clarify or enquire on issues related to the Company’s financial statements, operations and proposed resolutions.


:


Measure :

43

Timeframe :

44

Intended Outcome

There is continuous communication between the company and stakeholders to facilitate

mutual understanding of each other’s objectives and expectations.

Stakeholders are able to make informed decisions with respect to the business of the

company, its policies on governance, the environment and social responsibility.

Practice 11.2

Large companies are encouraged to adopt integrated reporting based on a globally

recognised framework.



:


: The Company does not fall under the “Large Company” as defined under Section 2.6 of the Malaysian Code on Corporate Governance. Therefore, this requirement is not applicable to the Company.


Measure :

Timeframe :

45

Intended Outcome

Shareholders are able to participate, engage the board and senior management effectively

and make informed voting decisions at General Meetings.

Practice 12.1

Notice for an Annual General Meeting should be given to the shareholders at least 28 days

prior to the meeting.



: The notice of the 20th Annual General Meeting (“AGM”) scheduled to be held on 28th November 2019 will be provided to the shareholders at least twenty-eight (28) days before the AGM, in line with recommendation of the Malaysian Code on Corporate Governance. This is in advance of the twenty-one (21) days requirement set under the Main Market Listing Requirements of Bursa Malaysia Securities Berhad. The additional time allows shareholders to make necessary arrangements to attend and participate in the AGM either in person or by appointing a proxy. The Company also publishes the notice of AGM in the newspaper.


:


Measure :

Timeframe :

46

Intended Outcome



Practice 12.2

All directors attend General Meetings. The Chair of the Audit, Nominating, Risk Management

and other committees provide meaningful response to questions addressed to them.



: During the last Annual General Meeting (“AGM”) held in November 2018, all the Board members were present to engage directly with the shareholders and address any questions from them. The Chairman invited the shareholders to raise and questions or issues on matters related to the Company’s financial statements, operations, proposed resolutions and other related matters. Constructive and meaningful responses were provided to the shareholders’ queries.


:


Measure :

Timeframe :

47

Intended Outcome



Practice 12.3

Listed companies with a large number of shareholders or which have meetings in remote

locations should leverage technology to facilitate–

▪ including voting in absentia; and

▪ remote shareholders’ participation at General Meetings.



:


: As the number of shareholders of the Company is considered small, the Board is of the view that it is not economically viable to provide shareholders the option to vote in absentia. Instead, shareholders who are unable to attend and participate in the AGM are encouraged to vote via proxy form or appoint a proxy or more to attend, speak and vote at the AGM on their behalf. The Company has adopted poll voting for all the proposed resolutions. An independent scrutineer, who is unrelated to the Company, is appointed to ensure an accurate recording of votes. The AGM is held annually at the same venue located in the Company, which is familiar among our shareholders and is easily accessible.


Measure :

Timeframe :

48

SECTION B – DISCLOSURES ON CORPORATE GOVERNANCE PRACTICES PURSUANT

CORPORATE GOVERNANCE GUIDELINES ISSUED BY BANK NEGARA MALAYSIA

Disclosures in this section are pursuant to Appendix 4 (Corporate Governance Disclosures)

of the Corporate Governance Guidelines issued by Bank Negara Malaysia. This section is

only applicable for financial institutions or any other institutions that are listed on the Exchange

that are required to comply with the above Guidelines.

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