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INTRODUCTION

WE WOULD LIKE TO TAKE THIS OPPORTUNITY TO PROVIDE YOU WITH SOME INSIGHTS INTO THE BOARD OF DIRECTORS’ (“BOARD”) VIEW OF CORPORATE GOVERNANCE, ITS KEY FOCUS AREAS AND FUTURE PRIORITIES IN RELATION TO THE CORPORATE GOVERNANCE PRACTICES.

This statement sets out the principles and features of Kulim Group’s corporate governance framework and main governance practices.  Kulim remains committed in ensuring the principle of good corporate governance in the conduct of the businesses and affairs of the Group. Integrity, transparency and professionalism are key components for the Group’s continued growth and success.

The Board is unreservedly committed to applying the practices necessary to ensure that highest standards of corporate governance and corporate conduct are adhered to throughout the Group in the interest of the stakeholders.

Kulim Group will continue its efforts in evaluating its governance practices in response to evolving best practices and the changing needs of Kulim Group. The Group has complied with and shall remain committed to attaining the highest possible standards of Corporate Governance through the continuous adoption of the principles and best practices of the Malaysian Code on Corporate Governance 2017 (“MCCG 2017”) and all other applicable laws.

BOARD LEADERSHIP AND EFFECTIVENESS

BOARD RESPONSIBILITIES

The Board is responsible for the oversight and overall management of the Group by providing guidance and direction to the management with regards to the sustainability, strategic planning, risk management, succession planning, financial and operations to meet the expectations and obligations to the shareholder.

Amongst the key responsibilities of the Board are as follows :-

1.Reviewing and adopting a strategic plan for the Group 

The Board will review and approve the annual budget and strategic plan for the Group.

It has in place an annual strategic planning process, whereby a comprehensive strategic plan will be tabled and debated at divisional level before the management presents to the Board its recommended strategy and proposed business and regulatory plans. At this session, the Board reviews and deliberates upon both the management’s and its own perspectives, as well as challenges the management’s views and assumptions, to deliver the best outcomes.

Additionally, on an ongoing basis, the Board will assess whether the projects, purchases and sale of equity as well as other strategic consideration being proposed at Board meetings during the year are in line with the objectives and broad outline of the adopted strategic plans.


2.Overseeing the conduct of the Company’s business to determine whether the business is being properly managed.

At Board meetings, all operational matters will be discussed and expert advice will be sought if necessary.

The performances of the various companies and operating units within the Group represent the major element of Board’s agenda. Where and when available, data are compared against nationals trends and performance of similar companies.

The Group uses Key Performance Indicators (“KPI”) system as the primary driver and anchor of its performance management system, of which is continually refined and enhanced to reflect the changing business circumstances.

3.Identifying principal risks and ensuring the implementation of appropriate internal controls and mitigation measures. 

The Group has set up a Risk Management and Compliance Committee (“RMCC”) in order to assist the Board in identifying, evaluating, reviewing and managing the principal risks and compliance management system.

Details on the RMCC and the risk management framework are set out in the Statement of Risk Management and Internal Control of this Integrated Annual Report.

4.Succession planning.

The Board’s responsibility in this aspect is being closely supportedby the Human Resource Division. More importantly, after several years of continuous effort in emphasising and communicating the important of succession planning, the subject has now become an ongoing agenda being reviewed at various high-level management and operational meetings of the Group.

Each year, the division assess the performance of the identified potential candidates undergoing the Johor Corporation Leadership Programme (“JLP”). The JLP is a two (2)-years structured leadership programme designed to enable participants to improve their decision making skills and expand their leadership capacity. Participants will be exposed to business challenges from different angles and will have the opportunity to share their leadership experiences. In 2016, a total of five (5) employees were selected for the JLP Cohort III 2017/2019, the third edition of the programme, joining an earlier batches of 14 candidates.

5.Overseeing the development and implementation of a shareholder communications policy for the Company.

Various strategies and approaches are employed by the Group so as to ensure that shareholders are well-informed about the Group’s affairs and development.

6.Reviewing the adequacy and integrity of the management information and internal control system of the Company.

The Board’s function in fulfilling the above responsibility is supported and reinforced through the various Committees established at both the Board and the management’s level. Aided by an independent function of the Internal Audit Department, the active functioning of these Committees through their regular meetings and discussions would provide a strong check and balance and reasonable assurance on the adequacy of the Company’s internal controls. Details on the Internal Audit functions are further discussed in Audit Committee Report in this Integrated Annual Report.

Schedule of Matters/ Agenda Reserved for Collective Decision of the Board

The authorities of the Board are specified below. The authorities may be varied from time to time as determined unanimously by the Board.

1.   Conductof Board

       Appointment and resignation of Directors;

       Appointment and resignation of Company Secretaries;

       Appointment and resignation of Board Members in Board Committees;

       Approval of terms of references of Board Committees and amendments to such items;

     Appointment and resignation of Senior Executive positions, including the Executive Directors, their duties and the continuation of their service; and

       Disclosure of the corporate governance practices of the Company in the Integrated Annual Report.

2.   Remuneration

       Approval of the remuneration arrangements for Non-Executive Directors. The Non-Executive Directors whose remuneration is being deliberated by the Board should play no part in the deliberations;

       Approval of the remuneration structure and policy for Executive Directors and key executives; and

       Approval of remuneration packages for Executive Directors and Senior Executives;

3.   Operational

•  Approval of business strategy and Group’s operational plans and budgets;

   Ongoing review of performance against business strategy and Group’s operational plans, including monitoring of marketing, key risks and risk management policies and actions;

   Approval of capital expenditure;

    Approval of asset write-off;

    Approval of investment or divestment in a company/ business/ property/ undertaking;

     Approval of investment or divestment of a capital project which represents a significant diversification from existing business activities;

    Approval of changes in the major activities of the Company;and

 • Approval of treasury policies and bank mandate.

4.   Financial

       Approval of quarterly and annual financial statements based on recommendations of the Audit Committee;

       Approval of the Integrated Annual Report and Statutory Financial Statements;

    Approval of interim dividends, the recommendation of final dividends and the making of any other distribution;

       Adoption of accounting policies;

       Approval of corporate policies and procedures, including the Group’s system of internal control;

       Review of the effectiveness of the Group’s system of internal control; and

       Disclosure of the state of internal controls of the Group to be included in the Integrated Annual Report.

5.   Other matters to be considered including:

       The granting of powers of attorney by the Company;

       The entering into any indemnities or guarantees;

       Recommendations for the alteration of the Constitution of the Company;

       Alteration of the accounting reference date, registered office and name of the Company;

       Purchase of own shares by the Company;

       Issuance of any debt instruments;

       Political or charitable contributions;

       Scheme of reconstruction or restructuring; and

       Any other significant business decision.

 

The Board is led by the Chairman,Dato’ Kamaruzzaman Abu Kassim who is responsible for leadership of the Board, ensuring its effectiveness on all aspects of its role and setting its agenda. The Chairman is also responsible for creating an environment for open, robust and effective debate. This include ensuring, via Company Secretary, that the Directors receive accurate, timely and clear information. 

The role and responsibilities of our Board Chairman and Executive Director are separate and distinct, to ensure that there is a balance of power and authority, such that no one individual has unfettered powers of decision making.

Zulkifly Zakariah is an Executive Director of the Company and leads the day-to-day management of the Group. He, together with the support of the management team, formulate business strategies and plans so as to achieve the Group’s vision and missions, targeted growth, turnover and profitability to meet the stakeholders’ expectation. He is responsible for implementing the policies and decisions of the Board and coordinating the implementation of business and corporate strategies.

The Company Secretary is an Associate member of the Malaysian Institute of Chartered Secretaries and Administrators(“MAICSA”). The Secretary whose appointment and removal is subject to the Board’s approval, attend all Board and Board Committees’ meetings.

The Secretary is responsible for the following in respect of effective Board operation:

• To ensure good information flows within the Board and its committees, between senior management and Non-Executive Directors.

• To facilitate Directors’ induction and assisiting with professional development.

• To advise the Board through the Chairman of all corporate governance obligations and developments in rules and regulations.

• To be responsible for communicating with shareholders as appropriate.

The Board has direct access to the advice and services of the Secretary who is responsible to the Board for ensuring that all governance matters and Board procedures are followed and that all applicable laws and regulations are complied with.

The Chairman, assisted by the Company Secretary takes responsibility in ensuring that the Directors receive all notices, agendas and minutes of the previous meetings and is supplied with pertinent information well in advance of each meeting. The agenda for each meeting shall be circulated at least seven (7) working days before each meeting to the Board members and all those who are required to attend the meeting. Written materials including information requested by the Board from the management and/or external consultants shall be received together with the agenda for the meetings. The Executive Director in consultation with the Chairman would decide on the agenda and accordingly structure and prioritise the respective matters based on their relevance and importance so as to enable quality and in depth discussion of the matters. All decisions and conclusions of the Board meetings are to be duly recorded and minutes are kept by the Company Secretary.

The Board recognises the importance of providing timely, relevant and up-to-date information in ensuring an effective decision making process by the Board. In this regard, the Board is provided with not just quantitative information but also those of qualitative nature that is pertinent and of a quality necessary to allow the Board to effectively deal with matters that are tabled in the meeting.

The duties and responsibilities of the Board of Directors are clearly defined in the Board Charter which regulates how business is to be conducted by the Board in accordance with the principles of good Corporate Governance. The Board Charter was last reviewed on 24 June 2014. The Board Charter will adopt any changes to the MCCG 2017, the Companies Act 2016 or any other relevant rules and regulations from time to time for best practices.

Access to Independent Professional Advice

In discharging Directors’ duties, each member of the Board is entitled to obtain independent professional advice at the cost of the Company.

If a member considers such advice is necessary, the member shall first discuss it with the Chairman and having done so, the member shall bring this matter up to the Board. The reason(s) for seeking independent professional advice and the proposed cost involved should be presented to the Board for approval. Once Board approval is obtained, the member is free to proceed.

The member should provide proper notice to the Company Secretary of the intention to seek independent advice and shall provide the names(s) of the professional advisors that he/she intends to contact, together with a brief summary of the subject matter for which professional advice is sought. The Company Secretary shall provide written acknowledgement of acceptance of notification. In the event that one (1) or more Directors seek to appoint one (1) or more advisors, the Chairman should take steps to facilitate discussions to arrive at a consensus. Fees for the independent professional advice will be payable by the Company but approval of the Board will be required.

The above restriction shall not apply to Executive Director acting in the furtherance of their executive responsibilities and within their delegated powers.

For the purposes of this section, independent professional advice shall include legal, accounting or other professional financial advice. Independent professional advice shall exclude any advice concerning the personal interests of the Directors (such as with respect to their contracts or disputes with the Company), unless these are matters affecting the Board as a whole and have the unanimous agreement of the Board.

Access to the Management and Information

Board members must have complete unimpeded access to the Company’s management. Board members must have unrestricted access to information pertaining to the Company including the Company’s auditors and consultants.

In accessing its rights to information and the management, Board members must use judgement to ensure that such access is not distracting the operations of the Company and that such contact, be copied to the Executive Director and Chairman.

Furthermore,during deliberations, the Board should encourage the management when necessary,to bring managers into Board meetings who:

•Can provide additional insight into the items being discussed because of personal involvement in these areas; and/or

•Have potential for future senior managerial positions that senior management believes would be enhanced by exposure to the Board.

Code of Ethics

The Code of Ethics (“Code”) sets forth the standard of conduct and culture required for all employees of the Group. The Code sets out the ethical standards of conduct that all employees are expected to comply with in their dealings with colleagues, customers, shareholders, suppliers, competitors, the wider community and the environment. Among others, the Code also requires the employees to ensure the following:

• maintaining full and accurate Company’s records.

• all assets and property of the company will be used only for the benefit of the Company.

• always dealing with customers and suppliers based on merit and fairness.

• engage competitors in a fair manner and not to engage in any unfair or illegal practice in order to gain an unfair advantage.

• always act to ensure a workplace environment that is free from harassment and discrimination.

• deal with all team members with respect, courtesy and fairness.

All employees are required to adhere to the Group’s Code of Ethics and to submit the Ethics Declaration Form annually.

The Board has set up guidelines which are designed to legalise acceptable behaviours for the committee members to increase confidence in the Group by showing that the Board members are committed in following basic ethical guidelines in the course of discharging its duties that cover:

• Corporate Governance

• Relationships: Shareholder,Employees, Creditors, Customers

• Social Responsibilities &Environment

The Directors adhere to the Code which is contained in the Board Policy Manual comprising the important aspects of which are as follows:

•Members must represent non-conflicted loyalty in the interests of the Group;

•Members must avoid conflict of interest with respect to their fiduciary responsibility;

•Members may not attempt to exercise individual authority over the Group except as explicitly set forth in the Board Policy; and

•Members will respect the confidentiality appropriate to issues of a sensitive nature.

Whistleblowing Policy

The Group has a Whistleblowing Policy in place. The objective are as follows:

•encourage stakeholders to feel confident in raising serious concerns and to question and act upon concerns.

•provide avenues to raise those concerns and receive feedback on any action taken.

•ensure that whistleblower receive a response and aware of how to pursue if they are not satisfied.

•reassure that whistleblower will be protected from possible retaliations.

A Whistleblowing Policy is published on the Company’s website.

Board Committees

The Board Committees are entrusted with specific responsibilities to oversee the Group’ s affair, with authority to act on behalf of the Board in accordance with their respective Terms of Reference.

Though the duties have been delegated to respective Board Committees, the Committees have responsibilities to report and table the respective minutes to keep the Board abreast of the decisions and discussions made by each Board Committee.

The Board, as at the date of this Statement, consists of:

Executive Director

• Zulkifly Zakariah

Non-Independent Non-Executive Directors

• Dato’ Kamaruzzaman Abu Kassim

• Ahamad Mohamad

• Jamaludin Md. Ali

• Zulkifli Ibrahim

• Mohamad Salleh Mohamad Yusof

• Wan Su Ali

Independent Non-Executive Director

• Dr. Radzuan A. Rahman


The Board met three (3) times during the financial year 2017. Attendance

at Board meetings is set out in the table below:



 

288th BOD

27.03.2017

289th BOD

13.08.2017

290th BOD

30.11.2017

Dato’ Kamaruzzaman Abu Kassim

 /

Zulkifly Zakariah

 /

 /

 /

Ahamad Mohamad

Zulkifli Ibrahim

 /

Jamaluddin Md Ali

 /

Dr. Radzuan A. Rahman

 /

 /

Mohamad Salleh Mohamad Yusof

Wan Su Ali

 /

Currently,the Board has one (1) standing committee namely, Audit Committee. The Board retains full responsibility for the direction and control of the Group.

Board Composition

The composition of the Board will reflect the duties and responsibilities to discharge and perform as representative of the interests of the shareholders.The composition of the Board shall reflect as much as possible or practicable, proportional representation of investments in the Group. Directors are not required to hold any qualification share.

A formal invitation to join the Group as a Board member would be extended by the Chairman after approval from the Board. The Chairman should ensure that all Board members, when taking up office, are fully briefed on the terms of their appointment, duties and responsibilities. New members will also be briefed on the operations of the Group to increase their understanding of the business and the environment and markets in which the Group operates. The new members will be given a copy of the Board Policy Manual, which consists of the following information:-

1. Group Organisation;

2. Board Organisation;

3. Board Responsibilities;

4. Board Procedures;

5. Board’s and Director’s Evaluation;and

6. Additional information including the latest business plan and budget, the latest Integrated Annual Reports and accounts and minutes of past three (3) Board of Directors’ meetings and applicable Committee Meetings.

The new members will be required to meet key members of the management. Members are expected to keep themselves abreast of changes and trends in the business and with the Group’s business environment and markets, and changes and trends in the economic, political, social, legal and regulatory climate that could affect the business of the Group.

In addition, the Constitution provide that the office of any Director shall become vacant if such Director:

• becomes bankrupt;

• be found to be lunatic or become of unsound mind;

• ceases to be a Director under the provisions of the Companies Act 2016;

• be convicted of any sizeable offences;

• by notice in writing given to theCompany, resigns from his office;

• is removed by ordinary resolutionof the Company subject to the provisions of Article 104; and

• is absent for more than 50% of the total Board of Directors’ meeting held during a financial year.

As at the date of this Statement, there are eight (8) Directors on the Board comprising of one (1) Executive Director and a strong team of seven (7) Non-Executive Directors of whom one (1) is Independent Directors.

There were several changes to the board composition during the year. Zulkifly Zakariah was appointed to the Board as Executive Director on 1 January 2017. Onthe same day, the Board accepted the resignation of Abdul Rahman Sulaiman as Executive Director. Ahamad Mohamad and Jamaludin Md Ali were re-designated as Non-Independent Non- Executive Directors (“NINED”) on 1 January 2017. Rozaini Mohd Saat had resigned from the Board as NINED on 1 March 2017.

Dr.Radzuan A. Rahman was re-appointed to the Board as Independent Non-Executive Director on 16 January 2017. Mohamad Salleh Mohamad Yusof and Wan Su Ali joined the Board as NINED respectively on 1 March 2017.

Currently, Dr. Radzuan A. Rahman is only Independent Director in the Board. Although Kulim has yet to be in line with Practice 4.1, that recommend the Board to have at least half of the Board is independent, the Board believes that the interests of shareholder would be better served by a Chairman and a team of Board members who act collectively in the best overall interest of shareholders with a balance that consists of Executive Director and Non-Executive Directors, such that no individual or small group of individuals can be dominate the Board’s decision making.

The size and composition of the Board provides for a diversity of views, the desired level of objectivity and independence in Board deliberations and decision making. The Directors of the Group are persons of high integrity and caliber who come from diverse backgrounds with expertise and skills accounting, plantations, economics, taxation and legal. The appointment of senior management are based on objective criteria, merit and with due regard for diversity in skills, experience, length of service and knowledge of the Group and cultural background.  The Group does not presently have a formal gender diversity policy. The Board is of the opinion that it is important to recruit and retain the best available talent regardless of gender.

REMUNERATION

The Board believes that the levels of remuneration offered by the Group are sufficient to attract Directors and senior management with sufficient experience and talents to contribute to the performance of the Group. Comparison with similar position within the industry is made in order to arrive at a fair rate of remuneration. The Board will determine the level of remuneration paid to members.

The details of the remuneration of each Director paid by the Company during the year are as follows:

 

Salary

RM ‘000

Allowance/ Others

Emolument

RM’000

Bonuses

RM’000

Benefit

In-kind

RM’000

Total

RM’000

Executive Director

341

372

104

30

847

Zulkifly Zakariah

Non-Independent Non-Executive  Director

 

 

 

37

37

Dato' Kamaruzzaman Abu Kassim

Ahamad Mohamad

600

471

305

11

1,387

Zulkifli Ibrahim

 

 

 

 

 

Jamaluddin Md Ali

 

 

 

 

 

Mohamad Salleh Mohamad Yusof

 

 

 

 

 

Wan Su Ali

 

 

 

 

 

Independent Non-Executive Director

 

 

 

 

 

Dr Radzuan A Rahman

Grand Total

941

843

409

78

2,271



EFFECTIVE AUDIT AND RISK MANAGEMENT

Audit Committee

The Audit Committee (“AC”) facilitates the Board of Directors to fulfill its corporate governance and overseeing responsibilities in relation to the Group’s financial reporting, internal control system, risk management and internal and external audit functions.

The AC of the Group comprises three (3) members. The AC is chaired by an Independent Non-Executive Director, Dr. Radzuan A. Rahman.

The Audit Committee Report for the financial year which sets out the composition, a summary of activities of the Audit Committee and internal audit function, is contained on page 125 to 126 of this Integrated Annual Report.

Risk Management and Internal Control Framework

The Group recognised that it is obliged to systematically manage and regular review its risk profile at a strategic, financial and operational level. The Group has done this by developing and adopting risk management framework that determines the process and identifies tools for releasing its objectives. Not only does it minimize its opportunities. It enhances the Company’s capability to respond timely to the changing environment and its ability to make better decision.

The Group’s Statement on Risk Management and Internal Control are set out on page 116 to 124 of this Integrated Annual Report.

INTEGRITY IN CORPORATE REPORTING AND MEANINGFUL RELATIONSHIP WITH STAKEHOLDERS

Communication with stakeholders

Corporate governance is not only concerned with shareholder interests but requires balancing the needs of other stakeholders such as employees, customers and suppliers.

The Group has been using the following formal channels to communicate with shareholder and stakeholders:

a.    Integrated Annual Report

The Integrated Annual Report remains a major channel of communications disclosing information not only on the Group’s business, financials and additional information such as the Group’s mission and vision, operations performance, outlooks and senior management team. The Board places great importance on the contents of the Annual Report to ensure the accuracy of the information as the Annual Report is a vital source of information.

Integrated Annual Reports of the Company are available at the Company’s website.

b.   Annual Audited Financial Statements

The Board is fully accountable for ensuring the Audited Financial Statements are prepared in accordance with Companies Act 2016 and Malaysian Financial Reporting Standards so as to present a true and fair view of the Group and Company’s state of affairs, results and cash flows as at the end of the accounting period.

In preparing the Audited Financial Statements, the Directors are satisfied that the applicable Malaysian Financial Reporting Standards and provisions of the Companies Act 2016 have been complied with and reasonable and prudent judgements and estimates have been made.

c.    Sustainability

The Board recognises that the Company’s stakeholders are increasingly interested in understanding its approach and performance in embedding sustainability in the organisation.

The Group has published a Sustainability Statement which disclosed Group’s efforts and initiatives in managing its material economic, environmental and social risks and opportunities. The reporting is guided by the Global Reporting Initiative (“GRI”) standard. The Sustainability Statement is on page 104 of this Integrated Annual Report.

 RELATED PARTY TRANSACTIONS

All related party transactions entered into by the Group were made in the ordinary course of business and on the same terms as those prevailing at the time for comparable transactions with other persons or charged on the basis of equitable rates agreed between the parties.

Details of the transactions entered into by the Group during the financial year ended 31 December 2017 are set out on page 234 to 239 of this Integrated Annual Report.