Corporate Governance

Statement on Corporate Governance

The Board of Directors (“Board”) of Carimin Petroleum Berhad (“the Company”) recognises the importance of good corporate governance and is committed to the establishment and implementation of a proper framework and controls that are in line with the principles of best practices as recommended by the Malaysian Code of Corporate Governance 2012 (”MCCG 2012” or ”the Code”) which was issued by the Securities Commission Malaysia and took effect on 31 December 2012.

The Board is committed to ensuring that the Principles and Recommendations of MCCG 2012 are observed and practiced in the discharge of its responsibilities in protecting and enhancing shareholders’ value and financial performance of the Company and its subsidiaries (“the Group”). The Board is pleased to report herein the manner which the Company has applied the Principles and Recommendations of the MCCG 2012 for the financial year ended 30 June 2016 pursuant to Paragraph 15.25 of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Securities”). The Company was listed on the Main Market of Bursa Securities on 10 November 2014.

A. The Board

1. Board Responsibilities

The Board collectively leads and is responsible for the performance and affairs of the Group, including practicing a high level of good governance. All Board members are expected to show good stewardship and act in a professional manner as well as upholding the core values of integrity and enterprise with due regard to their fiduciary duties and responsibilities.

The Board has the responsibility in leading and directing the Group towards realising long term objectives and shareholders’ value. The Board retains full and effective control of the Group’s strategic plans, implementing an appropriate system of risk management and ensuring the adequacy and integrity of the Group’s system of internal control.

Broadly, the Board assumes the following principal responsibilities in discharging its fiduciary and leadership functions:

a. Reviewing and adopting a strategic plan for the Group, including addressing the Group’s business strategies on promoting sustainability;

b. Overseeing the conduct of the Group’s business, and evaluating whether or not its businesses are being properly managed;

c. Identifying principal business risks faced by the Group and ensuring the implementation of appropriate internal controls and mitigating measures to address such risks;

d. Ensuring that all candidates appointed to the Board are of sufficient calibre, including having in place a process to provide for the orderly succession of the members of the Board;

e. Overseeing the development and implementation of an investor relations programme and stakeholder communications policy; and

f. Reviewing the adequacy and integrity of the Group’s internal control and management information systems, including systems for compliance with applicable laws, regulations, rules, directives and guidelines.

The Board has also delegated certain responsibilities to the following Committees to assist in the execution of its responsibilities:

i. Audit Committee

ii. Nomination Committee

iii. Remuneration Committee

iv. Risk Management Committee

The role of the Board Committees is to advise and make recommendations to the Board. However, the ultimate responsibility for the final decision on all matters lies with the Board. The Chairman of various committees provide a verbal report on the outcome of their committee meetings to the Board, and any further deliberation is made at the Board level, if required.

Each Committee operates in accordance with respective terms of reference approved by the Board. The Board appoints the members and Chairman of each Committee.

2. Composition and Board Balance

The Board currently has eight members, comprising one Non-Independent Non-Executive Chairman, two Executive Directors and five Independent Non-Executive Directors. This composition ensures that at least one-third of the Board comprise of Independent Directors in accordance to the requirement of Paragraph 15.02 of the Main Market Listing Requirements of Bursa Securities.

There is a clear separation of functions between the Board and Management. The Board has full control of the Group and oversees its business affairs and the Management is responsible for implementing the Board’s corporate objective, policies and procedures on risk and internal control.

The presence of five Independent Non-Executive Directors, comprising majority of the Directors, ensures that views, consideration, judgment and discretion exercised by the Board in decision making remains objective and independent whilst assuring the interest of other parties such as minority shareholders are fully addressed and adequately protected as well as being accorded with due consideration and is sufficient to provide the necessary checks and balances on the decision making process of the Board. This is evidenced by their participation as members of the various committees of the Board.

The role of the Chairman and the Managing Director (“MD”) are distinct and separate to ensure there is balance of power and authority.

The Chairman is responsible for the leadership, effectiveness, conduct and governance of the Board while the MD has overall responsibility for the day-to-day management of the business and implementation of the Board’s policies and decisions. The MD is accountable to the Board for the overall organisation, management, and staffing of the Company and/or Group, and for the procedures in financial and other matters, including conduct and discipline.

The Board took note of the recommendations on best practices in respect of gender diversity of the Board members in meeting the target of having 30% women directors. However, the Company has not implemented gender diversity policies and/or measures to meet the targets as both genders are given fair and equal treatment. The Board, through its Nomination Committee, believes that candidature to the Board should be based on a candidate’s merits, capability, experience, skill-sets and integrity but in line with the Code, theBoard will consider more females onto the Board in due course to bring about a more diverse perspective. The Board currently has one female representation in the Board.

In line with the Code and in view of the gained attention of boardroom diversity as an important element ofa well functioned organisation, the Board shall also accord due consideration to inculcate diversity policy in the boardroom and workplace which encapsulates not only to gender, but also age and ethnicity.

3. Board Charter

The Board has embarked on the relevant Corporate Governance Principles and Recommendations as set out in the MCCG 2012 and accordingly adopted its Board Charter on 7 October 2014 to incorporate the relevant principles and recommendations which establishes the role and responsibilities of the Board and those functions delegated to Management. It also serves as a reference point for the Board activities. It is designed to provide guidance and clarity for the Directors and Management with regard to the roles of the Board and its Committees, the requirements of the Directors in carrying out their roles and in discharging their duties towards the Company as well as the Board’s operating practices. The Board has also adopted a Code of Ethics and Conduct which is incorporated in the Board Charter. A Whistle Blowing Policy was also formalised on 7 October 2014 with the intention to promote the highest standard of corporate governance and business integrity that provides avenue for all employees of the Group and members of the public to raise concerns or disclose any improper conduct within the Group and to take appropriate action to resolve them effectively.

Board Charter

4. Independence

i. Tenure of Independent Director

The Board is aware that the tenure of an Independent Director shall not exceed a cumulative term of nine years. However, upon completion of the nine years, the Independent Director may continue to serve the Board subject to the Director’s re-designation as a Non-Independent Director. In the event the Director is to remain designated as an Independent Director, the Board shall first justify and obtain shareholders’ approval on a yearly basis.

ii. Annual Assessment of Independence

The Board is satisfied with the level of independence demonstrated by the Independent Directors and their ability to act in the best interest of the Company and/or the Group as all of the Independent Directors have satisfactorily demonstrated that they are independent from Management and free from any business or other relationship with the Group that could materially affect or interfere with the exercise of objective, unfettered or independent judgement to act in the best interest of the Group. Given the Company was listed in November 2014, there was no assessment on the independence carried out for the Independent Directors during the financial year ended 30 June 2016. The Nomination Committee will conduct an evaluation on the level of independence, on an annual basis.

5. Board Committees

The Board has delegated certain responsibilities to the Board Committees that operates within clearly defined terms of reference. These Committees are:

i. Audit Committee

The principle objectives of the Audit Committee is to assist the Board of the Company in discharging its statutory duties and responsibilities in relation to corporate governance, internal control systems, management and financial reporting practices of the Group and to ensure proper disclosure to the shareholders of the Company.

The members of Audit Committee and its summary of the works carried out during the financial year ended 30 June 2016 are set forth in the Audit Committee Report of this Annual Report.

The term of office and performance of the Audit Committee and its members should be reviewed by the Nomination Committee annually to determine whether such Audit Committee and members have carried out their duties in accordance with its Terms of Reference.

ii. Nomination Committee

The Nomination Committee of the Company is responsible to oversee the selection and assessment of directors. The Nomination Committee will assess the candidates and recommend to the Board who will thereon assess the shortlisted candidates and arrive at a decision on the appointment of the director. The Nomination Committee will also assess and evaluate the performance of each director of the Company, on an annual basis. Given the Company was listed in November 2014, there was no evaluation of Directors’ performance during the financial year ended 30 June 2016.

The Nomination Committee of the Company comprises the following members, all being Non-Executive Directors and majority of whom are Independent Directors

Name of Committee Members

Mohd Rizal Bahari Bin Md Noor, Chairman – Independent Non-Executive Director
Tan Sri Dato’ Kamaruzzaman Bin Shariff, Member – Non-Independent Non-Executive Director
Yip Jian Lee, Member – Independent Non-Executive Director

The Nomination Committee meets as and when required. The Nomination Committee met once in the financial year ended 30 June 2016 and the activities undertaken by the Committee were as follows:

a. Reviewed and assessed the Managing Director, Executive Directors and Non-Executive Directors’ Annual Performance Evaluation Forms.

b. Reviewed, evaluated and considered the appointment of En. Lim Yew Hoe as Executive Director and recommended him to the Board.

c. Reviewed and assessed the independence of the Independent Directors of the Company.

d. Considered and recommended to the Board for consideration, the re-election of Directors who retire by rotation pursuant to Company’s Articles of Association and re-appointment of Director pursuant to Section 129(6) of the Companies Act, 1965 at the Third Annual General Meeting of the Company.

iii. Remuneration Committee

The Remuneration Committee of the Company is principally responsible for assessing and reviewing the remuneration packages of the Executive Directors and subsequently furnishes their recommendations to the Board for adoption. The Board had also through the Remuneration Committee, established formal and transparent remuneration policies and procedures to attract and retain Directors.

The Remuneration Committee of the Company comprises the following members:

Name of Committee Members
Dato’ Ir Mohamad Razali Bin Othman, Member – Independent Non-Executive Director

Mokhtar Bin Hashim, Member – Managing Director
Yip Jian Lee, Member – Independent Non-Executive Director
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iv. Risk Management Committee

The Risk Management Committee of the Company was established on 20 August 2015 to act as a Committee of the Board with the primary objective to assist the Board in the following functions:

a. carrying out its responsibility of overseeing Group’s risk management framework and policies;

b. ensuring that Management maintains a sound system of risk management and internal controls to safeguard shareholders’ interest and the Group’s assets; and

c. determining the nature and extent of significant risks which it is willing to take in achieving its strategic objectives.

The Risk Management Committee of the Company comprises the following members:

Name of Committee Members Designation
Wan Muhamad Hatta Bin Wan Mos, Chairman – Independent Non-Executive Director
Dato’ Ir. Mohamad Razali Bin Othman, Member – Independent Non-Executive Director
Mokhtar Bin Hashim, Member – Managing Director
Shatar Bin Abdul Hamid, Member – Executive Director

6. Board Meetings and Supply of Information

The Board schedules at least four meetings in a year with additional meetings to be convened where necessary. During the financial year ended 30 June 2016, the Board met eight times where they deliberated and approved various reports and issues, including the quarterly financial results of the Group for the announcement to Bursa Securities as well as discussed on potential investments, strategic decisions as well as the Group’s financial performance. The Board was also briefed on the Code and Post Listing Obligations of a Public Listed Company and Directors of a Listed Company prior to the listing of the Company.

Details of the Directors’ attendance at Board meetings during the financial year ended 30 June 2016 are set out as follows:

Name of Directors Attendance
Tan Sri Dato’ Kamaruzzaman Bin Shariff (Chairman) 8 of 8
Mokhtar Bin Hashim 8 of 8
Shatar Bin Abdul Hamid 8 of 8
Yip Jian Lee 6 of 8
Mohd Rizal Bahari Bin Md Noor 8 of 8
Wan Muhamad Hatta Bin Wan Mos 8 of 8
Dato’ Ir Mohamad Razali Bin Othman 8 of 8
Vice Admiral (Retired) Datuk Haji Jamil Bin Haji Osman (Retired on 26 November 2015) 4 of 4

The Board is satisfied with the level of time commitment given by the Directors of the Company towards fulfilling their duties and responsibilities. This is evidenced by the attendance record of the Directors as set out herein above.

Prior to the Board meetings, all Board members are provided with the agenda and Board papers containing information relevant to the business of the meeting, typically at least three working days prior to the date of 29 the meeting, to enable them to obtain further explanations, where necessary, in order to be properly briefedbefore meetings. The Board Papers provide sufficient details of matters to be deliberated during the meeting which includes information on major financial, operational and corporate matters of the Group and the information provided therein is not confined to financial data but includes also non-financial information, both quantitative and qualitative, which is

Where necessary, senior management and/or external professionals may be invited to attend these meetings to clarify and/or explain matters being tabled.

In the event a potential conflict of interest situation arises, the Director concerned is to declare his interest and shall abstain from any deliberation and participation in respect of such resolution pertaining to the transaction.

Records of the deliberation, issues discussed and conclusion were recorded by the Company Secretary who attends all the meetings. The minutes will then be circulated to all Directors for their confirmation before it is signed by the Chairman of the meeting. Minutes of Board meetings together with decisions made by way of circular resolution are duly recorded and properly kept by the Company Secretary. In ensuring adherence board policies and procedures, the Board consults the Company Secretary on procedural and regulatory requirements.

Pursuant to Recommendation of 1.6 of MCCG 2012, the Board is regularly updated by the Company Secretaries who play an important advisory role and advises on the requirements to be observed by the Company and the Board arising from new statutes and guidelines issued by the regulatory authorities. The Company Secretaries brief the Board on proposed contents and timing of material announcements to be made to Bursa Securities amongst others. The Company Secretaries also serves notice to the Directors and Principal Officers to notify them of closed periods for trading in the shares of the Company, in accordance with closed periods for dealing in the Company’s securities pursuant to Chapter 14 of the Main Market Listing Requirements of Bursa Securities.

The Board recognises that the Company Secretaries are suitably qualified and capable of carrying out the duties required. The Board is satisfied with the service and support rendered by the Company Secretaries to the Board in the discharge of their functions.

7. Access to Information and Independent Advice

The Board recognises that the decision making process is highly dependent on the quality of information furnished. The Board members have full and unrestricted access to all information concerning the Group’s affairs pursuant to Recommendation 1.5 of the MCCG 2012. All Board Members, particularly the Chairman, have unrestricted access to the advice and services of the Company Secretary to enable them to discharge their duties effectively. The Directors also have access to the Internal and External Auditors of the Group, with or without Management present to seek explanations or additional information.

The Directors, collectively or individually, may seek independent professional advice and information, on a case to case basis, in the furtherance of their duties at the Company’s expense, so as to ensure the Directors are able to make independent and informed decisions.

8. Appointment and Re-election of Directors

In accordance with Article 103 of the Company’s Article of Association, at least one-third of the Directors for the time being shall retire from office and be subject to retirement by rotation at each Annual General Meeting (“AGM”). Directors who are appointed by the Board in the course of the year shall be subject to re-election at the next AGM to be held following their appointment. Directors who are over seventy years of age are required to submit themselves for annual re-appointment in accordance with Section 129(6) of the Companies Act, 1965. Tan Sri Dato’ Kamaruzzaman Bin Shariff who will retire pursuant to Section 129 (2) of the Companies Act, 1965 and being eligible, has offered himself for re-appointment at the forthcoming AGM. Tan Sri Dato’ Kamaruzzaman Bin Shariff has, during his tenure as the Non-Independent Non-Executive Chairman of the Board, provided strong leadership and is responsible for ensuring the adequacy and effectiveness of the Board’s governance
process.

The members of the Board are to be appointed in a formal and transparent practice as endorsed by the Code. The Nomination Committee will scrutinise the candidates and recommend the same for the Board’s approval. In discharging this duty, the Nomination Committee will assess the suitability of an individual by taking into account the individual’s mix of skill, functional knowledge, expertise, experience, professionalism, integrity and/or other commitments that the candidate shall bring to complement the Board.

All Board members shall notify the Chairman of the Board before accepting any new directorships in other companies. The notification shall include an indication of time that will be spent on the new appointment. The Chairman shall also notify the Board if he has any new directorships or significant commitments outside the Company.

9. Directors’ Training

The Board acknowledges that continuous education is essential for the Directors to keep abreast with the dynamic environment in which the Group operates and that continuous education is vital for the Board members to gain insight into the state of economy, technological advances, regulatory updates and management strategies to enhance the Board’s skills and knowledge in discharging its responsibilities.

The Directors are encouraged to attend relevant seminars and training programmes to equip themselves with the knowledge to effectively discharge their duties as Directors. In addition, individual directors are responsible for determining their continuous training needs to keep abreast of changes in both the regulatory and business environments as well as with new developments within the industry in which the Group operates.

The Board will assess the training needs of the Directors and ensure Directors have access to continuing education programmes.

All the Directors have attended and successfully completed the Mandatory Accreditation Programme (“MAP”) as required by Bursa Securities and will continue to attend other relevant training programmes as appropriate to enhance their skills and knowledge.

For the year ended 30 June 2016, the Directors have attended various seminars and briefings to enhance their knowledge with the latest development in the industry and to better themselves to fulfill their responsibilities. The Directors are also being updated on a continuing basis by the Company Secretary on new and/or amended Main Market Listing Requirements of Bursa Securities as and when the same are advised by Bursa Securities.

The list of training programmes attended by the Directors of the Company during the financial year ended 30 June 2016 were as follows:

The Directors will continue to undergo relevant training programmes and seminars to further enhance their skills and knowledge as well as awareness of the industry and market place that inevitably can contribute to the Group.

10. Directors’ Remuneration

The determination of remuneration packages of the Directors are matters for the Board as a whole. The remuneration of the Directors is structured to attract, retain and motivate them to run the Group successfully. The Board recognises that levels of remuneration must be sufficient to attract, retain and motivate the Directors of the quality required to manage the business of the Group and to align the interest of the Directors with those of the shareholders.

The Board will determine the level of remuneration of Board Members, taking into consideration the recommendations of the Remuneration Committee for the Executive Director(s).

Non-Executive Directors will be paid a basic fee as ordinary remuneration and will be paid a sum based on their responsibilities in Committees and the Board, their attendance and/or special skills and expertise they bring to the Board. The fee shall be fixed in sum and not by a commission or percentage of profits or turnover.

Each individual Director shall abstain from the deliberation and voting on all matters pertaining to their own remuneration.

The aggregate remuneration of the Directors for the financial year ended 30 June 2016 is as follows:

11. Corporate Disclosure Policy

The Board is committed to provide effective communication to its shareholders and general public regarding the business, operations and financial performance of the Group and where necessary, information filed with regulators is in accordance with all applicable legal and regulatory requirements. A Corporate Disclosure Policy was formalised on 7 October 2014 to promote comprehensive, accurate and timely disclosures pertaining to the Company and the Group to regulators, shareholders and stakeholders.

Corporate Disclosure Policy

B. SHAREHOLDERS

1. Relationship With Shareholders

The Group recognises the importance of effective communication and proactive engagement with the shareholders and investors to keep them informed and constantly kept abreast of the performance, corporate governance, and other matters affecting shareholders’ interest. Such information is disseminated through the following channels:

a. Quarterly Financial Reports, Annual Audited Financial Statements and Annual Report

b. Circulars to shareholders

c. Various disclosures and announcements to Bursa Securities

The Company’s corporate website at www.carimin.com serves as one of the most convenient ways for shareholders and members of the public to gain access to corporate information, news and events relating to the Group. The main forum for dialogue with shareholders remains at the AGM which encourages the shareholders to raise questions pertaining to the operations and financials of the Group.

2. AGM

At each AGM, shareholders will be accorded time and opportunity to query the Board on the resolutions being proposed and also matters relating to the performance, developments and the future direction of the Group. Shareholders will also be invited to convey and share their inputs with the Board. Where applicable, the Board will also ensure that each item of special business that is included in the notice of meeting is accompanied by a full written explanation of that resolution and its effects to facilitate its understanding and evaluation. All resolutions set out in the Notice of the AGM are put to vote by show of hands. The Company shall endeavour, wherever possible, to put to vote of resolutions at the AGM by poll, if required, including highlighting the shareholders of their right to demand a poll at the commencement of the general meeting. The outcome of all resolutions proposed at the AGM is to be announced to Bursa Securities at the end of the meeting day.

C. ACCOUNTABILITY AND AUDIT

1. Financial Reporting

The Board is responsible to present a balanced, clear and comprehensive assessment of the Group’s financial performance and prospects through the quarterly and annual financial statements to shareholders. The Board and Audit Committee of the Company have to ensure that the financial statements are drawn up in accordance with the provisions of the Companies Act, 1965 and applicable approved accounting standards in Malaysia. In presenting the financial statements, the Board has reviewed and ensured that appropriate accounting policies have been used, consistently applied and supported by reasonable judgement estimates. The Board, via the Audit Committee, has established a formal and transparent arrangement for maintaining an appropriate relationship with its auditors, both external and internal. The External Auditor’s appointment and independence policy had been developed and adopted by the Board. The annual assessment on the suitability and independence of the External Auditors is carried out by the Audit Committee. The re-appointment of the External Auditors is subject to the Board’s deliberation.

2. Internal Control and Risk Management

The Board affirms its overall responsibility for maintaining sound systems of risk management and internal controls to ensure that risks faced by the Group are identified, assessed and managed to tolerable levels determined by the Board so that shareholders’ investments and the Group’s assets are safeguarded. The Group has also established an internal audit function which is outsourced to a professional service firm. They report directly to the Audit Committee. The outsourced Internal Auditors carries out internal audit reviews in accordance with the approved internal audit plan and the results of their reviews are presented to the Audit Committee at their scheduled meetings.

Further information on the main features of the Group’s risk management process and internal control system are presented in the Statement on Risk Management and Internal Control of this Annual Report.

3. Relationship with Internal and External Auditors

The Group has established a transparent and appropriate relationship with the Internal Auditors and External Auditors. Such relationship allows the Group to seek professional advice on matters relating to compliance and corporate governance.

The Audit Committee undertakes an annual review of the suitability and independence of the External Auditors. Having assessed their performance, the Audit Committee will make its recommendation to the Board for re-appointment, upon which the shareholders’ approval will be sought at the AGM of the Company. Similar to the External Auditors, the outsourced Internal Auditors have direct reporting access to the Audit Committee to ensure that any audit findings highlighted are addressed independently, objectively and impartially without any undue influence of the Management.

This Statement was made in accordance with the resolution of the Board dated on 27 September 2016.