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CORPORATE GOVERNANCE REPORT

STOCK CODE : 9466 COMPANY NAME : KKB ENGINEERING BERHAD FINANCIAL YEAR : December 31, 2018

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

PERSUANT 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

: KKB Engineering Berhad has its Vision and Mission to achieve and guide in the day-to-day business operation.

The Board recognizes its duties and adopts the Board Charter as a general statement of its expectations as to how it will discharge its duties. The Board Charter will be of assistance to the Board in its ongoing assessment of its own performance and that of individual Directors.

The Board is responsible for the oversight and overall management of the Company. Every Director keeps himself/herself abreast of responsibility by constantly attending trainings/courses.

The Board discharge its functions by delegating to Group Managing Director and Board Committees such as Audit Committee (“AC”), Nomination Committee (“NC) and Remuneration Committee (“RC”).

The Board, together with the Management promotes good Corporate Governance (“CG”) culture within the organisation which reinforces ethical, prudent and professional behaviour. In discharging its duties and responsibilities, the Board delineates relevant matters and applicable limits, including those reserved for the Board’s approval, and those which the Board may delegate to the Board Committees and the Management.

The Board plays an active role in the development of the Company’s strategy and monitor its performance and implementation. Annually, the Management presents to the Board its recommendation strategic plan and proposed business plan for the following year.

The Board takes into consideration sustainability factors such as Economic, Environment and Social as well as Governance that may impact on the Board’s Strategic Plan.

As part of the Board’s responsibility, the Board assess management performance and ensure businesses are properly managed. The Management Committee (MANCO) headed by Group Managing

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Director is formed and reports to the Board regularly on the business operation of the Group.

The Risk Management Committee comprising Senior Management personnel oversees the risk management matters and reports to the AC which in turn reports to the Board.

The Board through the NC ensures there is effective and orderly succession plan of the Board and Senior Management. The RC is responsible to review Key Senior Management including Group Managing Director, Group Executive Director and Executive Director’s remuneration.

Explanation for departure

:

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

Measure :

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4

Intended Outcome



company.

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 roles and responsibilities of the Chairman of the Board are stated in the Board Charter which is available on KKB Engineering Berhad website at www.kkbeb.com.my/about-us/corporate-governance/


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http://www.kkbeb.com.my/about-us/corporate-governance/

5

Intended Outcome



company.

Practice 1.3

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

Application : Departure


:


: Although the positions of Chairman and Group Managing Director are held by the same individual, its independence is still maintained. The Board is satisfied with the composition and good mix of Executive Directors and Independent Non-Executive Directors to carry out the Board’s priorities objectively and impartially and to grow the Group effectively.

The Board will give careful consideration and take necessary measure to comply including any restructuring and re-alignment of the whole Board progressively. It will ensure an effective and suitable composition, including the right Board size, is achieved in the interest of the Company.

It will carefully formulate a step by step framework to apply all applicable practices.


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6

Intended Outcome



company.

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 Company Secretary is a person qualified to act as a Company Secretary under Section 235(2) of the Companies Act 2016. She is qualified, experienced and capable of carrying out duties attached to the post.

Prior to the Board meetings, the Company Secretary will furnish a notice together with an agenda to the Directors to allow them to have adequate preparation time to ensure effectiveness at the proceedings of the meeting. The Company Secretary will ensure Board’s proceedings are followed regularly and reviewed and will also provide guidance to the Board on director’s obligation arising from the rules and regulations including the MCCG and the Main Market Listing Requirements (“MMLR”).


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7

Intended Outcome



company.

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.



: In order to ensure the Board has sufficient time to review the board papers, the Company will circulate at least seven (7) days before the date of Board meetings all Board meeting papers including Quarterly and Annual year-to-date Financial Statements, Minutes of Previous Meetings, report on Recurrent Related Party Transactions, updates by Regulatory Authorities, Internal and External Audit Report and Group Operations Report.


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8

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 respective roles and responsibilities of the board, board committees, individual directors and management are clearly identified in the Board Charter on KKB Engineering Berhad website at www.kkbeb.com.my/about-us/corporate-governance/

The board charter is reviewed and approved by the Board annually.

On 26 February 2019, the Board reviewed and approved certain revisions to the Board Charter and it will continuously revise and amend to be in tandem with the Malaysian Code on Corporate Governance whenever necessary.

Key matters reserved for the Board’s approval include the annual and quarterly financial result, annual business plan and budget.


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9

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.



: KKB Engineering Berhad has in place a Code of Conduct for Directors and Employees of the Company. The Code of Conduct of the Company is available on Company website at www.kkbeb,com.my/about-us/corporate-governance/


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Measure :

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http://www.kkbeb,com.my/about-us/corporate-governance/

http://www.kkbeb,com.my/about-us/corporate-governance/

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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 Company’s Whistle Blowing Policy fosters an environment that engenders integrity, transparency and fairness to all employees and is encouraged to raise genuine concerns about possible improprieties in matters of financial reporting, compliance and other malpractices at the earliest opportunity, and in an appropriate way.

The policy is to support the Company’s value, to ensure employees can raise concerns without fear of reprisals and provide a transparent and confidential process for dealing with concerns.

If any employee believes reasonably and in good faith that malpractice exists in the work place, the employee should report this immediately to the line Manager. However, if for any reason the employee is reluctant to do so, then the employee should report the concerns to the Senior Independent Director through telephone or email.

Whistle Blowing Policy is also available on KKB Engineering Berhad website at www.kkbeb.com.my/about-us/corporate-governance/


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11

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.



:


: The Board of KKBEB comprises 8 Directors:

3 Executive Directors

3 Independent Non-Executive Directors

2 Non-Independent Non-Executive Directors

Although the existing Board consists of one-third Independent Directors, it is working towards achieving and meeting a composition of 50% of Independent Directors taking into consideration the overall Board and Board Committee structures which the Board of Directors intend to carefully review and formulate.


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12

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 : Applied - Two Tier Voting


: The Board take cognisance of Practice 4.2 of the Malaysian Code on Corporate Governance that the tenure of an independent director should not exceed a cumulative term limit of 9 years. Although a longer tenure of directorship may be perceived to have an effect on a director’s independence, the Board is of the view that the ability of long serving independent directors to remain independent and to discharge their duties with integrity and competency should not be measured solely by tenure of service or any pre-determined age.

The Board seeks to strike an appropriate balance between tenure of service, continuity of experience and refreshment of the Board. Such refreshment process of the Board will take some time and cannot happen overnight in order to maintain stability to the Board. Furthermore, the Company benefits from such directors who have, over time, gained valuable insights into the Group, its market and the industry.

The Board continues to retain the Independent Director after the twelfth year, and will seek shareholders’ approval through a two-tier voting process at the forthcoming Annual General Meeting (“AGM”).

In justifying the decision, the Nomination Committee (“NC”) is entrusted to assess the candidate’s suitability to continue as an Independent Non-Executive Director based on the criteria on independence and to disclose the reasons for retaining him/her as Independent Director in the Notice of AGM.

Although the Independent Non-Executive Director, Dr Arjunan Subramaniam has served a consecutive term of more than twelve (12) years on the Board as Independent Non-Executive Director and Senior Independent Director, his long tenure has not impaired his Independent Director’s background and can continue to bring independence and objective judgment to the Board’s decision with his vast experience and his technical background qualification. During the year under review, Dr Arjunan attended all scheduled Board Meetings without any absence including official functions.

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Dr Arjunan’s independency is also subject to prior yearly assessment by the Board through the NC. Further, his seniority, intellectual honesty, bona fide commitment and vast knowledge in various areas of finance, legal and particularly his specialized knowledge in Tax matters, warrant his retention as Independent Non-Executive Director and Senior Independent Director of the Company to which the Board seeks shareholder’s approval at the forthcoming AGM. Furthermore, he is able to challenge ideas and provide perspective to Management. In addition, in maintaining strong independence on the Board with tenure of more than twelve (12) years, Dr Arjunan also provides a bi-annual declaration of independence to the Board.


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14

Intended Outcome



Practice 4.3 - Step Up

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

Application : Not Adopted

Explanation on adoption of the practice

:

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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 and the Nomination Committee (“NC”) take into consideration diversity in the skills, experience, age etc in seeking potential candidate. The Board comprises three (3) Executive Directors, three (3) Independent Non-Executive Directors and two (2) Non-Independent Non-Executive Directors. In assisting the Board to fulfill its functions, various Board Committees have been set up. The Board through the NC also considers woman candidates as part of recruitment exercise to ensure gender diversity. Out of eight (8) Directors, two (2) Directors are females. Diversity Composition

Gender BOD Top Management (in figures)

Chief Executive

MC/Senior Management

Male 6 1 4

Female 2 - 2

Grand Total 8 1 6

Age Group BOD Top Management (in figures)

Chief Executive


< 20 years - - -

20 – 29 years - - -

30 – 39 years - - -

40 – 49 years - - -

50 – 59 years 3 - 5

60 years and above

5 1 1

Grand Total 8 1 6

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The Board decided to maintain an optimum board size of eight (8) by year 2020 taking into consideration the MCCG and MMLR. This will involve retirement of existing members and recruitment of suitable ones progressively step by step whilst at the same time be clear on the Company’s business objectives.

Race BOD Top Management (in figures)

Chief Executive


Bumiputera 1 - 2

Chinese 5 1 4

Indian 1 - -

Others 1 - -

Grand Total 8 1 6


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17

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 Company’s policies on gender diversity is available on KKB Engineering Berhad website at www.kkbeb.my/about-us/corporate-governance/

The Board has in place a Gender Diversity Policy, which recognises Board diversity including gender diversity as an essential measure of good corporate governance and an attribute of a well-functioning board.

The Board acknowledges the call by the Government and MCCG for boards to comprise at least 30% woman on board. The Board, through Nomination Committee, will conduct all Board appointment process in a manner that promotes gender diversity. Out of eight (8) Directors, two (2) Directors are females.

The Board is mindful that any gender representation should be in the best interest of the Company. Although the Company has not reached the 30% women representation target at Board level as required, the Board is putting its effort in getting other suitable women who could meet the objective criteria, merit and with due regard for diversity in skills, experience, age to join the Board.

It will ensure an effective and suitable composition, including the right Board size, is achieved in the interest of the Company. It will formulate a step by step framework and apply all applicable practices, where practicable.


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Measure :

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http://www.kkbeb.my/about-us/corporate-governance/

http://www.kkbeb.my/about-us/corporate-governance/

18

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


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 considering and proposing new nominees to the Board assessing and evaluating the relevant expertise and contribution of existing Board as a whole, Board Committees and of Individual Director. The NC is guided by a set of Criteria for Recruitment when recruiting new Director or new candidates. All criteria for recruitment will be reviewed by the Board annually.

The NC will as an ongoing process continue to select new potential Director and/or with view of filling vacancy and to review the profile of the potential candidates from various sources as and when the need arises.


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19

Intended Outcome



Practice 4.7

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

Director.



: The current Chairman of the Nomination Committee (“NC”) is the Senior Independent Director who is nominated amongst the Independent Non-Executive Directors. The NC is chaired by Dr Arjunan Subramaniam.


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20

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”) reviewed the terms of office and performance of the Audit Committee (“AC”) and its members to determine that AC and its members have carried out their duties according with AC’s terms of reference.

NC also evaluated the Group Chief Financial Officer’s character, experience, integrity, competence and time to discharge her role, Directors’ training needs, retention of Dato Kho Kak Beng as Group Managing Director and Chairman of the Company, retaining Dr Arjunan as Independent Director, female Directorships on the Board, developing and reviewing the criteria used in the recruitment process, annual assessment of Directors and Group Chief Financial Officer, and recommending to the Board for continuation in service of Directors who are due for retirement by rotation.

The assessment process of the Board, Board Committees, Individual Director and Senior Management is stated as follows:

Although internally facilitated, a detailed assessment using evaluation form is carried out. Such evaluation forms are continuously enhanced to keep pace with changing environment.

The Evaluation Form of Board, Individual Director, Group Chief Financial Officer and Self Evaluation, Audit Committee, Nomination Committee, Remuneration Committee and Management Executive committee are sent to all the members of Nomination Committee for their perusal.

Members of Nomination Committee to complete all the evaluation forms and thereafter return to Management office.

At the Nomination Committee meeting, the Committee members will discuss and make recommendation to the Board at the Board of Directors’ Meeting.

Chairman of Nomination Committee is required to report outcome of assessment and tabled to the Board during the Board of Directors’ Meeting.

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Measure :

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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 in place a Remuneration Policy and Procedures which the Remuneration Committee (“RC”) assists in reviewing and assessing the remuneration packages of Executive Directors, Group Managing Director and Group Chief Financial Officer, although determination of remuneration packages of both Executive and Non-Executive Directors remains with the Board. The RC is responsible to ensure that the level of remuneration is sufficiently attractive to retain a stable management team and to further encourage creation of value for the shareholders and link rewards to corporate goals and individual performance. Further, the RC also keeps abreast with changes in the external market for remuneration comparable, reviews and recommends changes to the Board as it deems appropriate. The Remuneration Policies and Procedures are annually reviewed and available on Company’s website at www.kkbeb.com.my/about-us/corporate-governance/

Since the Board will be re-addressing the overall structure and hierarchy of Senior Management including the total remuneration package of senior personnel and Succession Planning which is ongoing and how the Senior Management can be appropriately defined and classified, the Board will disclose all details once available.


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23

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 Remuneration Committee (“RC”) comprises only Non-Executive Directors and majority must be Independent Directors and operates within defined terms of reference or procedures. The Chairman of the RC will report to the Board on matters considered and submit recommendations to the Board for approval as appropriate.

RC terms of reference are reviewed annually taking into consideration recommendation of the MCCG and MMLR. It is available on the Company’s website at www.kkbeb.com.my/about-us/corporate-governance/


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24

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.



:


: The Board has a Remuneration Committee formed to determine the remuneration of each Executive Director, Group Managing Director and Senior Management reflecting the level of responsibility, experience and commitment. The fees paid to Non-Executive Directors are the responsibilities of the entire Board. No director is involved in determining his own remuneration.

Although disclosure is not based on specific name basis, the details stated in the Annual Report shows details of each Executive and Non-Executive Directors individually based on I, II and III on salaries, Fees, Bonus and other benefit in kind both for Company Level and Group Level. With such breakdowns and different bands, stakeholders are able to assess whether the remuneration commensurate with their performance.


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25

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.



:


: The Company has not disclosed 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.

The Board takes cognizance of MCCG Practice 7.2 as regards Senior Management’s remuneration. Management is still in the process of aligning the overall Human Resources structure. Once the organisational structure, classification and definition of “Senior Management” personnel have been properly decided, the Board will disclose all necessary details.


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26

Intended Outcome





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

senior management on a named basis.



:

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 Audit Committee (“AC”) comprises three (3) members who are Independent Non-Executive Directors and one (1) of whom is Non-Independent Non-Executive Director.

The AC Chairman is Dr Arjunan Subramaniam and he is not the Chairman of the Board.


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27

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.



: None of the members of the Audit Committee (“AC”) were former key audit partner within the cooling-off of 2 years. There is no such person being appointed as member of the AC.


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28

Intended Outcome




Practice 8.3

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

independence of the external auditor.



: In the 4Q17 the External Auditor, Messrs Ernst & Young presented the Audit Committee (“AC”) it’s Audit Plan outlining its engagement team, audit timeline, areas of audit emphasis, focus on key audit matters etc. The AC assesses the external auditor based on this and reports to the Board and makes recommendation for shareholder approval at the forthcoming Annual General Meeting. The AC reviews the performance of the External Auditor once a year.


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Intended Outcome





The Audit Committee should comprise solely of Independent Directors.



:

29

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.



: The Board appoints the Audit Committee (“AC”) members according to the Terms of Reference (“TOR”) laid down. The Board through its Nomination Committee reviews the terms of office of the AC members and assess the performance of the AC and its member through an evaluation form. The Chairman and the members are financially literate and have carried out their duties in according with the TOR of the AC which is available on KKB Engineering website at www.kkbeb.com.my/about-us/corporate-governance/


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30

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.



: The Board recognizes the importance of maintaining a sound risk management practices and internal control system to safeguard shareholder’s investment and Group’s assets.

It is responsible for reviewing the adequacy and integrity of the Group’s risk management and internal control system and management information system in compliance with applicable laws, regulations, rules, directives and guidelines.

The Group’s risk management and internal control framework is adequate and effective with a structured approach to implement, monitor, review and improve in tandem with changing business environment.

The Group’s risk management is an ongoing process and the Board recognizes its responsibility for identifying principal risks and ensuring the implementation of appropriate systems to manage the risks.

The Board together with the assistance of the Audit Committee, the Risk Management Committee and professionals and advisers such as the Internal Auditors, identify risks as an ongoing process and ensure continuous risk management arising therefrom.


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31

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 Risk Management Committee (“RMC”) is established and comprises Executive Directors and Senior Management staff to carry out the process of risk management and to execute in accordance with the Terms of Reference as available on www.kkbeb.com.my/about-us/corporate-governance/

As an ongoing process the RMC carries out risks identification, evaluate, monitor and formulate mitigation strategies on risks identified. The RMC executes its duty based on the Group’s operational activities and manages risks as directed by the Audit Committee who in turn reports to the Board.

The RMC periodically reviews risk management processes and policies to ensure relevancy and effectiveness. It will then submit an annual report on the overall risk management processes to the Audit Committee.

During the financial year under review, the RMC held four (4) meetings and worked within the adopted risk management framework. This process is monitored and reviewed by the Audit Committee who shall report and recommend to the Board in ensuring the adequacy and integrity of the system of risk management and internal control and to ensure that an appropriate mix of techniques are used to obtain level of assurance required by the Board.

The risk responses and internal controls that the management have implemented and/or are implementing are documented in the minutes of meeting of the RMC. For each of the risks identified, the management is assigned to ensure appropriate risk response actions are carried out.

The Group Managing Director and Group Chief Financial Officer, have given their assurance through the Audit Committee that the Company’s risk management and internal control system is operating adequately and effectively.


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32


Measure :

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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.



:

33

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.



: Whilst the Risk Management Committee (“RMC”) operates independently within the confines of its Terms of Reference and reports to the Audit Committee (“AC”) in ensuring that a sound system of risk management and internal control is maintained, the adequacy and integrity of the risk management and internal control system are further assured by the existence of an Independent Internal Audit Function which possesses the necessary expertise to perform their duties. The Internal Audit Function’s activities are outsourced to an independent service provider, who is adequately resourced to ensure the audit activities are carried out professionally with independence, objectivity and impartiality without interference.

The Internal Auditors’ role is separate (although may overlap) from that of the RMC as it regularly evaluates on an independent basis the effectiveness and appropriateness of the entire risk management and internal control structure as directed by the AC. In addition, the Internal Auditors may also provide such assurance and advice covering specialized areas. With the report presented to the AC, the AC in turn reports to the Board for review on the adequacy and effectiveness of the risk management and internal control system.

The Internal Auditors carried out detailed risk audits on each identified area as per directed and approved by the AC.


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34

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 Company is outsourced to an independent professional firm whose personnel are free from any relationships in ensuring an independent, objective assurance and to add value to and improve the Group’s operations.

For impartiality and independency, the Internal Auditors (“IA”) report directly to the Audit Committee (“AC”) on its findings and recommendations. Any necessary corrective action after reporting to the Board by the AC will be monitored by the management.

During the financial year under review, the IA carried out its audit assignments as approved by the AC. The audit subjects were selected based on a risk assessment exercise reviewed by the AC. The AC received and reviewed the Internal Audit Reports highlighting audit issues, recommendations and management response and directed actions to be taken by management to rectify and improve the system of risk management and internal control.

The Group outsourced its Internal Audit function to external party which assists the AC in the discharge of its duties and responsibilities. Its role is to provide independent and objective reports on the Group’s management, records, accounting policies and controls to the Board.

All internal audit functions during the financial year were conducted by Core Business Success Sdn Bhd (“CBS”). The IA carrying out the internal audit function or activity for the Group of Companies is headed by Mr. Wee Hun Been, member of Chartered Accountants (Malaysia), Associate Chartered Management Accountants (UK) and Certified Financial Planner License No.: C01441. Mr. Wee Hun Been holds a Bachelor Degree in Science (Education), Graduate Certificate in TESL and a member of the Malaysian Institute of Accountants (MIA: 8853) since 1996. He has accumulated over 29 years’ experience in a wide range industry.

Where required, the IA may be assisted by other qualified personnel in specific technical areas including forensic advisory. During the financial year ended 31 December 2018, the total cost incurred for the internal audit function was in the region of RM28,000.00 (2017: RM28,000)

35

The AC meets with the IA at least once a year without the presence of other Directors and Management, or whenever deemed necessary to ensure that the internal audit function is effective and able to function independently. The IA reports directly to the AC and his findings and recommendations are communicated to the Board via the AC.

The AC has assessed the performance of the IA and was satisfied that the IA function continue to deliver value-added assurance to KKB.


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Measure :

Timeframe :

36

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 recognizes the importance of communication and proper dissemination of information to its shareholders and investors. Through disclosure of relevant information such as announcements, quarterly reports and financial results, Annual Reports and Circulars, the Company aims to provide transparency to shareholders.

In that connection the Company has set out the internal Corporate Disclosure Policy and Dividend Policy which are practical and in compliance with the disclosure requirements by Bursa Malaysia Listing Requirements. The policy can be reached on our website at www.kkbeb.com.my/about-us/corporate-governance/

Furthermore, the Annual General Meeting is the principal forum for dialogue with shareholders who are provided a copy each of the Company’s Annual Report before the meeting. Shareholders are encouraged to participate in the Q&A session.

The Company also has a Website which is easily accessible by all where Company’s profile, Company’s policies including Whistle Blowing Policy, announcements and other information are available for viewing.

After the end of every quarter and Board’s approval on the financial results, the Company Secretary will announce the results via Bursa LINK immediately on the same day to ensure immediate access to information is provided to the investing public.


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Measure :

Timeframe :


37

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.



:


: Apply to Large Company only and KKB Engineering Berhad is not a Large Company.


Measure :

Timeframe :

38

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.



: KKB Engineering Berhad dispatches the notice of its Annual General Meeting (“AGM”) to shareholder at least 28 days before the AGM, well in advance of the 21-days requirement under the Companies Act 2016 and Main Market Listing Requirements (“MMLR”) of Bursa Malaysia Securities Berhad (“Bursa Securities”). The additional time given to shareholders allows them to make the necessary arrangements to attend and participate in person or through corporate representatives, proxies or attorneys. More importantly, it enables the shareholders to consider the resolutions and make an informed decision in exercising their voting rights at the general meeting.

The notes to the Notice had provided detailed explanations for each resolution proposed, e.g. Directors’ Remuneration comprising the Directors’ fees and allowances, re-election/retirement of Directors, appointment of auditors etc, to enable shareholders to make informed decisions in exercising their voting rights.

Besides, the Notice also provides notes to the shareholders regarding the details of the AGM, their entitlement to attend the AGM, their right to appoint a proxy and information as to who may count as a proxy. The Company allows a member to appoint a proxy who need not be a member of the Company.


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Measure :

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39

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.



: At the Annual General Meeting, all Directors were present at the meeting to engage and communicate with shareholder. Management and External Auditors were also present to answer any questions.


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Measure :

Timeframe :

40

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.



:


: KKB Engineering Berhad always holds its AGM at the same location, namely Abell Hotel, No. 22, 4th Floor, Jalan Tunku Abdul Rahman, 93100 Kuching, Sarawak, which is easily accessible by shareholders. The Company does not have meetings in remote location.

Alternatively, shareholders are allowed to appoint any person(s) as their proxies to attend, participate, speak and vote in his stead at a general meeting.


Measure :

Timeframe :

stock code 9466 company name kkb ...kkb.listedcompany.com/newsroom/kkb_corporate_governance...of the...

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