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Corporate Governance Overview Statement

The Board of Directors of Petrol One Resources Berhad believes in upholding the standards of corporate governance in conducting the affairs of the Company and its subsidiaries (“Group”) with integrity, transparency and professionalism.

This statement also serves as a compliance with Paragraph 15.25 of the Main Market Listing Requirements (“Main LR”) of Bursa Malaysia Securities Berhad (“Bursa Securities”) and is to be read together with the Corporate Governance Report (“CG Report”) as published in the Company’s website at http://www.petrolone.com.my/.


PRINCIPLE A: BOARD LEADERSHIP AND EFFECTIVENESS

I. Board Responsibilities
(1) Clear Functions of the Board and Management

The Board is entrusted with creating and building sustainable value for the shareholders of the Company. The duties and responsibilities of the Board include charting of the Group’s overall strategic plans and financial objectives, overseeing and evaluating the conduct and performance of the Group, engaging in leadership succession planning, adopting practical risk management and internal control system for the Group, promoting sustainability of business in the Group from the aspects of environmental, social and governance, and developing and implementing an effective investor relations and shareholder communications programme for the Company.

The formal schedule of matters reserved for the Board has been duly stipulated in the Board Charter and is available for viewing on the Company’s corporate website at www.petrolone.com.my.

(2) Roles and Responsibilities of the Board

All the Directors have equal responsibility for the Group’s risk management policy framework and corporate and regulatory accountability. Matters that are material to the Group are reserved to the Board for determination, with no individual or a company of individuals dominates the Board’s decisionmaking process. The presence of the Independent Directors is essential so as to bring independent and objective judgement to the Board’s deliberations.

The Board oversees the general business and affairs of the Group and will assume, amongst others, the following duties and responsibilities: -

• establishing strategic intent, strategies and targets for the Company and Group;

• overseeing and evaluating the conduct and performance of the Company and Group;

• identifying principal risks and ensuring implementation of appropriate internal controls and mitigation measures;

• establishing leadership succession plans and overseeing the development of the Group’s human capital;

• overseeing the development and implementation of an investor relations programme or shareholder communications policy for the Company;

• reviewing the adequacy and integrity of the management information and systems of internal control of the Group; and

• formulating strategies that promote sustainability and give due consideration on the environment, social and governance (“ESG”) aspects of business in the Group and consider appropriate ESG reports and information.

(3) Separation of Position of the Chairman and Chief Executive Officer

The Board is chaired by the Senior Independent Non-Executive Chairman who leads the Board and acts as a direct liaison between the Board and the Management of the Company. The Chief Executive Officer (“CEO”), who is also one of the Executive Directors, heads the Management team to manage the Company and its business within the level of authority determined by the Board. The separation of the positions of the Chairman and CEO promotes accountability and facilitates division of responsibilities between them.

The position of the Chairman of the Board and CEO are held by different individuals. Mr. Peter Thomas Phelan (“Mr. Peter”) is the Senior Independent Non-Executive Chairman while Encik Azlan Shairi Bin Asidin (“En. Azlan”) is the CEO of the Company.

The Board Charter has outlined the role of the Chairman as well as the role of the CEO to ensure accountability and division of responsibilities.

(a) Chairman of the Board

The Chairman is responsible in providing leadership for the Board to ensure that all Directors receive sufficient and relevant information on financial and non-financial matters to enable them to participate actively in Board decisions. The key roles and responsibilities of the Chairman are set out in the Board Charter of the Company.

The Chairman shall ensure the Board members receive accurate, timely and clear information for decision-making, keeps track of the contribution of individual Directors to ensure they are actively participated in Board deliberations and decision-making process, and maintain a relationship of trust with and between the Directors.

(b) CEO

The CEO leads the management team, shall have the authority and power to manage the Company and its businesses within the level of authority determined by the Board from time to time, and shall constantly report the Company’s performance to the Board for timely evaluation.

(4) Company Secretaries

The appointment and removal of the Company Secretaries is a matter for the Board. All Directors have access to the advice and services of the Company Secretaries, who are responsible for ensuring that Board procedures are followed, and that applicable rules and regulations are complied with. Also, the Company Secretaries ensure that the deliberations at the Board meetings are well captured and minuted.

Both the Company Secretaries are members of the Malaysian Institute of Chartered Secretaries and Administrators (“MAICSA”) and are qualified to act as company secretary under Section 235(2) of the Companies Act 2016.

(5) Access to Information and Advice

The Company takes necessary steps to ensure that quality and useful information be delivered to its Board members to facilitate their decision-making. Relevant Board papers are disseminated to all the Directors prior to the meetings in a timely manner to enable the Directors to review the materials and obtain additional information or clarification prior to the meetings.

Directors also have unfettered access to the information within the Group, to seek advice from independent professional advisers at the Group’s expense, and access to the advice and services of the Company Secretaries who ensure that Board procedures and applicable rules and regulations are complied with. The Company Secretaries also constantly attend training programmes to keep in touch with the latest development in the field.

(6) Board Charter

The Company has adopted a Board Charter which set out the Board’s strategic intent and outlines the Board’s roles, responsibilities, processes and functions of the Board, and serves as a source reference and primary induction literature, providing insights to prospective Board members and Senior Management of the Group.

In view of the recent amendments of the Main LR of Bursa Securities and Malaysian Code on Corporate Governance (“MCCG”), the Board Charter has been revised and updated by the Board on 30 August 2018 to be in line with the recent amendments.

The updated copy of the Board Charter is available at the Company’s corporate website at www. petrolone.com.my

(7) Code of Conduct

The Code of Conduct (“the Code”) has also been adopted by the Board on 30 August 2018. The Code has sets forth the principles, values, standards or rules of behaviour that guide the decisions of the Board, the Management and employees of the Group. The Code is adopted to guide the ethical conduct of the Board, Management and employees of the Group in their daily work.

A summary copy of the Code is available at the Company’s corporate website at www.petrolone.com. my

(8) Whistle Blowing

The Group’s Whistle Blowing guidance has been encapsulated in the Code. It is a specific means by which any employee/officer or stakeholder can report or disclose through established channels, concerns about any violations of the Code, unethical behaviour, malpractices, illegal acts or failure to comply with regulatory requirements that is taking place / has taken place / may take place in the future.

(9) Promote Sustainability

The Board has given due consideration on ESG aspects of the businesses in the Group and consider appropriate ESG reports and information while formulating its corporate strategies in order to promote sustainability.

II. Board Composition
(1) Board Composition and Balance

Presently, there are six (6) Directors on the Board, comprising two (2) Executive Directors (“EDs”) and four (4) Non-Executive Directors (“NEDs”), of whom three (3) of them are Independent Non-Executive Directors (“INEDs”) i.e. at least half of the Board comprise independent directors and complied with the recommendations of the MCCG. The composition of the Board is well-balanced and represents a good mix of skills, knowledge and experience that will contribute to the positive performance of the Group.

The presence of the INEDs brings an objective and independent judgement to the decision-making process of the Board. The biographical details of the Board members are set out in the Directors’ Profile of this Annual Report.

(2) Tenure of Independent Directors

The MCCG recommended that the tenure of an Independent Director shall not exceed a cumulative term of 9 years. Upon completion of the 9 years, the Independent Director may continue to serve the Board subject to the Director being re-designated as a non-independent Director. However, the Board shall provide justifications and seek shareholders’ approval in the event it proposes to retain the Independent Director who has served the Board in that capacity for more than 9 years.

If the Board continues to retain the Independent Director after the twelfth (12) years, annual shareholders’ approval must be sought through a two-tier voting process to retain the said Director as an Independent Director.

The Board noted there were no Independent Directors whose tenure exceeds a cumulative term of nine (9) years in the Company thus far.

(3) Annual Assessment of Independence of Directors

The Board subscribes mainly to the concept of independence in tandem with the definition of Independent Director in Paragraph 1.01 of the Main LR of Bursa Securities through the assistance of the Nomination and Remuneration Committee.

The Board noted that Letters of Declaration have been executed by the following Independent NonExecutive Directors (“INEDs”) of the Company, confirming their independence pursuant to the Main LR of Bursa Securities and that they have undertaken to inform the Company immediately should there be any change which could interfere with the exercise of their independent judgement or ability to act in the best interest of the Company:-

• Mr. Peter Thomas Phelan;

• Mr. Lee Kean Cheong; and

• Encik Ahmad Nainy Bin Mokhtar.

Based on the outcome of the Directors’ self-assessment and peer assessment evaluation, the evaluation on the effectiveness of the Board as a whole, as well as the additional assessment on the independence of the INEDs, the Board is satisfied with the level of independence demonstrated by the INEDs and their ability to act in the best interest of the Company.

The Board considers that its INEDs provide an objective and independent views on various issues dealt with at the Board and Board Committees level. All INEDs are independent of Management and free from any relationship. The Board is of the view that the current composition of INEDs fairly reflects the interest of minority shareholders in the Company through the Board representation.

(4) Senior Independent Non-Executive Director (“SINED”)

Mr. Peter Thomas Phelan was re-designated from Independent Non-Executive Director to the SINED on 16 October 2013. As outlined in the Board Charter, the responsibilities of SINED are as follows: -

• to serve as a designated contact person for consultation and direct communication with Shareholders and other stakeholders on areas that cannot be resolved through the normal channels of contact with the Company, at the expense of the Company;

• to seek assistance from the ED and/or any Senior Management of the Company, if so required, to resolve the issues raised by the Shareholders or other stakeholders to him;

• to seek advice from external professionals on a specific subject matter raised to him by the Shareholders or other stakeholders, at the expense of the Company, if so required;

• to report to the Board on any pertinent issues raised by the Shareholders or other stakeholders that warrants the Board’s attention and/or further action; and

• to ensure all INEDs have an opportunity to provide input on the agenda and advise the Board on the quality, quantity and timeliness of the information submitted by Management that is necessary or appropriate for the INEDs to perform their duties effectively

(5) Board Committees

Board Committees may be established from time to time to assist the Board in the execution of its responsibilities. These Committees shall operate under their defined terms of reference and have the authority delegated by the Board to deal with matters within their purview. Presently, the Audit Committee and the Nomination and Remuneration Committee duly appointed by the Board are actively playing their role in the governance structure of the Group.

All of these Board Committees have written terms of reference (“TOR”) clearly outlining their objectives, duties and powers. The final decisions on all matters are determined by the Board as a whole.

(6) Audit Committee (“AC”)

The primary task of the AC is to oversee the Company’s financial reporting and to assure the Board that the financial information issued publicly by the Company is of quality and reliable. Review of the Group’s corporate governance practices, risk management and internal control, internal and external audit processes, conflict of interest and related party transactions are also the duties of the AC. The composition and activities undertaken by the AC during the financial year 2018 are set out in the Audit Committee Report of this Annual Report.

In view of the recent amendments of the Main LR of Bursa Securities and MCCG, the TOR of AC has been revised and updated by the Board on 30 August 2018.

The updated copy of the TOR of AC is available at the Company’s corporate website at www.petrolone. com.my.

(7) Nomination and Remuneration Committee (“NRC”)

The NRC comprises exclusively of the following INEDs: -

The NRC met once during the financial year under review.

The NRC is governed by its TOR and its principal objectives are as follows: -

• to assist the Board of Directors in their responsibilities in nominating and selecting new candidates to the Board of Directors and matters relating to succession planning, boardroom diversity, training courses for Directors and other requisite qualities of Directors, as well as the annual assessment of the effectiveness of the Board as a whole, its Committees and the contribution of each individual Director;

• ensuring that the remuneration offered to the Executive and Non-Executive Directors and Senior Management is commensurate with the level of executive responsibilities and is appropriate in light of the Company’s performance; and

• ensuring that the compensation and other benefits encourage Executive Directors to act in ways that enhance the Company’s long-term profitability and value.

In view of the recent amendments of the Main LR of Bursa Securities and MCCG, the TOR of NRC has been revised and updated by the Board on 30 August 2018.

In view of the recent amendments of the Main LR of Bursa Securities and MCCG, the TOR of NRC has been revised and updated by the Board on 30 August 2018.

The updated copy of the TOR of NRC is available at the Company’s corporate website at www. petrolone.com.my.

(a) Activities undertaken during the financial year

For the financial year ended 30 June 2018, the NRC has undertaken the following activities: -

(i) Conducted evaluation to assess the effectiveness of the Board as a whole and of the Board Committees;

(ii) Evaluated the contribution and performance of each individual Director;

(iii) Reviewed the independence of the Independent Directors;

(iv) Reviewed and made recommendation to the Board on the re-election of the Directors retiring at the forthcoming Annual General Meeting of the Company;

(v) Reviewed the overall composition of the Board and ensured that the current composition is adequate to fulfil the needs of the Company; and

(vi) Reviewed the TOR of the NRC to comply with the recent amendments of the Main LR of Bursa Securities.

(b) Appointment and Election of Directors

The Company’s Articles of Association provides that at every annual general meeting, 1/3 of the Directors, including the Managing Director, shall retire from office provided always that all Directors shall retire at least once in every 3 years. A retiring Director shall be eligible for reelection. A director who is appointed during the year is subject to retirement and re-election by shareholders at the next annual general meeting held following his appointment.

(c) Gender Diversity

The Board does not have any formal gender diversity policy. Notwithstanding that, gender diversity has been adopted by the NRC as one of the criteria to be considered during the NRC’s assessment for potential candidate(s) for Board seat.

At present, the Board does not have any women Directors. The Board is putting its efforts in getting suitable women who could meet the objective criteria, merit and with due regard for diversity in skills, experience, age and cultural background to join the Board.

(d) Ethnicity Diversity

At present, the Board comprises two (2) Malay Directors, three (3) Chinese Directors and one (1) foreign Director.

(e) Age Diversity

The general age profile of the Directors was between forties to sixties years of age.

The Company does not set any specific target for the boardroom age diversity but will work towards having appropriate age diversity in the Board, if the opportunity arises.

The Company does not fix age limit for its Directors given that such Directors are normally reputed and experienced in the corporate world and could continue to contribute to the Board in steering the Company. The Board is fully committed to promoting age diversity, valuing the contribution of its members regardless of age, and seeks to eliminate age stereotyping and discrimination on age.

(8) Time Commitment

The Board requires its members to devote sufficient time to the workings of the Board, to effectively discharge their duties as Directors of the Company, and to use their best endeavours to attend meetings.

For the financial year ended 30 June 2018, the Board had convened a total of six (6) Board Meetings for the purposes of deliberating on the Company’s quarterly financial results at the end of every quarter and discussing important matters which demanded immediate attention and decision-making. During the Board Meetings, the Board reviewed the operation and performance of the Company and other strategic issues that may affect the Company’s business. Relevant staffs were invited to attend some of the Board Meetings to provide the Board with their views and clarifications on issues raised by the Directors.

The attendance record of each Director at Board of Directors’ Meetings during the last financial year is as follows: -

The Board will also meet on an ad-hoc basis to deliberate urgent issues and matters that require expeditious Board direction or approval. In the intervals between Board meetings, any matters requiring urgent Board decisions and/or approval are sought via circular resolutions which supported with all the relevant information and explanations required for an informed decision to be made.

(9) Trainings

The Board acknowledges the importance of continuous education and training to equip themselves for the effective discharge of its duties. New appointees to the Board undergo a familiarisation programme, which includes visits to the Group’s business operations and meetings with Key Management to facilitate their understanding of the Group’s operations and businesses.

All members of the Board have attended the Mandatory Accreditation Programme prescribed by Bursa Securities. The details of the trainings attended by the Directors during the financial year are disclosed in the Corporate Governance Report.

III. Remuneration
(1) Directors’ Remuneration

Presently the Company does not have a formalised remuneration policies and procedures for Directors and Senior Management.

The objectives of the Group on Directors’ remuneration are to attract and retain Directors of the calibre needed to manage the Group successfully. In the case of the CEO and EDs, the component parts of their remuneration are structured to link rewards to corporate and individual performances. For NEDs, their level of remuneration reflects the experience, expertise and level of responsibilities undertaken by the particular Non-Executive Director concerned.

The detailed disclosure on named basis for the remuneration of individual Directors is set out in the Corporate Governance Report.

The Board as a whole determines the remuneration of the NEDs with the Directors concerned abstaining from deliberation and voting in respect of his own individual remuneration.

For the period from 1 January 2019 to 31 December 2019, a total Directors’ Fees of RM180,000 have been recommended to the shareholders for approval at the forthcoming Twenty-Third Annual General Meeting of the Company.

PRINCIPLE B: EFFECTIVE AUDIT AND RISK MANAGEMENT

I. Audit Committee (“AC”)

The composition and details of activities carried out by the AC during the financial year under review are set out in the AC Report of this Annual Report.

FINANCIAL REPORTING
(1) Compliance with Applicable Financial Reporting Standards

The Company’s audited financial statements are prepared in accordance with the requirements of the applicable approved accounting standards in Malaysia and the provisions of the Companies Act 2016 (“Act”).

The AC assist the Board to oversee the financial reporting process and the quality of its financial reporting by reviewing the information to be disclosed, to ensure completeness, accuracy and adequacy prior to endorsing the same to the Board for release to Bursa Securities.

The Board ensures that shareholders are presented with a clear, balanced, meaningful assessment of the Company’s financial performance and prospects through the issuance of the audited financial statements and quarterly announcements of financial results on a timely basis and in compliance with the applicable financial reporting standards.

(2) Assessment of Suitability and Independence of External Auditors

For the financial year ended 30 June 2018, the AC has assessed the external auditors vide an annual assessment of the suitability and independence of the external auditors.

Upon completion of its assessment, the AC was satisfied with Messrs. Baker Tilly Monteiro Heng’s technical competency and audit independence during the financial year.

The TOR of the AC has been amended on 30 August 2018 to be in line with the recent changes in the MCCG.

None of the members of the Board were former key audit partners and notwithstanding that in order to uphold the utmost independence, the Board has no intention to appoint any former key audit partner as a member of the Board.

II. Risk Management and Internal Control Framework
(1) Sound Framework to Manage Risks

The Board affirms the importance of maintaining a sound system of internal controls and risk management practices to good corporate governance. The AC has been entrusted by the Board to ensure effectiveness of the Group’s internal control systems. The activities of the outsourced Internal Auditors are reported regularly to the AC which provides the Board with the required assurance in relation to the adequacy and integrity of the Group’s internal control systems. It acknowledges its overall responsibility in this area and also the need to review its effectiveness regularly.

The Statement on Risk Management and Internal Control of the Group as set out in this Annual Report provides an overview of the state of risk management and internal controls within the Group.

(2) Internal Audit Function

The outsourced Internal Auditors communicate regularly with and report directly to the AC. The AC met up four (4) times with the Internal Auditors during the financial year ended 30 June 2018.

The Internal Audit Review of the Company’s operations encompasses an independent assessment of the Company’s compliance with its internal controls and makes recommendations for improvement.

For the financial year ended 30 June 2018, the AC has assessed the performance of Internal Auditors vide an annual assessment of the suitability of the Internal Auditors.

Upon completion of its assessment, the AC was satisfied with the outsourced Internal Auditor, Moore Stephens Associates PLT’s (“MSA”) technical competency and audit independence during the financial year under review.

PRINCIPLE C: INTEGRITY IN CORPORATE REPORTING AND MEANINGFUL RELATIONSHIP WITH STAKEHOLDERS

I. Communication with Stakeholders
(1) Leverage on Information Technology for Effective Dissemination of Information

The Company’s corporate website provides all relevant information of the Company and is accessible by the public. It includes the announcements made by the Company and annual reports. The Board discloses to the public all material information necessary for informed investment and takes reasonable steps to ensure that all shareholders enjoy equal access to such information.

The Company’s corporate website is accessible at www.petrolone.com.my.

The Board has adopted the following measures with regards to communication with the Company’s shareholders: -

(i) Announcements to Bursa Securities

Material information, updates and periodic financial reports are published on a timely basis through announcements to Bursa Securities.

Shareholders and investors can obtain the Company’s latest announcements such as quarterly financial in the dedicated website of Bursa Securities at http://www.bursamalaysia.com.my

(ii) Corporate Website

A corporate website (http://www.petrolone.com.my) is maintained and the said website contains relevant information for the shareholders, potential investors, suppliers and the general public.

(iii) Annual Reports

The Company’s Annual Reports to the shareholders remain the central means of communication to the shareholders, amongst others, the Company’s operations, activities and performance for the past financial year end as well as the status of compliance with applicable rules and regulations.

(iv) Annual General Meetings (“AGMs”)/General Meetings

The AGM/General Meetings which are used as the main forum of dialogue for shareholders to raise any issues pertaining to the Company.

(v) Investor Relations

Any enquiry regarding investor relations from the shareholders may be conveyed to the following designated senior management personnel, the information of which has also been published on the Company’s Corporate Website: -

Mr. Sim Seng Loong @ Tai Seng, Chief Financial Officer
Email address: sim.sl@petrolone.com.my;

Telephone No.: 03 – 2242 3933
Facsimile No: 03 – 2242 4155

As indicated in the Board Charter, the office of SINED has been identified as the designated contact point to whom concern may be raised, including but not limited to consultation and direct communication with the shareholders or other stakeholders on areas that cannot be resolved through the normal channels of contact with the Company, at the expense of the Company. The contact details of the SINED are as follows: -

The Senior Independent Non-Executive Chairman
Attention: Peter Thomas Phelan
Petrol One Resources Berhad
Unit 28-09, Level 28, Tower A,
Vertical Business Suite,
Avenue 3, Bangsar South City,
59200 Kuala Lumpur,
Wilayah Persekutuan.

Email address: peterphelan@petrolone.com.my
Contact No : 03-2242 3933

II. Conduct of General Meetings
(1) Shareholders’ Participation at General Meetings

The Company communicates regularly with shareholders and investors through annual reports, quarterly financial reports and various announcements made via Bursa LINK as the Board acknowledges the importance of accurate and timely dissemination of information to its shareholders, potential investors and the public in general.

An AGM provides an opportunity for the shareholders to seek and clarify any issues pertaining to the Group and to have a better understanding of the Group’s activities and performance. Both individuals and institutional shareholders are encouraged to meet and communicate with the Board at the AGM and to vote on all resolutions. The Board is always available to meet members of the press after the AGM.

The notice of AGM together with the Annual Report is despatched to shareholders at least twentyeight (28) days prior to the meeting date. Sufficient notice period is given to the shareholders in order for them to schedule their time to attend the Company’s AGM.

(2) Poll Voting

Paragraph 8.29A of the Main LR of Bursa Securities requires for poll voting for any resolution set out in the notice of general meetings and at the Twenty-Second AGM held last year, poll voting was used to facilitate the voting process for resolutions tabled. An independent scrutineer was also appointed to scrutinise the polling process.

KEY FOCUS AREAS AND FUTURE PRIORITIES

Looking ahead to financial year ending 2019 and 2020, the Board and its respective committees will: -

• Focus on major strategic issues to ensure sustainability and growth;

• Continue to monitor succession planning for the senior leadership team, to ensure a healthy pipeline of talent is emerging for future senior executive management;

• Consider other variety of approaches and independent sources to identify suitable candidate for appointment of Directors, should the need arise; and

• Continue to review the balance, experience & skills of the Board.

CONCLUSION

The Board is satisfied that for the financial year ended 30 June 2018, it complies substantially with the principles and recommendations of the MCCG.

This Corporate Governance Overview Statement is made in accordance with a resolution of the Board of Directors dated 31 October 2018.