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KPJ Healthcare Berhad

A leader in Malaysia's challenging healthcare services industry

TOR Nomination & Remuneration Committee

I. PURPOSE

The NRC has been established primarily for the following purposes:

a) Nomination

  • To identify and recommend candidates for Board directorship;
  • To recommend Directors to fill the seats on Board Committees, taking into consideration the diversity of these Committees;
  • To evaluate the effectiveness of the Board and Board Committees (including the size and composition) and contributions of each individual Director;
  • To ensure an appropriate framework and plan for Board succession;
  • and
  • To assess the performance quality of individual directors and ensure training needs are addressed.

b) Remuneration

  • To provide assistance to the Board in determining the remuneration of the President & Managing Director as well as Senior Management. In fulfilling these responsibilities,the NRC is to ensure that the President & Managing Director and applicable Senior Management of the Company are:

- Fairly rewarded for their individual contribution to overall performance;

- Compensated reasonably in light of the Company's achievements; and

- Compensated similar to other companies.

c) Performance Setting & Assessment

• To establish the President & Managing Director's goals and objectives; and

• To review the President & Managing Director's performance against the goals and objectives set.

ii. MEMBERSHIP

The appointment of an NRC member terminates when the member ceases to be a Director of the Company. The NRC does not have executive powers. In the event of

equality of votes, the Chairman of the NRC shall have a casting vote. In the absence of the Chairman of the NRC, the members present shall elect one of their members to

chair the meeting.

The Board believes that the current composition of NRC is capable of acting collectively in the best overall interests of shareholders with reference to nomination and remuneration of Board members.

iii. MEETINGS

The NRC meets at least once a year, with additional meetings scheduled as and when necessary. The NRC has established procedures to govern its meetings, keeping of minutes and its administration.

The NRC has access to such information and advice, both from within the Group and externally, as it deems necessary or appropriate in accordance with the procedures determined by the Board. The NRC may request other Directors, members of management, counsels and consultants to participate in NRC meetings as necessary, to carry out the NRC's responsibilities.

Non-NRC Directors and members of management in attendance may be required by the Chairperson to leave the meeting of the NRC when so requested.

The secretary of the NRC is the Company Secretary. Setting the agenda for NRC meeting is the responsibility of the NRC Chairman, with inputs from the NRC members. The NRC Chairman may also request for management to participate in this process. The agenda of each meeting, including supporting information, are circulated to the NRC members in advance to enable them to have sufficient time to assess and evaluate prior to each meeting. The NRC, through its Chairman, reports to the Board at the next Board of Directors' meeting after the NRC meeting.

The Chairman of the NRC shall be available to answer questions about the NRC matters at the Annual General Meeting ("AGM") of the Company.

IV. SCOPE OF ACTIVITIES

The duties of the NRC shall include the following:

a) Nomination

  • To determine the criteria for Board membership, including qualities, experience, skills, education and other factors that will best qualify a nominee to serve on the Board;
  • To review annually and recommend to the Board the structure, size, balance and composition of the Board and Committees, including the required mix of skills and experience, core competencies which Non-Executive Directors should bring to the Board and other qualities to function effectively and efficiently;
  • To consider, evaluate and propose to the Board any new Board appointments, whether Executive or Non-Executive position. In making a recommendation to the Board on the candidate for directorship, the NRC shall have regard to:

- Size, composition, mix of skills, experience, competencies and other qualities of the existing Board, level of commitment, resources and time that the recommended candidate can contribute to the existing Board;

- Non-Executive Directors should be persons of calibre, credibility and have the necessary skills and experience to bring an independent judgement to bear on issues considered by the Board and that Independent Non-Executive Directors should make up at least one-third of the membership of the Board; and

- Boardroom diversity by ensuring that women candidates are sought as part of its recruitment exercises.

  • To propose to the Board the responsibilities of Non-Executive Directors, including membership and Chairmanship of Board Committees;
  • To evaluate and recommend the appointment of senior executive positions, including that of the Managing Director, their duties and the continuation (or not) of their service;
  • To establish and implement processes for assessing the effectiveness of the Board as a whole, the Committees of the Board and for assessing the contribution of each Director;
  • To evaluate on an annual basis:

- The effectiveness of each Director's ability to contribute to the effectiveness of the Board and the relevant Board Committees, in addition to providing the necessary feedback to the Directors in respect of their performance;

- The effectiveness of the Committees of the Board; and

- The effectiveness of the Board as a whole.

  • To recommend to the Board:

- Whether Directors who are retiring by rotation should be put forward for re-election; and

- Termination of membership of individual Directors in accordance with policy

  • To establish appropriate succession plans at Board level, and if appropriate, at senior management level;
  • To provide for adequate training and orientation of new Directors with respect to the business, structure and management of the Group as well as the expectations of the Board with regard to their contributions to the Board and Company;
  • To consider other matters as referred to the NRC by the Board.

b) Remuneration

  • To establish and recommend the remuneration structure and policy for Directors and key executives, if applicable, and to review changes to the policy as necessary.
  • To ensure that a strong link is maintained between the level of remuneration and individual performance against agreed targets, the performance-related elements of remuneration setting forming a significant proportion of the total remuneration package of Executive Directors.
  • To review and recommend the entire individual remuneration package for each of the Executive Director and, as appropriate, other senior Executives, including the terms of employment or contract of employment/service; any benefit, pension or incentive scheme entitlement; any other bonuses, fees and expenses; and any compensation payable on the termination of the service contract.
  • To review with the President & Managing Director, his/her goals and objectives and to assess his/her performance against these objectives as well as contribution to the corporate strategy.
  • To review the performance standards for key Executives to be used in implementing the Group’s compensation programmes where appropriate.
  • To consider and approve compensation commitments/severance payments for Executive Directors and key Executives, where appropriate, in the event of early termination of the employment/service contract.
  • To consider other matters as referred to the NRC by the Board.

Remuneration policies and procedures

The Board believes that the levels of remuneration offered by the Group are sufficient to attract Directors of calibre as well as sufficient experience and talent to contribute to the performance of the Group. The remuneration framework for the President & Managing Director has the underlying objective of attracting and retaining an Executive Director needed to manage the Company successfully. The remuneration package of the President & Managing Director is structured to commensurate with the achievement of corporate targets set by the Board and his individual performance. The Non- Executive Directors are remunerated based on fixed annual fees approved by the shareholders of the Company.

Recruitment Process and Annual Assessment

The Board is responsible to the shareholders. All Directors appointed during the financial year retire at the AGM of the Company in the period of appointment and are eligible for re-election. In compliance with Paragraph 7.26(2) of the Listing Requirements, all Directors shall retire at least once every three (3) years.

The Company has in place a formal and transparent procedure on the appointment of new Directors. All nominees to the Board are first considered by the NRC, taking into account the mix of skills, competencies, experience and other qualities required to oversee a highly-regulated healthcare business, before they are recommended to the Board.

While the Board is responsible for the appointment of new Directors, the NRC is delegated to the role of screening and conducting an initial selection, which includes an external search, before making a recommendation to the Board. The NRC evaluates the nominees' ability to discharge their duties and responsibilities before recommending their appointment as Directors to the Board for approval.

Board Performance Evaluation

The effectiveness of the Board is vital to the success of the Group. For that reason, a large portion of the Board Policy Manual is devoted to explaining and outlining the format and procedure for evaluating Board Members performance. The availability of the structured format for Board Members evaluation assists the members in discharging their duties effectively and efficiently.

The Board, through the NRC, undertakes a rigorous evaluation each year in order to assess how well the Board, its Committees, the Directors and the Chairman are performing, including assessing the independence of Independent Directors, taking into account the individual Director's capability to exercise independent judgement at all times. The evaluation covers the Board's composition, skills mix, experience, communication, roles and responsibilities, effectiveness as well as conduct. All Directors complete a questionnaire regarding the Board and Committees' processes, their effectiveness and where improvements may be considered. The process also includes a peer review in which Directors assess their fellow Directors' performance against a set criteria, including the skills they bring to the Group and the contribution they make. The Company Secretary reports the outcome of the evaluation exercise to the NRC and then to the Board for notation.

Following the performance evaluation process for 2016 which was conducted in February 2017, the Board has concluded that the Board and its Committees operate effectively. Additionally, the Chairman is satisfied that each Director continues to make an effective contribution to the work of the Board, is well prepared and informed concerning matters to be considered by the Board, has a good understanding of the Group's business and their commitment to the role remains strong.