Hibiscus Petroleum : Corporate Governance Report;

CORPORATE GOVERNANCE REPORT

STOCK CODE	:	5199
COMPANY NAME	:	Hibiscus Petroleum Berhad
FINANCIAL YEAR	:	June 30, 2022

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.

1

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	:	The Board of Hibiscus Petroleum Berhad (Board) is committed to high
application of the		standards of business integrity, ethics and professionalism; and strives
practice		to ensure it is practiced at Hibiscus Petroleum Berhad (Hibiscus
		Petroleum or Company) and its subsidiaries' (collectively, Group) as a
		fundamental part of discharging its responsibilities to protect and
		enhance shareholder value. At Hibiscus Petroleum, good corporate
		governance is imperative to ensure sustainable long‐term performance
		and growth, as well as maximise returns for our shareholders.
		Our Board sets the tone at the top by embodying our corporate values
		of tenacity, being environmentally responsible, trustworthy, agile and
		people focused, and such core values guide our every action.
		As a result of the Board's strong commitment to the principles of good
		corporate governance, for the latest review conducted in the calendar
		year 2022, the Company continued to maintain its constituency on the
		FTSE4Good Bursa Malaysia (F4GBM) Index, which was first attained in
		December 2020, evidencing recognition of our good Environmental,
		Social and Governance (ESG) practices. The Company has also retained
		its highest rating of 4 stars from FTSE Russell which placed us in the top
		25% by ESG ratings amongst public listed companies in the FBM EMAS
		Index, in addition to preserving our position in the FTSE4Good Bursa
		Malaysia Shariah Index.
		Furthermore, Hibiscus Petroleum continues to maintain its Green Lane
		Policy (GLP) status accorded by Bursa Malaysia Securities Berhad (Bursa
		Securities) which was first awarded in December 2019. The privileges of
		this inclusion include certain exemptions which allow for the issuance
		of "non‐complex" circulars (without pre‐vetting) by Bursa Securities and
		fast‐track processing of more "complex" circulars which do not fall
		within the parameters of the exemptions provided.

2

Our Board has established the Corporate Governance (CG) structure which sets out our framework, processes and lines of authority that govern how our Group's businesses are directed, managed and controlled, thereby delivering value to our stakeholders while ensuring compliance with the applicable laws, rules and regulations, our Company's Constitution and adherence to good CG practices. Our CG Overview Statement can be found on pages 104 to 111 of our Annual Report 2021/2022.

In discharging its duties and roles effectively, our Board is also guided by its Board Charter, which sets out the principles and guidelines that are to be applied by the Board. Our Board has delegated certain functions to its Board Committees, namely :

1. Audit and Risk Management Committee (ARMC);
2. Nominating Committee (NC); and
3. Remuneration Committee (RC).

The delegations of powers to our Board Committees, our Managing Director (MD) and the Leadership Team are set out in the Terms of Reference of the respective Board Committees and complemented by the Limits of Authority (LOA) which clearly delineates relevant matters and applicable limits, including those reserved for the Board's approval.

Key Focus Areas of our Board in FY2022:

	Strategy	The Board reviewed the Group's vision and
		mission, the proposed path forward and
		updating our Group corporate values as part of
		the 2022 Business Plan process over the course
		of the first half of FY2022, prior to approving the
		same in February 2022. The Board determined
		that the long‐term Business Plan can deliver
		material value to the Group in addition to
		generating the necessary cashflows.
		Whilst reviewing the Business Plan, the Board
		considered the following stakeholders:
		‐	Shareholders: The Group's ability to generate
			cashflows and provide returns to shareholders
			through dividends.
		‐	Host countries: The long‐term Business Plan is
			expected to deliver production growth and
			deliver significant value for Hibiscus
			Petroleum's host countries. It also reconfirms
			the Group's commitment to further develop
			and unlock value from its core assets and
			deliver shared prosperity to our host nations in
			the process of growing a responsible energy
			company. We continue to use our resources,
			founded on upstream oil and gas assets and
			3

expertise, to optimally build a sustainable business in line with the Group's aspiration to become a net zero emissions producer by 2050.

• Employees: By creating long‐term value for the Group, exciting professional opportunities and career development would be available for employees.

Our Board is highly involved in the end‐to‐end process of strategic planning, where its key role is to review and challenge the overall strategic plan prepared by our MD and Leadership Team, and to provide various inputs and insights to strive towards achieving optimum benefits for our Group and stakeholders. The implementation and execution of the approved strategies are closely monitored during the course of the financial year.

Pursuant to the above, the new mission and vision of the Group, the 2022 Group Scorecard and Key Performance Indicators (KPIs) were rolled‐out. The Group Scorecard is a means of regularly monitoring business performance and serves as the basis for determining the annual bonus for our employees, including the MD.

4

Monitoring	Post Board approval, the implementation and
Performance	progress of the key strategies are monitored
	through a structured process to ensure a holistic
	and disciplined review, decision‐making and
	reporting process so that key projects are
	delivered in a timely manner.
	The agenda of our Board meetings focus on the
	review of strategic, operational and financial
	performance, and other matters requiring our
	Board's attention and/or approval. Updates are
	provided by the Chair of the respective Board
	Committees on its deliberations, key findings,
	and recommendations. Our MD and the relevant
	Management Team attended our Board and/or
	Board Committee meetings.
	As part of its oversight of responsibilities, our
	Board approved the annual Group Scorecard
	which set out the KPIs (comprising both financial
	and non‐financial) with the appropriate and
	balance weightages:
	(a) Financials	KPIs including Earnings	Before
	Interest,	Taxes,	Depreciation,	and
	Amortisation (EBITDA); and
	(b) Non‐financial KPIs including Production,
	Health, Safety, Security and Environment
	(HSSE) and Project Milestones KPIs.

The Board had also undertaken a robust assessment of the Group's emerging and principal risks, including those that could threaten its business model, future performance, solvency, liquidity and reputation.

Our Board, through the ARMC, reviews our Group's risk profile against risk tolerance thresholds on a quarterly basis. The Executive Risk Management Committee (ERMC) tables our Group's Key Risk Profile and risk mitigation strategies at the ARMC meetings.

The ARMC held nine (9) meetings in FY2022 to review matters under its purview, including the quarterly financial reports, audited financial statements, external auditors' report, risk management reports as well as the status of preparedness arising from the anti‐corruption risk assessment conducted.

5