KUALA LUMPUR KEPONG BERHAD

(Company No. 15043-V)

28 October 2016

ACTION PLAN ARISING FROM LABOUR AUDIT BY VERITE

ON KLK’S OPERATING CENTRES IN EAST KALIMANTAN

Background

In August 2015, KLK commissioned Verite, an international non-profit Labour Auditor, to undertake
a voluntary labour audit of estates managed by subsidiary companies in East Kalimantan (“Kaltim”)
namely PT. Jabontara Eka Karsa, PT. Malindomas Perkebunan, PT. Hutan Hijau Mas and PT. Satu
Sembilan Delapan.

Verite visited the Kaltim operating centres on two separate occasions i.e. August 2015 and February
2016 respectively. Verite’s scope of assessment included Group’s labour practices (with emphasis
on social compliance) and working environment. Interviews were also conducted with 155
employees (from different levels of employees including Management).

The audit was undertaken as part of KLK’s continuous self-improvement programme in view that the
Plantations Group is operating in vast areas of Indonesia. The gaps in the implementation of its
Sustainability Policy and potential risks highlighted in the reports will serve as a guide in the Group’s
overall enhancement programme. The focus for the immediate future would be to standardise the
practices across KLK’s Indonesia’s operating centres and where applicable, to roll out the action
plan simultaneously. A substantial amount of the gaps highlighted in the report have been bridged
and others are work-in-progress stages.

Matters Highlighted & Action Plan

The action plan and recommendations stated below focus on pertinent matters raised by Verite and
mitigation of potential risks of non-conformance. Adoption of recommendations where applicable,
are as follows.

No. Matter Highlighted and Response by KLK and Action Plan Status and Timeline
Recommendation by Verite
1. Claim of employee  The Senior Management had carried out an internal This is a continuous process
coaching for interview (in investigation on the matter and noted that there could be which we had started back in
first session held in some form of unintentional coaching with no ill intent to April 2016.
August 2015) misled or misrepresent. 
 KLK is aware that coaching would not serve any purpose for
our objective to reach our goal of ensuring KLK remains one
of the employers of choice.
 Information in the fact sheet or written script merely
emphasises employees’ rights and benefits.
 There was definitely no element of threat, intimidation or
reprisal action to be taken against the employees should
they fail to answer any of Verite’s questions.
 The identities of the employees interviewed remained
anonymous to Management till today.

Action Plan
 Undertake continuous training for management on the
ground to instil the awareness and remind them of all
employees rights.
 This would enable them to also impart the knowledge with
those on the ground.
 KUALA LUMPUR KEPONG BERHAD
- Action Plan to Bridge Gaps in Labour Audit
No. Matter
Develop Grievance
Procedure and Harassment
and Abuse Policy
2. Intervention / Interference by
site managers during
interviews (during first
session held in August
2015)
Legend
 Completed
 In Progress
3. Labour and Compensation
(a) Workers’ awareness
 Improve awareness on
Sustainability Policy and
plantations procedures
through refresher training
programmes by giving
written policies, procedures
 To formulate mechanism to
gauge effectiveness
2
Response by KLK and Action Plan Status and Timeline
Remedial/Action Plan Implemented in July 2016 (and
 A more robust grievance mechanism was introduced and continuous training programme
explained to the employees. This included the setting up infused to ensure the grievance
of a phone Hotline (in addition to the existing avenues mechanism is well understood
through the grievance logbook, to their immediate and not abused.)
supervisor and gender committee). 
 From the time the phone Hotline was introduced (at estate
levels), there were no reports or grievances made on
mistreatment of employees.
 The grievance procedures also included the following:
- Definition of grievances;
- Types of grievances;
- Channels of raising grievances;
- Protection of employees against reprisal;
- Training of personnel handling grievances;
- Annual review & evaluation.
Note:
Events after audit in August 2015 and meeting with Verite in
January 2016:
- KLK thanked all employees for their assistance during
the audit and continued to reassure them (and Verite)
that there will be no reprisal against those that had
lodged complaints or grievances.
- Verite continued its audit for the remaining two operating
centres in February 2016 and no element of coaching
was detected at these centres.
(Photos – Procedures and Channels to Report Grievances)
 Verite had claimed that site managers intervene at times Immediate action – no
and gave conflicting information during interviews with intervention for second audit
local site staff. However, KLK wish to clarify that the on pursuant to assurance given by
and off intervention took place to close the Verite to have more qualified
communication/language gap. It was never the intention translators at site.
to provide answers on behalf of the interviewees. 
 Management of KLK gave assurance that such
interference would not occur provided that Management
is assured that there will be adequate qualified translators
during the interviews, which Verite agreed to.
Conclusion:
More qualified translators were made available during the
second visit in February 2016 and Management was not
present in any of the interviews held.
KLK’s Sustainability Policy was introduced mid-December Target implementation across all
2014. The ‘sosialisasi’ programmes were rolled out in each operating centres in Indonesia by
of the operating centres beginning in February 2015. It December 2016.
should be noted that understanding the requirements, 
expectations and commitments stated in the Sustainability
Policy would require some time, taking into account the level
of education of workers.
Pursuant to Verite’s audit, a more structure training
programme has been formulated – written copy of policies
given to employees and also made available in office
premises.
 KUALA LUMPUR KEPONG BERHAD
- Action Plan to Bridge Gaps in Labour Audit
No. Matter
 Enhanced disclosure
pertaining to computation of
wages, benefit and
deductions
 Workers able to understand
and compute own wages
(b) Facility Records and
Documentation
 Ensure employees
themselves sign the
employment agreement to
avoid any forgery of
signatures
(c) Child Labour
 No child labour detected.
 Recommended to develop
and implement stricter age
verification procedures, e.g.
requiring a review of school
certificates in addition to
existing measures being
implemented.
(d) Freedom of Association
 Ensure union is independent
of management
 Guarantee workers’ right to
freedom of association
(e) Work Hours
 Review work hours policy to
include master roll call as
part of working hours
 Ensure overtime within legal
limit and employees provided
with at least one day off in
every seven days
3
Response by KLK and Action Plan Status and Timeline
Going forward, Q&A sessions will be used after training to
ensure that all employees (old and new) understand the
objectives of the commitments stated in KLK’s Sustainability
Policy and all the procedures are adhered to. This would
provide an indication on the effectiveness of the training
programme.
(Photos –
(i) “Sosialisasi” sessions with employees on Sustainability
Policy;
(ii) Sustainability Policy training material; and
(iii) New employees’ orientation material)
On matters relating to enhance disclosures of wage To be implemented across all
computation to workers, the recommendations will be operating centres in Indonesia by
adopted. January 2017

 To avoid forgery, KLK currently uses manual thumb print To be implemented across all
instead of signatures. operating centres in Indonesia by
 KLK will enhance its Indonesian IT system to introduce the March 2017
electronic Card System especially for contract workers 
and biometrics thumb print for all employees.
 The Employee Handbook (Peraturan Perusahaan) and
Employment Contract will also be made available on the
office notice board for workers’ reference and ease of
accessibility. This is to enhance transparency in
employment contracts and benefits.
Henceforth, KLK’s policy will be to recruit workers of 18
years old and above, as indicated in their Kartu Tanda April 2016 - Implemented across
Penduduk (KTP) or identification document. all operating centres in Indonesia

As for including school certificates, it will be implemented
where applicable as many of the potential candidates are
illiterate or do not have the certificates.
 The management will only facilitate on how to set up the Ceased provision of guidance
workers’ union and no guidance will be provided. from February 2016.
 Management, consistent with the statement in KLK’s 
Sustainability Policy will continue to respect employees’
rights to form trade unions if they desire so, subject to the
requirement of the law.
All working hours have been standardised and master roll June 2016 – Implemented across
call period will form part of the working hours. all operating centres in Indonesia

Management noted that there are occasions, particularly Already in the process of
during peak crop period, certain employees in palm oil mills implementation and to be fully
may work more than the regulated limit of 60 hours per week practiced across all operating
without a rest day in seven due to nature of work. Pursuant centres in Indonesia by
to the finding, we will ensure that all employees have a day December 2016.
of rest in seven. 
Management is also reviewing the overtime policy especially The full review for overtime policy
for peak crop period. The review is still on-going, as it is is expected to be completed by
dependent on the peak crop season expected to take place 1QFY17.
in later part of the year. 
 KUALA LUMPUR KEPONG BERHAD
- Action Plan to Bridge Gaps in Labour Audit 4

No. Matter Response by KLK and Action Plan Status and Timeline
(f) Production Quotas
 To ensure reasonableness of Production quotas (minimum harvested bunches) were set Completed
production quotas as basis of based on industry practice. We have carried out exercises 
wage tabulation with the presence of workers’ representative and have
mutually concluded and agreed that the quotas are
reasonable and achievable within the normal working hours.
Incentives are then paid to those who exceed the quotas.

4. Health & Safety (“OSH”)

KLK takes the safety and welfare of its employees seriously. All the shortcomings and Immediate action taken.
deficiencies in OSH related matters have been immediately addressed. Major deficiencies
found at the old line sites (housing areas) will be replaced with new line sites within the next 2 OSH officers have and will
years. OSH officers will have regular checks/audit on the matters on a monthly basis. continue to conduct monthly
checks and audit on the OSH
Examples of training for: related matters to ensure safety
(i) Fire Drills of workers.
- The fire response teams of the respective operating centres have conducted fire drills
at least twice a year in line with the internal SOP No. 29 on Emergency Response to
Fire Outbreaks.

(Photos –
a) Firefighting training manual;
b) Fire drills in mills)

(ii) Personal Protection Equipment (“PPE”)

- Daily safety briefing and monthly inspection on usage of PPE have been conducted.
Employees are also made aware of the actions to be taken on those who did not
comply.

(Photos – Safety briefing materials for:

a) SOP for Harvester;
b) SOP for Sprayer;
c) SOP for Field preparation)

KLK is preparing these centres in Kaltim en-route for ISPO and RSPO certifications by 2017.
KLK will continue to implement and undertake self-assessments to see the effectiveness of
the programmes introduced. KLK commits to update stakeholders on the matters which have
yet to be implemented, as indicated above, in its periodic Sustainability Policy progress report.

We appreciate Verite’s recommendations and will take on them for implementation, where
relevant, as we continue in our journey of improvement. A summary by Verite compiling all
four reports of the operating centres is attached herewith for reference.

For further information, please contact:

Lim Poh Poh

Investor Relations & Corporate Communications
Tel : +605 240 8000
Email : pp.lim@klk.com.my