GOVERNANCE

The Board Charter sets out the duties, functions, roles and responsibilities of the Directors in accordance with good corporate governance practice set out in policies, rules and regulations issued by the respective regulatory bodies.

Samchem's Board Charter

The Board has established the following Committees to assist the Board in discharging its duties and responsibilities effectively. There are three Board committees, namely Audit and Risk Management Committee, Nomination Committee, and Remuneration Committee.

• AUDIT AND RISK MANAGEMENT COMMITTEES
  Terms of Reference

• NOMINATION COMMITTEES

  The primary function of the Nomination Committee is to propose new nominees for the Board and to assess directors on an ongoing basis.

  As the existing Board members are professionals from diverse disciplines, the Board collectively undertakes to review the required skills sets annually to ensure that it has an optimal mix of expertise and experience.

  Terms of Reference

• REMUNERATION COMMITTEES

  The primary function is to set the policy framework for the remuneration of the directors to ensure that the policy on directors' are sufficient to attract and retain directors of the calibre needed to manage the Group successfully.

  The determination of remuneration of our Executive and Non-Executive Directors shall be a matter to be determined by our Board as a whole after taking into consideration the Remuneration Committee's recommendation.

  Terms of Reference

This Corporate Governance Overview Statement is presented pursuant to Paragraph 15.25(1) of the Main Market Listing Requirements ("MMLR") of Bursa Malaysia Securities Berhad ("Bursa Securities"). The objective of this statement is to provide an overview of the application of the corporate governance practices of the Group during the financial year ended 31 December 2017 with reference to Board Leadership and Effectiveness, Effective Audit and Risk Management and Integrity in Corporate Reporting and Meaningful Relationship with Stakeholders as set out in the latest Malaysian Code on Corporate Governance ("MCCG").

The Board has also provided specific disclosures on the application of each Practices in its Corporate Governance Report ("CG Report"). This CG Report was announced together with the Annual Report of the Company on 26 April 2018. Shareholders may obtain this CG Report by accessing this link [www.samchem.com.my] for further details and are advised to read this overview statement together with the CG Report.

Except for the practices for segregating the position of chairman and the chief executive, gender diversity policy and 28 days of notice AGM, the Board has in all material aspect complies with the Practices as set out in the MCCG. The explanation for the departed practices are reported in the announced CG Report in Practices 1.3, 4.5, and 12.1 respectively.

• Board Responsibilities

  The Board continues to ensure its effectiveness and to provide strong leadership to the Group and Management. In order to ensure that business is being properly managed, the Board is entrusted to overseeing the overall management of the business affairs of the Group and to perform periodic review of the financial results to overseeing the conduct of the business.

  The Board is mindful of the importance of the establishment of clear roles and responsibilities in discharging its fiduciary and leadership functions including those reserved for the Board's approval. The Board has defined its Board Charter and schedule of matter setting out the roles, duties and responsibilities of the Board, the principles and practices of corporate governance to be followed as well as the key matters reserved for the Board's approval. These Board Charter and Schedule of Matter were reviewed and published in the Company's website at www.samchem.com.my

  The Chairman is responsible for instilling good governance practices, leadership and effectiveness of the Board. Presently, the Board Chairman is also the Chief Executive of the Group. The combination of the roles of Chairman and Chief Executive enable the Executive Chairman to align the interest of the board, management and shareholders for maximising shareholders' wealth as well as to serve as an interface between board and management. As a safeguarding measure, half of the Board members are Independent Non-Executive Directors who are able to express objective and independent views in the interest of minority shareholders.

  The Board has established the Audit, Nomination and Remuneration Committees to assist the Board in discharging its duties and responsibilities effectively. The terms of reference of each Board Committee are set out in Board Charter. These Committees have the authority to examine particular issues and report to the Board with their recommendations. However, the ultimate responsibility for the final decision on all matters lies with the Board.

  The Board has established and published its Code of Conducts and Ethics and Whistleblowing policy in the Company's website at www.samchem.com.my. Internally, the Board will communicate the Code of Conducts and Ethics and Whistleblowing Policy to staff members through the Human Resource Department so that all staff members are clear on what is considered acceptable behaviour and practice in the Company and the policies and procedures on whistleblowing.

  The Board is assisted by two (2) qualified and competent Company Secretaries. Both Company Secretaries are members of Malaysian Institute of Chartered Secretaries and Administrators. The Company Secretaries advise the Board, particularly with regards to compliance with regulatory requirements, guidelines, legislations and the principles of best corporate governance practices. All Directors have unrestricted access to the advice and services of the Company Secretaries. The appointment and removal of Company Secretaries or Secretaries of the Board Committees can only be made by the Board.

  Further information of the roles and responsibilities carried out by the Company Secretaries during the financial year ended 31 December 2017 are set out in Practice 1.4 of the Company's CG Report.

  The Board understand that the supply, timeliness and quality of the information affect the effectiveness of the Board to oversee the conduct of business and to evaluate the Management's performance of the Group. The Board ensures that each Director is provided with timely notices. Board papers are issued prior to the Board meetings to enable the Directors to review and consider the agenda items to be discussed and where necessary, to obtain further explanations in order to be fully briefed before the meeting.

  All Board members have unrestricted access to timely and accurate information in furtherance their duties and subject to Board's approval may seek independent professional advice when necessary in discharging its various duties, at the Company's expense.

  The Company Secretaries ensure that all Board and Board Committees' meetings are properly convened. The Company Secretaries will ensure that accurate and proper records of the proceedings and resolutions passed are recorded and the minutes are circulated to the Board members as soon as possible before the next meetings.

  The underlying factors of directors' commitment to the Company are devotion of time and continuous improvement of knowledge and skill sets.

  The Board meets at least once every quarter and additional meetings are convened as and when necessary. During the Financial Year, six (6) Board meetings and a special meeting were held. The record of attendance is as follows:

  DIRECTORS	NUMBER OF MEETINGS ATTENDED BY DIRECTORS DURING THE TENURE IN OFFICE
  Ng Thin Poh	7 / 7
  Chooi Chok Khooi	7 / 7
  Cheong Chee Yun	7 / 7
  Dato' Theng Book	7 / 7
  Lok Kai Chun	7 / 7
  Ng Ai Rene	1 / 1

  Save for Dato' Theng Book and Mr. Cheong Chee Yun, none of the Directors hold directorship in other listed company.

  The Directors are aware of their duty to undergo appropriate training from time to time to ensure that they are equipped to carry out their duties effectively. The Board is mindful therefore of the need to keep abreast of changes in both the regulatory and business environments as well as with new developments within the industry in which the Group operates.

  During the financial year ended 31 December 2017, the external training programmes and seminars attended by the Director are as follows:

  	DIRECTORS	COURSES/SEMINAR/CONFERENCE
  1.	Ng Thin Poh	Briefing on updates of Companies Act 2016
  2.	Chooi Chok Khooi	Briefing on updates of Companies Act 2016
  3.	Cheong Chee Yun	Updates of the 2016 & 2017 MFRS – Preparing MFRS compliant Financial Statements 2016 & 2017 Preparation of Group Accounts – conducted by CPA Australia Briefing on updates of Companies Act 2016
  4.	Dato' Theng Book	Driving Financial Integrity and Performance – Enhancing Financial Literacy for Audit Committee Briefing on updates of Companies Act 2016
  4.	Lok Kai Chun	Briefing on updates of Companies Act 2016

• Board Composition

  The Board is satisfied with the current composition of the Board in providing a check and balance in the Board as well as diversity of perspectives and views in Board's decision-making process. Presently, the Board consists of Executive and Non-Executive Directors with a mixture of suitably qualified and experienced professionals. The Board comprises six (6) members, where half of the Board is Independent Non-Executive Directors. This is in line with Practice 4.1 of the MCCG where it requires non-large company to have at least half of the Board members comprises independent directors.

  Annually, the Nominating Committee would review the independence of the Independent Directors. Criteria for assessment of independence are based on the requirements and definition of "independent director" as set out in the MMLR. Each Independent Directors is required to confirm their independence by giving the Board a written confirmation of their independence. In addition, consideration would also be given to assess whether the independent directors are able to meet the minimum criteria of "fit and proper" test of Independence, which is part of an annual assessment test, as enumerated in the Policy on appointment and continuous assessment of Directors and the suitability and ability of the Independent non-Executive Director to perform his duties and responsibilities effectively shall be based on his calibre, qualifications, experience, expertise, personal qualities and knowledge of the Company and industry.

  In accordance to Board Charter, the maximum tenure of an independent non-executive Director shall not exceed the cumulative term of nine years from the date of first appointment as Director or upon the expiry of the on-going term of appointment as Director whichever is the later. Any extension beyond nine years will require Board justification and shareholder approval unless the said Director wishes to be re-designated as non-independent non-executive Director which shall be a consideration for the Board to decide.

  The Board does not have formal gender diversity policy presently. Nonetheless, the Board supports the gender diversity initiative and has a female Non-Executive Director in the Board.

  The 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 current diversity in the ethnicity, age distribution and skillsets of the existing Board is as follows:

  	RACE/ETHNICITY				NATIONALITY		GENDER
  	MALAY	CHINESE	INDIAN	OTHERS	MALAYSIAN	FOREIGN	MALE	FEMALE
  Number of Directors	-	6	-	-	6	-	5	1
  Top Three Senior Management	-	3	-	-	3	-	2	1
  AGE GROUP (YEARS)	30 - 39		40 - 49		50 - 59		60 - 69
  Number of Directors	1		-		2		3
  Top Three Senior Management	1		1		-		1
  SKILL	ACCOUNTING & FINANCE MANAGEMENT		CHEMISTRY		LEGAL/LAW		BUSINESS MANAGEMENT
  Number of Directors	1		1		2		2
  Top Three Senior Management	1		1		-		1

  The Nomination Committee is chaired by an Independent Non-Executive Director. The Nomination Committee considers recommendations from existing board members, management, major shareholders and third-party sources to identify suitably qualified candidates, when necessary before recommending to the Board for further deliberation.

  There is no restriction on the number of Directorships save as advised the limit of five (5) listed company Directorships by Bursa Malaysia under its Listing Requirements & Corporate Governance Guidelines. Board members are at liberty to accept other board appointments in other companies so long as the appointment is not in conflict of interest with the Company and does not affect his performance for the Company.

  Board members are required to notify the Chairman of the Board and/or Company Secretary before accepting new external Directorships and indicating the time that will be spent on the new Directorship.

  The Nomination Committee undertakes annual assessment to evaluate the performance of each individual Directors, the effectiveness of the Board and the Board Committees by way of self-assessment. Directors are required to fill out the self-assessment forms and provide their feedback, views and suggestions for improvement. The results of these selfassessment forms are compiled and tabled to the Nominating Committee for review and deliberation.

• Remuneration

  The remuneration of Directors will be formulated to be competitive and realistic with aims to attract, motivate and retain Directors with the relevant experience, expertise and quality needed to assist in managing the Company effectively. For Executive Directors, the remuneration packages link rewards to corporate and individual performance whilst for the Non- Executive Directors, the level of remuneration is linked to their experience and level of responsibilities undertaken. The level of remuneration for the Executive Directors is assessed by the Remuneration Committee after giving due consideration to the compensation levels for comparable positions among other similar Malaysian public listed companies.

  The determination of directors' remuneration is subject to Board's approval. The director concerned should abstain from discussing his/her own remuneration.

  Pursuant to Section 230(1) of the Companies Act, 2016, the fees of the directors and any benefits payable to the directors of a listed company and its subsidiaries shall be approved at a general meeting.

  The amount of Directors' fee and benefits for the new financial year proposed for the shareholders' approval at the forthcoming AGM is RM350,000.

  The details of remuneration paid or payable to the Directors for the Financial Year and top three Senior Management are disclosed in Practice 7.1 and 7.2 of Corporate Governance Report.

• Audit and Risk Management Committee

  The Board has established an effective and Audit and Risk Management Committee ("ARMC"). The ARMC members are financially literate and are able to understand matters under the purview of the ARMC including the financial reporting process. Presently, the members of ARMC comprising fully Independent Non-Executive Directors and the Chairman of the ARMC is not the Chairman of the board.

  When considering the appointment of former key audit partner from its current External Auditor's firm, the ARMC is mindful of the minimum two (2) years cooling off period best practice under the MCCG before appointing this partner as a member of the ARMC. The Board is satisfied that, with the present composition structure and practice, the ARMC is able to objectively review and report its findings and recommendations to the Board.

  The present External Auditors of the Company was engaged since the financial year 2013. Annually, the ARMC will review the appointment, performance and remuneration of the External Auditors before recommending them to the Board to approve the recommendation for seeking shareholders' approval at the forthcoming AGM for re-appointment. In assessing the External Auditors, the ARMC will consider the adequacy of resources of the firm, quality of service and competency of the staffs assigned to the audit as well as the auditors' independence and fee.

  The ARMC will convene meeting with the External Auditors and Internal Auditors without the presence of the Executive Directors and employees of the Group as and when necessary. As part of the ARMC review processes, the ARMC will also obtain assurance from the External Auditors confirming that they are, and have been, independent throughout the conduct of the audit engagement in accordance with the terms of all relevant professional and regulatory requirements.

• Risk Management and Internal Control

  The Board is responsible for the oversight of risk management through ARMC while the Executive Directors together with the senior management team are primary responsible for managing risks in the Group.

  Information of the Group's internal control and risk management is presented in the Statement on Risk Management and Internal Control set out on pages 17 to 18 of the Annual Report. The Board has also commented in the said statement that they are satisfied with the effectiveness and adequacy the existing level of systems of risk management and internal control.

  Going forward, the Board will implement the enhanced formal risk management framework defining its risk policy and risk appetite as well as revisiting the risk assessment and risk mitigation plan in 2018.

  The Internal Audit Function is carried out by IA Essential Sdn. Bhd. ("IA Essential") an internal audit consulting firm. The internal audit function is headed by a Director who is assisted by a manager and supported by an audit executive. The Director in charge is a qualified accountant while the rest of the team members are accounting graduates from local universities. The Internal Auditors have performed its work with reference to the principles of the International Professional Practice Framework of Institute of Internal Auditors covering the conduct of the audit planning, execution, documentations, communication of findings and consultation with key stakeholders. The ARMC will review the engagement between the Group and IA Essential to ensure that the Internal Auditors' objectivity and independence are not impaired or affected.

• Communication with Stakeholders

  The Board maintains an effective communications policy that enables both the Board and the management to communicate effectively with its shareholders, stakeholders and the public. The policy effectively interprets the operations of the Group to the shareholders and accommodates feedback from shareholders, which are factored into the Group's business decision.

  The Board communicates information on the operations, activities and performance of the Group to the shareholders, stakeholders and the public through the following:

  • the Annual Report, which contains the financial and operational review of the Group's business, corporate information, financial statements, and information on ARMC and Board of Directors;
  • various announcements made to the Bursa Securities, which include announcements on quarterly results;
  • the Company website at www.samchem.com.my;
  • meetings with research analysts and fund managers if required to give them a better understanding of the business conducted by the Group in particular, and of the industry in which the Group's business operates, in general; and
  • participation in surveys and research conducted by professional organisations as and when such requests arise.

  Shareholders and investors are also encouraged to interact and feedback to the Chairman for opinions or concerns. Separately, the Company has also reported its Sustainability Statement on page 16 of this Annual Report covering the aspects of governance, environment and social responsibility for stakeholders' reference.

• Conduct of General Meetings

  The Annual General Meeting serves as an important means for shareholders communication. Presently, the notice of the Annual General Meeting and Annual Reports are sent to shareholders 21 days prior to the meeting in accordance to the Company's Constitution and the provision in the Companies Act 2016. The Board will change the present AGM's notice period to 28 Days in the Company's Constitution next year. Thereafter, the Board will provide notice of Annual General Meeting together with the Annual Report to shareholders 28 days prior to the meeting.

  At each Annual General Meeting, the Board presents the progress and performance of the Group's business and encourages participation of shareholders during questions and answers sessions. The Chairman and the Board will respond to all questions raised by the shareholders during the Annual General Meeting.

  Shareholders who are unable to attend the AGM are advised that they can appoint proxies to attend and vote on their behalf.

  Explanation for each proposed resolution set out in the Notice of AGM will be provided, if needed during AGM to assist shareholders in making their decisions and exercising their voting rights. In line with Paragraph 8.29A(1) of the MMLR, all resolutions set out in the Notice of AGM will be put to vote by poll. The Company will also appoint an independent scrutineer to validate the vote cast in the AGM. The outcome of the AGM will be announced to Bursa Securities on the same meeting day while the summary of key matters discussed during the AGM will be posted on the Company website.

  This Statement is made in accordance with the approval and resolution of the Board of Directors.

Any parties including our employees, suppliers, vendors, associated stakeholders and the customers are expected to report should there be a reasonable basis for your concern and that the information provided are substantially true. In addition, you must also make the disclosure in good faith and ensure that the disclosure is not for personal gain or motivated by ill intention.

Samchem commits to ensure that all disclosed information, including the identity of the complainant shall be treated with strictest confidence. Any party that retaliates against someone who has reported a wrongdoing in good faith may be subject to appropriate action, up to and including legal action, where applicable.