Sime Darby : Corporate Governance Report 2023

CORPORATE GOVERNANCE REPORT

STOCK CODE	:	4197
COMPANY NAME	:	Sime Darby Berhad
FINANCIAL YEAR	:	June 30, 2023

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.

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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 Sime Darby Berhad ("Sime Darby") Board of Directors' ("Board")
application of the		primary role is to protect and enhance the interest of the shareholders
practice		and stakeholders whilst enabling the Sime Darby Group to achieve long
		term profitability and sustainability. The Board strives to ensure that
		the highest standards of corporate governance is practiced throughout
		the Group by enforcing good standards of accountability, all with a view
		to enable Management to execute its duties effectively. The Board in
		discharging its fiduciary responsibilities to oversee the overall
		Management has undertaken the following:
		Reviewing and adopting a strategic plan for the Group;
		The Board plays a key and active role in the formulation and
		development of the strategic plan by bringing objectivity, commercial
		experience and breadth of judgment to ensure that the strategic plan
		for the Group supports long-term value creation. The plan also
		considers economic, environmental, safety & health, social, political
		and governance initiatives underpinning sustainability.
		The Board reviews, guides, provides input and monitors the Group's
		strategic plan which includes addressing the Group's business strategies
		on growth, operations, cost management, sustainability and setting of
		financial goals. The Group's sustainability efforts encompass
		environmental sustainability, sustainable partnerships, employee
		engagement and technology & innovation.
		The active role and commitment undertaken by the Board in the
		development of Company's strategies and execution of the business
		plan is detailed as follows:
		(a) Before the start of the new financial year, a strategy retreat with
		Senior Management and Board members is scheduled to

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deliberate on the Group's 5-Year Strategy Blueprint and Budget for implementation in the forthcoming year.

This year, the Strategy Retreat was conducted physically and fostered robust and strategic discussions between the Board and Management, which was important as Management unveiled the Group's Next 5 Year Strategy Blueprint (Financial Year ("FY") 2024 to FY2028) for approval.

1. The retreat is a challenge session attended by Management and the Board to:
2. • Provide input and guidance on the strategies to be developed, bearing in mind the current and future operating landscape;
   • test Management's assumptions of their respective forecasts;
   • advise on challenges that they may encounter next year as well as develop strategies to overcome such challenges;
   • consider the economic and market forecasts for the coming years along with the proposed risk appetite to ensure that the strategies are robust and within acceptable boundaries;
   • evaluate the proposed capital and operational expenditures, and human resource requirements of each division and ensure that Management would have sufficient resources to execute their respective strategies.
3. Key subject matter experts (economists, management consultants, investment bankers, research analysts, venture capitalists) were invited to provide their views on market conditions, key trends and future disruptions that will impact our core businesses.
4. Management will take in the comments, suggestions and guidance from the Board and incorporate them into the final Strategy Blueprint and Budget.
5. Thereafter, in the beginning of the new financial year, the Board will review and approve the Group's 5 Year Strategy Blueprint and
   Budget for annual implementation.
6. Once the Group Business Plan and Strategy have been approved for execution by Management, the financial performance and progress of strategies employed by each sector are then monitored and supervised by the Board.

Overseeing the conduct and managing performance of the Group's businesses;

The Board oversees the conduct of the Group's businesses, including the execution of strategic plans, achievement of performance objectives against approved budgets and targets, governance

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framework, risk management practices and human capital management.

The Board also supervises and assesses the performance of Management to determine whether the businesses are being properly managed and ensures that appropriate measures are in place against which Management's performance can be assessed. It also evaluates and ensures that its businesses are being managed according to "best- in-class" practices as benchmarked against world class multinational companies. Compliance is monitored with established policies and procedures.

The Board's responsibilities also include reviewing, evaluating and approving investment and capital expenditure proposals by Management and monitoring the implementation of the strategic plan by Management. The Board will deliberate on all proposals presented and recommended by Management, including those proposed by its Board Committees to ensure they are commercially viable and meet the requisite target returns.

The Board has also approved a Capital Allocation Framework that guides investment decisions in terms of business areas, geographical focus and target returns.

Promoting corporate governance culture within the Group;

The Board continues to promote good corporate governance culture, whereby the Group has put in place measures to guide its employees and partners in adhering to all applicable policies, procedures, laws, and regulations of the countries in which the Group operates in, including but not limited to: the Anti-Trust/Competition Laws, Environmental Laws and Regulations, Employment/Labour Laws and Policies, Compliance with Securities Laws and Anti-Bribery and Corruption Policies, Anti-Money Laundering and Anti-Terrorism Financing Policy.

Further, the Sime Darby Code of Business Conduct ("COBC") provides guidance on the standards of behaviour expected of all directors and employees of the Group, and where applicable, counterparts and business partners.

Identifying principal risks that applies to the Group and ensuring adequate process to address the risk;

The Board and Management are responsible and accountable for the establishment of the Group's system of risk management and internal control. The Risk Management Committee ("RMC") is established as a committee of the Board and is primarily responsible for assisting the Board in assessing and anticipating the potential risks to the business, developing and overseeing the risks management framework and policies within the Group, review the efficacy of internal controls within the Group and determine the Group's overall risk appetite and level of risk tolerance. In February 2023, the RMC was renamed to the 'Risk Management and Sustainability Committee 'RMSC'' to reflect the

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RMSC's oversight of the sustainability agenda, strategy and other economic, environmental and social risks. The RMSC's Terms of Reference ("TOR") were updated to include responsibility for the Group's sustainability focus.

The RMSC is primarily responsible for overseeing the risks management and sustainability frameworks and policies within the Group and review of the efficacy of internal controls across the Group. The Committee assists the Board in discharging its main responsibilities of identifying principal risks and key trends and deliberating strategic action plans to mitigate the impact of such risks in addition to monitoring the effectiveness of the sustainability strategy across the Group.

The Chairman of the RMSC shall report and update the Board on significant issues and concerns discussed and where appropriate, make the necessary recommendations to the Board.

In discharging its responsibilities, the RMSC is assisted functionally by both GRC and Group Safety and Sustainability.

This year, the Group extablished the Investment Committee ("IC") of the Board which has the objective of reviewing major business proposals which include mergers and acquisitions, new partnerships, disposals, capital expenditure and to monitor the implementation of the Group's strategic blueprints as approved by the Board and ensure that they remain robust and relevant.

Ensure effective, transparent and regular communication with its stakeholders to facilitate mutual understanding of each other's objectives and expectations;

The Company has a sound Investor Relations programme which reaches out to the investing community and other stakeholders through continuous engagement via one-on-one meetings, quarterly analyst briefings and regional investor roadshows to explain our business performance, strategies and plans. We also have a comprehensive, informative website for our shareholders with regularly updated information.

Ensure that Senior Management has the necessary skills and experience and there are measures in place to provide the orderly succession of board and Senior Management; and

The Nomination & Remuneration Committee ("NRC") is established as a committee of the Board. The NRC oversees matters related to the nomination of new Directors and Senior Management, annually reviews the required mix of skills, experience and other requisite qualities of Directors and Senior Management, as well as undertakes the annual assessment of the effectiveness of the Board as a whole, its Committees and the contribution of each individual Director.

The NRC is also primarily responsible for recommending to the Board the remuneration framework for Directors, reviewing the remuneration

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