Response to SGX Queries::

Company Registration No.: 196200046K

RESPONSES TO QUERIES FROM THE SGX-ST

The Board of Directors (the "Board") of Chemical Industries (Far East) Limited (the "Company", and collectively with its subsidiaries, the "Group") wishes to announce the following responses to certain queries raised by the Singapore Exchange Securities Trading Limited ("SGX-ST") in relation to the announcements issued by the Company on 28 September 2021 in relation to the cessation of Mr Lim Yew Khang Cecil ("Mr Cecil Lim") as Executive Director and re-designation to Non-Executive and Non- Independent Director and the appointment of Mr Chng Hee Kok ("Mr Chng") as Interim Chief Executive Officer ("CEO").

The SGX-ST's Query:

"1) In relation to the disclosure in the cessation announcement of Mr Lim Yew Khang Cecil ("Mr Cecil Lim") as Executive Director as to whether there are any "unresolved differences in opinion on material matters between the person and the board of directors", Mr Cecil Lim had indicated that he had "repeatedly urged the board of directors ("Board") to file a police report in respect of certain suspected misappropriation transactions". Please provide background on what these suspected misappropriation transactions are, the Board's assessment as to the making of the police report and whether this constitutes material information required to be disclosed under Listing Rule 703."

The Company's Response:

Mr Cecil Lim had on 11 August 2021 submitted a letter to the Board (the "Complaint"), raising concerns about certain petty cash claims which were paid to certain individuals over two months in 2018, without any supporting documents (the "Payments"), which had been noted in an internal audit report issued in 2019 (the "IA Report") to the audit committee (the "AC") by an external consultant engaged by the Company to conduct the internal audit.

In his Complaint, Mr Cecil Lim informed the Board that he would be lodging a police report in respect of the Payments, and invited the Board to join him in making the report on the following day, 12 August 2021. Mr Yeo Hock Chye (the "Chairman"), who is the chairman of the Board, responded to the Complaint, informing Mr Cecil Lim that the Complaint fell within the remit of the AC, who would need more time to review and understand the issues before being able to respond to Mr Cecil Lim's invitation, as none of the members of the AC (as at the date of his response) were members of the Board or the AC at the time the Payments were made or when the IA Report was issued. In addition, given that the Complaint related to events which took place more than three years ago, the Board was not in a position to decide whether to make a police report until it was fully apprised of the issues referred to in the Complaint.

Following the receipt of the Complaint, the Board referred the Complaint to the AC for review and the AC convened a meeting on 16 August 2021 (the "16 August AC Meeting"), at which Mr Cecil Lim was invited by the Independent Directors who were members of the AC at the time, namely the Chairman and Mr Chua Chin Kiat ("Mr Chua") to provide further information on the Complaint. At the interview, the Independent Directors requested Mr Cecil Lim for a copy of the police report filed by him for the purposes of their investigations, but Mr Cecil Lim declined to provide a copy of his police report.

At the 16 August AC Meeting, the AC also approved the appointment of Quahe Woo & Palmer LLC ("QWP") to advise the AC on matters pertaining to the Complaint and assist the AC in carrying out an investigation into the matters referred to in the Complaint, and to engage an auditor to review all documentation relating to such matters and any other governance matters. BDO Advisory Pte Ltd ("BDO") was subsequently appointed by QWP, on behalf of the AC, on 18 August 2021, to conduct such independent review and investigation.

The investigations by QWP and BDO are still ongoing. Pending the outcome of these investigations and until the Board and AC are fully apprised of the issues referred to in the Complaint, the Board and the AC are of the view that it is premature to lodge any police report or make any announcement on the SGX-ST.

The Board has treated the Complaint seriously, and has taken decisive actions to address the Complaint expediently. The Company will, in compliance with applicable laws and regulations (including Rule 703 of the Listing Manual of the SGX-ST), take further steps and make further announcements as appropriate.

The SGX-ST's Query:

"2) Mr Cecil Lim had also disclosed that he had "also raised concerns with the process of appointment and scope of responsibility of an advisor to the Company" and "have sought but was not provided with information relating to the scope of engagement of these professionals". Please disclose why information relating to the appointment of the advisor was not provided to Mr Cecil Lim, an Executive Director of the Board. Please disclose the reason for the Board not providing the information to Mr Cecil Lim about the appointment of an advisor and whether this will impinge on the ability of the Board to operate effectively and for directors to understand the Company's business as well as their directorship duties as set out in the provisions under Principle 1 of the Code of Corporate Governance."

The Company's Response:

The Board does not have a record of any concerns raised by Mr Cecil Lim with the process of appointment and scope of responsibility of an advisor to the Company and it is not clear to the Board which advisor or professional Mr Cecil Lim is referring to.

Mr Cecil had requested for the terms of engagement of BDO at the 6 September Board Meeting, which the Chairman had deferred providing, subject to advice from QWP on the disclosure of the terms of engagement. No concern was expressed by Mr Cecil Lim to the Chairman's response. Mr Cecil Lim also did not express any concern with the process of appointment of BDO. As set out above, BDO had already been appointed on behalf of the AC to conduct an independent review and investigation of the matters referred to in the Complaint and the terms of its engagement was approved by the AC.

The SGX-ST's Query:

"3) Mr Cecil Lim had disclosed that he "had also then raised queries as to whether individuals involved in the decision making process have declared all dealings with such advisor". Please explain what were the relationships of the advisor that Mr Cecil Lim was concerned about with the "individuals involved in the decision making process" that Mr Cecil Lim referred to and the background of such relationships, if any."

The Company's Response:

The Board does not have a record of any queries raised by Mr Cecil Lim on whether individuals involved in the decision making process have declared all dealings with "such" advisor and as stated above, it is not clear to the Board which advisor Mr Cecil Lim is referring to. In any event, as far as the Board is aware, the directors have duly declared their interest or dealings with the advisors which have been appointed by the Company.

The SGX-ST's Query:

"4) Mr Cecil Lim had disclosed that he had "repeated concerns raised, based on medical reports I have, or that I have sighted, which, coupled with the advanced age of Mr Lim of [92], has given me justifiable concerns of Mr Lim Soo Peng as an Executive Director of a Mainboard-listed issuer". Please elaborate on these concerns of Mr Cecil Lim had based on his knowledge of medical reports of Mr Lim Soo Peng as an Executive Director of the Company and provide the Board's views of the matters raised and the suitability of Mr Lim Soo Ping as an Executive Director of the Company."

The Company's Response:

Mr Cecil Lim sent two emails to the Board in July 2021, in which he stated that he was concerned about the mental capacity of Mr SP Lim. He had also expressed in his second email that he was of the view that Mr SP Lim should not stand for re-election as a director of the Company at the annual general meeting which was to be held on 21 July 2021 (the "2021 AGM"). In both emails sent by Mr Cecil Lim to the Board, he did not provide or refer to any medical reports that he had sighted or otherwise possess and did not provide any details of his concerns.

The NC (comprising Mr Chua Chin Kiat as chairman, the Chairman and Dr Wan Soo Bee at the relevant time) had a meeting on 8 July 2021 (the "8 July NC Meeting"), in advance of the proposed re-election of Mr SP Lim as a director of the Company at the 2021 AGM, to specifically consider Mr SP Lim's mental capacity to continue as a director of the Company. In summary, the NC was satisfied that Mr SP Lim was mentally sharp and was able to understand issues and what is happening around him and unanimously supported the re-election of Mr SP Lim as a director of the Company at the 2021 AGM.

In making its assessment, the NC had at the 8 July NC Meeting reviewed recent medical reports of Mr SP Lim that were issued by a clinical neurologist and a consultant psychiatrist respectively and also considered the general principles set out in the Mental Capacity Act, Chapter 177A of Singapore, which outlines when a person should be regarded to be mentally capable. Mr Chua and the Chairman also took into account their personal interaction with Mr SP Lim prior to 8 July NC Meeting.

It should be noted, Mr SP Lim had previously expressed his intention to the NC to step down once the relevant professional managers could be brought in. As such, from the NC's perspective at the 8 July NC Meeting, Mr SP Lim's continuation as a managing director of the Company was not intended to be indefinite and would change once the transition plans could be put into place, which is now being implemented with the board changes and changes in management announced by the Company on 28 September 2021.

Based on the assessment made by the NC at the 8 July NC Meeting, the Board is of the view that Mr SP Lim is able and suitable to carry on as the Executive Director for the limited period up to 31 December 2021 to assist Mr Chng as the Interim CEO in the Company's transition.

The SGX-ST's Query:

"5) Notwithstanding the disclosure by the Board that the cessation of Mr Cecil Lim is in line with "the overall strategy of the Company to move from a family-run company to one that is professionally managed", please explain the Board's view why Mr Cecil Lim's termination as Executive Director had to be effective immediately, and salary in lieu of notice would be paid instead and whether the termination is in any way related to the concerns raised by Mr Cecil Lim to the Board."

The Company's Response:

The Board and the NC had considered that Mr SP Lim would step down as Managing Director upon the appointment of Mr Chng Hee Kok as the Interim Chief Executive Officer of the Company, and would remain as Executive Director up to 31 December 2021 to facilitate the transition to a professionally managed company. As far as the Board and the NC were concerned, it was sufficient for Mr SP Lim to work with the Interim CEO to effect the transition.

The restructuring of the Board and key management, which was announced by the Company on 28 September 2021, marked the next stage of the Company's transformation and the Board and the NC were of the view that it was important that the Lim family's involvement in the day-to-day running of the Company to cease without delay, other than for the interim period for Mr SP Lim to stay on as an executive director to assist with the transition, in order to achieve the transformation.

Prior to the cessation of Mr Cecil Lim's employment as an executive director, the NC had considered the impact of the cessation of Mr Cecil Lim's services on the successful planning and continuity of the operations of the Company, and determined that it would not give rise to any significant impact on the operations of the Company.

The decision to terminate Mr Cecil Lim's employment was not related in any way to the concerns raised by Mr Cecil Lim to the Board as set out in this Announcement.

The SGX-ST's Query:

"6) We refer to the announcement on 28 September 2021 relating to the appointment of Mr Chng Hee Kok as interim CEO. Please provide the Board's and Nominating Committee's assessment on the suitability of Mr Chng Hee Kok as interim CEO of the Company in relation to:

1. The disclosure that Mr Chng was fined S$5,000 in August 2007 under section 156 of the Companies Act Chapter 50 and was given a warning under section 28(B)(b) of the Prevention of Corruption Act, Chapter 241;

1. Whether he is able to devote sufficient time to his appointment as interim CEO of the Company(which requires his full attention) in view of his other current directorships in 10 companies, which includes 8 other listed companies in addition to Chemical Industries (F.E.) Ltd; and
2. Whether he has any other executive appointments in any other companies in addition to or in his directorships in the 8 other listed companies"

The Company's Response:

1. We understand that these matters occurred when Mr Chng was the chief executive officer of NTUC Club. The NTUC Club owned a number of private limited companies and Mr Chng was a director in those entities. Mr Chng was fined S$5,000 in August 2007 for failure to disclose his beneficial interest in a company that had dealings with three firms in the NTUC Group where he was a director. Although Mr Chng had previously made verbal declarations of his involvements to the other directors, and those directors were aware of his involvement, he failed to provide a written declaration of his interests resulting in the authorities issuing him a fine. In the course of recording Mr Chng's statements, he provided certain information which were deemed to be false or misleading, and for that, he was given a written warning under Section 28(b) of the Prevention of Corruption Act, Chapter 241 of Singapore.
   The Board and the NC did not discuss this issue as it was not viewed as a concern, given that Mr Chng has held multiple directorships on other listed companies on the SGX-ST since 2007, and has also been appointed as the chief executive officer of three other companies listed on the SGX-ST.
2. During the interview between Mr Chng and certain members of the NC, namely the Chairman and Mr Lim Yew Nghee (collectively, the "Relevant NC Members"), the Relevant NC Members asked Mr Chng about his availability to take on the Interim CEO role given his other board memberships. The NC Members briefed Mr Chng on their expectations regarding his duties and scope of work and that he would be required to be responsible for the operations of the Company at all times during his tenure as Interim CEO. The duties and scope of work communicated by the NC Members to Mr Chng included (i) to be responsible for operations of the Company, (ii) to establish an integrated framework for Enterprise Risk Management, (iii) to identify areas of improvement in the Company's processes and governance systems and (iv) to assist with the on-boarding of the new CEO when the executive search is completed. It was pointed out that this assignment will likely be for six months, as the new CEO was expected to be identified within that timeframe. In this regard, Mr Chng assured the Relevant NC Members that he would be able to take on this role, whilst discharging his board duties on the other eight companies listed on the SGX-ST.

The Relevant NC Members were also informed by Mr Chng that he would be retiring from the board of directors of Ellipsiz Ltd at its upcoming annual general meeting this month and that Full Apex Holdings Ltd ("Full Apex Holdings"), of which Mr Chng is an independent non- executive director, is currently in the process of being delisted and is waiting for an exit offer from the major shareholder of Full Apex Holdings. Mr Chng also indicated that some of the other board of directors on which Mr Chng sits only meet about twice a year.