E) Corporate Governance and Regulatory Compliance • Reviewed and deliberated on the Recurrent Related Party Transactions (“RRPTs”) reports on quarterly basis, including the framework and procedures of RRPTs. • Reviewed and recommended to the Board the Statement on Risk Management and Internal Control, BAC Report and Additional Compliance Information for inclusion in the 2016 Annual Report. • Reviewed the following transactions that were deemed as related party transactions: i. Acquisition of 50% equity interest in GumusutKakap Semi-Floating Production System (L) Limited (“GKL”) from E&P Venture Solutions Co. Sdn. Bhd. (“EVS”), a wholly-owned subsidiary of PETRONAS Carigali Sdn. Bhd.; and ii. Revision of commercial terms of existing Time Charter Party with PETRONAS LNG Sdn. Bhd. (“PLNG”). • Reviewed the Directors’ Conflict of Interest report for MISC Group. With regard to the acquisition of 50% equity interest in GKL from EVS, the transaction was deliberated by the BAC to ensure the terms of the transaction are fair, reasonable and in the best interest of the Company, on an arm’s length basis and normal commercial terms and were not to the detriment of the minority shareholders. The BAC was also advised by the Company’s principal adviser (Maybank Investment Bank Berhad) as well as independent adviser (AmInvestment Bank Berhad) who presented their assessment and independent opinion of the transaction and recommended the transaction to the non-interested Directors for approval. The transaction was approved by the non-interested shareholders at an extraordinary general meeting (“EGM”) which was conducted via poll voting in compliance with the requirements of the MMLR for related party transactions. For the revision of commercial terms of existing Time Charter Party (“TCP”) with PETRONAS LNG Sdn. Bhd., the BAC deliberated the matter to ensure that the revised terms of the TCP are fair and reasonable and not detrimental to the non-interested shareholders’ interest. The revision was later approved by the non-interested Directors as recommended by the BAC. F) Ship Management Audit (“SMA”) • Reviewed the SMA’s semi-annual and annual audit reports focusing on the efficiency and effectiveness of the maintenance of the Group’s vessels and floating assets. STATEMENT ON INTERNAL AUDIT FUNCTION The internal audit function of the Company was carried out in house by the GIA, which reports functionally to the BAC in discharging its duties. GIA conducted scheduled audits independently to ensure there were effective risk monitoring, internal controls, governance processes and compliance procedures to provide the level of assurance required by the Board. GIA also conducted additional assurance assignments and/or special reviews upon request by the Management or BAC. In the conduct of their audits, GIA placed emphasis on a risk-based auditing where the focus was on higher risk areas. Audit reviews the adequacy of the identified mitigations and evaluates the effectiveness and efficiency of the controls to mitigate the risk events. The audit reports prepared by GIA provide details of audit findings and corresponding Agreed Corrective Actions (“ACA”). GIA monitored the status of implementation of these ACA through the Quarterly Audit Status Reports, of which, the ACA were monitored and analysed. The consolidated reports were submitted and presented to the Management Committee and BAC for deliberation and endorsement on a quarterly basis. Such regular monitoring was essential to ensure the integrity and effectiveness of the Group’s system of internal control. GIA submitted their findings and recommendations on audit issues to the MC for executive review. Subsequently, the reports together with deliberations by the MC were tabled at the BAC Meetings for decisions. At the Board Meetings, Chairman of the BAC highlighted the key audit issues and overall decisions and resolutions made during the BAC Meetings to the Board Members. During the financial year, GIA had carried out audits according to the internal audit plan approved by the BAC. The total cost incurred in discharging the internal audit functions during the financial year ended 31 December 2016 was RM6.45 million. Corporate Governance 151
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