MISC Annual Report 2019

Statement on RPTs and RRPTs The RRPTs entered into by the Group during the financial year ended 31 December 2019 are summarised below: Nature of Transaction Transacting Party Related Party 1. Purchase of lubricants and other petroleum products including bunker oil from PETRONAS Dagangan Berhad MISC and/or its subsidiaries PETRONAS* 2. Charters of petroleum and chemical tankers and LNG carriers from MISC by PETRONAS Group MISC and/or its subsidiaries PETRONAS* 3. Marine and Consultancy Services** MISC and/or its subsidiaries PETRONAS* 4. Sungai Udang Port management** MISC and/or its subsidiaries PETRONAS* * PETRONAS is a major shareholder of the Company. ** RRPTs come into view due to the acquisition of MISC Maritime Services Sdn. Bhd. and its wholly-owned subsidiary, Sungai Udang Port Sdn. Bhd., by MISC. However, the amount of transactions did not exceed the threshold of the MMLR. The BARC has reviewed the internal guidelines pertaining to the governance of RPTs and RRPTs as outlined above and is of the view that the said guidelines are sufficient to ensure that the RPTs and RRPTs are fair, reasonable and in the best interest of the Group. The BARC was satisfied that the Group has put in place adequate procedures and processes to monitor, track and identify RPTs and RRPTs in a timely and orderly manner to ensure that the RPTs and RRPTs were, at all times, carried out on normal commercial terms and consistent with the Group’s practices and were not to the detriment of the minority shareholders. The procedures and processes will be reviewed from time to time based on recommendations from the internal audit team of the Company. During the financial year under review, the GIA also conducted quarterly audits on RPTs and RRPTs and reviewed the internal control process and records of RPTs and RRPTs within the affected scope to verify that adequate procedures are in place and have been adhered to. The BARC is satisfied with the established procedures, and the RPTs and RRPTs were fairly concluded on prevailing market rates/prices, normal commercial terms/conditions, applicable industry norms and not detrimental to the interests of MISC and its minority shareholders. The BARC also confirmed that the methods or procedures for determining the prices and terms of the RRPTs have not changed since the issuance of the Independent Adviser’s opinion by PricewaterhouseCoopers Capital Sdn. Bhd. dated 26 March 2012. The same was published in the Company’s Annual Report for the year ended 31 December 2012. DATO’ SEKHAR KRISHNAN Chairman Board Audit and Risk Committee • Where possible, other contemporaneous or similar transactions with unrelated third parties for similar products or services and/or quantities will be used as comparison, to determine whether the price and terms offered to or by the related parties are fair and reasonable and comparable to those offered to or by other unrelated third parties for the same or substantially similar type of products or services and/or quantities. In the event that quotation or comparative pricing from unrelated third parties cannot be obtained, the transaction price will be based on prevailing market rates or prices that are agreed upon under similar commercial arrangements for transactions with third parties, business practices and policies and on terms which are generally in line with industry norms in order to ensure that the RPTs and RRPTs are not detrimental to the Company or the Group. • On-going awareness sessions are arranged with employees and stakeholders to ensure sufficient knowledge and familiarity on RPTs and RRPTs in order to comply with the MMLR. Records of all transactions with the related parties are properly maintained by all business segments, service divisions and the subsidiaries. • Group Internal Audit shall review the internal control process and records of RPTs and RRPTs within the affected scope to verify that relevant approvals have been obtained and review procedures in respect of such transactions are adhered to. Any divergence will be reported to the BARC. • The BARC shall review the internal audit reports and will also review from time to time any RPTs that may arise within the Group. If the BARC is of the view that the procedures are insufficient to ensure that RPTs and RRPTs are undertaken on an arm’s length basis and on normal commercial terms and on terms that are not more favourable to the transacting party than those generally available to the public during their periodic review of the procedures, the BARC has the discretion to request for additional procedures to be imposed on the RPTs and RRPTs. • An interested/deemed interested Director in any particular RPTs or RRPTs shall be required to declare his or her interest in the RPTs or RRPTs and will have to refrain from any deliberation and also abstain from voting on the matter at the Board meeting in respect of the RPTs or RRPTs. • MISC’s Limits of Authority also reflect the relevant thresholds for the approval of RPTs or RRPTs. A process flow is also defined to articulate the necessary steps of the process. MISC has put in place internal controls, guidelines and procedures to ensure that RPTs and RRPTs are entered into on normal commercial terms and on terms which are not more favourable than those generally available to third parties dealing on arms’ length basis and are not detrimental to the minority shareholders of the Company. In ensuring adequate procedures and processes are in place, the BARC is responsible to ensure the following: a) That a framework and appropriate procedures are in place for the purposes of identifying, monitoring, evaluating, reporting and approving RPTs and RRPTs; b) That a review of any RPTs or RRPTs and conflict of interests that may arise within the Group is conducted; and c) That the established procedures are adequate in order to ensure that the RPTs and RRPTs are entered into in the best interest of the Company, on fair and reasonable commercial terms and not detrimental to the interest of minority shareholders. The Group’s internal Guidelines on RPTs and RRPTs are summarised as follows: • Information on related parties and procedures applicable for RPTs and RRPTs which involve interest, direct or indirect, of such related parties shall be disseminated from time to time to all MISC’s business and service units as well as subsidiaries, for their reference. • All business segments and service divisions shall review their existing information systems on an on-going basis to ensure that relevant features are incorporated in the systems for capturing information on RPTs and RRPTs at source. All Heads of Departments are required to report on all transactions with related parties. • RPTs and RRPTs will only be undertaken after it has been ascertained that the transaction prices, terms and conditions, quality of products or services are comparable with those prevailing in the market and will meet industry standards. The transaction prices will be based on the prevailing market rates or prices of the service or product or to otherwise accord with the normal commercial terms and applicable industry norms. The interests of non-interested shareholders will be taken into account when entering into the RPTs and RRPTs to ensure that their rights and interests are upheld as per the MMLR. Board Audit and Risk Committee Report 219 218 OUR GOVERNANCE MISC BERHAD PEOPLE. PASSION. POSSIBILITIES ANNUAL REPORT 2019