BOARD AUDIT COMMITTEE REPORT GOVERNANCE • 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 units and subsidiaries. • GIA 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 BAC. • The BAC shall review the internal audit reports and will also review from time to time any related party transactions that may arise within the Group. If the BAC 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 public during their periodic review of the procedures, the BAC 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 that RPTs or RRPTs. • MISC Berhad’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. The RRPTs entered into by the Group during the financial year ended 31 December 2021 are summarised below: Nature of Transaction Transacting Party Related Party 1. Charters of petroleum and chemical tankers and LNG carriers from MISC by PETRONAS Group MISC Berhad and/or its subsidiaries PETRONAS* 2. Operating, maintaining and lease/charter of Floating Production, Storage and Off-Loading (FPSO), Floating Storage and Off-Loading (FSO) and other floating solutions by PETRONAS Group MISC Berhad and/or its subsidiaries PETRONAS* 3. Fabrication and construction of oil and gas offshore/onshore structures for PETRONAS Group MISC Berhad and/or its subsidiaries PETRONAS* 4. Marine and consultancy services to PETRONAS Group** MISC Berhad and/or its subsidiaries PETRONAS* 5. Sungai Udang Port management** MISC Berhad and/or its subsidiaries PETRONAS* Nature of Transaction Transacting Party Related Party 6. Purchase of industrial gases, lubricants and other petroleum products including bunker oil from PETRONAS Group MISC Berhad and/or its subsidiaries PETRONAS* 7. Supply of information technology services provided by PETRONAS Group MISC Berhad and/or its subsidiaries PETRONAS* 8. Rental of premises with PETRONAS Group MISC Berhad 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 as stipulated in the MMLR. The BAC 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 BAC 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 BAC is satisfied with the established procedures, and that 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 BAC 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 2011. DATO’ SEKHAR KRISHNAN Chairman Board Audit Committee MISC Berhad 264 Integrated Annual Report 2021 MISC Berhad Integrated Annual Report 2021 265
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