Terms of Reference

TERMS OF REFERENCE FOR BOARD AUDIT COMMITTEE

The Terms of Reference (“TOR”) and functions of the Board of Directors’ (“Board”) Audit Committee of SapuraKencana Petroleum Berhad (“SKPB”) (“BAC” or “the Committee”) are prepared based on the Main Market Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Malaysia”) (“MMLR”) and the Malaysian Code on Corporate Governance 2012. The TOR and the functions of the BAC shall be approved by the Board.


1. OBJECTIVES OF THE BAC

The BAC shall assist the Board of SKPB as follows:

a. in complying with specified accounting standards and required disclosures as administered by Bursa Malaysia, the relevant bodies of accounting standards, and any other laws and regulations as amended from time to time;

b. in presenting a balanced and understandable assessment of SKPB’s financial position and prospects;

c. in establishing a formal and transparent arrangement for maintaining an appropriate relationship with the external auditors and internal auditors;

d. in maintaining a sound system of internal control to safeguard the interest of shareholders in SKPB and its subsidiaries (collectively “Group”);

e. in acting upon the Board’s request to investigate and report any issues or concerns pertaining to the Management of the Group; and

f. in promoting and strengthening the confidence of the public in the Group’s reported results.


2. COMPOSITION AND SIZE

The BAC members shall be appointed by the Board from among its members and shall comprise at least three members, all of whom are non-executive directors with the majority of them being independent directors.

The BAC members must have the required skills to engage with the Management and auditors and be prepared to raise key and probing questions about the Group’s financial and operational risks, compliance with approved financial reporting standards and other relevant regulatory requirements.

All BAC members should be financially literate with at least one member of the BAC being:

a. a member of the Malaysian Institute of Accountants (“MIA”); or

b. if he/she is not a member of the MIA, he/she must have at least three years working experience and:

i. he/she must have passed the examinations specified in Part 1 of the First Schedule of the Accountants Act 1967; or

ii. he/she must be a member of one of the associations of accountants specified in Part II of the First Schedule of the Accountants Act 1967; or

c. fulfils such other requirements as prescribed or approved by Bursa Malaysia.

No alternate director shall be appointed as a member of the BAC.

In the event of any vacancy resulting in non-compliance of the minimum three members and the election of an independent chairman, the Board shall, upon the recommendation of the Board Nomination Committee, appoint such number of members to fill the vacancy and/or elect an independent chairman within three months of the event.


3. CHAIRMAN

The appointment of Chairman of the BAC shall be approved by the Board and the Chairman shall be an independent non-executive director.

The Chairman should assume, amongst others, the following responsibilities:

a. to steer the BAC to achieve the goals it sets;

b. to consult the Company Secretary of SKPB for guidance on matters related to BAC’s responsibilities under the applicable rules and regulations, to which they are subject to;

c. to organise and present the agenda for BAC meetings with the assistance of the Company Secretary / Secretary of the BAC based on input from members of the BAC for discussion on matters raised;

d. to provide leadership to the BAC and to ensure proper flow of information to the BAC by reviewing the adequacy of and timing for the making available of documentation;

e. to ensure that all members are encouraged to play their roles in its activities;

f. to ensure that consensus is reached on every BAC resolution and where considered necessary, call for a vote; and

g. to manage the processes and working of the BAC and to ensure that the BAC discharges its responsibilities without interference from the Management.


4. SECRETARY

The Company Secretary or other appropriate senior officers of SKPB shall act as the secretary of the BAC.

The Secretary, together with the Chairman of the BAC, shall be responsible for drawing up the notice and agenda for the meeting and the same shall be distributed to members and other attendees of the BAC two weeks before the meeting date. Consent from all members of the BAC shall be obtained for any meetings of BAC called shorter than this notice period.

The Company Secretary shall also be responsible for keeping the minutes of meetings of the BAC and circulating them to the BAC members.


5. MEETINGS

The BAC shall meet at least four times in a financial year. Additional meetings may be called at any time if so requested by any BAC member, the Management, internal auditors or external auditors.

The quorum for a BAC meeting shall be a majority of independent directors.

The BAC may, from to time, regulate its own procedure and, conduct of the BAC meeting. Such procedure shall be approved in the meeting of the BAC and attached to this TOR as Practice Notes.

Attendance at a meeting may be by being present in person or by participating in the meeting by video or teleconference. Members of the BAC who participate in a meeting of the BAC by video or teleconference or any other communication equipment shall be deemed to be present in person at the meeting and shall be entitled to vote or be counted in a quorum accordingly.

The BAC should record its deliberations, in terms of the issues discussed and the conclusions in discharging its duties and responsibilities, with the minutes kept and distributed to each member of BAC and the Board. The Chairman of the BAC shall provide the Board with a report of the BAC meetings at each Board meeting immediately following the BAC meetings.


6. CIRCULAR RESOLUTION

A circular resolution in writing (if only deemed necessary by the BAC Chairman) shall be valid and effectual if it is approved and signed by ALL members of the BAC as if it had been passed at a meeting of the BAC. All such resolutions shall be described as “Board Audit Committee Members’ Circular Resolution/(s)”.

Any discussions, including any concerns raised and the rationale for the decisions so made in the resolution, shall be tabled at the BAC meeting taking place immediately after the passing of the resolution, for a formal record keeping of the same.

Any such resolution may consist of several documents in like form, each signed by one or more BAC members.

7. RIGHTS AND AUTHORITIES

The BAC shall have the following rights in carrying out its duties and responsibilities:

a. explicit authority to investigate any matter within its TOR;

b. access to the resources which are required to perform its duties;

c. full, free and unrestricted access to any information, records, properties and personnel of the Group;

d. direct communication channels with the external auditors and internal auditors;

e. obtain independent professional or other advice and to invite external parties with relevant experience to attend the BAC meetings (if required) and to brief the BAC thereof;

f. authority to invite other directors and/or employees of the Group to attend BAC meetings specific to the relevant agenda; and

g. immediate access to reports on findings and recommendations from the Group Internal Audit (“GIA”) in respect of any fraud or irregularities discovered;


8. DUTIES AND RESPONSIBILITIES

The duties and responsibilities of the BAC shall be as follows:

a) Assessing the Control Environment

i. determine whether the Management has implemented policies ensuring that controls in place are adequate, and functioning properly to address the risks; and

ii. review the adequacy and integrity of the Group’s internal control systems and management information systems, including systems for compliance with the applicable laws, rules, directives and guidelines.

b) Overseeing Financial Reporting

i. BAC to review the quarterly results and year-end financial statements, before approval by the Board, focusing particularly on the following:

ii. changes in or implementation of accounting policies and practices;

iii. significant matters including financial reporting issues, significant judgments made by Management, significant and unusual events or transactions, and how these matters are addressed;

iv. significant adjustments arising from audit;

v. the going concern assumption; and

vi. compliance with accounting standards and other regulatory requirements.

c) Discussing the following with the External Auditors:

i. their audit plan and scope of audit;

ii. their evaluation of the system of internal controls and management information system;

iii. their audit report and the Management’s response including problems and reservations arising from their interim or final audits and any other matter the auditors may wish to discuss, at least twice a year without the presence of other directors, Management and/or employees of SKPB Group, whenever deemed necessary;

iv. the assistance given by the employees to the external auditors;

v. the coordination where more than one audit firm is involved; and

vi. audit fees.

BAC shall monitor the extent of non-audit work to be performed by the external auditors to ensure that the provision of non-audit services does not impair their independence and objectivity.

BAC shall consider if there is reason (supported by grounds) to believe that the external auditors are not suitable for appointment or reappointment before recommending the appointment or reappointment of the external auditors and their audit fees.

BAC shall review any letter of resignation from the external auditors of the Group.

d) Group Internal Audit (“GIA”)

i. review and approve the Internal Audit Charter, which defines the authority, accountability, responsibility, independence of the internal audit function in the Group;

ii. review the adequacy of the scope, functions, competency and resources of the internal audit function, and ensure it has the necessary authority to carry out its work;

iii. review and approve Internal Audit Plan;

iv. review the internal audit programme, processes and results of the internal audit work or investigation undertaken and where necessary, ensure that appropriate actions are taken on the recommendations of the GIA;

v. to meet and discuss with the internal auditors without the attendance of other Directors, Management and/or employees of SKPB, whenever deemed necessary;

vi. review and approve the appointment of the candidate for the position of Chief Internal Auditor (“CIA”), whenever it falls vacant;

vii. review the resignation of CIA and the reason(s) for the resignation;

viii. the annual performance review of the CIA should be decided by the BAC after taking into consideration the performance review conducted by the Executive Director to whom the CIA reports to administratively;

ix. be informed, referred to and agree on the initiation, commencement and mechanism of any disciplinary proceedings or investigations, including the nature and reasons for the said disciplinary proceedings or investigations, as well as the subsequent findings and proposed disciplinary actions against the CIA and senior staff members of GIA. As employees of SKPB, the CIA and senior staff members of GIA are subject to SKPB’s human resource policies and procedures, including disciplinary proceedings or investigations and actions;

x. review the assistance and co-operation given by the employees of the Group to the internal auditors. The GIA function should be independent of the activities they audit and should be performed with impartiality, proficiency and due professional care. The SKPB Board or the BAC should determine the merit of the internal audit function; and

xi. take cognisance of resignations of senior GIA members (i.e. Manager position and above) and provide the resigning staff member an opportunity to submit his reasons for resigning.

e) Reviewing Related Party Transactions (“RPTs”) and Conflict of Interest Situations

i. ensure that Management establishes adequate processes and procedures to monitor, track and identify RPTs. Such a framework should be able to provide sufficient assurance that RPTs and conflict of interest situations, including recurrent related party transactions, are identified, evaluated, presented for review and approval and reported, where required.

ii. review the RPTs and determine the following:
a. whether the transaction is in the best interest of SKPB;
b. whether the transaction is fair, reasonable and on normal commercial terms; and
c. that the transaction is not detrimental to the interest of minority shareholders.

f) Whistle blowing and Fraud

i. review the Group’s arrangements for its employees to raise concerns, in confidence, about any possible wrongdoing in financial reporting or other matters. The BAC shall ensure that these arrangements allow proportionate and independent investigation of such matters and appropriate follow-up actions. The BAC shall do so while ensuring the confidentiality of the anonymous submission of concerns regarding malpractice, illegal acts, questionable accounting or auditing matters;

ii. investigate whenever the Management or members of the Board are implicated in a possible fraud, illegal act or violation of the code of conduct;

iii. to discuss and review the major findings of internal investigations and Management’s response and provide independent assessment; and

iv. review the Group’s procedures for detecting fraud.

g) Other Matters

i. to ensure the reports of GIA should include management commentary prior to submission to the BAC;

ii. to review the following contents of Annual Report which shall be included in the Annual Report prior to recommending the same to the Board for approval;
• Statement on Corporate Governance
• Report of the Audit Committee
• Statement on Risk Management and Internal Control
• Statement on Directors’ Responsibility
• Additional Compliance Information

and/or any other contents of Annual Report which require review by the BAC may be required by the Regulator from time to time;

iii. to promptly report to Bursa Malaysia where a matter reported by the BAC to the Board has not been satisfactorily resolved resulting in a breach of the MMLR;

iv. to seek continuing professional education to keep abreast of developments not only in the area of financial reporting but also in regulatory compliance, technology, business risks and the implications of significant changes that may affect the Group;

v. to keep abreast of the latest corporate governance guidelines in relation to the BAC and the Board as the whole; and

vi. to consider any other matter that may reasonably fall within the ambit of this TOR, and as may be directed by the Board from time to time.


9. AMENDMENT OF THE TERMS OF REFERENCE

Any amendment to the TOR of the BAC, as proposed by BAC or any other third party, shall first be presented to the Board for approval. Upon the Board’s approval, the said amendment shall form part of the TOR of the BAC, of which shall be considered duly amended.


10. DISCREPANCIES

In the event of any discrepancies between the TOR and other relevant Acts, Guidelines, Circulars or other documents issued by relevant regulators (“collectively Regulators’ Documents”), the Regulators’ Documents shall prevail.


11. PUBLICATION OF TOR

The TOR of the BAC shall be made available on SKPB’s website.

TERMS OF REFERENCE FOR BOARD NOMINATION COMMITTEE


The Terms of Reference (“TOR”) and functions of the Board of Directors’ (“Board”) Nomination Committee of SapuraKencana Petroleum Berhad (“SKPB”) (“BNC” or “Committee”) are prepared based on the Main Market Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Malaysia”) (“MMLR”) and the Malaysian Code on Corporate Governance 2012 (“Code”). The TOR and the functions of the BNC shall be approved by the Board.


1. OBJECTIVE

The principal objective of the BNC is to assist the Board of Directors (“the Board”) in its responsibilities in the appointment of Board members where BNC shall nominate suitable persons to the Board. The BNC shall also assess the performance of the members of the Board and Board Committees as a whole and as individuals on an on-going basis.


2. COMPOSITION AND SIZE

The Board shall elect the BNC members from amongst its members and shall comprise at least three members, all of whom are non-executive directors with majority of them being independent directors.


3. CHAIRMAN

The Chairman of the BNC shall be elected from amongst the BNC members. In the absence of the BNC Chairman, the BNC members present shall elect a Chairman for the meeting from amongst the BNC members present.


4. SECRETARY

The Company Secretary or other appropriate senior officers of SKPB shall act as the secretary of the BNC.

The Secretary, together with the Chairman of the BNC, shall be responsible for drawing up the notice and agenda for the meeting and the same shall be distributed to members and other attendees of the BNC two weeks before the meeting date. Consent from all members of the BNC shall be obtained for any meetings of BNC called shorter than this notice period.

The Company Secretary shall also be responsible for keeping the minutes of meetings of the BNC and circulating them to the BNC members.


5. MEETINGS

The BNC may meet for the despatch of business, adjourn and otherwise regulate the meetings at least once a year or more frequent as deemed necessary. The Chairman of the BNC or any other members of the BNC may call for additional meetings at any time by giving at least three working days prior notice unless consent for shorter notice is obtained from all members.

The quorum for all meetings of the BNC shall not be less than two members, majority of whom are independent directors.

The BNC may, from time to time, regulate its own procedure and conduct of the BNC meeting. Such procedure shall be approved in the meeting of BNC and attached to this TOR as Practice Notes.

Attendance at a meeting may be by being present in person or by participating in the meeting by video or teleconference. Members of the BNC who participate in a meeting of the BNC by video or teleconference or any communication equipment shall be deemed to be present in person at the meeting and shall be entitled to vote or be counted in a quorum accordingly.

The BNC should record its deliberations in terms of issues discussed and conclusions in discharging its duties and responsibilities, with the minutes kept and distributed to each member of BNC and the Board. The Chairman of the BNC shall provide the Board with a report of the BNC meetings at the next Board meeting after the conclusion of each BNC meeting.

In its deliberations, the BNC shall take cognisance of the MMLR and the Code, and any other pertinent regulations and laws, as well as revisions which may come into force from time-to time.


6. CIRCULAR RESOLUTION

A circular resolution in writing (if only deemed necessary by the BNC Chairman) shall be valid and effectual if it is approved and signed by ALL members of the BNC as if it had been passed at a meeting of the BNC. All such resolutions shall be described as ‘Board Nomination Committee Members’ Circular Resolution/(s).

Any discussions including any concerns raised and the rationale for the decisions so made in the resolution, shall be tabled at the BNC meeting taking place immediately after the passing of the resolution, for a formal record keeping of the same.

Any such resolution may consist of several documents in like form, each signed by one or more BNC members.


7. RIGHTS, DUTIES AND RESPONSIBILITIES

The BNC is authorised by the Board to carry out the duties and responsibilities as follows:

7.1 Identify and recommend to the Board, candidates for directorships of the Company. In making its recommendations, the BNC will also consider candidates for directorships proposed by the group chief executive officer and, within the bounds of practicality, by any other senior executive or any director or shareholder. In making its recommendations, the BNC shall consider the following:

• skills, knowledge, expertise and experience;
• professionalism;
• integrity;
• in the case of candidates for the position of independent non-executive directors, the BNC shall also evaluate the candidates’ ability to discharge such responsibilities/function as expected from an independent non-executive director;
• diversity (including gender diversity);and
• ability to work together with members of the Board

The ultimate decision on the appointment of directors to the Board is the responsibility of the Board or the shareholders after due consideration of the recommendations of the BNC.

7.2 Recommend to the Board, directors to fill the seats on Board Committees.

7.3 Annually review the required mix of skills, independence and diversity (including gender diversity), experience and other qualities, including core competencies which non-executive and executive directors should possess.

7.4 Annually review the term of office and performance of the Board Audit Committee and each of its members annually to determine whether such Board Audit Committee and members have carried out their duties in accordance with their terms of reference;

7.5 Annually evaluate the effectiveness of the Board and Board Committees (including its size and composition) and the contributions of each individual director including independent non-executive directors as well as the group chief executive officer and/or group chief financial officer. All assessments and evaluations carried out by the BNC in the discharge of all its functions shall be properly documented and conducted at least once a year.

7.6 Entitled to the services of the Company Secretary who must ensure that all appointments are properly made and all necessary information is obtained from the directors, both for the SKPB’s own records and for the purposes of meeting statutory obligations, as well as obligations arising from the MMLR or other regulatory requirements.

7.7 Determine appropriate trainings for Directors, review the fulfillment of such training and disclose details in the annual report as appropriate, in accordance with Bursa Malaysia’s requirements on Continuing Education.

7.8 Consider and recommend the Directors for re-election/re-appointment at each Annual General Meeting.

7.9 Ensure an appropriate framework and plan for Board succession for the Company.

7.10 Consider and examine such other matters as the BNC considers appropriate.

7.11 Consider other matters as referred to the BNC by the Board.


8. AMENDMENT OF THE TERMS OF REFERENCE

Any amendment to the TOR of the BNC, as proposed by BNC or other third party, shall first be presented to the Board for approval. Upon the Board’s approval, the said amendment shall form part of the TOR of the BNC, of which shall be considered duly amended.


9. DISCREPANCIES

In the event of any discrepancies between the TOR and other relevant Acts, Guidelines, Circulars or other documents issued by relevant regulators (“collectively Regulators’ Documents”), the Regulators’ Documents shall prevail.


10. PUBLICATION OF TOR

The TOR of the BNC shall be made available on SKPB’s website.