STATEMENT OF CORPORATE GOVERNANCE
YTL Hospitality REIT ("YTL REIT" or "Trust") was established on 18 November 2005 pursuant to a trust deed ("Deed") entered into between Pintar Projek Sdn Bhd ("PPSB" or "Manager") and Maybank Trustees Berhad ("Trustee"), as the
manager and trustee, respectively, of the Trust. YTL REIT has been listed on the Main Market of Bursa Malaysia Securities Berhad ("Bursa Securities") since 16 December 2005.
The Board of Directors of PPSB ("Board") is firmly committed to ensuring that the Manager implements and operates good corporate governance practices in its overall management of the Trust and its subsidiaries ("YTL REIT Group"). In implementing its system of corporate governance, the Directors have been guided by the measures set out in the Guidelines on Real Estate Investment Trusts ("REIT Guidelines") issued by the Securities Commission Malaysia ("SC"), the Main Market Listing Requirements of Bursa Securities ("Listing Requirements") and the Malaysian Code on Corporate Governance 2012 ("Code").
THE ROLE OF THE MANAGER
YTL REIT is managed and administered by PPSB, who has the primary objectives of: (a) providing unitholders of the Trust ("Unitholders") with stable cash distributions with the potential or sustainable growth, principally from the ownership of
properties; and (b) enhancing the long-term value of YTL REIT's units ("Units").
The Manager is required to ensure that the business and operations of YTL REIT are carried on and conducted in a proper, diligent and efficient manner, and in accordance with acceptable and efficacious business practices in the real estate investment trust industry in Malaysia. Subject to the provisions of the Deed, the Manager has full and complete powers of management and must manage YTL REIT (including all assets and liabilities of the Trust) for the benefit of its Unitholders.
The Board recognises that an effective corporate governance framework is critical in order to achieve these objectives, to fulfil its duties and obligations and to ensure that YTL REIT continues to perform strongly.
The general functions, duties and responsibilities of the Manager include the following:
- to manage the YTL REIT Group's assets and liabilities for the benefit of Unitholders;
- to be responsible for the day-to-day management of the YTL REIT Group;
- to carry out activities in relation to the assets of the YTL REIT Group in accordance with the provisions of the Deed;
- to set the strategic direction of the YTL REIT Group and submit proposals to the Trustee on the acquisition, divestment or enhancement of assets of the YTL REIT Group;
- to issue an annual report and quarterly reports of YTL REIT to Unitholders within 2 months of YTL REIT's financial year end and the end of the periods covered, respectively; and
- to ensure that the YTL REIT Group is managed within the ambit of the Deed, the Capital Markets and Services Act 2007 (as amended) and other securities laws, the Listing Requirements, the REIT Guidelines and other applicable laws.
CONFLICTS OF INTEREST AND RELATED PARTY TRANSACTIONS
The Deed provides that the Manager, the Trustee and any delegate of either of them shall avoid conflicts of interest arising or, if conflicts arise, shall ensure that the YTL REIT Group is not disadvantaged by the transaction concerned. The
Manager must not make improper use of its position in managing the YTL REIT Group to gain, directly or indirectly, an advantage for itself or for any other person or to cause detriment to the interests of Unitholders.
In order to deal with any conflict-of-interest situations that may arise, any related party transaction, dealing, investment or appointment carried out for or on behalf of the YTL REIT Group involving parties related to the Trust must be executed on terms that are the best available to the Trust and which are no less favourable than an arm's length transaction between independent parties.
The Manager may not act as principal in the sale and purchase of real estate, securities and any other assets to and from the YTL REIT Group. "Acting as principal" includes a reference to:
- dealing in or entering into a transaction on behalf of a person associated with the Manager;
- acting on behalf of a corporation in which the Manager has a controlling interest; or
- the Manager acting on behalf of a corporation in which the Manager's interest and the interests of its Directors together constitute a controlling interest.
In addition, the Manager must not, without the prior approval of the Trustee, invest any moneys available for investment under the Deed in any securities, real estate or other assets in which the Manager or any officer of the Manager has a
financial interest or from which the Manager or any officer of the Manager derives a benefit.
In dealing with any related party transactions that may arise, no real estate may be acquired from, or disposed to, a related party of the Manager unless the following criteria are satisfied:
- A valuation must be undertaken of the real estate by an approved valuer, in accordance with the Deed, and a valuation report given to the Trustee where the date of valuation must not be more than 6 months before the date of the sale and purchase agreement provided that since the last valuation, no circumstances have arisen to materially affect the valuation and that, where applicable, the valuation has not been revised by the SC;
- All related party transactions involving real estate must be transacted at a price equivalent to the value assessed in the valuation report, consented to by the Trustee and consistent with the investment objectives and strategy of the Trust; and
- the real estate may be transacted at a price other than as specified in (b) above provided that:
- for acquisitions, the price is not more than 110% of the value assessed in the valuation report referred to in (a) above;
- for disposals, the price is not less than 90% of the value assessed in the valuation report referred to in (a) above; and
The Manager must inform Unitholders through an announcement to Bursa Securities of the Trustee's written confirmation. Where the transaction is conditional upon the approval of Unitholders, such approval must be sought prior to completion of the transaction.
In this regard, the Manager adheres strictly to the provisions of the REIT Guidelines which prohibit the Manager and its related parties from voting their Units at any meeting of Unitholders convened unless an exemption is obtained from the SC.
ROLES & RESPONSIBILITIES OF THE BOARD
The Manager is led and managed by an experienced Board with a wide and varied range of expertise. This broad spectrum of skills and experience gives added strength to the leadership, thus ensuring the Manager is under the oversight and guidance of an accountable and competent Board. The Directors recognise the key role they play in charting the strategic direction, development and control of the Manager. Key elements of the Board's stewardship responsibilities include those set out in the Code:
- Reviewing and adopting strategic plans for the YTL REIT Group;
- Overseeing the conduct of the YTL REIT Group's business operations and financial performance;
- Identifying the principal risks affecting the YTL REIT Group's businesses and maintaining a sound system of internal control and mitigation measures;
- Succession planning;
- Overseeing the development and implementation of Unitholder communication policies; and
- Reviewing the adequacy and integrity of the YTL REIT Group's management information and internal control system.
The Chief Executive Officer and Executive Directors are accountable to the Board for the profitability and development of the YTL REIT Group, consistent with the primary aim of enhancing long-term Unitholder value. The Independent Non-Executive Directors have the experience and business acumen necessary to carry sufficient weight in the Board's decisions and the presence of these Independent Non-Executive Directors brings an additional element of balance to the Board as they do not participate in the day-to-day running of YTL REIT.
The differing roles of Executive and Non-Executive Directors are delineated, both having fiduciary duties to Unitholders. Executive Directors have a direct responsibility for business operations whereas Non-Executive Directors have the necessary skill and experience to bring an independent and objective judgment to bear on issues of strategy, performance and resources brought before the Board. The Executive Directors are responsible for the Manager's operations and for ensuring that the strategies proposed by the executive management are fully discussed and examined, and take account of the long term interests of the Unitholders.
Board meetings are scheduled with due notice in advance at least four times a year in order to review and approve the interim and annual financial statements. Additional meetings may also be convened on an ad-hoc basis when significant issues arise relating to the Trust. The Board met four times during the financial year ended 30 June 2016.
The Directors have full and unrestricted access to all information pertaining to the business and affairs of the YTL REIT Group to enable them to discharge their duties. Prior to Board meetings, all Directors receive the agenda together with a comprehensive set of Board papers containing information relevant to the business of the meeting. This allows the Directors to obtain further explanations or clarifications, where necessary, in order to be properly briefed before each meeting.
All Directors have full access to the advice and services of the Company Secretary who ensures that Board procedures are adhered to at all times during meetings and advises the Board on matters including corporate governance issues and the Directors' responsibilities in complying with relevant legislation and regulations. The Company Secretary works very closely with management for timely and appropriate information, which will then be passed on to the Directors. In accordance with the Board's procedures, deliberations and conclusions in Board meetings are recorded by the Company Secretary, who ensures that accurate and proper records of the proceedings of Board meetings and resolutions passed are recorded and kept in the statutory register at the registered office of the Manager.
COMPOSITION & INDEPENDENCE OF THE BOARD
The Board currently has 7 Directors comprising 5 executive members and 2 non-executive members, all of whom are independent. This is in compliance with the provisions of the Listing Requirements and the REIT Guidelines for at least onethird of the Board to be independent.
The appointment of Directors is undertaken by the Board as a whole. The Chief Executive Officer makes recommendations on the suitability of candidates nominated for appointment to the Board and, thereafter, the final decision lies with the entire Board to ensure that the resulting mix of experience and expertise of members of the Board is sufficient to address the issues affecting the Manager. In its deliberations, the Board is required to take into account the integrity, professionalism, skill, knowledge, expertise and experience of the proposed candidate.
Directors' remuneration is decided in line with the objective recommended by the Code to determine the remuneration for Directors so as to attract and retain Directors of the calibre needed to successfully carry on the Manager's operations. The Executive Directors' remuneration consists of basic salary, other emoluments and other customary benefits as appropriate to a senior management member. In general, the component parts of remuneration are structured so as to link rewards to the overall performance of YTL REIT. In the case of Non-Executive Directors, the level of remuneration reflects the contribution, experience and responsibilities undertaken by the particular non-executive concerned.
The Directors are fully cognisant of the importance and value of attending seminars, training programmes and conferences in order to update themselves on developments and changes in the REIT industry, as well as wider economic, financial and governance issues to enhance their skills, knowledge and expertise in their respective fields. The Board will continue to evaluate and determine the training needs of its Directors on an ongoing basis.
Throughout the financial year under review, the Directors attended various conferences, programmes and speaking engagements covering areas that included corporate governance, information technology, leadership, legal, finance and business management which they collectively or individually considered useful in discharging their stewardship responsibilities. The conferences, seminars and training programmes attended by one or more of the Directors covered the following areas:-
- Corporate Governance/Risk Management
- Harnessing the Power of Disruption and Disrupting Beliefs for Strategic Advantage;
- Risk Oversight Practices, Corporate Culture and Enterprise Risk Management.
- Leadership, Legal and Business Management
- Amendments to Bursa's Listing Requirements;
- Trans-Pacific Partnership Agreement (TPPA): Enhancing Trade and Investment, Economic Growth and Development;
- YTL Leadership Conference 2015.
INTEGRITY IN FINANCIAL REPORTING
The Directors are responsible for ensuring that financial statements of the Trust are drawn up in accordance with applicable approved accounting standards in Malaysia, the provisions of the Companies Act 1965, the REIT Guidelines and the Deed. In presenting the financial statements, the Manager has used appropriate accounting policies, consistently applied and supported by reasonable and prudent judgments and estimates. The Directors also strive to ensure that financial reporting presents a fair and understandable assessment of the position and prospects of YTL REIT. Interim financial statements are reviewed and approved by the Directors prior to release to the relevant regulatory authorities.
RISK MANAGEMENT & INTERNAL CONTROL
The Manager's internal audit function is undertaken by the Internal Audit department of its parent company, YTL Corporation Berhad ("YTLIA"). YTLIA reports directly to the Audit Committee of YTL Corporation Berhad and to the Board on matters pertaining to the Manager and the Trust.
The activities of the internal audit function during the year under review included:-
- Developing the annual internal audit plan and proposing this plan to the Board;
- Conducting scheduled internal audit engagements, focusing primarily on the effectiveness of internal controls and recommending improvements where necessary;
- Conducting follow-up reviews to assess if appropriate action has been taken to address issues highlighted in audit reports; and
- Presenting audit findings to the Board for consideration.
None of the weaknesses or issues identified during the review for the financial year has resulted in non-compliance with any relevant policies or procedures, listing requirements or recommended industry practices that would require disclosure in the Trust's Annual Report.
The Manager's system of internal control will continue to be reviewed, enhanced and updated in line with changes in the operating environment. The Board will seek regular assurance on the continuity and effectiveness of the internal control system through independent appraisals by YTLIA. The Board is of the view that the current system of internal control in place is effective to safeguard the interests of the YTL REIT Group.
The Board has established a formal and transparent arrangement for maintaining an appropriate relationship with the auditors of YTL REIT. YTL REIT's auditors report their findings to members of the Board as part of the audit process on the statutory financial statements each financial year. From time to time, the auditors highlight matters that require attention to the Board.
CORPORATE DISCLOSURE & COMMUNICATION WITH SHAREHOLDERS
The Manager values dialogue with Unitholders and investors as a means of effective communication that enables the Board to convey information about the YTL REIT Group's performance, corporate strategy and other matters affecting Unitholders' interests. The Board recognises the importance of timely dissemination of information to Unitholders and, accordingly, ensures that they are well informed of any major developments of YTL REIT. Such information is communicated through the annual report, the Trust's various disclosures and announcements to Bursa Securities, including quarterly and annual results, and the corporate website.
Corporate information, annual financial results, governance information, business reviews and future plans are disseminated through the Annual Report, whilst current corporate developments are communicated via the company’s website, www.ytlhospitalityreit.com, in addition to prescribed information, including financial results, announcements, circulars, prospectuses and notices, which is released through the official website of Bursa Securities.
The Chief Executive Officer and Executive Directors meet with analysts, institutional Unitholders and investors throughout the year to provide updates on strategies and new developments. However, price-sensitive information and information that may be regarded as undisclosed material information about YTL REIT is not disclosed in these sessions until after the requisite announcements to Bursa Securities have been made.
This statement was approved by the Board on 28 July 2016.