PINTAR PROJEK SDN BHD (COMPANY NO. 314009-W)
(Manager for YTL Hospitality REIT)
(the "Manager")
POLICY ON AUDITOR INDEPENDENCE


1.0 INTRODUCTION

The independence of external auditors ("Auditors") is essential to the provision of an objective view on the truth and fairness of the financial statements of YTL Hospitality REIT (the "Trust").

The primary objective of this policy is to safeguard the continuing independence of the Trust's Auditors, both in fact and appearance.

2.0 APPOINTMENT/RE-APPOINTMENT/REMOVAL

The Audit Committee of the Manager ("AC") shall review the performance, suitability, objectivity and independence of the Auditors annually.

Subject to satisfactory performance and the recommendation of the AC, the Board of Directors of the Manager ("Board") will recommend the re-appointment of the Auditors to shareholders at the annual general meeting ("AGM").

If the AC does not recommend the incumbent audit firm for re-appointment, or there is a need to fill a vacancy of the Auditors arising from resignation or removal, a tender process is to be initiated by the AC and executive management to select a new firm.

2.1 Tendering & Selection
  (i) Audit firms who meet the criteria set out herein for appointment will be requested to submit their proposals for consideration;
  (ii) Shortlisted proposals will be submitted to the AC for assessment;
  (iii) In making its evaluation, the AC may, at its discretion, request to meet with representatives of the shortlisted audit firms;
  (iv) The AC will make its recommendation to the Board on the audit firm selected for endorsement.
2.2 Criteria for assessing suitability

The AC's recommendation on the appointment/re-appointment of Auditors should be based on an assessment of the independence, capabilities and effectiveness of the audit process.

In terms of capabilities, the AC should give consideration to a range of factors which include, but not limited to, the following key considerations:

(a) Reputation
The audit firm's reputation and its presence in the industry;
(b) Experience & Resources
Qualifications of its professionals, including the breadth and depth of resources and experience of the team members;
The firm's audit engagements
(c) Representation/network in other jurisdictions
Networking ability and competency to address overseas subsidiaries not audited by the firm (i.e. its liaison capability with the secondary auditors)
(d) Expertise
Audit methodology employed by the firm such as the underlying methodology and materiality used to determine the nature, extent and timing of testing required;
(e) Quality control
The internal quality control processes in place (e.g. independent quality control review and approach to audit judgments; establishing controls over risks to audit quality relating to component auditors' work);
(f) Added value
How the audit firm delivers value other than through the provision of the statutory audit report.
2.3 Terms & Remuneration

The AC should review the terms of engagement and remuneration to be paid to the Auditors in respect of the audit services to be provided and make its recommendation to the Board accordingly.

The audit fees payable should commensurate with the scope of the audit and accountability assumed by the Auditors, taking into account the required skills, knowledge and the allocation of time and resources needed to complete the audit assignment.

2.4 Audit Quality Indicators ("AQI")

To assist the AC in assessing and monitoring the effectiveness of the external audit process, the AC may consider the following key indicators of audit quality:

Adequacy of audit scope;
Whether the audit program/plan include specific procedures to test the internal controls over financial reporting areas identified as being of high risk or particular concern;
Ability of the Auditors to meet audit timelines;
Competence in performing the audit founded on strong auditing skills (analytical, judgmental and investigative); effective communication skills (ability to clearly, candidly and effectively communicate issues); and the strength of character to approach the audit with a high degree of professional scepticism;
Timeliness in escalating audit issues to the AC;
Allocation of resources to significant audit risk areas/ability of the audit firm to deploy experienced resources to each audit engagement based on its risk and complexity;
Effectiveness of the audit firm's recommendations in addressing material weaknesses or control deficiencies observed during previous audits, particularly on internal controls relevant to financial reporting process;
Ability to work co-operatively with management and non-financial management, while maintaining objectivity.

The AC will assess and refine the AQI as and when needed to meet its changing information needs.

2.5 Evaluation of Auditors for Re-appointment

The AC shall perform an assessment on the performance of the Auditors annually and undertake follow-up measures thereafter wherever required.

The evaluation shall encompass not only the performance and quality of the audit but also the independence and objectivity of the Auditors and will take the form of an assessment questionnaire.

The AC may consider feedback from other personnel of the Manager who had substantial contact with the Auditors throughout the year.

3.0 RESIGNATION

If the Auditors resign, the AC should investigate the issues giving rise to such resignation and consider whether any action is required.

4.0 INDEPENDENCE
4.1 Annual Confirmation of Independence

The AC shall obtain annually written confirmation from the Auditors that they are, and have been, independent throughout the conduct of the audit engagement in accordance with the terms of all relevant professional and regulatory requirements.

4.2 Non-Audit Services

The Auditors must not be engaged to provide services that are in conflict with their role as statutory auditors or that would otherwise impair or be perceived to impair their independence.

4.2.1 Prohibited Non-Audit Services

The non-audit services that should not be performed by the Auditors are as follows:

Services that would result in the Auditors functioning in the role of management;
Services that would result in the Auditors auditing their own work;
Services that would result in the Auditors serving in advocacy roles for the Trust and/or its subsidiaries;
Services that would result in concerns on the independence of the Auditors to an extent that they cannot be eliminated or reduced to an acceptable level by the application of safeguards.

Examples of the prohibited non-audit services include, but not limited to -

Accounting and bookkeeping services, including payroll services and the preparation of financial statements or financial information which forms the basis on which the audit report is provided;
Valuation services if the valuations would have a material effect, separately or in the aggregate, on the financial statements of the Trust ("FS");
Preparation of tax calculations of current and deferred tax liabilities (or assets) for the purpose of preparing accounting entries that are material to the FS;
Internal audit services that relate to -
a significant part of the internal controls over financial reporting;
financial accounting systems that generate information that is, separately or in the aggregate, significant to the accounting records or FS; or
amounts or disclosures that are, separately or in the aggregate, material to the FS;
Design or implementation of information technology systems that form a significant part of the internal control or information on financial reporting, accounting records or FS;
Acting in an advocacy role for the Trust in resolving a dispute or litigation when the amounts involved are material to the FS;
Recruiting services with respect to a director, officer or senior management personnel who would be in a position to exert significant influence over the preparation of accounting records of the FS; and
Corporate finance services which involve promoting, dealing in, or underwriting the Trust's units.
4.2.2 Permissible Non-Audit Services

The Auditors or a firm or corporation affiliated to the Auditors may be engaged for non-audit services that do not fall within the prohibited services.

All engagements of the Auditors or a firm or corporation affiliated to the Auditors to provide non-audit services are subject to the endorsement of the AC.

4.2.3 Confirmation of independence for Non-Audit Services

Management shall obtain confirmation from the Auditors that their independence or objectivity is not compromised or impaired by the provision of all non-audit services.

4.2.4 Regular Reporting of Non-Audit Services

All non-audit services shall be reported to the Audit Committee on a regular basis.

5.0 ROTATION OF KEY AUDIT PARTNERS

The engagement partner who is responsible for the performance of the audit engagement and the issue of the auditors' report, and concurring or quality review partner who objectively evaluates, before the audit report is issued, the significant judgments made by the engagement team and conclusion reached in formulating the report, shall be subject to a five-year rotation with a two-year cooling off period.

6.0 APPOINTMENT OF FORMER KEY AUDIT PARTNERS

Key audit partners will not be offered employment or be appointed as a member of the AC or the audit committee of any of its related corporations within 2 years of undertaking any role on the audit.

7.0 REVIEW OF THIS POLICY

The AC will review this policy periodically to ensure that it is up-to-date and remains consistent with its objectives and responsibilities.