Corporate Governance

Am ARA recognises the importance to have good and effective corporate governance culture to promote and safeguard the best interests of its Unitholders and other stakeholders, thereby enhancing the credibility and reputation of the Trust. This is also critical to the performance of the Manager and consequently, the success of AmFIRST REIT.

The Manager has adopted a good corporate governance framework that is designed to meet the best practice principles. In particular, the Board and the Management of the Manager have the obligation to act honestly, with due care and diligence, and in the best interests of its Unitholders and other stakeholders by emphasising on the transparency of decision making process, fairness and trustworthiness in managing AmFIRST REIT.

The Manager also recognises the need to adapt and improve the principles and practices to meet the ongoing changes and challenges in regulatory requirements, international developments and investor expectations.

The following sections describe the Manager’s main corporate governance practices and policies which are guided by measures recommended in Guidelines on Real Estate Investment Trusts (“REITs”) (the “REITs Guidelines”), Capital Markets and Services Act 2017 (“CMSA”), The Malaysian Code on Corporate Governance 2012 (“MCCG 2012” or the “Code”) and the Main Market Listing Requirements of Bursa Securities (“MMLR”) as well as the Manager’s obligations as described in the Deed.

UNITHOLDERS

The Manager, in particular, the Board and the Management recognise their responsibilities to protect the best interests of all Unitholders with the objective of maximising values of Unitholders. The summary of Unitholders’ profiles and unitholdings are as set out on pages 131 and 132 of this Annual Report.

Pursuant to Clause 15.33A of the SC’s REITs Guidelines, the Manager shall call for a general meeting of Unitholders once in every calendar year and not more than fifteen (15) months from the last preceding annual general meeting. Section 305(1) of CMSA further provides that a general meeting of Unitholders must be convened upon a written request of not less than fifty (50) Unitholders or one-tenth (1/10) of all Unitholders having a right to vote at that meeting, and deposited at the Manager’s registered office at 22nd Floor, Bangunan AmBank Group, No. 55, Jalan Raja Chulan, 50200 Kuala Lumpur.

AmFIRST REIT convened its Fourth Annual General Meeting (“AGM”) on 28 July 2016, at Berjaya Times Square Hotel Kuala Lumpur to seek its Unitholders’ approval on the following:-

  1. Proposed authority to allot and issue new units pursuant to Clause 14.03 of SC’s REITs Guidelines.
  2. Proposed increase in the existing approved fund size of AmFIRST REIT from 686,401,600 units up to a maximum of 823,681,920 units in AmFIRST REIT (“Units”).

All the resolutions were voted by way of a poll and were carried based on the results from the Unit Registrar, namely Symphony Share Registrars Sdn Bhd and the Scrutineers, namely Messrs Ernst & Young.


TRUSTEE

Maybank Trustees Berhad was appointed as the Trustee for AmFIRST REIT and the appointment was approved by the SC as prescribed under sections 288(1)(a) and 289(1) of the CMSA.

The Trustee is required to act honestly and discharge it’s roles and responsibilities in accordance with the Deed, SC’s REITs Guidelines, trust laws and securities laws. It has to exercise a degree of due care and diligence and has to act in the best interests of Unitholders. The primary roles and functions of the Trustee are outlined in the Deed.


THE MANAGER

AmFIRST REIT, constituted as a trust, is managed by the Manager and thus, it has no personnel of its own. The Manager appoints experienced and well qualified management personnel to handle the day to day operations of AmFIRST REIT. All the Directors and employees of the Manager are remunerated by the Manager and not the Trust.

Subject to the provisions of the Deed and the applicable laws and regulations, the Manager has general powers of management over the assets of AmFIRST REIT. Its main objective is to manage the assets and liabilities of AmFIRST REIT for the benefit of its Unitholders, with a view to provide long-term and sustainable distribution of income to its Unitholders and to achieve long- term growth in the net asset value per unit, in order to provide competitive investment return to its Unitholders.The primary roles and functions of the Manager as outlined in the Deed are to set the strategic directions of AmFIRST REIT and make recommendations to the Trustee on acquisition and enhancement or divestment of assets of AmFIRST REIT, in accordance with its stated investment strategy as provided under the Deed. Other general roles and functions of the Manager are, including but not limited to, as follows:-

Investment

Formulate and implement AmFIRST REIT’s investment strategy, including determining the location, subsector, market risk, type and other characteristic of AmFIRST REIT’s property portfolio. For acquisition and divestment, the Investment Department will make recommendations to and co-ordinate with the Trustee and implement the acquisition of new assets and divestment of AmFIRST REIT’s existing investments. The Department is also responsible for the revaluation of all the real estates in the fund’s investment portfolio and insurance renewal programs to ensure that all real estates acquired are insured in the name of the Trustee as required under SC’s REIT Guidelines.

Asset Management

During the financial year, the Asset Management role has been further enhanced by reorganising and establishing two separate departments namely Marketing and Operations. The Manager opined that the reorganisation is required to further enhance the corporate governance structure as well as to meet the service level demanded by the stakeholders.

The Marketing Department would greatly emphasize on leasing services, rent collection and following up on arrears, where as Operations Department would supervise and oversee the management of AmFIRST REIT’s properties which includes procurement of service providers to carry out specified activities, including but not limited to, on-site property management and property maintenance.

Finances

Formulate plans for equity and debt financing for AmFIRST REIT’s capital requirements with the objective of optimising the capital structure and cost of capital.The Manager is also responsible for managing the finances of AmFIRST REIT including preparation of accounts and financial statements.

Investor Relations

Developing and maintaining investor relations including information coordination and distribution as well as customer service to investors.

Legal and Compliance Management

Ensuring compliance with all legislations, tax rulings, rules and guidelines issued by SC, Bursa Securities, Inland Revenue Board Malaysia and other relevant authorities, where applicable. The Manager endeavors to carry on and conduct AmFIRST REIT’s business in a proper and efficient manner and to conduct all transactions with, or on behalf of AmFIRST REIT, at arm’s length basis.

Risk Management

Responsible for the risk management of AmFIRST REIT which includes but not limited to, identifying the principal risks associated with the business activities and ensuring appropriate measures, systems and internal controls are in place to mitigate the risk exposure.

CMSA

CMSA was amended to expand the definition of fund management to include management of assets in a unit trust scheme by an asset fund manager. Under this new regime, the Manager is required to be appropriately licensed in order to carry out the regulated activity. SC issued a Capital Markets Services Licence (“CMSL”) to the Manager to carry out the regulated activity of fund management in relation to asset management restricted to REITs pursuant to the requirements under CMSA.

As at the date of this report, the Manager has three (3) Capital Markets Services Representative’s Licence (“CMSRL”) holders where the Executive Director/Chief Executive Officer of the Manager is also a CMSRL holder to comply with the licensing requirements.

THE BOARD

The Manager is managed by an experienced Board with a wide and varied range of expertise. The Board is responsible for the overall management and corporate governance of AmFIRST REIT, including establishing goals for management and monitoring the achievement of these goals.

Each Director has a duty to act honestly and in good faith, with due care and diligence, and in the best interests of the Unitholders.The Board ensures that proper and effective controls are in place to assess and manage business risk,and compliance with applicable laws, regulations, guidelines and policies.

The Board is supported by an Audit Committee of Directors to look into, amongst others the risk management, internal control and financial management of AmFIRST REIT, which in turn is supported by the Group Internal Audit, Group Compliance and Group Operational Risk Departments of the ultimate holding company of the Manager.

The Board focuses mainly on strategy, financial performance and critical business issues, including:-

  • strategic business plans.
  • key financial performance indicators.
  • principal risks and their management.
  • succession planning for senior management.
  • investors and Unitholders relations programs.
  • system of internal control.
  • policies.

Board Composition

The Board has six (6) members comprising five (5) Non-Executive Directors and one (1) Executive Director, one (1) of whom is a female Director. Two (2) of the Board members are Independent Directors in compliance with the SC’s REITs Guidelines while the Chairman of the Board is a Non-Independent Director.

Pursuant to Recommendation 3.5 of MCCG 2012, the Board must comprise a majority of Independent Directors where the Chairman of the Board is not an Independent Director.

Notwithstanding that Recommendation 3.5 of MCCG 2012 is not met, one-third (1/3) of the Board comprises Independent Directors, and in compliance with the MMLR and SC’s REITs Guidelines.The Board strongly believes that all the Directors act in the best interest of all stakeholders.

The Board diversity in terms of gender, ethnicity, professional background and experience are as illustrated below:-

As at the date of this Report, none of the Directors held directorships in more than five (5) listed issuers.

The relationships among the Board members are disclosed on page 89 of this Annual Report. In addition to this, information on direct and indirect unitholdings related to the Manager and transactions with the companies related to the Manager are disclosed in Note 12 and Note 24 respectively, of the notes to the financial statements within.

The Board comprises business leaders and experienced professionals with backgrounds in fund management, property, banking, legal and finance. The profiles of the Directors are set out on pages 29 to 31 of this Annual Report.The Board is of the view that its current composition comprises individuals who, as a group, provide the necessary core competencies and that the current Board size is appropriate and effective, taking into consideration the nature and scope of AmFIRST REIT’s operations.

A Director who is independent of the Manager (or the controlling or significant shareholder of the Manager) and free from any business or other relationship, which could interfere with the exercise of independent judgment or the ability to act in the best interests of AmFIRST REIT, is considered to be independent.

The Board performs the function that a Nominating Committee would otherwise perform, namely, it administers nominations to the Board, review the structure, size and composition of the Board, and review the independence of Board members. The composition of the Board is reviewed to ensure an appropriate mix of expertise, independence, experience and knowledge in business, finance and management skills critical to AmFIRST REIT’s business is present in the composition of the Board.

Newly appointed Directors are given briefings by the Management on the business activities of AmFIRST REIT, its strategic directions and policies and the regulatory environment in which AmFIRST REIT operates. Directors are also informed of their statutory and other duties and responsibilities as well as policies and procedures relating to the corporate conduct and governance including the disclosure of interests, prohibitions on dealings in AmFIRST REIT’s units and restrictions on the disclosure of price-sensitive information.

Chairman and Executive Director/Chief Executive Officer

The roles and responsibilities of the Chairman and Executive Director/Chief Executive Officer are separate and the positions are held by two (2) different individuals. Mr Soo Kim Wai is a Non-Independent Non-Executive Director/Chairman while Mr Wong Khim Chon, the Executive Director (“ED”) also holds the position as the Chief Executive Officer (“CEO”). This is to ensure an appropriate balance of power and increased accountability.

The segregation ensures a clear distinction between the Chairman’s responsibilities to lead and manage the Board and the ED/CEO’s responsibilities to manage the Trust and the Manager.

Mr Soo Kim Wai, the Chairman, leads the Board and ensures that members of the Board work together with the management in a constructive manner to address strategies, business operations, financial performance, risk management and internal control issues.

Mr Wong Khim Chon,the ED/CEO has full executive responsibilities in consultation with the Executive Committee over the business directions and operational decisions of AmFIRST REIT. He leads the management and provides direction on the day-to-day operations and works with the Board to determine the overall business, investment and operational strategies for AmFIRST REIT and ensures that they are implemented as planned and in accordance with the Deed and the SC’s REITs Guidelines. In addition, he is also responsible for the overall planning for the future strategic development and growth of AmFIRST REIT.

Executive Committee

During the financial year, the Board made an imperative decision to establish an Executive Committee (“EXCO”). The EXCO was formed to support the Board of Directors to assess, deliberate and approve operational decisions expeditiously. The formation of EXCO demonstrates the Board’s commitment in ensuring good corporate governance. The EXCO comprises three (3) members who are key staff of the shareholders of Am ARA.TheEXCOMeetingisheldonmonthlybasisandattended by key management staffs. The Board will be notified by the EXCO on key deliberation and decisions made for each quarter.

Board Meetings

The Board meetings are scheduled at least four (4) times per annum with the purpose, amongst others, to discuss and review the operations of AmFIRST REIT and approve the release of the interim and the audited financial statements of AmFIRST REIT. Additional meetings are held as and when necessary between the scheduled meetings.

During the financial year ended 31 March 2017, the Board met four (4) times. Total number of meetings attended by the Board members were as follows:-

Directors Designation Number of
Board Meeting
Percentage of Attendance [%]
Soo Kim Wai Non-Independent
Non-Executive Director/Chairman
4/4 100%
Dato’ Wong Nam Loong
(Appointed on 15 August 2016)
Independent
Non-Executive Director
3/3 100%
Dato’ Abdullah Thalith bin Md Thani
(Appointed on 15 August 2016)
Independent
Non-Executive Director
3/3 100%
Kong Tai Meng Thomas Non-Independent
Non-Executive Director
4/4 100%
Wong Khim Chon Executive Director/Chief Executive Officer 4/4 100%
YM Raja Teh Maimunah binti Raja Abdul Aziz
(Appointed on 21 March 2017)
Non-Independent
Non-Executive Director
N/A N/A
Pushparani a/p A Moothathamby(Resigned on 23 February 2017) Non-Independent
Non-Executive Director
3/3 100%
Dato’Teo Chiang Quan
(Resigned on 16 August 2016)
Independent
Non-Executive Director
1/1 100%
Sr Tuan Haji Mohd Salleh bin Akram
(Resigned on 16 August 2016)
Independent
Non-Executive Director
1/1 100%

Note :
All attendances reflected the number of meetings attended during the Directors' tenure of service.

Directors’ Remunerations

The Directors’ remuneration is paid by the Manager and not the Trust. For Non-Executive Directors, they receive Directors’ fees and meeting allowance for their attendance at meetings of the Board and any of the Board Committee meetings.

The determination of the Non-Executive Directors’ remuneration is a matter of the Board as a whole and is subject to the Manager’s shareholders’ approval. The Directors are not involved in the approval of their own remuneration. The proposed Directors’ fees for the financial year ended 31 March 2017 are as follows:-

Director FY2017
Directors's Fees
FY2016
Directors' Fees
Soo Kim Wai 46,000 28,404
Kong Tai Meng Thomas (Appointed on 28 January 2016) 40,000 6,995
Dato’ Wong Nam Loong (Appointed on 15 August 2016) 25,096 -
Dato’ Abdullah Thalith bin Md Thani (Appointed on 15 August 2016) 25,096 -
YM Raja Teh Maimunah binti Raja Abdul Aziz (Appointed on 21 March 2017) 1,205 -
Y Bhg Dato’Teo Chiang Quan (Ceased as Member on 16 August 2016) 16,721 40,000
Sr Tuan Haji Mohd Salleh bin Akram (Ceased as Member on 16 August 2016) 16,721 40,000
Pushparani a/p A Moothathamby (Ceased as director on 23 February 2017) 35,945 40,000
Anthony Ang Meng Huat (Ceased as director on 28 January 2016) - 33,005
Dato’ Azlan bin Hashim (Ceased as director on 12 August 2015) - 16,716

Directors' Training

During the financial year under review, the Directors had attended various conferences, seminars and workshops to enhance their knowledge and expertise and to keep abreast with the relevant changes in laws, regulations and the business environment. The training programs attended by the Directors during the financial year ended 31 March 2017 were, inter alia, on areas relating to real estates, corporate leadership and governance, professional development, risk management, information technology, regulatory and compliance conducted by Group Learning and Development of the ultimate holding company of the Manager and regulators as well as professional establishments.

Effective 1 May 2015, SC has enforced that all Directors of CMSL holder for dealing in securities, dealing in derivatives and fund management in relation to portfolio management are required to attend and complete the Capital Market Director Programme (“CMDP”) within the stipulated timeline pursuant to the requirement of SC’s Licensing Handbook.

CMDP is an exclusive platform for Directors of licensed intermediaries to be equipped with the relevant knowledge, skills and abilities to meet the expected competencies required of a board. It is also designed to allow Directors to explore and deliberate on pertinent issues affecting the industry from multi- stakeholders perspectives. The Group Learning & Development has organised for all the Directors to complete the relevant CMDP modules within the stipulated timeline as prescribed by SC.

Dato’ Wong Nam Loong and Dato’ Abdullah Thalith bin Md Thani who were appointed to the Board on 15 August 2016, had completed the Mandatory Accreditation Programme (MAP) and has satisfied the Clause 2.0, Practice Note 5 requirement of the MMLR on Training for Directors.

The Board continues to evaluate and determine the training needs of its Directors on an ongoing basis.

Appointment and Removal, Retirement by Rotation and Re- election of Directors

  1. Appointment and Removal

    The Board as a whole will serve as the Nominating Committee. All new nominations received are assessed and approved by the entire Board in line with its policy of ensuring nominees are persons of sufficient caliber and experience.The process of assessing the Directors is an ongoing responsibility of the entire Board.The Board has the power to appoint any person to be a Director, either to fill a vacancy or as an addition to the existing Directors. Shareholders of the Manager may by ordinary resolution remove any Director and appoint another person in his stead.

  2. Retirement by Rotation and Re-election

    The Manager’s Articles of Association provides that one third (1/3) of the Board is subject to retirement by rotation at each Annual General Meeting. A retiring Director who is subject to retirement by rotation will retire at every Annual General Meeting with the exception of the First Annual General Meeting whereby all Directors shall retire from office.

    A retiring Director shall be eligible for re-election. The retiring Directors on each occasion will be those Directors who have remained in office the longest since their last election or appointment.As between persons who become Directors on the same day, those to retire shall (unless otherwise agreed among themselves) be determined by lot.

  3. Tenure

    Recommendation 3.2 of the MCCG 2012 states that the tenure of an Independent Director should not exceed a cumulative term of nine (9) years. This is in line with the Group’s existing policy which states that an Independent Non-Executive Director shall serve up to a maximum of nine (9) years (the “9-Year Rule”) and any exception to the same will be subject to the recommendation of the Group Nomination and Remuneration Committee of Directors and the approval of the Board.

    In line with the 9-Year Rule, Y Bhg Dato’ Teo Chiang Quan and Sr Tuan Haji Mohd Salleh bin Akram, who have served as Independent Non-Executive Directors of Am ARA for nine (9) years, have stepped down as Directors of Am ARA on 16 August 2016. The said positions are replaced by Dato’ Wong Nam Loong and Dato’ Abdullah Thalith bin Md Thani. Their appointments were effected on 15 August 2016.

Access to Information

The Management provides the Board with complete and adequate information in a timely manner. This is done through regular updates on financial results, market trends and business developments.Changes to regulations and accounting standards are monitored closely. To keep pace with regulatory changes, where these changes have an important and significant bearing on AmFIRST REIT and its disclosure obligations, the Directors are briefed by the Management either during Board meetings, at specifically convened sessions or via circulation of Board papers.

The Company Secretaries work with the Chairman and Management to ensure that Board papers and agenda are provided to the Directors ahead of meetings of the Board and Board Committees so that they can familiarise themselves with the matters prior to the meetings. Meetings are usually half-a-day affairs and include presentations by the Management, and when necessary, presentations by external consultants and experts on strategic issues relating to specific business areas.

The Board will take independent professional advice when it deems necessary for the proper and efficient discharge of its responsibilities and the Company Secretaries will assist the Board in obtaining such advice upon request.

The Board has separate and independent access to the Management and Company Secretaries, and vice versa. The Company Secretaries render necessary assistance to the Board, and ensure meeting procedures are followed and the applicable laws and regulations are complied with. Under the direction of the Chairman, the Company Secretaries’ responsibilities include ensuring good information flows within the Board and the Board Committees, and between the Management and Directors, as well as facilitating orientation and assisting with professional development as required.

COMPANY SECRETARIES

The Company Secretaries report directly to the Board and are the sources of guidance and advice to the Directors on areas of corporate governance, relevant legislations, regulations and policies besides ensuring compliance with the MMLR and other regulatory requirements.

The Company Secretaries attend the Board and the Board Committees’ meetings and responsible for the accuracy and adequacy of records of the proceedings of the Board and the Board Committees’ meetings and resolutions.

MANAGEMENT PERSONNEL

The Management have the responsibilities to ensure the successful implementation of the strategies and directions which have been set by the Board. In discharging these responsibilities, they apply business principles and ethics which are consistent with those expected by the Board, Unitholders and other stakeholders as guided by the Deed, the SC’s REITs Guidelines, the MMLR, other applicable laws and regulations together with the established policies and procedures. The details and profiles of the Senior Management are as set out on pages 32 to page 35 of this Annual Report.