Am ARA REIT Managers Sdn Bhd “ARA” or the “Manager”), the Manager of AmFIRST Real Estate Investment Trust ("AmFIRST REIT" or the "Trust") 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 of Directors (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 Securities Commission Malaysia (“SC”)'s Guidelines on Real Estate Investment Trusts (“REIT”)(“REITs Gudielines”), Capital Market and Services Act 2007 (“CMSA”), The Malaysian Code on Corporate Governance 2012 (“MCCG2012” or the “Code”) and the Main Market Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Securities”)(“MMLR”) as well as the Manager's obligations as described in the Deed.
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 Unitholder's profiles and unitholdings are as set out on pages 127 and 128 of this Annual Report.
Pursuant to Clause 15.33A of the 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.
On 28 July 2015, AmFIRST REIT convened its Third Annual General Meeting (“AGM”) at The Royale Chulan Kuala Lumpur to seek its Unitholder's approval on the following:-
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.
AmFIRST REIT, constituted as a trust, is externally 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, enhancement or divestment of assets of AmFIRST REIT, in accordance with its stated investment strategy provided under the Deed. Other general roles and functions of the Manager are, including but not limited to, as follows:-
Supervise and oversee the management of AmFIRST REIT's properties including procurement of service providers to carry out specified activities, including but not limited to on-site property management, property maintenance, letting and leasing services, rent collection and arrears control.
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.
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.
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 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 and Services License (“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 the CMSA. As at the date of this report, the Manager has three (3) Capital Markets and Services Representative License (“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 OF DIRECTORS OF THE MANAGER
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 other, the risk management, internal control and financial management of AmFIRST REIT, which in turn is supported by the Group Internal Audit and Group Compliance Departments of the ultimate holding company of the Manager.
The Board focuses mainly on strategy, financial performance and critical business issues, including:-
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 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 a 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 is in compliance with the MMLR and 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 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 87 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 of this Annual Report.
The Board comprises business leaders and experienced professionals with fund management, property, banking and finance backgrounds. The profiles of the Directors are set out on pages 59 to 64 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/Acting 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 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 Executive Director/Chief Executive Officer has full executive responsibilities 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 REITs Guidelines. In addition, he is also responsible for the overall planning for the future strategic development and growth of AmFIRST REIT.
Mr Wong Khim Chon was appointed to the Board of the Manager as an Executive Director/Chief Executive Officer on 8 January 2015. Arising from the above appointment, Encik Zuhairy bin Md Isa has resigned as the Executive Director of Am ARA and simultaneously re-designated from Acting Chief Executive Officer to Deputy Chief Executive Officer of Am ARA.
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 to 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 2016, the Board met six (6) times. Total number of meetings attended by the Board members are as follows:-
All attendances reflected the number of meetings attended during the Directors' tenure of service.
The Directors' remuneration is paid by the Manager and not from the Trust. For Non-Executive Directors, they receive Director's fees, and attendance fee for participation in meetings of the Board and any of the Board Committee meetings/p>
The Board as a whole resolves on the fees for the Non-Executive Directors with individual Directors abstaining from decisions in respect of their individual remuneration. The fees payable to the Non-Executive Directors are subject to the approval of the Manager's shareholders. The Director's fees for the financial year ended 31 March 2015 are as follows:-
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 2016 were, inter alia, on areas relating to real estates, corporate leadership and governance, professional development, risk management, financial and tax issues, regulatory and compliance conducted by Group Learning and Development of the ultimate holding company of the Manager and regulators as well as professional establishments.
Mr Soo Kim Wai and Mr Kong Tai Meng Thomas who were appointed to the Board on 19 August 2015 and 28 January 2016, respectively, had completed the Mandatory Accreditation Programme (MAP) within four (4) months of their appointments pursuant to Clause 2.0 of the Practice Note 5 of the MMLR on Training for Directors.
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.
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
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.
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.
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 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 65 to page 68 of this Annual Report.