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The management of Hektar REIT is governed by a Trust Deed executed on 5 October 2006 and as amended by two Supplemental Trust Deeds dated 20 March 2012 and 23 November 2016 respectively between the Manager and the Trustee. The Deed, inter alia, details out the roles, duties, obligations and power of the Manager and the Trustee. Essentially, the Trustee and the Manager play countervailing roles against each other to ensure that the REIT is managed with efficiency and integrity.
In addition to the Deed, the Board of the Manager is also governed by the Board Charter, which encompasses the principal role of the Board, establishing the functions, responsibilities and powers of the Board and its various Committees; and to set the policies and practices of the Board.
The Board of the Manager views corporate governance in accordance to four key concepts:
- good performance
The Board has the responsibility to ensure that the abovementioned concepts were rigorously observed throughout the year ended 31 December 2016. To this end, the Manager applied the principles and best practices as set out in SC Malaysian Code on Corporate Governance 2012 and REIT Guidelines, Capital Market and Services Act 2007, Bursa Securities Listing Requirements and relevant corporate governance guidelines.
Changes to Hektar REIT’s corporate governance practices will be updated on our website www.hektarreit.com. The Board Charter is also available on the Corporate Governance section of our website.back to top
The Board of the Manager is responsible for the overall corporate governance of Hektar REIT, including its strategic direction, establishing goals for management and monitoring the achievement of these goals. The role and function of the Board and its committees, as well as the differing roles of the Executive Directors and Non-Executive Directors, are clearly documented in the Board Charter.back to top
The Board is responsible for the stewardship of Hektar REIT’s business and affairs on behalf of shareholders of the Company and unit holders of the REIT with a view to enhancing long term shareholder/ unit holder value whilst taking into account the interests of other stakeholders and maintaining high standards of transparency, accountability and integrity.
The principal responsibilities of the Board are:
- to review and adopt a strategic plan, addressing the sustainability of the Company’s and REIT’s business;
- to oversee the conduct of the Company’s and REIT’s businesses and evaluate whether or not the businesses are being properly managed;
- to identify principal business risks faced by the Company and REIT and ensure the implementation of appropriate systems to manage these risks;
- to consider and implement succession planning, including appointing, training, fixing the compensation of and, where appropriate, replacing members of the Board and Senior Management;
- to develop and implement an investor relations programme or shareholder communications policy for the REIT;
- to review the adequacy and the integrity of the Company’s and REIT’s internal control systems and management information systems, including systems for compliance with applicable laws, regulations, rules, directives and guidelines; and
- to carry out the remunerating responsibilities in the absence of the Remuneration Committee.
An Executive Committee is delegated by the Board to, among other things :
- make decisions in relation to investments to be made or expenditure to be incurred by Hektar REIT;
- make decision in relation to operations and management of Hektar REIT; and
- carry out and undertake such other functions as may be determined by the Board by unanimous resolution and to act in accordance with the instructions of the Board
The committee comprises three directors, namely, Dato’ Hisham bin Othman as chairman, Dr Chew Tuan Chiong and Puan Zalila binti Mohd Toon.back to top
The Audit Committee assists and supports the Board’s responsibility to oversee the Company’s and REIT’s operations by providing a means for review of the Company’s and REIT’s processes for producing financial data, its internal controls, risk management activities and independence of the REIT’s external and internal auditors. The Audit Committee comprising the Independent Directors Mr. Philip Eng Heng Nee, Cik Rahanawati Ali Dawam and Encik Mahusni bin Hasnan as chairman, meets at least four (4) times annually and is delegated by the Board to take on the following functions :
- to review the quarterly and annual financial statements of the REIT, before the approval of the Board.
- to review any related party transaction and conflict of interest situation that may arise within the Manager and the REIT including any transaction, procedure or course of conduct that raises questions of management integrity.
- to review, on an annual basis, the principal risks identified by Management and the methodology employed in the identification, analysis, assessment, monitoring and communication of risks in a regular and timely manner.
- to ensure that the system of internal control is soundly conceived and in place, effectively administered and regularly monitored.
- to review extent of compliance with established internal policies, standards, plans and procedures.
- to obtain assurance that proper plans for control have been developed prior to the commencement of major areas of change within the organisation.
- to be satisfied that the strategies, plans, manning and organisation for internal auditing are communicated down through the REIT.
- to review with the External Auditors the nature and scope of their audit plan, their evaluation of the system of internal controls and report.
- to review any matters concerning the appointment and reappointment, audit fee and any questions of resignation or dismissal of the External Auditors and Internal Auditors.
- to review and evaluate factors related to the independence of the External Auditors and assist them in preserving their independence.
- to be advised of significant use of the External Auditors in performing non-audit services, considering both the types of services rendered and the fees, such that their independence and objectivity as External Auditors are not deemed to be compromised.
- to review the External Auditors’ findings arising from audits, particularly any comments and responses in management letters as well as the assistance given by the employees of the Manager in order to be satisfied that appropriate action is being taken.
- to recommend to the Board steps to improve the system of internal control derived from the findings of the Internal and External Auditors and from the consultations of the Audit Committee itself.
- to prepare the annual Audit Committee Report to the Board which includes the composition of the Audit Committee, its terms of reference, number of meetings held, a summary of its activities for the financial year and the existence of an internal audit function and summary of the activities of that function for inclusion in the annual report.
- to review the Board’s statements on compliance with the Malaysian Code of Corporate Governance for inclusion in the annual report.
- to review ordinary and extraordinary dividend payments.
- to review the assistance given by the employees of Manager to the External Auditors.
- to recommend the nomination of a person or persons as External Auditors.
During the financial year ended 31 December 2016, the Audit Committee has met four (4) times and have deliberated on all matters relating to their scope of function above.back to top
The Nomination Committee oversees matters relating to the nomination of new Directors, annually reviews the required mix of skills, experience, assessment of Independent Directors’, reviews succession plans and, Board diversity; oversees training courses for Directors and other requisite qualities of Directors, as well as the annual assessment of the effectiveness of the Board as a whole, its Committees and the contribution of each individual Director.
The Nominating Committee comprising Independent Directors Mr. Philip Eng Heng Nee, Cik Rahanawati Ali Dawam and Encik Mahusni bin Hasnan as chairman, meets at least once a year and is delegated with the following functions :-
- Identify and recommend candidates to the Board based on their skills, knowledge and experience, professionalism and integrity. In the case of Independent Non-Executive Directors (“INEDs”), the Committee shall evaluate the candidate’s ability to discharge such responsibilities as expected from INEDs.
- Assess on an annual basis, the effectiveness of the Board as a whole and its Board Committees, in the light of the needs of the Manager and the REIT and its operating environment.
- Assess on an annual basis, the contribution of each individual Director.
- Conduct a training needs analysis and recommend a continuous education program for Board members to enhance their effectiveness.
- Conduct an orientation/ induction training for new Directors of the Manager.
- Work together with the Board to develop an effective development and succession plan for Directors and Management members.
- Collaborate to share the results on the Directors assessment with Board for effective determination and deliberation of Directors’ remuneration packages.
As at the print of this statement, the Board consists of eight (8) members, comprising one (1) Independent and Non-Executive Chairman, two (2) Executive Directors, two (2) Non-Executive, Non-Independent Directors and three (3) Independent Non-Executive Directors. 50% of Directors are considered independent which complies and exceeds the directors’ independence requirements set out under paragraph 15.02 of Bursa Malaysia’s LR which requires that at least one-third of the Board to be Independent Directors. A brief profile of each Director is presented in the Board of Directors section of this annual report.
The concept of independence adopted by the Board is in tandem with the definition of an Independent Director in Section 1.01 of Bursa Malaysia’s LR.
The Directors, with their varied backgrounds and areas of expertise, collectively bring with them a wide range of experience and expertise in areas such as strategy, finance, corporate affairs, legal, marketing and operations. The Executive Directors are responsible for implementing policies and decisions of the Board, overseeing operations as well as coordinating the development and implementation of business and corporate strategies. The Independent Directors bring objective and independent judgment to the decision making of the Board and provide a review and challenge on the performance of management. As such, there is proper balance in the Board because of the presence of Independent Directors of the calibre necessary to carry sufficient weight in Board decisions.
The Board recognises the importance of having a clearly accepted division of power and responsibilities at the head of the Company and REIT to promote accountability and facilitate the division of responsibility. Given the importance and nature of the Chairman’s role, the position of Chief Executive Officer (“CEO”) is separate from the Chairman as recommended by the Malaysian Code on Corporate Governance 2012 (“MCCG 2012”) and the position of Chairman is held by a Non-Executive Director. The Board also places importance on the appointment and participation of Independent Non-Executive Directors in order to provide a balanced and independent view on Board deliberations, where the Independent Non-Executive Directors are able to convey their concerns in relation to the Company and the REIT. The Board is of the view that the composition of the Independent Non-Executive Directors, coupled with the adoption of the Board Charter which formally sets out the schedule of matters reserved solely for the Board for decision making, provides the relevant check and balance to ensure no one person in the Board has unfettered powers to make major decisions for the Company and the REIT businesses unilaterally.
The Board ordinarily meets at least once a financial quarter with additional meetings convened when urgent and important decisions need to be taken between the scheduled meetings. For the year ended 31 December 2016, the Board met on 4 occasions, where it deliberated upon and considered a variety of matters including Hektar REIT’s financial results and strategic and major investment decisions.
The Board receives documents on matters requiring its consideration prior to and in advance of each meeting. The Board papers are comprehensive and encompass both qualitative and quantitative factors so that informed decisions can be made. All proceedings from the Board meetings are minuted.
Below are the directors’ attendance for the board meetings held in the financial year 2016 :-
|Board Meeting||Audit Committee Meeting*|
|Dato’ Jaafar Bin Abdul Hamid
(Demised on 24 January 2017)
|Mr Michael Lim Hee Kiang
(Redesignated as Chairman w.e.f. 14 February 2017)
|Dato’ Hisham bin Othman||2/2||N/A|
|Puan Zalila binti Mohd Toon||4/4||N/A|
|Dr Chew Tuan Chiong||4/4||N/A|
|Mr Christopher Tang Kok Kai||4/4||N/A|
|Datuk Kamaruddin bin Awang
(Resigned w.e.f. 23 January 2017)
|Mr Philip Eng Heng Nee||4/4||4/4|
|Mr Jack Lam Juck Ngai
(Alternate Director to Mr Christopher Tang)
(Resigned w.e.f. 1 November 2016)
|Mr Alex Chia Soon Ren
(Alternate Director to Dr Chew Tuan Chiong)
|Ms. Tay Hwee Pio**
(Alternate Director to Mr Christopher Tang)
(Appointed w.e.f. 29 November 2016)
– denotes attendance not required.
* N/A denotes that the director is not a member of this committee.
** No attendance recorded as there was no meeting within the financial year after her appointment.
Note: Directors who are appointed after the financial year but before the date of print are not included here. Please refer to Corporate Directory for full list.
During the financial period under review, the Directors attended various conferences / programmes to enhance their knowledge and expertise, and to keep up to date with the relevant changes in law, regulations and the business environment. The training programmes, conferences and seminars attended by the Directors during the year under review covered areas such as corporate governance, leadership, professional development, industry updates, financial and tax matters amongst others.back to top
It is the Board’s commitment to provide a balanced and meaningful assessment of Hektar REIT’s financial performance and prospects at the end of the financial year, primarily through annual financial statements, quarterly and half yearly announcements of results to unitholders.
Directors' Responsibility Statement In Respect of the Preparation of the Audited Financial Statements
The Board is responsible for ensuring that the financial statements give a true and fair view of the state of affairs of Hektar REIT as at the end of the accounting period and of their profit & loss and cash flows for the period ended. In preparing the financial statements, the Directors endeavour to ensure that applicable approved accounting standards issued by the Malaysian Accounting Standards Board and the provisions of the Companies Act, 1965 are applied.
In preparing the financial statements, the Directors endeavour to select and apply consistently suitable accounting policies and make reasonable and prudent judgments and estimates. The Directors also have a general responsibility for taking such steps as are reasonably open to them to safeguard the assets of Hektar REIT and to prevent and detect fraud and other irregularities.
The Board acknowledges its responsibilities for maintaining sound internal control systems to safeguard unitholders’ interest and Hektar REIT’s assets and for reviewing the adequacy and integrity of these systems.
The Board has adopted an enterprise-wide risk management framework (“ERM”) to enhance its risk management controls. Key risks and controls are continually identified, reviewed and monitored as part of the ERM process. Under the ERM, a Risk Management Unit is set up and the main responsibilities of the Risk Management Unit are :
- Compliance of the ERM process and Methodology;
- Flow through of ERM concept to the respective departments / business units and each process levels;
- Continual risk assessment by each department using the methodology, assessing and monitoring management actions taken;
- Timely identification, mitigation and management of key risks that may have a material impact on Hektar’s profit and loss, balance sheet and corporate objectives;
- Communication and understanding of risk tolerance statements adopted by the relevant departments;
- Periodic discussions of risks and risk issues with management and departmental level;
- Ensuring that the ERM process is carried out by each department / business unit and is endorsed by the CEO;
- Assurance to the CEO and CFO regarding the effectiveness of the ERM.
Risk assessment exercise is carried out every six (6) monthly by the Management where key risks are being reported to the Audit Committee. The main objective is to provide the Board of Directors and the management with a view of events that could impact the achievement of its business objectives.
The Board has put in place an organizational structure with formally defined lines of responsibility and delegation of authority. A process of hierarchical reporting has been established which provide for a documented and auditable trail of accountability. The procedures include the establishment of limits of authority coupled with the publication of an Employees Handbook. There are also established procedures for planning, capital expenditure and for monitoring Hektar REIT’s business and performance.
These procedures provide for continuous assurance to be given at increasingly higher levels of management, and finally, the Board.
The Chief Executive Officer reports to the Board on significant changes in the business and external environment. The Chief Financial Officer provides the Board with quarterly financial information, which includes key financial indicators. This includes, among others, the monitoring of results against budget, with variances being followed up and management action taken, where necessary.back to top
The Board recognizes that the decision making process is highly dependent on the quality of information furnished. As such, all Directors have full and unrestricted access to any information pertaining to Hektar REIT.
The Chairman plays a key role in ensuring that all Directors have full and timely access to information relevant to matters that will be deliberated at the Board meeting. The agenda and set of Board papers are circulated in advance of the Board meetings. A comprehensive balance of financial and non-financial information is encapsulated in the papers covering strategic, operational, financial, regulatory and marketing issues.
All Directors have access to the advice and services of the Company Secretary, who ensures that the Board receives appropriate and timely information for its decision-making, that Board procedures are followed and the statutory and regulatory requirements are met. The Secretary also assists the Chairman in ensuring that all Directors are properly briefed on issues arising at Board meetings. The Board believes that the current Company Secretary is capable of carrying out the appropriate duties to ensure the effective functioning of the Board while the terms of appointment permit the removal and appointment by the Board as a whole.
Directors, whether acting as a full board or in their individual capacity, may obtain independent professional advice in the furtherance of their duties, at the Company’s expense, so far as is practicable and that the cost is reasonable.
The Manager recognizes the importance of being accountable to investors of Hektar REIT and as such maintained an active and constructive communication policy that enables the Board and Management to communicate effectively with Hektar REIT’s investors, stakeholders and public generally. This is achieved principally through quarterly reports, interim reports and annual reports.
The Manager also holds periodic briefings for fund managers, analysts and institutional investors. Press conferences are held when required, to brief members of the media on Hektar REIT’s strategic direction, performance and key events.
While the Manager endeavours to provide as much information possible to Hektar REIT’s unitholders, it is mindful of the legal and regulatory frameworks governing the release of material and pricesensitive information.
In November 2012, Bursa Malaysia had amended its LR in line with the recommendations made under the Corporate Governance Blueprint 2011 ("CG Blueprint"), as well as the Malaysian Code on Corporate Governance 2012 ("MCCG 2012") issued by the Securities Commission ("SC"). Following to this, the Board has drafted and approved a Board Charter to outline the principal role of the Board, establishing the functions, responsibilities and powers of the Board and its various Committees; and to set the policies and practices of the Board.
This Board Charter further defines the specific responsibilities of the Board, in order to enhance coordination and communication between the Chief Executive Officer and the Board and more specifically, to clarify both Board and Management accountability for the benefit of all its stakeholders, including the shareholders of the Company and unit holders of the REIT.back to top
The information set out below is disclosed in compliance with the Securities Commission’s Guidelines on Real Estate Investment Trusts :-
- Sanctions and/or penalties
There are no public sanction and/or penalty imposed on Hektar REIT, its directors or management of the Manager, by relevant regulatory bodies during the financial year ended 31 December 2016.
- Non-audit fees
The non-audit fees payable to the external auditors of Hektar REIT for the financial year ended 31 December 2016 amounts to RM 68,000.
- Soft commission
There was no soft commission received by the Manager for during the financial year ended 31 December 2016.
- Variation in results
There was no variance of 10% or more between the audited results for the financial year ended 31 December 2016 and the unaudited results previously announced during the quarter announcement. Hektar REIT did not release any profit estimate, forecast or projection for the financial year.
- Material contracts involving the interests of directors and major unitholders
There were no material contracts entered into by Hektar REIT involving the interests of the Directors and major unitholders during the financial year ended 31 December 2016.