LMIRT Management Ltd (the "Manager" or "LMIRT Management") is appointed as the manager of Lippo Malls Indonesia Retail Trust (the "LMIR Trust") in accordance with the terms of the Trust Deed dated 8 August 2007 as amended or supplemented (the "Trust Deed").
The Manager and its Officers are licensed under the Securities and Futures Act, Cap 289 ("SFA") to conduct Real Estate Investment Trust Management with effect from 6 May 2010.
LMIRT Management is committed to good corporate governance as it believes that such self-regulation is essential to protect the interestsof the Unitholders, as well as critical to the performance of the Manager.
It uses the Code of Corporate Governance (the "Code") as its benchmark for its corporate governance policies and practices. The followingsegments describe the Manager's main corporate governance policies and practices.
The Manager has general power of management over the assets of LMIR Trust.
LMIRT Management's main responsibility is to manage LMIR Trust's assets and liabilities for the benefit of Unitholders. The Manager's key financial objectives are to provide Unitholders of LMIR Trust with a competitive rate of return on their investment by ensuring regular and stable distributions to Unitholders and to achieve long-term growth in the net asset value of LMIR Trust.
The role of the Manager includes setting strategic direction of LMIR Trust and recommending to HSBC Institutional Trust Services (Singapore) Limited, as trustee of LMIR Trust (the "Trustee"), the acquisition, divestment and enhancement of assets of LMIR Trust in accordance with its stated investment strategy. The Manager is also responsible for the risk management of LMIR Trust.
Other functions and responsibilities of the Manager include:
LMIR Trust, constituted as a real estate investment trust, is managed by the Manager and accordingly, it has no personnel of its own. The Manager appoints experienced and well-qualifi ed management personnel to handle the day-to-day operations of the Manager. The Manager has in place procedures to comply with existing rules and regulations aff ecting listed REITs. The Legal and Compliance officer handles compliance with MAS' requirements.
Role of the Board
The Board of Directors of the Manager (the "Board") is entrusted with the responsibility for overall management and corporate governance of the Manager including establishing goals for management and monitoring the achievement of these goals. The Board is also responsible for the strategic business direction and risk management of LMIR Trust, and reviewing and assessing Management's performance. All Board members participate in matters relating to corporate governance, business operations and risk assessments, financial performance, and the nomination of Directors.
The Board meets to review the Manager's key activities. Board meetings are held once every quarter (or more often if necessary) to discuss and review the strategies and policies of LMIR Trust, including any signifi cant acquisitions and disposals, the annual budget, the financial performance of LMIR Trust against previously approved budget, and to approve the release of the quarterly, half year and full year results. The Board also reviews the risks to the assets of LMIR Trust, and acts judiciously upon the comments from the auditors of LMIR Trust. Where necessary, additional Board meetings will be held to address signifi cant transactions or issues. The Articles of Association of the Manager provide for Board meetings to be held by way of telephone conference and/or videoconference.
The Board is supported by the Audit Committee which provides independent supervision of management. The Board has adopted a set of internal controls, which sets out approval limits on capital expenditure, investments and divestments and bank borrowings as well as arrangement in relation to cheque signatories. The Board believes that the internal control system adopted is adequate and appropriate delegation of authority has been provided to management to facilitate operational effi ciency. The Board confi rms that based on the work performed by the internal auditors and the review undertaken by the external auditors, the Board, with the concurrence of the Audit Committee, is of the opinion that LMIR Trust's internal controls, addressing financial, operational, compliance and information technology risks, are adequate and Effective.
Changes to regulations, policies and accounting standards are monitored closely. Where the changes have an important impact on LMIR Trust or have an important bearing on the Manager's or Directors' disclosure obligations, the Directors will be briefed either during Board meetings or at specially-convened sessions involving relevant professionals. Management also provides the Board with complete and adequate information on a timely manner through regular updates on financial results, market trends and business developments. Newly appointed directors are briefed by management on the business activities of LMIR Trust and its strategic direction and all relevantregulations they need to comply with.
Six (6) Board meetings were held during the financial year 2012 and the attendance at the Board meetings are set out on page 46 of this Annual Report.
Disclosure of the Directors of their Board Representations in other Listed Company
The Board has recognized that the directors also hold other board representations in other listed companies. As such, the Board has continued to review and consider the maximum number of listed company board representation which any director may hold. The purpose of this is to ensure that suffi cient time and attention is given to the aff airs of each of the company.
The composition of the Board is determined using the following principles:
The composition of the Board is reviewed regularly to ensure adherence to the above principles.
The Board presently consists of six Directors, of whom only the Chief Executive Officer is an Executive Director, three are Independent Directors and two are Non-Executive Directors.
Mr Albert Saychuan Cheok, Mr Lee Soo Hoon, Phillip and Mr Goh Tiam Lock are considered Independent Directors.
The Board comprises business leaders and professionals with accounting, fund management, property, retail, banking and finance backgrounds.
The Board considers the present Board size appropriate for the nature and scope of LMIR Trust's operations. The profiles of the Directors are set out on pages 34 to 37 of this Annual Report.
Board Membership and Board Performance
As the Manager is not itself a listed entity, the Manager does not consider it necessary for the Board to establish a nominating committee as it believes that the performance of the Manager, and hence, its Board, is refl ected in the long term success of LMIR Trust. The Board reviews the structure, size and composition of the Board periodically.
The independence of each Director is reviewed upon appointment and reaffi rmed annually by the Board. The majority of the Directors are non-executive and independent of management. This enables management to benefi t from their external, diverse and objective perspective on issues that are brought before the Board. It also enables the Board to work with management through robust exchange of ideas and views to help shape the strategic process. This, together with a clear separation of the roles between the Chairman and the Chief Executive Officer, provides a healthy professional relationship between the Board and management, with clarity of roles and robust oversight as they deliberate on business activities of the Manager.
The Board has separate and independent access to senior management and the Company Secretary at all times and vice versa. The Company Secretary attends to corporate secretarial administration matters and attends all Board meetings.
The Board also has access to independent professional advice where appropriate.
The remuneration of Directors and staff of the Manager is paid by the Manager and not LMIR Trust. It is hence not necessary for the Manager to have a remuneration committee or to include a report on remuneration of its Directors and key executives.
The Manager believes that performance of the Board and individual board members would be better directed in providing proper guidance, diligent oversight and able leadership and support to the Manager in the management of LMIR Trust assets under challenging market conditions. This will in turn maximize Unitholder value.
The positions of Chairman of the Board and Chief Executive Officer are held by two separate persons. The Chairman, Mr Albert Saychuan Cheok, is an Independent Director while the Chief Executive Officer, Ms Viven Gouw Sitiabudi, is an Executive Director. This ensures Effective oversight and clear segregation of responsibilities. The Chairman and Chief Executive Officer are not related to each other.
The Chairman is responsible for the overall management of the Board as well as ensuring that members of the Board work together with management in a constructive manner to address strategies, business operations and enterprise issues. The Chief Executive Officer has full executive responsibilities over business direction and operational decisions concerning the management of LMIR Trust. She works closely with the Board to implement the policies set by the Board to realise the Manager's vision.
The Audit Committee is appointed by the Board from among the Directors and is composed of three members, all of whom (including the Chairman of the Audit Committee) are Independent Directors.
The Audit Committee consists of the following members:
|Mr. Lee Soo Hoon, Phillip (Chairman)||(Non-executive and Independent)|
|Mr. Albert Saychuan Cheok||(Non-executive and lndependent)|
|Mr. Goh Tiam Lock||(Non-executive and lndependent)|
The role of the Audit Committee is to monitor and evaluate the Effectiveness of the Manager's internal controls. The Audit Committee also reviews the quality and reliability of information prepared for inclusion in financial reports, and is responsible for the nomination of external auditors and reviewing the adequacy of external audits in respect of cost, scope and performance. The Audit Committee has recommended the outsourcing of the Manager's Internal Audit function and this has been accepted by the Board.
The Audit Committee's responsibilities include:
The Audit Committee has full access to and co-operation from management and enjoys full discretion to invite any director and executive Officer of the Manager to attend its meetings. The Audit Committee also has full access to reasonable resources to enable it to discharge its functions properly. The Trust has complied with Rules 712, 715 and 716 of the Listing Manual issued by the Singapore Exchange Securities Trading Limited in relation to its auditors.
During the financial year under review, the external auditors were paid fees and expenses totalling S$223,000 for their services as reporting accountants in connection with the issuance of Notes under the Guaranteed Euro Medium Term Note Programme and acquisition of the six properties. The re-appointment of the external auditors will be subject to approval by way of an ordinary resolution of Unitholders at LMIR Trust's fourth Annual General Meeting, to be held on 26 April 2013.
Four (4) Audit Committee meetings were held during the financial year 2012.
The attendance at the Board and Audit Committee meetings held is set out below.
Attendance of the Directors for 2012:
The Manager has put in place a system of internal controls of procedures and processes to safeguard LMIR Trust's assets, Unitholders' interest as well as to manage risks.
The internal audit function of the Manager is out sourced to KPMG LLP. The internal auditors report directly to the Audit Committee. The Audit Committee is of the view that the internal auditors have adequate resources to perform their functions.
The Board has adopted code of conduct to provide guidance to its directors or Officers dealing in LMIR Trust's units ("Units"). A Director is required to give notice to the Manager of his/her acquisition of Units or changes in the number of Units he/she holds or in which he/ she has an interest, within two business days after such acquisition or occurrence.
In general, the Manager's policy encourages directors and employees of the Manager to hold Units but prohibits them from dealing in such Units:
The Directors and employees of the Manager are expected to observe insider trading rules at all times.
In addition, as part of its undertaking to the MAS, the Manager has undertaken that it will not deal in the Units during the period commencing one month before the public announcement of LMIR Trust's full year results and where applicable, property valuation, and two weeks before the public announcement of LMIR Trust's quarterly results and ending on the date of announcement of the relevant results or, as the case may be, property valuation.
Effective risk management is a fundamental part of LMIR Trust's business strategy. Recognising and managing risk is central to the business and to protecting Unitholders' interests and value. LMIR Trust operates within overall guidelines and specifi c parameters set by the Board. Each transaction is comprehensively analysed to understand the risks involved. Responsibility for managing risk lies initially with the business unit concerned, working within the overall strategy outlined by the Board.
The Board reviews the business risks of LMIR Trust, examines liability management and act upon any comments from the auditors of LMIR Trust. In assessing business risk, the Board considers the economic environment and risk relevant to the property industry. The Board reviews management reports and feasibility studies on individual development projects prior to approving major transactions. Management meets regularly to review the operations of the Manager and LMIR Trust and discuss any disclosure issues.
The Manager has instituted the following procedures to deal with potential confl icts of interest issues, which the Manager may encounter, in managing LMIR Trust:
It is also provided in the Trust Deed that if the Manager is required to decide whether or not to take any action against any person in relation to any breach of any agreement entered into by the Trustee for and on behalf of LMIR Trust with a related party of the Manager, the Manager shall be obliged to consult a reputable law fi rm (acceptable to the Trustee) which shall provide legal advice on the matter. If the said law fi rm is of the opinion that the Trustee has a prima facie case against the party allegedly in breach under such agreement, the Manager shall be obliged to take appropriate action in relation to such agreement. The Directors shall have a duty to ensure that the Manager so complies. Notwithstanding the foregoing, the Manager shall inform the Trustee as soon as it becomes aware of any breach of any agreement entered into by the Trustee for and on behalf of LMIR Trust with a related party of the Manager and the Trustee may take any action it deems necessary to protect the rights of Unitholders and/or which is in the interest of Unitholders. Any decision by the Manager not to take action against a related party of the Manager shall not constitute a waiver of the Trustee's right to take such action as it deems fi t against such related party.
The Audit Committee has put in place procedures to provide employees of the Manager with well defi ned and accessible channels to report on suspected fraud, corruption, dishonest practices or other similar matters relating to LMIR Trust or the Manager, and for the independent investigation of any reports by employees and appropriate follow up action. The aim of the whistle blowing policy is to encourage the reporting of such matters in good faith, with the confi dence that employees making such reports will be treated fairly, and to the extent possible, be protected from reprisal.
In general, the Manager has established procedures to ensure that all Related Party Transactions will be undertaken on an arms' length basis and on normal commercial terms, which are generally no more favourable than those extended to unrelated third parties and will thus not be prejudicial to the interests of LMIR Trust and the Unitholders. As a general rule, the Manager must demonstrate to Audit Committee that such transactions satisfy the foregoing criteria, which may entail obtaining (where practicable) quotations from parties unrelated to the Manager, or obtaining one or more valuation from independent professional valuers (in accordance with the Property Funds Guidelines).
In addition, the following procedures will be undertaken:
For Related Party Transactions entered into or to be entered into by the Trustee (as trustee of LMIR Trust), the Trustee is required to consider the terms of such transactions to satisfy itself that such transactions are conducted on arm's length basis and on normal commercial terms, are not prejudicial to the interests of LMIR Trust and the Unitholders, and are in accordance with all applicable requirements of the Property Funds Guidelines and/or the Listing Manual relating to the transaction in question. Further, the Trustee (as trustee of LMIR Trust) has the ultimate discretion under the Trust Deed to decide whether or not to enter into a Related Party Transaction. If the Trustee (as trustee of LMIR Trust) is to sign any Related Party Transaction contract, the Trustee will review the contract to ensure that it complies with the requirements relating to Related Party Transaction as well as such other guidelines as may from time to time be prescribed by the MAS and the SGX-ST to apply to real estate investment trusts.
Role of the Audit Committee for Related Party Transactions
All Related Party Transactions will be subjected to regular periodic reviews by the Audit Committee. The Manager's internal control procedures are intended to ensure that Related Party Transactions are conducted on arm's length basis and on normal commercial terms and are not prejudicial to the interest of Unitholders.
The Manager will maintain a register to record all Related Party Transactions (and the bases, including any quotations from unrelated third parties and independent valuations obtained to support such bases, on which they are entered into) which are entered into by LMIR Trust. The Manager will incorporate into its internal audit plan a review of all Related Party Transactions entered into by LMIR Trust. The Audit Committee shall review the internal audit reports to ascertain that the guidelines and procedures established to monitor Related Party Transactions have been complied with. In addition, the Trustee will also have the right to review such audit reports to ascertain that the Property Funds Guidelines have been complied with. The Audit Committee will periodically review all Related Party Transactions to ensure compliance with the Manager's internal control procedures and with the relevant provisions of the Property Funds Guidelines and/or the Listing Manual. The review will include the examination of the nature of the transactions and its supporting documents or such other data deemed necessary by the Audit Committee.
If a member of the Audit Committee has an interest in a transaction, he is required to abstain from participating in the review and approval process in relation to that transaction.
The Listing Manual of the SGX-ST requires that a listed entity disclose to the market matters that would be likely to have a material effect on the price of the entity's securities. The Manager strives to uphold a strong culture of timely disclosure and transparent communication with the LMIR Trust Unitholders and the investing community.
The Manager's disclosure policy requires timely and full disclosure of all material information relating to LMIR Trust by way of public releases or announcements through the SGX-ST via SGXNET at fi rst instance and then including the release on LMIR Trust's website at www.lmir-trust.com.
The Manager also uses other channels of communication with Unitholders such as:
As recommended by the Code, all resolutions at general meetings are voted by general poll.