The Manager of MIT has responsibility over the strategic direction and management of the assets and liabilities of MIT.
The Manager discharges its responsibility for the benefit of MIT’s unitholders (“Unitholders”), in accordance with the applicable laws and regulations as well as the trust deed constituting MIT (“Trust Deed”). To this end, the Manager sets the strategic direction of MIT and gives recommendations to DBS Trustee Limited, in its capacity as trustee of MIT (the “Trustee”), on the acquisition, divestment or enhancement of assets of MIT. As a REIT Manager, the Manager is licensed by the Monetary Authority of Singapore and granted a Capital Markets Services Licence.
The Manager is committed to apply the Principles and the spirit of the Code of Corporate Governance 2005 (the “Code”).
The Board of Directors and employees of the Manager are remunerated by the Manager, and not by MIT.
(A) BOARD MATTERS
Board’s Conduct of its Affairs
Principle 1: Effective board
Our Policy and Practices
The Manager applies the principle that an effective Board of Directors (the “Board”) for the Manager is one constituted with the right core competencies and diversity of experience, so that the collective wisdom of the Board can give guidance and provide insights as well as strategic thinking to the Management.
The positions of Chairman and Chief Executive Officer (“CEO”) are held by two separate persons in order to maintain effective oversight.
The Board comprises nine Directors, of whom eight are Non-Executive Directors and three are Independent Directors.
The following sets out the composition of the Board:
• Mr Wong Meng Meng, Chairman and Non-Executive Director
• Mr Soo Nam Chow, Chairman of the Audit and Risk Committee and Independent Director
• Mr Seah Choo Meng, Member of the Audit and Risk Committee and Independent Director
• Mr John Koh Tiong Lu, Member of the Audit and Risk Committee and Non-Executive Director
• Mr Wee Joo Yeow, Independent Director
• Mr Hiew Yoon Khong, Non-Executive Director
• Mr Wong Mun Hoong, Non-Executive Director
• Mr Phua Kok Kim, Non-Executive Director
• Mr Tham Kuo Wei, Executive Director and Chief Executive Officer
The Board consists of business leaders and distinguished professionals in their respective fields. Each Director is appointed on the strength of his calibre, experience, stature, and potential to give proper guidance to the Manager for the business of MIT. They meet regularly, at least once every quarter, to review the business performance and outlook of MIT, as well as to deliberate on business strategy, including any significant acquisitions, development projects and disposals of MIT.
The meeting attendance of the Board and the Audit and Risk Committee for FY11/12 is as follows:
The Board is updated on any change to relevant laws, regulations and accounting standards by way of briefings by professionals or by updates issued by Management. In FY11/12, a briefing was held to update the Board on the relevant changes to the International Financial Report Standards and the relevant amendments to the Listing Manual of the SGX-ST as well as the recommendations on changes to the Code.
Board Composition and Balance
Principle 2: Strong and independent element on the board
Our Policy and Practices
The Manager applies the principle that at least one-third of its Directors are independent and the majority of its Directors are non-executive. This allows the Directors to engage in robust deliberations with Management and provide external, diverse and objective insights into issues brought before the Board. Further, such composition and separation of the roles of the Chairman and the CEO, provides oversight to ensure that Management discharges its roles with integrity.
Chairman and Chief Executive Officer
Principle 3: Clear division of responsibilities
Our Policy and Practices
The Manager applies the principle of clear separation of the roles and responsibilities between the Chairman of the Board and the CEO of the Manager. The Chairman guides the Board in constructive debates on the strategic direction, management of assets and governance matters. He is non-executive, and is free to act independently in the best interests of the Manager and Unitholders. The Chairman and the CEO are not related to each other.
The CEO is responsible for the running of the Manager’s business operations. He has full executive responsibilities over the business and operational decisions of MIT. The CEO is also responsible for ensuring compliance with the applicable laws and regulations in the daily operations of MIT.
Principle 4: Formal and transparent process for appointments
Our Policy and Practices
As the Manager is not a listed entity, it does not have a nominating committee. However, the Manager applies the principle that Board renewal is an ongoing process to ensure good governance and maintain relevance to the changing needs of the Manager and MIT’s business. All appointments and resignations of Board members are approved by the Board.
As a principle of good corporate governance, all Board members are required to submit themselves for re-nomination and re-election at regular intervals. The CEO, as a Board member, would subject himself to retirement and re-election.
Principle 5: Formal assessment of the effectiveness of the board
Our Policy and Practices
The Manager applies the principle that the Board’s performance is ultimately reflected in the performance of the Manager and MIT. The Manager conducted a formal assessment of Board performance this year.
Each Board member is given sufficient time to bring to the Board his or her perspective to enable balanced and well considered decisions to be made.
Access to Information
Principle 6: Complete, adequate and timely access to information
Our Policy and Practices
The Manager applies the principle that the Board shall be provided with timely and complete information prior to Board meetings as well as when the need arises.
Management is required to provide adequate and timely information to the Board, which includes matters requiring the Board’s decision as well as on-going reports relating to the operational and financial performance of MIT.
The Board has separate and independent access to Management and the Company Secretary. The Company Secretary attends to the administration of corporate secretarial matters and attends all Board and committee meetings.
The Board takes independent professional advice as and when necessary to enable it or the Independent Directors to discharge their responsibilities effectively. The Audit and Risk Committee meets the external and internal auditors separately at least once a year, without the presence of Management.
(B) REMUNERATION MATTERS
Procedures for Developing Remuneration Policies
Principle 7: Formal and transparent procedure for fixing the remuneration of directors
Level and Mix of Remuneration
Principle 8: Appropriate level of remuneration
Disclosure on Remuneration
Principle 9: Clear disclosure of remuneration matters
Our Policy and Practices
The Manager applies the principle that remuneration matters are to be sufficiently structured and benchmarked to good market practices, in order to attract suitably qualified talents so as to grow and manage its business.
The Manager applies the principle that remuneration for the Board and Senior Management should be viewed in totality. On one hand, it is linked to the continuous development of management bench strength to ensure that there is robust talent management and succession cover, and, on the other hand, the concerted pursuit of strong and ethical leadership for the success of MIT’s business and the Manager.
As the Manager is not a listed entity, it is not presently considered necessary for it to have a remuneration committee. However, as a subsidiary of the Sponsor, the Manager takes its reference from the remuneration policies and practices of the Sponsor in determining the remuneration of the Board and key executives. The Executive Resources and Compensation Committee (“Mapletree’s ERCC”) of the Sponsor at group level serves the crucial role of helping to ensure that the Manager is able to recruit and retain the best talents to drive its business forward.
The members of the Mapletree’s ERCC are:
• Mr Edmund Cheng Wai Wing (Chairman)
• Mr Paul Ma Kah Woh (Member)
• Ms Chan Wai Ching, Senior Managing Director, Temasek Holdings (Private) Limited (Co-opted Member)
All the members of the Mapletree’s ERCC are independent of Management. The Mapletree’s ERCC oversees executive compensation and development of the management bench strength, so as to build and augment a capable and dedicated management team, and gives guidance on progressive policies which can attract, motivate and retain a pool of talented executives for the present and future growth of the Manager.
Specifically, the Mapletree’s ERCC:
• establishes compensation policies for key executives;
• approves salary reviews, bonuses and incentives for key executives;
• approves key appointments and review succession plans for key positions; and
• oversees the development of key executives and younger talented executives.
Mapletree’s ERCC conducts, on an annual basis, a succession planning review of the CEO and selected key positions in the Manager. In this regard, potential internal and external candidates for succession are reviewed for immediate, medium term and longer term needs. A total of four meetings were held by Mapletree’s ERCC in FY11/12.
The remuneration of the Board and the employees of the Manager is paid by the Manager from the fees it receives from MIT, and not by MIT. Since MIT does not bear the remuneration of the Manager’s Board and employees, the Manager does not consider it necessary to include information (other than as set out below) on the remuneration of its Directors and its key executives.
The Chairman and the Non-Executive Directors have no service contracts with the Manager. Save for Mr Hiew Yoon Khong, Mr Wong Mun Hoong, Mr Phua Kok Kim, and Mr Tham Kuo Wei, all the Directors receive a basic fee and an additional fee for serving on the Audit and Risk Committee. Directors’ fees are subject to the approval of the Manager’s shareholder and the directors’ fees paid to the Board for FY11/12 are as follows:
The CEO, as an Executive Director, does not receive director’s fees. He is a lead member of Management. His compensation consists of salary, allowances, bonuses and share appreciation awards from the Sponsor. The latter is conditional upon him meeting certain performance targets. The CEO is not present during the discussions relating to his own compensation and terms and conditions of service, and the review of his performance.
Mr Hiew Yoon Khong, Mr Wong Mun Hoong and Mr Phua Kok Kim, respectively the Group Chief Executive Officer, the Group Chief Financial Officer and the Regional Chief Executive Officer, South-East Asia of the Sponsor, also do not receive director’s fees for serving as Non-Executive Directors of the Manager.
(C) ACCOUNTABILITY AND AUDIT
Principle 10: Balanced and understandable assessment of the company’s performance, position and prospects
Our Policy and Practices
The Manager applies the principle that to build confidence amongst stakeholders, there is a need to deliver maximum sustainable value.
The Manager complies with statutory and regulatory requirements as well as adopts best practices in its business processes.
Audit and Risk Committee (“AC”)
Principle 11: Written terms of reference
Our Policy and Practices
The Board is supported by the AC to allow deeper overview of financial, risks and audit matters, so as to maximise the effectiveness of the Board and foster active participation and contribution.
The Manager applies the principle that the AC shall have at least three members, all of whom must be non-executive and the majority of whom must be independent.
The AC consists of three members. They are:
• Mr Soo Nam Chow, Chairman
• Mr Seah Choo Meng, Member
• Mr John Koh Tiong Lu, Member
The AC has a set of Terms of Reference dealing with its scope and authority, which include:-
• review annual internal and external audit plans;
• examine Interested Person Transactions;
• review audit findings of internal and external auditors as well as management responses to them;
• evaluate the nature and extent of non-audit services performed by external auditors. In this regard, for FY11/12, MIT paid S$132,450 to the external auditors PricewaterhouseCoopers LLP (“PwC”), of which S$127,450 was for audit services and S$5,000 was for non-audit services relating to the establishment of the S$1.0 billion Multi-Currency Medium Term Note Programme for MIT. The AC has undertaken a review of all non-audit services provided by PwC and is of the opinion that such non-audit services would not affect the independence of the PwC; and
• recommend the appointment and re-appointment of external auditors.
In addition, the AC also:-
• meets with the external and internal auditors, without the presence of Management, at least once a year to review and discuss the financial reporting process, system of internal controls, significant comments and recommendations; and
• reviews all notification to the whistle-blowing mechanism by which staff may, in confidence, raise concerns about possible improprieties in matters of financial reporting or other matters. The objective is to ensure that arrangements are in place for independent investigations of such matters and for appropriate follow-up actions.
A total of four AC meetings were held in FY11/12.
The Manager, on behalf of MIT, confirms that MIT has complied with Rules 712 and 715 of the Listing Manual in relation to its auditing firm.
Principle 12: Sound system of internal controls
Our Policy and Practices
The Manager is committed to the principle of a sound system of internal controls.
The Manager, working with the Sponsor, has established an internal control framework which addresses the operational, financial and compliance risks applicable to MIT’s business and operating environment. These internal controls provide reasonable but not absolute assurance on the achievement of their intended control objectives.
The key elements of MIT’s system of controls are as follows:
The Manager has a defined operating structure with lines of responsibility and delegated authority, as well as reporting mechanisms to the Senior Management and the Board. This structure includes certain functions, such as Human Resources, Information Technology, Internal Audit, Legal and Risk Management, which are outsourced to the Sponsor.
Policies, Procedures and Practices
Controls are detailed in formal procedures and manuals. For example, the Board has approved a set of delegations of authority which sets out approval limits for operational and capital expenditures, investments and divestments, bank borrowings and cheque signatory arrangements. Approval sub-limits are also provided at various management levels to facilitate operational efficiency as well as provide a system of checks and balances.
The Internal Audit department (“IA”) of the Sponsor verifies compliance with these control procedures and manuals.
To reinforce a culture of good business ethics and governance, the Manager has a Whistle-blowing Policy to encourage the reporting in good faith of any suspected improper conduct, including possible financial irregularities, whilst protecting the whistleblowers from reprisals. Any reporting shall be notified to the AC Chairman and the AC for investigation.
Risk management is an integral part of business management by the Manager. In order to safeguard and create value for Unitholders, the Manager proactively manages risks and requires the risk management process to be part of the Manager’s planning and decision making process. The Manager’s policies and procedures relating to risk management can be found on pages 64 to 65 of the Annual Report.
In this regard, the Sponsor’s Risk Management department oversees the risk management framework, the adequacy and effectiveness of the risk management system and monitors the key risks faced by MIT. It reports to the AC and the Board on material findings and recommendations in respect of significant risk matters.
The Board is regularly updated on MIT’s financial performance via quarterly reports. These reports provide explanations for significant variances of financial performance and updated full year forecast, in comparison with budgets and financial performance of corresponding periods in the preceding year. In addition, the Board is provided with quarterly updates on key operational activities.
A management representation letter is provided in connection with the preparation of MIT’s financial statements presented to the AC and Board quarterly. The representation letter is supported by declarations made individually by the various Heads of Departments. Compliance checklists on announcement of financial statements, which are required for submission to the SGX-ST, are reviewed and confirmed by the Chief Financial Officer (“CFO”).
MIT’s financial results are reported to Unitholders quarterly in accordance with the requirements of the SGX-ST. These results announcements provide analysis of significant variances in financial performance and commentary on the industry’s competitive conditions in which MIT operates and any known factors or events that may affect MIT in the next reporting period and the next 12 months.
Detailed disclosure and analysis of the full year financial performance of MIT are in the Annual Report.
Management reviews the performance of the MIT portfolio properties on a monthly basis to instill financial and operational discipline at all levels of the Manager.
The key financial risks to which the MIT is exposed to comprise interest rate risk, liquidity risk and credit risk. Where necessary and appropriate, the Manager hedges MIT against interest rate fluctuations. In addition, the Manager proactively manages liquidity risk by maintaining sufficient working capital lines and bank facilities. The Manager’s capital management strategy can be found on pages 61 to 63 of this Annual Report. The Manager also has in place credit control procedures for managing tenant credit risk and monitoring of debt collection.
On an annual basis, the Sponsor’s Internal Audit Department (“IA”) prepares a risk-based audit plan to review the adequacy and effectiveness of MIT’s system of internal controls. The IA is also involved during the year in conducting system or process reviews that may be requested by the AC or Management on specific areas of concerns. In doing so, the IA obtains reasonable assurance that business objectives for the process under review are being achieved and key control mechanisms are in place.
Upon completion of each review, a formal report detailing the audit findings and the appropriate recommendations will be issued to the AC. The IA monitors and reports on the timely implementation of the action plans to Management and the AC on a quarterly basis.
The external auditors provide an independent perspective on certain aspects of the internal financial controls system arising from their work and annually report their findings to the AC.
Related Party Transactions
For all related party transactions, they are undertaken only on normal commercial terms and the AC regularly reviews all related party transactions to ensure compliance with the internal control system as well as with relevant provisions of the Listing Manual and the Property Funds Guidelines. In addition, the Trustee also has the right to review such transactions to ascertain that the Property Funds Guidelines have been complied with. The following rules are also applied:
• transactions (either individually or as part of a series or if aggregated with other related party during the same financial year) equal to or exceeding S$100,000 in value but below 3.0% of the value of MIT’s net tangible assets will be subject to review by the AC at regular intervals;
• transactions (either individually or as part of a series or if aggregated with other related party during the same financial year) equal to or exceeding 3.0% but below 5.0% of the value of MIT’s net tangible assets will be subject to the review and prior approval of the AC. Such approval shall only be given if the transactions are on normal commercial terms and are consistent with similar types of transactions made by the Trustee with third parties which are unrelated to the Manager; and
• transactions (either individually or as part of a series or if aggregated with other related party during the same financial year) equal to or exceeding 5.0% of the value of MIT’s net tangible assets will be reviewed and approved prior to such transactions being entered into, on the basis described in the preceding paragraph, by the AC which may, as it deemsfit, request advice on the transaction from independent sources or advisers, including the obtaining of valuations from independent professional valuers. Further, under the Listing Manual and the Property Funds Guidelines, such transactions would have to be approved by the Unitholders at a meeting with the Unitholders.
Dealing in MIT units
The Manager adopts the best practices on dealings in securities set out in the Listing Manual. All Directors provide and are also provided with disclosures of interests by other Directors as well as reminders on trading bans.
On trading in MIT units, the Directors and employees of the Manager are reminded not to deal in MIT units on short-term considerations and are prohibited from dealing in MIT units:
• in the period commencing one month before the public announcement of MIT’s annual and semi-annual results;
• in the period commencing two weeks before the public announcement of MIT’s quarterly results; and
• at any time whilst in possession of price-sensitive information.
Each Director is required to give notice to the Manager of his or her acquisition of MIT units or of changes in the number of MIT units which he or she holds or in which he or she has an interest, within two business days of such acquisition or change of interest. In addition, employees of the Manager and the Sponsor are to give pre-trading notifications before any dealing in MIT units.
Role of the Board and AC
The Board recognises the importance of maintaining a sound internal controls system to safeguard the assets of MIT and Unitholders’ interests, through a framework that enables risk to be assessed and managed.
The AC provides oversight of the financial reporting risks, accounting policies and the adequacy and effectiveness of MIT’s internal controls and compliance systems.
Based on the internal controls established and maintained by the Manager and Mapletree Group, work performed by Mapletree Group’s Internal Audit and Risk Management departments as well as by the external auditors, and reviews performed by Management, the Board, with the concurrence of the AC, is of the opinion that MIT’s internal controls, addressing key financial, operational and compliance risks, were adequate as at 31 March 2012.
Principle 13: Independent internal audit function
Our Policy and Practices
The Manager applies the principle that a robust system of internal audits is required to safeguard Unitholders’ interests, MIT’s assets, and to manage risks. Apart from the AC, other Board committees may be set up from time to time to address specific issues or risks.
The IA of the Sponsor reports directly to the Chairman of the AC of both the Manager and the Sponsor.
The role of IA is to conduct internal audit work in consultation with, but independently of Management. Its annual audit plan and audit findings are submitted to the AC. The AC also meets with the IA at least once a year without the presence of Management.
The Internal Auditor is a corporate member of the Singapore branch of the Institute of Internal Auditors Inc. (“IIA”), which has its headquarters in the USA. IA subscribes to, and is guided by the Standards for the Professional Practice of Internal Auditing (“Standards”) developed by the IIA and has incorporated these standards into its audit practices.
The Standards set by the IIA cover requirements on:
• independence & objectivity;
• proficiency & due professional care;
• managing the internal audit activity;
• engagement planning;
• performing engagement; and
• communicating results.
IA staff involved in Information Technology (“IT”) audits are Certified Information System Auditors and members of the Information System Audit and Control Association (“ISACA”) in the USA. The ISACA Information System Auditing Standards provide guidance on the standards and procedures to be applied in IT audits.
To ensure that the internal audits are performed by competent professionals, IA recruits and employs qualified staff. In order that their technical knowledge remains current and relevant, IA identifies and provides training and development opportunities to the staff.
(D) COMMUNICATION WITH SHAREHOLDERS
Principle 14: Regular, effective and fair communication with shareholders
Greater shareholder participation
Principle 15: Greater shareholder participation at Annual General Meetings (“AGM”)
Our Policy and Practices
The Manager is committed to regular and timely communication with Unitholders as well as to ensure equal access to information.
The Manager has an Investor Relations department which works with the Legal and Corporate Secretariat department of, the Sponsor to ensure MIT’s compliance with legal and regulatory requirements applicable to listed companies, as well as to incorporate best practices in its investor relations programme.
The Manager regularly communicates major developments in MIT’s businesses and operations to Unitholders, analysts, the media and its employees. The Manager issues announcements and press releases on MIT’s latest corporate developments on an immediate basis where required under the Listing Manual. Where immediate disclosure is not practicable, the relevant announcement will be made as soon as possible to ensure that all stakeholders and the public have equal access to the information.
The Manager also communicates with MIT’s investors on a regular basis through one-on-one meetings, investor conferences and non-deal roadshows. The Manager’s CEO, CFO and Senior Management are present at briefings and communication sessions to answer questions.
”Live” webcast of analyst briefings are conducted, where practicable. In addition, all announcements and press releases are first made to SGXNET and subsequently on MIT’s website. Investors can also subscribe to email alerts of all announcements and press releases issued by MIT through its website.
All Unitholders receive the annual report in CD format with the option of receiving a printed version. The AGM notice is published via SGXNET. The AGM is held once a year to provide a platform for Unitholders to interact with the Board, CEO and CFO.