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Statement of Corporate
Governance
Starhill Real Estate Investment Trust
(“Starhill REIT”) was established on 18 November 2005
pursuant to a trust deed (“Deed”) entered into between
Pintar Projek Sdn Bhd (“PPSB” or the “Manager”) and
Mayban Trustees Berhad (the “Trustee”). Starhill REIT
has been listed on the Main Board of Bursa Malaysia
Securities Berhad (“Bursa Securities”) since 16 December
2005.
The Board of Directors of PPSB (“Board”) is firmly committed
to ensuring that the Manager implements and operates
good corporate governance practices. In developing its
system of corporate governance, the Directors have been
guided by the measures recommended by the Guidelines
on Real Estate Investment Trusts issued by the Securities
Commission (“REIT Guidelines”), the Listing Requirements
of Bursa Securities (“Listing Requirements”) and the
Malaysian Code on Corporate Governance (“Code”), which
was revised on 1 October 2007.
THE ROLE OF THE MANAGER
Starhill REIT is managed and administered
by the Manager, who has the primary objectives of: (a)
providing Unitholders with stable cash distributions
with the potential for sustainable growth, principally
from the ownership of properties; and (b) enhancing
long-term Unit value.
The Manager must carry on and conduct its business in
a proper, diligent and efficient manner and ensure that
Starhill REIT is carried on and conducted in a proper,
diligent and efficient manner, and in accordance with
acceptable and efficacious business practices in the
real estate investment trust industry in Malaysia. Subject
to the provisions of the Deed, the Manager has full
and complete powers of management and must manage the
Starhill REIT (including all assets and liabilities
of Starhill REIT) for the benefit of the Unitholders.
The Board recognises that an effective corporate governance
framework is critical in order to achieve these objectives,
to fulfil its duties and obligations and to ensure that
Starhill REIT continues to perform strongly.
The general functions, duties and responsibilities of
the Manager include the following:
a) to manage Starhill REIT’s assets and liabilities
for the benefit of Unitholders;
b) to be responsible for the day-to-day management
of Starhill REIT;
c) to carry out activities in relation to the
assets of Starhill REIT in accordance with the provisions
of the Deed;
d) to set the strategic direction of Starhill
REIT and submit proposals to the Trustee on the acquisition,
divestment or enhancement of assets
of Starhill REIT;
e) to issue an annual report and interim report
of Starhill REIT to Unitholders within 2 months of Starhill
REIT’s financial year end and the
end of the period covered, respectively; and
f) to ensure that Starhill REIT is managed within
the ambit of the Deed, the Securities Commission Act
and other securities laws, the Listing
Requirements, the REIT Guidelines and other applicable
laws
CONFLICTS OF INTEREST
The Deed provides that the Manager,
the Trustee and any delegate of either of them shall
avoid conflicts of interest arising or, if conflicts
arise, shall ensure that Starhill REIT is not disadvantaged
by the transaction concerned. The Manager must not make
improper use of its position in managing Starhill REIT
to gain, directly or indirectly, an advantage for itself
or for any other person or to cause detriment to the
interests of Unitholders.
In order to deal with any conflict-of-interest situations
that may arise, the Manager’s policy is that all transactions
carried out for or on behalf of Starhill REIT are to
be executed on terms that are the best available to
Starhill REIT and which are no less favourable than
on arm’s length transactions between independent parties.
Cash or other liquid assets of Starhill REIT may only
be placed in a current or deposit account if: (a) the
party is an institution licensed or approved to accept
deposits; and (b) the terms of the deposit are the best
available for Starhill REIT and are no less favourable
to Starhill REIT than an arm’s length transaction between
independent parties.
The Manager may not act as principal in the sale and
purchase of real estate, securities and any other Assets
to and from Starhill REIT. “Acting as principal” includes
a reference to:
a) dealing in or entering into a transaction on behalf
of a person associated with the Manager;
b) acting on behalf of a corporation in which the Manager
has a controlling interest; or
c) the Manager acting on behalf of a corporation in
which the Manager’s interest and the interests of its
directors together constitute a controlling interest.
In addition, the Manager must not, without the prior
approval of the Trustee, invest any funds available
for investment under the Deed in any securities, real
estate or other assets in which the Manager or any officer
of the Manager has a financial interest or from which
the Manager or any officer of the Manager derives a
benefit.
RELATED PARTY TRANSACTIONS
In dealing with any related party
transactions that may arise, it is the Manager’s policy
that no real estate may be acquired from, or disposed
to, a related party of the Manager unless the criteria
set out in (a) to (c) below are satisfied and the procedures
described further below are complied with:
a i a valuation must be undertaken
of the real estate by an approved valuer, in accordance
with the Deed, and a valuation report given
to the Trustee;
ii the date of
valuation must not be more than 6 months before the
date of the proposed acquisition or disposal;
iii since the last valuation
date, no circumstances must have arisen to materially
affect the valuation;
iv the valuation must not have
been revised
by the Securities Commission (“SC”) pursuant to the
REIT Guidelines;
b the real estate must be transacted at a price
as assessed below:
i in the case of
acquisitions, not more than the value
assessed in
the valuation report referred to in (a) above;
ii in the case
of disposals, not less than 90% of the value assessed
in the valuation report referred to in (a) above; and
c the consent of the Trustee must be obtained
if it has not already been obtained.
An announcement must be made by the Manager to the Unitholders
prior to the acquisition or disposal of real estate,
providing full details of the proposed transaction,
the value of the real estate as assessed by an approved
valuer, whether the consent of the Trustee and the SC,
where applicable, has been obtained and the acquisition
or disposal price.
Where the transaction is conditional upon the approval
of Unitholders, Unitholders’ approval must be sought
prior to completion of the transaction. The Trustee
must ensure that the prior approval of Unitholders is
obtained at a general meeting, held specifically for
that purpose, in the following circumstances:
a where the real estate is to be acquired
or disposed of at a price other than that at a price
assessed by reference to the valuation report;
and
b a disposal which exceeds 50% of the Gross
Asset Value (on a per-transaction basis).
In this regard, the Manager adheres strictly to the
provisions of the REIT Guidelines which prohibit the
Manager and its related parties from voting their Units
at any meeting of Unitholders convened unless an exemption
is obtained from the SC.
BOARD STRUCTURE
The Manager is led and managed by an
experienced Board with a wide and varied range of expertise.
This broad spectrum of skills and experience gives added
strength to the leadership, thus ensuring the Manager
is under the guidance of an accountable and competent
board. The Directors recognise the key role they play
in charting the strategic direction, development and
control of the Manager and have adopted the six primary
responsibilities as listed in the REIT Guidelines as
well as the roles and duties set out in the REIT Guidelines,
which facilitate the discharge of the Directors’ stewardship
responsibilities.
The Board currently has five Directors comprising three
executive members and two non-executive members, both
of whom are independent. This is in compliance with
the requirement for at least one-third of the Board
to be independent.
The presence of independent non-executive directors
brings a critical element of balance to the Board and
these independent non-executive directors must be of
the calibre necessary to carry sufficient weight in
the Board’s decisions. The differing roles of executive
and non-executive directors are delineated, both having
fiduciary duties to Unitholders. Executive directors
have a direct responsibility for business operations
whereas non-executive directors have the necessary skill
and experience to bring an independent judgement to
bear on issues of strategy, performance and resources.
The executive directors are responsible for the Manager’s
operations and for ensuring that the strategies proposed
by the executive management are fully discussed and
examined, and take account of the long term interests
of the Unitholders. Together, the Directors possess
the wide range of business, commercial and financial
experience essential for the management and direction
of its operations.
BOARD MEETINGS & ACCESS TO INFORMATION
Board meetings are scheduled at least
four times per annum to review the operations of Starhill
REIT and to approve the interim and annual financial
statements of Starhill REIT. The Board met four times
during the financial year ended 30 June 2007.
The Directors have full and unrestricted access to all
information pertaining to the business and affairs of
Starhill REIT, both as a full Board and in their individual
capacity, to enable them to discharge their duties.
There are matters specifically reserved for the Board’s
decision to ensure that the direction and control of
the Manager is firmly in its hands.
Prior to Board meetings, all Directors receive the agenda
together with a full set of board papers containing
information relevant to the business of the meeting.
This allows the Directors to obtain further explanations/clarifications,
where necessary, in order to be properly briefed before
the meetings.
All Directors have full access to the advice and services
of the company secretary who ensures that Board procedures
are adhered to at all times during meetings and advises
the Board on matters including corporate governance
issues and the Directors’ responsibilities in complying
with relevant legislation and regulations.
APPOINTMENTS TO THE BOARD
The appointment of Directors is undertaken by the Board as a
whole. The Chief Executive Officer makes recommendations on
the suitability of candidates nominated for appointment to the
Board and, thereafter, the final decision lies with the entire Board
to ensure that the resulting mix of experience and expertise of
members of the Board is sufficient to address the issues affecting
the Manager. In its deliberations, the Board is required to take
into account the integrity, professionalism, skill, knowledge,
expertise and experience of the proposed candidate.
DIRECTORS’ REMUNERATION
Directors’ remuneration is decided
in line with the objective recommended by the REIT Guidelines
to determine the remuneration for Directors so as to
attract and retain Directors of the calibre needed to
successfully carry on the Manager’s operations.
In general, the component parts of remuneration are
structured so as to link rewards to performance, in
the case of Executive Directors. In the case of non-executive
directors, the level of remuneration reflects the experience
and responsibilities undertaken by the particular non-executive
concerned.
DIRECTORS’ TRAINING
During the financial year under review,
the Directors attended various conferences and programmes,
including speaking engagements, throughout the year
to enhance their knowledge and expertise. In this regard,
the Board will continue to evaluate and determine the
training needs of its Directors on an ongoing basis.
FINANCIAL REPORTING
The Directors are responsible for ensuring
that financial statements are drawn up in accordance
with the provisions of the Act and applicable approved
accounting standards in Malaysia. In presenting the
financial statements, the Manager has used appropriate
accounting policies, consistently applied and supported
by reasonable and prudent judgements and estimates.
The Directors also strive to ensure that financial reporting
presents a fair and understandable assessment of the
position and prospects of Starhill REIT. Interim financial
statements are reviewed and approved by the Directors
prior to release to the relevant regulatory authorities.
RELATIONSHIP WITH THE AUDITORS
The Board has established a formal
and transparent arrangement for maintaining an appropriate
relationship with the auditors of Starhill REIT. Starhill
REIT’s auditors report their findings to members of
the Board as part of the audit process on the statutory
financial statements each financial year. From time
to time, the auditors highlight matters that require
attention to the Board.
COMMUNICATION WITH UNITHOLDERS AND
INVESTORS
The Manager values dialogue with Unitholders
and investors as a means of effective communication
that enables the Board to convey information about Starhill
REIT’s performance, corporate strategy and other matters
affecting Unitholders’ interests. The Board recognises
the importance of timely dissemination of information
to Unitholders and accordingly ensures that they are
well informed of any major developments of Starhill
REIT.
Such information is communicated through the Annual
Report, the various disclosures and announcements to
Bursa Securities, including interim and annual results,
and corporate websites.
The Chief Executive Officer meets with analysts, institutional
unitholders and investors throughout the year. However,
price- sensitive information and information that may
be regarded as undisclosed material information about
Starhill REIT is not disclosed in these sessions until
after the requisite announcements to Bursa Securities
have been made.
This statement was approved by the Board on 12 July
2008.
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