Corporate governance

Executive Committee
The Executive Committee operates under delegated authority from the Board. The members of the Executive Committee are Mr Liew Mun Leong, Mr Olivier Lim Tse Ghow (with effect from 1/7/2005), Mr Lui Chong Chee (up till 1/7/2005), Mr Kee Teck Koon and Mr Pua Seck Guan. This committee oversees the day-to-day activities of the Manager on behalf of the Board including to:

Approve or make recommendations to the Board on new investments, acquisitions, financing offers and banking facilities;
Approve or make recommendations to the Board on divestments and write-offs of property assets/equity stakes;
Approve specific budgets for capital expenditure for development projects, acquisitions and enhancements/ugrading of properties;
Review management reports and operating budgets;
Award contracts for development projects;
Recommend changes to the financial limits for investment, etc.;
Report to the Board on decisions made by the Executive Committee; and
Perform such other functions as varied or delegated by the Board.

Two formal Executive Committee meetings were held during the year. In addition, many informal discussions were held with the Executive Committee members, with decisions made by circular resolutions.

Audit Committee
The Audit Committee is appointed by the Board from among the Directors of the Manager and is composed of four members, the majority of whom (including the Chairman of the Audit Committee) are Independent Non-Executive Directors. The members of the Audit Committee are Mr Hsuan Owyang, Mr James Glen Service, Mr David Wong Chin Huat, Mr Lui Chong Chee (up till 1/7/2005) and Mr Olivier Lim Tse Ghow (with effect from 1/7/2005).

The Audit Committee has a set of terms of reference defining its scope of authority which include, in relation to its management of CMT:

Monitoring and evaluating the effectiveness of the Manager’s internal control process through reviewing internal and external audit reports to ensure that where deficiencies in internal controls have been identified, appropriate and prompt remedial action is taken by management;
Reviewing the quality and reliability of information prepared for inclusion in the financial reports and approving the financial statements and the audit report before recommending to the Board for approval;
Monitoring the procedures established to regulate Related Party Transactions (as defined below), including ensuring compliance with the provisions of the Listing Manual relating to transactions between CMT and an ‘interested person’, and provisions of the Property Funds Guidelines of the CIS Code (Property Funds Guidelines) relating to transactions between CMT and an ‘interested party’;
Approving the appointment and re-appointment of external auditors and reviewing the adequacy of existing audits in respect of cost, scope and performance;
Reviewing the independence and objectivity of the external auditors and non-audit services provided by the external auditors and confirming that they would not, in the Audit Committee’s opinion, impair the independence of the auditors; and
Monitoring the procedures in place to ensure compliance with applicable legislation, the Listing Manual and the Property Fund Guidelines.

The Audit Committee plans to meet with the internal and external auditors, without the presence of management, at least once a year.

The Audit Committee is authorised to investigate any matters within its terms of reference. It is entitled to full access to and co-operation by management and enjoys full discretion to invite any Director or executive officer of the Manager to attend its meetings. The Audit Committee has full access to reasonable resources to enable it to discharge its functions properly.

The Audit Committee has also conducted a review of all non-audit services provided by the external auditors and is satisfied that the nature and extent of such services will not prejudice the independence and objectivity of the external auditors.

Audit Committee meetings are generally held after the end of every quarter of every financial year. Four Audit Committee meetings were held during the year.

Corporate Disclosure Committee
The Corporate Disclosure Committee operates under the delegated authority of the Board. This committee reviews corporate disclosure matters relating to CMT, including announcements to SGX-ST, and pursues best practices in terms of transparency. The members of this committee are Mr Hsuan Owyang, Mr Liew Mun Leong, Mr Lui Chong Chee (up till 1/7/2005), Mr Olivier Lim Tse Ghow (with effect from 1/7/2005) and Mr Kee Teck Koon.

Internal Controls
The Manager has put in place a system of internal controls of procedures and processes to safeguard CMT’s assets, Unitholders’ interests and to manage risk.

The internal audit function of the Manager is supported by CapitaLand’s Internal Audit Department (CLIA). CLIA plans its internal audit schedules in consultation with, but independent of, management and its plan is submitted to the Audit Committee for approval at the beginning of the year. The Audit Committee must also meet with the CLIA team at least once a year, without the presence of management.

A majority of the CLIA staff are members of the Singapore branch of the Institute of Internal Auditors, Inc. (IIA), which has its headquarters in the USA. CLIA subscribes to, and is guided by, the Standards for the Professional Practice of Internal Auditing developed by the IIA and has incorporated these standards into its audit practices.

The standards set by the IIA cover requirements in respect of the following:

Independence,
Professional proficiency,
Scope of work,
Performance of audit work, and
Management of the Internal Audit Department.

To ensure that the internal audits are performed by competent professionals, CLIA recruits and employs suitably qualified staff. In order that their technical knowledge remains current and relevant, CLIA identifies and provides training and development opportunities to its staff. The internal audit function provided by CLIA has incorporated the auditing standards developed by the IIA into its audit practices and meets with the standards set by the IIA.

The Board is satisfied that the Manager’s internal controls are adequate, based on the reports from the CLIA team and external auditors.

Dealings with Related Parties
Review of Procedures for Related Party Transactions
In general, the Manager has established internal control procedures to ensure that all future transactions involving the Trustee and a related party of the Manager (Related Party Transactions) are undertaken on an arm’s length basis and on normal commercial terms, which are generally no more favourable than those extended to unrelated third parties. In respect of such transactions, the Manager would have to demonstrate to the Audit Committee that the transactions would be undertaken on normal commercial terms which include obtaining valuations from independent valuers (in accordance with the Property Funds Guidelines).

In addition, the following procedures will be followed:

Transactions (either individually or as part of a series or if aggregated with other transactions involving the same interested party during the same financial year) equal to or exceeding S$100,000 in value, but below 3.0 percent of CMT’s net tangible assets, will be subject to review by the Audit Committee at regular intervals;
Transactions (either individually or as part of a series or if aggregated with other transactions involving the same interested party during the same financial year) equal to or exceeding 3.0 percent, but below 5.0 percent of CMT’s net tangible assets, will be subject to the review and approval of the Audit Committee. Such approval shall only be given if the transactions are on arm’s length commercial terms and consistent with similar types of transactions undertaken 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 transactions involving the same interested party during the same financial year) equal to or exceeding 5.0 percent of CMT’s net tangible assets will be reviewed and approved by the Audit Committee which may as it deems fit request advice on the transaction from independent sources or advisors, including the obtaining of valuations from professional valuers. Further, under the Listing Manual and the Property Funds Guidelines, such transactions would have to be approved by the Unitholders of CMT at a meeting of Unitholders.

Where matters concerning CMT relate to transactions entered into, or to be entered into, by the Trustee for and on behalf of CMT with a related party of the Manager, the Trustee is required to ensure that such transactions are conducted at arm’s length in accordance with the applicable requirements of the Property Funds Guidelines and/or the Listing Manual relating to the transaction in question. Further, the Trustee has the ultimate discretion under the Trust Deed to decide whether or not to enter into a transaction involving a related party of the Manager. If the Trustee is to sign any contract with a related party of the Trustee or the Manager, the Trustee will review that contract to ensure that it complies with applicable requirements relating to interested party transactions in the Property Funds Guidelines (as may be amended from time to time) and the provisions of the Listing Manual relating to interested person transactions (as may be amended from time to time) as well as other guidelines as may from time to time be prescribed by MAS and SGX-ST or other relevant authority to apply to real estate investment trusts.

Role of the Audit Committee for Related Party Transactions
All Related Party Transactions are subject to regular periodic reviews by the Audit Committee.

The Manager’s internal control procedures are intended to ensure that Related Party Transactions are conducted at arm’s length and on normal commercial terms and are not prejudicial to Unitholders’ interests. The Manager maintains a register to record all Related Party Transactions which are entered into by CMT (and the basis, including the quotations obtained to support such basis, on which they are entered into). The Manager then incorporates into its internal audit plan a review of all Related Party Transactions entered into by CMT. The Audit Committee reviews 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 review such audit reports to ascertain that the Property Funds Guidelines have been complied with.

The Audit Committee periodically reviews Related Party Transactions to ensure compliance with the internal control procedures and the relevant provisions of the Listing Manual and the Property Funds Guidelines. The review includes the examination of the nature of the transaction 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 to abstain from participating in the review and approval process in relation to that transaction.

The aggregate value of Related Party Transactions (equal to or exceeding S$100,000 each in value) conducted during the financial year are disclosed in this Annual Report (see page 193).

Dealings with Conflicts of Interest
The following procedures have been established to deal with potential conflicts of interest which the Manager (including its Directors, executive officers and employees) may encounter in managing CMT:

The Manager will be a dedicated manager to CMT and will not manage any other real estate investment trust or be involved in any other real property business.
All executive officers of the Manager will be employed by the Manager.
All resolutions at meetings of the Board of Directors of the Manager in relation to matters concerning CMT must be decided by a majority vote of the Directors, including at least one Independent Director.
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 CMT with an affiliate of the Manager, the Manager shall be obliged to consult with a reputable law firm (acceptable to the Trustee) which shall provide legal advice on the matter. If the said law firm is of the opinion that the Trustee, on behalf of CMT, has a prima facie case against the party allegedly in breach under such agreements, the Manager is obliged to pursue the appropriate remedies under such an agreement. The Directors of the Manager will have a duty to ensure that the Manager complies with the aforesaid. 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 CMT with an affiliate of the Manager, and the Trustee may take such action as it deems necessary to protect the rights of Unitholders and/or which is in the interests of Unitholders. Any decision by the Manager not to take action against an affiliate of the Manager shall not constitute a waiver of the Trustee’s right to take such action as it deems fit against such affiliate.
The Board shall include at least two Independent Directors

The Directors of the Manager are under a fiduciary duty to CMT to act in its best interests in relation to decisions affecting CMT when they are voting as members of the Board. In addition, the Directors and executive officers of the Manager are expected to act with integrity and honesty at all times.

Additionally, the Trustee has been granted a right of first refusal by CapitaLand Retail Limited (CRTL) over all retail income producing properties with certain specified characteristics which may in the future be identified and targeted for acquisition by CRTL or any of its subsidiaries.

Under the Trust Deed, in respect of voting rights where the Manager would face a conflict between its own interest and that of the Unitholders, the Manager shall cause such voting rights to be exercised according to the discretion of the Trustee.


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INTRODUCTION \| INGENIOUS VALUE CREATION & GROWTH STRATEGIES \| IN CONVERSATION \| INSIGHTS INTO GROWTH \| INSPIRING LEADERSHIP INTEGRATING PEOPLE & SOCIETY \| INVESTOR RELATIONS \| IN REVIEW \| INCREASING DOMINANCE \| IN DETAILS

INTRODUCTION CORPORATE GOVERNANCE BOARD OF DIRECTORS THE TRUST MANAGEMENT TEAM THE PROPERTY MANAGEMENT TEAM	CORPORATE GOVERNANCE (continued)
	Executive Committee The Executive Committee operates under delegated authority from the Board. The members of the Executive Committee are Mr Liew Mun Leong, Mr Olivier Lim Tse Ghow (with effect from 1/7/2005), Mr Lui Chong Chee (up till 1/7/2005), Mr Kee Teck Koon and Mr Pua Seck Guan. This committee oversees the day-to-day activities of the Manager on behalf of the Board including to: Approve or make recommendations to the Board on new investments, acquisitions, financing offers and banking facilities; Approve or make recommendations to the Board on divestments and write-offs of property assets/equity stakes; Approve specific budgets for capital expenditure for development projects, acquisitions and enhancements/ugrading of properties; Review management reports and operating budgets; Award contracts for development projects; Recommend changes to the financial limits for investment, etc.; Report to the Board on decisions made by the Executive Committee; and Perform such other functions as varied or delegated by the Board. Two formal Executive Committee meetings were held during the year. In addition, many informal discussions were held with the Executive Committee members, with decisions made by circular resolutions. Audit Committee The Audit Committee is appointed by the Board from among the Directors of the Manager and is composed of four members, the majority of whom (including the Chairman of the Audit Committee) are Independent Non-Executive Directors. The members of the Audit Committee are Mr Hsuan Owyang, Mr James Glen Service, Mr David Wong Chin Huat, Mr Lui Chong Chee (up till 1/7/2005) and Mr Olivier Lim Tse Ghow (with effect from 1/7/2005). The Audit Committee has a set of terms of reference defining its scope of authority which include, in relation to its management of CMT: Monitoring and evaluating the effectiveness of the Manager’s internal control process through reviewing internal and external audit reports to ensure that where deficiencies in internal controls have been identified, appropriate and prompt remedial action is taken by management; Reviewing the quality and reliability of information prepared for inclusion in the financial reports and approving the financial statements and the audit report before recommending to the Board for approval; Monitoring the procedures established to regulate Related Party Transactions (as defined below), including ensuring compliance with the provisions of the Listing Manual relating to transactions between CMT and an ‘interested person’, and provisions of the Property Funds Guidelines of the CIS Code (Property Funds Guidelines) relating to transactions between CMT and an ‘interested party’; Approving the appointment and re-appointment of external auditors and reviewing the adequacy of existing audits in respect of cost, scope and performance; Reviewing the independence and objectivity of the external auditors and non-audit services provided by the external auditors and confirming that they would not, in the Audit Committee’s opinion, impair the independence of the auditors; and Monitoring the procedures in place to ensure compliance with applicable legislation, the Listing Manual and the Property Fund Guidelines. The Audit Committee plans to meet with the internal and external auditors, without the presence of management, at least once a year. The Audit Committee is authorised to investigate any matters within its terms of reference. It is entitled to full access to and co-operation by management and enjoys full discretion to invite any Director or executive officer of the Manager to attend its meetings. The Audit Committee has full access to reasonable resources to enable it to discharge its functions properly. The Audit Committee has also conducted a review of all non-audit services provided by the external auditors and is satisfied that the nature and extent of such services will not prejudice the independence and objectivity of the external auditors. Audit Committee meetings are generally held after the end of every quarter of every financial year. Four Audit Committee meetings were held during the year. Corporate Disclosure Committee The Corporate Disclosure Committee operates under the delegated authority of the Board. This committee reviews corporate disclosure matters relating to CMT, including announcements to SGX-ST, and pursues best practices in terms of transparency. The members of this committee are Mr Hsuan Owyang, Mr Liew Mun Leong, Mr Lui Chong Chee (up till 1/7/2005), Mr Olivier Lim Tse Ghow (with effect from 1/7/2005) and Mr Kee Teck Koon. Internal Controls The Manager has put in place a system of internal controls of procedures and processes to safeguard CMT’s assets, Unitholders’ interests and to manage risk. The internal audit function of the Manager is supported by CapitaLand’s Internal Audit Department (CLIA). CLIA plans its internal audit schedules in consultation with, but independent of, management and its plan is submitted to the Audit Committee for approval at the beginning of the year. The Audit Committee must also meet with the CLIA team at least once a year, without the presence of management. A majority of the CLIA staff are members of the Singapore branch of the Institute of Internal Auditors, Inc. (IIA), which has its headquarters in the USA. CLIA subscribes to, and is guided by, the Standards for the Professional Practice of Internal Auditing developed by the IIA and has incorporated these standards into its audit practices. The standards set by the IIA cover requirements in respect of the following: Independence, Professional proficiency, Scope of work, Performance of audit work, and Management of the Internal Audit Department. To ensure that the internal audits are performed by competent professionals, CLIA recruits and employs suitably qualified staff. In order that their technical knowledge remains current and relevant, CLIA identifies and provides training and development opportunities to its staff. The internal audit function provided by CLIA has incorporated the auditing standards developed by the IIA into its audit practices and meets with the standards set by the IIA. The Board is satisfied that the Manager’s internal controls are adequate, based on the reports from the CLIA team and external auditors. Dealings with Related Parties Review of Procedures for Related Party Transactions In general, the Manager has established internal control procedures to ensure that all future transactions involving the Trustee and a related party of the Manager (Related Party Transactions) are undertaken on an arm’s length basis and on normal commercial terms, which are generally no more favourable than those extended to unrelated third parties. In respect of such transactions, the Manager would have to demonstrate to the Audit Committee that the transactions would be undertaken on normal commercial terms which include obtaining valuations from independent valuers (in accordance with the Property Funds Guidelines).	In addition, the following procedures will be followed: Transactions (either individually or as part of a series or if aggregated with other transactions involving the same interested party during the same financial year) equal to or exceeding S$100,000 in value, but below 3.0 percent of CMT’s net tangible assets, will be subject to review by the Audit Committee at regular intervals; Transactions (either individually or as part of a series or if aggregated with other transactions involving the same interested party during the same financial year) equal to or exceeding 3.0 percent, but below 5.0 percent of CMT’s net tangible assets, will be subject to the review and approval of the Audit Committee. Such approval shall only be given if the transactions are on arm’s length commercial terms and consistent with similar types of transactions undertaken 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 transactions involving the same interested party during the same financial year) equal to or exceeding 5.0 percent of CMT’s net tangible assets will be reviewed and approved by the Audit Committee which may as it deems fit request advice on the transaction from independent sources or advisors, including the obtaining of valuations from professional valuers. Further, under the Listing Manual and the Property Funds Guidelines, such transactions would have to be approved by the Unitholders of CMT at a meeting of Unitholders. Where matters concerning CMT relate to transactions entered into, or to be entered into, by the Trustee for and on behalf of CMT with a related party of the Manager, the Trustee is required to ensure that such transactions are conducted at arm’s length in accordance with the applicable requirements of the Property Funds Guidelines and/or the Listing Manual relating to the transaction in question. Further, the Trustee has the ultimate discretion under the Trust Deed to decide whether or not to enter into a transaction involving a related party of the Manager. If the Trustee is to sign any contract with a related party of the Trustee or the Manager, the Trustee will review that contract to ensure that it complies with applicable requirements relating to interested party transactions in the Property Funds Guidelines (as may be amended from time to time) and the provisions of the Listing Manual relating to interested person transactions (as may be amended from time to time) as well as other guidelines as may from time to time be prescribed by MAS and SGX-ST or other relevant authority to apply to real estate investment trusts. Role of the Audit Committee for Related Party Transactions All Related Party Transactions are subject to regular periodic reviews by the Audit Committee. The Manager’s internal control procedures are intended to ensure that Related Party Transactions are conducted at arm’s length and on normal commercial terms and are not prejudicial to Unitholders’ interests. The Manager maintains a register to record all Related Party Transactions which are entered into by CMT (and the basis, including the quotations obtained to support such basis, on which they are entered into). The Manager then incorporates into its internal audit plan a review of all Related Party Transactions entered into by CMT. The Audit Committee reviews 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 review such audit reports to ascertain that the Property Funds Guidelines have been complied with. The Audit Committee periodically reviews Related Party Transactions to ensure compliance with the internal control procedures and the relevant provisions of the Listing Manual and the Property Funds Guidelines. The review includes the examination of the nature of the transaction 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 to abstain from participating in the review and approval process in relation to that transaction. The aggregate value of Related Party Transactions (equal to or exceeding S$100,000 each in value) conducted during the financial year are disclosed in this Annual Report (see page 193). Dealings with Conflicts of Interest The following procedures have been established to deal with potential conflicts of interest which the Manager (including its Directors, executive officers and employees) may encounter in managing CMT: The Manager will be a dedicated manager to CMT and will not manage any other real estate investment trust or be involved in any other real property business. All executive officers of the Manager will be employed by the Manager. All resolutions at meetings of the Board of Directors of the Manager in relation to matters concerning CMT must be decided by a majority vote of the Directors, including at least one Independent Director. 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 CMT with an affiliate of the Manager, the Manager shall be obliged to consult with a reputable law firm (acceptable to the Trustee) which shall provide legal advice on the matter. If the said law firm is of the opinion that the Trustee, on behalf of CMT, has a prima facie case against the party allegedly in breach under such agreements, the Manager is obliged to pursue the appropriate remedies under such an agreement. The Directors of the Manager will have a duty to ensure that the Manager complies with the aforesaid. 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 CMT with an affiliate of the Manager, and the Trustee may take such action as it deems necessary to protect the rights of Unitholders and/or which is in the interests of Unitholders. Any decision by the Manager not to take action against an affiliate of the Manager shall not constitute a waiver of the Trustee’s right to take such action as it deems fit against such affiliate. The Board shall include at least two Independent Directors The Directors of the Manager are under a fiduciary duty to CMT to act in its best interests in relation to decisions affecting CMT when they are voting as members of the Board. In addition, the Directors and executive officers of the Manager are expected to act with integrity and honesty at all times. Additionally, the Trustee has been granted a right of first refusal by CapitaLand Retail Limited (CRTL) over all retail income producing properties with certain specified characteristics which may in the future be identified and targeted for acquisition by CRTL or any of its subsidiaries. Under the Trust Deed, in respect of voting rights where the Manager would face a conflict between its own interest and that of the Unitholders, the Manager shall cause such voting rights to be exercised according to the discretion of the Trustee.
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