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Based on Annual Report 2020

Ascott Residence Trust (ART) is a stapled group comprising Ascott Real Estate Investment Trust (Ascott Reit) and Ascott Business Trust (Ascott BT) pursuant to a stapling deed dated 9 September 2019 and each stapled security consists of one Ascott Reit Unit and one Ascott BT Unit and is treated as a single instrument (Stapled Security).

Ascott Residence Trust Management Limited (Reit Manager) was appointed manager of Ascott Reit in accordance with the terms of the trust deed dated 19 January 2006 (as amended) between the Reit Manager and DBS Trustee Limited, as the trustee of Ascott Reit (Trustee). Ascott Business Trust Management Pte. Ltd. (Trustee-Manager) (collectively with the Reit Manager, the Managers) was appointed the trustee-manager of Ascott BT in accordance with the terms of the trust deed constituting Ascott BT dated 9 September 2019 (as amended) (collectively, Trust Deeds).

We, as the Managers, set the strategic direction of ART and its subsidiaries (the Stapled Group) on any investment or divestment opportunities and asset enhancements in accordance with ART's stated investment strategy. The research, evaluation and analysis required for this purpose are led by us as the Managers.

As the Managers, we have general powers of management over the assets of ART. Our primary responsibility is to manage the assets and liabilities of ART for the benefit of the stapled securityholders of ART (Stapled Securityholders). We do this with a focus on generating rental income and enhancing asset value over time so as to maximise returns from the investments, and ultimately the distributions and total returns, to Stapled Securityholders.

Our other functions and responsibilities as the Managers include:

  1. using our best endeavours to conduct ART’s business in a proper and efficient manner;

  2. preparing annual business plans for review by the directors of the Managers (Directors), including forecasts on revenue, net income, and capital expenditure, explanations on major variances to previous years' financial results, written commentaries on key issues and underlying assumptions on rental rates, operating expenses and any other relevant assumptions;

  3. ensuring compliance with relevant laws and regulations, including the Listing Manual of Singapore Exchange Securities Trading Limited (SGX-ST) (Listing Manual), the Code on Collective Investment Schemes (CIS Code) issued by the Monetary Authority of Singapore (MAS) (including Appendix 6 of the CIS Code (Property Funds Appendix)), the Business Trusts Act (Chapter 31A of Singapore) (BTA), the Business Trusts Regulations 2005 (BTR), the Securities and Futures Act (Chapter 289 of Singapore) (SFA), written directions, notices, codes and other guidelines that MAS may issue from time to time, the tax rulings issued by the Inland Revenue Authority of Singapore on the taxation of ART and Stapled Securityholders;

  4. attending to all regular communications with Stapled Securityholders; and

  5. supervising the relevant property manager which performs the day-to-day property management functions (including leasing, marketing, promotion, operations coordination and other property management activities) for ART's properties.

The Managers also consider sustainability issues (including environmental and social factors) as part of their responsibilities. ART's environmental sustainability and community outreach programmes can be found in the Sustainability Management section set out on pages 87 to 95 of the Annual Report.

ART is externally managed by the Managers. The Managers appoint experienced and well qualified personnel to run their day-to-day operations.

The Managers were appointed in accordance with the terms of the Trust Deeds. The Trust Deeds outline certain circumstances under which the Managers can be removed. In the case of Ascott Reit, by resolution passed by a simple majority, and in the case of Ascott BT, by 75% of Stapled Securityholders present and voting at a meeting of Stapled Securityholders duly convened and held in accordance with the provisions of the Trust Deeds.

The Managers are wholly owned subsidiaries of CapitaLand Limited (CL) which holds a significant stapled securityholding interest in ART. CL is a long-term real estate developer and investor, with a vested interest in the long-term performance of ART. CL's significant stapled securityholding interest in ART demonstrates its commitment to ART and as a result, CL's interest is aligned with that of other Stapled Securityholders. The Managers' association with CL provides the following benefits, among other things, to ART:

  1. a stable pipeline of property assets through CL's development activities;

  2. wider and better access to banks and capital markets on favourable terms;

  3. fund raising and treasury support; and

  4. access to a bench of experienced management talent.

The Managers embrace the tenets of good corporate governance, including accountability, transparency and sustainability. They are committed to enhancing long-term stapled securityholder value and have appropriate people, processes and structure to direct and manage the business and affairs of the Managers with a view to achieving operational excellence and delivering the Stapled Group’s long-term strategic objectives. The policies and practices developed by the Managers to meet the specific business needs of the Stapled Group provide a firm foundation for a trusted and respected business enterprise.

Our corporate governance framework is set out below:

The Boards of Directors of the Managers (Boards) set the tone from the top and are responsible for the Managers' corporate governance standards and policies, underscoring their importance to the Stapled Group.

This corporate governance report (Report) sets out the corporate governance practices for the financial year (FY) 2020 with reference to the Code of Corporate Governance 2018 (Code).

Throughout FY 2020, the Managers have complied with the principles of corporate governance laid down by the Code and also complied, substantially, with the provisions underlying the principles of the Code. Where there are deviations from the provisions of the Code, appropriate explanations are provided in this Report. This Report also sets out additional policies and practices adopted by the Managers which are not provided in the Code.

ART has received accolades for excellence in corporate governance and corporate governance-related efforts. In FY 2020, ART was ranked third in the Singapore Governance and Transparency Index within the REIT and Business Trust Category for the third consecutive year.

Board Matters

Principle 1: The Boards’ Conduct of Affairs

Boards' Duties and Responsibilities

The Boards oversee the strategic direction, performance and affairs of the Managers, in furtherance of the Managers' primary responsibility to foster the success of ART so as to deliver sustainable value over the long term to Stapled Securityholders. The Boards provide overall guidance to the management team (Management), led by the Chief Executive Officer (CEO). The Boards work with Management to achieve ART’s objectives and long-term success and Management is accountable to the Boards for its performance. Management is responsible for the execution of the strategy for ART and the day-to-day operations of ART’s business.

The Boards establish goals for Management and monitor the achievement of these goals. The Boards ensure that proper and effective controls are in place to assess and manage business risks and compliance with requirements under the Listing Manual, the Property Funds Appendix, as well as any other applicable guidelines prescribed by the SGX-ST, MAS or other relevant authorities, and applicable laws. The Boards also set the disclosure and transparency standards for ART and ensure that obligations to Stapled Securityholders and other stakeholders are understood and met.

The Boards have adopted a set of internal controls which establishes financial approval limits for capital expenditure, investments, divestments, bank borrowings and issuance of debt instruments and this is clearly communicated to Management in writing. The Boards have reserved authority to approve certain matters including:

  1. material acquisitions, investments and divestments;

  2. issue of new stapled securities in ART (Stapled Securities);

  3. income distributions and other returns to Stapled Securityholders; and

  4. matters which involve a conflict of interest for a controlling Stapled Securityholder or a Director.

Apart from matters that specifically require the Boards' approval, the Boards delegate authority for transactions below the Boards’ approval limits to Board Committees and Management to optimise operational efficiency.

The Directors are fiduciaries and are collectively and individually obliged at all times to act honestly and objectively in the best interests of ART. Consistent with this principle, the Boards are committed to ethics and integrity of action and have adopted a Board Code of Business Conduct and Ethics (Board Code) which provides that every Director is expected to, among other things, adhere to the highest standards of ethical conduct. All Directors are required to comply with the Board Code. This sets the appropriate tone from the top in respect of the desired organisational culture, and assists the Boards in ensuring proper accountability within the Managers. In line with this, the Boards have a standing policy that a Director must not allow himself or herself to get into a position where there is a conflict between his or her duty to ART and his or her own interests. Where a Director has a conflict of interest in a particular matter, he or she will be required to disclose his or her interest to the Boards, recuse himself or herself from deliberations on the matter and abstain from voting on the matter. Every Director has complied with this policy, and where relevant, such compliance has been duly recorded in the minutes of meeting or written resolutions.

Furthermore, the Directors have the responsibility to act with due diligence in the discharge of their duties and ensure that they have the relevant knowledge to carry out and discharge their duties as directors, including understanding their roles as executive, non-executive, and independent directors, the business of ART and the environment in which ART operates. The Directors are also required to dedicate the necessary effort, commitment and time to their work as directors, and are expected to attend all meetings of the Boards, except if unusual circumstances make attendance impractical.

Directors' Development

In view of the increasingly demanding, complex and multi-dimensional role of a director, the Boards recognise the importance of continual training and development for their Directors so as to equip them to discharge the duties and responsibilities of their office as Directors to the best of their abilities. The Managers have in place a training framework to guide and support the Managers towards meeting the objective of having Boards which comprise individuals who are competent and possess up-to-date knowledge and skills necessary to discharge their duties and responsibilities. Directors who have no prior experience as a director of an issuer listed on the SGX-ST will be provided with training on the roles and responsibilities of a director of a listed issuer in accordance with the Listing Manual. The costs of training are borne by the Managers.

Upon appointment, each Director is provided with a formal letter of appointment and a copy of the Director's Manual (which includes information on a broad range of matters relating to the role, duties and responsibilities of a Director). All Directors, upon appointment, also undergo an induction programme which focuses on orientating the Director to ART's business, operations, strategies, organisation structure, responsibilities of CEO and other persons having authority and responsibility for planning, directing and controlling the activities of the Managers (key management personnel), and financial and governance practices. The induction programme may include visits to ART's properties. Through the induction programme, the new Directors also get acquainted with members of Management which facilitates their interaction at Board meetings.

Following their appointment, the Directors are provided with opportunities for continuing education in areas such as director's duties and responsibilities, changes to regulations and accounting standards, and industry-related matters, so as to be updated on matters that affect or may enhance their performance as Directors or Board Committee members. The Directors may also recommend suitable training and development programmes to the Boards. In FY 2020, the training and professional development programmes for the Directors included seminars conducted by experts and senior business leaders on board practices and issues faced by boards. The Directors also regularly receive reading materials on topical matters or subjects as well as updates on regulatory changes and their implications.

Board Committees

The Boards have established various Board Committees to assist them in the discharge of their functions. These Board Committees are the Audit Committee (AC) and the Executive Committee (EC).

All the Board Committees have clear written terms of reference setting out their respective composition, authorities and duties, including reporting back to the Boards. Each of the Board Committees operates under delegated authority from the Boards with the Boards retaining overall oversight. The decisions and significant matters discussed at the respective Board Committees are reported to the Boards on a periodic basis. The minutes of the Board Committee meetings which record the key deliberations and decisions taken during these meetings are also circulated to all members of the Boards for their information. The composition of the various Board Committees is set out on page 132 of the Annual Report and the inside back cover of the Annual Report. The duties and responsibilities of the Board Committees are set out in the Report.

The Boards may form other Board Committees from time to time. The composition of each Board Committee is also reviewed as and when there are changes to Board membership. Where appropriate, changes are made to composition of the Board Committees, with a view to ensuring there is an appropriate diversity of skills and experience, and fostering active participation and contributions from Board Committee members.

Meetings of Board and Board Committees

Board and Board Committee meetings are scheduled prior to the start of each financial year in consultation with the Directors. The Constitution of the Managers (Constitution) permits the Directors to participate in Board and Board Committee meetings via audio or video conference. If a Director is unable to attend a Board or Board Committee meeting, he or she may provide his or her comments to the Chairman or the relevant Board Committee Chairman ahead of the meeting and these comments are taken into consideration in the deliberations. The Boards and Board Committees may also make decisions by way of written resolutions.

In addition to scheduled meetings, the Boards may also hold ad hoc meetings as required by business imperatives. The Directors (excluding the CEO) also meet from time to time without the presence of Management.

At each scheduled Board meeting, the Boards are apprised of the following:

  1. significant matters discussed at the AC meeting which is typically scheduled before the Board meeting;

  2. AC's recommendation on ART’s periodic and year-end financial results following AC’s review of the same;

  3. decisions made by Board Committees in the period under review;

  4. updates on ART's business and operations in the period under review, including market developments and trends, as well as business initiatives and opportunities;

  5. financial performance, budgetary and capital management related matters in the period under review, including any material variance between any projections in budget or business plans and the actual results from business activities and operations;

  6. any risk management issues that materially impact ART’s operations or financial performance;

  7. updates on key Stapled Securityholder engagements in the period under review, as well as analyst views and market feedback; and

  8. prospective transactions which Management is exploring.

This allows the Boards to develop a good understanding of the progress of the Stapled Group's business as well as the issues and challenges faced by ART, and also promotes active engagement with Management.

The Managers adopt and practise the principle of collective decisions and therefore, no individual Director influences or dominates the decision-making process. There is mutual respect and trust among the Directors and therefore the Boards benefit from a culture of frank and rigorous discussions. Such discussions conducted on a professional basis contribute to the dynamism and effectiveness of the Boards. The Boards’ composition is such that there is diversity in views and perspectives which enriches deliberations and contributes to better decision-making of the Boards in the best interests of ART. At Board and Board Committee meetings, all the Directors actively participate in discussions, in particular, they engage in open and constructive debate and challenge Management on its assumptions and recommendations.

Management provides the Directors with complete, adequate and timely information prior to Board and Board Committee meetings and on an ongoing basis. This enables the Directors to make informed decisions and discharge their duties and responsibilities.

As a general rule, meeting materials are provided to the Directors at least five working days prior to Board and Board Committee meetings, to allow them to prepare for the meetings and to enable discussions to focus on any questions or issues that they may have or identify. Agendas for Board and Board Committee meetings are prepared in consultation with the Chairman and the chairmen of the respective Board Committees. This provides assurance that there is time to cover all relevant matters during the meetings.

In line with the Managers’ ongoing commitment to minimise paper wastage and reduce their carbon footprint, the Managers do not provide printed copies of Board and Board Committee meeting materials. Instead, the Directors are provided with tablet devices to enable them to access and review meeting materials prior to and during meetings. This initiative also enhances information security as the meeting materials are made available through a secure channel. The Directors are also able to review and approve written resolutions using the tablet devices.

A total of five Board meetings and five AC meetings were held in FY 2020. The key deliberations and decisions taken at Board and Board Committee meetings are minuted.

A record of the Directors' attendance at Board and Board Committee meetings for FY 2020 is set out on page 133 of the Annual Report. The CEO who is also a Director attends all Board meetings. She also attends all AC meetings on an ex officio basis. Other members of Management attend Board and Board Committee meetings as required to brief the Boards and Board Committees on specific business matters.

There is active interaction between the Directors and Management during and outside Board and Board Committee meetings. The Directors have separate, independent and unfettered access to Management for any information that they may require. The Boards and Management share a productive and harmonious relationship, which is critical for good governance and organisational effectiveness.

The Directors also have separate and independent access to the company secretary of the Managers (Company Secretary). The Company Secretary keeps herself abreast of relevant developments. She has oversight of corporate secretarial administration matters and advises the Boards and Management on corporate governance matters. The Company Secretary attends Board meetings and assists the Chairman in ensuring that Board procedures are followed. The Company Secretary also facilitates the induction programme for new Directors and oversees professional development administration for the Directors. The appointment and the removal of the Company Secretary is subject to the Boards' approval.

The Directors, whether individually or collectively as the Boards, are entitled to have access to independent external professional advice where necessary, at the Managers' expense.

Principle 2: Board Composition and Guidance

Board Independence

The Boards have a strong independent element as five out of nine directors, including the Chairman, are non-executive IDs. Other than the CEO who is the only executive Director on the Boards, non-executive Directors make up the rest of the Boards. None of the Directors have served on the Boards for nine years or longer. No lead ID is appointed as the Chairman is an ID. Profiles of the Directors, their respective Board Committee memberships and roles are set out on pages 21 to 26 of the Annual Report. Key information on the Directors is also available on ART’s website at www.ascottresidencetrust.com (Website). The statement on the composition of the Board of Directors of the Trustee-Manager pursuant to Regulation 12(8) of the BTR can be found on page 141 of the Annual Report.

The Boards review from time to time the size and composition of the Boards and each Board Committee, with a view to ensuring that the size is appropriate in facilitating effective decision-making, and the composition reflects a strong independent element as well as balance and diversity of thought and background. The review takes into account the scope and nature of the Stapled Group’s operations, and the competition that the Stapled Group faces.

The Boards assess annually (and as and when circumstances require) the independence of each Director in accordance with the requirements of the Listing Manual and the guidance in the Code, the Securities and Futures (Licensing and Conduct of Business) Regulations (SFR), the BTR and where relevant, the recommendations set out in the Practice Guidance accompanying the Code (Practice Guidance). A Director is considered independent if he or she is independent in conduct, character and judgment and:

  1. has no relationship with the Managers, their related corporations, their substantial shareholders, ART’s substantial Stapled Securityholders (being Stapled Securityholders who have interests in voting Stapled Securities with 5% or more of the total votes attached to all voting Stapled Securities) or the Managers’ officers that could interfere, or be reasonably perceived to interfere with the exercise of his or her independent business judgment in the best interests of ART;

  2. is independent from the management of the Managers and ART, from any business relationship with the Managers and ART, and from every substantial shareholder of the Managers and every substantial Stapled Securityholder of ART;

  3. is not a substantial shareholder of the Managers or a substantial Stapled Securityholder of ART;

  4. is not employed and has not been employed by the Managers or ART or their related corporations in the current or any of the past three financial years;

  5. does not have an immediate family member who is employed or has been employed by the Managers or ART or their related corporations in the current or any of the past three financial years and whose remuneration is or was determined by the Boards; and

  6. has not served on the Boards for a continuous period of nine years or longer.

There is a rigorous process to evaluate the independence of each ID. As part of the process:

  1. each ID provides information of his or her business interests and confirms, annually, that there are no relationships which interfere with the exercise of his or her independent business judgment with a view to the best interests of the Stapled Securityholders as a whole, and such information is then reviewed by the Boards; and

  2. the Boards also reflect on the respective IDs’ conduct and contributions at Board and Board Committee meetings, in particular, whether the relevant ID has exercised independent judgment in discharging his or her duties and responsibilities.

Each ID is required to recuse himself or herself from the Boards’ deliberations on his or her independence. In appropriate cases, the Boards also review the independence of an ID as and when there is a change of circumstances involving the ID. In this regard, an ID is required to report to the Managers when there is any change of circumstances which may affect his or her independence.

The Boards have carried out the assessment of the independence of their IDs for FY 2020 and the paragraphs below set out the outcome of the assessment. Each of the IDs had recused himself or herself from the Boards' deliberations on his or her independence.

Mr Tan Beng Hai, Bob

Mr Tan is a non-executive director of Singapore Post Limited (SingPost) which provides postal services to CL and its subsidiaries (CL Group). In addition, SingPost engages CL Group to manage SingPost Centre and had also purchased CapitaVouchers from CL Group during the course of the year. The decision to procure or provide the services was made by the management of CL in the ordinary course of business, on arm’s length basis and based on normal commercial terms. Mr Tan’s role in SingPost is non-executive in nature and he is not involved in the day-to-day conduct of business of SingPost.

Mr Tan also serves as a non-executive director of a subsidiary of Temasek Holdings (Private) Limited (Temasek). Temasek is deemed to be a substantial Stapled Securityholder through its direct and indirect interests in CL, which is a substantial Stapled Securityholder of ART. Mr Tan’s role in these corporations is non-executive in nature and he is not involved in the day-to-day conduct of the business of these corporations.

The Boards have considered the conduct of Mr Tan in the discharge of his duties and responsibilities as a Director, and are of the view that the relationships set out above did not impair his ability to act with independent judgment in the discharge of his duties and responsibilities as a Director. Save for the relationships stated above, Mr Tan does not have any other relationships and is not faced with any of the circumstances identified in the Code, SFR, BTR and Listing Manual, or any other relationships which may affect his independent judgment. The Boards are therefore of the view that Mr Tan has exercised independent judgment in the discharge of his duties and responsibilities. Based on the above, the Boards arrived at the determination that Mr Tan is an independent Director. Mr Tan will recuse himself from participating in any Boards’ deliberation on any transactions that could potentially give rise to a conflict of interest.

Mr Zulkifli Bin Baharudin

Mr Zulkifli is a non-executive director of a subsidiary and an associated corporation of Temasek. Mr Zulkifli’s role in these corporations is non-executive in nature and he is not involved in the day-to-day conduct of the business of these corporations.

The Boards have considered the conduct of Mr Zulkifli in the discharge of his duties and responsibilities as a Director, and are of the view that the relationships set out above did not impair his ability to act with independent judgment in the discharge of his duties and responsibilities as a Director. Save for the relationships stated above, Mr Zulkifli does not have any other relationships and is not faced with any of the circumstances identified in the Code, SFR, BTR and Listing Manual, or any other relationships which may affect his independent judgment. The Boards are therefore of the view that Mr Zulkifli has exercised independent judgment in the discharge of his duties and responsibilities. Based on the above, the Boards arrived at the determination that Mr Zulkifli is an independent Director. Mr Zulkifli will recuse himself from participating in any Boards’ deliberation on any transactions that could potentially give rise to a conflict of interest.

Mr Sim Juat Quee Michael Gabriel

Mr Sim serves as a board member of Jurong Town Corporation (JTC), a statutory board under the Ministry of Trade and Industry. In FY 2020, CL Group made certain payments to JTC in respect of lease of space from JTC. The leases were in the ordinary course of business, on arm’s length basis and based on normal commercial terms. Mr Sim’s role in JTC is non-executive in nature and he is not involved in the day-to-day conduct of business of JTC.

The Boards have considered the conduct of Mr Sim in the discharge of his duties and responsibilities as a Director, and are of the view that the relationships set out above did not impair his ability to act with independent judgment in the discharge of his duties and responsibilities as a Director. Save for the relationships stated above, Mr Sim does not have any other relationships and is not faced with any of the circumstances identified in the Code, SFR, BTR and Listing Manual, or any other relationships which may affect his independent judgment. The Boards are therefore of the view that Mr Sim has exercised independent judgment in the discharge of his duties and responsibilities. Based on the above, the Boards arrived at the determination that Mr Sim is an independent Director. Mr Sim will recuse himself from participating in any Boards’ deliberation on any transactions that could potentially give rise to a conflict of interest.

Mr Chia Kim Huat

Mr Chia does not have any relationships and is not faced with any of the circumstances identified in the Code, SFR, BTR and Listing Manual, or any other relationships which may affect his independent judgment.

The Boards have considered the conduct of Mr Chia in the discharge of his duties and responsibilities as a Director, and are of the view that Mr Chia has exercised independent judgment in the discharge of his duties and responsibilities. Based on the above, the Boards arrived at the determination that Mr Chia is an independent Director. Mr Chia will recuse himself from participating in any Boards’ deliberation on any transactions that could potentially give rise to a conflict of interest.

Ms Deborah Lee Siew Yin

Ms Lee does not have any relationships and is not faced with any of the circumstances identified in the Code, SFR, BTR and Listing Manual, or any other relationships which may affect her independent judgment.

The Boards have considered the conduct of Ms Lee in the discharge of her duties and responsibilities as a Director, and are of the view that Ms Lee has exercised independent judgment in the discharge of her duties and responsibilities. Based on the above, the Boards arrived at the determination that Ms Lee is an independent Director. Ms Lee will recuse herself from participating in any Boards’ deliberation on any transactions that could potentially give rise to a conflict of interest.

The Boards are of the view that as at the last day of FY 2020, each of Mr Tan, Mr Zulkifli, Mr Sim, Mr Chia and Ms Lee was able to act in the best interests of all Stapled Securityholders in respect of the period in which they served as directors in FY 2020.

In addition, under Regulation 13H(1) of the SFR, where a substantial shareholder of a manager of a real estate investment trust (REIT) is a corporation, a person would be considered to be connected to that substantial shareholder if he is, inter alia, a director of the substantial shareholder or a director of a related corporation or an associated company of the substantial shareholder. Such person will prima facie not be deemed to be independent unless the directors nevertheless regard him to be independent.

The Trustee-Manager is a related corporation of the Reit Manager as both the Trustee-Manager and the Reit Manager are directly held by CL Group and as Ascott BT and Ascott Reit are stapled, the directors of the Managers are identical to avoid any differences or deadlock in the operation of the Stapled Group. As a result, all five independent directors of the Reit Manager, namely Mr Tan Beng Hai, Bob, Mr Zulkifli Bin Baharudin, Mr Sim Juat Quee Michael Gabriel, Mr Chia Kim Huat and Ms Deborah Lee Siew Yin will prima facie be deemed to be connected to a substantial shareholder of the Reit Manager and hence not independent pursuant to Regulation 13H of the SFR.

Against the foregoing, the board of directors of the Reit Manager (Reit Manager Board) has reviewed and assessed the independence of each of the five IDs of the Reit Manager in relation to Regulation 13H of the SFR and has pursuant to Regulation 13D(8) of the SFR, resolved that notwithstanding that each of the five IDs is a director of both the Reit Manager and the Trustee-Manager, on the basis that:

  1. for so long as Ascott BT is stapled to Ascott Reit, there will be no real prejudice to the interests of the holders of Ascott Reit Units for the Trustee-Manager and the Reit Manager to have the same board of directors as Ascott Reit Units and the Ascott BT Units will be stapled together and held by the same investors. The stapling together of Ascott Reit Units and Ascott BT Units means that the holders of Ascott Reit Units are at the same time the investors of the Stapled Securities, who stand to benefit as a whole;

  2. since the Ascott BT Units and Ascott Reit Units are held by the same pool of investors in the same proportion, concerns and potential abuses applicable to interested party transactions will be absent in transactions between Ascott Reit and Ascott BT,

the Reit Manager Board is satisfied that the five IDs’ independent judgment and ability to act with regard to the interests of all the Stapled Securityholders of ART as a whole will not be impaired.

Board Diversity

The Boards embrace diversity and have formally adopted a Board Diversity Policy. The Board Diversity Policy provides for the Boards to comprise talented and dedicated Directors with a diverse mix of expertise, experience, perspectives, skills and backgrounds, with due consideration to diversity factors, including but not limited to, diversity in business or professional experience, age and gender.

The Boards believe in diversity and value the benefits that diversity can bring to the Boards in their deliberations by avoiding groupthink and fostering constructive debate. Diversity enhances the Boards’ decision-making capability and ensures that the Managers have the opportunity to benefit from all available talent and perspectives.

The Boards, in carrying out their duties of determining the optimal composition of the Boards in their Board renewal process, identifying possible candidates and making recommendations of board appointments to the Boards, consider diversity factors such as age, educational, business and professional backgrounds of their members. Female representation is also considered an important aspect of diversity. The current Boards comprise nine members who are corporate and business leaders, and are professionals with varied backgrounds, expertise and experience including in finance, banking, retail management, investment, real estate, legal, accounting and general management. The current Boards have two female members, one of whom is also the CEO. For further information on the Boards’ work in this regard, please refer to “Board Membership” under Principle 4 in the Report.

Board Composition and Guidance

Principle 3: Chairman and Chief Executive Officer

The roles and responsibilities of the Chairman and the CEO are held by separate individuals, in keeping with the principles that there be a clear division of responsibilities between the leadership of the Boards and Management and that no one individual has unfettered powers of decision-making. The non-executive independent Chairman is Mr Tan Beng Hai, Bob, whereas the CEO is Ms Beh Siew Kim. They do not share any family ties. The Chairman and the CEO enjoy a positive and constructive working relationship between them, and support each other in their respective leadership roles.

The Chairman provides leadership to the Boards and facilitates the conditions for the overall effectiveness of the Boards, Board Committees and individual Directors. This includes setting the agenda of Board meetings, ensuring that there is sufficient information and time at meetings to address all agenda items, and promoting open and constructive engagement among the Directors as well as between the Boards and the CEO on strategic issues.

The Chairman devotes considerable time to understanding the business of ART, as well as the issues and the competition that ART faces. He plays a significant leadership role by providing clear oversight, direction, advice and guidance to the CEO. He also maintains open lines of communication and engages with other members of Management regularly, and acts as a sounding board for the CEO on strategic and significant operational matters.

The Chairman also presides over the Annual General Meeting (AGM) each year and other general meetings where he plays a crucial role in fostering constructive dialogue between the Stapled Securityholders, the Boards and Management.

The CEO has full executive responsibilities to manage the Stapled Group’s business and to develop and implement policies approved by the Boards.

The separation of the roles and responsibilities of the Chairman and the CEO, and the resulting clarity of roles provide a healthy professional relationship between the Boards and Management, facilitate robust deliberations on the Stapled Group’s business activities and the exchange of ideas and views to help shape the strategic process, and ensure an appropriate balance of power, increased accountability and greater capacity of the Boards for independent decision-making.

As the roles of the Chairman and the CEO are held by separate individuals who are not related to each other, and the Chairman is an ID, no lead ID has been appointed. Moreover, the Boards have a strong independent element as five out of nine directors (including the Chairman) are non-executive IDs. There are also sufficient measures in place to address situations where the Chairman is conflicted as the Directors are required to recuse themselves from deliberations and abstain from voting on any matters that could potentially give rise to conflict. Accordingly the foregoing is consistent with the intent of Principle 3 of the Code.

Principle 4: Board Membership

The Boards undertake the functions of a nominating committee and therefore, the Managers do not have a separate nominating committee. The Boards perform the functions that such a committee would otherwise perform.

While this is a deviation from Provision 4.1 of the Code which requires the establishment of a nominating committee, the Boards are able to undertake the functions of a nominating committee because:

  1. the Reit Manager does not manage any other REITs and the Trustee-Manager does not manage any other business trusts (BTs). In general, REITs, BTs and stapled trusts (including ART) have a more focused scope and scale of business compared to those of listed companies. For this reason, the Boards’ capacity would not be unduly stretched if the responsibilities of a nominating committee were also undertaken by the Boards as the Boards would be able to give adequate attention to such issues;

  2. the focused scope of the business of ART also means a manageable competency requirement for the Boards such that the Boards are able to manage the duties of a nominating committee; and

  3. IDs form at least half of the Boards and the Chairman is an ID, which demonstrates that the IDs play a substantive role, and assure the objectivity and independence of the decision-making process concerning nomination. This also mitigates any concerns of conflict which can be managed by having the conflicted Directors abstain from the decision-making process. Further, conflict situations are less likely to arise in matters of nomination.

The SGX-ST has also issued a Practice Note which provides that the requirement for the establishment of nominating and remuneration committees under the Listing Manual does not apply to REITs or BTs if the REIT or BT complies with the SFA and the BTA and the regulations made thereunder relating to the board composition of a REIT manager or BT trustee-manager. As the Reit Manager and the Trustee-Manager comply with Regulation 13D of the SFR and the statutory stipulations relating to the composition of the Boards of the Managers, the Managers are of the opinion that the corporate governance requirements relating to the nominating and remuneration committees have been substantively addressed.

The Boards have a formal and transparent process for the appointment and re-appointment of Directors, taking into account the need for progressive renewal of the Boards. All Board appointments are made based on merit and approved by the Boards. The Boards’ scope of duties and responsibilities includes:

  1. reviewing the size and composition of the Boards, the succession plans for Directors, and the structure and membership of the Board Committees;

  2. reviewing the process and criteria for the evaluation of the performance of the Boards, Board Committees and Directors;

  3. ensuring the provision of training and professional development programmes for the Boards;

  4. considering annually and, as and when circumstances require, if a Director is independent;

  5. reviewing whether a Director has been adequately carrying out his or her duties as a Director; and

  6. considering the appointment and re-appointment of Directors.

Board Composition and Renewal

The Boards strive to ensure that there is an optimal blend in the Boards of backgrounds, experience and knowledge in business and general management, expertise relevant to the Stapled Group’s business and track record, and that each Director can bring to the Boards an independent and objective perspective to enable balanced and well-considered decisions to be made in the interests of the Stapled Group. The Boards have a few members who have prior working experience in the sector that ART operates in.

There is a structured process for determining Board composition and for selecting candidates for appointment as Directors. The Boards evaluate the Boards' competencies on a long-term basis and identify competencies which may be further strengthened in the long term. Board succession planning takes into account the need to maintain flexibility to effectively address succession planning and to ensure that the Managers continue to attract and retain highly qualified individuals to serve on the Boards. The process ensures that the Board composition is such that the Boards have capabilities and experience which are aligned with ART’s strategy and environment, and includes the following considerations: (a) the current size of the Boards and Board Committees, composition mix and core competencies; (b) the candidate’s/Director’s independence, in the case of an independent director; (c) the composition requirements for the Boards and relevant Board Committees (if the candidate/Director is proposed to be appointed to any Board Committee); and (d) the candidate’s/Director’s age, gender, track record, experience and capabilities and such other relevant factors as may be determined by the Boards, which would provide an appropriate balance and contribute to the collective skill of the Boards.

The Boards support the principle that Board renewal is a necessary and continual process, both for good governance and for ensuring that the Boards have the skills, expertise and experience which are relevant to the evolving needs of the Stapled Group’s business.

Board succession planning is carried out through the annual review of the Boards’ composition as well as when a Director gives notice of his or her intention to retire or resign. The Boards seek to refresh their membership progressively and in an orderly manner, whilst ensuring continuity and sustainability of corporate performance. The Boards also have in place guidelines on the tenure of Directors. The guidelines provide that an ID should serve for no more than a maximum of two three-year terms and any extension of tenure beyond six years will be reviewed by the Boards on a yearly basis up to a period of nine years (inclusive of the initial two three-year terms served).

Searches for possible candidates are conducted through contacts and recommendations. The Boards may retain external consultants from time to time to assist the Boards in identifying suitable candidates for appointment to the Boards. Candidates are identified based on the needs of ART and the relevant skills required, taking into account, among other things, the requirements in the Listing Manual and the Code, as well as the factors in the Board Diversity Policy. The candidates will be assessed against a range of criteria including their demonstrated business sense and judgment, skills and expertise, and market and industry knowledge (and may include elements such as financial, sustainability or other specific competency, geographical representation and business background). The Boards also consider the qualities of the candidates, in particular whether they are aligned to the strategic directions and values of ART. In addition, the Boards assess the candidates’ ability to commit time to the affairs of ART, taking into consideration their other current appointments.

In FY 2020, no alternate director to any Director was appointed. In keeping with the principle that a Director must be able to commit time to the affairs of the Managers, the Boards have adopted the principle that they will generally not approve the appointment of alternate directors.

Board Changes

On 15 April 2020 and 17 June 2020 respectively, Mr Chia Kim Huat and Ms Deborah Lee Siew Yin joined the Boards as Non-Executive Independent Director and member of the AC. On 15 April 2020, Mr Goh Soon Keat Kevin joined the Boards as Non-Executive Non-Independent Director and member of the EC. Ms Elaine Carole Young stepped down from the Boards with effect from 17 June 2020.

Directors who are appointed to the Boards from time to time either have prior experience as a director of an issuer listed on the SGX-ST or will undergo the training required under rule 210(5)(a) of the Listing Manual (the Mandatory Training). Mr Goh Soon Keat Kevin has registered for the relevant training courses required under rule 210(5)(a) of the Listing Manual, and will be attending these courses in March 2021 and May 2021, and will complete the Mandatory Training by 20 May 2021. As Mr Chia Kim Huat and Ms Deborah Lee Siew Yin have prior experience as a director of an issuer listed on the SGX-ST, they are not required to undergo the Mandatory Training.

Review of Directors' Ability to Commit Time

In view of the responsibilities of a Director, Directors need to be able to devote sufficient time and attention to adequately perform their duties and responsibilities. The Boards conduct a review of the other appointments and commitments of each Director on an annual basis and as and when there is a change of circumstances involving a Director which may affect his or her ability to commit time to the Managers. In this regard, Directors are required to report to the Boards any changes in their other appointments.

In respect of the Directors’ other appointments and commitments, no limit is set as to the number of listed company board appointments. The Boards take the view that the number of listed company directorships that an individual may hold should be considered on a case-by-case basis, as a person’s available time and attention may be affected by many different factors, such as his or her individual capacity, whether he or she is in full-time employment, the nature of his or her other responsibilities and his or her near term plan regarding some of the other appointments. A Director with multiple directorships is expected to ensure that he or she can devote sufficient time and attention to the affairs of the Managers. IDs are also required to consult the Chairman before accepting any invitation for appointment as a director of another entity or offer of a full-time executive appointment.

Each of the Directors is required to make his or her own self-assessment and confirm that he or she is able to devote sufficient time and attention to the affairs of the Managers. For FY 2020, all non-executive Directors had undergone the self-assessment and provided the confirmation.

The Boards assess each Director’s ability to commit time to the affairs of the Managers annually and, where appropriate, when there is a change of circumstances involving a Director. In conducting the assessment, the Boards take into consideration each Director’s confirmation, his or her commitments, attendance record at meetings of the Boards and Board Committees, as well as conduct and contributions (including preparedness and participation) at Board and Board Committee meetings.

The Directors’ listed company directorships and principal commitments are disclosed on pages 21 to 26 of the Annual Report and their attendance record for FY 2020 is set out on page 133 of the Annual Report. In particular, the CEO does not serve on any listed company board outside of the Stapled Group. For FY 2020, the Directors achieved high meeting attendance rates and have contributed positively to discussions at Board and Board Committee meetings. Based on the above, the Boards have determined that each Director has been adequately carrying out his or her duties as a Director and noted that no Director has a significant number of listed directorships and principal commitments.

Principle 5: Board Performance

The Managers believe that oversight from strong and effective Boards go a long way towards guiding a business enterprise to achieving success.

Whilst Board performance is ultimately reflected in the long-term performance of the Stapled Group, the Boards believe that engaging in a regular process of self-assessment and evaluation of Board performance provides an opportunity for the Boards to reflect on their effectiveness including the quality of their decisions, and for Directors to consider their performance and contributions. It also enables the Boards to identify key strengths and areas for improvement which are essential to effective stewardship and attaining success for ART.

As part of the Managers’ commitment towards improving corporate governance, the Boards have approved and implemented a process to evaluate annually the effectiveness of the Boards as a whole and that of each of its Board Committees and individual Directors. As part of the process, a questionnaire is sent to the Directors, and the evaluation results are aggregated and reported to the Chairman of the Boards. The overall evaluation results are also shared with the Boards and follow up action is taken where necessary with a view to enhancing the effectiveness of the Boards and individual Directors in the discharge of their duties and responsibilities.

Board and Board Committees

The evaluation categories covered in the questionnaire include Board composition, Board processes, strategy, performance and governance, access to information and Board Committee effectiveness. As part of the questionnaire, the Boards also consider whether the creation of value for Stapled Securityholders has been taken into account in the decision-making process. For FY 2020, the outcome of the evaluation was satisfactory and the Directors on the whole provided affirmative ratings across all the evaluation categories.

Individual Directors

The evaluation categories covered in the questionnaire include Director’s duties, contributions, conduct and interpersonal skills, as well as strategic thinking and risk management. For FY 2020, the outcome of the evaluation was satisfactory and each of the Directors on the whole received affirmative ratings across all the evaluation categories.

The Boards also recognise that contributions by an individual Director can take different forms including providing objective perspectives on issues, facilitating business opportunities and strategic relationships, and accessibility to Management outside of the formal environment of Board and Board Committee meetings.

Board Evaluation as an Ongoing Process
The Boards believe that performance evaluation should be an ongoing process and the Boards achieve this by seeking feedback on a regular basis. The regular interactions between the Directors, and between the Directors and Management, also contribute to this ongoing process. Through this process of engaging their members, the Boards also benefit from an understanding of shared norms between Directors which also contributes to a positive board culture. The collective board performance and the contributions of individual Directors are also reflected in, and evidenced by, the synergistic performance of the Boards in discharging their responsibilities as a whole by providing proper guidance, diligent oversight and able leadership, and lending support to Management in steering ART in the appropriate direction, as well as the long-term performance of ART whether under favourable or challenging market conditions.

Remuneration Matters

Principles 6, 7 and 8: Procedures for Developing Remuneration Policies, Level and Mix of Remuneration and Disclosure on Remuneration

The Boards undertake the functions of a remuneration committee and therefore, the Managers do not have a separate remuneration committee. The Boards perform the functions that such a committee would otherwise perform.

While this is a deviation from Provision 6.1 of the Code which requires the establishment of a remuneration committee, the Boards are able to undertake the functions of a remuneration committee because:

  1. the Reit Manager does not manage any other REITs and the Trustee-Manager does not manage any other BTs. In general, REITs, BTs and stapled trusts (including ART) have a more focused scope and scale of business compared to those of listed companies. For this reason, the Boards’ capacity would not be unduly stretched by reason of them undertaking the responsibilities of a remuneration committee and the Boards would be able to give adequate attention to such issues relating to remuneration matters; and

  2. the IDs form at least half of the Boards and the Chairman is an ID, which demonstrate that the IDs play a substantive role and assure the objectivity and independence of the decision-making process concerning remuneration. This also mitigates any concerns of conflict which can be managed by having the conflicted Directors abstain from the decision-making process. Further, conflict situations are less likely to arise in matters of remuneration.

In undertaking this function, the Boards consider all aspects of remuneration, including overseeing the design and implementation of the remuneration policy, the framework of remuneration and the specific remuneration packages for each Director and for key management personnel and termination terms (if any) to ensure they are fair. No Director, however, is involved in any decision of the Boards relating to his or her own remuneration.

The Boards have a formal and transparent procedure for developing policies on Director and executive remuneration, and for fixing the remuneration packages of individual Directors and key management personnel. These policies are in line with the Stapled Group’s business strategy and the executive compensation framework is based on the key principle of linking pay to performance, which is aligned with the long-term success of ART. Pay-for-performance is emphasised by linking total remuneration to the achievement of corporate and individual goals and objectives. The Boards have access to independent remuneration consultants for advice on remuneration matters as required.

In terms of the process adopted by the Managers for developing and reviewing policies on remuneration and determining the remuneration packages for Directors and key management personnel, the Managers, through an independent remuneration consultant, take into account compensation benchmarks within the industry, as appropriate, so as to ensure that the remuneration packages payable to Directors and key management personnel are in line with the objectives of the remuneration policies. They also consider the compensation framework of CL as a point of reference. The Managers are subsidiaries of CL which also holds a significant stake in ART. The association with the CL Group puts the Managers in a better position to attract and retain better qualified management talent; it provides an intangible benefit to the Managers such that it allows their employees to associate themselves with an established corporate group which can offer them the depth and breadth of experience and enhanced career development opportunities.

In FY 2020, an independent remuneration consultant, Willis Towers Watson, provided professional advice on Board and executive remuneration. Willis Towers Watson is a leading global advisory, broking and solutions company with 45,000 employees serving more than 140 countries and markets. The consultant is not related to the Managers, their controlling shareholder, their related corporations or any of their Directors.

Accordingly, the Boards’ procedures for developing remuneration policies are consistent with the intent of Principle 6 of the Code.

Remuneration Policy for Key Management Personnel

The remuneration framework and policy is designed to support the implementation of the Stapled Group’s strategy and deliver sustainable Stapled Securityholder value. The principles governing the Managers’ key management personnel remuneration policy are as follows:

Business Alignment

  • Focus on generating rental income and enhancing asset value over time so as to maximise returns from investments and ultimately the distributions and total returns to Stapled Securityholders

  • Provide sound and structured funding to ensure affordability and cost-effectiveness in line with performance goals

  • Enhance retention of key talents to build strong organisational capabilities

Motivate Right Behaviour

  • Pay for performance - align, differentiate and balance rewards according to multiple dimensions of performance

  • Strengthen line-of-sight linking rewards and performance

Fair & Appropriate

  • Ensure competitive remuneration relative to the appropriate external talent markets

  • Manage internal equity such that remuneration is viewed as fair across the Stapled Group

  • Significant and appropriate portion of pay-at-risk, taking into account risk policies of the Stapled Group, symmetrical with risk outcomes and sensitive to the risk time horizon

Effective Implementation

  • Maintain rigorous corporate governance standards

  • Exercise appropriate flexibility to meet strategic business needs and practical implementation considerations

  • Facilitate employee understanding to maximise the value of the remuneration programme

Remuneration for Key Management Personnel

Remuneration for key management personnel comprises fixed components, a variable cash component, stapled security-based components and employee benefits. A significant proportion of key management personnel’s remuneration is in the form of variable compensation, awarded in a combination of short-term and long-term incentives, in keeping with the principle that the interests of key management personnel align with those of Stapled Securityholders and that the remuneration framework links rewards to business and individual performance.

A. Fixed Components:

The fixed components comprise the base salary, fixed allowances and compulsory employer contribution to an employee’s Central Provident Fund.

B. Variable Cash Components:

The variable cash component comprises the Balanced Scorecard Bonus Plan (BSBP) that is linked to the achievement of annual performance targets for each key management personnel as agreed at the beginning of the financial year with the Boards.

Under the Balanced Scorecard framework, the Stapled Group’s strategy and goals are translated to performance outcomes comprising both quantitative and qualitative key performance indicators in the dimensions of:

  • Financial: This includes targets relating to profitability and distributions, capital structure, financial management and risk management;

  • Strengthening Execution: This includes targets relating to service excellence and investor relations;

  • Future Growth: This includes targets relating to asset enhancements and portfolio reconstitution; and

  • Sustainability: This includes targets relating to sustainable corporate practices and talent management.

These are cascaded down throughout the organisation, thereby creating alignment across the Stapled Group.

After the close of each financial year, the Boards review the Stapled Group’s achievements against the targets set in the Balanced Scorecard and determine the overall performance taking into consideration qualitative factors such as the quality of earnings, operating environment, regulatory landscape and industry trends.

In determining the pay-out quantum for each key management personnel under the BSBP, the Boards consider the overall business performance and individual performance as well as the affordability of the pay-out for the Managers.

C. Stapled Security-based Components:

Stapled Security awards were granted in FY 2020 pursuant to the Managers’ Performance Stapled Security Plan and the Restricted Stapled Security Plan (together, the Stapled Security Plans), approved by the Boards. The Managers believe that the Stapled Security-based components of the remuneration for key management personnel serve to align the interests of such key management personnel with that of Stapled Securityholders and ART’s long-term growth and value.

The obligation to deliver the Stapled Securities is expected to be satisfied out of the Stapled Securities held by the Managers.

To promote the alignment of Management’s interests with that of Stapled Securityholders in the longer term, senior members of Management are subject to Stapled Security ownership guidelines to instil stronger identification with the longer-term performance and growth of the Stapled Group. Under these guidelines, senior members of Management are required to retain a prescribed proportion of the Stapled Securities received under the Stapled Security Plans worth up to at least one year of basic salary.

Managers' Performance Stapled Security Plan (PSSP)

In FY 2020, the Boards granted awards which are conditional on targets set for a three-year performance period. A specified number of Stapled Securities will only be released to the recipients at the end of the qualifying performance period, provided that minimally the threshold target is achieved. An initial number of Stapled Securities (PSSP baseline award) is allocated conditional on the achievement of a pre-determined target in respect of the Relative Total Stapled Securityholder Return (TSSR) of the Stapled Group measured by the percentile ranking of the TSSR of the Stapled Group relative to the constituent REITs in the FTSE ST REIT Index.

The above performance measure has been selected as a key measurement of wealth creation for Stapled Securityholders. The final number of Stapled Securities to be released will depend on the Stapled Group’s performance against the pre-determined targets over the three-year qualifying performance period. This serves to align Management’s interests with that of Stapled Securityholders in the longer term and to deter short-term risk taking. No Stapled Securities will be released if the threshold target is not met at the end of the qualifying performance period. On the other hand, if superior targets are met, more Stapled Securities than the PSSP baseline award can be delivered up to a maximum of 200% of the PSSP baseline award. The Boards have the discretion to adjust the number of Stapled Securities released taking into consideration other relevant quantitative and qualitative factors. The recipient will receive fully paid Stapled Securities at no cost.

For FY 2020, the relevant award for assessment of the performance achieved by the Stapled Group is the award granted in FY 2018 where the qualifying performance period was FY 2018 to FY 2020. Based on the Boards’ assessment that the performance achieved by the Stapled Group has partially met the pre-determined performance targets for such performance period, the resulting number of Stapled Securities released has been adjusted accordingly to reflect the performance level.

In respect of the Stapled Securities awards granted under the PSSP in FY 2019 and FY 2020, the respective qualifying performance periods have not ended as at the date of this Report.

Managers' Restricted Stapled Security Plan (RSSP)

In FY 2020, the Boards granted awards which are conditional on targets set for a one-year performance period. A specified number of Stapled Securities will only be released to recipients at the end of the qualifying performance period, provided that minimally the threshold targets are achieved.

Under the RSSP, an initial number of Stapled Securities (RSSP baseline award) is allocated conditional on the achievement of pre-determined targets in respect of the following performance conditions:

  1. Gross Profit of the Stapled Group; and

  2. Distribution per Stapled Security of the Stapled Group.

The above performance measures have been selected as they are the key drivers of business performance and are aligned to Stapled Securityholder value. The final number of Stapled Securities to be released will depend on the Stapled Group’s performance against the pre-determined targets at the end of the one-year qualifying performance period. The Stapled Securities will be released in equal annual tranches over a vesting period of three years. No Stapled Securities will be released if the threshold targets are not met at the end of the qualifying performance period. On the other hand, if superior targets are met, more Stapled Securities than the RSSP baseline award can be delivered up to a maximum of 150% of the RSSP baseline award. The Boards have the discretion to adjust the number of Stapled Securities released taking into consideration other relevant quantitative and qualitative factors. Recipients will receive fully paid Stapled Securities at no cost.

In respect of the Stapled Securities awards granted under the RSSP in FY 2020, based on the Boards’ assessment that the performance achieved by the Stapled Group has partially met the pre-determined performance targets for FY 2020, the resulting number of Stapled Securities released has been adjusted accordingly to reflect the performance level.

D. Employee Benefits:

The benefits provided are comparable with local market practices.

At present, there are four key management personnel (including the CEO). Each year, the Boards evaluate the extent to which each of the key management personnel has delivered on the business and individual goals and objectives, and based on the outcome of the evaluation, approves the compensation for the key management personnel. In such evaluation, the Boards consider whether the level of remuneration is appropriate to attract, retain and motivate key management personnel to successfully manage ART for the long term. The CEO does not attend discussions relating to her performance and remuneration.

The CEO’s remuneration amount in a band of S$250,000 and the aggregate of the total remuneration of the other key management personnel (excluding the CEO), together with a breakdown of their respective remuneration components in percentage terms, are set out in the Key Management Personnel’s Remuneration Table on page 133 of the Annual Report.

While the disclosure of the CEO’s exact remuneration amount and the requisite remuneration band for each of the other key management personnel (who are not also Directors or the CEO) would be in full compliance with Provision 8.1 of the Code, the Boards have considered carefully and decided that such disclosure would not be in the interests of the Managers or Stapled Securityholders due to the intense competition for talents in the industry, as well as the need to balance the confidential and commercial sensitivities associated with remuneration matters. The Managers are of the view that despite this partial deviation from Provision 8.1 of the Code, the disclosures on pages 133 and 134 of the Annual Report are consistent with the intent of Principle 8 of the Code and would provide sufficient information and transparency to the Stapled Securityholders on the Managers’ remuneration policies and the level and mix of remuneration accorded to the key management personnel, and enable the Stapled Securityholders to understand the relationship between ART’s performance, value creation and the remuneration of the key management personnel. In addition, the remuneration of the management personnel, including the key management personnel, is not borne by ART as it is paid out of the fees that the Managers receive (the quantum and basis of which have been disclosed).

Apart from the key management personnel and other employees of the Managers, the Managers outsource various other services to a wholly owned subsidiary of CL (CL Subsidiary). The CL Subsidiary provides the services through its employees and employees of CL Group (together, the Outsourced Personnel). This arrangement is put in place so as to provide flexibility and maximise efficiency in resource management to match the needs of ART from time to time, as well as to leverage on economies of scale and tap on the management talent of an established corporate group which can offer enhanced depth and breadth of experience. However, notwithstanding the outsourcing arrangement, the responsibility for due diligence, oversight and accountability continues to reside with the Boards and Management. In this regard, the remuneration of such Outsourced Personnel, being employees of the CL Subsidiary and CL Group, is not included as part of the disclosure of remuneration of key management personnel of the Managers in the Report.

The Boards seek to ensure that the remuneration of the CEO and other key management personnel is strongly linked to the achievement of business and individual performance targets. The performance targets approved by the Boards are set at realistic yet stretched levels each year to motivate a high degree of business performance with emphasis on both shorter-term and longer-term quantifiable objectives.

In FY 2020, no termination, retirement or post-employment benefits were granted to Directors, the CEO and other key management personnel. There was also no special retirement plan, ‘golden parachute’ or special severance package for any of the key management personnel.

In FY 2020, there were no employees of the Managers who were substantial shareholders of the Managers, substantial Stapled Securityholders of ART or immediate family members of a Director, the CEO, any substantial shareholder of the Managers or any substantial Stapled Securityholder of ART. “Immediate family member” refers to the spouse, child, adopted child, step-child, sibling or parent of the individual.

Remuneration for Non-executive Directors

The non-executive Directors’ fees for FY 2020, together with a breakdown of the components, are set out in the Non-Executive Directors’ Remuneration Table on page 134 of the Annual Report. The CEO who is an executive Director is remunerated as part of the key management personnel of the Managers and does not receive any Director’s fees. The non-executive Directors who are employees of the CL Group also do not receive any Directors’ fees.

The compensation policy for non-executive Directors is based on a scale of fees divided into basic retainer fees for serving as Director and additional fees for attendance and serving on Board Committees. The framework for the non-executive Directors’ fees has remained unchanged from that of the previous financial year.

The compensation package is benchmarked against market, taking into account the effort, time spent and demanding responsibilities on the part of the non-executive Directors in light of the scale, complexity and geographic scope of the Stapled Group’s business. The remuneration of non-executive Directors is reviewed from time to time to ensure that it is appropriate to attract, retain and motivate the non-executive Directors to provide good stewardship of the Managers and ART.

The non-executive Directors’ fees are paid in cash (about 80%) and in the form of Stapled Securities (about 20%), save that a non-executive Director (not being an employee of the CL Group) who steps down from the Boards during a financial year will be paid fees fully in cash. The Managers believe that the payment of a portion of the non-executive Directors’ fees in Stapled Securities will serve to align the interests of non-executive Directors with the interests of Stapled Securityholders and ART’s long-term growth and value. In order to encourage the alignment of the interests of the non-executive Directors with the interests of Stapled Securityholders, a non-executive Director is required to hold the number of Stapled Securities worth at least one year of his or her basic retainer fee or the total number of Stapled Securities awarded to him or her, whichever is lower, at all times during his or her Board tenure.

In solidarity with ART’s stakeholders, the Boards agreed to a voluntary 5% reduction in the total FY 2020 fees for each Director.

ACCOUNTABILITY AND AUDIT

Principle 9: Risk Management and Internal Controls

The Managers maintain adequate and effective systems of risk management and internal controls addressing material financial, operational, compliance and information technology (IT) risks to safeguard Stapled Securityholders’ interests and the Stapled Group’s assets.

The Boards have overall responsibility for the governance of risk and oversee the Managers in the design, implementation and monitoring of the risk management and internal controls systems. The AC assists the Boards in carrying out the Boards’ responsibility of overseeing the risk management framework and policies for the Stapled Group.

Under its terms of reference, the scope of the AC’s duties and responsibilities includes:

  1. making recommendations to the Boards on the Risk Appetite Statement (RAS) for Stapled Group;

  2. assessing the adequacy and effectiveness of the risk management and internal controls systems established by the Managers to manage risks;

  3. overseeing the formulation, updating and maintenance of an adequate and effective risk management framework, policies and strategies for managing risks that are consistent with the Stapled Group’s risk appetite and reports to the Boards on its decisions on any material matters concerning the aforementioned;;

  4. making the necessary recommendations to the Boards such that an opinion regarding the adequacy and effectiveness of the risk management and internal controls systems can be made by the Boards in the Annual Report in accordance with the Listing Manual and the Code; and

  5. considering and advising on risk matters referred to it by the Boards or Management, including reviewing and reporting to the Boards on any material breaches of the RAS, any material non-compliance with the approved framework and policies and the adequacy of any proposed action.

The Managers adopt an Enterprise Risk Management (ERM) Framework which sets out the required environmental and organisational components for managing risks in an integrated, systematic and consistent manner. The ERM Framework and related policies are reviewed annually.

As part of the ERM Framework, the Managers undertake and perform a Risk and Control Self-Assessment (RCSA) annually to identify material risks along with their mitigating measures. The adequacy and effectiveness of the systems of risk management and internal controls are reviewed at least annually, by Management, the AC and the Boards, taking into account the best practices and guidance in the Risk Governance Guidance for Listed Boards issued by the Corporate Governance Council and the Listing Manual.

The Stapled Group’s RAS, incorporating the risk limits, addresses the management of material risks faced by the Stapled Group. Alignment of the Stapled Group’s risk profile to the RAS is achieved through various communication and monitoring mechanisms (including key risk indicators set for Management) put in place across the various functions within the Managers.

More information on the Managers’ ERM Framework including the material risks identified can be found in the ERM section on pages 96 to 100 of the Annual Report.

The internal and external auditors conduct reviews of the adequacy and effectiveness of the material internal controls (including financial, operational, compliance and IT controls) and risk management systems. This includes testing, where practicable, material internal controls in areas managed by external service providers. Any material non-compliance or lapses in internal controls together with corrective measures recommended by the internal and external auditors are reported to and reviewed by the AC. The AC also reviews the adequacy and effectiveness of the measures taken by the Managers on the recommendations made by the internal and external auditors in this respect.

The Boards have received assurance from the CEO and the Chief Financial Officer (CFO) of the Managers that the financial records of the Stapled Group have been properly maintained and the financial statements for FY 2020 give a true and fair view of the Stapled Group’s operations and finances. They have also received assurance from the CEO and the relevant key management personnel who have responsibility regarding various aspects of risk management and internal controls that the systems of risk management and internal controls in place for the Stapled Group are adequate and effective to address the risks (including financial, operational, compliance and IT risks) that the Managers consider relevant and material to the current business environment.

The CEO, the CFO and the relevant key management personnel of the Managers have obtained similar assurances from the respective risk and control owners. In addition, in FY 2020, the Boards received certification by Management on the integrity of financial reporting and the Boards provided a negative assurance confirmation to Stapled Securityholders as required by the Listing Manual.

Based on the ERM Framework and the reviews conducted by Management and both the internal and external auditors, as well as the assurance from the CEO and the CFO, the Boards are of the opinion that the systems of risk management and internal controls (including financial, operational, compliance and IT controls) are adequate and effective to address the risks (including financial, operational, compliance and IT risks) which the Stapled Group considers relevant and material to its current business environment as at 31 December 2020. The AC concurs with the Boards in their opinion. No material weaknesses in the systems of risk management and internal controls were identified by the Boards or the AC in the review for FY 2020.

The Boards note that the systems of risk management and internal controls established by the Managers provide reasonable assurance that the Stapled Group, as it strives to achieve its business objectives, will not be significantly affected by any event that can be reasonably foreseen or anticipated. However, the Boards also note that no system of risk management and internal controls can provide absolute assurance in this regard, or absolute assurance against poor judgment in decision-making, human error, losses, fraud or other irregularities.

Principle 10: Audit Committee

At present, the AC comprises four non-executive Directors, all of whom (including the chairman of the AC) are IDs. The AC Chairman is a Director other than the Chairman of the Boards. The AC Chairman and members bring with them invaluable recent and relevant managerial and professional expertise in accounting, auditing and related financial management domains.

The AC does not comprise former partners of ART’s incumbent external auditors, KPMG LLP (a) within a period of two years commencing from the date of their ceasing to be partners of KPMG LLP; or (b) who have any financial interest in KPMG LLP.

The AC has explicit authority to investigate any matter within its terms of reference. Management provides the fullest co-operation in providing information and resources, and in implementing or carrying out all requests made by the AC. The AC has direct access to the internal and external auditors and full discretion to invite any Director or key management personnel to attend its meetings. Similarly, both the internal and external auditors have unrestricted access to the AC.

Under its terms of reference, the AC’s scope of duties and responsibilities includes:

  1. reviewing the significant financial reporting issues and judgments so as to ensure the integrity of the financial statements of the Stapled Group and any announcements relating to the Stapled Group’s financial performance;

  2. reviewing and reporting to the Boards at least annually the adequacy and effectiveness of the Managers’ internal controls (including financial, operational, compliance and IT controls) and risk management systems;

  3. reviewing the scope and results of the external audit and the independence and objectivity of the external auditors;

  4. reviewing the adequacy and effectiveness of the Managers’ internal audit (IA) and compliance functions;

  5. making recommendations to the Boards on the proposals to Stapled Securityholders on the appointment, re-appointment and removal of the external auditors, and approving the remuneration of the external auditors;

  6. reviewing and approving processes to regulate transactions between an interested person (as defined in Chapter 9 of the Listing Manual) and/or interested party (as defined in the Property Funds Appendix) (each, an Interested Person) and ART and/or its subsidiaries (Interested Person Transactions), to ensure compliance with the applicable regulations. The regulations include the requirements that Interested Person Transactions are on normal commercial terms and are not prejudicial to the interests of ART and its minority Stapled Securityholders. In respect of any property management agreement which is an Interested Person Transaction, the AC also carries out reviews at appropriate intervals to satisfy itself that the Managers have reviewed the property manager’s compliance with the terms of the property management agreement and has taken remedial actions where necessary; and

  7. reviewing the policy and arrangements for concerns about possible improprieties in financial reporting or other matters to be raised, and independently investigated, for appropriate follow up action to be taken.

The AC undertook a review of the independence of the external auditors, taking into consideration, among other factors, ART’s relationships with the external auditors in FY 2020, as well as the processes and safeguards adopted by the Managers and the external auditors relating to audit independence. Based on the review, the AC is satisfied that the external auditors are independent. The external auditors have also provided confirmation of their independence to the AC. The amount of audit and non-audit fees paid to the external auditors for FY 2020 amounted to S$2,830,000, comprising audit fees of S$2,758,000 and non-audit fees of S$72,000.

The AC holds at least four scheduled meetings in a year and met five times in FY 2020. At all scheduled AC meetings in FY 2020, the CEO and the CFO were in attendance. During each of these meetings, among other things, the AC reviewed the financial statements including the relevance and consistency of the accounting principles adopted and any significant financial reporting issues. It recommended the financial statements and corresponding announcements to the Boards for approval. In FY 2020, the AC also reviewed and assessed the adequacy and effectiveness of the internal controls and risk management systems established by the Managers to manage risks, taking into consideration the outcome of reviews conducted by Management and both the internal and external auditors, as well as the assurances from the CEO and the CFO.

The AC also meets with the external auditors and with the internal auditors, without the presence of Management, at least once a year. In FY 2020, the AC met with the external auditors and internal auditors twice, separately and without Management’s presence, to discuss the reasonableness of the financial reporting process, the internal controls and risk management systems, and the significant comments and recommendations by the auditors.

Where relevant, the AC makes reference to the best practices and guidance for audit committees in Singapore including practice directions issued from time to time in relation to the Financial Reporting Surveillance Programme administered by the Accounting and Corporate Regulatory Authority of Singapore.

Key Audit Matters

In the review of the financial statements of the Stapled Group for FY 2020, the AC has discussed with Management the accounting principles that were applied and their judgment of items that might affect the integrity of the financial statements and also considered the clarity of key disclosures in the financial statements. The AC reviewed, amongst other matters, the following key audit matter as reported by the external auditors for FY 2020.

key audit matters

The Managers confirm, on behalf of ART, that ART complies with Rules 712 and 715 of the Listing Manual.

Internal Audit

The Managers have in place an IA function supported by CL’s Internal Audit Department (CL IA). CL IA is independent of the activities it audits and has unfettered access to the Stapled Group’s documents, records, properties and employees, including access to the AC, and has appropriate standing with respect to the Managers. The primary reporting line of CL IA in respect of the Stapled Group is to the AC, however, the AC does not decide on the appointment, termination and remuneration of the head of CL IA as it operates at the CL Group level. While this is a deviation from Provision 10.4 which requires the AC to decide on the appointment, termination and remuneration of the head of the IA function, CL IA is able to carry out its role effectively for the reasons below and is accordingly consistent with the intent of Principle 10 of the Code.

The AC monitors and assesses the role and effectiveness of the IA function through reviewing the IA process from time to time and may make recommendations to the Boards for any changes to the IA process. The AC also reviews to ensure that the IA function is adequately resourced and skilled in line with the nature, size and complexity of the Managers and ART’s business, and that an adequate budget is allocated to the IA function to assure its proper functioning. In respect of FY 2020, the AC has carried out a review of the IA function and is satisfied that the IA function performed by CL IA is adequately resourced, effective and independent.

CL IA plans its IA schedules in consultation with, but independently of, Management and its plan is submitted to the AC for approval prior to the beginning of each year. During FY 2020, the AC reviewed the results of audits performed by CL IA based on the approved audit plan. The AC also reviewed reports on whistle blower complaints reviewed by CL IA to ensure independent and thorough investigation and adequate follow up. The AC also received reports on Interested Person Transactions reviewed by CL IA that they were on normal commercial terms and are not prejudicial to the interests of ART and its minority Stapled Securityholders.

CL IA is adequately resourced and staffed with persons with the relevant qualifications and experience. CL IA is a corporate member of the Institute of Internal Auditors Inc. (IIA), Singapore, which is an affiliate of the IIA with its headquarters in the United States of America (USA). CL IA subscribes to, and is guided by, the International Standards for the Professional Practice of Internal Auditing (Standards) developed by IIA, and has incorporated these Standards into its audit practices.

To ensure that IAs are performed by competent professionals, CL IA recruits and employs suitably qualified professional staff with the requisite skill sets and experience. For instance, CL IA staff who are involved in IT audits have the relevant professional IT certifications and are also members of the ISACA Singapore Chapter, a professional body administering information systems audit and information security certifications that is headquartered in the USA. The ISACA Information Systems Auditing Standards provide guidance on the standards and procedures to be applied in IT audits. CL IA identifies and provides training and development opportunities for its staff to ensure their technical knowledge and skill sets remain current and relevant.

STAPLED SECURITYHOLDER RIGHTS AND ENGAGEMENT

Principles 11, 12 and 13: Shareholder Rights and Conduct of General Meetings, Engagement with Shareholders, Managing Stakeholder Relationships

The Managers are committed to treating all Stapled Securityholders fairly and equitably. All Stapled Securityholders enjoy specific rights under the Trust Deeds and the relevant laws and regulations. These rights include, among other things, the right to participate in profit distributions.

General Meetings

In view of the COVID-19 pandemic, the previous general meeting held in FY 2020 was, and the forthcoming AGM to be held on 19 April 2021 (AGM 2021) will be, held via electronic means pursuant to the COVID-19 (Temporary Measures) (Alternative Arrangements for Meetings for Companies, Variable Capital Companies, Business Trusts, Unit Trusts and Debenture Holders) Order 2020 (COVID-19 Temporary Measures Order). Alternative arrangements relating to attendance at the AGM 2021 (including arrangements by which the AGM 2021 can be electronically accessed via live audio-visual webcast or live audio-only stream, submission of questions in advance of the AGM 2021, addressing of substantial and relevant questions prior to or at the AGM 2021 and voting by appointing the chairman of the meeting as proxy at the AGM 2021) are set out in the Managers’ notice of annual general meeting dated 26 March 2021. The description below sets out ART’s usual practice for Stapled Securityholders meetings when there are no pandemic risks and the COVID-19 Temporary Measures Order is not in operation.

Stapled Securityholders are entitled to attend general meetings and are accorded the opportunity to participate effectively and vote at general meetings (including through the appointment of up to two proxies, if they are unable to attend in person or in the case of a corporate Stapled Securityholder, through its appointed representative). Stapled Securityholders such as nominee companies which provide custodial services for securities are not constrained by the two proxy limitation, and are able to appoint more than two proxies to attend, speak and vote at general meetings of ART.

ART supports the principle of encouraging Stapled Securityholder participation and voting at general meetings. ART’s Annual Report is provided to Stapled Securityholders within 120 days from the end of ART’s financial year. Stapled Securityholders may download the Annual Report from the Website and printed copies of the Annual Report are available upon request. More than the legally required notice period for general meetings is generally provided. Stapled Securityholders will receive the notices of general meetings and may download these notices from the Website. Notices of the general meetings are also advertised in the press and issued on SGXNet. The rationale and explanation for each agenda item which requires Stapled Securityholders’ approval at a general meeting are provided in the notice of the general meeting or in the accompanying circular (if any) issued to Stapled Securityholders in respect of the matter(s) for approval at the general meeting. This enables Stapled Securityholders to exercise their votes on an informed basis.

At AGMs, Management makes a presentation to Stapled Securityholders to update them on ART’s performance, position and prospects. The presentation materials are made available to Stapled Securityholders on the Website and also on SGXNet.

Stapled Securityholders are informed of the rules governing general meetings and are given the opportunity to communicate their views, ask questions and discuss with the Boards and Management on matters affecting ART. Representatives of the Trustee, Directors (including the chairman of the respective Board Committees), key management personnel and the external auditors of ART, are present for the entire duration of the AGMs to address any queries that the Stapled Securityholders may have, including queries about the conduct of ART’s external audit and the preparation and contents of the external auditors’ report. Directors and Management also interact with Stapled Securityholders after the AGMs.

All Directors attended the general meeting held during their tenure in FY 2020. A record of the Directors’ attendance at the general meeting in FY 2020 can be found in their meeting attendance records as set out on page 133 of the Annual Report.

To safeguard the Stapled Securityholders’ interests and rights, a separate resolution is proposed for each substantially separate matter to be approved at a general meeting.

To ensure transparency in the voting process and better reflect Stapled Securityholders’ interests, ART conducts electronic poll voting for all the resolutions proposed at general meetings. One Stapled Security is entitled to one vote. Voting procedures and the rules governing general meetings are explained and vote tabulations are disclosed at the general meetings. An independent scrutineer is also appointed to validate the vote tabulation procedures. Votes cast, for or against and the respective percentages, on each resolution are tallied and displayed ‘live’ on-screen to Stapled Securityholders immediately after each resolution is voted on at the general meetings. The total number of votes cast for or against each resolution and the respective percentages are also announced on SGXNet after the general meetings.

Provision 11.4 of the Code requires an issuer’s Constitution to allow for absentia voting at general meetings of shareholders. ART’s Trust Deeds currently do not permit Stapled Securityholders to vote at general meetings in absentia (such as via mail or email). The Managers will consider implementing the relevant amendments to ART’s Trust Deeds to permit absentia voting after they have carried out careful study and are satisfied that the integrity of information and the authentication of the identity of Stapled Securityholders through the internet will not be compromised, and after the implementation of legislative changes to recognise remote voting. The Managers are of the view that despite the deviation from Provision 11.4 of the Code, Stapled Securityholders nevertheless have opportunities to communicate their views on matters affecting ART even when they are not in attendance at general meetings. For example, Stapled Securityholders may appoint proxies to attend, speak and vote, on their behalf, at general meetings.

Minutes of the general meetings recording the substantial and relevant comments made, questions raised and answers provided, are prepared and are available to Stapled Securityholders for their inspection upon request. Minutes of AGMs are also made available on the Website. Accordingly, the rights provided to Stapled Securityholders are consistent with the intent of Principle 11 of the Code.

Distribution Policy

ART’s distribution policy is to distribute at least 90.0% of its taxable income (other than gains from the sale of real estate properties by ART which are determined to be trading gains), with the actual level of distribution to be determined at the Managers’ discretion. Distributions are generally paid within 35 market days after the relevant record date.

Timely Disclosure of Information

The Managers are committed to keeping all Stapled Securityholders, other stakeholders, analysts and the media informed of ART’s performance and any changes in the Stapled Group or its business which would likely to materially affect the price or value of the Stapled Securities.

The Managers provide Stapled Securityholders with periodic and annual financial statements within the relevant periods prescribed by the Listing Manual. In particular, for FY 2020, full unaudited half-yearly financial statements have been released, along with business updates for the calendar quarters ending 31 March and 30 September respectively. These periodic and annual financial statements were reviewed and approved by the Boards prior to release to Stapled Securityholders by announcement on SGXNet. The release of periodic and annual financial statements were accompanied by news releases issued to the media and which were also made available on SGXNet. In presenting the periodic and annual financial statements to Stapled Securityholders, the Boards sought to provide Stapled Securityholders with a balanced, clear and comprehensible assessment of ART and the Stapled Group’s performance, position and prospects.

In addition to the release of financial statements, the Managers also keep ART’s Stapled Securityholders, stakeholders and analysts informed of the performance and changes in the Stapled Group or its business which would likely materially affect the price or value of the Stapled Securities on a timely and consistent basis, so as to assist Stapled Securityholders and investors in their investment decisions. This is performed through the release on SGXNet of announcements in compliance with regulatory reporting requirements and news releases for the media, on a timely and consistent basis. These announcements and news releases are also posted on the Website. In addition, the Managers also conduct analysts’ and media briefings, and the materials used for such briefings are uploaded on SGXNet.

The Managers have a formal policy on corporate disclosure controls and procedures to ensure that ART complies with its disclosure obligations under the Listing Manual. These controls and procedures incorporate the decision-making process and an obligation on internal reporting of the decisions made.

The Managers believe in conducting the business of ART in ways that seek to deliver sustainable value to Stapled Securityholders. Best practices are promoted as a means to build an excellent business for ART and the Managers’ accountability to Stapled Securityholders for ART’s performance. Prompt fulfilment of statutory reporting requirements is but one way to maintain Stapled Securityholders’ confidence and trust in the capability and integrity of the Managers.

Investor Relations

The Managers have in place an Investor Relations department which facilitates effective communication with Stapled Securityholders and analysts. The Managers also maintain the Website which contains information on ART including but not limited to its prospectus, circulars, current and past announcements and news releases, financial statements, investor presentations and Annual Reports.

The Managers actively engage with Stapled Securityholders with a view to solicit and understand their views, and have put in place an Investor Relations Policy to promote regular, effective and fair communications with Stapled Securityholders. The Investor Relations Policy, which sets out the mechanism through which Stapled Securityholders may contact the Managers with questions and through which the Managers may respond to such questions, is available on the Website. Stapled Securityholders are welcome to engage with the Managers beyond general meetings and they may do so by contacting the Investor Relations department whose details may be found on the Website via the Managers Contacts channel on the Website.

More information on the Managers’ investor and media relations efforts can be found in the Investor Relations section on pages 32 to 34 of the Annual Report.

The Managers also have in place a corporate communications function supported by CL’s Group Communications department which works closely with the media and oversees ART’s media communications efforts.

Managing Stakeholder Relationships

The Boards’ role includes considering sustainability as part of their strategic formulation. The Managers adopt an inclusive approach for ART by considering and balancing the needs and interests of material stakeholders, as part of the overall strategy to ensure that the best interests of ART are served. The Managers are committed to sustainability and incorporate the key principles of environmental and social responsibility, and corporate governance in ART’s business strategies and operations. The Managers have arrangements in place to identify and engage with material stakeholder groups from time to time to gather feedback on the sustainability issues most important to them and to manage their relationships with such groups. Such arrangements include maintaining the Website, which is kept updated with current information, to facilitate communication and engagement with ART’s stakeholders. More details of ART’s sustainability strategy and stakeholder engagement can be found on pages 87 to 95 of the Annual Report.

Additional Information

Executive Committee
In addition to the AC, the Boards have also established an EC.

The EC oversees the day-to-day activities of the Managers and that of ART, on behalf of the Boards. The EC is guided by its terms of reference, in particular, the EC:

  1. approves specific budgets for capital expenditure on development projects, acquisitions and enhancements/upgrading of properties within its approved financial limits;

  2. reviews management reports and operating budgets; and

  3. awards contracts for development projects.

The members of the EC also meet informally during the course of the year.

Dealings with Interested Persons
Review Procedures for Interested Person Transactions

The Managers have established internal control procedures to ensure that all Interested Person 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, and are not prejudicial to the interests of ART and Stapled Securityholders. In respect of such transactions, the Managers would have to demonstrate to the AC that such transactions are undertaken on normal commercial terms and are not prejudicial to the interests of ART and Stapled Securityholders which may include obtaining (where practicable) third party quotations or obtaining valuations from independent valuers (in accordance with applicable provisions of the Listing Manual and the Property Funds Appendix). The internal control procedures also ensure compliance with Chapter 9 of the Listing Manual and the Property Funds Appendix.

In particular, the procedures in place include the following:

Interested Person Transactions1


Role of the Audit Committee for Interested Person Transactions
The Managers’ internal control procedures are intended to ensure that Interested Person Transactions are conducted at arm’s length, on normal commercial terms and are not prejudicial to ART and Stapled Securityholders’ interests.

The Managers maintain a register to record all Interested Person Transactions which are entered into by ART (and the basis on which they are entered into, including the quotations obtained to support such basis). All Interested Person Transactions are subject to regular periodic reviews by the AC, which in turn obtains advice from CL IA, to ascertain that the guidelines and procedures established to monitor Interested Person Transactions, including the relevant provisions of the Listing Manual and the Property Funds Appendix, as well as any other guidelines which may from time to time be prescribed by the SGX-ST, MAS or other relevant authorities, have been complied with. The review includes an examination of the nature of the transaction and its supporting documents or such other information deemed necessary by the AC. If a member of the AC has an interest in a transaction, he/she is to abstain from participating in the review and approval process in relation to that transaction.

Details of all Interested Person Transactions (equal to or exceeding S$100,000 each in value) entered into by ART in FY 2020 are disclosed on page 356 of the Annual Report.

Dealing with Conflicts of Interest
The following principles and procedures have been established to deal with potential conflicts of interest which the Managers (including their Directors, key management personnel and employees) may encounter in managing ART:

  1. the Managers are dedicated managers to ART and will not manage any other REIT or BT or be involved in any other real property business;

  2. all resolutions at meetings of the Boards in relation to matters concerning ART must be decided by a majority vote of the Directors, including at least one ID;

  3. in respect of matters in which CL and/or its subsidiaries have an interest, whether direct or indirect, any nominees appointed by CL and/or its subsidiaries to the Boards will abstain from voting. In such matters, the quorum must comprise a majority of IDs and shall exclude such nominee Directors of CL and/or its subsidiaries;

  4. in respect of matters in which a Director or his or her associates have an interest, whether direct or indirect, such interested Director will abstain from voting. In such matters, the quorum must comprise a majority of the Directors and shall exclude such interested Director(s);

  5. if the Reit 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 Ascott Reit with an affiliate of the Reit Manager, the Reit Manager is 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 Ascott Reit, has a prima facie case against the party allegedly in breach under such agreement, the Reit Manager is obliged to pursue the appropriate remedies under such agreement; and

  6. at least one-third of the Boards shall comprise IDs.

Additionally, ART has been granted a right of first refusal by The Ascott Limited (Ascott) which is a wholly owned subsidiary of CL over any proposed sale of (a) any properties that are used, or predominantly used, as serviced residences or rental housing properties in Europe and the Pan-Asia region and (b) any shares or equity interests in single-purpose corporations which hold such properties (each a Relevant Asset), by Ascott or any of its wholly owned subsidiaries (each an Ascott entity), for so long as the Managers remain the managers of ART and Ascott and/or any of its related corporations remain a shareholder of the Managers (TAL ROFR).

Following the completion of the combination of Ascott Reit and Ascendas Hospitality Trust, the agreement in relation to the right of first refusal granted by Ascendas Land International Pte. Ltd. (ALI), as sponsor of Ascendas Hospitality Trust (A-HTRUST), in favour of Perpetual (Asia) Limited, in its capacity as trustee of Ascendas Hospitality Real Estate Investment Trust and Ascendas Hospitality Trust Management Pte. Ltd., in its capacity as trustee-manager of Ascendas Hospitality Business Trust dated 9 July 2012 (as amended) (A-HTRUST ROFR, and together with TAL ROFR, the ROFRs) pursuant to which ALI had granted a right of first refusal to A-HTRUST in the event ALI wishes to dispose of certain assets which are subject to the A-HTRUST ROFR, had been novated by ALI to Ascott, such that Ascott becomes the obligor under the A-HTRUST ROFR.

Consequently, Ascott is required to ensure that ART has the first right to acquire any asset falling within the scope of either of the above ROFRs.

In respect of voting rights where the Managers would face a conflict between their own interests and that of Stapled Securityholders, the Managers shall cause such voting rights to be exercised according to the discretion of the Trustee.

Dealings in Securities

The Managers have adopted a securities dealing policy for the officers and employees which applies the best practice recommendations in the Listing Manual. Under this policy, Directors and employees of the Managers as well as certain relevant executives of the CL Group (together, the Relevant Persons) are required to refrain from dealing in ART’s securities (i) while in possession of material unpublished price-sensitive information, and (ii) during a prescribed period in accordance with the Listing Manual (Black-out Period) immediately preceding, and up to the time of each announcement of ART’s financial statements during a financial year. Prior to the commencement of each Black-out Period, an email would be sent to all the Relevant Persons to inform them of the duration of the Black-out Period. The Managers also do not deal in ART’s securities during the same Black-out Period. In addition, employees and Capital Markets Services Licence Appointed Representatives (CMSL Representatives) of the Managers are required to give a pre-trading notification to the CEO and the Compliance department before any dealing in ART’s securities.

This policy also provides for the Managers to maintain a list of persons who are privy to price-sensitive information relating to the Stapled Group as and when circumstances require such a list to be maintained.

Directors and employees of the Managers are also required to refrain from dealing in ART’s securities if they are in possession of unpublished price-sensitive information of ART arising from their appointment as Directors and/or in the course of performing their duties. As and when appropriate, they would be issued an advisory to refrain from dealing in ART’s securities.

Under this policy, Directors and employees of the Managers are also discouraged from trading on short-term or speculative considerations. They are also prohibited from using any information with respect to other companies or entities obtained in the course of their employment in connection with securities transactions of such companies or entities.

A Director is required to notify the Managers of his or her interest in ART’s securities within two business days after (a) the date on which he or she becomes a Director or (b) the date on which he or she acquires an interest in ART’s securities. A Director is also required to notify the Managers of any change in his or her interests in ART’s securities within two business days after he or she becomes aware of such change.

Dealings by the Directors are disclosed in accordance with the requirements in the SFA and the Listing Manual. In FY 2020, based on the information available to the Managers, save as disclosed in accordance with such requirements and other than the awards of Stapled Securities in part payment of Directors’ fees, there were no dealings by the Directors in ART’s securities.

CODE OF BUSINESS CONDUCT

The Managers adhere to an ethics and code of business conduct policy which deals with issues such as confidentiality, conduct and work discipline, corporate gifts and concessionary offers. Clear policies and guidelines on how to handle workplace harassment and grievances are also in place.

The policies and guidelines are published on CL Group’s intranet, which is accessible by all employees of the Managers.

The policies that the Managers have implemented aim to help to detect and prevent occupational fraud in mainly three ways, as set out below.

First, the Managers offer fair compensation packages, based on practices of pay-for-performance and promotion based on merit to their employees. The Managers also provide various healthcare subsidies and financial assistance schemes to alleviate the common financial pressures their employees may face.

Second, clearly documented policies and work procedures incorporate internal controls which ensure that adequate checks and balances are in place. Periodic audits are also conducted to evaluate the efficacy of these internal controls.

Finally, the Managers seek to build and maintain the right organisational culture through their core values, educating their employees on good business conduct and ethical values.

Fraud, Bribery and Corruption Risk Management Policy

In line with their core values, the Managers are committed to doing business with integrity. This is reflected in their longstanding zero tolerance stance against fraud, bribery and corruption. Consistent with this commitment, various policies and guidelines are in place to guide all employees of the Managers to maintain the highest standards of integrity in their work and business dealings. This includes clear guidelines and procedures for the giving and receipt of corporate gifts and concessionary offers, and an annual pledge by all employees of the Managers to uphold the Managers’ core values and to not engage in any corrupt or unethical practices. The Managers’ zero tolerance policy on bribery and corruption extends to their business dealings with third parties. Pursuant to this policy, the Managers require that certain agreements incorporate anti-bribery and anti-corruption provisions.

The Managers’ employees adhere to CL’s Fraud, Bribery and Corruption Risk Management Policy (FBC Risk Management Policy). The FBC Risk Management Policy reiterates the strong stance against fraud, bribery and corruption, and sets the overarching approach and standards in managing fraud, bribery and corruption risks in an integrated, systematic and consistent manner. The Managers’ stance against bribery and corruption is also reiterated by Management during their regular staff communication sessions.

Whistle-Blowing Policy
A whistle-blowing policy and other procedures are put in place to provide the Managers’ employees and parties who have dealings with the Managers with well defined, accessible and trusted channels to report suspected fraud, corruption, dishonest practices or other improprieties in the workplace, and for the independent investigation of any reported incidents and appropriate follow up action. The objective of this policy is to encourage the reporting of such matters so that employees or external parties making any reports in good faith will be able to do so with the confidence that they will be treated fairly and, to the extent possible, be protected from reprisal. The AC reviews all whistle-blowing complaints at its scheduled meetings. Independent, thorough investigation and appropriate follow up actions are taken. The outcome of each investigation is reported to the AC. All employees of the Managers are informed of this policy which is made available on CL Group’s intranet.

Business Continuity Management

The Managers have implemented a Business Continuity Management (BCM) programme that puts in place the prevention, detection, response and, business recovery and resumption measures to minimise the impact of adverse business interruptions or unforeseen events on the Stapled Group’s operations and also has in place a Business Continuity Plan (BCP). Under the BCP, Management has identified the critical business functions, processes and resources, and is able to tap on a pool of CL Group’s employees who are trained under a Business Psychological Resilience Programme to provide peer support to colleagues following the occurrence of adverse events. As part of the BCP, periodic desktop exercises and drills, simulating different scenarios, are carried out to stress-test the effectiveness of processes, procedures and escalation protocols. This holistic approach under the BCP serves to ensure organisational and staff preparedness and readiness to deal with adverse business disruptions such as acts of terrorism, cyber attacks, data breaches and epidemics. This approach aims to minimise financial loss to ART, allow the Managers to continue to function as the managers of ART and mitigate any negative effects that the disruptions could have on the Managers’ reputation, operations and ability to remain in compliance with relevant laws and regulations. The Managers have also acquired insurance policies for the Stapled Group on business interruption events.

Anti-Money Laundering and Countering the Financing of Terrorism Measures
As a holder of a Capital Markets Services Licence issued by MAS, the Reit Manager abides by the MAS’ guidelines on the prevention of money laundering and countering the financing of terrorism. Under these guidelines, the main obligations of the Reit Manager are:

  1. evaluation of risk;

  2. customer due diligence;

  3. suspicious transaction reporting;

  4. record keeping;

  5. employee and CMSL Representative screening; and

  6. training.

The Reit Manager has in place a policy on the prevention of money laundering and terrorism financing and remains alert at all times to suspicious transactions. Enhanced due diligence checks are performed on counterparties where there is a suspicion of money laundering or terrorism financing. Suspicious transactions will also be reported to the Suspicious Transaction Reporting Office of the Commercial Affairs Department.

Under this policy, all relevant records or documents relating to business relations with the Stapled Group’s customers or transactions entered into must be retained for a period of at least five years following the termination of such business relations or the completion of such transactions.

All prospective employees, officers and CMSL Representatives of the Reit Manager are also screened against various money laundering and terrorism financing information sources and lists of designated entities and individuals provided by MAS. Periodic training is provided by the Reit Manager to its Directors, employees and CMSL Representatives to ensure that they are updated and aware of applicable anti-money laundering and countering of terrorism financing regulations, the prevailing techniques and trends in money laundering and terrorism financing and the measures adopted by the Reit Manager to combat money laundering and terrorism financing.

Composition of Board Committees in FY2020

Attendance Record of Meetings of Stapled Securityholders, Board and Board Committees in FY2020

Key Management Personnel’s Remuneration Table for the FY2020

Non-Executive Directors’ Remuneration Table for FY2020

STATEMENT OF POLICIES AND PRACTICES OF ASCOTT BT

Apart from the corporate governance practices disclosed above, the Trustee-Manager has prepared a statement of policies and practices in relation to the management and governance of Ascott BT (as described in section 87(1) of the Business Trusts Act, Chapter 31A of Singapore) in respect of the financial year ended 31 December 2020 (FY 2020), which is set out on pages 135 to 141 of the Annual Report.

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