REPORT FOR THE PERIOD FROM 1 APRIL 2019 TO 31 DECEMBER 2019
The manager of Ascendas Real Estate Investment Trust (Manager) sets the strategic direction of Ascendas Real Estate Investment Trust (Ascendas Reit) and its subsidiaries (Ascendas Reit Group) and make recommendations to HSBC Institutional Trust Services (Singapore) Limited, in its capacity as trustee of Ascendas Reit (Trustee), on any investment or divestment opportunities for Ascendas Reit and the enhancement of the assets of Ascendas Reit in accordance with the stated investment strategy for Ascendas Reit. The research, evaluation and analysis required for this purpose are coordinated and carried out by the Manager.
The Manager has general powers of management over the assets of Ascendas Reit. Its primary responsibility is to manage the assets and liabilities of Ascendas Reit for the benefit of the unitholders of Ascendas Reit (Unitholders). The Manager does 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 Unitholders.
The Manager’s other functions and responsibilities include:
- using best endeavours to conduct Ascendas Reit’s business in a proper and efficient manner;
- preparing annual business plans for review by the directors of the Manager (Directors), including forecasts on revenue, net income, operating expenses and capital expenditure, explanations on major variances to previous years’ financial results, written commentaries on key issues and relevant assumptions;
- 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 Securities and Futures Act, Chapter 289 of Singapore (SFA), written directions, notices, codes and other guidelines that MAS may issue from time to time, and the tax rulings issued by the Inland Revenue Authority of Singapore on the taxation of Ascendas Reit and the Alternative Investment Fund Managers Directive (AIFMD);
- attending to all regular communications with Unitholders; and
- supervising Ascendas Services Pte Ltd (for properties located in Singapore), Ascendas Funds Management (Australia) Pty Ltd and CapitaLand Australia Pty Ltd, CL International Management (UK) Limited (formerly known as Ascendas Management (UK) Limited), CapitaLand International (USA) LLC (for properties located in Australia, the United Kingdom and the United States of America respectively) and third party managing agents (collectively known as the Asset/Property Managers), which perform the day-to-day property management functions (including leasing, marketing, promotion, operations coordination and other property management activities) for Ascendas Reit’s properties.
The Manager also considers sustainability issues (including environmental and social factors) as part of its responsibilities. Ascendas Reit’s environmental sustainability and community outreach programmes are set out on page 52 of this Annual Report and in the Integrated Sustainability Report.
Ascendas Reit, constituted as a trust, is externally managed by the Manager. The Manager appoints experienced and well qualified personnel to run its day-to-day operations.
The Manager was appointed in accordance with the terms of the trust deed constituting Ascendas Reit dated 9 October 2002 (as amended, varied or supplemented from time to time) (Trust Deed). The Trust Deed outlines certain circumstances under which the Manager can be removed, including by notice in writing given by the Trustee upon the occurrence of certain events, or by resolution passed by a simple majority of Unitholders present and voting at a meeting of Unitholders duly convened and held in accordance with the provisions of the Trust Deed.
The Manager is a wholly owned subsidiary of CapitaLand Limited (CL) which holds a significant unitholding interest in Ascendas Reit. CL is a long-term real estate developer and investor, with a vested interest in the long-term performance of Ascendas Reit. CL’s significant unitholding in Ascendas Reit demonstrates its commitment to Ascendas Reit and as a result, CL’s interest is aligned with that of other Unitholders. The Manager’s association with CL provides the following benefits, among other things, to Ascendas Reit:
- a stable pipeline of property assets through CL’s development activities;
- wider and better access to banking and capital markets on favourable terms;
- fund raising and treasury support; and
- access to a bench of experienced management talent.
The Corporate Governance Framework and Culture
The Manager embraces the tenets of good corporate governance, including accountability, transparency and sustainability. It is committed to enhancing long-term Unitholder value and has appropriate people, processes and structure to direct and manage the business and affairs of the Manager with a view to achieving operational excellence and delivering the Ascendas Reit Group’s long-term strategic objectives. The policies and practices it has developed to meet the specific business needs of the Ascendas Reit Group provide a firm foundation for a trusted and respected business enterprise.
The corporate governance framework is set out below:
(1) Details in the diagram are as at 24 February 2020.
The Board of Directors (Board) sets the tone from the top and is responsible for the Manager’s corporate governance standards and policies, underscoring their importance to the Ascendas Reit Group.
This corporate governance report (Report) sets out the corporate governance practices for financial year ended 31 December 2019 (FY2019) with reference to the principles of the Code of Corporate Governance 2018 (Code). For FY2019, save as stated in this Report, Ascendas Reit has complied with the principles of the Code and also, substantially, with the provisions underlying the principles of the Code. Where there are deviations from any of the provisions of the Code, an explanation has been provided within this Report, including an explanation on how the practices adopted are consistent with the intent of the principles of the Code. This Report also sets out additional policies and practices adopted by the Manager which are not provided in the Code.
Ascendas Reit has received accolades from the investment community for excellence in corporate governance. In FY2019, it won the Best Annual report - Silver award in the REITs & Business Trusts Category at the Singapore Corporate Awards.
As testament to the commitment to corporate governance, Ascendas Reit was selected by SGX to be included in the Fast Track Programme list. The scheme recognises listed companies with good governance standards and compliance practices, and accords prioritised clearance for selected corporate-action submissions.
(A) Board Matters
Principle 1: The Board’s Conduct of Affairs
The company is headed by an effective Board which is collectively responsible and works with Management for the long-term success of the company.
Board’s Duties and Responsibilities
The Board oversees the strategic direction, performance and affairs of the Manager, in furtherance of the Manager’s primary responsibility to foster the success of Ascendas Reit so as to deliver sustainable value over the long term to Unitholders. It provides overall guidance to the management team (Management), led by the Chief Executive Officer (CEO). The Board works with Management to achieve Ascendas Reit’s objectives and long term success and Management is accountable to the Board for its performance. Management is responsible for the execution of the strategy for Ascendas Reit and the day-to-day operations of Ascendas Reit’s business.
The Board establishes goals for Management and monitors the achievement of these goals. It ensures 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 SGXST, MAS or other relevant authorities, and applicable laws. It also sets the disclosure and transparency standards for Ascendas Reit and ensures that obligations to Unitholders and other stakeholders are understood and met.
The Board has adopted a set of internal controls which establishes financial approval limits for capital & operating expenditure, investments, divestments, bank borrowings and issuance of debt instruments. The Board has reserved authority to approve certain matters and this is clearly communicated to Management in writing.
- material acquisitions, investments and divestments;
- corporate and financial transactions;
- recommendation of the remuneration for the CEO and key management personnel of the Manager to its shareholder for approval; and
- approving the division of responsibilities between the chairman of the Board (Chairman) and the CEO.
Apart from the matters that specifically require the Board’s approval, the Board delegates authority for transactions below the Board’s 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 Ascendas Reit. Consistent with this principle, the Board is committed to ethics and integrity of action and has 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 Board in ensuring proper accountability within the Manager.
In line with this, the Board has 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 Ascendas Reit 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 Board, 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.
Further, 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 Ascendas Reit and the environment in which Ascendas Reit 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 Board, except if unusual circumstances make attendance impractical.
In view of the increasingly demanding, complex and multi-dimensional role of a Director, the Board recognises the importance of continual training and development for its Directors so as to equip them to discharge the duties and responsibilities of their office as Directors to the best of their abilities. The Manager has in place a training framework to guide and support the Manager towards meeting the objective of having a Board which comprises 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 rules of the SGX-ST. The costs of all trainings are borne by the Manager.
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, training and development programme which focuses on orientating the Director to Ascendas Reit’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 Manager (key management personnel), and financial and governance practices. The induction, training and development programme may include visits to the Ascendas Reit Group’s properties. Through the induction, training and development programme, the new Director also gets acquainted with members of the Management which facilitates their interaction at Board meetings.
Following their appointment, the Directors are provided with opportunities for developing and maintaining their skills and knowledge, and continuing education in areas such as directors’ duties and responsibilities, changes to regulations and accounting standards, and industry-related matters, at the Manager’s expense, 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 Board. In FY2019, 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 board. The Directors also receive on a regular basis, reading materials on topical matters or subjects as well as updates on regulatory changes and their implications.
The Board has established various Board Committees to assist it in the discharge of its functions. As at 24 February 2020, these Board Committees are the Audit and Risk Committee (ARC) (details of the ARC are disclosed under Principles 9 and 10 of this Report) and the Investment Committee (IC). The Nominating and Remuneration Committee (NRC) was dissolved with effect from 1 February 2020 and the Board now undertakes all the responsibilities for approving the appointment of directors and the remuneration for directors and key management personnel.
All the Board Committees have clear written terms of reference setting out their respective composition, authorities and duties, including reporting back to the Board. Each of the Board Committees operates under delegated authority from the Board with the Board retaining overall oversight. The decisions and significant matters discussed at the respective Board Committees are reported to the Board 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 Board members for their information. The composition of the various Board Committees is set out on pages 100 and 138 of this Annual Report. The duties and responsibilities of the Board Committees are set out in this Report.
The Board 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 Manager (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 Board and Board Committees may also make decisions by way of written resolutions.
In addition to scheduled meetings, the Board may also hold ad hoc meetings as required by business imperatives. The non-executive Directors and IDs also meet regularly without the presence of Management. The chairman of such meetings provides feedback to the Board and/or Chairman as appropriate.
At each scheduled Board meeting, the Board is apprised of the following:
- significant matters discussed at the ARC meeting which is typically scheduled before the Board meeting;
- the ARC’s recommendation on Ascendas Reit’s periodic and year-end financial results following the ARC’s review of the same;
- decisions made by Board Committees in the preceding quarter;
- updates on the Ascendas Reit Group’s business and operations in the period under review, including market developments and trends, as well as business initiatives and opportunities;
- 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;
- any risk management issues that materially impact Ascendas Reit’s operations or financial performance; and
- updates on key Unitholder engagements in the period under review, as well as analyst views and market feedback; and prospective transactions which Management is exploring.
This allows the Board to develop a good understanding of the progress of the Ascendas Reit Group’s business as well as the issues and challenges faced by Ascendas Reit, and also promotes active engagement with Management.
The Manager adopts and practises 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 Board benefits from a culture of frank and rigorous discussions. Such discussions conducted on a professional basis contribute to the dynamism and effectiveness of the Board. The Board composition is such that there is diversity in views and perspectives which enriches deliberations and contributes to better decisionmaking of the Board. At Board and Board Committee meetings, all the Directors attend and actively participate in discussions, in particular, they engage in open and constructive debate and challenge Management on its assumptions and recommendations.
The Directors are provided by Management 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 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 Manager’s ongoing commitment to minimise paper waste and reduce its carbon footprint, the Manager does 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 record of the Directors’ attendance at Board and Board Committee meetings for FY2019 and the number of such meetings held is set out on page 138 of this Annual Report. CEO who is also a Director attends all Board meetings. He also attends all ARC meetings on an ex officio basis. Other members of Management attend Board and Board Committee meetings as required to brief the Board and Board Committees on specific business matters. The key deliberations and decisions taken at Board and Board Committee meetings are minuted.
There is active interaction between the Directors and Management during and outside Board and Board Committee meetings. The Directors have separate and independent and unfettered access to Management for any information that they may require, at the Manager’s expense. The Board 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. The Company Secretary keeps himself or herself abreast of relevant developments. He or she has oversight of corporate secretarial administration matters and advises the Board and Management on corporate governance matters. The Company Secretary attends all Board meetings and assists the Chairman in ensuring that Board procedures are followed. The Company Secretary also facilitates the induction, training and development 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 Board’s approval.
The Directors, whether individually or collectively as the Board, are entitled to have access to independent external professional advice, where necessary, at the Manager’s expense.
Principle 2: Board Composition and Guidance
The Board has an appropriate level of independence and diversity of thought and background in its composition to enable it to make decisions in the best interests of the company.
The Board has a strong independent element as six out of nine directors, including the Chairman, are non-executive IDs. Other than the CEO who is the only executive Director on the Board, non-executive Directors make up the rest of the Board. This exceeds the recommendations in the Code and fulfils rule 210(5)(c) of the Listing Manual, which requires the Board to comprise at least two non-executive directors who are independent and free of any material business or financial connection with the issuer. None of the IDs had served on the Board for more than nine years.
Profiles of the Directors, their respective Board Committee memberships and roles are set out on pages 24 to 29 of this Annual Report. Key information on the Directors is also available on Ascendas Reit’s website at www.ascendas-reit.com (Website).
The Board reviews from time to time the size and composition of the Board 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 diversity of thought and background. The review takes into account the scope and nature of the Ascendas Reit Group’s operations, and the competition that the Ascendas Reit Group faces.
The Board assesses annually (and as and when circumstances require) the independence of each Director in accordance with the requirements of the Listing Manual, the Securities and Futures (Licensing and Conduct of Business) Regulations (SFR), the provisions in the Code where relevant, and 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 judgement and;
- has no relationship with the Manager, its related corporations, substantial shareholders being shareholders who hold 5% or more of the voting shares (Substantial Shareholders) of the Manager, its substantial Unitholders being Unitholders who have interests in voting Units with 5% or more of the total votes attached to all voting Units (Substantial Unitholders) or its officers that could interfere, or be reasonably perceived to interfere with the exercise of his or her independent business judgement in the best interests of the Unitholders;
- is independent from the management of the Manager and Ascendas Reit, from any business relationship with the Manager and Ascendas Reit, and from every Substantial Shareholder and every Substantial Unitholder;
- is not a Substantial Shareholder or a Substantial Unitholder;
- has not served on the Board for a continuous period of nine years or longer; and
- is not employed by the Manager or Ascendas Reit or their related corporations in the current or any of the past three financial years and does not have an immediate family member1 who is employed or has been employed by the Manager or Ascendas Reit or their related corporations for the past three financial years and whose remuneration is or was determined by the Board.
1. “Immediate family member” refers to the spouse, child, adopted child, step-child, sibling or parent of the individual.
There is a rigorous process to evaluate the independence of each ID. As part of the process:
- each ID provides information of his or her business interests and confirms, on an annual basis, that there are no relationships which interfere with the exercise of his or her independent business judgement with a view to the best interests of Ascendas Reit’s Unitholders, and such information is then reviewed by the Board; and
- the Board also reflects on the respective IDs’ conduct and contributions at Board and Board Committee meetings, in particular, whether the relevant ID has exercised independent judgement in discharging his or her duties and responsibilities.
Each ID is required to recuse himself or herself from the Board’s deliberations on his or her independence. In appropriate cases, the Board also reviews 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 Manager any change of circumstances which may affect his or her independence.
The Board has carried out the assessment of the independence of its IDs for FY2019 and the paragraphs below set out the outcome of the assessment. Each of the IDs had recused himself or herself from the Board’s deliberations on his or her independence.
Mr Lim Hock San, Mr Chan Pengee Adrian, Ms Chong Chiet Ping, Mr Daniel Cuthbert Ee Hock Huat, Ms Lim Sau Hoong and Mr Wong Yew Meng
Each of Mr Chan Pengee Adrian and Mr Daniel Cuthbert Ee Hock Huat is a non-executive, independent director of various subsidiaries and/or associate corporations of Temasek Holdings Private Limited (Temasek). Temasek is a substantial shareholder of the Manager, and is also a substantial Unitholder. Each of Mr Chan Pengee Adrian and Mr Daniel Cuthbert Ee Hock Huat’s role in these corporations is non-executive in nature and is not involved in the day-to-day conduct of these corporations.
The Board has also considered the conduct of Mr Chan Pengee Adrian and Mr Daniel Cuthbert Ee Hock Huat in the discharge of their responsibilities as Directors and is of the view that the relationships set out above did not impair their abilities to act with independent judgement in the discharge of their responsibilities as Directors. As at the last day of FY2019, the Board is satisfied that the respective Directors were able to act in the best interests of the Unitholders and they do not have any other relationships save for those disclosed above. The Directors were also not faced with any circumstances identified under the Code, Listing Rules or any other regulations which may affect their independent judgement.
Mr Lim Hock San, Ms Chong Chiet Ping, Ms Lim Sau Hoong and Mr Wong Yew Meng do not have any relationships and are not faced with any of the circumstances identified in the Code, SFR and Listing Manual, or any other relationships which may affect their independent judgement.
The Board considered the conduct of Mr Lim Hock San, Mr Chan Pengee Adrian, Ms Chong Chiet Ping, Mr Daniel Cuthbert Ee Hock Huat, Ms Lim Sau Hoong and Mr Wong Yew Meng respectively in the discharge of their duties and responsibilities as Directors, and is of the view that Mr Lim Hock San, Mr Chan Pengee Adrian, Ms Chong Chiet Ping, Mr Daniel Cuthbert Ee Hock Huat, Ms Lim Sau Hoong and Mr Wong Yew Meng have exercised independent judgement in the discharge of their duties and responsibilities. Based on the above, the Board arrived at the determination that Mr Lim Hock San, Mr Chan Pengee Adrian, Ms Chong Chiet Ping, Mr Daniel Cuthbert Ee Hock Huat, Ms Lim Sau Hoong and Mr Wong Yew Meng are IDs.
Mr Manohar Khiatani, Mr Lim Cho Pin Andrew Geoffrey and Mr William Tay Wee Leong
Mr Manohar Khiatani, Mr Lim Cho Pin Andrew Geoffrey and Mr William Tay Wee Leong are non-independent Directors. Among other things, Mr Manohar Khiatani was the Deputy Group CEO of Ascendas-Singbridge before 1 July 2019 and is currently a Senior Executive Director of CapitaLand Group, Mr Lim Cho Pin Andrew Geoffrey is the Group Chief Financial Officer of CapitaLand Group. CapitaLand Limited has a 100% deemed interest in the Manager. Mr William Tay Wee Leong is the CEO of the Manager.
Each of the above Directors had recused himself or herself from the Board’s deliberations on his or her independence. Each of the Directors will recuse himself or herself from participating in any of the Board deliberation or transactions that could potentially give rise to a conflict of interest. It was noted that all of the current Directors have served on the Board for fewer than nine years as at the last day of FY2019. The Board is satisfied that, as at the last day of FY2019, the respective Directors were able to act in the best interests of the Unitholders.
The Board embraces diversity and formally adopted a Board Diversity Policy in 2019. The Board Diversity Policy provides for the Board to comprise talented and dedicated Directors with a diverse balance and mix of expertise, experience, perspectives, skills, knowledge and backgrounds, with due consideration to diversity factors, including but not limited to, diversity in business or professional experience, age and gender, so as to avoid groupthink and foster constructive debate.
The Board believes in diversity and values the benefits that diversity can bring to the Board in its deliberations. Diversity enhances the Board’s decision-making capability and ensures that the Manager has the opportunity to benefit from all available talent and perspectives.
The Board, in carrying out its duties of determining the optimal composition of the Board in its Board renewal process, identifying possible candidates and making recommendations of board appointments to the Board, considers diversity factors such as age, educational, business and professional backgrounds of its members. Female representation is also considered an important aspect of diversity.
The current Board comprises nine members who are corporate and business leaders, and are professionals with varied backgrounds, expertise and experience including in finance, banking, real estate, information technology, marketing & branding, legal, accounting, business, customer-based experience or knowledge and general management. The current Board has two female members. For further information on the Board’s work in this regard, please refer to “Board Membership” under Principle 4 in this Report.
Principle 3: Chairman and Chief Executive Officer
There is a clear division of responsibilities between the leadership of the Board and Management, and no one individual has unfettered powers of decision-making.
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 Board and Management and that no one individual has unfettered powers of decision-making. The non-executive independent Chairman is Mr Lim Hock San, whereas the CEO is Mr William Tay Wee Leong. 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 Board and facilitates the conditions for the overall effectiveness of the Board, 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 Board and the CEO on strategic issues.
The Chairman devotes considerable time to understanding the business of Ascendas Reit, as well as the issues and the competition that Ascendas Reit 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 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 Unitholders, the Board and Management.
The CEO has full executive responsibilities to manage the Ascendas Reit Group’s business and to develop and implement policies approved by the Board.
The separation of the roles and responsibilities of the Chairman and the CEO which is set out in writing and the resulting clarity of roles provide a healthy professional relationship between the Board and Management, facilitate robust deliberations on the Ascendas Reit 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 Board 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, the recommendation under the Code for a lead independent Director is not applicable. Nonetheless, the Board has approved the appointment of a lead independent Director, on the basis that such lead independent Director would provide leadership for the other independent Directors only in the limited situation(s) where the Chairman is conflicted. This was done with a view to further strengthen the independence of the Board. The lead independent Director is available to Unitholders where they have concerns and for which contact through the normal channels of communication with the Chairman or Management are inappropriate or inadequate. The lead independent Director is Mr Chan Pengee, Adrian.
Principle 4: Board Membership
The Board has a formal and transparent process for the appointment and re-appointment of directors, taking into account the need for progressive renewal of the Board.
With effect from 1 February 2020, the NRC which had comprised Mr Lim Hock San, Mr Manohar Khiatani, Ms Chong Chiet Ping and Ms Lim Sau Hoong, had been dissolved by the Manager. While this is a variation from Provisions 4.1, 4.2, 4.4, 4.5, 5.1, 6.1, 6.2, 6.3 which requires a Nominating Committee and a Remuneration Committee to be set up, or assumes that such committees have been set up, the dissolution of the NRC is to streamline the functions performed by the NRC. 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 if the REIT complies with regulations made under the SFA relating to board composition of a REIT manager. As the Manager complies with Regulation 13D of the SFR relating to the composition of the Board of the Manager, the Manager is of the opinion that the corporate governance requirements relating to the nominating and remuneration committee have been substantively addressed.
Additionally, the dissolution of the NRC is not expected to have any adverse effect on the effective functioning of the Board as the Board will be undertaking all the responsibilities of the NRC. The Board is able to undertake the functions of the NRC because:
a. the Manager does not manage any other REIT and in general, REITs (including Ascendas Reit) have a more focused scope and scale of business compared to those of listed companies. For this reason, the Board’s capacity would not be unduly stretched by reason of it undertaking the responsibilities of the NRC and the Board would be able to give adequate attention to such issues relating to nomination and remuneration matters; and
b. the IDs form a majority of the Board 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 nomination and remuneration. This also mitigates any concerns of conflict which can be managed by having the conflicted Directors abstain from the decision making process.
For the above reasons, Ascendas Reit’s practices are consistent with Principles 4, 5 and 6. All disclosures in this Report is as at 24 February 2020 after taking into account the changes highlighted above unless otherwise stated.
The Board is responsible for the selection, appointment and re-appointment of directors to the Board. In determining whether to re-appoint a Director, the Board considers the following:
- whether the Director has given sufficient time and attention to the affairs of the Manager and Ascendas Reit, in particular, when a Director holds other directorships; and
- whether the Director is able to and has been adequately carrying out his/her duties as a Director.
The Board’s scope of duties and responsibilities in relation to nomination and remuneration matters includes:
- reviewing the process and criteria for evaluation of the performance of the Board, its Board Committees and Directors;
- reviewing the training and professional development programmes for the Board and its Directors;
- assessing the relevant attributes and corresponding representation and desired profile, underpinning any particular appointment or re-appointment;
- using external support (for example, search consultants), when necessary, to source for potential candidates if required;
- evaluating suitable candidates so that recommendations made on proposed candidates are objective and well supported;
- meeting shortlisted candidates to assess suitability, and to ensure the candidates are aware of the level of commitment required;
- determining annually, and as when circumstances require, if a Director is independent having regard to the circumstances set forth in pages 108 and 109 of this Report;
- considering all aspects of remuneration, including termination terms, to ensure they are fair;
- reviewing the succession plans for Directors for the Board’s consideration, in particular the appointment and/or replacement of the Chairman, the CEO and key management personnel; and
- reviewing the appointment and re-appointment of Directors (including alternate directors, if any).
Candidates for new Directors may be shortlisted through a search. They may also be nominated by the Manager or the sole shareholder of the Manager, for endorsement by the Board. New Directors are formally appointed by way of Board resolutions. The appointment and/or re-appointment of Directors is subject to the approval of the shareholders of the Manager and the MAS.
In recommending or endorsing the appointment of new Directors or re-appointment of existing Directors, the Board takes into consideration the current Board size and composition, including the diversity of skills, experience and knowledge which the new Director can provide to the Trust. The Board will also meet with the candidates to understand and assess how they can contribute effectively and commit their time to the Manager and Ascendas Reit as well as to ensure that new Directors are aware of their duties and obligations.
The Board has adopted internal guidelines to address the issue of competing time commitments when Directors serve on multiple boards and/or have other principal commitments. A Director with multiple directorships is expected to ensure that he or she can devote sufficient time and attention to the affairs of the Manager. After taking into account the results of the annual assessment of the effectiveness and performance of the individual Director and the respective Directors’ actual conduct on the Board, the Board is satisfied that all Directors have effectively carried out their duties as Directors, notwithstanding their other board representations and other principal commitments.
As a guide, Directors should not have more than six listed company board representations so that they are able to commit time and efforts to carry out their duties and responsibilities effectively.
The Board reviews the existing directorships annually. Renewal beyond a term of six years will be on an exceptional basis in order to encourage refreshment and renewal of the Board. In the year under review and pursuant to the recommendation of the Code, none of the independent Directors have served on the Board for more than nine years from the date of their first appointment and no alternate Directors were appointed.
Key information regarding the Directors, such as their academic and professional qualifications, the Board Committees served on, the date of first appointment as a Director and directorships, both present and those held over the last three years in other listed companies and other major appointments are disclosed on pages 25 to 29 of the Annual Report.
Board Changes During FY2019
As at 24 February 2020, the Board consists of nine directors. Mr Miguel Ko has retired from his role as a non-executive non-independent director with effect from 1 August 2019 and has also relinquished his roles as vice-chairman of the Board, chairman of the IC and member of the NRC. On 10 October 2019, Mr Andrew Lim joined the Board as a non-executive non-independent Director.
All disclosures in this Report relating to the Board and/or Board Committees is as at 24 February 2020 after taking into account the changes highlighted above unless otherwise stated.
The Directors’ listed company directorships and principal commitments are disclosed on pages 25 to 29 of this Annual Report and their attendance record for FY2019 is set out on page 138 of this Annual Report. In particular, CEO does not serve on any listed company board outside of the Ascendas Reit Group. For FY2019, the Directors achieved high meeting attendance rates and they have contributed positively to discussions at Board and Board Committee meetings. Based on the above, the Board has determined that each Director has been adequately carrying out his or her duties as a Director of the Manager and noted no Director has a significant number of listed directorships and principal commitments.
Principle 5: Board Performance
The Board undertakes a formal annual assessment of its effectiveness as a whole, and that of each of its board committees and individual directors.
The Manager believes that oversight from a strong and effective Board goes a long way towards guiding a business enterprise to achieving success.
Whilst Board performance is ultimately reflected in the long-term performance of the Ascendas Reit Group, the Board believes that engaging in a regular process of self-assessment and evaluation of Board performance provides an opportunity for the Board to reflect on its effectiveness including the quality of its decisions, and for Directors to consider their performance and contributions. It also enables the Board to identify key strengths and areas for improvement which is essential to effective stewardship and attaining success for Ascendas Reit.
The Board recommends the objective performance criteria and process for the evaluation of the effectiveness of the Board as a whole, and of each Board Committee separately, as well as the contribution by the Chairman and each individual director to the Board.
The performance of the Board and the respective Board Committees are reviewed annually to assess the effectiveness of the Board as a whole and the contribution by the Chairman and each Director to the effectiveness of the Board. The review includes assessing the individual Director’s commitment, attendance and ability to contribute effectively at meetings, the Board composition, access to information, processes, risk management, Board Committees, strategic planning, accountability and oversight, and standards of conduct. Each Director is required to complete a Board Performance Evaluation Questionnaire (the Questionnaire) and is allowed to individually express his or her personal and confidential assessment of the Board’s overall effectiveness in accomplishing its goals and discharging its responsibilities. The assessment provides insights into the functioning of the Board, whilst identifying areas that might need strengthening and further development. Based on the responses to the Questionnaire returned by each Director, a consolidated report is prepared and presented to the Board.
The annual assessment of the Board and the respective Board Committees’ performance for FY2019 has been carried out and no external facilitator was used for the FY2019 review. Based on the Board assessment exercise, the Board is of the view that the Board and the respective Board Committees have met the performance objectives and each of its members is contributing to the overall effectiveness of the Board.
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 Board also considers whether the creation of value for Unitholders has been taken into account in the decision making process. For FY2019 the outcome of the evaluation was satisfactory and the Directors on the whole provided affirmative ratings across all the evaluation categories.
The evaluation categories covered in the questionnaire include Director’s duties, contribution, conduct and interpersonal skills, as well as strategic thinking and risk management. For FY2019 the outcome of the evaluation was satisfactory and each of the Directors on the whole received affirmative ratings across all the evaluation categories.
The Board also recognises 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 Board believes that performance evaluation should be an ongoing process and the Board achieves 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 its members, the Board also benefits 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 Board in discharging its responsibilities as a whole by providing proper guidance, diligent oversight and able leadership, and lending support to Management in steering Ascendas Reit in the appropriate direction, as well as the long-term performance of Ascendas Reit whether under favourable or challenging market conditions.
(B) Remuneration Matters
Principle 6: Procedures for Developing Remuneration Policies
The Board has 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. No director is involved in deciding his or her own remuneration.
Principle 7: Level and Mix of Remuneration
The level and structure of remuneration of the Board and key management personnel are appropriate and proportionate to the sustained performance and value creation of the company, taking into account the strategic objectives of the company.
Principle 8: Disclosure on Remuneration
The company is transparent on its remuneration policies, level and mix of remuneration, the procedure for setting remuneration, and the relationships between remuneration, performance and value creation.
The Board undertakes the functions of a remuneration committee and therefore, the Manager does not have a separate remuneration committee. The Board performs the functions that such a committee would otherwise perform.
The Board is able to undertake the functions of a remuneration committee because:
- the Manager is a dedicated manager to Ascendas Reit and in general, REITs (including Ascendas Reit) have a more focused scope and scale of business compared to those of listed companies. For this reason, the Board’s capacity would not be unduly stretched by reason of it undertaking the responsibilities of a remuneration committee and the Board would be able to give adequate attention to such issues relating to remuneration matters; and
- the IDs form a majority of the Board 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 Board considers all aspects of remuneration including overseeing the design and implementation of the remuneration policy and the specific remuneration packages for each Director and for key management personnel. No Director, however, is involved in any decision of the Board relating to his or her own remuneration.
The Board has 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 Ascendas Reit 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 Ascendas Reit. Pay-for-performance is emphasised by linking total remuneration to the achievement of corporate and individual goals and objectives. The Board has access to independent remuneration consultants for advice on remuneration matters as required.
In terms of the process adopted by the Manager for developing and reviewing policies on remuneration and determining the remuneration packages for Directors and key management personnel, the Manager, through an independent remuneration consultant, takes 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. It also considers the compensation framework of CL as a point of reference. The Manager is a subsidiary of CL which also holds a significant stake in Ascendas Reit. The association with the CL group puts the Manager in a better position to attract and retain better qualified management talent; it provides an intangible benefit to the Manager such that it allows its 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 FY2019, 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 over 45,000 employees serving more than 140 countries and markets. The consultant is not related to the Manager, its controlling shareholder, its related corporations or any of its Directors.
Remuneration policy for key management personnel
The remuneration framework and policy is designed to support the implementation of the Ascendas Reit Group’s strategy, and deliver predictable distributions and achieve long-term capital stability for the Unitholders. The principles governing the Manager’s key management personnel remuneration policy are as follows:
- 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 Unitholders
- 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 Ascendas Reit Group
- Significant and appropriate portion of pay-at-risk, taking into account risk policies of the Ascendas Reit Group, symmetrical with risk outcomes and sensitive to the risk time horizon
- 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
The remuneration for key management personnel comprises fixed components, a variable cash component, unitbased 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 Unitholders and that the remuneration framework links rewards to corporate 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 Component:
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 Board.
Under the Balanced Scorecard framework, the Ascendas Reit Group’s strategy and goals are translated to performance outcomes comprising both quantitative and qualitative targets in the dimensions of Financial, Execution, Future Growth and Sustainability; these are cascaded down throughout the organisation, thereby creating alignment across the Ascendas Reit Group.
After the close of each financial year, the Board reviews the Ascendas Reit Group’s achievements against the targets set in the Balanced Scorecard and determines the overall performance taking into consideration qualitative factors such as the quality of earnings, business environment, regulatory landscape and industry trends.
In determining the payout quantum for each key management personnel under the BSBP, the Board considers the overall business performance and individual performance as well as the affordability of the payout for the Manager.
C. Unit-based Components:
Unit awards granted in FY2019 pursuant to the Ascendas Funds Management (S) Limited Performance Unit Plan (PUP) and the Ascendas Funds Management (S) Limited Restricted Unit Plan (RUP) (together, the Unit Plans), were approved by the Board. The Manager believes that the Unit-based components of the remuneration for key management personnel serves to align the interests of such key management personnel with that of Unitholders and Ascendas Reit’s long-term growth and value.
The obligation to deliver the Units is expected to be satisfied out of the Units held by the Manager.
To promote the alignment of Management’s interests with that of Unitholders in the longer term, senior members of management are subject to Unit ownership guidelines to instill stronger identification with the longer-term performance and growth of the Ascendas Reit Group. Under these guidelines, senior management is required to retain a prescribed proportion of the Units received under the Unit Plans.
Ascendas Funds Management (S) Limited Performance Unit Plan
In FY2019, the Board granted awards which are conditional on targets set for a three-year performance period. A specified number of Units will only be released to the recipient at the end of the qualifying performance period, provided that minimally the threshold target is achieved. An initial number of Units (PUP baseline award) is allocated conditional on the achievement of a pre-determined target in respect of the Relative Total Unitholder Return (TUR) of the Ascendas Reit Group measured by the percentile ranking of Ascendas Reit Group’s TUR 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 Unitholders. The final number of Units to be released will depend on Ascendas Reit Group’s performance against the predetermined targets over the three-year qualifying performance period. This serves to align Management’s interests with that of Unitholders in the longer term and to deter short-term risk taking. No Unit 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 Units than the PUP baseline award can be delivered up to a maximum of 200% of the PUP baseline award. The recipient will receive fully paid Units at no cost.
In respect of the Unit awards granted under the PUP in FY2019, the respective qualifying performance periods have not ended as at the date of this Report.
Ascendas Funds Management (S) Limited Restricted Unit Plan
In FY2019, the Board granted awards which are conditional on targets set for a one-year performance period. A specified number of Units will only be released to recipients at the end of the qualifying performance period, provided that minimally the threshold targets are achieved.
Under the RUP, an initial number of Units (RUP baseline award) is allocated conditional on the achievement of predetermined targets in respect of the following performance conditions:
- Net property income of the Ascendas Reit Group; and
- Distribution per Unit of Ascendas Reit Group.
The above performance measures have been selected as they are the key drivers of business performance and are aligned to Unitholder value. The final number of Units to be released will depend on the Ascendas Reit Group’s performance against the pre-determined targets at the end of the one-year qualifying performance period. The Units will be released progressively over a vesting period of three years. No Unit 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 Units than the RUP baseline award can be delivered up to a maximum of 150% of the RUP baseline award. Recipients will receive fully paid Units at no cost. This ensures alignment between remuneration and sustaining business performance in the longer term.
In respect of the Unit awards granted under the RUP in FY2019, based on the Board’s assessment that the performance achieved by the Ascendas Reit Group has met the pre-determined performance targets for FY2019, the resulting number of Units 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 five key management personnel (including the CEO). Each year, the Board evaluates the extent to which each of the key management personnel has delivered on the corporate 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 Board considers whether the level of remuneration is appropriate to attract, retain and motivate key management personnel to successfully manage Ascendas Reit for the long term. The CEO does not attend discussions relating to his 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 139 of this 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 Board has considered carefully and decided that such disclosure would not be in the interest of the Manager 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. Despite this partial deviation from Provision 8.1 of the Code, the Manager is of the view that disclosure in such manner is not prejudicial to the interests of Unitholders’ as the disclosures in the Remuneration Matters section and on page 139 of this Annual Report would provide sufficient information to the Unitholders on the Manager’s remuneration policies and the level and mix of remuneration accorded to the key management personnel, and enable the Unitholders to understand the link between Ascendas Reit’s performance and the remuneration of the key management personnel. In addition, the remuneration of the key management personnel is not borne by Ascendas Reit as it is paid out of the fees that the Manager receives (the quantum and basis of which have been disclosed).
Apart from the key management personnel and other employees of the Manager, the Manager outsources various other services to a wholly owned subsidiary of CL (CL Subsidiary). CL Subsidiary provides the services through its employees and employees of the 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 Ascendas Reit 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 Board and Management. In this regard, the remuneration of such Outsourced Personnel, being employees of CL Subsidiary and the CL group, is not included as part of the disclosure of remuneration of key management personnel of the Manager in this Report.
The Board seeks 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 Board are set at realistic yet stretched levels each year to motivate a high degree of business performance with emphasis on both short-term and longer-term quantifiable objectives.
In FY2019, no termination, retirement or post-employment benefits were granted to Directors, the CEO and key management personnel. There was also no special retirement plan, ‘golden parachute’ or special severance package for any of the key management personnel.
In FY2019, there were no employees of the Manager who were substantial shareholders of the Manager, substantial Unitholders of Ascendas Reit or immediate family members of a Director, the CEO, any substantial shareholder of the Manager or any substantial Unitholder of Ascendas Reit. “Immediate family member” refers to the spouse, child, adopted child, step-child, sibling or parent of the individual.
Quantitative Remuneration Disclosure under AIFMD
The Manager is also required under the AIFMD to make quantitative disclosures of remuneration. Disclosures are provided in relation to (a) the staff of the Manager; (b) staff who are senior management; and (c) staff who have the ability to materially affect the risk profile of Ascendas Reit.
All individuals included in the aggregated figures disclosed are rewarded in line with the Manager’s remuneration policies described in this Report.
The aggregate amount of remuneration awarded by the Manager to its staff (including CEO and non-executive Directors) in respect of FY2019 was approximately S$9.9 million1. This figure comprised of fixed pay of S$5.4 million1, variable pay of S$3.9 million (including Units issued under the Unit Plans, where applicable) and allowances and benefits-in-kind of S$0.6 million. There was a total of 94 beneficiaries of the remuneration described above. In respect of FY2019, the aggregate amount of remuneration awarded by the Manager to its management (which are also members of staff whose actions have a material impact on the risk profile of Ascendas Reit) was approximately S$4.1 million, comprising 8 individuals identified having considered, among others, their roles and decision making powers.
Remuneration for Non-Executive Directors
The non-executive Directors’ fees for FY2019, are set out in the Non-Executive Directors’ Remuneration Table on page 139 of this Annual Report. The CEO who is an executive Director is remunerated as part of the key management personnel of the Manager and therefore does not receive any Director fees. The Director fees for the non-executive Directors who are employees of the CapitaLand group were waived.
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 Directors’ fees remains unchanged from that for 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 international nature of the Ascendas Reit 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 Manager.
For FY2019, the remuneration of the non-executive Directors is paid in cash. No compensation is payable to any non-executive Director in the form of options in Units or pursuant to any bonus or profit-sharing plan or any other compensation relating to any profit-linked agreement or arrangement, under the service contracts.
1. Includes S$0.1million of Non-Executive Director fees which were waived.
(C) Accountability and Audit
Principle 9: Risk Management and Internal Controls
The Board is responsible for the governance of risk and ensures that Management maintains a sound system of risk management and internal controls, to safeguard the interests of the company and its shareholders.
The Manager maintains adequate and effective systems of risk management and internal controls (including financial, operational, compliance and information technology (IT) controls) to safeguard Unitholders’ interests and the Ascendas Reit Group’s assets.
The Board has overall responsibility for the governance of risk and oversees the Manager in the design, implementation and internal control systems. The ARC assists the Board in carrying out the Board’s responsibility of overseeing the risk management framework and policies for the Ascendas Reit Group and ensuring that Management maintains a sound system of risk management and internal controls.
Under its terms of reference, the scope of the ARC’s duties and responsibilities is as follows:
- reviewing and discussing, as and when appropriate with Management the Group’s risk governance structure, risk management systems and policies, including risk culture (“Tone at the Top”), risk identification, risk mitigation and monitoring processes and procedures;
- making recommendations to the Board for its determination the nature and extent of significant risks which the Group overall may take in achieving its strategic objectives and value creation, and the overall Group’s levels of risk tolerance and risk policies;
- reviewing at least half-yearly, reports from Management on major risk exposures/risk profile, and the steps taken to monitor, control and mitigate such risks;
- reviewing reports on any material breaches of risk limits and the adequacy of the proposed action and provide timely input to the Board on critical risk issues that are brought to the ARC’s attention;
- reviewing Management’s recommendations to the Board on:
- risk limits;
- changes to risk limits consistent with the Group’s risk appetite and exposure; and
- delegation of authority on risk limits.
- assessing the adequacy and effectiveness of the risk management and internal controls system established by the Manager to manage risks;
- reviewing the adequacy of resources directly involved in establishing and maintaining the risk management framework across the Group and monitor the independence of risk management functions throughout the Group;
- reviewing any issues raised by the external auditors and/or internal auditors, that relate to and impact the risk management framework; and
- providing a forum for proactively highlighting and addressing risk issues, and oversee Management in ensuring high levels of risk awareness and risk management best practices are implemented throughout the Group.
The Manager adopts 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 as and when appropriate. As part of the ERM Framework, the Manager has identified material risks along with their mitigating measures.
The adequacy and effectiveness of the systems of risk management and internal controls are reviewed regularly by Management, the ARC and the Board, 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. Any changes to the ERM Framework, risk policies, risk parameters and risk profiles were discussed with the ARC during the quarterly and additional scheduled meetings.
More information on the Manager’s ERM Framework including the material risks identified can be found in the ERM section on pages 140 to 145 of this 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 ARC. The ARC also reviews the adequacy and effectiveness of the measures taken by the Manager on the recommendations made by the internal and external auditors in this respect.
The Board has received assurance from the CEO and the Chief Financial Officer (CFO) of the Manager that:
- the financial records of the Ascendas Reit Group have been properly maintained and the financial statements for FY2019 give a true and fair view of the Ascendas Reit Group’s operations and finances; and
- the systems of risk management and internal controls within the Ascendas Reit Group are adequate and effective to address the risks (including financial, operational, compliance and IT risks) that the Manager considers relevant and material to the current business environment.
The CEO and the CFO have obtained similar assurances from the other key management personnel as well as the respective risk and control owners.
In addition, in FY2019, the Board received quarterly certification by Management on the integrity of financial reporting and the Board provided a negative assurance confirmation to Unitholders 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 Board is of the opinion that the systems of risk management and internal controls (including financial, operational, compliance and information technology controls) are adequate and effective to address the risks (including financial, operational, compliance and IT risks) which the Ascendas Reit Group considers relevant and material to its current business environment as at 31 December 2019. The ARC concurs with the Board in its opinion. No material weaknesses in the systems of risk management and internal controls were identified by the Board or the ARC in the review for FY2019.
The Board notes that the systems of risk management and internal controls established by the Manager provide reasonable assurance that the Ascendas Reit 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 Board also notes that no system of risk management and internal controls can provide absolute assurance in this regard, or absolute assurance against poor judgement in decision-making, human error, losses, fraud or other irregularities.
Principle 10: Audit and Risk Committee
The Board has an Audit and Risk Committee which discharges its duties objectively.
At present, the ARC comprises five non-executive Directors, four of whom (including the chairman of the ARC) are IDs. The ARC chairman is a Director other than the Chairman of the Board. The members bring with them invaluable recent and relevant managerial and professional expertise in accounting and related financial management domains.
The ARC does not comprise former partners of Ascendas Reit’s incumbent external auditors, Ernst & Young LLP (a) within a period of two years commencing from the date of their ceasing to be partners of Ernst & Young LLP; or (b) who have any financial interest in Ernst & Young LLP.
The ARC 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 ARC. The ARC 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 ARC.
Under its terms of reference, the ARC’s scope of duties and responsibilities is as follows:
- reviewing the significant financial reporting issues and judgements so as to ensure the integrity of the financial statements of the Ascendas Reit Group and any announcements relating to the Ascendas Reit Group’s financial performance;
- reviewing and reporting to the Board at least annually the adequacy and effectiveness of the internal controls (including material financial, operational, compliance and IT controls) and risk management system;
- reviewing the assurances from the CEO and CFO on the financial records and financial statements of the Ascendas Reit Group;
- reviewing the adequacy, effectiveness, independence, scope and results of the external audit and the independence and objectivity of the external auditors;
- reviewing the adequacy, effectiveness, independence, scope and results of the Manager’s internal audit and compliance functions;
- making recommendations to the Board on the proposals to Unitholders on the appointment, re-appointment and removal of the external auditors, and approving the remuneration of the external auditors;
- reviewing and approving processes to regulate 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 Ascendas Reit and/or its subsidiaries (Interested Person Transactions), to ensure compliance with the applicable regulations. The regulations include the requirement that Interested Person Transactions are on normal commercial terms and are not prejudicial to the interests of Ascendas Reit and its minority Unitholders. In respect of any asset or property management agreement which is an Interested Person Transaction, the ARC also carries out reviews at appropriate intervals to satisfy itself that the Manager has reviewed the asset or property manager’s compliance with the terms of the respective asset or property management agreement and has taken remedial actions where necessary; and
- reviewing the policy and arrangements for concerns about possible improprieties in financial reporting or other matters to be safely raised, independently investigated and appropriately followed up on.
The ARC undertook a review of the independence of the external auditors, taking into consideration, among other factors, all non-audit services provided by the external auditors, Ascendas Reit’s relationships with the external auditors in FY2019, as well as the processes and safeguards adopted by the Manager and the external auditors relating to audit independence. Based on the review, the ARC is satisfied that the external auditors are independent and that the provision of non-audit services would not affect the independence of the external auditors. The external auditors have also provided confirmation of their independence to the ARC. The total audit and non-audit fees paid and payable to external auditors for FY2019 amounted to S$772,850, comprising audit fees of S$735,050 and non-audit fees of S$37,800.
The ARC holds at least one scheduled meeting in a quarter and met five times in the nine-month period of FY2019. The CEO and the CFO were in attendance at all meetings. During each of the quarterly meetings, among other things, the ARC 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 Board for approval. In FY2019, the ARC also reviewed and assessed the adequacy and effectiveness of the internal controls and risk management systems established by the Manager to manage risks, taking into consideration the outcome of reviews conducted by Management and both the internal and external auditors, as well as the assurance from the CEO and the CFO.
The ARC also meets with the external auditors, and with the internal auditors, in each case without the presence of Management, at least once a year. In FY2019, the ARC met with the external auditors and internal auditors once, 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 ARC makes reference to 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 Matter
In its review of the financial statements of the Ascendas Reit Group for FY2019, the ARC had discussed with Management the accounting principles that were applied and their judgement of items that could affect the integrity of the financial statements and also considered the clarity of key disclosures in the financial statements. The ARC reviewed, among other matters, the key audit matter set out below, as reported by the external auditors for FY2019.
Key audit matter
VALUATION OF INVESTMENT PROPERTIES
How this issue was addressed by the ARC
The annual valuation for the 198 investment properties in Ascendas Reit’s portfolio as at 31 December 2019 was performed by nine independent external professional property valuers. Information on these valuers, the relevant investment properties in Ascendas Reit’s portfolio which they valued as at 31 December 2019 and their respective valuations can be found in the announcement made by the Manager on SGXNet on 31 January 2020. The ARC considered the methodology applied to the valuation model in assessing the valuation of investment properties conducted by these valuers, and also evaluated the valuers’ objectivity and competency.
As required by the CIS Code, the independent valuer should not value the same property for more than two consecutive financial years. The management applies a rigorous process every two years to select valuers based on their independence, track record, professional and relevant expertise in the respective cluster of properties.
The ARC reviewed the outcomes of the annual external valuation process and discussed the details of the valuation with Management, focusing on properties which registered higher fair value gains/losses during the period under review.
The ARC considered the findings of the external auditors, including their assessment of the appropriateness of valuation methodologies and the underlying key assumptions applied in the valuation of investment properties, including capitalisation, discount, terminal yield and equivalent yield rates.
The valuation of investment properties was also an area of focus for the external auditor. The external auditor has included this item as a key audit matter in its audit report for the financial year ended 31 December 2019. Refer to pages 148 and 149 of this Annual Report.
No other significant matter came to the attention of the ARC during the course of the review.
Changes to the accounting standards and accounting issues which have a direct impact on the financial statements are reported to and discussed with the ARC at its meetings. Directors are also invited to attend relevant seminars organised by leading accounting firms which provide updates on changes to accounting standards and key issues relating to accounting standards.
The Manager confirms, on behalf of Ascendas Reit, that Ascendas Reit complies with Rules 712 and 715 of the Listing Manual.
The Manager outsourced the internal audit function to Deloitte & Touche Enterprise Risk Services Pte. Ltd. (Deloitte) which is staffed by qualified executives. Deloitte reports to the chairman of the ARC, has unrestricted access to the ARC and is guided by the International Standards for the Professional Practice of Internal Auditing published by the Institute of Internal Auditors (IIA). Deloitte also has unfettered access to Ascendas Reit’s documents, records, properties and personnel (including the ARC), and has appropriate standing within Ascendas Reit. These standards cover attributes as well as performance and implementation standards. The ARC reviews and approves the annual internal audit plan, the internal audit reports and audit activities. The ARC has also met with the internal auditor without the presence of the Management. If required, the ARC also decides on the appointment, termination and remuneration of the internal audit function.
The ARC has carried out a review of the internal audit function and is satisfied that the internal audit function performed by Deloitte is adequately resourced, effective and independent.
Deloitte has carried out reviews to ascertain that (i) policies and procedures for identification, review and reporting of interested person transactions (IPTs) are established, updated and communicated to the relevant personnel, (ii) IPTs register is maintained and reviewed periodically, and (iii) IPTs are valid and accurate, and identified completely by management. Reports were submitted to the ARC quarterly.
(D) Shareholder Rights and Engagement
Principle 11: Shareholder Rights and Conduct of General Meetings
The company treats all shareholders fairly and equitably in order to enable them to exercise shareholders’ rights and have the opportunity to communicate their views on matters affecting the company. The company gives shareholders a balanced and understandable assessment of its performance, position and prospects.
Principle 12: Engagement with Shareholders
The company communicates regularly with its shareholders and facilitates the participation of shareholders during general meetings and other dialogues to allow shareholders to communicate their views on various matters affecting the company.
Principle 13: Managing Stakeholder Relationships
The Board adopts an inclusive approach by considering and balancing the needs and interests of material stakeholders, as part of its overall responsibility to ensure that the best interests of the company are served.
The Manager is committed to treating all Unitholders fairly and equitably. All Unitholders enjoy specific rights under the Trust Deed and the relevant laws and regulations. These rights include, among other things, the right to participate in profit distributions.
Unitholders 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 Unitholder, through its appointed representative). Unitholders 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 Ascendas Reit.
Ascendas Reit supports the principle of encouraging Unitholder participation and voting at general meetings. Ascendas Reit’s Annual Report is provided to Unitholders within 120 days from the end of Ascendas Reit’s financial year. Unitholders 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. Unitholders will receive the notices of general meetings and may download these notices from the Website. Notices of the general meetings are issued on SGXNet. The rationale and explanation for each agenda item which requires Unitholders’ approval at a general meeting are provided in the notice of the general meeting or in the accompanying circular (if any) issued to Unitholders in respect of the matter(s) for approval at the general meeting. This enables Unitholders to exercise their votes on an informed basis.
At the general meetings, Management makes a presentation to Unitholders to update them on Ascendas Reit’s performance, position and prospects. The presentation materials are made available to Unitholders on the Website and also on SGXNet. Unitholders are informed of the rules governing general meetings and are given the opportunity to communicate their views, ask questions and discuss with the Board and Management on matters affecting Ascendas Reit and the proposed transactions. Representatives of the Trustee, Directors (including the chairman of the respective Board Committees), key management personnel and the external auditors of Ascendas Reit are present for the entire duration of the general meetings to address any queries that the Unitholders may have including queries about the conduct of Ascendas Reit’s external audit and the preparation and content of the external auditors’ report. The external auditors of Ascendas Reit and the independent financial advisors were present for the entire durations of the AGM and EGM respectively. Directors and Management also interact with Unitholders after the general meetings.
All Directors attended the general meetings held during their tenure in FY2019 (save for Mr Ko and Ms Chong). A record of the Directors’ attendance at the general meetings in FY2019 can be found in their meeting attendance records as set out on page 138 of this Annual Report.
To safeguard the Unitholders’ 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 Unitholders’ interests, Ascendas Reit conducts electronic poll voting for all the resolutions proposed at general meetings. One Unit 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’ onscreen to Unitholders 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. Ascendas Reit’s Trust Deed currently does not permit Unitholders to vote at general meetings in absentia via mail, email or other electronic or online means. The Manager will consider implementing the relevant amendments to Ascendas Reit’s Trust Deed relating to absentia voting after it has carried out careful study and is satisfied that the integrity of information and the authentication of the identity of Unitholders through the internet will not be compromised, and after the implementation of legislative changes to recognise remote voting. The Manager is of the view that although full compliance with Provision 11.4 of the Code has not yet been achieved, Unitholders nevertheless have adequate opportunities to communicate their views on matters affecting Ascendas Reit even when they are not in attendance at general meetings and that this is consistent with Principle 11. For example, Unitholders 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 Unitholders for their inspection upon request. Minutes of general meetings are also made available on the Website.
Ascendas Reit currently distributes 100% of its distributable income to Unitholders, other than gains on the sale of properties, and unrealised surplus on revaluation of investment properties and investment properties under development on a semi-annual basis at the discretion of the Manager. In the case of its overseas subsidiaries, income from these subsidiaries will be distributed, after relevant adjustments (if any) such as withholding tax, on a semi-annual basis at the discretion of the Manager.
Due to the change of financial year end from 31 March to 31 December, FY2019 is a nine-month period from 1 April 2019 to 31 December 2019. The regular distributions to Unitholders of Ascendas Reit was for the six-month period ended 30 September 2019 and the three-month period ended 31 December 2019. Thereafter, the regular distributions shall be made on a semi-annual basis for every six-month period ending 30 June and 31 December each year.
Timely Disclosure of Information
The Manager is committed to keeping all Unitholders, other stakeholders, analysts and the media informed of Ascendas Reit’s performance and any changes in the Ascendas Reit Group or its business which would likely to materially affect the price or value of the Units.
In FY2019, the Manager provided Unitholders with periodic and annual financial statements within the relevant periods prescribed by the Listing Manual. These periodic and annual financial statements were reviewed and approved by the Board prior to release to Unitholders by announcement on SGXNet. The releases 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 Unitholders, the Board sought to provide Unitholders with a balanced, clear and comprehensible assessment of Ascendas Reit and the Ascendas Reit Group’s performance, position and prospects.
In addition to the release of financial statements, the Manager also keeps Ascendas Reit’s Unitholders, stakeholders and analysts informed of the performance and changes in the Ascendas Reit Group or its business which would likely materially affect the price or value of the Units on a timely and consistent basis, so as to assist Unitholders 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.
The Manager has a formal policy on corporate disclosure controls and procedures to ensure that Ascendas Reit 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 Manager believes in conducting the business of Ascendas Reit in ways that seek to deliver predictable distributions and achieve long-term capital stability for Unitholders. Best practices are promoted as a means to build an excellent business for Ascendas Reit and the Manager’s accountability to Unitholders for Ascendas Reit’s performance. Prompt fulfilment of statutory reporting requirements is but one way to maintain Unitholders’ confidence and trust in the capability and integrity of the Manager.
The Manager has in place an Investor Relations department which facilitates effective communication with Unitholders and analysts. The Manager also maintains the Website which contains information on Ascendas Reit including but not limited to current and past announcements and news releases, financial statements, investor presentations and Annual Reports.
The Manager actively engages with Unitholders with a view to solicit and understand their views, and has put in place an investor relations policy to promote regular, effective and fair communications with Unitholders. The investor relations policy sets out the mechanism through which Unitholders may contact the Manager with questions and through which the Manager may respond to such questions. Unitholders are welcomed to engage with the Manager beyond general meetings and they may do so by contacting the Investor Relations department, whose details may be found on the Website via the Contact Us section.
More information on the Manager’s investor relations efforts can be found in the Investor Relations section on pages 54 to 57 of this Annual Report.
The Manager also has in place a corporate communications function supported by CL’s Group Communications department which works closely with the media and oversees Ascendas Reit’s media communications efforts.
Managing Stakeholder Relationships
The Board’s role includes considering sustainability as part of its strategic formulation. The Manager adopts an inclusive approach for Ascendas Reit by considering and balancing the needs and interests of material stakeholders, as part of the overall strategy to ensure that the best interests of Ascendas Reit are served. The Manager is committed to sustainability and incorporates the key principles of environmental and social responsibility, and corporate governance in Ascendas Reit’s business strategies and operations. The Manager has arrangements in place to identify and engage with material stakeholder groups and to manage Ascendas Reit’s relationships with such groups. Such arrangements include maintaining the Website, which is kept updated with current information to facilitate communication and engagement with Ascendas Reit’s stakeholders. More information on key engagement modes for material stakeholder groups can be found in the Integrated Sustainability Report prepared in accordance with the Global Reporting Initiative (GRI) Standards.
Ascendas Reit received recognition for its efforts; it was the runner-up of the Sustainability Award (REITs and Business Trusts category) at the Securities Investors Association (Singapore) (SIAS) Investors’ Choice Awards. Ascendas Reit is also listed on several ESG indices including iEdge SG ESG Leaders Index and iEdge SG ESG Transparency Index.
(E) Additional Information
In addition to the ARC, the Board has also established an IC.
The IC comprises five Directors, two of whom are independent Directors. The five members on the IC are Mr Manohar Khiatani (IC chairman), Mr Lim Hock San, Mr Daniel Cuthbert Ee Hock Huat, Mr Lim Cho Pin Andrew Geoffrey and Mr William Tay Wee Long.
The IC is authorised to review all matters within its terms of reference. Pursuant to the IC’s terms of reference, the IC’s scope of duties and responsibilities involve assisting the Board in its oversight of responsibilities in the areas of investment, divestment and asset enhancement initiatives within the IC’s approval limits.
For FY2019, the IC regularly reviewed and approved matters tabled via circulation.
Dealings with Interested Persons
Review Procedures for Interested Person Transactions
The Manager has 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 Ascendas Reit and Unitholders. In respect of such transactions, the Manager would have to demonstrate to the ARC that such transactions are undertaken on normal commercial terms and are not prejudicial to the interests of Ascendas Reit and Unitholders which may include obtaining (where practicable) quotations from parties unrelated to the Manager, or obtaining valuations from independent valuers (in accordance with applicable provisions of the Listing Manual and the Property Funds Appendix). Regulatory requirements relating to IPTs, such as Chapter 9 of the Listing Manual and the Property Funds Appendix, are strictly observed by the Manager.
Where matters concerning Ascendas Reit relate to transactions entered into or to be entered into by the Trustee for and on behalf of Ascendas Reit with an interested party of the Manager, the Trustee is required to ensure that such transactions are conducted at arm’s length in accordance with all applicable requirements of the Property Funds Appendix and/or the Listing Rules relating to the transaction in question. Further, the Trustee has the ultimate discretion under the Trust Deed to decide whether or not to enter into a transaction involving an interested party of the Manager. If the Trustee is to sign any contract with an interested party of the Trustee or the Manager, the Trustee will review the contract to ensure that it complies with the requirements relating to IPTs in the Property Funds Appendix (as may be amended from time to time) and the provisions of the Listing Rules relating to IPTs (as may be amended from time to time) as well as such other guidelines as may from time to time be prescribed by the MAS and the SGX-ST to apply to real estate investment trusts.
In particular, the following procedures have been undertaken, some of which go beyond the prescribed Listing Rules requirements:
Interested Person Transactions1 Approving Authority, Procedures and Disclosure Transactions2 equal to or exceeding S$100,000 in value but below S$15 million › Audit & Risk Committee (review at regular intervals) Transactions2 equal to or exceeding S$15 million but below 3.0% of Ascendas Reit Group’s latest audited net tangible assets › Audit & Risk Committee (such approval shall only be given if the transactions are on arm’s length commercial terms and consistent with similar types of transactions made by the Trustee with third parties which are unrelated to the Manager) Transactions2 equal to or exceeding 3.0% of the Ascendas Reit Group’s latest audited net tangible assets but below 5.0% of the Ascendas Reit Group’s latest audited net tangible assets › Audit & Risk Committee (the ARC may, as it deems fit, request advice on the transaction from independent sources or advisers, including obtaining valuations from professional valuers)
› Immediate announcement
Transactions2 equal to or exceeding 5.0% of the Ascendas Reit Group’s latest audited net tangible assets
› Audit & Risk Committee (the ARC may, as it deems fit, request advice on the transaction from independent sources or advisers, including obtaining valuations from professional valuers)
› Immediate announcement
- This table does not include the procedures applicable to Interested Person Transactions falling under the exceptions set out in Rule 915 and Rule 916 of the Listing Manual.
- Either individually or as part of a series or if aggregated with other transactions involving the same interested party during the same financial year
- Any transaction which has been approved by Unitholders, or is the subject to the aggregation with another transaction that has been approved by Unitholders, need not be included in any subsequent aggregation.
The entry into and the fees payable pursuant to the Trust Deed have been approved by the Unitholders upon purchase of the Units at the initial public offering of Ascendas Reit on the SGX-ST in November 2002 and in an Extraordinary General Meeting held on 28 June 2007 (where the Unitholders approved the amendment of the Trust Deed, inter alia, to allow the Manager to receive development management fees), and are therefore not subject to Listing Rules 905 and 906. The entry into and the fees payable pursuant to the Singapore Property Management Agreement and Lease Management Agreement have been approved by the Unitholders in an Extraordinary General Meeting held on 28 June 2012, and such fees shall not be subject to aggregation or further Unitholders’ approval requirements under Listing Rules 905 and 906 to the extent that there is no subsequent change to the rates and/or bases of the property management fees and related expenses thereunder which are adverse to Ascendas Reit. The entry into and the fees payable pursuant to the New Strategic Management Agreement and New Master Asset Management Agreement have been approved by the Unitholders in an Extraordinary General meeting held on 28 June 2016 and such fees shall not be subject to aggregation or further Unitholders’ approval requirements under Listing Rules 905 and 906 to the extent that there is no subsequent change to the rates and/ or bases of the fees and related expenses thereunder which are adverse to Ascendas Reit.
Details of all Interested Person Transactions (equal to or exceeding S$100,000 each in value) entered into by Ascendas Reit in FY2019 are disclosed on page 257 of this Annual Report.
Role of the Audit & Risk Committee for Interested Person Transactions
The Manager’s 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 Ascendas Reit and Unitholders’ interests.
The Manager maintains a register to record all Interested Person Transactions which are entered into by Ascendas Reit (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 ARC, and the Manager incorporates into its internal audit plan a review of all IPTs entered into by the Group. The ARC reviews the internal audit reports 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 ARC. If a member of the ARC has an interest in a transaction, he is to abstain from participating in the review and approval process in relation to that transaction. In addition, the Trustee also reviews such audit reports to ascertain that the Listing Manual and the Property Funds Appendix have been complied with.
Dealing with Conflicts of Interest
The following principles and procedures have been established to deal with potential conflicts of interest which the Manager (including its Directors, key management personnel and employees) may encounter in managing Ascendas Reit:
- the Manager is a dedicated manager to Ascendas Reit and will not manage any other REIT or be involved in any other real property business;
- all resolutions at meetings of the Board in relation to matters concerning Ascendas Reit must be decided by a majority vote of the Directors, including at least one ID;
- 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 Board 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;
- 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);
- if the Manager is required to decide whether or not to take any action against any person in relation to any breach of any agreement entered into by the Trustee for and on behalf of Ascendas Reit with an affiliate of the Manager, the 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 Ascendas Reit, has a prima facie case against the party allegedly in breach under such agreement, the Manager is obliged to pursue the appropriate remedies under such agreement; and
- at least one-third of the Board shall comprise IDs.
In respect of voting rights where the Manager would face a conflict between its own interests and that of Unitholders, the Manager shall cause such voting rights to be exercised according to the discretion of the Trustee.
Dealings in Securities
The Manager has 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 Manager as well as certain relevant executives of the CL group (together, the Relevant Persons), are required to refrain from dealing in Ascendas Reit’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 Ascendas Reit’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 Manager also does not deal in Ascendas Reit’s securities during the same Black-Out Period. In addition, employees and Capital Markets Services License Appointed Representatives (CMSL Representatives) of the Manager are required to give pre-trading notification to the CEO and the Compliance department before any dealing in Ascendas Reit’s securities.
The policy also provides for the Manager to maintain a list of persons who are privy to price sensitive information relating to Ascendas Reit Group as and when circumstances require such a list to be maintained.
Directors and employees of the Manager are also required to refrain from dealing in Ascendas Reit’s securities if they are in possession of unpublished price-sensitive information of Ascendas Reit 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 Ascendas Reit’s securities.
Under this policy, Directors and employees of the Manager 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 Manager of his or her interest in Ascendas Reit’s securities within two business days after (a) the date in which he or she becomes a Director or (b) the date on which he or she acquires an interest in Ascendas Reit’s securities. A Director is also required to notify the Manager of any change in his or her interests in Ascendas Reit’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 FY2019, other than the timely disclosed dealings below, there were no dealings by the Directors in Ascendas Reit’s securities.
Date Director Dealing 23 August 2019 William Tay Wee Leong Acceptance of 148,642 contingent baseline unit awards under the Manager’s Unit Plans 06 December 2019 William Tay Wee Leong 6,400 new units at S$2.63 per unit allotted pursuant to the acceptance of 6,400 provisional allotted rights units 06 December 2019 Daniel Cuthbert Ee Hock Huat 3,200 new units at S$2.63 per unit allotted pursuant to the acceptance of 3,200 provisional allotted rights units 06 December 2019 Lim Cho Pin Andrew Geoffrey 1,760 new units at S$2.63 per unit allotted pursuant to the acceptance of 1,760 provisional allotted rights units
Code of Business Conduct
The Manager adheres 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 Manager.
The policies that the Manager has implemented aim to help to detect and prevent occupational fraud in mainly three ways, as set out below.
First, the Manager offers fair compensation packages, based on practices of pay-for-performance and promotion based on merit to its employees. The Manager also provides various healthcare subsidies and financial assistance schemes to alleviate the common financial pressures its 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 Manager seeks to build and maintain the right organisational culture through its core values, educating its employees on good business conduct and ethical values.
Fraud, Bribery and Corruption Risk Management Policy
In line with its core values, the Manager is committed to doing business with integrity. This is reflected in its 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 Manager 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 Manager to uphold the Manager’s core values and to not engage in any corrupt or unethical practices. The Manager’s zero tolerance policy on bribery and corruption extends to its business dealings with third parties. Pursuant to this policy, the Manager requires that certain agreements incorporate anti-bribery and anti-corruption provisions.
The Manager’s 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 Manager’s stance against bribery and corruption is also reiterated by Management during its regular staff communication sessions.
A whistle-blowing policy and other procedures are put in place to provide the Manager’s employees and parties who have dealings with the Manager 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 ARC 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 ARC. All employees of the Manager are informed of the policy which is made available on the CL group’s intranet.
Business Continuity Management
The Manager has a Business Continuity Plan (BCP) 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 Ascendas Reit Group’s operations. In the BCP, the critical business functions, processes and resources have been identified. Periodic desk-top exercises and drills, simulating different scenarios, are carried out to stress-test the effectiveness of processes, procedures and escalation protocols. This holistic BCP approach 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 Ascendas Reit, allows the Manager to continue to function as the manager of Ascendas Reit and mitigate any negative effects that the disruptions could have on the Manager’s reputation, operations and ability to remain in compliance with relevant laws and regulations. The Manager has also acquired insurance policies for the Ascendas Reit Group on business interruption events.
Anti-Money Laundering and Countering the Financing of Terrorism Measures
As a holder of a Capital Markets Services License issued by MAS, the 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 Manager are:
- evaluation of risk;
- customer due diligence;
- suspicious transaction reporting;
- record keeping;
- employee screening and CMSL Representative screening; and
The 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 Ascendas Reit’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.
Periodic training is provided by the 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 Manager to combat money laundering and terrorism financing.
Composition of Board Committees in FY2019
Board Members Audit & Risk
Lim Hock San C M Miguel Ko1 M C William Tay Wee Leong M Chan Pengee, Adrian C Chong Chiet Ping M M Lim Sau Hoong M Wong Yew Meng M Daniel Cuthbert Ee Hock Huat M M Manohar Khiatani2 M M C Lim Cho Pin Andrew Geoffrey3 M M
Denotes: C – Chairman M – Member
1. Retired as a Director and as Vice-Chairman of the Board, chairman of the IC and Member of the NRC on 1 August 2019.
2. Appointed as chairman of the IC and Member of the NRC on 1 August 2019.
3. Appointed as a Director, and as Member of the IC and Member of the NRC on 10 October 2019.
4. The Nominating & Remuneration Committee was dissolved on 1 February 2020.
Attendance Record of Meetings of Unitholders, Board and Board Committees in FY20191
Board7 Audit & Risk
AGM EGM No. of Meetings Held 8 5 2 1 1 Board Members Lim Hock San 100% - 100% 100% 100% Miguel Ko2,3 - - 100%3 - - William Tay Wee Leong 100% - - 100% 100% Chan Pengee, Adrian 100% 100% - 100% 100% Chong Chiet Ping4 100% 100% 100% 100% Lim Sau Hoong 100% - 100% 100% 100% Wong Yew Meng 100% 100% - 100% 100% Daniel Cuthbert Ee Hock Huat 100% 100% - 100% 100% Manohar Khiatani5 100% 100% - 100% 100% Lim Cho Pin Andrew Geoffrey6 100% - - - 100%
- All Directors are required to attend Board and/or Board Committee meetings called, in person or via audio or video conference, unless required to recuse. Attendance is marked against the Board and Board Committee meetings each Director is required to attend, and the percentage computed accordingly.
- On leave of absence from 21 January 2019. Mr Miguel Ko retired as a Director, and ceased to be the Vice-Chairman of the Board, chairman of the IC and a Member of the NRC on 1 August 2019.
- Mr Manohar Khiatani attended one NRC meeting as acting chairman on behalf of Mr Miguel Ko during Mr Ko’s leave of absence.
- Not in attendance for EGM due to conflicting schedule.
- Appointed as chairman of the IC and Member of the NRC on 1 August 2019.
- Appointed as a member of the Board, and Member of the IC and Member of the NRC on 10 October 2019.
- Includes a Board Strategy Meeting and three ad-hoc Board meetings.
- Includes two ad-hoc ARC meetings.
- The Nominating & Remuneration Committee was dissolved on 1 February 2020.
The IC regularly reviewed and approved matters tabled via circulation in FY2019.
Key Management Personnel’s Remuneration Table for FY20191
Components of Remuneration Salary inclusive
of AWS and
Bonus and Other
Benefits inclusive of
Bonus and Other
Total CEO William Tay Wee Leong 30% 35% 35% 100% Remuneration band for CEO: Above S$1,000,000 to S$1,250,000 Key Management Personnel (excluding CEO) Koo Lee Sze Serena Teo Lawden Tan 41% 37% 22% 100% Yeow Kit Peng Paul Toussaint4 Total remuneration for Key Management Personnel (excluding CEO): S$2,190,653
- Remuneration disclosed is for the nine-month financial year from 1 April 2019 to 31 December 2019, unless otherwise stated.
- The amounts disclosed include bonuses earned which have been accrued for in FY2019.
- The proportion of value of the Unit awards is based on the fair value of the Units comprising the contingent awards under the Ascendas Funds Management (S) Limited Restricted Unit Plan (RUP) and the Ascendas Funds Management (S) Limited Performance Unit Plan (PUP) at the time of grant in FY2019. The final number of Units released under the contingent awards of Units for the RUP and PUP will depend on the achievement of pre-determined targets and subject to the respective vesting period under the RUP and PUP.
- Mr Paul Toussaint ceased to be the CEO, Australia on 30 June 2019 as he was re-deployed to another entity of the CL group.
Non-Executive Directors’ Remuneration Table for FY20191
Total (S$)2 Non-Executive Directors Lim Hock San 105,000 Miguel Ko3,4 24,335 Chan Pengee, Adrian 87,500 Chong Chiet Ping 70,000 Lim Sau Hoong 51,500 Wong Yew Meng 61,500 Daniel Cuthbert Ee Hock Huat 71,500 Manohar Khiatani6 78,835 Lim Cho Pin Andrew Geoffrey5,6 17,144 Aggregate of remuneration for Non-Executive Directors: S$567,314
- Directors’ fees computed for the nine-month financial year from 1 April 2019 to 31 December 2019.
- Inclusive of attendance fees of (a) S$1,000 per meeting attendance (in person, or via teleconferencing or video conferencing), (b) ad-hoc meeting with Management of S$500 per meeting attendance and, (c) an additional of S$500 per day for overseas attendance allowance. Directors’ fees are subject to the approval of the Manager’s shareholder.
- The Director’s fees for Mr Miguel Ko payable to Ascendas Investment Pte Ltd (AIPL) and CLA Real Estate Holdings Pte Ltd (CLA), were waived by AIPL and CLA respectively.
- Mr Miguel Ko retired as non-executive non-ID and Vice-Chairman of the Board, chairman of the IC and Member of the NRC on 1 August 2019.
- Mr Lim Cho Pin Andrew Geoffrey was appointed as non-executive non-ID, Member of the IC and Member of the NRC on 10 October 2019.
- The director fees for Mr Manohar Khiatani and Mr Lim Cho Pin Andrew Geoffrey payable to their employers in the CL group were waived.