Investor RelationsCorporate Governance
Our primary role as the manager of CRCT (Manager) is to set the strategic direction of CRCT and make recommendations to HSBC Institutional Trust Services (Singapore) Limited, in its capacity as trustee of CRCT (Trustee), on any investment or divestment opportunities for CRCT and the enhancement of the assets of CRCT in accordance with the stated investment strategy for CRCT. The research, evaluation and analysis required for this purpose are coordinated and carried out by us as the Manager.
As the Manager, we have general powers of management over the assets of CRCT. Our primary responsibility is to manage the assets and liabilities of CRCT for the benefit of the unitholders of CRCT (Unitholders). We do this with a focus on generating rental income and enhancing asset value over time so as to maximise returns from the investments, and ultimately the distributions and total returns to Unitholders.
Our other functions and responsibilities as the Manager include:
- using our best endeavours to conduct CRCT’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 and capital expenditure, explanations on major variances to previous years’ financial results, written commentaries on key issues and underlying assumptions on rental rates, operating expenses and any other relevant assumptions;
- 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 CIS Code (Property Funds Appendix)), the Securities and Futures Act (Chapter 289 of Singapore), 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 CRCT and Unitholders;
- attending to all regular communications with Unitholders; and
- supervising CapitaLand Retail (Shanghai) Management & Consulting Co., Ltd. and its branches (Property Managers), the property manager which performs the day-to-day property management functions (including leasing, marketing, promotion, operations coordination and other property management activities) for CRCT’s malls.
The Manager also considers sustainability issues (including environmental and social factors) as part of its responsibilities. CRCT’s environmental sustainability and community outreach programmes are set out on pages 54 to 59 of this Annual Report.
CRCT, 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 CRCT dated 23 October 2006 (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 CRCT. CL is a long-term real estate developer and investor, with a vested interest in the long-term performance of CRCT. CL’s significant unitholding in CRCT demonstrates its commitment to CRCT 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 CRCT:
- 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.
Our Corporate Governance Culture
The Manager aspires to the highest standards of corporate governance. The Manager is committed to continuous improvement in corporate governance. It has developed and, on an ongoing basis, maintains sound and transparent policies and practices to meet the specific business needs of CRCT and to provide a firm foundation for a trusted and respected business enterprise. The Manager remains focused on complying with the substance and spirit of the principles of the Code of Corporate Governance 2012 (Code) while achieving operational excellence and delivering CRCT’s long-term strategic objectives. The Board of Directors (Board) is responsible for the Manager’s corporate governance standards and policies, underscoring their importance to the Manager.
This corporate governance report (Report) sets out the corporate governance practices for financial year (FY) 2017 with reference to the principles of the Code. For FY 2017, save as stated in this Report, CRCT has complied in all material aspects with the principles and guidelines in the Code. Where there are deviations from any of the guidelines of the Code, an explanation has been provided within this Report.
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- BOARD MATTERS
- REMUNERATION MATTERS
- ACCOUNTABILITY AND AUDIT
- SHAREHOLDER RIGHTS AND RESPONSIBILITIES
- ADDITIONAL INFORMATION
- CODE OF BUSINESS CONDUCT
(A) Board Matters
The Board's Conduct of Affairs
Principle 1: Every company should be headed by an effective Board to lead and control the company. The Board is collectively responsible for the long-term success of the company. The Board works with Management to achieve this objective and Management remains accountable to the Board.
The Manager is led by the Board, with non-executive independent directors (IDs) constituting more than half of the Board.
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 manage the assets and liabilities of CRCT for the benefit of Unitholders. The Board provides leadership to the Chief Executive Officer (CEO) and the management team (Management). The CEO, assisted by Management, is responsible for the execution of the strategy for CRCT and the day-today operations of CRCT’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 SGX-ST, MAS or other relevant authorities, and applicable laws. It also sets the disclosure and transparency standards for CRCT and ensures that obligations to Unitholders and other stakeholders are understood and met.
The Board has reserved authority to approve certain matters and these include:
- material acquisitions, investments and divestments;
- issue of new units in CRCT (Units);
- income distributions and other returns to Unitholders; and
- matters which involve a conflict of interest for a controlling Unitholder or a Director.
The Board has established various Board Committees to assist it in the discharge of its functions. These Board Committees are the Audit Committee (AC), the Corporate Disclosure Committee (CDC) and the Executive Committee (EC). Each of these Board Committees operates under the authority delegated from the Board, with the Board retaining overall oversight and has its own terms of reference. The composition of the various Board Committees is set out on page 49 of this Annual Report.
The Board may form other Board Committees from time to time. The composition of the Board Committees is also reviewed as and when there are changes to Board membership. The composition of the Board Committee is such that there is appropriate diversity of skills and experience, it fosters active participation and contributions from Board members and there is an equitable distribution of responsibilities among Board members.
Delegation of Authority
The Board has adopted a set of internal controls which establishes approval limits for capital expenditure, investments, divestments, bank borrowings and issuance of debt instruments. Apart from matters that specifically require the Board’s approval, the Board delegates authority for transactions below those limits to Board Committees and Management.
Meetings of Board and Board Committees
The Board meets at least once every quarter, and as required by business imperatives. Board and Board Committee meetings are scheduled prior to the start of each financial year. The Constitution of the Manager also permits the Directors to participate via audio or video conference. The Board and Board Committees may also make decisions by way of resolutions in writing. In each meeting where matters requiring the Board’s approval are to be considered, all members of the Board participate in the discussions and deliberations; and resolutions in writing are circulated to all Directors for their consideration and approval.
In line with the Manager’s ongoing commitment to limit paper wastage and reduce its carbon footprint, the Manager does not provide printed copies of Board papers. Instead, Directors are provided with tablet devices to enable them to access and read Board and Board Committee papers prior to and during meetings. This initiative also enhances information security as the papers are downloaded to the tablet devices through an encrypted channel. Directors are also able to sign Board papers through the tablet devices.
At Board and Board Committee meetings, non-executive Directors review the performance of the business, the progress made by Management in achieving agreed goals and objectives and monitor the reporting of such performance. During the Board meeting to discuss strategies, non-executive Directors constructively challenge and help develop proposals on strategy. Directors attend and actively participate in Board and Board Committee meetings.
The Manager adopts and practises the principle of collective decisions. This ensures that no individual influences or dominates the decision making process.
A total of four Board meetings were held in FY 2018. A record of the Directors’ attendance at Board and Board Committees meetings in FY 2018 is set out on page 49 of this Annual Report. The CEO who is also a Director attends all Board and Board Committee meetings. Other senior executives attend Board and Board Committee meetings as required to brief the Board on specific business matters.
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 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 responsibilities. The Manager also maintains a training record to track the Directors’ attendance at training and professional development courses. The costs of training 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 and responsibilities of a director). All Directors, upon appointment, undergo an induction programme which focuses on orientating the Director to CRCT’s business, operations, strategies, organisation structure, responsibilities of key management personnel, and financial and governance practices. 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.
Following their appointment, Directors are provided with opportunities for continuing education in areas such as director’s duties and responsibilities, changes to regulations and accounting standards, and industry-related matters, so as to be updated on matters that affect or may enhance their performance as Directors or Board Committee members. Directors may also propose training and development in relevant areas of interest to the Board. Directors also receive on-the-job training through being engaged in actual Board work. In FY 2018, the training and professional development programmes for Directors included forums and dialogues with experts and senior business leaders on issues facing boards and board practices. They also received on a regular basis reading materials on topical matters or subjects and regulatory updates and implications.
Board Composition and Guidance
Principle 2: There should be a strong and independent element on the Board, which is able to exercise objective judgement on corporate affairs independently, in particular, from Management and 10% shareholders. No individual or small group of individuals should be allowed to dominate the Board’s decision making.
The Board reviews from time to time the size and composition of the Board, with a view to ensuring that the size of the Board is appropriate in facilitating effective decision making, and that the Board has a strong independent element and diversity of thought and background in its composition. The review takes into account the scope and nature of the operations of CRCT Group.
The Board has a strong independent element and it presently comprises nine Directors, six of whom (including the Chairman) are IDs. The recommendation in the Code for a lead ID is therefore not applicable. Non-executive Directors also make up a majority of the Board. Profiles of the Directors are provided on pages 20 to 24 of this Annual Report.
The Board assesses the independence of each Director in accordance with the guidance in the Code, the Securities and Futures (Licensing and Conduct of Business) Regulations (SFR) and the Listing Manual.
An ID is one who is independent in conduct, character and judgement and:
- has no relationship with the Manager, its related corporations and its shareholders who hold 10% or more of the voting shares of the Manager, or Unitholders who hold 10% or more of the Units in issue, 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 CRCT, from any business relationship with the Manager and CRCT, and from every substantial shareholder of the Manager and every substantial unitholder of CRCT;
- is not a substantial shareholder of the Manager or a substantial unitholder of CRCT;
- has not served on the Board for a continuous period of nine years or longer; and
- is not employed by the Manager or CRCT or their related corporations in the current or any of the past three financial years and does not have an immediate family member who is employed or has been employed by the Manager or CRCT or their related corporations for the past three financial years and whose remuneration is determined by the Board.
The Board has established a process for assessing the independence of its Directors. As part of the process:
- each relevant non-executive Director provides information on his or her business interests and confirms, upon appointment, as well as on an annual basis, that there are no relationships which interfere with the exercise of his or her independent business judgement in the best interests of the Unitholders; such information is then reviewed by the Board; and
- the Board also reflects on the respective Directors’ conduct and contributions at Board and Board Committee meetings, specifically, if they have exercised independent judgement in discharging their responsibilities.
The Board has carried out the assessment of each of its Directors for FY 2018 and the paragraphs below set out the outcome of the assessment.
Mr Soh Kim Soon is a non-executive director and Chairman of ORIX Leasing Singapore Limited (ORIX Leasing) and ORIX Investment & Management Pte Ltd (ORIX) (together, “ORIX Companies”). ORIX Leasing provides leasing services to CL group whereas ORIX is one of the tenants of Raffles City Tower which is managed by CL group. The services were provided or received in the ordinary course of business, on arm’s length basis and based on normal commercial terms. Mr Soh’s role in the ORIX Companies is non-executive in nature and he is not involved in the day-to-day conduct of business of the ORIX Companies.
Mr Fong Heng Boo serves as a non-executive director of Agency Integrated Care Pte. Ltd., CapitaLand Township Development Fund Pte. Ltd., CapitaLand Township Development Fund II Pte. Ltd., and Singapore Health Services Pte Ltd; all of which had business relationships with CL group. The services were provided or received in the ordinary course of business, on arm’s length basis and based on normal commercial terms. Mr Fong was a non-executive director of Certis CISCO Security Pte. Ltd. (CISCO), a subsidiary of Temasek Holdings (Private) Limited (Temasek), until 31 December 2018. Temasek is deemed to be a substantial unitholder of CRCT through its direct and deemed interests in CL. CISCO provided security and maintenance services to CL group and the services provided were in the ordinary course of business, on arm’s length basis and based on normal commercial terms. Mr Fong’s role in these companies is/was non-executive in nature and he is/was not involved in the day-to-day conduct of the business.
Each of Professor Tan Kong Yam and Mr Neo Poh Kiat is a non-executive director of a few subsidiaries and/ or associated corporations of Temasek. Each of Professor Tan and Mr Neo’s role in these corporations is nonexecutive in nature and he is not involved in the day-to-day conduct of the business of these corporations.
The Board also considered the conduct of Mr Soh, Mr Fong, Professor Tan and Mr Neo in the discharge of their responsibilities as directors, and is of the view that the relationships set out above did not impair their ability to act with independent judgement in the discharge of their responsibilities as directors, and that as at the last day of FY 2018, they were able to act in the best interests of all the Unitholders in respect of FY 2018. Save for the relationships stated above, they do not have any other 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. Mr Soh, Mr Fong, Professor Tan and Mr Neo will recuse themselves from participating in any Board deliberation on any transactions that could potentially give rise to a conflict of interest.
Mr Christopher Gee Kok Aun and Ms Kuan Li Li 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 whether each of them had demonstrated independence in character and judgement in the discharge of his or her responsibilities as a director and concluded that each of them had acted with independent judgement.
It is noted that all of the current Directors have served on the Board for fewer than nine years.
On the bases of the declarations of independence provided by the relevant non-executive Directors and the guidance in the Code, the SFR and the Listing Manual, the Board arrived at the determination that each of Mr Soh, Mr Fong, Professor Tan, Mr Neo, Mr Gee and Ms Kuan is an independent director.
Each of the above Directors had recused himself or herself from the Board’s deliberations on his or her independence.
At all times, the Directors as fiduciaries are collectively and individually obliged to act honestly and with diligence, and in the best interests of CRCT. The Manager has established a policy that its Directors disclose their interests in transactions and recuse themselves from the deliberations on any matter in which they may have a conflict of interest. Every Director has complied with this policy. Compliance by the relevant Director is duly minuted in the proceedings of the relevant meeting.
Chairman and Chief Executive Officer
Principle 3: There should be a clear division of responsibilities between the leadership of the Board and the executives responsible for managing the company’s business. No one individual should represent a considerable concentration of power.
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 Soh Kim Soon, whereas the CEO is Mr Tan Tze Wooi. They do not share any family ties.
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 the Board in consultation with the CEO and ensuring that there is sufficient information and time 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 plays a significant leadership role by providing clear oversight, direction, advice and guidance to the CEO and Management on strategies. He also maintains open lines of communication, engages with other members of Management regularly and acts as a sounding board on strategic and operational matters.
Mr Tan Tze Wooi has full executive responsibilities to manage CRCT’s business and to develop and implement Board approved policies. The separation of the roles of the Chairman and the CEO and the resulting clarity of roles provide a healthy professional relationship between the Board and Management, facilitate robust deliberations on the business activities of CRCT and the exchange of ideas and views to help shape CRCT’s 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 CEO are held by separate individuals who are not related to each other and the Chairman is an ID, no Lead ID is required to be appointed.
Principle 4: There should be a formal and transparent process for the appointment and re-appointment of directors to the Board.
The Board undertakes the functions of a nominating committee and therefore, the Manager does not have a nominating committee. The Board performs the functions that such a committee would otherwise perform, namely, it administers nominations to the Board, reviews the structure, size and composition of the Board and reviews the performance and independence of Board members. The Board seeks to ensure that the Board is comprised of talented and dedicated directors with a diverse mix of expertise, experience, perspective, skills and backgrounds. Due consideration is also given to other diversity factors including but not limited to tenure, age and gender.
The current Board comprises individuals who are business leaders and professionals with financial, banking, fund management, real estate, legal, investment and accounting backgrounds. The Board believes in diversity and values the benefits diversity can bring to the Board. Diversity enhances decision making capability and ensures that the Manager has the opportunity to benefit from all available talent and perspectives. The Board is committed to diversity and will continue to consider the differences in skillsets and educational, business and professional backgrounds in determining the optimal composition of the Board in its Board renewal process.
In the year under review, no alternate directors were appointed. In keeping with the principle that a Director must be able to commit time to the affairs of the Manager, the Board has adopted the principle that it will generally not approve the appointment of alternate directors.
The Board is able to undertake the functions of a nominating committee because:
- the Manager is a dedicated manager to CRCT and in general, REITs (including CRCT) 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 if the responsibilities of a nominating committee were also undertaken by the Board as the Board would be able to give adequate attention to such issues;
- the focused scope of the business of CRCT also means a manageable competency requirement for the Board such that the Board is able to manage the duties of a nominating committee; and
- IDs form at least half of the Board and the Chairman is an ID, which demonstrates that the IDs play a substantive role, and assure the objectivity and independence of the decision making process concerning nomination. This also mitigates any concerns of conflict which can be managed by having the conflicted Directors abstain from the decision making process. Further, conflict situations are less likely to arise in matters of nomination.
The SGX-ST has also issued a Practice Note which provides that the requirement for the establishment of nominating and remuneration committee 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.
The Board has adopted the following criteria and process for selecting, appointing and reappointing Directors and for reviewing the performance of Directors:
- The Board carries out a proactive review of the Board composition on an annual basis as well as on each occasion that an existing ID gives notice of his intention to retire or resign. The review includes assessing the collective skills, knowledge and experience of Directors represented on the Board to determine whether the Board, as a whole, has the skills, knowledge and experience required to achieve the Manager’s objectives for CRCT. In carrying out this review, the Board considers the need for the Board composition to reflect balance in matters such as skills representation, tenure, experience, age spread and diversity (including gender diversity).
- The Board reviews the suitability of any candidates put forward by any director for appointment, having regard to the skills required and the skills represented on the Board and whether a candidate’s skills, knowledge and experience will complement the existing Board and whether he or she has sufficient time available to commit to his or her responsibilities as a director, and whether he or she is a fit and proper person for the office in accordance with the Guidelines on Fit and Proper Criteria issued by MAS (which require the candidate to be, among other things, competent, honest, to have integrity and be financially sound).
- External consultants may be engaged from time to time to access a wide base of potential directors.
- No member of the Board is involved in any decision of the Board relating to his or her own appointment, reappointment or assessment of independence.
- A newly appointed Director receives a formal appointment letter and a copy of the Director’s Manual (which includes information on a broad range of matters relating to the role and responsibilities of a director).
- All Directors undergo an induction programme on appointment to help familiarise them with matters relating to CRCT’s business and the Manager’s strategy for CRCT.
- The performance of the Board, Board Committees and directors is reviewed annually
- The Board proactively addresses any issues identified in the board performance evaluation.
The adopted process takes into account the requirements in the Code that the composition of the Board, including the selection of candidates for new appointments to the Board as part of the Board’s renewal process, be determined using the following principles:
- the Board should comprise Directors with a broad range of commercial experience, including expertise in funds management, the property industry, banking, finance and legal fields; and
- at least one-third of the Board should comprise IDs. Where, among other things, the Chairman of the Board is not an ID, at least half of the Board should comprise IDs.
As more than half of the Board comprises IDs, the Manager will not be voluntarily subjecting any appointment or reappointment of directors to voting by Unitholders. The Chairman of the Board is presently also an ID.
The Board seeks to refresh Board membership progressively and in an orderly manner. In this regard, Board succession planning is carried out through the annual review of Board composition as well as when a Director gives notice of his or her intention to retire or resign. On the issue of Board renewal, the Manager supports the principle that Board renewal is a necessary and continual process, for good governance and ensuring that the Board has the skills, expertise and experience which are relevant to the evolving needs of CRCT’s business.
The Board also conducts a review of the commitments of each Director on an annual basis and as and when there is a change of circumstances involving a Director. Guideline 4.4 of the Code recommends that the Board determines the maximum number of listed company board appointments which any director may hold and discloses this in the annual report. In view of the responsibilities of a director, the Board is cognisant of the need for Directors to be able to devote sufficient time and attention to adequately perform their roles and diligently discharge their duties. However, the Board has not imposed any limit as it has taken the view that the limit on the number of listed company directorships that an individual may hold should be considered on a case-by-case basis, as a person’s available time and attention may be affected by many different factors, such as whether he or she is in full-time employment and the nature of his or her other responsibilities. A director with multiple directorships is expected to ensure that he can devote sufficient time and attention to the affairs of the Manager in managing the assets and liabilities of CRCT for the benefit of Unitholders.
All Directors are required to confirm on an annual basis, and for FY 2018, had confirmed that they were able to devote sufficient time and attention to the affairs of the Manager in managing the assets and liabilities of CRCT. The Board assessed each Director’s ability to commit time to the affairs of CRCT, taking into consideration their confirmation, their commitments, their attendance record at meetings of the Board and Board Committees, as well as their conduct and contributions (including preparedness, participation and candour) at Board and Board Committee meetings. The Directors’ listed company directorships and principal commitments are disclosed on pages 20 to 24 of this Annual Report and their attendance record for FY 2018 is set out on page 49 of this Annual Report. For FY 2018, the Directors achieved high attendance record and they contributed positively to Board discussions at Board and Board Committee meetings, based on which the Board has determined that each Director has been adequately carrying out his or her duties as a Director of the Manager.
Principle 5: There should be a formal annual assessment of the effectiveness of the Board as a whole and its board committees and the contribution by each director to the effectiveness of the Board.
The Manager believes that oversight from a strong and effective board goes a long way towards guiding a business enterprise to achieving success.
The Board strives to ensure that there is an optimal blend in the Board of backgrounds, experience and knowledge in business and general management, expertise relevant to CRCT’s business and track record, and that each Director can bring to the Board an independent and objective perspective to enable balanced and well-considered decisions to be made in the interests of CRCT.
Whilst board performance is ultimately reflected in the long-term performance of CRCT, the Board believes that engaging in a regular process of self-assessment and evaluation of board performance in order to identify key strengths and areas for improvement is essential to effective stewardship and to attaining success for CRCT.
As part of the Manager’s commitment towards improving corporate governance, the Board has approved and implemented a process to evaluate the effectiveness of the Board as a whole and the Board Committees annually. As part of the process, questionnaires were sent to the Directors, and the results were aggregated and reported to the Chairman of the Board. 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. The results of the survey were considered by the Board and follow up action is taken where necessary with a view to enhancing the effectiveness of the Board in the discharge of its duties and responsibilities. The outcome of the evaluation was satisfactory with positive ratings received for all the attributes in the evaluation categories.
The Board was also able to assess the Board Committees through their regular reports to the Board on their activities. In respect of individual Directors, their contributions 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/or Board Committee meetings.
The Manager further believes that the collective Board performance and the contributions of individual Board members 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 CRCT in the appropriate direction, as well as the long-term performance of CRCT whether under favourable or challenging market conditions.
Access to Information
Principle 6: In order to fulfil their responsibilities, directors should be provided with complete, adequate and timely information prior to board meetings and on an ongoing basis so as to enable them to make informed decisions to discharge their duties and responsibilities.
The Manager recognises the importance of providing the Board with relevant information on a timely basis prior to Board and Board Committee meetings and on an ongoing basis, to enable the Directors to make informed decisions to discharge their duties and responsibilities. Reports on CRCT’s performance are also provided to the Board on a regular basis.
The Board meets regularly and Board meetings, in general, last up to half a day. At each Board meeting, the CEO provides updates on CRCT’s business and operations, as well as financial performance. Presentations in relation to specific business areas are also made by key executives, external consultants or experts. This allows the Board to develop a good understanding of the progress of CRCT’s business as well as the issues and challenges facing CRCT, and promotes active engagement with the key executives of the Manager.
As a general rule, Board papers are sent to Board members at least five working days prior to each meeting, to allow the Board members to prepare for the meetings and to enable discussions to focus on any questions that they may have.
In addition to providing complete, adequate and timely information to the Board on Board affairs and issues requiring the Board’s decision, Management also provides ongoing reports relating to the operational and financial performance of CRCT, such as monthly management reports.
Where appropriate, informal meetings are also held for Management to brief Directors on prospective transactions and potential developments in the early stages before formal Board approval is sought.
The Board has unfettered access to any Management staff for any information that it may require at all times. It also has separate and independent access to the company secretary of the Manager (Company Secretary) at all times. The Company Secretary attends to corporate secretarial administration matters and is the corporate governance advisor on corporate matters to the Board and Management. The Company Secretary attends all Board meetings and assists the Chairman in ensuring that Board procedures are followed. The appointment and the removal of the Company Secretary is subject to the Board’s approval. The Board, whether as an individual Director or as a group, is also entitled to have access to independent professional advice where required, with expenses borne by the Manager.
There were no separate meetings of the IDs without the presence of other Directors in FY 2018 because no Lead ID is required to be appointed.
The AC meets the internal and external auditors separately at least once a year without the presence of the CEO and Management.
(B) REMUNERATION MATTERS
Procedures for Developing Remuneration Policies
Principle 7: There should be a formal and transparent procedure for developing policy on executive remuneration and for fixing the remuneration packages of individual directors. No director should be involved in deciding his own remuneration.
Level and Mix of Remuneration
Principle 8: The level and structure of remuneration should be aligned with the long-term interest and risk policies of the company, and should be appropriate to attract, retain and motivate (a) the directors to provide good stewardship of the company, and (b) key management personnel to successfully manage the company. However, companies should avoid paying more than is necessary for this purpose.
Disclosure on Remuneration
Principle 9: Every company should provide clear disclosure of its remuneration policies, level and mix of remuneration, and the procedure for setting remuneration, in the company’s Annual Report. It should provide disclosure in relation to its remuneration policies to enable investors to understand the link between remuneration paid to directors and key management personnel, and performance.
The Board is able to undertake the functions of a remuneration committee because:
- the Manager is a dedicated manager to CRCT and in general, REITs (including CRCT) 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 at least half 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 oversees the design and implementation of the remuneration policy and the specific remuneration packages for each Director and senior executives including the CEO. No member of the Board, however, will be involved in any decision of the Board relating to his or her own remuneration.
The Board sets the remuneration policies in line with CRCT Group’s business strategy and approves the executive compensation framework based on the key principle of linking pay to performance. The Board has access to independent remuneration consultants for advice 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 executive officers, 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 executive officers 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 CRCT. 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 FY 2018, an independent remuneration consultant, Willis Towers Watson, was appointed to provide professional advice on Board and executive remuneration. Willis Towers Watson is a leading global advisory, broking and solutions company with over 40,000 employees serving more than 140 countries. The consultant is not related to the Manager, its controlling shareholder, its related corporations or any of its Directors.
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 systems are viewed as fair across CRCT Group
- Significant and appropriate portion of pay-at-risk, taking into account risk policies of CRCT 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 programmes
Remuneration for Key Management Personnel
Remuneration for key management personnel comprises fixed components, variable cash components, unit-based components and employee benefits:
A. Fixed Components
The fixed components comprise the base salary, fixed allowances and compulsory employer contribution to an employee’s Central Provident Fund.
B. Variable Cash Components
The variable cash components comprise 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, CRCT Group’s strategy and goals are translated to performance outcomes comprising both qualitative and quantitative targets in the dimensions of Financial, Execution, Future Growth and People; these are cascaded down throughout the organisation, thereby creating alignment across the CRCT Group.
After the close of each year, the Board reviews CRCT Group’s achievements against the targets set in the Balanced Scorecard and determines the overall performance taking into consideration qualitative factors such as the business environment, regulatory landscape and industry trends.
In determining the payout quantum for each key management personnel under the plan, the Board considers the overall business performance and individual performance as well as affordability of the payout of the Manager.
C. Unit-based Components
Unit awards were granted in FY 2018 pursuant to the CapitaLand Retail China Trust Management Limited Performance Unit Plan (PUP) and CapitaLand Retail China Trust Management Limited Restricted Unit Plan (RUP) (together, the Unit Plans), approved by the Board. The Manager believes that the Unit-based Component of the remuneration for key management personnel serves to align the interests of such key management personnel with that of Unitholders and CRCT’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.
CapitaLand Retail China Trust Management Limited Performance Unit Plan
In FY 2018, 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 (baseline award) is contingently allocated conditional on the achievement of a pre-determined target in respect of the Relative Total Unitholder Return (TUR) of CRCT Group measured by the percentile ranking of CRCT Group’s TUR against the REITs in the FTSE ST REIT Index.
The above performance measure has been selected as a key measure of wealth creation for Unitholders. The final number of Units to be released will depend on CRCT’s performance against the pre-determined target which is measured 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 Units will be released if the threshold target is not met at the end of the qualifying performance period. On the other hand, if the superior target is met, more Units than the baseline award can be delivered up to a maximum of 200% of the baseline award. Recipients will receive fully paid Units at no cost.
For the year under review, the relevant award for assessment of the performance achieved by CRCT is the award granted in FY 2016 where the qualifying performance period was FY 2016 to FY 2018. Based on the Board’s assessment that the performance achieved by CRCT Group has not met the pre-determined performance targets for such performance period, no Unit has been released for the Unit award granted in FY 2016.
In respect of the Unit awards granted under the PUP in FY 2017 and FY 2018, the respective qualifying performance periods have not ended as at the date of this Report
CapitaLand Retail China Trust Management Limited Restricted Unit Plan
In FY 2018, 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 (baseline award) is contingently allocated conditional on the achievement of pre-determined targets in respect of the following performance conditions:
- Net property income of CRCT Group
- Distribution per Unit of CRCT 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 CRCT’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, which serves to align Management’s interests with that of Unitholders in the longer term, deter short-term risk taking, as well as facilitate talent retention. No Units 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 baseline award can be delivered up to a maximum of 150% of the 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 FY 2018, based on the Board’s assessment that the performance achieved by the CRCT Group has met the pre-determined performance targets for FY 2018, the resulting number of units released has been adjusted accordingly to reflect the performance level.
To further promote alignment of Management’s interests with that of Unitholders in the longer term, the Board has approved unit ownership guidelines for senior management to instill stronger identification by senior executives with the longer-term performance and growth of CRCT Group. Under these guidelines, senior management participants are required to retain a prescribed proportion of CRCT’s Units received under the Unit Plans.
D. Employee Benefits
The benefits provided are comparable with local market practices.
The remuneration for the CEO in bands of S$250,000 and a breakdown of the remuneration of the CEO and other key management personnel of the Manager in percentage terms are provided in the Key Management Personnel’s Remuneration Table on page 50 of this Annual Report.
At present, there are four key management personnel of the Manager (including the CEO). The Manager outsources various other services to a wholly owned subsidiary of CL (CL Subsidiary). CL Subsidiary provides the services through its employees (Outsourced Personnel). This arrangement is put in place so as to provide flexibility and maximise efficiency in resource management to match the needs of CRCT 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 the CL Subsidiary, is not included as part of the disclosure of remuneration of key management personnel of the Manager in this Report.
The Manager has decided (a) to disclose the CEO’s remuneration in bands of S$250,000 (instead of on a quantum basis), and (b) not to disclose the remuneration of the other key management personnel of the Manager (whether in bands of S$250,000 or otherwise). In arriving at its decision, it took into account the commercial sensitivity and confidential nature of remuneration matters. The Manager is of the view that disclosure in such manner is not prejudicial to the interests of Unitholders as the indicative range for the CEO’s remuneration, as well as the total remuneration for the CEO and other key management personnel of the Manager, is made known to Unitholders, and sufficient information is provided on the Manager’s remuneration framework to enable Unitholders to understand the link between CRCT’s performance and the remuneration of the CEO and other key management personnel. In addition, the remuneration of the CEO and other key management personnel of the Manager is paid out of the fees that the Manager receives (of which the quantum and basis have been disclosed), rather than borne by CRCT.
The Board seeks to ensure that the remuneration paid to the CEO and other key management personnel of the Manager are 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 level of business performance with emphasis on both short and long term quantifiable objectives.
In FY 2018, there were no termination, retirement or post-employment benefits granted to Directors, the CEO and other key management personnel of the Manager. There was also no special retirement plan, ‘golden parachute’ or special severance package for any of the other key management personnel of the Manager.
There were no employees of the Manager who were substantial shareholders of the Manager, substantial unitholders of CRCT or immediate family members of a Director, the CEO or a shareholder of the Manager or substantial unitholder of CRCT in FY 2018. “Immediate family member” refers to the spouse, child, adopted child, step-child, sibling or parent of the individual.
Non-executive Director Remuneration
The Directors’ fees for FY 2018 are shown in the table below. The CEO who is also a Director is remunerated as part of the key management personnel of the Manager and therefore does not receive any Director’s fees. The compensation policy for 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 market benchmarked, taking into account the demanding responsibilities on the part of the Directors in light of the scope and nature of CRCT Group’s business.
Directors’ fees of non-executive Directors will be paid in cash (about 80.0%) and in the form of units (about 20.0%), save for fees to be paid to a non-executive director (not being an employee of CL) who steps down from the board, which are paid entirely in cash. The Manager believes that the payment of a portion of the Directors’ fees in Units will serve to align the interests of Directors with that of Unitholders and CRCT’s long-term growth and value. In order to encourage the alignment of the interests of the non-executive Directors with the interests of Unitholders, a non-executive Director is required to hold Units worth at least one year of his or her basic retainer fee or the total number of Units awarded under the above policy, whichever is lower, at all times during his or her Board tenure.
N.A.: Not Applicable
- Inclusive of attendance fees of (a) S$2,000 (local meeting) and S$5,000 (overseas meeting) per meeting attendance in person, (b) S$1,700 per meeting attendance via audio or video conference, and (c) S$1,000 per meeting attendance at project and verification meetings subject to a maximum of S$10,000 per Director per annum.
- Each non-executive Director (save for non-executive Directors who are employees of CL) shall receive up to 20.0% of his or her Directors’ fees in the form of Units (subject to truncation adjustments). The remainder of the Directors’ fees shall be paid in cash. No new Units will be issued for this purpose as these Units will be paid by the Manager from the Units it holds.
- Mr Liew Cheng San Victor stepped down as Non-Executive Independent Director with effect from 20 April 2017. Mr Liew also ceased to be Chairman of the Board and Chairman of the Corporate Disclosure Committee with effect from 20 April 2017.
- Mr Soh Kim Soon was appointed as Non-Executive Independent Director, Chairman of the Board and Chairman of the Corporate Disclosure Committee with effect from 20 April 2017.
- Mr Lim Ming Yan retired as Non-Executive Non-Independent Director and Deputy Chairman with effect from 1 July 2018. Mr Lim also relinquished his role as Chairman of the Executive Committee and Member of the Corporate Disclosure Committee with effect from 1 July 2018.
- Non-executive Directors who are employees of CL do not receive Directors’ fees.
- Mr Tony Tan Tee Hieong ceased to be the Chief Executive Officer, an Executive Non-Independent Director and a Member of the Executive Committee with effect from 1 April 2017.
- Mr Tan Tze Wooi was appointed as the Chief Executive Officer, an Executive Non-Independent Director and a Member of the Executive Committee with effect from 1 April 2017. He was subsequently appointed as a Member of Corporate Disclosure Committee with effect from 1 July 2018.
- Mr Neo Poh Kiat was appointed as Non-Executive Independent Director with effect from 20 April 2017.
- Ms Kuan Li Li was appointed as Non-Executive Independent Director with effect from 1 January 2018.
- Mr Lee Chee Koon was appointed as Non-Executive Non-Independent Director and a Member of the Executive Committee with effect from 1 January 2018. Mr Lee was subsequently appointed as the Chairman of Executive Committee on 1 July 2018.
- Mr Lim Cho Pin Andrew Geoffrey was appointed as Non-Executive Non-Independent Director, Member of the Audit Committee, the Corporate Disclosure Committee and the Executive Committee with effect from 1 January 2018.
- Mr Jason Leow Juan Thong was appointed as Non-Executive Non-Independent Director and a Member of the Executive Committee on 20 April 2017. Mr Leow had subsequently stepped down as Director with effect from 1 January 2018 and had also ceased to be a Member of the Executive Committee.
- Mr Ng Kok Siong stepped down as Non-Executive Non-Indepedent Director with effect from 1 January 2018. Mr Ng also ceased to be a Member of the Audit Committee, the Corporate Disclosure Committee and the Executive Committee.
(C) ACCOUNTABILITY AND AUDIT
Principle 10: The Board should present a balanced and understandable assessment of the company’s performance, position and prospects.
The Manager provides Unitholders with quarterly and annual financial statements within the relevant periods prescribed by the Listing Manual. These quarterly and annual financial statements are reviewed and approved by the Board prior to release to Unitholders by announcement to the SGXNet. These releases of quarterly and annual financial statements are accompanied by news releases issued to the media and which are also posted on SGXNet. In presenting the quarterly and annual financial statements to Unitholders, the Board aims to provide Unitholders with a balanced, clear and understandable assessment of CRCT’s performance, position and prospects. In order to achieve this, Management provides the Board with management accounts on a monthly basis and such explanation and information as any Director may require, to enable the Directors to keep abreast, and make a balanced and informed assessment, of CRCT’s financial performance, position and prospects.
In addition to quarterly and annual financial statements, the Manager also keeps Unitholders, stakeholders and analysts informed of the performance and changes in CRCT 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.
The Manager believes in conducting itself in ways that seek to deliver maximum sustainable value to Unitholders. Best practices are promoted as a means to build an excellent business for Unitholders and the Manager is accountable to Unitholders for CRCT’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.
Risk Management and Internal Controls
Principle 11: The Board is responsible for the governance of risk. The Board should ensure that Management maintains a sound system of risk management and internal controls to safeguard shareholders’ interests and the company’s assets, and should determine the nature and extent of the significant risks which the Board is willing to take in achieving its strategic objectives.
The Manager maintains an adequate and effective system of risk management and internal controls addressing material financial, operational, compliance and information technology (IT) risks to safeguard Unitholders’ interests and CRCT’s assets.
The Board has overall responsibility for the governance of risk and oversees the Manager in the design, implementation and monitoring of the risk management and internal controls systems. The AC assists the Board in carrying out the Board’s responsibility of overseeing the risk management framework and policies for CRCT Group.
Under its terms of reference, the AC’s scope of duties and responsibilities is as follows:
- makes recommendations to the Board on the Risk Appetite Statement (RAS) for CRCT Group;
- assesses the adequacy and effectiveness of the risk management and internal controls system established by the Manager to manage risks;
- oversees the formulation, updating and maintenance of an adequate and effective risk management framework, policies and strategies for managing risks that are consistent with CRCT Group’s risk appetite and reports to the Board on its decisions on any material matters concerning the aforementioned;
- makes the necessary recommendations to the Board such that an opinion regarding the adequacy and effectiveness of the risk management and internal controls system can be made by the Board in the annual report of CRCT in accordance with the Listing Manual and the Code; and
- considers and advises on risk matters referred to it by Management or the Board including reviewing and reporting to the Board on any material breaches of the RAS, any material non-compliance with the approved framework and policies and the adequacy of any proposed action.
The Manager adopts an Enterprise Risk Management (ERM) Framework which sets out the required environmental and organisational components for managing risk in an integrated, systematic and consistent manner. The ERM Framework and related policies are reviewed annually.
As part of the ERM Framework, the Manager, among other things, undertakes and performs a Risk and Control Self-Assessment (RCSA) annually to identify material risks along with their mitigating measures. The systems of risk management and internal controls are reviewed regularly by the Management, the AC and the Board, taking into account best practices and guidance in the Risk Governance Guidance for Listed Boards issued by the Corporate Governance Council and the Listing Manual.
CRCT Group’s RAS, incorporating the risk limits, addresses the management of material risks faced by CRCT Group. Alignment of CRCT Group’s risk profile to the RAS is achieved through various communication and monitoring mechanisms put in place across the various functions within the Manager.
More information on the Manager’s ERM Framework can be found in the Enterprise Risk Management section on pages 51 to 53 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 risks management systems. This includes testing, where practicable, material internal controls in areas managed by external service providers. Any material non-compliance or lapses in internal controls together with corrective measures recommended by the internal and external auditors are reported to and reviewed by the AC. The AC also reviews the adequacy and effectiveness of the measures taken by the Manager on the recommendations made by the internal and external auditors in this respect.
The Board has received assurance from the CEO and the Head, Finance of the Manager that:
- the financial records of CRCT Group have been properly maintained and the financial statements for FY 2018 give a true and fair view of CRCT Group’s operations and finances; and
- the systems of risk management and internal controls in place for CRCT Group are adequate and effective to address risks (including financial, operational, compliance and IT risks) which the Manager considers relevant and material to the current business environment.
The CEO and the Head, Finance of the Manager have obtained similar assurances from the respective risk and control owners.
In addition, in FY 2018, the Board has received quarterly certification by Management on the integrity of financial reporting and the Board has provided a negative assurance confirmation to Unitholders as required by the Listing Manual.
Based on the ERM Framework established and the reviews conducted by Management and both the internal and external auditors, as well as the assurance from the CEO and the Head, Finance of the Manager, the Board is of the opinion that the systems of risk management and internal controls are adequate and effective to address the risks (including financial, operational, compliance and IT risks) which CRCT Group considers relevant and material to its current business environment as at 31 December 2018. The AC 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 AC in the review for FY 2018.
The Board notes that the systems of risk management and internal controls established by the Manager provide reasonable assurance that CRCT 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 systems 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 12: The Board should establish an Audit Committee with written terms of reference which clearly set out its authority and duties.
At present, the AC comprises four non-executive Directors, the majority of whom (including the Chairman of the AC) are IDs. The members bring with them invaluable recent and relevant managerial and professional expertise in accounting and related financial management domains. The AC does not comprise members who were previously partners of the incumbent external auditors, KPMG LLP (KPMG), within the period of two years commencing on the date of their ceasing to be a partner of KPMG. The AC also does not comprise any member who has any financial interest in KPMG.
The AC has explicit authority to investigate any matter within its terms of reference. Management provides the fullest co-operation in providing information and resources, and in implementing or carrying out all requests made by the AC. The AC has direct access to the internal and external auditors and full discretion to invite any Director or executive officer to attend its meetings. Similarly, both the internal and external auditors have unrestricted access to the AC.
Under its terms of reference, the AC’s scope of duties and responsibilities is as follows:
- reviews the significant financial reporting issues and judgements so as to ensure the integrity of the financial statements of CRCT Group, and any announcements relating to CRCT Group’s financial performance;
- reviews and reports to the Board at least annually the adequacy and effectiveness of the Manager’s internal controls, including financial, operational, compliance and IT controls, and risk management systems;
- reviews the adequacy and effectiveness of the Manager’s internal audit and compliance functions;
- reviews the scope and results of the external audit and independence and objectivity of the external auditors;
- makes 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;
- reviews and approves processes to regulate transactions involving 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 CRCT 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 CRCT and its minority Unitholders. In respect of any property management agreement which is an Interested Person Transaction, the AC also carries out reviews at appropriate intervals to satisfy itself that the Manager has reviewed the Property Managers’ compliance with the terms of the property management agreement and has taken remedial actions where necessary; and
- reviews the whistle-blowing policy and arrangements by which employees of the Manager and any other persons may, in confidence, report suspected fraud or irregularity or suspected infringement of any laws or regulations or rules, or raise concerns about possible improprieties in matters of financial reporting or other matters with a view to ensuring that arrangements are in place for such concerns to be raised and independently investigated, and for appropriate follow-up action to be taken.
The AC undertook a review of the independence of the external auditors, taking into consideration, among others, CRCT’s relationships with the external auditors in FY 2018, as well as the processes and safeguards adopted by the Manager and KPMG relating to audit independence. Based on the review, the AC is satisfied that the external auditors are independent. The external auditors have also provided confirmation of their independence to the AC. The amount of audit fees paid/payable to the external auditors for FY 2018 amounted to S$414,887. There was no non-audit service in FY 2018.
In FY 2018, the AC also met with the internal and external auditors, separately and without Management’s presence, to discuss the reasonableness of the financial reporting process, the system of internal controls, and the significant comments and recommendations by the auditors. Where relevant, the AC 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.
In its review of the financial statements of CRCT Group for FY 2018, the AC has discussed with Management the accounting principles that were applied and their judgement of items that might affect the integrity of the financial statements and also considered the clarity of key disclosures in the financial statements. The AC reviewed the following key audit matter as reported by the external auditors for FY 2018.
Changes to the accounting standards and accounting issues which have a direct impact on the financial statements were reported to and discussed with the AC at its meetings.
The Manager confirms, on behalf of CRCT, that CRCT complies with Rule 712 and Rule 715 of the Listing Manual.
Principle 13: The company should establish an effective internal audit function that is adequately resourced and independent of the activities it audits.
The Manager has in place an internal audit function supported by CL’s Internal Audit Department (CL IA). The primary reporting line of CL IA is to the AC. The AC has carried out a review and is of the view that the internal audit function performed by CL IA is adequate, effective and independent. CL IA plans its internal audit schedules in consultation with, but independently of, Management and its plan is submitted to the AC for approval prior to the beginning of each year. The AC also meets with CL IA at least once a year without the presence of Management. CL IA has unfettered access to the Manager’s documents, records, properties and employees, including access to the AC, and has appropriate standing within CRCT Group.
CL IA is adequately resourced and staffed with persons with the relevant qualifications and experience. CL IA is a corporate member of the Singapore branch of the Institute of Internal Auditors Inc. (IIA), which has its headquarters in the United States of America (USA). CL IA subscribes to, and is guided by, the International Standards for the Professional Practice of Internal Auditing (Standards) developed by the IIA, and has incorporated these Standards into its audit practices. With respect to FY 2018, the AC has reviewed and is satisfied as to the adequacy and effectiveness of the IA function.
To ensure that internal audits are performed by competent professionals, CL IA recruits and employs suitably qualified professional staff with the requisite skill sets and experience. For instance, CL IA staff who are involved in IT audits are Certified Information System Auditors and members of the Information System Audit and Control Association (ISACA) in the USA. The ISACA Information System Auditing Standards provide guidance on the standards and procedures to be applied in IT audits.
CL IA identifies and provides training and development opportunities for its staff to ensure that their technical knowledge and skill sets remain current and relevant.
(D) SHAREHOLDER RIGHTS AND RESPONSIBILITIES
Principle 14: Companies should treat all shareholders fairly and equitably, and should recognise, protect and facilitate the exercise of shareholders’ rights, and continually review and update such governance arrangements.
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. They are also 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 CRCT.
More information on Unitholder participation in general meetings can be found in the section on Principle 16: Conduct of Shareholder Meetings of this Report.
Communication with Shareholders
Principle 15: Companies should actively engage their shareholders and put in place an investor relations policy to promote regular, effective and fair communication with shareholders.
The Manager is committed to keeping all Unitholders, other stakeholders, analysts and the media informed of the performance and changes in CRCT or its business which would likely materially affect the price or value of the Units. This is performed on a timely and consistent basis to assist Unitholders and investors in their investment decisions.
The Manager has in place an Investor Relations team and a Group Communications team, both of which facilitate effective communication with Unitholders, analysts, fund managers and the media.
The Manager actively engages with Unitholders and has put in place an Investor Relations Policy (Policy) to promote regular, effective and fair communications with Unitholders. The Policy is available on CRCT’s website at www.crct.com.sg, and contains the mechanism through which Unitholders may contact CRCT with questions and through which CRCT may respond.
The Board has established the CDC which assists the Board in the discharge of its function to meet the obligations arising under the laws and regulations of Singapore relating to and to conform to best practices in the corporate disclosure and compliance process. The views and approvals of the CDC were sought throughout the year through emails on various announcements and news releases.
More information on the Manager’s investor and media relations efforts can be found in the Investor & Media Relations section on pages 54 to 55 of this Annual Report and the Policy which is available on CRCT’s website.
CRCT’s distribution policy is to distribute at least 90.0% of its taxable income (other than gains from the sale of real estate properties by CRCT which are determined to be trading gains), with the actual level of distribution to be determined at the Manager’s discretion. Distributions are generally paid within 35 market days after the relevant book closure date.
Conduct of Shareholder Meetings
Principle 16: Companies should encourage greater shareholder participation at general meetings of shareholders, and allow shareholders the opportunity to communicate their views on various matters affecting the company.
The Manager supports the principle of encouraging Unitholders’ participation and voting at general meetings. Unitholders will receive a copy of notice of the general meeting and may download the Annual Report (printed copies of the Annual Report are available upon request) from CRCT’s website at www.crct.com.sg. Notices of the general meetings are also advertised in the press and issued on SGXNet. More than the requisite notice period for general meetings is generally provided. All Unitholders are given the opportunity to participate effectively in and vote at general meetings.
At general meetings, Management makes a presentation to Unitholders to update them on CRCT’s performance, position and prospects. The presentation materials are made available to Unitholders on CRCT’s website and SGXNet. Unitholders are given the opportunity to communicate their views and discuss with the Board and Management matters affecting CRCT. Unitholders are informed of the rules governing general meetings. Representatives of the Trustee, Directors (including the chairpersons of the respective Board Committees), the Manager’s senior management and the external auditors of CRCT, are present for the entire duration of general meetings to address any queries that Unitholders may have. Directors and Management also interact with Unitholders after the general meetings. All the Directors attended the general meeting held during their tenure in FY 2018. A record of the Directors’ attendance at the general meeting can be found in the records of their attendance at meetings set out at page 49 of this Annual Report.
To safeguard Unitholders’ interests and rights, a separate resolution is proposed for each substantially separate issue at general meetings. To ensure transparency in the voting process and better reflect Unitholders’ interests, the Manager conducts electronic poll voting for all the resolutions proposed at the general meetings. One Unit is entitled to one vote. Voting procedures 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 at the general meetings. The total number of votes cast for or against the resolutions and the respective percentages are also announced on SGXNet after the general meetings. Voting in absentia and by email, which are currently not permitted, may only be possible following careful study to ensure that the integrity of information and authentication of the identity of Unitholders through the web are not compromised, and legislative changes are effected to recognise remote voting.
Minutes of the general meetings, recording the substantial and relevant comments made and questions raised, are prepared and are available to Unitholders for their inspection upon request. Minutes of the annual general meetings are also uploaded to CRCT’s website at www.crct.com.sg.
(E) ADDITIONAL INFORMATION
In addition to the AC and CDC, the Board has also established an EC.
The EC oversees the day-to-day activities of the Manager and that of CRCT, on behalf of the Board. The EC is guided by its terms of reference, in particular, the EC:
- reviews, endorses and approves strategic directions and management policies of the Manager in respect of CRCT;
- oversees operational, investment and divestment matters within the approved financial limits; and
- reviews management reports and operating budgets.
The members of the EC also meet informally during the course of the year.
Dealings with Interested Persons
Review Procedures for Interested Person Transactions
The 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 CRCT and Unitholders. In respect of such transactions, the Manager would have to demonstrate to the AC that such transactions are undertaken on normal commercial terms and are not prejudicial to the interests of CRCT and Unitholders which may include obtaining (where practicable) third party quotations or obtaining valuations from independent valuers (in accordance with applicable provisions of the Listing Manual and the Property Funds Appendix). The internal control procedures also ensure compliance with Chapter 9 of the Listing Manual and the Property Funds Appendix.
In particular, the procedures in place include the following:
- 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.
- Any transaction of less than S$100,000 in value is disregarded.
- In relation to approval by Unitholders for transactions that are equal to or exceed 5.0% of CRCT’s latest audited net tangible assets/net asset value (whether singly or aggregated), any transaction which has been approved by Unitholders, or is the subject of aggregation with another transaction that has been approved by Unitholders, need not be included in any subsequent aggregation.
Role of the Audit 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 CRCT and Unitholders’ interests.
The Manager maintains a register to record all Interested Person Transactions which are entered into by CRCT (and the basis on which they are entered into, including the quotations obtained to support such basis). All Interested Person Transactions are subject to regular periodic reviews by the AC, which in turn obtains advice from CL IA, to ascertain that the guidelines and procedures established to monitor Interested Person Transactions, including the relevant provisions of the Listing Manual and the Property Funds Appendix, as well as any other guidelines which may from time to time be prescribed by the SGX-ST, MAS or other relevant authorities, have been complied with. The review includes an examination of the nature of the transaction and its supporting documents or such other information deemed necessary by the AC. If a member of the AC has an interest in a transaction, he 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.
Details of all Interested Person Transactions (equal to or exceeding S$100,000 each in value) entered into by CRCT in FY 2018 are disclosed on page 178 of this Annual Report.
Dealing with Conflicts of Interest
- the Manager is a dedicated manager to CRCT 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 CRCT 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 CRCT 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 CRCT, 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 devised and adopted a securities dealing policy for the Manager’s officers and employees which applies the best practice recommendations in the Listing Manual. To this end, the Manager has issued guidelines to its Directors and employees as well as certain relevant executives of the CL group, which set out prohibitions against dealings in CRCT Group’s securities (i) while in possession of material unpublished price sensitive information, (ii) during the two weeks immediately preceding, and up to the time of the announcement of, CRCT’s financial statements for each of the first three quarters of CRCT’s financial year, and (iii) during the one month immediately preceding, and up to the time of the announcement of, CRCT’s financial statements for the full financial year. Prior to the commencement of each relevant period, an email would be sent out to all Directors and employees of the Manager as well as certain relevant executives of the CL group to inform them of the duration of the period. The Manager will also not deal in CRCT Group’s securities during the same period. In addition, employees and Capital Markets Services Licence Appointed Representatives of the Manager are required to give pre-trading notification to the CEO and the Compliance department before any dealing in CRCT Group’s securities.
Directors and employees of the Manager as well as certain relevant executives of the CL group are also prohibited from dealing in securities of CRCT Group if they are in possession of unpublished price sensitive information of CRCT Group. As and when appropriate, they would be issued an advisory to refrain from dealing in CRCT Group’s securities.
Under the policy, Directors and employees of the Manager as well as certain relevant executives of the CL group 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.
Dealings by the Directors are disclosed in accordance with the requirements in the SFA and the Listing Manual.
(F) 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’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 mainlythree ways.
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 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.
Bribery and Corruption Prevention Policy
The Manager adopts a strong stance against bribery and corruption. In addition to clear guidelines and procedures for the giving and receipt of corporate gifts and concessionary offers, all employees of the Manager are required to make a declaration on an annual basis where they pledge to uphold the Manager’s core values and not to engage in any corrupt or unethical practices. This serves as a reminder to all employees to maintain the highest standards of integrity in their work and business dealings.
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.
A whistle-blowing policy and other procedures are put in place to provide employees of the Manager 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 the whistle-blowing 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 fullest extent possible, be protected from reprisal. The policy is published on CL’s Intranet which is accessible by all employees of the Manager.
Anti-Money Laundering and Countering the Financing of Terrorism Measures
As a holder of a Capital Markets Services Licence 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 diligenc;
- suspicious transaction reportin
- record keeping;
- employee screening and representative screening; and
The Manager has developed and implemented a policy on the prevention of money laundering and terrorist financing and is alert at all times to suspicious transactions. Where there is a suspicion of money laundering or terrorist financing, the Manager performs due diligence checks on its counterparties in order to ensure that it does not enter into business transactions with terrorist suspects or other high risk persons or entities. Suspicious transactions are also reported to the Suspicious Transaction Reporting Office of the Commercial Affairs Department.
Under this policy, the Manager must retain all relevant records or documents relating to business relations with its customers or transactions entered into for a period of at least five years following the termination of such business relations or the completion of such transactions.
All prospective employees, officers and representatives of the Manager are also screened against various lists of terrorist suspects issued by MAS. Periodic training is provided by the Manager to its Directors, employees and representatives to ensure that they are updated and aware of applicable anti-money laundering and terrorist financing regulations, the prevailing techniques and trends in money laundering and terrorist financing and the measures adopted by the Manager to combat money laundering and terrorist financing.
N.A.: Not Applicable.
# Given the nature and scope of the work of CDC and EC, their business was discussed/transacted primarily through conference call, correspondence and informal meeting.
- Mr Lim Ming Yan retired as Non-Executive Non-Independent Director and Deputy Chairman with effect from 1 July 2018. Mr Lim also relinquished his role as Chairman of the Executive Committee and Member of the Corporate Disclosure Committee with effect from 1 July 2018.
- Mr Tan Tze Wooi was appointed as Member of the Corporate Disclosure Committee with effect from 1 July 2018
- Ms Kuan Li Li was appointed as Non-Executive Independent Director with effect from 1 January 2018
- Mr Lee Chee Koon was appointed as Non-Executive Non-Independent Director and a Member of the Executive Committee with effect from 1 January 2018. Mr Lee was subsequently appointed as the Chairman of Executive Committee on 1 July 2018.
- Mr Lim Cho Pin Andrew Geoffrey was appointed as Non-Executive Non-Independent Director, Member of the Audit Committee, Corporate Disclosure Committee and Executive Committee with effect from 1 January 2018.
- The amounts disclosed include bonuses earned and the other incentive plans which have been accrued for in FY 2018.
- he proportion of value of the Unit awards is based on the fair value of the Units comprised in the contingent awards under the CapitaLand Retail China Trust Management Limited Restricted Unit Plan (RUP) and the CapitaLand Retail China Trust Management Limited Performance Unit Plan (PUP) at the time of grant in FY 2018. 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.
- The remuneration of Ms Pauline Yeh as Vice President, Investment and Asset Management for the period 1 January to 30 June 2018, was borne by CapitaLand Limited and/or its subsidiaries (other than the Manager), to which the Manager outsources the Investment and Asset Management functions, among others.