Corporate Governance Report
Cache Logistics Trust ("Cache") is a trust constituted by a deed of trust (as amended) ("the Trust Deed") entered into between ARA-CWT Trust Management (Cache) Limited, as manager of Cache (the "Manager" or "Management") and HSBC Institutional Trust Services (Singapore) Limited, as trustee of Cache (the "Trustee").
The Manager is committed to ensuring that high standards of corporate governance and business integrity are practised, in line with the Code of Corporate Governance 2005 (the "Code") and believes that an effective corporate governance framework is the foundation for sustainable long term growth. With the revised Code of Corporate Governance issued by the Corporate Governance Council ("CG Council") and amended by the Monetary Authority of Singapore in May 2012 (the "2012 Code"), the Manager is working towards further enhancing its Corporate Governance practices, and where necessary, adopting the recommendations made by the CG Council on the 2012 Code which is effective in respect of Cache's Annual Report for the financial year ending 31 December 2013.
The Manager believes that good corporate governance goes beyond ensuring compliance and that it is an integral part of the corporate culture. A robust structure and system of internal controls and accountability to all stakeholders with built-in checks and balances have been put in place, and the following sections describe the Manager's corporate governance practices in detail. The Manager confirms that it has adhered to the principles and guidelines of the Code as set below, and has also explained any areas of non-compliance where applicable.
In addition, the Manager also ensures that all applicable requirements, laws and regulations are duly complied with, which include, but not limited to, the Listing Manual of Singapore Exchange Securities Trading Limited (the "SGX-ST"), Appendix 6 to the Code on Collective Investment Schemes issued by the MAS (the "Property Funds Appendix" and the Code on Collective Investment Schemes issued by the MAS, the "Code on CIS"), the Guidelines on Criteria for the Grant of a Capital Markets Services Licence issued by the MAS (the "CMS Licence Guidelines"), the Guidelines on Fit and Proper Criteria issued by the MAS and the Securities and Futures Act, Chapter 289 of Singapore (the "SFA").
The Manager of Cache Logistics Trust
The Trustee and the Manager are independent of each other. The Trustee is responsible under the Trust Deed for the safe custody of the assets on behalf of holders of unit of Cache ("Unitholders"). The Manager's main responsibility is to manage the assets and liabilities of Cache in accordance with the Trust Deed and act honestly, with due care and diligence, in the best interest of Unitholders.
As Cache is externally managed by the Manager, it has no directly-hired employees. The Manager hires experienced and well-qualified professionals to handle the day-to-day operations. All directors and employees of the Manager are remunerated by the Manager and not Cache.
The Manager sets the strategic direction of Cache and makes recommendations to the Trustee on the acquisition, divestment and/or enhancement of assets of Cache in accordance with its business strategy. The Manager is also in charge of the capital and risk management of Cache.
Other functions and responsibilities of the Manager include:
- using its best endeavours to carry and conduct its business and operations in a proper and efficient manner and to conduct all transactions with or for Cache at arm's length;
- preparing reports on a regular basis, which may contain proposals and forecasts on net income, capital expenditure, sales and valuations, explanations of major variances to previous forecasts, written commentary on key issues and any relevant assumptions. The purpose of these reports is to manage the performance of Cache's assets;
- ensuring compliance with the applicable provisions of the SFA and all other relevant legislation, the Listing Manual of the SGX-ST, the Code on CIS including the Property Funds Appendix, Capital Markets Services License and Representatives' License issued by the MAS, the Singapore Code on Take-overs and Mergers, the Trust Deed, the tax ruling issued by the Inland Revenue Authority of Singapore and all relevant contracts;
- preparing the accounts of Cache;
- establishing a framework of prudent and effective controls which enables financial, operational and compliance risks to be managed;
- managing communications with the Unitholders; and
- ensuring the execution of works by the Property Manager, which provides property management, lease management, marketing and marketing co-ordination services and project management services pursuant to the respective property management agreements.
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 success of the company. The Board works with Management to achieve this and the Management remains accountable to the Board.
The Board of Directors of the Manager (the "Board") is entrusted with the responsibility of overseeing the overall corporate governance and management of the Manager, including setting its strategic direction, establishing a framework of prudent and effective controls to assess and manage risks, establishing goals for Management and monitoring the achievement of these goals.
The Board has adopted internal guidelines setting forth matters that require the Board's approval. Matters requiring the Board's approval include significant acquisitions and disposals, annual budget, funding strategy and hedging activities and review of the quarterly, half year and full year financial results. Management, on the other hand, is responsible for the day-to-day operations of Cache. Appropriate delegation of authority has been provided to Management to facilitate operational efficiencies. Apart from matters that specifically require approval from the Board, the Board approves transactions exceeding certain threshold limits, while delegating authority for transactions below those limits to the Board committee and Management respectively.
The schedule of all Board and Board Committee meetings and the Annual General Meeting for the next calendar year is planned well in advance, in consultation with the Directors. The Board meets at least four times a year to review the business plans and key risks assessed by Management. The Board also assesses the adequacy of internal controls of the Manager and the financial performance of Cache. Board meetings are held at least once every quarter and ad-hoc meetings are convened as and when warranted by particular circumstances requiring the Board's attention.
In the event any of the Directors are unable to physically attend Board meetings, the Manager's Articles of Association provide for Directors' participation in meetings by way of tele-conference or video conference. As and when necessary, Board meetings are also supplemented with resolutions circulated to the Directors for approval.
Directors are briefed by Management on the business activities and strategic directions of Cache, and provided with relevant information on the policies and procedures relating to corporate conduct and governance including but not limited to disclosure of interests in securities, prohibitions on dealings in the securities of Cache and restrictions on disclosure of price sensitive information. Directors can also request for further information or briefings on any aspect of Cache or the Manager's business operations.
Changes to regulations, policies and accounting standards are monitored closely. Where the changes have an important impact on Cache and its disclosure obligations, the Directors are briefed either during a Board meeting, at specially convened sessions (involving relevant professionals if required) or via circulation of Board papers.
The participation of each Director, as well as the number of Board and Board Committee meetings held during the year under review is summarised on page 69 of this Annual Report.
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. No individual or small group of individuals should be allowed to dominate the Board's decision making.
The Board presently comprises six members, who are non-executive. Two Board members are non-executive and independent. The Chairman of the Board is Mr Lim How Teck. The composition of the Board is determined using the following principles:
- the Chairman of the Board should be a non-executive Director;
- the Board should comprise Directors with a broad range of commercial experience including expertise in fund management, legal matters, audit and accounting and the property industry; and
- at least one-third of the Board should comprise independent Directors.
The current composition of the Board includes a diverse breadth of industry expertise and experience in areas such as accounting, finance, legal, strategic planning and business management. The Directors actively participate in all Board discussions and develop strategic goals for Management and consider objectively at all times the interest of Cache and its Unitholders. This enables Management to benefit from the expertise of the Directors who collectively possess the core competencies that contribute to the direction and growth of Cache.
The Board is of the view that its current composition of persons, who as a group provides the necessary core competencies, is adequate and that the current Board size is appropriate and balanced, taking into consideration the nature and scope of the operations of Cache.
As an added measure of oversight, MAS must provide prior approval for any change of the Chief Executive Officer or of any Board member.
As at least one-third of the Board comprises non-executive and independent Directors, Management benefits from their external, diverse and objective perspectives on issues brought before the Board. The independent Directors have no relationship with the Manager, its related companies or their officers that could interfere, or be reasonably perceived to interfere, with their independent judgement. When challenging Management proposals or decisions, they bring independent judgement to bear on business activities and transactions involving conflicts of interest and other complexities. This enables the Board to interact and work with Management through a robust exchange of ideas and views to help shape and guide Cache. This, together with a clear separation of roles between Chairman and Chief Executive Officer, provides a healthy and professional relationship between the Board and Management.
The independence of Directors is reviewed upon appointment and thereafter the Board reviews the independence of Board members annually with reference to the guidelines set out in the 2012 Code. The Board has received annual written confirmations from Mr Lim Ah Doo and Ms Stefanie Yuen Thio, stating that they are free from the relationships stated in Guideline 2.3 of the 2012 Code. The Board has determined that Mr Lim Ah Doo and Ms Stefanie Yuen Thio are independent in character and judgment and that there are no relationships or circumstances which are likely to affect, or could appear to affect their judgment.
Key information regarding the Directors, such as academic and professional qualifications, shareholding in Cache and its related corporations, Board committees served on, date of first appointment and last re-election as a Director, directorships or chairmanships both present and those held over the last three years in other listed companies, and other major appointments, is disclosed on pages 16 to 19 and 79 of this Annual Report.
Board members' participation in the various Board and Audit Committee Meetings held during the period from 1 January 2012 to 31 December 2012 are documented as follows:
Audit Committee Meetings
|Mr. Lim How Teck||Chairman||6/6||Member||4/4|
|Mr. Lim Hwee Chiang , John
(Alternate - Mr. Moses K. Song)
|Mr. Liao Chung Lik||Member||6/6||NA||NA|
|Mr. Jimmy Yim Wing Kuen||Member||3/6||NA||NA|
|Mr. Lim Ah Doo||Member||6/6||Chairman||4/4|
|Ms. Stefanie Yuen-Thio||Member||6/6||Member||4/4|
NA: Not applicable
Chairman and Chief Executive Officer
Principle 3: There should be a clear division of responsibilities at the top of the company - the working of the Board and the executive responsibility of the company's business - which will ensure a balance of power and authority, such that no one individual represents a considerable concentration of power.
The positions of Chairman and Chief Executive Officer are held by separate individuals to maintain an effective segregation of duties and ensure a balance of power and greater capacity of the Board for independent decisionmaking. The Chairman of the Board is Mr Lim How Teck, a Non-Executive Director, while the Chief Executive Officer is Mr Daniel Cerf.
The Chairman is responsible for the overall leadership and management of the Board and exercises control over the quality and timeliness of information flow between the Board and the Management. The Chairman leads the Board meetings to have constructive discussions with Management, promotes high standards of corporate governance and provides good oversight, guidance and advice to the CEO and Management.
The Chief Executive Officer works with the Board to determine strategic plans and is responsible for the day-to-day management of the Manager and Cache. The Chief Executive Officer has full executive responsibilities over the business operations and executes the plans set out by the Board and ensures that the Board is kept updated and informed.
The Board is of the view that there are sufficient safeguards and checks to ensure that the decision-making process of the Board is independent and based on the collective decision of the Directors without any concentration of power or influence residing in any individual.
Board Membership and Performance
Principle 4: There should be a formal and transparent process for the appointment of new directors to the Board.
Principle 5: There should be a formal assessment of the effectiveness of the Board as a whole and the contribution by each director to the effectiveness of the Board.
As the Manager is not itself a listed entity, the Manager does not consider it necessary for the Board to establish a Nominating Committee. The Board performs functions that a Nominating Committee would perform, namely, tabling nominations to the Board, reviewing the structure, size and composition of the Board and reviewing the independence of Board members.
In recommending the appointment of new Directors, the Board takes into consideration the current Board size and mix, the suitability of the candidate based on key attributes such as integrity, commitment and competencies, as well as the candidate's ability to carry out his/her duties as a Director, in particular, when the Director holds multiple directorships and contribute to the proper guidance of the Manager in its management of Cache. The Manager believes that contributions from each Director goes beyond his/her attendances at Board and Board Committee meetings. The search for candidates to be appointed as new Directors is conducted through a broad network of contacts. All candidates are carefully evaluated by the Board to ensure that the recommendations are objective and well supported, taking into account the criteria under the Guidelines on Fit and Proper Criteria issued by the MAS for such appointments.
Review of Board members' performance is informal where renewal or replacement of a member does not necessarily reflect his/her contributions to-date, but may be driven by the need to position and shape the Board in line with the needs of Cache and its business going forward.
Although the Directors have other listed company board representations and principal commitments, the Board has determined, during the informal assessment of the Board's performance, that the individual Directors have devoted sufficient time and attention to their role as Directors and to the affairs of the Manager. The Board is of the view that such appointments do not hinder the Directors from carrying out their duties as Directors of the Manager and therefore believes that it would not be necessary to prescribe a maximum number of listed company board representations a Director may hold.
Access To Information
Principle 6: In order to fulfil their responsibilities, Board members should be provided with complete, adequate and timely information prior to Board meetings and on an on-going basis.
Management provides the Board with complete, timely and adequate information on Board matters and issues requiring the Board's deliberations. All Directors are also provided with ongoing reports relating to the operational and financial performance of the Group to enable them to exercise effective oversight over Cache's operational and financial performance.
Board meetings for each year are scheduled in advance to facilitate Directors' individual administrative arrangements in respect of ongoing commitments. Board papers are generally circulated three days in advance of each meeting and include background explanatory information to enable the Directors to make informed decisions. Such information includes minutes of the previous meetings as well as operational and financial matters requiring the Board's attention or resolution. The information provided may also be in the form of briefings to the Directors or formal presentations by senior management staff in attendance at Board meetings, or by external professionals.
The Chief Executive Officer keeps Board members abreast of key developments affecting Cache as well as material transactions so that the Board is kept fully aware of the affairs of Cache. All Directors have separate and independent access to Management, the Company Secretary, internal and external auditors at all times. The Manager has in place procedures to enable Directors, whether as a group or individually, to obtain independent professional advice as and when necessary, in furtherance of their duties. The appointment of such independent professional advisors is subject to approval by the Board.
The Company Secretary or its designated representative (collectively referred to as "Company Secretary") attends all Board and Audit Committee meetings and assists in ensuring that procedures and all other rules and regulations applicable to the Manager are complied with, in addition to preparing the minutes. The Company Secretary works with the Chairman to ensure that information flows within the Board and the Audit Committee and between senior management and the Non-Executive Directors.
The Company Secretary will also assist with professional development and training for Directors when required to do so.
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.
Principle 8: The level of remuneration should be appropriate to attract, retain and motivate the directors needed to run the company successfully but companies should avoid paying more than is necessary for this purpose. A significant proportion of executive directors' remuneration should be structured so as to link rewards to corporate and individual performance.
Principle 9: Each company should provide clear disclosure of its remuneration policy, 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 executives, and performance.
Cache, as a trust, is externally managed by the Manager which has experience and well-qualified management personnel to manage the operational matters of the Manager and Cache. All fees and remuneration of the Directors and employees of the Manager are paid directly by the Manager from the fees it receives, and are not paid out of the deposited property of Cache.
Principle 10: The Board should present a balanced and understandable assessment of the company's performance, position and prospects.
The Board seeks to keep Unitholders updated on Cache's financial performance, business operations and strategy through quarterly and annual financial reports as well as timely announcements on developments in its businesses. Quarterly results are released to Unitholders within 45 days of the reporting period while the full year results are released to Unitholders within 60 days of the financial year end. In presenting the financial reports, the Board aims to provide a balanced and understandable presentation of Cache.
Management provides the Board with a continual flow of relevant information on a timely basis in order that the Board may effectively discharge its duties.
Audit Committee, Internal Control and Internal Audit
Principle 11: The Board should establish an Audit Committee with written terms of reference which clearly set out its authority and duties.
The Board has established an Audit Committee to assist in fulfilling its fiduciary responsibilities relating to corporate governance and interested person transactions.
The Audit Committee is appointed by the Board from among its members. It comprises three members, Mr Lim Ah Doo, Mr Lim How Teck and Ms Stefanie Yuen Thio. Two-thirds of the Audit Committee is made up of independent Directors. Mr Lim Ah Doo is the Chairman of the Audit Committee. The Audit Committee meets at least four times in a year and the decision made by the Audit Committee is passed upon majority vote whereby each member has an equal vote. In the event of an equality of votes, the Chairman of the Audit Committee does not have a casting vote. All conflicting views will be submitted to the Board for its final decision, if any.
The core function of the Audit Committee is to oversee the integrity of all financial statements and related disclosures, and monitor and evaluate the effectiveness of the Manager's internal controls. The Audit Committee also reviews the quality and reliability of information prepared for inclusion in financial reports, and is also responsible for the appointment of external auditors and reviewing the adequacy of external audits in respect of cost, scope and performance. The Audit Committee meets with the internal and external auditors without the presence of the Management, at least once a year.
Members of the Audit Committee bring with them invaluable experience and professional expertise in the accounting, finance and legal domains. The Board is of the view that these members are appropriately qualified to discharge their responsibilities.
The Audit Committee has adopted a written terms of reference defining its scope of authorities and responsibilities, which has been amended in line with the recommendations of the 2012 Code. This, inter alia, include:
- reviewing external and internal audit reports to ensure that where deficiencies in internal controls have been identified, appropriate and prompt remedial action is taken by Management;
- monitoring procedures in place to ensure compliance with applicable legislation, the SGX-ST Listing Manual and the Property Funds Appendix;
- reviewing the system of internal controls including financial, operational, compliance controls and risk management processes;
- reviewing the quarterly, half-yearly and annual results announcements, the financial statements and auditors' report before they are submitted to the Board for approval; and;
- monitoring procedures established to regulate Related Party Transactions (as defined below), including ensuring compliance with the provisions of the SGX-ST Listing Manual relating to transactions between the Trustee and an "interested person'', and the provisions of the Property Funds Appendix relating to transactions between the Trustee and an "interested party'' (both such types of transactions constituting "Related Party Transactions").
The Audit Committee is authorised to investigate any matters within its terms of reference. It is entitled to full access to and co-operation by Management and has full discretion to invite any Director or executive officer of the Manager to attend its meetings. The Audit Committee has full access to updated resources to enable it to keep abreast of changes to relevant accounting standards and regulatory issues and to enable it to discharge its functions fully.
The Audit Committee makes recommendation to the Board on the appointment/re-appointment of the external auditors, taking into consideration the scope, results of the audit as well as the cost effectiveness and the independence and objectivity of the external auditors.
For FY2012, the Audit Committee has:
- (i) held four meetings;
- (ii) reviewed the internal and external audit plans including the nature and scope of work before commencement of these audits;
- (iii) met up with the internal and external auditors without the presence of Management to discuss their findings set out in their respective reports to the Audit Committee. Both the internal and external auditors had confirmed that they had access to and received full cooperation and assistance from Management and no restrictions were placed on the scope of audits;
- (iv) received and approved the financial statements which comprised Statements of Financial Position and Portfolio Statements, the Statements of Total Return, Distribution Statements and Statements of Movements in Unitholders' Funds and Statement of Cash Flows, and a summary of significant accounting policies and other explanatory notes, and the auditors' report;
- (v) conducted a review of all non-audit services provided by the external auditors and is satisfied that the nature and extent of such services will not prejudice the independence and objectivity of the external auditors as well as cost effectiveness of the audit before confirming their re-nomination;
- (vi) recommended the re-appointment of KPMG LLP, Certified Public Accountants, as the auditors based on their performance and quality of their audit and confirmed compliance with Rule 712 of the SGX-ST Listing Manual. The Audit Committee was satisfied that the resources and experience of KPMG LLP, the audit engagement partner and her team assigned to the audit were adequate to meet its audit obligations given the size and complexity of Cache; and
- (vii) confirmed that the Manager had complied with Rule 715 of the Listing Manual in relation to the appointment of the same auditing firm based in Singapore to audit its accounts, its Singapore-incorporated subsidiaries and its foreign-incorporated subsidiaries. The Group's subsidiaries are disclosed under Note 6 of the Notes to the Financial Statements on pages 104 and 105 of this Annual Report.
The aggregate amount of the audit fees paid and payable by Cache to the external auditors for the financial year was S$281,000, of which audit and non-audit fees amounted to S$228,000 and S$53,000 respectively. The external auditors had also confirmed their independence in this respect.
The Board, with the concurrence of the Audit Committee, has put in place a Whistle-Blowing policy for Cache whereby staff may in confidence, raise their concerns about possible improprieties in matters of financial reporting or such other matters since 2010. An updated Policy and Procedures for reporting possible improprieties in matters of financial reporting or other matters ("Revised Whistle Blowing Policy"), in line with the 2012 Code, has been adopted in December 2012. The objective of the Whistle-Blowing programme is to ensure that arrangements are in place for the independent investigation of such concerns and for appropriate follow-up actions to be taken.
Complaints can be made in person, or in writing, to any member of the Audit Committee or the Designated Officers (CEO and/or Director of Operations). In addition, external parties may refer to the Revised Whistle Blowing Policy which is available on the corporate website at www.cache-reit.com. The website also provides an email address, cachefeedback@ ara.com.hk for any complainant to report possible improprieties. The email will be routed directly to the email addresses of the Audit Committee members and the Designated Officers to allow independent investigation of the matters raised and appropriate actions to follow.
There were no reports of whistle blowing received for the financial year ended 31 December 2012.
Risk Management, Internal Control and Audit
Principle 12: The Board should ensure that the Management maintains a sound system of internal controls to safeguard the Unitholders' investments and the company's assets.
Principle 13: The Company should establish an internal audit function that is independent of the activities it audits.
The Manager has put in place a system of internal controls, procedures and processes to manage risks, provide reasonable assurance against misstatement of loss, maintain reliable and proper accounting records, comply with relevant regulations as well as safeguard Cache's assets and Unitholders' interests.
Risk management is a fundamental part of Cache's ongoing operations. Management has identified the key risks faced by Cache and set out appropriate mitigating actions as well as monitoring mechanisms to respond accordingly. There are also standard operating procedures in place that cover financial reporting, new investments, investment due diligence, project evaluation, asset valuation, equity funds raising, bank borrowings, compliance, business continuity and other risk management issues.
Key risks, process owners, risk factors, mitigating actions and risk indicators are continually identified, assessed and monitored by Management as part of Cache's enterprise-wide risk management framework ("Framework") approved by the Board and is administered by Cache Risk Management Committee ("RMC"). This Framework, which was based on the existing Cache Risk Profile, was enhanced during the year under review in compliance with the guidelines on risk management and internal controls of the 2012 Code. The RMC is headed by the Chief Executive Officer and key management staff and it presents the quarterly risk profiles to the Audit Committee. The risk profiles highlight changes in the risk assessment, quantitative and qualitative factors affecting inherent risk levels and effectiveness of mitigating controls supporting the residual risks as within the approved risk appetite. The Audit Committee has full access to the RMC and is entitled to attend all their meetings and receive the relevant reports.
The internal audit function of the Manager is out-sourced to BDO Consultants Pte Ltd ("Internal Auditor"), an independent party, which is a member firm of BDO International Limited.
The Internal Auditor is independent of Management and reports directly to the Audit Committee on audit matters and to the Board on administrative matters. The Internal Auditor's activities are guided by the International Standards for the Professional Practice of Internal Auditing set by The Institute of Internal Auditors.
The Internal Auditor conducts audit reviews based on the internal audit plan approved by the Audit Committee. Upon completion of each audit assignment, the Internal Auditor reports their findings and recommendations to Management who would respond on the actions to be taken. The Internal Auditors submit internal audit reports, at least twice yearly, to the Audit Committee on the audit findings and actions taken by Management on the findings.
Any material non-compliance and internal control weakness, together with the internal and external auditor's recommendations to address them, are reported to the Audit Committee.
The internal auditor also performs detailed work to assist the Audit Committee in the evaluation of financial, operational and compliance controls and risk management processes. Any material non-compliance or weakness in internal controls including recommendations for improvements is reported to the Audit Committee. The Audit Committee also reviews the effectiveness of actions taken by the Manager on the recommendations made by the Internal Auditors in this respect.
In addition to the work performed by the internal auditors, the external auditors also perform tests of certain controls relevant to the preparation of the financial statements of Cache.
The Audit Committee is of the view that the Internal Auditor has adequate resources to perform its functions and has, to the best of its ability, maintained its independence from the activities that it audits.
The Board has also received assurance from the Chief Executive Officer and Senior Finance Manager that the financial records have been properly maintained and that the financial statements give a true and fair view of Cache's operations and finances, and the risk management and internal control systems remain effective.
Based on the internal controls established and maintained by the Manager and the work performed by the internal and external auditors, the Board, with the concurrence of the Audit Committee, is of the opinion that Cache's internal controls addressing financial, operational, compliance and information technology controls and risk management systems are adequate in compliance with Rule 1207(10) of the SGX-ST Listing Manual.
Communication with Unitholders
Principle 14: Companies should engage in regular, effective and fair communication with Unitholders.
The Listing Manual of the SGX-ST requires that a listed entity discloses to the market matters that would likely have a material effect on the price of the entity's securities. The Manager upholds a strong culture of timely disclosure and transparent communication with Unitholders and the investing community. The Manager's disclosure policy requires timely and full disclosure of all material information relating to Cache, on a non-selective basis, by way of public releases or announcements through the SGX-ST via SGXNET at the first instance and subsequently, by way of release on Cache's website at www.cache-reit.com.
The Manager also conducts half-yearly briefings for analysts and media representatives, which coincide with the release of Cache's results. During these briefings, the Manager's senior management will review Cache's most recent financial performance as well as discuss the business outlook for Cache. In line with the Manager's objective of transparent communication, briefing materials are publicly released through the SGX-ST via SGXNET and also made available at Cache's website.
The Manager regularly communicates with Unitholders and receives and attends to their queries and concerns. In FY2012, the Manager also met with investors in Singapore, Hong Kong, Europe and USA in one-on-one meetings and investor conferences. The annual Unitholders' Meeting was also held for the Manager to engage with retail investors, allowing them direct access to the Manager and the Board.
More details on the Manager's investor relations activities and efforts are found on pages 63 to 65 of the Annual Report.
Principle 15: Companies should encourage greater Unitholder participation at Annual General Meetings ("AGMs") and allow Unitholders the opportunity to communicate their views on various matters affecting the company.
Cache will hold its AGM on 18 April 2013. The notice of the AGM can be found on pages 128 to 130 of the Annual Report. The AGM will provide Unitholders a formal communication channel with the Manager. If any Unitholder is unable to attend the AGM, he or she is allowed to appoint up to two proxies to vote on his or her behalf at the meeting through proxy forms sent in advance.
The Board of Directors, Chairman of the Audit Committee and the external auditors will be in attendance at the AGM to answer questions from Unitholders. Unitholders are encouraged to attend the AGM to raise relevant questions and communicate their views.
Dealings in Units
The Board has adopted an internal compliance code of conduct to provide guidance to its officers in respect of dealings in Units.
In general, the Manager's policy encourages Directors and employees of the Manager to hold Units and not to deal in such Units for short-term consideration and also prohibits them from dealing in such Units:
- during the period commencing one month before the public announcement of Cache's annual and quarterly results and (where applicable) any property valuations, and ending on the date of announcement of the relevant results or property valuations; and
- at any time whilst in possession of price-sensitive information.
The Directors and employees of the Manager are also prohibited from communicating price- sensitive information to any person.
The Directors and officers are advised to observe at all times:
- To act in the best interests of Cache unitholders;
- To avoid, and be seen to avoid, actual or potential conflict between personal interest and duty to unitholders; and
- Comply with the prohibition on trading in Units as outlined in the internal compliance code of conduct with respect to the Trading of Units Policy.
The Manager has also provided an undertaking to the MAS that it will not deal in Units during the period commencing one month before the public announcement of Cache's annual and quarterly results and (where applicable) any property valuations, and ending on the date of announcement of such information.
Dealing with Conflicts of Interest
The Manager has also instituted the following procedures to deal with potential conflicts of interest issues:
- the Manager will not manage any other real estate investment trust which invests in the same type of properties as Cache;
- all key executive officers will be working exclusively for the Manager and will not hold other executive positions in other firms;
- all resolutions in writing of the Directors of the Manager in relation to matters concerning Cache must be approved by a majority of the Directors of the Manager, including at least one independent Director;
- at least one-third of the Board shall comprise independent Directors;
- in respect of matters in which the Sponsor and/or its subsidiaries have an interest, direct or indirect, any nominees appointed by the Sponsor and/or its subsidiaries to the Board to represent their interests will abstain from voting. In such matters, the quorum must comprise a majority of the independent Directors and must exclude nominee Directors of the Sponsor and/or its subsidiaries;
- in respect of matters in which ARA and/or its subsidiaries have an interest, direct or indirect, any nominees appointed by ARA and/or its subsidiaries to the Board to represent their interests will abstain from voting. In such matters, the quorum must comprise a majority of the independent Directors and must exclude nominee Directors of ARA and/or its subsidiaries; and
- It is also provided in the Trust Deed that 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 with a related party of the Manager, the Manager shall be obliged to consult with a reputable law firm (acceptable to the Trustee) which shall provide legal advice on the matter. If the said law firm is of the opinion that the Trustee has a prima facie case against the party allegedly in breach under such agreement, the Manager shall be obliged to take appropriate action in relation to such agreement. The Directors of the Manager will have a duty to ensure that the Manager so complies. Notwithstanding the foregoing, the Manager shall inform the Trustee as soon as it becomes aware of any breach of any agreement entered into by the Trustee with a related party of the Manager and the Trustee may take such action as it deems necessary to protect the rights of Unitholders and/or which is in the interests of Unitholders. Any decision by the Manager not to take action against a related party of the Manager shall not constitute a waiver of the Trustee's right to take such action as it deems fit against such related party.
The Directors of the Manager are under a fiduciary duty to Cache to act in the best interests of Cache, in relation to decisions affecting Cache when they are voting as a member of the Board. In addition, the Directors and executive officers of the Manager are expected to act with integrity at all times. The Manager has established a conflict of interest policy for its employees and major service providers to ensure that any conflicts of interest or potential conflicts of interest are disclosed and approvals are sought where required.
Review Procedures for Related Party Transactions
The Manager has established an internal control system to ensure that all Related Party Transactions will be undertaken on normal commercial terms and will not be prejudicial to the interests of Cache and the Unitholders. As a general rule, the Manager must demonstrate to its Audit Committee that such transactions satisfy the foregoing criteria. This may entail obtaining (where practicable) quotations from parties unrelated to the Manager; or obtaining two or more valuations from independent professional valuers (in accordance with the Property Funds Appendix).
The following procedures will be undertaken:
- transactions (either individually or as part of a series or if aggregated with other transactions involving the same related party during the same financial year) equal to or exceeding S$100,000 in value but below 3.0% of the value of Cache's net tangible assets will be subject to review by the Audit Committee at regular intervals;
- transactions (either individually or as part of a series or if aggregated with other transactions involving the same related party during the same financial year) equal to or exceeding 3.0% but below 5.0% of the value of Cache's net tangible assets will be subject to the review and prior approval of the Audit Committee. Such approval shall only be given if the transactions are on normal commercial terms and not prejudicial to the interests of Cache's and its Unitholders and are consistent with similar types of transactions made by the Trustee with third parties which are unrelated to the Manager; and
- transactions (either individually or as part of a series or if aggregated with other transactions involving the same related party during the same financial year) equal to or exceeding 5.0% of the value of Cache's net tangible assets will be reviewed and approved prior to such transactions being entered into, on the basis described in the preceding paragraph, by the Audit Committee which may, as it deems fit, request advice on the transaction from independent sources or advisers, including the obtaining of valuations from independent professional valuers. Furthermore, under the Listing Manual and the Property Funds Appendix, such transactions would have to be approved by the Unitholders at a meeting of Unitholders duly convened and held in accordance with the provisions of the Trust Deed.
Where matters concerning Cache relate to transactions entered into or to be entered into by the Trustee with a related party of the Manager and its associates or Cache, the Trustee is required to consider the terms of such transactions to satisfy itself that such transactions are conducted:
- on normal commercial terms;
- are not prejudicial to the interests of Cache and the Unitholders; and
- are in accordance with all applicable requirements of the Property Funds Appendix and/or the Listing Manual relating to the transaction in question.
The Trustee has the discretion under the Trust Deed to decide whether or not to enter into a transaction involving a related party of the Manager or Cache. If the Trustee is to sign any contract with a related party of the Manager or Cache, the Trustee will review the contract to ensure that it complies with the requirements relating to interested party transactions in the Property Funds Appendix (as may be amended from time to time) and the provisions of the Listing Manual relating to interested person transactions (as may be amended from time to time) as well as such other guidelines as may from time to time be prescribed by the MAS and the SGX-ST to apply to real estate investments trusts.
Cache will announce any interested person transaction in accordance with the Listing Manual if such transaction, by itself or when aggregated with other interested person transactions entered into with the same interested person during the same financial year, is 3.0% or more of Cache's latest audited net tangible assets. The aggregate value of all Related Party Transactions which are subject to Rules 905 and 906 of the Listing Manual in a particular financial year will be disclosed in Cache's annual report for that financial year.
Role of the Audit Committee for Related Party Transactions
All Related Party Transactions will be subject to regular periodic reviews by the Audit Committee. The Manager's internal control procedures are intended to ensure that Related Party Transactions are conducted on an arm's length basis and under normal commercial terms and are not prejudicial to Unitholders.
The Manager will maintain a register to record all Related Party Transactions which are entered into by Cache and the bases, including any quotations from unrelated parties and independent valuations on which they are entered into. The Manager will also incorporate into its internal audit plan a review of all Related Party Transactions entered into by Cache. The Audit Committee shall review the internal audit reports at least twice a year to ascertain that the guidelines and procedures established to monitor Related Party Transactions have been complied with. The Trustee will also have the right to review such audit reports to ascertain that the Property Funds Appendix has been complied with. The Audit Committee will periodically review all Related Party Transactions to ensure compliance with the Manager's internal control system, with the relevant provisions of the Listing Manual, and with the Property Funds Appendix. The review will include the examination of the nature of the transaction and its supporting documents or such other data deemed necessary by the Audit Committee.
If a member of the Audit Committee has an interest in a transaction, he is to abstain from participating in the review and approval process in relation to that transaction.
There are no material contracts entered into by Cache or any of its subsidiaries that involve the interests of the CEO, any Director, or any controlling Unitholder, except as disclosed in this Annual Report.
Dates of Initial Appointment and Last Re-election of Directors in ARA-CWT Trust Management (Cache) Limited and Directorships in Listed Companies
|Name of Director||Appointment||Date of Initial Appointment/
|Directorships in Listed
|Mr Lim How Teck2||Chairman and Non-Executive Director||18 March 2010/ 27 April 2012||ARA Asset Management Limited
Mewah International Inc.
Swissco Holdings Limited
(formerly known as C2O
|Mr Lim Hwee Chiang John||Non-Executive Director||15 October 2009/ 27 April 2012||ARA Asset Management Limited
APN Property Group Limited
|Mr Liao Chung Lik||Non-Executive Director||18 March 2010/ 14 April 2011||CWT Limited|
|Mr Jimmy Yim Wing Kuen||Non-Executive Director||18 March 2010/ 14 April 2011||CWT Limited
Low Keng Huat (Singapore) Ltd
Singapore Medical Group Limited
|Mr Lim Ah Doo3||Independent Director and Chairman of the Audit Committee||18 March 2010/ 14 April 2011||GP Industries Ltd
Sembcorp Marine Ltd
SM Investments Corporation
Sateri Holdings Limited
|Ms Stefanie Yuen Thio||Independent Director||18 March 2010/ 14 April 2011||Nil|
|Mr Moses K. Song||Alternate Director to Lim Hwee Chiang, John||18 March 2010/ 14 April 2011||APN Property Group Limited|
1 Current Directorships as at 31 December 2012.
2 Past Directorships in listed companies held over the preceding 3 years include Eng Kong Holdings Limited and IFS Capital Limited.
3 Mr Lim was an Independent Director and Chairman of the Audit Committee of PST Management Pte Ltd ("PSTM") as at 31 December 2012. PSTM ceased to be the trustee manager of Pacific Shipping Trust ("PST") after PST was de-registered in November 2012. PST was delisted in March 2012. Past Directorships in listed companies held over the preceding 3 years include Chemoil Energy Limited.