Parkway Trust Management Limited, in its capacity as the Manager of PLife REIT recognises that an effective corporate governance culture is critical to the performance of the Manager and consequently, the success of PLife REIT. The Manager is firmly committed to good corporate governance and has adopted a comprehensive corporate governance framework that meets best practice principles. In particular, the Manager has an obligation to act with due care and diligence, and in the best interests of Unitholders.
The following sections describe the Manager's main corporate governance policies and practices with reference to the Code of Corporate Governance 2018 ("CG Code"). They encompass proactive measures for avoiding potential conflicts of interest and ensuring that applicable laws and regulations such as the Securities and Futures Act, Chapter 289 of Singapore ("SFA"), the listing manual ("Listing Manual") of the Singapore Exchange Securities Trading Limited ("SGX-ST"), the Code on Collective Investment Schemes ("CIS Code") issued by the Monetary Authority of Singapore ("MAS") including the Property Funds Appendix in Appendix 6 of the CIS Code (the "Property Funds Appendix"), the CMS Licence (as defined below), the tax ruling issued by the Inland Revenue Authority of Singapore on the taxation of PLife REIT and its Unitholders are complied with, and that the Manager's obligations under PLife REIT's Trust Deed (as defined below) are properly and efficiently carried out. The Manager confirms that it has complied with the CG Code in all material respects and to the extent that there are any deviations from the CG Code, the Manager will provide explanations for such deviation and details of the alternative practices which have been adopted by the Company which are consistent with the intent of the relevant principle of the CG Code.
The Manager has general powers of management over the assets of PLife REIT. The Manager's main responsibility is to manage PLife REIT's assets and liabilities for the benefit of Unitholders.
The Manager sets the strategic direction of PLife REIT and makes recommendations to the Trustee on the acquisition, divestment and enhancement of assets of PLife REIT in accordance with its stated investment strategy.
Other main functions and responsibilities of the Manager are as follows:
PLife REIT, constituted as a trust, is externally managed by the Manager and accordingly, has no personnel of its own. The Manager appoints experienced and well-qualified management personnel to handle its day-to-day operations. All directors and employees of the Manager are remunerated by the Manager, and not PLife REIT.
Parkway Trust Management Limited has been appointed as the Manager of PLife REIT in accordance with the terms of the trust deed constituting PLife REIT dated 12 July 2007 (as amended, the "Trust Deed"). The Trust Deed outlines certain circumstances under which the Manager can be retired in favour of a corporation approved by the Trustee or be removed by notice given in writing from the Trustee upon the occurrence of certain events.
On 1 August 2008, a licensing regime for managers of real estate investment trusts ("REITs") was implemented under the SFA. A person conducting REIT management activities is required to hold a capital markets services licence ("CMS Licence") pursuant to the SFA. On 11 August 2009, the Manager obtained a CMS Licence from MAS to conduct REIT management. As a holder of a CMS Licence, the Manager is required to comply with various laws and regulations applicable to CMS Licence holders which include, among others, the SFA, the Securities and Futures (Licensing and Conduct of Business) Regulations, the Securities and Futures (Financial and Margin Requirements for Holder
The Board's Conduct of Affairs
Principle 1: The company is headed by an effective Board which is collectively responsible and works with Management for the long-term success of the company
The board of directors of the Manager ("Board") is responsible for the overall management and corporate governance of the Manager including establishing strategic objectives, providing entrepreneurial leadership, establishing goals for management and monitoring the achievement of these goals. All Board members participate in matters relating to corporate governance, business operations and risks, financial performance and the nomination and review of directors. The Board has established a framework for the management of the Manager including a system of internal controls and a business risk management process which enables risks to be assessed and managed.
The Board meets regularly, at least once every quarter, to deliberate the strategic objectives and policies of PLife REIT. Matters requiring the Board's decision and approval include investments, acquisitions and disposals, leasing, assets enhancement initiatives, operating/capital expenditure, loan or debt financing or refinancing taking into consideration PLife REIT's commitment in terms of capital and other resources, the annual budget, the release of the quarterly and full year results, the appointment of directors and other material transactions. Such matters have been clearly communicated to the management in writing. The Board also reviews the financial performance of PLife REIT against a previously approved budget, assesses the risks to the assets of PLife REIT, examines liability management, and acts upon any comments from the auditors of PLife REIT. Where necessary, additional Board meetings are held to address significant transactions or issues.
In the discharge of its functions, the Board is supported by an Audit Committee ("AC") that provides independent oversight of the Manager. The Board is also supported by a Nominating and Remuneration Committee ("NRC") which oversees the remuneration matters of the directors and key management personnel of the Manager, nomination of directors and the effectiveness of the Board. Each of these Board committees operates under delegated authority of the Board and is governed by its respective terms of reference which have been approved by the Board.
The Board has adopted a set of internal controls which it believes is adequate in safeguarding Unitholders' interests and PLife REIT's assets. Appropriate delegation of authority has been provided to management to facilitate operational efficiency.
The Board recognises that Directors of the Manager have the fiduciary duties to act objectively in the best interest of PLife REIT and hold the management accountable for performance. As such, any Director who has or appears to have a direct/deemed interest that may conflict with a subject under discussion by the Board shall declare his interest and recuse himself from the information flow and discussion of the subject matter. He will also abstain from any decision-making on the subject matter. The Manager adopts the holding company's group policy on code of conduct with necessary adaptation to its business and the applicable legal requirements. The core basic values of the code of conduct include upholding ethical standards of professional practice, to treat all internal and external parties with mutual respect and without prejudice, to uphold the confidential information relating to its business and to avoid conflict of interest. At the management level, all Manager's staff shall abide by the code of conduct, policies and guidelines pertaining to employment and accountability.
The number of Board and Board committee meetings during the financial year ended 31 December 2021 ("FY2021"), as well as the attendance of each Board member at these meetings, are set out below.
Changes to laws, regulations, accounting standards and commercial risks are monitored closely. To keep pace with such changes where these changes have an important bearing on the Manager's or directors' obligations, the directors will be briefed either during Board meetings or at specially-convened sessions involving the relevant professionals. The Board may also participate in seminars and/or discussion groups to keep abreast of the latest developments which are relevant to the Manager and PLife REIT. All newly-appointed directors receive letters of appointment explaining their roles, duties and obligations as a director of the Manager. Orientation and induction programmes will be conducted for new directors, which include briefings on the Board structure and responsibilities and overall strategic business plans and direction for PLife REIT. New directors will also be briefed on their duties and statutory obligations as a director of the Manager. First-time directors will also be provided training in areas such as accounting, legal and industry-specific knowledge as appropriate. In compliance with the training requirements under Rule 210(5)(a) of the Listing Manual, Mr. Joerg Ayrle who was appointed to the Board on 23 April 2021, has completed the following core modules of the Listed Entity Director Programme:-
(i) LED 1 – Listed Entity Director Essentials, completed on 5 October 2021;
(ii) LED 2 – Board Dynamics, completed on 7 October 2021;
(iii) LED 3 – Board Performance, completed on 8 October 2021; and
(iv) LED 4 – Stakeholder Engagement, completed on 12 October 2021.
The management provides the Board with complete and adequate information on the business and the operations of PLife REIT and the Manager, on a regular and quarterly basis, at Board meetings.
The annual calendar of the Board meeting is scheduled in advance. Board papers are dispatched to directors at least 5 days in advance before the scheduled meetings so that directors have sufficient time to review and consider matters being tabled and discussed at the meetings. The senior executives are also requested to attend the Board meetings to provide insights into matters being discussed and to respond to any queries from the directors.
The Board has separate and independent access to management and the company secretary at all times. The Board is entitled to request from management and is provided with such additional information in a timely manner as needed to make informed decisions. The company secretary attends to corporate secretarial administration, ensures that Board procedures are followed and that applicable rules and regulations are complied with. The company secretary also attends all Board meetings. The appointment and removal of the company secretary is a Board reserved matter. The Board also has access to independent professional advice where appropriate, at the Manager's expense.
Principle 2: The Board has an appropriate level of independence and diversity of thought and background in its composition to enable it to make decisions in the best interests of the company.
The Board presently consists of eight members, seven of whom are non-executive directors (including three independent directors). The Chairman of the Board is Mr. Ho Kian Guan. None of the directors has entered into any service contract directly with PLife REIT.
Current Director's Appointment and Membership on Board Committees
The composition of the Board is determined using the following principles:
The Board has three independent directors, namely Mr. Ho Kian Guan, Dr. Jennifer Lee Gek Choo and Ms. Cheah Sui Ling. None of the independent directors has served beyond nine years on the Board.
When evaluating the independence of the Directors, the Board follows the guidance in the CG Code where an "independent" director is defined as one who is independent in conduct, character and judgement, and has no relationship with the Manager, its related corporations, its substantial shareholders or its officers that could interfere, or be reasonably perceived to interfere, with the exercise of a director's independent business judgement in the best interests of the Manager and PLife REIT. Further, additional independence requirements were imposed under regulations 13D to 13H of the Securities and Futures (Licensing and Conduct of Business) Regulations ("SFLCB Regulations"). Under the SFLCB Regulations, a director is considered to be independent if the director (i) is independent from the management of the Manager and PLife REIT; (ii) is independent from any business relationship with the Manager and PLife REIT; (iii) is independent from every substantial shareholder of the Manager and every substantial unitholder of PLife REIT; (iv) is not a substantial shareholder of the Manager or a substantial unitholder of PLife REIT; and (v) has not served as a director on the Board for a continuous period of 9 years or longer. The Chairman of the Board also cannot be an executive director or a person who is a member of the immediate family of the CEO.
For FY2021, the NRC has conducted an annual review of the directors' independence taking into consideration the independence criterion given in the CG Code and the SFLCB Regulations. The NRC considered that Mr. Ho Kian Guan, Dr. Jennifer Lee Gek Choo and Ms. Cheah Sui Ling are independent as they have each demonstrated independence of view and conduct at both Board meetings and Board committee meetings and has been exercising independent judgment in the best interests of PLife REIT. Based on the review and recommendation of the NRC, the Board concurred that Mr. Ho, Dr. Lee and Ms. Cheah are considered independent. In view of the above, at least one-third of the Board comprises Independent Directors.
The Board has considered the relevant requirements under the SFLCB Regulations and its views in respect of each of the Directors as follows:
The Board of the Manager is satisfied that, as at 31 December 2021, each of them was able to act in the best interests of all Unitholders of PLife REIT as a whole. For the purposes of Regulation 13E(b)(ii) of the SFLCB Regulations, as at 31 December 2021, each of the abovementioned directors were able to act in the best interests of all the Unitholders as a whole.
The Board has not appointed a lead independent director given that the Chairman is an independent director who is not part of the management team, as described under section of "Chairman and CEO" below.
Non-executive directors exercise no management functions in the Manager or PLife REIT or any of its subsidiaries. Although all the directors have equal responsibility for the performance of the Manager and PLife REIT, the role of the non-executive directors is particularly important in ensuring that the performance of management in meeting agreed goals and objectives is reviewed and the reporting of performance is monitored; and the strategies proposed by management are fully discussed, rigorously examined and developed, taking into account the long-term interests of PLife REIT's assets and the Unitholders. The non-executive and/or independent directors meet regularly without the presence of the management on a need-to basis, and feedback will be communicated by the chairman of such meetings to the Chairman of the Board or the Board, as appropriate.
The majority of the directors are non-executive and/or independent of the management. This enables the management to benefit from their external, diverse and objective perspective on issues that are brought before the Board. It would also enable the Board to interact and work with the management through a robust exchange of ideas and views to help shape the strategic process. This, together with a clear separation of roles of the Chairman and CEO described below, provides a healthy professional relationship between the Board and the management, with clarity of roles and robust oversight as they deliberate the business activities of the Manager.
The composition of the Board is reviewed regularly to ensure that the Board has the appropriate mix of expertise and experience and is of the appropriate size. In carrying out this review, the Board looks to achieve a balance in matters such as skill representation, experience, diversity (Board is guided by their policies on gender and age diversity) and knowledge of the company. The current Board comprises eight members with two female directors, and the Board members are with varied backgrounds, expertise and experience including in finance, banking, investment, real estate, healthcare business and operations, business and general management. The Board composition in terms of age group, independence, tenure and gender as at 31 December 2021 are as follows:-
During the financial year 2021, the Board has reviewed its composition, the level of independence and diversity of the Board and is satisfied that the existing size and composition is appropriate in facilitating effective decision-making and constructive debate, taking into account the scope and nature of operations of the Manager and PLife REIT, the requirements of the business and the need to avoid undue disruptions from changes to the composition of the Board and its committees.
The profiles of the directors are set out on pages 14 to 19 of this Annual Report.
Principle 3: There is a clear division of responsibilities between the leadership of the Board and the Management, and no one individual has unfettered powers of decision-making.
The positions of Chairman and CEO are separately held by two persons in order to maintain an effective check and balance and ensure increased accountability and greater capacity for the Board for independent decision making. The Chairman of the Board, Mr. Ho Kian Guan is an independent director. The CEO is Mr. Yong Yean Chau who is also an executive director of the Manager. The Chairman and the CEO are not immediate family members and are not related to each other.
There is a clear and written separation of the roles and responsibilities between the Chairman and the CEO. The Chairman is responsible for the overall management of the Board as well as ensuring that the directors and the management work together with integrity and competency, and that the Board engages the management in constructive debate on strategy, business operations, enterprise risk and other plans. The Chairman also ensures effective communication with the Unitholders and takes a leading role in promoting high standards of corporate governance with support of the Board and the management.
The CEO has full executive responsibilities over the business directions and operational decisions in the day-to-day management of the Manager and PLife REIT.
Principle 4: The Board has a formal and transparent process for the appointment and re-appointment of directors, taking into account the need for progressive renewal of the Board.
The NRC of the Manager currently comprises Dr. Jennifer Lee Gek Choo (Chairman of the NRC) and Ms. Cheah Sui Ling, both of whom are non-executive and independent directors, and Dr. Kelvin Loh Chi-Keon, a non-executive director. The NRC members meet, at least once every year to deliberate the remuneration matters and matters relating to Board members' appointment and succession, Board performance evaluation and directors' independence.
The NRC has a set of terms of reference defining its scope of responsibility and authority, which includes the following:
The members of the NRC do not participate in any decisions concerning their own remuneration.
The NRC ensures that non-executive directors are not over-compensated to the extent that their independence may be compromised. Further, the NRC shall have the authority to consult experts (inside and/or outside the Manager) on the remuneration of all directors, if it considers necessary.
The appointment of director is a matter reserved for Board approval. The search for candidates is conducted through contacts and recommendations. The NRC will evaluate and assess the candidate based on the directors' criteria approved by the Board, candidate's academic and professional qualifications, expertise, commercial experience and knowledge, taking into account the scope and nature of operations of the Manager and PLife REIT. Suitable candidates are recommended by the NRC to the Board for approval. The Board will deliberate and review the proposed appointment of a new director taking into account the recommendation by the NRC. Such appointment is subject to the approval of MAS. A formal letter setting out the director's duties and responsibilities will be given to the new director upon his/her appointment to the Board.
As the Manager is not a listed company, directors of the Manager are not subject to periodic retirement by rotation. Pursuant to an undertaking given by Parkway Holdings Limited to the Trustee on 16 March 2017 ("Undertaking"), Unitholders are given the right to endorse the appointment of the directors of the Manager by way of ordinary resolution at the annual general meetings ("AGM") of Unitholders. Accordingly, one-third of the directors of the Manager were put forth for Unitholders' endorsement of appointment during PLife REIT's AGM since 2017. Pursuant to Rule 720(6) of the Listing Manual, information relating to the directors who will be subject to Unitholders' endorsement or re-endorsement at the upcoming AGM is provided on pages 79 to 84 of this Annual Report.
The Board has set a general policy that a director should not have more than six listed company board representations to take into account the market practices and the level of commitment required. This helps to ensure that the Board is effective as a whole and that each director is capable of contributing time and attention to the affairs of PLife REIT and the Manager, including attending and contributing at Board meetings. The Board and the NRC have assessed the effectiveness and performance of the Board and its Board Committees on an annual basis. Based on the attendance and level of participation at the Board and Board Committee meetings held in the financial year, all directors were able to adequately and diligently carry out their duties.
Principle 5: The Board undertakes a formal annual assessment of its effectiveness as a whole, and that of each of its board committees and individual directors.
A review of the Board's performance is conducted annually to assess the effectiveness of the Board and the Board committees. The review of the Board's performance includes the Board composition, directors' contribution and commitment at board meetings, access to information, procedures, accountability and standards of conduct, skills and any specific areas where improvement may be made by an individual director and the Board collectively. Attendance at meetings as well as the contributions of each director to the Board are also considered. The Board has not engaged any external facilitator to facilitate the assessment. Each of the directors are required to complete a questionnaire evaluating the Board and the Board committees for the financial year under review. A summary of the feedbacks and recommendations from the directors was prepared and presented to the NRC and the Board respectively. The NRC has reviewed the summary and put forward its comments and recommendations, if any, to the Board for approval. The Board is satisfied with the effectiveness of the Board and that all directors have demonstrated commitment to their roles and contributed effectively to the Board.
Principle 6: The Board has a formal and transparent procedure for developing policies on director and executive remuneration, and for fixing the remuneration packages of individual directors and key management personnel. No director is involved in deciding his or her own remuneration.
Principle 7: The level and structure of remuneration of the Board and key management personnel are appropriate and proportionate to the sustained performance and value creation of the company, taking into account the strategic objectives of the company.
Principle 8: The company is transparent on its remuneration policies, level and mix of remuneration, the procedure for setting remuneration, and the relationships between remuneration, performance and value creation.
As highlighted above, the NRC reviews and recommends to the Board a general framework of remuneration for the Board and the key management personnel. In current practice, the NRC reviews and recommends to the Board the specific remuneration packages for each Director and key management personnel to ensure that the remuneration payable is in line with the objectives of the Manager's remuneration guidelines.
The directors' fees and remuneration of staff of the Manager are paid in its own capacity using its own funds and fees received from PLife REIT and not from the funds of PLife REIT.
The Manager advocates a performance based remuneration system for the CEO/executive director and key management personnel. The NRC, which has an independent majority, helps to ensure that there is an effective and formal process to establish the remuneration system. The remuneration of the CEO/executive director and the key management personnel is reviewed by the NRC on an annual basis based on the financial and non-financial key performance indicators ("KPIs") linked to the performance of PLife REIT for the financial year under review, and individual performance of each of the CEO/ executive director and key management personnel in contribution to the long-term strategic goals of PLife REIT and the Manager. The financial KPI entails distributable income of PLife REIT and the non-financial KPIs entail analyst coverage, tenant satisfaction, retention of key staffs and regulatory compliance ("Performance Criteria").
The remuneration for the CEO/executive director and key management personnel comprises fixed pay and short-term and long-term incentives. The fixed pay component includes fixed salary and allowances. The short-term and long-term incentives are tied to the individual performance based on their value creation capability, being the ability in contributing and achieving the Performance Criteria in their respective roles, and the overall performance of PLife REIT for the financial year.
The Performance Criteria and its target were approved by the Board prior to each financial year. Under the long-term incentive plan ("LTI Plan"), the eligible employee will be awarded with the PLife REIT's units owned by the Manager based on the achievement of the Performance Criteria for the financial year under review.
The LTI Plan is designed to enhance executive performance, encourage talent retention and provide eligible employees with a personal direct interest in PLife REIT, so as to create better alignment of the interest between management and the interest of unitholders of PLife REIT. The LTI Plan will also serve to motivate eligible employees to achieve the performance targets of PLife REIT. The Manager believes that the LTI Plan will make the Manager's remuneration package sufficiently competitive to recruit, reward, retain and motivate outstanding employees which are paramount to the Manager's longterm objective of achieving sustainable returns for unitholders of PLife REIT.
The non-executive Directors receive their Directors' fees in accordance with their various levels of contributions, taking into account factors such as their responsibilities, effort and time spent for serving on the Board and the Board Committees, and their value creation capability, being the Directors' ability to provide valuable experiences and expertise in various aspects of PLife REIT's operations and providing stewardship to PLife REIT and the management of the Manager. The fees received by non-executive directors are at fixed rates and determined by the shareholder of the Manager on an annual basis. In addition to their basic fee, the non-executive directors who hold the position of chairman in the Board and any Board committee will be paid an additional fee. For the avoidance of doubt, the CEO/executive director does not receive any director's fee. None of the directors was involved in any decisions concerning their own remuneration. In discharging their duties, the NRC may seek advice from external consultants, whenever necessary.
The director's remuneration of the following non-executive directors for the FY2021 is as follows:
The Board has assessed and decided against the disclosure of (a) the breakdown (in percentage or dollar terms) of the CEO/executive director's remuneration earned through base/fixed salary, variable or performance-related income/bonuses, benefits-in-kind, stock options granted, share-based incentives and awards, and other long-term incentives, (b) the breakdown (in percentage or dollar terms) of each key management personnel's remuneration earned through base/fixed salary, variable or performance-related income/bonuses, benefits-in-kind, stock options granted, share-based incentives and awards, and other long-term incentives, and (c) the total remuneration paid to the top five key management personnel (who are not directors or the CEO), on a named basis whether in exact quantum or in bands of S$250,000, for the following reasons:
The Manager does not consider it prejudicial to unitholders' interests if the remuneration of the CEO/executive director and key management personnel is not specifically disclosed. Instead, the Manager believes that such disclosure would be disadvantageous given the highly competitive conditions in the REIT industry where poaching of executives is commonplace. As the retention of the CEO/executive director and key management personnel is crucial for continuity and a stable management platform for the interest of PLife REIT, the Manager does not wish to disclose such specific remuneration information.
No director or key management personnel of the Manager is paid in the form of shares or interests in the Manager's controlling shareholder or its related entities.
The NRC considers all aspects of remuneration, including termination terms, to ensure they are fair. For FY2021, there were no termination, retirement and post-employment benefits granted to directors, the CEO/executive director and the key management personnel other than the payment in lieu of notice in the event of termination in the employment contracts of the CEO/executive director and the key management personnel.
No employee of the Manager was an immediate family member of a director and CEO/executive director and whose remuneration exceeded S$100,000 during the FY2021. "Immediate family member" means the spouse, child, adopted child, stepchild, sibling and parent.
Principle 9: The Board is responsible for the governance of risk and ensures that Management maintains a sound system of risk management and internal controls, to safeguard the interests of the company and its shareholders.
The Board acknowledges that it is responsible for the overall internal control framework and the maintenance of a sound system of internal controls. The system includes, inter alia, enterprise risk management and internal auditing. However, the Board recognises that no cost-effective internal control system and risk management will preclude all errors and irregularities, as a system is designed to manage rather than eliminate the risk of failure to achieve business objectives, and can provide only reasonable and not absolute assurance against material misstatement or loss.
The Manager has appointed experienced and well-qualified management personnel to handle the day-to-day operations of the Manager and PLife REIT. In assessing business risks, the Board will consider the economic environment and risks relevant to the property and healthcare industry. It reviews management reports and feasibility studies on investment risks prior to approving all investment decisions. The Board meets regularly to review the operations of the Manager, the business risks of PLife REIT, examine liability management and will act upon any comments from the auditors of PLife REIT.
To ensure a robust risk management system is maintained, the Manager has put in place an Enterprise Risk Management ("ERM") framework and policies to determine the nature and the extent of the significant financial, operational, compliance and information technology risks in order to achieve strategic objectives and value creation of PLife REIT. An outline of the Manager's ERM framework and policies is set out on pages 77 to 79 of this Annual Report. Any material non-compliance and internal control weakness, together with the recommendations to address them, the mitigating controls or gaps (if any) are also presented to the AC and the Board accordingly.
The system of risk management is embedded in the internal control system of the Manager to address on-going changes and challenges and to reduce uncertainties to PLife REIT. The AC, through the assistance of internal and external auditors and the external risk consultant, reviews and reports to the Board on the adequacy and effectiveness of the Manager's internal control systems, including financial, compliance, operational and information technology controls.
The AC and the Board review the adequacy and efficiency of the risk management system and internal controls on an annual basis. Based on the up-to-date evaluation of the controls by the internal and external auditors and the external risk consultant, the CEO and the Chief Financial Officer ("CFO") of the Manager have provided written assurance to the Board that the financial records of PLife REIT have been properly maintained and the financial statements give a true and fair view of the operations and finances of PLife REIT for FY2021. The CEO, the CFO, the Chief Investment Officer ("CIO") and Chief Portfolio Officer ("CPO") have also provided the Board with written assurance that the Manager's internal controls and risk management systems are effective and adequate for the year under review.
Nonetheless, the AC will:
The Board believes that the ERM framework is adequate and effective taking into account the size of PLife REIT and the business environment it operates in. The Board has also observed that the management, being familiar with the ERM framework, implements it effectively and provides the AC and the Board with timely updates on risk management activities. In relation to the Manager's internal controls, the Board derives comfort that such internal controls are being audited by both internal and external auditors on an annual basis and any lapses in internal controls are promptly brought to the attention to the Board in order for corrective measures to be implemented as soon as practicable. The AC concurs with the Board's comments regarding PLife REIT's internal controls and risk management systems provided in the foregoing.
Taking into account the abovementioned evaluation of the controls by the internal and external auditors and the external risk consultant, the review by the Manager's ERM committee, and the assurance received from the CEO, CFO, CIO and CPO of the Manager, the Board is of the opinion that PLife REIT's financial, operational, compliance and information technology controls, and risk management systems were adequate and effective as at 31 December 2021. For the financial year ended 31 December 2021, the Board and the AC have not identified any material weaknesses in the Manager's internal controls and risk management systems.
Principle 10: The Board has an Audit Committee which discharges its duties objectively.
The AC comprises Ms. Cheah Sui Ling (Chairman of the AC), Dr. Jennifer Lee Gek Choo and Mr. Ho Kian Guan, all of whom are independent non-executive directors. The members of the AC collectively have recent and relevant expertise or experience in financial management and are appropriately qualified to discharge their responsibilities.
The role of the AC is to monitor and evaluate the adequacy of the Manager's internal controls and the effectiveness of the Manager's internal audit function. The AC also reviews the fairness and accuracy of information prepared for inclusion in the financial reports and statements, and is responsible for the nomination of external auditors and reviewing the adequacy of external audits in respect of cost, scope and performance. The AC members meet, at least once every quarter to deliberate matters under its responsibility.
The AC has a set of terms of reference defining its scope of responsibility and authority, which includes the following:
The AC has authority to investigate any matter within its terms of reference. It also has full access to and co-operation by management and full discretion to invite any director or executive officer to attend its meetings.
During the year under review, the AC has reviewed:
In addition, the AC has 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. For FY2021, the aggregate amount of fees paid and payable by PLife REIT to the external auditors was S$347,000, comprising non-audit service fees of S$64,000 and audit service fees of S$283,000. In appointing the audit firms for the Group, the AC is satisfied that PLife REIT has complied with the Listing Rules 712 and 715 of the Listing Manual.
The AC meets with the external auditors, without the presence of management, at least once a year.
The AC is briefed regularly on the impact of the new accounting standards on PLife REIT's financial statements by the external auditors.
The AC does not comprise former partners or directors of the Manager's and PLife REIT's external auditors, within a period of two years, or who holds any financial interest in the existing auditors engaged by PLife REIT and the Manager.
The Manager has put in place a system of internal controls of procedures, including financial, operational, compliance and information technology controls, and risk management systems to safeguard PLife REIT's assets, Unitholders' interests as well as to manage risk.
The internal audit function of the Manager is outsourced to BDO LLP, Singapore, a member of the international BDO network of independent member firms. BDO conducts their internal audits based on the BDO Global Internal Audit Methodology which is consistent with the International Standards for the Professional Practice of Internal Auditing adopted by The Institute of Internal Auditors. The internal audit team is well-resourced and is led by an engagement partner who is also the Head of Risk Advisory Services in BDO Singapore with more than 20 years of audit and advisory experience and is a Chartered Accountant (Singapore), Certified Internal Auditor and Certified Information System Auditor.
The AC reviews the adequacy and effectiveness of the internal auditor at least once a year. The AC is satisfied that the internal auditor has the relevant qualifications and experience and has met the standards established by internationally recognised professional bodies including the Standards for the Professional Practice of Internal Auditing set by The Institute of Internal Auditors. The internal auditor reports directly to the AC on audit matters and the AC approves the hiring, removal, evaluation and fees of the internal auditor. The internal auditor has unfettered access to all documents, records, properties and personnel in the Manager, including unrestricted access to the AC, the Board and the Management. The AC also reviews and approves the annual internal audit plan and reviews the internal audit reports and activities.
The AC meets with the internal auditor, without the presence of management, at least once a year. The AC 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 Manager has put in place a fraud and whistle-blowing policy (the "Whistle-Blowing Policy") which reflects the Manager's commitment to conduct its business within a framework that fosters the highest ethical and legal standards. In line with this commitment and PLife REIT's commitment to open communications, the Whistle-Blowing Policy provides for procedures and mechanisms by which employees and external parties may, in confidence, raise their concerns about possible improprieties in financial reporting or other matters relating to the Manager and its staff. The Whistle-Blowing Policy aims to foster and maintain an environment where employees of the Manager and external parties can act appropriately, without fear of retaliation, and provides reassurance that the report will be independently investigated and the whistle-blower will be protected from reprisals or victimisation for whistle-blowing in good faith.
Whistle-blowers may report any matters of concern by email at firstname.lastname@example.org. The report submitted through this channel would be received by the AC who has the absolute discretion to set up an investigation team independent from the alleged person to investigate the report. The investigation team shall investigate the alleged misconduct and report the findings directly to the Chairman of the AC. The AC, who is responsible for oversight and monitoring the implementation of the Whistle-Blowing Policy, reviews and ensures that independent investigations and any appropriate follow-up actions are carried out.
The Manager is committed to ensuring that whistle-blowers in good faith will be treated fairly and protected from reprisals and victimisation. All reports and related communications, including the identity of the whistle-blower will be documented and kept in confidence provided that it does not hinder or frustrate the investigations, and except where disclosure is required to the relevant authorities. The whistle-blow report should be as precise as possible so as to allow for proper investigation to be made. The whistle-blower shall provide contact details so that the investigation team may contact for more information if need be.
The AC reviewed the Whistle-Blowing Policy and was satisfied that the arrangements are in place for the independent investigation of such matters and for appropriate follow-up action. All employees of the Manager are informed of the Whistle-Blowing Policy and are required to confirm their understanding of the Whistle-Blowing Policy.
Principle 11: The company provides shareholders with the opportunity to participate effectively in and vote at general meetings of shareholders and informs them of the rules governing general meetings of shareholders.
Principle 12: The company communicates regularly with its shareholders and facilitates the participation of shareholders during general meetings and other dialogues to allow shareholders to communicate their views on various matters affecting the company.
Principle 13: The Board adopts an inclusive approach by considering and balancing the needs and interests of material stakeholders, as part of its overall responsibility to ensure that the best interests of the company are served.
Communication with Unitholders
The Listing Manual of the SGX-ST requires that a listed entity discloses to the market, among others, matters that would likely have a material effect on the price or value of the entity's securities. The Manager upholds a strong culture of continuous disclosure and transparent communication with Unitholders, various stakeholders and the investing community, and has put in place an investor relations policy which sets out the policies and practices which the Manager adopted. Investors can also subscribe to email alerts of all announcements and press releases issued by PLife REIT or submit questions at their convenience via an enquiry form on PLife REIT's corporate website.
The investor relations function is headed by the CEO and the CFO of the Manager. The Manager adopts a proactive approach in reaching out to the Unitholders, existing and potential investors, analyst and media through various communication channels and programmes such as the corporate website, corporate literature, annual general meeting and investor outreach programmes, throughout the year. The sustainability report of the PLife REIT set out on pages 53 to 76 of this Annual Report provide PLife REIT's approach to address stakeholders' concerns and methods of engagement and also set out the key areas of focus in relation to the management of stakeholders for the financial year ended 31 December 2021.
In line with the Manager's objective of transparent communication, timely and full disclosure of all material information relating to PLife REIT are disclosed by way of public releases or announcements through the SGX-ST via SGXNET at first instance and then including the release on PLife REIT's website at www.plifereit.com. The Manager ensures that unpublished price sensitive information are not disclosed selectively, and in the event of any inadvertent disclosure of such information, the Manager shall make necessary disclosure to the public via SGXNET and release on PLife REIT's website promptly.
It is the aim of the Board to provide the Unitholders with a balanced and comprehensive assessment of PLife REIT's performance, position and prospects.
The Unitholders are encouraged to attend the annual general meeting ("AGM") of PLife REIT to ensure a high level of accountability and to stay informed of the strategies and goals of PLife REIT. In view of the COVID-19 pandemic, PLife REIT's AGM held in 2021 was by electronic means in accordance with the COVID-19 (Temporary Measures) (Alternative Arrangement for Meetings for Companies, Variable Capital Companies, Business Trusts, Unit Trusts and Debenture Holders) Order 2020 ("Alternate Arrangement for AGM"). The Unitholders were encouraged to attend the AGM via electronic means, to submit questions in advance of the AGM and to vote via proxy form. The live webcast of the AGM was chaired by the Manager's Board Chairman in the presence of the CEO and CFO of the Manager. The other directors and company secretary of the Manager had joined the AGM through video conference, while the representatives of the Trustee and the independent auditors of PLife REIT had attended the AGM through webcast. The live webcast of the AGM was accessible by the Unitholders either via live audio-visual webcast or live audio-only streamed. The substantial and relevant questions from the Unitholders were addressed prior to the AGM via announcement on the SGXNET, and selective questions were also addressed during the live webcast of the AGM by the CEO and CFO of the Manager.
The followings are the usual AGM arrangements of PLife REIT when there is no COVID-19 pandemic risk and the Alternate Arrangement for AGM is not in force.
All Unitholders are entitled to attend and vote at general meetings in person or by proxy. The directors of the Manager attend the AGMs and the external auditors are also present to address Unitholders' queries including queries about the conduct of audit and the preparation and content of the auditors' report.
The notice of AGM is dispatched to the Unitholders in the manner set out in the Listing Manual. The Board welcomes questions from the Unitholders who have an opportunity to raise issues either informally or formally before or at the AGM.
Each item of special business included in the notice of AGM is accompanied, where appropriate, by an explanation for the proposed resolution and a proxy form with instructions on the appointment of proxies. Separate resolutions are prepared for substantially separate issues at the AGM. The resolutions approved in the AGM will be announced on or after the day AGM is held. The minutes of general meetings, which include substantial comments or queries raised by Unitholders and the responses from the Board and management are made available on PLife REIT's corporate website.
In support of the greater transparency of voting in AGM and good corporate governance, the Manager employed electronic polling whereby all resolutions are voted by poll and detailed results showing the number of votes cast for and against each resolution and the respective percentage are published at the meeting. Prior to voting at the AGM, the voting procedures will be made known to the Unitholders. The votes cast by each Unitholder are in direct proportion to their respective unitholdings in PLife REIT. If any Unitholder is unable to attend the AGM, the Trust Deed allows for the Unitholder to appoint up to two proxies to attend, speak and vote on his/her behalf at the general meeting.
Please refer to page 163 of this Annual Report on the distribution policy and "Distribution Statements" on pages 121 and 122 of this Annual Report for more details.
The Trust Deed requires each director to give notice to the Manager of his acquisition of units or of changes in the number of units which he holds or in which he has an interest, within two business days after such acquisition or the occurrence of the event giving rise to changes in the number of units which he holds or in which he has an interest. This is in line with the requirements of the Section 137Y of the SFA (relating to notification of unitholdings by directors and CEO of the Manager). The CEO of the Manager is also required to give similar notice under the new section.
All dealings in units by the directors and the CEO will be announced via SGXNET, with the announcement to be posted on the SGX-ST website at http://www.sgx.com.
The directors and employees of the Manager are encouraged, as a matter of internal policy, to hold units but are prohibited from dealing in the units:
The directors and employees of the Manager have been directed to refrain from dealing in units on short-term considerations.
In addition, the Manager has undertaken that it will not deal with the units during the period commencing one month before the public announcement of PLife REIT's annual results and (where applicable) property valuations and two weeks before the public announcement of PLife REIT's half-year results, and ending on the date of announcement of the relevant results or as the case may be, property valuations.
Further, the Section 137ZC of the SFA (relating to notification of unitholdings by responsible persons) requires the Manager to, inter alia, announce via SGXNET the particulars of any acquisition or disposal of interest in PLife REIT's units by the Manager no later than the end of the business day following the day on which the Manager became aware of the acquisition or disposal.
The Manager has instituted the following procedures to deal with potential conflicts of interest issues:
PLife REIT's properties are located in Singapore, Japan and Malaysia and its strategy is to invest primarily in incomeproducing real estate and/or real estate-related assets in the Asia-Pacific region (including Singapore) that are used primarily for healthcare and/or healthcare-related purposes (including, but not limited to, hospitals, healthcare facilities and real estate and/or real estate assets used in connection with healthcare research, education, and the manufacture or storage of drugs, medicine and other healthcare goods and devices), whether wholly or partially owned, and whether directly or indirectly held through the ownership of special purpose vehicles whose primary purpose is to own such real estate. The Sponsor has interests in several healthcare and/or healthcare-related properties in the Asia-Pacific region such as those located in Malaysia. Potential conflicts of interest between the Sponsor and PLife REIT may arise in respect of acquisition and ownership of healthcare and/or healthcare-related assets in the Asia-Pacific region, including Singapore where PLife REIT's initial properties are located, and where PLife REIT's investment strategy is to invest in healthcare and/or healthcarerelated properties located therein.
In order to mitigate any conflict of interest between the Sponsor and PLife REIT in the Asia-Pacific region, the AC will, during the course of its review of transactions to be entered into by PLife REIT in the future, take into account the expiry of the right of first refusal granted by the Sponsor, together with any other relevant factors that may arise during the assessment process and arrive at its view based on all relevant factors. The existing internal control systems on dealings with conflict of interest will be reviewed periodically to ascertain its effectiveness and suitability and further measures will be considered and implemented to fine-tune the internal control procedures to deal with potential conflicts of interest issues.
In addition, the nominee directors appointed by the Sponsor to the Board are committed not to disclose to the Sponsor information concerning offers to PLife REIT in respect of potential acquisition of new properties as well as offers made by PLife REIT in respect of the potential acquisition of new properties, save for properties which the nominee directors are in a position to confirm that the Sponsor has no intention of acquiring.
The Manager has also established a conflict of interest policy for its employees to ensure that any conflict of interest or potential conflicts of interest are disclosed and approvals are sought where required.
The Manager's Internal Control System
The Manager has established an internal control system to ensure that all future related party transactions (which term includes an "interested person transaction" as defined under the Listing Manual and an "interested party transaction" under the Property Funds Appendix) will be undertaken on normal commercial terms and will not be prejudicial to the interests of PLife REIT or the Unitholders. As a general rule, the Manager must demonstrate to the AC that such transactions satisfy the foregoing criteria, which may entail obtaining (where practicable) quotations from parties unrelated to the Manager, or obtaining one or more valuations from independent professionals valuers (in accordance with the Property Funds Appendix).
The Manager maintains a register to record all related party transactions which are entered into by PLife REIT and the bases, including any quotations from unrelated parties and independent valuations obtained to support such bases, on which they are entered. The Manager also incorporates into its internal audit plan a review of all related party transactions entered into by PLife REIT. The AC reviews 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. In addition, the Trustee will also have the right to review such audit report to ascertain that the Property Funds Appendix have been complied with.
Further, the following procedures will be undertaken:
Where matters concerning PLife REIT relate to transactions entered into or to be entered into by the Trustee for and on behalf of PLife REIT with a related party of the Manager or PLife REIT, the Trustee is required to consider the terms of such transactions to satisfy itself that such transactions are conducted on an arm's length basis and on normal commercial terms, are not prejudicial to the interests of PLife REIT or the Unitholders, and in accordance with all applicable requirements under the Property Funds Appendix and/or the Listing Manual relating to the transaction in question. Further, the Trustee has the ultimate discretion under the Trust Deed to decide whether or not to enter into a transaction involving a related party of the Manager or PLife REIT. If the Trustee is to sign any contract with a related party of the Manager or PLife REIT, 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 REITs.
PLife REIT will, in compliance with Rule 905 of the Listing Manual, announce any interested person transaction 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 PLife REIT's latest audited net tangible assets.
The Manager also discloses in the Annual Report the aggregate value of the related party transactions entered during the relevant financial year as required under the Listing Manual and the Property Funds Appendix. See page 210 of this Annual Report for the disclosure.
Role of the Audit Committee for Related Party Transactions
All related party transactions must be reviewed by the AC and where applicable, approved by a majority of the AC to ensure compliance with the Manager's internal control system and with the relevant provisions of the Listing Manual as well as the Property Funds Appendix. The review will include the examination of the nature of the transactions and its supporting documents or such other data deemed necessary to the AC.