Corporate Governance

Extracted from FY2018 Annual Report

Introduction

Cache Logistics Trust ("Cache") is a Real Estate Investment Trust ("REIT") listed on the Main Board of Singapore Exchange Securities Trading Limited ("SGXST") on 12 April 2010. Cache is managed by ARA Trust Management (Cache) Limited (the "Manager"). The Manager is a wholly-owned subsidiary of ARA Asset Management Limited ("ARA").

Cache was constituted by a deed of trust dated 11 February 2010 (as amended by a first supplemental deed dated 18 March 2010, a second supplemental deed dated 29 September 2014, a first amending and restating deed dated 13 April 2016, and a fourth supplemental deed dated 31 May 2018) (the "Trust Deed") entered into between the Manager, and HSBC Institutional Trust Services (Singapore) Limited, in its capacity as trustee of Cache (the "Trustee").

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 of Cache on behalf of the Unitholders of Cache (the "Unitholders"). The Manager's main responsibility is to manage the assets and liabilities of Cache in accordance with the Trust Deed and act honestly in the best interest of Unitholders. As required under the licensing regime for REIT managers, the Manager holds the Capital Markets Services ("CMS") Licence issued by the Monetary Authority of Singapore (the "MAS") to carry out REIT management activities.

The Manager is fully committed to sound corporate governance policies and practices and adheres to high standards of conduct in line with the recommendations of the Code of Corporate Governance 2012 (the "2012 CG Code"). In keeping its commitment to good corporate governance, the Manager has taken steps to align its corporate governance framework with recommendations of the revised Code of Corporate Governance issued by the MAS on 6 August 2018 (the "2018 CG Code") and the revised listing manual of SGX-ST which is effective since 1 January 2019 (the "Listing Manual").

While the 2018 CG Code will only take effect for the annual report for the financial year beginning 1 January 2019, Cache has already complied with several of the revised guidelines, including conflict recusal, disclosure of the Board Committees' terms of reference, Director's training for appointee with no prior listed company experience, Non-Executive Directors comprising majority of the Board, remuneration of any employees who are Substantial Unitholders1, Audit Committee not comprising former audit partners or directors, disclosure of Directors' attendance at general meetings, Investor Relations policy and process, and stakeholder engagement.

The Manager believes that an effective corporate governance culture is critical to its performance and the success of Cache. In particular, the Manager has an obligation to act honestly, with due care and diligence, and in the best interest of its Unitholders.

The primary role of the Manager is to set the strategic direction on, amongst others, acquisitions, divestments, asset enhancement and capital management, and, subject to any feedback from recommendations made to the Trustee, execute the adopted strategy accordingly.

Other functions and responsibilities of the Manager include:

  1. using its best endeavours to carry on 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;
  2. preparing an annual budget proposal including the net income forecast, property expenditure, capital expenditure, and providing explanations for major variances from the previous year's forecasts, written commentaries on key issues and any relevant assumptions;
  3. establishing a framework of prudent and effective controls which enables financial, operational, compliance and information technology risks to be managed;
  4. ensuring compliance with the principles and guidelines of the 2012 CG Code and other applicable laws, rules and regulations including the Securities and Futures Act, Chapter 289 of Singapore (the "SFA"), the Securities and Futures (Licensing and Conduct of Business) Regulations (the "SF(LCB)R"), the Listing Manual, the Code on Collective Investment Schemes (the "CIS Code"), the Property Funds Appendix, the Singapore Code on Takeovers and Mergers, the Trust Deed, the relevant MAS Notices and Guidelines and any tax rulings and all relevant contracts;
  5. managing communications with Unitholders; and
  6. oversight of the property management services provided by the property managers.

Note:

  1. The term "Substantial Unitholder" refers to a person who has an interest or interests in one or more voting Units (excluding treasury shares) in Cache and the total votes attached to that Unit, or those Units, is not less than 5% of the total votes attached to all voting Units (excluding treasury shares) in Cache.

This Corporate Governance Report (this "Report") describes the Manager's corporate governance framework and practices. The Manager is committed to complying with the principles and guidelines of the 2012 CG Code. Where there are deviations from the principles and guidelines of the 2012 CG Code, such as in respect of the guidelines on the formation of board committees, the maximum number of representations on the boards of listed issuers and the disclosure of remuneration, an explanation has been provided within this Report.

(A) BOARD MATTERS

The Board's Conduct of Affairs

Principle 1: Every company should be headed by an effective Board to lead and control the company. The Board is collectively responsible for the long-term success of the company. The Board works with Management to achieve this objective and Management remains accountable to the Board.

The composition of the board of directors of the Manager ("Directors", and the board of Directors, the "Board") as at 31 December 2018 is as follows:

Mr Lim How Teck Chairman and Non-Executive Director
(Non-Independent)
Mr Lim Hwee Chiang John1 Non-Executive Director
(Non-Independent)
Mr Moses K. Song1,2 Non-Executive Director
(Non-Independent)
Mr Chia Nam Toon2 Non-Executive Director
(Non-Independent)
Mr Lim Ah Doo3 Non-Executive Director and Chairman of the Audit Committee
(Lead Independent Director)
Ms Stefanie Yuen Thio3 Non-Executive Director
(Independent)
Mr Lim Lee Meng Non-Executive Director
(Independent)
Mr Lim Kong Puay Non-Executive Director
(Independent)

Note:

  1. Resigned on 1 January 2019.
  2. Appointed on 2 July 2018.
  3. Resigned on 15 March 2019.

In line with good corporate governance, with the stepping down of Mr Lim Hwee Chiang John and Mr Moses K. Song on 1 January 2019, a majority of the Board now comprises Independent Directors. Notwithstanding their resignations, both Mr Lim and Mr Song will continue to be actively involved in the business interests of Cache from the perspective of ARA, the holding company of the Manager, and the single largest Unitholder of Cache.

On 15 March 2019, Mr Lim Ah Doo and Ms Stefanie Yuen Thio have stepped down from the Board as Independent Directors who have reached their tenure of nine years. On this same date, Mr Lim Lee Meng is appointed as the Chairman of the Audit Committee and Lead Independent Director, and Mr Oh Eng Lock is appointed as a new Independent Non-Executive Director which maintains the majority of the Board comprising Independent Directors. The appointment of new Directors and their roles allow the Board to refresh itself in an orderly and progressive manner and comply with the applicable regulatory requirements.

The Board is entrusted with responsibility for the overall management of the Manager and its corporate governance, to establish goals for the management of the Manager ("Management") and monitor the achievement of these goals. All Directors must exercise objective judgement in the best interests of Cache.

The Board is also responsible for the strategic business direction and risk management of Cache. All Board members participate in matters relating to corporate governance, business operations and risks, financial performance and the nomination and appointment of Directors. The Board has established a framework for the Management and Cache and the framework comprises a system of robust internal controls, risk management processes and clear policies and procedures. The Board also reviews and sets the ethical values and standards of Cache as well as considers sustainability issues relevant to its business environment and stakeholders. Where a Director is conflicted in a matter, he or she will recuse himself or herself from the deliberations and abstain from voting on the matter in adherence with the 2018 CG Code.

The Board has adopted a set of prudent internal controls to safeguard Unitholders' interest and Cache's assets. A set of internal guidelines setting out the level of authorisation and financial authority limits for operating and capital expenditure, capital management, leasing and other corporate matters is adopted to facilitate operational efficiency with oversight by the Board. Apart from matters stated below that specifically require approval from the Board, the Board approves transactions which exceed established threshold limits, and delegates its authority for transactions below those limits to the relevant Board Committees, where appropriate.

Matters that are specifically reserved for the Board's decision and approval include:

  • corporate strategies and policies of Cache;
  • financial restructuring;
  • any material acquisitions and disposals;
  • annual budget;
  • release of quarterly and full year results;
  • audited financial statements;
  • issue of new Units in Cache ("Units");
  • income distributions and other returns to Unitholders; and
  • Interested Person Transactions (i.e. as defined below) of a material nature.

Board Committee

The Board is supported by its Board Committees, in particular, the audit committee ("Audit Committee"), which assists the Board in discharging its responsibilities and enhancing its corporate governance framework. The Board has delegated specific responsibilities to the Audit Committee, and its composition, terms of reference and summary of its activities are described in this Report.

The Board accepts that while the Board Committees have the authority to examine particular issues in their specific areas respectively, the Board Committees shall report to the Board with their decision(s) and/or recommendation(s) and the ultimate responsibility on all matters lies with the Board.

The Board meets regularly to review the Manager's key activities. Board meetings are held once every quarter (or more often if necessary). Where necessary, additional meetings would be held to address significant transactions or issues requiring the Board's attention. The Constitution of the Manager allows for Directors to convene meetings via teleconferencing, video conferencing or other similar means of communication.

Directors may request for briefings and discussions with Management on any aspect of Cache's operations, and may request for any additional reports and documents requiring the Board's attention. When circumstances require, Board members may exchange views outside the formal environment of Board meetings.

There were five Board meetings held during the financial year ended 31 December 2018 ("FY2018"). In FY2018, there was an additional ad-hoc Board meeting held in May 2018. The attendance of the Directors at Board meetings and Board Committees meetings, as well as the frequency of such meetings, are disclosed in this Report.

Directors' attendance at Board and Audit Committee Meetings in FY2018 are disclosed below:

Directors Board Meetings Audit Committee Meetings
Participation Attendance/ Number of Meetings4 Participation Attendance/ Number of Meetings
Mr Lim How Teck Chairman 5/5 NA -
Mr Lim Hwee Chiang John1 Member 4/5 NA -
Mr Moses K. Song2 Member 2/2 NA -
Mr Chia Nam Toon2 Member 2/2 NA -
Mr Jimmy Yim Wing Kuen3,5 Member 1/3 NA -
Mr Loi Pok Yen3,5 Member 1/2 NA -
Mr Lim Ah Doo Member 4/5 Chairman 3/4
Ms Stefanie Yuen Thio5 Member 4/5 Member 4/4
Mr Lim Lee Meng Member 4/5 Member 4/4
Mr Lim Kong Puay Member 5/5 Member 4/4

Note:

  1. Alternate – Mr Moses K. Song.
  2. Appointed on 2 July 2018.
  3. Resigned on 2 July 2018.
  4. An additional ad hoc meeting was held on 24 May 2018.
  5. Due to potential conflict of interest, Messrs Jimmy Yim Wing Kuen, Loi Pok Yen and Stefanie Yuen Thio had abstained and not attended the ad-hoc meeting held on 24 May 2018.

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 on such changes either during a Board meeting, at specially convened sessions by external auditors, lawyers and professionals, or via circulation of Board papers. Relevant regulatory updates and news releases issued by SGX-ST, the MAS and the Accounting and Corporate Regulatory Authority ("ACRA") will also be circulated to the Board for information.

The Directors receive regular training and are able to participate in conferences, seminars or any training programme in connection with their duties such as those conducted by the Singapore Institute of Directors. A list of training courses and seminars which might be of interest is sent to the Directors for their consideration. The costs of arranging and funding the training of the Directors will be borne by the Manager.

All approved Directors are given formal appointment letters explaining the terms of their appointment as well as their duties and obligations. An induction programme is arranged for new Directors to be briefed on the business activities of Cache and its strategic directions and policies. The Manager notes the new requirement under the 2018 CG Code and Listing Manual on the training requirements for directors with no prior experience on listed companies. Mr Chia Nam Toon was appointed as a Non-Executive Director with effect from 2 July 2018 and Mr Oh Eng Lock was appointed as an Independent Non-Executive Director with effect from 15 March 2019. Both Directors have prior experience acting as directors of listed companies.

Board Composition and Guidance

Principle 2: There should be a strong and independent element on the Board, which is able to exercise objective judgement on corporate affairs independently, in particular, from Management and 10% Unitholders. No individual or small group of individuals should be allowed to dominate the Board's decision making.

The Board currently comprises five members: two Non-Executive Directors and three Independent Non- Executive Directors. Non-Executive Directors make up the entire Board, which is in line with the 2018 CG Code (i.e. recommending a majority). Each Director is a wellrespected individual from the corporate industry and/or industry circles with diverse experience and network.

The Chairman of the Board is Mr Lim How Teck.

The composition of the Board is determined using the following principles:

  1. the Chairman of the Board should be a Non- Executive Director;
  2. the Board should comprise Directors with a broad range of commercial experience including expertise in fund management and the property industry; and
  3. at least half the Board should comprise Independent Directors.

Independence Composition
The Independent Non-Executive Directors exercise objective judgement on Cache's affairs and are independent from Management. The independence of each Independent Director is reviewed upon appointment and thereafter the Board reviews his or her independence declaration annually with reference to the principles and guidelines set out in the 2012 CG Code and applicable laws and regulations.

The assessment of a Director's independence takes into account the enhanced independence requirements and the definition of "independent director" as set out in the SF(LCB)R. An independent director is one who: (i) has no relationship with the Manager, its related corporations and its shareholders who hold 10.0% or more of the voting shares of the Manager, or Unitholders who hold 10% or more of the Units in issue, or its officers that could interfere, or be reasonably perceived to interfere, with the exercise of his or her independent business judgment, in the best interests of Unitholders; (ii) is independent from any management and business relationship with the Manager and Cache, and from every substantial shareholder of the Manager and every substantial Unitholder; (iii) is not a substantial shareholder of the Manager or a substantial Unitholder; (iv) has not served on the Board for a continuous period of nine years or longer; and (v) is not employed by the Manager or Cache or their related corporations in the current or any of the past three financial years and does not have an immediate family member who is employed or has been employed by the Manager or Cache or their related corporations for the past three financial years and whose remuneration is determined by the Board. This is also in line with the 2018 CG Code and the revised Listing Manual.

Each Independent Non-Executive Director has declared whether there were any relationships (as defined in the enhanced independence requirements under the SF(LCB)R) or any instances that would otherwise deem him or her not to be independent. None of the Independent Directors has served for a continuous period of nine years or longer on the Board. The independence declarations have been duly reviewed by the Board. On the basis of the declarations of independence provided, the Board has determined that these Independent Non-Executive Directors are independent as defined under the relevant regulations. Each of the Independent Non-Executive Directors has recused himself or herself from reviewing his or her own independence.

Note:

  1. The term "substantial shareholder" refers to a person who has an interest or interests in one or more voting shares (excluding treasury shares) in the Manager and the total votes attached to that share, or those shares, is not less than 5% of the total votes attached to all voting shares (excluding treasury shares) in the Manager.

All Non-Executive Directors contribute to the Board process by monitoring and reviewing Management's performance against Management's goals and objectives. Their views and opinions provide alternative perspectives to Cache's business and enable the Board to make informed and balanced decisions. Non-Executive Directors constructively provide inputs and enable the Board to interact and work with Management to establish strategies.

When reviewing Management's proposals or decisions, the Non-Executive Directors bring their objective judgement to bear on business activities and transactions involving conflicts of interest and other complexities. The Non-Executive Directors meet without presence of the Management on a needs-basis and provide updates to the Board where necessary.

The composition of the Board is reviewed regularly to ensure that the Board has the appropriate mix of industry expertise and experience. In particular, the Board's diversity policy strives to ensure that the Board as a whole has the requisite background, and diverse experience and knowledge in business, accounting and finance and management skills critical to Cache's businesses. Collectively and individually, the Directors act in good faith and exercise due diligence and care in the course of their deliberations and, at all times, consider objectively the interests of Cache and its Unitholders.

A healthy exchange of ideas and views between the Board and Management is carried out during regular meetings and updates to enhance the management of Cache. This, together with a clear separation of roles between the Chairman and Chief Executive Officer ("CEO"), establishes a healthy and professional relationship between the Board and Management.

The Board determines that its current composition of Independent Directors has made up a majority of the Board, which complies with the 2012 CG Code as well as the provisions of the 2018 CG Code, as the Chairman is a non-independent director. In addition, the Board continuously reviews its composition to enhance its independence, in consideration of the following factors:

  1. there are three Independent Non-Executive Directors and two Non-Executive Directors, out of a total of five members. Independent Non-Executive Directors make up 60% of the Board and Non- Executive Directors make up 100% of the Board;
  2. there is a newly appointed Independent Non-Executive Director in March 2019, who brings fresh independent perspective to the Board;
  3. the Independent Non-Executive Directors have been assessed based on the independence criteria which include (a) length of service not being more than nine years, (b) independence from management and business relationships with the Manager and Cache, (c) independence from Substantial Shareholders of the Manager and Substantial Unitholders, and (d) other factors described in Principles 2 and 4 of this Report;
  4. a separate Lead Independent Director has been appointed given that the Chairman is a nonindependent director. The Lead Independent Director serves in a lead capacity to co-ordinate the activities of the non-executive members in circumstances where it is inappropriate for the Chairman to direct and address matters relating to Cache and its Unitholders; and
  5. interested Director(s) are required to abstain from voting when passing Board resolutions and the quorum for such matter must comprise a majority of Independent Non-Executive Directors, excluding such interested Director(s).

Based on the above assessment, the Board is of the view that the current composition of Directors who, as a group, provide the diversity in respect of skills, experience, gender, age and knowledge of Cache and that the current Board size is appropriate, taking into consideration of the nature and scope of the Cache's operations. The Board believes that in spirit it has adhered to Principle 2 in terms of board composition and guidance, and the Board would continue to review its composition to ensure that it is able to exercise sound, objective and independent judgement in the interests of Cache and its Unitholders. In addition, prior approval of the MAS is required for appointment of any Board member or the CEO.

Profiles of the Directors and other relevant information are set out on pages 14 to 18 and page 95 of this Annual Report. There were no Alternate Directors as at the end of FY2018.

Chairman and Chief Executive Officer

Principle 3: There should be a clear division of responsibilities between the leadership of the Board and the executives responsible for managing the company's business. No one individual should represent a considerable concentration of power.

The roles of Chairman and CEO are separate and held by Mr Lim How Teck and Mr Daniel Cerf respectively. The Chairman and the CEO are not immediate family members. The separation of responsibilities between the Chairman and the CEO facilitates effective oversight and a clear segregation of duties and accountability.

The Chairman leads the Board and ensures that its members work together with Management in a constructive manner to address strategies, business operations and enterprise issues. The Chairman also ensures that there is effective communication with Unitholders and promotes a culture of openness and a high standard of corporate governance. The CEO has full executive responsibilities over the business direction and day-to-day operational decisions in relation to the management of Cache in accordance with the objectives established by the Board. The CEO is a licensed representative approved by the MAS and is resident in Singapore.

Separately, a Lead Independent Director is available to Unitholders when they have concerns and for which contact through the normal channels of communication with the Chairman or Management are inappropriate.

Board Membership

Principle 4: There should be a formal and transparent process for the appointment and re-appointment of directors to the Board.

The Board has not established a nominating committee as the Board, taking into account the activities of Cache and its current Board composition, considers that the objectives of a nominating committee are currently achieved by the Board. Therefore a separate committee, comprising a majority of Independent Directors, is not necessary. Accordingly, the Board has assessed its independence element under Principle 2 and is of the view that it can effectively perform the role of a nominating committee.

The Board performs the various functions of the nominating committee, including:

  • tabling nominations to the Board, taking into account the succession plan and framework for the Chairman and CEO;
  • reviewing the structure, size, and composition of the Board;
  • reviewing the overall performance and progress;
  • reviewing the independence of Board members; and
  • ensuring that there is professional development of Board members.

The Board believes that it can achieve orderly succession and renewal through continuously reviewing the appropriate composition of the Board. This is evident in the changes to the Board composition in FY2018, and subsequently in 2019, as described under Principle 1.

Process for Appointment of New Directors
When reviewing and recommending the appointment of new Directors, the Board takes into consideration the current Board's size and mix, and the principles outlined in the subsequent part of this Report. The Board has put in place a process for shortlisting, evaluating and nominating candidates for appointment as Directors. The selection and appointment of candidates is evaluated through taking into account various factors including the current and mid-term needs and goals of Cache, as well as the relevant background of the candidates and their potential contributions. Candidates may be put forward or sought through contacts and recommendations by the Directors or through external referrals where applicable.

Criteria for Appointment of New Director
The Board reviews each candidate's ability to contribute to the proper guidance of the Manager in its management of Cache, including attributes such as complementary experience, time commitment, financial literacy, reputation and whether he or she is a fit and proper person in accordance with the Guidelines on Fit and Proper Criteria issued by the MAS (which require the candidate to be competent, honest, to have integrity and be financially sound). The Board determines whether its members as a whole have the skills, knowledge and experience required to achieve the objectives of Cache.

The Board unanimously approves the appointment of new Directors via Board resolution upon assessing the candidates' profiles and credentials. For re-appointment of Directors, the Board assesses the relevant Directors based on the same process as above and they shall be reelected at the Annual General Meeting of the Manager. The Board seeks to refresh its membership progressively, taking into account the balance of skills and experience, tenure and diversity, as well as benchmarking within the industry, as appropriate. No Board member is involved in any decisions relating to his or her own appointment or re-appointment. In identifying potential candidates for directorship on the Board of the Manager, the selection criteria and process of appointment were observed for the newly appointed directors as described under Principle 1.

Review of Director's Independence
The Board undertakes the role of determining the independence status of the Directors as described under Principle 2. The independence of each director is reviewed prior to appointments and thereafter annually. In FY2018, the Board has reviewed and determined that Mr Lim Ah Doo, Ms Stefanie Yuen Thio, Mr Lim Lee Meng and Mr Lim Kong Puay are independent and are free from any of the relationships stated in the guidelines of the 2012 CG Code and the SF(LCB)R. The Board has also, prior to his appointment, received a declaration of independence, reviewed and determined that Mr Oh Eng Lock is considered to be independent and free from any of the relationships stated in the above relevant regulations.

Annual Review of Directors Time Commitments
Although the Directors have other listed company board representations and principal commitments, the Board has determined that each individual Director has devoted sufficient time and attention to his or her role as a Director and to the affairs of the Manager. In FY2018, the Directors attended Board meetings, had given feedback and participated constructively when discussing the activities of Cache. The Board has also procured written confirmations from the Directors stating that they are able to carry out their duties as Directors of the Manager and they would address any competing time commitments that may arise, despite their multiple Board representations. The Board is of the view that such external appointments do not hinder the Directors from carrying out their duties and therefore believes that it would not be necessary to prescribe a maximum number of listed company board representations a Director may hold.

Board Performance

Principle 5: There should be a formal annual assessment of the effectiveness of the Board as a whole and its board committees and the contribution by each director to the effectiveness of the Board.

The Board believes that performance of the whole Board, Board Committee and individual Directors are assessed and reflected in their proper guidance, diligent oversight, able leadership and support that it lends to Management. The Board takes the lead to steer Cache in the appropriate direction under both favourable and challenging market conditions. Ultimately, the interests of Cache are safeguarded and reflected in the maximisation of Unitholders' value in the long-term performance of Cache.

Contributions by individual Board members are assessed based on various criteria, including providing objective perspectives on issues, facilitating business opportunities and strategic relationships, and the amount of time and effort committed to Cache's affairs.

The Board continuously assesses its effectiveness as a whole throughout the year and is of the view that its composition, processes, performance and attendance of the Board, Board Committees and Directors were satisfactory and had met the Board's expectations. The Board has not engaged any external consultant to conduct a formal annual assessment of the performance of the Board and each individual Director. Where relevant, the Board will consider such an engagement.

Access to Information

Principle 6: In order to fulfil their responsibilities, directors should be provided with complete, adequate and timely information prior to Board meetings and on an on-going basis so as to enable them to make informed decisions to discharge their duties and responsibilities.

Prior to Board meetings and on an on-going basis, Management provides complete, adequate and timely information to the Board on Cache's affairs and issues that require the Board's decision. Explanatory background information relating to matters brought before the Board includes quarterly results announcements, budgets, and documents related to the operational and financial performance of Cache.

The CEO keeps all Board members abreast of key developments and material transactions affecting Cache so that the Board is kept fully aware of its affairs, and the business, financial environment and risks faced by Cache and the Manager. All Directors have independent and unrestricted access to Management, the Company Secretaries, as well as the internal auditors and external auditors at all times.

Board meetings for the year are scheduled in advance to facilitate the Directors' administrative arrangements and commitments. Board papers are generally circulated at least three days in advance of each meeting and include background explanatory information for the Directors to prepare for the meeting and make informed decisions. Information provided to the Board include financial results, market and business developments, and business and operational information. Management also highlights key risk issues for discussion and confers with the Audit Committee and the Board regularly. If a Director is unable to attend the Board meetings, he or she would review the Board papers and advise the Chairman or the chairman of the relevant Board Committee of his or her views on the matters to be discussed and conveyed to the other Directors at the meetings. Where appropriate, Management will be requested to attend meetings of the Board and Board Committees in order to provide their input and insight into the matters being discussed, and to respond to any queries that the Directors may have.

The Company Secretaries and/or her authorised designate(s) attend(s) all Board meetings and assist(s) the Board in ensuring that Board procedures and all other rules and regulations applicable to the Manager are complied with. The Company Secretaries advises the Board on governance matters and works with the Chairman to ensure that information flows within the Board and the Board Committees, and between Management and the Directors. The Company Secretaries will also assist with professional development and training for Directors when required to do so. The appointment and the removal of the Company Secretaries shall be reviewed by the Board.

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, with expenses borne by the Manager. The appointment of such independent professional advisors is subject to approval by the Board.

(B) REMUNERATION MATTERS

Procedures For Developing Remuneration Policies

Principle 7: There should be a formal and transparent procedure for developing policy on executive remuneration and for fixing the remuneration packages of individual directors. No director should be involved in deciding his own remuneration.

Level and Mix of Remuneration

Principle 8: The level and structure of remuneration should be aligned with the long-term interest and risk policies of the company, and should be appropriate to attract, retain and motivate (a) the directors to provide good stewardship of the company, and (b) key management personnel to successfully manage the company. However, companies should avoid paying more than is necessary for this purpose.

The Board has assessed its independence element under Principle 2 and is of the view that the current composition of Directors provides sufficient strong independence to perform the role of a remuneration committee. Accordingly, Board has considered that a separate remuneration committee, comprising a majority of Independent Directors, would not be necessary.

The Board has assessed the remuneration policies and practices of ARA and deemed such remuneration policies and practices to be appropriate for Cache. Accordingly, the Manager has adopted the remuneration policies and practices of ARA, which has an established framework for the remuneration, compensation, benefits and succession planning for the Directors and key management executives of the Manager.

Remuneration Framework
The Manager advocates a performance-based remuneration framework. In adopting the remuneration policies and practices of ARA, the Manager ensures that such remuneration policies take into account achieving the long-term success of Cache, which:

  • comprise a variable component of key performance indicators ("KPIs") that are tied to the financial performance of Cache and individuals' performance related to the organisational goals, aligning with the interests of the Unitholders;
  • comprise a fixed pay component that is benchmarked against the market to maintain competitiveness; and
  • attract and retain talented staff while considering the prevailing market conditions within the industry.

Link Between Pay and Performance
A comprehensive and structured performance assessment is carried out annually for the CEO and key management executives of the Manager. At the start of the year, KPIs for the CEO and key management executives are discussed and agreed upon to ensure that such indicators are specific, measurable, resultoriented and time-bound. The KPIs could be on financial and non-financial metrics such as performance related to distribution per Unit, net asset value and net property income. A mid-year review is carried out to monitor the performance and relevance of these indicators and a yearend review is carried out to measure actual performance against the KPIs. The overall assessment is based on a rating scale, where the variable year-end bonus for the CEO and key management executives are determined.

In addition to the base salary and a variable year-end bonus, designated key management executives of the Manager participate in a Performance Based Bonus Scheme (the "Scheme"). Under the Scheme, designated key management executives of the Manager may be entitled to a pool of incentive payments based on certain performance indicators linked to the growth of Cache and optimising the returns to Unitholders. The incentive payments are paid in cash and allocated amongst the designated key management executives based on various factors and conditions, including seniority, length of service, performance and contributions.

The remuneration of CEO and key management executives is not linked to the gross revenue of Cache. The Board also has access to independent remuneration consultants as and when required.

In FY2018, there were no termination, retirement and post-employment benefits granted to Directors, the CEO and key management executives.

Disclosure on Remuneration

Principle 9: Every company should provide clear disclosure of its remuneration policies, level and mix of remuneration and the procedure for setting remuneration, in the company's annual report. It should provide disclosure in relation to its remuneration policies to enable investors to understand the link between remuneration paid to directors and key management personnel, and performance.

The remuneration of the Non-Executive Directors for FY2018 comprises entirely Directors' fees paid entirely in cash and the details of the Non-Executive Directors' remuneration are set out below:

Name of Director Salary
(S$)
Bonus Directors'
(S$) Fees (S$)
Others
(S$)
Total
(S$)
Mr Lim How Teck - - 90,000 - 90,000
Mr Lim Hwee Chiang John1 - - 45,000 - 45,000
Mr Lim Ah Doo2 - - 85,000 - 85,000
Ms Stefanie Yuen Thio2 - - 65,000 - 65,000
Mr Lim Lee Meng - - 65,000 - 65,000
Mr Lim Kong Puay - - 65,000 - 65,000
Mr Jimmy Yim Wing Kuen3 - - 23,438 - 23,438
Mr Loi Pok Yen 3 - - 17,630 - 17,630
Mr Moses K. Song 1,4 - - - - -
Mr Chia Nam Toon4 - - - - -

Note:

  1. Resigned on 1 January 2019.
  2. Resigned on 15 March 2019.
  3. Resigned on 2 July 2018.
  4. Appointed on 2 July 2018.

Directors' fees are established annually based on the Directors' responsibilities on the Board and Board Committees. The remuneration for Directors takes into account the industry practices and norms for Directors to provide stewardship of the Board, while commensurating with their responsibilities and time spent. Each Director is paid a fixed fee, and no Director is involved in deciding his or her own remuneration. The framework for determining the Directors' fees is shown in the table below:

Mainboard
Chairman
Members
S$90,000 per annum
S$45,000 per annum
Audit Committee
Chairman
Members
S$40,000 per annum
S$20,000 per annum

The Manager is cognisant of the requirement to disclose (i) the remuneration of the CEO and each individual Director on a named basis; (ii) the remuneration of at least the top five key management executives (who are not directors or the CEO), on a named basis, in bands of S$250,000 and (iii) the aggregate remuneration of the top five key management personnel (who are not Directors or the CEO). The Board has assessed and elected not to disclose the above remuneration for the following reasons:

  1. the competition for talent in the REIT management industry is very keen and the Manager has, in the interests of Unitholders, opted not to disclose the remuneration of its CEO and top five key management executives so as to minimise potential staff movement which would cause undue disruptions to the management team of Cache;
  2. it is important that the Manager retains its competent and committed staff to ensure the stability and continuity of business and operations of Cache;
  3. due to the confidentiality and sensitivity of staff remuneration matters, the Manager is of the view that such disclosures could be prejudicial to the interests of Unitholders. Conversely, the Manager is of the view that such non-disclosure will not be prejudicial to the interests of Unitholders as the information provided regarding the Manager's remuneration policies is sufficient to enable Unitholders to understand the link between remuneration paid to the CEO and the top five key management executives and their performance; and
  4. there is no misalignment between the remuneration of the CEO and key management executives and the interests of the Unitholders as their remuneration is paid out from the fees the Manager receives from Cache, rather than borne by Cache.

There are no employees of the Manager who are immediate family members of a Director or the CEO and whose remuneration exceeds S$50,000 during the year.

In alignment with the 2018 CG Code, there are also no employees of the Manager who are Substantial Unitholders, or immediate family members of a Director, the CEO or a Substantial Unitholder, whose remuneration exceeds S$100,000 during the year.

The key management executives were remunerated wholly in cash in FY2018.

(C) ACCOUNTABILITY AND AUDIT

Accountability

Principle 10: The Board should present a balanced and understandable assessment of the company's performance, position and prospects.

The Board strives to keep Unitholders updated on Cache's operating and financial matters through quarterly and yearly financial reports as well as announcements on developments in its businesses. Such information would enable Unitholders to make informed investment decisions. Quarterly and yearly results are released to Unitholders within 45 days and 60 days of the reporting periods respectively, through announcements on the SGX-ST and Cache's corporate website. In presenting the financial reports, the Board aims to provide a balanced and understandable presentation of Cache's financial performance, position and prospects.

Management provides the Board with a continual flow of relevant information on the performance of Cache on a timely basis so that the Board may effectively discharge its duties. In addition, Management furnishes the Board with the policies and procedures which are put in place to comply with the necessary legislative and regulatory requirements. These include the compliance risk assessment and various checklists established under the SFA, the Listing Manual, the CIS Code, and the Trust Deed.

Risk Management and Internal Controls

Principle 11: The Board is responsible for the governance of risk. The Board should ensure that Management maintains a sound system of risk management and internal controls to safeguard Unitholders' interest and the company's assets, and should determine the nature and extent of the significant risks which the Board is willing to take in achieving its strategic objectives.

Effective risk management is a fundamental part of Cache's business strategy. Recognising and managing risks is central to the business and serves to protect Unitholders' interests and Cache's assets. Cache operates within the overall guidelines and specific parameters set by the Board. Each transaction is comprehensively analysed to understand the risks involved and appropriate controls and measures are put in place before the Manager proceeds with the execution.

Key risks, process owners, risk factors, mitigating actions and risk indicators are continuously identified, assessed and monitored by Management as part of Cache's Enterprise Risk Management Framework (the "ERM Framework") and documented in the Risk Profile maintained by the Manager and reviewed quarterly by the Audit Committee and the Board.

Risk Management Committee
The ERM Framework lays out the governing policies and procedures, ensuring that the risk management and internal control systems provide reasonable assurance on the safeguarding of assets, maintenance of reliable and proper accounting records, compliance with relevant legislations and against material misstatement of losses.

A separate risk management committee (the "Risk Management Committee") was established to assist the Audit Committee in assessing the adequacy of internal controls. The Risk Management Committee comprises the CEO, Director of Finance & Operations and the Head of ARA Group Risk Management & Internal Audit Division ("GRM & IA"). GRM & IA is a corporate division of ARA, the holding company of the Manager.

The Risk Management Committee meets regularly to review the Risk Profile of Cache. The Risk Management Committee, which is headed by the CEO, reports to the Audit Committee on overall risk management matters during the Audit Committee meetings quarterly.

The Risk Management Committee identifies the material risks that Cache faces, including strategic, operational, financial, compliance, information technology and sustainability risks, and sets out the appropriate mitigating actions and monitoring mechanism to respond to these risks and changes in the external business environment. The Risk Profile highlights the changes in risk assessment, quantitative and qualitative factors affecting the inherent risk levels and effectiveness of mitigating controls supporting the residual risks within the risk appetite approved by the Board. The key risks highlighted in the Risk Profiles include strategic, leasing, asset management, financial and compliance risk.

The CEO and his management team are primarily responsible for maintaining the internal controls and risk management systems. Risks are proactively identified and addressed. The ownership of these risks lies with the respective departmental heads with stewardship residing with the Board. The internal auditors conduct reviews of the adequacy and effectiveness of the risk profiles and material internal controls, addressing financial, operational, compliance, information technology and sustainability risks, as part of the audit plan approved by the Audit Committee. In addition, the external auditors perform tests of certain controls relevant to the preparation of Cache's financial statements. Any material non-compliance or improvements identified for the risk management processes is reported to the Audit Committee. The Audit Committee and the Board review the adequacy and effectiveness of Cache's risk management and internal control systems.

The Audit Committee and the Board believe that the internal controls, including financial, operational, compliance and information technology controls, risk management systems and sustainability measures put in place to manage the risks are adequate and effective and the residual risks are acceptable.

Role of Board and AC
For the financial year in review, the Board has received written assurances from the CEO and Director of Finance & Operations that (a) 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 (b) Cache's risk management and internal control systems are effective.

In addition, an Internal Assessment Checklist ("1207(10) Checklist") which captures the requirements under Rule 1207(10) of the Listing Manual had been used by Management as a guide to assess the adequacy of internal controls addressing financial, operational and compliance risks and to confirm whether there are any significant deficiencies. The 1207(10) Checklist covers the areas of risk management, internal audit, internal controls, information technology, fraud assessment, external audit and compliance. The completed 1207(10) Checklist is reviewed by the Audit Committee, in conjunction with the reports submitted by the internal auditors and external auditors, as well as the letters of undertaking from the CEO and Director of Finance & Operations of the Manager to give assurance on the state of internal controls.

Based on the ERM Framework established, the 1207(10) Checklist and the reviews conducted by the internal auditors and external auditors, together with the Management's confirmation on the adequacy and effectiveness of the internal controls, the Board is of the opinion (with the concurrence of the Audit Committee) that, taking into account the nature, scale and complexity of the Manager's operations, the systems of risk management and internal controls addressing financial, operational, compliance, information technology and sustainability risks were adequate and effective to meet the needs of Cache in its current business environment for FY2018, pursuant to Rule 1207(10) of the Listing Manual. In addition, the Audit Committee has reviewed and is satisfied with the adequacy of resources and qualifications of the Manager's key management executives who are performing accounting, financial reporting and compliance roles.

Cache has maintained proper records of the discussions and decisions of the Board and the Audit Committee.

Whistle Blowing Policy
Pursuant to the Whistle-Blowing Programme which has been put in place, the Audit Committee reviews arrangements by which staff of the Manager or any other persons may, in confidence, raise their concerns to the Audit Committee about possible improprieties in matters of financial reporting or such other matters in a responsible and effective manner.

The objective of the Whistle-Blowing Programme, as approved by the Audit Committee, is to ensure that arrangements are in place for independent investigation of such concerns and allow appropriate follow-up actions to be taken.

The Audit Committee is guided by the Whistle- Blowing Programme to ensure proper conduct and closure of investigations, including handling of possible improprieties, prohibition of obstructive or retaliatory actions, confidentiality, disciplinary and civil or criminal actions. All such investigations are undertaken by the Internal Auditors based on instructions from the Audit Committee.

Details of the Whistle-Blowing Programme and arrangements are posted on Cache's website. The website provides a feedback channel for any complainant to raise possible improprieties directly to the Audit Committee, and copied to the Head of ARA GRM & IA, to facilitate an independent investigation of any matter raised and appropriate follow-up action as required. The Whistle-Blowing Policy and Code of Conduct, amongst other policies, are circulated to all new incoming staff and are also covered as part of the staff's annual declaration of compliance.

Audit Committee

Principle 12: 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 discharging its corporate governance responsibilities. The Audit Committee's role is to assist the Board in ensuring the integrity of the financial reporting and that sound internal controls are put in place. In adhering to best practices of corporate governance, all members of the Audit Committee (including the Audit Committee Chairman) are Independent Directors.

The Audit Committee currently comprises three Independent Non-Executive Directors, namely:

  • Mr Lim Lee Meng (Chairman)1
  • Mr Lim Kong Puay (Member)
  • Mr Oh Eng Lock (Member)2

Notes:

  1. Member appointed as Chairman on 15 March 2019.
  2. Appointed on 15 March 2019.

Mr Oh Eng Lock was appointed as an Independent Director and a member of the Audit Committee following the resignations of Mr Lim Ah Doo and Ms Stefanie Yuen Thio, who have both reached their tenure of nine years on 15 March 2019.

The members of the Audit Committee bring with them professional expertise and experience in the financial, business management and consultancy fields. The Board is of the view that the Audit Committee Chairman and members of the Audit Committee are appropriately qualified, with the necessary accounting and financial management expertise and experience to discharge their responsibilities. Mr Lim Lee Meng was a former senior partner of an international accounting firm and he was previously on the boards of several Singapore-listed REITs, Mr Lim Kong Puay is a senior corporate executive in the electricity and utilities sector, and Mr Oh Eng Lock has extensive experience in the banking and financial sector and was formerly the CEO and an Executive Director of a listed company.

In compliance with the 2012 CG Code and the 2018 CG Code, the Audit Committee does not comprise any former partner or director of the incumbent external auditors, within the previous two years, or who hold any financial interest in the auditing firm.

Four Audit Committee meetings were held during FY2018.

The Audit Committee is guided by its terms of reference which defines its duties and scope of authority, which is in line with the 2012 CG Code and the 2018 CG Code. Specifically, the duties of the Audit Committee include:

  1. reviewing the annual audit plan, including the nature and scope of the internal and external audits before the commencement of these audits;
  2. reviewing the adequacy of the internal audit process and effectiveness of Cache's system of risk management and internal controls, including financial, operational, compliance, information technology and sustainability controls;
  3. 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 the Management;
  4. reviewing the independence of the internal auditors;
  5. reviewing the monitoring procedures put in place to ensure compliance with applicable legislation, the Listing Manual and the Property Funds Appendix;
  6. reviewing the significant financial reporting issues and judgements so as to ensure the integrity of the financial statements of Cache and any announcements relating to Cache's financial performance;
  7. reviewing the assurance from the CEO and the Director of Finance & Operations on the financial records and financial statements;
  8. reviewing the Whistle-Blowing Policy and arrangements by which staff of the Manager and any other persons may, in confidence, raise concerns about possible improprieties in matters of financial reporting or other matters;
  9. reviewing and discussing with the external auditors, any suspected fraud or irregularity, or suspected infringement of any applicable law, rules or regulations, which has or is likely to have a material impact on Cache's operating results or financial position and Management's response;
  10. reviewing the assistance given by the Management to the external auditors;
  11. reviewing annually the independence of the external auditors and the aggregate amount of audit and non-audit fees paid to the external auditors for the financial year, and the proposed appointment and removal of the external auditors; and
  12. reviewing the monitoring procedures established to regulate Interested Party Transactions and Conflict of Interests (as defined below), including ensuring compliance with the provisions of the 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 "Interested Person Transactions"). This includes the requirement to ensure transactions undertaken are on normal commercial terms and not prejudicial to the interests of the Unitholders and that the property manager, as an interested person, is in compliance with the property management agreement.

The Audit Committee has the authority to investigate any matters within its terms of reference. It is entitled to full access and co-operation from Management and has discretion to invite any Director or key management executives of the Manager to attend its meetings. The Audit Committee has full access to resources and is provided with regular updates from external professionals to keep abreast of changes in accounting and regulatory standards.

In FY2018, the Audit Committee had met with the internal auditors and external auditors without the presence of Management. The internal auditors and external auditors may request the Audit Committee to meet if they consider a meeting necessary. Both the internal auditors and external auditors have confirmed that they had full access and had received the co-operation and support of Management, with no restrictions place on the scope of their audits.

The Audit Committee had reviewed and approved the internal auditors' and external auditors' audit plans to ensure that they were sufficiently comprehensive in scope and address the internal controls of Cache. All audit findings and recommendations by the internal auditors and external auditors were forwarded to the Audit Committee for discussions at the meetings. The Audit Committee discussed with Management and the external auditors on significant financial reporting matters, in particular the key audit matter associated with valuation of investment properties. The Audit Committee concurs with the conclusion of the Management and the external auditors on the key audit matter.

During FY2018, the Audit Committee performed an independent review of the quarterly and full yearly financial statements of Cache. In the process, the Audit Committee reviewed the key areas of management judgement applied for adequate provisioning and disclosure, accounting policies, key audit matters and any significant changes made which have a material impact on the financials. The external auditors also presented their salient features memorandum to the Audit Committee, covering the audit focus areas, key audit matters findings, quality and independence.

In connection with the ERM Framework under risk management, the Audit Committee had reviewed the approach taken in identifying and assessing risks and internal controls in the risk profile documented and maintained by Management.

The Audit Committee had also conducted a review of all non-audit services provided by KPMG LLP (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. The aggregate amount of audit and non-audit fees paid/payable to the external auditors for FY2018 is diclosed on page 171 of this Annual Report.

The Audit Committee is satisfied that the resources and experience of the audit partner of KPMG LLP and her team are adequate to meet their audit obligations, given the size, nature, operations and complexity of Cache and its subsidiaries. The Audit Committee had assessed the performance of the external auditors based on factors such as performance and quality of their audit and independence. The external auditors had also confirmed their independence in writing to the Audit Committee.

The Audit Committee, with the concurrence of the Board, has recommended the re-appointment of KPMG LLP as the external auditors of Cache at the forthcoming Annual General Meeting ("AGM"). The Manager, on behalf of Cache, confirms that it has complied with the requirements of Rules 712 and 716 of the Listing Manual in respect of the suitability of the auditing firms of Cache and its significant associated companies and subsidiaries.

The Audit Committee had reviewed the Whistle- Blowing Policy which provides the mechanisms by which employees and other persons may, in confidence, raise concerns about possible improprieties in matters of financial reporting or other matters. The Audit Committee is satisfied that these arrangements are in place for concerns to be raised and investigated independently, and for appropriate follow-up actions to be taken.

On a quarterly basis, Management reports to the Audit Committee the Interested Person Transactions. All Interested Person Transactions together with the Register of Interested Person Transactions had been reviewed by the Audit Committee.

Internal Audit

Principle 13: The company should establish an effective internal audit function that is adequately resourced and independent of the activities it audits.

The Manager maintains a robust system of internal controls and risk management framework to safeguard Cache's assets and Unitholders' interests and to provide reasonable assurance against misstatement of loss, ensure maintenance of reliable and proper accounting records and comply with relevant legislation.

For FY2018, the internal audit function of the Manager was outsourced to Deloitte & Touche Enterprise Risk Services Pte. Ltd., a member firm of Deloitte Touche Tohmatsu Limited (the "internal auditors"). The internal auditors are independent of Management and report directly to the Audit Committee on audit matters and to Management on administrative matters.

The Audit Committee is satisfied that the internal auditors had met the standards set by internationally recognised professional bodies including the International Standards for the Professional Practice of Internal Auditing set by The Institute of Internal Auditors. The Audit Committee has assessed the adequacy of the internal auditors and is of the view that the internal auditors had the relevant qualifications and adequate resources to perform its functions effectively and had maintained its independence from the activities that it audits and had unfettered access to all the related documents, records and personnel. The Audit Committee approves the appointment, removal, evaluation and fees of the internal auditors, and conducts an assessment of the internal auditors' performance during re-appointments.

The internal auditors conduct audits to evaluate the effectiveness of the risk management and internal control systems in Cache, which include financial, operational, compliance controls, information technology and sustainability. The internal audit plan adopts a risk-based approach covering all business of Cache and support functions of the Manager and property managers. The audit assignments cover the design and operating effectiveness of the internal controls, as well as, compliance with the stated policies and procedures. Any material non-compliance or lapses in internal controls together with corrective measures and the status of implementation are reported to the Audit Committee.

In addition to the work performed by the internal auditors, the external auditors also performed tests of certain controls that are relevant to the preparation of Cache's financial statements, and reports any significant deficiencies of such internal controls to the Audit Committee.

(D) COMMUNICATION WITH UNITHOLDERS

Principle 14: Companies should treat all Unitholders fairly and equitably, and should recognise, protect and facilitate the exercise of Unitholders' rights, and continually review and update such governance arrangements.

Principle 15: Companies should actively engage their Unitholders and put in place an investor relations policy to promote regular, effective and fair communication with Unitholders.

Principle 16: Companies should engage greater Unitholder participation at general meetings of Unitholders and allow Unitholders the opportunity to communicate their views on various matters affecting the company.

The Manager upholds a strong culture of continuous disclosure and transparent communication with Unitholders and the investing community. In spirit of the disclosure requirements under the Listing Manual, the Manager is committed to keeping all Unitholders and stakeholders informed of the performance and changes in Cache's business, which would materially affect the price of the Units, on a timely basis. The Manager's Investor Relations and Disclosure Policy promotes regular, effective and fair communication through timely and full disclosure of material information by way of public releases or announcements on SGX-ST via SGXNET, and on Cache's website (www.cache-reit.com).

Cache's website provides Unitholders with comprehensive information required to make well-informed investment decisions. Information on Cache's business strategies and Directors' profiles can be accessed from the website. The website also features a (1) "Newsroom" link, which shows current and past announcements, financial results and annual reports; (2) "Investors" link which shows Cache's distribution history, historical stock price and research coverage and (3) "Contact Us" link which includes email alerts and contact details. The Whistle Blowing Policy is also published under the Corporate Governance link. As part of the Investor Relations Policy, the Manager has a dedicated Investor Relations Director who facilitates communication with Unitholders, institutional investors, analysts and media representatives. Unitholders can post their queries and feedback to the dedicated investor relations contact via email or the phone, which is also in the spirit of the 2018 CG Code.

In FY2018, the Trust Deed was amended to include provisions relating to electronic communications of notices and documents to Unitholders, following the AGM held on 23 April 2018, to be in line with the Listing Manual and the CIS Code.

Unitholders are notified in advance of the date of release of Cache's financial results through an announcement via SGXNET. The Manager conducts regular briefings for analysts and media representatives, which generally coincide with the release of Cache's half-yearly and full year results. During these briefings, Management will present Cache's most recent performance as well as discuss the business outlook for Cache. In line with the Manager's objective of transparent communication, briefing materials are also simultaneously released on SGX-ST via SGXNet and also made available at Cache's website.

In FY2018, Management met with institutional investors and analysts through group presentations, one-on-one meetings and conference calls. Management strives to maintain regular dialogue with retail investors and keep them updated on developments through participations in seminars and symposiums, timely announcements on SGXNET, Cache's website and the general media, in order to ensure a level playing field.

Unitholders are informed of meetings through notices accompanied by annual reports or circulars sent to them. All Unitholders are entitled to receive the annual reports at least 14 days prior to the AGM. The Manager ensures that Unitholders are able to participate effectively and vote at the general meeting of Unitholders (the "Unitholders' meetings"). In this regard, the Unitholders' meetings are generally held in central locations which are easily accessible by public transportation. Unitholders are invited at such meetings to put forth any questions they may have on the resolutions to be debated and decided upon. If any Unitholder is unable to attend, he or she is allowed to appoint in advance up to two proxies to vote on his/her behalf at the meeting through proxy forms sent to the Unitholder. The Manager has not implemented absentia voting methods such as voting via email or fax due to security, integrity and other pertinent considerations. At the Unitholders' meetings, each distinct issue is proposed as a separate resolution and full information is provided for each item in the agenda for the AGM in the Notice.

The Directors, Audit Committee, Management and external auditors will be in attendance at these meetings to address questions raised by Unitholders. 7 out of 8 Directors attended the Unitholders' meeting held in FY2018.

Voting at general meetings is conducted by way of electronic poll voting for all the Unitholders/proxies present at the meeting for all resolutions proposed at the general meeting. Unitholders/proxies will be briefed on the procedures involved in conducting a poll. This allows all Unitholders present or represented at the meetings to vote on a one-unit-one-vote basis. An independent scrutineer is appointed to validate the vote tabulation procedures. The voting results of all votes cast for or against each resolution are then screened at the meeting with respective percentages and these details are announced through SGXNET after the meeting. The Company Secretaries prepares the minutes of Unitholders' meetings, which incorporate comments or queries from Unitholders and responses from the Board and Management, and these minutes are available to Unitholders upon request.

Cache's current distribution policy is to distribute at least 90% of its annual distributable income.

(E) ADDITIONAL INFORMATION

Stakeholder Engagement
In keeping with its commitments to good corporate governance, the Manager has put in place a Sustainable Reporting Framework, which is published on Cache's website. In the report, the Manager focuses on Cache's Economic, Social, and Governance ("ESG") impacts and its progress towards the goal of sustainable management of its real estate portfolio. The Board has set a strategic direction in ensuring good corporate governance, prudent financial management, fair employment practices and efficient utilisation of resources. The Manager believes in the importance of integrating sustainability into its business strategies and operations in achieving sustainable economic growth and delivering long-term Unitholder value.

The Manager has identified the following as their key stakeholders: Unitholders, Investors, Tenants, Third Party Service Providers, Community, Employees, Government Agencies, Industry Organisations and Associations. The Manager ensures active engagement and frequent communication with the relevant stakeholders through the various engagement channels including meetings, forums and dialogues, general meetings and announcements, investor conferences, tenant engagement events, and employee satisfaction surveys. This stakeholder engagement process is in line with the 2018 CG Code.

The Manager is committed to upholding Cache's sustainability practices and creating value for its stakeholders.

Stakeholders can access Cache's Sustainability Report on Cache's website under the "Newsroom" link.

Dealing in Cache Units

The Manager has adopted the ARA Dealing in Securities Policy to guide its Directors, key management executives and employees (collectively referred to as "the Manager's personnel") in respect of dealings in Cache Units.

This policy encourages the Manager's personnel to hold Units (i.e. not to deal for short-term considerations), and prohibits them from dealing in such Units:

  1. during the period commencing two weeks before the public announcement of Cache's quarterly results and one month before the public announcement of Cache's annual results and (where applicable) any property valuations, and ending on the date of announcement of the relevant results or property valuations; and
  2. at any time whilst in possession of price-sensitive information.

The Manager's personnel are also prohibited from communicating price-sensitive information to any persons and to avoid, and be seen to avoid, actual or potential conflict between personal interest and duty to the Unitholders. The Manager had confirmed that its Directors, key management executives and employees have adhered to the policy for dealing in the Units for FY2018.

The Manager makes announcements on SGX-ST in respect of any changes of its Unitholdings interest in Cache within one business day. The Manager will not deal in Units during the period commencing two weeks and one month before the public announcement of Cache's quarterly and full year results respectively and (where applicable) any property valuations, and ending on the date of announcement of the said information. The Manager confirms that it had complied with Rule 1207(19) of the Listing Manual.

Dealing with Conflicts of Interest

The Manager has instituted the following procedures to deal with potential conflict of interest issues:

  1. the Manager shall be a dedicated manager to Cache and will not manage any other real estate investment trust which invests in the same type of properties as Cache;
  2. all management personnel will be employed and work exclusively under the Manager and will not hold other executive positions in other firms;
  3. all resolutions in writing of the Directors in relation to matters concerning Cache must be approved by a majority of the Directors, including at least one Independent Non-Executive Director;
  4. at least half of the Board shall comprise Independent Directors;
  5. in respect of matters in which a Director or his associates have an interest, direct or indirect, the interested Director will abstain from voting. In such matters, the quorum must comprise a majority of Independent Directors and must exclude such interested Directors;
  6. 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 Independent Non-Executive Directors and must exclude nominee Directors of ARA and/or its subsidiaries; and
  7. 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 an interested person 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 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 an interested person 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 an interested person of the Manager shall not constitute a waiver of the Trustee's right to take such action as it deems fit against such interested person.

The Directors owe 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 conflicts 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.

Dealing With Interested Person Transactions

Review Procedures for Interested Person Transactions
The Manager has established internal control procedures to ensure that all Interested Person Transactions ("IPT") will be undertaken on an arm's length basis and on normal commercial terms and are not prejudicial to the interests of Cache and its Unitholders. As a general rule, the Manager must demonstrate to the Audit Committee that such transactions satisfy the foregoing criteria, which may entail obtaining (where practicable) quotations from independent parties not related to the Manager, or obtaining one or more valuations from independent professional valuers (in accordance with the Property Funds Appendix).

The Manager maintains a register to record all IPT which are entered into by Cache and the basis thereof, including any quotations from unrelated parties and independent valuations on which they are entered into. The Manager incorporates into its internal audit plan a review of all IPT entered into by Cache.

In addition, the following procedures will be undertaken:

  1. transactions (either individually or as part of a series or if aggregated with other transactions involving the same interested person during the same financial year) equal to or exceeding S$100,000 in value but below 3.0% of the value of Cache's latest audited net tangible assets will be subject to review by the Audit Committee at regular intervals;
  2. transactions (either individually or as part of a series or if aggregated with other transactions involving the same interested person during the same financial year) equal to or exceeding 3.0% but below 5.0% of the value of Cache's latest audited 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 are consistent with similar types of transactions made by the Trustee with third parties which are unrelated to the Manager. The Manager will, in compliance with Rule 905 of the Listing Manual, announce any IPT if such transaction, either individually or when aggregated with other IPTs 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; and
  3. transactions (either individually or as part of a series or if aggregated with other transactions involving the same interested person during the same financial year) equal to or exceeding 5.0% of the value of Cache's latest audited net tangible assets will be subject to review and approval 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. Further, under the Listing Manual and the Property Funds Appendix, such transactions would have to be approved by the Unitholders at a meeting of Unitholders.

Where matters concerning Cache relate to transactions entered into or to be entered into by the Trustee with an interested person 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 an arm's length basis and on normal commercial terms, are not prejudicial to the interest 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.

Further, the Trustee has the ultimate discretion under the Trust Deed to decide whether or not to enter into a transaction involving an interested person of the Manager or Cache. If the Trustee is to enter into any agreement with an interested person of the Manager or Cache, the Trustee will review the terms of such agreement to ensure that compliance with the requirements relating to IPTs in the Property Funds Appendix and/or the Listing Manual (in each case, 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 SGX-ST to apply to real estate investment trusts.

Cache will announce any IPT in accordance with the Listing Manual if such transaction, by itself or when aggregated with other IPTs 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 IPT 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 Interested Person Transactions and Internal Control Procedures

All IPTs will be subject to regular periodic reviews by the Audit Committee. The Manager's internal control procedures are intended to ensure that IPTs are conducted on an arm's length basis and under normal commercial terms and are not prejudicial to Unitholders. Where an interested party is engaged as property management agent or marketing agent for the Trust's properties, the Audit Committee will satisfy itself at least once every two (2) to five (5) years, that the Manager has (i) periodically reviewed the compliance of the agent with the terms of the agreement; and (ii) taken remedial actions where necessary and has documented the reasons for its conclusion.

The Manager maintains a register to record all IPTs (and the basis, including any quotations from unrelated parties and independent valuations obtained to support such basis, on which they are entered into), which are entered into by Cache. The Manager will incorporate into its internal audit plan a review of all IPTs entered into by Cache. The Audit Committee shall review the internal audit reports to ascertain that the guidelines and procedures established to monitor IPTs have been complied with. In addition, the Trustee will also have the right to review such audit reports to ascertain that the Property Funds Appendix and the Listing Manual have been complied with. The Audit Committee will periodically review all IPTs to ensure compliance with the Manager's internal control procedures and with the relevant provisions of the Property Funds Appendix and the Listing Manual. 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/she is required to abstain from participating in the review and approval process in relation to that transaction.

The Manager will disclose in Cache's annual reports the aggregate value of IPTs conducted during the relevant financial year.

MATERIAL CONTRACTS

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 OF DIRECTORS IN ARA TRUST MANAGEMENT (CACHE) LIMITED AND DIRECTORSHIPS IN LISTED COMPANIES
Name of Director Appointment Date of Initial
Appointment/
Last Re-election
Directorships in Listed
Companies
(as at 31 December 2018)
Past Directorships in Listed Companies held over the preceding three years
Lim How Teck Chairman and Non- Executive Director 18 March 2010 /
22 April 2015
NauticAWT Limited
Raffles Education
Corporation Limited
ARA Asset Management Limited
Swissco Holdings Limited
Rickmers Trust Management Pte. Ltd.
(trustee-manager of Rickmers Maritime)
Lim Hwee Chiang John1 Non-Executive Director 15 October 2009 /
23 April 2018
Teckwah Industrial Corporation Ltd ARA Asset Management Limited
Chia Nam Toon Non-Executive Director 2 July 2018 /
N.A.
Nil Ascendas Funds Management (S) Limited
Lim Ah Doo2 Lead Independent Non-Executive Director and Chairman of the Audit Committee 18 March 2010 /
19 April 2017
GDS Holdings Limited
GP Industries Limited
Olam International Limited
Singapore Technologies Engineering Ltd
Sembcorp Marine Ltd
Stefanie Yuen Thio2 Independent Non- Executive Director 18 March 2010 /
19 April 2017
Singapore Medical Group Limited Nil
Lim Kong Puay Independent Non- Executive Director 1 January 2016 /
23 April 2018
Nil Nil
Lim Lee Meng Independent Non- Executive Director 1 January 2016 /
22 April 2016
Teckwah Industrial Corporation Ltd Tye Soon Limited Nil
Moses K. Song1 Non-Executive Director 2 July 2018 /
N.A.
Nil Nil
Oh Eng Lock Independent Non- Executive Director 15 March 2019 /
N.A.
Nil BreadTalk Group Limited

Notes:

  1. Resigned on 1 January 2019.
  2. Resigned on 15 March 2019.

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