MAK YUEN TEEN CHEW YI HONG Vol2 SUPPORTED BY
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FirstpublishedinJuly2018
Copyright@2018MakYuenTeen&ChewYiHong
All rights reserved. No part of this publica?on may bereproduced,stored inaretrievalsystem,ortransmiCed, inany form or by any means, electronic, mechanical,photocopying, recording or otherwise, without the priorwriCenpermissionofthepublisher,except for ‘fairuse’asbriefquota?onsinareviewaspermiCedbycopyrightlaws.
This book is published on the understanding that neitherthe authors nor the publisher are rendering professionaladvice. If professional advice or other expert assistance isrequired, the services of a competent professional personshouldbesought.
GOVERNANCEINDEXFORTRUSTSVolume2
AUTHORSMAKYUENTEEN&CHEWYIHONG
Theauthorswouldliketothankthetrustsfortheirpar?cipa?onintheself-assessment,making this rankingacommunityeffort; thepartnersfortheirsupportinthedevelopmentofGIFTin2017;andLimYueFengfor his assistance in collec?ng informa?on from no?ces,announcements and annual reports and in carrying out the analysis.However,theauthorsareresponsibleforthecontentinthisreportandanyerrors.
Acknowledgements
Thefindingsofthe2018edi?onoftheGovernanceIndexforTrusts(GIFT)tellofbiggainsmadeamongthe top-ranking trustssuchthatwhatwasconsideredasa topscore in2017 isnowamiddle-of-the-pack showing. As was the case in 2017, the best-ranked trusts were amix ofsmallertomid-sizeonesaswellasthebiggerones.
These results and the accompanying report are ?mely reminders to the REITs and BusinessTrustssectorofthreekeymaCers.First,istheimportanceoftransparencyandcommunica?on.Investors are becoming increasingly savvy and ac?ve. They are asking ques?ons on crucialmaCers and as part-owners of the trusts, they deserve answers that are clear, accurate and?mely.Thisistheminimumthatinvestors,themarketplaceandregulatorsexpect.
Second,asakeysectorwithintheSingaporemarket,theREITsandBusinessTrustssectormustkeepimproving.Lastyear,SGXsaiditwouldworkwiththeSingaporeIns?tuteofSurveyorsandValuerstoenhancevalua?onconductandrepor?ng.Ourtwoorganisa?onsjointlyestablishedaworkingcommiCeecomprisingindustrypar?cipantstoreviewthesemaCers.TheIns?tutehassincelauncheditsPrac?ceGuideonValua?onsforREITsandIPOs.Aimedatmee?nginvestors’need for clarity and completeness of informa?on, theGuide setsminimum requirements forvalua?onrepor?ngandfor inclusionofkey informa?oninvalua?onsummaries.SGXwillnowlook into how the Guide and other related maCers should be incorporated into the Lis?ngRules.WealsostronglyencouragetheREITsandBusinessTrustssectortostudytheGuideandweighcarefullyitsrecommenda?ons.
InApril,we introduced theSGXFastTrackprogramme for issuerswithgoodgovernanceandcompliancetrackrecord.Atotalof60issuersareontheprogramme.Ofthese,11arefromtheREITsandBusinessTrustssector.Thistranslatestoroughly25%ofthesectorandtes?fiestothequalityofthesectorasawhole.Nevertheless,ifthissectoristocon?nuetogrow,improvingongovernance standing will be crucial. Many other markets are already launching the REITsstructure;ifSingapore’sposi?onasaninterna?onalhubforREITsandBusinessTrustsistobesustained,issuers’governanceperformancemustcon?nuetoadvance.
Finally, the realestatesector, includingREITsandBusinessTrusts, isapillarof theSingaporeandregionaleconomies.Thesectoralsohasalargefootprintintermsoftheenvironmentandits impact on society. Given rising concerns on maCers such as climate change, wastemanagement, and health and safety standards – all of which are relevant to the REITs andBusiness Trusts sector – sustainability repor?ng presents yet another opportunity forSingapore-listedtruststoposi?onthemselvesapartfrompeerselsewhere.
IwillbelookingtothenextGIFTresultsfromProfessorMakandhispartnersforcluesontheprogressmadebythesector.Iamhopefulthatonceagain,thesectorwillexcelandstandoutfromnotjustamongotherlistedissuersinSingaporebutalsoamongtheirpeersglobally.
ByTanBoonGinCEOofSingaporeExchangeRegulaRon
Foreword
1TheGovernanceIndexforTrusts–GIFT-isproducedbyAssociateProfessorMakYuenTeenandChewYiHong, in collabora?on with governanceforstakeholders.com. The following individuals contributed to thedevelopmentofGIFT:AletheaTengShuyi,AuMeiLinEunice,WuWenjingandYapHuiLin.NopartoftheGIFTmethodologymaybereproducedwithoutthepriorwriCenpermissionofAssociateProfessorMakYuenTeen.
GOVERNANCEINDEXFORTRUSTS(GIFT)1
July2018
1.INTRODUCTION
PAGE2|GIFT2018
InJune2017,welaunchedtheGovernanceIndexforTrusts(GIFT),thefirst-everpublishedgovernanceindexinSingaporethatspecificallycaterstolistedrealestateinvestmenttrusts(REITs)andbusinesstrusts(BTs)inSingapore.ThisrecognisestheincreasingimportanceofREITsandBTsintheSingaporecapitalmarketandthedifferencesintheirgovernancestructuresandprac?ces,andapplicablerulesandregula?ons,comparedtolistedcompanies.GIFTassessesbothgovernanceandbusinessriskfactors,with80percentofthebasescoreallocatedtogovernancefactorsand20percentallocatedtobusinessriskfactors.Inaddi?on,meritanddemeritpointsareawardedforbothareas.
Fortheinauguralrankinglastyear,wecovered43REITsandBTswithaprimarylis?ngtradingonSingaporeExchange(SGX).Lastyear,thetrusts2thatwererankedinthetop5wereKeppelDCREIT,ParkwayLifeREIT,SoilbuildBusinessSpaceREIT,AIMSAMPCapitalIndustrialREITandStarhillGlobalREIT.
AnumberofthoserankedlowonGIFTlastyearhavebeenfacing
challenges.However,wedonotassertthatGIFTwillnecessarilypredictthefinancialperformanceofatrustespeciallyovertheshortterm,orthatahighly-rankedtrustwillcon?nuetobewellgoverned.
Asat30June2018,thereare48REITsandBTswithaprimarylis?ngtradingontheSingaporeExchange(SGX),accoun?ngforatotalmarketcapitalisa?onof$95billion.Ofthese,6arecons?tutedasstapledsecuri?es(SS),9aspurebusinesstrustsand33asREITs.
Forthissecondissue,weassessed44REITsandBTsusingpubliclyavailableinforma?onfromannualreports,websites,presenta?onsandotherSGXNETannouncementsofthetrusts,andnewsmediareports.Weexcluded4newly-listedtrusts(3REITsandaBT)thathavenotyetpublishedanannualreportatthecut-offdate.
Forthisyear’sassessment,wemadesomeminorchangestotheindexandourapproach.Otherthanwordingchangestomakethecriteriaclearer,someadjustmentsweremadetofine-tunethescoringcriteriaandasmallnumberofnew
GOVERNANCEINDEXFORTRUSTS2018|PAGE3
demeritcriteriawereaddedtorecogniseriskssuchasdilu?onfromnon-renounceableissues.Vola?lityofreturnsofthetrustasabusinessriskfactorwasdroppedaswerecognisethatthisisnotwhollyunderthecontrolofthetrust.Initsplace,wehaveaddedacriterionrela?ngtoforeignassetsandforeigncurrencyrisks.
Tofurtherimprovetheunderstandingoftherisksofthetrusts,wehaveprovidedabreakdownofthegovernanceandbusinessriskscores.Thisrecognisesthatwhileriskisimportanttoinvestors,thelevelofrisktotakeisul?matelyabusinessdecisionbythetrust.Investorsmaywishtoconsiderwhethertruststhathavehigherriskshavethecommensuratelevelofgovernancetosafeguardtheirinterestsandalsotheappropriatereward/riskra?o.Itmaythereforebewisetopaypar?cularaCen?ontotruststhathavehigherriskandpoorergovernance.
Forthisyear’sassessment,wealsocontactedallthetruststhathavepublishedemailaddressesfortheirinvestorrela?onsfunc?on,invi?ngthemtocompleteaself-assessmentusingtherevisedscorecard.This
wasdoneprimarilytoincreasetheengagementwiththetrustsandprovideanopportunityforthemtousethescorecardtoreflectontheirgovernance.Wereviewedtheself-assessmentaspartofourindependentassessment.AstheassessmentforGIFTisbasedonpubliclyavailableinforma?onthatisavailabletoinvestorsandotherstakeholders,wewouldliketoemphasisethatourindependentassessmentmaynotnecessarilybethesameastheself-assessmentprovidedbythetrust.
Wearedelightedwiththeresponsivenessofmanyofthetruststotheinvita?ontoundertaketheself-assessment.Ofthe43trustswewereabletocontactbyemail,29submiCedaself-assessment.Wewouldliketothankthemforengagingwithusonthisini?a?ve.
Finally,thisyear,wereleasedGIFTslightlylaterinordertoincludethelatestannualreportsfortrustswithaMarchyearend.Forthesetrusts,weusedtheannualreportsreleasedaslateasJuly2018.Thisallowsustousethemostupdatedinforma?onpossibleforthefinancialyearunderreviewtoassessthetrusts.
2Forbrevity,whenweusetheterm“trusts”,wearereferringtobothREITsandBTscollec?vely.Whenweusetheterm“managers”,itincludestrustee-managersinthecaseofBTs.Wealsousetheterm“trust”and“manager”interchangeablyeventhoughgovernanceofREITsandBTsisreallyaboutthegovernanceofthemanager,notthetrust,sinceREITsandBTsarealmostalwaysexternallymanagedinSingapore.
PAGE4|GIFT2018
First Ship Lease Trust (FSL) had a drama-filled year as its syndicated loan facility went into default, causing the trust to seek court protection via a scheme of
arrangement under section 210 of the Companies Act. Its trustee-manager was then sold, a new sponsor was appointed and the chairmanship of the trust was handed over to the new controlling unitholder while the trust sells some of its
assets to pare down debt. Meanwhile, the trust delayed its AGM and when it did publish its audited results, the auditors highlighted the existence of material
uncertainty related to going concern of the trust. Eventually, the trust secured commitments to refinance its overdue syndicated loans as a fund emerged as a
new substantial shareholder, building up a stake of over 6% in FSL.
Hutchison Port Holdings Trust and Accordia Golf Trust both suffered from falling DPU, with their respective unit price falling by two-fifths and by approximately
15%. RHT Health Trust received an emphasis of matter from its auditors relating to its ability to refinance its bonds, which led to a material uncertainty related to
going concern. Lippo Malls Indonesia Retail Trust (LMIRT) has fallen by a third in price too as the quality of its malls was called into question, coupled with
concerns about the deteriorating credit quality of its sponsor.
GOVERNANCEINDEXFORTRUSTS|PAGE5
2.METHODLOGY
Theindexincludesamainsec?oncarryinganoverallscoreof100points.Eighty(80)pointsareallocatedtothefollowingareasofgovernance:boardmaCers(20points),remunera?onofdirectorsandkeymanagement(10points),alignmentofincen?vesandinterests(10points),internalandexternalaudit(10points),communica?onwithunitholders(15points)andothergovernancemaCers(15points).
Twenty(20)pointsareallocatedtobusinessrisk,assessedusingleverage-relatedfactorsofoverallleverage,debtmaturity,percentageoffixedinterestrateborrowing;andotherfactorsrela?ngtodevelopmentlimit,leaseexpiry;incomesupportarrangements;andforeignassetsandforeigncurrencyrisks.
Therearesomedifferencesintermsofcriteriaandweigh?ngforREITsandBTstotakeintoaccountdifferencesinregulatoryrequirementsandbusinessmodels.
Inaddi?ontothemainsec?on,thereisasec?oncomprisingmeritanddemeritpoints.Meritpointsaregivenforcertainprac?cesthatwebelievetrustsshouldaspiretoadoptinordertofurtherimprovetheirgovernanceortoreducetheirrisks.Examplesincludeputngtrustdeedsandloanagreementsontheirwebsitesandavoidinghybridsecuri?esthatareclassifiedasequitybuthavedebt-likefeatures.Meritpointsrangedfromonetothreepointsperitemandthemaximumnumberofmeritpointsis25.
Demeritpointsaregivenforcasessuchasindependentdirectorsservingonboardsofarelatedmanagerorhavinganexcessivenumberofdirectorshipsinlistedcompaniesandmanagers.Demeritpointsgenerallyrangefromminusonetominusthree,althoughcertainseriousgovernanceissuescanincurasmanyas10demeritpointsperitem.
Thefullindexisavailableatwww.governanceforstakeholders.com.
3.COVERAGE
PAGE6|GIFT2018
Inthissecondissueoftheindex,weassessed44trusts,includingsixthatarestapled.Ofthesixstapledsecuri?es,threeofthemhavedormantbusinesstrusts.Thestapledsecuri?eswerescoredmostlyasREITsbutwhererelevant,thestricterstandardsforBTgovernancewasappliedtothestapledsecuri?es.
Forinforma?onfromannualreports,weuseannualreportspublishedbetweenSeptember2017andJuly2018.
AscendasREIT,CapitaLandCommercialTrustandCapitaLandMallTrustarethethreelargestREITswithmarketcapitalisa?onofmorethan$5billion.Another25trustsareinthebillion-dollarclub.Ofthe16remainingtrusts,15havemarketcapitalisa?onofmorethan$300millionto$1billion,withjustoneexcep?onbelowthe$100millionmarketcapitalisa?onlevel.
Ofthe36REITs(whichincludesthe6stapledsecuri?es)intheindex,25havethemajorityoftheirassetsin
Singapore.FourothershavethebulkoftheirassetsinChinaand/orHongKongandafurthertwoareAustralia-centric.TheremainingfivearefocusedonIndonesia,Europe,USAandawell-diversifiedporuolio.
JustoneoutofeightBTsisSingapore-centric.TheremainingsevenisadiversegroupwithgeographicfocusinChina,India,JapanandTaiwanforassetssuchasshippingvessels,hospitals,ports,retailandindustrialrealestate,golfcoursesandPayTV.
GOVERNANCEINDEXFORTRUSTS|PAGE7
4.KEYFINDINGS
Forthemainindex,theoverallrangeofscoresforthe44trustsisfrom51to81outofamaximumof100points,withameanof68andmedianof68.Thereisanincreaseinthemeanby3pointsandmedianby2pointscomparedtolastyear.Overall,thereissomeimprovementinaveragescoresacrossallareas,exceptforinternalandexternalauditandbusinessrisk.However,wenotethatthescoresarenotstrictlycomparabletolastyear’ssincetheindexhasbeenrefinedslightly.
Theimprovementin“BoardmaCers”ispartlyduetotheenhancedindependentrequirementsintroducedbyMASthatputahardlimitofnineyearsforindependentdirectors.Intheareaof
“Communica?onwithunitholders”,wehavealsoseentrustsstar?ngtoputupminutesofmee?ngsontheirwebsites.Thishasledtoanimprovementinthescoresaswell.
Whenmeritanddemeritpointsareincluded,theoverallrangeofscoresisfrom40to79,withameanof65.5andmedianof68.Thetotalscore,includingmeritanddemeritpoints,isamorecompletemeasureofthegovernanceofatrust.Comparedtolastyear,themeantotalscoreimprovedby3.5pointsandmediantotalscoreimprovedby6points.
Table1showsthedistribu?onofscoresforeachofthesevenareasofthemainindex.
GovernanceRisks BusinessRisks
Boardmatters
Remunerationofdirectorsandkeymanagement
Alignmentofincentivesandinterests
Internalandexternalaudit
Communicationwithunitholders
Othergovernancematters
Allocationofpoints
20points
10points 10points 10points
15points 15points 20points
Averagescore
10.8 4.2 7.2 9.3 11.1 12.6 12.8
Highestscore
16 8 10 10 14 15 19
Lowestscore
4 0 4 6 6.5 7.5 3
Table1:DistribuRonofscoresforeachofthesevenareasofthemainindex
PAGE8|GIFT2018
FortheoverallGIFTscore,thetop5trustsfor2018areCapitaLandCommercialTrustandKeppelDCREIT(jointfirst),followedbyMapletreeCommercialTrustandMapletreeGreaterChinaCommercialTrust3(jointthird),andFrasersLogis?cs&IndustrialTrust,whiletheboCom5areSabanaREIT,HutchisonPortHoldingsTrust,LippoMallsIndonesiaRetailTrust,RHTHealthTrustandFirstShipLeaseTrust.
Whenwedisaggregatethegovernanceandbusinessrisksec?onsofGIFT,thefollowingtrusts,listedinalphabe?calorder,wereassessedashavingbothgoodgovernanceandlowbusinessrisk,beingrankedinthetop10onbothfactors.Attheotherend,thefollowingtrustswereassessedashavingrela?velypoorergovernanceandhigherbusinessrisk,beinginrankedintheboCom10onbothfactors.
4.KEYFINDINGS
GoodgovernanceandlowbusinessriskCapitaLandCommercialTrustFrasersLogis?cs&IndustrialTrustKeppelDCREITMapletreeCommercialTrustMapletreeGreaterChinaCommercialTrust
PoorergovernanceandhigherbusinessriskAccordiaGolfTrustFirstShipLeaseTrustHutchisonPortHoldingsTrustOUECommercialREITSabanaREIT
3MapletreeGreaterChinaCommercialTrust(MGCCT)wasrenamedMapletreeNorthAsiaCommercialTrust(MNACT)inMay2018followingtheacquisi?onofaporuolioofsixproper?eslocatedinJapan.Forthefinancialyearunderreview,thetrustexistedasMGCCTandreferenceswillbemadetoMGCCT(insteadofMNACT)inthisreport.
GOVERNANCEINDEXFORTRUSTS|PAGE9
Therearesomemajorchangesinscoresandrankingsforcertaintrustscomparedtolastyear,duetobeCerdisclosureandgovernanceprac?cesbythesetrusts.Sometrustshavebeenovertakenintherankingseventhoughtheyhavelargelymaintainedtheirscorescomparedtolastyear.Thiswastheresultofgreatereffortonthepartofsomeothertruststoimprovetheirdisclosureandgovernanceprac?ces.OthertrustshavesimplybecomebeCer.
CertainrelatedREITsmovedupintandem,sugges?ngthatacollec?veeffortwasputintoimprovedisclosure.ChangesinscorescanalsobepartlyaCributedtochangesinpersonnelandchangesintheeconomicsoftheassets(e.g.leverage,debtmaturityandleaseexpiryetc),andpartlyduetotheadjustmentofthescoringguideline.
4.1.Boardma\ers
4.1.1.Appointmentofdirectors
CroesusRetailTrustwastheonlyinternallymanagedtrustinlastyear’sranking,andwithitsdelis?ng,therearenootherinternallymanagedtrustsinthisyear’sranking.Four
externallymanagedtrusts–KeppelREIT,KeppelDCREIT,SuntecREITandParkwayLifeREIT–havegiventherightforunitholderstoendorsedirectorsofthemanager.Thisgivesunitholderssomesayintheappointmentofthesedirectors.Wherethemanagercommitstoprocuretheresigna?onofdirectorswhoarenotendorsedbyunitholders,theunitholders’votebecomeseffec?velybinding.Allthetruststhatgivetherighttoendorsetheappointmentofdirectorsalsostatedthattheywillprocuretheresigna?onofunendorseddirectors.
However,wenotethatoneofthetruststhatallowedunitholderstoendorsetheirdirectorslastyeardidnotputupanydirectorsforre-elec?on.Wehavetakentheposi?onthatunlessitiscleartousthatdirectorsgoforre-endorsementatleastonceevery3years,thetrustwouldonlyearnpar?alpoints.
Currently,notrustgivesunitholderstherighttonominatedirectors,ratherthanjustendorsedirectorsselectedbythemanager.Therefore,notrustreceivedmeritpointsforthiscriterion.
PAGE10|GIFT2018
4.1.2.Boardsize
Theaverage(mean)boardsizeis7directors,witharangefrom4to12directors.Three-quartersofthetrustsinthestudyhaveaboardsizeofsixtoninedirectors,therangeusedinGIFTtodetermineappropriateboardsize.Managersandtrustee-managersgenerallyhavefewercommiCeesthanlistedcompaniesandusuallyhaveonlyasingleexecu?vedirector(ED),theCEO,ontheboard.Theycanoperateefficientlywithrela?velysmallerboardsthantheirlistedcompanycounterpartswithoutcompromisingboardeffec?veness,iftheyhavegoodprocessesforselec?ngtherightnon-execu?vedirectors(NEDs).
4.1.3.Boardchairman
Allofthemanagershaveanon-execu?vechairman.Manyalsostatethattheirchairmanisanindependentdirector(ID).Wehavere-designatedachairmanfromindependenttonon-independentwherehe/shehassignificant
rela?onshipswiththemanager/trustee-managerorthesponsor(evenwherethenomina?onscommiCeehasdeemedthedirectortobeindependent).
Rela?onshipsthatweconsidertobeseriousenoughtocauseare-designa?onincludesignificantconsul?ngservices(suchaslegalservices)providedbythedirectororhis/herfirm,orconcurrentserviceontheboardsofasponsor,controllingunitholderorrelateden??es.WedothesameforallIDsontheboardotherthanthechairman.
Therewasanimprovementinthescoresasallthedirectorswhosetenurehaveexceeded9yearssteppeddownfromtheboards.Lastyear,theywerere-designatedasnon-independentIDs.
Awerthere-designa?on,21trustshaveanindependentboardchairman.
4.KEYFINDINGS
GOVERNANCEINDEXFORTRUSTS|PAGE11
4.1.4.Independentdirectorsandcompetencies
ForthepercentageofIDsontheboard,wetookintoaccountthedifferentregulatoryrequirementsapplicabletoREITsandBTsinsetngtherangesfordifferentnumberofpointsawarded.ForREITs,therangesare:(a)below50%,(b)atleast50%tobelow75%,and(c)atleast75%.ForBTs,theyare:(a)atleast50%tobelow75%and(b)atleast75%.Asmen?onedearlier,somedirectorswerere-designatedfromindependenttonon-independentdirectors.Figure1showsthepercentageofREITsandBTs(includingstapledsecuri?es)respec?velywithineachoftheseranges.
Intermsofcompetencies,IDscommonlyhavegeneralbusiness,banking,accoun?ngandlegal
experience.Fortrusts,havingIDswhohaveinvestment/fundmanagementexperienceandpriorworkingexperienceintheindustryisuseful.Basedonourassessment,20trustshaveIDshavingeitherofthesetypeofexperience,while20haveIDswithbothtypesofexperience.Thereisanimprovementfromlastyear’sassessmentduetobeCerdisclosureandmoredirectorswithsuchcompetencies.
Figure 1: Percentage of Independent directors on the boards of REITs and BTs.
75%andabove
Lessthanone-third
Atleast50%tobelow75%
Atleastone-thirdtobelow50%
7% 7%
83%
3%
ForREITs
75%andabove
Atleast50%tobelow75%
7%
ForSSandBTs
93%
PAGE12|GIFT2018
When comparing the self-assessment of the trusts, we find that the trusts (usually the REIT manager or the trustee-manager) frequently score the “ Board Matters” section higher than our independent assessment. We would like to emphasise
that GIFT sets a high bar, especially in assessing the independence and experience of an independent director, particularly for audit committee members.
It could be that the manager/trustee-manager knows the directors better and hence score them better especially in the area of experience. We encourage trusts to improve the quality of the disclosure on the directors. To qualify as
having certain experience, we have looked for specific “hands-on” experience and have not included experience gained as lawyers, consultants, bankers or independent directors in the industry. We encourage trusts to re-evaluate the
competencies of their directors to ensure that they have the relevant competencies.
GOVERNANCEINDEXFORTRUSTS|PAGE13
4.1.5.Boardcommi\ees
Thirty-threetrustshaveestablishedanomina?ngcommiCee(NC)andthirty-fouraremunera?oncommiCee(RC).Thisisanimprovementfromlastyear.Ofthese,27haveacombinednomina?ngandremunera?oncommiCee.TrustsaregiventhesamepointswhethertheyhaveseparateNCandRC,orhavecombinedthem.FiveNCsand6RCshaveallIDsontheboardcommiCee.
AllthetrustshaveestablishedanauditcommiCee(AC)oranauditandriskcommiCee(ARC).
Figure2showsthepercentageofeachcommiCeethathaveanindependentchairmanandthepercentagesthathaveall,majorityandlessthanmajorityofIDsforeachcommiCee(awerthere-designa?onofIDstonon-independentdirectorswhereapplicable).
82%ofthetrustshaveanindependentACchairassessedtohaverecentandrelevantaccoun?ngorrelatedfinancialmanagementexper?seorexperience,andathirdofthemhaveamajorityofIDshavingsuchexper?seorexperience.WearestringentinassessingthelaCer,focusingonbothrecencyandrelevanceoftheexperience.Forexample,workingexperienceinthefinancialindustrymaynotnecessarilybeconsideredasrelevantaccoun?ngorfinancial-relatedexperiencefortheAC.
Trustsshouldconsideradop?ngamorerigorousapproachwhenassessingtherecencyandrelevanceoftheaccoun?ngandfinancialmanagement-relatedexper?seandexperienceofdirectorsappointedtoACs.
Figure 2: Percentages with independent chairman and composition of independent directors in the NC, RC and AC.
4.KEYFINDINGS
Allindependentdirectors
Majorityindependent
directors
Notformedornotwellcons?tuted
11%forNC14%forRC
84%
ForRemuneraRon/NominaRngcommi\eesForAuditcommi\ee
16%64%
25%forNC23%forRC
PAGE14|GIFT2018
4.2.Remunera;onofdirectorsandkeymanagement
DisclosuresarebeCerwhenitcomestoremunera?onofNEDscomparedtotheremunera?onofEDsandkeymanagement.ForNEDremunera?on,84%disclosedtheactualremunera?onofeachindividualNEDonanamedbasis,animprovementfromlastyear.However,just20%disclosedthefeestructure,althoughthisisaslightimprovementfromlastyear.
Moretrustsarebeginningtodisclosetheremunera?oncomponentsandra?onaleforhavingthesecomponentsfortheirCEOandEDs.Whenitcomestotheremunera?onamountsandbreakdownfortheCEO,otherEDsandkeymanagement,manytrustss?lldonotevenprovidedisclosuresinbands.Theyowencitecompe??vereasonsandsensi?vityfornon-disclosure.Inaddi?on,manyarguethattheirremunera?onispaidbythemanager
andnotbythetrust.Inourview,suchremunera?onisul?matelybornebythetrustandunitholders,andexcessiveorinappropriatelydesignedremunera?onpackageswouldaffecttheefficiencyandeffec?venessofthemanagerortrustee-managerinmanagingthetrust.
Twelvetrustslinktheremunera?onoftheEDsatleastpartlytoreturnonequityortotalunitholderreturnandsixteentodistribu?onorNAVperunit.
Figure3showsthekeyremunera?ondisclosuresandprac?cesofthetrustsforitemsinthemainindex.
Overall,thereiss?llconsiderableroomforimprovementinthedisclosureofremunera?on,especiallyforEDsandkeymanagement.
Figure 3: Key remuneration disclosures and practices for REITs and BTs.
4.KEYFINDINGS
48%
7%
84%
20%
0% 20% 40% 60% 80% 100%
Remunera?onbandsforkeymanagement
Exactremunera?onforCEO/ED
ActualfeesforNEDs
FeestructureforNEDs
To help trusts better understand what we were looking for in terms of disclosure of the fee structure for non-executive directors, we have
attached an example below.
For a trust to earn 2 points for the disclosure on remuneration matters of executive directors and the CEO, the scoring guideline has used
the term “fully disclose”. By “fully disclose”, we mean that the disclosure of remuneration should at most be rounded off to the
nearest $1,000, with a breakdown into salary, annual bonus, long term incentives and other benefits.
GOVERNANCEINDEXFORTRUSTS|PAGE15
PAGE16|GIFT2018
4.3.AlignmentofincenRvesandinterests
Trustsaregenerallytransparentabouttheamountsofdifferentfeespaidtothemanagerandotheren??esprovidingservicestothetrust,includingassetmanagementfees(baseandperformancefees),propertymanagementfees,acquisi?onfees,divestmentfeesandtrusteefees.Suchdisclosuresarehighlyregulatedbyrulesandregula?onssetbyMAS.
Fiweentrustsuseareturn-typemetric,distribu?onperunit(DPU)ornetassetvalue(NAV)perunittodeterminetheperformancefeeofthemanager.TheyaregivenhigherpointsinGIFT.However,25trustslinktheperformancefeetonetpropertyincome,whichmaynotnecessarilymeasuretheoverallperformanceofthetrustfromtheunitholder’sstandpoint.
Foratleasttwotrusts,theexistenceoftheperformancefeeforthetrustee-managerwasnotmen?onedatallintheannualreport.Eventhoughthemanagersinthesecases
havenotmetthecriteriatoearntheperformancefee,thisdisclosureontheperformancefeeandhowitisdeterminedshouldbeintheannualreportforunitholders’benefit.
Threetrustsdidnotdisclosethatthequantumofitsacquisi?onfeeandthedivestmentfee.Theymerelystatedthatthemanageris“en?tledundertheTrustDeed”toreceivesuchfeesbutthetrustdeedisnotavailableonline.Allthetrustschargeacquisi?onanddivestmentfeesandnonebasethesefeesonacost-recoverybasis.Onetrusthasafeestructurethaten?tlesitsmanagertoanacquisi?onfeeof1.5%fortransac?onsoflessthan$200million.
Overall,intheareaofalignmentofincen?vesandinterests,therecanbeimprovementinlinkingperformancefeesmorecloselytounitholders’interestssuchastotalunitholderreturnorDPUandreducingtheuseofnetpropertyincomeasaperformancemeasure,andadop?ngapolicyrequiringNEDstoholdsomeunitsun?ltheyleavetheboard.
4.KEYFINDINGS
GOVERNANCEINDEXFORTRUSTS|PAGE17
4.4.Internalandexternalaudit
Trustsgenerallyfarewellinhavingreputableexternalauditorsandunmodifiedauditopinions.Allbuttworeceivedthefull6pointsallocatedtoexternalaudit.Notrusthadunexplainedchangesintheexternalauditorormodifiedauditopinion(adverse,disclaimer,qualified).However,thisyear,RHTHealthTrustandFirstShipLeasehaveanemphasisofmaCerrela?ngtomaterialuncertaintyrelatedtothetrust’sabilitytocon?nueasagoingconcern.BothwererankedintheboComfiveinGIFTlastyear.
Similarly,thetrustsdidwellintheareaofinternalaudit.Alldisclosedthattheyhadaninternalaudit(eitherin-houseoroutsourced).Approximatelyhalfofthetrustsoutsourcedtoareputableexternalfirm(Big4,mid-?erorreputableriskconsultancyfirm),andtheotherhalfoutsourcedtotheinternalauditdepartmentofthesponsor.
Webelievethatthecommonprac?ceofoutsourcinginternalaudittotheinternalauditdepartmentofthesponsormayunderminetheperceivedindependenceoftheinternalauditfunc?on.Thisisespeciallysoinprovidingassuranceinareasrela?ngtootherfunc?onsthatmaybeoutsourcedtothesponsorandrelated
partytransac?ons,whicharecommonfortrusts.Weurgetruststobearinmindthispossibleconflictofinterestinsuchsitua?ons.
4.5.Communica;onwithunitholders
4.5.1.Timelinessofresults
Communica?onwithunitholdersisanotherareathattrustsexcelin.Morethan80%ofthetrustsreleasedtheirlatestannualresultswithin45daysandabout60%releasedalltheirquarterlyresultswithin30days,eventhoughtherequirementsaretoreleasewithin60daysand45daysrespec?vely(exceptforthefourthquarterwhichis60days).
4.5.2.Accessibilityofinforma;onandinvestorrela;ons
AllthetrustshaveawebsitewithalinktoitprovidedonSGXortheannualreport,withadedicatedlinkforinvestorrela?ons(IR)onthewebsite.Mosthavewell-designedwebsiteswhereinforma?onisrela?velyeasytofind.AllbutonehavetheirIPOprospectusonthewebsiteandallhaveatleastthepastfiveyears’annualreportsorallannualreportssinceIPOiflistedforlessthanfiveyears,usuallyinasubsec?on?tled“Publica?ons”.
Intermsofresultsannouncements,allthetrustshaveadedicatedsec?onforfinancialresultsforatleastthepast12quartersorsincetheirlis?ngdates.
PAGE18|GIFT2018
Webelievethatthetrustdeedisanimportantdocumentandshouldbemadeavailabletounitholdersonthewebsiteofthetrust.LippoMallsIndonesiaRetailTrusthasadedicatedsec?ononthewebsiteforitstrustdeed.
Allthetrustsalsoengagedwithinvestorsandanalyststhroughmee?ngsand/orconferencecallsandallbutoneputtheirpresenta?onmaterialsonthewebsite.
Allthetrustsprovideinforma?onforcontac?ngInvestorRela?ons(IR),withjustmorethanhalfprovidingaspecificIRcontactpersonwithcontactdetailsonthewebsiteandtherestprovidingeithergeneralcontactdetailsforanIRdepartmentoronlyanenquiriesformtobefilledupandsubmiCedonline.
Toassesstheresponsivenessofthetrust’sIR,wecontactedthetrustsviaemailorbyusingthecontactform.Truststhathadalreadyrespondedtoourinvita?ontosubmitaself-assessmentweredeemedtohavemetthiscriterionandwerenotcontactedagain.
Thirty-ninetrustsrespondedingood?mewhiletheremainingfivedidnotrespondbythecut-off?metwoweekslater.
4.5.3.UnitholdermeeRngs
Twenty-onetrustsgiveatleast21days’no?ceformee?ngswithunitholders,andatleast28days’no?cewherethemee?ngincludesaspecialresolu?on,comparedtotherequirementsof14daysand21daysrespec?vely.Itiscommendablethat32trustsdidnotholdtheirAGMswithinthelast5businessdaysofthepeakmonthsofApril,JulyorOctober,therebyavoidingthepeakAGMperiods.Thiswasanimprovementfrom27AGMsthatavoidedthepeakinthelastreviewperiod.AlltrustsshouldtargettoavoidthepeakAGMperiodstoimproveengagementwithitsunitholders.
ThreetrustsdidnotposttheirAGMpresenta?onmaterialonline.Whileitmightbethattherewasnopresenta?onmadeattheAGM,thisisanareaforimprovementforthesetrusts.
Inaddi?on,theCapitaLand-relatedREITsandtheMapletree-relatedREITsposteddetailedmee?ngminutesoftheAGMsontheirREITs’website.WewouldencouragethemandallothertruststoalsoposttheminutesonSGXNet.Inaddi?on,theyshouldposttheminutesassoonasprac?cable.Infuture,wemayconsiderwhetherminutesarepostedonSGXNetandthe?melinessofthepos?ng.
4.KEYFINDINGS
GOVERNANCEINDEXFORTRUSTS|PAGE19
4.6.Othergovernancema\ers
4.6.1.Keymanagementexperience
Goodgovernanceneedstobesupportedbyastrongmanagementteam.OneofthekeyareasweassessedhereisthelengthofworkingexperienceoftheChiefExecu?veOfficer(CEO),ChiefFinancialOfficer(CFO)andHeadofInvestmentorAssetManagement,ortheirequivalents,intheindustryinwhichthetrustoperates.
Table2showsthedistribu?onofthesethreekeymanagementposi?onswith(i)experienceoftenyearsormore,(ii)fivetotenyearsand(iii)belowfiveyears.Thisyear,thescoresinthissec?on,especiallyfortheCFO,showmarkedimprovementsduetobeCerdisclosure.
4.6.2.Ruleoflaw
Whereatrustoperatesmainlyinacountrywithstrongruleoflaw,thereislikelytobebeCerprotec?onofinvestorandpropertyrights.Weconsidercountriesinthetop25thpercen?leoftheWorldBankGovernanceIndicatorsashavingstrongruleoflaw.Forthetrustsassessed,8ofthemarenotawardedpointsastheysolelyorpre-dominantlyoperateincountrieswithweakerruleoflaw.
4.6.3.ACreviewofinterestedpersontransac;ons
AllbutonedisclosethattheACreviewsallinterestedpersontransac?ons(IPTs).TheothertrustonlystatesthattheACreviewscontrols,policiesandproceduresrela?ngtoIPTsorinternalauditreportsonIPTs,orthatitonlyreviewsIPTsaboveacertainthreshold.
Chief Executive Officer
Chief Financial Officer
Head of Investment or Asset Management, or their equivalents
Experience of ten years or more
73% 91% 84%
Experience of between five to ten years
20% 9% 5%
Experience of below five years
7% 0% 11%
Table 2: Experience of key management
PAGE20|GIFT2018
4.6.4.Entrenchmentofmanager
Managersoftrustsaregenerallyentrenchedtosomeextentasitisnoteasytoreplaceamanagerevenifpublicunitholdersaredissa?sfiedwithitsperformance.However,thehigherthepercentageofunitsheldbysponsororcontrollingunitholder,theharderitisforpublicunitholderstoreplacethemanager.ForREITs,therulesprovidethatthemanagercanberemovedbyamajorityofunitholders,whilethetrustee-managerofaBTcanonlyberemovedby75%ofunitholders.Therefore,itwouldbeimpossibleforpublicunitholderstoremoveamanagerifthesponsor/controllingunitholderretains50%oftheunitsinthecaseofaREITand25%(plusoneunit)inthecaseofaBT.Thirty-twoofthetrustswereassessedtohavelessentrenchment.
Notrustcurrentlysubjectsitsmanagertoperiodicre-appointmentbyunitholders.Webelievethatunitholdersrecognisethevalueofretaininganexperiencedmanagerortrustee-managerandwillnottrivialiseadecisiontochangeeveniftheyareableto.Perhapsgivingunitholdersarighttoendorsethere-appointmentperiodically-effec?velyanadvisoryratherthanabindingvote-wouldbeagoodwaytogaugethesa?sfac?onofunitholderswiththeperformanceofthemanagerortrustee-manager.
4.6.5.StaplingofREIT/BT
Staplingatrustwithanothertrustfurthercomplicatesthetruststructure,changesitsrisk-returnprofileandreducesinvestorchoice(whowouldprefertopurchaseindividualtrustsontheirowniftheysowish).Thisisespeciallysoifthetrustsareinunrelatedbusinesses.Onlysixofthetrustsincludedinourassessmentarestapledandjustthreehaveanac?vetrustee-managerstapledtotheREITinarelatedbusiness.
4.6.6.OthernegaRvegovernanceevents
Variousothernega?vegovernanceeventsaretakenintoaccountinassessingthegovernanceofthetrusts,suchasturnoverofdirectorsandkeymanagement;regulatoryissuesrelatedtothetrust,directorsandkeymanagement;andnon-compliancewithlaws,regula?ons,rulesandcodes.
Thesenega?vegovernanceeventsarerare,buttheyareimportanttoincludeintheindextohelpensurethattheindexscorebeCermeasuresthesubstanceofthegovernanceofthetrust.
Table3showsthenega?vegovernanceeventsapplicabletosometrustsandthenumberofdemeritpointsdeductedforeachevent.
4.KEYFINDINGS
GOVERNANCEINDEXFORTRUSTS|PAGE21
Table 3: Negative governance events with demerit points
Commonnegativegovernanceevents Demeritpoints
Any of the directors or KMPs resigns and raisescorporategovernance-relatedconcerns
5to10demeritpoints
CEO, CFO, CIO or COO of the REIT Manager/BTTrustee-Manager resigns without adequatedisclosureofthecircumstances
3 demeritpoints
Non-compliance with any Rules, Regulations, CodesorActs
3to10demeritpoints
Delay in holding its AGMwithin 4months from theendofthefinancialyear
3 demeritpoints
Disclosure-related lapses resulting in queries fromtheExchange
2 demeritpoints
PAGE22|GIFT2018
4.7.Businessrisk
InGIFT,20pointsareallocatedtofactorsrelatedtobusinessrisk.Thesefactorsinclude:(a)leverage-relatedfactorsofoverallleverage,averagedebtmaturity,percentageofdebtmaturingwithin12monthsandpercentageofborrowingscarryingfixedinterestrates;(b)changeinweightedaverageleaseexpiry(WALE)fromprioryear;and(c)extentofincomesupportarrangements.Vola?lityofreturnsofthetrust,whichwasincludedintheindexlastyear,wasdroppedaswerecognisethatthisisnotwhollyunderthecontrolofthetrust.Initsplace,wehaveaddedacriterionrela?ngtoforeignassetsandforeigncurrencyrisks.
ForREIT,afiwhfactor,percentageofdevelopmentlimit,wasincluded,with
theweightageforoverallleveragereduced.
Figure4showshowthetrustsfaredintermsofthedistribu?onofthelevelofleverage,theweightedaveragedebtexpiryandtheweightedaverageleaseexpiry.
InthecaseofWALE,wedifferen?atebetweenthosewithaWALEofatleastfiveyearsorwithanincreaseinWALEcomparedtothepreviousyear,fromothertrustswithaWALEoflessthanfiveyearsandaconstantordecreaseinWALE.TwentytrustshaveaWALEofatleastfiveyearsoranincreaseinWALE.EighthaveaWALEoflessthanfiveyearsandaconstantWALE,andninehaveaWALEoflessthanfiveyearsandadecreaseinWALE.
4.KEYFINDINGS
18%
36%
34%
5%5%2%
20%to30% 30%to35% 35%to40%
40%to45% Morethan45% Notdisclosed
Figure 4: Distribution of the level of leverage, the weighted average debt maturity and weighted average lease expiry
Leverage
39%
61%
3yearsormore Lessthan3years
Debtmaturity
GOVERNANCEINDEXFORTRUSTS|PAGE23
Aboutfour-fiwhofthetrustsdidnotdiscloseanyincomesupportarrangementsordisclosethattheydidnothavesucharrangements.Theothertrustshavesomeformofincomesupportarrangements,withthreetrustshavingincomesupportexceeding10%oftheirtotaldistribu?ons.
ForREIT,weincludedevelopmentlimitasafiwhfactorrelatedtobusinessrisk.RecentMASregulatorychangesallowREITstoexceeda10%developmentunitwiththeapprovalofunitholders.AhigherdevelopmentunitexposestheREITtohigherrisk.WedidnotfindanyREITseekingunitholders’approvaltoincreasethedevelopmentlimitinthisroundofassessment.
Figure 4: Distribution of the level of leverage, the weighted average debt maturity and weighted average lease expiry (continued)
45%
18%
25%
11%
Increasedormorethan5years Constant,ifnotmorethan5years
Decreasedandlessthan5years Notapplicable
WALE
PAGE24|GIFT2018
Forbusinesstrusts,werecognisethattheymaynothaveadirectmeasurementofWALEdependingonthebusinessmodel.Forinstance,AccordiaGolfTrustdependsonplayerfeesandthusthebusinessmodelofthetrustdoesnotprovideitsunitholderswitha
highlevelofcertaintyofitsincome.
Duringthescoringofthetrusts,wecameacrosstruststhatonlydiscloseWALEbyNetLeCableArea(NLA)andnotWALEbyGrossRentalIncome(GRI).WethinkthatthisisanareaforimprovementandweplantospecificallyscoreWALEbyGRIinfutureedi?onsof
GIFT.
GOVERNANCEINDEXFORTRUSTS|PAGE25
WewouldliketohighlightcertainmaCersthat,iflewunchecked,maycausegovernance,businessriskorperformanceissuesfortrustsgoingforward.
5.1Changeofcontrolinthemanager/sponsor
Therewereseveralcasesofmanagersoftrustsbeingsold,thusleadingtoachangeofcontrolinthemanager/sponsor.Financialdetailswerenotdisclosedasthemanagersareprivateen??esalthoughawell-runmanagerwithareasonableAUMwasvaluedatmorethan$50millionintheSingaporeREIT/BTcontext.SomeexamplesoftrustswithachangeincontrolincludeESRREIT(whichusedtobeCambridgeREIT),FirstShipLeaseTrustandIREITGlobal.
Asitisdifficulttoremovethemanagergiventhesubstan?alstakeheldbythecontrollingunitholdercoupledwithdispersedpublicunitholdingsinatypicaltrust,thereisanissueofentrenchmentbythemanager/trustee-manager.Inaddi?on,itisdifficulttochangethetrustdeedwithouttheblessingofthemanagerwhoisowencontrolledbythecontrollingunitholder/sponsorandthusitisunlikelythatfeesareadjusteddownwards.
Therecentsaleofamanagersuggeststhatthereisdemandformanagersduetotherela?velystablenatureoftheirfee-basedincome.Theriskisthatwhenamanager/trustee-managerisboughtatahighprice,unitholdersmayul?matelysufferasthemanager/trustee-managerisfacedwithsignificantpressuretodeliverreturnstothenewowners.Ul?mately,itmayleadtounitholderspayinghigherfeestothemanager/trustee-manager.
Thisalsocreatesapoten?alissuetounitholderswhennewownerschangethemandate(seenextsec?on).
5.2Changeofmandate
Most,ifnotall,trustdeedsallowthemanagertoexpanditsinvestmentmandatewith30days’no?cegivento“inform”unitholdersthatthemandatehasbeenexpanded.Noapprovalbyunitholdersisrequiredass?pulatedinthetrustdeed.
Therehavebeenseveralexamplesoftheexpansionofatrust’smandate.ASingapore-focusedindustrialREIThasexpandedtoAustraliawhileanAustralian-focusedindustrialREITexpandedtoEurope.Theusualreasongivenisthelackofinvestmentopportuni?esinitsoriginalmandate.
5.UNWRAPPINGTHETRUSTS
PAGE26|GIFT2018
Onetrusthas?lyannouncedaproposedacquisi?onunderthenewmandateonthe28thdayofthe30days’“no?ceperiod”.Oneothertrustwentevenfurthertoannounceaproposedacquisi?ontogetherwiththeannouncementofanenlargedmandate.
Theques?onunitholdersshouldbeaskingiswhetherthenewmandatesignificantlyalterstheriskprofileofthetrusts.Unitholdershavetoevaluateifthemanager/trustee-managerhastheexper?seandthenetworktomakegoodonthediversifica?onandconsiderifthegovernanceisinplacetopreventover-aggressiveacquisi?onsespeciallyasmostmanagers/trust-managersarecompensatedbasedonassets-under-management.
5.3Foreigncurrencyexposure
Ifatrust’sminorityinvestorsdependonthetrustforincome,thentheaddedexposureofforeignassetsearningincomedenominatedinforeigncurrencywillintroduceuncertaintyandriskstotheunitholders’expectedincomeintheformofdistribu?ons.However,mostREITshaveacertainlevelofnaturalhedging(i.e.foreigncurrencydenominatedloansforitsforeignassets).
Hedgingtheincomewillreducetheforeigncurrencyrisksandprovideacertainlevelofcertaintytotheshort-termcashflow.SomeREITshave,asapolicy,chosentobeexposedtocurrencymis-match,i.e.,borrowingsinSingaporedollarstoinvestinforeignassetsearningincomedenominatedinforeigncurrency.
5.4ManagingDPU(I)
NewREITsandbusinesstrustshaveemergedinthemarketthathavethesponsor/controllingunitholder/vendorwaivetheirrightstoreceivedistribu?onsforacertainperiodof?me.Thisthenallowstheunitstobesold/IPO-edwithacertainlevelofyieldtoaCractinvestors.Inonepar?culartrust,itwasdisclosedintheannualreportthatasmuchas55%oftheunitsinissuehavewaivedtheirrighttoreceivedistribu?ons.Ineffect,theactualDPUhasbeenar?ficiallyboostedtotwiceits“sustainable”levelifallunitsarerankedthesameandreceivedistribu?ons.Forinvestorswhodonotreadthefineprint,theseREITsaretradingatar?ficiallyhighyieldsandlessinformedinvestorsmaynotbeawareofit.
5.UNWRAPPINGTHETRUSTS
GOVERNANCEINDEXFORTRUSTS|PAGE27
5.5ManagingDPU(II)
Ass?pulatedinthetrustdeed,thefeesofmanagersandtrustee-managerscouldbepaidincashorinunitsattheirdiscre?on.AchairmanofaREITproudlyclaimedattheAGMthattheREIT’sCEOcould“performmagic”astheCEOincreasedtheREIT’sDPUdespitecarryingoutamajorassetenhancementini?a?veatoneofitskeyassets.Thiswasachievedpartlybyelec?ngtoreceiveitsfeesinunitsinsteadofcashsothattheREITcouldkeepupitstrendofincreasingDPUovertheyears/quarters.InitsannualreportandintheREIT’spresenta?onmaterial,theincreasesintheDPUover?mewereprominentlyhighlightedbutnotthe“magictrick”.
Ul?mately,thereisnofreelunch.Thehiddencosttounitholdersisthedilu?onoftheirunitholdings.Imagineifthemanager’sperformancefeesdependedonincreasesinDPU,thentherewillbehugeincen?vestomanagetheDPUtoearntheirperformancefees.Intheexamplestatedabove,themanager’sperformancefeesarepeggedtonetpropertyincomesothereisnothingtoosinisteraboutthemanagermanagingitsDPU.
Governance Index For Trusts – July 2018
PAGE28|GIFT2018
Ranking REIT/BT
GovernanceScore
BusinessRiskScore GIFT2018
1 CapitaLandCommercialTrust 61 18 79 KeppelDCREIT 60.5 18.5 793 MapletreeCommercialTrust 58 20.5 78.5 MapletreeGreaterChinaCommercialTrust 61.5 17 78.55 FrasersLogistics&IndustrialTrust 57.5 20 77.56 ESRREIT 62 15 777 AIMSAMPCapitalIndustrialREIT 61.5 14.5 768 AscendasREIT 60 15.5 75.5 ManulifeUSREIT 57 18.5 75.510 CapitaLandMallTrust 57.5 17.5 7511 FrasersCentrepointTrust 60 14 7412 MapletreeIndustrialTrust 51 22.5 73.5 SoilbuildBusinessSpaceREIT 64 9.5 73.514 IREITGlobal 54 18.5 72.515 AscottResidenceTrust 56 16 7216 FrasersHospitalityTrust 55.5 15.5 7117 FrasersCommercialTrust 53 17 7018 AscendasIndiaTrust 54 15.5 69.5 MapletreeLogisticsTrust 54.5 15 69.520 KeppelREIT 55 14 69 ParkwayLifeREIT 53 16 6922 FirstREIT 54 14.5 68.523 CapitaLandRetailChinaTrust 52 16 6824 SPHREIT 55 12 6725 AscendasHospitalityTrust 50.5 15.5 66 KeppelInfrastructureTrust 49 17 66 SuntecREIT 53 13 6628 BHGRetailREIT 55.5 8.5 6429 FarEastHospitalityTrust 52.5 11 63.530 StarhillGlobalREIT 46 17 6331 OUEHospitalityTrust 43 19 6232 CDLHospitalityTrusts 50.5 10.5 6133 AsianPayTelevisionTrust 47 12 5934 CacheLogisticsTrust 49 9 58 DasinRetailTrust 44.5 13.5 58 ECWorldREIT 48 10 5837 VivaIndustrialTrust 55.5 2 57.538 AccordiaGolfTrust 44 8 5239 OUECommercialREIT 41.5 9 50.540 SabanaREIT 48 0 4841 HutchisonPortHoldingsTrust 38.5 7 45.542 LippoMallsIndonesiaRetailTrust 48.5 -3.5 4543 RHTHealthTrust 33.5 11 44.544 FirstShipLeaseTrust 35 5 40
Note:ThemainGovernancescoreandBusinessriskscoreaddupto80and20pointsrespec8vely.Inthetwocolumnsabove,thescoresincludemeritanddemeritpoints.Thatiswhytwotrustsscoredmorethan20pointsandatrustreceivednega8vepointsinthebusinessrisksec8on.
ABOUTTHEAUTHORS
MakYuenTeen
MakYuenTeenisanAssociateProfessorofAccoun?ngattheNUSBusinessSchool,Na?onalUniversityofSingapore,whereheteachescorporategovernance.ProfMakholdsfirstclasshonoursandmasterdegreesinaccoun?ngandfinanceandadoctoratedegreeinaccoun?ng,andisafellowofCPAAustralia.
HeservedoncommiCeesthatdevelopedandrevisedtheCodeofCorporateGovernanceforlistedcompaniesinSingaporein2001and2005.HeisamemberoftheCorporateGovernanceCouncilformedbyMASin2017toreviewtheCode.
ProfMakdevelopedtheGovernanceandTransparencyIndex(GTI)andtheGovernanceEvalua?onforMid-andSmall-Caps(GEMS)andwastheSingaporeexpertinvolvedindevelopingtheASEANCorporateGovernanceScorecard.
Formoreinforma?onaboutProfMak’swork,pleasevisithiswebsiteatwww.governanceforstakeholders.com.
.
ChewYiHong
ChewYiHongisanac?veinvestorandakeenobserverofthecorporategovernancescene.HereceivedanMBAwithDis?nc?onfromtheLondonBusinessSchoolandgraduatedfromCornellUniversitywithdualdegreesinEconomicsandElectricalEngineering.
Priortohis?mespentataBig4publicaccoun?ngfirm,heconsultedforaglobalfundtoaddresscorporategovernanceissuesofalistedissuer.Mr.Chewhasalsoresearchedonotherareasofcorporategovernanceincludingboardandseniormanagementdiversityinthepublicandprivatesectors,andacrossmajorAsianeconomies.
GOVERNANCEINDEXFORTRUSTS|PAGE29
Associate Professor Mak Yuen Teen NUS Business School [email protected] www.governanceforstakeholders.com