Spring REIT
Corporate Governance
With the objectives of establishing and maintaining high standards of corporate governance, certain policies and procedures have been put in place to promote the operation of Spring REIT in a transparent manner and with built-in checks and balances. The corporate governance policy for Spring REIT have been adopted with due regard to the requirements under Appendix C1 of the Listing Rules, with necessary changes, as if those rules were applicable to REITs. Set out below is a summary of the key components of the corporate governance policy that have been adopted and will be followed by the REIT Manager and Spring REIT.
Authorization Structure
Spring REIT is a collective investment scheme constituted as a unit trust and authorized by the SFC under section 104 of the SFO and regulated by the SFC pursuant to the applicable provisions of the SFO, the REIT Code and the Listing Rules. The REIT Manager has been authorized by the SFC under section 116 of the SFO to conduct the regulated activity of asset management. The REIT Manager has four persons who are approved as Responsible Officers pursuant to the requirements of section 125 of the SFO and paragraph 5.4 of the REIT Code, at least one of whom is an executive Director of the REIT Manager pursuant to the requirements of section 125 of the SFO.
The Trustee is registered as a trust company under section 77 of the Trustee Ordinance (Chapter 29 of the Laws of Hong Kong). The Trustee is qualified to act as a trustee for collective investment schemes authorized under the SFO pursuant to the REIT Code.
Roles of the Trustee and the REIT Manager
The Trustee and the REIT Manager are independent of each other. The Trustee is responsible for the safe custody of the assets of Spring REIT on behalf of Unitholders and to oversee the activities of the REIT Manager in accordance with and in compliance with the Trust Deed, and the regulatory requirements applicable to Spring REIT. The REIT Manager is responsible for managing Spring REIT and its assets in accordance with the Trust Deed and ensuring that Spring REIT’s assets are managed in the sole interests of Unitholders.
Functions of The Board of Directors of the REIT Manager
The Board comprises eight members, four of whom are independent non-executive Directors. The Board principally oversees the day-to-day management and corporate governance of the REIT Manager. The Board is responsible for ensuring that the REIT Manager discharges its duties under the Trust Deed, which include but are not limited to: (i) managing Spring REIT in accordance with the Trust Deed in the sole interest of the Unitholders; (ii) ensuring sufficient oversight of the daily operations and financial conditions of Spring REIT when managing Spring REIT; (iii) ensuring compliance with the licensing and authorization conditions of the REIT Manager and Spring REIT and with any applicable laws, rules, codes and/or guidelines issued by government departments, regulatory bodies, exchanges or any other organizations regarding the activities of Spring REIT or its administration; and (iv) reviewing and monitoring the training and continuous professional development of Directors, executive officers and senior management.
Board Composition
With the aim of creating a board structure that is both effective and balanced, the size of the Board has been set to provide for a minimum of seven Directors and a maximum of nine Directors. Pursuant to the REIT Manager's Corporate Governance Policy, Independent Non-executive Directors must be individuals who fulfil the independence criteria set out in Rule 3.13 of the Listing Rules for assessing the independence of an independent non-executive director and the Corporate Governance Policy adopted by the REIT Manager.
The composition of the Board is determined mainly in accordance with the following principles:
- the Chairman of the Board should be a Non-executive Director;
- The Board should have a balance of skill, experience and diversity of perspectives appropriate to the requirements of Spring REIT' s business, and should ensure that the Directors devote sufficient time and make contributions to Spring REIT that are commensurate with their role and board responsibilities. It should ensure that changes to its composition can be managed without undue disruption;
- The Board should have a balanced composition of Executive Directors and Non-executive Directors and Independent Non-executive Directors so that there is a strong independent element on the Board which can effectively exercise independent judgment;
- The Board should include Non-executive Directors of sufficient caliber and number for their views to carry weight; and
- At least one-third, and a minimum of three members, of the Board should be Independent Non-executive Directors and at least one Independent Non-executive Directors must have appropriate professional qualifications or accounting or related financial management expertise.
The Board composition will be reviewed regularly to ensure that the Board has the appropriate mix of expertise and experience and that the Directors being appointed have the relevant expertise and experience in discharging their duties. Through serving on the Board committees, taking active participation and sharing of valuable impartial view on matters discussed at the Board and/or Board committees meetings and taking lead in managing issues involving potential conflict of interests, all Independent Non-Executive Directors have provided the independent view to the Board and made various contributions to the effective direction of the REIT Manager and Spring REIT Group. The Board and the Board committees may access the external professional consultants to obtain advice, where necessary, on the issues relevant to their duties set out in the Corporate Governance Policy. The Board shall review the implementation and effectiveness of independent view and input mechanism on annual basis.
Audit Committee
The Audit Committee is appointed by the Board from among the non-executive Directors and at least one of them shall has appropriate professional qualification or accounting or related financial management expertise. A majority of the members of the Audit Committee are required to be independent non-executive Directors. The Audit Committee is responsible for establishing and maintaining an adequate internal control structure and ensuring the quality and integrity of financial statements. The Audit Committee is also responsible for the nomination of independent external auditors and reviewing the adequacy of external audits in respect of cost, scope and performance.
The Audit Committee also ensures the existence and working of an effective system of internal control and risk management, in respect of both the REIT Manager and Spring REIT.
The Audit Committee' s responsibilities also include:
- reviewing dealings of the REIT Manager and the Directors on a half-yearly basis;
- reviewing all financial statements and all external audit reports and developing and implementing a policy on the engagement of external auditors to supply non-audit services;
- ensuring the internal audit function is adequately resourced and guiding the management to take appropriate actions to remedy any faults or deficiencies in internal controls which may be identified;
- assisting the Board in its monitoring of the entity' s overall risk management profile and setting guidelines and policies to govern risk assessment and risk management;
- periodically reviewing and monitoring all connected party transactions and related party transactions; and
- reviewing the REIT Manager and Spring REIT' s compliance with legal and regulatory requirements on a regular basis.
Disclosures Committee
The Disclosures Committee is appointed by the Board from among the Directors. The Disclosures Committee consists of three Directors, one of whom is an independent non-executive Director. The role of the Disclosures Committee includes reviewing matters relating to the disclosure of information to Unitholders and public announcements. The Disclosures Committee also works with the management of the REIT Manager to ensure that the disclosure of information is accurate and complete.
The Disclosures Committee' s responsibilities include:
- regularly reviewing and making recommendations to the Board on matters of corporate disclosure issues and announcements regarding (without limitation) financial reporting, connected party transactions, and potential areas of conflict of interests;
- overseeing compliance with applicable legal requirements and the continuity, accuracy, clarity, completeness and currency of information disseminated by or on behalf of Spring REIT to the public and applicable regulatory agencies;
- reviewing and approving all material non-public information and all public regulatory filings of or on behalf of Spring REIT prior to such information being disseminated to the public or filed with applicable regulatory agencies, as applicable;
- reviewing periodic and current reports, proxy statements, information statements, registration statements and any other information filed with regulatory bodies;
- reviewing press releases containing financial information, information about material acquisitions or dispositions or other information material to Unitholders;
- reviewing correspondence containing financial information disseminated to Unitholders;
- selecting, appointing, directing and terminating, where appropriate, outside experts (such as legal advisors or accountants) as the Disclosures Committee deems necessary in the performance of its duties; and
- maintaining and updating these terms of reference as the Disclosures Committee deems appropriate.
Remuneration Committee
The Remuneration Committee is appointed by the Board from among the Directors. A majority of the members of the Remuneration Committee are independent non-executive Directors and the chairman of the Remuneration Committee is an independent non-executive Director. Among other matters, the Remuneration Committee is responsible for reviewing the terms and conditions of employment of all staff and Directors of the REIT Manager (other than the members of the Remuneration Committee, whose remuneration is determined by the Board) and recommending an appropriate manpower deployment plan (including the succession plan for the management of the REIT Manager and the Board), remuneration and retirement policies and packages. The Remuneration Committee also ensures that no Director is involved in deciding his own remuneration.
Nomination Committee
The Nomination Committee is appointed by the Board from among the Directors. A majority of the members of the Nomination Committee are independent non-executive directors and the chairman of the Nomination Committee is required to be an independent non-executive Director or the Chairman of the Board. Amongst other matters, the Nomination Committee is responsible for reviewing the structure, size and composition of the Board and its committees on an ongoing basis and for nominating, and providing recommendations on, persons for appointment, re-appointment or removal as Directors.
Advisory Committee
The Advisory Committee is appointed by the Board from among the Directors. The role of the Advisory Committee includes generally reviewing the management services provided by the REIT Manager to Spring REIT, the financial performance of the REIT Manager, investor relations with respect to Spring REIT and potential acquisition opportunities, as well as supervising the performance of service providers to the REIT Manager and Spring REIT. The Advisory Committee presents information to the Board from time to time as it considers necessary and ensures the smooth co-ordination between the various committees established by the Board. Where appropriate, the Advisory Committee can recommend to the Chairman that a Board meeting be convened to discuss any Spring REIT matter. Meetings of the Advisory Committee will be held monthly to review Spring REIT management issues and to make recommendations to the Board.
General Meetings
Spring REIT will in each calendar year hold an annual general meeting in addition to any other general meetings in that year. The Trustee or the REIT Manager may at any time convene a meeting of Unitholders. The REIT Manager will also convene a meeting of Unitholders if requested in writing by not less than two Unitholders registered as holding together not less than 10.0% of the Units for the time being in issue and outstanding. Notice of 14 days or 10 clear business days (whichever is the longer) at the least, of the meeting will be given to Unitholders, except that notice of 21 calendar days or 20 clear business days (whichever is the longer) at the least, will be given to Unitholders where a Special Resolution is proposed for consideration at such meeting, and the notice will specify the time and place of the meeting and the terms of any resolutions to be proposed.
Two or more Unitholders present in person or by proxy registered as holding together not less than 10.0% of the Units for the time being in issue and outstanding will form a quorum for the transaction of all business, except for the purpose of passing a Special Resolution. The quorum for passing a Special Resolution will be two or more Unitholders present in person or by proxy registered as holding together not less than 25.0% of the Units for the time being in issue and outstanding.
Reporting and Transparency
Spring REIT will prepare its accounts in accordance with the International Financial Reporting Standards with a financial year end of December 31 and a financial half-year end of June 30. In accordance with the REIT Code, the annual report and accounts for Spring REIT will be published and sent to Unitholders and filed with the SFC no later than four months following each financial year-end of Spring REIT and the semi-annual reports no later than two months following the end of the period it covers.
The REIT Manager shall keep Unitholders informed of any material information pertaining to Spring REIT in a timely and transparent manner as required by the REIT Code and the provisions of Part XIVA of the SFO shall have effect, mutatis mutandis, as if Spring REIT is a "listed corporation" and if the board of directors of the REIT Manager are the board of directors of a "listed corporation".
The REIT Manager shall also inform Unitholders by way of announcement as soon as reasonably practicable of any information concerning Spring REIT which:
- is necessary to enable Unitholders to appraise the position of Spring REIT;
- is necessary to avoid a false market in the Units;
- might be reasonably expected to materially affect market activity in and the price of the Units; or
- requires Unitholders' approval.
Whistleblowing
The REIT Manager is committed to high standards of honesty, openness, accountability and good corporate governance in conducting its business. The REIT Manager has established channels for employees or external parties to raise concerns in relation to any actual or suspected misconduct, fraud, corruption, and malpractice without fear of reprisal.
All reports will be independently assessed to ensure that they are fairly and properly considered. As it is essential to have all critical information in order to be able to effectively evaluate and investigate a complaint, the report made should provide as much information and be as specific as possible.
It is encouraged that the reports are not being made anonymously in order to facilitate further investigations and follow-up.
All reports should be in writing via one of the following channels: