Corporate Governance

Board Matters

Principle 1: The Boards' Conduct of Affairs Boards' Duties and Responsibilities

The Boards oversee the strategic direction, performance and affairs of the Managers, in furtherance of the Managers' primary responsibility to foster the success of ART so as to deliver sustainable value over the long term to Stapled Securityholders. The Boards provide overall guidance to the management team (Management), led by the Chief Executive Officer (CEO). The Boards work with Management to achieve ART's objectives and long-term success and Management is accountable to the Boards for its performance. Management is responsible for the execution of the strategy for ART and the day-to-day operations of ART's business.

The Boards establish goals for Management and monitor the achievement of these goals. The Boards ensure that proper and effective controls are in place to assess and manage business risks and compliance with requirements under the Listing Manual, the Property Funds Appendix, as well as any other applicable guidelines prescribed by the SGX-ST, MAS or other relevant authorities, and applicable laws. The Boards also set the disclosure and transparency standards for ART and ensure that obligations to Stapled Securityholders and other stakeholders are understood and met.

The Boards have adopted a set of internal controls which establishes financial approval limits for capital expenditure, investments, divestments, bank borrowings and issuance of debt instruments and this is clearly communicated to Management in writing. The Boards have reserved authority to approve certain matters including:

1. material acquisitions, investments and divestments;
   
   
2. issue of new stapled securities in ART (Stapled Securities);
   
   
3. income distributions and other returns to Stapled Securityholders; and
   
   
4. matters which involve a conflict of interest for a controlling Stapled Securityholder or a Director.
   
   

Apart from matters that specifically require the Boards' approval, the Boards delegate authority for transactions below the Boards' approval limits to Board committees (Board Committees) and Management to optimise operational efficiency.

The Directors are fiduciaries and are collectively and individually obliged at all times to act honestly and objectively in the best interests of ART. Consistent with this principle, the Boards are committed to ethics and integrity of action and have adopted a Board Code of Business Conduct and Ethics (Board Code) which provides that every Director is expected to, among other things, adhere to the highest standards of ethical conduct. All Directors are required to comply with the Board Code. This sets the appropriate tone from the top in respect of the desired organisational culture, and assists the Boards in ensuring proper accountability within the Managers. In line with this, the Boards have a standing policy that a Director must not allow himself or herself to get into a position where there is a conflict between his or her duty to ART and his or her own interests. Where a Director has a conflict of interest in a particular matter, he or she will be required to disclose his or her interest to the Boards, recuse himself or herself from deliberations on the matter and abstain from voting on the matter. Every Director has complied with this policy, and where relevant, such compliance has been duly recorded in the minutes of meeting or written resolutions.

Furthermore, the Directors have the responsibility to act with due diligence in the discharge of their duties and ensure that they have the relevant knowledge to carry out and discharge their duties as directors, including understanding their roles as executive, non-executive, and independent directors, the business of ART and the environment in which ART operates. The Directors are also required to dedicate the necessary effort, commitment and time to their work as directors, and are expected to attend all meetings of the Boards, except if unusual circumstances make attendance impractical.

Directors' Development

In view of the increasingly demanding, complex and multi-dimensional role of a director, the Boards recognise the importance of continual training and development for their Directors so as to equip them to discharge the duties and responsibilities of their office as Directors to the best of their abilities. The Nominating and Remuneration Committee ensures that the Managers have in place a training and professional development framework to guide and support the Managers towards meeting the objective of having Boards which comprise individuals who are competent and possess up-to-date knowledge and skills necessary to discharge their duties and responsibilities. Directors who have no prior experience as a director of an issuer listed on the SGX-ST will be provided with training on the roles and responsibilities of a director of a listed issuer in accordance with the Listing Manual. The costs of training are borne by the Managers.

Upon appointment, each Director is provided with a formal letter of appointment and a copy of the Director's Manual (which includes information on a broad range of matters relating to the role, duties and responsibilities of a Director). All Directors, upon appointment, also undergo an induction programme which focuses on orientating the Director to ART's business, operations, strategies, organisation structure, responsibilities of CEO and other persons having authority and responsibility for planning, directing and controlling the activities of the Managers (key management personnel), and financial and governance practices. The induction programme may include visits to ART's properties. Through the induction programme, the new Directors also get acquainted with members of Management which facilitates their interaction at Board meetings.

Following their appointment, the Directors are provided with opportunities for continuing education in areas such as director's duties and responsibilities, changes to regulations and accounting standards, and industry-related matters, so as to be updated on matters that affect or may enhance their performance as Directors or Board Committee members. The Directors may also contribute by recommending suitable training and development programmes to the Boards. The Directors are regularly kept informed by the Company Secretary of the availability of appropriate courses, conferences and seminars including those conducted by the Singapore Institute of Directors (SID), and the Directors are encouraged to attend such training at the Company's expense. During FY 2021, some of the training attended by the Directors included the SID Listed Entity Directors' Programme, the Executive and Director Remuneration, SID Directors Conference 2021, REITAS Conference 2021 and Key Regulatory Updates by KPMG. Sharing and information sessions were also organised as part of Board meetings, where guest speakers and Management team members presented on key topics to the Boards. The Directors also regularly receive reading materials on topical matters or subjects as well as updates on regulatory changes and their implications.

In line with the Managers' commitment to sustainability, as well as environmental and social responsibility in ART's business strategies and operations, the Managers will be arranging for the Directors to undergo training on sustainability matters. First-time Directors will also be required to undergo such training.

Board Committees

The Boards have established various Board Committees to assist them in the discharge of their functions. These Board Committees are the Audit Committee (AC) and the Executive Committee (EC). In addition, the Nominating and Remuneration Committee (NRC) was established with effect from 30 October 2021. Prior to the establishment of the NRC, the Boards as a whole performed the equivalent functions.

All the Board Committees have clear written terms of reference setting out their respective composition, authorities and duties, including reporting back to the Boards. Each of the Board Committees operates under delegated authority from the Boards with the Boards retaining overall oversight. The decisions and significant matters discussed at the respective Board Committees are reported to the Boards on a periodic basis. The minutes of the Board Committee meetings which record the key deliberations and decisions taken during these meetings are also circulated to all members of the Boards for their information. The composition of the various Board Committees is set out on page 130 of this Annual Report and the inside back cover of this Annual Report. The duties and responsibilities of the Board Committees are set out in this Report.

The Boards may form other Board Committees from time to time. The composition of each Board Committee is also reviewed by the Boards, through the NRC, and as and when there are changes to Board membership. Where appropriate, changes are made to composition of the Board Committees, with a view to ensuring there is an appropriate diversity of skills and experience, and fostering active participation and contributions from Board Committee members.

Meetings of Board and Board Committees

Board and Board Committee meetings are scheduled prior to the start of each financial year in consultation with the Directors. The Constitution of the Managers (Constitution) permits the Directors to participate in Board and Board Committee meetings via audio or video conference. If a Director is unable to attend a Board or Board Committee meeting, he or she may provide his or her comments to the Chairman or the relevant Board Committee Chairman ahead of the meeting and these comments are taken into consideration in the deliberations. The Boards and Board Committees may also make decisions by way of written resolutions.

In addition to scheduled meetings, the Boards may also hold ad hoc meetings as required by business imperatives. The Directors (excluding the CEO) also meet from time to time without the presence of Management.

At each scheduled Board meeting, the Boards are apprised of the following:

1. significant matters discussed at the AC meeting which is typically scheduled before the Board meeting;
   
   
2. AC's recommendation on ART's periodic and year-end financial results following AC's review of the same;
   
   
3. decisions made by Board Committees in the period under review;
   
   
4. updates on ART's business and operations in the period under review, including market developments and trends, as well as business initiatives and opportunities;
   
   
5. financial performance, budgetary and capital management related matters in the period under review, including any material variance between any projections in budget or business plans and the actual results from business activities and operations;
   
   
6. any risk management issues that materially impact ART's operations or financial performance;
   
   
7. updates on key Stapled Securityholder engagements in the period under review, as well as analyst views and market feedback; and
   
   
8. prospective transactions which Management is exploring.
   
   

The Boards are also regularly apprised of ART's sustainability efforts and performance, including but not limited to environment and climate change related initiatives.

All of the above allow the Boards to develop a good understanding of the progress of the Stapled Group's business as well as the issues and challenges faced by ART, and also promote active engagement with Management.

The Managers adopt and practise the principle of collective decisions and therefore, no individual Director influences or dominates the decision-making process. There is mutual respect and trust among the Directors and therefore the Boards benefit from a culture of frank and rigorous discussions. Such discussions conducted on a professional basis contribute to the dynamism and effectiveness of the Boards. The Boards' composition is such that there is diversity in views and perspectives which enriches deliberations and contributes to better decision-making of the Boards in the best interests of ART. At Board and Board Committee meetings, all the Directors actively participate in discussions, in particular, they engage in open and constructive debate and challenge Management on its assumptions and recommendations.

Management provides the Directors with complete, adequate and timely information prior to Board and Board Committee meetings and on an ongoing basis. This enables the Directors to make informed decisions and discharge their duties and responsibilities.

As a general rule, meeting materials are provided to the Directors at least five working days prior to Board and Board Committee meetings, to allow them to prepare for the meetings and to enable discussions to focus on any questions or issues that they may have or identify. Agendas for Board and Board Committee meetings are prepared in consultation with the Chairman and the chairmen of the respective Board Committees. This provides assurance that there is time to cover all relevant matters during the meetings.

In line with the Managers' ongoing commitment to minimise paper wastage and reduce their carbon footprint, the Managers do not provide printed copies of Board and Board Committee meeting materials. Instead, the Directors are provided with tablet devices to enable them to access and review meeting materials prior to and during meetings. This initiative also enhances information security as the meeting materials are made available through a secure channel. The Directors are also able to review and approve written resolutions using the tablet devices.

A total of five Board meetings and four AC meetings were held in FY 2021. The key deliberations and decisions taken at Board and Board Committee meetings are minuted.

A record of the Directors' attendance at Board and Board Committee meetings for FY 2021 is set out on page 130 of this Annual Report. The CEO who is also a Director attends all Board meetings. She also attends all AC meetings on an ex officio basis. Other members of Management attend Board and Board Committee meetings as required to brief the Boards and Board Committees on specific business matters.

There is active interaction between the Directors and Management during and outside Board and Board Committee meetings. The Directors have separate, independent and unfettered access to Management for any information that they may require. The Boards and Management share a productive and harmonious relationship, which is critical for good governance and organisational effectiveness.

The Directors also have separate and independent access to the company secretary of the Managers (Company Secretary). The Company Secretary keeps herself abreast of relevant developments. She has oversight of corporate secretarial administration matters and advises the Boards and Management on corporate governance matters. The Company Secretary attends Board meetings and assists the Chairman in ensuring that Board procedures are followed. The Company Secretary also facilitates the induction programme for new Directors and oversees professional development administration for the Directors. The appointment and the removal of the Company Secretary is subject to the Boards' approval.

The Directors, whether individually or collectively as the Boards, are entitled to have access to independent external professional advice where necessary, at the Managers' expense.

Principle 2: Board Composition and Guidance

Board Independence

The Boards have a strong independent element as five out of eight directors, including the Chairman, are non-executive IDs. Other than the CEO who is the only executive Director on the Boards, non-executive Directors make up the rest of the Boards. None of the Directors have served on the Boards for nine years or longer. No lead ID is appointed as the Chairman is an ID. Profiles of the Directors, their respective Board Committee memberships and roles are set out on pages 14 to 19 of this Annual Report. Key information on the Directors is also available on ART's website at www.ascottresidencetrust.com (Website). The statement on the composition of the Board of Directors of the Trustee-Manager pursuant to Regulation 12(8) of the BTR can be found on page 138 of this Annual Report.

The Boards, through the NRC, review from time to time the size and composition of the Boards and each Board Committee, with a view to ensuring that the size is appropriate in facilitating effective decision-making, and the composition reflects a strong independent element as well as balance and diversity of thought and background. The review takes into account the scope and nature of the Stapled Group's operations, and the competition that the Stapled Group faces.

The Boards, through the NRC, assess annually (and as and when circumstances require) the independence of each Director in accordance with the requirements of the Listing Manual and the guidance in the Code, the Securities and Futures (Licensing and Conduct of Business) Regulations (SFR), the BTR and where relevant, the recommendations set out in the Practice Guidance accompanying the Code (Practice Guidance). A Director is considered independent if he or she is independent in conduct, character and judgment and:

1. has no relationship with the Managers, their related corporations, their substantial shareholders, ART's substantial Stapled Securityholders (being Stapled Securityholders who have interests in voting Stapled Securities with 5% or more of the total votes attached to all voting Stapled Securities) or the Managers' 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 ART;
   
   
2. is independent from the management of the Managers and ART, from any business relationship with the Managers and ART, and from every substantial shareholder of the Managers and every substantial Stapled Securityholder of ART;
   
   
3. is not a substantial shareholder of the Managers or a substantial Stapled Securityholder of ART;
   
   
4. is not employed and has not been employed by the Managers or ART or their related corporations in the current or any of the past three financial years;
   
   
5. does not have an immediate family member who is employed or has been employed by the Managers or ART or their related corporations in the current or any of the past three financial years and whose remuneration is or was determined by the Boards; and
   
   
6. has not served on the Boards for a continuous period of nine years or longer.
   
   

There is a rigorous process to evaluate the independence of each ID. As part of the process:

1. each ID provides information of his or her business interests and confirms, annually, that there are no relationships which interfere with the exercise of his or her independent business judgment with a view to the best interests of the Stapled Securityholders as a whole, and such information is then reviewed by the Boards; and
   
   
2. the Boards also reflect on the respective IDs' conduct and contributions at Board and Board Committee meetings, in particular, whether the relevant ID has exercised independent judgment in discharging his or her duties and responsibilities.
   
   

Each ID is required to recuse himself or herself from the Boards' deliberations on his or her independence. In appropriate cases, the NRC also reviews the independence of an ID as and when there is a change of circumstances involving the ID. In this regard, an ID is required to report to the Managers when there is any change of circumstances which may affect his or her independence. Thereafter, the NRC's recommendation is presented to the Boards for approval.

The Boards, through the NRC, have carried out the assessment of the independence of the IDs for FY 2021 (save for Mr Zulkifli Bin Baharudin, who stepped down with effect from 20 April 2021) and the paragraphs below set out the outcome of the assessment. Each of the IDs had recused himself or herself from the deliberations of the Board and NRC on his or her independence.

Mr Tan Beng Hai, Bob

Mr Tan is a non-executive director of Singapore Post Limited (SingPost) which provides postal services to the Stapled Group and CLI and its subsidiaries (CLI Group). In addition, SingPost engages CLI Group to manage SingPost Centre. All of these transactions with the Stapled Group and CLI Group are conducted in the ordinary course of business, on arm's length basis, on normal commercial terms and market rates. Mr Tan's role in SingPost is non-executive in nature and he is not involved in the business operations of SingPost.

Mr Tan also serves as a non-executive director of Sembcorp Marine Ltd (Sembcorp Marine), a subsidiary of Temasek Holdings (Private) Limited (Temasek). Temasek is deemed to be a substantial Stapled Securityholder through its direct and indirect interests in CLI, which is a substantial Stapled Securityholder of ART. Mr Tan's role in Sembcorp Marine is non-executive in nature and he is not involved in the day-to-day conduct of the business of Sembcorp Marine. This corporation is an independently managed company under Temasek and the role does not require him to nor result in him having to act in accordance with any instructions, directions or wishes of Temasek in relation to the corporate affairs of ART and the Managers.

Mr Tan is also a member of the Corporate Governance Advisory Committee and a member of the Securities Industry Council of MAS. This role generates no conflict of interest in respect of his role as a Director. Mr Tan's role in MAS is non-executive in nature and he is not involved in the business operations of MAS.

The Boards have considered the conduct of Mr Tan in the discharge of his duties and responsibilities as a Director, and are of the view that the relationships set out above did not impair his ability to act with independent judgment in the discharge of his duties and responsibilities as a Director. Save for the relationships stated above, Mr Tan does not have any other relationships and is not faced with any of the circumstances identified in the Code, SFR, BTR and Listing Manual, or any other relationships which may affect his independent judgment. The Boards are therefore of the view that Mr Tan has exercised independent judgment in the discharge of his duties and responsibilities. Based on the above, the Boards arrived at the determination that Mr Tan is an ID. Mr Tan will recuse himself from participating in the Boards' deliberation on any transactions that could potentially give rise to a conflict of interest.

Mr Sim Juat Quee Michael Gabriel

Mr Sim serves as a board member of Jurong Town Corporation (JTC), a statutory board under the Ministry of Trade and Industry. In FY 2021, CLI Group made certain payments to JTC in respect of lease of space from JTC. The leases were in the ordinary course of business, on arm's length basis, on normal commercial terms and market rates. Mr Sim's role in JTC is non-executive in nature and he is not involved in the business operations of JTC.

The Boards have considered the conduct of Mr Sim in the discharge of his duties and responsibilities as a Director, and are of the view that the relationships set out above did not impair his ability to act with independent judgment in the discharge of his duties and responsibilities as a Director. Save for the relationships stated above, Mr Sim does not have any other relationships and is not faced with any of the circumstances identified in the Code, SFR, BTR and Listing Manual, or any other relationships which may affect his independent judgment. The Boards are therefore of the view that Mr Sim has exercised independent judgment in the discharge of his duties and responsibilities. Based on the above, the Boards arrived at the determination that Mr Sim is an ID. Mr Sim will recuse himself from participating in the Boards' deliberation on any transactions that could potentially give rise to a conflict of interest.

Mr Chia Kim Huat

Mr Chia is currently the regional head, Corporate and Transactional Group of Rajah & Tann Singapore LLP (Rajah & Tann), which provides legal services to some of the subsidiaries of CLI Group. Mr Chia is considered as having a business relationship with the related corporation of the Managers. The engagement of Rajah & Tann to provide legal services to CLI Group was made by the management teams within CLI Group and he is not involved in the process, negotiations or approval of such engagement by the CLI Group. These services were carried out in the ordinary course of business, on arm's length basis and based on normal commercial terms.

The Boards have considered the conduct of Mr Chia in the discharge of his duties and responsibilities as a Director, and are of the view that the relationship set out above did not impair his ability to act with independent judgment in the discharge of his duties and responsibilities as a Director. Save for the relationships stated above, Mr Chia does not have any other relationships and is not faced with any of the circumstances identified in the Code, SFR, BTR and Listing Manual, or any other relationships which may affect his independent judgment. The Board is therefore of the view that Mr Chia has exercised independent judgment in the discharge of his duties and responsibilities. Based on the above, the Boards arrived at the determination that Mr Chia is an ID. Mr Chia will recuse himself from participating in the Boards' deliberation on any transactions that could potentially give rise to a conflict of interest.

Ms Deborah Lee Siew Yin

Ms Lee is not faced with any of the circumstances identified in the Code, SFR, BTR and Listing Manual and does not have any other relationships which may affect her independent judgment.

The Boards have considered the conduct of Ms Lee in the discharge of her duties and responsibilities as a Director. The Boards are of the view that Ms Lee has exercised independent judgment in the discharge of her duties and responsibilities. Based on the above, the Boards arrived at the determination that Ms Lee is an ID. Ms Lee will recuse herself from participating in the Boards' deliberation on any transactions that could potentially give rise to a conflict of interest.

LG Ong Su Kiat Melvyn

LG Ong is a non-executive director of ST Engineering Ltd, a subsidiary of Temasek. Temasek is deemed to be a substantial Stapled Securityholder through its direct and indirect interests in CLI, which is a substantial Stapled Securityholder of ART. This corporation is an independently managed company under Temasek and the role does not require him to nor result in him having to act in accordance with any instructions, directions or wishes of Temasek in relation to the corporate affairs of ART and the Managers.

LG Ong is also a board member of JTC. CLI Group made the certain payments to JTC in respect of lease of space from JTC. The leases were in the ordinary course of business, on arm's length basis, on normal commercial terms and market rates. LG Ong's role in JTC is non-executive in nature and he is not involved in the business operations of JTC.

The Boards have considered the conduct of LG Ong in the discharge of his duties and responsibilities as a Director, and is of the view that the relationship set out above did not impair his ability to act with independent judgment in the discharge of his duties and responsibilities as a Director. Save for the relationships stated above, LG Ong does not have any other relationships and is not faced with any of the circumstances identified in the Code, SFR, BTR and Listing Manual, or any other relationships which may affect his independent judgment. The Boards are therefore of the view that LG Ong has exercised independent judgment in the discharge of his duties and responsibilities. Based on the above, the Boards arrived at the determination that LG Ong is an ID. LG Ong will recuse himself from participating in the Boards' deliberation on any transactions that could potentially give rise to a conflict of interest.

The Boards are of the view that as at the last day of FY 2021, each of Mr Tan, Mr Sim, Mr Chia, Ms Lee and LG Ong was able to act in the best interests of all Stapled Securityholders in respect of the period in which they served as directors in FY 2021.

In addition, under Regulation 13H(1) of the SFR, where a substantial shareholder of a manager of a real estate investment trust (REIT) is a corporation, a person would be considered to be connected to that substantial shareholder if he is, inter alia, a director of the substantial shareholder or a director of a related corporation or an associated company of the substantial shareholder. Such person will prima facie not be deemed to be independent unless the directors nevertheless regard him to be independent.

The Trustee-Manager is a related corporation of the Reit Manager as both the Trustee-Manager and the Reit Manager are directly held by CLI Group and as Ascott BT and Ascott Reit are stapled, the directors of the Managers are identical to avoid any differences or deadlock in the operation of the Stapled Group. As a result, all five independent directors of the Reit Manager, namely Mr Tan Beng Hai, Bob, Mr Sim Juat Quee Michael Gabriel, Mr Chia Kim Huat, Ms Deborah Lee Siew Yin and LG Ong Su Kiat Melvyn will prima facie be deemed to be connected to a substantial shareholder of the Reit Manager and hence not independent pursuant to Regulation 13H of the SFR.

Against the foregoing, the board of directors of the Reit Manager (Reit Manager Board) has reviewed and assessed the independence of each of the five IDs of the Reit Manager in relation to Regulation 13H of the SFR and has pursuant to Regulation 13D(8) of the SFR, resolved that notwithstanding that each of the five IDs is a director of both the Reit Manager and the Trustee-Manager, on the basis that:

1. for so long as Ascott BT is stapled to Ascott Reit, there will be no real prejudice to the interests of the holders of Ascott Reit Units for the Trustee-Manager and the Reit Manager to have the same board of directors as Ascott Reit Units and the Ascott BT Units will be stapled together and held by the same investors. The stapling together of Ascott Reit Units and Ascott BT Units means that the holders of Ascott Reit Units are at the same time the investors of the Stapled Securities, who stand to benefit as a whole;
   
   
2. since the Ascott BT Units and Ascott Reit Units are held by the same pool of investors in the same proportion, concerns and potential abuses applicable to interested party transactions will be absent in transactions between Ascott Reit and Ascott BT.
   
   

The Reit Manager Board is satisfied that the five IDs' independent judgment and ability to act with regard to the interests of all the Stapled Securityholders of ART as a whole will not be impaired.

Board Diversity

The Boards embrace diversity and have formally adopted a Board Diversity Policy. The Board Diversity Policy provides for the Boards to comprise talented and dedicated Directors with a diverse mix of expertise, experience, perspectives, skills and backgrounds, with due consideration to diversity factors, including but not limited to, diversity in business or professional experience, age and gender.

The Boards believe in diversity and value the benefits that diversity can bring to the Boards in their deliberations by avoiding groupthink and fostering constructive debate. Diversity enhances the Boards' decision-making capability and ensures that the Managers have the opportunity to benefit from all available talent and perspectives.

The NRC, in carrying out its duties of determining the optimal composition of the Boards in its Board renewal process, identifying possible candidates and making recommendations of board appointments to the Boards, considers diversity factors such as age, educational, business and professional backgrounds of their members. Female representation is also considered an important aspect of diversity. The current Boards comprise eight members who are corporate and business leaders, and are professionals with varied backgrounds, expertise and experience including in accounting and finance, banking and capital markets, real estate and construction, innovation and technology, investments, mergers and acquisitions, legal, as well as hospitality ownership and management.

The current Boards have two female members, one of whom is also the CEO. For further information on the Boards' work in this regard, please refer to “Board Membership” under Principle 4 in this Report.

Principle 3: Chairman and Chief Executive Officer

The roles and responsibilities of the Chairman and the CEO are held by separate individuals, in keeping with the principles that there be a clear division of responsibilities between the leadership of the Boards and Management and that no one individual has unfettered powers of decision-making. The non-executive independent Chairman is Mr Tan Beng Hai, Bob, whereas the CEO is Ms Beh Siew Kim. They do not share any family ties. The Chairman and the CEO enjoy a positive and constructive working relationship between them, and support each other in their respective leadership roles.

The Chairman provides leadership to the Boards and facilitates the conditions for the overall effectiveness of the Boards, Board Committees and individual Directors. This includes setting the agenda of Board meetings, ensuring that there is sufficient information and time at meetings to address all agenda items, and promoting open and constructive engagement among the Directors as well as between the Boards and the CEO on strategic issues.

The Chairman devotes considerable time to understanding the business of ART, as well as the issues and the competition that ART faces. He plays a significant leadership role by providing clear oversight, direction, advice and guidance to the CEO. He also maintains open lines of communication and engages with other members of Management regularly, and acts as a sounding board for the CEO on strategic and significant operational matters.

The Chairman also presides over the Annual General Meeting (AGM) each year and other general meetings where he plays a crucial role in fostering constructive dialogue between the Stapled Securityholders, the Boards and Management.

The CEO has full executive responsibilities to manage the Stapled Group's business and to develop and implement policies approved by the Boards.

The separation of the roles and responsibilities of the Chairman and the CEO, and the resulting clarity of roles provide a healthy professional relationship between the Boards and Management, facilitate robust deliberations on the Stapled Group's business activities and the exchange of ideas and views to help shape the strategic process, and ensure an appropriate balance of power, increased accountability and greater capacity of the Boards for independent decision-making.

As the roles of the Chairman and the CEO are held by separate individuals who are not related to each other, and the Chairman is an ID, no lead ID has been appointed. Moreover, the Boards have a strong independent element as five out of eight directors (including the Chairman) are non-executive IDs. There are also sufficient measures in place to address situations where the Chairman is conflicted as the Directors are required to recuse themselves from deliberations and abstain from voting on any matters that could potentially give rise to conflict. Accordingly, the foregoing is consistent with the intent of Principle 3 of the Code.

Principle 4: Board Membership

The Boards have a formal and transparent process for the appointment and re-appointment of Directors, taking into account the need for progressive renewal of the Boards. With effect from 30 October 2021, it has established the NRC, which makes recommendations to the Board on all appointments to the Board and Board Committees. All Board appointments are made based on merit and approved by the Boards.

The NRC comprises three non-executive directors, two of whom (including the chairman of the NRC) are IDs. There were no NRC meetings held in FY 2021 but the NRC has met in January 2022 and February 2022 respectively.

The NRC has also reviewed and approved various matters within its remit via circulating papers.

Under its terms of reference, the NRC's scope of duties and responsibilities includes:

1. reviewing and making recommendations to the Boards on the structure, size and composition of the Boards and the Board Committees and formulating succession plans for Directors and the CEO;
   
   
2. reviewing the performance of the Boards, Board Committees and individual Directors and the results of such evaluation annually;
   
   
3. considering annually and, as and when circumstances require, if a Director is independent; and
   
   
4. considering and making recommendations to the Board on the appointment and re-appointment of directors.
   
   

The NRC's duties and responsibilities in relation to remuneration matters are set out on page 112 of this Annual Report.

Board Composition and Renewal

The Boards, through the NRC, strive to ensure that there is an optimal blend in the Boards of backgrounds, experience and knowledge in business and general management, expertise relevant to the Stapled Group's business and track record, and that each Director can bring to the Boards an independent and objective perspective to enable balanced and well-considered decisions to be made in the interests of the Stapled Group. The Boards comprise members who have experience in the sector that ART operates in.

There is a structured process for determining Board composition and for selecting candidates for appointment as Directors. In undertaking its duty of reviewing and making Boards appointment recommendations to the Boards, the NRC considers different time horizons for purposes of succession planning. The NRC evaluates the Boards' competencies on a long-term basis and identify competencies which may be further strengthened in the long term to achieve ART's strategy and objectives. As part of medium-term planning, the NRC seeks to refresh the membership of the Boards progressively and in an orderly manner, whilst ensuring continuity and sustainability of corporate performance. The NRC also considers contingency planning to prepare for sudden and unforeseen changes. In reviewing succession plans, the NRC has in mind ART's strategic priorities and the factors affecting the long-term success of ART. Board succession planning takes into account the need to maintain flexibility to effectively address succession planning and to ensure that the Managers continue to attract and retain highly qualified individuals to serve on the Boards. The NRC aims to maintain the optimal composition of the Boards by considering the trends affecting ART, reviewing the skills needed and identifying gaps, including considering whether there is an appropriate level of diversity of thought. The process ensures that the Board composition is such that the Boards have capabilities and experience which are aligned with ART's strategy and environment, and includes the following considerations: (a) the current size of the Boards and Board Committees, composition mix and core competencies; (b) the candidate's/Director's independence, in the case of an independent director; (c) the composition requirements for the Boards and relevant Board Committees (if the candidate/Director is proposed to be appointed to any Board Committee); and (d) the candidate's/Director's age, gender, track record, experience and capabilities and such other relevant factors as may be determined by the Boards, which would provide an appropriate balance and contribute to the collective skill of the Boards.

The Boards support the principle that Board renewal is a necessary and continual process, for good governance and ensuring that the Boards have the skills, expertise and experience which are relevant to the evolving needs of the Stapled Group's business.

Board succession planning is carried out through the annual review by the NRC of the Boards' composition as well as when a Director gives notice of his or her intention to retire or resign. The outcome of that review is reported to the Boards. The Boards seek to refresh their membership progressively and in an orderly manner, whilst ensuring continuity and sustainability of corporate performance. The Boards also have in place guidelines on the tenure of Directors. The guidelines provide that an ID should serve for no more than a maximum of two three-year terms and any extension of tenure beyond six years will be reviewed on a yearly basis up to a period of nine years (inclusive of the initial two three-year terms served) by the NRC in arriving at a recommendation to the Boards.

The NRC identifies suitable candidates for appointment to the Boards. Searches for possible candidates are conducted through contacts and recommendations. In this regard, external search consultants may be retained from time to time to assist the NRC in identifying candidates. Candidates are identified based on the needs of ART and the relevant skills required, taking into account, among other things, the requirements in the Listing Manual and the Code, as well as the factors in the Board Diversity Policy. The candidates will be assessed against a range of criteria including their demonstrated business sense and judgment, skills and expertise, and market and industry knowledge (and may include elements such as financial, sustainability or other specific competency, geographical representation and business background). The NRC also considers the qualities of the candidates, in particular whether they are aligned to the strategic directions and values of ART. In addition, the NRC assesses the candidates' ability to commit time to the affairs of ART, taking into consideration their other current appointments. The NRC uses a skills matrix to determine the skills gaps of the Boards and if the expertise and experience of a candidate would complement those of the existing members of the Boards.

Board Changes

As part of the Boards' renewal process, Mr Zulfiki Bin Baharudin and Mr Lee Chee Koon stepped down from the Boards with effect from 20 April 2021 while LG Ong Su Kiat Melvyn joined the Boards as Non-Executive Independent Director and member of the AC with effect from 1 May 2021. Upon the establishment of the NRC on 30 October 2021, Mr Tan Beng Hai, Bob was appointed as chairman of the NRC and LG Ong and Mr Goh Soon Keat Kevin were appointed as members of the NRC.

Directors who are appointed to the Boards from time to time either have prior experience as a director of an issuer listed on the SGX-ST or will undergo the training required under rule 210(5)(a) of the Listing Manual (the Mandatory Training). As LG Ong has prior experience as a director of issuers listed on the SGX-ST, he is not required to undergo the Mandatory Training.

Review of Directors' Ability to Commit Time

In view of the responsibilities of a Director, Directors need to be able to devote sufficient time and attention to adequately perform their duties and responsibilities. The NRC conducts a review of the other appointments and commitments of each Director on an annual basis and as and when there is a change of circumstances involving a Director which may affect his or her ability to commit time to the Managers. In this regard, Directors are required to report to the Boards any changes in their other appointments.

In respect of the Directors' other appointments and commitments, no limit is set as to the number of listed company board appointments. The Boards take the view that the number of listed company directorships that an individual may hold should be considered on a case-by-case basis, as a person's available time and attention may be affected by many different factors, such as his or her individual capacity, whether he or she is in full-time employment, the nature of his or her other responsibilities and his or her near term plan regarding some of the other appointments. A Director with multiple directorships is expected to ensure that he or she can devote sufficient time and attention to the affairs of the Managers. IDs are also required to consult the Chairman before accepting any invitation for appointment as a director of another entity or offer of a full-time executive appointment.

There is also no alternate director to any of the Directors. In keeping with the principle that a Director must be able to commit time to the affairs of the Manager, the NRC has adopted the principle that it will generally not approve the appointment of alternate directors to the Directors.

Each of the Directors is required to make his or her own self-assessment and confirm that he or she is able to devote sufficient time and attention to the affairs of the Managers. For FY 2021, all non-executive Directors had undergone the self-assessment and provided the confirmation.

On an annual basis and, where appropriate when there is a change of circumstances involving a Director, the NRC assesses each Director's ability to commit time to the affairs of the Managers. In the assessment, the NRC takes into consideration each Director's confirmation, his or her commitments, attendance record at meetings of the Boards and Board Committees, as well as conduct and contributions (including preparedness and participation) at Board and Board Committee meetings.

The Directors' listed company directorships and principal commitments are disclosed on pages 14 to 19 of this Annual Report and their attendance record for FY 2021 is set out on page 130 of this Annual Report. In particular, the CEO does not serve on any listed company board outside of the Stapled Group. For FY 2021, the Directors achieved high meeting attendance rates and have contributed positively to discussions at Board and Board Committee meetings. Based on the above, the NRC has determined that each Director has been adequately carrying out his or her duties as a Director and noted that no Director has a significant number of listed directorships and principal commitments.

The Boards, taking into consideration the NRC's assessment, have noted that each Director has been adequately carrying out his or her duties and responsibilities as a Director.

Principle 5: Board Performance

The Managers believe that oversight from strong and effective Boards goes a long way towards guiding a business enterprise to achieving success.

Whilst Board performance is ultimately reflected in the long-term performance of the Stapled Group, the Boards believe that engaging in a regular process of self-assessment and evaluation of Board performance provides an opportunity for the Boards to reflect on their effectiveness including the quality of their decisions, and for Directors to consider their performance and contributions. It also enables the Boards to identify key strengths and areas for improvement which are essential to effective stewardship and attaining success for ART.

The Boards undertake, with the assistance of the NRC, a process to evaluate the effectiveness of the Boards as a whole and that of each of its Board Committees and individual Directors for every financial year. As part of the process, a questionnaire is sent to the Directors. The evaluation results are aggregated and reported to the NRC, and thereafter the Boards. The findings are considered by the Boards and follow up action is taken where necessary with a view to enhancing the effectiveness of the Boards, Board Committees and individual Directors in the discharge of their duties and responsibilities.

Board and Board Committees

The evaluation categories covered in the questionnaire include Board composition, Board processes, strategy, performance and governance, access to information and Board Committee effectiveness. As part of the questionnaire, the Boards also consider whether the creation of value for Stapled Securityholders has been taken into account in the decision- making process. For FY 2021, the outcome of the evaluation was satisfactory and the Boards as a whole, and each of the Board Committees, received affirmative ratings across all the evaluation categories.

Individual Directors

The evaluation categories covered in the questionnaire include Director's duties, contributions, conduct and interpersonal skills, as well as strategic thinking and risk management. For FY 2021, the outcome of the evaluation was satisfactory and each of the Directors on the whole received affirmative ratings across all the evaluation categories.

The Boards also recognise that contributions by an individual Director can take different forms including providing objective perspectives on issues, facilitating business opportunities and strategic relationships, and accessibility to Management outside of the formal environment of Board and Board Committee meetings.

Board Evaluation as an Ongoing Process
The Boards believe that performance evaluation should be an ongoing process and the Boards achieve this by seeking feedback on a regular basis. The regular interactions between the Directors, and between the Directors and Management, also contribute to this ongoing process. Through this process of engaging their members, the Boards also benefit from an understanding of shared norms between Directors which also contributes to a positive board culture. The collective board performance and the contributions of individual Directors are also reflected in, and evidenced by, the synergistic performance of the Boards in discharging their responsibilities as a whole by providing proper guidance, diligent oversight and able leadership, and lending support to Management in steering ART in the appropriate direction, as well as the long-term performance of ART whether under favourable or challenging market conditions.