Corporate Governance Policies

The Manager is committed to upholding a high level of corporate governance standard. Good corporate governance entails a sound and effective system of checks and balances, and requires practices and procedures that promote awareness and observance of stakeholder rights. To ensure that the above objectives are satisfied and the relevant legislations and regulations are duly observed, the Manager has adopted a compliance manual (the “Compliance Manual”) which sets out the key processes, systems, measures, corporate governance policies as well as other policies and procedures governing the management and operation of Sunlight REIT.  The key components of the corporate governance policies that have been adopted by the Manager and Sunlight REIT are set out below.

Checks and Balances

Structure of Sunlight REIT

Sunlight REIT is a collective investment scheme authorised by the Securities and Futures Commission (the "SFC") and regulated by the provisions of the REIT Code. The Manager has been licensed by the SFC under the Securities and Futures Ordinance (the "SFO") to conduct the regulated activity of asset management.  The Trustee is registered as a trust company under the Trustee Ordinance and is qualified under the REIT Code to act as a trustee for collective investment schemes authorised under the SFO.

Role of the Trustee and the Manager

The Trustee is responsible for, among other things, the safe custody of the assets of Sunlight REIT on behalf of the unitholders.  The Manager is to manage and operate Sunlight REIT and to ensure that the financial and economic aspects of Sunlight REIT’s assets are professionally managed in the sole interest of the unitholders. The Trustee and the Manager are independent of each other.

The Board and Delegations

The Board principally oversees the day-to-day management and corporate governance of the Manager. It takes the role to lead and map out the corporate strategy and direction of Sunlight REIT.  The Board and management functions are largely separated; subject to certain matters specifically reserved to the Board itself, the day-to-day management duties are delegated to the management team of the Manager.

The Board currently has a total of seven Directors, consisting of one Executive Director (who is also the Chief Executive Officer), two Non-executive Directors (including the Chairman of the Board) and four Independent Non-executive Directors (“INEDs”). All Directors shall retire from office at every annual general meeting of the Manager but shall be eligible for re-election in accordance with the articles of association of the Manager. The positions of the Chairman of the Board and Chief Executive Officer are held by two different persons to ensure that segregation of duties and balance of authority are maintained.

The INEDs are responsible for ensuring that there is a strong independent element on the Board, and for effectively exercising independent judgment with regard to the overall corporate strategy and direction of the Manager as well as certain specific proposed policies and transactions.  In assessing the independence of the INEDs, each INED is required to provide to the Manager an annual written confirmation of his independence by reference to those factors set out in the Compliance Manual. Any further re-appointment of an INED who has served the Board for more than nine years shall be subject to a separate resolution to be approved by the unitholders. Such approval should be sought as soon as possible and no later than the annual general meeting immediately following the ninth anniversary of the INED’s appointment. The Board shall set out in the papers to the unitholders the reasons as to why they believe such retiring INED continues to be independent and should be re-appointed.

A board diversity policy has been adopted with a view to achieving diversity of expertise and experience at the Board level and promoting the effectiveness of the Board as a whole. The size, composition and structure of the Board is reviewed on a regular basis with due consideration on different aspects of diversity including but not limited to age, cultural and educational background, gender, knowledge, length of service, professional experience and skills. The ongoing review of the Board’s composition and recommendations on the appointment and re-appointment of Directors are matters within the terms of reference of the Remuneration and Nomination Committee. No measurable objectives have yet been set in respect of board diversity.

Except for the re-appointment of an INED who has served the Board for more than nine years, the appointment and removal of Directors is a matter for the Board and the shareholders of the Manager to determine in accordance with the provisions of the Compliance Manual, the articles of association of the Manager and the applicable law.

The Board meets on a regular basis and Directors are given written notices of board meetings in advance of the regular meetings, with suitable arrangements in place to allow Directors to raise items in the agenda. Agenda and accompanying board papers are circulated before the scheduled date of a board meeting. Board consents are given by votes at board meetings, and written resolutions are signed by all Directors from time to time. Board process is further facilitated by the use of telephone conferences in cases where urgent decisions are required before the next regular board meeting or where certain Director(s) is/are out of town.

The Board has delegated certain functions to four board committees, namely the Audit Committee, the Investment Committee, the Remuneration and Nomination Committee and the Disclosures Committee to deal with specific issues which require extensive discussion.

Management functions of the Manager are delegated to seven departments, headed up respectively by the General Manager – Investment and Investor Relations, the General Manager – Asset Management, the Chief Financial Officer, the Assistant General Manager - Human Resources and Operations, the Manager - Internal Audit, the Compliance Manager and the Company Secretary. All department heads report directly to the Chief Executive Officer, with the Manager - Internal Audit and the Compliance Manager also reporting directly to the Audit Committee and the Board respectively. Apart from regular communications among the department heads, management meetings are held periodically to coordinate and facilitate the implementation and operation of different management and business functions.

The Manager has delegated the authority to Henderson Sunlight Property Management Limited (the "Property Manager") to provide property management, lease management and marketing services solely and exclusively for all the properties of Sunlight REIT located in Hong Kong, subject to the overall management and supervision of the Manager.

Reporting and Transparency

Interest and Dealings in Units

The Manager has adopted a code governing dealings in securities of Sunlight REIT by Directors of the Manager (the “Dealings Code”) which is also applicable to the Manager itself, including unit buy-back by the Manager on behalf of Sunlight REIT. Similar dealing requirements are also applicable to employees of the Manager.  All Directors shall confirm that they have complied with the required standard as set out in the Dealings Code annually.

Director(s) who is(are) aware of or privy to any inside information or any negotiations or agreements related to intended acquisitions or disposals by Sunlight REIT which are significant transactions must immediately refrain from dealing in any securities of Sunlight REIT until (i) proper disclosure of the information has been made in accordance with the REIT Code and any applicable provisions of the Listing Rules; or (ii) the aforesaid negotiations or agreements related to such intended acquisitions or disposals have lapsed. Directors who are privy to relevant negotiations or agreements or any inside information should caution those Directors who are not that there may be unpublished inside information and that they must not deal in any securities of Sunlight REIT for a similar period.

In general, Directors must not make any unauthorised disclosure of confidential information or make any use of such information for the advantage of themselves or others.

The Manager has also adopted procedures in monitoring disclosure of interests by the Directors and the Manager. Unitholders with a holding of 5% or more of the units in issue, or the Manager and Directors with an interest in the units in issue, have a notifiable interest and are required to notify the Stock Exchange and the Manager of their holdings in Sunlight REIT and certain changes thereof within the prescribed time period.

Conflicts of Interests and Business Competitions

The Manager and the Property Manager are both indirect wholly-owned subsidiaries of HLD. Both Non-Executive Directors of the Manager (including the Chairman) are directors of HLD and some of its subsidiaries, associates and/or related companies, which are/may be engaged in, among other things, the development, investment and management of retail, office and other properties in and outside Hong Kong.

Accordingly, the Manager may experience conflicts of interest with HLD when acquiring and disposing of investments, or in connection with transactions between Sunlight REIT and HLD. The Manager and the Property Manager may also experience conflicts of interest with HLD when identifying and competing for potential tenants.

To ensure that conflicts of interest relating to Sunlight REIT are properly managed, various control measures have been adopted, including but not limited to the following :

1. the Manager will not manage any real estate investment trust other than Sunlight REIT nor manage any other real estate assets other than those owned by Sunlight REIT;

2. the Manager has functional units and systems which operate independently of its shareholder(s);

3. the Manager has established internal control systems to ensure that connected party transactions of Sunlight REIT are monitored and undertaken in compliance with the REIT Code, the Listing Rules and waivers granted by the SFC, whereas any other situations of potential conflicts of interest are reported and monitored;

4. a Director with potential conflicts of interest shall disclose his/her interest to the Board and abstain from voting on the relevant matter, as well as not to be counted in the quorum for that resolution; and

5. registers of other directorships and senior positions held by the Directors are maintained and updated from time to time.

The Manager assures that it is capable of performing, and shall continue to perform, its duties for Sunlight REIT in the best interests of Sunlight REIT and unitholders.

Financial Statements and Announcements

Financial statements of Sunlight REIT are prepared in accordance with accounting principles generally accepted in Hong Kong with a financial year end of 30 June and a financial half-year end of 31 December. In accordance with the REIT Code, the annual reports and financial statements of Sunlight REIT are published and distributed to unitholders within four months following the end of each financial year, and for semi-annual reports within two months following the end of the relevant period.

Pursuant to the requirements under the REIT Code, results announcements of Sunlight REIT are released on a semi-annual basis.

It is customary for the Manager to conduct briefings with unitholders, investors, analysts and the press immediately following the release of results announcements. Such information, including the relevant presentation materials and announcements, are made available to the public through Sunlight REIT’s website.

To keep unitholders abreast of the position of Sunlight REIT, public announcements of material information and developments with respect to Sunlight REIT are made by the Manager in a timely and transparent manner in accordance with the applicable regulatory requirements. Subsequent briefings with analysts and the press may also be convened by the Manager if necessary.

Accountability and Communication

Investor Relations

The Manager is committed to providing an open and effective communication platform, ensuring that unitholders and the investment community at large are informed of the ongoing developments of Sunlight REIT. The Manager reinforces this platform by utilising a variety of interactive means to engage and maintain dialogues with investors and analysts. The Manager believes feedback and comments from the investment community are critical to shaping the future direction of Sunlight REIT.

To the extent possible under the current regulatory framework, communications with investors are conducted through :

1. direct communication including physical meetings conducted with the senior management of the Manager, both locally and overseas;
2. guided property tours organised by the Manager and the Property Manager team;
3. provision of regular communication materials; and
4. announcements and press releases posted on Sunlight REIT’s website, including disclosures made pursuant to regulatory requirements or on a voluntary basis.

Other than annual and interim results announcements, the Manager also voluntarily releases the operational statistics of Sunlight REIT twice every year. As the first REIT in Hong Kong to undertake this initiative, the Manager believes that such disclosure will enhance financial transparency and provide greater confidence to investors.

Unitholders’ Rights and General Meetings

Unitholders are encouraged to attend general meetings of Sunlight REIT. Notice convening general meetings shall be given to the unitholders in accordance with the requirements set out in the Trust Deed, the REIT Code and other applicable rules and regulations.

As required by the Trust Deed, any resolution put to the meeting shall be decided on a poll and the results of the poll shall be published by way of an announcement. Pursuant to the waiver granted by the SFC on 13 March 2015 from strict compliance with paragraphs 2.16, 2.23 and 9.9(h) of the REIT Code, where the chairman of a general meeting of the unitholders in good faith so decides, a resolution which relates purely to procedural or administrative matters is allowed to be voted by a show of hands, rather than by way of poll and the results of the voting shall be published by way of an announcement.

The Trustee or the Manager may at any time convene a meeting of unitholders. Pursuant to the Trust Deed, not less than two unitholders registered as together holding not less than 10% of the outstanding units in issue for the time being are entitled to request the Manager in writing to convene a meeting of unitholders. In addition, unitholders may send their enquiries to the Board or may put forward proposals at general meeting, in both cases, to the investor relations team of the Manager by email or to the registered office of the Manager by post.

As required under the Trust Deed, Sunlight REIT shall at least once in every calendar year convene an annual general meeting of unitholders, providing an opportunity for unitholders to obtain a better understanding of and, if necessary, to enquire the Board about Sunlight REIT’s operating performance.

Matters to be decided by Unitholders by Special Resolution

A meeting of unitholders when convened may, by way of special resolution and in accordance with the Trust Deed, approve, among others, the following matters :

• any modification, variation, alteration or addition to the Trust Deed which shall be agreed by the Trustee and the Manager as provided in the Trust Deed (save for issues that are necessary to comply with applicable regulatory requirements);
• removal of the Trustee;
• disposal of an investment within two years from the date of its acquisition;
• termination or merger of Sunlight REIT in compliance with applicable provisions of the Codes on Takeovers and Mergers and Share Buy-backs;
• any change in the investment policy and objective of Sunlight REIT; and
• any increase in the maximum remuneration (other than any additional fee as allowed under the Trust Deed) or any change to the structure of the remuneration of the Trustee or the Manager.

Risk Management, Internal Control and Compliance

Management of Business Risks

The Board, assisted by the Investment Committee and the Audit Committee, takes the responsibilities to review the financial performance of the Manager and Sunlight REIT against the previously approved budget, to review any risks associated with the management and performance of Sunlight REIT, to examine liability management and to act upon any advice or comments from the auditor of Sunlight REIT.

In respect of risk management, mitigating strategies are formulated by the management team to combat with all identified risks, and are overseen by the Chief Executive Officer and the Board on an ongoing basis. In addition, the Board will review from time to time relevant analyses and proposals prior to approving any major transactions. For more information, please refer to the “Risk Management” section under Corporate Governance of Sunlight REIT’s website.

Internal Control

The Board is responsible for establishing a sound and effective system of internal control which is designed for

• safeguarding the interests of the unitholders;
• safeguarding the assets of Sunlight REIT against misappropriation;
• ensuring proper maintenance of accounting records for the provision of reliable financial information; and
• ensuring compliance with relevant legislation and regulations.

Adequate measures have been established by the Board to provide effective internal controls, including a well-defined organisational structure with clear lines of responsibility and limits of authority, a reliable management reporting system, and proper budgetary and management accounting control policies.

The Internal Audit Department, led by the Internal Auditor, plays a major role in support of the Board to monitor the internal governance of Sunlight REIT. Key tasks of the department include unrestricted access to review and to conduct comprehensive audits of practices, procedures, expenditure and internal controls of all business and support units of Sunlight REIT on a regular basis, as well as special reviews of areas of concern identified by senior management or the Audit Committee.