The REIT Manager recognizes the importance of good corporate governance since it is necessary for the management of TREIT and helps build confidence among its unitholders. It also allows the unitholders, investors and the public to get informed and be able to monitor TREIT operations conveniently, quickly, equitably and efficiently. The REIT Manager has managed TREIT according to the Trust Deed and related law, the REIT Manager believes that TREIT has good management highly accountable Board of Directors and management, and effective control mechanism with check and balance. While good corporate governance is critical and necessary for managing TREIT for sustainable development and benefit of the unitholders. Following are key principles of TREIT good corporate governance.
1. Corporate Governance Policy
1.1 Right of Unitholders
The REIT Manager is aware of its duty to promote and protect the right of unitholders including basic shareholder rights abided by laws as follows:
- Right to approve the connected transactions or the acquisition or disposal of assets with the size specified by law and related regulations;
- Right to buy and sell trust units
Every unitholder has the right to by and sell the trust units independently. The REIT Manager has appointed the Thailand Securities Depository Company Limited: TSD to act as the Registrar in order to facilitate the unitholders regarding the registration and trust certificate (Please see details in the topic “Registrar and Auditor”);
- Right to vote on items in the agenda presented in the Unitholders’ meeting
Every unitholder has the right to participate in the unitholders’ meetings and to exercise his/her right to vote on an equitable basis according to the number of units that he/she holds.In the voting process, the REIT Manager will prepare voting ballots and give to every unitholder during the registration process before the meeting starts. Barcode system is used for the meeting registration and the vote counting of each meeting agenda. The REIT Manager will announce the voting results after the voting of each agenda so that the unitholders will be informed of the results immediately;
- Right to equally earn the returns of investment
Each unitholder has the right to receive the distribution at the rate of not less than 90% of adjusted net profit of each fiscal year or at any rate specified by the Securities and Exchange Commission. The distribution will be paid within 90 days after the end date of fiscal year or of other period, which TREIT announces to pay the distribution. (Please see details in the topic “Dividend Payment Policy”);
1.2 Disclosure of complete, sufficient, trustworthy and timely information to all stakeholders
The REIT Manager emphasizes the importance of facilitating the unitholders to access the TREIT’s information conveniently, evenly and equally by disclosing the accurate, complete and timely information on regular basis. The information including financial information, the operating results of TREIT and other important information, which will support the unitholder’s decision about his/her investment, are disseminated through various channels and medias of the Stock Exchange of Thailand, the TREIT’s Annual Report, and the REIT Manager’s website.
Presently, TMAN as the REIT Manager is managed by the Board of Directors and management who has proper qualifications as defined by the guidelines in the Capital Market Supervisory Board’s concerning the qualification of person in capital market.
3. The Board of Directors’ Meeting
The REIT Manager has arranged the meeting of the Board of Directors at least one time in each quarter to consider the operation of the TREIT, with the following procedures:
- Compliance and Investor Relations Department shall send out the invitation together with meeting agenda and supporting documents with necessary contents for consideration to every director at least 7 days prior to the meeting date, so that the directors will have sufficient times to review the information prior to the meeting.
- The proposed agenda for the Board of Directors’ meeting shall be about the operations of TREIT including the operating result, the annual budget, the distribution, the arrangement of unitholder’s meeting, the investment in additional assets, the connected transactions, business and investment plan as well as the progress in the implementation of the business plan.
- In every meeting, the number of attending directors shall be more than one half of total directors. Every director has the right to vote for one vote. The director who has a conflict of interest in any matter shall have no right to vote on such matter.
- At the meeting, the Chairman of the Board will oversee the allocation of sufficient time for management to provide documents and information to debate important issues, and sufficient time for the directors to discuss the important issues. All directors are free to comment and propose the agenda.
- There shall be the minute with the record keeping of all related documents in accurate, complete and checkable manners. The minutes which are certified from the Board of Directors shall be kept as evidence for future reference.
4. Rules for proper use of Inside Information
The Director and management shall not use of the material information of TREIT which not been disclosed to the public for their own benefit or others. For making control over this matter, the Company has a policy that the Directors and management have to report on trading unit trust to Compliance and Investor Relations Department and submit staff dealing report to the Securities and Exchange Commission.
5. Process and Factors in Consideration of Investment and Management of TREIT
5.1 Investment in Core Assets of TREIT
The REIT Manager takes the following actions before acquisition of each core asset.
- Conduct a due diligence on assets;
- Organize valuation of assets under investment as specified in the Trust Deed;
- Establish risk prevention measure or remedy measure for potential damage caused by breach of agreements or non-enforcement under lease agreements, and disclose such risk prevention measures to the Trustee and unitholders in case of leasehold investment in form of sub-lease.
For acquisition of additional core assets, the REIT Manager shall take additional actions as follows:
- Propose to the Trustee for consideration and approval of investment in assets as specified in the Trust Deed and related laws;
- Apply for approval for investment in assets as follows:
2.1 Investment in assets owned by the REIT Manager or a connected person
- Except the transactions that have already been disclosed in this disclosure;
- For transactions value over 1 million Baht or equal to or above 0.03% of the net asset value of TREIT, whichever is higher, an approval must be obtained from the Board of Directors;
- For transactions value equal to or above 20 million Baht or over 3% of the net asset value of TREIT, whichever is higher, an approval must be obtained by resolution of a meeting of unitholders;
- The REIT Manager shall appoint a financial advisor regarding connected transactions to be entered into with the REIT Manager so that the Board of Directors and/or unitholders can make informed decision on approval of investment in such assets;
- The REIT Manager shall prohibit a person who is connected to the assets under disposal from participating in approval of investment in such assets.
2.2 Investment in assets owned by a person who is not the fund manager or a connected person
- For investment in assets with value equal to or above 10%of total asset value of TREIT, an approval must be obtained from the Board of Directors;
- For investment in assets with value equal to or above 30% of total asset value of TREIT, an approval must be obtained by a three-fourth of total votes of unitholders who attend the meeting and are eligible to vote.
5.2 Criteria for Investment in Core Assets and Equipment
Acquisition of core assets and equipment by TREIT must be in accordance with the criteria specified in the Trust Deed. The material details are summarized below:
- It must an investment in property in category of land and factory, warehouse and/ or office buildings for acquisition of ownership or possessory right;
- In case of acquisition of possessory right, the property must be acquired by mean of issuance of a Nor.Sor.3 Kor. In case of leasehold, the property must be acquired by mean of issuance of a title deed or a possessory right deed in a form of Nor. Sor.3 Kor;
- Properties to be acquired must not be enforced under the law on property right or dispute unless the REIT Manager and the Trustee jointly consider and issue a written opinion that such enforcement under the law on property right or such dispute has no material effect on making profit from the property and condition of acquisition of such property will benefit unitholders;
- An agreement for acquisition of a property must not specify an agreement or an obligation that may prevent the trust from disposing the property at a fair price (at the time of disposal) such as a pre- emptive right at fixed price;
- Properties and/or assets to be acquired which are classified as core assets as prescribed in the notification of The Capital Market Supervisory Board must be ready for profit making with minimum aggregate value of 75% of the units under offering (if any) for each issuance including borrowing amounts (if any). TREIT may make investment in projects under construction where the total value of investment amount for acquisition and development of the property until ready for profit making must not exceed 10% of total value of assets of TREIT (after offering of units) and TREIT must be able to prove that there is sufficient working capital for such development without affecting the survival of the trust;
- Properties to be acquired must be fully valuated including verification of title deed for disclosure to investors at least six months prior to application for acquisition but not exceeding one year preceding investment in such property minimum two valuators who are approved by the Securities and Exchange Commission;
- Properties to be acquired must have minimum aggregate value of Baht 500 million for the first time investment in core assets;
- In case of indirect investment in core assets by TREIT, it must be an investment in property specified in (1) - (7) above through shareholding in a company incorporated with objectives to engage in the same business as TREIT as specified in the Trust Deed. Such investment must meet the following criteria:
- TREIT must hold shares in such company in a ratio as prescribed in the notification of the Securities and Exchange Commission or The Capital Market Supervisory Board;
- TREIT must be able to prove that there are measures or mechanism to enable the Trustee and the REIT Manager to take care and control such company to ensure the operation as specified in the Trust Deed and the criteria of the Securities and Exchange Commission in a similar manner as if TREIT makes direct investment in such core assets.
- If value of properties to be acquired is above 5% higher than the minimum valuation price assigned by the valuation company within one year preceding the acquisition, facts and reasons of acquisition at such price must be provided.
5.3 Disposal of Core Assets of TREIT
The REIT Manager may consider disposing core assets of TREIT under the following procedure:
- The REIT Manager must have core assets valuated by an independent valuator in accordance with the criteria specified in the notification of Office of the Securities and Exchange Commission;
- Disposal of core assets must be overt and contain transaction details and approval procedure as specified in the Trust Deed and it must be approved by the trustee or a resolution of a meeting of unit holders in the same manner as acquisition of the assets.
- Disposal of core assets in the following categories is permitted only when necessary and appropriate and with approval from the Board of Directors:
- Disposal of core assets before one year anniversary from the date on which the trust acquires such core assets;
- Disposal of core assets that TREIT acquired ownership to the previous owner.
5.4 Management of Core Assets of the TREIT
In relation to management of core assets of TREIT, the Company as the REIT Manager appoints a Property Manager who is selected based on experience in management of each type of properties in which TREIT will make investment. The REIT Manager appointed TPARK as the Property Manager for asset in category of warehouse, TICON as the Property Manager for asset in category of factory, (Please see details in the topic “Property Manager”); The REIT Manager supervises and controls the Property Manager by the following means:
- The REIT Manager establishes a marketing policy and strategy in property management for the Property Manager to comply with;
- The REIT Manager controls and oversees the Property Managers’ performance on a regular basis and check accuracy and completeness of property-related tasks such as rental fee, outstanding payment, marketing activities, property conditions, repair expenses, and insurance of core assets.
5.5 Selection of Connected Persons to manage TREIT
The REIT Manager selects personnel to manage TREIT based on related experience and conducts a background check to assess if a person to be appointed to manage TREIT possesses qualifications as prescribed in the notification of the Securities and Exchange Commission as follows:
- Having experience in managing investment or making profit from property for minimum period of three years within five years preceding commencement of employment for the REIT Manager;
- Having no prohibited characteristics of a person who has a power to manage TREIT as prescribed in the notification of The Capital Market Supervisory Board re: Prohibited Characteristics of Persons in Capital Market Business;
- Being selected by the Board of Directors or an assigned person (as the case may be) based on the above qualification with Compliance and Investment Relations Department to participate in checking qualification of the candidate.
Persons who are selected for each position are restricted from taking duty in other positions which may create conflict with their assigned positions.
5.6 Investment in Other Assets for Cash Flow Management
The REIT Manager implements a procedure to control investment in other assets for management of cash flow of TREIT, checking category of assets under investment and investment ratio in other assets to ensure it complies with the Trust Deed.
5.7 Selection of Property Managers
The REIT Manager may appoint one or more individuals to act as property manager (s) to manage assets of TREIT. Property Managers must be competent to manage the and have knowledgeable people in estate management experience for not less than 3 years. The REIT Manager is responsible for property management fees and TREIT is responsible for other costs incurred by the property management, such as maintenance fees, etc.
However, if a new Property Managers are appointed, the REIT Manager informs the trustee of the appointment within 15 days of the appointment of the new Property Managers. Property Managers have the maturity each 5 years of contract and can be renewed automatically. However, REIT Manager may appoint additional or change Property Managers to the terms outlined in the contract, when one of the following;
- Property Managers do not perform their duties according to terms and conditions of the contract of appointment and Property Managers do not remedy the remedy within 60 days after receipt of notice from REIT Manager to rectify such non-performance.
- If the rental rate of TREIT’s properties under management of any Property Managers is less than 50% for 3 consecutive months and if the annual performance of the property is less than the performance estimate specified in the annual operating plan that Property Managers have proposed and approved by the REIT Manager for a consecutive period of more than 2 years except in case of force majeure.
- Property Managers were ordered by the court to be in receivership or the court has appointed the official receiver to manage the property of all real estate managers or only in significant parts.
- Property Managers lack the ability to act as Property Managers as determined by the REIT Manager and do not fix such disability within 60 days.
5.8 Monitoring Property Managers performance
The management of properties of TREIT, the REIT Manager supervises Property Managers appointed by TREIT to achieve its purpose and to preserve the best benefit of TREIT and unitholders. The REIT Manager has a system for executing and supervising Property Managers as follows;
1. Monthly Monitoring
- Property Management Department assigns Property Managers to submit a summary of factory visits of potential customers with customers’ names and phone numbers. In addition, they need to submit report on the lease of the main properties, and property repair or maintenance report.
- Accounting and Finance Department monitors the completeness of the rental received in TREIT’s accounts in each month.
- Accounting and Finance Department investigates the unpaid rental report and check out the overdue rental tracking records.The property management department ensures that Property Managers follow the unpaid process and audit the tracing process include a copy of the notice (if any).
- Property Management Department examines the documents used in marketing to find tenants to ensure that such documents are not conducive to a conflict of interest in finding tenants of Property Managers by performing at least the examination of the presentation of each rental property equally, without regard to the ownership title and check on the pricing of property rental as a price advantage to any property owner or not.
Property Management Department will contact the potential customers in item (1) by random to verify that the Property Managers are acting in a neutral manner without favoring any one property owner.
2. Semi Annual Monitoring
Every 6 months, or when appropriate, Property Management Department meets with Property managers to announce marketing policies, strategies, asset management. Property Managers provide information about the competition, relevant industry conditions, and issues that may arise with tenants.
3. Annual Monitoring
- Property Management Department audits properties with Property Managers and property appraiser to ensure that the core assets of TREIT are in normal use. There is no addition beyond the permission of TREIT and for the purposes of annual properties appraisal.
- Property Management Department reviews and audits the quotation, coverage and premium rates to confirm the insured’s primary coverage including the main insurance document to ensure that the core asset is properly insured as required by company.
4. Property Maintenance
Property Management Department reviews and audits the reasonableness of the property’s repairing or maintenance. This is included a list of repairers and cost before approval to ensure that the Property Managers perform repairs to the property standards without any conflict of interest which is divided into two cases:
- In case of repair and maintenance, the cost is not allow to exceed the amount approved by TREIT that Property Managers can carry out their own procurement.
However, every month, Property Management Department reviews and audits the correctness of the repair and maintenance items prepared by Property Managers.
- In case of repair and maintenance costs are more than the amount approved by TREIT;
- Urgentcy case, Property Managers must first obtain the approval from Property Management Department as principle, via phone or E-mail.
- No urgentcy case, Property Managers send the letter of approval to Property Management Department by including details of the property such as property number, name of the lessee, damaged property photos, and the amount of money to ask for approval. In the support documentation must be included illustrates the necessity and appropriateness of the proposed costs, such as photographs of property damage, or compare prices of service providers with other service providers.
- Property Management Department prepares a letter of approval of the cost limit back to the Property Managers with copies of the book are kept as evidence, together passing documents to Accounting and Finance Department for further processes.
5.9 TREIT’s Interest Tracking Procedure
The Company as the REIT Manager has appointed TPARK, TICON and may appoint other persons as deemed appropriate to collect revenue and manage spending of TREIT. In this regards, the Company has a procedure to track interest of TREIT which requires the appointed person to submit a report of such to the REIT Manager such as lease income report, lease cost report, selling and administrative expenses report, outstanding debt report, debt collection report, occupancy report, repair and maintenance hiring report, tenant’s core assets insurance report.
6. Information Disclosure to Unitholders
The REIT Manager has emphasized the importance of information disclosure to unitholders in a sufficient, accurate, complete, fast and transparent manner. Also the information disclosure of TREIT shall be complied with rules and guidelines of information disclosure of the Securities and Exchange Commission and the Stock Exchange of Thailand.
Key principles of information disclosure
- Information to be disclosed must be accurate, complete, clear and timely.
- Must be complied the rules and regulations of information disclosure accurately and completely.
- Every unitholder has the right to receive the information equally.
Parties who responsible for information disclosure
The Managing Director has assigned the Compliance Department, Investor Relations Department and the Accounting Finance Department for disclosing of information to the Securities and Exchange Commission and/or the Stock Exchange of Thailand. The information to be disclosed shall be approved by the Board of Directors and/or the Managing Director (as the case may be) prior to disclosure.
Channels of Information Disclosure
In order to communicate efficiently, transparent and on timely basis, the REIT Manager has arranged various channels for information disclosure as follows:
- Report to the Stock Exchange of Thailand, which is the formal channel of the Trust to disclose information.
- The REIT Manager’s website (www.treit.co.th) which gather all important information of the Trust such as general information, TREIT Structure, Financial Statement, Annual Report, Invitation to the Unitholder’s Meeting, Distribution and interested news.
7. Unitholders’ Meeting
Guidelines of arranging the unitholders’ meeting
The REIT Manager shall arrange a meeting for unitholders as Annual General Meeting within four months after the end of fiscal year. Other meeting of unitholders shall be called Extraordinary General Meeting. The REIT Manager shall hold the Extraordinary General Meeting to be in line with the Trust Deed and related laws as follows:
- When the REIT Manager considers that it is appropriate to call the unitholders’ meeting for TREIT management propose
- When the REIT Manager is required by the Trust Deed to get the resolution from the unitholders to carry out the following activities:
- The acquisition or disposal of TREIT’s major assets with the value equal to or over 30% of the total asset value;
- The issuance of debenture or any debt instruments;
- The increase or decrease of TREIT’s paid-up capital, as indicated in the Trust Deed;
- The connected transactions with the REIT Manager or connected persons with the REIT Manager, with the transaction value equal to or above Baht 20 million or higher or more than 3% of net asset value, whichever is higher;
- The change of benefits and the capital returned to the unitholders;
- The change of Trustee;
- The change of REIT Manager and the appointment of new REIT Manager
- The amendment of Trust Deed that significant impacts to the right of unitholder or the increase of fee and/or expenses to be higher than the maximum rate specified in the Trust Deed;
- The cancellation of the Trust
- Any other circumstance that the Trustee and/or the REIT Manager deem necessary and appropriate to propose to the unitholders’ meeting and to get resolution of such matter;
- Any other circumstance required by the Securities and Exchange Commission;
Rights of the Unitholders
At the unitholders’ meeting, the REIT Manager has a policy to facilitate and encourage all unitholders to attend the meeting by assigning the Compliance Unit to administrate the unitholder’s meeting in accordance with the Trust Deed and related laws.
Procedure for unitholders’ meeting
- The Compliance Department is responsible for the meeting appointment, preparing invitation, and meeting documents, accurately, completely and adequately. All documents will be given to The Thailand Securities Depository: TSD, the Registrar of the Trust, who will distribute invitation to all unitholders within 7 days or 14 days prior to the meeting (as the case may be). The REIT Manager will disclose the invitation letter in daily newspaper at least 3 days prior to the meeting date so that the unitholders will have sufficient time to review the related information before attending the meeting. In addition, the unitholder can download the invitation letter and supporting documents from the REIT Manager’s website (www.treit.co.th) in both Thai and English. This is the same information that the REIT Manager send to unitholders as printed document. Information in the invitation shall include the explanation of how to attend the meeting as well as the detailed agenda, which are sufficient for unitholders to review and make decision.
- At the meeting, every unitholder has the right and equality to express his/her opinion and ask any questions to the Board of Directors on any matters relating to TREIT according to the agenda or proposed topic. The REIT Manager shall inform the unitholders to acknowledge their voting right and procedure for voting prior to the meeting.
- Unitholders have the right to consider and approve the connected transaction or the acquisition or disposal of the assets with the value specified by law and related regulations.
Voting of the unitholders
Voting of the unitholders in general case must receive an approval from the majority of the unitholders who attending the meeting and entitled to vote.
Voting of the following material transactions must receive at least three-fourth of total unitholders attending the meeting and entitled to vote.
- The acquisition or disposal of the major assets with the value over 30% of the total assets value;
- The increase or decrease of the Trust’s paid-up capital, especially there is required the unitholders’ approval;
- The capital increase under general mandate;
- The connected transactions with the REIT Manager or connected person with the REIT Manager, with the transaction value equal to or above Baht 20 million or higher or more than 3% of the net asset value, whichever is higher;
- The change of benefits and the capital returned to the unitholders;
- The change of Trustee;
- The amendment of Trust Deed that significant impacts to the right of unitholder;
- The cancellation of the TREIT
8. Selection and Nomination of Directors and Management
The REIT Manager shall select the personnel to be responsible for the management of TREIT based on his/her past experience in the related functions, to ensure that such person could manage TREIT for the maximum benefit of the unitholders. The REIT Manager shall consider the qualifications of candidate as defined by the guidelines in the Capital Market Supervisory Board’s concerning the qualification of person in capital market as follows:
- Having work experience in the field of investment management or management of revenue- generating real estate for not less than 3 years within the period of 5 years before the date of joining with the company;
- No prohibited characteristics of authorised personnel of the TREIT management in accordance with the Capital Market Supervisory Board’s concerning the qualification of person in capital market.
9. Remuneration of the Auditor
TREIT has appointed EY Office Limited as the Auditor of TREIT for financial period ended December 31st, 2017 with the auditing fee in total amount of Baht 634,746.
10. Other Compliance with Good Corporate Governance (if any)
- None -