Frasers Hospitality Trust : Corporate governance report 2021

Contents

Overview

Year In Review

Leadership

Portfolio

Reports

Financial

105

Section

Corporate

Governance

INTRODUCTION

Frasers Hospitality Trust ("FHT") is a stapled group comprising Frasers Hospitality Real Estate Investment Trust ("FH-REIT") and Frasers Hospitality Business Trust ("FH-BT").

The units in FH-REIT and the units in FH-BT are stapled together under the terms of a stapling deed dated 20 June 2014 ("Stapling Deed") entered into between Frasers Hospitality Asset Management Pte. Ltd., as manager of FH-REIT ("REIT Manager"), Perpetual (Asia) Limited, as trustee of FH-REIT ("REIT Trustee"), and Frasers Hospitality Trust Management Pte. Ltd., as trustee-manager of FH-BT("Trustee-Manager", and together with the REIT Manager, the "Managers" and each, the "Manager"), to form stapled securities in FHT ("Stapled Securities", and each a "Stapled Security"). Each Stapled Security, consisting of one FH-REIT unit and one FH-BT unit, is treated as a single instrument. The Stapled Securities are listed on the Main Board of the Singapore Exchange Securities Trading Limited (the "SGX-ST").

FH-REIT is a real estate investment trust ("REIT") constituted in Singapore by a trust deed dated 12 June 2014 made between the REIT Manager and the REIT Trustee (as amended and restated by a first amending and restating deed dated 20 June 2014, and as further amended, restated and/or supplemented from time to time) (the "FH-REITTrust Deed"). FH-REIT is a collective investment scheme under the Securities and Futures Act, Chapter 289 of Singapore (the "SFA").

FH-BT is a business trust constituted in Singapore by a trust deed dated 20 June 2014 (as further amended, restated and/or supplemented from time to time) (the "FH-BTTrust Deed", and together with the FH-REIT Trust Deed and the Stapling Deed, the "Trust Deeds"). FH-BT is registered as a business trust under the Business Trusts Act, Chapter 31A of Singapore (the "BTA").

FH-BT was activated on 19 October 2016 to act as master lessee of "Novotel Melbourne on Collins" under a master lease agreement (the "Melbourne Master Lease Agreement") entered into between FH-BT NMCS Operations Pty Ltd (an indirectly wholly-owned subsidiary of FH-BT) and The Trust Company (PTAL) Limited, as trustee for FHT Melbourne Trust 1 (an indirectly wholly-ownedsub-trust of FH-REIT). The Melbourne Master Lease Agreement is an internal arrangement within the FHT stapled group.

The Managers comply with the principles of the Code of Corporate Governance 2018 (the "CG Code") in line with the listing manual of the SGX-ST (the "SGX-STListing Manual"). The REIT Manager also complies with the CG Code in accordance with its obligations under the Guidelines to All Holders of a Capital Markets Services Licence for Real Estate Investment Trust Management (Guideline No: SFA04-G07) issued by the Monetary Authority of Singapore ("MAS"). The practices and activities of the Board of Directors of each of the Managers (collectively the "Boards") and the management of the Managers (collectively the "Management") adhere closely to the provisions under the CG Code.

To the extent the practices may vary from any provision of the CG Code, the Managers will state explicitly the provision from which it has varied, explain the reason for the variation and explain how the practices nevertheless are consistent with the intent of the relevant principle of the CG Code. The Managers are also guided by the Practice Guidance which accompanies the CG Code and which sets out best practices for listed issuers; as this will build investor and stakeholder confidence in FHT and the Managers. A summary of compliance with the express disclosure requirements under the provisions of the CG Code is set out on pages 146 to 147 of this Annual Report.

Due to the different legislative and regulatory requirements in relation to a REIT as compared to a business trust, the corporate governance procedures and disclosure requirements in relation to the REIT Manager are different from those in relation to the Trustee-Manager, and where appropriate, we have highlighted them below.

FHT is a signatory to the 2019 Corporate Governance Statement of Support initiated by the Securities Investors Association (Singapore) where FHT has pledged its continued commitment to uphold high standards in corporate governance.

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The Managers

The Managers are wholly-owned subsidiaries of Frasers Property Limited ("FPL" or the "Sponsor" and together with its subsidiaries, "Frasers Property Group"). Each of the REIT Manager and the Trustee-Manager has general powers of management over the business and assets of FH-REIT and FH-BT, respectively.

As a manager of a REIT, the REIT Manager holds a Capital Markets Services Licence issued by the Monetary Authority of Singapore ("MAS") as required under the licensing regimes for real estate investment trust managers to carry out REIT management activities. The REIT Manager's main responsibility is to manage FH-REIT's assets and liabilities for the benefit of unitholders of FH-REIT. To this end, the REIT Manager is able to set the strategic direction of FH-REIT and make recommendations to the REIT Trustee, on acquisitions, divestments and enhancement of the assets of FHT. The role of the REIT Manager includes the pursuit of a business model that sustains the growth and enhances the value of FH-REIT and is focused on delivering regular and stable distribution to holders of the Stapled Securities of FHT (the "Stapled Securityholders"). Other functions and responsibilities of the REIT Manager include preparing annual asset plans, undertaking regular individual asset performance analysis and market research analysis, and managing finance functions relating to FH-REIT (which includes financial and tax reporting, capital management, treasury, and preparation of consolidated budgets). The Trustee-Manager performs similar functions for FH-BT.

The MAS has granted the Trustee-Manager an exemption from compliance with Sections 10(2)(a) and 11(1)(a) of the BTA to act in the best interests of the holders of FH-BT unitholders only, subject to:

1. the FH-BT units remaining stapled to the FH-REIT units; and
2. the directors of the Trustee-Manager("Trustee-ManagerDirectors") and the Trustee-Manager acting in the best interests of all Stapled Securityholders as a whole.

The Values of the REIT Manager and the Trustee-Manager

1. Each of the REIT Manager and the Trustee-Manager is committed to upholding and maintaining high standards of corporate governance, corporate transparency and sustainability, and instituting sound corporate practices and controls to facilitate their respective roles in safeguarding and enhancing FHT's asset value so as to maximise returns from investments, and ultimately the total return to Stapled Securityholders. Each of the REIT Manager and the Trustee-Manager believes that a robust and sound governance framework is an essential foundation on which to build, evolve and innovate a business which is sustainable over the long-term and one which is resilient in the face of the demands of a dynamic, fast-changing environment.
2. Each of the REIT Manager and the Trustee-Manager adheres to corporate policies, business practices and systems of risk management and internal controls, which are designed to ensure that it maintains consistently high standards of integrity, accountability and governance in FH-REIT and FH-BT (as the case may be) and its own daily operations.
3. Each of the REIT Manager and the Trustee-Manager ensures that the business and practices of FH-REIT and FH-BT (as the case may be) are carried out in a manner that comply with applicable laws, rules and regulations, including the BTA, the SFA, their respective subsidiary legislation, the SGX-ST Listing Manual, the CG Code, the Code on Collective Investment Schemes (the "CIS Code") issued by the MAS (including Appendix 6 of the CIS Code, the "Property Funds Appendix"), the Trust Deeds, as well as the written directions, notices, codes and other guidelines that the MAS and other regulators may issue from time to time.

The Boards work with Management to ensure that these values underpin its leadership of the REIT Manager and the Trustee-Manager.

The REIT Manager and the Trustee-Manager are staffed by an experienced and well-qualified team who manage the operational matters of FH-REIT and FH-BT (as the case may be). The Managers are wholly-owned subsidiaries of FPL, a multi-nationaldeveloper-owner-operator of real estate products and services across five asset classes, namely, residential, retail, commercial & business parks, industrial & logistics as well as hospitality. The Frasers Property Group has businesses in Southeast Asia, Australia, Europe and China, and its well-established hospitality business owns and/ or operates more than 120 award-winning serviced, hotel residences and boutique lifestyle hotels in 70 cities across Asia, Australia, Europe, the Middle East and Africa.

Contents

Overview

Year In Review

Leadership

Portfolio

Reports

Financial

107

Section

Corporate

Governance

As the Sponsor holds a substantial ownership stake of approximately 25.83% in FHT as at 30 September 2021, there is an alignment of interests between the Sponsor, the Managers and the Stapled Securityholders. The Managers are able to benefit from and leverage on its association with the Sponsor in the management of FHT in various ways, including tapping on the Sponsor's extensive experience in development and management of real estate assets, sourcing for talent and experienced personnel within the Sponsor's pool of employees, including those who may be considered for appointment to the Boards, access to the Frasers Property Group's network of lenders for debt financing, and negotiating for favourable terms with external suppliers and vendors on a group basis.

The REIT Manager and the Trustee-Manager are appointed in accordance with the terms of the FH-REIT Trust Deed and the FH-BT Trust Deed respectively. The REIT Manager and the Trustee-Manager are staffed by an experienced and well- qualified team who manage the operational matters of FH-REIT and FH-BT (as the case may be). The REIT Manager can be removed by notice in writing given by the REIT Trustee in favour of a corporation appointed by the REIT Trustee under certain circumstances outlined in the FH-REIT Trust Deed, including where the unitholders of FH-REIT, by a resolution duly passed by a simple majority of unitholders of FH-REIT present and voting (with no unitholder of FH-REIT being disenfranchised) at a unitholders' meeting, decide that the REIT Manager is to be removed. The Trustee-Manager may be removed, by a resolution by the unitholders of FH-BT holding in the aggregate not less than three-fourths of the voting rights of all the unitholders of FH-BT.

BOARD MATTERS

The Board

Each of the REIT Manager and the Trustee-Manager has its own Board.

So long as the FH-REIT units remain stapled to the FH-BT units, in order to avoid any conflict between FH-REIT and FH-BT and to act in the best interests of FHT, the Board of FH-REIT ("REIT Manager Board") and the Board of FH-BT("Trustee-ManagerBoard") will comprise the same persons.

The REIT Manager Board is responsible for the overall leadership and oversight of both FH-REIT's and the REIT Manager's business, financial, investment and material operational affairs and performance objectives, and FH-REIT'slong-term success. The REIT Manager Board sets the strategic direction of FH-REIT and the REIT Manager, which includes appropriate focus on value creation, innovation and sustainability. The REIT Manager Board also determines the REIT Manager's approach to corporate governance, including setting appropriate tone-from-the-top and the desired organisational culture, values and ethical standards of conduct, and works with Management on its implementation across all levels of the organisation's values, standards, policies and practices.

The key roles of the Trustee-Manager Board are to: (a) guide the corporate strategy and directions of the Trustee-Manager;

1. ensure that senior Management discharges business leadership and demonstrates the highest quality of management skills with integrity and enterprise; (c) oversee the proper conduct of the Trustee-Manager; and (d) ensure that measures relating to corporate governance, financial regulations and other required policies are in place and enforced. Further information on the roles and responsibilities of the Trustee-Manager Board can be found in the Statement on the Policies and Practices in Relation to the Management and Governance of Frasers Hospitality Business Trust on pages 155 to 160.

The Managers also focus on value creation, innovation and sustainability. The Boards, supported by Management, ensure necessary resources are in place for FHT and the Managers to meet their strategic objectives. Through the enterprise-wide risk management framework of FHT and its subsidiaries (the "Group"), the Boards establish and maintain a sound risk management framework to effectively monitor and manage risks and to achieve an appropriate balance between risks and the Group's performance. The Board also puts in place policies, structures and mechanisms to ensure compliance with legislative and regulatory requirements. The Board, which comprises directors who, as fiduciaries, are expected to act objectively in the best interests of the Manager and the Group, constructively challenges Management and reviews its performance, and holds Management accountable for performance. The Managers oversee Management to ensure transparency and accountability to key stakeholder groups.

During FY2021, the Boards have continued to spend time monitoring the impact of the ongoing COVID-19 pandemic and has been working closely with Management in reviewing the business opportunities and challenges posed by the COVID-19 pandemic. The Board has tasked management to prioritise health, well-being and safety of employees and customers in all aspects of the Group's operations. In addition, the Board has been paying close attention to the level of financial discipline and portfolio management rigour across the Group's businesses.

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In response to the COVID-19 pandemic, the Management has improved the FHT's services and offerings while striving for the highest international health and safety standards at FHT's properties for the well-being of hospitality guests and employees. A #FraserCares programme was launched to raise the bar for hygiene, safety and reservations flexibility for every property under Frasers Hospitality1 worldwide. This programme includes enhancing operational protocols and implementing comprehensive health and safety procedures for facilities. The Management also worked closely with hotel and serviced residence operators managing the properties under FHT's portfolio to improve health and well-being standards, such as conducting safety training relating to COVID-19 awareness, hygiene standards and safety and security, for employees.

To mitigate the impact of the COVID-19 pandemic on FHT's earnings, FH-REIT had relied on the contractual minimum master lease income that provides downside protection. At the operating level of our properties, the hotel and serviced residence operators persisted in pursuing alternative sources of stable revenue for the portfolio, such as tapping on opportunities to support some local government agencies by providing hotel accommodation for returning residents serving their quarantine orders or stay-home notices. At the same time, Management continued with cost containment measures to conserve cash flow and also tapped on available government support measures to help businesses, specifically granted during COVID-19 pandemic. In the UK and Malaysia where there had been prolonged lockdowns imposed by the governments, Management had scaled down or temporarily suspended operations in certain properties in order to minimise cash burn.

The Chairman

The chairman of the Board (the "Chairman") leads the Board2. The Chairman, provides leadership and direction in the review of Managers' corporate strategy and objectives, sets the right ethical and behavioural tone and ensures the Board's effectiveness by, among other things, promoting and maintaining high standards of corporate governance and transparency, encouraging active and effective engagement, participation from all directors of the REIT Manager (also the Trustee-Manager Directors, collectively, the "Directors") and facilitating constructive and appropriate relations among and between them and Management. The Chairman sets the agenda for each Board meeting to take full account of the issues and concerns of the Directors and the Management team, promotes a culture of openness and debate at Board meetings and encourages Directors to engage in productive and thorough discussions and constructive debate on strategic, business and other key issues pertinent to the business and operations of the Group, the REIT Manager and the Trustee-Manager, leading to better decision-making and enhanced business performance. The Chairman also enhances the standing of the FHT with the outside world and ensures effective communication with Stapled Securityholders, financial analysts and the media on critical issues that could significantly affect the reputation and standing of FHT.

The Chairman also presides over the Annual General Meeting each year and any other general meetings of Stapled Securityholders. The Chairman addresses, and/or requests the Chief Executive Officer (the "CEO") of the Managers to address, Stapled Securityholders' queries and ensures that there is clear and open dialogue between all stakeholders

Role of the CEO and Management

The Management is led by the CEO of the Managers. The CEO is responsible for the execution of the strategies and policies as approved by the Board, leading, promoting and conducting the affairs of FHT and the Managers with the highest standards of integrity, corporate governance and transparency. The CEO is responsible and is accountable to the Board for the conduct and performance of Management. The CEO and Management team of the Managers, are responsible for executing the Boards' strategies and policies as approved by the Board and are responsible for the planning, direction, control, conduct and performance of the business operations of the Group. With the support of the Management, the CEO seeks business opportunities, drives new initiatives and is responsible for the operational performance of the Group and building and maintaining strong relationships with stakeholders of the Group.

• Frasers Hospitality is a strategic business unit of FPL.

• In this Corporate Governance Report, references to the "Board", "Chairman", "Directors" and similar words and expressions are intended to mean the Board, Chairman, Directors, etc. of each of the REIT Manager and the Trustee-Manager (save where the context otherwise requires), as during FY2021, the Boards and Management comprised the same persons.

Contents

Overview

Year In Review

Leadership

Portfolio

Reports

Financial

109

Section

Corporate

Governance

Division of Responsibilities between the Chairman and the CEO

The Chairman and the CEO are separate persons and the division of responsibilities between the Chairman and the CEO is clearly demarcated, avoids concentration of power and ensures a degree of checks and balances, an increased accountability, and greater capacity of the Board for independent decision making. Such separation of roles between the Chairman and CEO promotes robust deliberations by the Boards and Management on the business activities of FHT.

Relationships between the Boards and the CEO

None of the members of the Boards and the CEO are related to one another, and none of them has any business relationships among them.

Board Committees

Each of the REIT Manager Board and the Trustee-Manager Board has formed committees of their respective boards (the "Board Committees") to oversee specific areas, for greater efficiency and has delegated authority and duties to such Board Committees based on written and clearly defined terms of reference. The terms of reference of the Board Committees set out their compositions, authorities and duties, including reporting back to the Boards. Each of the REIT Manager Board and the Trustee-Manager Board has constituted two Board Committees, namely, the Audit, Risk and Compliance Committee ("ARCC"), and the Nominating and Remuneration Committee ("NRC").

The ARCC of the REIT Manager ("REIT Manager ARCC") and the ARCC of the Trustee-Manager("Trustee-ManagerARCC") comprise the same persons. The NRC of the REIT Manager ("REIT Manager NRC") and the NRC of the Trustee-Manager("Trustee-ManagerNRC") also comprise the same persons.

Minutes of all Board Committee meetings are circulated to the respective Boards so that Directors are aware of and kept updated on the proceedings, matters discussed and decisions made during such meetings, and to enable the Directors to weigh in on any key points under consideration.

	Audit, Risk and Compliance Committee(1)
Membership	Key Objectives
David Wong See Hong, Chairman	Assist Board in fulfilling responsibility for overseeing
Law Song Keng, Member	the quality and integrity of the accounting, auditing,
Liew Choon Wei, Member	internal controls, risk management and financial
	practices of the Manager

Note:

1. Unless otherwise stated, the information provided herein is as of 30 September 2021.

As at 30 September 2021, each of the ARCCs3 comprises non-executive Directors, all of whom, including the chairman of each of the ARCCs, are independent Directors. All members of the ARCC, including the chairman of each of the ARCCs, are appropriately qualified and collectively possess relevant accounting and related financial management expertise or experience. Their collective wealth of experience and expertise enables them to discharge their responsibilities competently.

Under the Terms of Reference of each of the ARCCs, a former partner or director of FHT's existing auditing firm or auditing corporation should not act as a member of the ARCC: (a) within a period of two years commencing on the date of his ceasing to be a partner of the auditing firm or a director of the auditing corporation; and in any case, (b) for as long as he has any financial interest in the auditing firm or auditing corporation. None of the members of the ARCCs is a former partner of FHT's external auditors, KPMG LLP and none of the members of the ARCCs holds any financial interest in FHT's external auditors, KPMG LLP.

• In this Corporate Governance Report, references to the "ARCC" are intended to mean each of the REIT Manager ARCC and the Trustee-Manager ARCC, and references to the "NRC" are intended to mean each of the REIT Manager NRC and the Trustee-Manager NRC (save where the context otherwise requires)