Governance

Rigorous corporate governance ensures the Trust is run appropriately and is both successful and accountable and a consolidated copy of the Trust Deed can be found here.

The Trust

Vital Healthcare Property Trust (Vital) is a unit trust established under the Unit Trust Act 1960 by a Trust Deed dated 11 February 1994 as subsequently amended and replaced.

On 30th November 2016 Vital became a registered managed investment scheme under the Financial Markets Conduct Act 2013.

On 28th February 2020, the Manager proposed a restructuring of the Vital's corporate structure to facilitate a foreign exempt listing on the Australian Securities Exchange 'ASX'. Amendments to Vital's Trust Deeds required to effect the proposal are contained in the following documents:

- Vital NZ Trust Deed
- VHPT / Vital Australia Trust Deed

Mark-ups to show the proposed variations are as follows:

- Vital NZ Trust Deed (mark-up)
- VHPT / Vital Australia Trust Deed (mark-up)

You can also view these at our registered office at Level 16, AIG Building, 41 Shortland Street, Auckland any time during normal hours on the Companies Office website at (https://disclose-register.companiesoffice.govt.nz/disclose).

The Supervisor

The Supervisor of Vital is Trustees Executors Limited. The Supervisor is required to be licensed by the FMA under the Financial Markets Supervisors Act 2011 to act as a trustee of a unit trust.

The Manager

The Manager of Vital is NorthWest Healthcare Properties Management Limited, a wholly owned subsidiary of NWI Healthcare Properties LP. The Manager has responsibility for the management of Vital in accordance with the Trust Deed. NorthWest Healthcare Properties Management Limited is licensed under the Financial Markets Conduct Act 2013 as a manager of registered schemes.

The Manager’s responsibilities include the day-to-day management of Vital’s portfolio of properties and assets, negotiating the acquisition and disposal of assets, development and construction planning and management, treasury and funding management, ensuring Vital meets its financial, reporting and other statutory and regulatory obligations and communicating with unitholders and the market.

Vital does not engage or employ any Directors or employees of its own. The Manager provides a highly experienced and diverse range of professionals with expertise across a range of areas.

Stipulated within the Trust Deed is the basis on which the Manager is entitled to receive management fees and incentive fees.

Base management fees are charged at:

• 0.65% per annum of the monthly average of the gross value of the assets of the Trust up to $1 billion,

• 0.55% per annum of the monthly average of the gross value of the assets of the Trust between $1 billion and $2 billion,

• 0.45% per annum of the monthly average of the gross value of the assets of the Trust between $2 billion and $3 billion, and

• 0.40% per annum of the monthly average of the gross value of the assets of the Trust over $3 billion.

Activity services and activity fees are charged based on the following categories:

a) Leasing

Vital pays the Manager leasing fees where the Manager has negotiated leases instead of or alongside a real estate agent. Consistent

with general market rates, these fees are charged at 11% of the annual rental for terms of 3 years or less (to a minimum of $2,500),

12% of the annual rental for terms of 3 years, and 12% plus an additional 1% for each year greater than three years (to a maximum of

20%).

Lease renewals are charged at 50% of a new lease. Structured rent reviews or market reviews which do not result in a rental increase

are charged an administration fee of $1,000. Open market reviews are charged at 10% of the rental increase achieved in the first year.

Leasing fees are capitalised to the respective investment or development property in the Statement of Financial Position and

amortised over the term of the life of the lease.

b) Property management

Vital pays the Manager property management fees where the Manager acts as the property manager instead of or alongside a real

estate agent. These fees are charged at 1% - 2% of gross income depending on the type of property. These fees are expensed through

direct operating expenses in the year in which they arise.

c) Facilities management

Vital pays a facilities management fee on a cost recovery basis to the Manager. These fees are expensed through direct operating

expenses in the year in which they arise.

d) Acquisitions

Vital pays fees to the Manager for managing the due diligence, financing, legal aspects and settlement of the purchase of properties

instead of or alongside a real estate agent. These fees are charged at 1.5% of the purchase price. Acquisition fees are capitalised to

the respective investment or development property in the Statement of Financial Position.

e) Development management

Vital pays development management fees where the Manager acts as a development manager on Vital developments. These fees are

charged at 4% of the committed spend, exclusive of land. Development management fees are capitalised to the respective investment

or development property in the Statement of Financial Position.

f) Project management

Vital pays project management fees to the Manager for managing capital expenditure projects, instead of engaging an external project

manager. These fees are charged at 2% of the committed spend where the Manager is the project lead and 1% of committed spend

where the Manager has an oversight role. Project management fees are capitalised to the respective property in the Statement of

Financial Position.

The incentive fee is an amount equal to 10% per annum of the average annual increase in the Net Asset Value of Vital over the relevant financial year and two preceding financial years subject to a three year high-water mark.

The Board and Independent Directors

The Manager recognises that Independent Directors are important in assuring unitholders that the Board is properly fulfilling its role and is diligent in holding management accountable for its performance. The procedures in place for determining independence is whether the Director is independent of management and free of any business or other relationship that could materially interfere with, or could reasonably be perceived to materially interfere with, the exercise of their unfettered and independent judgement. As defined in the NZX Listing Rules, the Board has determined that three of its members: Graham Stuart, Andrew Evans and Michael Stanford are Independent Directors. Paul Dalla Lana and Bernard Crotty are considered not to be independent.

Corporate governance

The full version of the following policies and governance documents are available:

Code of Conduct

Board Charter

Audit Committee Charter

Statement of Investment Policy and Objectives

Joint Investment Policy

Security Trading Policy

Whistleblower Policy

Corporate Governance Statement NZX Code

Introduction

Corporate governance is the systems under which an organisation is guided, managed and measured. Good corporate governance is important to promote market and investor confidence. Ultimate responsibility for corporate governance of Vital resides with the Board of Directors of the Manager. The Board acknowledges strong corporate governance and stewardship as fundamental to the strong performance of Vital and, accordingly, their commitment is to the highest standards of business behaviour and accountability. It is with these objectives in mind that the Board has adopted its current framework, which, in the Board’s opinion materially comply with the NZX Corporate Governance Best Practice Code (NZX Code) and the Financial Markets Authority corporate governance principles and guidelines, unless otherwise stated.

A strong, independent Board

The Manager is committed to having an effective Board providing a balance of independent skills, knowledge, experience and perspectives. The Constitution of the Manager provides for there to be not more than seven Directors, nor less than three Directors. All the members of the Board are Non-Executive Directors. All bring a significant breadth and depth of expertise and have the composite skills to optimise the financial and portfolio performance of Vital and returns to unitholders.

The Board does not impose a restriction on the tenure of any Director as it considers that such a restriction may lead to the loss of experience and expertise from the Board. Appointment Unitholders have the opportunity to nominate two of the Independent Directors of the Manager required by the NZX Listing Rule 3.3.1.(c). Unitholders are able to nominate and vote on one Independent Director of the Manager each year. The nominee receiving the most votes will be approved as a Director of the Manager by the Manager’s shareholders, and will hold the position for a two-year term.

Board committee structure operating under formal charters

Consistent with NZX guidelines, the Board uses a number of committees to assist in the delivery of its duties and responsibilities. Board committees assist with the execution of the Board’s responsibilities to unitholders. Each committee operates under a charter agreed by the Board, setting out its role, responsibilities, authority, relationship with the Board, reporting requirements, composition, structure and membership.

Audit Committee

The Board has established an Audit Committee, which is responsible for overseeing the financial and accounting responsibilities of Vital. The minimum number of members on the Audit Committee is three. All members must be Directors, the majority must be Independent Directors and at least one member must have an accounting or financial background. The members of the Audit Committee are Claire Higgins (Chair), Andrew Evans and Bernard Crotty.

The Audit Committee assists the Board in fulfilling its corporate governance and disclosure responsibilities with particular reference to financial matters, and internal and external audit, and is specifically responsible for:

Recommending to the Board the appointment/removal of Vital’s external auditor
Supervising and monitoring external audit requirements
Reviewing annual and interim financial statements prior to submission for Board approvals
Reviewing and approving quarterly distributions with recommendation of the same for Board approvals
Reviewing the performance and independence of the external auditor
Monitoring compliance with the Unit Trusts Act 1960, Financial Reporting Act 2013, Companies Act 1993 and the NZX Listing Rules

In addition to the formal charter under which it operates, the Audit Committee has also developed a Charter of Audit Independence, which sets out the procedures that need to be followed to ensure the independence of the Trust’s external auditor.

Due Diligence Committee

From time to time the Board establishes Due Diligence Committees (DDC) to report on the due diligence process in relation to any potential transaction for Vital of material size or complexity. An example would be a material portfolio acquisition or equity capital raising. A DDC will normally include all Directors, relevant management staff and external consultants appropriate for the transaction.

Remuneration Committee

The NZX Code recommends that a Remuneration Committee be established to benchmark remuneration packages for Directors and senior employees and that the information be disclosed to investors. A key feature of the external management structure that Vital operates under is that all employment expenses are the responsibility of the Manager, not Vital. Consequently, a Remuneration Committee is not considered necessary by the Board at this time.

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