The ASX Corporate Governance Council (“the Council”) has issued Principles of Good Corporate Governance and Best Practice Recommendations. The Board of Centuria Property Funds No.2 Limited (CPF2L), as the responsible entity of the Centuria Industrial REIT (CIP) has established corporate governance practices in line with the Council’s recommendations.
As recognised by the Council, corporate governance is the system by which companies are directed and managed. It influences how the objectives of the company are set and achieved, how risk is monitored and assessed and how performance is optimised. There is no single model of good corporate governance. At Centuria, good corporate governance will evolve with our changing circumstances and will be tailored to meet those circumstances.
Once per year the Board of CPF2L approves a corporate governance statement in relation to the Centuria Industrial REIT (CIP) for publication. You can read the latest CIP Corporate Governance Statement (as @ 25 September 2017).
Links to relevant Centuria Capital Group policy and procedure documents referred to within the CIP Corporate Governance Statement can be found here:
- Board Charter
- Audit, Risk Management and Compliance Committee Charter
- Nomination & Remuneration Committee Charter
Policies & Procedures
- Procedures for the Appointment and Selection of New Directors
- Directors’ and Employees’ Securities Trading Policy
- Code of Conduct
- Auditor Selection, Appointment and Rotation
- Diversity Policy
Summary of Conflicts of Interest Policy
CPF2L recognises its responsibilities in relation to conflicts of interest and related party transactions and has a conflicts of interest policy in place that governs the way in which CPF2L manages such transactions or conflicts.
Through the application of this policy, CPF2L is committed to managing perceived, potential and actual conflicts of interest through:
- documenting policy and procedures on conflicts of interest;
- identifying, disclosing, assessing and evaluating conflicts of interest;
- avoiding conflicts of interests if appropriate to properly protect investors/policy owners’ interests;
- taking appropriate steps to ensure the fair treatment of any fund and all investors potentially impacted by the conflict which may include:
- seeking external advice or representation for different related party entities;
- separation or “quarantining” of decision-makers – particularly in relation to the consideration of the interests of investors in different funds or in different classes;
- documentation of procedures adopted which may include preparation of reports evaluating and considering conflict issues;
- escalation of decision-making;
- bench-marking transactions or arrangements against market practice or otherwise ensuring that arrangements are on arm’s length terms;
- disclosure to investors/policy owners (preferably upfront); and
- approval by investors/policy owners, if required by law;
- dealing in an open manner with conflicts of interest;
- board supervision of conflict of interest issues; and
- reviewing the application of its policies and procedures on a regular basis (at least annually) (for example by reviewing the identification and treatment of conflicts of interest during the review period).
Summary of Risk Management Framework
CPF2L has established a Risk Management Framework (RMF) that outlines the framework that applicable to CPF2L and CIP.
CPF2L RMF is designed to ensure that Centuria uses appropriate best practice consistent with the standards and principles identified by the Australian Securities Exchange (ASX), the Australian Securities and Investments Commission (ASIC) and Australian Standard AS/NZS ISO 31000:2009.
The RMF recognises the management of risk occurs at all levels of the organisation. It applies to risks at a strategic, tactical and operational level. Where appropriate, the framework is applied to specific projects, to assist with specific decisions or to manage specific recognised risk areas.
The RMF consists of the totality of the people, systems, policies and procedures that collectively form the framework for the management of risks across Centuria.
The RMF itself includes all systems, processes, policy and procedures documents, governing boards, committees (both board delegated and management) and people. It includes Centuria’s Risk Appetite Statement, material risks and strategy for managing those material risks.
The key objectives of Centuria’s RMF are to ensure:
- the strategic objectives of Centuria and its managed investment schemes are achieved by providing a framework to minimize undesirable outcomes associated with the delivery against those strategic objectives and goals;
- Material Risks are identified and managed to levels and within parameters that are acceptable to the Board;
- the prudent and sound management of the organisation and managed investment schemes;
- decisions are made with awareness and understanding of risks;
- a sound risk management culture is established and maintained throughout the institution;
- senior management take the steps necessary to monitor and manage all material risks consistent with the strategic objectives, risk appetite statement and policies approved by the Board;
- the operational structure of Centuria facilitates effective risk management;
- policies and processes are developed for risk-taking that are consistent with the risk management strategy and the established risk appetite;
- uncertainties attached to risk measurement are recognised, and the limitations and assumptions relating to any models used to measure components of risk are well understood; and
- appropriate controls are established that are consistent with the institution’s risk appetite, risk profile and capital strength, and are understood by, and regularly communicated to, relevant staff.
Centuria’s RMF is governed by four key elements. These are:
- Risk governance structures and people – the various boards, committees and personnel that oversee and implement the RMF;
- Risk management governance documents – the documentation that has been put in place to record and document risk information and to provide the principles, guidance and process for the Board and Management to identify, manage, mitigate or control identified risks applicable to Centuria;
- Assurance structures – the process of review by internal and external parties that provide assurance to the Board that key risks are managed and controlled; and
- Information systems and resources – the information systems and resources that support the management of risk through control and reporting.
Broadly, CPF2L’s strategy for managing risk is to:
- describe each Material Risk identified, and the institution’s approach to managing these risks through its Material Risk Records;
- list the policies and procedures dealing with risk management matters;
- summarise the role and responsibilities of the risk management function ;
- describe the risk governance relationship between the Board, board committees and senior management with respect to the risk management framework; and
- outline the approach to ensuring all persons within the institution have awareness of the risk management framework and for instilling an appropriate risk culture across the institution.
As a listed property fund, CIP will be exposed to a number of risks in its ongoing operation. These risks include:
- Property market risks – potential adverse impacts on the Fund’s performance due to market factors such as:
- a change in valuations;
- a change to AREIT markets (e.g. investor sentiment or appetite)
- a change to debt markets (increasing cost of debt or reduced availability)
- Leasing risks
- Capital expenditure risks
- Asset risks
- Tenancy risks
- Gearing / Finance risks
- Strategic risks
- Liquidity risks
- Environmental risks.
Summary of Continuous Disclosure Policy
CPF2L is committed to maintaining the confidence of market participants that trading in the securities of the CIP takes place in a fully informed manner and that CIP is compliant with itscontinuous disclosure obligations by:
- complying with the general and continuous disclosure principles contained in the Listing Rules and the Corporations Act;
- preventing the selective or inadvertent disclosure of material price sensitive information;
- ensuring that securityholders and the market are provided with full and timely information about the Centuria Entity and its activities;
- ensuring that all market participants have equal opportunity to receive externally available information issued by the Centuria Entities; and
- ensuring that all announcements made by the Centuria Entities are factual, balanced, clear and objective.
The Board of CPF2L is ultimately responsible for CIP’s compliance with its continuous disclosure obligations.
The Board will, subject to time constraints, generally consider and approve announcements regarding significant matters before they are released to the market. Such matters include proposed company restructures, capital raisings, security buy-backs, capital returns, financial results and other matters as determined by the Board from time to time.
The Boards have generally delegated responsibility for compliance with the various companies’ continuous disclosure obligations to the Head of Real Estate and Funds Management and the Company Secretary.
In accordance with Listing Rule 12.6, CPF2L has nominated the Company Secretary as the person responsible for communicating with ASX in relation to Listing Rule matters.
The Company Secretary is also primarily responsible for the Company’s compliance with this policy document and must:
- manage the CIP’s continuous disclosure policy, including:
- taking all reasonable steps to ensure that CIP complies with its continuous disclosure obligations as set out in Listing Rules, the Corporations Act and this policy document;
- overseeing the effective disclosure of information in accordance with this policy document; and
- raising employees’ awareness of CIP’s continuous disclosure obligations;
- communicate with ASX (including lodging notices or announcements with ASX); and
- ensure that Board members are given a copy of each continuous disclosure announcement immediately after release to ASX.
The Company Secretary, in conjunction with the Head of Real Estate and Funds Management, as the case requires, will:
- consider whether a continuous disclosure announcement is required in relation to a particular matter, having regard to the decision-making process recommended by ASX in its Guidance Note 8;
- give full consideration to the quality and adequacy of material information that the Centuria Entity releases to the market;
- consider and respond to any ‘price query’ or ‘aware’ letters issued by the ASX to the Centuria Entity;
- refer significant or contentious continuous disclosure announcements to the Board and make recommendations regarding the proposed disclosure;
- approve the release of all information to ASX in circumstances where the matter is significant or contentious and it is not practicable to convene a Board meeting; and
- ensure there are systems in place for the timely disclosure of all material information to the market