Corporate Governance Principles
Principle 1: Lay solid foundations for management and oversight
Responsibility for the overall direction and management of RPF, RPF's corporate governance and the internal workings of RPF will rest with the Boards of the Company and PIML.
The constitutions of the Company and PIML set out amongst other things the procedure for the appointment and removal of directors, requirements for board meetings and remuneration policy.
Both the Company and PIML have internal procedures for monitoring management and ensuring appropriate oversight. These procedures include:
• a compliance plan for the Trust which sets out the monitoring and governance requirements of the responsible entity relevant to the Trust (Compliance Plan); and
• a formal Board Charter adopted by the Board of the Company which sets out the functions and responsibilities reserved to the Board and those delegated to the Chief Executive Officer (CEO) and the Board Audit Committees. The Board Charter is available on the RPF website at www.redcape.com.au.
As disclosed in the Stapled Security Prospectus and Product Disclosure Statement for RPF dated 25 June 2007 (Offer Document), RPF has delegated day to day control of its assets to RPF Management Pty Limited (Manager) pursuant to service agreements between the Manager and the Company and the Manager and PIML (Service Agreements). The Manager will provide all investment, asset management and general administrative services to RPF (other than certain compliance and supervisory services which will be provided by PIML). RPF will establish an investment committee which will review the Manager's advice for compliance with the law, the Trust and Company Constitutions, RPF's investment criteria, the Services Agreements and the interests of Security holders. The Manager also advises the Board of the Company and PIML on corporate governance matters.
Principle 2: Structure the board to add value
The Board of the Company currently consists of four directors, all of whom three are independent. Two of the directors acts as Executive Directors. The roles of Executive Chairman and CEO are not exercised by the same individual.
The Board of the Company considers that although the Principles recommend having a majority of independent directors, having two rather than three independent directors will not interfere with the Board's ability to adequately discharge its duties or exercise independent judgment. The Board believes that notwithstanding the minority of independent directors, the composition of the Board represents an appropriate mix of skills, experience and expertise.
The Board of PIML currently consists of five directors, none of whom are independent. As each of the directors on PIML's board is an executive of Trust Company Limited, PIML's parent company, PIML has established an Audit, Risk and Compliance Committee – MIS comprising a majority of external, independent members to act as the compliance committee of the Trust for the purposes of Part 5C of the Corporations Act. Each of the members of this committee are 'external' members for the purposes of the Corporations Act.
The Boards believe that their membership should be comprised of directors with an appropriate mix of skills, experience and expertise. All directors will bring an independent judgment to bear in decision-making, and will seek independent professional advice if necessary.
Having regard to the size of the Boards and the delegation of key functions to the Manager, the Boards do not consider that there is sufficient value in each Board establishing a nomination committee. The Boards will, however, continue to monitor the position and may establish a nomination committee in the future.
Principle 3: Promote ethical and responsible decision-making
The Boards of the Company and PIML have adopted Codes of Conduct designed to promote integrity, responsibility and accountability in the conduct of their respective businesses.
Both the Company and PIML have adopted various policies of employee and officer conduct, including in relation to:
• related party transactions;
• compliance arrangements; and
• insider trading.
Principle 4: Safeguard integrity in financial reporting
The Boards have implemented processes to ensure that the presentation of RPF's financial position and financial performance is accurate, complete and in accordance with accounting standards.
The CEO and Chief Financial Officer (CFO) are both required to state in writing to the Boards that RPF's financial reports present a true and fair view, in all material respects, of the Fund's financial condition and operational results and are in accordance with relevant accounting standards.
The Company has established a Board Audit Committee to assist in the execution of the Board's responsibilities, and has adopted a formal Board Audit Committee Charter for the Committee. A copy of the Charter is available on the Group's website and will be reviewed, if appropriate, from time to time.
The Company intends to ensure that the membership of the Board Audit Committee is comprised of a majority of independent members when required pursuant to the ASX Listing Rules. Having regard to the size of the Boards, at present RPF does not consider failing to have, at this time, an independent board audit committee as recommended by the Principles will be detrimental to the integrity and quality of RPF's financial reporting and systems.
The Board Audit Committee intends to meet periodically with the external auditor to discuss and review issues arising from the external audit of RPF.
Principle 5: Make timely and balanced disclosure
RPF is committed to providing timely and balanced disclosure of all material matters concerning the company in accordance with its continuous disclosure obligations under the ASX Listing Rules and the Corporations Act. Accordingly, RPF has adopted an External Communications Policy on the recommendation of the Manager.
To give effect to the External Communications Policy and meet RPF's continuous disclosure obligations, the Company has adopted formal procedures for dealing with potentially price sensitive information and PIML also has appropriate procedures in place.
All material disclosures to the market will be published on the RPF website.
Principle 6: Respect the rights of Security holders
RPF is committed to providing timely information to security holders. RPF's External Communications Policy is designed to promote effective communication with, and best serve the interests of, investors through market disclosure, direct reporting to security holders, Annual General Meetings (AGMs) and prompt responses to direct queries.
The external auditor will attend AGMs and will be available to answer secruityholder queries about the conduct of the audit and the preparation and content of the auditor's report.
Complaints will be dealt with in accordance with RPF's Complaints Handling Policy as adopted on the recommendation of the Manager.
Principle 7: Recognise and manage risk
PIML has in place a formal risk management policy which is overseen by the Audit, Risk and Compliance Committee – MIS of PIML. This committee will also act as the compliance committee of the Trust for the purposes of Part 5C of the Corporations Act and report to PIML on all audit, risk and compliance issues arising from the Trust's activities.
Under the current profile, the material risks of RPF reside in the Trust. Accordingly, PIML has the key responsibility for managing the current risks of RPF.
To enhance management accountability, the CEO and the CFO of the Company will provide the
Boards with written confirmation that RPF's risk management and internal compliance and control system is operating efficiently and effectively in all material respects.
At such time as the profile of RPF materially changes, the Company intends to adopt a formal policy on risk oversight and management.
Principle 8: Encourage enhanced performance
The Board of the Company will annually consider, review and discuss the performance of the Board, including assessment of its Board Audit Committee and individual assessment of those directors required to stand for re-election at the next AGM and of key executives.
The CEO and CFO are seconded by the Manager under the terms of the Service Agreements. Annually, the Boards will also consider and review the performance of certain personnel of the Group, including the CEO and CFO and report back to the Manager.
PIML's parent company regularly reviews PIML's performance and composition of committees and directors.
Both the Company and PIML have access to information they need to effectively and efficiently discharge their responsibilities and can obtain independent professional advice if necessary.
Principle 9: Remunerate fairly and responsibly
The Board of the Company is responsible for ensuring that the directors of the Company are remunerated fairly, in light of their performance, and in accordance with the requirements of the ASX Listing Rules. PIML's parent company (Trust Company Limited) is responsible for deciding and paying the remuneration of the Directors of PIML, and complies with Principle 9.
The remuneration of the CEO and CFO are payable from the fees paid to the Manager under the Service Agreements. The remuneration of the independent directors on the board of the Company is paid by the Company in accordance with its constitution. Executive directors may be paid remuneration greater than that of non-executive directors to fairly reflect their additional duties, and may be paid by the Manager under the Services Agreements rather than by the Company.
Given the level and nature of services provided under the Services Agreements, the Boards do not consider that there is sufficient value in establishing a remuneration committee at present. The details of directors' remuneration for RPF will be disclosed in RPF's annual report.
Principle 10: Recognise the legitimate interests of stakeholders
Both the Company and PIML have Codes of Conduct addressing RPF's legal obligations to stakeholders, including directors, employees and security holders. The Company has adopted a Code of Conduct to apply to all of its directors and senior executives. The Code of Conduct sets out the fundamental values which form the basis of, and underpin all of Company’s business relationships and sets out key objectives for the Company to achieve in compliance with its relevant legal obligations.
PIML has adopted a Code of Conduct dealing with, amongst others, its Ethical Policies, Privacy Policy, Financial Dealing Policy, Gifts and Benefits Policy, Compliance Risk and Audit Policies and Corporate Governance.