Principle 1: Lay solid foundations for management and oversight
Companies should establish and disclose the respective roles and responsibilities of board and management.
CMIL is the Responsible Entity of CFS Retail Property Trust (CFX or the ‘Trust’). CMIL is a wholly owned subsidiary of Commonwealth Bank of Australia (the ‘Bank’).
The role of the Responsible Entity is to manage the Trust in the unitholders’ best interests in accordance with the Trust Constitution and the Corporations Act 2001 (Cth) (the ‘Act’).
• The Board of the Responsible Entity
• Charter
• Compliance Committee
• Compliance monitoring and reporting
• The Manager
• Performance evaluation
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The Board of the Responsible Entity
The Board of the Responsible Entity is appointed by the Bank and holds office until removed by the Bank. Ultimate responsibility for corporate governance matters resides with the Board of Directors of CMIL.
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Charter
The Board has adopted a Charter that sets out the roles and responsibilities of the Board of Directors.
In the Charter the Board acknowledges that in discharging its duties to the unitholders of the Managed Investment Schemes for which the Company acts as a Responsible Entity the interests of the unitholders may be different from those of its shareholder and that it has a duty to act in the best interests of unitholders including, where necessary, situations where those interests may conflict with the interests of the shareholder.
The Charter includes that the Board will:
• maintain corporate governance standards;
• adhere to the "if not why not" principles based approach of the ASX Corporate Governance Council’s Governance Principles and Recommendations;
• oversee the business and affairs of the Company by:
- establishing, with Management, the strategies and financial objectives to be implemented by Management for the Funds and to monitor the performance of Management;
- monitoring the financial and business operations of the Company and its Funds against targets and strategic objectives;- overseeing the systems of risk management by approving accounting policies, financial statements and reports, risk management policies, operational risk policies and procedures and systems of internal controls;
- approving major acquisitions, divestments and developments for the Funds which are in excess of the delegation to Management; and
- approving capital management initiatives for the Funds; and
• review the Board Charter at least annually to ensure it remains current, relevant and appropriate.
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Compliance Committee
The Compliance Committee is appointed by the Board of the Responsible Entity. The Committee has a Charter, approved by the Board, which sets out the Committee’s duties, responsibilities and reporting requirements.
The Committee has a statutory obligation to monitor the extent to which the Responsible Entity complies with the Trust’s Compliance Plan, Trust Constitution and the Act.
The Committee meets quarterly, or as necessary, and is provided with comprehensive compliance reports. The Committee reports its findings to the Responsible Entity.
The Committee consists of six members, four of whom are independent. The members are:
- Harley McHutchison (Chairman) independent non-executive member
- Paul Dortkamp independent non-executive member
- Penni James independent non-executive member
- David Robinson independent non-executive member
- Michael Venter internal executive member
- Peter Taylor internal executive member
Independence has been assessed using the same criteria as applying to the independent Directors of the CMIL Board.
The Compliance Committee has access to all information relevant to the Responsible Entity’s compliance with the Compliance Plan and the Act.
Under the Act, the Compliance Committee, in carrying out its functions, may commission independent legal, accounting or other professional advice or assistance, at the reasonable expense of the Responsible Entity.
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Compliance monitoring and reporting
There is a dedicated risk management and compliance team in place that is responsible for reviewing and monitoring the efficiency of compliance and operational risk management systems on an ongoing basis, and ensuring that appropriate compliance and risk mitigation measures are in place.
CMIL’s compliance framework is consistent with the Australian Standard for Compliance Programs (AS/NZS 3806:2006) and ASIC regulatory guidance for meeting general obligations and licence conditions. The compliance framework is integrated with the risk management framework described under Principle 7.
The compliance personnel provide reports at least quarterly for the Board and the Compliance Committee, as well as for the Manager and business areas responsible for the day-to-day delivery of business activities.
Compliance personnel are independent of the business, and may report matters directly to the Board without reference to any other party. This independence is underpinned through the Bank’s compliance framework which has been adopted by CMIL.
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The Manager
The Act empowers the Responsible Entity to engage agents to act on its behalf; however, it remains responsible for the actions of those agents.
The Responsible Entity has appointed Colonial First State Property Retail Pty Limited to manage the Trust. Colonial First State Property Retail Pty Limited is a wholly owned subsidiary of the Bank.
The appointment of the Manager is made under a Management Agreement. Under the Management Agreement the Manager is delegated to undertake all of the operational management duties of the Responsible Entity, except those that require the holding of an Australian Financial Services License.
The Manager provides regular reporting to the Responsible Entity and an annual certification of its ongoing capacity to continue to meet its obligations in accordance with the Management Agreement.
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Performance evaluation
Personnel engaged in the operational activities of the Trust are employees of the Bank. The Bank has in place a performance evaluation system that includes the setting of annual key performance indicators for each employee that are measurable and quantifiable, and are reviewed on a semi-annual basis. Amongst other things, the evaluation incorporates specific performance targets that directly relate to the Trust for the Trust’s management team. During the financial year, senior Trust personnel were reviewed in accordance with this process.
An integral part of the performance structure is the requirement for ongoing professional development of personnel. This includes training programs on a wide range of matters including risk management, compliance, market and industry knowledge, diversity and Trust obligations.
Where external service providers are engaged to provide specified activities for the Trust, the engagement is under contract and includes performance and service delivery requirements that are subject to monitoring, review and reporting to CMIL.
