Corporate governance statement

You may read our full Corporate Governance statement below or simply click onto the section headings to take you directly to the relevant section.

Kiwi Income Property Trust (the Trust) is a unit trust established in Auckland under a Deed of Trust dated 21 August 1992, and is registered under the Unit Trusts Act 1960. 

UNDER THE TERMS of the Trust Deed, Kiwi Income Properties Limited (the Manager) is the Manager of the Trust and New Zealand Permanent Trustees Limited (the Trustee) is the Trustee.

The Board of Directors of the Manager (the Board) and the Trustee assume responsibility for corporate governance of the Trust. This responsibility includes overseeing the business and the affairs of the Trust, establishing with management the strategies and financial objectives to be implemented by management, and monitoring the performance of management directly and indirectly through subcommittees.

In fulfilling this obligation, the Board and the Trustee acknowledge the need for the highest standards of corporate governance and ethical conduct. The Trust’s corporate governance framework primarily comprises the Board and the Audit and Risk Committee, which operate in accordance with the principles set out in their respective charters. However, overlaying this is an additional level of governance and compliance to which the Manager is subject by reason of its ownership by Colonial First State Property Limited and its ultimate parent company, the Commonwealth Bank of Australia. Consequently, in addition to the Board and Audit and Risk Committee charters, the Board is also required to be cognisant of protocols and processes specific to companies within the Commonwealth Bank of Australia Group.

Trustee's role

The Trustee is authorised to act as a trustee company under the Trustee Companies Act 1967. The Trustee was established in 1929 and is a wholly owned subsidiary of Public Trust. The Trustee’s primary role is to ensure that the Manager complies with its obligations under the Trust Deed. As part of that role, the Trustee takes title to the Trust’s assets. The Trust Deed also confers certain discretions and powers to approve actions (including investments and divestments) proposed to be taken by the Manager. In those cases, the Trustee does so having due regard to the interests of Unit Holders. The Trustee also acts as trustee for the holders of the Mandatory Convertible Notes.

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Manager's role

The role of the Manager is to manage the Trust in accordance with the Trust Deed and the law. Ultimate responsibility for corporate governance resides with the Board of Directors. The Board’s actions and its conduct are governed by the Manager’s constitution, the Trust Deed, protocols and processes specific to companies within the Commonwealth Bank of Australia Group and a Code of Corporate Governance (the Code), committed to by all directors. The Code sets out all the functions and operating procedures of the Board, including a charter for the Audit and Risk Committee. The Code also sets out those matters that only the Board can make decisions on. These include: setting the overall strategic direction; determination of portfolio mix; property selection; analysis, review and negotiation of property acquisitions and disposals; supervision of property managers; determining distribution payments; determining the Trust’s appropriate funding mix, either by way of equity and/or debt funding; approving annual financial statements; provision of information to investors; approving and monitoring major capital expenditure; and appointment of auditors.

The Board has delegated the management of the Trust’s day-to-day affairs to the Chief Executive. The Chief Executive makes recommendations as to the Trust’s overall strategic direction and presents annual budgets for approval by the Board. The Trust’s performance against budget is monitored by the Board, as is the performance of other delegated responsibilities. All investment and divestment approvals sought from the Trustee must first have the approval and recommendation of the Board.

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Composition of the Board of Directors

A fundamental tenet of corporate governance is to have a mix of executive, non-executive and independent directors on the Board. The Board currently has two executive and seven non-executive directors (six of whom are independent) and regularly assesses the independence of each director in light of interests disclosed by them.

As well as having both executive and non-executive directors, effective boards require a mix of directors from different backgrounds with complementary skills and experience. The Board is structured in such a way that it has a proper understanding of, and competence to deal with, the current and emerging issues of the Trust, and can effectively review and challenge the performance of management and exercise independent judgement, including in relation to financial issues. The Board undertakes Board performance reviews and considers the appropriate mix of skills required of its members.

Each director is required to be conversant with corporate governance, corporate strategy and relevant laws, regulations and the NZSX Listing Rules. In addition, directors need to be familiar with the responsibilities and obligations of a company director, aware of their rights and obligations under the Manager’s constitution and familiar with operations, strategies, budgets and financial plans. At least one director is required to have an accounting or financial background.

It is the responsibility of all directors to ensure that they undergo continuous training to educate and update themselves on how to appropriately and effectively perform their duties as directors.

In recognition of the importance of independent views and the Board’s role in supervising the activities of management, the Chairman of the Board may not also hold the position of Chief Executive of the Manager.

The Chairman of the Board ensures that all directors receive and understand the information needed for the Board to make fully informed decisions. If required, members of the Board are entitled to seek independent legal advice.

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Board committees

The Board may establish committees to assist in the execution of its duties and to allow detailed consideration of complex issues.

Each committee has its own written charter setting out its role and responsibilities and the manner in which the committee is to operate.

Committees do not diminish the full Board’s responsibility for the affairs of the Trust. All matters that are determined by committees are submitted to the full Board as recommendations for the Board’s decision.

Each committee is empowered to seek the information it requires from management in pursuing its duties, and to obtain independent legal or other professional advice.

The Manager does not maintain a Remuneration Committee as the Manager pays the remuneration of the directors and the Chief Executive, rather than the Trust. There is no requirement for directors to hold units in the Trust, although they are encouraged to do so. A Nomination Committee is not deemed necessary as directors are appointed in accordance with the Manager’s constitution.

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Audit and Risk Committee

The Audit and Risk Committee assists the Board in carrying out its responsibilities under the Companies Act 1993, the Financial Reporting Act 1993, the Unit Trusts Act 1960 and the NZSX Listing Rules with respect to accounting practices, policies and controls.

The minimum number of members on the Audit and Risk Committee is three, with a majority comprising independent directors of the Manager. The Board ensures that at least one member has an accounting or financial background. The Chairman of the Audit and Risk Committee cannot also be the Chairman of the Board, or Chairman of any other committee established by the Board.

The Audit and Risk Committee has a clear line of direct communication with management, external auditors, executives of the shareholder of the Manager and the Board.

The Audit and Risk Committee is charged with: reviewing and reporting to the Board on Annual and Interim Reports, related stock exchange announcements and all other financial information published or released to the market; assisting the Board in reviewing the effectiveness of the internal control environment, including effectiveness and efficiency of operations, reliability of financial reporting and compliance with applicable laws and regulations; overseeing the effective operation of the risk management and compliance framework; and recommending to the Board the appointment, removal and remuneration of the external auditors and reviewing the terms of their engagement and the scope and quality of the audit, and reviewing and approving within established procedures and, before commencement, the nature and scope of non-audit services being provided by the external auditors.

The Audit and Risk Committee has authority to seek the information it requires from any employee or external party and may, if necessary, conduct or authorise investigations into any matters within the Committee’s scope of responsibilities. The Committee is empowered to retain independent counsel, accountants or others to assist it in the conduct of its duties.

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Code of ethics

Directors, employees and consultants of the Manager and its related entities must uphold the highest ethical standards, acting in good faith and in the best interests of the Trust and investors at all times.

Directors, employees and consultants must comply with the policies which the Board has collectively endorsed, and observe the Trust’s Code of Ethics, which requires directors, employees and consultants to: act properly and efficiently and within the authorities and discretions delegated to them in pursuing the objectives of the Trust; avoid putting themselves in a position where they stand to benefit personally (directly or indirectly) or be accused of insider trading; not trade in the Trust’s securities unless they do so in accordance with the Trust’s Securities Trading Policy; ensure that they and the business are in compliance with all laws and regulations; maintain confidentiality of information at all times; and be absolutely honest in all professional activities.

The Code of Ethics forms part of every employment contract or consultancy agreement. Failure to comply with the Code of Ethics can result in disciplinary action including, where appropriate, dismissal.

Knowledge of a breach, or suspected breach of the Code of Ethics, can be reported to any layer of management, the Chairman of the Board or the Chairman of the Audit and Risk Committee, and may be done without fear of retribution or adverse action.

The Code of Ethics is regularly reviewed.

A copy of the Trust’s Code of Ethics is available on the Trust’s website at www.kipt.co.nz.

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Risk management

The Trust has policies, procedures and appropriate internal controls in place to identify and effectively manage areas of significant business risk, including financial risks arising from exposures to interest rates, credit risk and liquidity risk. Processes are in place to ensure the business is compliant with approved policies and procedures, as well as relevant legislation, regulations and the NZSX Listing Rules.

Management processes are also in place to ensure all material risks identified are promptly reported to the Board and Trustee. Matters reported are assessed and, where appropriate, corrective action is taken to mitigate and monitor the risk.

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Continuous disclosure

In accordance with the NZSX Listing Rules, the Trust is required to disclose to the market matters which could be expected to have a material effect on the price or value of the Trust’s securities. Management processes are in place to ensure that all material matters which may potentially require disclosure are promptly reported to the Chief Executive through established reporting lines. Matters reported are assessed and, where required by the NZSX Listing Rules, advised to the market. The Chief Executive and Chief Financial Officer are responsible for communications with the NZX and for ensuring that such information is not released to any person until the NZX has confirmed its release to the market.

All material NZX announcements are also posted on the Trust’s website at www.kipt.co.nz.

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Interests register

Section 189(1)(c) of the Companies Act 1993 requires the Manager to keep a Register of Directors’ Interests, and this has been extended to include interests in the Trust. Each director is required to disclose the following information and have that information entered into the Register of Interests as soon as they become aware of it: particulars of other board appointments; particulars of interests in transactions of the Trust; disclosure or use of Trust information acquired by virtue of office or employment by the Manager; dealings in the Trust’s securities; and particulars of Board approved payments, loans and guarantees of the debts of directors, or contracts to do any of these things.

In considering any dealings in the Trust’s securities, directors and employees must observe the Trust’s Securities Trading Policy. Directors and employees must notify and obtain approval of the Manager before dealing in the Trust’s securities. Directors and officers must also observe the Directors and Officers Disclosure Policy in respect of ‘relevant interests’ in securities of the Trust or any of its related entities.

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Management fees

In accordance with the terms of the Trust Deed, the Manager is entitled to receive a management fee.

The Manager is entitled to receive a management fee comprising a base fee of 0.55% per annum of the average gross value of the Trust fund, and a performance fee calculated on Unit Holder returns above 10% per annum. The total management fee payable, including both the base and performance fees, is capped at 0.70% per annum of the average gross value of the Trust fund.

The base fee is calculated and paid quarterly in arrears, and the performance fee is calculated and, where applicable, paid semi-annually in arrears (with any excess or deficit balance carried over on an aggregating basis for a period of two years). In accordance with a waiver from the NZX, and the approval of Unit Holders (which was given at a meeting of Unit Holders held on 13 August 2008), the Manager reinvests any performance fee received by way of subscribing for new units in the Trust.

In addition, the Manager, or a related entity of the Manager, has the right to be reimbursed for certain expenses or services. These include property management services, property agency services, including facilities management and leasing services, development advisory and project management services, accounting services, advertising and promotional services. Any such services which are provided by the Manager, or a related entity of the Manager, are on an ‘arms’ length’ basis at normal commercial rates, and are disclosed as related party transactions in the Notes to the Financial Statements.

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Directors' and officers' liability insurance

The Manager maintains directors’ and officers’ liability insurance and indemnifies the directors and officers of the Manager against all liabilities which may arise out of the performance of normal duties as directors or officers, unless the liability relates to conduct involving a lack of good faith. This includes indemnity of costs and expenses incurred in defending an action that falls within the scope of the indemnity.

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Compliance with corporate governance best practice

The Trust’s corporate governance processes materially comply with the Corporate Governance Best Practice Code recommended by the NZX (the NZX Code). The key area where the align with the NZX Code relate to the establishment of Remuneration and Nomination Committees, as described previously under ‘Board committees’.

The Trust’s corporate governance framework also materially complies with the Securities Commission’s Corporate Governance Principles. The Board regularly reviews its practices and will continue to refine them in light of the NZX and the Securities Commission’s recommendations to ensure they consistent in all material respects.

 

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