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Corporate Governance

Corporate governance
BCML, in its capacity as Responsible Entity for the Fund, is required under the ASX Listing Rules to prepare a Corporate Governance Statement (the Statement) and include the Statement in its annual financial report.

The Statement discloses the extent to which BCML has followed the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations with 2014 Amendments (3rd edition), (the ASX Principles) during the reporting period.

The ASX Principles are guidelines for businesses which set out eight core principles the Corporate Governance Council believes lie behind good corporate governance. BCML is committed to maintaining high standards of corporate governance.

As a wholly owned subsidiary of Brookfield Australia Investments Limited (BAIL), BCML will, wherever possible, make use of the existing governance framework and expertise within the Brookfield Australia Investments Group (the Group) as it applies to the Fund’s operations and will continue to review and update its governance practices and policies from time to time.

The Principles have been adopted by BCML, where appropriate, to ensure stakeholder interests are protected, however, some of the Principles are neither relevant nor practically applicable to the investment structure of the Fund. This Statement outlines BCML’s main governance policies and practices, and the extent of its compliance with the ASX Principles for the reporting period 1 July 2015 to 30 June 2016.

Principle 1: Lay solid foundations for management and oversight
It is the Board’s responsibility to ensure that the foundations for management and oversight of the Fund are established and documented appropriately.

Role of the Board & Senior Executives
The Board identifies the role of the Board, its committees and the powers reserved to the Board in a charter. The Board Charter reserves the following powers for the Board:
− approval of risk management strategy;
− approval of financial statements and any significant changes to accounting policies;
− approval of distribution payments;
− approval and monitoring of major investments or divestitures and strategic commitments;
− consideration of recommendations from the Audit Committee and Board Risk and Compliance Committee; and
− any matter which, according to law, is expressly reserved for Board determination.

A copy of the Board Charter is available on the Brookfield Australia website at www.au.brookfield.com.

 In addition, the Board is responsible for:
− monitoring the implementation of the financial and other objectives of the Fund;
− overseeing and approving the risk, control and accountability systems;
− monitoring compliance with legal, constitutional and ethical standards; and
− ensuring there is effective communication with unitholders and other stakeholders of the Fund.

On appointment, each independent director of the Board receives a letter of appointment which details the key terms and expectations of their appointment.


Information regarding election and re-election of director candidates
BAIL and BCML carefully considers the character, experience, education and skillset, as well as interests and associations of potential candidates for appointment to the Board and conducts appropriate checks on the suitability of the candidate, prior to their election.

The nomination and appointment of Directors is undertaken by BAIL in consultation with the Board. This practice is in accordance with BCML's Charter and the Corporations Act 2001.

Written contracts of appointment
In addition to being set out in the Charter, each independent director of the Board receives a letter of appointment which details the key terms and expectations of their appointment. The Management team responsible for the operation of the
Fund and BCML are employees of the Group.

Company Secretary
All Directors have access to the Company Secretary. The Company Secretary is accountable to the Board on all governance matters and supports the Board by monitoring and maintaining Board policies and procedures, and coordinating the timely completion and dispatch of the Board agenda and briefing material. The appointment and removal of the Company Secretary is a matter for BAIL in consultation with the Board.

Diversity policy
The ASX Corporate Governance Council recommends that Companies establish a policy concerning diversity.  BCML is not part of an ASX listed group of companies and does not directly employ staff. As a result, BCML has not developed a policy concerning diversity.

Evaluation of the performance of the Board, its Committees and individual Directors
The Board is responsible for reviewing and monitoring its performance and the performance of its committees and directors.  The Board undertakes an annual self-evaluation of its performance. The evaluation is conducted by way of a survey of each Director, followed by an analysis and discussion of the results. As part of the review, consideration is given to the existing skills and competency of the Directors to ensure there is an appropriate mix of skills for managing BCML and the Fund.

Process for evaluating the performance of senior executives

The Management team responsible for the operation of the Fund and BCML are employees of the Group and are subject to the Group’s performance evaluation process.
All new employees, including senior executives, attend a formal induction which provides an overall introduction to the various business units within the Group.


Principle 2: Structure the Board to add value

Nomination committee
The ASX Corporate Governance Council recommends that boards establish a nomination committee to oversee the selection and appointment of directors. Ultimate responsibility for director selection rests with the full board.

BCML does not have a nomination committee. The nomination and appointment of Directors is undertaken by BAIL in consultation with the Board. This practice is in accordance with BCML's Charter and the Corporations Act 2001.

Board skill matrix
The Board considers that collectively, the Directors have an appropriate mix of skills, experience and expertise which allow it to meet the Fund’s objectives. The composition of the Board is subject to continuous review. Profiles of each of the
Directors may be found on page 4 of the Brookfield Prime Property Fund Annual Report 2016.

Disclose independence and length of service of Directors
The table below sets out the details of each of the Directors including their independent status and length of tenure. The interests of the Directors may be found on page 5 of the Brookfield Prime Property Fund Annual Report 2016.

 Name Position Held
Independent
Yes/No
Date appointed to the Board
 F.Allan McDonald
Non-Executive Independent Chairman
Yes 1 January 2010
 Barbara Ward
Non-Executive Independent Chairman Yes 1 January 2010
Shane Ross
Executive Director
No 6 May 2015


Majority of Independent Directors
Throughout the reporting period the Board had a majority of Independent Directors. The independent status of those Directors was determined using the criteria set out in Recommendation 2.4 of the ASX Principles.

Chairperson Independent and not CEO
The ASX Corporate Governance Council recommends that the Chairperson of the Board be independent. Allan McDonald, the Chairman of the Board, is an independent, non-executive Director.

The ASX Corporate Governance Council recommends that the roles of Chairman and Chief Executive Officer be split and not exercised by the same individual.  Allan McDonald, the Chairman, is an independent, non-executive Director and does not perform the role of CEO.

Induction and education
An induction programme for Directors is facilitated by the Company Secretary. The programme provides new directors with an understanding of the financial, strategic, operational and risk management position of BCML, the Fund and the Group.


Principle 3: Promote ethical and responsible decision making

The Brookfield Group has a Code of Business Conduct and Ethics (the Code) which sets out the requirements for workplace and human resource practices, risk management and legal compliance.


Code of Business Conduct and Ethics
The Board acknowledges that all employees of the Group and Directors of BCML are subject to the Code and are required to act honestly and with integrity. The Code is designed to ensure that all directors, officers and employees conduct activities with the highest standards of honesty and integrity and in compliance with all legal and regulatory requirements. The Code is aligned to the Group’s core values of teamwork, integrity and performance and is fully supported by the Board.
A copy of the Code is available on the Brookfield Australia website at www.au.brookfield.com.


Principle 4: Safeguard integrity in corporate reporting

The approach adopted by the Board is consistent with the Principle. The Board requires the Chief Executive Officer and the Chief Financial Officer to provide a written statement that the financial statements of the Fund present a true and fair view, in all material aspects, of the financial position and operational results.

Audit Committee
The Board has established an Audit Committee to oversee the integrity of the financial reporting controls and procedures used by BCML when acting in its capacity as the Responsible Entity.
The Audit Committee is responsible for:
− overseeing financial reporting to ensure balance, transparency and integrity; and
− evaluating and monitoring the effectiveness of the external audit function.

The members of the Audit Committee throughout the reporting period were:

 Name Position
Number of Meetings in Year
 Attendance
 Barbara Ward
Chairman
 2 2
 F.Allan McDonald
 Member  2  2


The members of the Audit Committee are not substantial shareholders of BCML or the Fund or officers of, or otherwise associated directly with, a substantial shareholder of BCML or the Fund and therefore are deemed independent.

With only two members, the Audit Committee does not satisfy all the requirements of ASX Recommendation 4.1 which suggests that an audit committee should have 'at least three members'. The structure of the Audit Committee satisfied the three other requirements of Recommendation 4.1

BCML currently has three Directors, and the Board considers that during the reporting period the Audit Committee was of sufficient size, independence and technical expertise to discharge its mandate effectively.

Charter of the Audit Committee

The Audit Committee has adopted a formal Charter which sets out their responsibilities with respect to financial reporting, external audit (including procedures regarding appointment, removal of and term of engagement with the external auditor), and performance evaluation.    A copy of the Audit Committee’s Charter is available on the Brookfield Australia website at www.au.brookfield.com.

CEO and CFO certification of financial instruments
The Board has received declarations from the Executive Director and Chief Financial Officer that the sign off of the financial statements is based upon a sound system of risk management and that the internal compliance and control systems are
operating efficiently in all material respects in relation to financial reporting risks.

External auditors available at AGM
BCML is not a public listed entity on the ASX and is not required to hold an AGM under the Corporations Act 2001. Listed trusts established in Australia as managed investment schemes are not required by the Corporations Act 2001 to have an
AGM.

BCML’s external audit function is performed by Deloitte Touche Tohmatsu (Deloitte).


Principle 5: Make timely and balanced disclosure

Disclosure Policy

BCML is committed to complying with the continuous disclosure obligations contained in the ASX Listing Rules. The Board has adopted a Continuous Disclosure Policy which is designed to ensure that all unit holders have equal and timely access to material information concerning the Fund. The Continuous Disclosure Policy applies to all Directors, managers and employees involved in the operation of the Fund and BCML.

The Company Secretary is primarily responsible for the Fund’s compliance with its continuous disclosure obligations and maintaining the Continuous Disclosure Policy. The Company Secretary is also the liaison between the Board and the ASX.

A copy of the Continuous Disclosure Policy is available on the Brookfield Australia website at www.au.brookfield.com.


Principle 6: Respect the rights of the Fund’s unitholders

Information on website
Up to date information of the Funds, including any continuous disclosure notices given by the Fund, financial reports and distribution information is available on the Brookfield Australia website at www.au.brookfield.com.

Investor relations program

BCML’s communication strategy is incorporated into the Continuous Disclosure Policy.

BCML is committed to timely and ongoing communication with the Fund’s unitholders. The Annual Report also provides an update to investors on major achievements and the financial results of the Fund.

Facilitate participation at meetings of unitholders
BCML is not a public listed entity on the ASX and is not required to hold an AGM under the Corporations Act 2001. Listed trusts established in Australia as managed investment schemes are not required by the Corporations Act 2001 to have an
AGM.

Facilitate electronic communication
BCML provides its investors the option to receive communications from, and send communication to, the Company and the share registry electronically.


Principle 7: Recognise and manage risk

Risk management and compliance framework
An important role of BCML is to effectively manage the risks inherent in its business while supporting the performance and success of the Fund. BCML is committed to ensuring that it has a robust system of risk oversight and management and internal controls in compliance with ASX Principle 7.

Risk and Compliance Committee
The Board has delegated responsibility for the oversight of BCML’s compliance program to a Board Risk and Compliance Committee.

The members of the Board Risk and Compliance Committee throughout the financial period were:
 Name Position
Number of Meetings in Year
 Attendance
 Barbara Ward
Chairman
 2 2
 F.Allan McDonald
 Member  2  2

The Board Risk and Compliance Committee is governed by a formal Charter which is available on the Brookfield Australia website at www.au.brookfield.com.

The Board has adopted a Risk Management Strategy (RMS) and has assigned accountability and responsibility for the management of risk to Management. The RMS describes the key elements of the risk management framework that relates to the delivery of financial services by BCML as an AFS Licencee.

In addition to the RMS, Risk Registers are used by management to record and manage potential sources of material business risks that could impact upon BCML or the Fund.

Annual risk review
The Board is ultimately responsible for overseeing and managing risks to BCML or the Fund. Management reports to the Board on risk management and compliance via a Board Risk and Compliance Committee. Financial risks are managed by
the Audit Committee. Designated compliance staff assist BCML by ensuring that a robust system of compliance and risk management is in place. The Compliance Manager for the Group is responsible for reviewing and monitoring the efficiency of compliance systems on an ongoing basis. The Group has an internal audit function which may review aspects of BCML’s business and the Fund as part of its annual program.

A summary of BCML’s policies on risk oversight and management is available on the Brookfield Australia website at
www.au.brookfield.com.

Internal audit
BAIL on behalf of BCML has an internal audit function that is independent of management. The internal audit function may review aspects of BCML's business and the Fund as part of its annual program.
The external audit function is performed by Deloitte Touche Tohmatsu (Deloitte).

Sustainability risks
Environmental stewardship is a major component of Brookfield’s strategic business plan. Sustainability is a high priority to Brookfield and is treated as a key business objective, along with revenue growth and risk management. Every decision we make as a company balances both our fiscal and our environmental responsibilities.


A copy of the Sustainability Report is available on the Brookfield Australia website at www.au.brookfield.com.


Principle 8: Remunerate fairly and responsibly

Remuneration committee
The ASX Corporate Governance Council suggests that the Board should establish a dedicated Remuneration Committee. The Directors receive a fee for service and BCML does not directly employ staff, therefore no remuneration committee has been established.

Independent and non-executive Directors receive fees for serving as Directors. Director’s fees are not linked to performance of BCML or the Fund.


Interests of the Responsible Entity

Management fees
For the year ended 30 June 2016, the Consolidated Entity incurred $5,125,000 in management fees to the Responsible Entity (2015: $6,258,000). $1,146,000 of management fees remain payable as at year end (2015: $1,566,000).

Investments held
The following interests were held by related entities in the Consolidated Entity during the financial year:
− Brookfield BPPF Investments Pty Ltd as trustee for Brookfield BPPF Investments Trust holds 10,893,945 units or 22.2% of the Fund at year end
(2015: 10,893,945 units or 22.2%);
− Brookfield Securities (Australia) Pty Ltd holds 2,663,073 units or 5.4% of the Fund at year end (2015: 2,663,073 units or 5.4%); and
− Brookfield Capital Securities Limited as trustee of Brookfield Multiplex PPF Investment No 2 Trust holds 25,895,419 units or 52.8% of the Fund at year end (2015: 25,895,419 units or 52.8%).

Significant changes in the state of affairs
In the opinion of the Directors there were no significant changes in the state of affairs of the Consolidated Entity that occurred during the financial year other than those disclosed in this report or in the financial statements.

 
Events subsequent to reporting date

On 8 July 2016, the Fund refinanced its existing senior debt facility  with a new $340,000,000 senior debt facility, drawn to $315,000,000. The new senior debt facility comprises of two tranches. Tranche A of $300,000,000 is fully drawn and Tranche B of $40,000,000 is drawn to $15,000,000, with the balance to be drawn as and when required to fund capital expenditure. The new senior debt facility matures on 8 July 2020.

The existing subordinated debt facility terms were amended to reduce the facility limit to $50,000,000 and extend the expiry date to 9 July 2020.

Other than the matters noted above, there are no matters or circumstances which have arisen since the end of the financial year which significantly affected or may significantly affect the operations of the Consolidated Entity, the results of those operations, or the state of affairs of the Consolidated Entity in subsequent financial years.


Likely developments
Other than the matters already included in the Directors’ Report, information on likely developments in the operations of the Consolidated Entity in future financial years and the expected results of those operations have not been included in this report because the Directors believe that to do so would be likely to result in unreasonable prejudice to the Consolidated Entity.

Environmental regulation
The Consolidated Entity has systems in place to manage its environmental obligations. Based upon the results of inquiries made, the Responsible Entity is not aware of any significant breaches or non-compliance issues during the year covered by this report

 

 

  
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