Role and Responsibilities of the Board and Delegation to Management

As a result of the stapling of GPTRE and GPTMHL, both entities operate as a coordinated group. For example, the entities must, to the extent possible, ensure the Boards of GPTRE and GPTMHL have the same composition and that meetings are held concurrently or consecutively. References to the “Board” in this statement are references to the Board of GPTRE (as responsible entity of the Trust) and GPTMHL.

The Board is accountable to Securityholders for GPT’s performance and is responsible for the overall management and governance of GPT.

The Board is responsible for overseeing all of GPT’s businesses, including:

• setting strategic direction and ensuring it is followed;
• approving and monitoring business plans to execute strategy;
• approving major investments and commitments above $20 million;
• reviewing and ratifying systems of risk management, internal compliance and control and legal compliance and codes of conduct;
• reviewing Chief Executive Officer performance and results;
• reviewing Director and Senior Executive compensation and benefits; and
• approving and monitoring financial and other reporting.

The Board has established a formal Charter setting out its main responsibilities and functions.

All matters not specifically reserved for the Board and necessary for the day-to-day management of GPT, are delegated to management. The Board has approved delegated authority limits for management in this context. These delegated authorities are reviewed on an annual basis. The Board has also delegated specific responsibilities to Board committees to deal with particular matters. These Committees are discussed in more detail in Section 4.10.

All new Directors have formal agreements governing their employment. These agreements prescribe:

• term of appointment – subject to Securityholder approval;
• remuneration;
• expectations in relation to attendance at meetings;
• expectations and procedures in relation to other directorships;
• procedures in relation to conflicts of interest;
• insurance and indemnity arrangements;
• compliance with governance policies (including Code of Conduct, Board and Committee Charters, Personal Dealing Policy and Conflicts Management Policy);
• access to independent advice; and
• confidentiality and access to information.

• job description;
• remuneration*;
• compliance with governance policies (including Code of Conduct, Personal Dealing Policy and Conflicts Management Policy);
• confidentiality; and
• notice and rights on termination*.

Further details on these in relation to the Key Management Personnel are set out in the Remuneration section of the Directors’ Report.

Downloads:
Board Charter (PDF 27 KB)

Principle 2: Structure of the Board to Add Value

Composition of the Board

The Boards of GPTRE and GPTMHL have the same Directors, comprising seven Non-Executive Directors and one Executive Director.

The Board represents a broad range of skills and experience to assist with decision making and leading GPT. Members of the Board have significant experience in various fields, including funds management, property investment, financial markets, accounting and general management. Details concerning the membership of the Board, the period of office and the experience and expertise of the Directors of the Board are set out in the Directors’ Report.

Director Independence

The Board is responsible for determining the independence of each Director. In determining each Director’s independence, the Board refers to the following criteria adapted from the Principles and set out in the Board Charter:

• the Director must be non-executive;
• the Director cannot be a substantial Securityholder of GPT;
• the Director must not have been employed in an executive capacity with GPT within the last three years;
• the Director must not have been a principal or employee of a material professional adviser or consultant to GPT within the last three years;
• the Director must not have been a material supplier or customer to GPT;
• the Director has no material contractual relationship with GPT other than as a Director;
• the Director has not served on the Board for a period which could, or could reasonably be perceived to, materially interfere with the Director’s ability to act in the best interests of GPT;
• the Director is free from any interest and any business or other relationship which could, or could reasonably be perceived to, materially interfere with the Director’s ability to act in the best interests of GPT;
• the Director’s past performance (if applicable) in their role as a Director.

The Board recognises that the above principles are relevant in determining independence, but considers that independence is a matter of judgement having regard to all the facts and circumstances of particular relationships or circumstances.

The Board considers that of the matters set out above, the most relevant consideration for determining the independence of GPT’s Directors is that a Director be free from any interest and any business or other relationship which could, or could reasonably be perceived to, materially interfere with the Director’s ability to act in the best interests of GPT. This principle is also used when considering issues such as the materiality of any identified interest, business or relationship. The Board evaluates the materiality of any interests or relationships that could be perceived as to compromise independence on a case by case basis having regard to the circumstances of each Director.

Lim Swe Guan, is not considered independent as he is a nominee of GIC Real Estate.

Based on the criteria above and having taken in account the matters noted below, the Board considers all other Non-Executive Directors to be independent.

Ian Martin was an independent Non-Executive Director of Babcock & Brown Limited (B&B) until his retirement in 2009. GPT has a joint venture with Babcock & Brown International Pty Limited (BIPL) which is a subsidiary of B&B. Whilst Mr Martin was Director of B&B, he was considered to be conflicted in respect of decisions involving B&B in accordance with GPT’s Conflicts Management Policy which is discussed in Section 4.3.

The Board considers Mr Martin to be an independent director including during the period he was a director of B&B. In considering this issue and making its determination that Mr Martin is independent, the Board has had regard to a number of factors, including: the impact the conflicts noted above have on the Directors’ ability to take part in the affairs of the Board generally; the materiality of the issues in which the Directors are unable to take part compared to the Directors who do not have these conflicts; Directors’ participation and approach at Board and Committee meetings. Having regard to the above, the Board considers that Mr Martin’s interest could not reasonably be considered to materially interfere with his ability to act in GPT’s best interests.

Notification of Interests and Conflicts

Directors are required to notify the Chairman of any contract, office (including other directorships) or interest which might involve a conflict of interest and a list of interests is included at the front of the Agenda for each Board meeting.

The Board has developed a Conflicts Management Policy to provide guidance in the event of a conflict of interest arising. The Conflicts Management Policy provides guidance principally in respect of conflicts arising from the existence of obligations owed by certain Directors to other corporate entities, but also in respect of conflicts arising from any material personal interests held by the Directors. In particular, where a conflict of interest may exist, Directors will not take part in discussions or vote on the matter being considered.

Downloads:
Conflicts Management Policy

Attendance at Board Meetings by Directors

The number of Board meetings and Directors’ attendance at those meetings during the financial year is set out in the Directors’ Report.

Access to Information and Independent Advice

Each Director enters into an Access and Indemnity Deed with GPT to ensure seven years’ access to documents after their retirement as a Director.

The Board collectively, and each Director individually, has the right to seek independent professional advice in the performance of their duties as a Director.

Induction and Training

On commencement of employment, all Directors and employees undertake an induction program which includes information on GPT’s values, Code of Conduct, OH&S and employment practices and procedures.

General compliance training is provided to all employees and specific training is provided depending on job function (eg to meet licensing requirements, or to meet specific industry or professional body accreditation requirements). GPT has also built an in-house learning and development capability to support the maintenance and development of required employee capabilities.

Ongoing training for Directors involves education programs which are incorporated into the Board program, visits to GPT’s offices or assets and presentations on developments impacting the business.

Review of Board Performance

The Board is committed to enhancing its own and management’s effectiveness through a combined process of continuing education and performance management.

The Board considers that reviewing its performance is essential to good governance. This review process is designed to help enhance performance by providing a mechanism to raise and resolve issues and to provide recommendations to assist the Board to enhance its effectiveness.

An evaluation of the Board’s performance was undertaken in 2009. It was conducted in accordance with the principles set out in this statement.

Board Renewal

Over the last year, GPT undertook a process of Board renewal and succession planning. As part of this process:
the new role of Deputy Chairman was introduced with Rob Ferguson being appointed as Deputy Chairman on 25 May 2009;
Dr Ken Moss, Chairman of GPT, has indicated that he will not be standing for re-election at the 2010 Annual General Meeting. The Board has determined that Deputy Chairman Rob Ferguson, will be appointed Chairman of the Board subject to ratification of his appointment by Securityholders at the 2010 Annual General Meeting;
Brendan Crotty was appointed as a Non-Executive Director on 22 December 2009 subject to ratification of his appointment by Securityholders at the 2010 Annual General Meeting;
Ian Martin has indicated that he will not be standing for re-election at the 2010 Annual General Meeting;
Dr Eileen Doyle was appointed as a Non-Executive Director on 1 March 2010 subject to ratification of her appointment by Securityholders at the 2010 Annual General Meeting.

Review of Performance of Senior Executives

GPT has implemented a uniform performance management system to provide employees with clear financial and personal performance objectives. Components of this system include GPT or business unit financial and non financial key performance indicators as well as an assessment of performance measured against GPT’s values and culture. These key performance indicators are initially set by the Board for the Chief Executive Officer and are then cascaded into the business.

The Nomination and Remuneration Committee conducts a performance review of the Chief Executive Officer annually and makes recommendations to the Board. In turn, the Chief Executive Officer conducts performance reviews of the Senior Executive team and reports on their performance to the Nomination and Remuneration Committee.

The performance of the Chief Executive Officer and Senior Executives during 2009 was reviewed in accordance with these principles.

Further details can be found in the Remuneration section of the Directors’ Report.

Committees of the Board

• The Board has established the Audit and Risk Management Committee and Nomination and Remuneration Committee to assist it in carrying out its responsibilities.

The Chairman of each Committee is an Independent Director with the appropriate qualifications and experience to carry out that role. Members of the Committees must all be Non-Executive Directors.

Each of the Committees has a formal Charter setting out its responsibilities and functions.

Downloads:
Audit and Risk Management Committee Charter (PDF 44 KB)
Nomination and Remuneration Committee Charter (PDF 30 KB)

Nomination and Remuneration Committee

GPT’s Nomination and Remuneration Committee was established with responsibility for identifying and making recommendations to the Board regarding the appointment of Non-Executive Directors and reviewing and making recommendations to the Board regarding remuneration of Non-Executive Directors and Senior Executives.

Before making a recommendation to the Board regarding the appointment of a new Director, the Nomination and Remuneration Committee will assess the appropriate mix of skills, experience and expertise required on the Board and any future succession planning needs to identify potential candidates. An external professional recruitment search firm may also be employed.

Members of the Nomination and Remuneration Committee during 2009 were:
I Martin (Chairman)
P Joseph (retired on 25 May 2009)
M Latham (retired on 25 May 2009)
K Moss (appointed to Committee on 25 May 2009)
R Ferguson (appointed on 25 May 2009)
The attendance record for the Nomination and Remuneration Committee in 2009 is set out in the Directors’ Report.

Audit and Risk Management Committee

The Board has established the Audit and Risk Management Committee to give assurance regarding the quality and reliability of financial information used by the Board and to review and report on financial statements issued by GPT. In addition, the Audit and Risk Management Committee performs a range of advisory services to the Board, including:

• review of compliance with statutory responsibilities relating to financial disclosure;
• review of ongoing compliance with laws and regulations;
• review of ongoing compliance with the Trust’s Compliance Plan;
• overseeing the establishment and implementation of internal controls and a risk management system that incorporates a system of assurance confirming GPT’s risks are being considered and appropriate management plans are in place; and
• providing advice to the Board on whether the provision of non-audit services by the external auditor is compatible with the standards of independence required by the Corporations Act, 2001.

Members of the Audit and Risk Management Committee during 2009 were:
A McDonald (Chairman)
K Moss (retired from Committee on 25 May 2009)
E Goodwin
Lim Swe Guan (appointed on 21 April 2009)

The Audit and Risk Management Committee meets a minimum of four times per year. The attendance record for the Audit and Risk Management Committee in 2009 is set out in the Directors’ Report.

Corporate Responsibility Committee

In 2007 the Board established the Corporate Responsibility Committee to assist it in overseeing GPT’s commitment to good corporate citizenship and being an ethically and socially responsible organisation. On 30 June 2009 the Board resolved to discontinue the Corporate Responsibility Committee and to incorporate its activities into the Board’s functions.

Funds management is a business based to a large extent upon integrity and mutual trust where the interests of all stakeholders are recognised. GPT has established a Code of Conduct to assist Directors and employees to ensure that their conduct and the conduct of GPT meets the highest ethical and professional standards.

Code of Conduct

All Directors and employees are committed to, and bound by, GPT’s Code of Conduct. The Code of Conduct does not seek to provide prescriptive rules on every ethical issue that may be faced by Directors or employees. Rather it provides a benchmark for ethical behaviour to assist GPT to maintain the trust and confidence of all of GPT’s stakeholders. The Code of Conduct also articulates the consequences for Directors and employees if they do not live up to the standards that are expected of them.

The Code of Conduct deals with:

• ethical behaviour;
• conflicts of interest;
• prohibition on insider trading;
• prohibition on making unauthorised gains;
• non-disclosure of confidential information;
• equal opportunity;
• fair dealing;
• health and safety;
• protection and use of company assets;
• prohibition on making unauthorised public statements.

GPT also has a Whistleblower Policy which deals with reporting and investigating unethical behaviour.

All employees receive Code of Conduct training on commencement of employment with GPT and routine refresher training thereafter.

Trading in Securities and Hedging

In addition to its responsibilities under the Corporations Act, the Board has established a policy for Directors, officers and employees trading in GPT Securities. This policy provides that:
Directors and employees are only permitted to trade in GPT Securities in the six week period beginning three days after the announcement of GPT’s half year, full year results or the provision by the Board of forecasts in an offer document released to the market. In addition to this trading window, Link Market Services Limited (as administrator of the GPT Employee Security Ownership Plan) may acquire Securities on behalf of employees who participate in the GPT Employee Security Ownership Plan;
even during the permitted trading window, no Director or employee may deal in GPT Securities if he or she has information which, if publicly available, would affect the price of those Securities;
entering into transactions in products which have their primary aim of limiting the economic risk of holding GPT Securities acquired as part of the GPT Employee Security Ownership Plan is prohibited;
dealing in financial products over GPT Securities created by third parties (e.g. options, warrants), is prohibited.

GPT’s Code of Conduct also sets out an explanation and prohibition of insider trading.

Political Donations

GPT’s policy in relation to political donations is to ensure that all donations made by GPT are registered and, to the extent practicable, bipartisan. A regular review of donations made by GPT is undertaken by the Board. GPT made political donations totalling $4,290 in 2009.

Governance for Externally Managed Funds

GPT recognises that as the manager of an externally managed vehicle, conflicts or potential conflicts may arise from time to time between GPT and the externally managed funds. Therefore effective and transparent governance procedures are vital to ensure that the interests of investors in the fund are being protected.

GPT has adopted the following basic principles for managing conflicts of interest that may arise:
regular reporting in relation to conflicts;
training of executives on their responsibilities in providing services to externally managed funds as part of a funds management business;
clear delineation of the matters that require investor consent in the operation of the funds;
fees paid to GPT by the funds are as stipulated in the documentation establishing the fund or otherwise on an “arm’s length” basis.

GPT’s funds management business in Australia currently comprises the GPT Wholesale Office Fund and the GPT Wholesale Shopping Centre Fund (Funds). GPT Funds Management Limited, a subsidiary of GPTMHL, is the Responsible Entity of these Funds. The Board of the Responsible Entity is responsible for all decisions in respect of the Funds and, if there is a conflict between the investors’ interests and the interests of GPT, the Board of the Responsible Entity must give priority to the investors’ interests. Under the arrangements entered into between GPT and investors, it has been agreed that the Board of the Responsible Entity will be comprised of a majority of independent directors and transactions between the Funds and GPT are to be approved by the Board of the Responsible Entity (comprised only of its independent directors).

Downloads:
Personal Dealing Policy (PDF 40 KB)
Whistleblower Policy (PDF 91.7 KB)
Code of Conduct (PDF 27 KB)

Audit and Risk Management Committee

The Board has established the Audit and Risk Management Committee. The Audit and Risk Management Committee is comprised only of Non-Executive Directors all of whom are independent.

At least one member of the Audit and Risk Management Committee has relevant accounting qualifications and experience and all members have a good understanding of financial reporting and risk management.

Further details of the structure and responsibilities of the Audit and Risk Management Committee are set out under Principle 2.

External Auditor
GPT’s external Auditor is PricewaterhouseCoopers (PWC).

Under the Board’s guidelines for the engagement of, and dealing with, GPT’s Auditor:

• the Auditor’s appointment will be reviewed every five years and the lead audit and review partner must be rotated every five years;
• any major non-audit work to be undertaken by the Auditor must be approved by the Audit and Risk Management Committee; and
• the Audit and Risk Management Committee regularly monitors the type of non-audit work undertaken by the Auditor and the fees paid for such work and provides advice to the Board on the independence of the Auditor.
• The Audit and Risk Management Committee is responsible for making recommendations to the Board on the appointment, reappointment, replacement, and remuneration of external Auditors.

All fees paid to the Auditors are disclosed in GPT’s Annual Financial Report. In relation to the audit of the Annual Financial Report of GPT for the year ended 31 December 2009 PWC has provided written confirmation to the Board that, to the best of its knowledge and belief, there have been no contraventions of:

• the auditor independence requirements of the Corporations Act 2001;
• any applicable code of professional conduct.

A copy of PWC’s independence declaration is included in the Directors’ Report.

Downloads:
Audit and Risk Management Committee Charter (PDF 44 KB)

Continuous Disclosure Policy

The Board is committed to ensuring that all stakeholders are fully informed in a timely manner so that trading in GPT Securities takes place in an informed and competitive market.

GPT has a Continuous Disclosure Policy which outlines the concepts and principles of continuous disclosure, how they apply in practice, the obligations on GPT personnel to keep the market informed at all times, the procedures to be followed in the case of a disclosable event and the penalties for contravening continuous disclosure obligations. All employees receive training on GPT’s obligations to ensure disclosure of material information.

The Company Secretary is responsible for communication with the Australian Securities Exchange in relation to listing rule obligations including continuous disclosure.

Downloads:
Continuous Disclosure Policy (PDF 22 KB)

The Board is committed to effective communication with GPT’s stakeholders on all major developments and events concerning GPT’s operations and financial results. To achieve this, GPT has designed a communications policy which outlines GPT’s procedures for disclosure of information to the market.

Communication with Stakeholders
In addition to complying with the continuous disclosure obligations required by the Australian Securities Exchange, timely and accurate information is made available to all stakeholders. Announcements are:

• released to the Australian Securities Exchange in the case of market sensitive information;
• posted to the ‘News and Media ’ section of the GPT website (additionally, interested parties can register for GPT’s ‘Alert Service’ to receive an emailed message following new announcements);
• distributed to major media and investor contacts.

Major communication forums, such as Full and Half Year results briefings and the Annual General Meeting, are also webcast.

GPT maintains an extensive website which includes the following information:

• copies of Annual Reports (from 1971 to 2009);
• historical information in relation to distributions including all distributions paid since 1985;
• detailed property information;
• Board and Committee charters and policies.

Executives also meet with investors and their representatives on a regular basis to discuss GPT’s performance.

Annual General Meeting

GPT’s Annual General Meeting is held each year, typically in April/May. In addition to formal business, the meeting is an opportunity for Securityholders to be briefed on GPT’s activities and to ask questions of the Board and management.

A Notice of Meeting and accompanying Explanatory Memorandum on proposed resolutions is provided to Securityholders well in advance of any meeting of Securityholders. It is also posted on GPT’s website and lodged with the ASX.

Securityholders who are not able to attend GPT’s Annual General Meeting are able to vote by proxy in accordance with the Corporations Act.

The Board encourages participation of Securityholders at the Annual General Meeting. The Chairman encourages questions and comments from Securityholders and the meeting is structured to allow ample opportunity for those present to participate.

The Auditor attends the Annual General Meeting and is available to answer Securityholder questions about the conduct of the audit and the preparation and content of the Auditor’s Report.

The Annual General Meeting is webcast via GPT’s website for those Securityholders who are unable to attend in person. Additionally, the Chairman’s address is immediately announced to the ASX.

Risk Management Compliance Framework

Whilst GPT recognises that risk is inherent in all enterprises, GPT adopts a proactive risk management approach directed toward realising potential opportunities whilst managing possible adverse effects. GPT also recognises that risk management is not static and systems and procedures must be able to respond to the demands of a rapidly changing market, such as in 2008 which saw the negative and unforeseen impact of the global credit crisis and general operating conditions on real estate markets around the world.

GPT’s approach to risk management follows the ‘Australian/New Zealand Standard on Risk Management AS/NZ4360:2004’. It is also guided by the Enterprise Risk Management Integrated Framework of the Committee of Sponsoring Organisations of the Treadway Commission (COSO).

The Board has adopted a Risk Management Policy outlining GPT’s objectives, strategies and resources to identify, evaluate, treat, monitor, quantify and report significant risks to the Audit and Risk Management Committee and, through the Audit and Risk Management Committee, to the Board. Management, through the Chief Executive Officer, is responsible for designing, implementing and reporting on the adequacy of GPT’s risk management and internal control system.

The objectives of GPT’s approach are to provide effective identification, assessment and management of risks that may impact on Securityholder value. Specifically:

• strategic and operational risks are reviewed at least annually by all core portfolios/businesses;
• operational risk profiles are also reviewed more frequently by portfolio risk committees;
• executive management committees also meet regularly to deal with specific areas of risk such as OH&S and Treasury.

Underpinning this system is the recognition that while the Board retains ultimate responsibility, each level of the business is responsible for risk management, not just within GPT, but also through GPT’s associated entities, service providers and business partners.

In addition, GPT’s risk management system incorporates a system of assurance and internal audit activities to confirm that GPT’s risk management system is functioning, key risks are being considered and appropriate management plans are being implemented to minimise key risks. GPT has an internal risk management team who assist the Chief Risk Officer in undertaking these assurance and internal audit activities. An annual work program of assurance and internal audit activities is prepared based on the results of GPT’s annual risk review. Results of assurance and internal audit reviews are reported to the Audit and Risk Management Committee and, through the Committee, to the Board.

Reporting to the General Counsel, the Compliance Manager promotes a compliance culture across GPT, while assisting management to comply with the regulatory framework within which GPT operates. This includes monitoring compliance with the Trust’s Compliance Plan and other key compliance policies and procedures of GPT. Reports on compliance activities are provided to the Audit and Risk Management Committee and, through the Committee, to the Board.

The Audit and Risk Management Committee and, through it the Board, receive reports on GPT’s risk management practices and control systems and the effectiveness of GPT’s management of its material business risks.

Integrity in Financial Reporting, Risk Management and Internal Control

For the period ended 31 December 2009, the Board has received written assurance from the Chief Executive Officer and Chief Financial Officer that the declaration provided by them in accordance with section 295A of the Corporations Act is founded on a sound system of risk management and internal compliance and control which, in all material respects, implements the policies adopted by the Board and that this system is operating effectively and efficiently in all material respects in relation to financial reporting. Since 31 December 2009 nothing has come to the attention of the Chief Executive Officer and Chief Financial Officer that would indicate any material change to these statements.

Downloads:
OH&S Policy

Nomination and Remuneration Committee

GPT’s Nomination and Remuneration Committee is responsible for:
reviewing and making recommendations to the Board on remuneration policies (including performance management and short and long term incentive schemes) applicable to GPT employees;
reviewing the Chief Executive Officer’s performance and remuneration annually, and reporting to and making recommendations to the Board thereon;
making recommendations to the Board on remuneration policies and packages applicable to Board members.

Further information concerning the Nomination and Remuneration Committee is set out above under Principle 2.

Remuneration Policy

GPT is a performance-based culture that creates opportunities for market competitive rewards to employees in line with their performance. As a result, GPT’s remuneration strategy is focused on aligning and rewarding superior employee performance. GPT’s remuneration processes are also designed to demonstrate a clear and direct link between GPT’s performance and an individual’s performance and remuneration.

The Board, with the assistance of the Nomination and Remuneration Committee, aims to create a remuneration system that:

• is transparent;
• is fair and market competitive;
• encourages superior performance by aligning employee rewards with the interests of all stakeholders;
• attracts, motivates, retains and rewards talented and skilled directors, executives and employees;
• rewards employees who align their conduct and performance with the core values and culture of GPT.

Non-Executive Directors receive fees which reflect their skills, responsibility and time commitment in the discharge of their duties. There is no performance link, in that fees are fixed with no short or long term incentive schemes in place. Non-Executive Directors do not receive any retirement benefits.

GPT’s philosophy and the policies and procedures that are applied to determine the nature and amount of remuneration paid to Directors and employees of GPT are set out in the Remuneration section of the Directors’ Report. Specific details concerning the remuneration of Directors and specified Senior Executives of GPT are also contained in the Directors’ Report.