Our corporate governance

QIC’s active Board, Committees and robust policies provide the perspective and structure for efficiency and integrity in corporate governance. Our practices are benchmarked against best practice corporate governance principles.

QIC’s Board of Directors and Management are committed to achieving and demonstrating a high standard of corporate governance. QIC’s Board, which is appointed by the Governor-in Council, guides and monitors the Corporation’s business affairs on behalf of our shareholders to whom it is accountable.

In this section, we have summarised the main corporate governance practices established by the Board and in place to ensure that the interests of shareholders, clients, staff and other stakeholders are well managed.

Corporate governance best practice

QIC is committed to best practice in corporate governance, and our corporate governance practices are continually reviewed and improved to reflect industry guidelines and recommendations. QIC’s corporate governance practices have been compared against the ASX Corporate Governance Council Principles of Good Corporate Governance and Best Practice Recommendations (Second Edition), the Standards Australia standard for good governance principles and recommendations made by the Auditor-General of Queensland. This approach has been reinforced and supported by the introduction of Corporate Governance Guidelines for GOCs issued in September 2005 by the Queensland Government.

QIC’s Board considers that its corporate governance practices comply with the following best practice recommendations:

QIC’s Chairman is an independent and non-executive Director; and the Board is entirely constituted of non-executive Directors, all of whom are considered by the Board to be independent, as defined by ASX principles
QIC has a Board charter which details the functions and responsibilities of the Board
QIC’s Directors are appointed by the Governor-in-Council, who considers each person’s ability to make a contribution to QIC’s commercial performance and the implementation of our Statement of Corporate Intent
QIC has an Audit & Risk Management Committee that consists only of non-executive directors and has a publicly available charter
QIC has a publicly available Code of Conduct and a publicly available Code of Ethics that apply to all staff and Directors
QIC has a policy on trading in securities where conflicts of interest may arise
QIC’s principal external auditor is the Auditor-General of Queensland who is appointed to this position on a seven year non-renewable basis. In addition, the Auditor-General has a policy for the regular rotation of audit staff and executives between audits. KPMG have been appointed, for a three year term, as auditors to a number of entities which form part of the QIC Private Capital investment structure.
QIC has a sound system of risk oversight that is integrated into the internal reporting structure
The Chief Executive and the Chief Financial Officer state in writing to the Board that the Company’s financial reports represent a true and fair view, in all material respects, of the company’s financial condition and operational results and are in accordance with relevant accounting standards.

Our shareholders

As a Queensland GOC, QIC’s shareholding Ministers are the Honourable Anna Bligh MP, Premier and the Honourable Andrew Fraser MP, Treasurer. QIC reports to shareholding Ministers and regularly liaises with the Office of Government Owned Corporations.

Board and management

In accordance with the Government Owned Corporations Act (1993), QIC’s Board is appointed by the Governor-in-Council. The Board comprises eight non-executive Directors, all of whom are considered by the Board to be independent, as measured against the ASX Principles of Good Corporate Governance and Best Practice Recommendations (Second Edition). In assessing the independence of directors, regard is had to the following factors:

Whether, in the last three years, the Director has been employed in an executive capacity by QIC;
Whether, in the last three years, the Director has been a material professional adviser or consultant to the company or is associated with a material professional adviser or consultant;
Whether the Director is a material supplier or customer of QIC or associated with a material supplier or customer;
Whether a material contractual relationship exists between QIC and the Director, other than in their capacity as a director;
Whether the Director has any interest and any business or other relationship that could, or could reasonably be perceived to, materially interfere with the Director’s ability to act in the best interests of QIC.

Family ties and cross-directorships may be relevant in considering interests and relationships which may compromise independence and should be disclosed by Directors to the Board. The Board determines materiality thresholds relevant for the purposes of assessing independence on a case by case basis. QIC takes a qualitative rather than a strictly quantitative approach to materiality thresholds. The independence of each director is reviewed on each occasion a new disclosure of interest is given under the Disclosure of Relevant Interests - Board Members Policy. QIC’s Board is responsible for directing and controlling QIC’s activities. The Board operates in accordance with the principles set out in its Charter and the company's Constitution. These documents outline the key governance principles adopted by the Board including:

Role, responsibilities and powers of the Board
Delegation of certain responsibilities to management
Directors' duties and interests
Board structure
Remuneration
Meeting procedures
Board committees
External communication guidelines
Professional conduct, including conflicts of interest and independence
Performance assessment

Directors, the Chief Executive and any other person who takes part in the management of QIC (“officer”) are also bound under the provisions of the Government Owned Corporations Act 1993 and Corporations Act 2001 that relate to the duties and liabilities as officers of a Company GOC. Officers also have common law duties to which they must adhere.

In addition to attending board and committee meetings, the Directors are required to allocate sufficient time to prepare for meetings and consult with management as required. The Chairman commits further time and meets with the Chief Executive on a regular basis.

The responsibility for the day-to-day operation and administration of QIC is delegated (in accordance with the Corporate Delegations and Investment Delegations policies) by the Board to the Chief Executive and the executive management team. These executives are appointed by the QIC Board with the prior written approval of the shareholding Ministers. Prior to consideration by Ministers, candidates must disclose any shareholdings or trading and property ownership that may create a conflict of interest. An independent probity review and criminal check is also undertaken. The Board ensures that this team is appropriately qualified and experienced to discharge their responsibilities, and has in place procedures to assess the performance of the Chief Executive and the executive management team.

QIC has established policies and procedures designed to ensure that Directors, management and staff meet high standards of professionalism and integrity, and adhere to relevant industry standards and legal requirements. QIC’s expectations are clearly articulated and documented in its Code of Conduct and Code of Ethics.

Specific procedures are outlined in the following policies:

Gifts and Benefits Disclosure
Disclosure and Approval of Personal Investments and Business Interest for Employees and Disclosure of Relevant Interest for Board Members
Fraud Policy

Understanding and compliance with the above policies is confirmed by employees at the beginning of their employment period, and annually thereafter. An overview of these policies is also included in the Compliance Induction Program. The policies apply to Directors, employees of QIC and its subsidiary companies, temporary staff and contractors.

QIC’s trading policy is incorporated in the Code of Conduct, the Disclosure and Approval of Investments and Business Interest policy for employees, and the Disclosure of Relevant Interest Policy for Board Members. QIC takes holdings in listed securities and, while security selection decisions are made by QIC’s asset management team (within the guidelines of client investment mandates) and not the Board, the Directors disclose trading in listed securities where QIC (as a group) holds more than 4%.

Board performance evaluation

The Board Charter contains guidance on Induction and Continuing Education. In addition, the process for the evaluation of the Board, Board Committees and Directors is detailed in the Board Charter. During 2007-2008, the evaluation was undertaken through formal discussion between each Director and the Chairman encompassing the following topics:

Role of the Board, strategy and planning
Board structure
Meeting processes
Committees
Performance monitoring
Board and senior management behaviour and relationships
Personal contribution to the role
General comments

Board Committees

To assist our Directors to fulfil their responsibilities, several Board Committees operated during 2007-2008. The membership of these committees is shown below.

The Audit and Risk Management Committee, comprising Marian Micalizzi (Chair), John Allpass, David Harrison and Bronwyn Morris, reviewed matters relating to financial reporting and assurance, corporate risk management, compliance and internal and external audit functions. The Committee has a formal charter which outlines its role and obligations.
The Committee aims to ensure that financial controls and systems address key business risks and are of a high standard. Each Committee member has significant accounting and financial services experience.
Ernst & Young conducts internal audit reviews to examine the adequacy of internal controls and to measure compliance with Board and management policies and external regulatory requirements. Internal controls aim to provide reasonable assurance that assets are safeguarded, proper accounting records are maintained, and financial information is accurate and complete. The controls are linked to QIC’s corporate risk management system. The Audit and Risk Management Committee monitors and considers reports from internal audits and monitors any remedial action required. Ernst & Young was appointed internal auditor for a three-year term following a tender process administered by the Audit and Risk Management Committee.
The Auditor-General of Queensland is the external auditor in accordance with the Government Owned Corporations Act (1993). KPMG has been appointed as external auditor of a number of entities in the QIC Private Capital investment structure for three years, following a detailed tender assessment by the Committee.
The Committee considers external audit reports and management letters and monitors action by management in respect of these reports. The Committee periodically meets separately with the internal and external auditors in the absence of management.
The Committee has enhanced procedures and policies relating to overseeing internal and external auditors’ independence. Internal and external auditors are not permitted to provide services where the auditors would have a mutual or conflicting interest with QIC; be in a position where they audit their own work; function as management of QIC; or have their independence impaired or perceived to be impaired in any way. Both the internal and external auditors are required to comply with QIC’s Auditor Independence Policy and provide an annual explicit declaration of independence to the Audit and Risk Management Committee.
The Human Resources Committee, comprising Ken MacDonald (Chair), Trevor Rowe, David Harrison, Ian Brusasco, Lyn Gearing and Doug McTaggart, considered matters relating to human resource management policies and practices, including staff remuneration.
The Product Development Committee, comprising Maurice Newman (Chair), Trevor Rowe, John Allpass, Marian Micalizzi, Ken MacDonald, Bradley Bowton, Lyn Gearing and Doug McTaggart, guided QIC’s product development process including the establishment of new funds, production of explanatory brochures and due diligence verification processes.
The Debt Management Committee comprising John Allpass (Chair), Marian Micalizzi, Bradley Bowton, Doug McTaggart and members of the executive management team, ensured that debt facilities used in QIC products were managed prudently and in an efficient and effective manner.

Other Committees

QIC’s Chief Executive is Chairman of three standing Committees that ensure the integrated and efficient management of our Corporation.

The Executive Committee consists of the Chief Executive and other senior managers. It is a forum to address strategic corporate issues and provides assistance and advice to the Chief Executive, the Chairman and the Board. The Head of Corporate Strategy participates in and assists the Chief Executive to facilitate these meetings.
The Investment Strategy Committee consists of senior investment staff from each asset division and client services staff. The Committee is a forum for discussing market developments and their implications for investment returns and for monitoring strategic developments in finance and economics.
The Programme Management Office Executive Committee is a working Committee of the Executive Committee. The Committee and its sub-committees, with defined delegations of authority, manage QIC’s portfolio of projects.

QIC has the following Management Committees:

The Alpha Committee considers competing sources of alpha and works to establish a portfolio of active returns that meets clients’ objectives.
The Beta Strategy Committee oversees all beta investment activities to ensure that client objectives are achieved in compliance with the relevant scorecards. It also provides a forum for pro-active passage of information on all beta related developments and issues.

Remuneration management

QIC is aware of the need to balance attractive remuneration with controlled costs and accountability as a Government Owned Corporation (GOC).

Our remuneration and incentive schemes must be competitive within the funds management industry to attract and retain the high quality staff we need in order to give our clients leading investment services.

Remuneration standards

In setting our remuneration and incentive policies we believe they must:

Align with business strategy
Be competitive against industry benchmarks
Comply with relevant legislation and GOC guidelines
Discriminate between high and low performance
Show clear methods of performance assessment, applied fairly to all in the scheme
Enable staff to track their performance against targets.

QIC’s performance framework

The key feature of QIC’s performance-based commissions framework is that performance payments are linked to investment performance as well as to the individual’s contribution to defined key result areas.

For this purpose, the performance of QIC funds is measured against demanding benchmarks, and the full payment is only made if actual performance significantly exceeds those benchmarks and achieves stretch targets.

QIC's various incentive schemes were recently reviewed by the Queensland Audit Office and external benchmark providers.

Ongoing assessment and approval of remuneration

Our Human Resources Committee advises the Board on appropriate levels of staff remuneration after conducting an annual review of corporate and individual performance, taking into account industry comparisons and independent advice. The Board then decides the remuneration of the Chief Executive and senior management staff, subject to our shareholding Ministers’ approval.

Our Employment and Industrial Relations Plan is approved annually by our shareholding Ministers. This plan includes our remuneration policy and practices for all staff.

Directors’ fees

The Directors of QIC are to be paid by way of fees for their services, the amounts, if any, approved by the Company in general meeting. Directors are not entitled to performance-based payments and retirement benefits.

Trustee stewardship

In undertaking the role of trustee of a number of investment trusts, QIC ensures that the trusts are efficiently and effectively administered and maintained in accordance with the relevant trust deed, legal requirements and prudential standards.

Independent advice and access to QIC information

Each Director has the right of access to all relevant QIC information, to the Chief Executive, the Company Secretary and the executive management team. Subject to prior consultation with the Chairman, Directors may seek independent professional advice at QIC’s expense. A copy of advice received by a Director is made available to all other members of the Board.

Conflicts of interest

QIC’s overall conflict of interest policy is articulated in the Code of Conduct. Other policies, such as the Code of Ethics and the disclosure policies, relate to the management of conflict of interest. Regular due diligence on the disclosure process is undertaken and outcomes are incorporated into the Monthly Compliance Report to the Board.

To identify and resolve any conflicts of interest, Directors must disclose potential conflicts of interest and may be excluded from participating in Board matters where a potential conflict exists. Nominated staff must disclose transactions in property (excluding their private residences unless the transaction might possibly affect any asset in QIC’s property portfolio), shares, currencies and derivatives of shares and currencies to ensure there is no actual or perceived conflict of interest. Where the staff member exercises significant influence over the investment activities of another person (involving both advice and investment execution), those transactions should also be disclosed. The policy also provides for declaration of other business interests by staff. The Chief Executive must obtain approval from the Chairman to conduct his own investment transactions.

Code of Conduct and Code of Ethics

Our Code of Conduct and Code of Ethics apply to the Board and all QIC employees. They reflect funds management industry and Queensland public sector requirements and issues.

As outlined in the Code of Conduct, QIC’s reputation in the marketplace and community is critically important in terms of our shareholders’ expectations, our ability to operate a successful funds management business and the professional standing of our staff. QIC personnel and others working at QIC are expected to exercise good judgement in their professional life and our Code of Ethics provides guidance in terms of the core values and principles of ethical conduct to which they must adhere.

Reporting to shareholders

As a GOC, QIC prepares an annual Statement of Corporate Intent (SCI) and a Corporate Plan for our shareholding Ministers’ approval.

Both of these documents are based on comprehensive strategic planning and budgeting processes. The SCI is a formal performance contract between QIC and our shareholding Ministers, detailing our proposed undertakings and target performance for the year ahead. The SCI is tabled in Parliament as an accompaniment to this annual report. There have been no modifications to the SCI during the year.

Our Corporate Plan is a review of current and future operational strategies and QIC is responsible for meeting forecast profits as detailed in the plan. Corporate performance against planned outcomes is regularly monitored and reported to the Board, and quarterly status reports are provided to our shareholding Ministers.

QIC liaises with the Office of Government Owned Corporations in order to conduct or inform shareholding Ministers on various matters as required by the Queensland Investment Corporation Act 1991 and the Government Owned Corporations Act 1993. QIC aims to provide shareholding Ministers with the information they need to make informed assessments of the operations, financial performance and financial position of QIC and its subsidiaries.

Risk management

QIC’s Board and management have adopted a risk management framework that assists us to proactively identify and manage risks to our corporation. Management maintains risk registers and reports to the Board and the Audit and Risk Management Committee as to the effectiveness of QIC’s management of its material business risks.

Fraud policy

The QIC Board is committed to maintaining a highly fraud-resistant corporation and immediately initiating rigorous investigation of any incidents of suspected fraud. The QIC Fraud Policy provides guidance to staff on how to prevent, detect, identify, and report fraud.

Freedom of information

The Queensland Freedom of Information Act (1992) applies to QIC as a GOC. We have policies and procedures that govern freedom of information.

Insurance and Indemnities

QIC maintains adequate insurance cover with reliable underwriters to protect us from known quantifiable liabilities and risks. This cover includes asset protection, employee accident compensation, general public liabilities, and financial loss. The Board, senior management and staff are, to the extent permitted by law, provided with indemnification against:

liability to third parties arising out of conduct undertaken in good faith in their capacity as a QIC officer; and
the costs and expenses of defending legal proceedings arising out of conduct as described above.

Corporate governance in the sharemarket

On behalf of our clients, we actively monitor corporate governance issues both at a domestic and international shareholding level.

Anti-Money Laundering and Counter-Terrorism Financing

QIC takes preventing money laundering and terrorism financing seriously and has implemented processes to meet our obligations under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006.

Controlling and managing risk

From balancing investment risks and returns for our clients to planning for unforeseen impacts on our business, we are constantly assessing and managing risks.

Risk management at QIC is a multi-faceted process that requires communication, judgment and knowledge of financial products and markets. Our Board is responsible for identifying and managing risks that may affect the future viability of our business, as well as reviewing investment strategies that reflect clients’ preferred exposures to risk. The Chief Executive, Chief Financial Officer and General Manager Operations have declared, in writing to the Board, that the financial reporting risk management, operational and associated compliance and controls have been assessed and found to be operating efficiently and effectively, based on representations by management.

Our corporate risk management process, compliant with the AS/NZS 4360:2004 risk management standard, is based on three main principles:

Understanding and valuing risks
Aligning risk management with our corporate governance structure
Implementing and operating a risk monitoring system.

QIC’s Audit and Risk Management Committee oversees our risk management processes, while our Corporate and Advisory Services team develops and implements corporate and investment risk management policies and procedures. In summary, our policies are designed to ensure strategic, operational, legal, reputation and financial risks are identified, assessed, effectively and efficiently managed and monitored to enable achievement of our business objectives.

Internal audit conducts regular systematic monitoring of risk control activities, and reports to relevant managers and the Audit and Risk Management Committee.

Management is required, as part of the monthly due diligence process, to identify and report any risk events that have occurred and any breaches in authorities, policies or legislative requirements. These reports are endorsed by the executive management team and are included in the Chief Executive’s monthly compliance report to the Board. Considerable importance is placed on maintaining a strong control environment. There is a corporate structure with clearly drawn lines of accountability and delegation of authority. Adherence to the Code of Ethics and Code of Conduct is required at all times and the Board actively promotes a culture of quality and integrity. QIC personnel are required to observe the highest level of professional conduct in undertaking their business activities, respecting our core values of excellence, conviction, innovation, teamwork and integrity.

Integrated risk management process

QIC has integrated risk management processes that provide us with centralised compliance and risk management support and monitoring functions.

We have continued to expand our current risk management systems to cater for client service level compliance, and to monitor the results from our automated portfolio compliance system that delivers independent, robust compliance in a multi-product environment. We monitor against client instructions, investment regulations and against our investment policies and guidelines.

Business continuity management

Business continuity management (BCM) within QIC involves the development, maintenance and testing of advance action plans to respond to defined risk events.

This ensures that business processes continue with minimal adverse impact on clients, staff, products, services and brands. BCM is an essential part of QIC’s risk management process, providing a controlled response to potential operational risks that could have a significant impact on QIC’s critical processes and revenue streams. It includes both cost effective responses to mitigate the impact of risk events or disasters and crisis management plans to respond to crisis events.

QIC Limited

As of 30 September 2008, the organisation converted from a statutory GOC to a company GOC and was renamed QIC Limited. Our ACN is 130 539 123. Our ABN is 95 942 373 762.

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