CORPORATE GOVERNANCE as at 12 September 2016 This document is the property of. It must not be copied or reproduced in any way or transmitted on to any third party without written authority from. ABN: 83 098 556 159 Level 5, 1 Adelaide Terrace, East Perth Western Australia 6004
TABLE OF CONTENTS SECTION 1 CORPORATE GOVERNANCE POLICY 8 1.0 INTRODUCTION 8 2.0 STATEMENT OF BOARD AND MANAGEMENT FUNCTIONS 9 2.1 Role of the Board 9 2.2 Responsibility of the Board 9 2.3 Materiality Threshold 10 2.4 The Chairperson 11 2.5 The Managing Director 11 2.6 Role and Responsibility of the Management 12 2.7 Relationship of Board with the Management 12 3.0 NOMINATION COMMITTEE CHARTER 12 3.1 Composition 12 3.2 Role 12 3.3 Operations 12 3.4 Responsibilities 13 4.0 POLICY AND PROCEDURE FOR SELECTION AND APPOINTMENT OF NEW DIRECTORS 14 5.0 CODE OF CONDUCT FOR DIRECTORS AND KEY EECUTIVES 14 6.0 POLICY ON SECURITIES TRADING 14 7.0 AUDIT COMMITTEE CHARTER 14 7.1 Composition of the Audit Committee 14 7.2 Role of the Audit Committee 14 7.3 Operations 15 7.4 Resources 15 7.5 Reporting to the Shareholders 15 8.0 POLICY AND PROCEDURE FOR SELECTION OF THE ETERNAL AUDITOR AND ROTATION OF AUDIT ENGAGEMENT PARTNERS 15 8.1 Responsibility 15 8.2 Selection Criteria 16 8.3 Review 16 9.0 POLICY AND PROCEDURES FOR COMPLIANCE WITH CONTINUOUS DISCLOSURE REQUIREMENTS 16 10.0 ARRANGEMENTS REGARDING COMMUNICATION WITH AND PARTICIPATION OF SHAREHOLDERS 17 10.1 General Communication 17 10.2 Participation at Annual General Meeting 17 10.3 Company's Website 18 11.0 COMPANY S RISK MANAGEMENT POLICY AND INTERNAL COMPLIANCE AND CONTROL SYSTEMS 18 Page 2 of 90
12.0 PROCESS FOR PERFORMANCE EVALUATION OF THE BOARD, BOARD COMMITTEES, INDIVIDUAL DIRECTORS AND KEY EECUTIVES 18 13.0 REMUNERATION COMMITTEE CHARTER 19 13.1 Composition 19 13.2 Role 19 13.3 Operations 19 13.4 Responsibilities 19 14.0 CORPORATE CODE OF CONDUCT 20 14.1 Introduction 20 14.2 Commitment of the Board and the Management to the Corporate Code of Conduct 20 14.3 Responsibilities to Shareholders and the Financial Community Generally 20 14.4 Responsibilities to Clients, Customers and Consumers 20 14.5 Employment Practices 21 14.6 Responsibility to the Community 21 14.7 Responsibility to the Individual 21 14.8 Obligations Relative to Fair Trading and Dealing 21 14.9 Conflicts of Interest 21 14.10 Compliance with the Code 21 14.11 Periodic Review of Code 22 14.12 Incorporation of Code of Conduct for Executives 22 SECTION 2 COMPLIANCE WITH AS CORPORATE GOVERNANCE PRINCIPLES AND RECOMMENDATIONS 23 1.0 COUNCIL PRINCIPLE 1: LAY SOLID FOUNDATIONS FOR MANAGEMENT AND OVERSIGHT 23 1.1 Council Recommendation 1.1: 23 1.2 Council Recommendation 1.2: 23 1.3 Council Recommendation 1.3: 23 1.4 Council Recommendation 1.4: 23 1.5 Council Recommendation 1.5: 24 1.6 Council Recommendation 1.6: 24 1.7 Council Recommendation 1.7: 24 2.0 COUNCIL PRINCIPLE 2: STRUCTURE THE BOARD TO ADD VALUE 25 2.1 Council Recommendation 2.1: 25 2.2 Council Recommendation 2.2: 25 2.3 Council Recommendation 2.3: 26 2.4 Council Recommendation 2.4: 26 2.5 Council Recommendation 2.5: 26 2.6 Council Recommendation 2.6: 26 3.0 COUNCIL PRINCIPLE 3: ACT ETHICALLY AND RESPONSIBLY 27 3.1 Council Recommendation 3.1: 27 4.0 COUNCIL PRINCIPLE 4: SAFEGUARD INTEGRITY IN CORPORATE REPORTING 27 4.1 Council Recommendation 4.1: 27 4.2 Council Recommendation 4.2: 28 4.3 Council Recommendation 4.3: 28 Page 3 of 90
5.0 COUNCIL PRINCIPLE 5: MAKE TIMELY AND BALANCED DISCLOSURE 28 5.1 Council Recommendation 5.1: 28 6.0 COUNCIL PRINCIPLE 6: RESPECT THE RIGHTS OF SECURITY HOLDERS 28 6.1 Council Recommendation 6.1: 28 6.2 Council Recommendation 6.2: 29 6.3 Council Recommendation 6.3: 29 6.4 Council Recommendation 6.4: 29 7.0 COUNCIL PRINCIPLE 7: RECOGNISE AND MANAGE RISK 29 7.1 Council Recommendation 7.1: 29 7.2 Council Recommendation 7.2: 30 7.3 Council Recommendation 7.3: 30 7.4 Council Recommendation 7.4: 31 8.0 COUNCIL PRINCIPLE 8: REMUNERATE FAIRLY AND RESPONSIBLY 31 8.1 Council Recommendation 8.1: 31 8.2 Council Recommendation 8.2: 32 8.3 Council Recommendation 8.3: 32 SECTION 3 STATEMENT OF BOARD AND MANAGEMENT FUNCTIONS 33 1.0 ROLE OF THE BOARD 33 2.0 RESPONSIBILITY OF THE BOARD 33 3.0 MATERIALITY THRESHOLD 34 4.0 THE CHAIRPERSON 35 5.0 THE MANAGING DIRECTOR 35 6.0 ROLE AND RESPONSIBILITY OF THE MANAGEMENT 36 7.0 RELATIONSHIP OF BOARD WITH THE MANAGEMENT 36 SECTION 4 CHARTER FOR THE CORPORATE GOVERNANCE COMMITTEE 37 1.0 PURPOSE OF CHARTER 37 2.0 AUTHORITY 37 2.1 Delegation of powers of Directors 37 2.2 Independent Experts 37 3.0 DUTIES AND RESPONSIBILITIES 37 4.0 COMPOSITION 38 4.1 Membership 38 4.2 Appointment 38 4.3 Chairperson 38 4.4 Secretary 38 5.0 TERM 38 Page 4 of 90
6.0 MEETINGS 39 6.1 Meetings Other than in Person 39 6.2 Frequency of Meetings and convening of meetings 39 6.3 Quorum 39 6.4 Minutes 39 7.0 ATTENDING AT MEETINGS 39 8.0 AMENDMENTS TO THE CHARTER 40 9.0 FEES 40 10.0 REPORTING AND ASSESSMENT 40 SECTION 5 NOMINATION COMMITTEE CHARTER 41 1.0 COMPOSITION 41 2.0 ROLE 41 3.0 OPERATIONS 41 4.0 RESPONSIBILITIES 41 SECTION 6 POLICY AND PROCEDURES FOR DEALING IN THE SECURITIES OF LYCOPODIUM LIMITED 43 1.0 INTRODUCTION 43 2.0 CLOSED PERIOD 43 3.0 POLICY ON TRADING IN LYCOPODIUM LIMITED SECURITIES 44 4.0 TRADING NOT SUBJECT TO THE TRADING POLICY 44 5.0 ECEPTIONAL CIRCUMSTANCES IN WHICH TRADING IN A CLOSED PERIOD IS PERMITTED 45 6.0 PROCEDURES FOR TRADING IN LYCOPODIUM LIMITED SECURITIES 45 7.0 DEFINITIONS 46 8.0 CORPORATIONS ACT LEGISLATION 47 SECTION 7 AUDIT COMMITTEE CHARTER 48 1.0 COMPOSITION OF THE AUDIT COMMITTEE 48 2.0 ROLE OF THE AUDIT COMMITTEE 48 3.0 OPERATIONS 48 4.0 RESOURCES 49 5.0 REPORTING TO THE SHAREHOLDERS 49 Page 5 of 90
6.0 RESPONSIBILITIES 49 SECTION 8 COMPLIANCE PROCEDURES FOR AS LISTING RULE DISCLOSURE REQUIREMENTS 53 1.0 OVERVIEW OF THE COMPLIANCE PROCEDURES 53 1.1 Legal Basis of Compliance Procedures 53 1.2 Statement of the Company's Continuous Disclosure Obligations 53 1.3 Objective of the Compliance Procedures 54 1.4 Scope of Compliance Procedures 54 1.5 Consequences of Non-Compliance 54 2.0 THE COMPLIANCE PROCEDURES 55 2.1 Responsible Officer Appointment and Duties 55 2.2 Areas of Risk 57 2.3 Guidelines for Identifying Disclosure Material 59 2.4 Monitor Share Price Movements 62 2.5 Use of Trading Halts 62 2.6 Decision Making Process 63 2.7 Record Keeping 64 2.8 Educate Directors and Staff (New and Existing) 65 2.9 Confidentiality Obligation 66 2.10 Release of Disclosure Material 67 2.11 Updating Compliance Procedures 69 2.12 Statement in Annual Report 69 3.0 GLOSSARY 70 SECTION 9 SHAREHOLDER COMMUNICATION STRATEGY 72 1.0 GENERAL COMMUNICATION 72 2.0 PARTICIPATION AT ANNUAL GENERAL MEETING 72 3.0 COMPANY'S WEBSITE 72 SECTION 10 RISK MANAGEMENT POLICY 73 1.0 INTRODUCTION 73 2.0 POLICY 73 SECTION 11 REMUNERATION COMMITTEE CHARTER 86 1.0 COMPOSITION 86 2.0 ROLE 86 3.0 OPERATIONS 86 4.0 RESPONSIBILITIES 86 SECTION 12 CORPORATE CODE OF CONDUCT 88 1.0 INTRODUCTION 88 Page 6 of 90
2.0 COMMITMENT OF THE BOARD AND THE MANAGEMENT TO CORPORATE CODE OF CONDUCT 88 3.0 RESPONSIBILITIES TO SHAREHOLDERS AND THE FINANCIAL COMMUNITY GENERALLY 88 4.0 RESPONSIBILITIES TO CLIENTS, CUSTOMERS AND CONSUMERS 88 5.0 EMPLOYMENT PRACTICES 88 6.0 RESPONSIBILITY TO THE COMMUNITY 89 7.0 RESPONSIBILITY TO THE INDIVIDUAL 89 8.0 OBLIGATIONS RELATIVE TO FAIR TRADING AND DEALING 89 9.0 CONFLICTS OF INTEREST 89 10.0 COMPLIANCE WITH THE CODE 89 11.0 PERIODIC REVIEW OF CODE 89 12.0 INCORPORATION OF CODE OF CONDUCT FOR EECUTIVES 90 Page 7 of 90
SECTION 1 CORPORATE GOVERNANCE POLICY 1.0 INTRODUCTION ("the Company") has adopted systems of control and accountability as the basis for the administration of corporate governance. Corporate governance is the system by which companies are directed and managed. It influences how the objectives of the Company are achieved, how risk is monitored and assessed and how performance is optimised. The Board and management are committed to corporate governance and, to the extent they are applicable to the Company, have adopted the eight Corporate Governance Principles and Recommendations as amended by AS Corporate Governance Council in 2014. A copy of these principles can be viewed on the AS website (http://www.asx.com.au/about/corporategovernance_aa2.shtm). Whilst the Board has demonstrated, and continues to demonstrate, its commitment to best practice in corporate governance, it emphasises that good corporate governance is only one factor contributing to the success of the Company's operations. Information about the Company's corporate governance practices is summarised as follows: Compliance with AS Corporate Governance Principles and Recommendations. Statement of Board and Management Functions. Nomination Committee Charter. Policy and procedure for selection and appointment of new directors. Summary of code of conduct for directors and key executives. Summary of policy on securities trading. Audit Committee Charter. Procedure for selection of external auditor and rotation of audit engagement partners. Summary of policy and procedure for compliance with continuous disclosure requirements. Page 8 of 90
Summary of arrangements regarding communication with and participation of shareholders. Summary of Company's risk management policy and internal compliance and control systems. Process for performance evaluation of the Board, Board committees, individual directors and key executives. Remuneration Committee Charter. Corporate Code of Conduct. 2.0 STATEMENT OF BOARD AND MANAGEMENT FUNCTIONS 2.1 Role of the Board The Board's primary role is the protection and enhancement of medium to long term shareholder value. To fulfil this role, the Board is responsible for the overall corporate governance of the Company including its strategic direction, establishing goals for management and monitoring the achievement of these goals. 2.2 Responsibility of the Board The Board is collectively responsible for promoting the success of the Company by supervising the Company s framework of control and accountability systems to enable risk to be assessed and managed which includes but is not limited to to (h): ensuring the Company is properly managed for example by: (i) (ii) (iii) (iv) (v) (vi) setting and communicating clear objectives, appointing and removing the Managing Director of the Company, ratifying the appointment and, where appropriate, the removal of the Chief Financial Officer and the Company Secretary, input into and final approval of the management's development of corporate strategy and performance objectives, reviewing and ratifying systems of risk management and internal compliance and control, codes of conduct, and legal compliance, monitoring the senior management's performance and implementation of strategy, and ensuring appropriate resources are available, Page 9 of 90
(c) (d) (e) (f) (g) (h) approving and monitoring the progress of major capital expenditure, capital management, and acquisitions and divestitures, approval of the annual budget, monitoring the financial performance of the Company, approving and monitoring financial and other reporting, overall corporate governance of the Company, including conducting regular reviews of the balance of responsibilities within the Company to ensure division of functions remain appropriate to the needs of the Company, liaising with the Company s external auditors either directly or via the Audit Committee as appropriate, and monitoring, and ensuring compliance with, all of the Company's legal obligations, in particular those obligations relating to the environment, native title, cultural heritage and occupational health and safety. The Board must convene regular meetings with such frequency as is sufficient to appropriately discharge its responsibilities generally once per month, but more or less as required. The Board may from time to time, delegate some of its responsibilities listed above to its senior management team (except for paragraphs [,, (f) and (g)] and where any matter exceeds the Materiality Threshold as defined below). 2.3 Materiality Threshold The Board has agreed on the following guidelines for assessing the materiality of matters. Materiality Quantitative Balance sheet items Balance sheet items are material if they have a value of more than 10% of pro forma net assets. Profit and loss items Profit and loss items are material if they will have an impact on the current year operating result of 10% or more. Materiality Qualitative Items are also material if: (i) they impact on the reputation of the Company, Page 10 of 90
(ii) (iii) (iv) (v) they involve a breach of legislation, they are outside the ordinary course of business, they could affect the Company s rights to its assets, or if accumulated they would trigger the quantitative tests. (c) Material Contracts Contracts will be considered material if: (i) (ii) (iii) (iv) (v) (vi) (vii) they are outside the ordinary course of business, they contain exceptionally onerous provisions in the opinion of the Board, they impact on income or distribution in excess of the quantitative tests, there is a likelihood that either party will default and the default may trigger any of the quantitative tests, they are essential to the activities of the Company and cannot be replaced or cannot be replaced without an increase in cost of such a quantum as to trigger any of the quantitative tests, they contain or trigger change of control provisions, they are between or are for the benefit of related parties, or (viii) they otherwise trigger the quantitative tests. Any matter which falls within the above guidelines is a matter which triggers the materiality threshold ("Materiality Threshold"). 2.4 The Chairperson The Chairperson is responsible for leadership of the Board, for the efficient organisation and conduct of the Board's function and for the briefing of all directors in relation to issues arising at Board meetings. The Chairperson is also responsible for overall shareholder communication, chairing shareholder meetings, and arranging Board performance evaluation. 2.5 The Managing Director The Managing Director is responsible for running the affairs of the Company under delegated authority from the Board and to implement the policies and strategy set by the Board. In carrying out his / her responsibilities the Managing Director must report to the Board in a timely manner and ensure all reports to the Board present a true and fair view of the Company s financial condition and operational results. Page 11 of 90
2.6 Role and Responsibility of the Management The role of the management is to support the Managing Director and implement the running of the general operations and financial business of the Company, in accordance with the delegated authority of the Board. The management is responsible for reporting all matters which fall within the Materiality Threshold at first instance to the Managing Director or if the matter concerns the Managing Director then directly to the Chairperson or the lead independent director, as appropriate. 2.7 Relationship of Board with the Management Management of the day-to-day business of the Company is to be conducted by or under the supervision of the Board, and by those other officers and employees to whom the management function is properly delegated by the Board. The Board will adopt appropriate structures and procedures to ensure that the Board functions independently of the management. Appropriate procedures may involve the Board meeting on a regular basis without the management present, or may involve expressly assigning the responsibility for administering the Board's relationship to the management to a Committee of the Board. Information is formally presented to the Board at Board meetings by way of Board reports and review of performance to date. When directors are providing information about opportunities for the Company, this should always be through the Board. 3.0 NOMINATION COMMITTEE CHARTER 3.1 Composition The Nomination Committee shall comprise the full Board. 3.2 Role The role of the Nomination Committee is to determine the status of director nominees for election to the Board, to identify and recommend candidates to fill casual vacancies. 3.3 Operations The full Board shall convene as the Nomination Committee at least once a year and otherwise as required. Minutes of all meetings of the Nomination Committee are to be kept. Nomination Committee meetings will be governed by the same rules as set out in the Company s Constitution, as they apply to meetings of the Board. Page 12 of 90
3.4 Responsibilities The responsibilities of the Nomination Committee are: (c) (d) (e) (f) (g) (h) (i) (j) (k) (l) to implement processes to assess the necessary and desirable competencies of Board members including, experience, expertise, skills and performance of the Board and its committees, to provide new directors with an induction to the Company, to provide all directors with access to ongoing education relevant to their position in the Company, to advise on new appointments and assist with selection of new Board members, to evaluate the performance of the Managing Director, to review time required for non-executive directors to perform their duties, to evaluate the performance and effectiveness of the Board to facilitate the directors fulfilling their responsibilities in a manner that serves the interests of shareholders, to prepare a list of individuals to be recommended for nomination for election to the Board at the annual meeting of shareholders (this includes identifying directors who are eligible for re-election), before recommending an incumbent, replacement or additional director, to review his or her qualifications, including capability, availability to serve, conflicts of interest, and other relevant factors, to assist in identifying, interviewing and recruiting candidates for the Board, to annually review the composition of each committee and present recommendations for committee memberships to the Board as needed, to periodically review the compensation paid to directors for annual retainers (including Board and committee chairs) and meeting fees, if any, and make recommendations to the Board for any adjustments. Page 13 of 90
4.0 POLICY AND PROCEDURE FOR SELECTION AND APPOINTMENT OF NEW DIRECTORS The Board, in its capacity as the Nomination Committee, will review its composition on an annual basis to ensure that the Board has the appropriate mix of expertise and experience. Where a vacancy exists, for whatever reason, or where it is considered that the Board would benefit from the services of a new director with particular skills, the Board will select appropriate candidates with relevant qualifications, skills and experience. 5.0 CODE OF CONDUCT FOR DIRECTORS AND KEY EECUTIVES A Corporate Code of Conduct ( the Code ) has been established for all executives. It requires all business affairs to be conducted legally, ethically and with integrity. The code provides for reporting of breaches of the Code by others. 6.0 POLICY ON SECURITIES TRADING The Board has adopted a policy and procedure on dealing in the Company s securities by directors, officers and employees which: (c) (d) prohibits dealing in the Company's securities whilst in possession of insider information, prevents short term trading in the Company's securities, requires the Company Secretary or a director (other than the director trading, if applicable) to be notified upon a trade occurring, and prevents dealing in the Company's securities during specified blackout periods. 7.0 AUDIT COMMITTEE CHARTER 7.1 Composition of the Audit Committee The Audit Committee consists of three directors. At least one member has significant, recent and relevant financial experience. 7.2 Role of the Audit Committee To monitor the integrity of the financial statements of the Company, reviewing significant financial reporting judgments. Page 14 of 90
(c) (d) (e) To review the Company s internal financial control system and, unless expressly addressed by a separate risk committee or by the Board itself, risk management systems. To make recommendations to the Board in relation to the appointment of the external auditor and to approve the remuneration and terms of engagement of the external auditor. To monitor and review the external auditor s independence, objectivity and effectiveness, taking into consideration relevant professional and regulatory requirements. To develop and implement policy on the engagement of the external auditor to supply non-audit services, taking into account relevant ethical guidance regarding the provision of non-audit services by the external audit firm. 7.3 Operations (c) The Audit Committee meets at least bi-annually, with further meetings on an as required basis. Minutes of all meetings of the Audit Committee are to be kept. Audit Committee meetings will be governed by the same rules, as set out in the Company s Constitution as they apply to the meetings of the Board. 7.4 Resources The Company is to provide the Audit Committee with sufficient resources to undertake its duties, including provision of educational information on accounting policies and other financial topics relevant to the Company and such other relevant materials requested by the Audit Committee. 7.5 Reporting to the Shareholders The Directors Report is to contain a separate section that describes the role of the Audit Committee and what action it has taken. 8.0 POLICY AND PROCEDURE FOR SELECTION OF THE ETERNAL AUDITOR AND ROTATION OF AUDIT ENGAGEMENT PARTNERS 8.1 Responsibility The Board is responsible for the initial appointment of the external auditor and the appointment of a new external auditor when any vacancy arises. Any appointment made by the Board must be ratified by shareholders at the next Annual General Meeting of the Company. Page 15 of 90
8.2 Selection Criteria Mandatory criteria Candidates for the position of external auditor of the Company must be able to demonstrate complete independence from the Company and an ability to maintain independence through the engagement period. Further the successful candidate must have an arrangement in place for the rotation of the audit engagement partner on a regular basis. Other criteria Other than the mandatory criteria mentioned above, the Board may select an external auditor based on criteria relevant to the business of the Company such as experience in the industry in which the Company operates, references, cost and any other matters deemed relevant by the Board. 8.3 Review The Board will review the performance of the external auditor on an annual basis. 9.0 POLICY AND PROCEDURES FOR COMPLIANCE WITH CONTINUOUS DISCLOSURE REQUIREMENTS Detailed Compliance Procedures for AS Listing Rule Disclosure Requirements have been adopted by the Company. It appoints an officer of the Company to be responsible for compliance. It is detailed in its application covering the following areas. (c) Appointment of the Responsible Officer and description of his / her duties. Identification of areas of risk for the Company. Provision of guidelines for: (i) (ii) identifying disclosure material, and monitoring share price movements. (d) (e) (f) (g) (h) Guidelines for use of trading halts. Guidelines for decision making process. Requirements for record keeping. Education of the Board and the management. Confidentiality. Page 16 of 90
(i) (j) (k) Release of disclosure material. Updating of compliance procedures. Inclusion of a statement of the main practices and procedures in the Company s Annual Financial Report and website. 10.0 ARRANGEMENTS REGARDING COMMUNICATION WITH AND PARTICIPATION OF SHAREHOLDERS 10.1 General Communication The Board of directors aims to ensure that the shareholders are informed of all major developments affecting the Company s state of affairs. Information is communicated to shareholders as follows. (c) (d) The Shareholder Report and the Annual Financial Report are available through the Company s website, www.lycopodium.com.au. They are also distributed to those shareholders who have elected to receive a paper copy. The Board ensures that the Annual Financial Report includes relevant information about the operations of the Company during the year, changes in the state of affairs of the Company and details of future developments, in addition to the other disclosures required by the Corporations Act, The Half-yearly Report contains summarised financial information and a review of the operations of the Company during the period. The audited Half-year Financial Report is prepared in accordance with the requirements of applicable Accounting Standards and the Corporations Act and is lodged with the Australian Stock Exchange. The Half-yearly Report is sent to any shareholder who requests it, Proposed major changes in the Company which may impact on share ownership rights are submitted to a vote of shareholders, The Company's website is well promoted to shareholders and shareholders may register to receive updates. 10.2 Participation at Annual General Meeting The Board encourages full participation of shareholders at the Annual General Meeting to ensure a high level of accountability and identification with the Company s strategy and goals. Important issues are presented to the shareholders as single resolutions. The shareholders are requested to vote on the appointment and aggregate remuneration of directors, the granting of options and shares to directors and changes to the Constitution. A copy of the Constitution is available to any shareholder who requests it. Page 17 of 90
10.3 Company's Website On its website, www.lycopodium.com.au the Company makes the following information available on a regular and up to date basis. (c) (d) Company announcements. Latest information briefings. Notices of meetings and explanatory materials. Half-yearly and annual reports. 11.0 COMPANY S RISK MANAGEMENT POLICY AND INTERNAL COMPLIANCE AND CONTROL SYSTEMS The Board considers risk management as one of its primary responsibilities. The Board has adopted a Risk Management Policy, which provides that: All members of the Board are responsible for risk management and oversight of internal controls. The day to day responsibilities for risk management and internal controls rest with the Managing Director. The Managing Director reports on risk management and internal controls, using an exception reporting basis, to the full Board as part of a monthly written report to directors. The Company has an internal control framework covering all areas of identified risk within the Company s operations and has documented these policies in order to centralise the controls and intends that the Risk Management Policy will be enhanced as its operations evolve. The areas of risk covered by the internal control framework are tenders / proposals, client contract negotiation and management, financial control and reporting, commercial / corporate control and reporting, operational control and reporting, personnel management, procurement and purchasing and supplier contract negotiation and management. 12.0 PROCESS FOR PERFORMANCE EVALUATION OF THE BOARD, BOARD COMMITTEES, INDIVIDUAL DIRECTORS AND KEY EECUTIVES The Chairperson is responsible for conducting an annual review of overall Board performance during a regular meeting of the Board. The Managing Director reviews all key executives performance annually and reports the results of this review to the Board. Page 18 of 90
13.0 REMUNERATION COMMITTEE CHARTER 13.1 Composition The Remuneration Committee shall comprise the full Board. 13.2 Role The Remuneration Committee s role is to discharge the Board's responsibilities in relation to remuneration of the Company s executives including share and benefit plans. 13.3 Operations The full Board shall convene as the Remuneration Committee at least once a year and otherwise as required. Minutes of all meetings of the Remuneration Committee are to be kept. Remuneration Committee meetings will be governed by the same rules as set out in the Company s Constitution, as they apply to meetings of the Board. 13.4 Responsibilities The responsibilities and functions of the Remuneration Committee are as follows. Review the competitiveness of the Company s executive compensation programs to ensure: (i) (ii) (iii) the attraction and retention of corporate officers, the motivation of corporate officers to achieve the Company s business objectives, and the alignment of the interests of key executives with the longer-term interests of the Company s shareholders. (c) (d) (e) Review trends in management compensation, oversee the development of new compensation plans and, when necessary, approve the revision of existing plans. Review the performance of the executive management. Review and approve Chairperson and Managing Director goals and objectives, evaluate Chairperson and Managing Director performance in light of these corporate objectives, and set Chairperson and Managing Director compensation levels consistent with Company philosophy. Approve the salaries, bonus and other compensation for all senior executives. The Remuneration Committee will recommend appropriate salary, bonus and other compensation to the Board for approval. Page 19 of 90
(f) (g) Review and approve compensation packages for new corporate officers and termination packages for corporate officers as requested by the management. Review and approve the awards made under any executive officer bonus plan, and provide an appropriate report to the Board. (h) Review and make recommendations concerning long-term incentive compensation plans, including the use of share options and other equity-based plans. Except as otherwise delegated by the Board, the Remuneration Committee will act on behalf of the Board as the committee established to administer equity-based and employee benefit plans, and as such will discharge any responsibilities imposed on the committee under those plans, including making and authorising grants, in accordance with the terms of those plans. (i) Review periodic reports from the management on matters relating to the Company s personnel appointments and practices. 14.0 CORPORATE CODE OF CONDUCT 14.1 Introduction This Corporate Code of Conduct sets out the standard which the directors, executives and employees of the Company are required to comply with when dealing with each other, shareholders and the broader community. 14.2 Commitment of the Board and the Management to the Corporate Code of Conduct The Board and the management approve and endorse this Corporate Code of Conduct ( the Code ) and support the Code and all it strives to achieve. The Board and the management are to encourage all staff to consider the principles of the Code and use them as a guide to determining how to respond when acting on behalf of the Company. 14.3 Responsibilities to Shareholders and the Financial Community Generally The Company aims: to increase shareholder value within an appropriate framework which safeguards the rights and interests of the Company s shareholders and the financial community, and comply with systems of control and accountability which the Company has in place as part of its Corporate Governance with openness and integrity. 14.4 Responsibilities to Clients, Customers and Consumers The Company is to comply with all legislative and common law requirements which affect its business, in particular those in respect of occupational health and safety, the Page 20 of 90
environment, native title and cultural heritage. Any transgression from the applicable legal rules is to be reported to the Managing Director as soon as an employee becomes aware of such a transgression. 14.5 Employment Practices The Company will employ the best available staff and consultants with skills required to carry out vacant positions. The Company will ensure a safe work place and maintain proper occupational health and safety practices commensurate with the nature of the Company s business and activities. 14.6 Responsibility to the Community The Company will recognise, consider and respect environmental issues which arise in relation to the Company s activities and comply with all applicable legal requirements. 14.7 Responsibility to the Individual The Company recognises and respects the rights of individuals and to the best of its ability will comply with the applicable legal rules regarding privacy, privileges, private and confidential information. 14.8 Obligations Relative to Fair Trading and Dealing The Company will deal with others in a way that is fair and will not engage in deceptive practices. 14.9 Conflicts of Interest The Board, management and employees must not involve themselves in situations where there is a real or apparent conflict of interest between them as individuals and the interest of the Company. Where a real or apparent conflict of interest arises the matter should be brought to the attention of the Chairperson in the case of a board member or the Managing Director in the case of a member of the management and a supervisor in the case of an employee, so that it may be considered and dealt with in an appropriate manner for all concerned. 14.10 Compliance with the Code Any breach of compliance with this Code is to be reported directly to the Managing Director or Chairperson, as appropriate. Page 21 of 90
14.11 Periodic Review of Code The Company will monitor compliance with the Code periodically by liaising with the Board, management and staff especially in relation to any areas of difficulty which arise from the Code and any other ideas or suggestions for improvement of the Code. Suggestions for improvements or amendments to the Code can be made at any time by providing a written note to the Managing Director. 14.12 Incorporation of Code of Conduct for Executives The Code of Conduct for Executives forms part of this Corporate Code of Conduct. It provides as follows: All executives will: (c) (d) (e) (f) actively promote the highest standards of ethics and integrity in carrying out their duties for the Company, disclose any actual or perceived conflicts of interest of a direct or indirect nature of which they become aware and which they believe could compromise in any way the reputation or performance of the Company, respect confidentiality of all information of a confidential nature which is acquired in the course of the Company s business and not disclose or make improper use of such confidential information to any person unless specific authorisation is given for disclosure or disclosure is legally mandated, deal with the Company s customers, suppliers, competitors and each other with the highest level of honesty, fairness and integrity and observe the rule and spirit of the legal and regulatory environment in which the Company operates, protect the assets of the Company to ensure availability for legitimate business purposes and ensure all corporate opportunities are enjoyed by the Company and that no property, information or position belonging to the Company or opportunity arising from these are used for personal gain or to compete with the Company, and report any breach of this Code of Conduct for Executives to the Chairperson, who will treat reports made in good faith of such violations with respect and in confidence. This Code of Conduct for Executives is in addition to the Corporate Code of Conduct which has been adopted by the Board of the Company. Page 22 of 90
SECTION 2 COMPLIANCE WITH AS CORPORATE GOVERNANCE PRINCIPLES AND RECOMMENDATIONS 1.0 COUNCIL PRINCIPLE 1: LAY SOLID FOUNDATIONS FOR MANAGEMENT AND OVERSIGHT 1.1 Council Recommendation 1.1: A listed entity should: disclose the respective roles and responsibilities of the Board and Management disclose those matters expressly reserved to the Board and those delegated to Management. The Company complies with this recommendation. 1.2 Council Recommendation 1.2: A listed entity should: undertake appropriate checks before appointing a person, or putting forward to security holders a candidate for election as a Director provide security holders with all material information in its possession relevant to a decision whether or not to elect or re-elect a Director. The Company complies with this recommendation. 1.3 Council Recommendation 1.3: A listed entity should have a written agreement with each Director and senior executive setting out the terms of their appointment. The Company complies with this recommendation. 1.4 Council Recommendation 1.4: The Company Secretary of a listed entity should be accountable directly to the Board, through the Chair, on all matters to do with the proper functioning of the Board. The Company complies with this recommendation. Page 23 of 90
1.5 Council Recommendation 1.5: A listed entity should: (c) have a diversity policy which includes requirements for the Board or a relevant committee of the Board to set measurable objectives for achieving gender diversity and to access annually both the objectives and the entity's progress in achieving them; disclose that policy or a summary of it; and disclose as at the end of each reporting period the measurable objectives for achieving gender diversity set by the Board or a relevant committee of the Board in accordance with the entity's diversity policy and its progress towards achieving them, and either: (i) (ii) the respective proportions of men and women on the Board, in senior executive positions and across the whole organisation (including how the entity has defined 'senior executive' for these purposes); or if the entity is a 'relevant employer' under the Workplace Gender Equality Act, the entity's most recent published 'Gender Equality Indicators', as defined in under the Act. The Company does not comply with recommendation 1.5 or 1.5(c)(i). As a global participant, the Company recruits staff from every continent and has an established policy of equal opportunity employment. 1.6 Council Recommendation 1.6: A listed entity should: have and disclose a process for periodically evaluating the performance of the Board, its committees and individual Directors; and disclose, in relation to each reporting period, whether a performance evaluation was undertaken in the reporting period in accordance with that process. The Company complies with this recommendation. 1.7 Council Recommendation 1.7: A listed entity should: have and disclose a process for periodically evaluating the performance of its senior executives; and Page 24 of 90
disclose, in relation to each reporting period, whether a performance evaluation was undertaken in the reporting period in accordance with that process. The Company complies with this recommendation. 2.0 COUNCIL PRINCIPLE 2: STRUCTURE THE BOARD TO ADD VALUE 2.1 Council Recommendation 2.1: The Board of a listed entity should: have a nomination committee which: (i) (ii) (iii) (iv) (v) has at least 3 members, a majority of which are independent directors; and is chaired by an independent director; and disclose the charter of the committee; the members of the committee; and as at the end of each reporting period, the number of times the committee meet throughout the period and the individual attendances of the members at these meetings; or if it does not have a nomination committee disclose the fact and the process it employs to address Board succession issues and to ensure that the Board has the appropriate balance of skills, knowledge, experience, independence and diversity to enable it to discharge its duties and responsibilities effectively. The Company does not comply with this recommendation. The role of the nomination committee is carried out by the full Board. 2.2 Council Recommendation 2.2: A listed entity should have and disclose a Board skills matrix setting out the mix of skills and diversity that the Board currently has or is looking to achieve in its membership. The Company does not comply with this recommendation. The Board considers that each of its current directors possess skills and experience appropriate to managing and developing the Company. Any additional information or specific advice can be more appropriately and economically obtained by engaging independent external expert consultants. Page 25 of 90
2.3 Council Recommendation 2.3: A listed entity should disclose: (c) the names of directors considered by the Board to be independent directors; if a director has an interest, position, association or relationship that might cause doubt about the independence of the director but the Board is of the opinion that it does not compromise the independence of the director, the nature of the interest, position, association or relationship in question and an explanation of why the Board is of that opinion; and the length of service of each director. The Company does not complycomplies with this recommendation 2.3 as no director is independent. 2.4 Council Recommendation 2.4: A majority of the Board of a listed entity should be independent. The Company does not comply with this recommendation as no director is independent. The Board considers that at this time the shareholders are better served by directors who have a vested interest in the Company. The Board intends to reconsider the formation of a separate Nomination Committee as the Company's operations evolve. 2.5 Council Recommendation 2.5: The Chair of the Board of a listed entity should be an independent director and, in particular, should not be the same person as the CEO of the entity. The Company does not fully comply with this recommendation as the Chairperson is not an independent director. The Board considers that at this stage in the development of the Company, an independent Chairperson would not add sufficient expertise to the Board to justify the associated cost and any additional information or specific advice required can be more appropriately and economically obtained from independent external expert consultants. 2.6 Council Recommendation 2.6: A listed entity should have a program for inducting new directors and provide appropriate professional development opportunities for directors to develop and maintain the skills and knowledge needed to perform the role as directors effectively. The Company complies with this recommendation. Page 26 of 90
3.0 COUNCIL PRINCIPLE 3: ACT ETHICALLY AND RESPONSIBLY 3.1 Council Recommendation 3.1: A listed entity should: have a code of conduct for its directors, senior executives and employees; and disclose that code or a summary of it. The Company complies with this recommendation. 4.0 COUNCIL PRINCIPLE 4: SAFEGUARD INTEGRITY IN CORPORATE REPORTING 4.1 Council Recommendation 4.1: The board of a listed entity should: have an audit committee which: (i) (ii) (iii) (iv) (v) has at least three members, of all whom are non-executive directors and a majority are independent directors; and is chaired by an independent director, who is not the chair of the Board, and disclose; the charter of the committee; the relevant qualifications and experience of the members of the committee; and in relation to each reporting period, the number of times the committee met throughout the period and the individual attendances of the members at these meetings; or if it does not have an audit committee, disclose that fact and the processes it employs that independently verify and safeguard the integrity of its corporate reporting, including the processes for the appointment and removal of the external auditor and the rotation of the audit engagement partner. The Company does not fully comply with this recommendation in that the Audit Committee consists of three directors only one of which is a non-executive and none are independent. Page 27 of 90
4.2 Council Recommendation 4.2: The Board of a listed entity should, before it approves the entity's financial statements for a financial period, receive from its CEO and CFO a declaration that, in their opinion, the financial records of the entity have been properly maintained and that the financial statements comply with the appropriate accounting standards and give a true and fair view of the financial position and performance of the entity and that the opinion has been formed on the basis of a sound system of risk management and internal control which is operating effectively. The Company complies with this recommendation. 4.3 Council Recommendation 4.3: A listed entity that has an AGM should ensure that its external auditor attends its AGM and is available to answer questions from security holders relevant to the audit. The Company complies with this recommendation. 5.0 COUNCIL PRINCIPLE 5: MAKE TIMELY AND BALANCED DISCLOSURE 5.1 Council Recommendation 5.1: A listed entity should: have a written policy for complying with its continuous disclosure obligations under the listing Rules; and disclose that policy or a summary of it. The Company complies with this recommendation. 6.0 COUNCIL PRINCIPLE 6: RESPECT THE RIGHTS OF SECURITY HOLDERS 6.1 Council Recommendation 6.1: A listed entity should provide information about itself and its governance to investors via its website. The Company complies with this recommendation. Page 28 of 90
6.2 Council Recommendation 6.2: A listed entity should design and implement an investor relations program to facilitate effective two-way communication with investors. The Company complies with this recommendation. 6.3 Council Recommendation 6.3: A listed entity should disclose the policies and processes it has in place to facilitate and encourage participation at meetings of security holders. The Company does not currently comply with this recommendation, although the matter will be assessed in the light of what emerges in the market and will be responded to as appropriate. 6.4 Council Recommendation 6.4: A listed entity should give security holders the option to receive communications from, and send communications to, the entity and its security registry electronically. The Company complies with this recommendation. 7.0 COUNCIL PRINCIPLE 7: RECOGNISE AND MANAGE RISK 7.1 Council Recommendation 7.1: The Board of a listed entity should: have a committee or committees to oversee risk, each of which: (i) (ii) (iii) (iv) (v) has at least 3 members, a majority of whom are independent directors; and is chaired by an independent director, and disclose; the charter of the committee; the members of the committee; and as at the end of each reporting period, the number of times the committee met throughout the period and the individual attendances of the members at those meetings; or if it does not have a risk committee or committees that satisfy above, disclose that fact and the processes it employs for overseeing the entity's risk management framework. Page 29 of 90
The Company complies with of this recommendation. The Board considers risk management as one of its primary responsibilities. The Board has adopted a Risk Management Policy, which provides that: All members of the Board are responsible for risk management and oversight of internal controls. The day to day responsibilities for risk management and internal controls rest with the Managing Director. The Managing Director reports on risk management and internal controls, using an exception reporting basis, to the full Board as part of a monthly written report to directors. The Company has an internal control framework covering all areas of identified risk within the Company s operations and has documented these policies in order to centralise the controls and intends that the Risk Management Policy will be enhanced as its operations evolve. The areas of risk covered by the internal control framework are tenders / proposals, client contract negotiation and management, financial control and reporting, commercial / corporate control and reporting, operational control and reporting, personnel management, procurement and purchasing and supplier contract negotiation and management. 7.2 Council Recommendation 7.2: The Board or a committee of the Board should: (c) (d) Review the entity's risk management framework at least annually to satisfy itself that it continues to be sound; and Disclose, in relation to each reporting, whether such a review has taken place. The Company complies with this recommendation. 7.3 Council Recommendation 7.3: A listed entity should disclose: if it has an internal audit function, how the function is structured and what role it performs; or if it does not have an internal audit function, that fact and the processes it employs for evaluating and continually improving the effectiveness of its risk management and internal control processes. The Company complies with of this recommendation. Page 30 of 90
7.4 Council Recommendation 7.4: A listed entity should disclose whether it has any material exposure to economic, environmental and social sustainability risks and, if it does, how it manages or intends to manage these risks. The Company is of the view that it is not materially exposed to the risks outlined in this recommendation. 8.0 COUNCIL PRINCIPLE 8: REMUNERATE FAIRLY AND RESPONSIBLY 8.1 Council Recommendation 8.1: The Board of a listed entity should: have a remuneration committee which: (i) (ii) (iii) (iv) (v) has at least three members, a majority of whom are independent directors; and is chaired by an independent director, and disclose; the charter of the committee; the members of the committee; and as at the end of each reporting period, the number of times the committee met throughout the period and the individual attendances of the members at those meetings; or if it does not have a remuneration committee, disclose that fact and the processes it employs for setting the level and composition of remuneration for directors and senior executives and ensuring that such remuneration is appropriate and not excessive. The Company does not fully comply with this recommendation as a separate Remuneration Committee has not been formed. The role of the Remuneration Committee is carried out by the full Board. The Company has a remuneration committee charter which is published on its website. Statistics regarding participation at remuneration committee meetings are published in each Annual Report. Page 31 of 90