Functions and Responsibilities of the Board and Management

The Directors of the Company are accountable to shareholders for the proper management of business and affairs of the Company. The key responsibilities of the Board are to:

• establish, monitor and modify the corporate strategies of the Company;
• ensure proper corporate governance;
• monitor the performance of management of the Company;
• ensure that appropriate risk management systems, internal control and reporting systems and compliance frameworks are in place and are operating effectively;
• assess the necessary and desirable competencies of Board members, review Board succession plans, evaluate its own performance and consider the appointment and removal of Directors;
• consider executive remuneration and incentive policies, the Company’s recruitment, retention and termination policies and procedures for senior management and the remuneration framework for non-executive Directors
• monitor financial results;
• approve decisions concerning the capital, including capital restructures,
  and dividend policy of the Company; and
• comply with the reporting and other requirements of the law.

The Board delegates responsibility for day-to-day management of the Company to the Managing Director, subject to certain financial limits. The Managing Director must consult the Board on matters that are sensitive, extraordinary, of a strategic nature or matters outside the permitted financial limits.

Composition of the Board

The Board presently comprises four Directors, three of whom, including the Chairman,
are non-executive and independent Directors. The Managing Director is an executive Director. Profiles of the Directors are set out on page 8 of this Annual Report. The profiles outline the skills, experience and expertise of each Director. All Directors (except the Managing Director) are subject to retirement by rotation but may stand for re-election by the shareholders every three years. The terms of the Managing Director’s appointment is governed by his terms of engagement.The composition of the Board is determined by the Board and, where appropriate, external advice is sought. The Board has adopted the following principles and guidelines in determining the composition of the Board:

• The Majority of Directors ought to be independent.

To be independent, a Director ought to be non-executive and:

(i) not be a substantial shareholder of the Company or an officer of, or otherwise associated directly with a substantial shareholder of the Company;

(ii) not be employed in an executive capacity with the Company in the last three years or been a Director after ceasing to hold such employment

(iii) not within the last three years been a principal of professional adviser or a consultant to the Company or an employee materially associated with the service provider, whose annual billings to the Company represent more than 1% of the Company’s annual revenue or more than 5% of the professional advisor’s or consultant’s total annual billings

(iv) not be a supplier or customer of the Company or an officer of, or otherwise associated directly with a supplier or customer whose annual billings to the Company represent more than 1% of the Company’s annual revenue or more than 5% of the supplier’s or customer’s total annual revenue

(v) not have a material contractual relationship with the Company other than as Director of the Company(vi) not been on the Board for a period which could materially interfere with the Director’s ability to act in the best interests of the Company

(vii) is otherwise 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 the Company.

• The Board ought to comprise a wide range of skills and competencies.

The Board is responsible for ensuring that there are amongst their number, Directors with appropriate skills and experience to competently discharge their duty to the other stakeholders in the Company and to manage the Company in a manner that protects the interest of all stakeholders and maximises the return to and value of the Company for the members of the Company. In determining this matter the Board should specifically consider whether it is structured and composed in such a way that it:

(i) has a proper understanding of, and competence to deal with, the current and emerging issues of the business of the Company; and

(ii) can effectively review and challenge the performance of management and exercise independent judgement.

Director Selection

When a vacancy exists through whatever cause, or where it is considered that the Board would benefit from the services of a new Director with particular skills, the Board identifies a panel of candidates with appropriate expertise and experience. A selection procedure is then completed, which includes a review of the candidates’ independence, and the Board appoints the most suitable candidate who, in accordance with reg 3.3of the Company’s constitution, must retire but may stand for re-election at the next annual general meeting of shareholders.

Board Committees

The Board has established an Audit Committee which operates under a formal Charter - see Principle 4. The Directors have not established separate nomination, remuneration or risk management committees as recommended in the Guidelines because these matters are appropriately addressed by the full Board.

Independent Professional Advice

A procedure has been determined for each Director to have the right to seek independent professional advice at the Company’s expense. Prior approval of the Chairman is required, but such approval is not withheld unreasonably.

Codes of Conduct

The Company has developed codes of conduct to guide all of the Company’s employees, particularly Directors, the Managing Director, the Chief Financial Officer and other senior executives, in respect of ethical behaviour. These codes are designed to maintain confidence in the Company’s integrity and the responsibility and accountability of all individuals within the Company for reporting unlawful and unethical practices. These codes of conduct embrace such areas as:

• Conflicts of interest
• Corporate opportunities
• Confidentiality
• Fair dealing and trade practices
• Protection of assets
• Compliance with laws, regulations and industry codes
• Whistle blowing
• Security trading
• Commitment to, and recognition of the legitimate interests of, stakeholders

Share Trading Policy

Directors and other shareholders are encouraged to be long-term holders of the Company’s shares.

For Directors and Officers, the Company has adopted a formal Securities Trading policy. Officers may not deal in any of the Company’s securities at any time if they have inside information.An Officer may trade in securities in the four-week period after the release to the ASX of the half-yearly and annual results, the end of the annual general meeting or at any time the Company has a prospectus open, but only if they have no inside information and the trading is not for short term or speculative gain.

An Officer may trade in securities at other times only if they are personally satisfied that they are not in possession of inside information and have obtained the approval of the Chairman or in the case of any proposed trade by the Chairman, of another non-executive Director nominated by the Chairman for the purpose.

Officers must advise the Company Secretary in writing of the details of completed transactions within two business days following each transaction. Such notification is necessary whether or not prior authority has been required. The Secretary must maintain a register of securities transactions. The Company must comply with its obligations to notify ASX in writing of any changes in the holdings of Securities or interest in Securities by Directors.

Managing Director and Chief Financial Officer certification of financial reports

The Managing Director and the Chief Financial Officer have certified to the board in writing, prior to Board approval of the 2005 annual financial report, that:

• the Company has in place a financial accounting system to correctly record and explain all transactions and financial position and performance of the Company and that would enable true and fair financial statements to be prepared and audited;
• the Company’s financial reports:
• present a true and fair view, in all material respects, of the company’s financial condition and operating results;
• are in accordance with relevant accounting standards; and
• are founded on a sound system of risk management and internal compliance and control which implements the policies adopted by the Board; and
• the Company’s risk management and internal compliance and control system is operating efficiently and effectively in all material respects.

Audit Committee

The Audit Committee formed on 24 September 2004 consists of:

Mr Peter Pursey (Chairman)

Mr Peter Fitch

Mr Eugene Fung

Each of the members of the committee are independent non-executive Directors and the chairman of the committee is not the chairman of the Board. Meetings of the committee may be attended by invitation by the Managing Director and the Chief Financial Officer/Company Secretary.

All members of the Committee are financially literate (i.e. they are able to read and understand financial statements) and have an understanding of the industry in which the Company operates. However, none of the Committee members are qualified accountants or financial professionals and in this regard, the Committee does not comply with Recommendation 4.3. The Directors do not believe that at this stage the Company is of a size, or has affairs of such complexity, to warrant the appointment of a Director who is a qualified accountant or financial professional. However, the Board will monitor that position regularly and assess the composition of the Audit Committee if circumstances change.

The Audit Committee will provide an independent review of

• the effectiveness of the accounting and internal control systems and management reporting, which are designed to safeguard company assets;
• financial information produced by the Company;
• the accounting policies adopted by the Company;
• the quality of the internal and external audit functions;
• external auditor’s performance and independence as well as considering such matters as replacing the external auditor where and when necessary; and
• approving internal audit plans including identified risk areas.

The Board recognises that the Company as a publicly listed entity has an obligation to make timely and balanced disclosure in accordancewith the requirements of the Australian Stock Exchange Listing Rules and the Corporations Act 2001. The Board also is of the view that an appropriately informed shareholder base,
and market in general, is essential to an efficient market for the Company’s securities. The Board is committed to ensuring that shareholders and the market have timely and balanced disclosure of matters concerning the Company. In demonstration of this commitment, the Company has adopted a formal external communications policy including a continuous disclosure policy. In order to ensure the Company meets its obligations of timely disclosure of such information, the Company has adopted the following policies:

• immediate notification to ASX of information concerning the Company that a reasonable person would expect to have a material effect on the price or value of the Company’s securities as prescribed under listing rule 3.1, except where such information is not required to be disclosed in accordance with the exception provisions of the listing rules.
• the Company will establish a website and all information disclosed to ASX shall be promptly placed on the Company’s website following receipt of confirmation from ASX and, if deemed desirable, released to the wider media.
• the Company will not respond to market rumour or speculation, except where required to do so under the listing rules.

Communications Strategy

The Board recognises that the shareholders are the beneficial owners of the Company and respects their rights and is continually seeking ways to assist shareholders in the exercise of those rights.The Board also recognises that as owners of the Company, the shareholders may best contribute to the Company’s growth, value and prosperity if they are informed. To this end the Board seeks to empower shareholders by:

• communicating effectively with shareholders;
• enabling shareholders to have access to balanced and understandable information about the Company, its operations and proposals;
• assisting shareholders participation in general meetings.

All shareholders are entitled to receive a copy of the Company’s annual and half-yearly reports.
In addition, the Company will shortly provide a website in order to provide opportunities for shareholders to access Company announcements, media releases and financial reports through electronic means.

Participation in Meetings

The Board is committed to assisting shareholders participation in meetings and has adopted the following measures:

• adoption of the ASX Corporate Governance Council’s recommendation and guidelines as published in the Council’s Principles of Good Governance and Best Practice Recommendations in respect of notices of meetings; and
• ensuring that a representative of the Company’s external auditor, subject to availability, is present at all annual general meetings and that shareholders have adequate opportunity to ask questions of the auditor at that meeting concerning the audit and preparation and content of the auditor’s report.

Risk oversight and management policy

The Board carries overall responsibility to all stakeholders for the identification, assessment, management and monitoring of the risks faced by the Company. The Company has in place informal policies and procedures for risk management and expects to document and adopt a formal risk management policy by 31 December 2005. Once adopted, it will be available to shareholders on request and, after 31 March 2006, it will be available for inspection on the Company’s website.

The Board has determined a process for evaluating the performance of the Board, individual Directors and key executives as follows:

• the Non-Executive Chairman reviews the performance of each Director and interviews each Director individually on their role as Director and their achievement of goals.
• independent members of the Board interview the non-executive Chairman and are responsible for reviewing his performance.

As mentioned previously (refer Principle 2 above), the Directors consider that at this stage, the Company is not of a size nor are its affairs of such complexity to warrant the formation of a separate nomination committee and the responsibilities of the nomination committee are carried out by the full Board.

Remuneration Policy

The Board believes that it is in the interest of all stakeholders in the Company for there to be in place a remuneration policy that:

• attracts and retains talented and motivated Directors, managers and employees so as to encourage enhanced performance of the Company;
• recognises and rewards superior performance by any individual or group to which the individual has made a significant contribution;
• enables the Company’s stakeholders and the investment community to understand:

(i) the costs and benefits of that policy; and

(ii) the link between remuneration paid to Directors and key executives and the Company’s performance

• distinguishes the structure of non-executive Directors’ remuneration from that of executives using the following guidelines for non-executive Directors’ remuneration:

(i) non-executive Directors should not be provided with retirement benefits other than statutory superannuation; and

(ii) non-executive Directors ought to receive equity-based remuneration only under strict controls and subject to shareholder approval.

(iii) payment of equity-based executive remuneration should only be made in accordance with such schemes that have been approved by shareholders.To this end, the Board has established a process of transparency in remuneration matters that relates remuneration to performance and clearly communicates the policy underlying executive remuneration to shareholders.

Remuneration Objectives:

The Board’s remuneration objectives are as follows:

to motivate Directors and management to pursue the long-term growth and success of the Company within an appropriate control framework;

to demonstrate a clear relationship between key executive performance and remuneration.

Structure:

The Board has determined that executive remuneration may comprise any of the following:

• Base salary (Cash)
• Shares in the Company and/or options to acquire shares in the Company
• Other incentive schemes
• Allowances
• Provision of motor vehicle
• Holiday, sick, and long service leave
• Superannuation
• Any other component that the Company can lawfully provide to an officer to salary sacrifice
• Any other component that the Board considers relevant and desirable
• Fringe benefits tax (howsoever called) associated with components of remuneration requested by the officer to be salary-sacrificed

The remuneration, and its elements, paid to Directors and the highest paid executives are set out in the Director’s Report. It is not the policy of the Company to make loans to Directors or executives except on full commercial terms.

Remuneration Committee

As mentioned previously, the Directors consider that at this stage, the Company is not of a size nor
are its affairs of such complexity to warrant the formation of a separate remuneration committee
and the responsibilities of the remuneration committee is carried out by the full Board.

The Board recognises the interests of stakeholders other than shareholders of the Company.
The Company has a number of legal and other obligations to stakeholders such as employees, customers, suppliers and the community as a whole and it is the Board’s view that the Company can create value by better managing its natural, human, social and other forms of capital.

Accordingly, the Board has adopted a code of conduct in respect of dealings with these stakeholders to guide Directors, executives and all staff in matters such as:

• shareholder, Customer and community relations
• fair trading and dealing with the company
• employment practices
• compliance, compliance monitoring and adherence to this code