The Company's 'Corporate Governance Framework' is reviewed on a periodic basis to ensure that it is relevant and effective in light of the changing legal and regulatory requirements. The Board of Directors continues to adopt a set of Corporate Governance Practices and a Code of Conduct appropriate for the size, complexity and operations of the Company.

Unless otherwise stated all Policies and Charters meet the ASX Corporate Governance Best Practice Recommendations.

The directors’ objective is to increase long-term shareholder value within an appropriate framework, which protects the Company and enhances the interests of shareholders and ensures the Company is properly managed.

The function of the Board of Directors is clearly defined and includes responsibility for:

• Approval of corporate strategies, the annual budget and financial plan;

• Monitoring financial performance including approval of the annual report and liaison with the Company’s auditors;

• Appointment of, and assessment of the performance of, the Chief Executive Officer;

• Monitoring managerial performance;

• Ensuring the significant risks facing the Company have been identified and appropriate and adequate control, monitoring and reporting mechanisms are in place; and

• Reporting to shareholders.

Board of Directors

Remuneration & Nomination Committee

Audit Committee

Risk Management

Ethical Standards

Communication with shareholders

Board of Directors

The directors are committed to the principles underpinning best practice in corporate governance, applied in a manner which is best suited to the Company and to best address the directors' accountability to shareholders and other stakeholders.

The structure of the Board is fundamental to achieving these objectives. It is the role of management to propose strategies and to carry out agreed plans. The Board, which ultimately has the responsibility for the direction and performance of the Company, is composed of directors able to consider the issues with independence and objectivity. It currently comprises four non-executive directors and one executive director. A majority of directors have extensive knowledge of the Company’s industry both locally and overseas.

By definition, independent directors are those directors who are not a member of management; who holds less than 5% of the voting shares and is not associated directly or indirectly with a shareholder who holds more than 5% of the voting shares; has not within the last three years been employed in an executive capacity by the Company; and has not been an employee in the last three years of a consultant or advisor to the Company; is not a material supplier or customer of the Company and has no material contract with the Company other than as a director of the Company; who is free from any interest and any business relationship which could or could reasonably be perceived to materially interfere with the director’s ability to act in the best interest of the Company.

The full Board is responsible for establishing criteria for Board membership, reviewing Board membership and identifying and nominating directors. New appointments to the Board must have well-established scientific and business credentials in order to be able to demonstrate the required range of skills, knowledge and experience. Details of the directors are set out in the Directors’ report under the heading "directors."

Performance is monitored by monthly analysis of financial statements and critical evaluation of research progress against key benchmarks. In addition, on a regular basis the Board reviews Company progress against the long-term goals set out in the strategic plan.

Where directors are associated with organisations with which the Company might have ongoing commercial relationships, the director involved will withdraw from all deliberations where a potential conflict of interest may arise.

Director education

The Company has a process to educate new directors about the nature of the business, current issues, the corporate strategy and the expectations of the Company concerning performance of directors. Directors also have the opportunity to visit Company facilities and meet with management to gain a better understanding of business operations. Directors are given access to continuing education opportunities to update and enhance their skills and knowledge.

Independent advice

Each director has the right of access to all relevant Company information and to the Company’s executives and subject to prior consultation with the Chairman may seek independent professional advice at the Company's expense. A copy of the advice received by the director will be made available to all members of the Board.

 

Remuneration & Nomination Committee

The Remuneration Committee reviews and makes recommendations to the Board on the remuneration packages and policies applicable to the executive officers and directors of the Company. It is also responsible for share option schemes, incentive performance packages, superannuation entitlements, retirement and termination entitlements, fringe benefits policies and professional indemnity and liability insurance policies.

Current members of the Remuneration Committee are:

Mr H Morgan	Non-executive	Non-independent
Mr D Brooks	Non-executive	Independent
Dr J Brown	Non-executive	Non-independent

The Board policy is for the Remuneration Committee to be comprised of independent non-executive directors. Currently, only one director is independent.  The others are either associated with substantial shareholders or have related party transactions. The Chief Executive Officer is invited to Remuneration Committee meetings as required.

Remuneration and other terms of employment are reviewed annually by the Committee having regard to performance against goals set at the start of the year, relevant comparative information and independent expert advice. Remuneration packages include superannuation as well as base salary.

Remuneration of non-executive directors is determined by the Board within the maximum amount approved by the shareholders from time to time. Non-executive directors also receive superannuation payments in accordance with statutory levels.

The committee meets twice a year and as required.

Audit Committee

The Audit Committee has a documented charter approved by the Board. All members must be non-executive directors with a majority being independent. Currently, only one director is independent. The others are either associated with substantial shareholders or they have related party transactions.

Current members of the Audit Committee are:

Mr D Brooks	Non-executive	Independent
Mr H Morgan	Non-executive	Non-Independent
Dr J Brown	Non-executive	Non-independent

The external auditor, the Chief Executive Officer and the Chief Financial Officer, are invited to attend Audit Committee meetings at the discretion of the committee. 

The external auditors attend Audit Committee meetings twice during the financial year with management being present.

The responsibilities of the Audit Committee include:

• Reviewing the annual, half year and other financial information distributed externally. This includes approving new accounting policies to ensure compliance with accounting standards and principles and assessing whether the financial information is adequate for shareholders needs.
• Assist the Board in reviewing the effectiveness of the organisation’s controls.
• Oversee effective operation of the risk management framework.
• Assessing the performance and independence of the external auditor.
• Monitoring procedures to ensure compliance with the Corporations Act 2001 and the ASX Listing Rules and other regulatory requirements.

The Audit Committee meets with the external auditors during the year to:

• Discuss the external audit and address any issues arising, such as but not limited to changes in operations, structure, controls or accounting policies, and to review the proposed fee for the audit work.

Risk Management

Overview of the risk management system

The Board oversees the establishment, implementation and annual review of the Company’s risk management systems. Management has established and implemented the risk management system for assessing, monitoring and managing operational financial reporting and compliance risks for the entity. 

Risk Profile

Protection of intellectual property is at the core of the Company’s activities and the Company engages one of Australia’s leading patent attorneys for such advice. The attorneys carry out due diligence and report in writing on any intellectual property to be acquired. Future patenting strategy is discussed and agreed in the light of any proposed development plan. Upon acquisition, BioDiem takes over control of the patent applications together with the attorneys. New inventions reported to BioDiem by its Contract Research Organisations are passed to its attorneys for advice on patentability. Management then decides whether or not to proceed with new patent application(s).
The patent attorneys write to the Company each time there is a significant activity in the patenting process. Meetings and teleconferences with the firm take place when required to discuss patenting issues and any changes in strategy.

The Company's business strategies and activities involve a degree of risk. Development of new therapies historically has been shown to have high risk because of the complexity of proving safety and efficacy of new compounds. Risk is minimised to the extent it does not inhibit the Company from pursuing business opportunities with a considered and balanced view of risk.

Risk management is a managerial responsibility of the senior management and is monitored by the Board. Comprehensive practises have been established to ensure:

• Capital expenditure and revenue commitments above a certain size obtain prior approval from the Board.
• Business transactions are properly authorised and executed.
• Financial reporting accuracy and compliance with financial reporting regulatory framework.
  

Financial Reporting

The Chief Executive Officer and the Chief Financial Officer are responsible for ensuring that the Company’s financial reports are founded on a sound system of risk management and internal compliance and controls which implement the policies adopted by the Board.

Monthly results are reported against budgets approved by the directors and revised forecasts are prepared regularly.

Key business risks

Below are some of the key risks identified and managed by the Company.

• Product liability
  Currently, no product liability risks are identified other than compounds used in clinical trials. The Company enters into insurance appropriate for its clinical trials.

• Occupational Health and Safety Committee
  Under the direction of the Chief Executive Officer, the Committee monitors employee exposure to health and safety issues in the workplace and reports to the Board on the results of any incidents.
  
• Contractual
  The organisation believes that it is taking all the required steps to protect its intellectual property through the establishment of Australian and international patents and through third party agreements.

• Funds management
  Funds held for future research and development are managed by the Company. Investments are made in Term Deposits and Bank Accepted Bills.

• Continuous disclosure
  The Company has policies and procedures on information disclosure that requires focus on the continuous disclosure of any information concerning the Company that a reasonable person would expect to have a material effect on the price of the Company’s securities.
  

Ethical Standards

All directors, managers and employees are expected to act with the utmost integrity and objectivity, trying at all times to enhance the reputation and performance of the Company.

Directors must keep the Board advised on an ongoing basis of any interest that could potentially conflict with those of the Company. The Board has procedures in place to assist directors in disclosing any potential conflict of interest.

Where the Board believes that a significant conflict exists for a director on a Board matter, the director concerned does not receive the relevant Board papers and is not present at the meeting whilst that item is considered.

A policy regarding the trading in general Company securities by directors and employees is in place.

The policy details the insider trading provisions of the Corporations Act and provides for directors, management and employees to be able to acquire shares in the Company at any time except when there is a “black-out”. Company wide black-outs will occur for a period of 30 days prior to the release of the half-year and annual results. Black-outs can occur at any other time for the Company or for certain individuals prior to any major announcement or when they are in the possession of price sensitive information.

The Company’s guidelines for dealing in securities also prohibit any employee who holds shares in the Company acquired pursuant to the terms of the Company’s employee share plans from entering into a transaction to limit the economic risk of such shares, whether through a derivative, hedge or other similar arrangement, without the prior written approval of the Chief Executive Officer or the Board.

Communication with shareholders

The Board provides shareholders with information using a comprehensive continuous disclosure policy which includes the identification of matters that may have a material effect on the price of the Company’s securities, notifying them to the ASX, the media and posting them to the Company’s website.

The Chief Executive Officer and the Company secretary are responsible for interpreting the Company’s policy and informing the Board. The Company secretary is responsible for all communications with the ASX. Such matters are advised to the ASX as they occur. A continuous disclosure review process, which involves monitoring all areas of the entity’s internal and external environment, is in place.

Announcements made to the market and related information, including information provided to analysts or the media are placed on the Company’s website after release to the ASX.