1.  Scope of responsibility of Board

Responsibility for the Company’s proper corporate governance rests with the Board.  The Board’s guiding principle in meeting this responsibility is to act honestly, conscientiously and fairly, in accordance with the law, in the interests of PepinNini’s Shareholders (with a view to building sustainable value for them) and those of employees and other stakeholders.

The Board’s broad function is to:

(a) chart strategy and set financial budgets for the Company;

(b) monitor the implementation and execution of strategy and performance against financial budgets; and

(c)  appoint and oversee the performance of executive management and generally to take and fulfill an effective leadership role in relation to the Company.

Power and authority in certain areas is specifically reserved to the Board – consistent with its function as outlined above.  These areas include:

(a)  composition of the Board itself including the appointment and removal of Directors;

(b) oversight of the Company, including its control and accountability system;

(c) appointment and removal of senior management and the Company secretary;

(d) reviewing and overseeing systems of risk management and internal compliance and control, codes of ethics and conduct, and legal and statutory compliance;

(e) monitoring senior management’s performance and implementation of strategy;  and

(f) approving and monitoring financial and other reporting and the operation of committees.

2. Composition of Board

The Board currently performs its roles and function, consistent with the above statement of its overall corporate governance responsibility, in accordance with the following principles:

(a) the Board should comprise at least three Directors;

(b) at least half of the Board should be non-executive Directors independent from management;  and

(c) the chairman of the Board should be one of the non-executive Directors.

3.  Board and charter policy

The Board has adopted a charter (which will be kept under review and amended from time to time as the Board may consider appropriate) to give formal recognition to the matters outlined above.  This charter sets out various other matters that are important for effective corporate governance including the following:

(a) a detailed definition of ‘independence’;

(b) a framework for the identification of candidates for appointment to the Board and their selection;

(c) a framework for individual performance review and evaluation;

(d) basic procedures for meetings of the Board and its committees – frequency, agenda, minutes and private discussion of management issues among non-executive Directors;

(e) ethical standards and values – formalised in a detailed code of conduct;

(f) dealings in securities – formalised in a detailed code for securities transactions designed to ensure fair  and transparent trading by Directors and senior management and their associates;  and

(g) communications with Shareholders and the market.

These initiatives, together with the other matters provided for in the Board’s charter, are designed to ‘institutionalise’ good corporate governance and generally, to build a culture of best practice in PepinNini’s own internal practices and in its dealings with others.

4.Company committees

The Company's size is not sufficient to warrant the establishment of separate committees for the nomination of directors, review of remuneration and risk management. As an alternative the Company has formed a corporate governance committee (currently consisting of all directors) to assist with the building of its own internal practices concerning good corporate governance.  In addition to their regular Board meetings, the Directors will meet on a regular basis to discuss action matters concerning:

•          risk management;

•          remuneration and issues relevant to remuneration policies and practices for all Directors and senior  management; and

•          any recommendations concerning the appointment of new Directors and senior management.

Example of the items of business that the committee will address at its meetings are:

•          Board and committee structure to facilitate a proper review function by the Board;

•          corporate risk assessment and compliance with internal controls;

•          review and evaluation of market practices and trends on remuneration matters;

•          the performance of senior management;

•          development of suitable criteria such as skills, qualifications and experience for Board candidates;

•          identification and consideration of possible candidates; and

•          review of the performance of each Director and of senior management each year in accordance with the
     procedures developed and adopted by the Board.

Whilst items of risk management  will be discussed on a quarterly basis, items concerning remuneration and nominations will be discussed annually.

5. Audit committee

The Company has established an Audit Committee which operates under a formal charter Audit Committee Charter (pdf 59KB). The Audit Committee meets and reports to the Board as required, but in any case at least twice each year. Its members are currently the two non executive directors including the Secretary of the Company. The Committee has authority to seek any pertinent information it requires from any employee or external party. The Company external auditor is invited to attend each meeting of the committee.

The responsibilities of the audit committee include:

• oversee the existence and maintenance of internal controls and accounting systems, including the implementation of mandatory and non-mandatory accounting policies and reporting requirements

• oversee the financial reporting process, including reviewing and reporting to the Board on the accuracy of all financial reports lodged with ASX which include the quarterly, half-yearly and annual financial reports

• recommendations to the Board regarding the nomination, removal and remuneration of the external auditors and

• review the existing external audit arrangements, including ensuring that any non-audit services provided do not impair auditor independence.

• assessing the adequacy of external reporting for the needs of Shareholders;

6. Best practice commitment

The Company is committed to achieving and maintaining the highest standards of conduct and has undertaken various initiatives that are designed to achieve this objective.  PepinNini’s corporate governance charter is intended to ‘institutionalise’ good corporate governance and, generally, to build a culture of best practice both in the Company’s own internal practices and in its dealings with others.

The following are a tangible demonstration of the Company’s corporate governance commitment.

Independent professional advice

With the prior approval of the Chairman, which may not be unreasonably withheld or delayed, each Director has the right to seek independent legal and other professional advice concerning any aspect of the Company’s operations or undertakings in order to fulfill their duties and responsibilities as Directors.  Any costs incurred are borne by the Company.

Code of Conduct

The Company has developed and adopted a detailed code of conduct to guide Directors and employees in the performance of their duties.

Code of conduct for transactions in securities

The Company has developed and adopted a formal code to regulate dealings in securities by Directors and senior management and their associates.  This is designed to ensure fair and transparent trading in accordance with both the law and best practice.

Charter

The code of conduct and the code of conduct for transactions in securities (referred to above) both form part of the Company’s corporate governance charter which has been formally adopted and is incorporated in  the Company Policy and Procedure Manual (pdf 601KB)

7.Compliance with ASX corporate governance guidelines and best practice recommendations

The ASX document, ‘Principles of Good Corporate Governance and Best Practice Recommendations’ (‘Guidelines’) applying to listed entities was published in March 2003 by the ASX Corporate Governance Council with the aim of enhancing the credibility and transparency of Australia’s capital markets.

The Board has assessed the Company’s current practice against the Guidelines and outlines its assessment below:

PRINCIPLES
Principle 1 - Lay solid foundations for management and oversight	The role of the Board and delegation to management have been formalised as described above in this section and will continue to be refined, in accordance with the Guidelines, in light of practical experience gained in operating as a listed company.  PepinNini complies with the Guidelines in this area.
Principle 2 - Structure the Board to add value	Together the Directors have a broad range of experience, expertise, skills, qualifications and contacts relevant to the business of the Company. Collectively, the Directors have solid experience in the exploration and mining industry.  Currently, the Board is comprised of one independent and three non‑independent directors. This does not comply with the Guidelines in that a majority of directors are not independent. The Company considers  that the recruitment and employment of independent directors would be too expensive at present. It is intended that, subject to the performance of the Company, new candidates for the Board will be considered.
Principle 3 - Promote ethical and responsible decision making	The Board has adopted a detailed code of ethics and values and a detailed code of conduct for transactions in securities as referred to in the Company Policy and Procedure Document.  The purpose of these codes is to guide Directors in the performance of their duties and to define the circumstances in which both they and management, and their respective associates, are permitted to deal in securities. The Board will ensure that restrictions on dealings in securities are strictly enforced.  Both codes have been designed with a view to ensuring the highest ethical and professional standards , as well as compliance with legal obligations, and therefore compliance with the Guidelines.
Principle 4 - Safeguard integrity in financial reporting	The Managing Director is required to state in writing to the Board that the Company's financial reports present 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. An Audit Committee of three non executive directors has been established and has a formal charter. The Audit Committee is not in compliance with the Guidelines in that the majority of members are not independent.
Principle 5 - Make timely and balanced disclosure	PepinNini’s current practice on disclosure is consistent with the Guidelines.  Policies and procedures for compliance with ASX Listing Rule disclosure requirement are included in the Company Policy and Procedure Document.
Principle 6 - Respect the rights of Shareholders	The Board recognises the importance of this principle and strives to communicate with Shareholders both regularly and clearly – both by electronic means and using more traditional communication methods.  Shareholders are encouraged to attend and participate at general meetings.  The Company’s auditors will always attend the annual general meeting and are available to answer Shareholders’ questions.  The Company’s policies are outlined in the Company Policy and Procedure Document and comply with the Guidelines in relation to the rights of Shareholders.
Principle 7 - Recognise and manage risks	The Board, together with management, has constantly sought to identify, monitor and mitigate risk.  Internal controls are monitored on a continuous basis and, wherever possible improved.  The whole issue of risk management is formalised in the Company Policy and Procedure Document (which complies with the Guidelines in relation to risk management) and will continue to be kept under regular review.
Principle 8 - Encourage enhanced performance	The corporate governance charter adopted by the Board requires individual performance review and evaluation to be conducted formally on an annual basis.  In addition, an external review of the performance of Directors and key executives is planned to take place after the completion of previous financial year audit and prior to the convening of the next annual general meeting, and this external review process will be repeated on a regular basis (at intervals not exceeding three years) to ensure independent professional scrutiny and benchmarking against developing best market practice.  The Board acknowledges that performance can always be enhanced and will continue to seek and consider ways of further enhancing performance both individually and collectively.  PepinNini’s practice complies with the Guidelines in this area.
Principle 9 - Remunerate fairly and responsibly	PepinNini’s current practices in this area are reviewed regularly by the Company’s corporate governance committee and comply with the Guidelines.  Remuneration of Directors and executives is fully disclosed in the annual report.  It is Company policy that remuneration of non executive directors and payment of equity-based executive remuneration requires approval by shareholders.
Principle 10 - Recognise the legitimate interests of stakeholders	The Board recognises the importance of this principle (which it believes represents not only sound ethics but also good business sense and commercial practice) and continues to develop and implement procedures to ensure compliance with legal and other obligations to legitimate stakeholders.  The Company and its policies and practices comply with the Guidelines in this area.