XRF Scientific : 2016 Corporate Governance Statement

XRF SCIENTIFIC LIMITED

2016 CORPORATE GOVERNANCE STATEMENT

The Corporate Governance Statement is accurate as at 22 September 2016 and has been approved by the Board.

ASX CORPORATE GOVERNANCE COUNCIL'S PRINCIPLES

The table below summarises the Company's compliance with the ASX Corporate Governance Council's Revised Principles and Recommendations.

Comply?	Reference/Explanation
Principle 1 - Lay solid foundations for management and oversight
1.1 A listed entity should disclose:
(a) the respective roles and responsibilities of its board and management; and	Yes	Page 6
(b) those matters expressly reserved to the board and those delegated to	Yes	Page 9
management.
1.2 A listed entity should:
(a) undertake appropriate checks before appointing a person, or putting forward to security holders a candidate for election, as a director; and	Yes	Page 6
(b) provide security holders with all material information in its possession
relevant to a decision on whether or not to elect or re-elect a director.	Yes	Page 7
1.3 A listed entity should have a written agreement with each director and senior	Yes	Senior executives sign
executive setting out the terms of their appointment.	employment contacts on the date of their appointment. The term of employment for directors is
specified in the Company's Constitution.
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.	Yes	Page 6
1.5 A listed entity should:
(a) have a diversity policy which includes requirements for the board or a	No	The Company implemented an
relevant committee of the board to set measurable objectives for achieving gender diversity and to assess annually both the objectives and the entity's progress in achieving them;	Equal Opportunity policy in 2013, however, measurable objectives for gender diversity have not yet
been set.
(b) disclose that policy or a summary of it; and	Yes	Page 10
(c) disclose as at the end of each reporting period the measurable	No	Measurable objectives for gender
objectives for achieving gender diversity set by the board or a relevant committee of the board in accordance with the entity's diversity policy	diversity have not yet been set.
and its progress towards achieving them and either:
(1) the respective proportions of men and women on the board, in senior executive positions and across the whole organisation	Yes	Whole organisation - 21% Senior Executive Positions - 8%
(including how the entity has defined "senior executive" for these purposes); or	Board of Directors - 0%
(2) if the entity is a "relevant employer" under the Workplace Gender Equality Act, the entity's most recent "Gender Equality Indicators", as defined in and published under that Act.	N/A
1.6 A listed entity should:
(a) have and disclose a process for periodically evaluating the	Yes	Page 6
performance of the board, its committees and individual directors; and
(b) disclose, in relation to each reporting period, whether a performance evaluation was undertaken in the reporting period in accordance with	Yes	Board reviews for FY16 have been completed as per Company
that process.	policy.

1. A listed entity should:

2. have and disclose a process for periodically evaluating the performance of its senior executives; and

3. disclose, in relation to each reporting period, whether a performance evaluation was undertaken in the reporting period in accordance with that process.

Yes Yes

Refer to the Remuneration Report in the 2016 Annual Report.

Performance reviews for FY16 have been completed as per Company policy.

Principle 2 - Structure the board to add value

1. The board of a listed entity should:

2. have a nomination committee which:

3. has at least three members, a majority of whom are independent directors; and

4. is chaired by an independent director, and disclose:

5. the charter of the committee;

6. the members of the committee; and

7. 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

8. if it does not have a nomination committee, disclose that fact and the processes 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.

   No

   Yes

   Given the size of the Board, it is determined that the Board will execute the functions of a nomination committee and that a separate nomination committee is not warranted.

   Page 6

9. 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.

   Yes Page 8

10. A listed entity should disclose:

11. the names of the directors considered by the board to be independent directors;

12. if a director has an interest, position, association or relationship of the type described in Box 2.3 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

13. the length of service of each director.

    Yes

    N/A

    Yes

    K. Baxter, D. Kiggins and

    F. Grimwade are independent directors.

    Page 7

14. A majority of the board of a listed entity should be independent directors. Yes Three out of four board members

    are considered independent.

15. 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.

    Yes K. Baxter is an independent, non- executive director and does not perform the role of CEO.

16. 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 their role as directors effectively.

Yes Page 6

Principle 3 - Act ethically and responsibly

1. A listed entity should:

2. have a code of conduct for its directors, senior executives and employees; and

3. disclose that code or a summary of it.

Yes

Yes

Page 9

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Principle 4 - Safeguard integrity in corporate reporting

1. The board of a listed entity should:

2. have an audit committee which:

3. has at least three members, all of whom are non-executive directors and a majority of whom are independent directors; and

4. is chaired by an independent director, who is not the chair of the board,

   and disclose:

5. the charter of the committee;

6. the relevant qualifications and experience of the members of the committee; and

7. in relation to each reporting period, the number of times the committee met throughout the period and the individual attendances of the members at those meetings; or

8. 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.

   Yes Yes

   Yes

   Yes Yes

   Yes

   N/A

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9. 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.

   Yes The Board has received a statement from the CEO and the CFO, as per the requirements of section 295A of the Corporations Act 2001.

10. 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.

Yes BDO attends each AGM and is available to answer shareholder questions about the conduct of the audit and the preparation and content of the audit report.

Principle 5 - Make timely and balanced disclosure

1. A listed entity should:

2. have a written policy for complying with its continuous disclosure obligations under the Listing Rules; and

3. disclose that policy or a summary of it.

Yes Yes

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Principle 6 - Respect the rights of security holders

1. A listed entity should provide information about itself and its governance to investors via its website.

   Yes Information about the Company and its governance is available in the "Corporate Governance" section of the Company's website.

2. A listed entity should design and implement an investor relations program to facilitate effective two-way communication with investors.

   Yes Page 10

3. A listed entity should disclose the policies and processes it has in place to facilitate and encourage participation at meetings of security holders.

   Yes All shareholders receive written notice of general meetings and are encouraged to attend and participate.

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.

Yes Contact details for the Company and its share registry are available on their respective websites. Shareholders can provide their email address to receive certain communications electronically.

Principle 7 - Recognise And manage risk

1. The board of a listed entity should:

2. have a committee or committees to oversee risk, each of which:

3. has at least three members, a majority of whom are independent directors; and

4. is chaired by an independent director, and disclose:

5. the charter of the committee;

6. the members of the committee; and

7. 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

8. if it does not have a risk committee or committees that satisfy

   (a) above, disclose that fact and the processes it employs for overseeing the entity's risk management framework.

   Yes Yes Yes

   Yes Yes Yes

   N/A

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9. The board or a committee of the board should:

10. review the entity's risk management framework at least annually to satisfy itself that it continues to be sound; and

11. disclose, in relation to each reporting period, whether such a review has taken place.

    Yes Yes

    Page 10

    A review of the risk register will be conducted in the second half of the 2016 calendar year.

12. A listed entity should disclose:

13. if it has an internal audit function, how the function is structured and what role it performs; or

14. 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.

No

Yes

Due to the size and nature of the Company's operations, the Company does not currently have a formal internal audit function.

The Audit and Governance Committee is responsible for monitoring the Company's risk management and internal financial control systems.