MITCHELL SERVICES LIMITED — Governance Information 2011

Jul 28, 2011

Drill Torque Limited (DTQ)

Corporate Governance Statement

DTQ is committed to high standards of corporate governance. The DTQ board have agreed “that to the extent practicable DTQ endorses the ASX Corporate Governance Principles and Recommendations (2[nd] Edition) prepared by ASX Corporate Governance Council and will endeavour to implement all recommendations.

Notwithstanding the foregoing the board is currently of the view that DTQ (as proposed newly listed company) is not of a size, nor are the affairs of DTQ of such complexity to justify the expense of appointing a corporate governance executive. Thus, DTQ is in the early stages of compliance and while it may at this stage of its development be able to comply with most recommendations such compliance in some areas may be rudimentary at best.

The table below summarises the ASX Corporate Governance Councils’ recommendations and DTQ’s current practices, including instances where recommendations have not been adopted by DTQ, this has been identified and explained.

	Recommended Principle	Complied	Note
1.1	Establish the functions reserved to the board & those delegated to senior executives & disclose those functions.	Yes	1
1.2	Disclose the process for evaluating the performance of senior executives.	Yes
1.3	Provide for the information indicated in the guide for reporting Principle 1.	Yes
2.1	A majority of the board should be independent directors.	No	2
2.2	The chairperson should be an independent director.	No	3
2.3	The role of chairperson and managing director/CEO should not be exercised by the same individual.	Yes
2.4	The board should establish a Nominations Committee.	Yes	4
2.5	Disclose the process for evaluating the performance of the board, its Committees & individual Directors.	Yes
2.6	Provide the information indicated in Guide to reporting on Principle 2.	Yes
3.1	Establish a code of conduct & disclose the code or a summary of the code as to:‐
	• the practices necessary to maintain confidence in the company’s integrity;	Yes
	• the practices necessary to take into account their legal obligations & the reasonable expectations of their stakeholders;and	Yes
	• the responsibility & accountability of individuals for reporting & investigating reports of unethicalpractices.	Yes	5
3.2	Establish a policy concerning trading in company securities by Directors, senior Executives & employees and disclose thepolicyor a summaryof thatpolicy.	Yes	6
3.3	Provide the information indicated in Guide to Reporting on Principle 3.	Yes
4.1	The board should establish an Audit Committee.	Yes	7

Drill Torque Limited (DTQ) Corporate Governance Statement

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ASX Corporate Governance Principles

“ ” PRINCIPLE 1 ‐ Establishing the roles of the Board & senior executives

The initial board of Directors of Drill Torque Ltd consists of the following:‐

David J. Fairfull	‐	Non Executive Chairman
David Williamson	‐	Independent Non Executive Deputy Chairman
Dr Ralph Craven	‐	Independent Non Executive Director
Peter Miller	‐	Managing Director
Guy Drummond	‐	Executive Director

Details of the Board of Directors & senior management team can be found in Section 5 of Drill Torque Limited’s (DTQ) prospectus.

The respective roles and responsibilities are outlined in detail in Section 5 of DTQ’s prospectus. Notwithstanding the foregoing and Section 5 of DTQ’s prospectus, the major issues in regard to the company’s framework are as follows:‐

• Organisation Chart established to enable the board to provide strategic guidance & effective oversight of management. Such is already being achieved via open communication at board, board committees & management levels.

• Apart from overall board meeting participation on a monthly basis independent non executive directors are encouraged to interface with senior executives and via board committees.

David Williamson is Chairman of Audit & Risk Committee; and

Dr Ralph Craven is Chairman of Remuneration & Nominations Committee.

The entire board are members of the Health, Safety, Environment and Sustainability Committee. This committee is responsible for the overview of:‐

• Health & Safety

• Corporate Social Responsibility;

• Environment; and

• Compliance.

It is the boards’ current intention in the first 12 months of DTQ’s public listing to:‐

• Hold Director’s meeting every month; and

• With each alternate meeting being held at Drill Torque’s office in Townsville and the other monthly meeting to take place via telephone.

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The foregoing policy will be reviewed each six months to assess the viability of the board meeting programme.

DTQ Board have reviewed its responsibilities as set out on Page 11 of ASX Corporate Governance Principles & Recommendations and believe that where practicable DTQ endorses the ASX Corporate Governance principles & Recommendations 2[nd] Edition prepared by ASX Corporate Governance Council and will endeavour to implement all recommendations.

PRINCIPLE 2 ‐ Structure of the Board to add Value

• DTQ’s board has been established as a five member board made up of a Non Executive Chairman, two Independent Non Executive Directors & two Executive Directors.

• All Non Executive Directors have skills deemed necessary to add value to DTQ’s business activities. A biography of each director can be found in Section 5 of DTQ’s Prospectus.

• The chairperson is a Non Executive Director and due to being a Non Executive Director of WHSP (a 9.8% shareholder in DTQ on a fully diluted basis), is therefore not an independent Director. The board believes that even though the chairperson is not an independent Director, the chairperson is able to make quality and independent judgement on all relevant issues falling within the scope of the role of a chairman. In the event of a personal conflict the chairperson would not participate nor vote on the matter under consideration.

• DTQ has a Remuneration & Nominations Committee already in place & chaired by Dr Ralph Craven. The performance of board members will be reviewed annually or as agreed by the Chairman of the Remuneration & Nominations Committee & the Chairman of DTQ.

• All directors of DTQ have the right to seek outside professional advice on any matter pertaining to DTQ. Such seeking of professional advice will be handled in conjunction with DTQ’s Chairman.

• All Directors of DTQ do have access to DTQ’s Company Secretary & Chief Financial Officer.

PRINCIPLE 3 ‐ Promote ethical & responsible decision making

• No director, Senior Executive or employee can accept unauthorised benefits as a result of their position in DTQ.

• Ensure DTQ assets and confidential information is not used improperly.

• Maintain and further enhance DTQ’s reputation and not act in a manner which may harm that reputation.

• Reporting all breaches of the code.

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DTQ has established a share trading policy, the main principles are as follows:‐

• The policy relates to trading in shares of the company and controlled & associated entities of the company that are publicly listed.

• Trading is prohibited when Directors and employees are in possession of price sensitive information which is not available to the public.

• In respect of Directors & senior executives trading in its shares, the company has established the following share trading windows each for a period of 6 weeks commencing prior to & post:

• The release of the company’s annual result to the ASX;

• The release of the company’s half yearly result to the ASX;

• The date of the Annual General Meeting; and

• The release of a prospectus.

At times other than those referred to above, Directors and senior executives, may trade with the prior approval of the Chairman, or in his absence, two Directors. Subsequent confirmation of any such trades is to be given to the Chairman or the Directors who approved the trade.

• Directors and senior executives are prohibited from using margin loans to finance the purchase of shares in the company or from trading in any financial products issued or created over the company’s shares.

PRINCIPLE 4 ‐ Safeguard integrity in financial reporting

The company has an established Audit Committee, which has a formal charter outlining the committee’s function, composition, authority, responsibilities and reporting.

The current members of the Audit Committee are:‐

David Williamson (Chairman) Dr Ralph Craven

David Fairfull

All of the members of the committee are Non Executive Directors. Mr Williamson, who is the Chairman of the Audit Committee, is not the Chairman of the Board.

The Executive Directors, Chief Financial Officer & Company Secretary may attend Audit Committee meetings by invitation. The external auditors are requested by the Audit Committee to attend the appropriate meetings to report on the results of their half‐year review and full‐year audit.

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The function of the Audit Committee is to assist the board in fulfilling its statutory and fiduciary responsibilities relating to:‐

• The external reporting of financial information, including the selection & application of accounting policies.

• The independence and effectiveness of the external auditors.

• The effectiveness of internal control processes & management information systems.

• Compliance with the Corporations Act, ASX Listing Rules and any other applicable requirements

• The application and adequacy of risk management systems within the company.

The Executive Director and the Chief Financial Officer are required to state in writing to the board, by submission to the Audit Committee, that the company’s financial statements present a true & fair view, in all material respects, of the company’s financial position & operating results and that they are in accordance with relevant accounting standards.

PRINCIPLE 5 ‐ Make timely and balanced disclosure

The board recognises the need to ensure that all investors have equal and timely access to material information regarding the company and for announcements to be factual, clear, balanced and complete.

The company has established a Continuous Disclosure Policy to ensure compliance with ASX and Corporations Act continuous disclosure requirements. The policy requires timely disclosure through the ASX announcement platform 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 or which would materially influence the decision making of investors. Internal procedures are in place to ensure that relevant information is communicated promptly.

The Chairman & Executive Directors are responsible for determining disclosure obligations and the Company Secretary is the nominated continuous disclosure officer for the company.

PRINCIPLE 6 ‐ Respect the rights of Shareholders

The board is committed to ensuring that shareholders are fully informed of all material matters affecting the company in a timely manner.

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The dissemination of information is mainly achieved as follows:‐

• Annual Report is distributed to shareholders in October each year.

• The Chairman’s address to the Annual General Meeting is distributed to Shareholders in November each year.

• A Half‐Yearly Review of Operations is distributed to Shareholders in April each year.

• Significant information is posted on the Company’s website.

In addition, Shareholders are encouraged to attend and participate in the Annual General Meeting of the company. The external auditor attends the Annual General Meeting to answer Shareholders’ questions in regard to the conduct of the audit and the content of the auditor’s report.

PRINCIPLE 7 ‐ Recognise and manage risk

The company is committed to identifying and managing areas of significant business risk to protect Shareholders, employees, earnings and the environment. Arrangements in place include:‐

• Regular detailed financial, budgetary and management reporting.

• Procedures to manage financial and operational risks.

• Established organisational structures, procedures and policies dealing with the areas of health and safety, environmental issues, industrial relations & legal and regulatory matters.

• Comprehensive insurance and risk management programs.

• Procedures requiring board approval for all borrowings, guarantees and capital expenditure beyond minor levels.

• Where applicable, the utilisation of specialised staff and external advisors.

Management is responsible for the design and implementation of a risk management and internal control system which manages the material business risks of the Company and reporting to the board on whether those risks are being managed efficiently. Management reported to the board on an ongoing basis during the current reporting period.

The Executive Director and the Chief Financial Officer are required to state in writing to the board, by submission to the Audit Committee that the risk management & internal control compliance systems are operating efficiently and effectively. In their declaration under Section 295A of the Corporations Act the Executive Directors and the Chief Financial Officer must make this statement in respect of the annual financial reports.

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PRINCIPLE 8 ‐ Remunerate fairly and responsibly

The company has established a Remuneration Committee, which consists of three Non Executive Directors, the majority of whom are independent, and is chaired by an independent Director. The Committee makes recommendations to the full board on remuneration matters and other terms of employment for the Executive Directors, senior Executives and Non Executive Directors. The details of the Remuneration Committee members at the date of this statement & their attendance at meetings are set out in the Prospectus of DTQ.

Senior Executive performance is continually monitored by the Executive Directors and the Executive Director’s performance is subject to continuous monitoring by the full board.

The remuneration of the Executive Directors is reviewed annually by the Remuneration Committee, which consists of all of the Non Executive Directors. The remuneration of the senior Executive staff is reviewed annually by the full board after taking into consideration the recommendations of the Remuneration Committee and the Executive Directors.

The Executive Directors and senior executive staff are renumerated by way of salary, non monetary benefits and superannuation contributions. Neither the Executive Directors nor senior Executive staff are entitled to receive bonus payments or any equity based remuneration, which is not approved by the Remuneration Committee and board.

Non Executive Directors’ fees are reviewed annually by the full board after taking into consideration the company’s performance, market rates, level of responsibility and the recommendations of the Remuneration Committee. The aggregate amount of fees which may be paid to non executive Directors is subject to the approval of Shareholders at the Annual General Meeting and is currently set at $215,000 per annum. Approval for this amount was given in DTQ’s Prospectus & Board Meeting in May 2011.

Non Executive Directors are renumerated by way of fees in the form of cash, non monetary benefits and statutory superannuation contributions.

Remuneration is set so as to attract and retain suitable personnel and to motivate them to pursue the long term growth and success of the company.

Further information of Directors’ and Executives’ remuneration will be set out in the Remuneration Report each year.

For further information concerning the corporate governance practices of the company refer to the corporate governance section of the company’s website .

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	Recommended Principle	Complied	Note
4.2	The Audit Committee should be structured so that it:‐
	• consists only of non Executive Directors;	Yes
	• consists of a majority of independent Directors;	Yes
	• is chaired by an independent chairperson, who is not chairman of the board; and	Yes
	• has at least 3 members.	Yes
4.3	The Audit Committee should have a formal charter.	Yes
4.4	Provide the information indicated in Guide to reporting on Principle 4.	Yes
5.1	Establish written policies designed to ensure compliance with ASX Listing Rule disclosure requirements and to ensure accountability at a senior Executive level for that compliance and disclose thosepolicies or a summaryof thosepolicies.	Yes	8
5.2	Provide the information indicated in Guide to reporting on Principle 5.	Yes
6.1	Provide the information indicated for promoting effective communication with Shareholders and encouraging their effective participation at General Meetings and disclose theirpolicyor a summaryof thatpolicy.	Yes	9
6.2	Provide the information indicated in the Guide to reporting on Principle 6.	Yes
7.1	Establish policies for the oversight and management of material business risks and disclose a summaryof thosepolicies.	Yes	10
7.2	Require management to design and implement the risk management and internal control system to manage the company’s material business risks and report to it on whether those risks are being managed effectively. The board should disclose that management has reported to it as to the effectiveness of the Company’s management of its material business risks.	Yes
7.3	The board should disclose whether it has received assurance from the Managing Director/CEO (or equivalent) and the Chief Financial Officer (or equivalent) that the declaration provided in accordance with Section 295A of the Corporations Act is founded on a sound system of risk management & internal control and that the system is operating effectively in all material respects in relation to financial reportingrisks.	Yes
7.4	Provide the information indicated in Guide to reporting on Principle 7.	Yes
8.1	The board should establish a Remuneration Committee.	Yes	11
8.2	Clearly distinguish the structure of Non Executive Directors’ remuneration from that of Executive Directors and senior Executives.	Yes
8.3	Provide the information indicated in the Guide to reporting on Principle 8.	Yes

Drill Torque Limited (DTQ) Corporate Governance Statement

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NOTES:

1. The Directors of the company are accountable for the proper management of the business and affairs of the company.

Responsibilities of the board are:‐

• ►overseeing the company, including its control and accountability systems;

• ►appointing and removing the Managing Director/CEO, or equivalent;

• ►where appropriate, ratifying the appointment and the removal of senior Executives;

• ►establishing, monitoring & modifying corporate strategies and performance objectives;

• ►ensuring that appropriate risk management systems, internal compliance & control, reporting systems, codes of conduct and legal compliance measures are in place;

• ►monitoring the performance of management and implementation of strategy and ensuring appropriate resources are available;

• ►approving & monitoring of financial and other reporting; and

• ►approving dividends, major capital expenditure, acquisitions and capital raising/restructures.

The company has an informal process to educate new Directors about the nature of the business, current issues, the corporate strategy and the expectations of the consolidated entity concerning performance of Directors. Directors also have the opportunity to visit consolidated entity facilities and meet with management to gain a better understanding of business operations.

1. While the majority of the board members are not independent Directors as set out in ASX Corporate Governance Principles & Recommendation (only 2 of 5 Directors are independent), the board believes that the experience and skills of the Directors are sufficient to discharge the board’s duties effectively. The board considers that the company is not currently of a size, nor are the affairs of such complexity, to justify the expense of appointing more independent Directors.

2. The chairperson is a Non Executive Director and due to being a Non Executive Director of WHSP (a 9.8% shareholder in DTQ on a fully diluted basis), is therefore not an independent Director. The board believes that even though the chairperson is not an independent Director, the chairperson is able to make quality and independent judgement on all relevant issues falling within the scope of the role of a chairman. In the event of a personal conflict the chairperson would not participate nor vote on the matter under consideration.

3. The board has appointed a Remuneration and Nomination Committee.

The board oversees the appointment and induction process for Directors and committee members, and the selection, appointment and succession planning process of the company’s executive management team. The appropriate skill mix, personal qualities, expertise and diversity are factors taken into account in each case. When a vacancy exists or there is a need for particular skills, the Committee determines the selection criteria based on the required skills and recommendations of the executive team and recommends to the board.

The Committee annually reviews the effectiveness of the functioning of the board, individual Directors and senior Executives.

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1. The consolidated entity recognises the need for Directors and employees to observe the highest standards of behaviour and business ethics. All Directors and employees are required to act in accordance with the law and with the highest standard of propriety. This policy requires all Directors and employees to seek approval from the Chairman and the Company Secretary prior to dealing in the company’s securities.

2. The company’s policy regarding Directors and employees trading in securities is set by the board. The policy restricts Directors and employees from acting on material information until it has been released to the market and adequate time has been given for this to be reflected in the security’s prices. See Securities Trading Policy.

3. The company has established an Audit and Risk Committee. The committee advises on the establishment and maintenance of a framework of internal control and appropriate ethical standards for the management of the consolidated entity. The board believes that the current members of the committee have the experience and skills to discharge the Audit Committee’s duties effectively.

Currently, the committee will:‐

• ►review the annual, half‐year & concise financial reports and other financial information distributed externally. This includes approving new accounting policies to ensure compliance with Australian Standards and generally accepted accounting principles, and assessing whether the financial information is adequate for shareholder needs;

• ►assess whether non‐audit services provided by the external auditor are consistent with maintaining the external auditor’s independence. Each reporting period the external auditor provides an independent declaration in relation to the audit or review;

• ►assess the adequacy of the internal control framework and the company’s ethical standards;

• ►discuss the external audit and internal audit plans, identifying any significant changes in structure, operations, internal controls or accounting policies likely to impact the financial statements and to review the fees proposed for the audit work to be performed;

• ►monitor the procedures to ensure compliance with the Corporations Act 2001 and the ASX Listing Rules and all other regulatory requirements;

• ►address any matters with the auditors, Australian Taxation Office, Australian Securities and Investments Commission and ASX;

• ►review the nomination and performance of the external auditor; and

• ►review and approves corporate governance policy.

• The company has established procedures designed to ensure compliance with the ASX Listing Rules so that company announcements are made in a timely manner, are factual, do not omit material information and are expressed in a clear and objective manner that allows investors to assess the impact of the information when making investment decisions.

• The company has a communications strategy and an established policy on stakeholder communication and continuous disclosure to promote effective communication with shareholders, subject to privacy laws and the need to act in the best interests of the company by protecting commercial information.

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1. The board and Audit Committee have established policies on risk oversight and management which can be viewed on the company’s website. To carry out this function the board:‐

2. ►oversees the establishment, implementation and annual review of the company’s risk management system, including assessing, monitoring and managing operational, financial reporting and compliance risks for the consolidated entity;

3. ►reviews the financial reporting process of the company;

4. ►discusses with management and the external auditors, the adequacy and effectiveness of the accounting and financial controls, including the policies and procedures of the company to assess, monitor and manage business risks;

5. ►reviews with the external auditor any audit problems and the company’s critical policies and practices; and

6. ►reviews and assesses the independence of the external auditor.

Systems of internal financial control have been put in place by the management of the company and are designed to provide reasonable, but not absolute protection against fraud and material misstatement. These controls are intended to identify, in a timely manner, control issues that require attention by the board.

The board is responsible for the overall internal control framework, but recognises that no cost‐effective internal control system will preclude all errors and irregularities.

Practices have been established to ensure:‐

►capital expenditure and revenue commitments above a certain size obtain prior board approval;

►financial exposures are controlled, including any use of derivatives. Further details of the company’s policies relating to interest rate management, forward exchange rate management and credit risk management are included in the financial statements;

►occupational health and safety standards and management systems are monitored and reviewed to achieve high standards of performance and compliance with regulations;

►business transactions are properly authorised and executed;

►the quality and integrity of personnel; and

►financial reporting accuracy and compliance with the financial reporting regulatory framework.

1. The remuneration policy, which sets the terms and conditions for the Chairman, Remuneration & Nomination Committee and other senior Executives has been approved by the board. The board and the Remuneration & Nomination Committee reviews Executive packages annually by reference to company performance, Executive performance, comparable information from industry sectors and other listed companies.

The amount of remuneration of all Directors and Executives, including all monetary and non‐monetary components, is detailed in the Directors’ Report.

The board expects that the remuneration structure implemented will result in the company being able to attract and retain the best executives to run the economic entity. It will also provide Executives with the necessary incentives to work to grow long‐term shareholder value.

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