ORTHOCELL LIMITED — Governance Information 2014

Aug 6, 2014

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CORPORATE GOVERNANCE STATEMENT

General

The Board is responsible for establishing the Company’s corporate governance framework, the key features of which are set out in this Section. In establishing its corporate governance framework, the Board has referred to the 3[rd] edition of the ASX Corporate Governance Councils’ Corporate Governance Principles & Recommendations.

This corporate governance statement discloses the extent to which the Company intends to follow the recommendations as at the date of admission of the Company to the ASX. The Company will follow each recommendation where the Board has considered the recommendation to be an appropriate benchmark for its corporate governance practices. Where the Company's corporate governance practices will follow a recommendation, the Board has made appropriate statements reporting on the adoption of the recommendation. In compliance with the "if not, why not" reporting regime, where, after due consideration, the Company's corporate governance practices will not follow a recommendation, the Board has explained it reasons for not following the recommendation and disclosed what, if any, alternative practices the Company will adopt instead of those in the recommendation.

The following governance-related documents can be found on the Company's website at www.orthocell.com.au, under the section marked "Corporate Governance":

Charters

Board

Codes Policies and Procedures

Code of Conduct Continuous Disclosure Policy Shareholder Communications Policy Risk Management and Internal Compliance and Control Policy Performance Evaluations Policy Diversity Policy Remunerations Policy Securities Trading Policy

Board

Roles and responsibilities of the Board, Company Secretary and Senior Executives (Recommendations: 1.1, 1.4)

The Company has established the functions reserved to the Board, and those delegated to senior executives and has set out these functions in its Board Charter.

The Board is collectively responsible for promoting the success of the Company through its key functions of overseeing the management of the Company, providing overall corporate governance of the Company, monitoring the financial performance of the Company, engaging appropriate management commensurate with the Company's structure and objectives, involvement in the development of corporate strategy and performance objectives, and reviewing, ratifying and monitoring systems of risk management and internal control, codes of conduct and legal compliance.

The Company Secretary supports the effectiveness of the Board by monitoring that Board policy and procedures are followed, and by coordinating the completion and dispatch of Board agendas, minutes, appropriate registers and briefing papers. The Company Secretary is accountable to the Board via the Chairperson.

Senior executives are responsible for supporting the Managing Director and assisting the Managing Director in implementing the running of the general operations and financial business of the Company in accordance with the delegated authority of the Board. Senior executives are responsible for reporting all matters which fall within the Company's materiality thresholds at first instance to the Managing Director or, if the matter concerns the Managing Director, directly to the Chair or the lead independent Director, as appropriate.

The Company’s Board Charter is disclosed on the Company’s website.

Skills, experience, expertise and period of office of each Director (Recommendation: 2.2)

A profile of each Director setting out their skills, experience, expertise and period of office will be included in the Company’s Annual Report.

The mix of skills and diversity for which the Board is looking to achieve in its membership is represented by the current Board. The Board comprises directors with significant experience as directors of public companies; marketing experience; accounting and financial expertise; experience in the management and growth of businesses and extensive experience in the industry in which Orthocell operates. The Board considers that these skills and experience are appropriate for Orthocell.

Director independence (Recommendations: 2.3, 2.4, 2.5)

The Board does not have a majority of directors who are independent.

The Board considers that the composition of the Board is adequate for the Company’s current size and operations, and includes an appropriate mix of skills and expertise, relevant to the Company’s business. These skills include members with significant experience as directors of public companies, relevant experience in the management and growth of businesses together with extensive experience in the industry in which Orthocell operates.

The Board will review its composition as the Company’s circumstances change. The Board will have regard to the Company’s Diversity Policy and the balance of independence on the Board in identifying appropriate candidates for any appointments for the Board.

The independent Director of the Company is Professor Lars Lidgren. Professor Lidgren is independent as he is a non-executive Director who is not a member of management and who is free of any business or other relationship that could materially interfere with, or could reasonably be perceived to materially interfere with, the independent exercise of their judgment.

The Board considers the independence of directors having regard to the relationships listed in Box 2.3 of the Principles & Recommendations and the Company's materiality thresholds.

The Executive Chair of the Board is Dr Stewart Washer. The board considers that given its stage of development it is beneficial that Dr Washer is an Executive. The Board will consider the appointment of an independent chair as the Company increases in size and complexity.

The Managing Director is Paul Anderson who is not Chair of the Board.

To assist Directors with independent judgement, it is the Board's policy that if a director considers it necessary to obtain independent professional advice to properly discharge the responsibility of their office as a Director then, provided the Director first obtains approval from

the Chair for incurring such expense, the Company will pay the reasonable expenses associated with obtaining such advice. Where it is the Chair who is seeking the independent professional advice, the role of the Chair to consider and provide approval as set out above will be carried out by the independent Directors.

Selection and (Re) Appointment of Directors (Recommendation: 1.2, 1.3, 2.2)

In determining candidates for the Board the board will evaluate the mix of skills, experience, expertise and diversity of the existing Board. In particular, the board will seek to identify the particular skills and diversity that will best increase the Board's effectiveness. Consideration will also be given to the balance of independent Directors. Any appointment made by the Board will be subject to ratification by shareholders at the next general meeting.

Prior to the appointment of a new director the Board will undertake appropriate checks to ensure that the person’s character, experience and education is appropriate for the position which will include criminal history and bankruptcy checks.

Each Board member will have a written letter of appointment or executive contract setting out the terms of their appointment.

Each Director other than the Managing Director, must not hold office (without re-election) past the third annual general meeting of the Company following the Director's appointment or three years following that Director's last election or appointment (whichever is the longer). However, a Director appointed to fill a casual vacancy or as an addition to the Board must not hold office (without re-election) past the next annual general meeting of the Company. At each annual general meeting a minimum of one Director or one third of the total number of Directors (rounded down) must resign. A Director who retires at an annual general meeting is eligible for re-election at that meeting. Re-appointment of Directors is not automatic.

Board committees

Nomination Committee (Recommendations: 2.1) Audit Committee (Recommendations: 4.1) Remuneration Committee (Recommendations: 8.1) Risk Committee (Recommendation (7.1)

The Board considers that the Company is not currently of a size, nor are its affairs of such complexity to justify the formation of separate or special committees at this time preferring at this stage to manage the Company through the full board of Directors.

Matters typically dealt with by a Nomination, Audit, Remuneration and Risk committee will be dealt with by the full Board in accordance with adopted policies and procedures.

If the Company’s activities increase in size, scope and nature, the appointment of separate or special committees will be reviewed by the Board and implemented if appropriate.

Remuneration of Directors and Executives (Recommendation 8.1, 8.2, 8.3)

Details of remuneration, including the Company’s policy on remuneration, will be contained in the “Remuneration Report” which will form part of the Company’s Annual Report.

The Company's policy is to remunerate non-executive Directors at a fixed fee for time, commitment and responsibilities. Remuneration for non-executive Directors is not linked to individual performance. From time to time the Company may grant performance rights or to non-executive Directors. The grant of performance rights or options is designed to attract and retain suitably qualified non-executive Directors. The maximum aggregate amount of fees

(including superannuation payments) that can be paid to non-executive directors is subject to approval by shareholders at a General Meeting.

There are no termination or retirement benefits for non-executive directors (other than for superannuation).

Executive remuneration consists of a base salary and performance incentives.

Short term performance incentives may be paid in cash and may be subject to the successful completion of performance hurdles agreed by the board.

Long term performance incentives may include options, performance rights, or other equity based products granted at the discretion of the Board subject to obtaining the relevant approvals. The grant of equity based products is designed to recognise and reward efforts as well as to provide additional incentive to continue those efforts for the benefit of the Company, and may be subject to the successful completion of performance hurdles.

Executives are offered a competitive level of base pay at market rates (for comparable companies), which are reviewed at least annually to ensure market competitiveness.

The Company's Securities Trading Policy includes a statement of the Company's policy on prohibiting transactions in associated products which limit the risk of participating in unvested entitlements under any equity based remuneration schemes.

Performance evaluation

Senior executives (Recommendations: 1.7)

The Managing Director will review the performance of the senior executives. The Managing Director will conduct a performance evaluation of the senior executives by meeting individually with each senior executive on a yearly basis to review performance against the senior executive’s responsibilities as outlined in his or her contract with the Company and against key performance indicators (KPI’s) set for the senior executive set by the Managing Director or the Board.

The performance of executive Directors, including the Managing Director, will be reviewed by the Board. The Board (or Directors nominated by the board) will conduct a formal performance evaluation of the Executive Directors annually to review performance against KPIs set for the previous year, and to establish KPIs for the forthcoming year.

Board, its committees and individual directors (Recommendations: 1.6)

The Chair has the overall responsibility for evaluating the Board, any committees established and, when appropriate, individual directors on an annual basis.

The method and scope of the performance evaluation will be set by the Chair and which may include a Board self-assessment checklist to be completed by each Director. The Chairperson may also use an independent adviser to assist in the review.

Ethical and responsible decision making

Code of Conduct (Recommendation: 3.1)

The Company has established a Code of Conduct as to the practices necessary to maintain confidence in the Company’s integrity, the practices necessary to take into account its legal

obligations and the reasonable expectations of its stakeholders and the responsibility and accountability of individuals for reporting and investigating reports of unethical practices.

Diversity

(Recommendation: 1.5)

The Company has established a Diversity Policy, which provides the Board with objectives for achieving diversity that is appropriate for the Company.

The Company presently has only a small number of full time employees. The Board considers due to the size of the Company setting measurable diversity objectives is not appropriate with its practice currently being to hire the most appropriate candidate for the position to be filled having regard to the activities to be undertaken in the role. As the Company increases in size the board will consider setting measurable objectives.

The Company will report on the proportion of women employees in the whole organisation, women in senior executive positions and women on the Board in its Annual Report.

Integrity of Financial Reporting (Recommendations: 4.1, 4.2, 4.2)

The Company has not established and Audit Committee. The full Board has responsibility for verifying and safeguarding the integrity of its corporate reporting. The full Board will assess any proposal to appoint or remove the auditor and will ensure that the engagement partner rotates in accordance with the Corporations Act.

The Managing Director and the Chief Financial Officer will to provide a declaration to the Board in accordance with section 295A of the Corporations Act and will assure the Board that such declaration is founded on a sound system of risk management and internal controls and that the system is operating effectively in all material respects in relation to financial reporting risks.

A representative of the Company’s auditor will be present at the Annual General Meeting and to answer any questions regarding the conduct of the audit and the preparation and content of the auditors’ report

Continuous Disclosure

(Recommendation: 5.1)

The Company has established a written policy designed to ensure compliance with ASX Listing Rules disclosure requirements and accountability at a senior executive level for that compliance.

Shareholder Communication

(Recommendations: 6.1, 6.2, 6.3, 6.4)

The Company has designed a communications policy for promoting effective communication with shareholders, receive communities from shareholders, including by electronic means, and encouraging shareholder participation at general meetings and at the annual general meeting.

Risk Management

Recommendations: (7.1, 7.2, 7.3, 7.4)

The Company has not established a Risk Committee or a formal internal audit function.

The Board has adopted a Risk Management, internal Compliance and Control Policy., which sets out the Company's risk management and control framework. Under the policy, the Board is responsible for the oversight of the Company’s risk management and control framework and satisfying itself that management has developed and implemented a sound system of risk management and internal control.

Under the policy, the Board delegates day-to-day management of risk to the Managing Director , who is responsible for identifying, assessing, monitoring and managing risks.

In fulfilling the duties of risk management, the Managing Director may obtain independent expert advice on any matter they believe appropriate, with the prior approval of the Board.

The Board will receive a periodic report from management as to the effectiveness of the Company's management of identified risks, including identified weaknesses or incidents and will review the Company’s risk framework, at lease annually to satisfy itself that it continues to be sound and appropriate for the Company’s size and levels of operations.

ASX Corporate Governance Council recommendations checklist

The following table sets out the Company’s position with regard to adoption of the Principles & Recommendations:

Principles and Recommendations	Principles and Recommendations	Comply (Yes/ No)
Principle 1: Lay solid foundations for management and oversight
1.1	Companies should establish the	Yes
	functions reserved to the Board and
	those delegated to senior executives
	and disclose those functions.
1.2	Background checks and information to	Yes
	be given for elections
1.3	Written contracts of engagement	Yes
1.4	Company Secretary accountable to	Yes
	board through Chairperson
1.5(a)(b)(d)	Diversity Policy	Yes
1.5(c)	Measurable Objectives in Diversity	No
	Policy	The Board considers that due to the
		size of the Company setting
		measurable diversity objectives is not
		appropriate with its practice currently
		being to hire the most appropriate
		candidate for the position to be filled
		having regard to the activities to be
		undertaken in the role
1.6	Evaluation of Board	Yes
Principle 2: Structure the Board to add value
2.1	The Board should establish a nomination	No
	committee.	Due to its current size the Company
		has not established a nomination
		committee. The full Board will
		undertake the activities normally
		undertaken by a nomination
		committee
2.2	Skills Matrix	Yes
2.3	Disclose independence and length of	Yes
	service
2.4	A majority of the Board should be	No
	independent directors.	The Board considers that the
		composition of the Board is

Principles	and Recommendations	Comply (Yes/ No)
		adequate for the Company’s current
		size and operations, and includes
		an appropriate mix of skills and
		expertise, relevant to the
		Company’s business. Consideration
		will be given to the appointment of
		further independent directors as the
		Company’s level of activities
		increase.
2.5	The chair should be an independent	No
	director.	The board considers that given its
		stage of development it is beneficial
		that Dr Washer is an Executive. The
		Board will consider the appointment
		of an independent chair as the
		Company increases in size and
		complexity.
2.5	The roles of chair and chief executive	Yes
	officer should not be exercised by the
	same individual.
2.6	Induction and professional development of	Yes
	directors
Principle 3: Promote ethical and responsible decision-making
3.1	Companies should establish a code of	Yes
	conduct
Principle 4: Safeguard integrity in financial reporting
4.1	The Board should establish an audit	No
	committee.
		Due to its current size the Company
		has not established an audit
		committee. The full Board will
		undertake the activities normally
		undertaken by an audit committee
4.2	Declaration from chief executive officer	Yes
	and the chief financial officer (or
	equivalent) that the declaration provided in
	accordance with section 295A of the
	Corporations Act.
4.3	External Auditor to be available at AGM	Yes
Principle 5: Make timely and balanced disclosure
5.1	Companies should establish written	Yes
	policies designed to ensure compliance
	with ASX Listing Rule disclosure
	requirements.
Principle 6: Respect the rights of shareholders
6.1	Information of website	Yes
6.2	Investor relations program	Yes
6.3	Facilitate participation at general meetings	Yes
6.4	Facilitate electronic communications	Yes

Principles	and Recommendations	Comply (Yes/ No)
Principle 7: Recognise and manage risk
7.1	The Board should establish a risk	No
	committee	Due to its current size the Company
		has not established a risk
		committee. The full Board will
		undertake the activities normally
		undertaken by a risk committee
7.2	Conduct annual risk review	Yes
7.3	Internal audit function	No
		Due to its current size the Company
		has not established an internal audit
		function. The Board has
		responsibility for the oversight of the
		Company’s risk management and
		control framework. the Board
		delegates day-to-day management
		of risk to the Managing Director,
		who is responsible for identifying,
		assessing, monitoring and
		managing risks
7.4	Disclose exposure to sustainability risks	Yes
Principle 8: Remunerate fairly and responsibly
8.1	The Board should establish a	No
	remuneration committee.
		Due to its current size the Company
		has not established a remuneration
		committee. The full Board will
		undertake the activities normally
		undertaken by a remuneration
		committee
8.2	Disclose remuneration policy	Yes
8.3	Disclose policy on hedging equity	Yes
	incentive schemes