The Board is responsible for the overall corporate governance of the Company including setting its strategic direction and performance objectives, increasing shareholder wealth, meeting ethical and regulatory obligations and managing business risk. Key responsibilities include:

• appointing and removing the Managing Director;
• final approval and monitoring of corporate strategies and performance objectives;
• monitoring senior management's performance and implementation of the Board approved strategies;
• reviewing and ratifying systems of risk management and internal compliance and control;
• approving and monitoring the progress of major capital expenditure, capital management, and acquisitions and divestments;
• approving and monitoring financial and other reporting; and
• any other matters required to be dealt with by the Board from time to time.

To assist in the execution of its responsibilities, the Board has established an Audit Committee and a Remuneration Committee.

Responsibility for the day-to-day operation and administration of the Company is delegated by the Board to the Managing Director and members of the senior Management team.

Procedure for Selection and Appointment of New Directors

The structure of the Board is determined having regard to the following criteria:

• The Chairperson should be a non-executive director.
• A majority of the Board should be non-executive directors.
• The roles of Chairperson and Managing Director should not be exercised by the same individual.
• The Board should comprise of directors with an appropriate range of qualifications and expertise.

Except where a director is elected by shareholders, the Board determines the appointment of new directors. There is no Nominations Committee as such.

The following principles and guidelines are adhered to in the selection and appointment of new directors:

• The Board is required to have a broad range of skills, experience and commercial expertise to ensure that it is able to discharge its mandate effectively. Therefore, when an individual is nominated for consideration as a director, their selection will depend upon an evaluation of what skills, experience and commercial expertise they would bring to the Board and how these skills would complement or enhance the Board's effectiveness.
• The composition of the Board needs to be conducive to making decisions expediently and in the best interests of the Company as a whole (rather than of individual shareholders or interest groups). Therefore, the size of the Board is limited so as to encourage efficient decision-making.
• Individuals being considered for non-executive roles will be required to provide the Company with details of their other commitments and an indication of the time involved. Candidates must be able to satisfy the Board that they will have sufficient time to meet what is expected of them.
• The Constitution of the Company provides that the directors may at any time appoint any person to be a director. That person shall hold office until the end of the next following general meeting and shall be eligible for election at that meeting.
• The Constitution of the Company provides that at every general meeting one-third of the directors or, if their number is not a multiple of three, then the number nearest to one-third, shall retire from office and be eligible for re-election.

Code of Conduct

The Company has established a Code of Conduct to guide the directors and key executives as to the practices necessary to maintain confidence in the Company's integrity and the responsibility and accountability of individuals for reporting and investigating reports of unethical practices. The Company and its directors, managers, employees and consultants are expected to act with high standards of honesty, integrity, fairness and equity, striving at all times to enhance the reputation and performance of the economic entity as a whole.

The Code of Conduct largely follows that of the Australian Institute of Company Directors and covers the main areas of: Conflicts of Interest; Confidentiality; Fair Dealing; Protection and Use of the Company's Assets; Compliance with Laws and Regulations; Reporting Unlawful/Unethical Behaviour; and Compliance with Legal and Other Obligations to Legitimate Stakeholders.

Share Trading Policy

The Company has in place a share trading policy for directors, key executives or any other employee who is likely to possess inside information (defined as information concerning the Company's financial position, strategy or operations which, if made public, would be likely to have a material impact on the price of the Company's securities).

Shares are to be traded in accordance with the guidelines stipulated by the Corporations Act and the ASX Listing Rules.  The Company identifies and raises awareness about the prohibitions under the law and directors are made aware of their continuous disclosure responsibilities and obligations. The Company does not stipulate "trading windows" or "black-out periods".

Audit Committee

The role of the Audit Committee is to advise on the establishment and maintenance of a framework of internal controls and appropriate ethical standards for the management of the Company. It also gives the Board of Directors additional assurance regarding the quality and reliability of financial information prepared for use by the Board in determining policies or for inclusion in the financial report.

The Audit Committee reviews the performance of the external auditors on an annual basis and meets with them during the year to discuss the audit plan, to review any significant issues that have arisen during the period and to review the nature and impact of changes in accounting policies. Prior to the announcement of results, the Audit Committee meets with the external auditors to review the draft financial report and the audit and make the necessary recommendation to the Board for the approval of the financial report.

To ensure management accountability of financial reporting, the Managing Director and the Group Finance Manager state to the Board in writing 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 are in accordance with relevant accounting standards."

When considering the selection and appointment of an external auditor, the Audit Committee and Board considers several factors including the professional qualifications and standing of the external auditor and the expertise and experience of the engagement partner, particularly in respect to the Company's operations.

During the year all the Directors were members of the Audit Committee. The Group Finance Manager and the external auditor also attend Audit Committee meetings.

Continuous Disclosure

The Company has adopted a policy to ensure that it complies with its continuous disclosure obligations under the ASX Listing Rules which state that:

Once an entity is or becomes aware of any information concerning it that a reasonable person would expect to have a material effect on the price or value of the entity's securities, the entity must immediately tell ASX that information.

Directors and senior management must immediately notify the Managing Director if they become aware of any information that should be considered for release to the market. The information will be reviewed and, if considered material, the appropriate disclosures will be made to the ASX.

The Company will not release any information to any other party until acknowledgement has been received from the ASX that the information has been released to the market.

Shareholder Communication

The Company aims to ensure that shareholders are informed of all major developments affecting the Company's state of affairs. Information is communicated to shareholders on a regular basis by means of continuous reporting and half yearly and annual reports. The Board ensures that these reports include all relevant information about the operations of the Company, changes in the state of affairs of the Company and details of future developments.

All documents that are released publicly (ie. ASX Announcements and Annual Reports) are made available on the Company's web site (www.garratts.com.au).

The Board encourages full participation of shareholders at the Annual General Meeting to ensure a high level of accountability and identification with the Company's strategy and goals. Important issues are presented to the shareholders as single resolutions. The Board also requests that the external auditor attend the Annual General Meeting and be available to answer shareholder questions about the conduct of the audit and the preparation and content of the auditor's report.

Risk Management and Internal Compliance and Control

The Board has established policies on risk management that include oversight of the risk management system, identification of business and financial risks, risk management/compliance and control, and assessment of effectiveness. The Audit Committee assists the Board in carrying out this function.

To ensure management accountability, the Managing Director and the Group Finance Manager state in writing to the Board that:

"The statement given in regard to financial reporting is founded on a sound system of risk management and internal compliance and control which implements the policies adopted by the Board; and
The Company's risk management and internal compliance and control system is operating efficiently and effectively in all material respects."

The Board acknowledges that the policies are designed to provide reasonable but not absolute protection against errors and irregularities and that they are intended to identify control issues that require the attention of the Board or Audit Committee.

The Board reviews the implementation of the risk management and internal compliance and control system on an annual basis.

Performance Evaluation

The Board conducts an evaluation of its performance, policies and practices annually. The review includes an examination of the effectiveness and composition of the Board, including the required mix of skills, experience and other qualities which the non-executive directors should bring to the Board for it to function competently and efficiently; a review of the Company's strategic direction and objectives, and an assessment of the corporate governance practices. The Board also conducts an annual review of the Managing Director and key executives.

Remuneration Committee

The Remuneration Committee reviews and makes recommendations to the Board on remuneration packages and policies applicable to the Managing Director, senior executives and directors themselves. This role also includes responsibility for share option schemes, incentive performance packages, superannuation entitlements, retirement and termination entitlements, fringe benefit policies and professional indemnity and liability insurance policies.  Remuneration levels are competitively set to attract the most qualified and experienced directors and senior executives. All the members of the Board constitute the Remuneration Committee.

The directors and senior executives are all on fixed remuneration; no employee is remunerated on the basis of performance-based or equity-based remuneration.  Non-executive directors are remunerated by way of fees (in the form of cash, non-cash benefits or statutory superannuation), do not receive options or bonus payments, and are provided with statutory superannuation.