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CGR-KeyFindings _Horwath_ - Key findings from the Horwath 2006

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					Key findings from the
Horwath 2006 Corporate Governance Report
(mid-sized Australian ASX companies)




Research conducted by the
University of Newcastle School of Business and Management
                                     Key findings from the Horwath 2006 Corporate Governance Report (mid-sized Australian ASX companies)



Key findings                                                     Research design
The research contained in this report is derived                 The research design of this report is very similar
from the 2005 Annual Report disclosures of 150                   to that employed in the 2005 Horwath Report. As
‘mid-sized’ Australian companies (251-400 largest                would be expected, many of the factors in our
based on market capitalisation at 31 December                    model are similar to (but not necessarily identical
2005). The report contains an overall assessment                 to) those in the ASX Corporate Governance
of each company’s corporate governance                           Council Report.
structures, a star rating out of 5, and a relative               To that degree, it is fair to presume that a high
ranking. The findings were as follows.                           ranking in the Horwath Report will normally mean
    There were only 4 companies (2.7%) that                      that a company has complied with most of the
    achieved a ‘five-star rating’. In order, the five            ASX guidelines.
    star companies were Tasmanian Perpetual                      However, the corporate governance assessment
    (1st), Home Building Society (2nd), Coventry                 model developed in the research is based upon a
    Group (3rd), and Gallery Gold Limited (4th).                 combination of factors identified in national and
    The corporate governance structures of 66                    international best practice guidelines and
    companies (44%) could be described as good                   research studies. These include the USA Blue
    (or better). Conversely, the corporate                       Ribbon Committee Report (1999), the UK Hempel
    governance structures of 50 companies                        Report (1999), the OECD Report (2001), the UK
    (33.3%) were lacking in key areas. In                        Higgs Report (2003), the Australian Ramsay
    addition, there were 9 (6%) companies that                   Report (2001), Investment and Financial Services
    obtained a one-star rating. The corporate                    Association of Australia Corporate Governance
    governance structures of these 9 companies                   Guide (2003) and the ASX Corporate Governance
    were sub-standard and were lacking in most                   Council Report (2003), and CLERP 9.
    key areas. Almost without exception the                      As was the case in previous Horwath Reports,
    main board and the associated committees                     central to the model is the need for companies to
    (where they existed) contained no                            have appropriate levels of independence on the
    independent members. Overall, there was a                    Board of Directors, their associated committees
    scarcity of corporate governance structures                  and from their external auditor.
    for these companies.
                                                                 The model considers objective factors based on
    In general, the corporate governance                         publicly disclosed information pertaining to the
    structures of the ‘251-400 companies’ were                   existence and structure of a company’s Board of
    not quite strong as was found for the ‘1-250                 Directors and associated committees, the level of
    companies’ (as reported in the 2005 Horwath                  perceived independence of the company from the
    Corporate Governance Report), but arguably                   external auditors, and disclosures relating to the
    the differences are not as great as might be                 existence of a code of conduct, risk management
    expected. Certainly in the case of main                      and share trading policy.
    board independence, audit committee
    existence and composition, non-audit fees,
    and policies on code of conduct, risk
    management and share trading, the 251-400
    companies stack up reasonably well
    compared to the 1-250 companies. Probably
    some areas where the 251-400 companies
    do not come close to the 1-250 companies
    relates to the existence and composition of
    the remuneration and nomination
    committees. In these areas they have some
    work to do.
                           Key findings from the Horwath 2006 Corporate Governance Report (mid-sized Australian ASX companies)



Alphabetical company listing
Company                     Market Capitalisation            2006 Rank              2006 Stars
                            @ 31 December 2005
                                   $000
A.P. Eagers Limited                 167,438                     136
Aevum Limited                       127,700                     =67
Agincourt Resources                 130,135                     =114
Alchemia Limited                    151,576                     =74
ALE Property Group                  219,737                     =89
Allco Equity Partner                279,584                     =101
Amadeus Energy                      200,831                     =144
Anvil Mining                        203,608                     =60
Anzon Australia Limited             150,329                     137
APN Property Group                  230,099                     =120
ARB Corporation                     190,377                     =144
Arrow Energy NL                     121,144                     =30
Aspen Group                         203,015                     =10
Astron Limited                      171,468                     =39
Auspine Limited                     186,118                     =78
Avjennings Homes                    256,120                     =78
B Digital Limited                   186,604                     =106
Babcock & Brown Env.                185,778                     138
Baxter Group Limited                222,657                     =15
Becton Property Group               184,479                     =60
Bemax Resources NL                  270,770                     =89
Biota Holdings                      263,407                     =20
Blackmores Limited                  229,757                     43
Brazin Limited                      207,697                     =55
Brickworks Investments              243,856                     =126
Capral Aluminium                    261,779                     =89
Cardno Limited                      150,563                     =78
Cedar Woods Property                163,146                     125
Cellestis Limited                   262,642                     =97
Centamin Egypt                      266,357                     =131
Central Equity                      141,739                     =64
Century Australia                   197,784                     =28
CH4 Gas Limited                     126,492                     =55
Clough Limited                      191,338                     =120
Codan Limited                       162,046                     =85
Coffey International                251,757                     =82
Collection House                    135,278                     =25
Consolidated Rutile                 245,620                     =82
Country Road Limited                139,495                     49
Coventry Group                      211,213                     3
Credit Corp Group                   197,688                     =89
Cromwell Corporation                125,315                     149
Cumnock Coal Limited                130,277                     =89
CVC Limited                         166,726                     =139
Diversified United                  285,333                     =142
Domino's Pizza Australia            197,401                     =128
Electro Optic Systems               168,200                     =139
Emeco Limited                       131,876                     119
Equigold NL                         235,346                     =104
Eservglobal Limited                 145,574                     =20
Etrade Australia                    255,435                     52
Everest Babcock & B                 282,601                     =67
Fantastic Holdings                  278,650                     =55
Forest Enterprises                  158,894                     =78
Funtastic Limited                   219,838                     =37
Gallery Gold Limited                270,689                     4
                           Key findings from the Horwath 2006 Corporate Governance Report (mid-sized Australian ASX companies)



Alphabetical company listing
Company                     Market Capitalisation            2006 Rank              2006 Stars
                            @ 31 December 2005
                                   $000
Gazal Corporation                   191,158                     =37
Genetic Technologies                148,580                     =67
Geodynamics Limited                 158,905                     =22
Gloucester Coal                     246,210                     =25
Goldlink Incomeplus                 134,088                     =45
Grange Resources                    134,487                     124
Hastie Group Limited                195,697                     =15
Hastings High Yield                 132,001                     109
Home Building Soc.                  197,470                     2
Housewares International            185,711                     =89
Hpal Limited                        203,309                     =76
Hutchison                           190,016                     =53
IBA Health Limited                  165,885                     =72
Iinet Limited                       204,141                     =35
Independence Group                  188,510                     =15
Indophil Resources                  183,893                     =128
Infomedia Ltd                       169,246                     66
Integrated Tree Crop                240,201                     =72
IWL Limited                         238,328                     24
K & S Corporation                   227,609                     =85
Keycorp Limited                     121,319                     =30
Life Therapeutics                   126,567                     =60
Lion Selection Group                221,241                     =89
Lipa Pharmaceuticals                123,596                     =7
Macquarie Radio                     120,208                     =110
Maxitrans Industries                137,394                     =104
Mcpherson’s Ltd                     120,984                     =18
Mincor Resources NL                 125,558                     =85
Mineral Deposits                    221,343                     118
Mirrabooka Investments              197,313                     130
MMC Contrarian Limited              204,219                     =106
Mortgage Choice Ltd                 182,269                     =67
Mount Gibson Iron                   277,323                     =139
National Hire Group                 214,129                     =53
Nexus Energy Limited                124,611                     50
Nylex Limited                       161,782                     =55
Oakton Limited                      194,542                     =97
Objective Corporation               216,953                     147
Oceana Gold Limited                 250,200                     51
OM Holdings Limited                 159,510                     =74
Orchard Petroleum                   184,078                     =134
Pacifica Group                      242,194                     12
PAN Australian Res                  158,439                     =142
Peptech Limited                     220,116                     =22
Perilya Limited                     185,202                     =64
Perseverance Corporation            183,094                     =97
Petra Diamonds Limited              210,625                     =134
Petsec Energy                       210,604                     =41
Phosphagenics Limited               133,956                     =106
Photon Group Limited                224,373                     =112
Platinum Capital Limited            261,800                     =76
Powertel Limited                    168,810                     =45
Primelife Corporation               124,046                     =120
PRO Medicus Limited                 151,001                     =28
Programmed                          251,922                     9
Psivida Limited                     160,434                     48
                           Key findings from the Horwath 2006 Corporate Governance Report (mid-sized Australian ASX companies)



Alphabetical company listing
Company                     Market Capitalisation            2006 Rank              2006 Stars
                            @ 31 December 2005
                                   $000
Queensland Gas                      224,563                     =131
RCR Tomlinson                       124,719                     =101
Realestate.Com.Au                   303,339                     =114
Rebel Sport Limited                 214,186                     =67
Redflex Holdings                    264,028                     13
Regional Express                    126,501                     =45
Resolute Mining                     264,090                     =89
Reverse Corp Limited                154,306                     =126
Roberts Limited                     131,340                     =82
S8 Limited                          206,467                     =120
SMS Management                      136,893                     =5
ST Barbara Mines                    241,450                     =30
ST Synergy Limited                  158,358                     150
Stargames Limited                   145,621                     =41
Steamships Trading                  161,863                     =131
Sunraysia Television                152,524                     =144
Super Cheap Auto Group              303,325                     =5
Sydney Att Group Limited            128,416                     =25
Symex Holdings                      128,391                     =39
Talent2 International               137,190                     =85
Tasmanian Perpetual                 125,878                     1
Tassal Group Limited                134,344                     =18
Technology One                      167,978                     =110
Total Communications                184,145                     =97
Treasury Group                      283,668                     =114
Trinity Consolidated                126,675                     44
Troy Resources NL                   158,300                     148
UXC Limited                         148,218                     14
Ventracor Limited                   217,312                     =10
Villa World Limited                 172,619                     =114
Virotec                             154,828                     =60
Volante Group                       138,061                     =55
Warrnambool Cheese                  144,833                     =30
Watpac Limited                      153,166                     =101
Wattyl Limited                      282,361                     =7
Western Areas NL                    259,353                     =35
Whitefield Limited                  192,122                     =30
Wide Bay Aust Limited               185,874                     =112
                           Key findings from the Horwath 2006 Corporate Governance Report (mid-sized Australian ASX companies)



Company listing by corporate governance ranking
Company                     Market Capitalisation            2006 Rank              2006 Stars
                            @ 31 December 2005
                                   $000
Tasmanian Perpetual                 125,878                     1
Home Building Soc.                  197,470                     2
Coventry Group                      211,213                     3
Gallery Gold Limited                270,689                     4
SMS Management                      136,893                     =5
Super Cheap Auto Group              303,325                     =5
Lipa Pharmaceuticals                123,596                     =7
Wattyl Limited                      282,361                     =7
Programmed                          251,922                     9
Aspen Group                         203,015                     =10
Ventracor Limited                   217,312                     =10
Pacifica Group                      242,194                     12
Redflex Holdings                    264,028                     13
UXC Limited                         148,218                     14
Baxter Group Limited                222,657                     =15
Hastie Group Limited                195,697                     =15
Independence Group                  188,510                     =15
Mcpherson’s Ltd                     120,984                     =18
Tassal Group Limited                134,344                     =18
Biota Holdings                      263,407                     =20
Eservglobal Limited                 145,574                     =20
Geodynamics Limited                 158,905                     =22
Peptech Limited                     220,116                     =22
IWL Limited                         238,328                     24
Collection House                    135,278                     =25
Gloucester Coal                     246,210                     =25
Sydney Att Group Limited            128,416                     =25
Century Australia                   197,784                     =28
PRO Medicus Limited                 151,001                     =28
Arrow Energy NL                     121,144                     =30
Keycorp Limited                     121,319                     =30
ST Barbara Mines                    241,450                     =30
Warrnambool Cheese                  144,833                     =30
Whitefield Limited                  192,122                     =30
Iinet Limited                       204,141                     =35
Western Areas NL                    259,353                     =35
Funtastic Limited                   219,838                     =37
Gazal Corporation                   191,158                     =37
Astron Limited                      171,468                     =39
Symex Holdings                      128,391                     =39
Petsec Energy                       210,604                     =41
Stargames Limited                   145,621                     =41
Blackmores Limited                  229,757                     43
Trinity Consolidated                126,675                     44
Goldlink Incomeplus                 134,088                     =45
Powertel Limited                    168,810                     =45
Regional Express                    126,501                     =45
Psivida Limited                     160,434                     48
Country Road Limited                139,495                     49
Nexus Energy Limited                124,611                     50
Oceana Gold Limited                 250,200                     51
Etrade Australia                    255,435                     52
Hutchison                           190,016                     =53
National Hire Group                 214,129                     =53
Brazin Limited                      207,697                     =55
CH4 Gas Limited                     126,492                     =55
Fantastic Holdings                  278,650                     =55
Nylex Limited                       161,782                     =55
                           Key findings from the Horwath 2006 Corporate Governance Report (mid-sized Australian ASX companies)



Company listing by corporate governance ranking
Company                     Market Capitalisation            2006 Rank              2006 Stars
                            @ 31 December 2005
                                   $000
Volante Group                       138,061                     =55
Anvil Mining                        203,608                     =60
Becton Property Group               184,479                     =60
Life Therapeutics                   126,567                     =60
Virotec                             154,828                     =60
Central Equity                      141,739                     =64
Perilya Limited                     185,202                     =64
Infomedia Ltd                       169,246                     66
Aevum Limited                       127,700                     =67
Everest Babcock & B                 282,601                     =67
Genetic Technologies                148,580                     =67
Mortgage Choice Ltd                 182,269                     =67
Rebel Sport Limited                 214,186                     =67
IBA Health Limited                  165,885                     =72
Integrated Tree Crop                240,201                     =72
Alchemia Limited                    151,576                     =74
OM Holdings Limited                 159,510                     =74
Hpal Limited                        203,309                     =76
Platinum Capital Limited            261,800                     =76
Auspine Limited                     186,118                     =78
Avjennings Homes                    256,120                     =78
Cardno Limited                      150,563                     =78
Forest Enterprises                  158,894                     =78
Coffey International                251,757                     =82
Consolidated Rutile                 245,620                     =82
Roberts Limited                     131,340                     =82
Codan Limited                       162,046                     =85
K & S Corporation                   227,609                     =85
Mincor Resources NL                 125,558                     =85
Talent2 International               137,190                     =85
ALE Property Group                  219,737                     =89
Bemax Resources NL                  270,770                     =89
Capral Aluminium                    261,779                     =89
Credit Corp Group                   197,688                     =89
Cumnock Coal Limited                130,277                     =89
Housewares International            185,711                     =89
Lion Selection Group                221,241                     =89
Resolute Mining                     264,090                     =89
Cellestis Limited                   262,642                     =97
Oakton Limited                      194,542                     =97
Perseverance Corporation            183,094                     =97
Total Communications                184,145                     =97
Allco Equity Partner                279,584                     =101
RCR Tomlinson                       124,719                     =101
Watpac Limited                      153,166                     =101
Equigold NL                         235,346                     =104
Maxitrans Industries                137,394                     =104
B Digital Limited                   186,604                     =106
MMC Contrarian Limited              204,219                     =106
Phosphagenics Limited               133,956                     =106
Hastings High Yield                 132,001                     109
Macquarie Radio                     120,208                     =110
Technology One                      167,978                     =110
Photon Group Limited                224,373                     =112
Wide Bay Aust Limited               185,874                     =112
Agincourt Resources                 130,135                     =114
Realestate.Com.Au                   303,339                     =114
Treasury Group                      283,668                     =114
Villa World Limited                 172,619                     =114
Mineral Deposits                    221,343                     118
                                              Key findings from the Horwath 2006 Corporate Governance Report (mid-sized Australian ASX companies)



Company listing by corporate governance ranking
Company                                         Market Capitalisation                 2006 Rank                  2006 Stars
                                                @ 31 December 2005
                                                       $000
Emeco Limited                                            131,876                          119
APN Property Group                                       230,099                          =120
Clough Limited                                           191,338                          =120
Primelife Corporation                                    124,046                          =120
S8 Limited                                               206,467                          =120
Grange Resources                                         134,487                          124
Cedar Woods Property                                     163,146                          125
Brickworks Investments                                   243,856                          =126
Reverse Corp Limited                                     154,306                          =126
Domino’s Pizza Australia                                 197,401                          =128
Indophil Resources                                       183,893                          =128
Mirrabooka Investments                                   197,313                          130
Centamin Egypt                                           266,357                          =131
Queensland Gas                                           224,563                          =131
Steamships Trading                                       161,863                          =131
Orchard Petroleum                                        184,078                          =134
Petra Diamonds Limited                                   210,625                          =134
A.P. Eagers Limited                                      167,438                          136
Anzon Australia Limited                                  150,329                          137
Babcock & Brown Env.                                     185,778                          138
CVC Limited                                              166,726                          =139
Electro Optic Systems                                    168,200                          =139
Mount Gibson Iron                                        277,323                          =139
Diversified United                                       285,333                          =142
PAN Australian Res                                       158,439                          =142
Amadeus Energy                                           200,831                          =144
ARB Corporation                                          190,377                          =144
Sunraysia Television                                     152,524                          =144
Objective Corporation                                    216,953                          147
Troy Resources NL                                        158,300                          148
Cromwell Corporation                                     125,315                          149
ST Synergy Limited                                       158,358                          150


Star ratings summary
5 stars       (4 companies, 2.7%)
              Corporate governance structures were outstanding. The structures met all best practice standards and could not be faulted. Companies
              demonstrated unequivocal independence in all key areas including their Board of Directors, audit committees, remuneration committees,
              and nomination committees. The board and related committees met regularly and disclosure on related party transactions was clear and
              unambiguous. The level of non-audit fees paid to the external auditor was within acceptable parameters, and/or a rigorous policy was in
              place with respect to the provision of non-audit services by the external auditor. In addition, there was a documented code of conduct,
              policies on risk management and share trading.

4.5 stars     (15 companies, 10%)
              Corporate governance structures were excellent and met all best practice standards other than in relatively minor circumstances.

4 stars       (24 companies, 16%)
              Corporate governance structures were very good and met the vast majority of best practice standards.

3.5 stars     (23 companies, 15.3%)
              Corporate governance structures were generally good and met most of the best practice standards.

3 stars       (34 companies, 22.7%)
              Corporate governance structures were adequate and met some of the best practice standards. Most of the trimmings of good corporate
              governance were present but usually the board and associated committees had a minority of non-independent members. There were
              also non-trivial short-falls in some other areas of their corporate governance structures.

2 stars       (41 companies, 27.3%)
              Corporate governance structures were lacking in some key areas. The Board of Directors and associated committees contained few
              independent members and there were significant corporate governance weaknesses in other areas.

1 star        (9 companies, 6%)
              Corporate governance structures were lacking in most key areas. Almost without exception the Board of Directors and the associated
              committees (where they existed) contained no independent members. Overall there was an absolute scarcity of corporate governance
              structures.
Horwath contacts in Australia:


Paul Dwyer                     Andrew Pearce
Level 10                       Level 30
1 Market Street                525 Collins Street
Sydney NSW 2000                Melbourne Vic 3000
Tel: 02 9372 0795              Tel: 03 8320 2222




www.horwath.com.au

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