BIOTECH CAPITAL LIMITED
ABN 45 091 979 172
Corporate Governance Statement
Commensurate with its commercial objectives as a Pooled Development Fund, and the scale of its resources, BioTech Capital Limited has in place corporate governance practices which pursue best practice standards recommendations of the ASX Corporate Governance Council, unless otherwise stated.
The appropriateness and effectiveness of these practices are subject to periodic review by the Board of Directors.
A Foundation for Effective Management and Board Oversight of Management:
The Board's governance responsibilities include:
- setting down the Company's main commercial goals and strategies for achieving these goals;
- ensuring the overall financial, human and material resources needed to properly pursue the business goals, are provided;
- clarifying the individual responsibilities of board members and managers to ensure personal accountability and to place restraint on the authority of each individual;
- appointing and removing the Chief Executive Officer;
- regularly monitoring financial performance and the achievement of short term objectives;
- ensuring implementation of suitable internal control, compliance and complaints handling systems, monitoring these and ensuring their continuing effectiveness.
Structuring of the Board to Add Value:
The Board is structured to provide:
- an adequate number (currently 4) of experienced, capable and committed individuals who clearly understand their personal commercial and legal responsibilities as directors, and are able to operate very effectively as a Board under the needs and demands of the Company's particular field of specialisation;
- directors possessing a broad range of suitable academic, technical, financial and administrative skills, who are highly competent in dealing with the Company's business and administrative needs, and the persistent challenges posed by change and emerging issues;
- directors who have the ability to effectively review and challenge management performance, and exercise independent judgement on issues at all operational levels;
- that a majority of the directors shall be 'independent' (currently 75%);
- that the Chairperson must be an 'independent' director;
- that the roles of Chairman and Chief Executive Officer shall not be performed by the same person.
K.T. Greiner appointed 18 October, 2005.
A. Basten appointed 27 June, 2002.
A.J. Davidson appointed 14 March, 2000.
H. Karelis appointed 18 May, 2000.
A Due Diligence Committee, consisting of 1 independent director and 1 non-independent director was established to attend to the special needs of the Management Rights buy-back agreement, completed in April 2004. The Committee was then disbanded.
A Nominations Committee has not yet been established, as the Directors consider it more appropriate for the full Board to consider its membership structure and nominations issues.
Promotion of Ethical and Responsible Decision-Making:
The Board fosters a code of ethical behaviour requiring responsible personal conduct, well considered decision-making and committed performance of personal duties on the part of each Director and company officer.
Should any Director have a material personal interest in a matter to be considered by the Board, the Director will not be permitted to be present during the discussion of, or voting on, the matter.
Other than in the case of dealing in the Company's securities, owing to the very subjective nature of the behavioural issues involved, the expected high standards of honest and ethical behaviour have not been set in the form of written requirements and guidelines. There is no written Code of Conduct providing guidance on compliance with legal, ethical and other obligations to the Company's stakeholders.
The general rule is that any behaviour on the part of directors and officers which is likely to bring the Company into disrepute, is totally unacceptable.
The highly technical nature of the Company's life-sciences area of specialisation also means that from time to time, in order to gain the necessary level of understanding for responsible, well-informed decision making, the Board needs to receive skilled independent scientific advice. With the approval of the Board and at the company's expense, a Director also has the right to seek independent legal or professional advice concerning any aspect of the company's operations, if this is necessary for fulfilment of the Director's duties and obligations as a Director. The Board has not laid down criteria for these purposes but would not deny any reasonable request by a Director for the right to seek such independent advice.
Safeguarding Integrity in Financial Reporting:
The Company has in place a structure to ensure the truthful and factual presentation of the Company's operating results and financial position, and a process to monitor and ensure the independence and competence of the Company's auditors.
Development and finalisation of the Company’s accounts are under the scrutiny of the Audit Committee consisting of a non-executive director and the Company Secretary. Although this is less than the minimum committee size of 3 persons recommended by the ASX Corporate Governance Council, it is considered adequate for the needs of the Company at this stage. The reasons for this is that the Company is externally managed by Titan BioVentures Management Pty Ltd so there is less financial risks such as fraud and given the Company is an investment company, the audit is simpler and a variety of risks are diminished. This also takes into consideration the fact that the Company’s accounts are prepared by an independent Chartered Accountant, who was appointed Company Secretary on 1 July 2006. For these reasons also a formal audit committee charter is not considered necessary for the Company.
The members of the Audit Committee at the date of this report are Non-Executive Director, Alastair Davidson, and Company Secretary, Baden Bowen. Both are qualified accountants and have considerable experience in the financial administration of public companies, and the preparation and presentation of Statutory Reports and Accounts in accordance with prevailing legal requirements and accounting standards. The Audit Committee does not have executive authority and must provide its findings and recommendations solely for the Board's consideration.
In addition to ensuring the continuing adequacy of internal controls, the Audit Committee reviews:
| Meetings Held | Meetings Attended | |
| Alastair Davidson | 2 | 2 |
| Baden Bowen | 2 | 2 |
The Managing Director is also required to provide the Board with written certification that in all material respects:
- the Company's financial statements provide a true and fair view of its financial condition and operational results;
- the integrity of the financial statements is based upon a sound system of risk management and internal compliance and control, implementing 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 external auditor is invited to attend all general meetings and to:
- express any matter which is of concern to the auditor or raise any matter considered as being in the interests of the Company to discuss; and
- invite and respond to questions from shareholders.
Making Timely and Balanced Disclosure:
In keeping with the principles of continuous disclosure, the Directors have taken measures to ensure timely, and meaningful disclosure of material information concerning the Company, to shareholders and the general public.
In accordance with ASX Listing rules, the Company will immediately notify ASX of any information which the Board considers would be likely to have a material effect on the price or value of the Company's securities, or which could influence a person to buy, sell or hold its securities.
Half-yearly reviews of the Company's regulated investments are mailed to shareholders, and all reviews, announcements and reports are posted to the Company's website (www.biotechcapital.com.au) immediately following their release to the Australian Stock Exchange.
The Company also has a policy of ensuring that all media comment is provided by the Chairman or the Managing Director only.
Respecting the Rights of Shareholders:
The Company informs its shareholders through formal means, eg ASX releases and members' meetings, and informally through its website and in response to written and verbal communications. Any shareholder expressions of concern or opinion are referred to the Directors for their consideration and preparation of a reply.
All enquiries by shareholders, investment intermediaries and the general public are promptly and comprehensively responded to (by a Director or the Company Secretary) with due awareness of the need to restrict such information and explanation to material which has already been released publicly through the proper channels.
Recognising and Managing Risk:
The Directors have not appointed a Risk and Compliance Committee. The Board thus retains direct responsibility for risk and compliance issues.
The multiple risks inherent in operating the Company and managing its investments, are managed by a number of means designed to avoid or minimise any adverse material financial impact. These include:
- reviews and reports to the Board by the Audit Committee on compliance with and continuing appropriateness of internal controls;
- reviews by the Board of the scope, practical application and thoroughness of the system of internal control and the Company's means of recognising and protecting itself against material risk;
- reviews and reports on the system of risk management, internal compliance and control, given to the Board by the Managing Director;
- reports from the Company's insurance broker concerning the adequacy of insurance cover and occupational health and safety issues;
- reports and recommendations received from the external auditor during the process of reviewing the accounts and internal controls.
Given that the Company's business focus is upon providing patient equity capital to new Australian enterprises endeavouring to exploit commercial opportunities in the life-sciences field, the major financial risk is that the Company's investment will be lost or will materially lose value. This could occur under a variety of circumstances including where the underlying enterprise later completely fails, or commercially suffers in a significant way, eg due to excessive marketing difficulties or delays, product failure, serious management or funding problems, etc.
In the case of listed investee companies, there is also a risk of loss in market value reflecting adverse share price fluctuations.
The innovative nature of the investee enterprises also tends to increase the investment risk involved.
The Board endeavours to reduce investment risk by a number of means, including:
- requiring all investments to be made in full compliance with the Pooled Development Funds Act 1992 and the general rationale of the PDF Program;
- unless otherwise authorised by the Directors in writing, requiring all investments to be made in accordance with the Company's stated investment policy;
- ensuring proper evaluation of new investment opportunities by means of a thorough due diligence assessment;
- placing a limit on the maximum amount which can be invested in a single investee;
- ensuring investees have taken proper steps to secure their intellectual property rights;
- ensuring each investee has a proper business plan, financial budgets and has established clear, achievable, commercial goals;
- diversifying investment over a number of different companies, each aiming at a different potential market area or niche;
- appointing a director to the board of an investee company when possible, to assist with its governance and development.
Encouraging Enhanced Performance:
With the approval of shareholders given on 8 April 2004, the Company appointed Titan Bioventures Management Pty Ltd ('Titan') to manage the Company's investments. The Company's Managing Director, Harry Karelis, is a director of and holds a financial interest in Titan.
The management terms provide for payment of an annual management fee of 2% to Titan, based on the value of the underlying portfolio. Payments are made monthly, based on the value of the portfolio at the end of the previous month.
In addition to the management fee, the agreement provides for payment of a 'performance fee' incentive to Titan, equivalent to 10% of any gains realised on disposal of an investment, less any unrealised losses in the remaining portfolio and less a 30% rebate of the performance fee thus calculated.
Within this context and the other requirements of their corporate governance roles and responsibilities, the Directors thus oversee the investment activity and performance of the investment manager. They also aim to ensure that Titan always diligently fulfils its management obligations and that it does so in full accordance with the aims and interests of the Company, and in keeping with the Company's stated investment policy.
Except for the Managing Director's indirect participation in the fees and incentives payable to Titan, as described above, the Board has not established formal procedures for reviewing the individual performance of the other Directors and Company Secretary.
Remunerating Fairly and Responsibly:
The Company has no employees, and fees for services provided by Directors and the Company Secretary have been determined contractually, at arm's length.
For these reasons, the Board has not appointed a Remuneration Committee.
With the exception of the Managing Director, Harry Karelis, who receives no fee in view of the payment of management fees to Titan Bioventures Management Pty Ltd, of which he is a director and in which he holds a financial interest, the non-executive Directors are each paid a fee at a rate determined by the Board and which ensures that the aggregate sum of directors' fees is within any limitation imposed by the Company's constitution.
Particulars concerning Directors' remuneration are set out in the Directors' Report and in Note 15 of the Financial Report.
Recognising the Legitimate Interests of Stakeholders:
The Board recognises that the Company has legal and other obligations to stakeholders who are not holders of the company's securities. These include clients, customers, creditors, and the community as a whole.
The Company endeavours to conduct its operations in a manner which ensures compliance with the law, full and timely performance of contractual commitments, adherence to recognised codes of practice, maintenance of confidentiality and due fulfilment of other compliance needs and expectations.
The Company is not subject to any significant environmental regulation in respect of its activities.