Corporate Governance

The Board of Directors of Lakes Oil N.L. is responsible for the corporate governance of the Company.

The Board guides and monitors the business and affairs of the Company on behalf of the shareholders by whom they are elected and to whom they are accountable.

Lakes Oil N.L’s corporate governance principles and policies are structured with reference to the Corporate Governance Council’s best practice recommendations, which are as follows:

Lay solid foundations for management and oversight.
Structure the board to add value.
Promote ethical and responsible decision making.
Safeguard integrity in financial reporting.
Make timely and balanced disclosure.
Respect the rights of shareholders.
Recognise and manage risk.
Encourage enhanced performance.
Remunerate fairly and responsibly.
Recognise the legitimate interests of stakeholders.

1. Lay Solid Foundations for Management and Oversight

The Board’s responsibilities include development of strategy, oversight of management, risk management and compliance systems, and monitoring performance. The Board has established certain policies and protocols in relation to the Company’s operations, some of which are summarised below.

It is the responsibility of management to administer the company in accordance with the directions and policies of the Board and within the powers delegated by the Board.

2. Structure the Board to Add Value

The Board comprises an Executive Chairman and three non-executive directors whose qualifications and experience are set out in the Directors report.

Corporate Governance Council Recommendation 2.1 requires a majority of the Board to be independent directors. Recommendation 2.2 requires the Chairperson to be independent and Recommendation 2.3 requires the role of Chairperson and CEO should not be exercised by the same person. The three non-executive directors Mr. Barney I. Berold, Mr. Peter B. Lawrence and Mr James H Y Syme are all considered to be independent. Mr. Robert J. Annells is the Executive Chairman and is not considered to be independent.

Whilst not all recommendations are complied with because of the Company’s size and cost considerations, the Board has an appropriate level of industry experience and business skills.

The functions of a nomination committee are carried out by the full Board, therefore a seperate nomination committee has not been formed.

Directors acknowledge the need to act in good faith in the interests of all shareholders.

3. Promote Ethical and Responsible Decision-making

Directors, management and staff are expected to act ethically and responsibly and in accordance with the company's Code of Conduct. All Board members are qualified professionals within their respective industries and accordingly conduct themselves in a professional and ethical manner in both their normal commercial activities and the discharge of their responsibilities as directors.

Whenever necessary, individual members of the Board may seek independent professional advice at the expense of the Company in relation to fulfilling their duties as directors.

The Company has a policy concerning trading in the Company’s securities by Directors, management and staff. Trading in the Company’s shares by Directors, Executives and Staff of the Company should only occur in circumstances where the market is considered to be fully informed of the Company’s activities. This policy requires that Directors, Executives and Staff discuss their intention to trade in the Company’s shares with the Executive Chairman of the Company prior to trading. The Board recognises that it is the individual responsibility of each Director and employee to carry this policy through.

The Company's Code of Conduct and Share Trding Policy, which are in accordance with the ASX Corporate Governance Principles may be viewed on the Company's website.

4. Safeguard Integrity in Financial Reporting

Recommendation 4.1 requires the CEO and CFO to sign a certificate regarding the financial reports giving a true and fair view and are in accordance with accounting standards. The Executive Chairman Mr. Robert Annells and the acting Chief Financial Officer Mrs. Vicki Kahanoff have certified that the financial reports give a true and fair view and are in accordance with accounting standards.

The Board has established an Audit and Compliance Committee consisting of Mr Peter B Lawrence (Chairman), Mr Barney I. Berold and Mr James H Y. Syme, all of whom are non-executive Directors. The number of meetings attended by each member is set out in the Directors' report.

The Audit Committee works under an Audit Committee Charter which can be viewed on the company's website.

It is the Board’s responsibility to ensure that an effective internal control framework exists to examine the effectiveness and efficiency of significant business processes such as the safeguarding of assets, the maintenance of proper accounting records and the integrity of financial information, the implementation of quality assurance practices and procedures and ensuring compliance with environmental regulations. The Board continues to hold the responsibility for the establishment and maintenance of a framework of internal control mechanisms for the management of the Company.

At regular occasions the Board conducts:

the review of accounting policies;
the detailed review of the Company's annual, half yearly and quarterly financial reports;
the effectiveness of accounting and internal control systems;
addressing the findings of the external auditors;
the assessment of the scope, quality and cost of the external audit;
identifying areas of operation, regulatory and legal risk and procedures to ensure those risks are effectively managed; and
ensuring that conflicts of interest do not arise from services provided by the Company's external advisors.

5. Make Timely and Balanced Disclosure

The Board and Senior Management are aware of the Continuous Disclosure requirements of the ASX and have procedures in place to disclose any information concerning the Company that a reasonable person would expect to have a material effect on the price of the Company’s securities.

Lakes Oil N.L. recognises that it has a legal and moral obligation to immediately disclose to the market any information that a reasonable person would expect to have a material effect on the price or value of the Company’s securities.

The directors and senior management personnel of Lakes Oil N.L. acknowledge that they each have an obligation to identify and immediately disclose information that may be regarded as material to the price or value of the Company’s securities.

The Chairman is authorised to make statements and representations on Lakes Oil N.L.’s behalf. The Company Secretary is responsible for overseeing and coordinating the disclosure of information to the ASX, analysts, stockbrokers, shareholders, the media and the public. The Secretary must inform the Directors, senior management and employees of Lakes Oil N.L.’s continuous disclosure obligations on a quarterly basis.

The Directors and senior management personnel must ensure that the Secretary is aware of all information to be presented at briefings with analysts, stockbrokers, the media and the public. Prior to being presented, information that has not already been the subject of disclosure to the market and is not generally available to the market must be the subject of disclosure to the ASX. Only when confirmation of receipt of the disclosure and release to the market by the ASX is received and after the information is posted on the Company’s website may the information be presented.

If information that would otherwise be disclosed comprises matters of supposition or is insufficiently definite to warrant disclosure, or if the effect of a disclosure on the value or price of the Company’s securities is unknown, Lakes Oil N.L. may request that the ASX grant a trading halt or suspend it’s securities from quotation. Management of Lakes Oil N.L. may consult the Company’s external professional advisers and the ASX in relation to whether a trading halt or suspension is required.

6. Respect the Rights of Shareholders

The Board aims to ensure in accordance with the Recommendation 6.1 that all shareholders are informed of major developments affecting the affairs of the Company. Information is communicated to the shareholders through the annual, half year, quarterly reports, disclosures made to the ASX, notices of meetings and occasional letters to shareholders where appropriate.

The auditor is invited to the Annual General Meeting for the purpose of answering shareholders' questions.

7. Recognise and Manage Risk

The Board has responsibilty for managing risk and internal control and acknowledge that risk management is a core principle of sound Corporate Governance. The financial viability,reputation and future of the company are materially dependent on the manner in which risk is managed.

The Board's strategy covers the areas of Financial Risk, Operational Risk, Insurance and Internal Control. The company has not appointed a Risk Management Committee dur to the importance the Board places on risk mitigation. In addition, the samll size of the Board makes it appropriate for the full board to manage this area.

Financial Risk

The Board receives regular financial reports which measure peformance and trends against budget. The reports are discussed at Board Meetings and the Chief Financial Officer answers questions posed by the Directors. Any variations from budget are highlighted, explained and evaluated. This scrutiny is appropriate to a company of the size of Lakes OIl N.L. In addition to monthly financial reporting, the company has in place policies to manage credit, foreign exchange and other business risks. Non-executive Directors meet at appropriate times with the external auditor in order to fulfil its Charter.

Operational Reporting

Projects are approved only after extensive review by a highly qualified technical staff and detailed submissions to the Board through the Chairman. The operations of the company consist of a search for oil and gas and projects are only considered after a review and evaluation of all the technical data on record. Outside consultants are engaged as required to enhance the chances of success. Environmental considerations are factors in the consideration of every new project and are fully evaluated are reported before approval by the Board.

Insurance

The Board recognises the value of insurance as a risk mitigation strategy and wrks with a leading insurance broker to ensure that approprate insurance cover is in place at all times. Contracts with contractors are drawn up or reviewed by solicitors prior to the company entering into any commitment.

Internal Control

In a small company, an extensive internal control system is not possible, however there is a natural control as a consequence of being small. the Board works very closely with the staff and, because the transactional volume is small, the Directors have a detailed knowledge of the working of the company. The Directors believe the system of internal control is appropriate to the size of the company and to its level of potential risk.

Declaration by the Chairman and Chief Financial Officer

Both the Chairman and Chief Finacial Officer sign the following declaration in the presence of the Bard prior to the Board accepting the Financial Results each year:

in accordance with the Corporations Act 2001 section 295A, I declare that to the best of my knowledge and belief;
the financial records of the disclosing entity for the financial year have been properly maintained in accordance with section 286; and
the financial statements, and the notes for the financial year comply with the accounting standards; and
the financial statements and notes for the financial year give a true and fair view; and
any other matters that are prescribed by the regulations for the purposes of this declaration in relation to the financial statements and the notes for the financial year are also staisfied.

Also in accordance with the ASX Corporate Governance Council Best Practice Recommendations 4.1 and 7.2, to the best of my knowledge and belief, and in my opinion:

the financial reports present a true and fair view, in all material respects, of the company's financial condition and operational results and are in accordance with relevant accounting standards; and
the statement in (1) above concerning the integrity of financial statements is founded on a sound system of risk managment and internal compliance and control, which implements the polices adopted by the board; and
the company's risk management and internal compliance and control system is operating efficiently and effectively in all material repects.

Signed by the Chairman and Chief Financial Officer

The Board has procedures in place to recognise and manage risk in accordance with Recommendation 7.1. Monthly reporting of financial performance is in place as are policies to manage credit, foreign exchange and other business risks.

The Board has delegated to the Chairman and Company secretary such matters as the Company's liquidity, currency, interest rate and credit policies and exposures.

8. Encourage Enhanced Performance

The Company has not established Remuneration and Benefits Committee or a Governance Committee.

The Board is responsible for determining and reviewing the remuneration of the directors the Executive Chairman Executive Officers and other employees of the company. This process requires consideration of the levels and form of remuneration appropriate to securing, motivating and retaining employees with the skills to manage the Company’s operations. The Board reviews the remuneration of officers and employees of the Company. In order to retain and attract executives of sufficient calibre to facilitate the efficient and effective management of the Company’s operations, the Board seeks the advice of external advisers in connection with the structure of remuneration packages.

The Board also reviews the levels and form of remuneration for non executive directors with reference to performance, relevant comparative remuneration and independent expert advice. The total sum of remuneration payable to non executive directors shall not exceed the sum fixed by members of the Company in general meeting.

The Board reviews the composition of the Board on a regular basis to ensure that the Board has the appropriate mix of expertise and experience.

9. Remunerate Fairly and Responsibly

It is the Company’s objective to provide maximum shareholder benefit from the retention of high quality Board members and Executives. Directors and Executives are remunerated with reference to market rates for comparable positions. Details of the remuneration of specified directors and executives are contained in the Directors report.

No formal evaluation of the performance of the Board is conducted. The Board, being a small active Board is in a position to view its performance on a constant basis. Similarly, key executives are well known to the Board and constant contact with them forms a constant performance review.

10. Recognise the Legitimate Interests of Stakeholders

The Board recognises the legitimate interests of shareholders, employees and other stakeholders.

The Company has established a Cultural Heritage Policy and an Environmental Policy.

Lakes Oil N.L. recognises the need to understand the cultural and spiritual significance to the community of the area in which it is licensed to operate.

Lakes Oil N.L. will work closely with relevant community groups and people to identify significant cultural and heritage sites and any impact the Company’s activities may have on them.

Lakes Oil N.L. is committed to reaching mutually agreeable outcomes on the effects of its activities on cultural and spiritual values.

Lakes Oil N.L. will specifically undertake to:

respect and protect cultural heritage sites of significance and sites of spiritual significance;
embrace the intent and comply with the provisions of the Native Title Act and relevant petroleum legislation;
communicate openly with Aboriginal peoples and local communities so that all relevant issues may be aired and understood by the participants;
involve Aboriginal people in the conduct of Lakes Oil N.L.s operations where these operations impact on their cultural and spiritual heritage;
commit to the ongoing monitoring of the implementation of this policy and to amending its approach if the policy proves to be inadequate.

Lakes Oil N.L. is committed to protecting the environment and safeguarding public and employee health in all aspects of its operations. Environmental protection and safe conduct are the responsibility of Lakes Oil N.L., its employees, its alliance partners and suppliers of goods and services.

Specifically, Lakes Oil N.L. will:

comply with the intent and provision of all applicable laws, regulations and standards;
minimise environmental impact;
ensure that employees, partners, suppliers and the public are made fully aware of Lakes Oil N.L.'s responsibility for the effect of its operations on the environment;
ensure adequate management systems and procedures are in place to manage and mitigate the risks to the environment from Lakes Oil N.L.'s operations; and
commit to continual improvement in environmental management performance.

Lakes Oil N.L.'s business ethos is to operate in a manner which addresses three fundamental principles to achieve balanced outcomes. These fundamental principles are:

social acceptability
economic viability; and
environmental responsibility.

Lakes Oil N.L. is committed to meeting these objectives, to monitoring the meeting of these objectives and to amending its approach if it proves to be inadequate in complying with its stated intentions and plans. In addition, Lakes Oil N.L. is committed to the public dissemination of this information.

Corporate