Corporate Governance

Set out below is an overview of the Company’s corporate governance practices including those matters required to be addressed in the annual report by the ASX Corporate Governance Council Principles of Good Corporate Governance and Best Practice Recommendations. Additional information is available on the Company’s website.

The Board considers that the Company is in compliance in all substantial respects with the Principles and Best Practice Recommendations.

Board Role

On behalf of the shareholders, the Board:

These and other functions of the Board and by exception the functions of management, have been formalised through the adoption of a formal Board Charter.

Board Composition

Newcrest’s Board currently comprises seven Directors, six of whom are Non-Executive including the Chairman of Directors and one of whom is the Managing Director. Details of each Director’s skills, experience and relevant expertise are set out here.

The Board has determined that all Non-Executive Directors, including the Chairman, are independent and free of any relationship which might conflict with the interests of the Company. In doing so the Board adopted the definition suggested in the ASX Best Practice Recommendations and formed the view that the materiality thresholds set out in the ASX definition would be breached only if a Director received, as a consultant to the Company, fees exceeding $250,000 per annum or was a principal or partner of a professional adviser that billed more than $3 million per annum during the last three years, or was a Director or Officer of a supplier or customer that held contracts with the Company for value exceeding 10 percent of Newcrest’s annual revenue. Although Mr Johnson acted in the role of Executive Chairman for a period of three months during 2001, pending the appointment of a new Managing Director, the Board considers that the interim nature and shortness of that appointment has not compromised his independence. The Board will monitor the independence of each Director and the appropriateness of the thresholds of independence that it has set, on an ongoing basis, to ensure that they remain appropriate to the Company’s circumstances.

The Board regularly reviews its membership to ensure that it provides the range of business skills and expertise demanded by the Company’s operations. When a Board position becomes vacant or additional Directors are required, candidates are identified with the assistance of professional advice and are considered, at first instance, by the Nomination, Governance and Ethics Committee of the Board and finally by the full Board. Directors are selected for their specialist skills and business backgrounds in order to create appropriate skill balance on the Board. In the case of the appointment or resignation of the Managing Director, decisions are made by the full Board, with professional advice sought, as required. All Board appointments are subject to shareholder approval. As a general rule, a Non-Executive Director who has served on the Board for 12 or more years will not seek re-election.

All Directors of the Newcrest Board are required, as a matter of Board Policy, to own a minimum of 3,000 shares in the Company. In addition, all Non-Executive Directors are required to direct at least 10 percent of their Director’s fees to purchase shares in the Company (at market prices) through the Non-Executive Directors’ Share Plan, which was approved by shareholders at the Company’s 1999 Annual General Meeting. Directors’ shareholdings are subject to the Company’s Share Trading Policy which restricts the times when a Director can purchase or sell Company stock and also prohibits short-term trading.

Board Function

The Board meets monthly and at such other times as the business of the Company requires. Each year at least one Board Meeting is held at one of the Company’s mine sites.

At each regular meeting the Board reviews the performance of the Company, with particular emphasis on safety and environmental matters. As well as considering any major strategic or investment decisions, the Board reviews in detail principal aspects of the Company’s operations and performance. This process involves receiving detailed presentations from management about key components of the Company’s business.

The Board periodically reviews the Company’s strategic direction and each year, together with senior management, conducts a structured strategic review of the Company’s activities and its future direction. To enhance the Board’s capacity to monitor the full range of the Company’s operations and to increase Directors’ exposure to them, a number of Board Committees have been put in place.

The Committees can, where necessary, also provide a forum for more detailed consideration of issues of special importance.

The current Committee structure is:

Audit Committee

Ensures compliance with all accounting and financial reporting obligations of the Group and reviews internal financial controls, the role of the internal and external auditors, including the independence of the external auditors and the Company’s risk management activities.

Remuneration Committee

Deals with all matters relating to the Company’s remuneration policy, executive and employee remuneration levels and remuneration matters generally.

Finance Committee

Formulates and monitors policies and procedures for treasury practices and considers the Company’s funding requirements.

Nomination, Governance and Ethics Committee

Considers candidates for the Board, reviews corporate governance, compliance processes and human resource (but not remuneration) and monitors the ethical standards of the Company.

Safety, Health and Environment Committee

Ensures that the Company has in place appropriate policies and monitors the Company’s practices in the areas of safety, health and environmental management.

Each Committee is comprised of selected Non-Executive Directors, one of whom acts as Committee Chairman except the Remuneration Committee which is comprised of all Directors. Memberships and attendance at meetings are detailed in the Directors’ Report. Each Committee acts pursuant to a separate formal charter also approved by the Board. All Board Committee deliberations are reported to the Board at the earliest opportunity and, where necessary, recommendations of a Committee are submitted to the Board for a decision.

The Managing Director, although formally only a member of the Remuneration Committee, is invited to attend all other Committee meetings. Other non-Committee Board members are also free to attend any Committee meeting if they wish to do so.

Directors of the Company have direct access to the Company’s senior managers. The Board has adopted a formal policy which ensures that Directors also have access to independent external advisers where necessary. All Directors are encouraged to visit the Company’s operating sites annually.

The Board has in place a formal process for evaluating its own performance. Through a combination of a written evaluation and interview process with each Director individually, as well as a collective Board review of the outcomes of that process, individual Director and Board performance are measured in key areas and opportunities identified where performance can be improved. The Company also receives each year a confidential market report of Board and Company performance and standing, relative to a peer group.

Board Remuneration

Total annual remuneration paid to all Non-Executive Directors may not exceed the maximum amount authorised by the shareholders in a general meeting (currently $1,000,000). Also each Non-Executive Director appointed prior to 2003 entered into a deed with the Company which provides that, upon retirement, that Director will be eligible to receive a retirement benefit being an amount equivalent to the fees paid to that Director during their preceding three years. The Board has determined that the practice of providing retirement benefits will be discontinued and all benefits accrued as at December 2003 will be frozen as at that date.

Remuneration of the Non-Executive Directors is fixed, rather than variable, and is determined with regard to the need to maintain Board membership of an appropriate calibre and remuneration trends in the marketplace. Remuneration levels and trends are assessed with the assistance of professional independent remuneration consultants. The Board has adopted a policy that each Director must personally hold a minimum of 3,000 shares in the Company. In addition to the minimum shareholding, each Director is required to participate in the Non-Executive Directors’ Share Plan pursuant to which at least 10 percent of each Director’s annual remuneration must be used to buy shares in the Company, on market and at pre-determined times. Both of these measures strongly align Directors’ personal interests with shareholders’ interests.

From time to time individual Directors may be asked by the Board to devote extra time or undertake extra duties, usually involving their specialist skills or knowledge, to assist the Board monitor, review or direct key aspects of the business. As any Director who undertakes such extra duties does so only at the request and direction of the Board, rather than management, no conflict of interest or loss of independence arises.

Executive Remuneration

The Board has in place a formal Remuneration Policy which defines and directs the Company’s remuneration practices for management. The Policy recognises the different levels of contribution within management to the short-term and long-term success of the Company. A key element of the Remuneration Policy is the principle of reward for performance with a significant proportion of each senior manager’s remuneration placed ‘at risk’ to both personal and Company performance. Every employee undergoes a formal performance appraisal each year which is used, in part, to determine that employee’s remuneration in the year ahead.

The ‘at risk’ component of management remuneration is made up of a short-term incentive plan and a long-term incentive plan. Under the short-term incentive plan a component of a senior manager’s cash remuneration is only deliverable upon certain pre-determined personal performance criteria being satisfied. The long-term incentive component is comprised of fully paid ordinary shares issued under the Performance Share Plan which was introduced in July 2004. In line with legislative and regulatory requirements the Plan has not been presented to shareholders for approval. The Plan, like the discontinued Executive Option Plan before it, incorporates the use of performance hurdles and progressive vesting mechanisms, both of which are reflective of contemporary remuneration practices and which align a proportion of management’s remuneration with the level of returns to shareholders.

The Board has established with the Managing Director appropriate and specific personal and corporate performance objectives for the short and long term. The performance of the Managing Director is formally assessed against these objectives annually. The assessment is used to determine, in part, the level of ‘at risk’ remuneration paid to the Managing Director.

The extent to which ‘at risk’ remuneration is delivered to senior management or to the Managing Director varies, dependent upon among other factors, the performance of the Company’s share price and overall shareholder returns, measured against its peer group of listed Australian gold companies. The Board is reviewing the future structure and operation of the ‘at risk’ component of management remuneration.

Risk Management and Compliance

The Board recognises that risk management and compliance are among its key responsibilities and are fundamental to the sound management of the business. The Company has a formal Risk Policy approved by the Board and a comprehensive reporting system which seeks to identify, at the earliest opportunity, any significant business risks.

The Company also has in place specific reporting and control mechanisms to manage significant risks and a formal compliance program to monitor compliance levels across a range of key areas. An internal audit function, which reviews and reports to the Board on the effectiveness of those mechanisms, is also maintained.

These reporting and control mechanisms underpin written certifications given by the Managing Director and Chief Financial Officer to the Board each half year that the Company’s financial reports fairly reflect its financial condition and operational results and are in accordance with relevant accounting standards and that the risk management and internal compliance and control system is operating efficiently and effectively in all material respects.

Ethics

The Company has a formal Code of Ethics which all Newcrest Directors, employees and contractors are required to observe as well as a comprehensive range of corporate policies which detail the framework for acceptable corporate behaviour. These set out procedures that employees are required to follow in a range of areas including share trading, employment practices and compliance. The Company policies are reviewed periodically.

Communication with Stakeholders

The Board recognises the importance of keeping the market fully informed of the Company’s activities and of communicating openly and clearly with all stakeholders. A formal Continuous Disclosure Policy is in place to ensure that information which might be relevant to the market is brought forward. Company information considered to be material is announced immediately through the Australian Stock Exchange. Key presentations given by Company personnel to investors and institutions are also lodged with the Australian Stock Exchange. Every effort is made to ensure that communications are clear and complete and that they address shareholders’ needs for information.

All key communications are placed immediately on the Company website and, where necessary, are mailed directly to all shareholders. General and historical information about the Company and its operations is also available on the website.

The Company has adopted the practice of alternating the location of its Annual General Meeting to facilitate the maximum possible attendance by shareholders. At each meeting the Company’s auditors are available to answer questions relating to the auditing of the Company’s financial statements.

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