DMC Diagnostic Medical Co-operative Limited

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STATEMENT CORPORATE GOVERNANCE

The Board of Directors of DMC is committed to achieving best practice in the area of corporate governance and business conduct.

DMC Board of Directors 2009:
Dr Girolamo Vinci : Chairman
Dr Ramnan Venkatessan
Dr Geoff White
Dr Anthony Tsamoglou
Dr Soji Swaraj

This Corporate Governance Statement outlines the main corporate governance principles and practices followed by DMC.

Index:

Dividend & Member Bonus Policy
Share Allocation Policy
Shareholders/Members Rights
Communication policy
Annual General Meeting
Board of Directors - role and responsibilities
Board of Directors - composition
Directors - independence
Independent Professional Advice
Risk Management
Ethical Standards
Board Committees
Audit & Risk Committee
Compliance & Social Responsibility & Medical Ethics Committee
Code of Conduct for Directors, officers and employees

Dividend & member bonus policy

It is the intention of the Board of Directors' of the Diagnostic Medical Co-operative Limited (DMC) that DMC will pay regular dividends and/or bonuses to its Members while conserving sufficient funds to maintain a strong capital base.

Thus, in determining whether to declare future dividends and/or bonuses, the Board will have regard to DMC's earnings, its overall financial condition and requirements, regulatory policy, the outlook for the medical diagnostics industry, the taxation position of DMC, changes in taxation legislation, future capital requirements, debt and financial gearing, financial arrangements and any other factors considered relevant by the Directors. 1

Dividend and/or bonus amounts will therefore reflect cash availability, funding requirements of existing projects and operations, plus funding requirements of new projects and other opportunities for profitable growth.

Dividends and/or bonuses, if any, are declared at each board meeting following 30th of September, the 31st of December and the 30th of March, and the 30th of June. Payments are made in line with sound financial management of the DMC cash flow.

No assurance or guarantee can be given about future dividend policy, the extent of future dividends, the timing or franking of any dividend, or the extent of payout ratios.

1 Any Interim Dividend and/or bonuses will be determined after taking into consideration all relevant matters including Half Year and forecast trading results.

It is anticipated that any Interim Dividends will generally be larger than the Final Dividend, reflecting the fact that a higher proportion of DMC's profit is earned in the first half of the Financial Year.

Any Final Dividend and/or bonuses will be determined after taking into account the final trading results for the year, any Interim Dividend or Dividends already paid and other financial considerations.

Share allocation policy

Each member is allocated an initial 5000 shares (5000 @ $1 per share) and 10% of the capital must be paid prior to the allocation and allotment of shares.

Any further purchase of shares is allocated through application to the Board. The Board's decision is based on three Rules:

1. Additional share allocation to any individual member must not be detrimental to other members.

2. All additional shares must be fully paid following allocation and allotment.

Shareholders/Members Rights

The rights of DMC's shareholders are detailed in DMC's Constitution. Those rights include electing the members of the Board. In addition, shareholders have the right to vote on important matters which have an impact on DMC.

To allow shareholders to effectively exercise these rights, the Board is committed to improving the communication to shareholders of high quality, relevant and useful information in a timely manner. DMC has adopted the following communication framework:

an ongoing communication program - regular and comprehensive disclosures to Member to be undertaken covering important topics including performance and governance issues;
contact information - contact details for Members to contact the Chairman of the Board of Directors and the Chief Executive Officer are provided to facilitate and encourage communication;
communication responsibilities - identification of the items that are appropriate for Board comment and those for management comment;
communication policy - a Member disclosure policy that covers all forms of communication, including meetings, telephone calls, email and other written communications; and
policy review - regular Board review to ensure adherence to the communication policy.

Communication policy

DMC's communication policy requires that Members be informed about strategic objectives and major developments.

DMC is committed to keeping Members informed and improving accessibility to Members through:

Member announcements;
company publications (including the Annual Report);
the Annual General Meeting;
the Company website www.dmcl.com.au
the Member contact number 1300 658 916; and
a contact email address members@dmcl.com.au

The following principles govern DMC's communication:

DMC will act in accordance with the NSW Co-operatives Act
Only authorised spokespersons can communicate on behalf of DMC with Members, the media or the medical diagnostics industry, Federal and State Government and any relevant Federal and State Government bodies and instrumentalities;
DMC's Disclosure Committee manages the day-to-day continuous disclosure issues and operates flexibly and informally. It is responsible for compliance, coordinating disclosure and educating employees about DMC's communication policy; and
All material information for Members, the Annual Reports, full year and half year results and presentation material given to analysts is published on DMC's website (secured members page) www.dmcl.com.au

The Chief Executive Officer is the primary person responsible for communication with members; it is DMC's responsibility to make available the appropriate communication channels for member inquiries.

DMC's Members are encouraged to make their views known to DMC and to directly raise matters of concern. From time to time, DMC requests meetings with its Members to share views on matters of interest. The views of those parties are shared with the Board on a regular basis, both by the Chairman of the Board of Directors and management.

Annual General Meeting

Members are encouraged to attend DMC's Annual General Meeting and use this opportunity to ask questions. The Annual General Meeting will remain the main opportunity each year for Members to comment and to question DMC's Board and management.

DMC is committed to improving the efficiency of its Annual General Meetings and encourages participation of Members through:

Prior collection of shareholder questions for answering during the meeting. Questions can be submitted either by completing the relevant form accompanying the notice of meeting or by emailing DMC at members@dmcl.com
providing a process to ensure that Members are considerate of each other's right to participate; and
Providing an opportunity after each Annual General Meeting to discuss matters with the Board and management.

Further, the external auditor attends the Annual General Meeting and is available to answer shareholder questions about the conduct of the audit and the preparation and content of the auditor's report.

Board of Directors - role and responsibilities

The Board represents Members and has the ultimate responsibility for managing DMC's business and affairs to the highest standards of corporate governance and business conduct. The Board operates on the principle that all significant matters are dealt with by the full Board and has specifically reserved the following matters for its decisions:

the strategic direction of DMC;
approving budgets and other performance indicators, reviewing performance against them and initiating corrective action when required;
ensuring that there are adequate structures to provide for compliance with applicable laws;
ensuring that there are adequate systems and procedures to identify, assess and manage risks;
ensuring that there are appropriate policies in place and systems to ensure compliance;
monitoring the Board structure and composition;
ensuring that there is an appropriate focus on the interests of all stakeholders; and
representing the interests of and being accountable to DMC's Members.

To assist in its deliberations, the Board has established or will in the future a number of committees which, apart from routine matters, act primarily in a review or advisory capacity. The delegation of such responsibilities to those committees will only occur provided that sufficient systems are in place to ensure that the Board is meeting its responsibilities. The responsibility for implementing the approved business plans and for the day-to-day operations of DMC is delegated to the Chief Executive Officer who, with the management team, is accountable to the Board.

Board of Directors - composition

The composition of the Board is based on the following factors:

The Chairman is a Non-Executive Director;
Two directors of the Board are required to retire at each Annual General Meeting and may stand for re-election. The Directors to retire shall be those who have been longest in office since their last election;
A Director who has been appointed by the Board to fill a casual vacancy is required to be considered for re-election by the shareholders at the next Annual General Meeting.

Directors - independence

When a potential conflict of interest arises, the Director concerned withdraws from the Board meeting while such matters are considered. Accordingly, the Director concerned takes no part in discussions and exercises no influence over the Board if a potential conflict of interest exists.

Independent Professional Advice

For the purposes of the proper performance of their duties, Directors are entitled to seek independent professional advice at DMC's expense. Before doing so, a Director must notify the Chairman (or the Chief Executive Officer if the Chairman is absent) and must make a copy of the advice available to all Directors.

Risk Management

In addition to the risk management duties of the Audit & Risk Committee, the Board has retained responsibility for approving the strategic direction of DMC and ensuring the maintenance of the highest standards of quality. This extends beyond service quality to encompass all ways in which DMC's reputation and its services are measured. The Board monitors this responsibility through the receipt of regular risk assessment reports and management presentations.

The Audit & Risk Committee reviews reports by members of the management team (and independent advisers, where appropriate) during the year and, where appropriate, makes recommendations to the Board in respect of:

overall business risk in DMC's operations;
procurement;
insurance;
taxation;
litigation; and
other matters as it deems appropriate.

The Committee also reviews and, where appropriate, makes recommendations to the Board in respect of policies relating to the above matters. This includes ensuring that DMC has systems that identify, assess, monitor and manage risk. The internal and external audit functions also review DMC's risk assessment and management. The internal and external audit functions are separate and independent of each other.

Ethical Standards

The Board recognizes the need to observe the highest standards of corporate practice, business conduct and medical ethics. To this end, DMC has established a formal Code of Conduct, which requires management and employees to adopt high ethical standards in all of DMC's activities.

The Audit & Risk Committee is responsible for ensuring effective compliance policies exist to ensure compliance with the requirements established in the Code of Conduct. The Code contains procedures for identifying and reporting any departures from the required standards. DMC has also established a system for distribution of the Code at appropriate intervals to employees and for them to acknowledge its receipt.

The Code sets standards of behavior expected from everyone who performs work for DMC - Directors, employees and individual contractors. It is also expected that DMC's suppliers will enforce a similar set of standards with their employees.

Board Committees

To assist in its deliberations, the Board has established or will in the future establish a number of committees which, apart from routine matters, act or will act primarily in a review or advisory capacity.

Audit & Risk Committee

Current composition:
To be headed by the Principal Executive Officer

Purpose:
Audit - reviews the auditor's performance, the professional independence of the auditor, audit policies, procedures and reports, as a direct link between the Board and the auditor.

Financial Statements - reviews DMC's financial statements, the effectiveness and compliance with accounting policies and standards and adequacy of disclosures.

Risk Management - reviews policies and reports on all major categories of risk including, but not limited to, overall business risk in DMC's operations, treasury risk (including currency and borrowing risks if applicable), procurement, insurance, taxation and litigation.

Ensures that there are effective policies covering such matters as treasury policy, procurement policy, code of conduct and whistle blowing.

Compliance & Social Responsibility & Medical ethics Committee

Current composition:
To be headed by the Chairman of the Board

Purpose:
Compliance - reviews compliance with laws including occupational health and safety, environmental protection, product safety and trade practices.

Reviews policies reflecting on DMC's reputation, including quality standards and disclosure.

Social responsibility - reviews reports and makes recommendations to the Board, where appropriate, in respect of political donations, community sponsorship and support and relevant social issues such as obesity.

CODE OF CONDUCT FOR DIRECTORS, OFFICERS AND EMPLOYEES

1. Purpose

1.1 The purpose of the Code of Conduct is to codify the principles and standards of behaviour expected from Directors, officers and employees consistent with DMC's commitment to be an ethical corporate citizen of the highest integrity.

1.2 This Code of Conduct is an integral part of the terms and conditions of employment and all Directors, officers and employees agree to these conditions on acceptance of an appointment.

2. Personal Conduct

2.1 Directors, officers and employees of DMC will:

Respect their co-workers, Members of DMC, patients, suppliers and other service providers; act ethically, fairly, honestly and with integrity; act with due care, diligence and to the best of their abilities; avoid all forms of bullying, harassment and discrimination; comply with all DMC policies and respect all of the laws of the countries in which they operate; act in the best interests of DMC at all times, use the powers of their position or office for a proper Purpose and act within the limits of their authority; and do all things necessary to enhance the reputation of DMC.

3. Corporate Conduct and Behaviour

3.1 Confidentiality

3.1.1 Directors, officers and employees must ensure that information of any kind or any process of any kind which is confidential and sensitive is not disclosed to any third parties or to any other person within the DMC who does not have a need to know. Such information can be disclosed with the prior written authorisation of DMC or if required by law. This obligation survives the termination of a Director, officer and employee.

3.1.2 Directors, officers and employees are to ensure that confidentiality is preserved at all times by inserting restrictive conditions in agreements with external service providers, information memorandums and related documents.

3.2 Conflicts of Interest

3.2.1 Directors, officers and employees must not place themselves in the position where there is a conflict, whether actual or perceived, between their personal interests and the best interests of DMC. Further, Directors, officers and employees must not use their position for personal benefit or advantage. All actual or perceived conflicts of interest should be disclosed to the next level of management or, if in doubt, to the Company Secretary or Chief Executive Officer.

3.2.2 Directors, officers and employees must not accept an outside directorship or any other form of additional employment without prior approval.

3.4 Compliance with Laws

3.4.1 Directors, officers and employees are to comply with all relevant Federal and State laws and specifically comply with all HIC and Medicare legislation.

3.4.2 Laws in respect of competition, the environment and health and safety impose onerous standards of behaviour with potentially significant sanctions or penalties for violations. Directors, officers and employees who have responsibilities in these areas must ensure they have a sound knowledge and understanding of the compliance requirements and ensure that their staff members do not inadvertently cause a breach. DMC will not indemnify any employee who is wilfully or knowingly involved in a breach.

3.4.3 Known or suspected breaches of any laws must be reported to the appropriate levels of management. DMC will not pay any fines or penalties resulting from violations of the law. Depending on the seriousness of the offence, an employee may be subject to disciplinary action or dismissal.

3.5 Safety

DMC is committed to providing a safe workplace and to the use of safe work practices. Employees are expected to observe and to comply with all of the safety practices prescribed or otherwise generally expected for their job. Employees are encouraged to report all unsafe work practices or work sites and to make recommendations which can lead to improvements in their workplace.

3.6 Business Relationships

3.6.1 Dealings with customers, suppliers, Members of DMC, third party service providers and regulatory bodies are to be conducted fairly and transparently. The choice of suppliers and third party service providers should be based on merit and not motivated by personal preferences or the prospect of personal gain.

3.6.2 The offering or receiving of a bribe or similar inducement is prohibited. Any gifts over $100 received or given should be reported to a manager.

3.7 Workplace Relationships

3.7.1 DMC is committed to an open and fair working environment. Initial employment and advancement is to be based on merit.

3.7.2 Consistent with a safe and harmonious work environment, all forms of bullying, harassment and discrimination are prohibited.

3.8 Group Assets and Property

3.8.1 Directors, officers and employees are responsible for safeguarding the assets and property of DMC. Assets include leased rights, information such as trade secrets or Member listings or supplier listings or employee listings, trademarks, business names, copyright, logos, patents and licences.

3.8.2 Directors, officers and employees must not use any assets or property improperly or for personal benefit or allow those assets to be damaged. No assets or information are be destroyed, loaned or disposed of in any way except with the appropriate written authorisations.

3.8.3 Any fraud, misappropriation, false claims, misleading entries in financial records or unauthorised removal or wilful damage of equipment must be reported to a manager or Director or the Chief Executive Officer immediately.

3.9 Intellectual Property

3.9.1Directors, officers and employees must not knowingly infringe the intellectual property rights of third parties.

3.10 Privacy

3.10.1 Directors, officers and employees must comply strictly with privacy law and must not disclose any private information about a person without the prior written consent of that person.

3.11 Illicit Drugs

3.11.1 All forms of illegal drugs or substances must not be consumed or brought into any of DMC's workplaces. Any person found to be under the influence of illegal drugs or substances is to be immediately removed from the workplace.

3.11.2 All non-smoking restrictions at the various workplaces in DMC are to be observed at all times.

4. Reporting Requirements

4.1 Directors, officers and employees who become aware of an actual, probable or suspected breach of this code should report the matter to the next level of management or, if in doubt, to the Chief Executive Officer.

4.2 Any person who reports an incident in good faith and without any vexatious intentions will not be subject to any form of retribution or reprisal.

5. Compliance

5.1 Any breach of this Code of Conduct and any person(s) involved in concealing a breach will be subject to disciplinary action. Serious breaches could result in instant dismissal and the matter referred for police action.