Chapmans Limited

ACN 000 012 386

9th Floor, 82 Elizabeth Street
Sydney NSW Australia
Phone: +61 2 9233 6022
Fax: +61 2 9233 6475

Corporate Governance

Pursuant to Australian Securities Exchange (ASX) listing rule 4.10.3, this statement outlines the main corporate governance practices that were in place throughout the period from 1 January 2010 to the date of this report.

The Directors' style of management of the Company's affairs, as embodied in the Corporate Governance Policies and Procedures shown below, has been in place in most respects for many years before any such provisions were formally required. Specific comments on each Principle are shown below:

1. Lay solid foundations for Board and Management

The Board of Directors has the over-all responsibility for the management and governance of the Company. The Board sets and implements the objectives and strategy of the Company. The management company assists in carrying out these tasks and also provides day to day administration services.

The Board reviews the reports of the management company on the operational and financial performance of the Company. There are no formal statements as to the delegated authority of management. However the Board reviews all operations of the Company and monitors and manages business risk, and ensures adherence to appropriate ethical standards.

2. Structure of the Board

Directors' qualifications and experience are outlined in the Statutory Directors' Report.

The Company does not have any salaried Directors or executives. Administration services are provided by a management company.

The Board is comprised of four non-executive Directors, two of whom may be deemed to be independent. There are no executive Directors at present, nor do any Directors draw any salary.

It has not been considered necessary to establish a nomination committee due to the size of the company. No special policy has been found necessary in respect of the appointment or retirement of non-executive Directors, apart from the provisions of the Company’s Constitution.

There are no set procedures for Directors to seek independent professional advice at the Company's expense but each Director would be able to seek independent advice and any request for payment of such costs would be treated on a case by case basis.

The Board has not established any committees to evaluate the performance of Directors and has not adopted formal performance enhancement evaluation procedures, due to the size of the Company.

3. Promote ethical and responsible decision-making

The Company, its officers, consultants and representatives are obliged to maintain the highest ethical standards in all their dealings and negotiations. The Company has issued a policy guideline concerning trading in company securities by Directors, officers and consultants which imposes certain restrictions on trading and which, inter alia, requires the person to pose the question: "Is it right to deal at this stage?"

A code of conduct as recommended in best practice recommendation 3.1 has not been formally established as the Board consistently ensures that all members of the Board have a clear understanding of their duties, responsibilities and their accountability to the Company, its shareholders and stakeholders for their conduct.

4. Safeguard integrity in financial reporting

Auditors of the Company can be nominated by shareholders. There are no other procedures in place at present. There is no formal audit committee, as the majority of Directors are involved in performing the functions of an audit committee and reviewing the adequacy of existing audit arrangements.

5. Make timely and balanced disclosure

The Board, through its continuous disclosure policy, the maintenance of a web site and the holding of General Meetings, where shareholders are encouraged to participate, seeks to keep shareholders fully informed of significant developments in an efficient and timely manner.

The Company aims to provide relevant and timely information to its shareholders and the broader investment community in accordance with its continuous disclosure obligations under the ASX Listing Rules.

The Board has established policies and procedures to ensure compliance with ASX Listing Rules disclosure requirements and accountability at Director and management level for that compliance. The Board believes that the formalisation of these policies and procedures in a written form per best practice recommendation 5.1 is not necessary as the Board is satisfied that all Board members are acutely aware of the importance of making timely and balanced disclosure.

The Chairman and/or the Company Secretary have been nominated as the persons responsible for communications with the ASX. This role includes responsibility for ensuring compliance with the continuous disclosure requirements in the ASX Listing Rules and overseeing and co-ordinating information disclosure to the ASX and the public.

6. Respect the rights of shareholders

The Board encourages the participation of shareholders at General Meetings to ensure a sound rapport between shareholders and the Company. The Board asks the Auditor to attend General Meetings. On request, information is made available to shareholders by e-mail, facsimile or post.

7. Recognise and manage risk

Usual standards of identifying significant business risks are applied by the Board. The Directors' collective experience and knowledge are relied upon in managing significant risks in such a way as to ensure that no single project or investment would jeopardise the Company’s viability.

The Board examines projects and investments and assesses them on a risk/reward basis. Exploration for coal can be viewed as high risk/high reward speculative activity.

The Chairman and the Alternative Chief Financial Officer provide the declarations recommended in best practice recommendation 4.1 regarding the Company's financial reports and confirm that they are founded on a sound system of risk management. Relative to its operations and size, the Board has not yet established a risk management committee but believes that the Company has adequately identified potential business risks and continues to operate effectively in material respects in relation to financial reporting risks.

Specific areas of risk are identified in view of the inherently risky exploration industry and depending on the sovereign risk of any specific country in which the Company may be operating.

Business Risk

The board monitors and receives advice as required on areas of operational and financial risk, and considers appropriate risk management strategies. Specific areas of risk that are identified are regularly considered at Board meetings. Included in these areas are performance of activities, continuous disclosure obligations, asset protection and financial exposures.

8. Remunerate fairly and responsibly

Due to the size of the Company it has not been considered necessary to establish a remuneration committee.

The Board is comprised of non-executive Directors and all administration is outsourced. Although the Chairman often acts in an executive capacity, he receives no remuneration for that function.

The Board is responsible for determining and reviewing the remuneration of Directors, within parameters approved by shareholders, and of executives and consultants when appointed. No performance hurdles have been imposed as there were no executive directors.

The modest remuneration scale of a maximum of $4,000 per annum per Director of the parent company is below the amount approved by shareholders. No other benefits were paid to Directors during the year. Remuneration of executives and consultants, when appointed, is determined by market conditions. No equity based payments or other benefits were paid to Directors or consultants during the year under review.