Corporate Governance Statement

for the year ended 30 june 2008

CORPORATE COVERNANCE

The Credit Union continues to demonstrate its commitment to a high standard of corporate governance.

Corporate governance describes the system by which the Credit Union and the consolidated entity are directed and managed. It includes how we define and achieve our objectives, as well as how we manage our relationships with members (shareholders), Directors, employees and other stake holders such as regulators and suppliers.

Good corporate governance encourages the consolidated entity to create value through achieving its objectives, while providing accountability and control systems that are appropriate to the risks involved in its business.

This statement outlines the main corporate governance practices in place throughout the financial year.

BOARD OF DIRECTORS

Board Governance
The Credit Union is governed by the Board whose principal source and rules of governance include:

• The Constitution;

• Board Charter;

• Terms of Reference of various Board committees; and

• Board policy statements.

The Credit Union is diligent in complying with all regulatory bodies, in particular the Prudential Standards and Guidelines produced by the industry’s regulator, the Australian Prudential Regulation Authority (APRA).

Role of the Board
The Board’s primary role is the protection and enhancement of long-term member (shareholder) value.

To fulfil this role, the Board is responsible for the overall corporate governance of the consolidated entity including:

• Establishing a strategic plan based on the Credit Union’s vision statement and values designed to meet members’ needs;

• Approving budgets and key performance indicators and monitoring these on a regular basis;

• Setting remuneration, appointing, removing and creating succession plans for the Chief Executive Officer and, as appropriate, Directors;

• Ensuring the integrity of internal control and management information systems; and

• Approving and monitoring financial and other reporting.

The Board has delegated responsibility for operation and administration of the consolidated entity to the Chief Executive Officer. Responsibilities are delineated by a formal Instrument of Delegation.

Board Processes
To assist in the execution of its responsibilities, the Board has established a number of Board Committees including a Risk Management Committee, a Corporate Governance and Policy Committee and an Audit Committee. These committees have written Terms of Reference, which are reviewed by the Board on a regular basis. From time to time, the Board may convene a special purpose committee or task force to consider a particular issue.

The Board has also established a framework for the management of the consolidated entity including a system of internal control, a business risk management process and the establishment of appropriate ethical standards.

The full Board currently holds 12 scheduled meetings each year, plus strategy meetings and any extraordinary meetings at such other times as may be necessary to address any specific significant matters that may require consideration.

Director Professional Development
The consolidated entity has a formal process to educate new Directors about the nature of the business, current issues, the corporate strategy and the expectations of the consolidated entity concerning performance of Directors. Directors also have the opportunity to meet with management to gain a better understanding of business operations. All Directors are given access to continuing professional development opportunities to update and enhance their skills and knowledge of the credit union and finance industries, changing regulatory requirements, and ongoing business opportunity and risk management issues.

Composition and Performance of the Board
The names of the Directors of the consolidated entity in office during the period of, and up to the date of, this report are set out in the Directors’ Report. Under the Savings & Loans Credit Union Constitution, the Board is required to have a minimum of five Directors and at least five Directors must be appointed by members. Subject to certain constraints, the Board may also appoint Directors. There were eight Directors during the financial year. Seven Directors were member-appointed with the Board appointing Director Mark Day as permitted under the Constitution. This appointment brings additional skills to the Board. Director Day’s appointment was confirmed by the members at the 2007 Annual General Meeting (“AGM”).

All Directors of the consolidated entity during the financial year were non-Executive Directors. The Board has in place a process to review its own performance. This process involves each Director conducting peer reviews, and the Board reviewing its collective performance.

Director Independence
Each Director is independent of management and free of any business or other relationship that could materially interfere with, or could reasonably be perceived to materially interfere with, the exercise of their unfettered and independent judgment.

Chairperson
The Board elects the Chairperson of the Board annually. The Chairperson of the Board also sits on each Board Committee.

AUDIT COMMITTEE

The Audit Committee advises on the establishment and maintenance of a framework of internal control and appropriate ethical standards for the management of the consolidated entity. The General Manager Professional Services (responsible for the internal audit function), the external auditors, the Chief Executive Officer and other management are invited to Audit Committee meetings at the discretion of the Chairperson of the Committee.

The responsibilities of the Audit Committee include:

• Reviewing the annual financial statements for recommendation to the Board. This includes new or significant changes to accounting policies to ensure compliance with Australian Accounting Standards and reviewing significant accounting estimates and the results of the external audit;

• Reviewing the effectiveness of the risk management framework;

• Assessing and monitoring the performance and objectivity of the internal audit function and approving the annual internal audit plan;

• Reviewing annually the external auditor’s independence in accordance with relevant Corporations Act, professional body and APRA requirements;

• Completing the annual Fit and Proper assessment of the external auditor in accordance with prudential standards;

• Assessing the adequacy of the internal control framework;

• Organising, reviewing and reporting on any special reviews deemed necessary by the Board;

• Assessing whether fraud risks are properly identified and effective preventative and detective controls are in place to manage these risks;

• Monitoring processes to ensure compliance with regulatory requirements;

• Receiving the annual report on the conduct and outcomes of the Whistleblowers Protection Program; and

• Overseeing the APRA statutory reporting requirements.

In addition, the Audit Committee monitors and evaluates the performance and effectiveness of the external auditor including:

• Reviewing the external audit plan and agreeing the annual engagement letter;

• Reviewing the external audit reports and monitoring management’s responsiveness to the findings;

• Discussing with the external auditor any problems encountered during the audit; and

• Meeting with the external auditor at least once a year independently of management.

The external auditor is invited to attend every Audit Committee meeting.

COPORATE GOVERNANCE AND POLICY COMMITTEE

The role of the Corporate Governance and Policy Committee is to make recommendations to the Board on the development, maintenance and review of governance-related matters.

The responsibilities of the Corporate Governance and Policy Committee include monitoring and review of:

• Strategic planning processes;

• Board and Chief Executive Officer succession plans;

• Director skill mix, education and professional development;

• Board Code of Ethics;

• Board, Director and Chief Executive Officer assessment processes;

• Regulatory environment;

• Election of Directors, AGM and Annual Report;

• Instrument of Delegation; and

• Overall scope and depth of Board policies and review of specific policies in the areas of governance and human resources.

RISK MANAGEMENT

Board Risk Management Committee
The role of the Board Risk Management Committee is to monitor the consolidated entity’s risks and make recommendations to the Board on risk management related matters and policies. The Board Risk Management Committee receives reports from management relating to financial, market, credit, liquidity and operational risks and other risk related issues. The Board Risk Management Committee also receives specialist reports from external parties covering specific areas of risk where necessary.

Oversight of the Risk Management System
The Board Risk Management Committee oversees and monitors the risk management systems and processes to ensure that relevant risks are identified, managed and monitored in accordance with the Risk Management Framework, sound business practice and regulatory requirements. In addition, the Board Risk Management Committee oversees that risks are managed within the limits and risk appetite as agreed by the Board.

Risk Management, Compliance and Control
The Board is responsible for the overall internal control framework within the consolidated entity, but recognises that no cost-effective internal control framework will preclude all errors and irregularities.

The consolidated entity has in place practices with the aim of ensuring that:

• Board approval is obtained when capital expenditure and expenditure commitments are above Board preapproved limits;

• Business transactions are properly authorised and executed;

• Its financial exposures are managed and controlled appropriately;

• Its financial reporting complies with the financial reporting regulatory framework; and

• Systems are in place to achieve high standards of compliance with regulatory requirements.

Quality and Integrity of Personnel
Formal appraisals are conducted at least annually for all employees. Training and development and appropriate remuneration and incentives with regular performance reviews create an environment of co-operation and constructive dialogue with employees and senior management. A formal succession plan is also in place to ensure competent and knowledgeable employees fill senior positions when retirements or resignations occur.

Assessment of Effectiviness of Risk Management
Internal Audit assists the Board in ensuring compliance with internal controls and risk management programs by regularly reviewing the effectiveness of the above mentioned compliance and control systems. The Audit Committee is responsible for approving the program of Internal Audit reviews to be conducted each financial year and for the scope of the work to be performed.

ETHICAL STANDARDS

All Directors, managers and employees are expected to act with the utmost integrity and objectivity, striving at all times to enhance the reputation and performance of the consolidated entity.

Code of Ethics
The consolidated entity has advised each Director that they must comply with the Board Code of Ethics. The Code of Ethics, which is available to members on request, covers:

• Confidentiality;

• Conflict of interest (see below);

• Conduct at and outside of meetings;

• General Board protocols; and

• Other related matters.

Conflict of Interest
Directors must keep the Board advised, on an ongoing basis, of any interest that could potentially conflict with those of the consolidated entity. The Board has developed procedures to assist Directors to disclose potential conflicts of interest.

Where the Board believes that a significant conflict exists for a Director on a Board matter, the Director concerned does not receive the relevant Board papers and is not present at the meeting whilst the item is considered. Details of Director-related entity transactions with the consolidated entity are set out in notes to the financial statements.

COMMUNICATION WITH MEMEBRS (SHAREHOLDERS)

The Board encourages full participation of members at the AGM to ensure a high level of accountability and identification with the consolidated entity’s strategy and goals. Important issues are presented to the members as single resolutions. It is current practice that proxy forms are issued to all eligible members with the notice of AGM.

Members are requested to vote on the appointment and aggregate and individual remuneration of Directors and changes to the Constitution. Copies of the Constitution are available to any member who requests it and from savingsloans.com.au.

The State Electoral Commissioner has been appointed the Returning Officer for the Credit Union’s election of Directors in 2008. The State Electoral Office has extensive experience in conducting various elections, including State and Local Government elections. The decision to appoint the State Electoral Office ensures we continue to provide for members a transparent, efficient and accurate election of Directors to the Credit Union.

Other means of communication with members include:

• The Annual Report which is available to all members from branches, the Credit Union’s website savingsloans.com.au or, alternatively, by post if the member has elected to receive it by this means; and

• Communication of key events to members through the News & Views newsletter and savingsloans.com.au.

Feedback from members is also regularly sought through a variety of mechanisms including surveys, focus groups and informal feedback opportunities. Members can communicate directly with the CEO by way of a blog called ‘here&now’, which is accessible from the Credit Union’s website. Members can also utilise the telephone service called CEOchat.

OTHER COPORATE GOVERNANCE MATTERS

Other structures and processes contributing to good corporate governance within the consolidated entity include:

• Management committees – a variety of management committees are in place to support the control framework described above, including: Executive, Pricing, Executive Asset & Liability Committee, Credit and Operational Risk.

• Business sustainability – during the year the consolidated entity further enhanced the application of business sustainability considerations (such as environmental and social considerations) in its decision making processes. The Credit Union is committed to sustainable business practices that are supported by a range of initiatives. Corporate Social Responsibility (CSR) requires that we conduct our business in a transparent and ethical way that enhances value for all of our stakeholders. Good governance structures and the practices which are in place within the organisation provide for a solid foundation on which to build our corporate social responsibility program.

• Strategic planning process – the Board and management of the consolidated entity have developed a robust and integrated strategic planning process that links relevant aspects from long term strategic and capital management planning through to annual business planning and individual performance planning processes.

• Fit & Proper and Governance processes - to ensure the Credit Union meets the requirements under APRA’s Prudential Standards the Board has a range of policies to support compliance with these standards. The standards include the minimum requirements that Authorised Deposit taking Institutions must apply in corporate governance and in determining the fitness and propriety of individuals to serve in responsible person positions, including the position of Director. The Fit and Proper assessment process has been applied to the external auditor, Senior Management and all incumbent Directors and all were determined as meeting the requirements of the Fit and Proper policy.