BOARD COMPOSITION AND STRUCTURE

Introduction

Under the ASX Listing Rule 4.10, companies are required to disclose in their Annual Report the extent to which they have followed the best practice recommendations of the ASX Corporate Governance Council.

Corporate governance is the system by which companies are directed and managed. It influences how the objectives of the Company are achieved, how risk is monitored and assessed, and how performance is optimised.

Good corporate governance structures encourage companies to create value and provide accountability and control systems commensurate with the risks involved.

Brainytoys Limited’s Policy

The composition of the Board has been determined using the following principles:

	The Board is comprised of four directors and may be increased where it is determined that additional expertise is required in specific areas, or when an outstanding candidate is identified.
	The Board has a majority of non-executive directors.
	The Board comprises directors with a broad range of expertise but with an emphasis on toy and game and marketing experience.

The Board has a Nomination Committee consisting of all members of the Board. The committee reviews its composition as required to ensure that the Board has the appropriate mix of expertise and experience. When a vacancy exists, for whatever reason, or where it is considered that the Board would benefit from the services of a new director with particular skills, candidates with the appropriate expertise and experience are considered. The Board then appoints the most suitable candidate who must stand for election at the next general meeting of shareholders.

The Board reviews the performance of all Directors around June and December of each year. Directors whose performance is unsatisfactory are counseled and encouraged to improve their performance. If the Board believes an individual's performance has not adequately improved or that Director is unable or willing to provide the skills required by the Company, they are asked to retire.

The corporate governance section of the Annual Report contains information on directors consistent with recommendation 2.5 of the best practice principles in relation to the composition and structure of the Board.