Caltex Australia : Corporate Governance Statement

2016 CORPORATE GOVERNANCE STATEMENT

CALTEX AUSTRALIA LIMITED

2016 CORPORATE GOVERNANCE STATEMENT

AS AT 21 MARCH 2017

The Board of Directors (Board) of Caltex Australia Limited (Caltex or the Company) is committed to high standards of corporate governance.

This Corporate Governance Statement (Statement) summarises Caltex's corporate governance practices including compliance with the ASX Corporate Governance Council's Principles and Recommendations (ASX Principles) for the period from 1 January 2016 to

21 March 2017. This Statement has been approved by the Board. As at the date of this Statement, Caltex has complied with all of the ASX Principles.

Assurance

• External auditors

  Delegation

  Oversight through reporting

  External Auditor Policy

  Board

• Board Charter

  Accountability

  Delegation

  Delegation Accountability

  MD & CEO

• Internal Audit

  Independent Advice

• Independent legal or other professional advice

• Board Governance Policy

• Charter of Director Independence

• Delegation of Authority

• Performance Evaluation Process

• Risk Management Summary

• Continuous Disclosure Policy

• Securities Trading Policy

• Shareholder Communications Policy

• Code of Conduct

• Diversity and Inclusion Policy

Caltex Leadership Team

(CLT)

Audit Committee OHS & Environmental Risk Committee Human Resources Committee Nomination Committee

• Audit Committee Charter • OHS & Environmental Risk Charter • Human Resources Committee Charter • Nomination Committee Charter

The Board oversees and directs Caltex management in seeking to deliver superior business and operational performance, and long term growth in shareholder value.

The Board has delegated responsibility for managing Caltex's day-to-day business and operations to the Managing Director & CEO within the limits set out in Delegations of Authority (DOA) approved by the Board. The Managing Director & CEO has in turn delegated authority for certain matters to the Caltex Leadership Team (CLT) who, along with the Managing Director & CEO, are accountable to the Board.

The Board Charter and Caltex's DOA give Caltex's Managing Director & CEO and the CLT the authority to manage Caltex's day-to-day operations, while reserving important strategic, business, operational and governance matters to the Board.

The Board's key responsibilities under the Board Charter include:

Culture, ethical standards and diversity

• Establishing and modelling the Caltex culture, values and commitment to safety

• Enhancing and protecting Caltex's reputation and corporate integrity

• Approving Caltex's Code of Conduct and receiving an annual report from management in relation to compliance with the Code of Conduct

• Approving Caltex's diversity and inclusion policy and measurable objectives for achieving diversity and inclusion across the Caltex Group set in accordance with Caltex's diversity and inclusion policy, assessing annually those objectives and the progress against them, and monitoring the respective proportions of women and men on the Board, in senior executive positions, and across the whole organisation

  Overall direction, objectives and goals, reviewing and approving strategy

• Approving Caltex's overall direction and financial, operational and safety objectives and goals each year

• Approving Caltex's business plan and budget each year

• Approving Caltex's strategies, as formulated by management with guidance from the Board, to implement the objectives and goals set by the Board

• Monitoring business performance against the objectives and goals set by the Board and reviewing the implementation of Board- approved strategies

  Major capital expenditure, business acquisitions and other transactions

• Approving capital expenditure, business acquisitions and other transactions outside the authorities delegated to the Managing Director & CEO

• Monitoring the progress of major capital projects and business acquisitions and reviewing the returns from these investments

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  CORPORATE GOVERNANCE STATEMENT CONTINUED

  Financial matters and reports

• Approving Caltex's half year and full year reports to shareholders and the ASX

• Receiving declarations from the Managing Director & CEO and the Chief Financial Officer in relation to financial reports (including as required by section 295A of the Corporations Act)

• Assessing the external auditor's independence, based on advice from the Audit Committee and taking into account matters related to services provided by the external auditor during the year

• Approving Caltex's dividend policy

• Determining the amount, nature and timing of dividends to be paid

• Approving changes to Caltex's capital structure and significant funding arrangements

  Corporate Governance and legal and regulatory compliance

• Establishing appropriate standards of corporate governance and legal and regulatory compliance

• Approving policies dealing with continuous disclosure, securities trading and communications with shareholders

• Approving the charters of the Board's standing committees (Audit Committee, Human Resources Committee, Nomination Committee and OHS & Environmental Risk Committee)

• Approving the corporate governance statement and related governance disclosures for the Caltex Annual Report, including diversity and inclusion disclosures

  Risk management

• Monitoring the adequacy, integrity and effectiveness of the critical systems and internal controls used to manage Caltex's material business risks, as implemented by management, including the identification, assessment, elimination, avoidance and control of these risks

• Receiving statements from management in relation to the effectiveness of risk management and internal control systems implemented to address material business risks

• Reviewing Caltex's risk management framework at least annually to satisfy itself that it continues to be sound and determining whether there have been any changes in material business risks

• Approving financial and other material risk management policies

  Human resources matters

• Approving the selection, appointment terms, remuneration, cessation of, and termination payments to, the Managing Director & CEO

• Setting the performance objectives for the Managing Director & CEO and evaluating performance against those objectives

• Approving, following review with the Managing Director & CEO, the remuneration of the Caltex Leadership Team (CLT) and any termination payments to CLT members

• Approving changes to Caltex's remuneration system (on a whole of remuneration system basis)

• Approving Caltex's short term and long term incentive plans (with any discretionary powers to re-set approved targets or the size of a funding pool for incentive payments being specifically reserved to the Board)

• Approving the terms of any salary sacrifice share plans for directors (subject to the requirements of the ASX Listing Rules), senior executives and Caltex staff.

  The Board Charter is available on the Corporate Governance page of the Caltex website, www.caltex.com.au.

  Board composition and independence

  There are currently eight Directors on the Caltex Board, comprising seven independent, Non-Executive Directors and the Managing Director & CEO.

  Details of each Director's date of appointment and tenure as at 21 March are set out in the table below.

  DATE OF

  APPOINTMENT

  TENURE AS AT

  21 MARCH 2017

  Greig Gailey Chairman, Independent Non-Executive Director 11 December 2007 9 years, 3 months

  Julian Segal Managing Director & CEO 1 July 2009 7 years, 4 months Trevor Bourne Independent, Non-Executive Director 2 March 2006 11 years

  Melinda Conrad Independent, Non-Executive Director 1 March 2017 Appointed 1 March 2017

  Steven Gregg Independent, Non-Executive Director 9 October 2015 1 year, 5 months

  Bruce Morgan Independent, Non-Executive Director 29 June 2013 3 years, 8 months

  Barbara Ward AM Independent, Non-Executive Director 1 April 2015 1 year, 11 months

  Penny Winn Independent, Non-Executive Director 1 November 2015 1 year, 4 months The Board Charter requires that the Chairman be an independent, Non-Executive Director.

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  Assessing Director independence

  Directors are required to disclose relevant personal interests and conflicts of interest when appointed and on an ongoing basis. Independence is initially assessed on each Director's appointment and is reviewed and confirmed annually.

  Caltex considers independent Directors are those who are independent of management and free from any business or other relationship that could (or could reasonably be perceived to) materially interfere with the independent exercise of a Director's judgement.

  Under Caltex's Charter of Director Independence, a Non-Executive Director will be considered independent if the Director:

• has not been employed in an executive capacity by Caltex or any Caltex group entity in the last three years;

• has not been a professional adviser or consultant that has had a material business relationship with Caltex in the last three years;

• has not had a significant relationship (as a substantial shareholder, partner, principal, director, officer, senior executive, or employee significantly associated with the service provided to Caltex) with a professional adviser or consultant that has had a material business relationship with Caltex in the last three years;

• has not been a supplier or customer that has had a material business relationship with Caltex;

• has not had a significant relationship (as a substantial shareholder, partner, principal, director, officer, senior executive, or employee significantly associated with the goods or services provided to or by Caltex) with a supplier or customer that has had a material business relationship with Caltex in the last three years;

• is not a substantial securityholder of Caltex;

• is not an officer of, or otherwise directly associated with, a substantial security holder of Caltex;

• has not been a partner, principal or director of Caltex's external auditor in the last five years;

• has not had significant direct or indirect involvement in the external audit of Caltex in the last five years;

• has no material contractual relationship (directly or indirectly) with Caltex or any Caltex group entity that could, or could reasonably be perceived to, materially interfere with the Director's ability to act in the best interests of Caltex;

• has not served on the Board for a period that could materially interfere with the Director's ability to act in the best interests of Caltex; and

• is free from any interest and any business or other relationship that could, or could reasonably be perceived to, materially interfere with the Director's ability to act in the best interests of Caltex.

  A professional adviser, consultant, supplier or customer will be considered to have a material business relationship with Caltex if:

• from the perspective of the Caltex Director, the business relationship is significant (directly or indirectly) to their own circumstances, or

• from Caltex's perspective, the business relationship generates revenue or expenses (to Caltex) of 5% or more of Caltex's total revenues or expenses, as applicable.

The Charter of Director Independence is available on the Corporate Governance page of the Caltex website.

Access to independent advice

Caltex Directors have access to independent professional advice at Caltex's expense.

Company secretaries

The company secretaries are accountable directly to the Board, through the Chairman, on all matters to do with governance and the proper functioning of the Board.

The decision to appoint or remove a Company Secretary is approved by the Board.

Appointment of new Directors

The Nomination Committee is responsible for reviewing policies and processes for the selection of new Non-Executive Directors, including the identification of the necessary and desirable competencies.

The Nomination Committee engages an independent search firm to conduct a search based on set selection criteria and requests the firm to provide a list of candidates for consideration. Background checks, including checks as to each candidate's character, experience, education, criminal record and bankruptcy history, are conducted as part of the process.

Based in the selection criteria, candidates who are considered suitable for appointment as Directors meet with the Chairman and other Directors. Any decision to appoint a new Director is made by the Caltex Board.

An appointment letter is provided to each new Director which sets out the terms of their appointment, their responsibilities and the expectations of them in their role, and the assistance and resources Caltex provides to Directors. All current Directors have received an appointment letter.

The Nomination Committee periodically reviews the standard letter of appointment for new Directors to ensure that it appropriately reflect Directors' evolving roles and changes to Caltex's business and operations. The standard letter of appointment was most recently reviewed and revised in 2017.

The Board Governance policy is available on the Corporate Governance page of the Caltex website.

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