Investor Relations

Corporate Governance Report >

For the period ended 31 December 2008

The Group joined AIM in September 2006 and as such is not required to fully comply with the provisions of the Combined Code ("the Code"). However, the directors have adopted elements of the Code having given due consideration to the principals of the Code, and to the current size of the Group. The Directors set out below those elements of the code adopted by the Group.

The Board

The Board of Directors comprises an Executive Chairman, two Executive Directors and an independent Non-Executive Director. The company anticipates appointing an experienced independent Non-Executive Chairman in the near future. These Directors bring a wide range of business and sector experience to the decision making processes of the Board.

The Board meets on a monthly basis and receives a Board pack comprising individual reports from each of the Executive Directors together with any other information deemed necessary for the Board to discharge its duties. In addition, the Board holds regular meetings to discuss and devise the company's medium and long-term strategic focus. Regular informal presentations are given and meetings held in order to advise Directors of issues of importance affecting the Company.

There is a formal schedule of matters specially reserved for the Board. This includes but is not limited to overall strategy, business planning, capital expenditure and acquisition approval.

Board Committees

Following the change in constitution of the Board in September 2008, the delegated responsibilities of the three Board committees of Audit, Remuneration and Nominations were transferred back to the main Board. It is anticipated that these committees will be reinstated following the appointment of a Non-Executive Chairman. In the interim, the Board will continue to apply the terms of reference of the existing committees save for their prescribed constitution. In summary, the responsibilities of these committees are as follows:

Audit Committee

The Audit Committee meets at least twice a year to review the preliminary and interim results before they are presented to the Board. The Committee will also meet on an ad hoc basis where necessary. The Committee operates within specified terms of reference which includes making recommendations to the Board on appropriate accounting policies and monitoring on behalf of the Board, the compliance with and effectiveness of the company's accounting and internal control systems.

The Committee's duties also include the appointment of the Company's auditors and determination of their remuneration. In addition, they will monitor the scope and results of the Company's annual audit and the independence, general performance and objectivity of its auditors.

The external auditors have the opportunity for independent discussion with the Committee in the absence of the Executive Directors.

Remuneration Committee

The Remuneration Committee is responsible for establishing a formal and transparent policy on the remuneration of the Company's senior executives and Chairman.

Nomination Committee

The Nominations Committee meets as required to consider and make recommendations to the board on the appointment of Directors and operates within specified terms of reference.

Internal Control and Risk Management

The Board is responsible for the system of internal control and for reviewing its effectiveness. Such systems are designed to manage rather than eliminate risks and can provide only reasonable and not absolute assurance against material misstatement or loss. Each year, on behalf of the Board, the Audit Committee reviews the effectiveness of these systems. This is achieved primarily by considering the risks potentially affecting the Group and discussions with the external auditors.

The Directors are ultimately responsible for the Group's system of internal controls including financial, operational and compliance controls and risk management. The role of management is to implement Board policy on risk and control.

The main elements of the Group's internal control are:

• a clearly defined management structure and delegation of authority to committees of the Board and Heads of Department;
• procedures for the approval of major contracts, capital expenditure and business acquisitions;
• management are provided with regular and detailed financial information with which they can assess performance;
• a detailed budgeting process and rolling strategic plan which is approved by the Board;
• monthly monitoring and re-forecasting results against budget with procedures to investigate variances and implement corrective actions.

Shareholder Relations

The company maintains regular contact with shareholders through RNS announcements, via the Group's website and by direct contact with its major shareholders. The Board values the views of shareholders and maintains regular dialogue with investment fund managers, other investors and analysts to ensure that the investing community receives a consistent and accurate view of the Group's performance. There is also the opportunity at the Company's Annual General Meeting for individual shareholders to raise general business matters with the Board.

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