Corporate Governance

Code on Corporate Governance

The Group is committed to high standards of corporate governance. The Board is accountable to the Group’s shareholders for good governance. The Board fully supports the underlying principles of corporate governance contained in the Combined Code, notwithstanding that, as its shares are not listed on the Main Market of the London Stock Exchange, it is not required to comply with such recommendations. It has sought to comply with the provisions of the Combined Code, insofar as is practicable and appropriate for a public company of its size and nature, and recognises its overall responsibility for the Company’s systems of internal control and for monitoring their effectiveness. Set out below is a statement of how the Group has sought to apply the main principles of the Combined Code.

Board of Directors

The Board, which is headed by the Chairman who is non-executive, comprises two other non-executive and three executive members as at 31 December 2007.
The Board met regularly throughout the year with ad hoc meetings being held also. The role of the Board is to provide leadership of the Company and to set strategic aims but within a framework of prudent and effective controls which enable risk to be managed. The Board has agreed the Schedule of Matters reserved for its decision which includes ensuring that the necessary financial and human resources are in place to meet its obligations to its shareholders and others. It also approves acquisitions and disposals of businesses, major capital expenditure, the annual financial budgets and recommends interim and final dividends. It receives recommendations from the Audit Committee in relation to the appointment of auditors, their remuneration and the policy relating to non-audit services. The Board agrees the framework for executive directors’ remuneration with the Remuneration Committee and determines fees paid to non-executive directors. Board papers are circulated before Board meetings in sufficient time to be meaningful. The division of responsibilities between the Chairman and the Chief Executive Officer is clearly defined. The Chairman’s primary responsibility is ensuring the effectiveness of the Board and setting its agenda. The Chairman has no involvement in the day-today business of the Group. The Chief Executive Officer has direct charge of the Group on a day-to-day basis and is accountable to the Board for the financial and operational performance of the Group. The performance of the Board is evaluated on an ongoing basis with reference to all aspects of its operation including, but not limited to: the appropriateness of its skill level; the way its meetings are conducted and administered (including the content of those meetings); the effectiveness of the various Committees; whether Corporate Governance issues are handled in a satisfactory manner; and, whether there is a clear strategy and objectives. A new director, on appointment, is briefed on the activities of the Company. Professional induction training is also given as appropriate. The Chairman briefs nonexecutive directors on issues arising at Board meetings if required and non-executive directors have access to the Chairman at any time. Ongoing training is provided as needed. Directors are continually updated on the Group’s business and on issues covering insurance, pensions, social, ethical, environmental and health and safety by means of Board presentations. In the furtherance of his duties or in relation to acts carried out by the Board or the Company, each director has been informed that he is entitled to seek independent professional advice at the expense of the Company. The Company maintains appropriate cover under a Directors and Officers insurance policy if legal action is taken against any director. The non-executive directors are considered by the Board to be free to exercise independence of judgement. They do not participate in any of the Company’s pension schemes or bonus arrangements. They receive no other remuneration from the Company other than their fees. It is recognised that the Combined Code does not treat the Chairman as independent after appointment and it is considered best practice that he should not sit on the Audit or Remuneration Committees. However the Board takes the view that as the number of non-executive directors is only three, including the Chairman, and as the Chairman does not chair either of those Committees, his participation will continue as the Committees gain the benefit of his external expertise and experience in areas which the Company considers important. The table overleaf shows the number of Board, Audit Committee and Remuneration Committee meetings held during the year from the date of the approval of the last set of financial statements to the date of approval of these financial statements and the attendance of each director.

The Audit Committee

The Audit Committee (“the Committee”) is established by and is responsible to the Board. It has written terms of reference. Its main responsibilities are: - to monitor and be satisfied with the truth and fairness of the Company’s financial statements before submission to the Board for approval, ensuring their compliance with the appropriate accounting standards and the law; - to monitor and review the effectiveness of the Company’s system of internal control; - to make recommendations to the Board in relation to the appointment of the external auditors and their remuneration, following appointment by the shareholders in general meeting, and to review and be satisfied with the auditors’ independence, objectivity and effectiveness on an ongoing basis; and - to implement the policy relating to any non-audit services performed by the external auditors. Barry Fielder replaced Craig Slater as Audit Committee Chairman at the time that the latter became Chief Executive Officer. Colin Cooke and Keith Willis, the other two nonexecutive directors, remain as members of the Committee.

The Committee is authorised by the Board to seek and obtain any information it requires from any officer or employee of the Company and to obtain external legal or other independent professional advice as is deemed necessary by it.

Meetings of the Committee are held normally two times a year (usually September and March) to coincide with the review of the scope of the external audit and observations arising from their work in relation to internal control and to review the financial statements. The external auditors meet with the Audit Committee without management being present at least once a year. At its meeting in March, it carries out a full review of the year end financial statements and of the audit, using as a basis the Report to the Audit Committee prepared by the external auditors and taking into account any significant accounting policies, any changes to them and any significant estimates or judgments. Questions are asked of management of any significant or unusual transactions where the accounting treatment could be open to different interpretations.

The Committee receives reports from management on any shortfall in the system of internal controls as and when such matters are identified. It also receives from the external auditors a report of matters arising during the course of the audit which the auditors deem to be of significance for the Committee’s attention. The statement on internal controls and the management of risk, which is included in the annual report, is approved by the Committee. The 1998 Public Interest Disclosure Act (“the Act”) aims to promote greater openness in the workplace and ensures “whistle blowers” are protected. The Company maintains a policy in accordance with the Act which allows employees to raise concerns on a confidential basis if they have reasonable grounds in believing that there is serious malpractice within the Company. The policy is designed to deal with concerns, which must be raised without malice and in good faith, in relation to specific issues which are in the public interest and which fall outside the scope of other Company policies and procedures. There is a specific complaints procedure laid down and action will be taken in those cases where the complaint is shown to be justified. The individual making the disclosure will be informed of what action is to be taken and a formal written record will be kept of each stage of the procedure. The external auditors are required to give the Committee information about policies and processes for maintaining their independence and compliance regarding the rotation of audit partners and staff. The Committee considers all relationships between the external auditors and the Company to ensure that they do not compromise the auditors’ judgement or independence particularly with the provision of non-audit services. The Remuneration Committee The Committee, which is chaired by Keith Willis, comprises two non-executive directors, one of whom is independent. It has written terms of reference and is responsible for advising the Board on the terms of service, including remuneration, of the executive Directors and invites participation in the Company’s long term incentive schemes. Further details are given in the Directors’ Remuneration Report. Communication with investors The executive Directors are the Company’s principal spokesmen with investors, fund managers, the press and other interested parties and the Company undertakes a formal programme of institutional presentations on the announcement of its full year and interim results. Investors will be encouraged to participate at the forthcoming Annual General Meeting, and all the Directors, including the Chairmen of the Audit and Remuneration Committees will be available to answer questions.

Internal controls

The Board is responsible for the Group’s system of internal controls and for reviewing its effectiveness. Such a system is designed to manage rather than eliminate the risk of failure to achieve business objectives, and can only provide reasonable and not absolute assurance against material misstatement or loss. The Group highlights potential financial and non-financial risks which may impact on the business as part of the monthly management reporting procedures. The Board receives these monthly management reports and monitors the position at Board meetings. The Board confirms that there are ongoing processes for identifying, evaluating and mitigating the significant risks faced by the Group and that these processes are consistent with the guidance for directors on internal control issued by the Turnbull Committee. The Group’s internal financial control and monitoring procedures include: - clear responsibility on the part of line and financial management for the maintenance of good financial controls and the production of accurate and timely financial management information; - the control of key financial risks through appropriate authorisation levels and segregation of accounting duties; - detailed monthly budgeting and reporting of trading results, balance sheets and cash flows, with regular review by management of variances from budget; - reporting on any non-compliance with internal financial controls and procedures; and - review of reports issued by the external auditors. The Company does not have an Internal Audit function as the Board presently considers that the size and nature of the business does not require it. The Audit Committee on behalf of the Board reviews reports from the external auditors together with management’s response regarding proposed actions. In this manner the Board have reviewed the effectiveness of the system of internal controls for the period covered by the accounts. The Board considers that this system of internal controls has been in place throughout the year.

BW Fielder Chairman of the Audit Commitee 8 May 2008