The Board of Kellan Group plc is committed to achieving good standards of corporate governance, displaying integrity and operating ethically in its activities. Under the rules of the Alternative Investment Market, the Group is not required to comply with the Combined Code. However, it has taken steps to comply with the Combined Code in so far as it can be practically applied, given the size of the Group and the nature of its business.

Board and Committees

Main Board

The Board meets at least nine times per year and is responsible to the shareholders for:

• Approving the Group's strategy and associated budgets
• Ensuring policies, decision-making processes and resources exist within which the strategy can be implemented
• Monitoring performance against financial and non-financial indicators
• Setting values and standards in corporate governance matters.

There is a list of matters reserved for the Board, which may be updated by the Board and approved by the Board only.

The Board comprises 5 Directors; 3 non-executive Directors, two of whom act as Co-Chairmen, and 2 Executive Directors.

The Co-Chairmen are responsible for leading the Board, facilitating the effective contribution of all members and ensuring that it operates effectively in the interests of the shareholders. The Chief Executive Officer is responsible for the leadership of the business, evolution and implementation of the strategy.

The Directors may have access to independent professional advice where needed at the Company's expense.

View Biographies of Main Board

The Company has established audit and remuneration committees of the Main Board, each with documented terms of reference formally delegating their duties and responsibilities.

Audit Committee

The audit committee has primary responsibility for:

• Monitoring the quality of internal controls
• Ensuring that the financial performance of the Company is properly measured and reported on.
• Consider the need for, or performance of, internal auditors.
• Recommend the external auditor and its remuneration.
• Review the external auditors independence and objectivity, and the effectiveness of the audit itself.
• To develop a policy on the use of the external auditors in the supply of non-audit services and report to the Board on improvements needed.
• To review arrangements by which the staff can report possible improprieties ensuring investigation and follow-up is appropriate.

It does this by receiving and reviewing reports from the Company's management and auditors relating to its published accounts and the internal control systems in use throughout the Company.

The Audit Committee meets 2 times per year, one of which is a formal review with the auditors following the year end audit, and has unrestricted access to the Company's auditors at all times. The audit committee consists of 3 Non-Executive Directors with John Bowmer as Chair.

Remuneration Committee

The remuneration committee reviews the performance of the executive Directors and makes recommendations to the Board on matters relating to their remuneration and terms of employment. The remuneration committee will also make recommendations to the Board on the remuneration of Senior Operating Managers in the Business including proposals for the granting of share options and other incentives pursuant to any share option scheme or incentive scheme. The committee meets twice a year and comprises 3 Non-Executive Directors with Tony Reeves as Chair.

Independence of external auditors

BDO Stoy Hayward is the auditor of the Kellan Group. They have procedures in place to ensure their independence is maintained.

The Audit Committee has the specific task of keeping the extent and nature of non-audit services provided by the auditors to ensure that objectivity and independence is maintained.

Risk Management

The Board attaches considerable importance to Kellan Group's systems of internal control and risk management. It acknowledges its responsibility in this regard regularly reviews controls to ensure their effectiveness. The Company's systems are designed to manage rather than eliminate the risk of failure to achieving business objectives, recognising that any system can only provide reasonable mitigation and not absolute assurance against material misstatement or loss. The Audit Committee and the Directors review the effectiveness of the internal controls each year.

Financial reporting and associated business controls are managed by the Main Board through regular review of operational performance against budgets, updated forecasts and the prior year. Appropriate action plans put in place to optimise operational and financial performance. The Audit Committee is responsible for reviewing the ongoing control process.

Health and Safety risks are managed by the use of a dedicated Health and Safety Manager, who works in conjunction with the Company's Insurance Broker and site representatives. Regular Health and Safety reviews are carried out at each of the Company's operating sites and exceptions reported via the Operations Board.

Relations with Shareholders

At each meeting, the Main Board is updated on meetings and communications with shareholders. An analysis of the shareholder base is presented quarterly along with Research notes by the broker. Throughout the year the Chairman, Chief Executive Officer and Finance Director undertake scheduled meetings and conference calls with the larger, institutional shareholders who hold the majority of the shares. Regular feedback is given to the Company following meetings with shareholders via the broker.

The Company recognises that whilst larger institutions comprise the majority of the shareholders, attention should be paid to private shareholders including employees. Improvements have been made to the Company website with a view to providing better information to all shareholders, particularly private investors. The website provides facilities to receive e-mail alert notifications, monitor trends of financial data including share price as well as review documentation such as presentations and published accounts.

At the Annual General Meeting the Co-Chairmen issue a statement and the Chief Executive reviews the activities throughout the year. All Directors are available following the meeting to answer questions and for informal discussions.