The Company is committed to the principles of corporate governance contained in the Combined Code on Corporate Governance which is appended to the Listing Rules of the Financial Services Authority (“the Combined Code”) and for which the Board is accountable to shareholders. The Company has complied with the provisions of Section 1 of the Combined Code throughout the year except for the following matters:

A.7.2 Non-executive Directors (with the exception of Nick Prest) who served during the year do not have contracts of employment for a specific term due to their appointment being prior to the issue of the 2003 Combined Code.

A.4.1 A nominations committee has not been established because the full Board is actively involved in all Board appointments.

A.6.1 A formal performance evaluation of the Board, its Committees and its individual Directors was not conducted during the year. The Board decided that it was appropriate to defer the implementation of a formal performance evaluation process until a new Chairman was appointed, to allow him to have input in the process. The appointment of Nick Prest in January 2006 meant there was insufficient time to have this in place by 31 March 2006. The Board will ensure this is a priority for the forthcoming financial year.

B.2.1 and C.3.1 The Audit Committee and the Remuneration Committee should only consist of independent non-executive Directors. During the year, the Chairman who is not a non-executive Director, was a member of both Committees. The Company believes that it is appropriate for the Chairman to sit on both Committees given the size of the Board.

The Company has applied the Principles of Good Governance set out in Section 1 of the Combined Code, including both the main principles and supporting principles, by complying with the Combined Code as noted above.
Further explanation of how the principles have been applied is set out below and, in connection with Directors' remuneration, in the Directors’ remuneration report.