Corporate Governance Statement

Compliance with the Combined Code

The rules of the Alternative Investment Market (“AIM”) do not compel the Company to comply with the Combined Code (the “Code”).  Nevertheless the Directors intend that the Company will comply with some of the provisions of the Code providing a limited number of disclosures deemed necessary and valuable to readers, insofar as it is practicable for a company of its size.

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Board of Directors

The Company has two Non-executive Directors (Gerard Moufflet and Miroslaw Izienicki) with relevant sector experience to complement the Executive Directors and to provide an independent view to the Board.  R. James Macaleer, the Company’s Chairman and Chairman of the Compensation Committee, passed away on 29 October 2015.

The Company has an Audit Committee of two Non-executive Directors (Miroslaw Izienicki and Gerard Moufflet).  The Audit Committee meets to consider i) the audit plan for each financial year, ii) the publication of the final results, and iii) the publication of interim results.  The Audit Committee met once in 2015.

The Company has a Compensation Committee of one Non-executive Director.  The members of the committee during 2015 were R. James Macaleer through October 2015 and Miroslaw Izienicki.  The Compensation Committee is responsible for reviewing the performance of the executives, setting remuneration, determining the payment of bonuses based on an established management incentive plan, and considering the grant of options.  The Compensation Committee met once in 2015.

The Company has a Nomination Committee of one Non-executive Director.  The members of the committee during 2015 were R. James Macaleer and Gerard Moufflet.  As part of the regular board meetings, the Non-executive Directors meet without the Executive Directors to review the leadership needs of the Company, both executive and non-executive.  The Nomination Committee did not meet in 2015.

The Board meets regularly, generally every two months, to review key business risks including the financial risks facing the Company in the operation of its business.

The Board approves the annual budget and operating plan and monitors the performance of the Company and the executive management team against the approved budget, as well as considering employee issues and any key appointments.  The Board approves all additional and new portfolio investments and additional investments to existing Partner Companies.  The Board meets prior to the publication of the final results to approve the value of the Company’s Partner Company investments and considers the going concern assumption.

The Directors will retire by rotation and offer themselves for re-election in accordance with the Company’s Articles and the Code.

The Company has adopted a model code for Directors’ dealings which is appropriate for an AIM listed company.  The Directors complied with Rules 21 and 31 of the AIM Rules relating to Directors’ dealings and took reasonable steps to ensure compliance by the Company’s applicable employees as well.

A summary of the performance and financial position of the Group for the year ended 31 December 2015 is set out in the CEO’s Statement on pages 2 to 7.  The Board considers this information to provide a balanced assessment of the Group’s financial position and future prospects.

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Chairmanís duties

Normally the Company has separate individuals as Chairman and Chief Executive Officer.  The Company’s Chairman, R. James Macaleer, passed away on 29 October 2015.  Since the death of Mr. Macaleer, Richard Morgan, CEO, is currently acting Chairman.

The Chairman is responsible for:

Chief Executive Officerís duties

The Company’s Chief Executive Officer (“CEO”) is responsible for:

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Internal control and risk management

The Board attaches considerable importance to the Company’s system of internal control and risk management.

The Company operates a comprehensive accounting and budgeting system, which is analysed on a monthly basis.  Variances between forecast and actual results are analysed thoroughly to ensure that, should there be any material differences, they would be investigated immediately.  Variances between forecast and actual results are reported to the Board as part of regularly scheduled Board meetings.

The Company intends to maintain a small and close-knit team and to stay in close touch with its Partner Companies.  As a result, the Company intends to limit the number of Partner Companies to no more than 10 at any one time.  In addition to limiting the number of Partner Companies, the Company employs a rigorous selection process prior to initial investment into a Partner Company and once invested, the Company provides a wide range of services including direct management, strategic planning, intellectual property planning and strategy, capital raising, recruiting, business development, and other advisory services in areas such as marketing, administration, and capital markets.  These services allow the Company to have direct knowledge of the operations of the Partner Companies and allow the Company to identify and seek remedies for potential financial and operational issues occurring at the Partner Companies.

The internal controls and risk management are designed to manage, rather than eliminate, the risk of failure to achieve business objectives, and the Board recognises that any system can only provide reasonable, and not absolute, assurance against material misstatement or loss.

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Going concern

The Board has undertaken a recent and thorough review of the Group’s forecasts and associated risks and sensitivities.  The extent of this review reflects the uncertain economic outlook for the US and UK economies taken as a whole, as well as the specific financial circumstances of the Group at this time.  The review has identified that the Group’s cash flow forecasts are particularly sensitive to the Company’s ability to continue to raise new funds for itself and its Partner Companies. 

Following this review, the Board has concluded that even though the Group and Company have a net current liability position at the year end and operating losses, it has a reasonable expectation that the Group and Company have adequate resources to continue in operational existence for the foreseeable future and for this reason, the going concern basis continues to be adopted in preparing the financial statements.  The monthly performance of the business and its forecasts are being regularly reviewed in detail.  Should there be an unforeseen and material adverse change in any of the key sensitivities impacting on the Group’s forecasts, the Board would seek to mitigate the impact by adopting different operating and funding strategies.  For further details of management’s assessment of going concern, refer to note 1 of the financial statements.

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Communication with shareholders

The Company is strongly committed to the maintenance of good investor relations and seeks, wherever possible, to build a relationship of mutual understanding with both its institutional and private investors.  Additionally, the Board seeks to meet with the shareholders whenever possible and to use the Company’s website (www.amphionplc.com) to communicate with all shareholders. Further queries are welcome and should be directed to Richard C.E. Morgan, CEO (rmorgan@amphionplc.com), or Charlie Morgan, Director of Communications (cmorgan@amphionplc.com).

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