Corporate Governance

STATEMENT OF COMPLIANCE WITH THE QCA CORPORATE GOVERNANCE CODE

Chairman's Introduction

As the Chairman, I have overall responsibility for implementing corporate governance at Asimilar Group Plc (Company or Asimilar Group Plc). Working with the company secretary, I am responsible for our corporate governance statements. The board is collectively responsible for setting the tone and culture of the Company and promoting good corporate governance.

Asimilar Group Plc has now adopted the Quoted Companies Alliance Corporate Governance Code (QCA Code). At Asimilar Group Plc we believe in good corporate governance and accountability and we make robust corporate governance part of our culture and business values.

This statement sets out how each of the QCA Code's principles is applied by the Company and where the Company departs from the expectations set by the QCA Code. Where we do not fully comply with the expectations of the QCA Code, we explain why we do so and we review our position regularly. Our annual report also reviews and reports on any significant changes in our corporate governance during the period since the previous annual report.

Our primary means of communicating our approach to corporate governance is through our annual report and our website disclosures. Where specific questions are raised by private individual shareholders and institutional investors, we engage directly with those shareholders. This statement sets out how the board is led, its responsibilities, our risk reporting, governance structure and engagement with stakeholders. Robust corporate governance improves performance and mitigates risk and therefore is key to the long-term success of the Company.

John Taylor, Chairman

Principle 1: Establish a strategy and business model which promote long-term value for shareholders

Our vision is to be a successful and profitable investment company with a particular focus to technology opportunities in the fields of big data, machine learning, telematics and the internet of things (IoT).

We identify early stage or turnaround opportunities with content and delivery capability that engage customers, monetise the user experience and have the potential to grow rapidly through using networks.

We invest in businesses that typically have some or all of the following characteristics:

• strong management with a proven track record;
• ready for investment without the need for material restructuring by the Company;
• generating positive cash flows or likely to do so in the short term;
• able to benefit from the directors' existing network of contacts; and
• the potential to deliver significant returns for the Company.

Although we focus on making investments in private businesses, we do not rule out investments in listed businesses.

Our investment philosophy is that we back management teams whilst providing active support in situations where the directors can make a clear contribution to the progress and development of the investment.

The key challenge for an investing company is its ability to source potential investment opportunities. The directors believe that their broad collective experience together with their extensive network of contacts will assist them in the identification, evaluation and funding of appropriate investment opportunities.

The Company also needs to ensure that it has the necessary cash resources to take advantage of appropriate investment opportunities as they arise. Where a significant investment opportunity is identified, the Company has historically placed shares to raise the necessary additional cash to make that investment. In addition, the Company has invested in a mixture of unlisted and listed companies. The investments in listed companies gives the Company the ability to sell such investments to supplement its cash reserves.

The Company's primary objective is that of securing for our shareholders the best possible value consistent with achieving, over time, both capital growth and income for shareholders through developing profitability coupled with dividend payments on a sustainable basis.

Principle 2: Seek to understand and meet shareholder needs and expectations

The Company remains committed to listening to and communicating openly with its shareholders to ensure that its strategy, business model and performance are clearly understood and that the board understands the needs and expectation of its shareholders. Understanding what our shareholders think about us is a key part of driving our business forward and we actively seek dialogue with the market.

The board typically holds meetings with institutional investors and other large shareholders following the release of interim and financial results and regards the annual general meeting (AGM) as a good opportunity to communicate directly with shareholders via an open question and answer session. All our directors routinely attend the AGM and are available to answer questions raised by shareholders. The AGM is the main forum for dialogue with our retail shareholders.

Details of all shareholder communications are provided on the Company's website.

The Company participates at investor shows as opportunities arise around the country offering smaller and private investors similar insight into the Company and access to management.

The Company discloses contact details on its website and on all announcements released via RIS, should shareholders wish to communicate with the board. Communication with shareholders is co-ordinated by the Chairman.

The board believes that the annual report and the half year report published at the half-year play an important part in presenting all shareholders with an assessment of the Company's position and prospects. All reports and press releases are published on the Company's website.

Principle 3: Take into account wider stakeholder and social responsibilities and their implications for long-term success.

Engaging with our stakeholders strengthens our relationships and helps us make better business decisions to deliver on our commitments. The board is regularly updated on wider stakeholder engagement feedback to stay abreast of stakeholder insights into the issues that matter most to them and our business, and to enable the board to understand and consider these issues in decision-making. Asimilar Group Plc is a small company with no employees. Our most important stakeholder groups are our shareholders and the management teams of the companies that we invest in. The board also understands that it has a responsibility to take into account, where practicable, the social, environmental and economic impact of its investing policy and makes its investment decisions accordingly.

The board has the ultimate responsibility for the Company's corporate responsibility activities. The board is responsible for ensuring compliance with key internal and external policies including:

• anti-corruption and bribery policy;
• whistleblowing policy;
• UK Modern Slavery Act policy.

Principle 4: Embed effective risk management, considering both opportunities and threats, throughout the organisation

The Company has an established framework of internal financial controls, the effectiveness of which is regularly reviewed by the board in light of an ongoing assessment of significant risks facing the Company. The board analyses the risks associated with new and existing investments and actively manages investments in the light of such risks and broader market conditions.

The board is responsible for reviewing and approving overall Company strategy, approving financial budgets and for tax and dividend policy. Monthly results and variances from plans and forecasts are reviewed by the board.

The Company currently has four directors:

John Taylor (Non-Executive Chairman);

Mark Horrocks (Non-Executive Director);

Mike Preen (Non-Executive Director);

Sohail Bhatti (Chief Financial Officer)

The Board considers both John Taylor and Mike Preen to be independent.  The board regularly considers the merit of appointing one or more additional independent non-executive directors. Any appointment of additional non-executive directors will reflect the Company's resources and the availability of candidates with appropriate expertise that would complement the skills of the current directors.

Regular post-investment reviews are carried out to check the delivered return on investment.

The board has ultimate responsibility for the Company's system of internal control and for reviewing its effectiveness. However, any such system of internal control can only mitigate risk and provide reasonable, but not absolute, assurance against material misstatement or loss. The board considers that the internal controls in place are appropriate for the size, complexity and risk profile of the Company. The principal elements of the Company's internal control system include:

• close management of the day to day activities of the Company by the executive directors;
• detailed monthly reporting of performance against budget;
• the company secretary ensures legal risk is properly managed.

All contracts are reviewed and signed by a director. Material contracts are reviewed by external legal advisers.

Principal Risks and Uncertainties

The Company is subject to a number of risks and uncertainties. The Board continually considers how to identify and mitigate the key business risks that could impact the Company's performance. The following risks are those that the board considers could have the most serious adverse effect on its performance and reputation.

Funding Risks

As an investing company, the Company needs to have access to capital to continue making investments and to ensure that expenses may be met. The board actively considers the management of its cash resources in a number of ways including:

• raising cash through share issues to fund particular investment opportunities and to provide a general investment funds;
• actively reviewing its investments to optimise the returns for shareholders with a view to generating positive cash returns for future investments;
• holding cash and liquid assets (such as holdings in other listed companies) for investment and working capital purposes;
• considering raising debt to accelerate investment programmes and to smooth out cash flows.

Investment Performance

Generating profitable exits from investments is key to the Company's long-term performance and continued success. The board actively manages its investments; in particular, the Company works very closely with investee company management teams to support them in the achievement of their companies' commercial and financial objectives.

Competition Risks

The Company needs to access high quality investment opportunities, often in competition with other potential investors. The board utilises the experience and contacts of each director to ensure that there is a good flow of investment opportunities to consider. The Company also works closely with a number of advisers and investment intermediaries to source investment opportunities. By investing at an early stage, the Company aims to identify high return opportunities and to have first refusal for any additional capital that its investee companies might require.

Attraction and Retention of Directors

As a small investing company, the Company depends upon the continued service and performance of the executive directors. Whilst it has entered into contractual arrangements with the executive directors with the aim of securing the services of each of them, retention of these services cannot be guaranteed. The loss of the services of any of the executive directors could damage the Company's business. Equally, the ability to attract new directors and employees with the appropriate expertise and skills cannot be guaranteed. The board seeks to mitigate this risk by providing share options or warrants to its directors.

General Economic Conditions

Market conditions, particularly those affecting investee companies, may affect the ultimate value of the Company's share price regardless of operating performance. General economic conditions may affect exchange rates, interest rates, inflation rates and the ability to access capital. Risk is principally mitigated by seeking to diversify the investment portfolio.

Principle 5: Maintaining the board as a well-functioning, balanced team led by the Chair

The board sets the Company's strategic aims and ensures that the necessary resources are in place in order for the Company to meet its objectives. All members of the Board take collective responsibility for the performance of the Company and all decisions are taken in the interests of the Company.

The board is responsible for ensuring that a sound system of internal control exists to safeguard shareholders' interests and the Company's assets and to ensure that the board is provided with accurate information in a timely manner, so they can make informed decisions. It is responsible for the regular review of the effectiveness of the systems of internal control. Internal controls are designed to manage rather than eliminate risk and therefore even the most effective system cannot provide assurance that each and every risk, present and future, has been addressed. Given the size of the Company, there is currently no internal audit function, although this is kept under annual review.

Whilst the board has delegated the normal operational management of the Company to the executive directors, there are certain matters that are specifically reserved to the board for decision. These include the approval of the making of investments and disposals. The non-executive directors have a particular responsibility to challenge constructively the strategy proposed by the executive directors, to scrutinise and challenge performance and to ensure that succession planning arrangements are in place in relation to executive directors.

The board regularly considers the merit of appointing one or more additional independent non-executive directors. Any appointment of non-executive directors will reflect the Company's resources and the availability of candidates with appropriate expertise that would complement the skills of the current directors.

All directors are encouraged to use their independent judgement and to challenge all matters, whether strategic or operational. Key board activities this year included:

• continued open dialogue with our principal shareholders;
• agreeing strategic priorities;
• reviewing the Company's capital structure, financial strategy, investment strategy and shareholder returns.

Sohail Bhatti is our executive director. He has been engaged on the basis of a three day working week.

During the year 1 October 2021 to 30 September 2022 there were 7 board meetings all of which were attended by all the directors.

Directors' conflicts of interest

The Company has effective procedures in place to monitor and deal with conflicts of interest. The board is aware of the other commitments and interests of its directors, and changes to these commitments and interests are reported to and, where appropriate, formally agreed with the board.

Committees

As the Company has two non-executive directors, the Company currently complies with the QCA Code's recommendation that there are at least two non-executive directors on the audit and remuneration committees. To facilitate appropriate scrutiny of financial matters, the audit committee does not include the Finance Director. To ensure that executive remuneration is independently reviewed, the remuneration committee comprises only the non-executive directors.

The board has established the following committees.

Audit

Membership: Mark Horrocks (chairman) and John Taylor.

The audit committee meets at least twice a year. The Finance Director attends committee meetings by invitation.

It has primary responsibility for monitoring the quality of internal controls and ensuring that the financial performance of the Company is properly measured and reported on. It receives and reviews reports from the Finance Director and the auditor relating to the annual accounts and the accounting and internal control systems in use throughout the Company. It also advises the board on the appointment of the auditor, reviews their fees and discusses the nature, scope and results of the audit with the auditor.

Remuneration

Membership: Mark Horrocks (chairman) and John Taylor.

The remuneration committee reviews the performance of executive directors and sets the scale and structure of their remuneration and the terms of their service agreements with due regards to the interests of shareholders. The remuneration committee also determines the payment of bonuses to executive directors and the allocation of share options to executive directors and any other employees.

The Finance Director is invited to attend for some parts of the committee meetings where his input is required although he does not take part in any discussion on his own benefits and remuneration.

The remuneration and terms and conditions of appointment of the non-executive directors is set by the board.

The Company does not have a Nominations Committee and additional appointments to the board is a matter reserved for the whole board.

Principle 6: Ensure that between them the directors have the necessary up-to-date experience, skills and capabilities

Details of the Company's directors and their biographical information are set out on the Company's website at https://www.asimilargroup.com/content/investors/board.

The Company's directors have experience of managing business operations of listed and unlisted company groups. This operational experience is invaluable when assessing the commercial aspects of investment opportunities and also the strength of management teams. Sohail Bhatti is a qualified accountant. His professional experience is utilised in the assessment of the financial aspects of investments.  Donald Stewart is a qualified solicitor and his professional experience is utilised in the assessment of the legal and commercial aspects of investments.

The directors maintain their skills by attending relevant seminars and workshops. Where it is felt that a director has a particular training or education need, the Company will help identify and meet the costs of appropriate training and courses. The company secretary ensures that all directors are kept abreast of changes in relevant legislation and regulations (with the assistance of the Company's solicitors where appropriate).

The board considers its composition appropriate for an Aquis listed company of its size, market capitalisation and investing activities.

Whilst the Company is guided by the provisions of the Combined Code in respect of the independence of directors, it has regard to the overall effectiveness and independence of the contribution made by directors to the board in considering their independence. A director's period of service is not considered in isolation to determine their independence.

The board is satisfied that, between the directors, it has an effective and appropriate balance of skills and experience. All directors receive regular and timely information on the Company's operational and financial performance. Relevant information is circulated to the directors in advance of board meetings.

Appointment, removal and re-election of directors

There is a formal, rigorous and transparent procedure for the appointment of directors. The Company's articles of association require that one-third of the directors must stand for re-election by shareholders annually in rotation, that all directors must stand for re-election at least once every three years and that any new directors appointed during the year must stand for election at the AGM immediately following their appointment.

Independent external advice

All directors are able to take independent professional advice in the furtherance of their duties, if necessary, at the Company's expense. In addition, the directors have direct access to the advice and services of the company secretary.

Principle 7: Evaluate board performance based on clear and relevant objectives, seeking continuous improvement

Following the adoption of the QCA Code, the board will review its performance and effectiveness and the performance of each director on an annual basis. The Company will undertake annual monitoring of personal and corporate performance responsibility.

Over the next 12 months the Company intends to review the performance of the board as a whole to ensure that the members of the board collectively function in an efficient and productive manner and identify any development or mentoring needs of individual directors. The focus of the review will be to identify any gaps in skills and experience, how well the board functions as a group and the individual contributions made by each director. The Chairman will be responsible for leading the review and will involve external support as appropriate.

Principle 8: Promote a culture that is based on ethical values and behaviours

The board believes that the promotion a corporate culture based on sound ethical values and behaviours is essential to maximise shareholder value. This means promoting strong business ethics.

As a first priority, the Company seeks to uphold individual human rights in its operations, and expects the same from all the companies that it invests in. The Company's policies outline the behaviours expected and set out the Company's zero tolerance approach towards any form of modern slavery, discrimination or unethical behaviour relating to bribery, corruption or business conduct.

The Company is committed to building an inclusive culture. Discrimination in all its forms (including on the basis of age, race, sexual orientation, religion, national origin and gender) is not tolerated at any level.

Principle 9: Maintain governance structures and processes that are fit for purpose and support good decision-making by the board

The board is responsible for the long-term success of the Company. It is responsible for:

• overall Company strategy;
• approval of investments;
• approval of the annual and interim results;
• annual budgets;
• dividend policy;
• board structure;
• the exposure to key business risks.

As there are only three directors, the board works in a highly collegiate manner. The Chairman is formally responsible for running the business of the board and for ensuring appropriate strategic focus and direction. Sohail Bhatti is Finance Director and he is responsible for the Company's accounting records and the preparation of the management and annual accounts.

The board meets formally at least four times each year to review routine matters. Additional formal meetings are held as necessary (including to approve fundraisings and the making or disposal of invetsments).

The board receives appropriate and timely information prior to each meeting. A formal agenda is produced for each meeting, and board papers are distributed several days before meetings take place. Any director may challenge Company proposals and decisions are taken democratically after discussion. Although the Chairman has a casting vote, in practice all decisions are taken with the approval of both directors.

Principle 10: Communicate how the Company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders

The Company communicates with shareholders through the annual report, full year and half year announcements, the AGM and one to one meetings with large existing or potential new shareholders. A range of corporate information (including all Company announcements) is also available to shareholders, investors and the public on the Company's corporate website (www.asimilargroup.com).

The board receives regular updates on the views of shareholders through briefings and reports from the Company's broker.

An announcement is made after the AGM to announce the resolutions passed at the AGM. To date all AGM resolutions proposed have been passed. The Company has not experienced significant dissenting shareholder votes for resolutions proposed at the AGM (over 20% including proxy votes).