Governance

• Principles statement
• Board of Directors
• Board committees
• Audit Committee
• Remuneration Committee
• Internal control
• External Audit
• Going Concern
• Annual General Meeting (AGM)

Principles statement

The Board recognizes its accountability to shareholders and is committed to maintaining high standards of corporate governance. The Company is not required as a listed company on the AIM to fully comply with the current version of the Combined Code on Corporate Governance (“the Combined Code”). The Combined Code, as published by the Financial Reporting Council in July 2006 (the 2006 FRC Code), applies to the Company in respect of its 2007 and 2006 financial years. The Board has reviewed its processes and procedures and reviewed compliance with the Provisions of the Code. It has also identified those areas where compliance with the Combined Code Provisions is not considered appropriate for XL TechGroup as a smaller company. The report on the application of the principles of the Combined Code set out below has been extended to include an explanation of the Board’s view on these rules.

Board of Directors

The Board comprises three Non-Executive Directors and two Executive Directors. The size of the Board and the balance between Executives and Non-Executives is considered appropriate to the Company’s size and scope of activities and provides for effective operation.

A schedule of formal meetings of the Board, the Audit Committee and the Remuneration Committee is arranged during each year in line with the Company’s management reporting, and interim and annual reporting. In 2007, the Company’s Board met formally on 6 occasions. In addition, the Board held discussions with the Executive Directors and senior operational managers on strategy, business development, and other topics important to the Company’s progress. During the year to December 31, 2007, the Directors had a 100% attendance record in respect of Board meetings and meetings of the committees of which they were members.

The Board has reserved for itself powers relating to matters that it considers significant to the Group’s business, operational and financial risks. These include the approval of corporate policies, strategy, plans and budgets; major acquisitions and disposals of companies or businesses; major investment and financial decisions; appointments to the Board; executive remuneration policy and major management or organizational changes.

The Board conducts an annual review of its performance and effectiveness, and did not identify any weaknesses.

The Chairman and Chief Executive have defined roles, providing for a division of responsibilities between them, which have been documented and approved by the Board.

The Board considers that two of the Non-Executive Directors, namely Dr. Vernon and Dr. Heath, are independent of management and free of any business or other relationship that could materially interfere with the exercise of their independent judgment.

Board committees

The Board has two standing committees – Audit and Remuneration. The Board has reviewed membership of these committees and has confirmed its view that, as a smaller company, it is appropriate that all the independent Non-Executives should participate as members of these committees, so that they are fully involved in monitoring the governance issues affecting the Company, including executive remuneration, succession planning and risk management.

Audit Committee

The Audit Committee comprises Dr. Vernon (Committee Chairman), Dr. Heath and Mr. Szostak. Responsibilities of the Audit Committee encompass a wide range of activities, including

• reviewing the effectiveness of the Company’s financial reporting, internal controls and risk management systems for the identification, assessment and reporting of risk;
• considering and making recommendations to the Board on the appointment of external auditors;
• keeping the relationship with external auditors under review, including the terms of their engagement and fees, their independence and their expertise, resources and qualifications;
• monitoring the integrity of the Company’s financial statements;
• reviewing the annual and interim reports in detail to ensure that they present a balanced assessment of the Company’s position; and
• reviewing significant financial reporting issues and judgments.

With a 100% attendance record, the Audit Committee held nine formal meetings in the year to December 31, 2007.

Remuneration Committee

The Remuneration Committee comprises Dr. Heath (Committee Chairman), Dr. Vernon and Mr. Haskell. The Remuneration Committee held five formal meetings in the year to December 31, 2007.

The report of the Board of Directors’ remuneration, which include details of the Directors’ remuneration and Directors’ interests held and in options, together with responsibilities of the Remuneration Committee, are set out on pages 22 and 23 of the 2007 Report and Accounts.

Internal control

The Board is responsible for the Company’s system of internal control which aims to: safeguard the Company’s assets; ensure that proper accounting records are maintained; ensure compliance with statutory and regulatory requirements; and ensure the effectiveness and efficiency of operations, including the assessment and management of risk of failure to achieve business objectives and can provide only reasonable and not absolute assurance, particularly against misstatement or loss.

The goal is to establish and embed a framework of internal financial and operational control for identifying, evaluating and managing the risks faced by the Company. The key elements of the review process, which included a specific assessment by the Board for the purpose of the annual report and accounts, and complies with the Turnbull guidance, “Internal Control Guidance for Directors on the Combined Code” published in September 1999, are as follows:

• Directors have responsibility for reviewing the strategy and monitoring the conduct of the Company. The Directors and the Executive management of the Company are accountable for their conduct and performance within the agreed strategies. A management structure exists with clearly defined lines of responsibility and the appropriate levels of delegation; and
• the Company and its operations are subject to a detailed annual budget process and ongoing capital investment process. Actual performance during the year is monitored monthly against budget and full year forecasts are updated at regular intervals during the year.

External Audit

The external auditors, Grant Thornton LLP, independent certified public accountants, are engaged to express an opinion on the Company’s annual report and accounts.

Going Concern

The Directors acknowledge that there is currently a timing gap between the deadline for releasing these accounts and the satisfactory conclusion of negotiations with potential financial and strategic investors, the anticipated signing of licensing agreements by one or more of the Company’s subsidiaries, and the targeted sale of a non-core technology asset. The Company is working with potential financial and strategic investors to structure financing to provide operating capital to bridge the Company to the point when it completes a number of cash producing events. The Directors are confident that the Company will successfully conclude agreements providing the Company with adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the accounts.

This report is presented in accordance with the relevant provisions of the Combined Code on Corporate Governance (the Combined Code) and the Directors’ Remuneration Report Regulations 2002 (the Regulations). The Regulations require the auditors to report on the “auditable part” of the remuneration report. The audited information has therefore been separately reported in the remuneration section of the annual report.

Annual General Meeting (AGM)

The AGM will be held on August 20, 2008 at 12.00 noon Florida time at the Company’s offices at 1901 South Harbor City Blvd, 3rd Floor, Melbourne, Florida 32901, USA. The Company will convey the results of proxy votes cast at the AGM.

 

 

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