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 the main 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.

Board of Directors
The Company has appointed four Non-executive Directors (Richard M. Mansell-Jones, Chairman, R. James Macaleer, Anthony W. Henfrey and Ronald E. Thomas) with relevant sector experience to complement the Executive Directors and to provide an independent view to the Board.

The Company has an Audit Committee of three Non-executive Directors. The Audit Committee meets a minimum of three times a year 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 three times in 2006 with all members present.

The Company has a Compensation Committee of two Non-executive Directors. 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 three times in 2006.

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 investments. The Board meets prior to the publication of the final results to approve the value of the Company’s partner investments.

The Directors will submit 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 intend to comply with Rules 21 and 31 of the AIM Rules relating to Directors’ dealings and will take reasonable steps to ensure compliance by the Company’s applicable employees as well.

A Directors’ Remuneration Report is included on page 21*.

Profiles of the Directors are on page 17 and illustrate their relevant corporate and industry experience.

A summary of the performance and financial position of the Company for the year ended 31 December 2006 is set out in the Chairman and Chief Executive Officer Statements. The Board considers this information to provide a balanced assessment of the Company’s financial position and future prospects.

Chairman’s Duties
The Company has separate individuals as Chairman (Richard M. Mansell-Jones) and Chief Executive Officer (Richard C.E. Morgan).

The Chairman is responsible for:
• leadership of the Board,
• ensuring the Board’s effectiveness on all aspects of its role and setting its agenda,
• ensuring that the Directors receive accurate, timely, and clear information,
• ensuring the effectiveness of communication with shareholders,
• facilitating the effective contribution of Non-executive Directors in particular and
• ensuring constructive relations between Executive and Non-executive Directors.

Chief Executive Officer’s Duties
The Company’s Chief Executive Officer (CEO) is responsible for:
• running the Company’s business,
• managing the senior executive staff,
• reporting to the Board on all aspects of the Company’s operations,
• being the primary spokesperson for the Company and
• carrying out the annual operating plan approved by the Board.

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
Partners 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.

Going Concern
The financial statements have been prepared on a going concern basis, as the Directors are satisfied that the Company has adequate resources to continue its operations for the foreseeable future.

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 clients. Additionally, the Board seeks to use the Annual General Meeting and 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, or Josh Berkman, Media Relations.

Statement of Directors' Responsibilities

The Directors are responsible for preparing the Annual Report comprising the Chairman’s Statement, the Directors’ Remuneration Report, the Corporate Governance Statement, the Directors’ Report and financial statements in accordance with applicable laws and regulations. The Directors have elected to prepare financial statements of the Company and the Group in accordance with International Reporting Standards (“IFRS”). Isle of Man company law requires the Directors to prepare such financial statements in accordance with relevant accounting standards and the Companies Acts 1931 to 2004.

International Accounting Standard 1 requires that financial statements present fairly for each financial year the Company’s position, financial performance, and cash flows. This requires the faithful representation of the effects of the transactions, other events and conditions in accordance with the definitions and recognition criteria for assets, liabilities, income, and expenses set out in the International Accounting Standard’s ‘Framework for the preparation and Presentation of Financial Statements.’ In virtually all circumstances, a fair presentation will be achieved by compliance with all applicable International Financial Reporting Standards.

Directors are also required to:
• properly select and apply accounting standards;
• present information, including accounting policies, in a manner that provides relevant,
reliable, comparable and understandable information;
• prepare the financial statements on a going concern basis unless it is inappropriate to
presume that the Company will continue in business; and
• provide additional disclosures when compliance with the specific requirements of IFRS is insufficient to enable users to understand the impact of particular transactions, other
events and conditions on the entity’s financial position and financial performance.

The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Company and the Group, for the system of internal control, for safeguarding assets, for taking reasonable steps for the prevention and detection of fraud and other irregularities and for the preparation of a Directors’ Report which complies with the requirements of the Companies Acts 1931 to 2004.

The Directors are responsible for the maintenance and integrity of the company website. Legislation in the Isle of Man governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

* Click here for Amphion's 2006 Annual Report (719k PDF)