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August 19 2019

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Governance

Last updated on 15 May 2019.

QCA CORPORATE GOVERNANCE CODE 2019

INTRODUCTION

The role of the Chair is to manage the affairs of the company having regard to the QCA Corporate Governance Code, published by the Quoted Company Alliance. The Chair supports the principles underlying these requirements.

The company's application of the QCA code is explained in the Corporate Governance section of the Annual Report on pages 8 to 11. This section explains how the Chair leads the board through various committees relating to the relations with shareholders, management structure, finance and accounting principles, budgetary process, identification of business risks, investment appraisal, audit, remuneration, quality and integrity of staff. The Chair also insures the good information flows within the board and its committees as well as between the NEDs and senior management.

Given the size of the group, the relative simplicity of the systems and the close involvement of senior management, the Chair considers that there is no current requirement for an internal audit function. This is kept under regular review.

PRINCIPLE 1: STRATEGY AND BUSINESS MODEL

The company's business model is explained in the Annual Report. More specifically, in the Directors' report (Principal activities on page 12) as well as in the notes to the financial consolidated statements, in the Revenue section on page 27 and the Segmental reporting on page 28.

The company's strategy is communicated to its shareholders through the Annual Report, in the Chairman's statement on page 1, in the Outlook section of the CEO statement on page 2 and 3 as well as in the Strategic Report on pages 4 and 5. This report offers details on the strategy at the technological level, as well as an explanation of the business' KPIs. It also presents the risks and uncertainties of the business and how the board mitigates these.

During the AGM, the strategy is discussed with the shareholders present or represented. It forms a large part of the dialogue with the shareholders and reflects the company's commitment to good information flows, growth delivery and the promotion of long-term value for shareholders.

PRINCIPLE 2: MEET SHAREHOLDERS EXPECTATIONS

The company communicates with its shareholders primarily through regulatory announcements. These contains the contact details of the company's CEO, CFO and its Nominated Adviser. In the context of the company's communication with its shareholders, it is important to highlight that twelve shareholders hold 89% of the company's share capital. Of these twelve shareholders, four are directors of the company. Over the years the members of the board have had the opportunity to meet or talk directly to the shareholders that are not involved in the running of the business, including each of its largest shareholders.

The board is keen to understand the needs and expectations of its shareholders. Some of the company's larger shareholders have been investors in Cellcast for a number of years and have regularly attended or sent a representative to the company's AGM. They have the direct contact details of the Chair, the CEO and the CFO.

The AGM is the other way the company uses to talk to the shareholders about their expectations and maintain a good flow of communication.

The members of the board of the company are always available to talk to the shareholders. The board strongly believes in encouraging dialogue with its shareholders. The Chair and the rest of the board dedicate adequate time to make sure that communication is effective with existing and potential shareholders and other key stakeholders.

PRINCIPLE 3: WIDER STAKEHOLDERS

The company's main supplier is Arqiva who supplies the bandwidth necessary for Cellcast to broadcast on both the Sky and Freeview platforms. The CEO and CFO meet the representative of Arqiva on a quarterly basis to discuss current trading, new ideas and other input.

The company's main resource is constituted by its staff. Cellcast believes that its strong corporate identity has been responsible for its staff loyalty and retention over the years.

The company main regulators are OFCOM and PSA. A good flow of communication is maintained by the Compliance Officer appointed by Cellcast who works closely with both organisations to ensure that new and existing legislations are correctly enforced.

Cellcast uses an ad-hoc Business Intelligence software based on Microsoft Azure Cloud to obtain a fine-grained analysis of user behaviour leading to a better understanding of their usage pattern. These enables the company to constantly work on improving its product offering.

Social Media is also used to monitor customers' expectations and better respond to them.

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PRINCIPLE 4: RISK MANAGEMENT

The main risks affecting the business are set out in the strategic report, on page 4 and 5 of the Annual Report.

These risks, whether they are of a regulatory, commercial or technological nature are monitored on a regular basis by the board. The strategic report also explains how the board deals with and mitigates these risks.

The board meets regularly to review both opportunities and threats to the business. Once a risk is identified, the board will assess it and make sure that the related control systems in place are effective.

PRINCIPLE 5: DYNAMIC MANAGEMENT FRAMEWORK

Cellcast's board comprises five directors, two of which are considered by the rest of the board to be independent for the reasons set out below.

Mike Neville

Non-Executive Chairman and Independent Director

Even though Mike is a shareholder of Cellcast PLC and has a long time of service, having been on the board since the company became public in 2005, the rest of the board considers that he is an independent director. Mike is sufficiently removed from the day to day operations of the company to retain a critical view and as such be in a good position to represent best the interest of all the shareholders.

He dedicates two days a week to the affairs of the company.

Samuel Malin

Non-Executive Independent Director

Sam Malin joined the board of Cellcast in July 2017. His short time of service as well as the fact that he has no prior connection to the board or the company justify his independent status.

He dedicates one day a week to the affairs of the company.

The board meet nine times a year in London to discuss the results, communications with shareholders and any other business. All the directors attended all of these board meetings.

The board is supported by various committees, such as the remuneration committee, the audit committee, that have the necessary knowledge to fulfil their responsibilities in an effective way. In the last twelve months the audit committee met twice. Each meeting was attended by both committee members, Mike Neville and Bertrand Folliet. In addition, one meeting was also attended by the CEO and CFO and the second meeting was attended by the CEO and CFO as well as two members of the company's audit firm. In the last twelve months the remuneration committee met once. The attendees were both committee members, Mike Neville and Bertrand Folliet.

PRINCIPLE 6: EXPERIENCE AND SKILLS OF THE BOARD DIRECTORS

The skills of each members of the board are set out below.

Mike Neville - Non-Executive Chairman and Independent Director

Mike Neville has extensive experience in the capital markets and is a director of a number of public and private companies. His background is in the telecoms, technology and media arena, where he has worked for the last 20 years specialising in strategy, mergers and acquisitions and turnaround situations. He has worked for companies such as Cable & Wireless and United Utilities, where he has been involved in large and small scale fundraising as well as numerous merger and acquisition transactions in various parts of the world.

Craig Gardiner - Chief Executive Officer

Craig Gardiner has been with the company since its foundation in 2002, previously as the General Manager of all aspects of Cellcast's operations. Prior to that, Craig was General Manager of international telemedia services provider VISL, supervising its activities across Europe and Asia. Craig has over 25 years' multinational experience in the information service, telecoms and broadcasting sectors and is abreast of all Cellcast's key commercial relationships.

Craig keeps his knowledge and skills up to date by attending industry forums. These take place twice a year. He also invites key member of his management team to join these forums.

He is a full-time employee of the company.

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Emmanuelle Guicharnaud - Chief Financial Officer

Emmanuelle Guicharnaud spent four years as a management consultant for PricewaterhouseCoopers. In 1999 she joined a privately held chain of hotels with the responsibility of evaluating new acquisitions. In 2000 she relocated to the UK and took up a position as the financial controller of m-Quest, a telecoms company providing value added telephony and SMS solutions that was subsequently acquired by Monstermob plc. She joined Cellcast as financial controller in 2002. Emmanuelle holds a DECF (Accountancy and Finance Diploma) from an International Business School (ESC).

Emmanuelle keeps her knowledge and skills by regularly meeting with the company's tax, audit and accounting advisers in order to understand and apply any new law or standard affecting the business.

She is a full-time employee of the company.

Bertrand Folliet - Non-Executive Director

Bertrand Folliet co-founded Cellcast in 2002. He has many years' experience in the telecoms, digital content and multimedia industries, and a successful record of building profitable businesses providing value-added billing and distribution services in the international telecom sector. Before co-founding Cellcast, he served as an executive director of the Tokyo based Jasdaq-listed e-Lux Corporation and was the chief operating officer of e-Lux Corporation's key operating subsidiary in Hong Kong. Prior to this he was president of the publicly listed Hong Kong Company e-New Media. He also served as managing director of e-New Media subsidiary New Media Corporation and was director of operations of the company's predecessor, VISL. Before joining VISL, he was senior vice president of Matra-Hachette Multimedia On-line. Bertrand Folliet holds a PhD in Management.

Bertrand dedicates two days a week to the affairs of the company.

Samuel Malin - Non-Executive Director

Samuel Malin is a professional engineer with over 30 years' international business experience, particularly in Africa, and strong project management capabilities. Samuel founded Madagascar Oil, holding the position of CEO between 2003 and 2006 and then as director to 2008, helping to raise $125 million and increasing the valuation of the company to over $1 billion. Between 2013 and 2014, he was CEO of Vanoil Energy Limited, a company with significant oil and gas exploration interests in east Africa. Currently, he is Chairman of Burke's Peerage Limited and Frigate Exploration. Samuel has a strong communications and technology component to his background, having worked also for companies such as Dimension Data (now part of Nippon Telephone and Telegraph), Data Research International (part of McGraw-Hill) and Saladin (now within Fidelity National Information Services). He is also an Honorary Consul for the Republic of Lithuania.

The board considers that it has the right balance of sector (Craig Gardiner and Bertrand Folliet), financial (Emmanuelle Guicharnaud and Mike Neville) and public market skills (Mike Neville and Sam Malin). The board has a clear purpose and benefits from a strong leadership by the Chair. The board understands the business and is able to deliver a clear strategy that is then communicated to the shareholders and other key stakeholders. The directors also benefit from a strong team spirit and a corporate culture they happily relate to.

PRINCIPLE 7: EVALUATION OF THE PERFORMANCE OF THE BOARD

The directors consider that the size of the company does not justify the use of third parties to evaluate the performance of the board on an annual basis. Nevertheless, review of the non-independent directors by the independent directors takes place regularly throughout the year.

Should the size of the company increase, the board will consider whether it is appropriate to put in place a more prescribed evaluation process.

In 2017, the board appointed a new CEO, the transition was a success, resulting in an undisrupted succession between Andrew Wilson and Craig Gardiner. The board planned this transition over a 6-month period and made sure that both previous and new CEO worked together during that time to ensure a smooth handover.

PRINCIPLE 8: CORPORATE CULTURE

Cellcast has a strong corporate identity which has been instrumental in retaining the talents that are essential to ensure the prosperity of the business.

In 2008, the board appointed a Compliance Officer, his role is to ensure that the entire staff is made aware of the ethical standards that are expected of them. This is done in conjunction with the company's regulator, OFCOM.

The corporate governance statement in the company's annual report sets out further how the company's culture is consistent with its strategy and objectives.

PRINCIPLE 9: GOVERNANCE STRUCTURES

The Chair

Mike Neville's main responsibility is to oversee the implementation and communication of the company's corporate governance model. The rest of the board considers that he has adequate separation from the day-to- day business to make independent decisions.

Mike Neville is focused on the company's strategy, has a clear vision and acts in the manner that brings together the skills, qualities and experience of the other members of the board. He attends all the board meetings as well as the AGM during which he establishes a direct dialogue with the shareholders. Due to the nature of its shareholding structure, Mike Neville has been able to meet or communicate directly with the majority of the company's substantial shareholders over the years. This has ensured that a good flow of communication is maintained between the company and its shareholders. Any shareholder is invited to contact the Chair. Contact details are clearly indicated in the company's announcements and Annual Report.

Mike Neville's is also responsible for making sure that that the board agenda concentrates on the key issues, both operational and financial. Over the years and thanks to the monitoring system the company has implemented, the CFO has been able to present the board with highly detailed and comprehensive financial statements and forecasts. These are discussed in depth at each board meetings and ensure that the company's strategy is constantly reviewed and updated.

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The non-executive directors

Bertrand Folliet and Sam Malin participate in all board level decisions, they possess the critical skills that are essential to positively challenge the rest of the board and to listen in in equal measure. They have both been through an induction process organised by the company's corporate adviser.

Both Bertrand and Sam commit an appropriate amount of time to the company's affairs. Sam used the 2018 AGM to meet the company's shareholders present. Both Bertrand and Sam are available to meet and discuss any issues with the shareholders of the company.

From time to time and if they consider it necessary to discharge their responsibilities as directors, either of them can call upon independent professional advice, at the company's expenses.

Bertrand is part of the audit committee, the nomination committee and the remuneration committee.

The executive directors

Craig Gardiner and Emmanuelle Guicharnaud are in charge of implementing and monitoring - within the business model - the strategy set by the board. They maintain a good flow of information with the rest of the board and communicate in an open and transparent way. Regular board meetings insure that both Craig and Emmanuelle keep the rest of the board up-to-date with the performance of the business and any other business to ensure that the strategy is effectively followed. If necessary, they can suggest a realignment of the strategy based on any new factor or risk affecting the business. Any such decision would have to be reviewed and approved by the Chair and the non-executive directors. Cellcast runs its business based on unanimous decisions made by its board.

The audit committee

The audit committee is represented by Mike Neville as Chairman and Bertrand Folliet. The committee meets not less than twice annually. The committee provides a forum for reporting by the group's external auditor. Meetings are also attended, by invitation, by the chief executive officer and/or the chief financial officer. The audit committee is responsible for reviewing a wide range of matters including the half year and annual accounts before their submission to the board and monitoring the controls which are in force to ensure integrity of the information reported to the shareholders. The audit committee advises the board on the appointment of the external auditor and their remuneration both for audit and non-audit work, and discusses the nature, scope and results of the audit with the external auditor. The audit committee keeps under review the cost effectiveness and the independence and objectivity of the external auditor. A formal statement of independence is received from the external auditor each year.

The role of the audit committee is also to provide confidence to the shareholders on the integrity of the financial reports. The audit committee challenges both the external auditors and the management of the company. It reviews the need for internal audit, if required and the tendering and approval of non-audit services.

The members of the audit committee have always made sure to commit significant time, particularly during the weeks leading up to the publication of results.

The audit committee has a risk oversight within its term of reference in order to add to the effectiveness of the risk management and internal control system of the company.

The remuneration committee

The remuneration committee is represented by Mike Neville as Chairman and Bertrand Folliet. The committee is responsible for making recommendations to the board, within agreed terms of reference, on the company's framework of executive directors' remuneration and its cost. The committee determines the contract terms, remuneration and other benefits for each of the executive directors, including share options, pension rights and compensation payments. The board itself determines the remuneration of the non-executive directors.

The members of the committee make sure that the remuneration arrangements are aligned with the company strategy. It can from time to time ask advice from external sources. The members make sure that the policy rewards the right behaviours and values as well as the contribution made to the performance of the business.

The nomination committee

The nomination committee is represented by Bertrand Folliet as Chairman and Mike Neville. The committee is responsible for proposing candidates for appointment to the board, having regard to the balance and structure of the board. In appropriate cases, recruitment consultants may be used to assist the process. The committee kept a close eye on the CEO change that took place in 2017. It was responsible for the internal promotion of Craig Gardiner. It worked closely with the rest of the board to identify the skills, knowledge and experience required by the position.

PRINCIPLE 10: BUILDING TRUST

The company makes sure that a good flow of communication exists between the board and all its stakeholders, including shareholders, to enable all interested parties to come to informed decision.

To further involve the shareholders, the company's Articles of Association include a clause stipulating that each director should step down every two years and be re-elected during the AGM.

The corporate website of the company, www.cellcast.tv, plays an important role in insuring that the shareholders have all the information they should require.

The notice of AGM, the Annual and Interim reports since 2005 are available on the company's website, here.

The company will make sure that in the future the corporate website also includes the results of the votes cast during the AGM.

 

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