A Community Media Company

Our aim is to serve local communities by meeting their needs for local news, information and advertising services through a range of media including print and digital channels which together achieve unparalleled levels of market reach.

Corporate Governance

The Company is committed to the principles of Corporate Governance contained in the revised Combined Code on Corporate Governance that was issued in 2008 by the Financial Reporting Council (“the Code”) for which the Board is accountable to shareholders.

The Company is reviewing the provisions of the UK Corporate Governance code (which replaces the Code for financial years starting on or after 29 June 2010), and which was published on 28 May 2010.

Statement of Compliance with The Code of Best Practice
The Company complied with the Provisions set out in Section 1 of the Code throughout 2009, other than a departure from Section A.3.2 in the early part of 2009 when, due to resignations, the Board was temporarily unbalanced in terms of the proportion of independent Non-Executive Directors. This was addressed through the appointment of M A Pain and C A Rhodes during 2009 and G M Iddison on 1 January 2010. In light of the recent retirement from the Board of F P M Johnston, P E B Cawdron and M A King, a process is underway to recruit an additional independent Non-Executive Director.

Statement of Application of The Principles of Good Governance
The Company has applied the principles set out in Section 1 of the Code as reported above. Further explanation of how the principles have been applied is set out below and, in connection with directors’ remuneration, in the Directors’ Remuneration Report contained in the Annual Report for 2009.

Board Effectiveness
The Board considers that it has shown its commitment to leading and controlling the Company. It met ten times during 2010, and can meet when necessary for any matters which may arise.
The Remuneration Committee met on three occasions, the Audit Committee three times and the Nomination Committee met seven times during 2009.

The Board sets the strategic aims and objectives of the Group, ensuring that the Group has sufficient financial and human resources to meet its objectives. The Board also sets the Group’s values and standards and ensures that its obligations to its shareholders and others are understood and met. Management is responsible for the application of the aims and objectives on a day-to-day basis, as well as monitoring the financial achievements of the business. The Board reviews the performance of management in meeting the agreed objectives and goals, plans the succession of key executives, and determines appropriate remuneration levels.

The core values of the Board are integrity, independence and objectivity. All Directors must take decisions in the interests of the Company and all of its shareholders.

At least one Board meeting each year is devoted to strategy and to the consideration of a plan for the long term growth and development of the Group. This is reviewed and discussed as appropriate at the other Board meetings held during the year.

In addition to the normal agenda at Board meetings, which is described below, the Directors consider one operational or special topic at each meeting. During the last twelve months this has included business risks, circulation and audience reach of paid for newspapers, national sales, digital publishing, the Group’s debt facilities, human resources trends and issues and IT strategy.

Board Meeting Agenda
The Board receives a formal schedule of matters specifically reserved to it for decision, such as future strategy, acquisitions and disposals, dividend policy, approval of the Annual Report and Accounts, capital expenditure, trading and capital budgets and Group borrowing facilities. The Board considers reports from the Chief Executive Officer, Chief Financial Officer and Chief Operating Officer and Minutes of the Board and Committees are circulated to all Board members. It has also made the Company Secretary responsible to the Board for the timeliness and quality of information provided to it.

Board Responsibilities
The Board acknowledges the division of responsibilities for running the Board and managing the Company’s business. I S M Russell succeeded R G Parry as Non-Executive Chairman on 12 March 2009. On 5 January 2009, J A Fry replaced T J Bowdler as Chief Executive Officer following the previously announced retirement of T J Bowdler on 31 December 2008. P E B Cawdron did not seek re-election at the Annual General Meeting on 30 April 2010 and was succeeded as Senior Independent Director by M A Pain.

The Senior Independent Director is available to address any concerns that shareholders may have that have not been resolved through the normal communication channels of the Chairman or Executive Directors.

Throughout 2009, the Nomination Committee was chaired by I S M Russell. The Remuneration Committee was chaired by S J Waugh who resigned as a Non-Executive Director of the Company on 30 January 2009 following his appointment to a government post; P E B Cawdron succeeded him as Chairman of the Remuneration Committee with effect from that date. This was a temporary appointment and it was intended that a further change would take place later in 2009. Due to the length of time that the Non-Executive Director recruitment process took, P E B Cawdron remained as Chairman of the Remuneration Committee for the remainder of the year and was succeeded by G M Iddison when he stepped down from the Board at the Annual General Meeting on 30 April 2010. I S M Russell stepped down as Chairman of the Audit Committee when he was appointed Non- Executive Chairman of the Company. M A Pain, who joined the Board as an independent Non-Executive Director on 1 May 2009, succeeded I S M Russell as Chairman of the Audit Committee.

The terms of reference of each of the Board’s Committees are displayed on the Company’s website in the Investor Centre section.

Board Attendance
All Directors are expected to attend all Board and meetings of Board Committees of which they are a member unless unable to do so. The table below indicates their attendance during 2009 (the figures in brackets indicate the total meetings held during the year):

1 Resigned 24 April 2009
2 Resigned 30 January 2009
3 Appointed 1 May 2009 (attended all Board and Committee meetings in period post appointment)
4 Appointed 13 July 2009 (attended all Board Meetings in period post appointment)
5 Stepped down as a member of the Audit Committee on 12 March 2009

Board Balance
Of the Company’s current eight Directors, three are Executive and the remainder Non-Executive, of whom three are regarded as independent, excluding the Chairman. 
Following the recent retirement of F P M Johnston, M A King and P E B Cawdron, the process of recruiting a further independent Non-Executive Director has commenced. The Board is satisfied that, as a result of this process, it will have a sufficient independent Non-Executive element to satisfy the relevant provisions of the Code.

A R Marshall was appointed as a Non-Executive Director on 27 June 2008. He is regarded as non-independent because he was appointed to the Board as the nominee Director of Usaha Tegas, which owns 20% of the Company’s issued share capital. F P M Johnston is regarded as non-independent because he has a large shareholding in the Company and previously served the Group in an executive role.

Nomination Committee
The Nomination Committee is chaired by I S M Russell. Reporting to the Board, its duty is to seek suitably skilled and experienced candidates, with sufficient time to devote to the role, as Non- Executive Directors and to oversee all Board appointments. Once the role of a vacancy has been determined, the Committee appoints external recruitment consultants to assist with the search.  With effect from 1 January 2010, the Committee comprised I S M Russell, M A Pain, C A Rhodes, A R Marshall and G M Iddison.

The Board undertook an evaluation of its performance during the year. This included a review of the effectiveness of this Committee, considering its composition, chairmanship, whether it fulfilled its role as outlined in the terms of reference, its reporting and overall performance. This evaluation process was undertaken by the Committee itself as well as by all members of the Board. The results of this process were positive and confirmed the effectiveness of the Committee.

Information and Professional Development
The Chairman arranged a detailed induction process for both M A Pain and C A Rhodes. This included meetings and discussions with advisers and senior management where appropriate, together with the preparation of a full induction pack and seminars both internally and externally. A similar process is being undertaken for G M Iddison. A more extensive programme was developed for J A Fry which included a full tour of the Group’s operations.

G M Iddison was appointed Chairman of the Remuneration Committee, effective from 1 May 2010, and a detailed training programme for this role involved internal briefings and the input of Hewitt New Bridge Street, the Committee’s advisers.

All Board members have access to independent advice on any matters relating to their responsibilities as Directors and as members of the various Committees of the Board. The Company Secretary is available to all Directors and he is responsible for ensuring that all Board procedures are complied with.

Board Performance Evaluation
During the last year, the Board has conducted a rigorous evaluation of its own performance. This involved the completion of an assessment questionnaire by all Directors covering the performance of the Board, individual Directors, the Company Secretary and Board Committees. Other topics included the conduct of meetings, the provision of information, relationships, strategy, training, the response to the current economic recession and the overall effectiveness of the Board. There was a continued emphasis on a scoring system for assessing individual, Committee and Board performance, together with a focus on the future strategy of the Group, especially in the area of digital publishing. The completed questionnaires were submitted to the Company Secretary who prepared a summary of the conclusions which was presented to the Board meeting in January 2010. Separately, the Secretary produced a detailed report summarising any individual recommendations for the consideration of the Chairman. This was followed up by meetings as appropriate with individual Directors.

Training
Training is undertaken as required during the year. The feedback from the recent questionnaires will assist in the training plan for the forthcoming year. The Board arranges for its Non-Executive Directors to visit the Group’s principal locations at certain intervals to discuss the operations with local management. In addition, all Directors are encouraged to visit at least two of the Group’s centres during the year where they will receive a presentation and a tour of the business. Individual Directors also attend a range of seminars presented by professionals throughout the year.

When the Non-Executive Directors meet without the Executive Directors present, training is one of the standard topics for the Board to consider, both individually and collectively.

Board Re-election
It is the policy of the Board that all Directors are subject to election at the first Annual General Meeting after their appointment and thereafter to re-election every three years.
All Directors who have served nine years or more or who are above age 70, and who wish to stand for re-election, are subject to re-election annually. The provision of the UK Corporate Governance Code relating to the re-election of directors are being considered by the Company. Following the formal evaluation process described above, I S M Russell as Chairman considered the performance of the Directors subject to election or re-election at the 2010 Annual General Meeting and was satisfied that the individuals’ performance continued to be effective and that they demonstrated a clear commitment to the role.

Separately, the Non-Executive Directors met without I S M Russell in 2009 and were satisfied that he continues to be effective and has demonstrated a commitment to the role of Chairman.

Financial Reporting
The Board has shown its commitment to presenting appropriate information about the Group’s financial position by complying with best practice and all standards issued by the International and UK Accounting Standards Boards relating to the disclosures which are included in this Annual Report.

Statement of Directors’ Responsibilities
The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors are required to prepare the Group financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and Article 4 of the IAS Regulation and have elected to prepare the parent Company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the Directors must not approve the accounts unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.

In preparing the parent Company financial statements, the Directors are required to:

• select suitable accounting policies and then apply them consistently;
• make judgments and accounting estimates that are reasonable and prudent;
• state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements;
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.

In preparing the Group financial statements, International Accounting Standard 1 requires that Directors:

• properly select and apply accounting policies;
• present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;
• provide additional disclosures when compliance with the specific requirements in IFRSs are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity’s financial position and financial performance; and
• make an assessment of the Company’s ability to continue as a going concern.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

After making enquiries, the Directors have formed a judgement, at the time of approving the financial statements, that there is a reasonable expectation that the Group has 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 financial statements. Further detail is contained in the Group's Annual Report and Accounts for 2009.

Internal Control
The Board has applied principle C.2 of the Code by establishing a continuous process for identifying, evaluating and managing the significant risks the Group faces. The Board regularly reviews the process which is in accordance with the revised guidance on internal control published in October 2005 (the Turnbull Guidance). The Board is responsible for the Group’s system of internal control and for reviewing its effectiveness. Such a system is designed to manage rather than eliminate the risk of failure to achieve business objectives and can only provide reasonable and not absolute assurance against material misstatement or loss.

In compliance with Provision C.2.1 of the Code, the Board regularly reviews the effectiveness of the Group’s system of internal control.

The Board’s monitoring covers all controls, including financial, operational and compliance controls and risk management. It is based principally on reviewing reports from management to consider whether significant risks are identified, evaluated, managed and controlled and whether any significant weaknesses are promptly remedied or indicate a need for more extensive monitoring. The Board has also performed a specific assessment for the purpose of the 2009 annual report. This assessment considered all significant aspects of internal control arising during the period covered by the report including work of the Internal Financial Control Committee. The Audit Committee assists the Board in discharging its review responsibilities.

During the course of its review of the system of internal control, the Board has not identified nor been advised of any failings or weaknesses which it has determined to be significant. Therefore a confirmation in respect of necessary actions has not been considered appropriate. The key elements of the ongoing continuous process during the period under review have been:

• Formal Board reporting by the Chief Executive Officer, Chief Financial Officer and Chief Operating Officer on the Group’s performance and on any emerging risks and issues. The monthly management accounts break down the results of the Group’s operations by individual business performance and all significant variations against budget and the previous year are fully examined. The day-today responsibility for managing the Group’s operations rests with local experienced Senior Executives and the Group has a clear organisational structure which includes appropriate delegation of authority. The Executive Directors ensure that regular contact is maintained with all Senior Executives. The Group Management Board, comprising the Executive Directors, the Company Secretary, the Group Head of Finance, the Director of Human Resources, the Digital Strategy Director and the Business Development Manager, meets every month to review financial and operational issues as well as the risks facing the Group.
  
• Formal Board approval for capital expenditure over £250,000 and for other investment decisions. Approval was granted for all acquisitions and disposals submitted after due enquiry.
  
• Formal Board approval of the annual budget for the forthcoming financial year. This includes detailed and comprehensive budgets covering each operating business.
  
• Formal Board reporting of the key functional departments’ future strategy as part of the operational topics considered at Board meetings during the year.
  
• Review by the Audit Committee on a six-monthly basis of the work performed by the Internal Financial Control Committee (IFCC) based on a programme of work agreed in advance. The IFCC is chaired by the Group Head of Finance who is responsible for the conduct of control reviews in selected locations by members of the Committee who are independent of the location visited. The IFCC is also responsible for the review of detailed financial control checklists submitted by each operation to head office monthly. This work is strongly supported by the Group’s financial accounting centre which ensures a consistent and compliant approach to the processing of transactions and ensures a uniform control process across the Group’s operations.
  
• Review by the Audit Committee of the conclusions of the Group’s external auditors in their annual audit and review of the half-year results. These reviews include discussion of any control weaknesses or issues identified by the auditors.
  
• The conduct of risk assessment involving all senior managers of the Group’s businesses in addition to the Executive Directors. A risk matrix is reviewed on a regular basis both in the local operations and by the Group Management Board. One risk is discussed at every monthly executive meeting both locally and at Group level. These risk assessment sessions are held at each operation and will evaluate and address the risks identified. The results of these assessments are addressed in the Chief Operating Officer’s monthly report to the Board. During 2009, the Group Management Board focussed particularly on customer care metrics; impairment testing of the Group’s publishing titles; disaster recovery plans in fewer, larger pre-press and press centres; national advertising sales; management succession planning; digital strategy; bad debts in the economic slowdown; management stretch; daily newspaper sales; and corporate strategy.

On an ongoing basis, steps are taken to embed best practice into all the operations of the business and to deal with areas of improvement which come to management’s and the Board’s attention.

In addition, the Group Management Board has the ongoing responsibility to set policies, procedures and standards as detailed in the Group’s policy guidelines. These are reviewed and revised on an annual basis and a tailored version has been released for all the businesses in the Republic of Ireland. The guidelines include policies on:

• Finance
• Cash/treasury controls
• Authorisation levels
• Trading
• Customer service
• Commercial and competition
• Technology
• Property management
• Human resources including pension administration, disability and health and safety
• Environmental issues and energy management
• Legal and regulatory compliance
• Business continuity

The Directors, at the Board meeting in January 2010, reviewed the need for an internal audit department and concluded that they did not believe it necessary for the Group to maintain such a department given the very effective role played by the IFCC and the current independent review and monitoring procedures in operation.

Audit Committee
The Audit Committee is chaired by M A Pain, a chartered accountant. C A Rhodes (who was appointed to the Committee with effect from 1 January 2010) are also members. Both are independent Non-Executive Directors.

The Committee has written terms of reference that outline its authority and duties. The terms include a review of the arrangements by which staff may, in confidence, raise concerns about possible improprieties in matters of financial reporting or other areas.

The Committee meets once during the year with the Company’s external auditors to discuss and agree the audit programme for the forthcoming year, together with any proposed non-audit work.

Any significant non-audit work by the auditors is approved by the Committee in advance of any engagement letter being signed.

The two other scheduled meetings follow the interim financial review and the year-end audit. They cover a comprehensive report from the external auditors on their work and their conclusions. The Committee focusses in particular on the areas of financial judgement by the Group. As part of the main Board it also reviews the summary of the Group’s key business risks and discusses any revisions. The Committee is actively involved in the ongoing review of internal controls by the main Board.

In addition, these two meetings consider a report on the work of the IFCC. Its work is described in the Internal Control section and, given the detail and comfort included in the report, the Committee regards this approach as the most effective way to review the financial controls in the business rather than establish an internal audit function.

The Audit Committee meetings to consider the financial results of the Group are attended by the Chief Financial Officer, Group Head of Finance and the Company Secretary, who acts as Secretary to the Committee, with minutes being circulated to all Board members. The Chairman, Chief Executive Officer and Chief Operating Officer are also invited to attend if required to do so by the Committee. Towards the close of relevant meetings, all Executives leave in order for the Committee to have a private discussion with the auditors. The Chairman also has a private meeting with the audit partner during the course of the year to discuss any relevant issues.

At the meeting to review the Annual Report and Accounts, the Committee formally considers the non-audit services provided by the Group’s external auditors and the effectiveness of the audit process. These are fully explored and discussed and the Committee is satisfied that the objectivity and independence of the external audit is safeguarded. During 2009 the Company has used several professional firms for different projects and the Republic of Ireland taxation compliance and advisory work is undertaken by a professional firm other than the Group’s auditors.

As explained in the Annual Report, the Board undertook an evaluation of its performance during the year. This included a review of the effectiveness of this Committee considering its composition, chairmanship, whether it fulfilled its role as outlined in the terms of reference, its reporting and overall performance. This evaluation process was undertaken by the Committee itself as well as by all members of the Board. The results of this process were positive and confirmed the effectiveness of the Committee.

The Committee oversaw the appointment of Deloitte LLP in 2002 and have a primary responsibility for the appointment, re-appointment and removal of auditors. The Audit Committee conducted a formal evaluation of the effectiveness of the external audit process. The Committee has approved the extension of the current external audit contract by one year and recommended to the Board the reappointment of the external auditors. On the recommendation of the Audit Committee, the Directors proposed the reappointment of Deloitte LLP at the Annual General Meeting on 30 April 2010 which was approved by shareholders. The Audit Partner at Deloitte rotated at the commencement of the 2007 interim review.

Dialogue with Institutional Shareholders
The Board encourages and seeks to build a mutual understanding of objectives between the Company and its institutional shareholders. As part of this process, the Chief Executive Officer and Chief Financial Officer make twice yearly presentations to institutional shareholders and meet with shareholders to discuss any issues of concern and to obtain feedback. In addition, they communicate regularly throughout the year with those shareholders who request a meeting.

The Chairman and the Senior Independent Director personally contact the leading shareholders in the Company on an annual basis to address any concerns and discuss any issues. The Board receives a report on any discussion with shareholders and the written feedback that follows the half yearly presentations is circulated to the Board. Brokers’ reports and analysts’ briefings are included in the Board papers sent to the Directors in advance of meetings.

The Board receives a quarterly update on the shareholder register with a summary of the main movements in shareholdings since the previous report.

Members of the Board have met with institutional shareholders during the year to consider Corporate Governance matters. All the Non-Executive Directors are prepared to meet with shareholders to understand more fully their views.

Annual General Meeting
The Board seeks to encourage shareholders to attend its Annual General Meeting. It is the policy of the Board that all Directors should attend the Annual General Meeting and be available to answer shareholders’ questions. The Company uses the Annual General Meeting to communicate with private investors and encourages their participation. All Directors attended the AGM in 2010.