The Ten Principles are set out in three groups, each group addressing a fundamental objective, as follows:

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1 Corporate Governance THE QUOTED COMPANIES ALLIANCE CORPORATE GOVERNANCE CODE The Company s shares are listed on the Alternative Investment Market (AIM) of the London Stock Exchange. As an AIM-listed company, the Company is required to follow the principles of an appropriate code of corporate governance. The Board is committed to high standards of corporate governance and has chosen to apply the Quoted Companies Alliance Corporate Governance Code (the QCA Code ). The QCA Code was updated in 2018 and is described as follows: The QCA Code is a pragmatic and practical corporate governance tool, which continues to adopt a proportionate, principles-based approach, enhancing the user s ability to explain their application of the principles and their corporate governance arrangements. The QCA Code is designed to be the means through which companies can earn and keep the confidence of shareholders and other stakeholders as they develop and mature. The QCA Code embodies Ten Principles of Corporate Governance, to promote the following goal: Companies need to deliver growth in long-term shareholder value. This requires an efficient, effective and dynamic management framework and should be accompanied by good communication which helps to promote confidence and trust. The Ten Principles are set out in three groups, each group addressing a fundamental objective, as follows: Deliver growth Maintain a dynamic management framework Build trust with shareholders and other stakeholders The table below sets out the Ten Principles, their application as described by the QCA and our approach to compliance with those Principles. In most cases the Group has already been complying with the QCA Code s predecessor, the Quoted Companies Alliance Corporate Governance Code for Small and Mid-Size Quoted Companies 2013, as described in our Annual Report for the year ended 31 August 2017 ( Annual Report 2017 ), and the table includes references to this compliance where appropriate. Further information on compliance with the updated QCA Code will be included in our Annual Report 2018, for the year ended 31 August 2018, which is expected to be published in January Tony Lochery, Non-executive Chairman The information in this Corporate Governance summary was last reviewed on 26 September APC Corporate Governance Code 26 September

2 THE TEN PRINCIPLES OF THE QUOTED COMPANIES ALLIANCE CORPORATE GOVERNANCE CODE DELIVER GROWTH QCA Code Principle Application (QCA description) APC s compliance 1. Establish a strategy and business model which promote long-term value for shareholders The board must be able to express a shared view of the company s purpose, business model and strategy. It should go beyond the simple description of products and corporate structures and set out how the company intends to deliver shareholder value in the medium to long-term. It should demonstrate that the delivery of long-term growth is underpinned by a clear set of values aimed at protecting the company from unnecessary risk and securing its long-term future. The Group s strategy was explained within the Strategic Report and Operations Review section on pages 4-9 of our Annual Report Directors must develop a good understanding of the needs and expectations of all elements of the company s shareholder base. APC s shareholder base comprises a mix of institutional and private investors, whose primary expectation at this stage of our development is share price growth. 2. Seek to understand and meet shareholder needs and expectations The board must manage shareholders expectations and should seek to understand the motivations behind shareholder voting decisions. The Group will pursue three main growth strategies: growth through its existing and high growth technologies: growth through the signing of new complementary product lines; and growth through targeted bolt-on acquisitions. The key risks and uncertainties facing the business, and how these are mitigated, are detailed on page 10 of our Annual Report The Company s dividend policy is set out on page 7 of our Annual Report The Company s aim is to pay dividends in the longer term. APC encourages two-way communication with both its institutional and private investors. The CEO and Finance Director meet with institutional investors after interim and final results announcements. The AGM is an especially important opportunity to meet private shareholders, who are given ample opportunity to ask questions during the Meeting, as well as to put their point of view to individual Directors informally afterwards. The Board will engage with relevant shareholders as needed, to APC Corporate Governance Code 26 September

3 QCA Code Principle Application (QCA description) APC s compliance understand and address the reasons behind any unexpected voting results. The Company discloses the outcomes of all votes at general meetings by publishing a regulatory announcement. Where a significant proportion of votes have been cast against a resolution, the Company will include, in such regulatory announcement or the Company website, the actions it intends to take to understand the reasons behind the vote result and where appropriate any different action it intends to take as a result of the vote. The people responsible for shareholder liaison and the points of contact for such matters are the Chief Executive, the Finance Director and the Company Secretary. Contact details can be found in the Investor Relations section of the Company website. 3. Take into account wider stakeholder and social responsibilities and their implications for long-term success Long-term success relies upon good relations with a range of different stakeholder groups both internal (workforce) and external (suppliers, customers, regulators and others). The board needs to identify the company s stakeholders and understand their needs, interests and expectations. Where matters that relate to the company s impact on society, the communities within which it operates or the environment have the potential to affect the company s ability to deliver shareholder value over the medium to long-term, then those matters must be integrated into the company s strategy and business model. APC is committed to a process of continuous improvement in our relationships with all of our wider group of stakeholders, as follows: Customers: our dedicated customerfocussed teams specialise in technical sales that provide solutions to our customers technical needs. This is being strengthened by the appointment of key account managers. APC encourages interaction with its customers through social media (Facebook and Twitter). Suppliers: We enjoy close relationships with our US and European component manufacturers for whom we act as UK distributor and we are working to enhance these relationships further by strengthening our team of product champions. Feedback is an essential part of all control mechanisms. Systems APC s relationships with its customers need to be in place to solicit, and suppliers are described more fully consider and act on feedback from on page 1 of our Annual Report all stakeholder groups. Staff: APC recognises that its employees are its greatest assets and places great emphasis on developing their strengths. APC s employment policies are set out on page 12 of our APC Corporate Governance Code 26 September

4 QCA Code Principle Application (QCA description) APC s compliance Annual Report Regulators: As an AIM-listed company APC regards regulatory compliance as a high priority, which is reviewed regularly in Board Meetings, facilitated by the Company Secretary. The Group has also achieved recognised quality standards in ISO 9001:2015 and the aeronautical standard AS 9120:2016 and is involved in a continuous programme to maintain and improve its processes. Our responsibility to the environment is recognised in our promotion of energysaving products, including LED lighting, as well as providing energymonitoring services to help our customers optimise their energy usage. 4. Embed effective risk management, considering both opportunities and threats, throughout the organisation The board needs to ensure that the company s risk management framework identifies and addresses all relevant risks in order to execute and deliver strategy; companies need to consider their extended business, including the company s supply chain, from key suppliers to endcustomer. The risks and uncertainties facing our business, together with the steps we take to mitigate them, are set out on page 10 of our Annual Report Setting strategy includes determining the extent of exposure to the identified risks that the company is able to bear and willing to take (risk tolerance and risk appetite). Executive Directors meet frequently with senior managers to review ongoing trading performance and addresses the risks, uncertainties and dependencies influencing the attainment of forecasts. Our regular Board Meetings place great emphasis on identifying the risks facing the business, both immediate and longer-term, and working on mitigation strategies. New contracts with suppliers and customers undergo a rigorous review process, in line with our quality certification standards, to identify the risks and make decisions on the appropriate levels of risk tolerance and risk appetite. APC Corporate Governance Code 26 September

5 MAINTAIN A DYNAMIC MANAGEMENT FRAMEWORK 5. Maintain the board as a wellfunctioning, balanced team led by the chair. The board members have a collective responsibility and legal obligation to promote the interests of the company, and are collectively responsible for defining corporate governance arrangements. Ultimate responsibility for the quality of, and approach to, corporate governance lies with the chair of the board. The board (and any committees) should be provided with high quality information in a timely manner to facilitate proper assessment of the matters requiring a decision or insight. The Company s Board of Directors, consists of four Directors (three executive and one non-executive), led by its Chairman, Tony Lochery. The biographies and responsibilities of the Directors are covered in more detail in the Directors section of our website. All Directors receive regular and timely information regarding the Group s operational and financial performance, including monthly management accounts. Such information is circulated to the Directors in advance of meetings. The Company Secretary attends Board meetings and takes comprehensive Minutes which are circulated to all Directors The board should have an appropriate balance between executive and non-executive directors and should have at least two independent non- executive directors. Independence is a board judgement. The board should be supported by committees (e.g. audit, remuneration, nomination) that have the necessary skills and knowledge to discharge their duties and responsibilities effectively. The Board is aware that the balance between executive and non-executive directors falls short of the QCA principles, as APC has only one nonexecutive director. We believe that the current composition of the Board is appropriate, given the present size of the Group and the fact that the Chairman does represent a strong and independent influence. However the position is being kept under review and the Board will consider appointing a second non-executive director in due course, once a candidate is identified who can add real value to the Group s skill set and expertise. The Board has a formal schedule of matters reserved to it and is supported by Audit and Remuneration Committees. Owing to the present size of the Group it is not considered appropriate to have a Nominations Committee and all Board members are involved in the appointment of additional Directors. The Schedule of Reserved Matters and Committee Terms of Reference are available on the Corporate Governance page of the Company s website Directors must commit the time necessary to fulfil their roles. APC Corporate Governance Code 26 September 2018 The non-executive Chairman is able to devote a significant portion of his time to APC matters. The executive Directors are all full-time, with no other business commitments. 5

6 6. Ensure that between them the directors have the necessary upto-date experience, skills and capabilities The board must have an appropriate balance of sector, financial and public markets skills and experience, as well as an appropriate balance of personal qualities and capabilities. The board should understand and challenge its own diversity, including gender balance, as part of its composition. New Board appointments are made on merit against objective criteria and with due consideration for the benefits of diversity and a variety of skills and experience on the Board. Details of the Directors experience are set out in their respective biographies, included in the Directors section of the website. The Company Secretary plays an important role in advising the Board on its corporate governance responsibilities. 7. Evaluate board performance based on clear and relevant objectives, seeking continuous improvement The board should not be dominated by one person or a group of people. Strong personal bonds can be important but can also divide a board. The Chairman encourages all Directors to fully contribute and participate in all discussions. As companies evolve, the mix of skills and experience required on the board will change, and board composition will need to evolve to reflect this change. The Board is mindful of the need to ensure that the mix of skills and experience is appropriate to the Company s evolution. This topic forms part of the Board s internal review of its effectiveness. The board should regularly review the effectiveness of its performance as a unit, as well as that of its committees and the individual directors. The Board carries out an evaluation of its own and its individual members and Committees performance annually, led by the Chairman and taking into account the corporate governance code followed by the Company (now the QCA Code). The Board is developing a more formal evaluation process and this document will be updated with further details in due course. The board performance review may be carried out internally or, ideally, externally facilitated from time to time. The review should identify development or mentoring needs of individual directors or the wider senior management team. It is healthy for membership of the board to be periodically refreshed. Succession planning is a vital task for boards. No member of the board should become indispensable. The Board is supported by an experienced senior management team to whom authority and responsibility is delegated at appropriate levels. All Directors stand for re-election by rotation every three years. 8. Promote a corporate culture that is based on ethical values and behaviours The board should embody and promote a corporate culture that is based on sound ethical values and APC Corporate Governance Code 26 September 2018 The Group s corporate culture is based on creating an atmosphere of trust, openness and appropriate 6

7 behaviours and use it as an asset and a source of competitive advantage. The policy set by the board should be visible in the actions and decisions of the chief executive and the rest of the management team. Corporate values should guide the objectives and strategy of the company. The culture should be visible in every aspect of the business, including recruitment, nominations, training and engagement. The performance and reward system should endorse the desired ethical behaviours across all levels of the company. The corporate culture should be recognisable throughout the disclosures in the annual report, website and any other statements issued by the company. The company should maintain governance structures and 9. Maintain governance structures processes in line with its corporate culture and appropriate to its and processes that are fit for size and complexity; and purpose and support good capacity, appetite and tolerance decision- making by the board for risk. informality, combined with a professional approach. The Group s management structure emphasises short reporting lines, encouraging its staff to realise their full potential, as well as to raise issues and concerns with senior managers and Directors. This culture extends to establishing close relations with suppliers and customers, which in turn leads to openness and ethical resolution of issues arising. The Group s culture is reflected in internal newsletters to staff and we strive for continuous improvement in the tone of our communications generally. This table summarises the main building blocks of our corporate governance structures and processes. They are dealt with in more detail in our Corporate Governance Statement on page 14 of our Annual Report 2017 and in the Corporate Governance section of our website. The roles and responsibilities of the Chairman and the other Directors, together with the Board committees that support them, are referred to under Principle 5 above. The governance structures should evolve over time in parallel with its objectives, strategy and business model to reflect the development of the company. APC Corporate Governance Code 26 September 2018 Our corporate governance structures and processes are kept under continuous review at Board meetings and the website is updated when appropriate. 7

8 BUILD TRUST QCA Code Principle Application (as set out by QCA) APC s compliance 10. Communicate how the company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders. A healthy dialogue should exist between the board and all of its stakeholders, including shareholders, to enable all interested parties to come to informed decisions about the company. Formal communication of the Company s financial performance is communicated to the market by RNS announcements on the London Stock Exchange. These announcements are complemented by further announcements through the RNS Reach mechanism, in cases where the announcement is not required for In particular, appropriate regulatory purposes but will assist the communication and reporting understanding of the Company s structure should exist between the board and all constituent parts of its commercial performance. shareholder base. This will assist: As stated under Principle 2 above, APC encourages two-way the communication of communication with both its shareholders views to the institutional and private investors. The board; and CEO and Finance Director meet with the shareholders institutional investors after interim and understanding of the final results announcements. The unique circumstances and AGM is an especially important constraints faced by the opportunity to meet private company. shareholders, who are given ample opportunity to ask questions during the Meeting, as well as to put their point of view to individual Directors informally afterwards. APC s approach to disclosing the results of shareholders voting at general meetings, and to understanding the reasons for a significant proportion of votes being cast against any resolution, are set out under Principle 2 above. It should be clear where these communication practices are described (annual report or website). Communication of how the Group is governed is primarily contained in the Group s website, with summaries in the Annual Report The Company website includes historical annual reports and other governance-related material over the last five years. APC Corporate Governance Code 26 September