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In accordance with AIM rule 26, the Board have considered and adopted the QCA Corporate Governance Code for Small and Mid-size Quoted Companies published in April 2018 (“the Code”).

THE PRINCIPLES OF GOOD GOVERNANCE AND COMPLIANCE ARRANGEMENTS

The Board is committed to high standards of corporate governance. The adoption and maintenance of good governance is the responsibility
of the Board as a whole, who in accordance with AIM rule 26 have considered and adopted the QCA Corporate Governance Code for Small and Mid-size Companies (“the Code”). The Code includes a number of principles of good practice, which have been developed to support the delivery of growth in long term shareholder value by maintaining a flexible, efficient and effective management framework within an entrepreneurial environment. The Board believes that by adopting these principles, which are appropriate to the size of the Group, the Company’s numerous and widespread shareholder base can expect the highest possible level of standards. The Directors are pleased to provide the following additional information with regard to compliance with these principles of the Code:

1. Establish a strategy and business model which promote long term value for shareholders

Wynnstay is committed to sustained development within the agriculture sector and will strive for continued growth by acquisition and organic
development of the business. In so doing, the Group will optimise the return to all stakeholders in the business. In order to achieve this
ambition, the Group recognises that it must excel in terms of value, quality and the development of its products, services and people. The
Group strives to become the “Supplier of Choice” for its customer base. Fuller details of the operational strategy of the business can be found in the latest published Strategic Report.

2. Seek to understand and meet shareholder needs and expectations

The Board appreciates that the diverse shareholder base of the Group may have differing objectives for their investment in the business, and
therefore the importance of ensuring that non-executive directors (“NED”) in particular, have an up to date understanding of these perspectives is well recognised. Directors will therefore routinely engage with both institutional and private investors and will seek out opinions on unusual or potentially controversial matters before adopting policy changes or tabling shareholder resolutions. The Board will always review written feedback reports from investors following financial results “roadshows” and will also always consider information received from institutional voter advisory firms. Mr P.M. Kirkham is the nominated independent NED who makes himself available to shareholders who may require independent Board contact.

3. Take into account wider stakeholder and social responsibilities and their implications for long-term success

The Directors recognise the importance of managing the business in a responsible, fair and ethical manner, and strive to engender such values in every aspect of the Group’s operations. Social, environmental and sustainable considerations are taken into account in the formulation of polices across the Group, and areas of particular interest to the Board are reported on, in the separate Corporate Social Responsibility Report.

4. Embed effective risk management, considering both opportunities and threats, throughout the organisation

The Group adopts a risk approach appropriate to the business activities being conducted, and the Board retain responsibility for regularly reviewing risk management strategies. Risks and uncertainties for the business are classified into two main categories, Financial and Operational. The Board monitor such risks having developed policies for managing the uncertainties they bring. The monitored risk categories and the main policies for their control can be found in our published Risk Management Statement contained in the Strategic Report.

The Board of Directors has overall responsibility for the system of internal controls, including financial, operational and compliance, operated by the Group and for its effectiveness. Such a system can only provide reasonable and not absolute assurance against material misstatement or loss, as it is designed to manage rather than eliminate the failure to achieve business objectives.

The key procedures within the control structure include:

• Managers at all levels in the Group have clear lines of reporting responsibility within a clearly defined organisational structure;
• Comprehensive financial reporting procedures exist, with budgets covering profits, cash flows and capital expenditure being prepared and adopted by the Board annually. Actual results are reported monthly to the Board and results compared with budgets and last year’s actual. Revised forecasts are prepared as appropriate; and
• There is a structured process for appraising and authorising capital projects with clearly defined authorisation levels.

5. Maintain the board as a well-functioning, balanced team led by the chair

The Board currently comprises seven directors, three of whom are executive and four non-executives. The roles of Chairman and Chief Executive are separated. The Chairman is non-executive and is elected by the whole Board on an annual basis, with Mr J J McCarthy originally appointed to this role in November 2013. A Senior Independent Director has been appointed, who carries out the important function of acting as a confidential “sounding board” for other directors, and who has been nominated as the person available to shareholders who may require independent Board contact. The Board believes that this structure, together with the operation of its sub-committees described below, satisfies the flexible and effective management elements of the Code guidelines. Certain relevant details of the contracts of employment for the executive directors, and the letters of appointment for the non-executive directors are disclosed in the annual Director’s Remuneration Statement. The circumstances of all non-executive directors, including the Chairman, have been considered against the guidelines laid out in section B.1.1 of the UK Corporate Governance Code, and the general concept of independence of character and judgement, as of July 2018. The conclusions of these reviews were that all non-executives were deemed Independent under the Effectivness principles of the Code. However, the following points were considered worthy of further disclosure with regard to each non-executive director:

• James John McCarthy – currently served seven years on the Board and been Chairman since 2013. He is also the Chairman of one other listed UK company.
• Philip Michael Kirkham – currently served five years on the Board and been Vice Chairman since 2015 and nominated as Senior Independent Director. He is a director of M & R Kirkham & Sons Limited, a mixed farming business in the West Midlands, which is a customer of the Group, who during the last financial year purchased goods on an arms length basis from the Company.
• Howell John Richards - currently served four years on the Board. Prior to his appointment he had served for a number of years as a paid sales consultant to the business, but has not received any additional income for such services since being appointed to the Board. He is a director of Cwrt Malle Limited, a farming business in South Wales, which is a customer of the Group, who during the last financial year purchased goods on an arms
length basis from the Company.
• Stephen Ellwood - currently served three years on the Board. He is a director of a number of other businesses operating in the broader agricultural sector, including NIAB, to whom the Group pays DEFRA regulated seed crop registration fees.

6. Ensure that between them the directors have the necessary up-to-date experience, skills and capabilities

Brief biographies of the directors can be found in this annual report. The executive directors all have considerable experience in the agricultural supply industry and have spent much of their careers with the Group, providing a significant degree of management continuity. The nonexecutives bring a range of business and commercial expertise to the Board, including direct agriculture and specialist merchanting skills, and are all deemed independent under the Code as described above.

7. Evaluating board performance based on clear and relevant objectives, seeking continuous improvement

The Chairman is responsible for the periodic performance reviews of the Board, its sub-committees and non-executive directors. In October 2018, the senior independent non-executive conducted a Board evaluation exercise, considering the structure, governance, operating dynamics and the risk management processes currently in place. The conclusions of this exercise were considered by the whole Board and deemed satisfactory, with areas for improvement noted, including specific responsibilities allocated to named individual directors.

Following the appointment of a new CEO during the year, the Board arranged executive development training for specific directors and certain senior managers of the Group with Cranfield School of Management. This provides ideal personal development support for a period of time, away from the day to day pressures of managing the business.

8. Promote a corporate culture that is based on ethical values and behaviours

The Board operates a policy of collective responsibility with regard to its decision making, with the Chairman being responsible for the smooth functioning of its activities. The Chairman will ensure that each member of the Board is given fair and equal opportunity to clearly express their respective views on all matters, and that the executive directors are adequately able to communicate reasonable commercial views on matters under debate. A formal schedule of matters requiring Board approval is maintained, and includes:

• Group strategy control, including approval of principal activities description and periodic corporate plans.
• Board appointments, including structure and composition, casual and expansionary appointments, retirement policies and rotation selection, and election of Chairman, Vice Chairman and other delegated roles.
• Corporate governance matters, including relevant code adherence, corporate social responsibility matters and statements, and approval of any political support or financial contributions.
• Financial control, specifically approval of Group financial and capital budgets, approval of Group financial results, and approval of Group financial indebtedness commitments in excess of a total of £500,000.
• Capital expenditure confirmation of projects, which are budget approved and exceed an expenditure limit of £100,000 or non budget approved above an expenditure limit of £50,000.
• Share capital matters with regard to, the allotment of new shares, the market purchase of existing shares, the cancellation of any existing shares, and the dividend policy of the Group, and approval of Interim & Final dividends.

9. Maintain governance structures and processes that are fit for purpose and support good decision-making by the board

The Board operate Code recommended, Audit, Remuneration and Nomination sub-committees and details are provided below.
Board Committees:

Audit Committee

This Committee currently consists of three non-executive directors: Mr P M Kirkham, Mr H J Richards and is chaired by Mr S J Ellwood, who through his previous banking experience satisfies the guideline requirement for a financially qualified member of an audit committee. The Committee normally meets three times a year as required. The Committee has standard terms of reference which have been formally approved by the Board, and which include the supervision of the external audit process and the effectiveness of the internal financial controls. The terms of reference further task the Committee with identifying and evaluating significant internal and external risks faced by the Company, and then making recommendations to the Board on appropriate strategies for effectively managing these risks. Such risks include:

• The reliability of internal and external reporting systems;
• The safeguarding of assets from inappropriate use, loss and fraud;
• Identifying and properly managing liabilities;
• Compliance with relevant taxation legislation and ensuring the Group acts in accordance with its published tax strategy; and
• Ensuring the business operates within all applicable legislation and uses best practice wherever possible.

The Audit Committee met three times during the last financial year and all committee members attended. The Committee agreed the nature and scope of the audit with the auditor and monitored their findings. The Committee organise internal audit assignments to test the operating effectiveness of internal systems and controls. These assignments are not completed by specific internal audit employees, but appropriate members of staff. The Committee has procedures in place to enable it to meet with the auditor without the presence of the Company’s management and it formulates and oversees the Company policy on maintaining auditor objectivity and independence in relation to non audit services. The policy is to ensure that the nature of the non audit services performed or the fee income relative to the audit does not compromise the auditors’ independence, objectivity or integrity and complies with ethical standards. Details of such services and fees are provided in note 6 to the accounts.

Remuneration Committee

This Committee of the Board consists of Mr J J McCarthy and Mr H J Richards and is chaired by Mr P M Kirkham. The Committee meets at least once a year and has standard terms of reference in place which have been formally approved by the Board. These terms of reference include the formulation of remuneration policies for executive directors and senior managers, and the supervision of employee benefit structures throughout the Company. The Remuneration Committee met three times during the last financial year and all committee members attended.

Nomination Committee

This Committee of the Board currently consists of Mr J J McCarthy, Mr G W Davies and is chaired by Mr P M Kirkham. The Committee meets at least once a year and has standard terms of reference in place which have been formally approved by the Board. The Committee is tasked with reviewing the leadership needs of the Company and making recommendations to ensure the continuity of such leadership through the identification, evaluation and appointment of both executive and non-executive directors. The Nomination Committee met once during the last financial year and all committee members attended. The Committee also conducted an independent review with search consultants during the year, leading to the appointment of Gareth Davies as CEO in July 2018.

The Board regularly reviews the structures and processes used to manage the business, and takes advice from appropriate retained professionals, including its nominated financial advisor and corporate lawyers. The Board normally meet once a month with additional meetings as necessary. During the financial year ending October 2018, there were thirteen Board meetings and all directors attended, with the exception of, Mr J.J. McCarthy and Mr D.A.T. Evans who both attended twelve meetings. Minutes are maintained of all Group and subsidiary Board meetings, and all senior management sessions. Records are maintained of everyone present at such meetings and may have been absent. Directors are able, if necessary, to take independent professional advice in furtherance of their duties, at the Company’s expense. All directors and some senior members of staff have adopted a set of guidelines in regard to their responsibilities for the management and conduct of the Company.

The formal schedule of matters reserved for Board approval has been described above and acts as the main guide for any specific information provided to directors. Additionally, as a matter of routine, directors receive papers relating to each Board meeting at least seven days in advance, and which also include:

• Group monthly and year to date management accounts with variances reported against prior year comparisons and budgets.
• Executive director commercial reports on segmental trading and financial issues.
• A report on any health and safety matters or issues.
• A report on any environmental matters or issues.
• Any relevant industry or competition news.

All directors have access to the Company Secretary to arrange the inclusion of any matter they wish to table for Board discussion or to receive additional information on any Company matter that they feel is relevant. As previously highlighted directors are able, if necessary, to take independent professional advice in furtherance of their duties, at the Company’s expense, and are able to commission appropriate external support for any Board Committee responsibilities.

The Board have adopted policies in regard to various regulatory, compliance and control issues, and will always seek to ensure that such policies are operated in a cost effective manner while ensuring effective achievement of the respective objective. As the Group operates across a number of different markets in both its Agriculture and Specialist Agricultural Merchanting segments, strong internal controls are required to ensure the business is not exposed to financial irregularities or losses that are not readily identifiable. Such controls include policies for the proper authorisation of the procurement of all products and services, and the sanctioning of expense expenditure and employment costs. These policies are principally controlled by the Management Boards of the operating subsidiaries of the Group, who meet on a regular routine basis. The Group Chief Executive and Finance Director attend all these meetings and undertake business and financial reviews of subsidiary activity with particular attention paid to the monitoring of actual performance against budget.

The Board of Directors has overall responsibility for the system of internal controls, including financial, operational and compliance, operated by the Group and for its effectiveness. Such a system can only provide reasonable and not absolute assurance against material misstatement or loss, as it is designed to manage rather than eliminate the failure to achieve business objectives.

The key procedures within the control structure include:

• Managers at all levels in the Group have clear lines of reporting responsibility within a clearly defined organisational structure;
• Comprehensive financial reporting procedures exist with budgets covering profits, cash flows and capital expenditure being prepared and adopted by the Board annually. Actual results are reported monthly to the Board and results compared with budgets and last year’s actual. Revised forecasts are prepared as appropriate; and
• There is a structured process for appraising and authorising capital projects with clearly defined authorisation levels.

10. Communicate how the company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders

The Board recognises the importance of communicating with its shareholders and maintains dialogue with institutional shareholders and analysts, and presentations are made when financial results are announced. The Group retains the services of a professional financial public relations company, who assist with ensuring the accurate and timely communication of relevant corporate, financial and other regulatory news. Mr P M Kirkham is the nominated independent nonexecutive Director who makes himself available to shareholders who may require independent Board contact. The Annual General Meeting is the principal forum for dialogue with private shareholders who are given the opportunity to raise questions at the meeting, and to meet directors and senior managers of the business who make themselves available after each meeting. The Company aims to send out the notice of the Annual General meeting at least 21 working days before the meeting and publish the results of resolutions (which are usually voted on by a show of hands) in a Regulatory News Statement after the relevant meeting. Shareholders also have access to the Company’s website at www.wynnstay.co.uk.

ADDITIONAL INFORMATION

Going concern and long term viability - The Group works within a corporate plan to ensure clear direction and focus for the strategic development of the business. This corporate plan is regularly reviewed and updated appropriately for commercial and economic circumstances. Annual budgets are set in line with corporate goals in the plan, but which recognise specific market conditions at the time. The Directors have prepared the financial statements on a going concern basis, having satisfied themselves from a review of internal budgets, forecasts and current bank facilities that the Group has adequate resources to continue in operational existence for the foreseeable future.

New Developments – The Board regularly monitors developments to Corporate Governance regulations and processes appropriate to entities of its size and will regularly review the continuing applicability of the QCA Code to the Company.

Auditor Independence - The Board is satisfied that BDO LLP has adequate policies and safeguards in place to ensure that auditor objectivity and independence is maintained. The Company meets its obligations for maintaining the appropriate relationship with the external auditors through the Audit Committee whose terms of reference include an obligation to consider and keep under review the degree of work undertaken by the external auditor, other than the statutory audit, to ensure such objectivity and independence is safeguarded.

B P Roberts
Company Secretary
22 January 2019