Under the Singapore Companies Act, Chapter 50, the Company is not required to follow the Singapore Corporate Governance Code. The Company has voluntarily agreed to the principles of corporate governance contained in the Combined Code on Corporate Governance which is appended to the Listing Rules of the Financial Services Authority.

Statement of Compliance with the Code of Best Practice

Throughout the year ended 31 December 2007 the Company has been in compliance with the Code provisions set out in Section 1 of the July 2003 FRC Combined Code on Corporate Governance except for the following matters:

• Larry Tracey and James Peters, Executive Directors, are members of the Remuneration Committee and the Nominations Committee, in contravention with A4.1 and B2.1 of the Combined Code. They are the two main shareholders and consider that any decisions they make will be aligned to the interests of the shareholders.
  
  
• There has been no formal evaluation of the performance of the Board, its Committees and the Directors during the year, as required by the Combined Code (A6.1)

Notwithstanding the above departures from the Combined Code, the directors consider that the current structure and function of the Board is appropriate for the present size and composition of the Group.

The Board is responsible for the proper management of the Group and for its system of corporate governance. It receives information on at least a monthly basis to enable it to review trading performance, forecasts and strategy. The following matters are specifically reserved for its decision:

• - changes to the structure, size and composition of the Board
  - consideration of the independence of Non-Executive Directors
  - review of management structure and senior management responsibilities
  - with the assistance of the Remuneration Committee, approval of remuneration policies across the Group
  - approval of strategic plans, profit plans and budgets and any material changes to them
  - oversight of the Group's operations, ensuring competent and prudent management, sound planning, an
  adequate system of internal control and adequate accounting and other records
  - final approval of annual accounts and accounting policies
  - approval of the dividend policy
  - approval of the acquisition or disposal of subsidiaries and major investments and capital projects
  - delegation of the Board's powers and authorities including the division of responsibilities between the Chairman, Chief Executive and the other Executive Directors.

The Board acknowledges that it is responsible for the Group's internal control and for reviewing its effectiveness.

The Group's internal controls are designed to manage rather than eliminate the risk of failure to meet business objectives, and can only provide reasonable not absolute assurance against material misstatement or loss.

An ongoing process for identifying, evaluating and managing the significant risks faced by the Group was in place during the entire financial year and has remained in place up to the approval date of the annual report and accounts. That process is regularly reviewed by the board and Audit Committee and in accordance with the Internal Control guidance for directors on the Combined Code produced by the Turnbull working party.

The Board keeps its risk control procedures under constant review and deals with areas of improvement which come to its attention.

As might be expected in a Group of this size, a key control procedure is the day to day supervision of the business by the executive directors supported by managers within the Group companies.

The Board has considered the need for an internal audit function, but has decided that, because of the size of the Group and the systems and controls in place, it is not appropriate at present. The Board reviews this on a regular basis.

Board Meetings

There were 12 Board Meetings during the year, 6 before the Scheme of Arrangement for XP Power plc and 6 after for XP Power Limited. The attendees were as follows:

Audit Committee

The Audit Committee consists of the non-executive directors John Dyson (chairman) and Michael Hafferty (replaced Roger Bartlett as from 24 April 2007). The Audit Committee met seven times during 2007, the attendees were as follows:

The Committee is responsible for, amongst other things, ensuring that the financial performance of the Group is properly reported and monitored focusing particularly on compliance with legal requirements, accounting standards, and the requirements of the UK Listing Authority. The Committee also meets with the auditors and reviews the reports from the auditors without executive board members present.

As part of its remit, the Audit Committee also keeps under review the nature and extent of audit and non-audit services provided to the Group by the auditors. During the year the Committee formalised its policy and approved a set of procedures in relation to the appointment of external auditors to undertake audit and non-audit work. Under this policy:

• the award of audit-related services to the auditors in excess of £50,000 must first be approved by the Chairman of the Audit Committee, who in his decision to approve will take into account the aggregate of audit-related revenue already earned by the Group Auditor in that year. Audit related services include formalities relating to borrowing, shareholder and other circulars, regulatory reports, work relating to disposals and acquisitions, tax assurance work and advice on accounting policies;
  
  
• the award of tax consulting services to the auditors in excess of £100,000 must first be approved by the Chairman of the Audit Committee;
  
  
• the award of other non-audit related services to the auditors in excess of £20,000 must first be approved by the Chairman of the Audit Committee;
  
  
• and the auditors will be required to make a formal report to the Audit Committee annually on the safeguards that are in place to maintain their independence and the internal safeguards in place to ensure their objectivity.

Nomination Committee

The Nomination Committee consists of Larry Tracey, James Peters and the non-executive directors. It is chaired by Larry Tracey and it reviews and considers the appointment of new directors. Any appointment of a new director is voted on by the whole Board. The Nomination Committee met once during the year on 12 February 2007. During the year, the Nomination Committee oversaw the appointment of Andy Sng, as an additional Executive Director and Michael Hafferty as an additional Non-Executive Director.

Relations with Shareholders

The Group engages in two-way communication with both its institutional and private investors and responds quickly to all queries received. The Group uses its website www.xppower.com to give private investors access to the same information that institutional investors receive. Interested parties are able to register for the Group's email alert service on this website to receive timely announcements and other information published from time to time. The Annual General Meeting is also an opportunity to communicate with shareholders where Directors are available for questions.

Going Concern

The directors, after making enquiries, are of the view, as at the time of approving the accounts, that there is a reasonable expectation that it will have adequate resources to continue operating for the foreseeable future and therefore the going concern basis has been adopted in preparing these accounts.