Corporate Governance

Homeserve complied throughout the year with the provisions set out in the Combined Code published by the UK Financial Reporting Council in July 2003 ('the Code') except for the balance of the Board between executive and non-executive directors between 5 March 2007 and 31 March 2007. As we announced today, Andrew Sibbald will be joining the Board as an independent non-executive director on 1 June 2007.

The manner in which the Company applies the principles of good governance contained in the Code is described in the appropriate parts of this Report and Accounts. Thus the application by the Company of the Code's principles relating to remuneration matters should be read in conjunction with the statement below.

The Board

The Board of directors leads and controls the Company by holding at least eight meetings a year at which its current and forecast performance is reviewed and monitored. Regular reports on monthly performance and other matters of importance to the Group ensure that the Board is supplied in a timely manner with the information necessary to make informed judgments. In addition, the Board holds regular meetings, also attended by senior operational management, to devise and discuss the Company's medium and long term strategic focus and management development strategy.

Regular formal and informal presentations are given and meetings held in order to apprise directors of issues of importance affecting the Group. Occasionally, meetings of the Board are held at the Company's operating sites other than Walsall, in order to afford the Board, particularly the nonexecutive directors, with the opportunity to meet with local management.

In accordance with the provisions of its Articles of Association and with the Code, each director is subject to election by the Company's shareholders at the Annual General Meeting immediately following his appointment and is subject to reelection at least every three years thereafter.

The Board has a Schedule of Matters specifically reserved to it for decision and has approved the written terms of reference of the various committees to which it has delegated its authority in certain matters. Matters reserved to the Board include the recommendation or approval of dividends, the approval of final and interim financial statements, major financial commitments, the acquisitions of significant companies or businesses, appointments to the Board and its committees, the Company's future strategy and its internal controls. It also provides that the Board receive regular updates from the chairmen of its committees.

During the year the Board was led by Brian Whitty, the Executive Chairman, who also served as a member of the Board's Nomination Committee.

The Chairman's responsibilities are clearly defined in a written specification agreed by the Board and which makes clear the division of responsibilities between the Executive Chairman and the Chief Executive. They include the smooth running of the Board, effective communication between executive and non-executive directors and the general progress and long term development of the Group. His executive responsibilities include major strategic acquisitions, relations with shareholders and those relating to property, legal and governance matters.

The Board has established a formal procedure for directors wishing to seek independent legal and other professional advice and all members of the Board have access to the advice and services of the Company Secretary.

The day-to-day running of Homeserve's business is delegated to an Executive Board, also led by Brian Whitty, and which includes Richard Harpin, Chief Executive, Ian Carlisle, Chief Executive of the Emergency Services division, Jon Florsheim, Chief Executive of Homeserve Membership (from his appointment on 5 March 2007), Andrew Belk, Group Finance Director (until his resignation on 30 March 2007), and Jonathan Simpson-Dent, Chief Financial Officer (from his appointment on 30 March 2007). Other members of the Executive Board, together with autobiographical details, are listed here.

Richard Harpin, the Chief Executive, is responsible for leading business development, operational issues and marketing. He is also responsible for all operational public relations and tactical acquisitions.

During the year, three independent non-executive directors with extensive business, finance and marketing backgrounds, provided the Board with a breadth of experience and with independent judgement. John Maxwell served as the Company's independent senior non-executive director. In anticipation of the appointment of Jon Florsheim to the Board in March 2007, the Board recognised that the number of executive directors would outnumber the number of independent non-executive directors. Accordingly, it commenced a search for an additional independent nonexecutive director and on 21 May 2007 announced the forthcoming appointment of Andrew Sibbald to the Board from 1 June 2007. In addition, the Board is currently in the process of selecting a further independent non-executive director.

The Board actively encourages all directors to deepen their knowledge of their roles and responsibilities and to gain a clear understanding of the Group and the environment in which it operates; and has adopted a formal policy on the induction and training of directors. Newly appointed Board members are required to undergo an induction programme, which includes obtaining a thorough understanding of the Group's various operations, and have the opportunity to receive formal training.

During the year, the non-executive directors have met with various members of the Group's management teams and have visited several of the operating businesses. Further training for directors is available, offered and provided as appropriate.

The Board has adopted a formal process for reviewing its own effectiveness and that of its individual members. In addition, it continued to ensure that regular meetings of the nonexecutive directors were held without the executive directors, and at least once a year, without the Chairman present, in order to evaluate his performance. The evaluation process, which was facilitated by external advisers, was completed in April 2006, comprising one-on-one meetings to discuss the existing and future needs of the Board, its composition and the skills of its members. The results of the process were reviewed by the whole Board in June and October 2006 and a further review is planned to take place in September 2007.