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Governance report
for year ended 30 April 2011

Introduction

As Cohort plc is listed on AIM it is neither required to comply with the Combined Code on Corporate Governance that was issued in 2008 by the Financial Reporting Council (the Code) nor issue a statement of compliance with it. Nevertheless, the Board fully supports the principles set out in the Code and seeks to comply wherever this is appropriate, having regard to the size of the Company and the resources available to it. Details are provided below of how the Company applies the Code.

The Board

The Board of Directors comprises the Chairman, two Executive Directors and two Non-executive Directors, Stanley Carter (Co-Chairman) and Sir Robert Walmsley. Nick Prest and Stanley Carter are not considered independent.

The Board has determined Sir Robert Walmsley to be independent and he is designated the Senior Independent Director.

The Board meets most months and receives a monthly Board pack comprising individual reports from each of the Executive Directors and the subsidiary Managing Directors together with any other material deemed necessary for the Board to discharge its duties. It is the Board's responsibility to formulate, review and approve the Group's strategy, budgets, major items of expenditure and acquisitions.

All Directors retire by rotation and are subject to election by shareholders at intervals of once every three years.

Board committees

The Board has established two committees: Audit and Remuneration & Appointments, each having written terms of delegated responsibilities.

Audit committee

The Audit committee comprises the Company Chairman and the Non-executive Directors and is scheduled to meet at least twice a year. It is the Audit committee's role to provide formal and transparent arrangements for considering how to apply the financial reporting and internal control requirements of the Code, whilst maintaining an appropriate relationship with the independent auditor of the Group. In order to comply with the requirement of the Code that at least one member has relevant financial experience, the Chairman of the Board sits on the Audit committee.

The independent auditor liaises with the Audit committee regarding work to be undertaken and complies with the Ethical Standards for Auditors issued by the Auditing Practice Board. Each year, prior to commencing its audit work, the independent auditor confirms in writing the nature of any non-audit work on behalf of the Group and the safeguards in place to ensure its independence and objectivity; any in-year proposals for non-audit work are subject to prior approval by the Audit committee.

The Company has formal arrangements in place to facilitate "whistle-blowing" by employees through a contract with a third party service provider. If any call is made to this third party, either the Chief Executive or the Chairman of the Audit committee is notified promptly of the fact and the content of the call, so that appropriate action can be taken.

Remuneration & Appointments committee

The Remuneration & Appointments committee comprises the Company Chairman and the Non-executive Directors and is scheduled to meet at least once a year. It is the Remuneration & Appointments committee's role to establish a formal and transparent policy on Executive remuneration and to set remuneration packages for individual Directors.

Sir Robert Walmsley is Chairman of both the Audit and Remuneration & Appointments committees.

The attendance of the Directors at Board and committee meetings for the year ended 30 April 2011 was as follows:

The Board has not established a Nominations committee. This is not considered necessary due to the small size of the Cohort Board. The role of the Nominations committee is undertaken by the Remuneration & Appointments committee and the Chief Executive.

Management of the Group and its subsidiary undertakings

The management of the Group and subsidiary undertakings is as follows:

Group management

• Cohort plc Board meeting at least eight times per year.
• Group Executive committee meeting at least four times per year, comprising Cohort plc Executive Directors and subsidiary Managing Directors.

Subsidiary management

• Monthly executive management meetings involving the senior management of each subsidiary. Cohort Executive Directors attend subsidiary executive management meetings on a regular basis.

Shareholder relations

The Company meets with its institutional shareholders and analysts as appropriate and uses the AGM to encourage communication with private shareholders. In addition, the Company uses the Annual Report and Accounts, Interim Report and website (www.cohortplc.com) to provide further information to shareholders.

Internal control and risk management

The Board is responsible for the system of internal control and for reviewing its effectiveness. Such systems are designed to manage rather than eliminate risks and can provide only reasonable and not absolute assurance against material misstatement or loss. Each year, on behalf of the Board, the Audit committee will review the effectiveness of these systems. This is achieved primarily by considering the risks potentially affecting the Group and from discussions with the external auditor.

The Group does not currently have an internal audit function due to the small size of the administrative function and the high level of Director review and authorisation of transactions.

A comprehensive budgeting process is completed once a year, reviewed and approved by the Board. In addition the Group conducts quarterly re-forecasts. The Group's results, as compared against budget and the latest quarterly forecast, are reported to the Board on a monthly basis and discussed in detail at each meeting of the Board.

As reported on last year, the Board (through the Chairman of the Audit Committee) undertook a review of the oversight and control of the Group and its subsidiaries. The significant recommendations of this report, which was independently reviewed, have now been implemented including the key recommendations of:

• Closer oversight of the subsidiaries by the Cohort Executive
• Review and implementation of business processes at SCS

In the case of the latter recommendation, further assurance was obtained at the interim review last December when the Group's auditors, KPMG, carried out a review of SCS's business processes which confirmed the progress made.

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