Jonathan peacock

Jonathan Peacock
Chairman

Dear Shareholders,

Following the listing of the company's ordinary shares on the London Stock Exchange Main Market in February of 2017, the Board has focused on both supporting the company to achieve its strategic goals set out during the listing process and on high standards of corporate governance. At listing we appointed a number of highly experienced Non-Executive Directors. This year there have been further changes which I believe have strengthened the Board and the executive governance of the Company in preparation for the further growth. In February 2019 we clarified the executive governance of the Company when the Board confirmed Dr Joe Anderson in the CEO role and at the same time I stepped into a Non-Executive Chairman role and Sir Chris Evans stepped off the Board but remains a consultant to the Company. Three years after founding the company and with important contributions by all three founders to building Arix, this was an important and natural evolution of our governance model. Also in September 2018, the Board welcomed Mr Art Pappas, who joined the Board as an independent Non-Executive Director. Mr Pappas has extensive experience both as a senior executive in the pharmaceutical industry and in building his own leading life sciences firm in the United States, Pappas Capital. Mr Pappas has already made a great contribution in his short tenure so far, and I'm sure he will continue to do so.

During the year Lord Hutton and David U'Prichard retired from the Board. Both helped to oversee the Company's growth as a private company and since its successful IPO. It was a pleasure and a privilege to work with Lord Hutton and David, I would like to thank them both for their invaluable contribution to the successful creation and early development of Arix Bioscience.

This report includes a description of the Company's governance structure, how it has applied the principles and the extent of compliance with the provisions of the UK Corporate Governance Code throughout 2018. We also discuss our focus for the coming year with reference to the revised UK Corporate Governance Code, published in July 2018 (the "New Code").

Jonathan Peacock
Chairman

UK Corporate Governance Code – Compliance Statement

As a company admitted to the standard segment of the Official List, the Company is not required to adopt the UK Corporate Governance Code but it has voluntarily chosen to observe the requirements of the Code. During the year the Company has applied all of the main principles of the Code and provides below explanations of its non-compliance with the Code provisions:

A.3.1 – The Chairman was not independent on appointment. Due to the nature of the strategic objectives of the Company and its recent incorporation, the Company has a highly experienced Chairman, Jonathan Peacock.

B.6.1 – The Board has not carried out a performance evaluation to date. Since the IPO in February 2017 there have been a number of changes to the membership of the Board, some of which took place more recently. In 2018, the Board considered a performance evaluation and it has been agreed it would be most appropriate to conduct a review towards the end of 2019, which would then be reported on in the following year's Annual Report and Accounts. A high level review process of the Board's processes and governance practices is also planned to be carried out internally during the course of 2019.

The Board structure

The role of the Board is to provide entrepreneurial leadership to the Group, set strategy and monitor performance, and to ensure that the necessary financial and human resources are in place to enable the Group to meet its objectives. In addition, the Board ensures the appropriate financial and business systems and controls are in place to safeguard shareholders' interests and maintain effective corporate governance.

The Board operates in accordance with the Company's Articles of Association and its own written terms of reference. The Board has established a number of committees. Each has its own terms of reference, which are reviewed at least annually. A summary of the matters reserved for decision by the Board is set out below:

Key Board roles and responsibilities

The Board currently consists of eight Directors (including the Chairman), five of whom are considered to be independent.

Senior Independent Director

Franz Humer is the Senior Independent Director (SID). The SID's role is to act as a sounding board for the Chairman and serve as an intermediary for the other Directors when necessary. The SID will meet other Non-Executive Directors without the Chairman present at least once a year, to appraise the Chairman's performance, taking into account the views of Executive Directors, plus on such other occasions as are deemed appropriate. The SID is also available to shareholders should they wish to discuss concerns they have failed to resolve through the normal channels of Chairman, Chief Executive Officer or Executive Directors or for which such contact is inappropriate.

Responsibilities of the Board

FocusOperation
Leadership, strategy and management
  • Providing leadership and setting values and standards
  • Approving the Company's strategic aims and objectives
  • Overseeing operations
Structure and capital
  • Changes to the Group's capital or corporate structure
  • Changes to the Group's management and control structure
Financial reporting
  • Approval of financial statements
  • Approval of the dividend policy
  • Approval of material changes in accounting policies
  • Approval of major capital expenditure
Risk management and internal controls
  • Ensuring maintenance of a sound system of internal control and risk management
  • Determining the principal risks of the Company and how they are managed and mitigated
  • Reviewing the effectiveness of the risk and controls processes
Board membership
  • Changes to the structure, size and composition of the Board
  • Ensuring adequate succession planning
  • Appointment or removal of the Chairman, CEO, SID and Company Secretary
Corporate governance
  • Review of Group's overall governance framework
  • Determining the independence of Directors
  • Considering the balance of interests between shareholders and other stakeholders
  • Authorising any conflicts of interest
Remuneration
  • Determining the policy for remuneration of Chairman, the Executive Directors, Company Secretary and other senior executives
  • Determining the remuneration of the Non-Executive Directors
  • Introducing new share incentive plans or major changes to existing plans
Other
  • Approval and monitoring of the share dealing code
  • Approval and monitoring of CSR
  • Approving policies and political and charitable donations
  • Approval of the overall levels of insurance for the Group

Commitment

The Board expects Non-Executive Directors to commit sufficient time to allow them to meet their obligations to the Company. The Non-Executive Directors are required to confirm, on acceptance of the role, that they have sufficient time to meet the expectations of their role. Non-Executive Directors will need to attend scheduled and emergency Board meetings, and committees as well as the AGM, as well as allowing appropriate preparation time ahead of each meeting. The Board reviewed and considered the feedback received from the proxy voting advisers during the year, particularly around the external directorship of Jonathan Peacock on the board of Bellorophon Therapeutics, Inc. and the Board is satisfied that Mr Peacock devotes sufficient time to his role with the Company.

Conflicts of interest

The Company's Articles of Association set out the policy for dealing with Directors' conflicts of interest, in line with the Companies Act 2006. The Articles permit the Board to authorise conflicts and potential conflicts, as long as the potentially conflicted Director is not counted in the quorum and does not vote on the resolution to authorise. A record of Directors' interests is kept and Directors are reminded at the beginning of each Board meeting to notify the Board of any further conflicts of interest, in accordance with Sections 175, 177 and 182 of the Companies Act 2006.

Board process

The Board meets formally at least four times a year, with ad hoc meetings called as and when circumstances require at short notice. The table below shows the attendance of each Director at formal meetings of the Board and the committees of which they are a member.

All Directors are expected to attend all meetings of the Board, and any committees they are members of, and to devote sufficient time to the Company's affairs to fulfil their duties as Directors. Where Directors are unable to attend a meeting, they will be encouraged to submit to the Chairman any comments on papers to be considered at the meeting in advance, to ensure their views are recorded and taken into account.

The Chairman and Non-Executive Directors have met without the Executive Directors present on a number of occasions throughout the year.

Board attendance

BoardAuditRemunerationNomination
Jonathan Peacock5/5
Professor Sir Chris Evans4/5
Joe Anderson4/4
James Rawlingson5/5
Dr Franz Humer5/55/52/2
David U'Prichard3/31/21/1
Lord Hutton2/33/3
Professor Trevor Jones4/55/5
Meghan Fitzgerald5/52/3
Giles Kerr5/53/3
Art Pappas2/22/21/1

Attendance is expressed as the number of scheduled meetings attended out of the number of such meetings possible or applicable for the Director to attend


Board independence

Board independence

Non-independent


Jonathan Peacock

Joe Anderson

James Rawlingson

Independent


Franz Humer

Giles Kerr

Art Pappas

Trevor Jones

Meghan Fitzgerald

* As at 27 March 2019. Meghan Fitzgerald stepping down 1 April 2019; Mark Breuer joining 25 April 2019

Training and development

The Company Secretary regularly provides the Board with updates on Corporate Governance and regulatory matters at Board meetings. A formal and tailored induction is also provided to Directors on joining the Board.

Information and support

An agenda and accompanying detailed papers are circulated to the Board well in advance of each Board meeting. These include reports from Executive Directors and other members of senior management, and all Directors have direct access to senior management should they require additional information on any of the items to be discussed.

The information supplied to the Board and its committees will be kept under review to ensure it is fit and proper for purpose, and that it enables sound decision-making.

The Company has adopted a formal procedure through which Directors may obtain independent professional advice at the Company's expense. The Directors also have access to the services of the Company Secretary.

Performance evaluation

All of the current Directors have either been appointed since the Company commenced trading in January 2016; or appointed as part of further changes in 2017 and 2018. Accordingly, the Board has considered the evaluation and has concluded that a meaningful evaluation of the Board will be conducted towards the end of 2019. The Board will consider an annual evaluation policy during 2019, alongside its high-level internal review of Board processes and governance practices.

Dialogue with shareholders

The Company has a Head of Investor Relations. As part of its investor relations programme, the Group maintains a dialogue with its key stakeholders, including institutional investors, to discuss issues relating to the performance of the Group, including strategy and new developments. The Non-Executive Directors are available to discuss any matter stakeholders might wish to raise, and the Chairman attends meetings with investors and analysts as required.

During the year the Company presented at a number of investor attended conferences.

Annual General Meeting

The Company's Annual General Meeting will take place on 3 June 2019 at the offices of Brown Rudnick, 8 Clifford Street, London W1S 2LQ at 10.30am.

To encourage shareholders to participate in the AGM process, we propose to offer electronic proxy voting through the CREST service and all resolutions will be proposed and voted on at the meeting individually by shareholders or their proxies. Results will be announced through the Regulatory News Service and made available on the Company's website as soon as practicable after the meeting.

Consideration of the 2018 UK Corporate Governance Code (the "New Code")

The Board has considered the New Code, which applies to financial years commencing on or after 1 January 2019.

The Board will carry out a detailed analysis of the impact of the New Code during 2019. We will report further on any changes to the Company's governance framework in next year's Annual Report and Accounts.


Jonathan Peacock
Chairman