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The Board is committed to high standards of corporate governance in its management of the affairs of the Company and the Group. This report, together with the Directors¬? Remuneration Report on pages 29 to 35 of the Annual Report and Financial Statements, describes how the principles set out in section 1 of the Combined Code on Corporate Governance (revised with effect from 29 June 2008) (¬?the Code¬?) are being applied.


The Directors consider that throughout the accounting period ended 30 September 2010, the Company has fully complied with the Code except as follows:

  • A2.1 The roles of Chairman and Chief Executive should not be exercised by the same individual.
  • D1.1 The Senior Independent Director should meet with a range of major shareholders to listen to their views in order to help develop a balanced understanding of the issues and concerns of major shareholders.

Explanations for non-compliance are set out below.

The Board of Directors
The Board of Directors is currently made up of three Executive Directors, three Non-executive Directors and a Chairman. From July 2009 to April 2010, John Coleman stepped in as Executive Chairman on an interim basis, pending the recruitment of a new Group Chief Executive. Martin Davies was appointed Group Chief Executive in April 2010 hence the roles of Chairman and Group Chief Executive from then on were not combined, ensuring a clear division of responsibility at the head of the Company. James Greenbury, a Non-executive Director, has been designated as Senior Independent Director. Collectively, the Non-executive Directors provide a broad range of knowledge and experience to the Board¬?s deliberations. The complementary range of financial, operational and entrepreneurial experience ensures that no one Director or viewpoint is dominant in the decision-making process. Following a review of the Board structure in the 2006/2007 financial year, it was concluded that, having regard to the Code, the structure of the Board should progressively change so that there would be a balance in numbers between Executive Directors and Non-executive Directors (excluding the Chairman). Following the changes to the Board this year, that balance has now been achieved.

The Board continues to consider its Non-executive Directors as independent from management and each other and that they provide a strong independent element on the Board, being free from any business or other relationship which could materially interfere with the exercise of their judgment. Whilst Neil Bright will commence his role as Group Finance Director on 1 January 2011, the Board considers that he remains independent until that date, given his current role with the Company has not changed and that he is, at the date of this report, still group finance director at HMV Group plc. The Board also considers that John Coleman, on his appointment as Chairman, was independent in accordance with the Code. To strengthen the independence of the Non-executive Directors and to enable them to discuss more freely the performance of the Group's management, the Chairman meets with the Non-executive Directors at least once a year without the Executive Directors present.

The independence of the Directors is further supported by the work of the Company Secretary whose appointment and removal is the responsibility of the Board as a whole. The Company Secretary is responsible for good information flow, ensures that Board procedures are complied with and provides advice on corporate governance and regulatory compliance. All Directors have unfettered access to the advice and services of the Company Secretary. Directors can, where necessary for the discharge of their duties, obtain independent professional advice at the Company's expense.

Biographical notes on all the Directors are given on pages 18 and 19 of the Annual Report and Financial Statements. Fuller biographies together with biographies of the Company Secretary and divisional directors are available on the Company's website at www.holidaybreak.co.uk.

Appointments to the Board are made after receiving recommendations from the Nomination Committee.

The practice is to appoint Non-executive Directors whose appointment, provided they have indicated a willingness to serve a term of three years, is subject to a twelve month rolling notice from the Company and also subject to re-election and to Companies Act provisions relating to the removal of a Director. Re-appointment is not automatic. In considering the re-appointment of James Greenbury, the Nomination Committee concluded that James had built up considerable knowledge and understanding of the business and the business models over the previous six years and that he had contributed effectively and constructively at Board meetings whilst continuing to show integrity and exercising sound independent judgment. The Nomination Committee also had a desire for stability within the Board, given the number of changes over the previous 18 months. Consequently James Greenbury has agreed to serve for an additional three year period from 1 January 2011, subject to early termination from the Company on twelve months¬? notice. New Directors appointed by the Board must submit themselves for re-election by shareholders at the Annual General Meeting following their appointment. Thereafter the Company¬?s Articles of Association require that all Directors stand for re-election at intervals of not more than three years. The Chairman will confirm to shareholders when proposing re-election that, following formal evaluation, the individual¬?s performance continues to be effective and they continue to demonstrate commitment to the role. As noted above in relation to James Greenbury, any term beyond six years for a Non-executive Director will be subject to rigorous review and will take into account the need for progressive refreshing of the Board. Letters of appointment and service contracts for Directors will continue to be available for inspection at the Company¬?s registered office and on display at the Annual General Meeting.

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Performance Evaluation
Following various changes to the Board during the year, the Board undertook an evaluation of the performance of the Board and of the principal Board Committees internally. This year, each of the Directors completed a tailored questionnaire which included, amongst other areas, Board information, effectiveness of Board meetings, interaction of Directors, strategy, risk management, Board composition and succession planning. The responses were analysed by the Company Secretary and the results subsequently discussed at a Board meeting. Some of the actions identified last year are under continuous development including the increasing focus of the Board on longer-term strategic challenges and opportunities. This year¬?s evaluation welcomed the change in the composition of the Board structure and recognised the increase in the Board¬?s time spent on strategy. The Board intends to continue to maintain the balance of the Board¬?s time spent on strategic matters. The evaluation concluded that the Board and its principal Committees had functioned efficiently and all Directors contribute effectively with proper commitment to their roles. Whilst not a requirement for FTSE SmallCap companies under the new UK Corporate Governance Code, it is the Board¬?s intention to hold externally facilitated evaluations once every three years.

Executive Directors are appraised annually by the Group Chief Executive in addition to regular one-to-ones with each Executive Director. The Group Chief Executive is usually appraised by the Chairman and whilst one-to-one meetings have been held the formal appraisal of the Group Chief Executive is not planned until after his first anniversary of appointment. The Chairman¬?s appraisal is carried out by the Non-executive Directors, led by the Senior Independent Director. Additional feedback on individual Director¬?s performance was received as part of the Board performance evaluation.

Continuing training is provided as and when necessary. This year the Board received training on the new UK Corporate Governance Code which applies in relation to the accounting period which started on 1 October 2010 and the Bribery Act which is now scheduled to come into force in 2011. The Board have since adopted internal procedures to support the Group anti-corruption policy. The Directors also received briefings on social, environmental and ethical matters including the Equality Act 2010 and updates on the Carbon Reduction Commitment Regulations. Training requirements are also identified as part of the annual appraisal process and/or Board performance evaluation.

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Board Committees
The Board has three principal committees, all with written terms of reference which are published on the Company¬?s website and which are available in hard copy form on application to the Company Secretary.

The Audit Committee
The Audit Committee reviews the half-year and annual financial statements and matters related to internal controls, including the external audit function. The Committee also keeps under review non-audit work carried out by the Company¬?s auditors. The Committee reviews the cost effectiveness, independence and objectivity of the external auditors.

The Directors who served on the Audit Committee during the year were as follows:

Neil Bright (Chairman)
James Greenbury
Chris Stephens

The Audit Committee Report is set out on pages 23 and 24 of the Annual Report.

The Nomination Committee
The Nomination Committee is responsible for recommending candidates for Board appointment.

The Directors who served on the Nomination Committee during the year were as follows:

John Coleman (Chairman)
Neil Bright
James Greenbury
Chris Stephens

The Nomination Committee report is set out on page 24 of the Annual Report.

The Remuneration Committee
The Remuneration Committee is responsible for ensuring that remuneration policy facilitates the attraction, retention and motivation of senior executives of appropriate calibre, whilst avoiding unnecessary costs. Details of membership of the Committee and its current remuneration policies are given in the Directors¬? Remuneration Report on pages 29 to 35 of the Annual Report.

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Dialogue with Shareholders
The Directors seek to build on a mutual understanding of objectives between the Company and its institutional shareholders and communicate with investors and analysts on a regular basis throughout the year as required. Results presentations are made on a bi-annual basis to market analysts and cover the historical results, current trading and immediate future prospects. A series of one-to-one and group meetings are then held with institutional shareholders and potential institutional investors covering the same material. The primary responsibility for this process lies with the Group Chief Executive and the Group Finance Director. However, the Chairman and other Executive Directors also participate as appropriate. In October 2010 the Company hosted an investor day for institutional investors and analysts at PGL¬?s newly opened centre at Liddington, which included a tour of the centre and strategy presentations from the Executive Directors and senior management. The Company¬?s advisers provide regular feedback from investors and analysts which is communicated to the whole Board together with monthly investor relations reports which are reviewed at monthly Board meetings.

The Code recommends that the Senior Independent Director meets with a range of major shareholders to gain an understanding of their views. In practice, as a result of the regular feedback provided, the Senior Independent Director and the other Non-executive Directors believe that they are aware of such issues and that, unless requested by major shareholders, such meetings are not required.

Where appropriate the Chairman of the Remuneration Committee communicates with major shareholders to canvas opinion when deciding remuneration policy for consideration by the Board and has recently consulted on the proposed changes to the performance conditions for the Company¬?s Long Term Incentive Plan. All shareholders have the opportunity to put questions to the Board at the Annual General Meeting and, at all other times, by e-mailing or writing to the Company. They may also contact the Chairman, the Group Chief Executive or, if more appropriate, the Senior Independent Director to raise any issue with one or all of the Non-executive Directors of the Company. Notice of the Annual General Meeting and related papers are distributed to shareholders at least 20 working days before the meeting. The Company prepares separate resolutions on each substantially separate issue. The notice for the Annual General Meeting shall specify the deadline for exercising voting rights and appointing a proxy or proxies to vote at a general meeting. At the Annual General Meeting, the Chairman reports, after the vote on a show of hands, details of all proxy votes lodged for and against each resolution and the number of votes withheld. Details of the proxy votes lodged are made available as soon as practicable after the meeting on the Company¬?s website www.holidaybreak.co.uk. The notice of meeting and details of the total voting number of shares in respect of which shareholders are entitled to exercise voting rights are made available on the Company¬?s website shortly after the notice is posted to shareholders.

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Board Responsibilities & Planning
All members of the Board take collective responsibility for the Company¬?s performance. The Board is responsible for promoting the long-term success of the Company and for creating shareholder value, while having regard to other stakeholders¬? interests. A formal schedule of matters reserved for the Board covers key areas of the Group¬?s affairs including the formulation of the Group¬?s corporate strategy, treasury policy and risk management policy, approval of acquisitions and disposals, annual Group budget and major capital expenditure. Control of operational matters is delegated through the Group Chief Executive, the Group Finance Director, the respective divisional and subsidiary managing directors and local directors as appropriate. This structure ensures a strong link between corporate strategy and its effective implementation.

The Board meets regularly to review the affairs and trading progress of the various businesses within Holidaybreak plc and the Group as a whole. If and when required, meetings in addition to the scheduled meetings are held either in person or by telephone conference. Each of the Executive Directors and the Company Secretary reports to the Board on relevant matters relating to their areas of responsibility, having previously circulated written or electronic reports to all Board members. Reports from divisions not represented directly at the Board are also circulated prior to the meeting and presented by the Group Chief Executive. The Board also receives monthly updates on health and safety matters and on other ad hoc material relating to specific projects, legal and regulatory matters. Senior management are invited to attend Board meetings from time to time to enable the Board to explore specific issues in detail as necessary. The attendance records of individual Directors at scheduled meetings of the Board and its Committees can be found in the table below:

Table of attendance for the year ended 30 September 2010

 Scheduled Board MeetingsAnnual General Meeting Audit Committee Remuration Committee Nomination Committee 
Bob Baddeley12 (12)1 (1)N/AN/AN/A
Neil Bright 12 (12) 1 (1)3 (3)8 (9)4 (5)
John Coleman12 (12)1 (1)N/A2 (2)5 (5)
Nick Cust 3 (3)N/AN/AN/AN/A
Martin Davies 12 (12)1 (1)N/AN/AN/A
James Greenbury12 (12)1 (1)3 (3)9 (9)5 (5)
Chris Stephens 12 (12)1 (1)3 (3)9 (9)5 (5)
Steve Whitfield 12 (12)1 (1)N/AN/AN/A


Figures in brackets indicate the maximum number of meetings in the period in which the individual was a member of the Board or the relevant Committee. John Coleman stepped down as a member of the Remuneration Committee in January 2010 given his role as Executive Chairman at the time. Neil Bright did not attend the meeting of the Nomination Committee at which his prospective appointment was discussed nor did he attend meetings of the Remuneration Committee which discussed future policy after he agreed to take up the position of Group Finance Director with effect from 1 January 2011.

The Chairman and the Non-executive Directors have met without the Executive Directors being present. The Non-executive Directors have also met separately without the Chairman present.

The Executive Board (consisting of the Executive Directors, the Managing Director of the Hotel Breaks Division, the Head of Corporate Development and the Company Secretary) meet on a monthly basis prior to circulation of the papers to the plc Board to review strategic progress, matters to be presented to the plc Board, trading, succession planning and to discuss future plans. This meeting follows monthly board meetings held by the four trading divisions of the Group, Education, Adventure Travel, Hotel Breaks and Camping which report on and review trading progress and discuss future plans. The Group Chief Executive and the Group Finance Director attend some of the divisional meetings.

The planning and budgeting cycle enables management at all levels to identify and address all significant business risks and to control the strategic and financial objectives of the Group. The Board is responsible for the formulation of medium-term corporate strategy. This, in turn, provides a basis for the formulation and review of divisional strategy by the divisional boards. All strategic plans are subject to annual review. Divisional strategic plans and annual reviews are presented to and reviewed by the Board and, once approved, form the basis of annual budgets.

Detailed reviews of the trading divisions are included within the Business and Financial Review. The Board uses these, together with the Chairman¬?s Statement, to present a balanced and understandable assessment of the Group¬?s position and prospects.

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Conflicts of Interest
At the 2009 Annual General Meeting the shareholders approved an amendment to the Company¬?s Articles of Association to allow the Board to authorise actual or potential conflicts of interest that may arise and to impose such limits and conditions as it thinks fit. Conflicts of interest and duties can only be authorised by those Directors who do not have an interest in the matter being considered, and in making such decision, the Directors must act in a way they consider, in good faith, will most likely promote the success of the Company. The Company has established a procedure whereby actual and potential conflicts of interest and duties (and any changes) are advised to the Company Secretary and reviewed. The Board considers these procedures to have operated effectively during the year. During the year Neil Bright did not attend that part of the Board meeting or the Committee meeting at which his prospective appointment as Group Finance Director was discussed.

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Internal Control
The Board of Directors has overall responsibility for ensuring that the Company maintains a system of internal financial control to provide them with reasonable assurance regarding the reliability of financial information used within the business and for publication, and that assets are safeguarded.

There are inherent limitations in any system of internal financial control and accordingly even the most effective system can provide only reasonable, and not absolute, assurance with respect to the preparation of financial information and safeguarding of assets. The Board regularly reviews the effectiveness of the systems, control and reporting procedures and will continue to do so, making any changes required as a result of the review and the development of the Group.

The key features of the control system include:

  • an established internal organisation structure with clearly defined lines of responsibility and accountability;

  • comprehensive business planning, risk assessment and financial reporting procedures, including the annual preparation of detailed operational budgets for the following year and projections for subsequent years;

  • well established and documented accounting policies and procedures for individual businesses;

  • a monthly Board review of divisional management accounts information which is used to compare actual performance with budget and medium-term plans. These accounts include updated forecasts and other information to enable the Board to assess the prospects of all businesses in the Group;

  • a monthly Board review of significant changes in the external environment;

  • specific guidelines for the appraisal and authorisation of all capital expenditure and disposal proposals;

  • centralised treasury operations operating within defined limits which are subject to regular reporting to the Group Finance Director and monthly to the Board;

  • certain of the Group¬?s key functions (including company secretarial, legal, taxation (compliance and planning) and business risk insurance) are undertaken centrally under the direct control of the Group Chief Executive or the Group Finance Director. The Board is updated regularly on specific matters including taxation, interest and foreign exchange exposures;

  • annual risk assessment exercise involving self-assessment by management of all major business risks in terms of impact; and

  • post completion assessments which are carried out following major acquisitions.


During the year the senior financial management attended an internal conference at which a technical update, tailored specifically to the Group¬?s commercial needs, was presented by the Company¬?s auditors.

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Risk Management
The Board is responsible for the Group's system of internal control and for reviewing its effectiveness. Such a system is designed to manage rather than eliminate the risk of failure to achieve business objectives, and can only provide reasonable and not absolute assurance against material misstatement or loss. It is necessary to take commercial risks in the course of the management of the Group¬?s operations but those risks are fully evaluated as part of the decision making process.

The Board confirms that there is an ongoing process for identifying, evaluating and managing the significant risks that the Group faces. The Board regularly reviews the process, which has been in place for the whole of the 2009/2010 financial year and has continued to the date of approval of this report. The processes are in accordance with the revised Turnbull Guidance.

The Board continuously reviews the effectiveness of the Group's system of internal control. The Board's monitoring covers all controls, including financial, operational and compliance controls and risk management. It is based principally on reviewing monthly reports from executive management to consider whether significant risks are identified, evaluated, managed and controlled and whether any significant weaknesses are promptly remedied and indicate a need for more extensive monitoring. The Audit Committee assists the Board in discharging its review responsibilities and considers reports from the Group¬?s auditors on the effectiveness of the operation of internal control procedures. The Board has considered the need to establish an internal audit resource and has concluded that the current control mechanisms are sufficient for the size of the Group. The Board will continue to review this decision.

The Board also conducts an annual self-assessment process designed to review the effectiveness of all internal controls and risk management processes at both subsidiary and Group level. This review is structured by division and is based on information prepared by divisional management and reviewed by divisional boards. This process is designed to highlight key risks to the business (including social, environmental and ethical risks) and to consider what action should reasonably and cost effectively be taken to manage them.

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Audit Committee Report
The Audit Committee presents its report in relation to the financial year ended 30 September 2010.

Composition of the Audit Committee
During the year the Committee comprised three Non-executive Directors, all of whom are considered by the Board to be independent. Details of those who served on the Committee during the year are set out on page 21 and a further explanation of the reasons for independence can be found on page 20. Neil Bright, Chairman of the Committee, is a qualified chartered accountant and is currently group finance director of HMV Group plc. As a whole, the Committee has recent and relevant financial expertise and is appropriately qualified to undertake its duties in an effective manner. The Nomination Committee is in the process of recruiting a further Non-executive Director, who will also Chair the Audit Committee, once Neil Bright steps down as a Non-executive Director on 31 December 2010, to take up the role of Group Finance Director.

The Committee¬?s terms of reference are published on the Company¬?s website and are available on request from the Company Secretary.

Operation of the Audit Committee
The Committee met three times during the year. The Group Chief Executive, the Group Finance Director and the Chairman, together with representatives from the external auditors, attend meetings at the invitation of the Committee. The Committee has also met the external auditors without executive management present. The external auditors may also request a meeting if they consider it necessary. Members¬? attendance at the meetings held during the year can be found on page 22. The Committee¬?s duties included:

  • monitoring the integrity of and reviewing the Company¬?s financial statements and the material financial reporting judgments contained in them;

  • reviewing the Company¬?s financial risk management and internal control processes;

  • reviewing the external auditors¬? terms of engagement and plan for the audit of the accounts;

  • approving non-audit work provided by the Company¬?s auditors for fees in excess of ¬£10,000;

  • considering and making recommendations on the requirement for an internal audit function; and

  • reviewing arrangements for reporting and investigating employee concerns.


In addition to the above, the Committee revised the format of the self-assessment process designed to review the effectiveness of all internal controls and risk management processes to include specific sections on succession planning and management of anti-bribery and corruption practices in the Group. It also reviewed a schedule of claims above a threshold which are the subject of litigation being made by or brought against the Group.

Review of the external auditors
The Committee has been delegated responsibility for making recommendations to the Board on the appointment and removal of the external auditors.

Subject to the annual appointment of the auditors by shareholders, the Committee conducts a continuous review of the relationship between the Group and the auditors. This review includes:

  • the consideration of audit fees and advance approval of any fees for non-audit related work in excess of ¬£10,000 for an individual assignment;

  • the consideration of the auditors¬? independence and objectivity; and

  • the nature and scope of the external audit.


The current auditors were appointed following a detailed tender process in 2003. The Committee considered that it was not appropriate to conduct a tender process for audit services during the year due to the forthcoming change of the Chairman of the Committee and the Group Finance Director. The auditors confirm annually their policies on ensuring audit independence and provide the Committee with a report on their own audit quality procedures. A rotation of the audit partner took place during the 2006/2007 financial year. The Committee is satisfied that the independence of the external auditors has been maintained. A full breakdown of the audit and non-audit related fees is set out in note 3 to the financial statements on page 52 of the Annual Report. The Committee discussed the level of fees and considered them appropriate given the current size of the Group. The Committee endorses the use of the auditors for tax compliance work and some specific tax advisory work and the auditors have carried out work of this nature during the year as well as providing advice on changes to the accounting standards relating to the savings related share option scheme. In respect of due diligence reports the Board considers what is appropriate at the time of the acquisition, which does not preclude it from appointing the audit firm. Indeed, in some instances there is a clear benefit from using professional advisers who have a good understanding of the Group¬?s operations. Other accounting firms have been used during the year where the Group recognises them as having particular areas of expertise or where there is an independence issue. The Committee believes the level and scope of non-audit services does not impair the objectivity of the auditors.

Based on the Committee's review of the performance of the external auditors and on the planning and execution of the annual audit, the Committee has recommended to the Board that a resolution to reappoint Deloitte LLP be proposed at the forthcoming Annual General Meeting.

Neil Bright
Chairman of the Audit Committee

30 November 2010

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Nomination Committee Report
The Nomination Committee presents its report in relation to the financial year ended 30 September 2010.

Composition and role of the Nomination Committee
During the year the Committee comprised three Non-executive Directors and the Chairman. The Committee is responsible for evaluating the balance of skills, knowledge and experience of the Board and, where appropriate, recommending candidates for appointment. During the year the Company prepared job specifications for the Group Finance Director and a Non-executive Director (also to be Chair of the Audit Committee) and engaged external consultants to assist in identifying appropriate candidates for these roles as well as completing the search of the Group Chief Executive. The Committee proposed its candidates for appointment and, following disclosure of the candidates¬? other significant commitments, the full Board made the final decision. In addition, the Nomination Committee considered the re-appointment of James Greenbury and further details are set out on page 20 of the Annual Report. Neil Bright did not participate in those meetings at which his appointment as Group Finance Director was discussed. The search for the Non-executive Director has not been concluded at the date of this report.

For Non-executive Directors, their individual letter of appointment sets out the expected time commitment.

The Committee¬?s terms of reference are published on the Company¬?s website and are available on request from the Company Secretary.

Induction procedure
The Company Secretary supports the Chairman in ensuring new Directors receive appropriate induction and training. On joining the Board, a Director undergoes a structured induction programme, including the receipt of a comprehensive induction pack which includes various governance related issues. The new Director meets with each of the Executive Directors and senior management. If appropriate, the new Director also attends external training courses following his or her appointment which is tailored to his or her requirements.

Succession planning
The Board and the Nomination Committee recognise the importance of succession planning to ensure that the Group continues to prosper in the longer term. Operational matters are delegated through the Group Chief Executive and the Group Finance Director to the divisional directors with clearly defined lines of responsibility and accountability. This provides the opportunity for senior management to develop in some of the smaller business units before progressing to wider and more responsible roles. The Company has introduced a senior executive development programme which is aimed at enhancing the calibre of its senior management. The Committee is satisfied that Directors retiring in accordance with the Articles of Association at the forthcoming Annual General Meeting are properly qualified for reappointment by virtue of their skills and experience and their contribution of guidance and time to Board deliberations. The Committee is mindful of the need to ensure appropriate succession arrangements are in place for the Directors. The Committee seeks to identify new Directors and senior managers to ensure succession of Directors is conducted in a managed way, without significant disruption to the ongoing business of the Group.

John Coleman
Chairman of the Nomination Committee

30 November 2010

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Statement of Directors¬? Responsibilities
The Directors are responsible for preparing the Annual Report, the Directors¬? Remuneration Report and the Financial Statements in accordance with applicable laws and regulations.

Company law requires the Directors to prepare consolidated financial statements for each financial year. Under that law the Directors are required to prepare Group financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and Article 4 of the IAS Regulation and have also chosen to prepare financial statements for the Company under IFRSs as adopted by the European Union. Under company law the Directors must not approve the accounts unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing these Financial Statements, the Directors are required to:

  • properly select and apply accounting policies;

  • present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;

  • provide additional disclosures when compliance with the specific requirements in IFRSs are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity¬?s financial position and financial performance; and

  • make an assessment of the Company¬?s ability to continue as a going concern.

The Directors are responsible for keeping proper accounting records that are sufficient to show and explain the Company¬?s transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company¬?s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

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Responsibility Statement
We confirm to the best of our knowledge:

  • the financial statements, prepared in accordance with IFRSs, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and
  • the Business and Financial Review, which is incorporated into the Directors¬? Report, includes a fair review of the development and performance of the business and position of the Company and the undertakings included in the consolidation taken as a whole together with a description of the principal risks and uncertainties that they face.

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Going Concern
The Directors, in their consideration of going concern, have reviewed the Group¬?s future cash flow forecasts and revenue projections, which are based on market data and past experience. The Group is subject to a number of significant risks and uncertainties which are set out in the Business and Financial Review on page 9 of the Annual Report, which could affect the Group¬?s ability to meet these forecasts and hence its ability to meet its banking covenants. The Directors believe that the Group is adequately placed to manage its business risks successfully despite the current uncertain consumer economic outlook and challenging macro economic conditions.

Management is currently of the opinion that the Group¬?s forecasts and projections, after subjecting them to reasonable robust sensitivities, show that the Group should be able to operate within its current facilities and comply with its banking covenants. The Group has a robust policy towards liquidity and cash flow management and it is financed principally through ¬£255m of committed bank facilities through to May 2013.

After making enquiries, the Directors have formed a judgment, at the time of approving the financial statements, that there is a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the financial statements.

By Order of the Board

Martin Davies
Group Chief Executive

30 November 2010

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Terms of Reference for the Audit Committee
Constitution

1. The Audit Committee is constituted as a sub-committee of the main Board of Holidaybreak plc, to be known as the Audit and Risk Committee.

Membership

2. The Committee shall be appointed by the Board. All members of the Committee shall be independent non-executive directors of the Company. The committee shall consist of not less than three members. A quorum shall be two members.

3. The chairman of the Committee shall be appointed by the Board from amongst the independent non-executive directors.

Attendance at meetings

4. The Group Finance Director, head of internal audit, if appointed, and a representative of the external auditors shall attend meetings at the invitation of the Committee.

5. The Chairman of the Board, the Group Chief Executive and other board members shall attend if invited by the Committee.

6. There should be at least one meeting a year, or part thereof, where the external auditors attend without management present.

7. The Company Secretary shall be secretary of the Committee.

Frequency of meetings

8. Meetings shall be held not less than three times a year, and where appropriate should coincide with key dates in the Company's financial reporting cycle.

9. External auditors or internal auditors, if appointed, may request a meeting if they consider that one is necessary.

Authority

10. The Committee is authorised by the Board to:
    a. investigate any activity within its terms of reference;

    b. seek any information that it required from any employee of the Company and all employees are directed to co-operate with any request made by the Committee; and

    c. obtain outside legal or independent professional advice and such advisors may attend meetings as necessary.
Responsibilities

11. The responsibilities of the Committee shall be:
    a. to consider the appointment of the external auditor and assess independence of the external auditor, ensuring that key partners are rotated at appropriate intervals.

    b. to recommend the audit fee to the Board and pre-approve any fees in respect of non-audit services provided by the external auditor and to ensure that the provision of non-audit services does not impair the external auditors' independence or objectivity;

    c. to discuss with the external auditor, before the audit commences, the nature and scope of the audit and to review the auditors' quality control procedures and steps taken by the auditor to respond to changes in regulatory and other requirements:

    d. to oversee the process for selecting the external auditor and make appropriate recommendations through the Board to the shareholders for consideration at the AGM;

    e. to review the external auditor's management letter and management's response;

    f. to review the internal audit programme and ensure that the internal audit function is adequately resourced and has appropriate standing within the Company;

    g. to consider management's response to any major external or internal audit recommendations;

    h. to approve the appointment or dismissal of the head of internal audit, if appropriate;

    i. to review the Company's procedures for handling allegations from whistleblowers;

    j. to review management's and the internal auditor's reports on the effectiveness of systems for internal financial control, financial reporting and risk management;

    k. to review, and challenge where necessary, the actions and judgements of management, in relation to the interim and annual financial statements before submission to the Board, paying particular attention to:

      i. critical accounting policies and practices, and any changes in them
      ii. decisions requiring a major element of judgement
      iii. the extent to which the financial statements are affected by any unusual transactions in the year and how they are disclosed
      iv. the clarity of disclosures
      v. significant adjustments resulting from the audit
      vi. the going concern assumption
      vii. compliance with accounting standards
      viii. compliance with stock exchange and other legal requirements
      ix. reviewing the Company's statement on internal control systems prior to endorsement by the Board and to review the policies and process for identifying and assessing business risks and the management of those risks by the Company; and

    l. to consider other topics, as defined by the Board.
Reporting procedures

12. The secretary shall circulate the minutes of meetings of the Committee to all members of the Board, and the Chairman of the Committee or, as a minimum, another member of the Committee, shall attend the Board meeting at which the accounts are approved.

13. The Committee members shall conduct an annual review of their work and these terms of reference and make recommendations to the Board.

14. The Committee's duties and activities during the year shall be disclosed in the annual financial statements.

15. The Chairman shall attend the AGM and shall answer questions, through the Chairman of the Board, on the Audit Committee's activities and their responsibilities.

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Terms of Reference for the Nomination Committee
Scope and Objectives

The Nomination Committee's primary objective shall be to assist the Board in making decisions on Board appointments, both executive and non-executive. In doing so, the Committee shall ensure that there is a formal and transparent procedure for identifying individuals who will complement the competence of the Board and that appointments are made on merit against a specification agreed by the Board.

Chairman

The Chairman of the Nomination Committee shall be the Chairman of the Company.

Membership

Membership shall be the non-executive directors of the Company and the Chief Executive. Any member of the Board shall have authority to attend meetings and to contribute to proceedings.

The Board shall elect members for a period of 3 years subject to periodic re-election of directors by the Company in general meeting and subject to the retirement or removal of non-executive directors from the Board. The Board shall have power to appoint members of the Committee or to remove members of the Committee.

Quorum

A quorum shall be taken as two members present in person or by proxy who shall be authorised to pass resolutions on behalf of the full Committee.

Secretary

The Company Secretary shall be secretary of the Committee. The Company Secretary, his/her designated assistant, or any other Executive Director in attendance shall take minutes of meetings. Minutes of meetings shall be circulated to all Board members.

Frequency and Procedures of Meetings

Meetings shall be held as and when necessary.

Any member of the Committee shall have authority to convene a meeting of the Committee by giving Notice to all members of the Committee in the form outlined in Article 96 of the Company's Articles of Association.

In accordance with Article 103 of the Company's Articles of Association, the meetings and proceedings of the Committee shall be governed by the provisions contained in the Company's Articles of Association for regulating meetings and proceedings of the Board so far as the same are applicable and are not superseded by any regulations imposed by the Board.

Powers

The Committee shall not have any executive powers and shall report to the Board of Directors. The Board delegates authority to the Committee to discharge the responsibilities outlined in the following paragraph:

Responsibilities

a) to review the composition of the Board and establish potential gaps in experience.

b) to propose to the Board, in the first instance, any new appointment, whether of executive or of non-executive directors.

c) to provide a forum in which candidates can be more easily discussed against a specification previously agreed with the Board and through which they can be better assessed.

d) to ensure that any search in respect of the appointment of a new director of the Company is thorough and maintains its momentum.

e) to ensure that appointments are made on merit against a specification agreed with the Board.

Outside Advice

The Committee shall be entitled to call on the advice of any person whom it considers appropriate to advise them.

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Terms of Reference for the Remuneration Committee
1. Scope and Objectives

The Remuneration Committee's primary objective is to enable the attraction, retention and motivation of Executive Directors of appropriate calibre and experience to run the Company successfully whilst not paying more than is necessary to meet this objective. In meeting this objective, the Committee shall ensure that a proportion of Executive Director remuneration is structured so as to link rewards to corporate and individual performance.

In addition, the Committee has a broader remit which includes share option schemes, overall remuneration policy in respect of the Executive Directors and also Executive Director performance, career development and training requirements.

2. Chairman

The Chairman of the Remuneration Committee shall be an independent non-executive director of the Company.

3. Membership

Membership will consist of all the independent non-executive directors. Members shall have no personal financial interest other than as shareholders in the matters to be decided, no potential conflicts of interest arising from cross-directorships and no day-to-day involvement in the running of the business.

The Board shall have power to appoint members of the Committee or to remove members of the Committee should they fail to discharge any of the responsibilities outlined in paragraph 8 of these terms of reference, or should they cease to meet the criterion of independence.

The Board of Directors shall elect members for a period of 3 years subject to periodic re-election of directors by the Company in general meeting and subject to the retirement or removal of a non-executive director from the Board.

4. Quorum

A quorum shall be taken as two members present in person or by proxy who shall be competent to exercise all or any of the authorities, powers and discretions vested in or exercisable by the full Committee.

5. Secretary

The secretary of the Committee shall be the Company Secretary. Minutes of meetings can be taken by the Company Secretary, his/her designated assistant, or any other Executive Director in attendance.

6. Frequency and procedures of meetings

Meetings shall be held as and when necessary but not less than twice a year.

Any member of the Committee shall have authority to convene a meeting of the Committee by giving Notice to all members of the Committee in the form outlined in Article 96 of the Company's Articles of Association. The Board shall have authority to compel any member of the Committee ("the Member") to convene a meeting of the Committee and the Member shall be required to carry out such instructions without delay but in any event within 48 hours of receipt.

In accordance with Article 103 of the Company's Articles of Association, the meetings and proceedings of the Committee shall be governed by the provisions contained in the Company's Articles of Association for regulating meetings and proceedings of the Board so far as the same are applicable and are not superseded by any regulations imposed by the Board.

The Chief Executive shall have the right to address any meeting of the Committee; others may be called upon or shall be able to speak by prior arrangement with the Chairman of the Committee.

7. Powers

In accordance with Article 102 of the Company's Articles of Association, the Board has delegated its powers, authorities and discretions to the Committee to discharge the responsibilities outlined below in paragraph 8 of these terms of reference.

8. Responsibilities

    The responsibilities of the Committee shall be:

    a) to determine the remuneration and all other benefits in cash or in kind (including but not restricted to pensions, options and bonus payments), and terms of employment including compensation payments in respect of individual Executive Directors in consultation with the Chief Executive of the Company save that the Chief Executive shall play no part in determining his own remuneration and other benefits or his own terms of employment.

    b) to liaise with the Nomination Committee to ensure that the remuneration of newly appointed Executive Directors is within the Company's overall policy;

    c) to keep under review and to make recommendations with regard to, and to approve the introduction, variance or discontinuance of, all specific forms of reward whether in cash or in kind.

    d) to keep under review the Company's overall policy in respect of the remuneration and all other benefits of the Executive Director.

    In framing the policy on remuneration, the Committee shall give full consideration to the best practice provisions relating to directors' remuneration, remuneration policy, service contracts and compensation as set out in the Combined Code; as well as the UK Listing Authority's Listing Rules and associated guidance and shall be sensitive to other factors including levels of pay and employment conditions elsewhere within and outside the Company;

    e) to review competitor companies but ensure automatic increases are not implemented without a corresponding improvement in performance;

    f) to keep under review the Company's share option schemes and incentive plans to determine all option grants or share awards to be made under the terms of the Company's share option schemes and incentive plans and to determine the relevant performance criteria, which should be met by participants in such schemes before options may be exercised or awards vest. In making such decisions, the Committee shall consult the Chief Executive of the Company save that the Chief Executive shall play no part in determining his own award or performance conditions.

    g) to keep under review Executive Director performance, career development and training requirements.

    h) to report and account directly to shareholders each year on matters relating to Executive Directors' remuneration, on behalf of the Board, in accordance with the Directors' Remuneration Report Regulations 2002 and the UK Listing Authority's Listing Rules;

    i) the Committee's Chairman or other member of the Committee to attend the Company's Annual General Meeting to answer shareholders' questions relating to directors' remuneration.

    j) to review annually the level of remuneration for divisional directors and senior managers who report directly to Executive Directors, such remuneration being determined by the Executive Director to whom they report, subject to prior agreement with the Group Chief Executive.

    k) to make its terms of reference available on request and to include the information on the Company's website.
9. Authority

    The Committee is authorised by the Board:

    9.1 to seek any information it requires from any employee of the Company in order to perform its duties;

    9.2 to take professional advice from any external adviser, at the Company's expense;

    9.3 to select, determine terms of reference and appoint, at the Company's expense, Remuneration Consultants in connection with its duties; and

    9.4 to seek the advice and assistance of any of the Company's executives, provided that it ensures that this role is clearly separated from their role within the business.

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