Simon Haslam

Colt continued to make progress in its commitment to effective succession planning, planned Board refresh and maintaining a balanced Board, including the right skills and diversity. During 2014 the Board appointed a new Independent Non-Executive Director and a new non- Independent Non-Executive Director as part of its planned refresh cycle. Colt also appointed a new Executive Director, our CFO, who is independent of the majority shareholders. Colt will continue to work to maintain and improve Board effectiveness and governance at Colt. The overriding priority is to maintain a world class Board to serve our shareholders.

Simon Haslam

The UK Corporate Governance Code ("the Code") is published by the UK Financial Reporting Council and is available on their website www.frc.org.uk. As a company with a premium listing of shares on the London Stock Exchange, we are required to explain how we apply the main principles and how far we complied with the provisions set out in the Code. The Company complied with the provisions of Section A and C of the Code in all respects except for A.3.1 with regard to the appointment of Simon Haslam as Chairman as he did not meet the independence criteria for appointment. The Board decided that it remains appropriate to continue to have a Chairman who is employed by one of the Company's major shareholders and Simon Haslam, although not independent under the provisions of the Code, is independent of management and continues to exercise his judgement in the interests of all shareholders.

Three of our Independent Non-Executive Directors who had served on the Board for more than nine years, Andreas Barth, Vincenzo Damiani and Gene Gabbard stood down at the AGM in 2014. This was in accordance with the principle in Colt's Board Composition Guidelines that Independent Non-Executive Directors should not serve for more than nine years. All Directors serving for more than six years are subject to a rigorous annual review. The Board is satisfied that Sergio Giacoletto remains independent and makes an outstanding contribution to the Board.

All Directors are subject to annual re-election.

Olivier Baujard was appointed to the Board at the AGM in 2014. He was recruited by MWM, an independent firm specialising in NED recruitment. Colt retained Egon Zehnder and MWM, both independent firms with considerable experience in senior executive recruitment, in the search for Hugo Eales. Pursuant to Colt's ongoing programme of planned Non-Executive Director rotation and refresh, Tim Hilton retired as a Non-Executive Director on the Colt Board on 31 December 2014 and was replaced by Jennifer Uhrig on 1 January 2015. The process of recruitment for Jennifer Uhrig is set out in the Nomination Committee.

Board composition as at 31 December 2014

Board Composition

Division of responsibility

There is a clear division of responsibility between the Chairman and the Chief Executive Officer, with neither having unfettered powers of decision with respect to substantial matters. The Chairman is responsible for leading the Board and setting its agenda, including major decisions on strategic direction and financial transactions and for ensuring that the Board functions effectively. Simon Haslam's commitments other than to the Group are set out on in the Board of Directors. They were disclosed to the Board prior to his appointment and have not changed during the year. The Chief Executive Officer is responsible for executing strategy and executive management, operation and development of the Group's business.

Governance Structure 2014
Division of responsibility

Board and Committee membership as of 31 December 2014

NameStatusAuditRemunerationNomination
Olivier Baujard*Independent Non-Executive DirectorMemberMember
Rakesh BhasinCEO, Executive Director
Hugo EalesCFO, Executive Director
Sergio GiacolettoSenior Independent DirectorMemberMemberMember
Simon HaslamChairman, Non-Executive DirectorChairman*
Tim HiltonNon-Executive Director
Katherine Innes KerIndependent Non-Executive DirectorMemberMember
Anthony RabinIndependent Non-Executive DirectorChairmanMember
Lorraine TrainerIndependent Non-Executive DirectorChairman*Member
Michael WilensNon-Executive Director

* As from 24 April 2014

Senior Independent Director

Sergio Giacoletto is the Senior Independent Director (SID).

The role of the SID is to act as an alternative conduit to the Board for the communication of shareholder concerns, to act as chairman of meetings of the Independent Non-Executive Directors which are not attended by the Chairman and to lead the annual performance evaluation of the Chairman.

The SID reports the discussions of any meetings with shareholder representatives to the Board. At the end of every Board meeting Executive Directors, management and Fidelity related Directors withdraw and the SID chairs a meeting of the Independent Non-Executive Directors to provide a forum for any issues to be raised.

In 2014 the SID chaired numerous meetings of the Independent Non-Executive Directors to discuss, negotiate and decide the acquisition of KVH, a related-party transaction. Together with the Chairman of the Audit Committee, the SID led negotiations on behalf of the Company with the owners of KVH in respect of the terms, purchase price and other aspects of the transaction.

Attendance

In the event that a Director is unable to attend all meetings of the Board or Board Committees of which they are members, the Director is invited to confirm that they remain committed to the role and have the requisite time available to perform the role.

In 2014 the Board held five scheduled meetings and numerous interim telephone meetings as required. There were 22 additional meetings including 17 Independent Directors' meetings to discuss, negotiate and decide the acquisition of KVH.

Operation of the Board

The attendance of each of the Directors at the scheduled Board meetings held in 2014 while a Director was:

DirectorMeetings
held
Meetings
attended
Percentage
attended
Andreas Barth*22100%
Olivier Baujard**33100%
Rakesh Bhasin55100%
Vincenzo Damiani*22100%
Hugo Eales**11100%
Mark Ferrari*44100%
Gene Gabbard*22100%
Sergio Giacoletto55100%
Simon Haslam55100%
Tim Hilton55100%
Katherine Innes Ker5480%
Anthony Rabin55100%
Lorraine Trainer55100%
Michael Wilens55100%
Average % attendance99%

* Andreas Barth, Vincenzo Damiani and Gene Gabbard retired at the 2014 AGM on 24 April 2014. Mark Ferrari stepped down from the Colt Board as an Executive Director on 31 October 2014.

** Olivier Baujard and Hugo Eales were appointed to the Board on 24 April 2014 and 1 November 2014, respectively.

The Board is primarily responsible for decisions on Group strategy, including the approval of strategic plans, annual budgets, interim and full year financial statements and reports, accounting policies and all material capital projects, investments and disposals. There is a schedule of matters reserved for approval by the Board.

Each Director is provided with monthly reports which include financial information and updates on the business. When there is a Board meeting, this information is circulated to the Directors in advance of the meeting, together with details of all other business items to be considered at the meeting. Directors receive regular articles on industry news and analysts' and press reports on Colt. The Directors are encouraged to supplement this information through direct contact with the Group's senior management and the Company Secretary facilitates regular informal meetings throughout the year. Direct access to senior management is encouraged. Other members of the senior management team regularly attend Board and Committee meetings. The Non-Executive Directors have the opportunity to discuss Colt strategy and Board business individually with the Chairman and the CEO regularly throughout the year as well as during the annual Board training day.

Calendar of activities for the Board

Board meetings are held in Luxembourg or elsewhere by exception. The Articles prohibit any decisions being made in the UK. The annual programme, which is set three years in advance, involves four meetings timed to review the quarterly results and another timed to approve the budget for the following financial year. Meetings are held over a two or three day period, to include site visits, formal and informal meetings with local management and Committee meetings. Occasional single purpose interim meetings are held by teleconference to deal with out of cycle requests.

Board meeting 2014 activities

The Board approved the 2013 financial statements and the 2013 Annual Report together with the 2014 Annual and Extraordinary General Meeting notice and received the results of those shareholder meetings.

During 2014, the Board focused on executing and developing Colt's growth strategy plan, including geographic expansion. The Board considered possible targets and the strategic fit and growth opportunities of KVH. The Board focused on acquisition related matters, including financing options, due diligence review and integration plans. The Board reviewed periodic reports on the business and monitored the progress of the business during the year. The Board considered how to improve performance against the business plan. In reviewing execution, the Board approved the realignment of Colt into four lines of business: Network Services, Voice Services, Data Centre Services and IT Services to simplify and focus the business. The Go to Market organisation and capability was reviewed. The Board also devoted time to succession planning, both at Board and management level. Candidates for new Board appointments were reviewed and the Board approved the appointments of Olivier Baujard and Jennifer Uhrig. A Board evaluation was conducted by an independent third party external provider. Other activities included a review of Colt's property portfolio and key nodes as well as a review of the Colt-wide approach to programme and project governance, control and management. The Board visited Colt's operation in Paris and received presentations from the local management team.

The Board also approved each of the 2014 Q1 and Q3 Interim Management Statements and the H1 financial results and associated announcements. The 2015 budget was approved.

At each meeting the Board received reports from each Chairman of the Audit Committee, Remuneration Committee and Nomination Committee on the business conducted by those Committees.

Induction, information and ongoing development

Induction is tailored to each individual Director's requirements depending on their background and role. On appointment, Directors receive a comprehensive induction process in accordance with ICSA best practice and Section B of the UK Code of Corporate Governance. This is designed to develop their knowledge and understanding of the Group's business through visits to various key sites including data centres and offices, presentations on relevant technology, products and services, one-to-one meetings with Executive Directors and senior management and a familiarisation with investor and analysts' perceptions of the Group. As appropriate, meetings are arranged with representatives of significant shareholders and key advisors including lawyers, brokers and auditors. Slaughter and May provided a tailored seminar on UKLA rules for Olivier Baujard as part of his induction.

A Director's Manual is available for new Directors. The manual contains information on the Company, the Directors' duties and liabilities under Luxembourg law and key policies and documents. New Directors are offered tutorials on Colt's corporate governance framework, organisation, corporate structure, operations, insurance, Code of Business Conduct, share dealing and other corporate policies and procedures, together with recent Board materials and presentations as appropriate.

The Directors' knowledge and understanding of the Group's business is refreshed throughout the year, with briefings as necessary on corporate governance and regulatory compliance. The training needs of the Directors are periodically reviewed and a Board training day is organised annually. Presentations by key members of the relevant teams are supplemented by reading materials. Ad hoc informal training on issues relevant to Colt, such as new technologies and network development, is regularly provided by management upon request during the year. Additionally, as part of ongoing training and development, Directors receive periodic summaries of Colt specific and industry news.

Evaluation

The 2014 Board evaluation was performed externally by an independent third party consultant, EquityCommunications Ltd. EquityCommunications provides no other services to Colt. The 2014 report was the second externally facilitated review that the Company has commissioned. It is intended that Colt will use external consultants to conduct the evaluation every three years, in compliance with the Code.

The review process took the form of confidential questionnaires specifically tailored to the needs of the Colt Board. Directors were asked to complete the questionnaire by indicating their level of agreement with questions or statements, and were encouraged to provide additional comments, as they felt appropriate. The questionnaires focused on areas for development recommended from the previous year's evaluation and centred on Board composition, Board structure and diversity, decision making, competitor landscape, project management and customer contact, strategy, risk and risk management, succession planning and performance as well as Board Committees. Answers to the questionnaires were collated by EquityCommunications, findings from the evaluation were considered by the Board and a follow-up action plan was agreed.

In summary, the conclusion was that each Director continued to devote appropriate time to the role and that the Board, the Committees and each of the Chairmen are performing effectively, with the right skill sets and a culture which enables openness and high quality debate.

To supplement the evaluation process, it is the Board's practice for the Chairman to provide feedback to the CEO and for the Senior Independent Director to provide feedback to the Chairman at the end of each meeting. Additionally the Company Secretary collates regular feedback from each Director as part of the process.

how the board spent its time in 2014 Board Time 2014

The acquisition of KVH required 22 additional meetings including 17 Independent Directors' meetings and an additional site visit in Japan.