Report of the Directors

Letter from the Chairman

Tim Stevenson

“I am pleased to present the Governance section of the annual report, including the Corporate Governance Report for the year ended 31st March 2012.”

Dear Shareholder

Good governance is a cornerstone of a successful and sustainable company. The group has a well established framework of policies, processes and management systems to support its governance and sustainability efforts, which apply to all group operations worldwide. These are described in the Governance and Sustainability section.

The UK Corporate Governance Code

The Annual Report and Accounts includes a formal Corporate Governance Report. The company is reporting against the UK Corporate Governance Code (the Code), which was introduced in June 2010. Although based on the Combined Code on Corporate Governance (the Combined Code) which it replaced, the Code contains a number of substantive changes to the Combined Code’s main principles and provisions. In the main, these place greater emphasis on board behaviour. As in previous years, the company is reporting on how it has applied the main principles and whether it has complied with the relevant provisions. Under the Code, companies must explain their business model and strategies for delivering objectives. Explanations of our business model and strategy are contained in the Business Review. Click here to read the Responsibility of Directors statement.

Board Role and Effectiveness

The preface to the Code encourages chairmen to report in their annual statement how they have ensured that the Code principles concerning leadership and board effectiveness have been applied during the year. I refer to this briefly in my Chairman’s Statement and more fully in the Corporate Governance Report. In preparing these, account has been taken of the Guidance on Board Effectiveness issued by the Financial Reporting Council in March 2011, which is aimed at assisting boards in applying these Code principles.

Board and Committee Evaluation

We report in the Corporate Governance Report on the board and committee evaluation process carried out following my appointment as Chairman Designate in March 2011. For the first time, the evaluation was externally facilitated by an independent consultant experienced in board evaluation. The evaluation process was ongoing at the date of publication of the 2011 annual report and has since been concluded. We report on the methodology used and the outcome. The board is conducting an internal review process this year and we describe the process being used. I propose to present the outcome of the evaluation, which is not complete at the date of publication of this annual report, to the meeting of the board in July 2012. I will report fully in the 2013 annual report.

Boardroom Diversity and Succession Planning

Boardroom diversity and succession planning are key issues for all boards. Descriptions of our approaches to these topics are set out in the Corporate Governance Report.

UK Corporate Governance Code Compliance Statement

Our statement of compliance with the provisions of the Code is set out in the Corporate Governance Report. I am pleased to report that except in one limited respect, the company has complied with all relevant provisions of the Code throughout the year ended 31st March 2012 and from that date up to the date of publication of this annual report.

Tim Stevenson

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