The Board.

The Board comprises a non-executive Chairman, seven non-executive directors and four executive directors. The details of the current directors, including biographies, are in the Board of Directors section. During 2009, there were a number of Board changes:

• Mark Gregory was appointed as Group Executive Director (Savings) on 28 January 2009 following the resignation of Kate Avery as a director of the Company.
• Dame Clara Furse joined the Board as a non-executive director on 1 June 2009.
• Andrew Palmer retired from the Board and Nigel Wilson was appointed as Group Chief Financial Officer and a director of the Company with effect from 1 September 2009.
• John Stewart was appointed as Chairman Designate on 1 January 2010. Sir Rob Margetts retired from the Board and John Stewart formally took over as Chairman on 1 March 2010.

Appointments to the Board are the responsibility of the Board as whole, acting on the advice and recommendations of the Nominations Committee. The non-executive members of the Board contribute their diverse business experience and wide range of skills to the Company. The composition of the Board is regularly reviewed to ensure the right combination of skills is in place to successfully drive the Company forward. Most recently, this took place as part of our Board evaluation exercise, as described in the Introduction section. Experience and qualities from other industries, and other aspects of commercial and public life, that will contribute to the driving forward of the Company’s strategy are valued however, the time commitments of all our non-executive directors are carefully assessed to ensure that the Company continues to derive the benefit whilst avoiding time commitments on the non-executives that are unduly onerous. Succession planning is considered on an ongoing basis for all Board members and senior management, and arrangements are in place to identify the right people when the time comes.

The Combined Code, as well as the Company’s Articles of Association, require that on appointment to the Board, a director is subject to election by the Company’s shareholders at the first AGM after their appointment, and then to re-election every three years.

Dame Clara Furse, John Stewart and Nigel Wilson will all offer themselves for election at this year’s AGM as they have been appointed since the last AGM. Rudy Markham, John Pollock, Henry Staunton and James Strachan retire by rotation at this year’s AGM and will offer themselves for re-election. Each of the non-executive directors offering themselves for re-election have been reappointed by the Company for further three year terms. The Board is satisfied that those directors retiring and seeking re-election are properly qualified for their reappointment by virtue of their skills and experience and their contribution to the Board and its committees. The Notice for this year’s AGM confirms that the performance of the directors being proposed for election and re-election continues to be effective and they continue to show commitment to their role.

If any director is not elected or re-elected at the AGM, their appointment will terminate automatically with immediate effect.

Following appointment to the Board, directors undertake a formal induction programme aimed at familiarising them with the Company, its products and services, the markets in which it operates and the Company’s senior management. The programme includes meetings with the executive directors, the Group General Counsel and senior management responsible for Investor Relations, Internal Audit, Strategy, International, Communications, Human Resources and Group Compliance.

Ongoing training is provided to the Board through the Business Awareness Programme and ad hoc training sessions are conducted on topical issues as they arise. Sessions during 2009 included the Turner Review and the Retail Distribution Review.

The terms of appointment of the non-executive directors are available for inspection at the Company’s registered office, on the Company’s website and will be available at the AGM.

The service contracts for the executive directors all provide for termination on notice by the executive director or the Company on 12 months’ or less. In relation to John Pollock, who will offer himself for re-election at this year’s AGM, the termination notice period is six months and on termination, he would become entitled to six months’ salary in addition to the payment of pension contributions and car allowance. The service contract of Nigel Wilson, who will offer himself for election at the AGM, is terminable on 12 months’ notice.

The Board has determined that throughout 2009 the majority of the non-executive directors (excluding the Chairman) were independent in character and judgment. Dr. Ronaldo Schmitz has served on the Board since October 2000 and he intends to retire at this year’s AGM. The Board remained satisfied of Dr. Schmitz’s independence of character and judgment during 2009. Although Sir Rob Margetts first joined the Board in 1996, the Board believes that his knowledge and experience were of great value to the Board and the Company in 2009 during which time the Nominations Committee worked to identify his successor.

The Board and committee meetings attended by each director during 2009 are shown in the table above. Non-attendance at a meeting is rare and only arises if a director has an unexpected commitment or, for a newly appointed director, an unavoidable existing commitment that cannot be rearranged.

The activities of the Board are guided by the principles of the Combined Code. There is a formal list of matters specifically reserved for decision by the Board which includes all decisions on strategic matters, capital expenditure, dividend policy and major contracts. The Board regularly reviews the performance of the Group and its businesses against plan and receives regular reports from each executive director and the Group General Counsel. The Board also receives detailed briefings from senior managers on the key business areas, which are aimed at enhancing Board members’ understanding of the business and provide the Board with the opportunity to question and review strategy and develop working relationships with senior managers. The Board also receives an annual report from the Group Risk and Compliance Director on regulatory compliance matters and the Company’s relationship with its regulator, the Financial Services Authority.

The Chairman and non-executive directors meet formally in the absence of the executive directors at least twice per year. The Chairman also regularly meets the non-executive directors on a one to one basis to discuss any concerns they may have about the Board or the running of the Company. The Senior Independent Director is also available to the non-executive directors should they have any concerns about the performance of the Chairman. The non-executive directors formally met in 2009 without the Chairman present to appraise the Chairman’s performance. In addition to the annual Board performance evaluation, executive directors participate in regular performance reviews with the Group Chief Executive and are subject to a formal annual appraisal. The Chairman conducts regular performance reviews of the Group Chief Executive.

The Board has defined the roles of the Chairman, the Group Chief Executive and the Senior Independent Director and the division of responsibilities between them so that no one individual has unfettered powers of decision. The Chairman is responsible for the leadership and effective performance of the Board, effective communication by the Board with the Company’s shareholders and, through the Company Secretary, ensuring that Board members have the information they require in order to discharge their responsibilities.

The Group Chief Executive is responsible for leading the day to day management of the Group within the strategy approved by the Board. The Group Chief Executive chairs the Executive Committee of which all executive directors are members together with the Chief Executive Officer (Investments) and Head of International. The Group Risk and Compliance Director, the Investor Relations and Strategy Director, the Human Resources Director and the Group General Counsel are all in regular attendance.

Sir David Walker is the vice Chairman and Senior Independent Director. He is available to shareholders if they have any concerns that cannot be resolved through the usual channels.

The Company Secretary is responsible for advising the Board, through the Chairman, on all governance matters. Directors have access to the advice and services of the Company Secretary as and when required, as well as to independent professional advice at the expense of the Company. The appointment and removal of the Company Secretary is a matter reserved specifically for the Board.