Introduction.

2009 was a challenging year for Boards of financial services companies. The events that shook financial markets last year have focussed attention on the governance of major companies and the role of the Board in providing leadership. The Board of Legal & General has steered the Company through these recent difficult times ensuring continuing stability whilst striving for better performance for our shareholders.

The Board is committed to the highest standards of corporate governance and is determined that the Group is recognised as a leader in responsible business. The Board believes that good corporate governance and a successful company go hand in hand.

The Board sits at the peak of the Company’s governance structure. In the words of the Combined Code, the Board’s role is to provide entrepreneurial leadership within a framework of prudent and effective controls which enables risk to be assessed and managed. The Board achieves this through its own work and the work of its committees.

I hope this report, together with the other reports in this section, provide you with an understanding of our governance framework and how the Company complies with the principles and provisions of the Combined Code.

It has been an honour to serve the Company, the Board and shareholders for the last 13 years. I wish John and the Board all the best for 2010 and beyond.

Much is demanded of the directors of the Boards of major companies. It is imperative that a Board comprises the right balance of skills and experience to provide effective stewardship of the Company through good times and bad. During 2009, the Board welcomed Dame Clara Furse as non-executive director, and Nigel Wilson as executive director. All of our non-executive directors contribute their diverse business experience and wide range of skills to the Company. With two of our most experienced non-executive directors, Frances Heaton and Dr. Ronaldo Schmitz, planning to retire this year, our focus is on identifying successors with skills and experience aligned to the Group’s strategy.

The Board has closely followed the developments in corporate governance practice during 2009, in particular the commentary on the Board’s role in risk governance. In line with emerging best practice, the Board determined that, in future, its risk committee should be chaired by a non-executive director. Like the executive chaired Group Risk and Compliance Committee, the non-executive chaired risk committee will have responsibility for providing advice and oversight to the Board on current risk exposures and future risk strategy. More information about the committee and how we manage risk can be found in the Risk management section.

Each year the Board participates in a formal evaluation of its performance, the performance of its committees and that of individual directors. The evaluation process is considered a valuable exercise. The Board undertook the evaluation for 2009 in January of this year. Use of an external facilitator was considered however, as the timing of the exercise coincided with the transition from Sir Rob Margetts to myself, it was agreed that the evaluation should be facilitated internally by myself and supported by externally established online tools. The evaluation comprised a confidential online questionnaire, which sought directors’ views on Board relationships, the role of the Board and its committees, its effectiveness (in particular in developing and testing strategy), and individual directors’ views on their own contribution during the year. The questions also examined whether the Board meets regularly enough, provides an atmosphere for candid discussion and debate, and devotes the right amount of time to the right things. I have met with all Board members individually to discuss their responses and will be developing an action plan to be agreed by the Board and implemented this year. Overall, I am satisfied that the Board operates well.

We recognise that engagement between the Board and the Company’s shareholders is critical to ensure an alignment of interests. During 2009, the Company was particularly focussed on ensuring the channel of engagement was open and that the messages being communicated by the Company to its investors were clear and understandable. Meetings with institutional investors and analysts were undertaken during the year on behalf of the Board by the Group Chief Executive and Group Chief Financial Officer. The Board is supported by our Investor Relations department, which is in regular contact with institutional investors and analysts. A report on the activities of the Investor Relations department, and the feedback received from investors and analysts, is provided to the Board at each meeting by the Group Chief Financial Officer. This ensures that the Board is kept regularly appraised of the key issues and concerns of the Company’s major shareholders. This year, we are continuing our focus on engagement with a comprehensive schedule of regular investor and analyst meetings. Sir David Walker, as the Senior Independent Director, and myself are available to meet or speak with major shareholders on request if they have any concerns that are not able to be addressed through the usual channels.

The Board views the Annual General Meeting (AGM) as an important opportunity to engage with the Company’s private investors. All Board members attend the AGM and are available to meet shareholders and answer any questions. We endeavour to make attendance at our AGM a rewarding experience for investors in terms of meeting the Board and developing a better understanding of our business. I would encourage as many shareholders as possible to attend on 26 May 2010. We also now provide a dedicated contact in the Company for our private investors to raise any concerns or queries that they might have.

I look forward to meeting many of you at the AGM and through our Investor Relations programme.