Report of the Directors

A note from the Nominations Committee

Dear shareholder,

The Committee seeks to ensure that there is a balanced and effective Board in terms of skills, knowledge and experience. It also reviews the leadership needs of the Group and is responsible for identifying and developing talent across the Group. This year the Nominations Committee comprised myself, Sir Christopher Bland, Sir Stuart Rose, David Rough and Bo Lerenius.

During the year under review, the principal focus of the Committee was succession planning for both the Board and across the Group as a whole. The Committee looks at identifying and developing internal talent as well as bringing in new people to ensure that we have the right skills in key areas of the business. We met four times. Two of these meetings were arranged on an ad hoc basis to consider and recommend to the Board the appointments of Chris Bartram and Robert Noel. External search consultants were used in relation to the appointment of Chris Bartram.

At the remaining two meetings, the Committee considered Board structure, size, composition and succession needs, keeping under review the balance of membership and the required blend of skills, knowledge and experience of the Board. We decided to propose all Board members for re-election at the Annual General Meeting every year in order to enhance accountability to shareholders.

Having reviewed the effectiveness and commitment of Non-executive Directors at the conclusion of their specified terms of office, the Committee made recommendations to the Board on their reappointment. The Committee concluded that all of the Non-executive Directors were demonstrating a high level of time commitment and effectiveness in respect of their Board participation. If a Non-executive Director has served on the Board for more than six years, the Committee conducts a particularly rigorous review before making its recommendation to the Board. There are currently two Non-executive Directors who have served on the Board for more than six years, David Rough and Sir Stuart Rose, who joined the Board in April 2002 and May 2003 respectively. Bo Lerenius joined the Board in June 2004 and, accordingly, was subject to a particularly rigorous review prior to being proposed for re-election at the 2010 Annual General Meeting.

During the year the Committee reviewed the time required from Non-executive Directors, and the annual performance evaluation was used to support the Board’s conclusion that the Non-executive Directors were spending sufficient time to fulfil their duties. The Committee also reviewed succession plans for Executive Directors and senior managers.

When considering candidates, the Committee used – and continues to use – objective criteria. All appointments are made on merit.