Report of the Nomination Committee

Role of the Nomination Committee

The Nomination Committee is a sub-committee of the Board whose principal purpose is to advise on the appointment and, if necessary, dismissal of Executive and Non-Executive Directors. The Committee's terms of reference, which are listed on the company's website, include all matters required by the UK Corporate Governance Code. Further information on "The Code" can be found on the Financial Reporting Council's website The terms of reference are reviewed periodically by the Company Secretary and any changes are then referred to the Board for approval. No changes were made to the terms of reference during the year.

Composition of the Nomination Committee

The Nomination Committee comprises all the independent Non-Executive Directors together with the Chairman and Group Chief Executive. The quorum necessary for the transaction of business is two, each of whom must be an independent Non-Executive Director.

As recommended by the Code the Chairman acts as the Chairman of the Committee which also comprises Messrs J. A. Biles, S.C. Harris, Dr. K. Rajagopal and Ms. E. Lindqvist (appointed 1 June 2012). J. Vogelsang, after 9 years of service, retired from the Committee on 31 December 2011. The Chairman may not chair the Committee when it is dealing with the matter of succession to the Chairmanship of the Company. Only members of the Committee have the right to attend the Committee meetings. Other individuals and external advisers may be invited to attend for all or part of any meeting as and when appropriate.

The Company Secretary is secretary to the Committee.

The Committee has the authority to seek any information that is required, from any officer or employee of the company or its subsidiaries. In connection with its duties, the Committee is authorised by the Board to take such independent advice (including legal or other professional advice, at the Company's expense) as it considers necessary, including requests for information from, or commissioning investigations by, external advisers.

Main activities of the Nomination Committee

In 2012 the Committee formally met four times and reviewed the skills of the Board, with a view to considering the current and future skills and experience which the Board might require.

The Committee discussed succession planning, board diversity and reviewed the performance of the Group Chief Executive and other senior executives. In particular, the need to broaden the Board membership with respect to gender, ethnicity and age was discussed. The Chairman led the ensuing recruitment project and Egon Zehnder, an international search firm, was engaged to identify suitable candidates with relevant experience. Egon Zehnder produced a shortlist of candidates and a sub-group of the Committee met with the shortlisted candidates. All members of the Committee and the Executive Directors met with the preferred candidate prior to confirmation of her appointment. Eva Lindqvist, a Swedish national and qualified engineer, was appointed to the Board in June 2012. She has lived and worked at senior management level in Europe, North America and Asia over the last 30 years. The Committee also considered and approved the appointment of J. Biles as Senior Independent Director (SID) with effect from 1 April 2012 in succession to J. Vogelsang.

The Committee considered and authorised the potential conflicts of interest which might arise where a Director has fiduciary responsibilities in respect of other organisations. The Committee concluded that no inappropriate conflicts of interest exist. The Committee also assigned the Chairman to review and agree with the Group Chief Executive the Group's objectives for the forthcoming year.

In December 2012 the Nomination Committee reviewed the Board's size and composition, the frequency of the process for Board and Committee meetings, best practice for the handling of a number of Board issues including defining the Committee's terms of reference and drawing up a training programme for Directors. In anticipation of the retirement of J. Vogelsang at the 2013 Annual General Meeting, the succession of the Remuneration Committee Chairman was addressed and E. Lindqvist was appointed Chairman of that Committee with effect from 14 December 2012.

In line with the UK Corporate Governance Code the Committee carried out its first external Board Evaluation during 2012. The project was undertaken by Geoffrey Shepheard of ICSA Board Evaluation, who presented the report to the October Nomination Committee meeting, with both Executive and Non-Executive Directors in attendance. Further details of the review can be found in the Corporate Governance section of the Annual Report. Recommendations arising from the 2012 Board Evaluation are in the process of being addressed.

As Chairman of the Committee I will be available at the 2013 Annual General Meeting to answer questions relating to the work of the Committee.

On behalf of the Committee:

A.M. Thomson
Chairman of the Nomination Committee
27 February 2013