The Board has as its prime objective the enhancement of business performance and shareholder value over time. It carries the responsibility for determining all major policies, for ensuring that effective strategies are in place, and for reviewing the system of internal control, including those relating to social, ethical and environmental matters (see social, ethical and environmental matters for details of corporate governance relating to social, ethical and environmental matters). The Board also seeks to present to investors and other interested parties a balanced and coherent assessment of the Company's strategy, financial position and prospects.

The Board has reserved certain items for specific review including the approval of annual and quarterly results, other trading statements, dividend policy, acquisitions, disposals, risk management, material agreements, major capital expenditures, budgets, long range plans, senior executive appointments and the setting of social, ethical and environmental policies. The day to day running of the business is delegated to the executive management who report to the Board on a regular basis. Procedures are also in place to enable the Board to monitor the implementation of management decisions and review the performance of executive directors. Certain matters are delegated to Board committees, each with defined terms of reference, procedures, responsibilities and powers. Details of the principal committees, their membership and roles are set out below.

Application of corporate governance principles

The Board
The Board consists of eight directors in total: three executive directors, four independent non-executive directors, one of whom is nominated as the senior independent director and the Chairman, who ceased to be a full time executive of the Group on 31 March 2001. The Chairman is not considered to be independent. Incumbents are identified in directors, officers and advisers.

The Board met nine times in 2001/02, including two sessions of more than one day. All directors receive written reports in a timely manner prior to each meeting which enables them to make informed decisions on the corporate and business issues under consideration.

It is believed that the composition of the Board gives an appropriate balance of skills, experience, independence and executive involvement, whilst being small enough for efficient operation. No one individual has unfettered powers of decision and no individual or grouping is in a position to unduly influence the Board's decision making. The mix of skills and business experience of the directors is considered to be appropriate for the proper functioning of the Board. The terms of reference of the Nomination Committee include the regular review of the composition and balance of the Board.

The Company Secretary is responsible to the Board for ensuring that Board procedures are followed and all directors have access to his advice and service. There is also a procedure for directors to take independent advice in the course of their duties, if considered appropriate, at the Company's expense.

The Group comprises two separate operating divisions, one for the US and one for the UK, each with a separate executive committee which meets regularly. The Group Chief Executive is Chief Executive of the Group's US division. The Finance Director and the Chief Executive of the UK division report to the Group Chief Executive.

On appointment new directors are given an opportunity to familiarise themselves with the Group's business and procedures. The Group also makes available the opportunity for all directors to attend relevant courses or receive appropriate training to equip them to carry out their duties as directors.

Directors are subject to periodic re-election by shareholders at the first annual general meeting after appointment and thereafter normally every three years. The Board is of the view that additional term or age limits should not be set for non-executive directors as it considers it important that the particular contribution being made by individual directors be taken into account in deciding when they should retire. However, any director over the age of 70 is expected to stand annually for election to the Board.

Board committees
The Group operates a number of committees to which specific tasks are delegated. The principal committees are:

The Audit Committee, which consists of all the non-executive directors, was chaired by Brook Land in 2001/02 and normally meets at least five times a year. Although foreign private issuers listed on Nasdaq are not required to comply with National Association of Securities Dealers ("NASD") audit committee requirements, Signet has chosen to do so voluntarily. The Audit Committee has adopted a clear written charter and has an established channel of direct communication with the external auditors who attend all meetings except in relation to certain aspects of their own appointment, assessment of their independence and determination of their fees. The Chairman, the executive directors and any other officer of the Group may be invited to attend meetings. The Committee's responsibilities include the review of the appropriateness and effectiveness of the Group's accounting policies and financial procedures. It reviews, discusses with management and approves for submission to the Board all audited accounts, trading statements and selected internal financial reports. It also reviews reports submitted to the Board by the Group's external auditors, including the scope and the results of the audit. The appointment of the external auditors, the determination of their fees and an assessment of their independence (including a written disclosure by the external auditors of all relationships that they have with the Company) are matters that are considered annually by this committee. The Audit Committee considers whether it is appropriate to appoint the external auditor to carry out non-audit work.

The Nomination Committee, which consists of all the non-executive directors and the Chairman of the Board, was chaired by David Wellings, the senior independent non-executive director in 2001/02, and meets as required. It makes recommendations to the Board on all new Board appointments and nominations for re-election as directors. The Committee uses the services of external recruitment agencies to identify suitable candidates. The procedure for the election of directors is laid out in directors, officers and advisers. The Committee also reviews a number of other senior appointments within the Group.

When the role of the Group Chairman or any matter relating to succession to that role is discussed, the Chairman may be consulted, but the responsibility for making any recommendation to the Board rests solely with the independent non-executive directors.

The role of the Remuneration Committee is discussed in the Board report on remuneration in the board report on remuneration.

The chairmen and members of these Committees are set out in directors, officers and advisers.

Relations with shareholders

The Board communicates regularly with shareholders about the Group's strategy, financial performance and prospects through communications sent to shareholders, stock exchange announcements and general meetings of shareholders. In addition it carries out a programme of meetings with institutional investors. Through the use of teleconferences and web casting, presentations on quarterly results and the Christmas trading statement are open to all interested parties, including private shareholders. Other presentations are available on the Group web site (www.signetgroupplc.com). The Group also hosted a meeting in conjunction with the United Kingdom Shareholder Association, a private shareholder group, during 2001.

The Board recognises that the prime opportunity for private investors to question the Board is at a general meeting of shareholders. At the annual general meeting the chairmen of the Audit, Nomination and Remuneration Committees, in addition to the Chairman of the Board, are expected to be available for questions relating to the function of their respective Committees.

Compliance statement

In June 1998 the London Stock Exchange published the Principles of Good Corporate Governance and the Code of Best Practice ("the Combined Code") which embraces the work of the Cadbury, Greenbury and Hampel Committees.

The Board of Directors considers that it has complied throughout the year with the provisions of the Combined Code required to be observed by companies.

Internal control
The Combined Code introduced a new requirement, that the directors review the effectiveness of the Group's system of internal controls. This extended the previous corporate governance recommendation, which referred only to internal financial controls, to cover all controls including:

• Financial
• Operational
• Compliance
• Risk management

Guidance for directors Internal Control: Guidance for Directors on the Combined Code ("the Turnbull guidance") was published in September 1999. The Board of Directors considers that it has complied with the Turnbull guidance throughout the year, and up to the date of approval of this Annual Report & Accounts.

The Board is ultimately responsible for the Group's system of internal controls and for monitoring its effectiveness. The Group's system of internal control is designed to safeguard shareholders' investment and the Group's assets, both tangible and intangible, including the reputation of the Group with its various stakeholders and to ensure the maintenance of proper accounting records and the reliability of the financial information used within the business or for publication. However, such a system is designed to manage rather than eliminate the risk of failure to achieve business objectives and can provide only reasonable, not absolute, assurance against material misstatement or loss. Key procedures that have been established and are designed to provide effective internal control are:

• Control environment - control is exercised through an organisational structure with clearly defined levels of responsibility and authority and appropriate reporting procedures, particularly with respect to capital expenditure, investment, granting of guarantees, the use of treasury products (see risk and other factors for more detail), health, safety, environmental and customer service issues.
   
• Reporting and information systems - the Group has a comprehensive budgeting and five year strategic planning system with an annual budget and strategic plan approved by the Board. Monthly trading results and balance sheets are reported against the corresponding figures for the budget and the previous year with any significant variances examined by divisional operating management, discussed with Group management and action taken as appropriate. A forecast of the full year's results is updated regularly, based on performance to date and any changes in outlook. The executive directors regularly report to the Board on the development of the business, the competitive environment and any material breaches of procedure. Through these mechanisms, the Group's performance is continually monitored, risks identified in a timely manner, their implications assessed, control procedures re-evaluated and corrective actions agreed and implemented. The Group reports externally on a quarterly basis. The external auditors review the quarterly statements and present a report to the Audit Committee for consideration, with a more in depth review being carried out at the half year.
   
• Risk management - the identification of major business risks is carried out in conjunction with operating management and appropriate steps are taken to monitor and mitigate risks. The Risk Management Committee, whose members include the Group Finance Director, the Chairman of the Audit Committee and senior divisional executives, meets on a regular basis, at least four times a year. The matters considered by the Risk Management Committee include the review of the Group's risk register, the appropriate actions arising from that review, the activity of the internal audit function, emerging issues, and new regulations. The external auditors receive copies of the papers submitted to the committee. A report from each Risk Management Committee meeting, and any material non-compliance, is considered by the Board in a timely manner.
   
• Control procedures - each operating division maintains documented financial and operating controls as well as procedures appropriate to its own business environment and in conformity with Group guidelines. Each of the operating divisions has an internal audit function which primarily reviews the processes in the store operations but also reviews central service functions. The work of the internal audit functions are monitored by senior divisional executives, Group management, the external auditors and the Risk Management Committee.
   
• Reviews of effectiveness - the Board annually reviews the effectiveness of the internal control system on the basis of a report submitted to the Risk Management Committee. This report is based on annual written self-certification statements prepared by the operating divisions and head office departments which confirm the extent of their compliance with all material internal financial and operating controls. These statements are prepared by the divisional finance directors on behalf of each operating division and are reviewed by senior divisional executives, Group management and the Risk Management Committee.