Corporate governance

The board remains committed to maintaining high standards of corporate governance throughout the group. The Listing Rules of the Financial Services Authority require UK listed companies to report on the manner in which they apply the Combined Code on Corporate Governance (‘the Combined Code’). This report is published pursuant to the Combined Code in effect at the Company’s year end. The principles of this Combined Code deal with directors, directors’ remuneration, relations and accountability to shareholders and the audit of the Company.

Statement of compliance
Following the publication in June 2006 of the findings of a review by the Financial Reporting Council of the implementation of the Combined Code (as published in July 2003), amendments have been proposed and the revised Combined Code (‘the revised Code’) is encouraged to be applied voluntarily for financial years beginning on or after 1 November 2006. Formal requirements for the application of the revised Code will apply only once consultation has concluded.

The board recognises that the Combined Code represents best practice and this report, together with the Remuneration report, gives details of how the principles of the Combined Code and the revised Code have been applied within the Company.

The board considers that the Company has complied fully with the provisions set out in Section 1 of the Combined Code during the year, except for the following:

The Combined Code provides that the Remuneration committee should only comprise independent non-executive directors. The board of Associated British Foods plc does not accept this recommendation as it considers that Martin Adamson, as Chairman, should participate in any decisions concerning remuneration due to his experience and the fact that, encompassed in his role is the supervision of the board. Indeed, the revised Code recognises this viewpoint and allows the chairman of the Company to be a member of the Remuneration committee (but not chair the committee) if he was considered to be independent on appointment. No director has any involvement in the determination of his own remuneration.

The Combined Code provides that the terms and conditions of appointment of non-executive directors should be made available for inspection. For Galen Weston the board has not considered it appropriate to enter into a formal letter of appointment. This is due to his relationship with the ultimate holding company of Associated British Foods plc, Wittington Investments Limited. Galen Weston receives no fees for performing his role as a non-executive director and Associated British Foods plc does not reimburse him for any expenses incurred by him in that role. In accordance with the Combined Code he is subject to annual re-election.

The board of directors
The business and the management of the Company are the responsibility of the whole board. The board met formally nine times during the year. The individual attendance by directors is detailed here. There is a formal schedule of matters reserved to the board for decision which include the approval of annual and interim results, the Company’s strategic plans, annual budget, larger capital expenditure and investment proposals and the overall system of internal control and risk management. Other specific responsibilities are delegated to the board committees, notably the Audit, Remuneration and Nomination committees, which operate within clearly defined terms of reference, reporting regularly to the board.

The board comprises the non-executive Chairman Martin Adamson, the Chief Executive George Weston, the Finance Director John Bason and six non-executive directors, with effect from 1 November 2006, who are independent of management and have no relationships which would materially interfere with the exercise of their independent judgement.

The board also includes Galen Weston, a non-executive, who is not regarded as independent. The board considers that the non-executive directors provide a solid foundation for good corporate governance for the group and ensure that no individual or group dominates the board’s decision making. Details of the full board are set out on in the Board of Directors section.

The roles of the Chairman and the Chief Executive are separately held and are so defined as to ensure a clear division of responsibilities. Lord MacGregor, who has served on the board for 12 years, is the recognised senior independent director. The board is fully satisfied as to his independence, given the manner in which he discharges his duties with the Company, but reviews this annually in the light of the provisions of the Combined Code.

The Articles of Association require that one third of the directors retire by rotation at the annual general meeting in each year subject to the requirement that each director seeks re-election every three years. Furthermore, in accordance with the Combined Code, each non-executive director who has served for more than nine years is required to stand for annual re-election. Accordingly, in addition to those otherwise seeking election, Galen Weston and Lord MacGregor, who have served for more than nine years, and Jeffery Harris will be subject to re-election at the forthcoming annual general meeting.

On joining the board, directors are given background documents describing the Company and its activities. The Company offers major shareholders the opportunity to meet new non-executive directors. New directors are provided with an appropriate induction programme and site visits are arranged to major business units. Ongoing training is provided as necessary.

Board and committee papers are circulated to members in advance of the meetings. In addition to formal meetings, the Chairman and Chief Executive maintain regular contact with all directors. The Chairman also holds informal meetings with non-executive directors, without any of the executives being present, to discuss any issues affecting the group.

Senior executives below board level are invited, when appropriate, to attend board meetings and make presentations on the results and strategies of their business units.

The board has adopted a procedure whereby directors may, in pursuit of their duties, take independent professional advice on any matter at the Company’s expense.

Directors have direct access to the advice and services of the Company Secretary who is responsible for ensuring that board procedures are followed.

Board committees
Attendance during the year ended 16 September 2006
Directors	Possible	Actual	Possible	Actual	Possible	Actual	Possible	Actual
	Audit committee		Nomination committee		Remuneration committee		Full board meeting
Martin Adamson	-	-	2	2	6	6	9	9
George Weston	-	-	-	-	-	-	9	9
John Bason	-	-	-	-	-	-	9	9
Lord MacGregor	4	4	2	2	6	6	9	9
Mike Alexander	4	4	2	2	6	6	9	9
Jeff Harris	4	4	2	2	6	5	9	8
Tim Clarke	4	4	2	2	6	6	9	9
Galen Weston	-	-	-	-	-	-	9	2

Nomination committee

Current members: Martin Adamson, Mike Alexander, Jeff Harris, Lord MacGregor, Tim Clarke.

Chairman: Martin Adamson.

Further details of the Nomination committee can be found here.

Audit committee

Current members: Mike Alexander, Jeff Harris, Lord MacGregor, Tim Clarke.

Chairman: Jeff Harris.

Further details of the Audit committee can be found here.

Remuneration committee

Current members: Martin Adamson, Mike Alexander, Jeff Harris, Lord MacGregor, Tim Clarke.

Chairman: Martin Adamson.

Details of the Remuneration committee and its policies can be found here.

The terms of reference of the Nomination committee, the Audit committee and the Remuneration committee are available upon
request and from www.abf.co.uk

Performance evaluation
In the final financial quarter Spencer Stuart, the global executive search firm and corporate governance consultants, led the annual process which enabled the board to evaluate the effectiveness of its performance. This involved an individual discussion between Spencer Stuart and each director based upon designated areas and topics. All input was treated as strictly confidential and was not attributed to any individual board member. The results of this exercise were subsequently reviewed by the board. The performance of the Chairman was also appraised at a meeting of the non-executive directors chaired by the senior independent director and taking into account the views of the executive directors.

The process in 2006 confirmed that all directors continued to contribute effectively and with proper commitment, including of time, to their roles.

Relations with shareholders
The manner in which the Company communicates with its shareholders is described in the Corporate citizenship section of the 2006 annual report.

The annual general meeting takes place in London and formal notification is sent to shareholders approximately one month
in advance and in any event at least 20 working days before the meeting. The annual general meeting gives shareholders an
opportunity to hear about the general development of the business and to ask questions of the Chairman and the board. The practice has been for a short film to be shown at the meeting explaining a particular area of the group’s business.

Accountability and audit
The board is required by the Combined Code to present a balanced and understandable assessment of the Company’s
position and prospects. In relation to this requirement reference is made to the statement of directors’ responsibilities for preparing the financial statements in the Remuneration section of this annual report and accounts. The independent auditors' report of this annual report and accounts includes a statement by the auditors about their reporting responsibilities. The board recognises that its responsibility to present a balanced and understandable assessment extends to interim and other price-sensitive public reports, and reports to regulators, as well as information required to be presented by law.

Going concern
After making due enquiries, the directors have a reasonable expectation that the group has adequate resources to continue in operation for the foreseeable future. For this reason they continue to adopt the going concern basis for preparing the financial statements.

Report of the Nomination committee

The committee comprises the Chairman of the board who also chairs the committee together with the independent non-executive directors. Executive directors may be invited to attend as appropriate.

The Nomination committee leads the process for board appointments making recommendations to the board.

The Chairman does not chair the Nomination committee when it is dealing with the appointment of a successor to the chairmanship, in which case the committee is chaired by a non-executive director elected by the remaining members. The committee met twice during the year.

Duties

The committee is responsible for identifying and nominating, for the approval of the board, candidates to fill board vacancies as and when they arise. Before an appointment is made, the committee evaluates the balance of skills, knowledge and experience on the board and, in the light of this evaluation, prepares a description of the role and capabilities required for a particular appointment.

Candidates from a wide range of backgrounds are considered. The committee uses external advisors to facilitate searches for potential candidates.

The time required from a non-executive director is reviewed annually. The annual performance evaluation is used to assess whether the non-executive director is spending enough time to fulfil his duties.

The committee gives full consideration to succession planning in the course of its work, taking into account the challenges and opportunities facing the Company and what skills and expertise are therefore needed on the board and from senior management in the future.

The committee reviews the structure, size and composition (including the skills, knowledge and experience) of the board, and, if appropriate, makes recommendations for changes to the board. In this respect, the committee has regard to the results of the annual performance evaluation. The committee keeps under review the leadership needs of the organisation, both executive and non-executive, with a view to ensuring the continued ability of the organisation to compete efficiently in the marketplace. The committee makes recommendations regarding the membership of the Audit committee in consultation with the Audit committee chairman.

Activities

The committee makes recommendations to the board on succession for executive directors, the re-appointment of any non-executive director at the conclusion of their specified term of office, any matter relating to the continuation in office of any director at any time and the appointment of any director to executive or other office.

External recruitment consultants Spencer Stuart, the global executive search firm, conducted a thorough search and identified a number of high quality candidates in connection with the recent appointment of two new non-executive directors.

The committee recommended the appointment of Lord Jay of Ewelme GCMG and Javier Ferrán to the board and they became non-executive directors on 1 November 2006.

Corporate website

The terms of reference of the committee, which set out the role and the authority delegated to it by the board, are available for inspection at the Company’s registered office and can be viewed on the Company’s website.

The formal letters of appointment of non-executive directors are also available for inspection at the Company’s registered office.

Report of the Audit committee

Summary of the role of the Audit committee

The Audit committee is responsible for maintaining an appropriate relationship with the group’s external auditors and for reviewing the Company’s internal audit resources, internal financial controls and the audit process. It aids the board in seeking to ensure that the financial and non-financial information supplied to shareholders presents a balanced assessment of the Company’s position.

The committee reviews the objectivity and independence of the external auditors and also considers the scope of their work and fees paid for audit and non-audit services.

The committee has unrestricted access to Company documents and information, as well as to employees of the Company and the external auditors. Members of the committee may, in pursuit of their duties, take independent professional advice on any matter at the Company’s expense. The Audit committee chairman reports the outcome of meetings to the board.

Composition of the Audit committee

The members of the Audit committee who held office during the year and at the date of this report are:

Name                                        Date of appointment
Jeff Harris                                 May 2003, and appointed chairman in September 2003
Lord MacGregor                        December 1994
Mike Alexander                         January 2002
Tim Clarke                                 January 2005

Membership of the committee is determined by the board, on the recommendation of the Nomination committee and in
consultation with the Audit committee chairman, from amongst the independent, non-executive directors of the Company. Its terms of reference are set by the board and are modelled closely on the provisions of the Combined Code.

Appointments are for a period of three years after which they are subject to annual review, extendable by additional three-year periods so long as members continue to be independent. The committee is comprised of a minimum of three independent non-executive directors at any time and currently comprises four members. Two members constitute a quorum.

The committee structure requires the inclusion of one financially qualified member (as recognised by the Consultative Committee of Accountancy Bodies). Currently the Audit committee chairman fulfils this requirement. All Audit committee members are expected to be financially literate.

The board expects committee members to have an understanding of the following areas:

• the principles of, and developments in, financial reporting including the applicable accounting standards and statements
of recommended practice;

• key aspects of the Company’s operations including corporate policies and the group’s internal control environment;

• matters which may influence the presentation of accounts and key figures;

• the principles of, and developments in, company law, sector-specific laws and other relevant corporate legislation;

• the role of internal and external auditing and risk management; and

• the regulatory framework for the group’s businesses.

Meetings

The committee meets at least three times each year and has an agenda linked to events in the group’s financial calendar.

The committee invites the Group Finance Director, Group Financial Controller, Director of Financial Control and senior
representatives of the external auditors to attend all of its meetings in full, although it reserves the right to request any of these individuals to withdraw. Other senior management are invited to present such reports as are required for the committee to
discharge its duties.

Overview of the actions taken by the Audit committee to discharge its duties

In order to fulfil its terms of reference, the committee receives and reviews presentations and reports from the group’s senior management, consulting as necessary with the external auditors.

During the year, the committee formally reviewed draft interim and annual reports and associated interim and preliminary year end results announcements. It also reviewed the group’s preparation for the adoption, and issuance, of financial statements under IFRS. These reviews considered:

• the accounting principles, policies and practices adopted in the group’s accounts, and proposed changes to them;

• significant accounting issues and areas of judgement and complexity;

• litigation and contingent liabilities affecting the group; and

• potential tax contingencies and the group’s compliance with statutory tax obligations.

The Audit committee is required to assist the board to fulfil its responsibilities relating to the adequacy and effectiveness of the control environment and the group’s compliance with the Combined Code. To fulfil these duties, the committee reviewed:

• the external auditor’s management letters and audit highlights memoranda;

• internal audit reports on key audit areas and significant control environment deficiencies;

• reports on the systems of internal controls and risk management; and

• reports on frauds perpetrated against the group.

The Audit committee is responsible for the development, implementation and monitoring of the group’s policy on external audit. The group’s policy on external audit sets out the categories of non-audit services which the external auditors will, and will not, be allowed to provide to the group, subject to de minimis levels.

To fulfil its responsibility regarding the independence of the external auditors, the committee reviewed:

• changes in external audit executives in the audit plan for the current year;

• a report from the external auditors describing their arrangements to identify, report and manage any conflicts of interest; and

• the extent of non-audit services provided by the external auditors.

To assess the effectiveness of the external auditors, the committee reviewed:

• the external auditors’ fulfilment of the agreed audit plan and variations from it; and

• reports highlighting the major issues that arose during the course of the audit.

To fulfil its responsibility for oversight of the external audit process, the Audit committee reviewed:

• the terms, areas of responsibility, associated duties and scope of the audit as set out in the external auditors’ engagement letter for the forthcoming year;

• the external auditors’ overall work plan for the forthcoming year;

• the external auditors’ fee proposal;

• the major issues that arose during the course of the audit and their resolution;

• key accounting and audit judgements;

• the levels of errors identified during the audit; and

• recommendations made by the external auditors in their management letter and the adequacy of management’s response.

The Audit committee has recommended to the board that the external auditors are re-appointed.

Internal audit function

The Audit committee is required to assist the board to fulfil its responsibilities relating to the adequacy of the resourcing and plans of internal audit. To fulfil these duties, the committee reviewed:

• internal audit’s terms of reference, reporting lines and access to the committee and all members of the board;

• internal audit’s plans and its achievement of the planned activity;

• the results of key audits and other significant findings, the adequacy of management’s response and the timeliness of resolution;

• statistics on staff numbers, qualifications and experience and timeliness of reporting; and

• the level and nature of non-audit activity performed by internal audit.

The group’s ‘whistleblowing’ policy contains arrangements for the Company Secretary to receive, in confidence, complaints on accounting, risk issues, internal controls, auditing issues and related matters for reporting to the Audit committee as appropriate.

The group’s anti-fraud policy has been communicated to all employees and states that all employees have a responsibility for fraud prevention and detection. Any suspicion of fraud should be reported immediately and will be investigated vigorously.

The committee holds private meetings with the external auditors after each committee meeting, and with the Director of Financial Control as appropriate but at least annually, to review key issues within their spheres of interest and responsibility.

The chairman of the committee will be present at the annual general meeting to answer questions on this report, matters within the scope of the Audit committee’s responsibilities and any significant matters brought to the committee’s attention by the
external auditors.

The full terms of reference of the Audit committee are available on the Company’s website: www.abf.co.uk

Internal control
The board acknowledges its responsibilities for the group’s system of internal control to facilitate the management of risk,
the protection of shareholders’ investments and the group’s assets. The directors recognise that they are responsible for
providing a return to shareholders, which is consistent with the responsible assessment and mitigation of risks.

Effective controls ensure that the group is not exposed to avoidable risk, that proper accounting records have been
maintained and that the financial information used within the business and for publication is reliable. The dynamics of the group and the environment within which it operates are continually evolving together with its exposure to risk. The system is designed to manage rather than eliminate the risk of assets being unprotected and to guard against their unauthorised
use and the failure to achieve business objectives. Internal controls can only provide reasonable and not absolute assurance
against material mis-statement or loss.

The directors confirm that there is an ongoing process for identifying, evaluating and managing the risks faced by the group, which has been in place for the year under review and up to the date of approval of the annual report and accounts; further details of the Risk Management Review are set out here. The directors have regularly reviewed the system of internal controls utilising the review process set out below.

Standards

There are guidelines on the minimum group-wide requirements for health and safety and environmental standards. There are
also guidelines on the minimum level of internal control that each of the divisions should exercise over specified processes.
Each business has developed and documented policies and procedures to comply with the minimum control standards
established, including procedures for monitoring compliance and taking corrective action. The board of each business is
required to confirm annually that it has complied with these policies and procedures.

High level controls

All operations prepare annual operating plans and budgets which are updated regularly. Performance against budget is
monitored at operational level and centrally, with variances being reported promptly. The cash position at group and
operational level is monitored constantly and variances from expected levels are investigated thoroughly.

A significant part of the group’s cash reserves is managed by independent fund managers operating within detailed guidelines specified by the group relating to, inter alia, permitted investments and counterparties, currency exposures and approved instruments. The balance of the group’s cash reserves is managed by its treasury function in accordance with guidelines referred to in the Financial review.

Clearly defined guidelines have been established for capital expenditure and investment decisions encompassing budgets,
appraisal and review procedures and levels of authority.

Internal audit

The group’s businesses employ internal auditors (both employees and resources provided by Ernst & Young where appropriate) with skills and experience relevant to the operation of each business, with the exception of four businesses within Grocery, where independent peer review audits are carried out. All of the internal audit activities are co-ordinated centrally by the group’s Director of Financial Control, who is accountable to the Audit committee.

All group businesses are required to comply with the group’s financial control framework that sets out minimum control
standards. A key function of the group’s internal audit resources is to undertake audits to ensure compliance with the financial control framework and make recommendations for improvement in controls where appropriate. Internal audit also conduct regular reviews to ensure that risk management procedures and controls are adhered to. The Audit committee receives regular reports on the results of internal audit’s work and monitors the status of recommendations arising. The Audit committee reviews annually the adequacy of the group’s internal audit resources and the nature and scope of internal audit activity in the overall context of the group’s risk management system set out below. The Director of Financial Control meets with the chairman of the Audit committee as appropriate but at least annually, without the presence of executive management, and has direct access to the Chairman of the board.

Risk Management Review
The risk management process in Associated British Foods plc seeks to enable the early identification, evaluation and effective management of the key risks facing the businesses at operational level and to operate internal controls, which adequately mitigate these risks. The key risks and internal control procedures are reviewed by group personnel together with internal audit activities. Each business is responsible for regularly assessing its risk management activities to ensure good practice in all areas. Compliance with group requirements is monitored six monthly, and these assessments are formally reviewed by group personnel at least annually. The Audit committee receives reports on internal financial control issues from management and from the external auditors and regularly reports to the board for the purposes of the board’s annual review.

The principal corporate risks as identified by each business and noted by the board are currently:

1. Food safety

The Company derives over 55% of its turnover from the production and sale of food. Food products include bread, crispbreads, flour, rice, noodles, teas, sugar and sweeteners, vegetable oils, cakes, meat and dairy products.

To manage food safety risks, our sites operate food safety systems which are regularly reviewed to ensure they remain effective, including compliance with all regulatory requirements for hygiene and food safety. Our food products are made to high standards regardless of where they are manufactured. The group always puts food safety before economic considerations.

British Sugar plc encourages farmers to minimise herbicides and pesticides and Associated British Foods plc as a whole markets a wide range of organic foods and animal feeds.

2. Supply chain labour standards

Companies in our sector, especially those with global supply chains, are at greater risk of controversies relating to breaches
by suppliers of the International Labour Organisation core labour standards. The group mitigates this risk of possible damage to its reputation by working hard to ensure that it does not buy from factories with poor working conditions. Primark requires all the factories that manufacture its clothes to sign up to Primark’s Supplier Code of Conduct which lays out strict guidelines on working conditions. Primark’s buyers visit all factories before they start working with them and will not buy from factories with
obviously poor conditions. In addition, every year the Company sends independent auditors to a selection of factories to check that they are keeping to our standards. In this way we try to ensure that the factories around the world that make our clothes do so in a responsible way.

Primark is a member of the Ethical Trading Initiative, an alliance of companies, trade unions and non-profit organisations that aims to promote respect for the rights of people in factories and farms worldwide. The Company is committed to monitoring and progressively improving the conditions of the people that make its products.

Twinings is a member of the Ethical Tea Partnership which requires its suppliers and subcontractors to meet the International
Labour Organisation core labour standards, respecting an observance of human rights and fundamental freedoms without
discrimination as to race, sex, language or religion.

3. Competition rules

The penalties for failing to comply with the 1998 Competition Act, relevant EU law and all relevant competition legislation are
recognised as risks to be managed within the group. Clear policy direction, which includes compulsory awareness training and close support from the internal legal department, has reduced the likelihood of the group breaching these regulations.

4. Environment

Associated British Foods plc recognises the impact that its businesses have on the environment. Therefore, as a minimum, we aim to comply with current applicable legislation of the countries in which we operate, and our operations are conducted with a view to ensuring that:

• emissions to air, releases to water and land filling of solid wastes do not cause unacceptable environmental impacts and do not offend the community;

• significant plant and process changes are assessed and positively authorised in advance to prevent adverse environmental impacts;

• energy and natural resources are used efficiently and energy consumption is monitored and raw material waste is minimised;

• solid waste is reduced, reused or recycled where practicable;

• the amount of packaging used for group products is minimised, consistent with requirements for food safety and product protection;

• products are transported efficiently to minimise fuel usage, consistent with customers’ demands, production arrangements
and vehicle fleet operations; and

• effective emergency response procedures are in place to minimise the impact of foreseeable incidents.

Energy

The efficient use of energy is a major element of our environmental policy. Our manufacturing operations in the UK are participating in the UK Government’s Climate Change Agreement Scheme to reduce specific energy consumption and thereby reduce emissions of carbon dioxide and combat the serious threat of climate change. Sites which are subject to the EU’s Pollution Prevention and Control regime are also under a statutory requirement to minimise energy consumption by use of best available techniques.

In 2005, our factories and stores consumed 10,600 GWh of energy, of which 44% was consumed outside the UK. Given the variety of our operations there is a correspondingly wide range in the amount of energy they consume per tonne of product manufactured.

Although the absolute quantity of energy used by the Company has grown over time this is a reflection of the growth of the group.

Carbon dioxide emissions

Carbon dioxide, a gas which contributes to climate change, is emitted both directly by the combustion of fossil fuels at our sites to create steam, heat and electricity, and indirectly by the power stations from which we buy our electricity. The energy generated from the burning of bagasse, sugar cane waste, is rated as CO2 neutral as it is a renewable energy source and accounted for 12% of ABF’s energy usage. The use of bagasse eliminates the need to use virgin fossil fuels and last year prevented the emission of approximately 400,000 tonnes of CO2.

Our use of energy in 2005 led to the emission of 2.45 million tonnes of carbon dioxide, either directly or indirectly, worldwide.

Water

In 2005, our factories used 65 million tonnes of water from a variety of sources. We treat all our cooling and waste water
and recharge it, cleansed, into the environment. The acquisition of the AB Mauri yeast and ingredients factories, whose processes require considerable quantities of water, increased our water consumption. The increase has been partly offset by savings in existing factories.

Solid waste

In 2005, our operations generated some 283,000 tonnes of waste for disposal, of which 1,000 tonnes were classified as hazardous waste. This is 14% less waste than in 2004. The quantity of waste finally disposed equates to an average of 2.3% of the tonnage of products – a highly efficient use of raw materials. Independent verification reports are available on the Company’s website: www.abf.co.uk

5. Health and safety

We consider health and safety as equal in importance to that of any other function of the Company and its business objectives. We seek to provide a safe and healthy workplace and system of work in line with local regulations in order to protect all
employees, visitors and the public, insofar as they come into contact with foreseeable work hazards. Our employees are
expected to adopt a proactive attitude towards this end. We will continue to develop safety awareness amongst all employees and will measure, manage and further improve our health and safety performance.

Fatalities

We very much regret that there were two deaths in our factories during the year. One involved rotating machinery and the other involved a mechanical tail-lift fitted to a delivery vehicle. They were both fully investigated by our own experts and by the external regulatory authorities.

Injuries

In 2005 we reported 666 injuries to the regulators. There was an increase in the absolute number of injuries in 2005 due to the acquisition of 44 more factories, both in the UK and internationally. However, there were good performances and safety improvements in the established ABF companies.

6. Currency/commodity/energy price fluctuation

In common with other global businesses in our sectors, the group is exposed to risks from currency fluctuations and changes in commodity and energy prices. Group businesses operate strict hedging and procurement policies, assisted by the group treasury function, to mitigate the effects of volatility in these areas. The group has a treasury policy to which group businesses must adhere when implementing risk management strategies.

7. Loss of a major site

The group operates from many key sites the loss of which, for example as a result of fire, would present significant operational difficulties. Our operations have business continuity plans in place to manage the impact of such an event and group insurance programmes to mitigate the financial consequences. This readiness to deal with the unexpected is exemplified by the response to the potentially catastrophic fire which destroyed Primark’s major UK warehouse in November 2005, when alternative arrangements were quickly made to continue supply of stock to Primark stores, and minimise disruption.