The directors are committed to maintaining the highest standards of corporate governance. This statement details how the Group applies the main principles and provisions of Section 1 of the Combined Code on Corporate Governance, June 2008 ('the Code') published by the Financial Reporting Council in the UK.

The Board is responsible for the leadership and control of the Group. The Board has reserved certain items for its review including the approval of Group strategic plans, financial statements, budgets, corporate plans, significant acquisitions and disposals, investments in joint ventures, significant property transactions, significant capital expenditure and board appointments.

The roles of Chairman and Chief Executive are separate with a clear division of responsibility between them. The Board has delegated responsibility for the management of the Group, through the Chief Executive to executive management. The Board has also delegated some of its responsibilities to board committees, details of which are set out below.

The Group's professional advisers are available for consultation by the Board as required. Individual directors may seek independent professional advice at the Group's expense, where they judge it necessary to discharge their responsibility as a director.

The Group has a policy in place which indemnifies the directors in respect of legal action taken against them as directors of the Company.

The Board is comprised of five executive and seven non-executive directors. Biographical details are set out on the following page - Biographical details

It is board policy that a majority of the Board is comprised of non-executive directors and the Chairman be non-executive.

All of the directors bring independent judgement to bear on issues of strategy, performance, resources, key appointments and standards. The Board considers that between them, the directors bring a range of skills, knowledge and experience necessary to lead the Group.

The Board has evaluated the independence of each of its non-executive directors and has determined that, each of the nonexecutive directors is independent. In arriving at this conclusion, the Board considered many factors including, whether any of the non-executive directors:

• has been an employee of the Group;
• has, or had within the last three years, a material business relationship with the Group;
• receives remuneration from the Group other than a director's fee;
• has close family ties with any of the Group's advisers, directors or senior employees;
• holds cross-directorships or has significant links with other directors through involvement in other companies or bodies;
• represents a significant shareholder; or
• has served on the Board for more than nine years from the date of their first election.

In particular, the Board considered the position of Mr. K. McGowan in the context of the Combined Code as he was appointed to the Board in 1999 and his length of service exceeds nine years. The Board considers Mr. K. McGowan to discharge his duties in a thoroughly independent manner. Mr. K. McGowan has extensive business experience and makes valuable and constructive contributions to the Board.

Mr. R. Kells has been Chairman of the Group since October 2005. On appointment as Chairman, Mr. R. Kells met the independence criteria set out in the Combined Code. The Chairman has overall responsibility for the effective and efficient working of the Board, ensuring that the Board considers the key strategic issues facing the Group and that the directors receive accurate, relevant, timely and clear information. The Chairman also ensures appropriate and effective interaction with shareholders.

Mr. G. McGann is the Senior Independent non-executive director. Mr. G. McGann is available to shareholders who have concerns that cannot be addressed through the Chairman, Chief Executive or Finance Director. Mr. G. McGann is also available to meet major shareholders on request.

The appointment and removal of the Company Secretary is a matter for the Board. All directors have access to the advice and services of the Company Secretary, who is responsible for ensuring that Board procedures are followed and that applicable rules and regulations are complied with.

The non-executive directors are engaged under the terms of a letter of appointment. A copy of the standard letter of appointment is available on request from the Company Secretary. It is board policy that non-executive directors are normally appointed for an initial period of three years. Non-executive directors are typically expected to serve two, three year terms however the Board may invite them to serve longer.

On appointment, directors are provided with briefing materials on the Group and its operations. Visits to group businesses and briefings with senior management are arranged as appropriate and ongoing briefings are also provided to all directors.

The Board conducts an annual review of its own performance and that of its committees and of each individual director. During the year, this review was primarily achieved through discussions held by the Chairman with directors on both an individual and group basis and through a detailed questionnaire completed by each director. In addition, the Chairman also independently met with the non-executive directors. The Chairman summarised the results of the evaluation processes and reported them to the Board for its consideration, the results of which were satisfactory. The Senior Independent non-executive director also met with the other non-executive directors, without the Chairman present, to review the performance of the Chairman.

Details of directors' remuneration are set out in the Report of the Remuneration Committee on directors' remuneration on pages 39 to 45 of the Annual Report 2009.

The Group's Articles of Association provide that directors must submit themselves for re-election at least every three years. Directors appointed by the Board must submit themselves for election at the first Annual General Meeting following their appointment. All directors over the age of seventy must submit themselves for re-election on an annual basis. In accordance with the Combined Code, a director who has served on the Board for in excess of nine years will also be subject to annual re-election.

Details of directors' shareholdings are set out in the Report of the Remuneration Committee on directors' remuneration on pages 39 to 45 of the Annual Report 2009.

The Group has a policy on dealing in shares that applies to all directors and senior management. This policy adopts the terms of the Model Code as set out in the Listing Rules published by the UK Listing Authority and the Irish Stock Exchange.

The Board routinely meets at least six times a year and additionally as required. Details of directors' attendance at these meetings are set out in the table on page 38 of the Annual Report 2009.

The Chairman sets the agenda for each meeting in consultation with the Chief Executive and the Company Secretary. The agenda and board papers are circulated prior to each meeting to provide the directors with relevant information and enable them to fully consider the agenda items in advance of the meeting.

The Group recognises the importance of shareholder communications and has an established investor relations programme. There is regular dialogue with institutional shareholders as well as general presentations at the time of the release of the annual and interim results. The Board is briefed regularly on the views and concerns of institutional shareholders.

Results announcements are sent out promptly to shareholders. Trading statements were issued in April and October 2009. Interim management statements were also issued in February and July 2009, in accordance with requirements under the EU Directive 2004/109/EC ('the Transparency Directive'). In addition, acquisitions are notified to the stock exchanges in accordance with the requirements of the Listing Rules.

The Group's website, www.united-drug.ie provides the full text of the annual and interim reports, trading statements and interim management statements. News releases are also available after release to the stock exchanges.

The Annual General Meeting affords individual shareholders the opportunity to question the Chairman and the Board. The annual report and the Notice of Annual General Meeting are sent to shareholders at least 21 working days before the meeting. At the meeting, after each resolution has been dealt with, details are given of the level of proxy votes lodged and the number of votes for, against and withheld regarding that resolution. This information is made available on the Company's website following the meeting.

The Board has established four permanent committees to assist in the execution of its responsibilities. These committees are the Audit Committee, Remuneration Committee, Nomination Committee and Acquisitions and Finance Committee. Each committee has specific terms of reference under which authority is delegated to it by the Board. The terms of reference are available on the Group's website. The membership of each committee is set out in this report. Details of attendance at meetings are set out in the table on page 38 of the Annual Report 2009. The Chairmen of each committee report to the Board. The Chairmen of these committees attend the Annual General Meeting and are available to answer questions from shareholders.

During the year, the Audit Committee comprised of Mr. P. Gray (Chairman), Dr. J. Peter and Mr. P. Toomey, all of whom are non-executive directors.

The Chief Executive, Mr. L. FitzGerald and the Finance Director, Mr. B. McGrane, are not members of the Committee but may be invited to attend its meetings. The Head of Internal Audit and the external auditor also attend meetings and have direct access to the Chairman and the Committee for independent discussions. During the year, the Committee met with the Head of Internal Audit and with the external auditor in the absence of management.

The Committee meets a minimum of three times a year. During the year under review, the Committee met nine times. Attendance at meetings is set out on page 38 of the Annual Report 2009.

The Committee has determined that Mr. P. Gray is the Committee's financial expert.

The Committee's responsibilities include:

• monitoring the integrity of the Group's financial statements, including the annual report, interim report, preliminary announcement, interim management statements and trading statements;
• reviewing the effectiveness of the Group's internal financial controls and financial risk management systems;
• monitoring and reviewing the effectiveness of the Group's internal audit function;
• making recommendations to the Board on the appointment and removal of the external auditor;
• monitoring and reviewing the external auditor's independence, objectivity and effectiveness; and
• ensuring compliance with the Group's policy on the provision of non-audit services by the external auditor.

The Committee discharged its obligations during the year by:

• reviewing the Group's interim management statements which were issued in February and July 2009;
• reviewing the Group's trading statements which were issued in April and October 2009;
• reviewing the interim report for the six months ended 31 March 2009;
• reviewing the preliminary announcement and annual report for the year ended 30 September 2009;
• reviewing the results of the Group's financial controls risk identification and assessment process;
• approving the internal audit plan and reviewing internal audit reports; and
• reviewing the external audit plan in advance of the audit and the post-audit report, as presented by the external auditor.

The Committee regularly monitors the nature, extent and scope of non-audit services provided to the Group by the external auditor in order to ensure that this does not impair their independence and objectivity. It is current committee policy that where it is deemed to be in the best interests of the Group, alternative professional advisers, beyond the incumbent external auditor, are engaged to provide non-audit services. Four key principles underpin the provision of non-audit services by the external auditor, namely that the auditor shall not:

• audit its own firm's work;
• make management decisions for the Group;
• have a mutuality of financial interest with the Group; or
• be put in the role of advocate for the Group.

The Committee also reviewed the Group's practices in respect of the hiring of former employees of the external auditor.

Click here for the Terms of Reference for the Audit Committee

The Renumeration Committee consists solely of non-executive directors and during the year ended 30 September 2009, comprised of Mr. G. McGann (Chairman), Mr. H. Friel, Mr. R. Kells, Dr. J. Peter and Mr. P. Toomey. Mr. H. Friel was appointed to the Committee on 4 June 2009.

The Chief Executive, Mr. L. FitzGerald, is not a member of this committee but may be invited to attend meetings, except those where his own remuneration is discussed.

The Committee meets at least once a year. During the year under review, the Committee met three times. Attendance at meetings is set out on page 40 of the Annual Report 2009.

The Committee's responsibilities include:

• determining the Group's policy on executive remuneration;
• determining the remuneration of the executive directors;
• monitoring the level and structure of the remuneration for senior management; and
• reviewing and approving the design of performance related pay schemes and share incentive plans and approving awards under such schemes.

During the period under review, the Committee determined the salaries and awards under incentive plans for the executive directors and senior management. The Committee also approved the award of share options to executive directors and key management under the Executive Share Option Plan. The Committee also oversees the preparation of the Report of the Remuneration Committee as set out on pages 39 to 45 of the Annual Report 2009.

The Committee is empowered to use the services of external independent consultants to advise on all compensation and remuneration matters as required. The Committee engaged Deloitte LLP to review and make recommendations regarding the Group's long term incentive arrangements. Details of the proposed new long term incentive arrangements are on page 40 of the Annual Report 2009. Deloitte LLP did not provide any other significant services to the Group during the year.

Click here for the Terms of Reference for the Renumeration Committee

During the year ended 30 September 2009, the Nomination Committee comprised Mr. R. Kells (Chairman), Mr. L. FitzGerald, Mr. P. Gray, Mr. G. McGann and Mr. P. Toomey.

The Committee meets at least once a year. During the year under review, the Committee met twice. Attendance at meetings is set out on page 38 of the Annual Report 2009.

The Committee's responsibilities include:

• reviewing the structure, size and composition, including the skills, knowledge and experience required by the Board and making recommendations regarding any changes in order to ensure that the composition of the Board and committees is appropriate for the Group's requirements;
• establishing processes for the identification of suitable candidates for appointment to the Board; and
• overseeing succession planning for the Board and senior management.

During the year, the Committee recommended to the Board, one suitable candidate for appointment as a non-executive director. The Committee is empowered to use the services of independent consultants to facilitate the search for suitable candidates however such services were not required as the Committee engaged in a formal and rigorous process to consider the requirements of the position and identify suitable candidates.

Click here for the Terms of Reference for the Nomination Committee

The Acquisitions and Finance Committee advises the Board on matters relating to acquisitions and finance and during the year ended 30 September 2009, comprised of Mr. R. Kells (Chairman), Mr. L. FitzGerald, Ms. A. Flynn, Mr. H. Friel, Mr. P. Gray, Mr. G. McGann, Mr. K. McGowan and Mr. B. McGrane. Mr. H. Friel was appointed to the Committee on 4 June 2009.

The Committee meets during the year as required. During the year under review, the Committee met three times. Attendance at meetings is set out on page 38 of the Annual Report 2009.

Click here for the Terms of Reference for the Acquisitions and Finance Committee

The Group's corporate social responsibility policies and activities are summarised on the Corporate Social Responsibility page.

The directors have overall responsibility for the Group's system of internal control and for reviewing the effectiveness of these controls. The system of internal control is designed to manage, rather than eliminate, the risk of failure to achieve business objectives and can provide only reasonable but not absolute assurance against material misstatement or loss.

There is a continuous process for identifying, evaluating and managing the significant risks faced by the Group which has been in place during the year under review and up to the date on which the financial statements were signed. The Group's management operates a risk management process, which identifies the key risks facing the business, and reports to the Board on how these risks are being managed. This is based on each business unit producing a risk register, which identifies its key risks, the probability of those risks occurring, their impact should they occur and actions being taken to manage those risks to the desired level. This information is compiled by executive management, who meet bi-annually to discuss these risks, and other risks faced at group level, and this process culminates in the production of the Group's risk register. On an ongoing basis, management ensure that steps are taken to further embed internal control and risk management into the operations of the Group and to identify any areas for improvement.

The Audit Committee meets and receives reports from both internal and external auditors and satisfies itself as to the adequacy of the Group's internal financial control systems. The Chairman of the Audit Committee reports to the Board on significant matters considered by the Committee and the minutes of its meetings are circulated to all directors.

Further key procedures that have been established and are designed to provide effective internal control include:

• an organisational structure with clearly defined lines of responsibility and delegation of authority;
• the approval by the Board of comprehensive annual budgets, and the monthly monitoring of performance against these budgets;
• the approval by the Board for all major capital projects; and
• the existence of an independent internal audit function, which reviews key business processes and controls.

The directors confirm that they have reviewed and are satisfied with the effectiveness of the system of internal control, which operated during the year covered by the financial statements and up to the date on which the financial statements were signed. In particular, they have considered the significant risks affecting the business and the way in which these risks are managed, controlled and monitored.

Company Name: United Drug PLC
Place of Registration: Companies Registration Office, Dublin, Ireland
Registered Number: 12244
Registered Office: United Drug House, Magna Drive, Magna Business Park, Citywest Road, Dublin 24, Ireland.