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PROMOTING AND PROTECTING SHAREHOLDER INTERESTS

Our directors are expected to be, and they are, active overseers of our business. In addition to the minimum of five formal board meetings (and the committee meetings described below) to be held each year, the directors are solicited for, and at their own initiative provide, their views and counsel on a variety of topics.

Our non-Management directors meet periodically in executive session. Unless they determine otherwise, the Chairman of our Corporate Governance and Nominating Committee presides at these meetings. The meetings provide a forum for the free expression of views and the exchange of ideas by our outside directors without the possible inhibiting influence of Management directors.

The Board of Directors accomplishes a substantial amount of its work through three committees: the Audit Committee, the Compensation Committee and the Corporate Governance and Nominating Committee. Our Corporate Governance Guidelines and committee charters require that all members of these committees be "independent"—that they have no relationship that may interfere with the exercise of their independence from Management and the firm. Each of these committees is authorized to engage whatever resources, as it deems appropriate, without seeking approval of the Board or Management, to discharge its duties and responsibilities. Our strong belief is that exceptional independent oversight will promote and protect shareholder interests.

Our Audit Committee consists of four independent directors and is chaired by Lord Browne of Madingley, who is the Group Chief Executive of BP p.l.c., and earlier in his career had been the Group Treasurer of BP and Chief Financial Officer of Standard Oil Company (Ohio). The primary purposes of the Audit Committee include assisting the Board in its oversight of the integrity of our financial statements, our compliance with legal and regulatory requirements, the qualifications and independence of our independent auditors, the performance of our internal audit function and independent auditors, and our management of market, credit, liquidity and other financial and operational risks. In addition, the Audit Committee reviews and monitors the adequacy of the structures, policies and procedures that the firm has developed to assure the integrity of our investment research. During fiscal 2002, the Audit Committee (or sub-committees thereof) held eight meetings, including five executive sessions, two private sessions with Management, and five private sessions with each of the independent auditors and Director of Internal Audit. Lord Browne also held five meetings with the Director of Internal Audit. The independent auditors and the Director of Internal Audit each have free access to the Audit Committee to discuss any matters they deem appropriate.

Our Compensation Committee consists of five independent directors and is chaired by James A. Johnson, a Vice Chairman of Perseus, L.L.C., a merchant banking and private equity firm, and retired Chairman and CEO of Fannie Mae. The primary purposes of the Compensation Committee include assisting the Board in overseeing the development and administration of our compensation programs and reviewing the compensation of our executives and, to insure consistency with the firm's Statement of Investment Research Principles, of our investment

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