Cairn is committed to achieving compliance with the principles and provisions set out in the Combined Code appended to the Listing Rules and to ensuring that high standards of corporate governance are maintained. The Board considers that the Company is compliant with the Combined Code, other than in the areas detailed here.

Set out below is a statement of how the Company applied the principles of the Combined Code for the year ended 31 December 2009.

The Board
Cairn’s business is international in scope and carries political, commercial and technical risks. Accordingly, particular attention is paid to the composition and balance of the Board to ensure that it has wide experience of the sector and regulatory environment in which Cairn operates, and appropriate financial and risk management skills. In each Board appointment, whether executive or non-executive, the Board considers that objectivity and integrity, as well as skills, experience and ability that will assist the Board in its key functions, are prerequisites for appointment.

The Board currently comprises the Chairman, the Chief Executive, five executive directors and five independent non-executive directors. The directors’ biographies are here. Hamish Grossart and Mark Tyndall both served as non-executive directors during the year but will be retiring at the AGM on 20 May 2010. The Board plans to appoint two new independent non-executive directors in the near future as replacements for Mr Grossart and Mr Tyndall.

Iain McLaren took over the role of Cairn’s senior independent non-executive director from Hamish Grossart on 19 May 2009. A key responsibility for the senior independent non-executive director is to be available to shareholders in the event that they may feel it inappropriate to relay views through the Chairman, Chief Executive or the Finance Director. In addition, the senior independent non-executive director takes the lead role when the non-executive directors assess the performance of the Chairman.

All of the directors are subject to election by shareholders at the first AGM after their appointment to the Board and to re-election by shareholders at least once every three years. In addition, any non-executive director who has served on the Board for more than nine years is subject to annual re-election.

The division of responsibilities between the Chairman and the Chief Executive has been clearly established, set out in writing and agreed by the Board and was reviewed during 2009 to ensure it remains appropriate and effective.

The Board has a formal schedule of matters specifically reserved to it for decision. These reserved matters include determination of the overall strategy of the Group and approval of the annual report and accounts and any other financial statements, the Group’s annual budget and amendments to that budget over a particular amount, borrowing and security, acquisitions and disposals, capital expenditure over a specified amount, amendments to the organisational structure of the Group and Board, approval of significant changes to accounting policies and approval of management incentive schemes and Group policy on pensions. The schedule of matters reserved to the Board was also reviewed and updated during 2009.

The Board delegates the execution of its strategic objectives to the Chief Executive’s Committee, which comprises the executive directors and senior management. Operational management of the Group on a day-to-day basis is delegated to asset managers and functional heads of department.