20^th March, 2002.

Dear Howard,

You may recall that a year ago you expressed agreement with some of the ideas about mutuality I put in a submission to Treascom. I attach recent letters I wrote to John Tiner spelling out the continuing failure of mutuality at the Equitable, along with a letter I wrote to Treves explaining why I was withdrawing my application for board membership.

We want mutuality to provide effective accountability to members, which means two things:-

• the requirement on a board to provide a full explanation of what it is doing, and not to hide its misjudgements behind a smokescreen of specious reasons for not providing information as Thomson appears to have done to hide the contents of the financial review June 2001

• an effective way for members to elect member representatives to the board. The constitution of the Equitable as a company coupled with its archaic articles of association and voting by resolution mean that:-

• members cannot put down motions at an AGM

• members cannot effectively call an EGM

• *through proxy voting the incumbent board/chairman can de facto control new board appointments

• In consequence the Chairman/Board can effectively gerrymander the voting (as we imagine Treves will do at the next AGM on May 27^th to ensure he continues to have a compliant board including an "appointed" member representative)

To these ends we would like to see ACTION by the FSA to improve the governance of mutual life offices. We want to see the following provisions set out in legally enforceable form:-

• analogous to the Building Societies Act of 1986 we want a definition of the maximum number of members required to call an EGM of (say) 0.1%, and to put a motion to an AGM of 0.05%

• a minimum number for proposing people for election to the board. The number would vary by size of membership, but might be 50 for a Society the size of Equitable. There are two reasons for this:-

• to avoid frivolous applications

• to avoid the incumbent Board splitting "independents'" votes

• a ban on voting by resolution, which requires members to vote for and against each resolution and allows proxy voting. Indeed if a voting paper is signed, but the votes are left blank, the voter is deemed to give the chairman power of proxy. The Building Societies Act 1986 allows for both voting by resolution and postal voting, which the Nationwide adopts. Under postal voting the yes votes for each candidate are totalled and those with the most votes are appointed. There is no proxy voting and signed blank forms are void)

• the publication on a website of all matters of significant commercial interest unless those matters are adjudged to be genuinely commercially confidential in the interests of the members. Where there is a dispute between members and a board over whether a matter is confidential or not, there should be a simple means of resolving the dispute on a level playing field which precludes the board employing a squad of lawyers and barristers to outspend members. The means might be a reference to the FSA or a county court with provision for no award of expenses.

We are aware that the board of Equitable is not alone in gerrymandering elections. I read on Motley Fool that Ronnie Sloan, actuary and independent board candidate at Standard Life has for the second year running withdrawn his application in protest of the proposed voting procedure despite his seemingly suitable qualification. To paraphrase from his press release the obstacles to his election:-

• it would be necessary first to vote off one of the existing directors standing for re-election

• The chairman would not agree to abstain from casting all discretionary proxies in favour of existing directors (thereby thwarting the above), nor from casting them against Sloan if his resolution ever came to a vote

Thus far the regulatory authorities have seemingly done nothing for the members of the Equitable - I hope you will at least define a regulatory code with legal force to ensure effective mutuality.

Yours sincerely,

ALEX HENNEY

c.c. EMAG Commiteee and website
ELAS Board
Mr. Andrew Bolger
Ms. Liz Dolan
Mr. Christopher Chope MP
Mr. Ron Sandler
Ms. Liz Kwantes
Mr. Ron Bullen