Chairman's letter

"After six and a half exhilarating and eventful years, I am leaving the Company in the best possible hands. Ocado is one of the most innovative and exciting growth companies in the UK and it has been a privilege to be a part of their story."

Lord Grade of Yarmouth
Chairman

Dear Shareholder,

On behalf of the Board, I am pleased to present the Company's statement of corporate governance. The Board fully supports the principles of good corporate governance and is committed to the improvement and development of appropriate structures, processes and procedures for the Group in support of these principles. In particular, we endorse the description of governance published by the FRC in October 2010 that "governance should support, not constrain, the entrepreneurial leadership of the company, while ensuring that risk is properly managed . . . Boards must see good governance as a means to improve their performance, not just a compliance exercise". As Chairman, I recognise that my leadership of the Board is critical to encouraging open and transparent debate, discussion, constructive challenge and support.

Board balance and effectiveness

Securing the right balance of skills, experience and perspectives on the Board is a key responsibility to ensure that the Board works effectively.

I am also mindful of my responsibility as Chairman to lead the Board and ensure that it is working effectively. This year a Board evaluation was carried out with the FRC's Guidance on Board Effectiveness in mind. I am encouraged that our Board operates effectively and remains properly engaged.

Management of risk

Monitoring the level of risk, and ensuring appropriate governance to support this is a key objective of the Board. It is important that we continue to improve our understanding and monitoring of the risks associated with our business strategy, and that our risk appetite and tolerance is communicated through the management structures as our business evolves. Details of our risk management systems are described in greater detail in the Accountability section.

Communications with shareholders

We are committed to maintaining constructive communications with our shareholders. Our Chief Executive Officer and Chief Financial Officer are responsible for maintaining a regular dialogue with major shareholders. I and David Grigson, the Senior Independent Director, are also available to the Company's shareholders and during the year, we met with several of our largest shareholders to discuss governance matters.

Changes to the Board composition

We welcomed a number of new Directors to the Board during the period. Duncan Tatton-Brown joined the Board as Chief Financial Officer in September 2012 and Mark Richardson was appointed as Operations Director in January 2012. We also appointed Alex Mahon as an Independent Non-Executive Director of the Board.

A number of Directors also left the Board. Andrew Bracey resigned as Chief Financial Officer in March 2012 and David Young retired after almost 12 years of service as Non-Executive Director at the annual general meeting in May 2012. Non-Executive Director, Wendy Becker, left the Company on 21 January 2013. The Board would like to thank Andrew, David and Wendy for their valued contributions to Ocado.

Chairman succession

On 22 January 2013, I announced my retirement as Chairman. A recruitment process has taken place as described in the Nomination Committee report, and as a result Sir Stuart Rose will be succeeding me as Chairman from the 2013 AGM.

After a smooth succession process and having secured a new Chairman my job at Ocado is almost complete. After six and a half exhilarating and eventful years, I am leaving the Company in the best possible hands. Sir Stuart's substantial retail experience and commercial acumen will add significant value. Ocado is one of the most innovative and exciting growth companies in the UK and it has been a privilege to be a part of their story.

Annual General Meeting

The Annual General Meeting will be held at 11am on 10 May 2013 at One Bunhill Row, London, EC1Y 8YY and I look forward to seeing you at my final Ocado AGM.

Lord Grade of Yarmouth
Chairman

Ocado Group plc