Remuneration report.

The remuneration report for 2011 sets out the remuneration policy for Directors and how it has been applied, including disclosures on directors’ remuneration required by law.

During the year, the Committee carried out a comprehensive review of the policy and structure of remuneration for executive Directors and as a result we are proposing to make a number of changes to the executive Director remuneration framework beginning with the 2012 financial year.

These changes, some of which are subject to shareholder approval, are summarised at the end of this report and described in the 2012 AGM circular. The proposed changes aim to improve the alignment of the remuneration framework with the interests of shareholders and our strategic objectives, in particular the delivery of long term sustainable earnings growth. Key features are:

  • although the structure of the reward is changing, the overall quantum will remain broadly unchanged;
  • an element of the short term variable remuneration scheme (up to 10% of basic salary for the 2012 financial year) will be assessed against strategic measures to align better our reward structure with key strategic priorities. In addition, deferred amounts of bonus earned will be subject to clawback in the event of a material individual or corporate failure; and
  • subject to shareholder approval, we will make awards under a new incentive plan, the Sustainable Earnings Plan (SEP), which will replace awards under the current Long Term Incentive Plan and Executive Share Option Scheme. Under the SEP, the time horizon of awards is being extended to five years to reflect better the longer term nature of our business. The key principle behind the SEP is to encourage and reward earnings performance which is sustained over the long term, in line with our growth strategy and our stated objective of creating long term shareholder value.

Throughout 2011, the Committee continued to apply the current remuneration policy prudently with a strong alignment to the interests of shareholders. Details are given in the following pages.

On behalf of the Board

Richard Parry-Jones
Chairman of the Remuneration Committee

27 February 2012

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