Remuneration report

Governance

The Committee is chaired by Sir Nigel Rudd and all of its members are independent non-executive directors. The Company’s Chairman and Chief Executive attend Committee meetings by invitation only. They do not attend where their individual remuneration is discussed and no director is involved in deciding his own remuneration.

In 2007 the Committee met eight times and details of attendance at these meetings are provided in the Corporate governance section.

In August 2007 the Committee appointed Kepler Associates as its Independent Adviser. The role of the Committee’s Independent Adviser is to provide advice to the Committee and its individual members on all aspects of the Committee’s remit, and Kepler Associates will not undertake any work for the Company whilst they are retained as the Committee’s Independent Adviser. Representatives from Kepler Associates have attended each of the Committee meetings since their appointment and will be in attendance at all meetings unless specifically requested otherwise by the Committee.

During the year the Committee also received material assistance and advice on remuneration policy from the Company’s Human Resources Director, Alastair Imrie, and the Human Resources Director, Group Remuneration and Benefits, Graham Middleton. Dick Olver and Mike Turner, in their respective capacities as Chairman and Chief Executive, also provided advice that was of material assistance to the Committee.

Legal advice to the Committee has been provided by Linklaters and Freshfields Bruckhaus Deringer, who are both appointed by the Company, and who also provided services to the Company during the year. The Committee is satisfied that the services provided to it by these firms were of a technical nature and did not create any conflict of interest. If a conflict of interest were to arise in the future, the Committee would appoint separate legal advisers from those used by the Company.

PricewaterhouseCoopers (PwC), who are appointed by the Company and also provided services to the Company during the year, provided detailed information on market trends and the competitive positioning of packages. New Bridge Street Consulting, who are appointed by the Committee, provided advice on long-term incentive plans and the total shareholder return figures for assessing the performance condition under the Performance Share Plan.

Activities

In discharging its responsibilities, the Committee has, during the year, undertaken a thorough review of the Company’s reward strategy. As a result of that review, the Committee has agreed a number of changes as set out in this report. In addition, the Committee has agreed the:

• performance targets for the year and progress against those targets;
• operation of the long-term incentive plans and policy for executive share scheme grants including the level of individual grants and performance conditions;
• policy for the operation of the all-employee share schemes;
• award of bonuses based on the prior year’s performance;
• Chairman’s fees for his second three-year term;
• base salary for the two new Chief Operating Officers in the light of their progress at the half year;
• discretionary elements of the executive share plans;
• terms on which Steve Mogford and Chris Geoghegan left the Company during the year; and
• terms on which Mike Turner will retire from the Company at the end of August 2008.

In addition, the Committee has also:

• reviewed the Remuneration report; and
• consulted with major shareholders over aspects of remuneration policy.

The Company’s remuneration strategy, policy and details of executive remuneration are set out on other pages of this Remuneration report.

On behalf of the Remuneration Committee

Sir Nigel Rudd
Remuneration Committee Chairman