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Report of the Remuneration Committee

Information not subject to audit

Members: Dr Martin Read (Chairman), Maarten van den Bergh, Jim Lawrence and Alison Reed.

Committee and advisers

The Company’s Remuneration Committee determines on behalf of the Board, within the agreed terms of reference, the overall remuneration packages for the Chairman, the executive directors and the other members of the Management Team (as defined in the Committee’s terms of reference found on the Company’s investor relations website). Its members are all independent non-executive directors of the Company, none of whom has any personal financial interest, other than as a shareholder, in the matters to be decided.

The Committee’s main duties can be summarised as:

a)  To determine the framework or broad policy for the remuneration of the Chairman, the executive directors and the other members of the Management Team including incentive compensation plans and equity based plans;

b)  Within the terms of the agreed policy, to determine the total remuneration packages for the Chairman, the executive directors and the other members of the Management Team; and

c)  To determine the policy for and scope of pension arrangements, service agreements, termination payments and compensation commitments, undertaking direct supervision of such matters in relation to the executive directors and the other members of the Management Team.

The Committee has three main meetings every financial year. The first meeting, typically held in the first quarter of the financial year, assesses performance in the prior year and considers bonus awards in relation to that year, reviews salary levels and determines the level of awards to be granted under the long-term incentive schemes. The second meeting, typically held in the third quarter of the financial year, is a planning meeting for the next year to review the market trends and issues of interest to investors. Any new remuneration schemes would be considered in detail at this meeting. The third meeting, typically held in the fourth quarter of the financial year, considers the bonus and long-term incentive targets for awards to be made in the following year. Additional meetings are held as required.

The Company currently participates in four main salary survey sources run by Hay, PricewaterhouseCoopers (PwC), Hewitt New Bridge Street (Hewitt) and Towers Perrin. Data is extracted from each of these in determining the Company’s approach to base-pay market rates, and identifying competitive market practice in respect of the other remuneration elements. The Remuneration Committee is aware of the risk of an upward ratcheting of remuneration that can result from the use of pay surveys.

Hewitt is the adviser to the Remuneration Committee and gave advice to the Committee that materially assisted it. Its terms of reference are available for inspection on the Company’s investor relations website. The Chairman, Chief Executive, Chief Financial Officer, Company Secretary, Director – People and Organisational Effectiveness and two Reward Managers, all assisted the Committee in its deliberations but none of them participated in any decisions relating to their own remuneration. None of those who materially assisted the Committee in its deliberations was appointed by the Remuneration Committee other than Hewitt. Towers Perrin and Hay provided no other services to the Company other than advice on remuneration matters during 2008/09. In addition to its advice on remuneration, Hewitt also provided some advice to the Company on general employee reward and on pensions and PwC also provided minor advisory services.

Where appropriate, the Committee consults with investors about its proposals. The terms of reference of the Committee are available on the Company’s investor relations website.

Executive directors

Policy

The Company’s remuneration policy is to provide compensation packages at market rates which reward successful performance and attract, retain and motivate managers. The remuneration packages offered by the Company are broadly comparable with other UK-based international businesses of similar size.

In fixing packages, the Committee has regard to the compensation commitments which would result in the event of early termination.

The Committee has taken the Company’s Key Performance Indicators into account in shaping the compensation package for the executive directors and is satisfied that the compensation package does not, of itself, raise any environmental, social or governance risks by inadvertently motivating irresponsible behaviour.

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