Executive Directors’ Remuneration MM&K/Manifest Survey Seminar Launch Monday 10 June 2013 Agenda: 5:00pm Registration, coffee and networking 5:30pm Chairman’s Welcome and Opening Address 5:35pm Keynote Presentations Survey highlights - Cliff Weight, Director, MM&K Shareholder engagements and voting results - Sarah Wilson, Chief Executive, Manifest 6:00pm Panel Debate with Cliff Weight Sarah Wilson Dr Daniel Summerfield, USS chaired by Deborah Hargreaves, with contributions from the floor 7:00pm Seminar ends followed by drinks

Survey Results Cliff Weight, Director, MM&K Remuneration Consultants Agenda Context Definitions Differences of Averages and Medians Total Remuneration Realised Total Remuneration Awarded Comments on BIS proposals 2

Context - Corporate Governance Changes Voting – Advisory vote on payments made – Binding vote on future policy Disclosure – Single figure of total remuneration – 5+ year history of TSR, single figure, bonus % and LTIP % vesting – Scenario analysis of future policy – No surprises 3

Communicating Pay to Shareholders - a window on the soul of the company 4 How directors and senior managers are remunerated provides an important window on corporate governance more generally. A well-managed process – with a properly constituted remuneration committee which operates independently, appoints expert, professional, independent remuneration consultants to assist it, listens to shareholders and management and evaluates their inputs – is a good sign that other corporate governance will be effective. Process The choice of performance measures and their relative importance in the delivery of performance-related pay is the second window on corporate governance, as they indicate what is felt to be important in the company. Performance measures

Pension Normally entitlement is defined in contract of service and only changes with salary level Pension Normally entitlement is defined in contract of service and only changes with salary level Long term incentive Awards decided by the remuneration committee Long term incentive Awards decided by the remuneration committee Bonus opportunity Remuneration committee sets max. and on-target opportunity (expressed in % of salary) Bonus opportunity Remuneration committee sets max. and on-target opportunity (expressed in % of salary) DIMENSIONS OF REMUNERATION Salary (e.g. £1m) Key issue: valuation  Face value of shares?  Expected value (rule of thumb or Black Scholes?)  Modelling for the future? Realised value Can be further deferral of LTI after performance conditions are met Realised value Can be further deferral of LTI after performance conditions are met Realised Time 0 (Jan 01) Time 1 (Dec 31) Time 3 (+ 3 yrs or more) Time n (After retirement) ¼ tax free at retire- ment ¾ paid as pension until death of executive and then widow(er)s pension until their death Realised remuneration Pay award decisions Performance Deferred (poss. matched grant if voluntary deferment) Deferred (poss. matched grant if voluntary deferment) Performance MM&K, Y. Chahed & L. Goh (LSE), 2011 TOTAL PAY Note: Total reported pay is driven by decisions made at different points in time and does not necessarily reflect current market conditions. Some users (e.g. press) use realised value from prior year grants to criticise pay increases Note: Total reported pay is driven by decisions made at different points in time and does not necessarily reflect current market conditions. Some users (e.g. press) use realised value from prior year grants to criticise pay increases Defined Benefit (DB = x% of final salary)  Value depends on accrual rate, which drives the x% (eg 1/30th for each year of service)  Final salary (eg highest 12months in last three years) OR Defined Contribution (DC = y% of salary) OR Cash Salary Supplement (SS = y% of salary) Defined Benefit (DB = x% of final salary)  Value depends on accrual rate, which drives the x% (eg 1/30th for each year of service)  Final salary (eg highest 12months in last three years) OR Defined Contribution (DC = y% of salary) OR Cash Salary Supplement (SS = y% of salary)

Total Remuneration Survey Definitions RealisedAwarded SalaryPaid in yearSame BonusPaid for yearSame Deferred BonusValue Vested in year Value Deferred LTIPsValue Vested in year Expected Value OptionsGain on ExerciseExpected Value PensionsComplicatedSame 6

Total Remuneration Survey Definitions RealisedAwarded SalaryPaid in yearSame BonusPaid for yearSame Deferred BonusValue Vested in year Expected Value LTIPsValue Vested in year Expected Value OptionsGain on ExerciseExpected Value PensionsComplicatedSame 7 Exercise price Option Gain Share price Time Vests at 3 years

Total Remuneration RealisedAwardedLSE Listing Rules BIS – single figure SalaryPaid in yearSame Cash BonusPaid for yearSame Deferred Bonus Value Vested in year Value Deferred LTIPsValue Vested in year EVFV at awardValue Vested for year OptionsGain on Exercise EVFV at awardGain at date of vesting PensionsComplicated For DB = increase in TV of accrued pension sameActuarial GN1120x inc in accrued pension EV = Expected Value FV = Face Value 8

Top 100 Average and Median Increases, and Average of Increases TRR Latest TRR Previous Year% Increase 109,832 2,516,023-96% 2,336,182 9,025,143-74% 7,349,176 23,792,621-69% 2,536,849 6,180,209-59% 4,545,009 9,182,308-51% 1,835,560 3,395,423-46% 2,329,894 4,282,149-46% 6,441,480 9,818,324-34% 6,591,441 9,711,926-32% 2,246,648 3,240,120-31% 4,098,580 5,800,967-29% 2,941,209 3,754,024-22% 7,645,027 9,744,134-22% 1,994,024 2,498,631-20% 4,622,238 5,707,865-19% 1,460,121 1,782,000-18% 4,443,208 5,388,297-18% 4,504,627 5,324,919-15% 6,124,609 7,151,274-14% 2,209,720 2,558,453-14% 1,996,000 2,265,000-12% 4,447,348 4,952,044-10% 8,696,797 9,641,836-10% 1,869,952 2,066,975-10% 1,888,658 2,004,774-6% 1,588,541 1,674,625-5% 895, ,403-5% 549, ,768-2% 1,966,600 2,010,900-2% 1,519,384 1,548,605-2% 1,808,000 1,795,3391% 2,851,291 2,800,7832% 2,500,000 2,454,0002% 373, ,0004% 4,439,287 4,208,8695% 2,268,174 2,133,3576% 817, ,4498% 3,036,158 2,796,3339% 5,446,492 4,923,92311% 8,337,658 7,526,99211% 1,306,139 1,160,36913% 3,046,465 2,601,44917% 1,653,000 1,408,00017% 5,277,165 4,425,68219% 3,886,898 3,254,57919% 2,782,811 2,295,87421% 8,213,682 6,417,71728% 3,492,186 2,699,77329% 9,358,567 7,201,16830% 4,235,260 3,157,70634% 8,018,252 5,885,40236% 6,650,854 4,846,84537% 9,690,658 6,986,17739% 3,377,163 2,360,30743% 2,485,878 1,620,12553% 4,591,365 2,979,26954% 4,846,112 3,137,00054% 3,012,788 1,899,40359% 5,080,095 3,199,85159% 7,960,340 4,876,02463% 3,477,608 1,873,83586% 6,234,928 3,323,75188% 8,188,834 4,060,510102% 12,162,890 5,885,277107% 5,067,376 2,310,948119% 3,852,128 1,737,214122% 6,140,665 2,676,000129% 4,410,273 1,671,984164% 9,724,005 3,636,731167% 4,516,814 1,618,361179% 5,759,667 2,035,000183% 6,376,572 1,900,554236% 16,901,241 4,937,859242% 8,353,092 1,935,194332% Increase in average10% Median increase8% Average of increases30% £4.25m 2011 £3.86m

Salary Increases – Latest Data Top 100 – Average Salary 2011 £849, £861,594 % increase 1% Median increase 2.7% 10

CEO Salary + Bonus Awarded- Average of FTSE 100. Shift to deferred bonus results in reduction in cash bonus, but masks future increases in deferred bonus payouts 11

LTIPs – How they work - Example AWARD X PERFORMANCE CONDITIONS + SHARE PRICE CHANGE % of Max VESTING + DIVIDENDS 62%+30% Max £1.9m Expected Value £1.167 m £1,198,000 1,556,000 12

LTIPs Realised 13

LTIPs – Comparison of 2011 Realised and 2012 Realised AWARD X PERFORMANCE CONDITIONS + SHARE PRICE CHANGE % VESTING + DIVIDENDS 62%+30% Expected Value £1.167 m 1,198,000 1,556, AWARD X PERFORMANCE CONDITIONS + SHARE PRICE CHANGE % VESTING + DIVIDENDS 39%+15% Expected Value £1.480 m 959,000 1,102, Max £1.9m Max £2.5M

LTIPs – Comparison of 2011 Realised and 2012 Realised AWARD X PERFORMANCE CONDITIONS + SHARE PRICE CHANGE % VESTING + DIVIDENDS 62%+30% Expected Value £1.167 m 1,198,000 1,556, AWARD X PERFORMANCE CONDITIONS + SHARE PRICE CHANGE % VESTING + DIVIDENDS 39%+15% Expected Value £1.48 m 959,000 1,102, Max £1.9m Max £2.5M +41% -21%

16 LTI includes deferred bonus realised, in this slide

17 Total Remuneration RealisedAwarded MEDIAN +8%+1% AVERAGE +10%-5% Due to payouts realised (vested) from LTIs awarded 3+ years ago Due to Rem Com decisions in the year. Awarded = expected value of awards SURVEY RESULTS - Summary

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Moderation in Award Levels Total Remuneration Awarded up just 1% for FTSE 100 CEOs (Median). Average reduced by 5%. Is this the effect of the Shareholder Spring? Impact of deferred bonus understates pay by about 8% 19

FTSE 100 Average CEO Pay v. Company Size – BIGGER NOT BETTER Indexed data back to Pay has increased as has turnover and since 2003 market cap. However pay has increased much faster than the FTSE 100 index. What might change the long term trends? Can pay keep rising? 20

CEO costs 2.7 basis points CEO total rem = £4.5 million _______________________ Market cap = £17 billion Figures are for average The top 100 CEOs 21 = 0.027% 21

CEO costs 2.7 basis points CEO total rem = £4.5 million _______________________ Market cap = £17 billion Figures are for average The top 100 CEOs 22 = 0.027% 22

BIS Proposal re 5/10 year disclosure- example Single Figure of Total Remuneration £000 Annual variable element award rates against maximum opportunity Long term incentive vesting rates against maximum opportunity 2013CEO24,516 83%100% 2012CEO24,771 90%0% 2011¹CEO22,250 93%0% 2011CEO14,245 82%100% 2010CEO13,958 93%0 2009CEO13,895 89%67%

DISCLOSURE CONSEQUENCES YearSalaryBonusLTI Realised Total Remuneration Received Total Remuneration Awarded Total Average per year

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Ratio CEO to Average Employee 26