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New 2019 remuneration policy being submitted for approval at the AGM on 14 May 2019. The tables below summarise the main elements of the remuneration packages of the Executive Directors.

Salary (fixed pay)

Link to strategy To pay a fair salary commensurate with the individual’s role, responsibilities and experience and having regard to market rates for similar roles in comparable companies.
Operation The Remuneration Committee reviews basic salaries annually with changes effective from 1 January. This review takes into account practices elsewhere in the Group. Salary is pensionable.
Opportunity There is no prescribed maximum salary or maximum rate of increase. The Committee will take into consideration the general increase for the broader employee population but on occasion may need to recognise changes in responsibility, development in the role or specific retention issues.
Changes No material changes.

Retirement benefits (fixed pay)

Link to strategy To provide market competitive pension arrangements to aid recruitment and retention of senior executives.
Operation The Group will pay a pension allowance or contribute to a pension scheme for Executive Directors. The Group’s legacy defined benefit scheme has been closed to new members since 2002 and the pensionable salary frozen in 2010. Pension contributions for new appointments will be kept under review in line with developing market practice.
Opportunity Company contribution of up to 25% of base salary or equivalent cash allowance in lieu (inclusive of employer’s national insurance contribution).
Changes No material changes.

Other benefits (fixed pay)

Link to strategy To provide cost effective benefits to aid recruitment and retention of senior executives and to support the wellbeing of employees.
Operation Benefits include, car allowance or Company car, private medical insurance, permanent health insurance and any other such benefits as the Committee considers appropriate.
Opportunity The benefits are not subject to a specific cap but represent a small element of total remuneration. Costs to provide these benefits are closely monitored.
Change No material changes.

Annual bonus (variable pay)

Link to strategy To incentivise performance over a 12 month period based on financial targets and individual performance objectives agreed by the Remuneration Committee.
Operation The bonus is paid in cash based on the audited financial results and the Remuneration Committee’s assessment of delivery against personal objectives. Any bonus award in respect of periods from 2015 is subject to penalty and clawback provisions covering material misstatement of Group results and is in force for 2 years following the award.
Opportunity Maximum bonus potential capped at 100% of basic salary but will remain at 50% for 2016.
Performance measure The performance measures applied may be financial or non-financial and corporate, divisional or individual and in such proportions as the Committee considers appropriate. The annual bonus plan remains a discretionary arrangement and the Committee retains a standard power to apply its judgement to adjust the outcome of the annual bonus plan for any performance measure (from zero to any cap) should it consider that to be appropriate.
Changes No material changes.

Long term incentive (variable pay)

Link to strategy To incentivise delivery of strategic targets and sustained performance over the long-term.
Operation Each year conditional awards over shares may be granted which can be earned subject to the delivery of performance goals. The Committee may set such performance conditions on PSP awards as it considers appropriate (whether financial or non-financial and whether corporate, divisional or individual). Performance conditions are for a fixed three-year period and there is no re-testing. Executive Directors are expected to build up a prescribed level of shareholding equivalent to 100% of base salary. If the prescribed shareholding has not been reached, Executive Directors will be expected to retain a proportion of the shares vesting under the Company’s PSP until the guideline is met. LTIP awards are subject to malus and clawback provisions for 3 years following vesting.
Opportunity Any award is capped at 100% of base salary in normal circumstances (200% in exceptional circumstances). For 2019 the Committee intends to make awards of 50% of salary.
Performance measure Conditional awards will vest based on three-year performance against challenging financial and other targets set and assessed by the Committee in its discretion.
Changes No material changes
Outstanding obligations

The Company will honour any commitments entered into prior to the approval and introduction of this policy, including obligations entered into under prior policies.

Clawback/malus in the Annual bonus and the LTIP

Provisions are in place for both the Annual bonus and the LTIP arrangement to operate malus and/or clawback in certain exceptional circumstances, including the material misstatement of the Company’s results (annual bonus and LTIP), if the assessment of performance on which vesting is based was based on an error (LTIP only) or circumstances which would warrant the summary dismissal of the individual, whether or not the Company has chosen to do so.

Consideration of employment conditions elsewhere in the Group

The Remuneration Committee has not conducted a specific employee consultation exercise on the Directors’ remuneration policy. However, there is a periodic employee survey and the Board receives a regular presentation from the Director of Human Resources, which includes consideration of the Group’s remuneration policies.

Consideration of shareholder views

The Remuneration Committee considers shareholder feedback received as part of any dialogue with shareholders via the Chairman, executive management or the Company’s brokers. Where necessary the Remuneration Committee Chair will engage pro-actively with shareholders such as in advance of proposed awards under the Performance Share Plan.

Differences between the policy on remuneration for Directors from the policy for all other employees

While appropriate benchmarks vary by role, the Company seeks to apply the philosophy behind this policy across the Company as a whole. Where the Company’s pay policy for Directors differs from its pay policies for groups of employees, this reflects the appropriate market rate position and/or typical practice for the relevant roles. The Company takes into account pay levels, bonus opportunity and share awards applied across the Group as a whole when setting the Executive Directors’ Remuneration Policy.

Approach to recruitment remuneration

The Remuneration Committee will follow the above policy when setting the remuneration for a new Executive Director. Base salary will be set at a competitive level appropriate for the role and experience of the Director being appointed. Where there is an external appointment, the Committee may consider it appropriate to recognise awards or benefits that will or may be forfeited on resignation from a previous appointment. This may take the form of cash and/or share awards. The policy is that the maximum payment under such arrangements will be no more than the Committee considers is required to provide reasonable compensation. If the Director is required to relocate then the policy is to provide reasonable relocation, travel and subsistence payments at the discretion of the Committee and for a period of no more than two years following appointment.

Service contracts and letters of appointment

Executive service contracts have a standard notice period of 12 months. The Committee reserves flexibility to alter these principles if necessary to secure the appointment of an appropriate candidate and if appropriate introduce a longer initial notice period (of up to two years) reducing over time. Executive Directors are entitled to accept appointments outside the Company provided the Board’s permission is obtained, however the Board may require the fees from such appointments to be accounted for to the Company. Neither P.D. Atkinson nor J. Love currently hold any external appointments.

Chairman and Non-Executive Director appointments are through letters of appointment for periods not exceeding three years subject to re-election at the AGM and contain notice periods of six months and three months respectively.

Directors’ contracts are available for inspection at the Company’s registered office by prior arrangement or immediately prior to the AGM.

Executive directors
Contract commencement date
Notice period
P.D. Atkinson 6 October 2003 12 months
J. Love 11 October 1999 12 months
Non-executive Directors
Letter of appointment commencement date
Notice period
S.R. Paterson 29 September 2017 6 months
R. McLellan  10 March 2016 3 months
J.W.F. Baird 8 January 2018 3 months
A. M. Dunstan 1 September 2018 3 months
Non-executive Director remuneration policy

Chairman

Link to strategy To attract and retain a high-calibre Board Chairman by offering a market competitive fee level.
Operation The Board Chairman is paid a single fee for all his responsibilities. The level of fee is reviewed periodically by the Remuneration Committee with reference to other comparable companies.
Opportunity The current fee is £67,578 and is subject to periodic change under this policy. There is no maximum fee level.

Non-executive Directors

Link to strategy To attract and retain high-calibre Non-executive Directors by offering a market competitive fee level.
Operation Non-executive Directors are paid a basic fee. Committee Chairs may be paid a supplement to reflect their additional responsibilities. Fee levels are reviewed periodically by the Chairman and the Executive Directors with reference to other comparable companies.
Opportunity The current fee is £33,789 and is subject to periodic change under this policy. There are currently no supplementary fees paid and there is no maximum fee level.

Illustration of the application of the remuneration policy

The charts above illustrate how the remuneration policy for the Executive Directors will apply in 2019 based on the following assumptions:

Payment for loss of office

The Remuneration Committee’s policy for an Executive Director whose employment is to be terminated is to agree a termination payment based on the value of the base salary, contractual pension contributions and other benefits that would have accrued during the contractual notice period unless there has been a breach of the service agreement by the Director.

The policy is that the departing Director may work or be placed on garden leave for all or part of their notice period or receive payment in lieu of notice in accordance with the service agreement. The Committee supports the principle of mitigation and phased payments relative to any settlement and will take legal advice in relation to any settlements to be proposed. Any share-based entitlements granted to an Executive Director will be determined based on the relevant rule plans as previously approved by shareholders.

The Company has the power to enter into settlement agreements with Directors and to pay compensation to settle potential legal claims. In addition, and consistent with market practice, in the event of the termination of an Executive Director, the Company may make a contribution towards that individual’s legal fees and fees for outplacement services as part of a negotiated settlement. Any such fees will be disclosed as part of the detail of termination arrangements. This policy does not include an explicit cap on the cost of termination payments.

Committee discretions

The Committee will operate the annual bonus plan and PSP according to their respective rules and the above policy table. The Committee retains discretion, consistent with market practice, in a number of respects including the terms and the termination of any contract, in relation to the operation and administration of these plans.

These discretions include but are not limited to:

  • Selection of participants;
  • Timing of the grant of an award and/or bonus opportunity;
  • The size of an award and/or bonus opportunity subject to the maximum limits set out under the policy;
  • Determination of performance against targets and resultant vesting of awards and/or bonus payments;
  • Determination of vesting of awards and/or bonus payments when dealing with a change of control or restructuring of the Group;
  • Determination of vesting of awards and/or bonus payments when dealing with a change of control or restructuring of the Group;
  • Determination of the treatment of leavers based on the rules of the plan and any treatment chosen;
  • Adjustments reflecting particular circumstances, e.g. Rights issues, corporate restructurings etc.; and
  • The annual review of performance measures, weightings and targets from year to year.

While performance measures and targets used in the Annual bonus plan and PSP will generally remain unaltered, if events occur, which in the Committee’s opinion, would make a different or amended target a fairer measure of performance, this can be set provided it is not materially more or less difficult to satisfy (having regard to the event in question). Any use of these discretions would, where relevant, be explained in the Director’s Remuneration Report and if appropriate be the subject of consultation with major shareholders.

The Committee may make minor amendments to the policy set out above without obtaining shareholder approval for that amendment.

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