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Introduction

I am pleased to present the annual Remuneration Report, and would like to comment briefly on what is covered. This report has been designed to provide stakeholders with a good understanding of the Group's remuneration philosophy and practices, with particular emphasis on the remuneration arrangements for the executive directors.

Since 2009, our strategic direction has been focused on a turnaround of the Group and in 2010 we communicated a number of transformational changes which management intend to execute by the end of 2012. To create a direct alignment between the executive directors and our strategy, we introduced a new long-term strategic incentive plan (OMSIP) for 2010 and 2011, which was approved by shareholders at the AGM in May 2010.

This was done after consultation with a number of major shareholders, whose views were taken into account to ensure that the plan, in conjunction with other aspects of remuneration, was clearly aligned with the strategy and delivery of long-term value to shareholders. The Committee continues to welcome such feedback from institutional investors.

This is my last year as a member and Chairman of the Committee as, after nine years on the Board and six years as Chairman of the Committee, I will be retiring at the Company's Annual General Meeting in May. I wish my successor, Russell Edey, well in taking over responsibility for chairing the Committee.

Rudi Bogni
Chairman of the Remuneration Committee
8 March 2011

This report has been prepared by the Committee and approved by the Board. The figures included in the sections of this report headed 'Directors' emoluments for 2009 and 2010' on page 159 and 'Directors' interests under employee share plans' on page 166 have been audited by KPMG Audit Plc as required by the Large & Medium-sized Companies and Groups (Accounts & Reports) Regulations 2008. Their audit report is set out on page 171. The information in the remainder of this report has not been audited.

Remuneration Committee

The Committee is a committee of the Board. Its full terms of reference are published on the Company's website. The Committee is responsible for:

• Determining the remuneration, incentive arrangements, benefits and any compensation payments of the executive directors;
• Determining the remuneration of the Chairman of the Board;
• Monitoring and approving the level and structure of remuneration of the executive directors of the Company and its principal operating subsidiaries, the Group Company Secretary, senior executive employees (as identified by the Board) and those who perform a significant influence function or whose activities have, or could have, a material impact on the risk profile of the Company or as defined for compliance with regulations in accordance with the policy; and
• Reviewing, monitoring and approving, or recommending for approval, the Company's share incentive arrangements and awards.

Membership and meetings of the Committee during 2010

The Committee Chairman has access to and regular contact with Group HR independently of the executive directors. During 2010, the Committee met eight times. The Board accepted the recommendations made by the Committee during the year without amendment. The Group Company Secretary, Martin Murray, acted as Secretary to the Committee. The following, all of whom are or were at the relevant time independent non-executive directors of the Company, served as members of the Committee during the year:

* The date for this meeting had been set before Alan Gillespie joined the Board and he was unable to rearrange prior commitments to attend it.

Other attendees at Committee meetings to which they were respectively invited during 2010 were as follows:

* Other than when their own remuneration was being discussed.

The Committee renewed the appointment of Alan Judes as its independent adviser for 2010, through his consultancy Strategic Remuneration, and has also done so for 2011. A copy of his letter of engagement is on the Company's website. Any work that the Company wishes Alan Judes to do on its behalf, rather than for the Committee, is pre-cleared with the Committee Chairman with a view to avoiding conflicts of interest. Work undertaken by Alan Judes for the Committee included attending meetings of the Committee and advising the Committee in connection with benchmarking of the total reward packages for the executive directors and other senior members of staff, the design of short-term incentive and long-term incentive arrangements, advising on issues arising from changes to UK pensions legislation, updating the Committee on trends in compensation and governance matters and accompanying the Chairman of the Committee to meetings with shareholder representatives to discuss proposed remuneration structures. No work was performed by Alan Judes for the Company, as distinct from the Committee, during 2010. His consultancy company's fees for 2010 totalled £84,000, excluding VAT (2009 £72,000, excluding VAT).

Don Schneider and Kevin Stacey of Group HR assisted the Committee during the year. Group HR provided supporting materials for matters that came before the Committee, including comparative data and justifications for proposed salary, benefit, annual incentive plan and share awards and criteria for performance targets and appraisals against those targets. It used the services of external advisers (including PricewaterhouseCoopers) as necessary.