Governance

Directors' remuneration report - Remuneration for 2007

The table below summarises the remuneration elements for 2007.

Base salary

Base salaries for Executive Directors were reviewed in July. When determining the salary of the Executive Directors, the Committee takes into account:

• base salaries of comparable roles within FTSE 100 retail financial services businesses which operate predominantly in the UK;
• the performance of the Group;
• the performance of the individual Executive Director; and
• the individual Executive Director's experience and responsibilities.

Base salary is the only element of pay that is pensionable.

Executive Incentive Scheme 2007

In 2007, following a benchmarking review, it was identified that the total remuneration package was positioned significantly below market practice. The Remuneration Committee was keen to address this to ensure that the Executive Directors were retained and motivated to drive performance within the Group and assist in delivering the business strategy.

The EIS 2007, delivers an award of up to a maximum of 150% of base salary for delivering key strategic objectives and over achieving personal objectives, paid entirely in restricted shares vesting in 2011. The scheme is based on robust and genuinely stretching targets. The EIS 2007 was a one-off arrangement and will not operate in 2008.

The Executive Incentive Plan

The EIP was introduced to encompass both annual and three year performance. The EIP applies to those individuals whose personal performance has a significant impact on the Group's results, namely the Executive Directors and certain other senior executives. In 2007 there were 18 participants in total.

Short-term performance component

Under the EIP, the short-term component is composed of two equal parts, one of cash and one of deferred shares, both subject to the achievement of pre-determined shortterm performance measures during the year. For both components 'on-target' performance results in a payout of 30% of base salary and a maximum of 60% of base salary.

The performance measures are reviewed annually to ensure they are appropriate to the current market conditions and the Company's goals and priorities. Once set, they are not normally adjusted during the year. No changes were made over the course of the past financial year.

Performance-related payments earned for the past year totalled on average 35% of annual salary in cash and 35% of annual salary in deferred shares. The value of the deferred shares element will be disclosed at the time of vesting in the relevant report.

Long-term performance component

If the Company performs strongly during the three year deferral period, participants will be entitled to an additional award of matching performance shares. The performance conditions determining the level of match to be applied to the shares relating to 2007 performance will be as follows:

Matching is calculated on a pro-rata basis between the above points, we see this as the simplest and fairest method of calculating matching awards. Underlying EPS growth was chosen as the performance measure for the EIP as something for which the Executive Directors can be held directly accountable by focusing on internal financial performance only.

Total remuneration is heavily geared to performance. At maximum performance base salary represents 20% of the total package.

The value of pensions has been excluded from the calculations as these values can vary significantly from year to year and from person to person.

Remuneration elements for 2007