PERFORMANCE • No further performance targets will apply to the share awards granted in respect of the bonuses for FY20 as METRICS those awards reflect the outcome of the performance targets for that year, as set out on pages 144 to 146 of the FY20 Annual Report. • Stretching performance targets are set each year. Performance targets for the Executive Directors may be based on financial objectives and/or strategic objectives and/or personal goals set by the Remuneration Committee annually. • Financial objectives may include, but are not limited to, budgeted PBT for the financial year taking into account market consensus and individual broker expectations. • The strategic objectives will vary depending on the specific business priorities in a particular year. • Ordinarily, at least 50% of the annual bonus for Executives will be subject to financial objectives. • For the avoidance of doubt, share awards in respect of the bonuses for FY20 will not be subject to further performance targets as they reflect the outcome of the performance targets for that year, as set out on pages 144 to 146 of the FY20 Annual Report. • Awards are subject to recovery provisions (malus and clawback) as set out on page 146. LONG-TERM Awards to be made to Executive Directors other than Sir Will Adderley, INCENTIVE PLAN who has requested that he not be considered for LTIP awards PURPOSE AND • Supports delivery of strategy by requiring the achievement of financial targets which include EPS, which the LINK TO STRATEGIC Committee believes to be the most appropriate measure for medium-term performance, aligned with our OBJECTIVES growth ambitions and continuing to win market share. EPS growth is also a prime driver of shareholder value creation. Flexibility will be retained to base part of the award on other financial or strategic measures in order that targets can be tailored to the circumstances of each grant. • Rewards strong financial performance and sustained increase in shareholder value over the long term. • Aligns with shareholder interests through the delivery of shares, the majority of which (after payment of tax liabilities) are retained. OPERATION • Awards are made annually (which can take the form of a conditional award, nil-cost option or nominal value option), with vesting subject to performance over three financial years. • A majority of shares must be retained as set out in the ‘Shareholding requirements’ section below. • The Committee has discretion to adjust the LTIP vesting outturn upwards or downwards if it considers that the formulaic output does not reflect its assessment of overall financial or non-financial performance of the participant or the Group, or is inappropriate in the context of circumstances that were unexpected or unforeseen at grant, or is inappropriate for any other reason. MAXIMUM • The maximum annual award for Executive Directors is 200% of salary. OPPORTUNITY • Dividend accruals may be made in respect of special dividends paid during the performance period applicable to an award and up to the vesting date. Payment would only be made in respect of shares vesting after applying performance criteria. PERFORMANCE • For at least 75% of an award, one or more financial measures, which will include a measure based on EPS, METRICS assessed over the three-year performance period. The balance of the award will be based on one or more other financial, strategic, environmental, social and governance measures. • The Remuneration Committee considers the targets annually taking into account a range of factors which will include the Company’s plans, external forecasts and the overall business environment. • Subject to the Committee’s discretion to override formulaic outturns, for financial measures 10% of an award will vest for threshold performance (the lowest level of performance at which awards will vest), rising to up to 50% for achieving a stretching level of ‘on-target’ performance and to 100% for achieving or exceeding a stretch level of performance. Vesting between threshold and on-target and between on-target and maximum will typically be on a straight-line basis. • For strategic, environmental, social or governance measures, vesting will be determined by the Committee between 0% and 100% based on its assessment of the extent to which the relevant measures have been met. • Awards are subject to recovery provisions (malus and clawback) as set out on page 146. DUNELM GROUP PLC ANNUAL REPORT & ACCOUNTS 2021 145 GOVERNANCESTRATEGIC REPORT FINANCIAL STATEMENTSOTHER INFORMATION