60 Xchanging plc Annual report 2011

Remuneration report

Foreword We will continue to make awards under the Performance

Xchanging has successfully emerged from a number of business
and operational challenges in 2011. During this time Kenneth
Lever and David Bauernfeind were appointed Chief Executive
Officer and Chief Financial Officer respectively, and the business
was successfully stabilised. The appointment of Geoff Unwin as
Chairman from 1 January 2012 was also announced towards
the end of the year and has helped complete the stabilisation
process and accelerate the turnaround.
As outlined on pages 18 to 21 over the next 12 months we
will seek to move towards the next phase of our growth plan
which includes a focus on maximising the economic value of
the business and the growth of profitable and sustainable
revenue streams. The Board has taken the view that
managing for growth in this way will help lead to superior
levels of medium- and longer-term value creation for
our shareholders.
Embedding this philosophy across the Company will take
some time to implement. The proposed revisions to our
executive incentive arrangements in 2012 outlined in this
report represent some of the first steps towards achieving
our growth aspirations.
Share Plan (‘PSP’) with vesting after three years although the
Committee intends to make changes to the performance
conditions and vesting arrangements for awards made in
2012 and thereafter. Full details will be published in the 2012
Directors’ Remuneration Report.
To be clear, the proposed changes outlined above will not
result in any increases to the quantum of pay opportunity in
2012, and the Remuneration Committee is committed
to only paying for demonstrable returns to shareholders.
In conclusion, the Remuneration Committee will continue to
closely review the appropriateness of the revised arrangements
during 2012 as the business develops and grows.
Bill Thomas
Chairman of the
Remuneration Committee

After a review of our executive remuneration arrangements

over 2011 the Committee has determined that:
„ There will be no change to our policy of calibrating base
salaries for Executive Directors around appropriate
mid-market norms over time, taking account of corporate
performance, market conditions and individual
performance.
„ There will be no change to pensions or benefits
arrangements which remained positioned towards the
lower end of the market; with the exception of the
introduction of an annual health screen.
„ We will implement a revised annual bonus plan with
payouts linked to three measures: operating profit, revenue
growth and cash flow performance. In 2012 we plan to
maintain the maximum and target bonus opportunity at
150% and 90% of salary, respectively.
„ One third of any bonus award will be deferred into
shares for three years for Executive Directors and other
senior executives.
 Company Business Corporate Financial
overview review governance statements
Remuneration Committee
Over 2011 the Remuneration Committee was chaired by Pat
O’Driscoll who was appointed on 22 July 2009 by the Board.
At the start of 2011, the Remuneration Committee consisted
of the following Non-executive Directors: Pat O’Driscoll,
Dennis Millard and Stephen Brenninkmeijer. Stephen retired
from the Board on 31 August 2011 and was replaced by
Michel Paulin who was appointed to the Remuneration
Committee for the period from 13 September 2011 to
13 December 2011. Bill Thomas was appointed to the
Remuneration Committee with effect from 13 December
2011, and when Pat O’Driscoll stood down as Chairman of
the Remuneration Committee, on 8 February 2012, Bill took
over as Chairman. Pat O’Driscoll remains a member of the
Remuneration Committee.
Geoff Unwin was appointed as a member of the
Remuneration Committee with effect from 8 February 2012.
Stephen Brenninkmeijer was deemed not to be independent
for the year commencing 1 January 2011. All other members
were deemed independent throughout the year.
The Company Secretary is Secretary to the Remuneration
Committee. Only Remuneration Committee members and
the Company Secretary (except when his own remuneration
is being directly considered) are entitled to attend meetings
of the Remuneration Committee. However, the Chief
Executive Officer, the Chief HR Officer and others may
attend by invitation of the Chairman of the
Remuneration Committee.
The Remuneration Committee’s primary purpose is to review
the ongoing appropriateness of the remuneration policy
as it applies to the Executive Directors and key senior
management and to make recommendations on the
framework for their remuneration and to determine
their specific remuneration packages. In addition, the
Remuneration Committee is responsible for monitoring the
remuneration strategy and policy of the Group. In making
its decisions, the Remuneration Committee considers the
Employee, Social and Governance (‘ESG’) implications in
making its decisions. It is also mindful to ensure that
inappropriate risk-taking is not incentivised.
The Remuneration Committee’s Terms of Reference can
be found under the corporate governance section of the
Xchanging website. The current Terms of Reference were
adopted on 28 February 2012.
The Remuneration Committee received advice from Towers
Watson (our appointed advisers) and Clifford Chance during
2011. Towers Watson has also provided remuneration advice
more widely to the Company with the permission of the
Remuneration Committee. Towers Watson has signed the
Remuneration Consultants Code of Conduct and has made
the code available to Xchanging. Clifford Chance provided
legal advice on the operation of share schemes, employment
matters and legal advice more widely to the Company.
Other Xchanging plc Annual report 2011 61
information
Remuneration policy
Xchanging’s remuneration policy is to ensure that we attract
and retain key talent in order to create sustainable long-term
value for shareholders. To help inform the Remuneration
Committee, total remuneration is benchmarked periodically
against relevant FTSE 250 companies (excluding financial
services) taking into account the geographic reach of each role
in determining competitive remuneration. The Remuneration
Committee has determined that the FTSE 250 still remains the
most appropriate peer group for its UK-based executive talent
during its current transformation phase. The Remuneration
Committee has also agreed that the remuneration philosophy
for 2012 will remain as follows:
„ To position base salaries around competitive market
practice over time. Mid-market base salary benchmarks
will be determined by reference to the local geographic
market for the role, and its size and scope.
„ To reward for business success with a significant proportion
of the reward opportunity for our senior employees linked
to sustainable performance in the form of variable
compensation:
– annual bonuses will reward business performance
delivered in the year above pre-agreed and appropriate
thresholds and based on affordability. Performance
measures will be based on a balanced set of key value
drivers of the business;
– long-term incentives will form part of a market
competitive remuneration package. Making awards in
the form of shares aligns the interests of our executives
with those of shareholders.
„ To encourage our senior team to build a personally
significant stake in the business over time.
The Remuneration Committee believes that the remuneration
policy described above is aligned to Xchanging’s business
objectives and is in the interests of shareholders. The
Remuneration Committee will continue to monitor performance
against the total remuneration policy to ensure that it achieves
its aim of attracting, motivating and retaining the senior
management talent that is required to develop the Company
and deliver shareholder value.
Remuneration for Executive Directors in 2012
Remuneration packages for the Executive Directors will
continue to consist of base salary, annual bonus, awards under
long-term incentive schemes and other benefits. Following a
review of remuneration policy and feedback from investors
the Remuneration Committee intends to make a number of
changes in 2012. These changes, which are outlined below in
more detail, will maintain levels of target and maximum total
pay for Executive Directors at the same levels as for 2011 but
will seek to more closely align Xchanging’s executive incentive
plans with our key value drivers going forward.
Base salary
In light of the current economic circumstances, base salaries
for the Executive Directors will remain fixed at £475,000 and
£300,000 for 2012 for the Chief Executive Officer and Chief
Financial Officer respectively.
62 Xchanging plc Annual report 2011

Remuneration report continued

Annual bonus plan for 2012 Pay mix in 2012

Maximum annual bonus opportunity will remain at 150% of Assuming the proposed changes described are implemented,
salary and the target opportunity, for reaching the challenging the two charts below illustrate the resulting pay mix for
business plan for 2012 will remain at the current level of 60% Executive Directors based on target and maximum
of maximum (ie 90% of base salary). Maintaining this policy performance. In both cases, variable pay forms a significant
reflects the current environment in which the business portion of total remuneration in accordance with the
operates whilst also providing management with an incentive Remuneration Committee’s policy described earlier.
to deliver the agreed business strategy. No bonus will be paid
in the event that threshold profit-based hurdles are not Executive Director pay mix (%)
achieved. Performance will be measured over three equally (Target performance)
weighted key metrics:
4.0
„ Operating profit;
„ Revenue growth; and 16.0
„ Cash flow targets.
42.0
Payment of bonuses will be delivered in light of performance
13.0
across these three measures and appropriately challenging Base salary
Target annual bonus
hurdles determined at the outset of the year. Performance (cash)
will be assessed between each respective hurdle rate and Target annual bonus
plan maximum on a sliding scale basis. (deferred shares)
25.0
25.0
0 Long-term incentive
threshold vesting
For Executive Directors one third of any bonus earned will be Pension
deferred into equity which will vest into nil-cost options after
three years and will continue to be exercisable for a further Executive Director pay mix (%)
seven years to increase alignment with shareholders. A similar (Maximum performance)
bonus deferral structure will also be extended to the wider
senior management team in 2012. 2.0

Long-term incentives in 2012 24.0

Over the course of 2011 the Committee undertook a review 37.0
of existing long-term incentive arrangements to ensure that
they remain appropriate. In assessing the new arrangements Base salary
the Committee was mindful of the following guiding Target annual bonus
principles for incentives: (cash)
24.
24
4.0
0
24.0 Target annual bonus
„ They should be simple to understand and communicate. (deferred shares)
„ They should provide management with incentives that are 12.0 Long-term incentive
threshold vesting
appropriately geared and represent an acceptable cost to Pension
the company and shareholders.
„ They should be based on goals that are challenging but
achievable. Remuneration during 2011
Base salary
It was determined that long-term incentive awards under Kenneth Lever was appointed Acting Chief Executive Officer
the Performance Share Plan (‘PSP’) will continue under the on 9 February 2011, in addition to his role as Chief Financial
current policy for Executive Directors and a more focused Officer. He was appointed Chief Executive Officer on 7 June
selection of senior management than in previous years. 2011. As Chief Financial Officer his salary was £375,000,
and after his appointment as acting Chief Executive Officer
The Remuneration Committee also intends to revise the his base salary remained unchanged but he received a
existing performance test to align them with our current £60,000 per annum pro rata allowance in recognition
business priorities and at the same time preserving the of the additional responsibilities. On appointment as Chief
current, ‘Basic’ and ‘Stretch’ awards approach in place in Executive Officer, the payment of the allowance ceased
2011. Therefore Basic awards will continue to represent an and his salary was increased to £475,000 per annum.
annual award of up to 100% of base salary and the Stretch David Bauernfeind was appointed Chief Financial Officer
award up to an additional 50% of salary. The Remuneration on 7 June 2011 on a base salary of £300,000.
Committee will communicate the new arrangements to its
major investors and will disclose them in the 2012 Directors’
Remuneration Report.

A shareholding policy continues to apply to the Executive

Directors that requires a minimum shareholding equivalent
to 100% of base salary to build up over a maximum period
of five years.
 Company Business Corporate Financial
overview review governance statements
Annual bonus for 2011
Executive Directors, Kenneth Lever, Chief Executive Officer
and David Bauernfeind, Chief Financial Officer will receive a
performance bonus in respect of 2011 of £150,000 and
£60,000 respectively. The Committee determined that both
Directors made a strong contribution in stabilising the
Company and in particular through:
„ Renegotiating our banking covenants.
„ Restructuring of the business.
„ Restructuring of the senior management team.
„ Initiating the Changing Xchanging Programme.
„ The successful implementation of the Four Point
Action Plan.
„ the liquidation of Cambridge Integrated Services Group Inc.
One third of bonuses will be deferred into shares, for
three years.
Long-term incentive plans
The Company established a number of equity-based share
incentive plans around the time of the initial public offering
(‘IPO’), namely an Approved and Unapproved Executive
Share Option Plan (‘ESOP’) and a Performance Share Plan
(‘PSP’). Other share plans, namely the Share Purchase Plan
and earlier Approved and Unapproved G Share Options Plans
were also in existence at the IPO, but no further awards will
be made under the pre-IPO Plans.
Executive Share Option Plan (‘ESOP’)
An ESOP award was made on 4 March 2011 to 45 senior
managers including David Bauernfeind, who was appointed
Chief Financial Officer in June. This award was made partially
as approved options and partially as unapproved options.
Performance Share Plan (‘PSP’)
The Remuneration Committee chose the PSP as the primary
vehicle through which share-based long-term incentives
were offered to Executive Directors and other senior
executives in 2011.
The Awards made will vest three years after grant,
depending upon the Company’s Total Shareholder Return
(‘TSR’) performance when compared to the TSR performance
of the constituents of the FTSE 250 index (excluding
investment trusts) (the ‘Comparators’) and continuous
employment over the vesting period.
The ‘Basic award’ will vest ranging from 25% if the Company’s
TSR is equal to the median TSR of the Comparators, through
to 100% if the Company’s TSR performance is at or above the
upper quartile of the Comparators. The ‘Stretch award’ will
only begin to vest if the Company’s TSR performance is at least
upper quartile of the Comparators, with full vesting of the
Stretch award only for upper decile performance. In any event,
the Basic and Stretch awards will vest only if the Company’s
annual average EPS growth over the relevant three-year period
is no less than the UK Retail Price Index (RPI) +3%.
The extent to which the performance conditions are achieved
will be determined by the Remuneration Committee, having
received appropriate third-party advice.
Other Xchanging plc Annual report 2011 63
information
Historical TSR graph
The graph below is prepared in accordance with Schedule 8
of the Large and Medium-Sized Companies and Groups
(Accounts and Reports) Regulations 2008. It shows the
Company’s TSR from the time of listing on 24 April 2007 to
31 December 2011 against that of the Total Return Indices
for the FTSE 250, and the FTSE All Share index.
Historical TSR performance
Growth in the value of a hypothetical £100 holding invested
in Xchanging plc at the IPO price, FTSE 250 (excluding
investment trusts) and FTSE All Share comparison based on
spot values.
£200
Value of hypothetical £100 holding £175
£150
£125
£100
£75
£50
25
£0
Dec 06 Apr 07 Dec 07 Dec 08 Dec 09 Dec 10 Dec 11
Date
Xchanging plc FTSE 250 (Excl.investment trusts) FTSE All Share
Additionally 12 employees were granted restricted shares
in April 2011 where a three-year service is the only vesting
condition applied. Those granted an award included David
Bauernfeind prior to his appointment as Chief Financial Officer.
Share Purchase Plan (‘SPP’)
At the start of 2007, prior to the listing of Xchanging plc,
certain Directors, and members of senior management
(excluding David Andrews) (the ‘F Share Loan Participants’),
purchased class F common shares (in Xchanging BV), under
the terms of the SPP, at the prevailing market price. Upon
IPO, the class F common shares in Xchanging BV were split
into shares in Xchanging plc on a one-for-four basis, with
an equivalent value of £1.325 per share (the ‘SPP shares’).
Under the terms of the SPP, the Xchanging BV 2007
Employee Benefit Trust provided non-interest-bearing loans
to 12 F Share Loan Participants, who were deemed key to
retain following IPO, to enable them to fund the purchase
of the class F common shares. The SPP shares were subject
to an 18-month lock-in period, which expired in August
2008. The SPP shares could then be sold on the condition
that a pro-rata proportion of any loan from the Xchanging
BV 2007 Employee Benefit Trust was repaid.
The non-interest-bearing loans provided to the F Share
Loan Participants become repayable on the earliest of
the F Share Loan Participants ceasing employment,
the transferring or otherwise disposing of their shares
(or attempting to do so), accepting another loan from
a member of the Group to refinance the loan and the
‘long stop’ date of 31 December 2011.
64 Xchanging plc Annual report 2011
Remuneration report continued
As at 31 December 2011, a loan of £662,500 made to
Richard Houghton remains outstanding with repayment due
on or before 31 March 2012. A mortgage has been taken
over his SPP shares by the Xchanging BV 2007 Employee
Benefit Trust to secure this loan.
Other benefits
Kenneth Lever is eligible for a cash allowance of 10% of base
salary per annum in lieu of pension contributions. His cash
allowance is non-bonusable.
David Bauernfeind is a member of the Xchanging Pension
Scheme, a defined contribution scheme, and he receives 6%
of his base salary capped at a base salary of £129,600.
No payments other than base salary are pensionable.
Executive Directors are eligible to receive other benefits
including Life Assurance and Permanent Health Insurance
(‘PHI’), and are also eligible to join Xchanging’s private
medical insurance scheme in accordance with the scheme
terms and conditions under which cover is provided.
The Group’s Life Assurance and PHI scheme provides a
benefit equal to four times their basic salary at the time of
death and 75% of their basic salary should an individual be
unavailable for work due to a critical illness for 26 continuous
weeks. David Andrews was a participant and David
Bauernfeind is a participant in the insured Death in Service
Pension Plan.
David Andrews was not a participant in any Xchanging
pension scheme, however, had he died in service his widow
would have received a pension. The liabilities of this plan
ceased when his employment terminated.
Dilution and the pre-IPO share pool for
entrepreneurial achievement
As disclosed in Xchanging’s IPO prospectus, 4,006,388
shares authorised by shareholders prior to the IPO, but not
allocated to employees at that time, may be placed under
option or issued under the Company’s share incentive plans
without counting towards the ongoing Association of British
Insurers (‘ABI’) guideline dilution limits. The Remuneration
Committee has subsequently approved that such pool of
options may be awarded to employees under any of the
shareholder approved schemes.
Service contracts
Executive Directors have service contracts with notice
periods of 12 months from either the Director or the
Company. This is in line with best practice for listed
companies. The Company has the right to terminate the
employment of an Executive Director without notice or with
less than 12 months’ notice by making a payment in lieu of
notice equal to the base salary the Executive Director would
be entitled to receive during any unexpired period of the
notice period.
Executive Director appointments
Kenneth Lever was appointed as Acting Chief Executive
Officer on 9 February 2011. At this time his base salary was
not increased although he received an allowance of
£60,000 per annum pro rata and on 11 April 2011 was
awarded 572,519 PSP shares with a Basic award of 458,015
shares and a Stretch award of 114,504 shares.
On 7 June 2011, Kenneth Lever was appointed Chief Executive
Officer and his base salary was increased to £475,000 per
annum to reflect his increased responsibilities and the
allowance was withdrawn. In addition, on 23 June 2011 he
was granted an additional Basic award of 94,451 and Stretch
award of 135,773 shares under the PSP bringing the total
shares awarded under the PSP in the year to a grant value of
150% of salary.
In addition, 150,000 shares will vest on 6 October 2012
providing that Kenneth Lever remains in continuous service.
This award represents the second tranche of an award
previously disclosed in the 2010 Directors’ Remuneration
Report. On a similar basis this award will not vest if he has
given, or received, notice of termination of his employment
with Xchanging on the anniversary of the date of grant, and
to the extent not vested; will lapse in the event he ceases
employment with Xchanging during this period.
It was contractually agreed on Kenneth Lever’s appointment as
Chief Financial Officer that should there be a change in control
in the period to 31 December 2011 the Company would pay a
discretionary bonus of no less than 60% and no more than
150% of base salary for the period of notice. Any entitlement
to a guaranteed bonus ceases after the 2011 bonus payment
date (March 2012).
David Bauernfeind was appointed Chief Financial Officer on
7 June 2011 and on 23 June 2011 received a Basic award of
129,207 shares and Stretch award of 64,604 shares under the
PSP. In aggregate over 2011 he received Basic awards of
219,207 and Stretch awards of 64,604 with a grant value
totalling 150% of salary.
Additionally David Bauernfeind received Approved Executive
Share Options over 38,772 shares on 4 March 2011 at an
option price of £0.77375, and Unapproved options over
56,228 shares on the same date and at the same option price.
Leaving arrangements
David Andrews’ employment with the Company ended on
31 March 2011. The amount payable on departure was
£505,685 payable in 11 equal monthly instalments
commencing in April 2011.
Following his departure David Andrews entered into a
consultancy agreement with Xchanging plc until 28 February
2012 as a special adviser to the Chairman to support the
Company’s business development initiatives. The agreement
expired automatically on 28 February 2012. Under the terms
of the consultancy agreement, Xchanging paid David Andrews
a monthly retainer of £8,500. In total he received £76,500 in
retainer fees during 2011.
 Company Business Corporate Financial Other Xchanging plc Annual report 2011 65
overview review governance statements information

Non-executive Directorships, and other external
appointments
Kenneth Lever continues to be a member of the Accounting
Standards Board for which he received fees of £15,000
during 2011.
He was also appointed a Non-executive Director of
FM Insurance Company Limited, a subsidiary of FM Global,
and has received fees of £17,000 during 2011.
Non-executive Directors
The Board aims to recruit Non-executive Directors of a high
calibre with broad commercial, international or other
relevant experience. Non-executive Directors are expected to
bring objectivity and independence of view to the Board’s
discussions, and to help the Board with effective leadership
in relation to the Company’s strategy, performance, risk and
people management as well as ensuring high standards of
financial probity and corporate governance.
The fees paid to Non-executive Directors are reviewed
regularly. In setting the fees, a review of current market
practice is undertaken which takes into account time
commitment and responsibilities. The fees payable to
Non-executive Directors are ratified by the Board, based
both on the recommendations of the Executive Directors and
the Chairman. The Non-executive Directors do not
participate in the Company’s incentive or pension schemes,
nor do they receive any employee benefits. The Company
will reimburse all expenses reasonably incurred by the
Non-executive Directors in the performance of their duties.
The Company has obtained appropriate directors’ and
officers’ liability insurance. All fees to Non-executive
Directors will cease to accrue with effect from the date of
ceasing to be a Non-executive Director for whatever reason.
Nigel Rich stepped down as Chairman with effect from
31 December 2011 and he received no compensation on
departure.
Should Geoff Unwin cease to be a director at any time
as a result of death, disability or any other reason but not
including resignation before 2 December 2015 and before
such date Xchanging is acquired by a third party for a price
per share in excess of £1.00, the Board may in its sole
discretion match Geoff Unwin’s purchased shares on a
one-for-one basis.
He is under no obligation to hold such matched shares for
a set period of time.
Though the share matching and the absence of a
requirement to hold the matched shares for a period of time
is not compliant with D.1.3 of the Code, the terms of Geoff
Unwin’s remuneration were discussed with the major
shareholders in advance of his appointment.
Bill Thomas was appointed as a Non-executive Director on
1 December 2011 for an initial term of three years with an
annual fee of £40,000. With effect from 8 February 2012
he will receive an additional sum of £10,000 per annum
for his work as Chairman of the Remuneration Committee.
The level of fees will be reviewed after three years and
thereafter annually.
Dennis Millard was appointed as a Non-executive Director
on 2 April 2007 and following his re-election was appointed
Senior Independent Non-executive Director on 2 April 2010
for a term of three years or until the 2013 AGM whichever
shall occur later.
Michel Paulin was appointed Non-executive Director on
1 January 2010, and he has been appointed for a period
of three years from 27 April 2010.
Pat O’Driscoll was appointed as a Non-executive Director on
3 November 2008 and will serve for a period of three years
from 21 May 2009.

Stephen Brenninkmeijer and Johannes Maret resigned as

Non-executive Directors on 31 August 2011 and received
no compensation on departure.

Geoff Unwin was appointed as a Non-executive Director on

1 December 2011 and was appointed Chairman on 1 January
2012. His appointment is for an initial term of four years
from 1 December 2011, unless terminated earlier by either
party with six months’ notice.

Geoff Unwin will receive a fee of £160,000 per annum

which is subject to review after three years and thereafter
annually. In accordance with his Terms and Conditions of
Appointment, Geoff Unwin purchased with his own funds
270,908 shares in Xchanging which he is expected to hold
for at least four years.

In the event that Xchanging is acquired by a third party for a

price per share in excess of £1.00 before 2 December 2015
the Company will match Geoff Unwin’s purchased shares he
still holds on a one-for-one basis.
66 Xchanging plc Annual report 2011

Remuneration report continued

This part of the remuneration report is audited

Individual Directors’ remuneration

The remuneration of Directors for the year ended 31 December 2011 is made up as follows:

Directors’ remuneration
For the financial year ended 31 December 2011
Base salary 2010
and fees Bonus Benefits Other Total Total
Director (£) (£) (£) (£) (£) (£)

Executive Directors
David Andrews1 146,250 – 2,697 413,742 562,689 611,483
Kenneth Lever2 431,795 150,0003 47,9294 20,8085 650,532 155,039
6 3
David Bauernfeind 171,984 60,000 7,122 – 239,106 –
Total 750,029 210,000 57,748 434,550 1,452,327 766,522
Non-executive Directors
Nigel Rich7 150,0008 – – – 150,000 150,000
9
Geoff Unwin 13,333 – – – 13,333 –
Stephen Brenninkmeijer 30,000 – – – 30,000 45,000
Johannes Maret11 26,667 – 16,66712 43,334 68,500
13
Dennis Millard 65,000 – – – 65,000 65,000
Pat O’Driscoll14 50,000 – – – 50,000 50,000
Michel Paulin 40,000 – – – 40,000 40,000
15
Bill Thomas 3,333 – – – 3,333 –
Total 378,333 – – 16,667 395,000 418,500
Grand total 1,128,362 210,000 57,748 4,451,217 1,847,327 1,185,022

1 David Andrews resigned from the Board with effect from 9 February 2011. The payments classified as ‘Other’ represent pay in lieu of notice agreed to be paid in 11 equal
monthly instalments commencing in April 2011. David Andrews had a special adviser consultancy agreement with the Company which expired automatically on 28 February
2012. His payments under this agreement were £76,500 during 2011.
2 Kenneth Lever was appointed Acting Chief Executive Officer on 9 February 2011, in addition to his role as Chief Financial Officer; he was appointed Chief Executive Officer
on 7 June 2011.
3 This figure represents the total bonus, one-third of which is deferred for three years in the form of equity.
4 Kenneth Lever’s benefits include a cash allowance of 10% of base salary in lieu of pension contributions.
5 Kenneth Lever received an allowance of £60,000 per annum pro rata for the period when he was acting Chief Executive Officer (February to June).
6 David Bauernfeind was appointed Chief Financial Officer on 7 June 2011. The remuneration shown is that received since his appointment.
7 Nigel Rich resigned as Chairman with effect from 31 December 2011.
8 The fee paid to Nigel Rich was in his capacity as Chairman of the Board and Chairman of the Nominations Committee.
9 Geoff Unwin was appointed as a Non-executive Director with effect from 1 December 2011 and took over as Chairman on 1 January 2012.
10 Stephen Brenninkmeijer resigned from the Board with effect from 31 August 2011.
11 Johannes Maret resigned as Non-executive Director on 31 August 2011.
12 Johannes Maret received £16,667 under a special adviser agreement until his resignation.
13 Dennis Millard receives £40,000 as his base fee as a Non-executive Director, £10,000 in relation to his role as Chairman of the Audit Committee, and £15,000 in relation to his
appointment as Senior Independent Non-executive Director.
14 Pat O’Driscoll receives £40,000 fees as a Non-executive Director and an additional £10,000 in relation to her role as Chairman of the Remuneration Committee.
15 Bill Thomas was appointed to the Board with effect from 1 December 2011. He receives a fee of £40,000 per annum as a Non-executive Director. Bill Thomas was appointed
Chairman of the Remuneration Committee on 8 February 2012 and will receive an additional fee of £10,000 per annum in recognition of undertaking this role.

Note: Richard Houghton stood down as a director on 5 October 2010, and left employment on 31 March 2011. During the period 1 January 2011 until 31 March 2011
he received a salary of £102,750. His termination payments were reported in the remuneration report for 2010.
 Company Business Corporate Financial Other Xchanging plc Annual report 2011 67
overview review governance statements information

Share options and long-term incentive schemes

Details of share options held, granted, and exercised in 2011 in respect of qualifying services are outlined below.

Xchanging plc share options – approved scheme

Number of Number of
options held at options held at
1 January Granted during Exercised during 31 December Exercise price Date from which
Director 2011 the year the year 2011 £ exercisable Expiry date

David Bauernfeind – 38,772 – 38,772 £0.77 4/3/2014 4/3/2021

Xchanging plc share options – unapproved scheme

Number of Number of
options held at options held at
1 January Granted during Exercised during 31 December Exercise price Date from which
Director 2011 the year the year 2011 £ exercisable Expiry date

David Bauernfeind – 56,228 – 56,228 £0.77 4/3/2014 4/3/2021

Johannes Maret 200,000 – – 200,000 £1.63 15/3/2010 15/3/20171

1 Following Johannes Maret stepping down as Non-executive Director on 31 August 2011 these options have now lapsed.

The options shown above have no performance conditions attached.

Xchanging plc 2007 Performance Share Plan (2007 PSP)

Number of Date of Total
Director PSP shares Basic award Stretch award vesting conditional

David Andrews
Grant 12/4/2010 431,415 287,610 143,805 12/4/2013 431,415
Kenneth Lever
Grant 11/4/2011 458,015 114,504 11/4/2014 572,519
Grant 23/6/2011 94,451 135,773 23/6/2014 230,224
David Bauernfeind
Grant 26/8/2010 159,907 26/8/2013 159,907
Grant 12/4/2010 25,943 12/4/2013 25,943
Grant 11/4/2011 90,000 11/4/2014 90,000
Grant 23/6/2011 129,207 64,604 23/6/2014 193,811

Note: The Remuneration Committee has applied its discretion under the 2007 PSP to allow David Andrews to maintain his outstanding awards on a pro-rata basis. As a result up to
431,415 conditional shares may vest on 12 April 2013 to the extent that the applicable performance conditions are satisfied at those dates and provided that a pro rata
reduction (68% reduction) in shares awarded based on the term of employment during the vesting period shall be applied to the awards.
The market price at the time of the award on 11 April was £0.82.
The market price at the time of the award on 23 June was £1.06.
68 Xchanging plc Annual report 2011

Directors’ shareholdings
Number of Number of
shares at Acquisition of shares at
1 January Disposals of shares shares during Shares 31 December
Director 2011 during the year the year awarded 2011

Executive Directors
David Andrews1 21,120,3122 4,000,0003 17,120,312
Kenneth Lever 0 100,000 61,6504 161,650
5
David Bauernfeind 64,800 0 0 0 64,8005
Non-executive Directors
Nigel Rich1 250,000 50,000 300,000
6
Geoff Unwin 0 270,908 270,908
7
Stephen Brenninkmeijer 253,272 70,000 323,272
Johannes Maret1 1,224,004 0 1,224,004
Dennis Millard 100,000 0 100,000
Pat O’Driscoll 12,230 14,000 26,230
Michel Paulin – 30,000 30,000
Bill Thomas8 – – –

1 The Director retired from the Board during FY11 (David Andrews 9 February 2011, Nigel Rich 31 December 2011, Stephen Brenninkmeijer 31 August 2011, Johannes Maret
31 August 2011).
2 Includes 400,000 shares held by the Trustees of the David William Andrews Discretionary Fund and 1,146,864 held by his son William Andrews, as a connected person under
the Listing Rules and 175,000 shares held by his spouse Sylvia Andrews.
3 Transferred interest in 4,000,000 shares into a Trust for the benefit of his four children.
4 The shares awarded had a market value of £0.70 valuing the grant at £43,155. This represents an award of 150,000 shares under LR 9.4.2 R(2). Sufficient shares were sold to
cover the relevant tax liabilities accruing to Kenneth Lever.
5 David Bauernfeind holds 28,000 shares and his spouse holds 36,800 shares in the Company which were acquired prior to his appointment as a Director.
6 Geoff Unwin was appointed Non-executive Director with effect from 1 December 2011 and was appointed Chairman with effect from 1 January 2012.
7 Amended data following discovery that the acquisition by Stephen Brenninkmeijer of 3,272 shares, which had been announced on 24 May 2007 had not been incorporated
into his total shareholding since that date.
8 Bill Thomas was appointed Non-executive Director on 1 December 2011.

The Directors’ shareholdings have not changed between the end of the financial year and the publication of the report
and accounts.
 Company Business Corporate Financial Other Xchanging plc Annual report 2011 69
overview review governance statements information

Employee Benefit Trust

Xchanging has three Employee Benefit Trusts: The Infrex Employee Share Trust, the Xchanging Employee Benefit Trust and
the Xchanging BV 2007 Employee Benefit Trust.

The trustees of the Infrex Employee Share Trust during 2011 were David Andrews (replaced by Gary Whitaker from December
2011) and Kenneth Lever. The Infrex Employee Share Trust is a discretionary trust for the benefit of employees of Xchanging
UK Limited and its subsidiaries as the trustees decide. The Infrex Employee Share Trust holds 191,108 shares.

The trustee of the Xchanging Employee Benefit Trust is Ogier Employee Benefit Trustee Limited, an independent professional
trustee situated in Jersey. The Xchanging Employee Benefit Trust is a discretionary trust for the benefit of such employees of
Xchanging BV and its subsidiaries as the trustees decide. The Xchanging Employee Benefit Trust does not hold any shares.

The trustee of the Xchanging BV 2007 Employee Benefit Trust is Ogier Employee Benefit Trustee Limited, an independent
professional trustee situated in Jersey. The Xchanging BV 2007 Employee Benefit Trust is a discretionary trust for the benefit
of such employees of Xchanging UK Limited as the trustees decide. The Xchanging BV 2007 Employee Benefit Trust does not
hold any shares.

Approved on behalf of the Board of Directors

Bill Thomas
Chairman of the Remuneration Committee