Remuneration Report

Remuneration Report

This report provides information on Directors’ remuneration. A resolution will be put to shareholders at the Company’s Annual General Meeting inviting them to approve this Report.

Remuneration policy

This report sets out the Company’s policy on Directors’ remuneration for 2009/10 and, so far as practicable, for subsequent years. The Committee considers that a successful remuneration policy needs to be sufficiently flexible to take account of future changes in the Group’s business environment and remuneration practice. Any change in policy for years after 2009/10 will be described in future Remuneration Reports.

The Company’s overall policy aims are to:

• attract, develop, motivate and keep talented people at all levels throughout the Group;
• pay market competitive salaries and benefits to all of its people;
• encourage the holding of shares in the Company as an effective way of aligning the interests of employees with those of shareholders; and
• focus remuneration arrangements to help each business in the Group meet its specific targets.

The Board’s policy for executive remuneration is to:

• pay a basic salary which is competitive with other companies of similar size and complexity;
• give executives the opportunity to increase their basic earnings by meeting and outperforming key short-term and long-term measures, thereby linking executive rewards to the Group’s performance and shareholder interests;
• encourage executives to hold shares in the Company; and
• reward executives fairly and responsibly for their contribution to the Group’s performance, without paying more than is necessary to achieve this objective.

In framing this policy, the Board has given full consideration to the provisions of the Combined Code on Corporate Governance (as updated in June 2006).

It is the Company’s policy that Executive Directors be permitted to hold one non-executive directorship with another company and that the fees payable in respect of the directorship are retained by the Executive Director. During the year, Harriet Green was appointed a Non-Executive Director of Emerson Electric Co and is a member of its Audit Committee. For this, Harriet received during the year to 31 December 2008 fees of $35,167. Harriet has also received two awards of restricted stock from Emerson; the first made shortly after she took up her appointment in respect of 1,047 ordinary shares, with a fair market value as at grant of $47.715 per share and the second on 3 February 2009 in respect of 3,450 ordinary shares with a fair market value on grant of $33.33 per share.

The Remuneration Committee and its role

Andrew Dougal, William Korb, and Paul Withers served on the Remuneration Committee throughout the year. Cary Nolan and John Roques were members of the Committee from the beginning of the year until they each retired at the Company’s Annual General Meeting on 17 June 2008, when Dennis Millard was appointed to the Committee.

Andrew Dougal was Chairman of the Committee from February 2008 until 20 January 2009 when Paul Withers took over the chairmanship of the Committee. All members of the Committee are independent Non-Executive Directors. The Committee met five times during the year covered by this report. The Chairman will continue to ensure the Company maintains contact, as necessary, with its principal shareholders about remuneration.

The Committee determines the specific remuneration packages for Executive Directors and makes recommendations to the Board on, and monitors the level and structure of, remuneration of senior managers (being the first layer of management below Board level).

The Company Chairman also attends all meetings of the Committee. During the year the Committee received advice from Harriet Green in respect of the remuneration arrangements for other senior executives and from the Group HR Director in respect of remuneration arrangements generally. No individual is present when his or her own position is discussed. Having been appointed by the Committee, Hewitt New Bridge Street (’HNBS’) provide general remuneration advice to the Committee and to the Company. The Chairman and other members of the Committee have direct access to advice from HNBS and the Chairman is informed of all material advice HNBS provides to the Company.

The terms of reference of the Remuneration Committee are available on the Company’s website or on request from the Company Secretary. The terms of engagement between HNBS and the Remuneration Committee may be obtained from the Company Secretary.

The current remuneration package

The elements of remuneration for Executive Directors and senior executives for the year under review and the forthcoming financial year are set out below. In particular, for 2009/10 the Remuneration Committee has considered the structure of performance related pay under the short and long-term incentive schemes in the light of the current economic downturn and extreme market uncertainty, and has adapted the performance conditions to reflect these issues. Details of how the schemes will operate in 2009/10 are set out below.

Salary and benefits

The Committee reviews salaries in June each year, taking account of Group and personal performance and the salaries paid by companies of similar size and complexity. The Committee also takes account of the levels of pay awarded elsewhere in the Group. Changes to salaries take effect from 1 July in each year.

The current base salaries for Harriet Green, Mark Whiteling and Laurence Bain are £500,000, £327,000 and £327,000 respectively, having been increased by 16% in the case of Harriet and 9% for Mark and Laurence. These increases were made taking account of benchmarking data for other companies of similar size and complexity and of the fact that the Company also competes for senior personnel against larger US companies. Harriet’s increase also reflects the excellent contribution which she has made as Chief Executive since joining the Company and the criticality of retaining her as Chief Executive. The increases were made in line with the Company’s normal pay review dates for all employees and before the current economic downturn became apparent.

In view of the economic situation and recognising that the Company must retain flexibility to reward promotions or increases in responsibility and be in a position to respond to market conditions particular to a region or country, the Company has determined that there will be no merit-based salary increases for Executive Directors or senior management during the financial year to January 2010.

The value of benefits for Executive Directors is included in the table of remuneration below. These benefits include a car allowance and life and health insurance for Harriet Green, Mark Whiteling and Laurence Bain. The value of each Executive Director’s benefits is assessable to income tax, but is not pensionable.

Short-term incentives

2008/09

The Company operates an annual performance-related bonus scheme (the ‘Management Incentive Plan’ or ‘MIP’) for Executive Directors and senior executives. The maximum bonus potential under the MIP during the financial year to 1 February 2009 was 120% of base salary for Harriet Green and 90% of base salary for Mark Whiteling and Laurence Bain. To achieve this maximum required attainment of a number of business specific and personal targets. For the year under review, the targets were as follows:

• Achievement of specified levels of operating profit for the financial year to 1 February 2009. 66.6% of each Director’s bonus was determined by reference to this;
• Achievement of budgeted cash flow targets;
• Achievement of a gross margin target;
• Other important and measurable business objectives relevant to the key elements of the Group’s strategy.

As the specified level of operating profit was not achieved, the Remuneration Committee assessed performance against the other targets. The conclusion of this was that the bonuses should be 10% of the available opportunity, reflecting good progress against the other targets, particularly those related to cash flow (where actual performance was considerably ahead of target). These bonus payments are shown in the table of Directors’ remuneration below.

2009/10

For the forthcoming year, the Remuneration Committee has considered the structure of the bonus in view of the uncertainty in world markets and the limited visibility which the Group has of future activity levels, even in normal market conditions, and, following consultation with a number of shareholders, has made certain changes to the MIP for the year commencing 2 February 2009. These changes are designed to ensure that the MIP supports the Group’s corporate goals and to incentivise the Executive Directors and senior management to achieve them. As a result of these changes, the MIP will operate as follows in 2009/10:

• the Plan comprises a combination of operating profit (carrying a 70% weighting) and strategic measures (30% weighting). The strategic measures and operating profit targets are considered to be commercially sensitive and not suitable for detailed disclosure but are set by reference to the individual Director’s role and the goals of the Group. The strategic measures include a target relating to employee engagement, retention and development and other measures such as cash flow management;
• the operating profit measure has been set as two six monthly targets, both with equal weighting, with the first set against budgeted performance in the period to 31 July 2009 and the second determined independently, by reference to performance between 1 August and 31 January 2010. The budget and second half target will be reviewed and, if necessary, adjusted (upwards or downwards) in June 2009 based on knowledge of market conditions at that time. This approach is deemed necessary for 2009/10 given the lack of predictability over second half earnings at the time the budget was set;
• the operating profit will be calculated on a foreign currency neutral basis so that Directors will not benefit from or be penalised for swings in exchange rates;
• the strategic objectives will be assessed over the full year;
• any payment due will be made at the end of the financial year;
• the maximum percentage of the bonus payable for achieving ‘on-target’ performance has been reduced to 40%;
• at the year end, the Committee will review the full year bonus outturn and, if it feels that it is sufficiently unrelated to the performance of the Group for the year as a whole to represent a “reward for failure”, it has retained the discretion to adjust the payment to an appropriate level.

It is the current intention of the Company that in future years the MIP will revert to being assessed against twelve month targets but, should the outlook remain uncertain towards the end of this financial year, it may consider retaining the above arrangements. If it does so, this will be disclosed in the Company’s Remuneration Report.

The following additional changes have been made to the MIP for 2009/10, with the view that these will apply for both 2009/10 and beyond:

• the maximum bonus potential for Mark Whiteling and Laurence Bain has been increased to 100% of base salary to align their remuneration more closely to market rates. However, as stated above, the bonus on achieving ‘on target’ performance has been reduced, meaning that the amount payable if this target is met is lower than it was in 2008/09;
• to reflect best practice, the Remuneration Committee has been given discretion to claim repayment of bonus paid in respect of years from 2009 onwards, if it emerges that those bonuses were paid in reliance on results which turn out to have been inaccurate.

None of the bonuses referred to above is pensionable.

Long-term incentive arrangements

The Company’s policy is that, generally, awards of long-term incentives to Executive Directors and other senior managers will be made under its Performance Share Plan (or ‘PSP’), the key features of which are summarised below. The Company’s intention is that it will no longer make general grants of options under the Company’s Executive Share Option Scheme (ESOS) to individuals receiving awards under the PSP, although the Committee has reserved the power to make future grants under the ESOS in exceptional circumstances or to be competitive in local employment markets (for example, in the USA).

Performance share plan

Under the PSP, Executive Directors and senior executives are awarded rights to acquire ordinary shares. Each award made under the plan is subject to performance conditions which will determine how many (if any) of the shares under the award the participant is entitled to acquire after a three-year performance period. The maximum award which can be made to a participant in any year is equal to 150 percent of base salary. It is the Company’s current policy to grant annual awards of 150% of salary to Harriet Green, and 130% to Mark Whiteling and Laurence Bain. The Remuneration Committee considered whether it would be appropriate to reduce the level of awards to be granted in 2009/10 but determined that it would not, given the Company’s strong performance compared with its peer group, as described below.

PSP awards in financial years 2007/08 and 2008/09

For the awards made in June 2007 and April 2008, two performance conditions applied to awards made to Executive Directors. Half of each award is subject to a relative total shareholder return (or TSR) performance condition measured over a three-year period. The growth in the Company’s TSR over this period is compared to that of the companies in the comparator group and the Company’s ranking among the comparator group determines the percentage of the relevant half of the award that will vest and become exercisable.

The comparator group consists of the FTSE 250 Index excluding banks, speciality and general financial, life insurance, investment trusts, mining, non-life insurance, oil and gas producers and real estate sector companies.

The other half of the awards made to Executive Directors are subject to a performance condition requiring growth in the Company’s earnings per share (or EPS) over the three-year performance period to exceed the annual compound growth rate of the UK Retail Prices Index (RPI) over the same period by at least 4 percent (at which point 20% of awards vest). Full vesting will require compound annual growth of 12% per annum in excess of RPI.

The performance of the Company’s TSR in the period to 1 February 2009 has been monitored in order to determine whether, if performance were to be measured at that time, the performance condition relevant to the awards granted in calendar years 2007 and 2008 and those granted in calendar year 2006 (for which performance in respect of 100% of the award is tested by reference to the Company’s TSR, as described above) would have been met. This exercise shows that, if 1 February 2009 were to be the final date of the test period for each of these awards, the Company’s TSR would rank as follows as compared with the members of the relevant comparator group listed as at that date, and that the following percentages of each award would vest:

The information above illustrates the Company’s strong performance against its peer group, articularly during calendar year 2008.

The graph below shows the performance, up to 1 February 2009, under the April 2006 award, compared to the median and upper quartile of the comparator group. The points plotted represent the three month average TSR over the performance period for both the Company and the median and upper quartile of the comparator group (in line with the Plan Rules). This demonstrates that, as at the end of the financial year, the Company’s TSR ranked it between the median and upper quartile of the comparator group under the 2006 award.

PSP awards in financial year 2009/10

The Remuneration Committee has reviewed the targets to be applied for the forthcoming grants under the PSP. For the avoidance of doubt, no changes are being considered to past awards under the PSP.

The outcome of this review was that, while the TSR condition is considered to remain an appropriate and robust measure of performance in respect of one half of an award, EPS should be replaced with a return on sales (or ‘ROS’) target in respect of the other half. This change formed part of the consultation with shareholders referred to above. ROS is calculated by dividing the operating profit (or adjusted operating profit if this is reported in the Annual Report and Accounts) by sales. The half of the award which is subject to an ROS target will not vest unless ROS is 12% or higher in the final year of the three year performance period, with full vesting requiring an ROS of 13% or higher. Between these points, the relevant half of the award vests on a straight line basis. For grants made in 2009, the ROS for the financial year ending in 2012 will determine the level of vesting.

ROS is currently one of the key strategic and financial targets for the Company and it is its published target to achieve a 12% ROS over the next three years, compared to a current ROS of around 10.6%. As ROS represents the gross margin from sales, less the marginal operating costs of the business, it can be influenced by ensuring that gross margins are effectively managed and by careful control of operating costs.

The Committee believes that an ROS target encourages the delivery of substantial shareholder value through increased profitability, and that the targets are aligned with the Company’s strategic objectives.

By way of example only, if the Group’s sales are £800 million and ROS is 10%, the pre-tax profit would be £80 million. If sales were to remain at £800 million, but ROS improved to 12%, the pre-tax profit would increase to £96 million, so each 1% improvement in ROS would create an extra £8 million of pre-tax profits. For the stretch ROS target of 13% to be met, the operating profit would need to be £104 million (again, assuming sales of £800 million) or an improvement of 30% over the current level.

The vesting schedules for the TSR and ROS performance targets will be as follows:

In addition, awards to which the TSR performance measure applies will continue only to vest if the Committee is satisfied that the underlying performance of the Company during the performance period justifies the exercise of an award. In the case of the ROS element, the Committee must be satisfied that the improvement in ROS has not been achieved at the expense of the Group’s market share in its electronics distribution sector. In assessing performance in respect of market share, the Remuneration Committee will take into account relevant industry statistics and competitor performance.

For all awards made under the PSP, performance is measured over a three-year period and there is no re-testing of the performance condition.

For 2009/10, the use of a split of TSR and ROS has been chosen as it is felt to provide an appropriate balance between relative financial returns to shareholders and the internal financial performance of the Company. More specifically, the TSR performance condition was chosen as the Committee believes that TSR is an appropriate method of ensuring that the rewards to Executive Directors are aligned with those of shareholders by comparing the performance of the Company to that of the index of which it is a member (while excluding those sectors which are felt to be too far removed from the Company’s operations).

The decision to replace EPS with ROS for 2009/10 was made as ROS is considered to be the measure most consistent with the Company’s strategic goals and a robust gauge of the successful execution of the Group’s strategy. The range of ROS targets were selected on the basis that they would represent a strong level of performance if achieved and are felt to be no less stretching than the previous EPS conditions in the current market conditions.

In line with the change from using EPS for Executive Directors, PSP participants below the Board will be assessed wholly on ROS for forthcoming awards.

In assessing whether the TSR performance condition has been met, the Committee will rely on calculations of the Company’s TSR and that of the comparator group carried out on its behalf by HNBS. The Company’s EPS performance is reported quarterly in the Company’s results announcements. ROS is determined from and will be reported in the Company’s audited accounts as described above. In the event that the ROS figure to be used for determining performance under the PSP differs from the published headline figure, this will be disclosed and explained in the Remuneration Report.

Benefits under the PSP are not pensionable.

The PSP is due to expire in 2010, and the Committee will, therefore, carry out a review of the structure of the Company’s long-term incentives during this year before making any decision as to the most appropriate replacement arrangements.

Option schemes

The Company has an executive share option scheme, under which both Inland Revenue approved and unapproved options may be granted, and an SAYE option scheme. Benefits under these plans are not pensionable. As mentioned above, it is intended that, generally, the Company will no longer grant executive share options to individuals receiving awards under the PSP.

In common with all eligible employees of the Group, Executive Directors are entitled to participate in the Company’s SAYE option scheme. These options are not subject to the satisfaction of a performance condition as this scheme is not restricted to Executive Directors and senior executives.

Share ownership guideline

The Company’s executive shareholding policy requires Executive Directors and other senior executives to retain a number of the shares acquired as a result of the exercise of executive share options or awards under the PSP until a shareholding with a value equal to the executive’s annual base salary is reached. This level of shareholding is then to be maintained. Currently no Executive Director has acquired any shares in the Company from the exercise of executive share options or awards under the PSP and their holdings as disclosed below result from market purchases and, in the case of Harriet Green, from the vesting of awards made under the restricted share plan detailed below.

Share usage under share-based incentive schemes

Based on the number of options outstanding as at 1 February 2009:

• The number of new shares issued under all share option plans over the last ten years, together with the number potentially to be issued under all plans, totalled an amount equal to 3.24% of the Company’s issued ordinary capital; and
• The number of new shares issued under all executive share option plans over the last ten years, together with the number potentially to be issued under all executive plans, totalled an amount equal to 2.87% of the Company’s issued ordinary share capital.

These totals are well within the dilution limits of 10% and 5% respectively set by the ABI and reflected in the rules of the Company’s share plans.

It is intended that awards under the PSP will be satisfied by shares purchased in the market by the Company’s Employee Share Ownership Trust.

Relative importance of remuneration elements

The Committee’s view is that the performance related elements of the remuneration package for Executive Directors should be a significant element of the total. This serves to align the interests of such Directors with shareholders.

The charts below illustrate the mix between the salary and incentive pay of the Executive Directors for 2009/10 in both a ‘target’ and a ‘stretch’ performance scenario. These show that, if all the performance related elements were to pay out in full, more than two thirds of the Executive Directors’ total remuneration (before pensions) would be performance linked.

Pension arrangements

The final salary section of the Premier Farnell UK Pension Scheme (the UK Scheme) was closed to new entrants during 1998. Employees joining the UK Scheme since 1 January 1999 are entitled to money purchase benefits only and the UK Scheme is no longer contracted out.

As a result of changes to pensions legislation which came into effect in April 2006, the Company offers employees who are over or close to reaching the lifetime allowance beyond which pension savings do not receive favourable tax treatment a cash supplement as an alternative to pension accrual beyond the lifetime allowance. Any such cash supplement is paid net of income tax and National Insurance Contributions and is an amount no greater than the amount that the Company’s pension contributions would have been for that individual.

Harriet Green and Mark Whiteling are entitled to elect to receive either money purchase benefits from the UK Scheme or to have contributions made to a registered personal pension scheme. In each case, the Company’s contributions are equal to 25% of basic salary. Both Harriet and Mark have elected to have all contributions made to a personal pension scheme. The total cost to the Company of these contributions during the financial year to February 2009 was £117,709 (2008: £104,355) in respect of Harriet Green and £78,937 (2008: £73,437) in respect of Mark Whiteling.

Throughout the year under review, Laurence Bain elected to receive a cash supplement in place of the contributions which would otherwise have been made by the Company to the UK scheme and the funded unapproved scheme on his behalf. This supplement is paid at the same rate as the Company’s previous contributions to the UK Scheme and the funded unapproved scheme and, taking into account the National Insurance contributions payable by the Company, equates to 27% of Laurence’s basic salary, which is in line with practice in previous years. The total cost to the Company of contributions made by the Company in respect of Laurence Bain for the year under review was £82,897 (2008: £79,380).

No Executive Directors receive any final salary pension benefits.

Service contracts

In accordance with the Company’s policy, Harriet Green, Mark Whiteling and Laurence Bain have service agreements terminable by the Company on twelve months’ notice. Laurence Bain’s service agreement dated 23 April 2004 allows the Company to make a payment of salary and benefits in lieu of the whole or part of his notice period.

The service agreements for Harriet Green and Mark Whiteling, dated 7 February 2006 and 28 June 2006 respectively, entitle the Company to pay salary and benefits in lieu of the whole or part of the notice period in a single payment or by way of monthly instalments. Where payments are made monthly, the Director is under an obligation to mitigate his or her loss and, in so far as monthly payments relate to salary, they will reduce or cease altogether on his or her accepting alternative employment. The contractual discretion to pay monthly does not apply where termination results from a change of control.

Aside from the lack of requirement to phase termination payments, in the event of a change of control of the Company, there are no special contractual provisions outside of the standard terms of the service contracts. The vesting of awards under the Company’s share incentive plans is determined by the Rules of the relevant Plans and was approved by shareholders on adoption.

Non-Executive Directors

The fees for the Non-Executive Directors are approved by the Board following a review carried out by the Chairman and discussed with the Executive Directors. Fees for the Chairman are determined by the Remuneration Committee. All reviews are carried out annually in January. Business expenses are also reimbursed. In addition to the base fee of £36,500, £6,000 per annum was paid to the Chairmen of the Audit and Remuneration Committees and £3,000 to the Senior Independent Director during the year under review. The Chairman’s fee during the year was £144,000.

In the fee reviews in January 2009, the Committee and the Board determined not to make any increases to the above fees for the Chairman or the other Non-Executive Directors.

The Non-Executive Directors do not have contracts of service, but are appointed by letters of appointment. Such appointments are initially for a three-year term. It is normal that the appointment is renewed for a second three-year period, after which the Company’s policy is for re-appointments to be on an annual basis. The expiry dates of all re-appointments coincide with the Company’s Annual General Meeting in the relevant year. Non-Executive Directors are not eligible to participate in any incentive plans, share options schemes or Company pension arrangements and are not entitled to any payment in compensation for any early termination of their appointment.

Any Director appointed by the Board during the year holds office only until the next Annual General Meeting and must then stand for election to continue in office. Thereafter, each Director must retire from office at every third Annual General Meeting since he or she last retired, at which meeting he or she will be eligible for re-election.

Directors’ interests (audited)

The beneficial interests of the Directors in the ordinary share capital of the Company at the beginning and end of the financial year are set out below, together with a note of those interests as at 15 April 2009, being within one month of the date of the Company’s Notice of Annual General Meeting.

In addition to the above beneficial interests in the Company’s ordinary shares, the Executive Directors are regarded for Companies Act purposes as being interested in 2,886,004 ordinary shares held by the Premier Farnell Executive Trust. All employees (including Executive Directors) are potential beneficiaries of the trust. It is not anticipated that any employee or Executive Director will be entitled to receive from the trust a greater number of shares than that to which they are entitled on exercise of awards made to them under the PSP.

The rules of the ESOS allow annual awards to be made, with a maximum grant equal to 100 per cent of the individual’s annual salary. Exercise of options granted under the scheme is subject to a performance condition. This condition is that the growth in the Company’s adjusted EPS over the three consecutive financial years starting with the year of grant exceeds the growth in RPI over the same period by at least 9 per cent. At this level of performance half of the options granted are exercisable. Exercise of all options granted requires that the Company’s EPS growth exceeds RPI over the period by at least 15 per cent, with a sliding scale for performance between 9 per cent and 15 per cent. The rules of the scheme approved by shareholders in 2003 provided that, if the performance condition was not met over this three-year period, options could also be exercised if the Company’s EPS growth exceeded RPI by a minimum of 12 per cent over the four financial years starting with the year of grant. The Committee decided to remove this re-testing provision with effect from 13 March 2006 and it does not apply to any options granted after that date.

Options granted under earlier schemes operated by the Company remain outstanding. Executive options granted under such schemes after 13 March 2001 may not be exercised unless the growth in the Company’s EPS over a period of three consecutive financial years exceeds the growth in RPI over the same period by at least nine per cent.

The Company has met the performance condition for options awarded up to and during January 2003 and for options awarded from March 2004 up to and during October 2006. With the exception of the options granted in 2006 (which do not become exercisable until October 2009) these options are now exercisable.

No price was paid for any option. There were no variations to the terms and conditions of any Director’s options during the year.

The market price of the Company’s shares at 1 February 2009 was 135.5p (3 February 2008: 150.5p) and the range during the year was 118p – 203.5p.

The conditions for the vesting of an award made under the plan since the Company’s AGM in June 2007 are described under the heading Performance Share Plan above.

For awards made prior to June 2007, the main performance condition compares the growth of the Company’s TSR (share price growth and reinvested dividends) over a three-year period to that of the companies in the FTSE mid-250 Index (excluding investment trusts). The Company’s ranking among the comparator companies determines the percentage of shares which a participant can acquire. No shares may be acquired where the Company’s ranking is below median and, to acquire the full number of shares awarded, the Company must rank in the top quartile of the comparator group. Between these two points, vesting is on a straight-line basis, with 20 per cent of any award vesting where the Company’s performance is at the median.

There were no variations made to the terms and conditions of any award during the year.

Restricted share plan (audited)

As part of the remuneration package offered by the Company to secure Harriet Green’s services, the Company established a restricted share plan, of which Harriet is the sole participant. Two conditional awards of shares were made under the plan, one of which was exercised in March 2007 and the other being detailed below. This second tranche vested on 27 March 2008 and the shares were transferred to Harriet. Benefits under the restricted share plan are not pensionable.

No performance condition attached to this award.

Performance graph

The graph below shows the total shareholder return for a holding of the Company’s ordinary shares for the five financial years of the Company of which the year to 1 February 2009 is the last. This is compared to the total shareholder return for a hypothetical holding in the FTSE mid-250 Index (excluding investment trusts). This was chosen as it is the index of which the Company is a constituent. Total shareholder return is the growth in value of a share plus the value of dividends paid, assuming that the dividends are reinvested in the Company’s shares on the day on which they are paid.

This graph shows the value, by 1 February 2009, of £100 invested in Premier Farnell over the last five financial years compared with £100 invested in the FTSE 250 Index (excluding Investment Trusts). The other points plotted are the values at intervening financial year-ends.

The Company’s TSR performance for the financial year to 1 February 2009 ranks it 35th among the 250 companies making up the FTSE 250 as at 1 February 2009, graded by reference to the relative performance of each such company’s TSR over the same period. This ranking is calculated by allocating to each such company a notional score of 100 per cent at the beginning of the year and by measuring the percentage increase or decrease in performance of the TSR of each such company over the one year period.

Elements of report subject to audit

The information above under the headings Directors’ remuneration, Directors’ interests, Share options, Performance share plan and Restricted share plan is auditable. All other information provided in the Remuneration Report is not subject to audit.

Approved by the Board on 17 April 2009

Signed on behalf of the Board by

Paul Withers

Chairman of the Remuneration Committee