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Directors' remuneration report

(b) Annual bonus plan

(i) Bonus plan 2007/08
As a result of the decline in Group pre-tax profit in 2007/08 no annual bonus was paid to the Group Chief Executive (target is 100% and potential maximum is capped at 200% of base salary) or to the Group Finance Director (target is 50% and potential maximum is capped at 100% of base salary).

As a result of the decline in divisional operating profit in 2007/08 no annual bonus was earned by the Chief Executive of the UK division (target is 50% and potential maximum is capped at 100% of base salary) or by the Chief Executive of the US division (target is 60% and potential maximum is capped at 120% of base salary).

(ii) Bonus plan 2008/09
Annual bonus payment criteria for 2008/09 are based predominantly upon profit measures. However the Remuneration Committee believes it appropriate to also consider a broader approach linking bonus to measureable and quantifiable corporate goals of the executive directors using measures that are specific to their individual roles within the corporate strategy. After careful analysis to ensure that the measures are linked to the objectives of the individual directors, the executive directors have each been given specific goals upon which 25% of the total bonus capacity may be earned. These specific goals, which have been agreed for the Group Chief Executive, Group Finance Director and the Chief Executives of the UK and US divisions, include such quantifiable objectives as store openings and staff training. Other goals include the continuation as an industry leader in social environmental & ethical matters in areas concerning conflict diamonds and dirty gold. Succession planning is also included as one of the objectives of the Group Chief Executive.

The financial performance measure for the annual bonus plan for 2008/09 upon which 75% of the total annual bonus capacity may be earned will be based as in previous years on growth in profits. The specific targets for the US and UK divisions will be based upon 2007/08 divisional operating profit plus inflation, at which point 0% of maximum bonus is earned and then on a straight line basis up to 2007/08 divisional profit plus 12%, at which point 75% of maximum bonus is earned.

The bonuses for the Group will be calculated using the same formula as above but based on pre-tax profit. Pre-tax profit is calculated on a constant exchange rate basis and is earned on a straight line basis between pre-tax profit plus inflation, at which point 0% of maximum bonus is earned and pre-tax profit plus 12%, at which point 75% of maximum bonus is earned.