Executive Directors’ Remuneration

Remuneration Policy
The policy of the Company is to provide competitive remuneration packages in order to recruit and retain high calibre executives. In addition to salary and pensions, this is achieved by means of an annual bonus and a long-term incentive plan directly related to the Company’s longer-term performance. The Executive Share Option Scheme terminated in 1995.

Salary
Executive directors’ salaries are reviewed by the Remuneration Committee, normally annually, having regard to business results, individual accountabilities and performance, and market conditions. Independent surveys are obtained on salary levels in major companies of comparable size in both the financial and non-financial sectors.

Annual Bonus
This element of the directors’ remuneration package is designed to encourage directors to achieve the highest levels of annual corporate performance.

During 1998, executive directors other than Derek Higgs qualified for awards under the Group’s short-term deferred bonus plan, known as the Share Participation Plan. Awards were determined by the Remuneration Committee based on the performance of the Group against quantitative financial and business targets, as well as specific personal objectives, up to a maximum total award value of 45 per cent of salary at the time of the award.

Under the Plan executive directors received an initial cash award. Either the net amount of this award had to be used to buy shares or an equivalent number of shares had to be lodged with the Trustees of the Plan. The Company then lodged additional shares with the Trustees equivalent to the gross value of the cash award. Both sets of shares are held in trust for five years. If a director leaves prior to this, the additional shares may be released in certain circumstances.

During 1998, Derek Higgs was eligible to be awarded a bonus, up to a maximum of 100 per cent of salary at the time of the award. Half of the net amount of the bonus was used to buy Prudential shares. The bonus was based on the overall performance of Prudential Portfolio Managers, his performance as an executive director of the Company and performance against personal objectives.

For 1999, both the above arrangements will be replaced by a new short-term incentive plan in which awards will be made in cash with no deferral period. These awards will continue to be based on the performance of the Group against quantitative financial and business targets, and to take account of an element of personal performance. The maximum awards under this plan will remain as at present. Awards under this plan will not be pensionable.

Benefits
Executive directors receive certain taxable benefits, principally the provision of company cars. These benefits are not pensionable.

Service Contracts
In 1995 the Remuneration Committee changed its policy so that the normal notice of termination which the Company is required to give executive directors is 12 months, although for newly appointed directors there may be an initial contractual period of up to two years before the 12-month notice period applies. In the case of Keith Bedell-Pearce, who was in office prior to 1995 and of Jonathan Bloomer who joined the Company in 1995, the period was previously reduced to 18 months from three years. During 1999, this period will be further reduced to 12 months. When considering termination of service contracts, the Committee will have regard to the specific circumstances of each case, including mitigation.

Policy on External Appointments
Executive directors are able, subject to the Board’s approval, to accept a limited number of external appointments as non-executive directors of other organisations.