Investor Presentaiton

BOOHOO GROUP PLC DIRECTORS' REMUNERATION REPORT ANNUAL REPORT AND ACCOUNTS 2021 // GOVERNANCE ANNUAL STATEMENT BY THE CHAIRMAN OF THE REMUNERATION COMMITTEE Dear shareholder, I am pleased to present the report of the Remuneration Committee on behalf of the directors. This directors' remuneration report will be put to an advisory shareholder vote at the forthcoming annual general meeting. REMUNERATION POLICY The Remuneration Committee is committed to complying with the principles of good corporate governance in relation to the design of the directors' remuneration policy. As such, our policy takes account of the UK Corporate Governance Code and the QCA Corporate Governance Code (against which the company formally reports compliance). The Committee also considers other best practice guidance (for example, the QCA Remuneration Committee Guide and the Investment Association's Principles of Remuneration), as far as is appropriate to the group's management structure, size and listing. We also endeavour in this report to provide information on the remuneration policy and its implementation in a manner broadly consistent with the reporting regulations as they apply to Premium Listed companies. Our approach to remuneration is governed by our directors' remuneration policy. The primary objectives of the policy continue to be to attract and retain the highest calibre directors and to design remuneration which promotes the long-term success of the group. In order to put these objectives into effect, we provide the opportunity for executives to receive short-term and long-term variable pay, dependent upon appropriate performance conditions, ensuring a clear link is established between shareholder value creation and the of our directors. pay Each year, the Committee reviews overall levels of and the operation of the pay incentive arrangements for executive directors to ensure they remain appropriate in light of the current business strategy and the interests of shareholders. This has been a particular area of focus for the Committee during the year under review in light of the heightened level of scrutiny of the business, the size of the vote against the directors' remuneration report at the 2020 AGM, feedback from leading shareholders and our desire to ensure that, going forwards, there is the strongest possible alignment between executive pay and the long-term interests of all stakeholders. After a detailed review, we have agreed a number of changes to directors' remuneration, which are explained in more detail below. We discussed these changes with major shareholders earlier this year and I was pleased to report that we received overwhelmingly positive feedback. PERFORMANCE AND REWARD FOR THE YEAR ENDED 28 FEBRUARY 2021 For the year ended 28 February 2021, in relation to the annual bonus plan, the group achieved outstanding revenue and Adjusted EBITDA growth above the top end of the stretching target ranges, which are disclosed on page 77. As a result, the executive directors received 100% of their bonus potential, which the Committee believes was an excellent result in what have been challenging business conditions. We considered the financial performance in the context of the wider supply chain and governance issues which occurred during the course of the year and noted the outstanding response of the management team in seeking to resolve the complex and difficult problems that have been the subject of much debate internally and externally. Although there is still some way to go, progress to date has been excellent and the Committee does not believe that reducing bonus outcomes would be necessary or desirable. Bonuses have also been paid to employees throughout the company to recognise the every strong level of performance over the year and we have made a one-off share award to all full-time employees worth £3,600 per person, in recognition of their outstanding commitment and performance in what has been an exceptionally challenging year from an operating perspective. MANAGEMENT INCENTIVE PLAN A new, one-off, long-term incentive plan for directors and senior managers, the Management Incentive Plan ('MIP') was introduced in June 2020 to align long- term growth in the share price and market capitalisation to executive reward. Participants include the founders of the business, Mahmud Kamani and Carol Kane, neither of whom have participated in any long-term incentive scheme since the flotation in 2014, despite being integral to the success of the group since its inception. The MIP is broad-based and includes 13 other participants, including the CFO, Neil Catto, and key contributors below board level. The ultimate value of MIP awards will depend on the growth of the business over the three years to June 2023, with the market capitalisation of the company needing to reach £6.295 billion (equal to a compound annual growth rate of 11%) by June 2023 before any value is realised. A maximum amount of £150 million may be shared by all participants if market capitalisation is £7.554 billion (equal to a CAGR of 18%) or higher. The Committee believes that the targets, required to be achieved in just over two years' time from now, are exceptionally demanding. The MIP is a central part of the remuneration arrangements for our leading executives over the mediumterm and is intended to drive further growth in the business. It is consistent with our performance-based culture and has many similarities with the structure of the Growth Share Plan introduced for John Lyttle in 2019, thus ensuring a broadly consistent approach to long-term incentives across the executive director and senior management team. Although participants have the ability to earn considerable amounts under the MIP, this would be a very small fraction of the overall returns delivered to shareholders and will only become payable if boohoo achieves exceptional growth for the benefit of all shareholders. The MIP was implemented after it was announced to the market and, as permitted by the AIM Rules, there was no requirement to seek shareholder approval for the plan. As announced at the time, the Committee took the view that the interests of shareholders would be best served by granting the awards immediately without recourse to a shareholder vote, which ensured participants were immediately incentivised to deliver stretching share price growth as the executes its group multi-brand online strategy. We subsequently received a number of comments about this decision and, with hindsight, we recognise that it would have been more consistent with our philosophy of transparency and shareholder openness to seek shareholder approval before implementing the plan. We have also reviewed the MIP in light of the supply chain issues raised over the course of the financial year. Whilst we ultimately believe that the full resolution (or otherwise) of these issues will be reflected in long-term share price performance (and thus have an impact on the value of awards) we have also agreed with participants to add a new non- financial performance condition. Under this new target, the Committee must be satisfied that the Agenda for Change programme has been successfully implemented over the three-year performance period before the vesting of any MIP awards. The Agenda for Change programme is centred around the implementation of the recommendations from the Alison Levitt Independent Review. These recommendations are a set of clear, measureable and focused targets, which have been published in full. The level of programme oversight provided by KPMG, together with the overall programme oversight provided by Sir Brian Leveson, will ensure that performance against these recommendations and the wider programme is constantly monitored and reported on by independent third parties. In line with its wider commitment to the highest standards of transparency, the group has committed to publishing each of Sir Brian Leveson's reports, in full. Through the Agenda for Change programme, the Committee has a clear structure in place to assess performance. In the event of the Committee determining that the Agenda for Change programme has not been successfully implemented in full, we will have the ability to reduce the level of vesting of awards, irrespective of the share price growth achieved over the performance period. In addition, John Lyttle has agreed to a similar amendment to his award under the Growth Share Plan, meaning that he will only benefit from his award to the extent that there is both sufficient growth in boohoo's market capitalisation and a successful implementation of Agenda for Change. REMUNERATION FOR THE YEAR ENDING 28 FEBRUARY 2022 We have also reflected on how we should implement the remuneration policy for the financial year ending 28 February 2022, taking into account the events of the past year and the views of major boohoo shareholders. These changes are as follows: Basic salaries for the executive directors will increase by 3% with effect from May 2021, in line with the average increase for the workforce as a whole. Maximum bonus opportunity will continue to be up to 100% of salary for Neil Catto, up to 150% for John Lyttle and up to 200% for Mahmud Kamani and Carol Kane. In line with common practice for companies of a similar size to boohoo, we will introduce an equity deferral element such that a minimum of one-third of any bonus earned must be invested in shares and held for at least two years. We will supplement the current financial performance conditions for the annual bonus with a mix of ESG and strategic non-financial targets. As a result, 45% of . . the 2022 bonus will be based on EBITDA, 30% on revenue, 15% on continued progress on the 2022 Agenda for Change milestones and 10% on the successful integration of the newly-acquired brands. The Remuneration Committee will also have the discretion to scale back the entire bonus if it is considered that the Agenda for Change has not been implemented successfully over the financial year. These changes are designed to ensure that the management team remains focused both on growing the business and continuing to make progress on addressing the supply chain issues. to No awards will be made to the executive directors under the Long-Term Incentive Plan ('LTIP) in the 2022 financial year, ensure full focus on the targets which must be met under the MIP and the Growth Share Plan. To date, Neil Catto has been the only director to receive standard awards under the LTIP, which vest subject to stretching three-year performance targets. He received an award during the ended year 28 February 2021 as part of his standard remuneration package. Whilst executives will not receive an award in the 2022 financial year, we will review the position at a later date with regards to awards in future years, mindful of the need to have suitable ongoing long-term incentive arrangements in place. The shareholding requirements for the executive directors have been extended and increased from 150% of basic salary to 200% of basic salary. For John Lyttle, the holding requirement currently increases to 300% on maturity of the Growth Share Plan and this will rise to 400%. On maturity of their awards under the MIP, the other executive directors will then also be required to hold shares equivalent to 400% of their basic salary. We are also requesting that the executive directors hold shares equivalent to the level of their in-service shareholding guideline for a minimum of two years after cessation of employment. These changes further enhance the alignment between directors' remuneration and the interests of shareholders, and are consistent with best of boohoo's size. practice for a company The clawback and malus provisions in the incentive schemes have been extended, with the Committee now able to invoke them in circumstances of serious reputational damage or corporate failure (in addition to the existing trigger events). Again, this change brings our practice into line with what investors expect for a large listed company. We have decided to make a small but important change to the pension provision for the directors. Currently, certain directors receive a cash supplement equivalent to 6.2% of basic salary in lieu of a pension contribution. With effect from 1 January 2023, we will reduce this to 5% of basic salary to align with the provision for the wider workforce. This approach ensures that boohoo complies with the UK Corporate Governance Code and the guidance of the Investment Association (notwithstanding that the Code and the IA guidance apply primarily to premium listed companies). ENCOURAGING EQUITY OWNERSHIP ACROSS THE BUSINESS The Remuneration Committee regularly reviews the pay arrangements for all employees. We remain committed to encouraging all our employees, as well as our senior executives, to be shareholders in the business. As part of facilitating this policy objective, as stated above, we made a further award of free shares worth £3,600 per person to all eligible employees under a UK HMRC-approved Share Incentive Plan in February 2021. This award recognised the outstanding contribution made by boohoo employees to the performance of the business over a challenging period. The award follows those made in the 2015, 2016, 2019 and 2020 financial years and our intention will be to make another award in the financial year ending 2022. Discounted options were issued under an HMRC-approved Save As You Earn ('SAYE') plan in each of the financial years ended 2016 to 2021. There has been a high level of participation by employees, and we intend to continue with similar arrangements in subsequent years. SHAREHOLDER FEEDBACK The Remuneration Committee recognises that dialogue with shareholders plays a key role in informing the design of the remuneration policy and we welcome the interactions we have had with investors over the last 12 months. The comments received have been instrumental in informing the changes that we have made, as set out above. We would welcome any additional feedback either before or after the forthcoming AGM. We will keep executive remuneration under regular review and will continue to consult with significant shareholders where major changes are proposed. We hope you will support the advisory vote on the directors' remuneration report at the forthcoming annual general meeting, as the directors will do in respect of their own beneficial shareholdings. lain McDonald CHAIRMAN OF THE REMUNERATION COMMITTEE 66 67