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Remuneration report:part 3

Directors' shareholdings

The beneficial interests of Directors who served at the end of the year, together with those of their families, in the shares of the Company are as follows:

	31 March 2010	31 March 2009
R D Harpin1	11,021,714	11,012,416
M Bennett2	7,014	3,971
J Florsheim	63,216	29,167
I H Chippendale	3,000	3,000
J M B Gibson	11,500	6,675
A Sibbald	2,000	—
M C Morris	3,500	—
B H Whitty	202,463	91,813

• 1Includes an indirect interest of 5,700 shares.
• 2Martin Bennett was appointed on 26 June 2009.

There were no changes in the Directors' interests in shares between 31 March and 25 May 2010.

Directors' share options and long-term incentives
Save as you earn (Sharesave) schemes

Details of the share options held by Directors under SAYE schemes are as follows:

	31 March 2010	Granted during year	Exercised during year	31 March 2009	Option price	Date granted	Date exercisable from
R D Harpin	1,753	—	—	1,753	£9.18	23.12.05	1.3.11
M Bennett1	—	—	3,043	3,043	£5.43	30.12.04	1.3.10
J Florsheim	1,263	—	—	1,263	£7.60	22.12.08	1.3.12
J Simpson-Dent2	662	—	—	662	£14.50	19.12.07	1.3.11
B H Whitty3	1,263	—	—	1,263	£7.60	22.12.08	1.3.12

• 1Martin Bennett was appointed on 26 June 2009.
• 2Jonathan Simpson-Dent left on 26 June 2009 and was treated as a good leaver under the rules of the scheme. He was therefore permitted to exercise a proportion of this option.
• 3Brian Whitty left on 31 March 2010 and was treated as a good leaver under the rules of the scheme. He will therefore be permitted to exercise a proportion of this option.

The price of an ordinary share on 1 March 2010 when Mr Bennett exercised his option was £16.80.

SAYE options are exercisable for a six month period from the date shown.

ESOP

Details of the share options held by Directors under the ESOP are as follows:

	31 March 2010	Granted during year	Lapsed during year	Exercised during year	31 March 2009	Option price	Date granted
R D Harpin	49,000	—	—	—	49,000	£5.50	17.7.01
	44,000	—	—	—	44,000	£5.89	8.7.02
	60,000	—	—	—	60,000	£4.70	1.7.03
	83,000	—	—	—	83,000	£6.61	27.5.04
	51,000	—	—	—	51,000	£9.61	28.6.05
	—	—	38,380	—	38,380	£14.07	23.5.06
	32,375	—		—	32,375	£17.18	4.9.07
M Bennett1	—	—	11,727	—	11,727	£14.07	23.5.06
	10,387	—	—	—	10,387	£17.18	4.9.07
J Florsheim	39,290	—		—	39,290	£17.18	4.9.07
J Simpson-Dent2	—	—	26,193	—	26,193	£17.18	4.9.07
B H Whitty3	—	—	—	72,500	72,500	£5.50	17.7.01
	—	—	—	65,000	65,000	£5.89	8.7.02
	—	—	—	80,000	80,000	£4.70	1.7.03
	99,500	—	—	—	99,500	£6.61	27.5.04
	55,000	—	—	—	55,000	£9.61	28.6.05
	—	—	42,644	—	42,644	£14.07	23.5.06
	—	—	35,972	—	35,972	£17.18	4.9.07

• 1Martin Bennett was appointed on 26 June 2009.
• 2Jonathan Simpson-Dent left on 26 June 2009 and was treated as a good leaver under the rules of the plan. However, the options granted in 2007 lapsed on leaving following an assessment of the performance conditions.
• 3Brian Whitty left on 31 March 2010 and was treated as a good leaver under the rules of the plan. The options granted between 2001 and 2005 had already vested so are exercisable for a limited period. The options granted in 2007 lapsed on leaving following an assessment of the performance conditions.

The price of an ordinary share on 31 March 2010 when Mr Whitty exercised options was £17.92.

The ESOP was approved by shareholders in 2001. Options were granted on an annual basis and become exercisable between three and ten years from the date of grant subject to the achievement of stretching performance criteria. The option price is the market price on the last dealing day prior to the date of grant.

Options will become exercisable based on the following scale:

Average normalised EPS1 growth per annum over 3 financial years	Vesting level as percentage of overall award (%)
RPI + 4%	25
RPI + 6%	50
RPI + 8%	75
RPI + 10%	100

• 1EPS is defined as the normalised earnings per share of the Company as defined in IAS33.

EPS growth is calculated by the Company and independently verified by HNBS. Options granted under the ESOP in 2007 will only become exercisable if the Company's share price growth is equal to or exceeds 48% in the three year period from the date of grant. Options granted in 2006 lapsed as neither the EPS nor share price targets had been met at the end of the performance period.

There were no changes in the options held under the ESOP between 31 March and 25 May 2010.

2004 LTIP

Details of the maximum number of shares receivable from conditional awards made under the LTIP are as follows:

	31 March 2010	Awarded during year	Lapsed during year	Vested during year	31 March 2009
R D Harpin	—	—	83,000	—	83,000
B H Whitty	—	—	99,500	—	99,500

The LTIP was approved by shareholders in 2004. One-off awards of 200% of salary were made in that year to Executive Directors under the LTIP to incentivise them towards specific goals reflecting the Company's aim to deliver exceptional shareholder value over the five years from 2004. Awards were granted as nil cost share options.

Awards were subject to absolute TSR performance. TSR is independently calculated by HNBS and verified by the Committee. At the end of the performance period, the required absolute TSR had not been achieved and these awards therefore lapsed.

Conditional share scheme awards (CSS)

Details of the maximum number of shares receivable under the CSS are as follows:

	31 March 2010	Awarded during year	Lapsed during year	Vested during year	31 March 2009
J Florsheim	—	—	—	24,604	24,604

On 12 March 2007, pursuant to Listing Rule 9.4.2. (2), a grant of 49,207 conditional shares was made to Jon Florsheim under the CSS. 25% of the award vested on the first anniversary of the grant, 25% of the award vested on the second anniversary of the grant and the remaining 50% of the award vested on the third anniversary of the grant. The price of an ordinary share on 12 March 2010, the date on which this third and final tranche of the award vested, was £16.89.

Key executive incentive plan awards

Details of the individual share option awards held by Directors are as follows:

	31 March 2010	Granted during year	Lapsed during year	Exercised during year	31 March 2009	Option price	Date granted
M Bennett1	19,508	—	—	—	19,508	£9.61	28.6.05
J Florsheim	100,278	—	—	—	100,278	£17.95	30.3.07
J Simpson-Dent2	—	—	66,852	—	66,852	£17.95	30.3.07

• 1Martin Bennett was appointed on 26 June 2009.
• 2Jonathan Simpson-Dent left on 26 June 2009. The award lapsed on leaving.

On 30 March 2007, a grant of share options was made to Jon Florsheim and Jonathan Simpson-Dent under a Key Executive Incentive Plan. Awards will vest in two tranches, with 50% of the award vesting at the earliest on the third anniversary of the date of grant and 50% two years later. The awards are subject to performance conditions in respect of profit before tax and growth in the Company's share price to £32.50 at the time of first vesting. As the share price target has not been achieved these options will lapse.

On 28 June 2005, Martin Bennett received an award under the Key Executive Incentive Plan (along with a number of other executives below Board level). These options are fully vested.

DBP

Details of the maximum number of shares receivable from conditional awards made under the DBP are as follows:

	31 March 2010	Awarded during year	Lapsed during year	Vested during year	31 March 2009	Date granted
R D Harpin	51,399	—	—	—	51,399	2.8.05
	—	—	27,204	17,886	45,090	25.5.06
	50,954	—	—	—	50,954	6.9.07
B H Whitty1	—	—	—	61,680	61,680	2.8.05
	—	—	28,021	18,422	46,443	23.5.06

• 1Brian Whitty left on 31 March 2010. At the end of the performance period of the award granted in 2005, he had opted to roll the award over into a nil priced option, as permitted under the rules of the plan. This fully vested option, over 61,680 shares, was exercised on leaving.

The price of an ordinary share on 31 March 2010 when Mr Whitty exercised options was £17.92.

The DBP was introduced in 2005. Under its terms, Executive Directors were able to invest some or all of their annual bonus into shares and to defer receipt for three years. Matching shares could be earned if the TSR of the Company over a three year period exceeds the median of the FTSE-350 index of companies (excluding investment trusts).

The table below demonstrates the vesting of matching shares under the DBP according to TSR growth:

TSR1 performance	Matching ratio
Below median	Nil
Median	0.5:1
Median – upper decile	0.5:1-3 on a straight line basis
Upper decile	3:1

• 1TSR is averaged over the three months prior to the beginning and end of the performance period.

The Committee retains the discretion to decline to permit matching shares to vest if it is not satisfied that there has been a sustained improvement in the underlying financial performance of the Company at the time of vesting.

Shares invested in the DBP by Executive Directors may be withdrawn at any time but any entitlement to matching shares will be forfeit in such circumstances.

At the end of the performance period for the 2006 awards, HomeServe's was ranked between median and upper decile against the constituents of the FTSE 350 Index. Accordingly 1.19 matching shares vested for each invested share out of a maximum three matching shares for each invested share. The price of an ordinary share on 26 June 2009, the date on which the 2006 invested shares vested was £14.81.

In relation to the 2007 awards, at March 2010 the Company's TSR performance in the period from the date of grant of awards is below the upper decile in comparison with the comparator Group. If this performance were unchanged at the end of the performance period, the number of matching shares available to each participant would be 1.70.

2008 LTIP

Details of the maximum number of shares receivable from conditional awards made under the 2008 LTIP are as follows:

	31 March 2010	Awarded during year	Lapsed during year	Vested during year	31 March 2009	Date granted	Type of award
R D Harpin	37,965	—	—	—	37,965	6.8.08	Performance
	28,603	—	—	—	28,603	6.8.08	Matching
	51,688	51,688	—	—	—	23.6.09	Performance
	16,850	16,850	—	—	—	26.6.09	Matching
M Bennett1	4,872	—	—	—	4,872	6.8.08	Performance
	8,369	—	—	—	8,369	6.8.08	Performance
	31,013	—	—	—	31,013	23.6.09	Performance
J Florsheim	46,074	—	—	—	46,074	6.8.08	Performance
	31,133	—	—	—	31,133	6.8.08	Matching
	28,458	—	—	—	28,458	4.12.08	Performance
	51,688	51,688	—	—	—	23.6.09	Performance
	32,016	32,016	—	—	—	26.6.09	Matching
B H Whitty2	42,183	—	—	—	42,183	6.8.08	Performance
J Simpson-Dent3	34,791	—	—	—	34,791	6.8.08	Performance
	22,346	—	—	—	22,346	6.8.08	Matching

• 1Martin Bennett was appointed on 26 June 2009.
• 2Brian Whitty left on 31 March 2010 and was treated as a good leaver under the rules of the plan. His award may vest on the third anniversary of grant subject to the performance conditions and will be pro-rated for time.
• 3Jonathan Simpson-Dent left on 26 June 2009 and was treated as a good leaver under the rules of the plan. His awards may vest at the end of the three year performance period subject to the performance conditions and will be pro-rated for time.

The market price of the Company's shares on 23 June 2009, the date the awards were granted was £14.63.

The performance conditions in respect of the 2008 LTIP awards granted in 2008 and 2009 are based exclusively on a TSR performance condition, as described in the unaudited section of this report in relation to the TSR part of the award.

For awards granted in 2008, as at 31 March 2010 the Company's TSR performance was below that of the FTSE 250 Index. If this level of performance was maintained until the end of the performance period, no part of the performance or matching awards would vest.

For awards granted in 2009, as at 31 March 2010 the Company's TSR performance was greater than the Index but less than 15% p.a. compound. If this level of performance was maintained until the end of the performance period 41.4% and 33.7% respectively of the performance and matching awards made in June 2009 would vest.

General

The market price of the Company's shares at 31 March 2010 was £17.92 (2009: £11.70). During the year the price ranged from £11.70 to £18.04.

The shares required for share options and awards under any of the long-term incentive schemes described above may be fulfilled by the purchase of shares in the market by the Company's employee benefit trust (EBT). As beneficiaries under the EBT, the Directors are deemed to be interested in the shares held by the EBT which at 31 March 2010 amounted to 1,811,498 ordinary shares. Shares may also be fulfilled through newly issued shares, subject to the dilution limits within each scheme (fully compliant with investor guidelines).

By Order of the Board

Ian Chippendale

Chairman of the Remuneration Committee
25 May 2010