The Committee

During the period, the Remuneration Committee (the "Committee") consisted of Claudia Arney (Chairman), Dennis Millard, David Adams, Helen Jones, Bill Ronald and Keith Harris (Bill and Keith retired on 31 May 2014).

All members are considered to be independent for the purposes of the UK Corporate Governance Code. The Company Secretary acts as secretary to the Committee.

The Board has delegated responsibility to the Committee for ensuring that a policy exists for the remuneration of the CEO, the Chairman, other Executive Directors and members of executive management. The Committee has designed a policy that provides Executive Directors with the appropriate incentives to enhance the Group's performance and to reward them for their personal contribution to the business. The Committee's other activities include:

• Recommending to the Board the total individual remuneration package of Executive Directors and members of executive management;
• Recommending the design of Company share incentive plans to the Board, approving any awards to Executive Directors and other executive managers under those plans and defining any performance conditions attached to those awards;
• Determining the Chairman's fee, following a recommendation from the CEO; and
• Maintaining an active dialogue with institutional investors and shareholder representatives.

The Committee's full Terms of Reference are set out on the Company's website at www.halfordscompany.com

The Committee met on eight occasions during the period; attendance details are shown in the Board attendance at scheduled meetings table. Details of advisors to the Committee can be found in the Advisors section.

Summary of Committee Activity during FY15

In this period, the Committee has:

• Discussed and approved both financial and strategic annual bonus metrics and targets;
• Discussed and reviewed Directors' salaries;
• Reviewed Directors' share ownership guidelines;
• Set parameters for the potential package available during the CEO recruitment exercise;
• Discussed and reviewed attainment against the performance conditions for the Performance Share Plan and Company Share Option Scheme due to vest during the period;
• Approved grants under the Performance Share Plan, Company Share Option Scheme (to senior managers below Board) and Sharesave Scheme;
• Considered and approved the design of the proposed Irish Sharesave Scheme;
• Reviewed and approved the termination arrangements in relation to the outgoing CEO;
• Considered and approved the Service Agreement and letter of appointment for the new CEO;
• Considered and approved the drafting of Malus and Clawback provision for inclusion in the Executive Bonus Scheme and the Deferred Bonus Plan; and
• Reviewed its choice of appointed remuneration advisors.

Structure and content of the Remuneration REPORT

This Remuneration Report has been prepared in accordance with the provisions of the Companies Act 2006 and Schedule 8 of the Large and Medium-sized Companies and Group (Accounts and Reports)(Amendment) Regulations 2013. This report meets the requirements of the Listing Rules and the Disclosure and Transparency Rules.

The information set out below represents auditable disclosures referred to in the Independent auditor's report' to the members of halfords group plc only section, as specified by the UK Listing Authority and the Regulations.

Advisors

During the year, the Committee has been supported by Jonathan Crookall, People Director and Justin Richards, Company Secretary. The CEO and CFO also attend Committee meetings on occasion, at the request of the Committee; they are never present when their own remuneration is discussed. The Committee also engaged with Deloitte LLP, which advised on performance measures for the PSP, remuneration reporting and other remuneration matters. Fees paid to Deloitte for this advice were £19,250. Deloitte has also provided advice to management, to enable their support of the Committee, primarily in relation to remuneration reporting.

Deloitte is a founding member of the Remuneration Consultants Group and adheres to the Remuneration Consultants Group Code of Conduct when dealing with the Committee. We consider Deloitte's advice to be independent and impartial. We are also satisfied that the Deloitte Engagement Partner and team, who provided remuneration advice to the Committee, do not have connections with the Company that might impair their independence. The Committee considered the potential for conflicts of interest and judged that there were appropriate safeguards against such conflicts.

Towers Watson also provided the Committee with executive salary benchmark data. Towers Watson are also signatories of the Remuneration Consultants Code of Conduct. Fees paid to Towers Watson for this advice were £3,500.

Shareholder dialogue

The voting outcome from the 2014 Annual General Meeting reflected very strong individual and institutional shareholder support. We continue to be mindful of the concerns of our shareholders and other stakeholders and welcome shareholder feedback on any issue related to Executive remuneration. In the event of a substantial vote against a resolution in relation to Directors' remuneration, we would seek to understand the reasons for any such vote, determine appropriate actions and detail any such actions in response to it in the Directors' Remuneration Report. In the period, the Committee Chairman and the Company Secretary met with one of the largest shareholder advisory consultancies to discuss executive remuneration.

The following table sets out the votes cast at the 2014 AGM in respect of the previous Remuneration Report.

Votes in relation to the Annual Report on Remuneration

* 759,006 votes were withheld in relation to this resolution.
** 16,227 votes were withheld in relation to this resolution.

How was the Remuneration Policy implemented in 2014/15 – Executive Directors

Single remuneration figure (audited)

1. Matt Davies and Andrew Findlay tendered their resignations prior to the payment of the FY15 bonus and, accordingly, were not eligible to receive any bonus in respect of the period.
2. Shares were awarded in August 2011 under the Performance Share Plan based on performance in the period April 2011 to March 2014. In May 2014 the performance conditions for these shares were measured and the Committee determined that no awards would vest. Matt Davies did not receive a PSP award in 2011 as this was prior to his joining the Company.
3. Shares were awarded in August 2012 under the Performance Share Plan based on performance in the period April 2012 to March 2015. In May 2015 the performance conditions for these shares were measured and the Committee determined that a percentage of awards would vest. Matt Davies did not receive a PSP award in 2012 as this was prior to his joining the Company. Further detail is given under 2012 Performance Share Plan award.

Salary

In keeping with its usual cycle of reviewing company-wide salaries in October, the Committee considered an executive pay report compiled for it by Towers Watson. We concluded that the CEO and CFO's salaries were competitive and accordingly decided to increases both by 2%, mirroring the increase generally awarded to colleagues in the Support Centre.

2014/15 Annual Bonus

Annual Bonuses for FY15 for Executive Directors were based 80% on Group PBT and 20% on the delivery of key strategic initiatives crucial to the delivery of the Company's strategy.

Annual Bonuses reported in the Single remuneration figure (audited) table and payable in June 2015 for the FY15 financial period were calculated as follows:

The annual bonus outturn was reviewed in the context of the performance of the underlying business during the year and delivery against strategy. In that context, we assessed the level of bonus to be appropriate however, due to the resignations of Matt Davies and Andrew Findlay prior to the payment of bonus, each ceased to be eligible and, therefore, did not receive a bonus in respect of the period.

We are committed to providing the greatest possible transparency in relation to retrospective achievement against the objectives that form part of the bonus measures. Clearly, some of those measures are commercially sensitive and to disclose them could reveal information about our business planning and budgeting to competitors, which could be damaging to our business interests and, therefore, also to shareholders. Of the FY15 metrics against which bonus outturn has been assessed, we are able to disclose the following:

1. 50:39 Store delivery was a new metric for FY15.

2012 Performance Share Plan award

Awards granted in 2012 under the PSP were subject to the following performance conditions:

TSR and EPS performance are assessed on an independent basis. However, to ensure that the PSP continues to support sustainable performance, the multiplier for one measure is only applied if performance is at least at the threshold level (30% vesting) for the other measure.

The companies included in the TSR comparator group are based on the FTSE 350 general retail and food retail companies on the date of grant. For awards granted in 2012 these are as follows:

N. Brown Group plc; Carpetright plc; Debenhams plc; Dignity plc; Dixons Retail plc (formerly DSG International); Dunelm Group plc; Greggs plc; Home Retail Group plc; JD Sports Fashion plc; J. Sainsbury plc; Darty plc (formerly Kesa Electricals); Kingfisher plc; Marks & Spencer plc; Morrison (WM) Supermarkets plc; WH Smith plc; Next plc; Sports Direct International plc; and Tesco plc.

Based on TSR performance between 31 March 2012 to 3 April 2015, Halfords' TSR was positioned at median against the comparator group and therefore 30% of the TSR element of the award will vest. EPS growth between FY12 and FY15 was 5.6% below RPI and, therefore, 0% of the EPS element of the award will vest.

The following table shows the history of PSP award vesting over the last 5 five years.

Benefits

Benefits include payments made in relation to life assurance, private health insurance and the provision of a fully expensed company car or equivalent cash allowance and fuel card.

Pension

Pension payments represent contributions made either to defined contribution pension schemes or as a cash allowance. The CEO received a contribution of 20% of base salary and the CFO received a contribution of 15% of base salary.

Share awards granted during the year (audited)
Performance Share Plan

During the period we approved awards to the Executive Directors under the Performance Share Plan as follows:

* These awards were based on 150% of salary
** Based on the mid-market price on the date of the awards of £4.79

Performance Conditions

Awards granted in 2014 are subject to the following performance conditions:

In addition to achieving these targets, the vesting of awards will be subject to meeting an underpin of net debt to EBITDA ratio no greater than 1.5x throughout the three-year performance period. This will ensure that net debt remains at appropriate levels and management is not incentivised to increase net debt levels to meet targets; the focus is to maximise the return on cash investments. The Core Award shares that vest will become exercisable in August 2017. To the extent that awards vest in line with the performance multiplier outlined above, these shares will only become exercisable in August 2019, following a retention period of two years.

Deferred Bonus Plan

Matt Davies received a bonus of £736,734 in respect of 2013/14 of which one-third (£245,578) was deferred into 50,437 shares under the Deferred Bonus Plan on 30 May 2014 at a price of £4.869.

Outstanding share awards (audited)

Performance Share Plan

The following summarises outstanding awards under the PSP:

1. Interim and final dividends have been reinvested in shares at prices between £3.54 and £4.8177.
2. Matt Davies resigned on 30 April 2015 and his outstanding PSP awards lapsed at this date in accordance with the scheme rules.
3. The Remuneration Committee has reviewed the performance conditions attached to 2012 Performance Share Plan award and determined that 15% of the award will vest in August 2015. Please see 2012 performance share plan award table for details.

The performance conditions for 2012 awards were TSR performance and EPS growth. Awards from 2013 onwards have performance conditions based on Group revenue performance and Group EBITDA growth.

Co-Investment Plan

On appointment, the Company made Matt Davies a one-off Co-Investment Award. This award was designed to allow the Company to recruit and retain an executive of the calibre required to run the business and to incentivise the CEO to deliver exceptional shareholder value creation through the achievement of share price performance targets. This plan was adopted for the sole purpose of making a one-off award to Matt Davies and it was not anticipated that any further awards would be made under this plan to either Matt Davies or any other executive.

1. Interim and final dividends have been reinvested in shares at prices between £3.709 and £4.759

Matt Davies tendered his resignation in the period and accordingly, all awards under the Co-Investment Plan lapsed upon his leaving. As previously committed, the scheme was not utilised in the recruitment of Jill McDonald, successor CEO.

Deferred Bonus Plan

1. Matt Davies resigned on 30 April 2015. In accordance with the Plan rules, he is entitled to exercise awards held in this Plan
2. Matt Davies received a bonus of £736,734 of which one-third was deferred into shares under the Halfords Deferred Bonus Plan at a price of £4.869 per share

CEO pay compared to performance

The following graph shows the TSR performance of the Company since April 2009, against the FTSE 350 General Retailers (which was chosen because it represents a broad equity market index of which the Company is a constituent).

The following table summarises the CEO single figure for the past five years and outlines the proportion of annual bonus paid as a percentage of the maximum opportunity and the proportion of PSP awards vesting as a percentage of the maximum opportunity. The annual bonus is shown based on the year to which performance related and the PSP is shown for the last year of the performance period.

1. Matt Davies was appointed on 4 October 2012 and stepped down as CEO on 30 April 2015. Matt did not receive PSP awards in 2011 or 2012, as these were before he was appointed.
2. David Wild stepped down as CEO on 19 July 2012. David's 2010 PSP award lapsed on leaving.
3. Matt Davies tendered his resignation prior to the payment of the FY15 bonus and, accordingly was not eligible to receive any bonus in respect of the period.

Shareholding guidelines (audited)

The Committee believes that it is important that Executive Directors' interests are aligned with those of our shareholders to incentivise them to deliver the corporate strategy, thus creating value for all shareholders. Executive Directors are encouraged to acquire and retain shares with a value equal to 100% of their annual base salary. Executive Directors have a five-year period to build this shareholding following their appointment.

These figures include those of their spouse or civil partner and infant children, or stepchildren, as required by Section 822 of the Companies Act 2006. There was no change in these beneficial interests between 3 April 2015 and 4 June 2015.

Outside appointments

Halfords recognises that its Executive Directors may be invited to become non-executive directors of other companies. Such non-executive duties can broaden experience and knowledge which can benefit Halfords. Subject to approval by the Board, Executive Directors are allowed to accept non-executive appointments and retain the fees received, provided that these appointments are not likely to lead to conflicts of interest. Matt Davies received fees of £38,993.18 as a non-executive director of Dunlem Group plc in the period, having resigned from the post on 8 January 2015.

Loss of Office Payments (audited)

No loss of office payment was made to a Director during the year.

Payments to former directors (audited)

As stated in the prior year, Paul McClenaghan left the business on 12 April 2013 with 'Good Leaver' status and, therefore, retained a pro-rated portion of his Performance Share Plan ("PSP") award that had been granted in 2012. The Remuneration Committee has reviewed the performance conditions attached to the 2012 PSP and determined that 15% of the awards will vest, which translates to a pro-rated vesting of 11,320 shares for Paul.

How was the Remuneration Policy implemented in 2014/2015 – Non-Executive Directors

Non-Executive Director single figure comparison (audited)

Non-Executive Director Shareholding

These figures include those of their spouses, civil partners and infant children, or stepchildren, as required by Section 822 of the Companies Act 2006. There was no change in these beneficial interests between the 3 April 2015 and 4 June 2015.

Non-Executive Directors do not have a shareholding guideline but they are encouraged to buy shares in the Company.

How remuneration policy will be implemented for 2014/15 — Executive Directors

Salary

Base salaries were reviewed with effect from 1 October 2014 and increases were made as per the details here. Current salaries for the Executive Directors are as follows:

Salaries will next be reviewed with effect from 1 October 2015.

Annual bonus

The annual bonus opportunity for 2015/16 will remain unchanged as follows:

The annual bonus will continue to be based 80% on Profit Before Tax ('PBT') performance and 20% based on performance against strategic objectives. PBT targets range from 94% of budget, where payment is zero to 106% of budget for maximum payment. The Committee reviews the goals included in the strategic objectives portion of the bonus to ensure that they remain appropriate.

In determining whether any bonuses are payable, the Committee retains the discretionary authority to increase or decrease the bonus to ensure that the level of bonus paid is appropriate in the context of performance. Bonus targets are considered by the Board to be commercially sensitive as they could reveal information about Halfords' business plan and budgeting process to competitors which could be damaging to Halfords' business interests and therefore to shareholders.

Share Plans

We have adopted four share plans: The Halfords Sharesave Scheme; the Halfords Company Share Option Scheme ("CSOS"), a market value share option plan; the Halfords Performance Share Plan ("PSP"); and the Halfords Co-Investment Plan (it is intended that no further awards will be made under this plan).

For the Executive Directors we intend to continue granting awards under the Performance Share Plan of 150% of base salary. If exceptional performance is achieved up to 1.5x the core award can be earned ('performance multiplier'). The vesting of awards will be subject to meeting the following performance conditions:

In addition to achieving these targets, the vesting of awards will be subject to meeting an underpin of net debt to EBITDA ratio no greater than 1.5x throughout the three-year performance period. This will ensure that net debt remains at appropriate levels and management is not incentivised to increase net debt levels to meet targets; the focus is to maximise the return on cash investments. The Core Award shares that vest will become exercisable in August 2017. To the extent that awards vest in line with the performance multiplier outlined above, these shares will only become exercisable in August 2019, following a retention period of two years. We are committed to providing the greatest possible transparency and will, therefore, provide retrospective disclosure of achievement against bonus metrics wherever possible, as further described in the 2014/15 annual bonus table.

While committed to the use of equity-based performance-related remuneration as a means of aligning Executive Directors' interests with those of shareholders, we are aware of shareholders' concerns on dilution through the issue of new shares to satisfy such awards. Therefore, when reviewing remuneration arrangements, we take into account the effects such arrangements may have on dilution. Halfords intends to comply with the Investment Association guidelines relating to the issue of new shares for equity incentive plans.

How remuneration policy will be implemented for 2015/16 — Non-Executive Directors

Fees

The fees of Non-Executive Directors will normally be reviewed every two years to ensure that they are in line with market benchmarks, so that the Company can attract and retain individuals of the highest calibre. Any changes to these fees will be approved by the Board as a whole following a recommendation from the Chief Executive. The base fee for Non-Executive Directors was increased by 6.6% as from 1 March 2014, this was the first increases in these fees since April 2009. No fees were changed during the period. Current fees for Non-Executive Directors are as follows:

Spend on Pay

The Committee is aware of the importance of pay across the Group in delivering the Group's strategy and of shareholders' views on executive remuneration.

Change in remuneration of Chief Executive compared to Group employees

The table below sets out the increase in total remuneration of the Chief Executive and that of all colleagues.

1. Matt Davies tendered his resignation in the period and, accordingly was not eligible to receive any bonus in respect of the period
2. The increase generally awarded to all colleagues was 2% with an additional 1% merit pot

Relative importance of pay

The Committee is also aware of shareholders' views on remuneration and its relationship to other cash disbursements. The following table shows the relationship between the Company's financial performance, payments made to shareholders, payments made to tax authorities and expenditure on payroll.

1. Based on the 52 week period.
2. Based on the single figure calculation, not all of which is included within wages and salary costs.