INTRODUCTION

This report has been prepared in accordance with Regulation 11 and Schedule 8 of the Large and Medium-Sized Companies and Groups (Accounts and Reports) Regulations 2008 (the ‘Regulations’). The report also meets the relevant requirements of the Listing Rules of the Financial Services Authority and describes how the Board has applied the Principles of Good Governance relating to directors’ remuneration. As required by the Regulations, a resolution to approve the report will be proposed at the forthcoming AGM.

The auditors are required to report to the Company’s members on the ‘auditable parts’ of the report and to state whether, in their opinion, those parts have been properly prepared in accordance with the Regulations and the Companies Act 2006.

In light of this requirement, and in order to present the information in a form that is as accessible as possible to shareholders, the report has been split into a number of separate sections. The heading of each section indicates whether it is audited or unaudited.

OVERVIEW OF THE REMUNERATION COMMITTEE AND ITS POLICIES (UNAUDITED)

Purpose and Structure of the Remuneration Committee
The remuneration committee determines and agrees with the Board the overall remuneration policy for the executive directors and the members of the CEC. The remuneration committee also determines, within the terms of the agreed policy and having consulted with the Chief Executive about their proposals, specific remuneration packages for each of the executive directors, including pension rights and any compensation payments to be paid on termination.

Reference is made to the Corporate Governance Statement, where there is a further summary of the role of the remuneration committee.

Cairn’s remuneration committee operates within terms of reference set by the Board. These are reviewed periodically to ensure that the remuneration committee remains up to date with best practices appropriate to Cairn, its strategy and the business environment in which it operates. The terms of reference are available on the Company’s website.

The members of the remuneration committee during the year were as follows:

• Dr Jim Buckee (joined the committee on 15 January 2009 and became chairman on 19 May 2009);
• Mark Tyndall;
• Todd Hunt;
• Norman Murray (joined the committee on 19 May 2009);
• Ed Story (resigned from the committee on 15 January 2009); and
• Hamish Grossart (resigned as chairman and member of the committee on 19 May 2009).

The Chief Executive is not a member of the remuneration committee but may attend its meetings by invitation and is consulted in respect of certain of its proposals (although the Chief Executive is not consulted or involved in any discussions in respect of his own remuneration).