This report sets out the policy for the financial year just ended, for the forthcoming year and, subject to ongoing review, for subsequent years. The report has been approved by the Board and the Remuneration Committee (the “Committee”). Shareholders will be invited to approve the report at the 2011 Annual General Meeting.

Remuneration Committee

Role of the Remuneration Committee The key responsibilities of the Committee are to:

• determine the fees of the Chairman;
• determine the remuneration and conditions of employment (including any termination arrangements) of the Executive Directors;
• approve the remuneration and conditions of employment of the Divisional Chief Executives and Company Secretary;
• review the remuneration and conditions of employment of the senior management team; and
• select and appoint any remuneration consultants who advise the Committee.

The full terms of reference of the Committee are available on the Company’s website at www.nationalexpressgroup.com. The members of the Committee who served during the year were all independent Directors.

Advisors to the Committee The Committee has appointed independent remuneration consultants, Hewitt New Bridge Street (“HNBS”) to advise on all aspects of senior executive remuneration. HNBS has no other connection with the Group other than in the provision of advice on executive and employee remuneration.

Dean Finch, the Group Chief Executive, provided advice to the Remuneration Committee in respect of the remuneration of the senior executive team (other than himself).

Activities in 2010 During the year the Committee considered the following items of business:

• Executive Directors’ and senior executives’ salary levels;
• Annual bonus scheme terms for 2010;
• Review of the Non-Executive fees;
• The total shareholder return comparator group used in the Long Term Incentive Plan’s performance condition;
• 2010 award levels under the Company’s share plans;
• Recruitment packages for new senior executives;
• Testing of performance conditions and vesting of Long Term Incentive Plan awards granted in 2007;
• Long Term Incentive Plan entitlements upon redundancy; and
• Outline of 2011 bonus scheme.

The Committee’s recommendations in 2010 were all accepted and implemented by the Board.

Remuneration of Non-Executive Directors The fees of the Non-Executive Directors are set by the Board as a whole and those of the Chairman are set by the Remuneration Committee in both cases following an annual review. The review takes account of fees paid for similar positions in the market, the time commitment required from the Director (estimated to be 100 days per year for the Chairman and 20 days per year for the other Non- Executive Directors) and any additional responsibilities undertaken, such as acting as Chairman to one of the Board Committees or fulfilling the role of Senior Independent Director. Non-Executive Directors are not eligible to receive pension entitlements or bonuses and may not participate in share option schemes.

For 2011 the basic fee for acting as a Non-Executive Director will increase to £45,500 and the fee for chairing a Committee will increase to £10,000. There will be no increase in the additional fee paid to the Senior Independent Director nor to the fee of the Chairman.

Remuneration policy for Executive Directors Remuneration policy is based on the following broad principles set by the Committee:

• to provide a competitive remuneration package to attract and retain quality individuals;
• to align remuneration to drive the overall objectives of the business;
• to align the interests of management with the interests of shareholders; and
• to provide the foundation for overall reward and remuneration beyond the specific roles falling within the direct remit of the Remuneration Committee.

The objective of this policy is aligned with the recommendation of the UK Corporate Governance Code on Directors’ remuneration. That is to provide a level of remuneration “to attract, retain and motivate Directors of the quality required to run the Company successfully, but avoid paying more than is necessary for this purpose. A significant proportion of Executive Directors’ remuneration should be structured so as to link rewards to corporate and individual performance.”

In implementing its policy, the Committee gives full consideration to the principles set out in the UK Corporate Governance Code with regard to Directors’ remuneration and due regard is given to the guidance issued by investor protection bodies and institutional investors more generally.

Fixed versus variable remuneration A substantial proportion of the Executive Directors’ pay is performance related. The charts above show the balance between fixed and performance related pay at target and maximum performance levels based on the elements of National Express’s remuneration package set out below. Maximum performance assumes achievement of maximum bonus and full vesting of shares under the LTIP.

Elements of remuneration1 Summary of the components of the Executive Directors’ remuneration.

1 Awards granted to Directors in respect of buy-out of share awards lost upon leaving previous employment have not been included as an element of remuneration and they are not recurring.

(i) Basic salary The salary of individual Executive Directors is reviewed at 1 January each year. Account is taken of the performance of the individual concerned, together with any change in responsibilities that may have occurred and the rates for similar roles in two comparator groups of companies. The comparator groups for the 2010 financial year were (i) a group of transport/leisure sector companies and (ii) a group of companies from the FTSE Mid 250 drawn from across all sectors. The constituents of each group were selected to be broadly reflective of the size (market capitalisation and turnover) and complexity of National Express at the time of completing the review. For 2011 the comparator groups will be based on similar groups of transport/leisure and general sector companies drawn from the FTSE 250.

In setting the Executive Directors’ remuneration, due account is taken of the salary budget for the Group as a whole and the policy that is applied across all employees when setting individual salary levels. In line with this policy, the performance of each Executive Director is taken into account along with the results of comparative benchmarking. In light of these factors, and after taking into account broader economic conditions, salary levels are then set by the Committee. In 2010 employees received an inflationary uplift but Executive Directors were not awarded a pay increase. In 2011 Dean Finch’s salary will increase to £550,000 and Jez Maiden’s salary to £420,000. The salary of Dean Finch upon appointment was set at a level which the Committee believed was reasonable given that he had not previously held the post of Group Chief Executive of a listed company. The benchmarking undertaken by the Committee, taken together with Mr Finch’s demonstrable achievements since his appointment, indicated that a salary of £550,000 was now appropriate for Mr Finch. Mr Maiden’s salary was also subject to a benchmarking exercise and performance appraisal which the Committee believes justifies a salary of £420,000.

(ii) Performance related bonusThe maximum potential bonus payable to Executive Directors in 2010 was 100% of salary. 70% of the bonus payable was based on financial targets and 30% based on non-financial targets. The non-financial targets encompassed customer, operational excellence and people objectives. The financial target set for 2010 was normalised profit (the definition of normalised profit is set out in the Glossary on page 150.

In relation to the proportion of the bonus determined by performance against financial targets, Executive Directors receive 25% of the bonus upon achieving 95% of budget, 50% of the bonus upon achieving budget and 100% upon achieving a stretch target which, for 2010, was 110% of budget.

The targets set in relation to non-financial performance are key strategic Group objectives that are tailored to the responsibilities of each individual Executive Director and, in aggregate, are considered to be similarly challenging to the range of financial targets set. In addition, no bonus in respect of non-financial performance is payable unless 95% of the Group’s normalised profit budget is achieved. Irrespective of the performance achieved in respect of the financial and non-financial performance targets, the Committee will, in exceptional circumstances, have the ability to scale back (to zero) bonus awards based on safety performance if it feels that there are sufficiently extenuating circumstances.

In terms of actual performance against the financial targets set for the financial year under review, more than 110% of budgeted normalised profit was delivered resulting in a bonus payable of the financial targets of 70% of salary. In terms of performance against non-financial targets, the performance delivered resulted in the full 30% of targets being achieved. In total, bonuses were payable at 100% of salary.

Bonuses awarded in 2009 were deferred for a period of one year and vested, subject to the terms of the award and the relevant Director’s continuing employment, on 10 March 2010. Half of each award was a cash deferred bonus conditional upon the continued employment of the relevant director. The other half of the award was converted into deferred forfeitable ordinary shares of the Company. Both cash deferred bonus and the deferred forfeitable ordinary shares were awarded under the terms of The National Express Group Executive Deferred Bonus Plan.

The National Express Group Executive Deferred Bonus Plan (“Executive Deferred Bonus Plan”)

The principal terms of awards under the Executive Deferred Bonus Plan (“EDBP”) are summarised below:

• Awards under the Plan may be cash awards, conditional awards or forfeitable shares awards.
• Awards normally vest one year from the date of grant, subject to the relevant Director’s continued employment with the Company.
• The Committee may decide that Participants shall be entitled to receive a benefit determined by reference to the value of the dividends that would have been paid on the vested shares in respect of dividend record dates occurring during the period between the Grant date and the date of vesting.
• The awards will normally lapse on cessation of employment save in certain compassionate “good leaver” circumstances (eg death or disability).
• In the event of a variation of the share capital the Committee may make such adjustments to the awards as it considers appropriate.

For 2011 bonus payments will be based on a similar structure but with the maximum potential bonus opportunity increasing to 125% of salary for Dean Finch and 112.5% of salary for Jez Maiden. The additional 25% and 12.5% of salary respectively will be awarded by reference to a challenging sliding scale of margin improvement targets which, along with normalised profit, reflect the key short-term objectives of the Group. In light of the fact that bonuses are to operate in 2011 with higher maximum potential reward, 25% of any bonus earned will be the subject of a mandatory deferral into the Company’s shares for a period of one year. Since the deferred shares will be awarded under the EDBP, receipt of the deferred shares will be subject to continued service and the same ‘good leaver’ provisions and other terms as noted above. The 2011 bonus will also operate with an additional clawback feature that would require the deferred shares to be forfeited or repaid should it be necessary for the Company to restate materially its 2011 results within a two year period following the deferred bonus being awarded. The proportion of the bonus that would be the subject to a clawback would depend on the extent to which the original bonus payment turned out to be false following the publication of corrected results. In addition, the Committee has decided that no bonus will be awarded unless there is a continued improvement in safety statistics in 2011 in place of the more general safety override that is described above in respect of the annual bonus year under review.

(iii) Pensions Under the terms of their service agreements, Executive Directors are either entitled to become members of one of the Group pension schemes or to receive payment of a fixed percentage of salary.

Ray O’Toole was a member of The National Express Group Staff Pension Plan (“the Plan”) until 7 April 2006. This Plan is an HM Revenue & Customs (“HMRC”) approved defined benefit scheme. The benefits from this Plan are subject to HMRC limits. Spouses’ pensions are provided in accordance with the terms of the Plan. Life assurance of four times’ basic annual salary is provided for the Executive Directors. From 7 April 2006, Ray O’Toole has received a salary supplement of 44% in lieu of pension contributions.

Dean Finch and Jez Maiden are not members of a company pension scheme. Dean Finch receives a 35% salary supplement and Jez Maiden receives a 25% salary supplement in lieu of pension contributions.

(iv) Incentive scheme and share options (a) Long-term incentive arrangements The National Express Group Long Term Incentive Plan (“LTIP”) was approved by shareholders at the 2005 Annual General Meeting and operates as the Company’s sole type of executive long term incentive arrangement. The LTIP consists of annual awards of performance and matching shares. Details of the plan are provided below.

Performance shares Executive Directors are eligible to receive a conditional award of shares up to an equivalent of 100% of basic salary. The vesting of the award is conditional on meeting the performance conditions set out below.

Matching shares Executive Directors are also eligible to receive awards of matching shares that are based on a personal investment in National Express Group PLC shares funded either through a personal investment (for example using an annual bonus award) or through pledging of shares not already allocated to the LTIP. The maximum matching award is restricted to 100% of basic salary and matching awards are made on the basis of up to two matching shares being awarded on a net of tax basis for each National Express share pledged or purchased from net of tax income. Matching share awards are also conditional on the performance conditions set out below.

If a participant ceases employment before vesting for a ‘compassionate’ reason (eg redundancy, retirement, death in service, sale of business out of the Company’s group) his/her awards will ordinarily vest. The extent of vesting will be determined by applying the relevant performance conditions to the date of cessation and scaling back the number of shares awarded on a pro rata basis (rounded up to the next complete six month period from the date of grant) unless the Committee determines that it would be inappropriate to apply a pro rata reduction. Awards lapse on cessation of employment for any other reason.

Performance conditions There are normally two distinct performance conditions applying to awards made. First, the performance condition attached to one- half of an award (Part “A”) is based on the Company’s normalised diluted earnings per share (“EPS”) growth performance in excess of inflation over a fixed three-year period (three financial years commencing with the financial year in which the award is made). The performance condition attached to the other half of an award (Part “B”) is based on the Company’s Total Shareholder Return (“TSR”) performance over the same fixed three-year period relative to the TSR performance of a comparator group of up to around 20 transport companies taken predominantly from the FTSE Industrial Transportation and FTSE Travel & Leisure sectors. The companies comprising the comparator group have been chosen on the basis of their comparability to National Express Group PLC (based on their size and scope of business operations). There is no ability to retest either performance condition. EPS and TSR have generally been chosen for the LTIP as the most appropriate measures of the Group’s long term performance, since EPS is an important growth measure and driver and TSR improves shareholder alignment and is consistent with the Company objective of providing superior long- term returns to shareholders.

For awards made in 2008 Parts A and B will vest to the extent that the performance conditions set out in the tables below are met:

*Normalised diluted earnings per share and CPI are as defined in the Glossary on page 150.

Exceptionally in 2009, relative TSR was applied as the sole performance condition as the prevailing economic conditions made it difficult to set a robust range of earnings targets at National Express.

However, to ensure that the relative condition was supported by improved underlying financial performance, the awards made in September 2009 were also subject to an earnings underpin that will apply to the extent that the performance condition set out in the table below is met:

For Awards granted in 2010, it was considered appropriate to return to the use of relative TSR in tandem with a challenging range of EPS growth targets. As a result, the awards were granted in two parts with Part A vesting to the extent that the EPS performance condition set out below is met and Part B vesting based on the same sliding scale of TSR targets set out above. The TSR peer group applying to the awards granted in 2010 was an appropriately weighted group of transport-related comparator companies.

The following table sets out the percentage of each extant award that would have vested if the performance conditions had been tested as at 31 December 2010 (without making any allowance for pro rata reduction for any period of less than three years).

Indicative percentage of LTIP awards vesting based on performance to 31 December 2010

1For 2008 and 2010 TSR applies to 50% of the award and EPS applies to 50% of the award. For 2009 TSR applies to 100% of the award.

To determine vesting of LTIP awards, the Committee retains independent consultants to test the proportion of an award vesting under the relative TSR test and then reviews the conclusion of this analysis before shares formally vest. With regard to the EPS targets, vesting is based on the Company’s audited results with liaison, as required, between the Audit and Remuneration Committees.

(b) Savings Related Share Option Scheme (“Sharesave Scheme”) The Company operates an HMRC approved Sharesave Scheme which is open to all UK employees, including the Executive Directors, who have completed at least six months’ service at the date of grant. The options are exercisable after three years at a discount of 10% to the market value of the shares at the time of grant.

Performance criteria The Committee believes that budgeted profit and/or EPS growth as performance measures for the discretionary bonus scheme and long term incentives, in most normal circumstances, provide a transparent and accessible method of gauging the performance of the Company. The Company calculates performance against these performance measures by reference to the profit or earnings per share figures reported in the Company’s audited accounts, which the Company believes to be the most transparent and objective measure of the Company’s profit or EPS. The Committee also monitors the Group’s TSR against the FTSE All-Share Travel & Leisure Index as a broad measure of the Company’s performance. TSR measured against a more tailored group of comparators has been used by the Company as a primary performance measure for awards made to Executive Directors under the LTIP as outlined above.

As noted earlier, it is currently intended that the performance targets that will apply to awards granted in 2011 will again be an equal blend of EPS and TSR. If it were considered appropriate to make any fundamental changes to the performance targets in 2011, it is anticipated that this would be accompanied by a consultation with major shareholders.

Directors’ service contracts, notice periods and termination paymentsExecutive Directors The contract dates and notice periods for the Executive Directors are as follows:

The service contracts of all the Executive Directors, which are rolling contracts, contain a provision, exercisable at the option of the Company, to pay an amount on early termination of employment equal to one year’s salary or, in the case of Dean Finch, one year’s salary, salary supplement in lieu of pension and car allowance. The Company will use the payment in lieu of notice provisions when the speed, certainty and protection of restrictive covenants afforded by such clauses are thought to be in the best interests of the Company and the circumstances surrounding the departure of the relevant Director justify their use.

The service contract of Ray O’Toole has a further provision that, where the Company initiates a termination, other than for cause, within six months of a change of control taking place the Company will exercise its option to make a payment in lieu of notice of an amount equal to the salary and benefits that the Director would have received during the notice period.

The service contract of Dean Finch contains a provision that, if there is a change of control within 24 months of his commencement date and directly or indirectly in connection with it the Company initiates a termination, other than for cause, or Dean Finch serves notice of termination on the Company on account of provable constructive dismissal, then the period of notice required from the Company will increase to 24 months. The Company waives any requirement for the Director’s duty to mitigate his losses in respect of such termination in these circumstances. This clause, while not reflective of the Company’s policy, was considered necessary by the Committee to facilitate the appointment of Dean Finch given that the Company had been formally approached in relation to a takeover during the year in which he was recruited.

In any event the Committee’s policy is that payments to Directors on termination should reflect the circumstances that prevail at the time, also taking account, if applicable and appropriate, the Director’s duty to mitigate.

The Committee continuously reviews its policies on executive remuneration and severance in the best interests of shareholders. Guidance on best practice expectations is taken into account prior to agreeing directors’ contractual provisions.

Executive Directors’ external appointments Under the terms of their service agreements, Board approval is required before any external appointment may be accepted by an Executive Director. The Executive Director is permitted to retain any fees paid for such services. Details of fees received by Executive Directors in 2010 are as follows:

Non-Executive Directors The Non-Executive Directors do not have service contracts with the Company but are appointed for an initial three-year term. Non- Executive Directors are typically expected to serve for two three-year terms, although their appointment can be terminated either by them or the Company on one month’s written notice. It is open to the Company to invite a Non-Executive to serve for a further period after the expiry of two three-year terms. All Directors are required to stand at least once every three years for re-appointment by shareholders. The original appointment dates of the Chairman and Non-Executive Directors are:

Senior executive remuneration The Remuneration Committee reviews and notes the salaries of senior executives within the Group. The salaries of this group of employees by band are as follows:

Information subject to audit: Directors’ remuneration Directors’ emoluments

1Benefits in kind include a company car, fuel, life assurance and health insurance. Relocation expenses of £100,000 were also incurred in respect of Jez Maiden.

2Total remuneration excludes Company pension contributions which are shown below.

3John Devaney received a temporary additional fee in 2010 for the period during which he held the role of Executive Chairman.

4Ray O’Toole’s 2010 bonus was calculated solely on the basis of the Company’s financial performance using the same stretch targets as applied to the continuing directors.

Former Director Ray O’Toole stepped down as an Executive Director of the Company on 5 May 2010. He will remain in full time employment with the Group until 4 May 2011. He will continue to receive his usual salary and benefits in accordance with the terms of his contract until this date. On 4 May 2011 Ray O’Toole will receive, in accordance with his contractual entitlements any accrued but unused holiday entitlement. On retirement, any unvested awards held by Ray O’Toole under the Long Term Incentive Plan (the “Plan”) shall vest subject to a pro-rating reduction and the fulfilment of the applicable performance conditions in accordance with the rules of the Plan.

Pensions Pension benefits earned by Directors in the year to 31 December 2010 from both the approved and unapproved plans were:

1Normal Retirement Age.

2Ray O’Toole ceased to accrue pension benefits on 7 April 2006.

Directors’ shareholdingsDirectors’ interests and transactions The beneficial and non-beneficial interests of the Directors in office as at 31 December 2010 are shown below:

(The above table is not subject to audit.)

1For Ray O’Toole as at date of resignation.

In order to align the interests of the Directors more closely with the shareholders, the Remuneration Committee has also determined that the Executive Directors should build up a share fund equal to at least one year’s salary over a period of five years.

Sharesave Share Option Awards

Conditional award of shares to Dean Finch As disclosed in last year’s Directors’ Remuneration Report, in relation to his appointment as Group Chief Executive, the Committee granted Dean Finch share awards under a one-off arrangement in accordance with Listing Rule 9.4.2 (2). The Committee felt that the award was appropriate to provide compensation for share arrangements forfeited in the process of joining National Express Group PLC and assisted with his recruitment and provided alignment with the interests of the Company’s shareholders.

The share award comprised two parts, an award of 28,023 shares (the “First Award”) and an award of 18,281 shares (the “Second Award”). Each award is structured as an award of forfeitable shares. Subject to the terms of the awards, the First Award and Second Award will ordinarily vest on 1 April 2011 and 1 April 2012 respectively. At the time of vesting the relevant shares subject to the awards will cease to be subject to a risk of forfeiture.

In connection with the awards, a cash payment was also made to Dean Finch of equal value to the prevailing market value of 32,177 ordinary shares in National Express Group PLC. This was also agreed at the time of recruitment in compensation for forfeited remuneration in relation to joining the Company.

In addition, as part of compensation for remuneration forfeited on joining National Express, and to align Dean Finch with other key executives, it was agreed that he would also receive separate awards of performance shares and matching shares under the LTIP. These awards were each equal in value to £500,000 at grant and comprised his sole LTIP awards in 2010. These awards were subject to the same performance targets described above.

The Matching Award was granted on the basis of shares acquired from a cash payment of £254,250 that was made in lieu of remuneration forfeited in joining National Express Group PLC.

Conditional award of shares to Jez Maiden As disclosed in prior years, Jez Maiden was granted a share award under a similar one-off arrangement to that described above for Dean Finch in respect of his appointment as Group Finance Director in 2008.

The award comprised three parts, an award over 21,074 shares (the “First Award”), an award over 21,075 shares (the “Second Award”) and an award over 28,666 shares (the “Third Award”). Each award is structured as a conditional right to free shares, the terms of which were set after taking account of Jez Maiden’s forfeited awards (which included performance and non-performance awards).

The First and Second Awards have now vested with the Third Award, subject to the terms of the Award, due to vest on 17 November 2011. The extent of vesting of the Third Award is also dependent on the satisfaction of performance targets assessed over a three-year performance period.

The performance targets applying to the Third Award are identical to those set for the 2008 LTIP awards, details of which are set out above (a mix of earnings per share and shareholder return targets).

Awards of shares granted under one-off arrangements to Dean Finch and Jez Maiden in relation to their appointments are shown below:

Notes

1Each award is structured as an award of forfeitable shares. At the time of vesting the relevant shares subject to the awards will cease to be subject to a risk of forfeiture.

2The extent of vesting of the Third Award will be dependent on the satisfaction of performance targets assessed over a three year performance period. The performance targets applying to the Third Award are identical to those set for the 2008 LTIP awards, details of which are set out above (a mix of earning per share and shareholder return targets).

3The number of shares subject to The First Award, the Second Award and the Third Award was adjusted to incorporate the effects of the Rights Issue, effective 15 December 2009 and multiplied by a factor of 1.9248. The adjustment process is standard practice and results in the impact of the Rights Issue being neutral on outstanding awards (where the Rights Issue is undertaken at a discount as was the case at National Express) and ensures consistency of treatment (in value terms) between shareholders and award holders.

Long Term Incentive Plan (“LTIP”) Awards Performance shares of 1 x salary are awarded to Executive Directors as nil cost options under the Long Term Incentive Plan. In addition 100 matching shares are awarded for every 30 investment shares pledged or invested by the Director under the share matching element of the LTIP. Further details of the LTIP and the performance conditions that have applied to each award below are shown on page 57.

Notes

1Performance and matching shares granted under the LTIP on 11 April 2007 lapsed on 11 April 2010. TSR performance had been such as to result in 0% of that part of the performance and matching share awards that were subject to the TSR performance condition to vest and the EPS performance had been such as to result in 0% of that part of the performance and matching share awards that were subject to the EPS performance condition to vest.

In respect of the operation of the Long Term Incentive Plan the Company operates the National Express Group Employee Benefit Trust which currently holds 429,222 shares as at 24 February 2011.

The Register of Directors’ Interests maintained by the Company contains full details of the Directors’ holdings of shares and options over shares in the Company. No LTIPs vested during the year. The aggregate value of the LTIPs which vested in 2009 was £92,021. The mid-market price of the Company’s ordinary shares at 31 December 2010 was 251p (2009: 191.9p) and the range during the year ended 31 December 2010 was 259.6p to 194p.

By order of the Board

Roger Devlin Director and Chairman of the Remuneration Committee

24 February 2011