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Governance presentation for Investors

20th January 2017

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Governance Meeting - Agenda

Our Approach

Current Governance Arrangements:- Philosophy- Journey- Board and Committees- Shareholder Communications- Risks- Audit Committee- Remuneration Committee- Nomination Committee

Issues under consideration

Questions

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Comply, but be pragmatic

– focus on business benefit

Think like owners and be

prepared to explain

Governance arrangements

should be established with

the aim of

adding to, or preserving

long term shareholder

value

Our Approach

Governance - Our Approach

That means making them comprehensive but simple, accessible and brief(effectiveness is often destroyed by long and complex procedures and outputs)

NEDs in frequent contact, often at Company facilities, with Executive Committeemembers

General Counsel and Company Secretary services all committees and looks afterrisk register, incentive schemes, corporate reporting, legal and governance andregulatory compliance across the group.

Governance Philosophy

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HOW WE ‘DO’ GOVERNANCE:

Governance arrangements should be designed, as far as possible to be• engaging for all with a role in their operation• embedded in job responsibilities and accountabilities

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Governance - Journey

1997

2010 – Secondary Buyout led by Charterhouse & exit of founder Dean Hoyle

2006

2010

2014

What next?

Card Factory founded

Investment by Lloyds Development Capital (LDC)

Secondary Buyout led by Charterhouse & exit of founder Dean Hoyle

IPO - Beginning our life as a Public Company- Appointment of Chairman & NEDs- Establishment of Board & Committees- Rigorous assessment of internal controls & procedures- Creation of Board & governance structures

Keeping us on the ‘straight & narrow- Detailed tracking of control and procedure improvements following IPO review- First Board evaluation- Design and approval of Remuneration Policy- Publication of first Annual Report- Tracking governance developments and practice- Regular programme of IR activity around our reporting calendar’

Continuous development- Retaining the support & trust of our shareholders- Conducting our first externally facilitated Board evaluation- Comprehensive review of our Remuneration Policy

2014 to date

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Current Governance Arrangements – Introduction to Board Members

Geoff CooperChairman

Karen HubbardChief Executive Officer

Darren BryantChief Financial Officer

Octavia MorleySenior Non-Executive Director

David SteadNon-Executive Director

Paul McCruddenNon-Executive Director

Current Governance Arrangements – Board Composition

BoardGeoff Cooper, NE Chair

& NomCo Chair

ExecutivesKaren Hubbard, CEODarren Bryant, CFO

Non-ExecutivesOctavia Morley, SID &

RemCo ChairDavid Stead, AuditCo Chair

Paul McCrudden

General Counsel & Company Secretary

Shiv Sibal

• Board meets at least 8 times per year• Supplemented as needed with Board conference

calls• NEDs meet 3/4 times per year• External board review scheduled for Autumn 2017• Frequent email and phone traffic between meetings

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Current Governance Arrangements – Board Committees

Board

Executive CommitteeChair: Karen Hubbard, CEO

Darren Bryant, CFOChris Beck, Supply ChainGavin Peck, CommercialJustin Fletcher, PropertyIan McEvoy, Operations

Stuart Middleton, CreativeLucy Crowther, HR

Audit and RiskChair: David Stead

Octavia MorleyPaul McCrudden

CEO and CFO attend by invitation

Chairman attends by invitation

RemunerationChair: Octavia Morley

Geoff CooperDavid Stead

Paul McCruddenCEO & CFO - attend by

invitation

NominationChair: Geoff Cooper

Octavia MorleyDavid Stead

Paul McCruddenCEO & CFO - attend by

invitation

• Meets at least 8 times per year

• Weekly trading meeting• Quarterly product review

meeting

• Meets 4 times per year • Meets 2 times per year • Meets at least once per year and as required (e.g. during recruitment of CEO)

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Shareholder Communications and Advisers

Broker: UBS

Auditors: KPMG

PR: MHP

Remuneration Advisers: Kepler (part of Mercer)

Corporate Lawyers : Linklaters

Shareholder Communication:

• Traditional CEO/CFO contact with analysts and PMs

• NEDs at Analyst presentations

• NEDs attend selected institutional meetings

• Analyst visits to follow up IPO activity

• This Governance presentation

• Responses to ad hoc communications

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Management of Risks

Risk owned by the Board as a whole; risk management process overseen by Audit and Risk Committee

Management aligned through shareholding:– CEO min 200%– CFO min 150%– Executive Committee average of 4061% (as at 13.01.17)

Risks reviewed twice per year:– formal review of process, risk register and key mitigation actions– blank sheet review by Executive Committee and by plc Board (“things that keep us awake”)

Card Factory business model is inherently low risk (eg property strategy); main risks identified as:– Market changes/proposition development– Sourcing/supply chain– FX management– Loss of key personnel– IT and cyber security– Compliance– Business continuity– Management of change.

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Audit and Risk Committee

Committee focus:– External audit– Internal audit– Risk management process– Fraud and whistleblowing– Annual report

External audit arrangements– KPMG since 2010– new partner assigned from 2016/17– to be tendered by 2020/21 at the latest – a non ’big 4’ firm will be included

Internal audit arrangements– co-source arrangement with Deloitte since 2015– reviews to date focused mainly on IT, including cyber security

Annual report– Key judgements: inventory valuation, FX hedge accounting– FRC review of 2015/16 report – no issues raised

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Remuneration Committee

Principles:• Simplicity and transparency

• Strong alignment with group strategy

• Bonuses are for meeting short-term stretched expectations

• Long-term equity-based incentives are to share the rewards of creating a more valuable and stronger company

• Consistent shareholder focus maintained through executive share ownership

• Current policy:• Base salaries and benefits at or below median

• Bonus assessed against EBITDA targets, with personal performance underpin

• LTIP assessed against EPS progression, with a ROCE underpin

Future Remuneration Policy – will be reviewed and tabled with shareholders at 2018 AGM following consultation

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Nomination Committee

New board in 2014 – no retirement issues until 2020, however, board skills and composition are subject to regular review

Main issue to date has been CEO Succession

Now working on succession issues for all of senior management

Recent appointment of senior HR Director to service NomCo (and RemCo)

Diversity:

Women are a majority of the staff and customers

Statement that Board will always be mixed gender, but no quotas

Focus is on managing talent on a gender and ethnicity - neutral basis

Strive to achieve diversity of thought within a consistent company culture

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Current Issues

Findings of Executive Remuneration

Working Group

Latest IA Principles of Remuneration

Parker Review on Diversity on UK Boards

Use of consultants and exercising independent judgement

Flexibility in Remuneration Structures: LTIPs vs Deferred Shares vs Enhanced Bonus

Board engagement and committee make-up

Shareholder engagement: back and forth

Transparency on targets and use of discretion

Wider impact of scale of executive pay and rises

Levels of remuneration –adequate justification: maximum and outturn

Bonus disclosure: disclosure of financial and personal and strategic performance targets

Policy renewal: 2018

Post retirement shareholding requirements

Promoting and developing people from all backgrounds

Recruitment, development and mentoring

Transparency on policies

No quotas

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QUESTIONS ?

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