BAE Systems Regulatory News (BA.)

NOTICE OF DIRECTORATE CHANGE

Ian King, Chief Executive, BAE Systems plc, has today informed the Board that he will retire on 30 June 2017. The Board has also today confirmed that Charles Woodburn, currently Chief Operating Officer, will be appointed as Chief Executive from 1 July 2017. Until that time, Ian and Charles will continue in their current roles.

Ian King will retire after a career spanning more than 40 years in the defence sector, including serving as Chief Executive since September 2008.

Charles Woodburn joined BAE Systems in May 2016 as Chief Operating Officer and Executive Board Director, following over 20 years' international experience in senior management positions in the oil and gas industry.

Sir Roger Carr, Chairman, BAE Systems plc said:

"After a distinguished career, Ian will retire leaving a legacy of disciplined performance, ethical behaviour, a burgeoning order book, a track record of delivering shareholder value and a strong leadership team. During his tenure as Chief Executive, Ian has built a world-class defence engineering and technology business, providing vital capabilities to our customers and contributing to the security and economic prosperity of the nations in which we operate.

Since his appointment last year, Charles has made an important contribution to the Company, bringing impeccable engineering credentials, broad international experience and fresh perspectives to build on our existing strengths. In his new role, he will build on an enviable inheritance to create an exciting future, where we will continue to be performance-driven and values-led."

Notes:

The following arrangements will apply in relation to Ian King when he retires as a director and ceases employment on 30 June 2017. The arrangements are strictly in accordance with the Company's Remuneration Policy, approved by shareholders at the Annual General Meeting on 7 May 2014, and the Rules of the Company's 2000 Pension Plan and Executive Pension Scheme outlined in the 2015 Annual Report.

(a) Mr. King's retirement will constitute early retirement with Company consent for share plan and pension purposes and, accordingly:

(i) he will be entitled to an immediate pension. Under the Rules of the 2000 Pension Plan and Executive Pension Scheme, a pension of 1/30th of three-year final average salary for each year of service subject to the payment of members' contributions (currently 8%) is payable at 62 years of age. Benefits paid prior to age 62 are subject to actuarial reduction, currently a reduction of 4% to annual benefits for each year that retirement takes place prior to age 62, with proportionate reductions applied in respect of part years. Mr. King will be 61 at the date of his retirement and his pension payments will be reduced accordingly;

(ii) unvested share awards and options under the Company's Long-Term Incentive Plan will vest at the normal vesting date, subject to testing of the relevant performance conditions at the end of the normal performance period. Share awards will be reduced pro rata on the basis of complete months from the grant date to 30 June 2017. Any share options that vest will remain exercisable for a period of 6 months from the vesting date;

(iii) unvested deferred bonus awards will be preserved and will vest at the normal vesting dates; and

(iv) vested share options awarded in 2012 under the Executive Share Option Plan will remain available to exercise in the six month period from 1 July 2017. The award will lapse if not exercised by the end of this period.

(b) He will continue to be covered by the Company's D&O insurance policy and his current director's indemnification arrangements will remain in force;

(c) He will continue to be bound by those provisions of his service agreement which continue to apply following cessation of employment, including post-termination restrictive covenants and confidentiality provisions;

(d) He will be eligible for an annual incentive payment for 2017, determined by the Remuneration Committee, based on an assessment of individual and Company performance. Any bonus will be pro-rated for his 6 months of service during 2017 and will be paid at the normal date following the end of the 2017 financial year. One-third of the net bonus will be compulsorily deferred into shares in the normal way;

(e) No award will be granted under the Long-Term Incentive Plan in 2017;

(f) No termination payment will be payable; and

(g) Taxable benefits comprising the provision of a car allowance and the private use of a chauffeur-driven car will cease from 30 June 2017.

On becoming Chief Executive, Charles Woodburn's base salary will increase to £875,000 per annum. All other provisions of his remuneration package will be as set out in our Remuneration Policy in respect of the Chief Executive role.

This announcement has been determined to include inside information.

22 February 2017