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By John Donovan

The Wall Street Journal has published an article this morning mentioning an email from Jeroen van der Veer which was leaked to us. It came from a trusted Shell insider source. Shell has confirmed its authenticity.

It contains an admission of disappointment by Mr van der Veer over Shell’s financial performance compared with the majority of its rivals. Such an admission was completely lacking from the Shell 2007 Annual Report and from Shell’s associated press release. Hence there was no article conveying this admission until the mention in the WSJ article today. Clearly negative news is only meant for internal consumption, not for investors, the media and the public.

Such concealment of the Chief Executives assessment of materially important information is totally at odds with the claimed “openness” in Shell’s General Business Principles trumpeted in the Annual Report.

This is the leaked email…

From: Jeroen van der Veer, Chief Executive
To: All Performance Share Plan 2005 Recipients
Date: 13 March 2008
Subject: Performance Share Plan 2005

Dear Colleagues

The measurement period for the 2005 Performance Share Plan (PSP) ended in mid-February. Shell was in fourth place among the five oil majors in terms of total shareholder return (TSR), ahead of BP and just behind Total. In principle, this outcome results in no vesting of the performance shares. You will recall the PSP vesting scheme is as follows:

First place – 200%
Second place – 150%
Third place – 80%
Fourth and fifth place – 0%

Total shareholder return measures share price growth and dividend payments over a fixed period. Simply put, the shares of three of our competitors grew more than ours over the last three years (dividend payments were comparable).

This outcome is a disappointment. However, further analysis shows that the five companies fall into three distinct clusters of performance. Total and Shell are close together, well behind Exxon in first place and Chevron in second, but considerably ahead of BP in fifth place.

In this situation our company’s underlying performance should play a role in the vesting decision. Our business results over the last three years, illustrated by the Group Scorecard results, were strong, made possible by your efforts. In recognition of this, I am pleased to announce that the Management Development Committee has decided to apply discretion and vest 65% of the 2005 PSP award.

Share price is all about how investors view the future success of the company. We have been working hard (and will continue to do so) to improve results and become a top-quartile performer. At the same time, many of you are managing important new projects and pursuing new business. These efforts will bear fruit in the years to come and show up in the external valuation of our company. I’m convinced Shell will do well against our competitors on share price growth in the future, resulting in financial rewards for you.

This TSR outcome does strengthen my belief that the change we made to the PSP performance measures starting in 2007, where half of the award is linked to TSR and the other half to the Group Scorecard average, is the right one. In this regard, the Group Scorecard of 1.3 for 2007 means a good start for the 2007 PSP award.

Award distribution, and where applicable, trading clearance and compliance requirements, will be addressed in a separate message from Michael Reiff on Monday, March 17.

Kind regards,
Jeroen van der Veer
Chief Executive

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