TLM

FORM 6-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Report of Foreign Issuer

Pursuant to Rule 13a-16 or 15d-16 of

the Securities Exchange Act of 1934

May 7, 2015

TALISMAN ENERGY INC.

Commission File No. 1-6665

[Translation of registrant’s name into English]

2000, 888 - 3rd Street S.W.,

Calgary, Alberta, Canada, T2P 5C5

[Address of principal executive offices]

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

Form 20-F o      Form 40-F x

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): o

Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): o

Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant’s security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.

Exhibit      Title

99.1                        Talisman - Supplementary Disclosure

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

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Exhibit 99.1

SUPPLEMENTAL DISCLOSURE

May 7, 2015

ABOUT THIS DOCUMENT

Talisman Energy Inc. (“Talisman” or the “Company”) is party to an arrangement agreement with Repsol S.A. (“Repsol”) and a subsidiary of Repsol (“AcquisitionCo”) pursuant to which AcquisitionCo is to acquire all of the outstanding shares of Talisman (the “Repsol Acquisition”). The Repsol Acquisition is scheduled to be completed on May 8, 2015. Upon completion of the Repsol Acquisition, Talisman will remain a reporting issuer and continue to be subject to the continuous disclosure reporting obligations under applicable Canadian securities laws.

As a result of the Repsol Acquisition, Talisman will not be holding the annual meeting of shareholders that it would otherwise hold if its shares continued to be publicly held and will not be preparing and filing with the applicable securities regulators the management proxy circular that would be required for such a meeting. This document contains certain information that Talisman is required to disclose that would otherwise be disclosed in a management proxy circular.

This document consists of two parts. Part I contains disclosure relating to corporate governance. Part II contains disclosure relating to director and executive compensation. The disclosure is given in respect of the year ended December 31, 2014, except where otherwise indicated. In light of the Repsol Acquisition and the changes to Talisman that will arise therefrom, the information contained in this document is not indicative of Talisman’s executive compensation or corporate governance in the future.

Part I shall be considered to be an addition to, and form part of, Talisman’s annual information form dated March 4, 2015.

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PART I
CORPORATE GOVERNANCE

This section describes Talisman’s corporate governance framework, including the structures and processes regarding the direction, management and oversight of the Company.

Governance Principles

Code of Business Conduct and Ethics

The Company has adopted a Code of Business Conduct and Ethics (“BCE Code”) which is applicable to all directors, officers and employees of the Company.  To monitor compliance with the BCE Code, certificates are required at least annually from all directors, worldwide employees and various consultants of the Company, which confirm compliance with the BCE Code or disclose any deviations therefrom. The Company requires annual online ethics training as part of the certificate of compliance process. Exceptions are required to be noted directly to the President and Chief Executive Officer (“CEO”), and supervisors are notified if employees do not complete their annual certifications. Disclosures contained in the certificates, as well as a status report on the percentage of directors, employees and various consultants who have completed their annual certification, are reported to the Audit Committee for consideration. The Governance and Nominating Committee reviews any requests for waivers from the BCE Code from executive officers and directors, and all material waivers from the BCE Code are required to be disclosed promptly to shareholders. No waivers from the BCE Code were granted for the benefit of the Company’s directors or executive officers during the year ended December 31, 2014.

The Company values good faith actions in support of the BCE Code and will not tolerate retaliation of any kind as a result of good faith reporting by employees. Talisman requires that observed breaches of the BCE Code be reported to a supervisor or manager, a Vice President in the Legal Department, the Vice President, Internal Audit, an executive officer, or through the Integrity Matters hotline noted below.

The Company’s BCE Code can be obtained from the Company’s website at www.talisman-energy.com or upon request from: Investor Relations Department, Talisman Energy Inc., 2000, 888 — 3rd Street S.W., Calgary, Alberta, T2P 5C5 or by email at: tlm@talisman-energy.com. The BCE Code, as last updated in 2014, has been filed with Canadian securities regulators and can be accessed through www.sedar.com.

Disclosure Policy

The Company has a Disclosure Policy which applies to directors, employees and third parties who represent the Company and its subsidiaries. The objectives of the Disclosure Policy are to: (1) ensure that the Company broadly disseminates information in a timely manner in order to keep security holders and capital markets appropriately informed regarding the Company; (2) prevent improper use or disclosure of material information and to give guidance on dealing with other confidential information pertaining to the Company; (3) raise awareness of disclosure requirements and the Company’s approach to disclosure; (4) provide guidance concerning communicating corporate information to investors, industry analysts, members of the media and the investing public; and (5) ensure compliance with all applicable legal and regulatory requirements relating to disclosure. Pursuant to the Disclosure Policy, a Disclosure Committee has been constituted and is comprised of the President and Chief Executive Officer, the Executive Vice-President, Finance and Chief Financial Officer and the Executive Vice-President, Corporate. In addition, ongoing disclosure training is provided to targeted groups within the Company, including senior management and the Board. The Disclosure Policy was last updated in 2013 following a comprehensive review of evolving legal requirements and peer policies.

Ethics Hotline

The Company maintains a confidential and anonymous reporting hotline for submitting inquiries or complaints regarding ethics matters and other areas of concern, such as human resources or workplace practices. This Integrity Matters hotline is available to internal and external users, and reports are received by an independent third party provider and subsequently forwarded to Talisman’s Ethics Coordinator. In addition, the Company has a Global Investigation Policy and has developed investigation procedures and protocols. All matters reported through the Integrity Matters hotline in 2014 were reviewed by the Ethics Coordinator for possible breaches of Company policies, and actions were taken where appropriate. The Audit Committee has developed procedures for the receipt, retention and treatment of complaints received regarding accounting, internal accounting controls or auditing matters. Any reports made through the Integrity Matters hotline which relate to these areas are subject to the parameters and notification protocols embedded in the Audit Committee procedures.

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Role of the Board

Board Roles and Responsibilities

The Board of Directors of the Company (the “Board”) sees its principal role as stewardship of the Company and its fundamental objective as the creation of shareholder value, including the protection and enhancement of the value of the Company’s assets. The Board’s stewardship responsibility means that it oversees the conduct of the business and management, which is responsible for developing long-term strategy and conducting the Company’s day-to-day business. In addition to strategy discussions at regularly scheduled Board meetings, the Board meets at an extended annual Board session to specifically review corporate strategy.

The Board has developed Terms of Reference for the Board, reproduced in their entirety in Appendix “A” to this Part I, and which are reviewed on an annual basis. To assist Board members in performing their responsibilities, the Company has adopted a policy whereby, with the approval of the Chairman of the Governance and Nominating Committee or the Board, a Board member may engage an outside advisor at the Company’s expense.

Position Descriptions

The Board has developed and approved written position descriptions for the Chairman of the Board, the Chief Executive Officer and the Committee Chairs.  Summaries of the mandates of the Board, its committees (including position descriptions for the Chair of each committee), the Chairman and the CEO may be obtained from the Company website at www.talisman-energy.com or upon request from: Corporate and Investor Communications Department, Talisman Energy Inc., 2000, 888 — 3rd Street SW, Calgary, Alberta, T2P 5C5, or by email at tlm@talisman-energy.com.

Chairman of the Board

The principal role of the Chairman of the Board is to manage and provide leadership to the Board. The Chairman is accountable to the Board and acts as a direct liaison between the Board and management of the Company through the Chief Executive Officer. In addition, the Chairman acts as a communicator for Board decisions where appropriate. The Chairman of the Board is also specifically charged with responsibility for leading and managing the Board in discharging its responsibilities (see “Performance Assessments” herein). The Chairman’s mandate directs him to ensure that the directors hold discussions without management present at each Board meeting, and he presides at such sessions.

Chief Executive Officer

The position description of the Chief Executive Officer includes a description of duties and responsibilities in the areas of strategic planning; risk assessment, monitoring and management; internal controls and management information systems; leadership, corporate citizenship and social responsibility; and management’s relationship with the Board. In addition, the Chief Executive Officer is directly responsible for achieving the goals of the Company through the annual operating plan process, which sets out specific financial, operational, long-term and short-term strategic and leadership goals.

Committee Chairs

The Chair of each Committee leads committee discussion on meeting agenda items and reports to the Board, on behalf of the Committee, with respect to the proceedings of each committee meeting. The Chair of each Committee also reviews agendas, work plans and, as appropriate, substantive agenda items with members of management prior to each committee meeting.

Independence of Directors

All directors of Talisman are independent with the exception of the President and Chief Executive Officer, Hal Kvisle, and Henry Sykes. Mr. Sykes’ non-independence determination is based on the fact that Robert R. Rooney, Executive Vice-President, Corporate of the Company, served as a member of the board of directors and compensation committee of MGM Energy Corp. (“MGM Energy”), where Mr. Sykes served as President.  Mr. Sykes resigned as President in June 2014.  In July of 2013, prior to Mr. Sykes joining Talisman’s Board, Mr. Rooney resigned from the board of directors of MGM Energy. Under specific look-back provisions of the relevant independence rules of the Canadian Securities Administrators (“CSA”) and the New York Stock Exchange (“NYSE”), Mr. Rooney’s past service on the compensation committee of MGM Energy renders Mr. Sykes technically non-independent for three years following the date of Mr. Rooney’s resignation from the MGM Energy board of directors. The Board considered Mr. Sykes’ non-independence when assessing his appointment and determined that, with all of the other directors other than the CEO being independent, and given that Mr. Sykes’ non-independence determination is based upon a past, rather than current, relationship, Mr. Sykes’ appointment would not compromise the independence of the Board and that the qualifications and experience which Mr. Sykes brings to the Board outweigh his technical non-independence.

Each of the Chairman of the Board and Committee Chairs are independent.

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Independence Determinations — Directors

The Board believes that independence of the Board as a whole is essential to fulfilling its duty to oversee the conduct of the business and management of Talisman.

The CSA rules state that a board should have a majority of independent directors. An independent director is defined as an individual who has no direct or indirect material relationship with the Company (that is, a relationship which could, in the view of the Company’s Board, be reasonably expected to interfere with the exercise of a director’s independent judgment). Director independence is also reviewed, on a voluntary basis, having regard to NYSE corporate governance listing standards for independence applicable to US domestic issuers including the NYSE rules applicable to compensation committee member independence. The independence of Audit Committee members is also reviewed against the requirements of National Instrument 52-110 Audit Committees (“NI 52-110”). Each director annually completes a detailed questionnaire about their business and charitable relationships and shareholdings. The Company reviews the information provided, conducts searches in internal databases and prepares a legal analysis with initial determinations of independence. After reviewing the legal analysis, the Corporate Secretary and the Executive Vice-President, Corporate provide management’s recommendations to the Governance and Nominating Committee for review. Finally, management’s recommendations are presented to the Board to pass a resolution on director independence.

The composition of the Board, including the independence of the Chairman, ensures that the Board has in place appropriate structures and procedures to ensure that the Board can function independently of management.

Independence Determinations — Board Committees

All Committees of the Board are currently composed entirely of independent directors, with the exception of the Reserves Committee and the Health, Safety, Environment and Corporate Responsibility Committee (“HSECR Committee”) of which the majority of members are independent.

The committee memberships noted below are as at December 31, 2014.

ü* Denotes Committee Chair

Other and Interlocking Directorships

Certain directors of the Company serve as directors of other reporting issuers. The Board has not adopted a formal policy limiting the number of outside directorships of the Company’s directors. However, the Governance and Nominating Committee monitors the amount of other board memberships for current and proposed directors on an ongoing basis to ensure the ability of all directors to effectively act in the best interests of the Company.

In Camera Sessions

The Chairman of the Board is required to ensure that, upon completion of the business of all meetings of the Board and more often as needed, the directors have the opportunity to hold discussions without management present. The Board therefore meets without management at all regularly scheduled and special meetings of the Board. All Committees also hold in camera sessions without management present at least at the end of each regularly scheduled meeting. Finally, certain Committees

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hold additional in camera sessions as follows:

·                  The Audit Committee holds private sessions with each of the external auditor, the Vice-President of Internal Audit and senior management following each regularly scheduled committee meeting;

·                  The Human Resources Committee (“HRC”) holds private sessions with senior management following each regularly scheduled committee meeting. The HRC also holds private sessions with its independent external compensation consultant following meetings in which compensation items are discussed; and

·                  The Reserves Committee holds private sessions with the Internal Qualified Reserves Evaluator following each regularly scheduled Reserves Committee meeting.

A tabular form of the in camera sessions of the Board, its five standing committees and the CEO Succession Committee that occurred during 2014 is as follows:

(1)         The HRC held one meeting, in April 2014, for which the sole business was the approval of the annual long-term incentive grant (for which no in camera session was required).

Director Attendance

Board members are expected to attend Board meetings and meetings of Committees on which they are a member.

(1)         Due to schedule conflicts Ms. Bergevin and Mssrs. Carty, Kvisle and Merksamer each missed one special Board meeting.

(2)         Mr. Christodoro was appointed to the Human Resources Committee on May 7, 2014, his attendance reflects all meetings held from May 7 to December 31, 2014; and Mr. Merksamer was appointed to the Governance & Nominating Committee on May 7, 2014, his attendance reflects all meetings held from May 7 to December 31, 2014

(3)         While Mr. Kvisle is not an official member of any Committee, he attends Committee meetings in his capacity as CEO.

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Director Orientation and Continuing Education

Talisman is committed to ensuring its directors have the skills and knowledge necessary to meet their obligations as directors. The program has two components: new director orientation and ongoing director development.

New Director Orientation

The Company has an orientation and development program for new directors that includes the following:

·                  All new directors are provided with an orientation package that includes, among other things, copies of corporate and Board policies including the Company’s BCE Code, the Terms of Reference of the Board and its Committees, position descriptions, background information regarding each of the other directors and executive officers, members of the Board Committees, meeting dates and a memorandum of director duties. New directors are expected to review and become familiar with the contents of this orientation package.

·                  Following the appointment or election of a new Board member, the Corporate Secretary typically conducts an orientation session with each new director to discuss Board governance structures, director compensation, and administrative and regulatory procedures associated with director appointments.

·                  The Corporate Secretary also coordinates an extensive orientation session with new directors to review the Company’s business, expectations of directors, current issues and opportunities, and corporate goals and objectives. New directors are introduced to executives and key employees and provided with an overview of the Company’s operations and strategic objectives. As required, a special education session on reserves estimates and related processes is arranged with the Company’s Internal Qualified Reserves Evaluator, and additional sessions on special topics may be scheduled at the request of new directors.

·                  New Board members meet with and have access to the President and CEO.

Ongoing Director Development

The Company regularly provides directors with opportunities to increase their knowledge and understanding of the Company’s business. The Board typically visits one of the Company’s international locations, major domestic facilities or operating areas on an annual basis or as schedules permit.  Briefings on strategic issues are completed on an ongoing basis and at every regularly scheduled Board meeting, but specifically at an annual strategy session which typically includes reviews of the competitive environment, the Company’s performance relative to its peers, and any other developments that could materially affect the Company’s business.

Director Education Activities in 2014

Continuing education helps Talisman’s directors stay up-to-date with industry developments and changing governance issues and requirements, and understand issues facing the Company.  The continuing education activities of the Board and its members include internal presentations and external presentations on regulatory developments, case law, best practices, peer reviews, look-backs, investor feedback and other topics of interest from time to time.  All committees regularly receive informational papers from management on trends and issues related to the particular committee mandate as part of their Board and Board committee mailings. Board members are canvassed on an annual basis to determine whether they have educational needs on topics specific to the Company or the industry.  Please see below for some of the director education activities that took place during 2014:

·                  Update on regulatory environment affecting reserves disclosure, including proposed changes to NI 51-101 (Reserves, December 2014)

·                  Informational session on HSE and CR regulatory regimes, trends and issues (HSECR, December 2014)

·                  Update on emerging accounting and regulatory issues (Audit, December 2014)

·                  Update on governance trends and best practices, Say on Pay industry trends (Governance, December 2014)

·                  Updates on executive compensation and governance trends (HRC, September 2014 and December 2014)

·                  Poster board sessions with management surrounding various assets in the Canada Delivery Unit (Full Board, June 2014)

Individual Board members may also pursue educational opportunities such as meetings with independent investment advisors and legal advisors and the Canadian Institute of Corporate Directors programs, in addition to director seminars generally. Directors may attend industry conferences and subscribe to industry publications.

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Talisman also maintains a corporate membership in the Institute of Corporate Directors to ensure that all directors have access to ongoing director education opportunities.

Director Qualifications, Expectations and Number of Directorships

In 2004, the Governance and Nominating Committee adopted screening and assessment guidelines to assist in the process of identifying new Board members. To further assist in the director selection process, the Governance and Nominating Committee also created a profile of ideal characteristics and qualifications of new nominees, which takes into account the Company’s governance framework, current Board composition and skills and experience priorities as corporate strategy changes. This skills matrix is updated regularly to ensure that it remains relevant to the current business environment and corporate strategic direction.

In addition to the skills matrix, the Governance and Nominating Committee considers all director candidates against various personal attributes which it believes contribute to the effective functioning, governance and decision-making of the Board. These attributes include:

While the attributes described above provide the Governance and Nominating Committee with a framework for assessing director candidates, it is not meant to limit the scope of the review. Each candidate is reviewed against his or her specific experiences and perspectives to assess his or her potential effectiveness as a director.

The Governance and Nominating Committee also reviews all existing and future commitments of each candidate, including other directorships, to determine: (a) if they impact a candidate’s independence or pose a potential conflict of interest; (b) whether the candidate will be able to devote sufficient time and commitment to his or her duties as a Board member; and (c) whether there are interlocking directorships.

Diversity

Talisman is committed to increasing diversity on the Board over time, and is actively engaged in support of initiatives aimed at developing and seeking out candidates who meet diversity criteria. In pursuit of this aspiration, in 2014, Talisman:

·                  was a sponsor of Catalyst, a non-profit organization, and had previously endorsed Catalyst Canada’s initiative to increase the overall proportion of the Financial Post 500 board seats held by women by 2017;

·                  was a member of the Canadian Board Diversity Council and a supporter of its National Diversity initiative and its “Get on Board” Governance Education Program;

·                  was a sponsor of Young Women in Energy; and

·                  organized and provided opportunities for its employees to participate in diversity education sessions and women’s networking events.

The Governance & Nominating Committee considers all director candidates against various personal attributes which it believes contribute to the effective functioning, governance and decision-making of the Board.  The Board does not adhere to any quotas in determining Board membership but a nominee’s diversity of gender, ethnicity, nationality, age, experience and geographic background or other attributes may be considered favorably in his or her assessment.  Currently, 2 out of Talisman’s 13 board members (or 15%) are women.  Talisman has not adopted a written policy relating to the identification and nomination of women directors because its Board Succession Policy addresses diversity more generally.

Talisman’s Human Resources Committee conducts a formal annual review of succession plans for key management positions with the Company, in addition to ongoing conversations about talent management generally, including the pipeline for the most senior leadership roles.  Currently, Talisman does not have any women on its executive leadership team but 15% of Talisman’s senior leaders (in a managerial role) globally are women.  Talisman’s senior leaders are potential successors for executive roles. Talisman is focused on creating a work environment that supports women in their career development and removes barriers for promotion in order to increase the talent pool of women who can fill executive roles within the Company.  Talisman believes in recruiting, developing and promoting the most capable candidates available for all roles.

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Talisman approaches and encourages diversity at all levels of its organization and believes this is more effective than setting specific quotas or targets at this time.

Performance Assessments

The Chairman of the Board and Chair of the Governance and Nominating Committee oversee a comprehensive annual assessment process.

The evaluation process assists in assessing overall effectiveness. Measuring contributions made by the Board, by each committee and by each director also illuminates skill gaps and educational opportunities to be addressed for the coming year.

Assessments of the Board, its committees, and individual directors (including special assessments of the Chairman of the Board and of Committee Chairs) are conducted on an annual basis.  The last assessment was conducted in February 2014.  The following chart sets out the processes by which these assessments are conducted.

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Director Selection and Succession Planning Process

The Governance and Nominating Committee is responsible for:

(a)         Establishing a long-term plan for the composition of the Board that takes into consideration the current strengths, competencies, skills and experience of Board members, retirement dates and the strategic direction of the Company as well as the competencies and skills the Board, as a whole, should possess;

(b)         Identifying individuals qualified to become Board members and establishing a list of potential candidates with the desired skills and experience, consistent with criteria in the long-term succession plan noted above;

(c)          Overseeing the process to recruit new Board members, and to recommend to the Board nominees for election to the Board; and

(d)         Ensuring there is a succession plan for the position of the Chairman of the Board.

The Governance and Nominating Committee believes that a board that has a broad mix of complementary skills and expertise can more effectively oversee the range of issues that arise and make more informed board decisions, particularly for a company of Talisman’s size and complexity. The experience, qualifications and skills of Talisman’s directors are evaluated regularly to ensure that Talisman’s Board and committee composition is appropriate and essential areas of expertise are represented.

List of Director Candidates

The Company maintains an “evergreen” list of potential Board members, which is used in the director selection process noted above.

Board Succession Policy — Term Limits, Tenure and Retirement

The Board Succession Policy states that an independent director should offer to resign if he or she has ceased to be independent. Board members are also required to advise the Chairman of the Governance and Nominating Committee where there is a significant change in the member’s personal status, including a negative change in public profile, or significant changes in employment or health. Upon receipt of any such notification, the Governance and Nominating Committee will consider the member’s change in status in light of the Company’s recruitment criteria and Board succession plans and, depending on the results of those deliberations, may request the member’s resignation from the Board.  Talisman’s Board Succession Policy was last updated in 2013.

In 2008, Talisman’s Board Succession Policy was amended to provide that Board members will offer their resignations on the 10th anniversary of the member’s first election or appointment with the expectation that, unless otherwise determined by the Governance and Nominating Committee, they will not be nominated for election at the next annual shareholders’ meeting. The Governance and Nominating Committee, following a focused assessment of the member’s areas of principal contribution against the overall composition and needs of the Board, has the discretion to recommend the member’s continued nomination as a director. No waivers to the Board Succession Policy were granted in 2014.

The Governance and Nominating Committee undertakes a focused review of the Chairman of the Board every three years, with a possible extension of the Chairman’s position of up to a further three years.

The Board Succession Policy establishes a mandatory retirement age of 70 for directors. No waivers to the mandatory retirement age limit were granted during 2014.

Board Committees

The Board fulfils its role, to act in the best interests of the Company, directly and through committees to which it delegates certain responsibilities.

The Board has established five standing committees: the Audit Committee, the Governance and Nominating Committee, and the Human Resources Committee, the Reserves Committee, the Health, Safety, Environment and Corporate Responsibility Committee.  In addition, a CEO Succession Committee was formed in 2013 to fulfil a more limited mandate.

The standing Committees of the Board convene in accordance with an annually developed schedule. The following describes the composition, responsibilities and key activities of the five standing committees.

Audit Committee

The Audit Committee is responsible for assisting the Board in fulfilling its obligations by overseeing and monitoring the Company’s financial accounting and reporting process. It is also responsible for overseeing and monitoring the integrity of

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the Company’s financial statements, its internal control over financial reporting and the external financial audit process, evaluating the independence of the Company’s auditor and overseeing the Company’s internal audit function. In fulfilling its responsibilities, the Audit Committee meets regularly with the internal and external auditors and management. The Terms of Reference of the Audit Committee require that each member be independent and, as such, all members of the Audit Committee are unrelated, independent directors.

The Audit Committee is committed to compliance with all applicable accounting policies, procedures and related controls. In accordance with the requirements of the US Securities Exchange Act of 1934, as amended, and NI 52-110, the Audit Committee has adopted procedures for (a) the receipt, retention, and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters; and (b) the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters.

The Committee’s mandate can be found at www.talisman-energy.com.

Members at May 1, 2015:

Michael T. Waites (Chair)

Donald J. Carty

Thomas W. Ebbern

Charles M. Winograd

The Committee is comprised entirely of independent directors who are financially literate. Additional information on the Company’s Audit Committee, including the Terms of Reference for the Audit Committee, a description of Audit Committee members’ education and experience, and a summary of external auditor fees is contained in Schedule “B” to the Company’s Annual Information Form for the year ended December 31, 2014.

Human Resources Committee

The objective of the HRC is to oversee certain management assessment, succession and compensation matters. The primary roles and responsibilities of the HRC include reviewing and approving the compensation levels of executive officers and leading the process for assessing the performance of the Chief Executive Officer; reviewing and recommending to the Board for approval the compensation and benefit policies of the Company and its subsidiaries, and the terms and conditions of employee benefit plans; reviewing and approving employee long- term incentive grants and recommending cash unit grants to subsidiaries; reviewing and approving amendments to the terms and conditions of the Company’s pension plans; reviewing and making recommendations to the Board as to the appointment of executive officers; reviewing succession plans for key management positions within the Company and its subsidiaries; reviewing management development policies and practices and staffing plans; reviewing human resources strategies and policies; and reviewing the Company’s executive compensation disclosure. The HRC also assesses and manages the risk associated with the Company’s compensation programs and their alignment with the Company’s value creation objectives.

Collectively, the five members of the HRC sit on all Committees of the Board, which ensures understanding of and alignment with the work of other committees. Members of the HRC have direct experience and skills pertaining to executive compensation, enabling them to make decisions on the suitability of the Company’s compensation policies and practices.

The Committee’s mandate can be found at www.talisman-energy.com.

Members at May 1, 2015:

Donald J. Carty (Chair)

Jonathan Christodoro

Brian M. Levitt

Lisa A. Stewart

Peter W. Tomsett

The Committee is comprised entirely of independent directors. No members of the HRC are active Chief Executive Officers of publicly traded companies.

Governance and Nominating Committee

The Governance and Nominating Committee is responsible for developing and recommending a set of corporate governance principles and guidelines applicable to the Company. Its duties include approving the Company’s annual corporate governance disclosure; establishing a long-term plan for composition of the Board; establishing a process for identifying, recruiting and appointing new directors; reviewing and determining director compensation; and reviewing the general responsibilities and function of the Board, its Committees and the role of the Chairman of the Board and the Chief Executive

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Officer.

The Committee’s mandate can be found at www.talisman-energy.com

Members at May 1, 2015:

Charles M. Winograd (Chair)

Christiane Bergevin

Brian M. Levitt

Samuel J. Merksamer

Charles R. Williamson

The Committee is comprised entirely of independent directors.

Reserves Committee

The primary responsibilities of the Reserves Committee include reviewing the Company’s procedures relating to the disclosure of information with respect to oil and gas reserves and valuation activities; reviewing the Company’s procedures for providing information to the qualified reserves evaluator or auditor who reports on reserves data; meeting with management and the qualified reserves evaluator or auditor to review the reserves and valuation data; reviewing the value creation and capital investments associated with or relative to changes in reserves volumes; reviewing and recommending to the Board for approval the content and filing of the Company’s Annual Statement of Reserves Data and Other Oil and Gas Information, and the Company’s Annual Report of Management and Directors on Oil and Gas Disclosure.

The Committee’s mandate can be found at www.talisman-energy.com.

Members at May 1, 2015:

Lisa A. Stewart (Chair)

Jonathan Christodoro

Thomas W. Ebbern

Henry W. Sykes

Michael T. Waites

The Committee is comprised of a majority of independent directors.

Health, Safety, Environment and Corporate Responsibility Committee

The HSECR Committee reviews the effectiveness with which the Company meets its obligations and achieves its objectives pertaining to health, safety and the environment. The primary responsibilities of the HSECR Committee include reviewing policies and management systems and the Company’s system of internal controls in the areas of health, safety and the environment; reviewing the findings of regulatory agencies and auditors in respect of health, safety, the environment and corporate responsibility and management’s responses thereto; reviewing significant health, safety and environmental risks and exposures; and assessing mitigating or remedial action taken to address the identified risks, including the adequacy of environmental insurance. The Terms of Reference of the HSECR Committee require the Committee to review and consider corporate social responsibility policies with respect to security, community relations and human rights.

The Committee’s mandate can be found at www.talisman-energy.com.

Members as at May 1, 2015:

Peter W. Tomsett (Chair)

Christiane Bergevin

Henry W. Sykes

The Committee is comprised of a majority of independent directors.

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APPENDIX A — TERMS OF REFERENCE — BOARD OF DIRECTORS

Roles and Responsibilities

The principal role of the Board of Directors (the “Board”) is stewardship of the Company with the creation of shareholder value, including the protection and enhancement of the value of its assets, as the fundamental objective. The stewardship responsibility means that the Board oversees the conduct of the business and management, which is responsible for the day to day conduct of the business. The Board must assess and ensure systems are in place to manage the risks of the Company’s business with the objective of preserving the Company’s assets. The Board, through the Chief Executive Officer (“CEO”), sets the attitude and disposition of the Company towards compliance with applicable laws, environmental, safety and health policies, financial practices and reporting. In addition to its primary accountability to shareholders, the Board is also accountable to employees, government authorities, other stakeholders and the public.

A.                                    Primary Responsibilities

The principal responsibilities of the Board required to ensure the overall stewardship of the Company are as follows:

1.                                      the Board must ensure that there are long term goals and a strategic planning process in place. The CEO, with the approval of the Board, must establish long term goals for the Company. The CEO formulates the Company’s strategy, policies and proposed actions and presents them to the Board for approval. The Board brings objectivity and judgment to this process. The Board ultimately approves, on an annual basis, the strategic plan which takes into account, among other things, the opportunities and risks of the Company’s business;

2.                                      the Board must identify and have an understanding of the principal risks associated with the Company’s businesses, and must ensure that appropriate systems are in place which effectively monitor and manage those risks;

3.                                      the Board must ensure that processes are in place to enable it to monitor and measure management’s, and in particular the CEO’s, performance in achieving the Company’s stated objectives. These processes should include appropriate training, development and succession planning of management;

4.                                      the Board must approve the CEO’s compensation;

5.                                      the Board shall satisfy itself as to the business and professional integrity of the CEO and other executive officers and that the CEO and other executive officers create a culture of integrity throughout the Company;

6.                                      the Board must ensure that the necessary internal controls and management systems are in place that effectively monitor the Company’s operations and ensure compliance with applicable laws, regulations and policies;

7.                                      the Board must monitor compliance with the Company’s Policy on Business Conduct and Ethics;

8.                                     the Board must ensure that processes are in place to properly oversee Company sponsored pension plans; and

9.                                      the Board must ensure the Company has a communications program in place which effectively communicates with and receives feedback from shareholders. The Board must also ensure that the Company has appropriate processes in place to effectively communicate with employees, government authorities, other stakeholders and the public.

B.                                    Non-Delegable Responsibilities

Pursuant to the Canada Business Corporations Act (the “Act”), various matters are considered of such importance so as to warrant the attention of all Directors and, accordingly, the Act prescribes that such matters either cannot be delegated or may only be delegated in a qualified or partial manner:

1.                                            the submission of items to shareholders for their approval;

2.                                      the filling of a vacancy among the directors or in the office of auditor;

3.                                      the appointment of additional directors;

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4.                                      the issue of securities;

5.                                      the declaration of dividends;

6.                                      the purchase, redemption or other acquisition of the Company’s own shares;

7.                                      the payment of certain commissions prescribed by the Act;

8.                                      the approval of a management proxy circular;

9.                                      the approval of annual financial statements;

10.                               1the adoption, amendment or repeal of by laws; and

11.                               the review and approval of

(a)                                 the content and filing of the Company’s statement of reserves data and other oil and gas information;

(b)                                 the filing of the report on reserves data by the Company’s Qualified Reserves Evaluator or Auditor; and

(c)                                  the content and filing of the Company’s report of management and directors on oil and gas disclosure.

C.                                    Typical Board Matters

The following is not an exhaustive list but typifies matters generally considered by the Board in fulfilling its responsibility for stewardship of the Company. The Board may determine it appropriate to delegate certain of these matters to committees of the Board:

1.                                      appointment of officers, other than executive officers;

2.                                      considering the appropriate size of the Board, with a view to facilitating effective decision making;

3.                                      adopting a process to consider and assess the competencies and skills of each Board member and the Board as a whole;

4.                                      determining the remuneration of directors and auditors;

5.                                      reviewing and recommending to shareholders, changes to capital structure;

6.                                      approving the Company’s long term strategy and the annual capital expenditure plan of the Company and its subsidiaries and where appropriate any supplementary capital plan;

7.                                      approving banking, borrowing and investment policies;

8.                                      determining dividend policy;

9.                                     developing the Company’s approach to corporate governance including, without limitation, developing a set of corporate governance principles and guidelines;

10.                               approving the holding, location and date of meetings of shareholders;

11.                               appointing members to committees of the Board of Directors and approving terms of reference for and the matters to be delegated to such committees;

12.                               granting any waivers from the Company’s Policy on Business Conduct and Ethics for the benefit of the Company’s directors or executive officers;

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13.                               granting and delegating authority to designated officers and employees including the authority to commit capital, open bank accounts, sign bank requisitions and sign contracts, documents and instruments in writing;

14.                               determining the number of directors and recommending nominees for election by the shareholders;

15.                               approving amendments to the Company’s Employee Savings Plan, Employee Stock Option Plan, Director Stock Option Plan, employee benefits plans, or such other plans as the Company approves from time to time;

16.                               approving the funding policy for the Company’s defined benefit pension plans, including decisions related to surplus withdrawals and contribution holidays;

17.                               approving the acquisition or disposition or certain corporate assets; and

18.                               appointing the Company’s transfer agents and registrars.

D.                                    Board Committees

The Board of Directors has the authority to appoint a committee or committees of the Board and may delegate powers to such committees (with the exceptions prescribed by the Act). The matters to be delegated to committees of the Board and the constitution of such committees are assessed annually or more frequently as circumstances require. The following committees are ordinarily constituted:

1.                                      the Governance and Nominating Committee, to deal with governance of the Company and the nomination and assessment of Directors;

2.                                      the Audit Committee, to deal with financial reporting and control systems;

3.                                      the Human Resources Committee, to deal with the assessment of management and succession to key positions and compensation within the Company;

4.                                      the Reserves Committee, to deal with matters relating to the Company’s oil and gas reserves and related reporting;

5.                                      the Health, Safety, Environment and Corporate Responsibility Committee, to deal with health, safety and environment matters as well as the Corporate Responsibility Report; and

6.                                      the Executive Committee, to deal with general corporate matters and matters which are incidental to previous Board authorizations.

E.                                    Pension Management Committee

The Board of Directors has the authority to establish a Pension Management Committee, comprised of officers of the Company, to deal with employee pension plans and related matters and may delegate powers to such committee (with the exceptions prescribed by the Act). The members of the Pension Management Committee will be appointed by the CEO. The matters to be delegated to the Pension Management Committee and the constitution of such committee are assessed annually or more frequently as circumstances require.

Composition and Procedure

The Board of Directors is elected annually by shareholders and consists of a minimum of four directors and a maximum of 20 directors, as determined from time to time by the Directors. The number of Directors to be elected at shareholders’ meetings is currently fixed at eleven. While the election of directors is ultimately determined by the shareholders, it is the policy of the Board that a majority of the Directors as well as the Chairman of the Board be independent (as defined under applicable stock exchange rules and securities laws).

The Chairman of the Board presides as Chair at all meetings of the Board and shareholders of the Company. The Corporate Secretary or, in the absence of the Corporate Secretary, an Assistant Corporate Secretary attends all meetings of the Board and shareholders and records the proceedings thereof. The Corporate Secretary prepares and keeps minutes and records of all meetings of the Board.

Meetings of the Board of Directors, including telephone conference meetings, are to be held at such time and place as the

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Chairman of the Board, the President and CEO, an Executive Vice President who is a Director, or any two Directors may determine. Notice of meetings shall be given to each Director not less than 48 hours before the time of the meeting. Meetings of the Board of Directors may be held without formal notice if all of the Directors are present and do not object to notice not having been given, or if those absent waive notice in any manner before or after the meeting.

Notice of meeting may be delivered personally, given by mail, facsimile or other electronic means of communication.

Fifty percent of the Directors then in office and in attendance constitutes a quorum at any meeting.

Each Board member is expected to attend Board meetings and meetings of committees of which he or she is a member and to become familiar with deliberations and decisions as soon as possible after any missed meetings. In that regard, members of the Board are expected to prepare for Board (and committee) meetings by reviewing meeting materials distributed to members of the Board, to the extent feasible, in advance of such meetings. Matters of a confidential or sensitive nature may be discussed at Board (or committee) meetings without advance distribution of meeting materials to members of the Board. It is expected that members of the Board will actively participate in determining and setting the long and short term goals and interests of the Company.

In recognition of its independence, the Board shall have the opportunity to hold discussions without management present upon completion of all meetings of the Board.

A resolution in writing signed by all the Directors entitled to vote on that resolution at a meeting of the Directors is as valid as if it had been passed at a meeting of the Directors. A copy of any such resolution in writing is kept with the minutes of the proceedings of the Directors.

At meetings of the Board, any matter requiring a resolution of the Directors is decided by a majority of the votes cast on the question.

The Board shall ensure that there is a process in place for annually evaluating the effectiveness of the Board, the committees of the Board and individual directors.

Compensation

No Director, unless he or she is an officer of the Company, should receive remuneration from the Company other than compensation received in his or her capacity as a Director.

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PART II
EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

This Compensation Discussion & Analysis (“CD&A”) describes Talisman’s executive compensation programs and overall approach to executive compensation. The CEO and all current Executive Vice-Presidents are referred to herein as “Executive Officers”. Specifically discussed in the CD&A is the compensation for the following Named Executive Officers (“NEOs”):

·                  Harold N. Kvisle, President and Chief Executive Officer;

·                  Paul R. Smith, Executive Vice-President, Finance and Chief Financial Officer;

·                  Paul Blakeley, Executive Vice-President, Asia-Pacific;

·                  Paul C. Warwick, Executive Vice-President, Europe-Atlantic; and

·                  Robert R. Rooney, Executive Vice-President Corporate

For the purposes of this CD&A, “executive compensation” means base salary, short-term and long-term incentives, benefits (including post-employment benefits and change of control provisions), and other compensation. The executive compensation program covers all Executive Vice-President positions that report to the President and Chief Executive Officer, and the President and Chief Executive Officer position itself.

Compensation Philosophy and Program Design

Talisman’s executive compensation philosophy is intended to reward Executive Officers commensurate with the success of the Company, execution of Talisman’s strategy as outlined on page 19, personal achievements in support of that strategy, and in accordance with Talisman’s values.

In keeping with this philosophy, the main objectives of Talisman’s executive compensation programs are to:

·                  Pay for performance by rewarding the attainment of goals and objectives;

·                  Attract, retain and motivate high quality Executive Officers to drive organizational success and long-term shareholder value creation, with appropriate consideration of risk;

·                  Develop a sense of proprietorship, thereby encouraging all Executive Officers to act in the best interests of the Company;

·                  Build flexibility in its programs to accommodate the cyclical nature of the oil and gas business; and

·                  Align programs to business needs, structure and culture.

Talisman’s executive compensation policy is to position total direct compensation at approximately the 50th percentile of the executive compensation peer group.

Corporate performance is measured by achievement of safety, environmental, strategic, operational, financial and people goals. Individual performance is evaluated based on achievement of personal performance goals, leadership, and demonstration of Talisman’s values. Talisman’s values emphasize safety, passion, bias for results, respect, excellence, teamwork, and honest communication. Through individual goal setting and performance reviews involving the HRC, Executive Officers have a clear line of sight between individual contributions, organizational success, and the impact on compensation.

Executive Officers have both fixed and performance-based elements of compensation. Programs are intentionally designed to be more heavily weighted towards performance-based elements of compensation, reinforcing Talisman’s performance culture. Total direct compensation is targeted such that top quartile compensation is provided to Executive Officers in times when Talisman and the individual exceed performance goals. By having elements of total direct compensation subject to performance, Executive Officers will receive significantly less compensation if Talisman does not achieve its goals, particularly if share price is impacted.

Annual Compensation Review Process

Compensation for the Executive Officers is reviewed on an annual basis, and involves a detailed review of corporate and

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individual performance and market compensation data. The HRC reviews base salaries, variable pay and long-term incentives individually and as a whole (that is, it considers “total direct compensation” in its entirety).

The full Board approves changes to the CEO’s compensation, following the HRC’s review and recommendation. The HRC reviews and approves changes to the remaining Executive Officers’ compensation.

Competitive Market Analysis

The HRC reviews compensation practices in peer organizations when establishing compensation levels for Executive Officers. Talisman’s executive compensation peer group consists of eight Canadian companies and eight US companies. These companies were selected in consideration of the following attributes:

·                  Significant presence in oil and gas exploration and production, or in a similar and related industry;

·                  Revenue, assets, market capitalization, total enterprise value and oil and gas production relative to Talisman; and

·                  Headquartered in Canada or the US, with North American and/or international operations.

The following companies were used for competitive market analysis of executive compensation for Talisman’s Executive Officers in 2014:

When using the peer group to determine executive compensation levels, the HRC considers the market median compensation levels for each group of peers, Canadian and US, and then based on market competitive considerations, determines which reference point is more appropriate for each executive role.

Executive Compensation Consultants

The HRC retained the services of Hugessen Consulting (“Hugessen”) to provide an independent external opinion on various executive compensation matters, and advice to the HRC in respect of compensation for Talisman’s executives. Hugessen reports directly to the Chair of the HRC on these matters. Hugessen was first retained by Talisman in May 2013.

In 2012, the HRC approved an internal Global Compensation Consultant Policy and Process. The policy provides mechanisms and protocols to ensure the independence of the HRC’s compensation consultant by providing the HRC appropriate oversight for all services provided by the compensation consultant to the HRC and the Company. In February 2014 the HRC pre-approved the anticipated Hugessen fees for 2014.

In 2014, Hugessen received $340,982 for services provided to the HRC.

Executive Compensation Related Fees

Determining Executive Officer Compensation — Context for Decision-Making

Talisman links executive compensation to the Company’s performance against both strategic and operating targets. Overall corporate results, together with each Executive Officer’s individual performance results for the prior performance year, influence the HRC’s final determination of executive compensation. Market data is also considered by the HRC in determining executive compensation levels for Executive Officers. Finally, while the majority of the executive compensation program is tied to quantitative measures, there is always also an element of informed judgment that is applied by the HRC in determining pay outcomes. The HRC considers this full range of criteria in its decision making process.

On an annual basis, the HRC or the Board approves the performance agreements of the Executive Officers for the upcoming

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year, which allows the Board to set expectations of the Executive Officers. The performance agreement for the President and Chief Executive Officer reflects the overall corporate objectives for the year, while those of the other Executive Officers cascade from these overall objectives.

The 2014 performance agreements of the Executive Officers have four main components, with the following performance ranges and weightings:

(1)         The plan structure produces a formulaic outcome for the HRC’s consideration ranging from 0% to 150% of target; as the HRC has the ability to apply discretion to the final score and under scenarios of exceptionally strong or poor performance, the final score can range from 0%-200% of target.

Safety is a top priority of the Company, and safety metrics apply to Talisman employees, contractors and all others directly affected by Talisman’s operations. Safety goals are included under “Minimum Corporate Performance” to ensure that the Company’s safety culture is driven by a visible commitment by Executive Officers.

The HRC considers the targets included in the performance agreements when evaluating performance and determining the variable component of compensation. Performance against these targets is then supplemented by the HRC’s thorough assessment of all business and individual performance results and a qualitative evaluation of strategic leadership. The HRC also considers the broader economic environment in which the business is operating, the degree to which risk mitigation informed the decisions made by Executive Officers, and the performance of management in ensuring that the Company acts in a socially responsible manner. More specifically, the HRC recognizes that:

·                  Executive Officers need to consider not only commercial and technical risks, but also social, political, and reputational objectives and risks integral to the Company’s ability to achieve long-term sustainability;

·                  Changes in the economic environment, actions by competitors, drilling results and other factors during the year may require deviation from the original plan;

·                  Executive Officers must be given the flexibility and ability to make reasonable decisions, to ensure that they can lead the development and execution of the Company’s strategy; and

·                  Executive Officers should be rewarded for capitalizing on opportunities that arise during the year and their ability to avoid or minimize negative impacts resulting from changing market conditions.

The President and Chief Executive Officer provides the HRC with additional context for its decision-making, offering assessments on the individual performance of each of the Executive Officers. The HRC finalizes decisions on all executive compensation elements at the same time that the annual financial results are reviewed by the Board. This ensures that a holistic view of performance and compensation is taken.

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Discretion

The HRC reviews compensation in its in camera sessions, as well as in an in camera session of the full Board. The HRC has full discretion on executive compensation outcomes with respect to adjusting awards up or down. The HRC may also waive the eligibility criteria, performance measures, and target and maximum award levels if it believes it is reasonable to do so, considering factors such as key performance indicators and the external global business environment in which the performance was achieved. In 2011, the Terms of Reference of the HRC were changed such that, on a go forward basis, the CEO’s compensation is reviewed by and approved by the full Board, with the same discretion as previously held by the HRC.

The HRC has authority to engage consultants and/or legal advisors, as required, to gather information and deliver independent opinions and advice on various subjects, including, among other things, executive compensation and compensation disclosure practices. As part of its normal course, the HRC completes a review of the market position and trends which in turn provides a frame of reference for compensation decisions.

Risk Assessment

Towers Watson completed an executive compensation risk assessment for the HRC in February 2012.  The assessment examined key financial and operating activities of the Company as well as the interplay of these activities with the key drivers of the executive compensation arrangements. Towers Watson also examined Talisman’s underlying compensation philosophy, the mix of fixed and variable compensation, and the amount of equity-based compensation within the Company’s programs. Finally, the measures within the incentive plans were examined to determine how they incent and reward Executive Officers for the performance of the Company and if there is the potential for any unintended consequences. Towers Watson reported to the HRC that its review did not find risks arising from the compensation programs that are likely to have a material adverse effect on the Company.

In 2013, Towers Watson updated its Executive Compensation Risk Assessment for the HRC based on the new CEO compensation arrangements in place for Mr. Kvisle, and reported to the HRC that they did not find risks arising from the compensation programs that are likely to have a material adverse effect on the Company.

Following their hiring, in May 2013, Hugessen performed a complete review of the Company’s compensation programs, philosophy and governance, and the link between pay and performance. While this review was not structured as a formal risk assessment, Hugessen was thorough in their considerations of the Company’s compensation programs, and they did not identify any compensation risk concerns.

Hedging

In 2012, the Board approved an amendment to Talisman’s Insider Trading Policy that prohibits reporting insiders from purchasing financial instruments designed to hedge or offset a decrease in market value of equity securities granted as compensation or other Talisman securities which are held, directly or indirectly, by the reporting insider. No Executive Officer or director has entered into any such arrangements.

Clawback Policy

In 2014, the Board adopted an executive compensation clawback policy which will authorize the Board to demand the reimbursement of all or any portion of annual short-term and long-term incentive compensation received by or payable to an executive officer if (1) there is a material noncompliance of the Company with any financial reporting requirement under the securities laws requiring the restatement of financial results, and (2) the executive officer would have received less compensation based on the restated financials, with a 36 month look back period.

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Executive Compensation Elements

Base salary and variable pay reward both Company and individual Executive Officer performance on an annual basis. Long-term incentives reward Executive Officers for long-term performance of the Company as measured by key business metrics as well as share price performance. The summary chart below describes the key objectives for each executive compensation element and the relative pay mix1.

The summary chart below describes the key objectives for each executive compensation element and the relative pay mix.  The sections that follow describe these elements in further detail.

(1)         Pay mix refers to the relative combination of three key elements — base salary, variable pay, and long-term incentives. Target pay mix for the Executive Officers, including the President and CEO, is depicted to the right of the summary table above. As demonstrated, compensation is more heavily weighted toward performance-based “at risk” compensation, rather than fixed compensation. This positioning supports the Company’s guiding principle of placing a significant portion of pay at risk, linking executive rewards with the achievement of business objectives.

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Base Salary

Base salary provides a fixed level of income to Executive Officers. When making base salary decisions, an Executive Officer’s skills, relevant experience, level of contribution to Talisman, and overall performance is assessed. Base salaries for Executive Officers are reviewed annually and adjustments are made in early April of each year. Any changes to base salaries require the approval of the HRC for the Executive Vice-Presidents, and the full Board for the CEO.

Base salaries are generally targeted at the 50th percentile of similar positions in the Company’s executive compensation peer group. The HRC will consider the market median compensation levels for each of the Canadian and US peer groups, then based on market competitive considerations, determine which reference point is more appropriate for each executive role.

The HRC has noted current Executive Officers are well placed in the competitive market, and as such, the HRC did not provide salary increases in 2013 or 2014.

In addition to providing a fixed element of compensation, base salaries are linked to other compensation elements, including short-term and long- term incentives. Since targets for short-term and long-term incentives are expressed as a percentage of base salary, all elements of Executive Officer compensation are reviewed at the same time.

Variable Pay Plan

Variable pay is a key element of executive compensation and provides a target total cash compensation opportunity at a market competitive level. The Variable Pay Plan (“VPP”) is designed to link an Executive Officer’s individual performance and impact on corporate performance to actual variable pay received. Talisman’s Executive Officers share in the risks and rewards of safety, environmental, operational, financial, people and strategic objectives.

Key objectives of Talisman’s variable pay plan are intended to:

·                  Align performance with the achievement of annual goals and objectives;

·                  Reinforce accountability and Company values;

·                  Reward performance contributions relative to leadership, financial results and operational achievements; and

·                  Provide opportunities to share in Talisman’s success.

Variable pay for 2014 was targeted (as a percentage of salary) at the median of Talisman’s executive compensation peer group. Actual variable pay received by Executive Officers may exceed or fall short of targets based upon Company and individual performance outcomes. Variable pay opportunities range from 0% to 200% of target for each of the corporate, regional and individual components of the program. Variable pay in respect of the current year’s performance is paid in April of the following year after a full assessment by the HRC of year-end financial performance and individual results.

The variable pay targets, opportunity ranges, and relative weightings for the most recently completed performance year were as follows:

For 2014, in consideration of the increased scope of Mr. Rooney’s role as Executive Vice President Corporate, the variable pay target for that position was increased from 60% to 75% of base salary.

2014 Variable Pay Plan Award

As noted on pages 23 to 26 the HRC considers market data, the performance of the Company as a whole against the targets set out in the Executive Officers’ performance agreements, and the broader environment in which the Company operates in making its determination on variable pay plan awards. Acting in the best interests of the Company, the HRC has the ability to adjust variable pay upward or downward based on their judgment of these factors.

In February 2015, the HRC considered the performance agreements of the Executive Officers against actual results achieved. The HRC made the following observations with respect to the corporate objectives for 2014 (which were contained in Mr. Kvisle’s performance agreement):

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Corporate Objectives and 2014 Results

1  International Association of Oil and Gas Producers

2  Lost Time Injury Frequency

3  Total Recordable Injury Frequency

4  Flammable Unintentional Hydrocarbon Release Frequency

5  General and Administrative

6  In this table, as well as the following performance contract tables, cash flow—as commonly used in the oil and gas industry—represents net income before exploration costs, DD&A, deferred taxes and other non-cash expenses including Talisman’s share of cash flow from equity accounted entities.  Cash flow is used by the Company to assess operating results between years and between peer companies using different accounting policies.  Cash flow is not a measure defined by IFRS.

7  In this table, as well as the following performance contract tables, exploration and development (E&D) spending is calculated by adjusting the exploration and development expenditure per the financial statements for exploration costs that were expensed as incurred.

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2014 Corporate Multiplier and Key Determinants

Based on the HRC’s assessment of Company performance in 2014, the HRC approved a corporate multiplier of 1.0 for the 2014 performance year.  Consideration was given to the delivery of operating performance targets, execution of the US$1.5 billion divestment target in challenging market conditions, launching a major UK joint venture reorganization, and signing the arrangement agreement with Repsol in December 2014.  The determination of the outcome and score for each category are highlighted in the table below:

(1)         Combining the minimum possible scores in each range results in a formulaic minimum score of 0%; combining the maximum possible score in each range results in a formulaic maximum score of 150%.  However, the HRC may apply discretion in situations with exceptionally strong or poor performance, and in such cases, the final score can range 0%-200% of target.

The final score was calculated by adding together the scores for operating performance, capital investment performance and strategic initiatives weighted by a 50%, 25% and 25% weighting respectively, then multiplying this result by the minimum requirements’ score, as illustrated on page 19.

2014 CEO Performance and Compensation

Mr. Kvisle’s objectives in 2014 were the corporate objectives discussed above. In its judgment of the performance of the CEO, the HRC considered the Company’s performance against these metrics, as well as the transaction with Repsol, and the impact of Mr. Kvisle’s strong leadership in these areas.  Consistent with the corporate score, the HRC and the Board determined an individual performance score of 1.0 for Mr. Kvisle.

Combining the corporate score of 1.0, using a 70% weighting, and Mr. Kvisle’s individual score of 1.0, using a 30% weighting, results in a final VPP multiple of 1.00 for Mr. Kvisle.  Applying this bonus multiplier to Mr. Kvisle’s VPP target of 110% of salary resulted in a bonus payment of $1,430,000.

Other Executive Officers’ Performance and Compensation

Paul R. Smith
Executive Vice-President, Finance and Chief Financial Officer

During 2014, Mr. Smith was responsible for the global finance, accounting and tax functions, investor relations, marketing and the transactional portion of Talisman’s merger and acquisition activities.  Mr. Smith’s performance in 2014 was assessed by the CEO against individual performance objectives, as well as the safety, operating and financial outcomes used to determine the corporate variable pay multiplier.

The HRC, at the recommendation of the CEO, approved a corporate functional performance score of 1.0.  Based on Mr. Smith’s efforts in leading the Company’s divestment activities and his contributions on transformational transactions culminating in the Repsol acquisition during 2014, the HRC approved an individual performance score of 1.50.  Combining these outcomes with the corporate multiplier of 1.0, and applying the corporate/functional/individual weightings of 25%/25%/50% resulted in a final VPP multiplier of 1.25 for Mr. Smith.  Applying this performance multiple of 1.25 to Mr. Smith’s VPP target of 75% of salary resulted in a bonus payment of $642,188.

A. Paul Blakeley
Executive Vice-President, Asia Pacific

During 2014 Mr. Blakeley was responsible for Talisman’s operations in Southeast Asia and Algeria.  Mr. Blakeley’s performance in 2014 was assessed by the CEO against individual performance objectives, key regional business metrics and

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safety metrics.

The HRC, at the recommendation of the CEO, approved a regional performance score of 0.85 for the Asia-Pacific region, based on its consideration of operating performance being below expectations, while delivery of strategic initiatives exceeded expectations.  Mr. Blakeley’s individual performance was considered to be consistent with the assessment of the region’s performance, and he received an individual performance score of 0.85.  Combining these outcomes with the corporate multiplier of 1.0, and applying the corporate/region/individual weightings of 25%/25%/50% resulted in a final VPP multiplier of 0.887 for Mr. Blakeley.  Applying this performance multiple of 0.887 to Mr. Blakeley’s VPP target of 75% of salary resulted in a bonus payment of $455,953.

Paul C. Warwick
Executive Vice-President, Europe Atlantic

During 2014 Mr. Warwick was responsible for Talisman’s operations in Norway, the UK, Kurdistan, Peru and Colombia as well Talisman’s technical functions.  Mr. Warwick’s performance in 2014 was assessed by the CEO against individual performance objectives, key regional business metrics and safety metrics.

The HRC, at the recommendation of the CEO, approved a regional performance score of 1.0 for the Europe-Atlantic region, based on its consideration of operating performance meeting expectations, while delivery of strategic priorities exceeded expectations.  Based on Mr. Warwick’s successful intervention in the North Sea business and ongoing restructuring of the HSE and technical functions, Mr. Warwick was awarded an individual performance score of 1.5.  Combining these outcomes with the corporate multiplier of 1.0, and applying the corporate/region/individual weightings of 25%/25%/50% resulted in a final VPP multiplier of 1.25 for Mr. Warwick.  Applying this performance multiple of 1.25 to Mr. Warwick’s VPP target of 75% of salary resulted in a bonus payment of $736,525.

Robert R. Rooney
Executive Vice-President Corporate

During 2014 Mr. Rooney was responsible for Talisman’s legal, internal audit, corporate security, information technology, corporate affairs and government relations functions.  Mr. Rooney’s performance in this role was assessed by the CEO against individual performance objectives, as well as the safety, operating and financial outcomes used to determine the corporate variable pay multiplier.

The HRC, at the recommendation of the CEO, approved a corporate functional performance score of 1.0.  Based on Mr. Rooney’s contributions in leading contractual negotiations in several transactions, including the Repsol acquisition, the support he provided in the TSEUK intervention, and strong corporate leadership, Mr. Rooney was awarded an individual performance score of 1.60.  Combining these outcomes with the corporate multiplier of 1.0, and applying the corporate/function/individual weightings of 25%/25%/50% resulted in a final VPP multiplier of 1.30 for Mr. Rooney.  Applying this performance multiple of 1.30 to Mr. Rooney’s VPP target of 75% salary resulted in a bonus payment of $609,375.

Long-Term Incentives

Long-term incentives are an integral component of Talisman’s overall compensation strategy, focusing on Company performance and creating long-term shareholder value. The key objectives of the Long-term Incentive Plan (“LTIP”) are to align long-term interests of Executive Officers with those of shareholders, ensure Talisman’s sustained profitability and results, focus Executive Officers on long-term corporate strategy, and retain Executive Officers who have the knowledge, experience and expertise required by the Company.

The long-term incentive value granted to each Executive Officer is expressed as a percentage of base salary. Decisions with respect to 2014 long-term incentive grants for Executive Officers were made consistent with the objectives and processes described herein, and the pay mix illustrated on page 21. In 2014, long-term incentive targets were set to support the compensation philosophy of targeting total direct compensation at the 50th percentile of the executive compensation peer group.

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Long-term incentives for Executive Officers are 100% weighted to Performance Share Units (“PSUs”). Mr. Kvisle’s 2014 LTIP grant was in the form of performance-based executive deferred share units as this form of LTIP would continue to be appropriate should he continue as a member of the Board following his term as President and Chief Executive Officer.

For 2014, in consideration of the increased scope of Mr. Rooney’s role as Executive Vice President Corporate, the long-term incentive target for that position was increased from 250% to 330% of base salary.

Context for Granting Long-Term Incentives

The Board has responsibility for reviewing and approving the granting of long-term incentives to the CEO, following a recommendation from the HRC. The HRC has responsibility for reviewing and approving the granting of long-term incentives to the remaining Executive Officers.

Approval for long-term incentives includes:

·                  Setting out the number of stock options, PSUs and/or executive deferred share units (“EDSUs”) to be granted to Executive Officers; and

·                  Setting out the parameters and authorities for approving other stock option, PSU and/or EDSU grants throughout the year for promoted or newly- appointed Executive Officers.

As part of Talisman’s philosophy of rewarding Executive Officers commensurate with the performance of the Company, long-term incentives comprise a significant portion of pay mix. Talisman’s LTIP does not provide mechanisms by which Executive Officers can monetize unvested equity awards.

Stock Options (Option-Based Awards)

The HRC did not grant stock options to any Executive Officers or Directors in 2014.

Performance Share Units (Share-Based Awards)

Overview

The PSU plan is strictly performance-based and intended to reward Executive Officers for the Company’s performance against specific corporate goals and objectives.

PSUs are a notional share equivalent based on the value of the Company’s underlying Common Shares. PSUs are evaluated over a three-year performance cycle, and the number of PSUs that vest following the three-year performance cycle are subject to the Company’s achievements against predetermined performance targets. The vesting performance factor can range from 0%-200% of the number of PSUs granted, and the vested PSUs are typically settled after tax in the form of Talisman Common Shares, which are purchased by the Company on the open market. Participants in the PSU plan are credited with additional PSUs corresponding to any associated dividend payments (referred to as “dividend equivalent PSUs”).

The Company has used PSUs in the executive compensation program since 2009. The Company has revisited the metrics and structure of the PSU plan several times since then, in response to changes in corporate strategy and evolving best practices. Significant changes to the PSU metrics were made at the conclusion of 2012, in order to adjust to a change in strategic direction. To recognize the ongoing strategic transition, the HRC incorporated a relative Total Shareholder Return (“TSR”) measure into the 2014 LTIP, as well as three years of annual corporate performance measures.

Assessment of the 2012 PSU Grant

At the conclusion of the 2012 performance year, the HRC determined the metrics that were set at the time of grant for the 2012 PSU grant were no longer aligned with the new strategic direction of the Company. For Executive Officers, for this grant, past performance (prior to December 31, 2012) was crystallized at a performance multiple of 18%, representing one-third of the three year performance period. Future performance (after December 31, 2012) was measured against revised metrics that were aligned with the new strategy. This approach was adopted to provide appropriate compensation for the completed portions of the awards, while ensuring that the compensation program for continuing Executive Officers continued to be aligned with the Company’s new priorities.

The remaining two-thirds of the 2012 PSU grant vested for Executive Officers based on performance against the annual corporate performance metrics for the 2013 and 2014 performance years. For 2014, these metrics are the same metrics that are discussed in the section titled “Corporate Objectives and 2014 Results” on page 23, and the HRC determined that the final corporate score would be 100% of target for the 2014 performance year. Combining the score of 18% for the first year of this grant, with the score of 100% for each of the final two years of this grant, resulted in a calculated performance score of 73% Executive Officers. As negotiated with Repsol, the HRC then applied discretion to increase the final score to 100%

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Executive Officers.

Metrics and Performance Range for 2013 PSU Grant

For the Executive Officers, excluding the CEO, the 2013 LTIP grant consisted entirely of PSUs. For the 2013 PSU grant for Executive Officers, the HRC approved several changes to the metrics, vesting and range of the performance factor. These PSUs are evaluated over a three-year performance period. The HRC assesses the PSU performance against the annual CEO (Company-level) performance agreements. One-third of the PSU grant will be evaluated against each of the three annual performance agreements during the three-year performance period. All PSUs will vest and be settled on the third anniversary of the grant date. For clarity, each portion of the grant will track shareholder experience for the entire three-year performance period. For the PSUs granted in 2013, the vesting performance factor can range from 50%-150% of the number of PSUs granted.

The HRC determined that the performance multiple for the 2013 performance year of this grant would be 100% of target.  The 2013 performance score will be applied to one-third of the 2013 PSU grant.  The HRC determined that the performance multiple for the 2014 performance year of this grant would be 100% of target.  The 2014 performance score will be applied to one-third of the 2013 PSU grant.  The remaining one-third of the 2013 PSU grant would normally vest based on performance against the performance metrics for the 2015 performance years. However, if the transaction with Repsol closes as planned, the payout for the 2013 PSU grant will be as defined in the plan of arrangement.

Metrics and Performance Range for 2014 PSU Grant

For the Executive Officers, excluding the CEO, the 2014 LTIP grant consisted entirely of PSUs. For the 2014 PSU grant the HRC adopted the following metrics:

i)                 50% weighting to relative TSR (measured by the price in Canadian dollars on the TSX) against Canadian Exploration and Production Companies (using the S&P/TSX Composite Index Oil & Gas Exploration & Production, Sub Industry).

ii)              50% weighting to the average of three years of VPP corporate performance score during the performance period.

The 2014 PSUs would normally vest at the conclusion of a three-year performance period, based upon corporate performance against these metrics. The value of this settlement would be determined by the share price at the time of settlement, and the vesting performance factor. The vesting performance factor could range from 0%-200% of the number of PSUs granted.  However, if the transaction with Repsol closes as planned, the payout for the 2014 PSU grant will be as defined in the plan of arrangement.

Restricted Share Units (Share-Based Awards)

Talisman has a senior employee Restricted Share Unit (“RSU”) plan whereby the HRC can approve grants of RSUs on a select basis to attract and/or retain senior employees with the knowledge, experience and expertise required by Talisman. The RSU plan is not an annual component of an Executive Officer’s compensation package.

RSUs are notional share equivalents with the value of the Company’s underlying Common Shares. RSUs fully vest after three years from the grant date. Participants are also credited with additional RSUs corresponding to any associated notional dividend payments (referred to as “dividend equivalent RSUs”).

RSUs are settled in cash at the end of the vesting period based on the fair market value, defined as the average of the closing prices of the Common Shares on the TSX over the previous five trading days, multiplied by the number of vested RSUs.

The RSU plan provides that, if an Executive Officer voluntarily resigns or is terminated for cause during the vesting period, the RSUs and any dividend equivalent RSUs will be cancelled and no payment will be made. In the event of a change of control prior to the end of the vesting period, all RSUs and dividend equivalent RSUs in respect there of vest on the date of such change of control.  If the transaction with Repsol closes as planned, all outstanding RSUs will vest on the date of the change of control.

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Executive Deferred Share Units

In December 2011, the HRC approved an Executive Deferred Share Unit Plan to promote greater alignment of long-term interests between executives and shareholders of the Company, in a tax efficient manner, and to support executives in reaching their share ownership guidelines. This is achieved by allowing executives to choose to receive a portion of future variable pay plan awards (up to 100% of the award) in the form of deferred share units, which represent a notional investment in Talisman Common Shares, rather than as an immediate cash payment.  There are no performance conditions applicable to these elective EDSUs.

The Executive Officers’ December 2013 election applied towards their 2014 variable pay, with the grant of EDSUs pursuant to those elections to be made in April 2015. Mr. Kvisle has indicated that he will take 100% of his variable pay plan awards in the form of EDSUs each year; to this end he has taken his variable pay payouts for the 2012, 2013 and 2014 performance years in the form of EDSUs, and he has elected to take his variable pay payout for the 2015 performance year in the form of EDSUs.

Mr. Kvisle has also elected to receive 25% of his base salary, along with the value of some perquisite items that he would have otherwise received, in the form of EDSUs which will be granted quarterly in arrears. Mr. Kvisle does not participate in the Company’s pension plan for executive officers, but instead receives, on an annual basis, EDSUs of a value equal to the incremental compensatory value he would have accrued had he participated in the executive pension plan.

Performance-Based Executive Deferred Share Units

Overview

For 2014, Mr. Kvisle received his LTIP awards in the form of performance-based EDSUs. The performance-based EDSUs will become eligible to vest based on one-year performance period. Vesting eligibility will be assessed by the HRC based on performance in relation to the objectives set out in Mr. Kvisle’s annual performance agreement. Performance-based EDSUs that have become eligible to vest in a particular year will be paid out at the later of:

i)                 the date when Mr. Kvisle ceases to be an employee of the Company; and

ii)              the date when Mr. Kvisle ceases to be a director of the Company (if he continues as a member of the Board following his term as CEO).

Mr. Kvisle is subject to a post-retirement ownership requirement, where he is required to hold one Common Share for each vested performance-based EDSU that he receives, up until the third anniversary of the date of grant date respective to that performance-based EDSU, net of taxes. This requirement is intended to ensure that each performance-based EDSU will track shareholder experience for at least three years from date of grant. Note that this holding requirement will be null and void on the date the plan of arrangement with Repsol is effective, as Talisman will cease to be a publicly traded entity.

Performance-based EDSUs that have been deemed by the HRC to be ineligible to vest, following their one-year performance period, are forfeited and cancelled. The vesting performance factor for performance-based EDSUs can range from 50%-150% of the number of performance-based EDSUs granted.

Assessment of 2014 Grant

The metrics that were used to determine the vesting of the 2014 performance-based EDSUs are the same metrics that are discussed in the section titled “Corporate Objectives and 2014 Results” on page 23. The HRC determined that the final corporate score for the variable pay plan would be 100% of target for the 2014 performance year, and Mr. Kvisle’s 2014 performance-based EDSUs settled at this level with no additional discretion applied. These vested performance-based EDSUs are subject to the post-retirement ownership requirement referenced above.  Note that this holding requirement will be null and void on the date the plan of arrangement with Repsol is effective, as Talisman will cease to be a publicly traded entity.

Benefits, Savings and Pension

In order to attract and retain high quality talent, Executive Officers are eligible for Company-paid executive benefits, including life insurance, accidental death and dismemberment, short-term disability, long-term disability, supplementary medical, dental, and pension plans. Pensions are intended to recognize service with Talisman, providing an income during retirement when the Executive Officer is no longer earning income from employment (refer to page 35 for specific details on pension arrangements). In addition to the above Company provided benefits, Executive Officers may contribute 5% of their annual base salary and variable pay towards Talisman’s savings plan, and contributions are then matched by the Company. All Company contributions into Talisman’s savings plan are invested in Talisman Common Shares.

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Perquisites

Executive Officers are eligible to receive direct or indirect personal benefits which are not generally available to all employees. Perquisites remain reasonable and competitive with market practices. While perquisites generally comprise a relatively small percentage of overall total compensation, it is a prevalent practice among Talisman’s Canadian peer group to maintain some level of perquisites.

The current value of the perquisite program is $35,000 per Executive Officer which is competitive and in line with the market. This program supports the needs of the Executive Officers for increased flexibility and is more efficient to administer.

Termination and Change of Control Benefits

Employment contracts contain change of control and termination provisions designed to retain Executive Officers in certain circumstances and promote continuity of management. Employment contracts allow for the payout of severance benefits to an Executive Officer if his or her employment is terminated within one year following the occurrence of specified events. The practice of including change of control provisions in executive employment contracts is consistent with industry peers and is influential in attracting and retaining executive talent. Refer to page 37 for more details on “Employment Contracts and Termination”.

Effective January 1, 2012, executive contracts for newly hired Executive Officers were revised to require termination following a change of control for executives (“double-trigger”) for termination benefits to become payable. The revised contract also includes non-competition and non-solicitation provisions as well as an intellectual property provision.

Performance and Trends in Executive Compensation

The graph below shows what $100 invested in Talisman common shares for the period between December 31, 2009 and December 31, 2014 would be worth at the end of each of the last five years and compares that to the performance of the S&P/TSX Composite, the S&P/TSX Oil and Gas Exploration and Production and the S&P500 Oil and Gas Exploration and Production indices.  The graph assumes that all dividends are reinvested when paid and that reinvested dividends are compounded annually.

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(1)                   Or last business day of the year.

(2)                   Assumes dividends are reinvested.

(3)                   Converted to Canadian funds.

Link between Company Performance and Executive Compensation

In keeping with Talisman’s executive compensation principles, the Company’s compensation programs are designed to pay for performance, and a significant portion of Executive Officers’ pay is at risk. Salaries are not directly linked to share performance, but are determined by considerations of market compensation levels, individual performance, internal equity and other considerations.  Variable pay is based upon an assessment of performance against operational, financial, strategic, safety and individual objectives. While there is not a direct link between variable pay and share performance, the metrics in the variable pay plan are set with the intention that their achievement will create shareholder value. Although share price performance did not reflect it, the Company performed at its targeted levels of operational, value creation and strategic initiatives, while also meeting its minimum requirements standards, and as a result the corporate portions of the variable pay awards were paid out at or near target levels.

The realizable value of long-term incentive awards is strongly tied to any increase (or decrease) in the Common Share price, which creates a strong correlation between Common Share performance and compensation earned by an individual. Talisman executives have experienced a considerable impact to the market value of their long-term incentives and personal holdings of Talisman Common Shares due to the significant decrease in Talisman’s share value during 2011. The value of currently outstanding long-term incentive awards (granted since 2012) is approximately 72% of the initial expected value, which is slightly less than shareholder experience over that time period.  The introduction of metrics measuring the Company’s total shareholder return relative to other Canadian exploration and production companies for the 2014 long-term incentive grant further strengthens this alignment with shareholder experience.

Executive Compensation Tables

The following executive compensation tables summarize, for the periods indicated, the compensation of Talisman’s President and Chief Executive Officer, the Executive Vice-President, Finance and Chief Financial Officer, and each of the three most highly compensated Executive Officers. Collectively, these individuals are referred to in this section as the Named Executive Officers (“NEOs”). Figures are reported in Canadian dollars unless otherwise specified.

Summary Compensation Table

The following table contains the compensation provided to NEOs during the year in which it was earned. Cash compensation is valued at the time that it was paid, long-term incentive compensation is valued at the time that it was granted, and pension amounts are valued at their present value.

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(1)             The grant date value of PSU, RSU and performance-based EDSU awards is based on the number of units granted multiplied by the average closing price of the Company’s Common Shares on the TSX for the 5 days immediately prior to the grant date. For PSUs granted in 2012, a valuation ratio of 0.75 was applied in order to account for vesting restrictions and performance conditions attached to these grants; this valuation ratio was calculated by an independent consultant (Towers Watson) and was a commonly recognized way of calculating a meaningful and reasonable estimate of fair value.

Share-based awards also includes the value of EDSUs granted to Mr. Kvisle in lieu of the value of some perquisites he would have otherwise received, and in lieu of the compensatory value he would have received if he was participating in the pension plan; these EDSU grants are discussed in footnote 6 below.

For the purpose of accounting and financial statements, Talisman values share-based awards as at the grant date by multiplying the share price by a forfeiture factor based on historical employee turnover. This is adjusted in subsequent periods based on the expected payout relative to target and amortized over the performance period. As such, the accounting fair value changes with each financial statement issued. As at December 31, 2014, the accounting fair value of share-based awards in 2014 to NEOs totaled $15,067,531.

(2)             Option-based award values reflect grant date fair market value using the Binomial Lattice Option Pricing Model; which is a commonly recognized way of calculating a meaningful and reasonable estimate of fair value. The grant date value of option-based awards is based on the number of units granted multiplied by the average of the prior day’s high and low price on the TSX multiplied by the binomial factor. As a UK based employee, Mr. Warwick received cash units in 2012, which have all of the same terms as stock options received by other executives, except that the holder does not have the right to purchase the underlying shares of the Company.

For the purposes of accounting and financial statements, Talisman reports option awards as of the date of the financial statements and as such, the accounting fair value changes with each financial statement issued. There were no option-based awards granted to NEOs in 2014.

(3)             Amounts shown are variable payments related to the performance year indicated, paid the following April.

·                    For 2014, Messrs. Kvisle and Rooney elected to receive 100% and 50%, respectively, of their VPP awards in the form of EDSUs; these EDSUs were granted on April 1, 2015.

·                    For Mr. Smith, 2014 also includes a performance bonus paid in recognition of his contributions to the company’s dispositions success ($400,000), and 2013 also includes a performance bonus in recognition of his effectiveness in transitioning to the CFO role while continuing to assist the North America region ($600,000);

·                    For 2013, Messrs. Kvisle and Rooney elected to receive 100% and 75%, respectively, of their VPP awards in the form of EDSUs; these EDSUs were granted on April 1, 2014.

·                    For 2012, Messrs. Kvisle and Smith elected to receive 100% of their VPP awards in the form of EDSUs, and Mr. Rooney elected to receive 75% of his VPP award in the form of EDSUs; these EDSUs were granted on April 1, 2013.

(4)             Amounts for 2014 include perquisites and other personal benefits, the value of the Company’s Savings Plan, post-retirement benefits, life, medical, dental, and long-term disability insurance premiums paid by the Company, and any service awards. Except for Mr. Blakeley, the perquisites and other

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personal benefits do not exceed the lesser of $50,000 or 10% of the total annual salary of the Executive Officer. For Mr. Blakeley, this amount includes $936,454 attributable to his ongoing assignment in Asia; the costs are part of his relocation arrangement and are in line with Talisman’s normal arrangements for expatriates.  For Messrs. Kvisle, Smith and Rooney, amounts for 2014 also includes the value of an administrative correction granting EDSUs in lieu of missed savings plan contributions on the portion of variable pay that was taken in the form of EDSUs for the 2012 and 2013 performance years; these awards were made on April 1, 2014, at a share price of $11.05, with values of $95,485, $18,509, and $28,645, respectively.

(5)             Total compensation reflects the value of share- and option-based awards at the time of grant.

(6)            The amounts shown only reflect compensation payable to Mr. Kvisle as President and CEO of the Company. Prior to becoming the President and CEO on September 10, 2012, Mr. Kvisle received compensation for his service on the Company’s Board. For details for the director compensation received by Mr. Kvisle prior to becoming the President and CEO, please refer to pages 42-45 under “Director Compensation”.

(7)             Salary and share-based award amounts for Mr. Kvisle include the value of EDSUs granted in 2014:

·                    For 25% of his salary in 2012 ($101,566), 2013 ($324,996) and 2014 ($324,994);

·                    In lieu of the value of some perquisite items he otherwise would have received in 2012 ($6,247), 2013 ($20,006) and 2014 ($19,993);and

·                    In lieu of the compensatory value he would have received if he was participating in the pension plan in 2012 ($191,206), 2013 ($735,996) and 2014 ($1,296,200).

The grant date value of EDSU awards is based on the number of units granted multiplied by the average closing price of the Company’s Common Shares on the TSX for the five days immediately prior to the grant date.