The Group currently has the following incentive schemes and
plans in place. For further details of the proposed new Long
Term Incentive Plan and Deferred Bonus Plan, refer to the
notice of meeting which contains a summary of the main terms.
2002 Executive Share Option Scheme
This is an Inland Revenue approved scheme. Executive
directors and other senior employees are selected to receive
options over shares. Exercise of an option is subject to growth in
the Company’s earnings per share, excluding exceptional or
extraordinary items, exceeding the growth in the retail prices
index over a performance period. The percentage growth over
the retail prices index determines the proportion of the award
that may be exercised. Options are exercisable between the
third and the tenth anniversaries of their dates of grant.
Performance condition: If the percentage growth in the adjusted
earnings per share of the Company exceeds the percentage
growth in the retail prices index over the three year performance
period by 3.0301% (the base target threshold), an option will
become exercisable in respect of one-third of the shares over
which it is held. Full vesting takes place when such growth over
the performance period is 9.2727% or greater. A sliding scale
operates for performance between the lower and upper
thresholds. Options lapse if the base target threshold is not
achieved. There is no re-testing of performance.
2002 Unapproved Executive Share Option Scheme
Executive directors and other senior employees are selected to
receive options over shares. As with the 2002 Executive Share
Option Scheme, exercise of an option is subject to growth in the
Company’s earnings per share, excluding exceptional or
extraordinary items, exceeding the growth in the retail prices
index over a performance period. Options are exercisable
between the third and the tenth anniversaries of their dates
of grant.
Performance condition: The performance condition is identical
in all respects to the performance condition of the 2002
Executive Share Option Scheme set out above. There is no retesting
of performance.
Long Term Incentive Plan
Under this plan, executive directors and other senior employees
are selected to receive awards over shares that vest in whole or
in part depending on the satisfaction of a performance condition
related to the growth in earnings per share compared to the
retail prices index over a performance period.
Performance condition: The performance condition attaching to
awards under the plan relate to increase in earnings per share.
For an award to vest in its entirety, the increase in earnings per
share over the performance period of three years must be not
less than the increase in the retail prices index plus 36% or
more. For an award to vest at its lowest level of 25%, the growth
in earnings per share over the performance period must be
equal to the increase in the retail prices index plus 9%. Awards
lapse if the performance is below 9%. Where growth is between
9% and 36% awards are realisable on a straight-line basis.
Premium Option Plan
Under this plan, selected executive directors and other senior
employees receive options over shares that are granted in the
form of two tiers. The exercise price of the first tier is set at 25%
in excess of the share price immediately prior to the date of
grant; the exercise price of the second tier is set at 50% in
excess of that same share price.
Performance condition: First tier options are only exercisable if
the average middle market price of the Company’s shares
increases to, and remains in excess of, the option exercise price
for a minimum of 20 consecutive dealing days within three years
of the date of grant. Second tier options are only exercisable if
the average middle market price of the Company’s shares
increases to, and remains in excess of, the option exercise price
for a minimum of 20 consecutive dealing days within five years
of the date of grant. Each tier of options lapses if the share price
does not achieve the required threshold within the relevant
performance period. Subject to the share price reaching the
required threshold, options are exercisable between the third
and the tenth anniversaries of their dates of grant.
Deferred Bonus Plan
Under the plan, an eligible executive may defer between 10%
and 50% of his or her cash bonus in exchange for receiving a
basic award over shares in the Company with a value
equivalent, at the date of award, to the amount of the deferred
bonus. A basic award may, in normal circumstances, be
exercised by a participant after two years. However, if exercise is
deferred until after three years and the executive remains
employed by the Group, the participant is entitled to receive a
matching award of additional shares equal in number to those
comprised in the basic award. Shares comprising basic awards
are purchased in the market and held in trust by Mourant & Co
Trustees Limited until exercise. Dividends are not paid on
shares until their exercise by participants.
Performance conditions: Bonuses received by participants, and
which may be deferred under the plan, are themselves subject
to demanding performance conditions linked to Company and/or
individual performance. The awards under the plan are not
subject to any further performance targets.
2002 Sharesave Scheme and International Plan
The Group also operates a savings related share option scheme
in the UK and a similar international plan in respect of overseas
employees in certain countries. The scheme and plan are open
to all the Group’s employees in those geographical areas who
have the necessary length of service. Under the scheme and
plan participants contract to save a set amount each month in
return for which they receive an option over a specified number
of shares. At the end of the savings period participants may
exercise their options to buy shares in the Company using their
savings. Exercise is not subject to any performance condition.