Annual Report - SABMiller India

Remuneration report continuedFollowing the announcement of the results for the financial year,Mercer undertook for the committee an assessment of whetherthe performance condition applying to the vesting of any optionhad been met. This assessment was reviewed by the company’sauditors.Performance Share Award PlansThe company operates the following Performance Share AwardSchemes:■the SABMiller plc Performance Share Award Scheme(Performance Share Scheme); and■ the SABMiller plc International Performance Share AwardSub-Scheme(s) (Performance Sub-Scheme(s)).The Performance Share Scheme is used for awards to theexecutive directors, and is operated in conjunction with thecompany’s Employees’ Benefit Trust (EBT). The trustee of the EBTgrants awards in consultation with the company. Awards madeunder the plan prior to 2006 are subject solely to TSR performanceconditions applied after three years from date of grant, with aprovision that if vested awards are retained for a further two yearsthey will automatically be increased by an allocation of 50% of thenumber of shares in the original award that vested.Relative TSR was chosen as the performance measure because itallows for performance to be measured relative to other companiesand reflects the benefit to shareholders of management effort.For the purpose of calculating TSR the share prices and dividendsof the comparator companies are converted, as necessary, intosterling at the exchange rates prevailing at the relevant times. Theconversion into sterling is intended to remove distortions arisingfrom differing rates of inflation in the countries in which thecomparator companies are listed. TSR and the relevant statisticalquartiles are determined in accordance with current market practice.In 2006, the committee determined that 50% of awards under thisplan should be subject to a TSR performance condition and 50%to an adjusted EPS growth performance condition. For 50% of theawards made under this plan in 2006, vesting occurs only if threeyearTSR (change in value of a share and reinvested dividendsover the period), exceeds the median TSR of a comparator groupof companies identified at the time of award. On reaching themedian performance of the relevant comparator group, 25% of theaward vests and on reaching at least the upper quartile, 100% ofthe award vests. Between these levels of achievement awards vestpro rata. The TSR test is applied to two-thirds of this part of theaward after three years and to one-third of this part of the awardafter five years.The remaining 50% of the award granted is subject to three-yearadjusted EPS growth, with targets set by reference to historicaland forecast adjusted EPS growth for the six members of thecomparator group determined by the committee to be thecompany’s closest peers in the global brewing industry, namelyAnheuser-Busch, Carlsberg, Heineken, Inbev, MolsonCoors andScottish & Newcastle (although Scottish & Newcastle has beendropped from this group for the purposes of awards made in2008). For awards made in the year under review the committeeset an EPS growth target of 11% p.a. for full vesting, with thresholdvesting of 25% at 6% p.a., and pro rata vesting between theselevels of achievement. For regional managing directors the profitelement is based on regional, segmental EBITA targets over thethree-year fiscal cycle for their respective regions awarded underthe Performance Sub-Scheme. As noted above, for 2008 andfuture years, the committee has decided to discontinue thepractice of setting regional segmental EBITA targets for regionalmanaging directors, and instead to apply the group EPSgrowth targets for their awards, on the same basis as for theexecutive directors.In the year under review, awards of 230,000 shares were madeto the Chief Executive and 140,000 shares to the Chief FinancialOfficer (with awards of 820,000 shares being made to otherexecutive committee members in the aggregate, depending ontheir roles and responsibilities). The table on page 58 gives detailsof the awards made to executive directors in 2007; those stilloutstanding for 2006; and those made in 2004 and 2005 whichvested in 2007 and 2008. Details of the relative TSR performanceachieved for vesting of the 2004 and 2005 awards are given in thenotes to the table.The companies comprising the two TSR comparator groups forall the performance share awards under the Performance ShareScheme which had vested during 2007 or had not yet vested orlapsed at 31 March 2008 are listed below.2003 and 2004 awards 2005 and future awards*AmbevAnheuser BuschAsahi BreweriesAsia Pacific Breweries*BavariaCarlsberg A*Coors Adolph BFemsaFostersGreene King*Grolsch*Hartwall AHeineken*InterbrewKirin BreweryLion Nathan*Molson A*QuinsaSan Miguel BSapporo Breweries*Scottish & Newcastle*Wolverhampton & DudleyAnheuser BuschAsahi BreweriesCarlsberg AConstellation BrandsDiageoFemsaFosters*GrolschHeinekenInbevKirin BreweryLion Nathan*MolsonCoorsPernod RicardSapporo Breweries*Scottish & Newcastle* Notes: Hartwall A was acquired by Scottish & Newcastle in December2002. Wolverhampton & Dudley plc changed its name to Marston’s plc on8 January 2007. Ambev merged into Interbrew which changed its name toInbev on 29 March 2005 and has been removed from future measurementfrom that date. Coors and Molson merged on 9 February 2005 and havebeen replaced for future measurement by MolsonCoors Brewing Company.Bavaria was consolidated into SABMiller plc with effect from 12 October2005 and has been removed from the comparator group for the 2004awards. Quinsa was consolidated into Ambev with effect from 9 August2006 and has been removed from the comparator group for the 2004awards. Grolsch was consolidated into SABMiller with effect from12 February 2008 and has been removed from both comparator groups.Scottish & Newcastle has been removed from both comparator groupswith effect from April 2008.52 Remuneration reportSABMiller plc Annual Report 2008