Annual report and financial statement 2009 - United Utilities

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GOVERNANCE: DIRECTORS’ REMUNERATION REPORTDirectors’ remuneration reportcontinuedMatched share investment scheme for Tim WellerFull details of the matched share investment scheme for Tim Weller, introduced as part of his terms of appointment, were disclosed inthe remuneration report for 2007. In accordance with the rules of that scheme, Tim Weller invested in 39,000 shares and a conditionalmatched award of 39,000 shares was made to him on 14 February 2007 which will transfer to him at the end of the five-year retentionperiod on 30 June 2011, subject to his still being employed by the group at that date.Table 10: Tim Weller’s continuing scheme interests in the matched share investment scheme (audited information)Awards AwardsAwards granted lapsed Awardsas at during during as at1 April 2008 the year the year 31 March 2009Marketprice of Value at Number Number Number NumberAward Retention a share at Number of award date of Value of Value of of Valuedate period award (p) shares £’000’s shares £000’s shares £000’s shares shares £000’sTim Weller 14.2.07 1.7.06 to 772.5 39,000 301.3 44,296 305.9 2,885 18.9 – 47,181 228.130.6.11Special long-term incentive scheme for Charlie CornishFull details of the special long-term incentive scheme for Charlie Cornish were disclosed in the remuneration report for 2007. Inaccordance with the rules of that scheme, an award equal in value to his annual salary was granted to Charlie Cornish on 16 March 2007in the form of an option over 47,027 shares. There are performance conditions which are attached to this award which mirror theoperational performance measures adopted in respect of the first matching share award grant in 2007/08.Table 11: Charlie Cornish’s continuing scheme interests in his special long-term incentive scheme(audited information)Awards AwardsAwards granted lapsed Awardsas at during during as at1 April 2008 the year the year 31 March 2009Marketprice of Value at Number Number Number NumberAward Retention a share at Number of award date of Value of Value of of Valuedate period award (p) share £’000’s shares £000’s shares £000’s shares shares £000’sCharlie 16.3.07 1.4.06 to 723 47,027 340.0 53,413 368.9 3,479 22.7 – 56,892 275.1Cornish 31.3.10United Utilities Group PLCFollowing the acquisition of shares in United Utilities PLC by United Utilities Group PLC, all company share awards, that were previouslyawards over shares in United Utilities PLC (‘UU’) became awards over shares in United Utilities Group PLC (‘UUG’). The cash alternativesthat were available to shareholders in addition to the exchange of UU shares for UUG shares did not apply to company share awards andany cash redemption or dividend payment in respect of UUG B Shares was not included for the purposes of any notional dividend reinvestmentthat applies to existing awards. Executives who were the beneficial owners of UU shares connected with awards under anymatched investment scheme were entitled to receive UUG B shares but were required to retain UUG B shares until the last possibleredemption date in April 2009. In order to retain any matching company awards the executives are required to retain the revised holdingin UUG shares to the end of the original performance or retention period. Full details were provided to shareholders in the prospectusprior to the approval of the scheme of arrangement at the extraordinary general meeting on 1 July 2008.Contracts of service and compensation for terminationThe group’s policy is that the executive directors normally have one-year notice periods. The group may offer a longer notice period if itconsiders that necessary to recruit a new director. If it offers an initial notice period of more than one year, it will reduce that to a rollingone-year notice period after the initial period has expired. At 31 March 2009, all current executive directors had one-year notice periods.Service contracts are with, and all remuneration and benefits are provided by, United Utilities PLC.Contracts terminate automatically upon the director reaching age 65 unless the group agrees that a director may continue to work afterattaining that age. No special arrangements apply if there is a change of control.Service contracts do not provide explicitly for termination payments (other than for holidays due but not taken), liquidated damagesor payments in lieu of notice. If a contract is to be terminated, the remuneration committee will, in each circumstance, determine thecompensation that will be paid, normally by reference to fixed elements of remuneration and the notice period. There is no automaticentitlement to payments under the annual bonus or performance share plan. Any annual bonus payment is at the discretion of the group.Performance share plan vesting is at the discretion of the trustees based upon a recommendation from the remuneration committeeand an award will not normally vest unless the termination is for a ‘good leaver’ reason such as retirement or because of ill health, orthere are other special circumstances. Payments are then pro-rated and subject to the performance conditions on which awards weregranted (or modified, if appropriate) being satisfied.38 unitedutilities.com
The committee will apply such mitigation to any contractualobligations as it considers is fair and reasonable. It will take intoaccount the best practice provisions of the Combined Code and willtake legal advice on the company’s liability to pay compensation. Thecompany’s policy is to take a robust line on reducing compensation,and it may phase payments to reflect a departing employee’sobligation to mitigate loss.Details of directors’ contracts as at 31 March 2009 are set out intable 12.Table 12: Executive directors’ service contracts as at31 March 2009Date of Unexpired term Noticecontract (to 65th birthday) periodPhilip Green 13.02.06 12.05.18 12 months (rolling)Charlie Cornish 05.01.04 30.11.24 12 months (rolling)Tim Weller 01.07.06 08.06.28 12 months (rolling)Non-executive directorshipsThe group recognises that its executive directors may be invited tobecome non-executive directors of companies outside the groupand exposure to such non-executive duties can broaden experienceand knowledge, which will be to the benefit of the group. Subject toboard approval (which will not be given if the proposed appointmentis with a competing company, would otherwise lead to a materialconflict of interest or could have a detrimental effect on a director’sperformance), executive directors are allowed to accept one nonexecutivedirectorship and to retain the fee. Philip Green is anon-executive director of Lloyds Banking Group plc and received£100,000 in fees in the year to 31 December 2008. Tim Weller isa non-executive director of the Carbon Trust and received £21,000in fees for the year to 31 March 2009.Performance graphThe performance graph compares the group’s annual TSRperformance (reflecting B shares issued to shareholders andthe share consolidation) for the past five years against the FTSE100 index. This index was chosen as it is the most appropriatebroad equity market index. This comparison also supplementsthe information on the group’s TSR performance relative to thecomparator groups in the MSAP and PSP. The TSR indices used inthe chart have been calculated in accordance with the Directors’Remuneration Report Regulations 2002 relative to a base dateof 31 March 2004.Total shareholder returnSource: Thomson FinancialSource: Thomson FinancialValue £20015010050Non-executive directors (including the chairman)A committee of the board decides the remuneration of all of thenon-executive directors other than the chairman. Its members arethe chairman (Sir Richard Evans until 25 July 2008 and Dr JohnMcAdam thereafter) and the executive directors: Philip Green,Charlie Cornish and Tim Weller. The committee met once duringthe year to review the fees paid to non-executive directors, whichwere increased with effect from 1 September 2008 (see below).The remuneration committee (details of which are set out earlierin this report) determines the remuneration of the chairman.The group’s policy is to pay annual fees that reflect theresponsibilities placed upon the non-executive directors. Feesare reviewed each year when account is taken of the level offees paid in companies of similar size and complexity. There areseparate annual fees for the chairman and the other non-executivedirectors. Additional fees are paid to the chairmen of the auditand remuneration committees and to the senior independent nonexecutivedirector. Non-executive directors do not participate inany annual bonus or incentive plans, pension schemes, healthcarearrangements, the group’s long-term incentive plans or employeeshare schemes. The group repays the reasonable expensesthat non-executive directors incur in carrying out their dutiesas directors.Non-executive directors’ fees were increased on 1 September 2008.The base annual fee is £54,000 a year (2008: £52,000). The chairmanof the audit committee receives an additional annual fee whichwas increased on 1 September 2008 from £10,000 to £12,500.The chairman of the remuneration committee and, with effectfrom 1 September 2008, the senior independent non-executivedirector, receive an additional annual fee of £10,000.The chairman’s fee was £250,000 which was payable following hisappointment at the AGM on 25 July 2008. The next review of nonexecutivedirectors’ fees will be in September 2009.Non-executive directors’ remuneration for the year ended31 March 2009 is set out in table 14.Terms of appointmentNon-executive directors’ appointments are for an initial period ofthree years. They are subject to re-appointment at the first AGMafter their initial appointment and at an AGM at least every threeyears thereafter (if they are to be reappointed). After nine years inoffice, a non-executive director is required to seek reappointmenteach year at the AGM. They have letters of appointment, as opposedto contracts of service. In the event of early termination, forwhatever reason, they are not entitled to receive compensationfor loss of office.The non-executive directors’ letters of appointment can beinspected at the group’s registered office and on the group’swebsite, unitedutilities.com The letters set out the expectedtime commitment and non-executives agree to devote sufficienttime to meet what is expected of them. Table 13 summarisesthe terms of appointment for each non-executive director.Governance31 Mar 04 31 Mar 05 31 Mar 06 31 Mar 07 31 Mar 08 31 Mar 09This graph shows the value, by 31 March 2009, of £100 invested in United Utilities on31 March 2004 compared with the value of £100 invested in the FTSE 100 Index.The other points plotted are the values at intervening financial year-ends.United UtilitiesFTSE 100 Indexunitedutilities.com 39
Page 1 and 2: UNITED UTILITIES GROUP PLC ANNUAL R
Page 3 and 4: Business reviewPerformance against
Page 5 and 6: In the 2005-2010 period, UUW is inv
Page 7 and 8: Business reviewTogether with the in
Page 9 and 10: FINANCIAL REVIEWUnited Utilities ha
Page 11: cash resources. Cash and short-term
Page 15 and 16: Non-regulated activitiesand other a
Page 17 and 18: BUSINESS REVIEW: EMPLOYEESEmployees
Page 19 and 20: RISKCURRENT CAPITAL MARKET CONDITIO
Page 21 and 22: RISKMATERIAL LITIGATIONNOSS Consort
Page 23 and 24: GovernanceTim Weller (45)Chief fina
Page 25 and 26: In addition, resolutions will be pr
Page 27 and 28: Corporate governance reportThe Comb
Page 29 and 30: The letters of appointment of the n
Page 31 and 32: group are required to complete and
Page 33 and 34: eporting or other matters. Historic
Page 35 and 36: The chart below sets out the summar
Page 37 and 38: Table 5: Operational performance me
Page 39: ii) Matching share award planDetail
Page 43 and 44: Statement of directors’ responsib
Page 45 and 46: Independent auditors’ reportIndep
Page 47 and 48: Balance sheetsat 31 MarchGroupCompa
Page 49 and 50: Cashflow statementsfor the year end
Page 51 and 52: asset (or disposal group) is availa
Page 53 and 54: economy) are translated into sterli
Page 55 and 56: estimates, which would result in op
Page 57 and 58: Notes to the financial statements1
Page 59 and 60: Remuneration of key management pers
Page 61 and 62: 5 INVESTMENT INCOME2009 2008£m £m
Page 63 and 64: 8 DISCONTINUED OPERATIONSDuring the
Page 65 and 66: Basic earnings per share are calcul
Page 67 and 68: 14 INVESTMENTSOtherAssociate invest
Page 69 and 70: A full list of the company’s subs
Page 71 and 72: Trade and other receivables is spli
Page 73 and 74: Terms and debt repayment schedule c
Page 75 and 76: The counterparties in respect of tr
Page 77 and 78: Market riskMarket risk is the risk
Page 79 and 80: More1 year 1-2 2-3 3-4 4-5 than 5Gr
Page 81 and 82: Fair valuesThe fair values of finan
Page 83 and 84: The main financial assumptions used
Page 85 and 86: Defined contribution pension costsU
Page 87 and 88: 24 SHAREHOLDERS’ EQUITYShareCumul
Page 89 and 90: 27 SHARE-BASED PAYMENTSOn 28 July 2
Page 91 and 92:
The movement in total outstanding o
Page 93 and 94:
28 RELATED PARTY TRANSACTIONSGroupT
Page 95 and 96:
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Annual report and financial statement 2009 - United Utilities

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