Annual Report & Accounts 2008 - Euromoney Institutional Investor ...

Directors' Remuneration Report continuedRemuneration structure continuedSAYE schemeThe group operates an all employee save as you earn scheme in which those directors employed in the UK are eligible toparticipate. Participants save a fixed monthly amount of up to £250 for three years and are then able to buy shares in the companyat a price set at a 20% discount to the market value at the start of the savings period. In line with market practice, no performanceconditions attach to options granted under this plan. The executive directors who are participating in this scheme are PM Fallon,PR Ensor, NF Osborn, CR Jones, SM Brady and CHC Fordham, details of which can be found on pages 37 and 38 of this report.Share schemesThe directors consider that share schemes are an important part of overall compensation and align the interests of directors andemployees with those of shareholders.Capital Appreciation Plan (CAP)The CAP was approved by shareholders on February 1 2005 and replaced the 1996 executive share option scheme. Each CAPaward comprises an option to subscribe for ordinary shares of 0.25p each in the company for an exercise price of 0.25p perordinary share. In accordance with the terms of CAP, no consideration was paid for the grant of the awards. The awards vest inthree equal tranches. The first tranche of awards became exercisable on satisfaction of a primary performance condition and lapseto the extent unexercised on September 30 2014. The two future tranches of awards become exercisable one year and two years,respectively, following the financial year in which the primary performance target was achieved. The second and third tranchesonly vest on satisfaction of the primary and a secondary performance condition. The scheme was potentially available to allemployees.The primary performance condition, broadly, required that the company achieve pre-tax profits (before goodwill amortisation orimpairment, exceptional items and before the cost of the CAP) of £57 million by no later than the financial year ending September30 2008 and remain at least this level for the future vesting periods of the following two tranches. The secondary performancecondition requires that the profits of the respective participants' businesses in the subsequent two vesting periods remainat least 75% of that achieved in the year the primary performance condition was met.The CAP profit target was achieved in 2007 and the option pool (of a maximum of 7.5 million shares) was allocated between theholders of outstanding awards by reference to their contribution to the achievement of the primary performance condition, subjectto conditions that no individual had an option over more than 10% of the option pool. One third of the awards vested immediately.The primary performance target was achieved again in 2008 and the second tranche of options will vest in February 2009 subjectto the businesses also achieving the secondary performance criteria. The final tranche will vest in 2010, but only if the primary andsecondary performance conditions are again met, otherwise vesting is deferred until both the profit target of £57 million achievedin 2007 is achieved again, and the profits of the individual participants businesses are at least 75% of that achieved in 2007 butno later than by reference to the year ending September 30 2012. Thus the CAP is designed so that profit growth must besustained if awards are to vest in full.The actual value of the first tranche of the CAP award to each director is set out in the directors share option table on pages 37and 38. The number of options received by the directors for the second tranche is provisional and will depend on the extent thatthe secondary performance test has been met for their respective businesses. The Remuneration Committee require the results ofthe businesses to be reviewed and subsequently modified for true-up adjustments during the period to December 31. Theprovisional number of options anticipated to be received by the directors for the second tranche is given in the directors shareoption table on pages 37 and 38.The fair value per option granted and the assumptions used to calculate its value are set out in note 23.1996 executive share option schemeAll executive directors have options from a previous executive share option scheme approved by shareholders in 1996 in whichpotentially all employees could receive options. This scheme expired in 2006 and no share options have been issued under thisscheme since February 2004 although options granted may be exercised before various dates to February 2014. Options wereissued to a selection of individual employees, including directors, on a merit basis. These options are exercisable at least three yearsafter their grant and are subject to certain performance conditions. For options expiring on January 29 2009, February 11 2009,June 25 2009 and January 5 2010 the performance test set by the remuneration committee requires the growth in the company'searnings per share for the three consecutive financial years commencing from the year of grant to exceed the growth in the retailprices index by an average of 4% a year. For the options expiring on June 25 2009 only, there is an additional performancecondition which requires that Internet Securities, Inc. must have achieved an operating profit for three consecutive months and acumulative operating profit over a period of six months. For all other options expiring after 2005, the performance test set by theremuneration committee requires that the Total Shareholder Return (TSR) of the company exceeds that of the average TSR for theFTSE 250 index for the same period. For the performance condition to be satisfied, the TSR of the company must exceed that ofthe FTSE 250 on a cumulative basis, measured from the date of grant of the option, in any four out of six consecutive monthsstarting 30 months after the option grant date.32 Euromoney Institutional Investor PLC