Annual Report 2012 - Development Securities PLC

Remuneration Report continued
Additional awards under the Development Profit Plan have been made
to senior managers.
Following practical completion of the hotel development at Southampton,
C J Barwick received £50,634 from maturity of his Development Profit
Plan award.
During the period M H Marx waived his entitlements to receive awards under
the Development Profit Plan and reaffirmed his intention of not participating
in any future awards under the Plan.
In addition to making awards under the Development Profit Plan for securing
development opportunities, the Remuneration Committee retains the
discretion to award bonuses to Executive Directors and other senior managers
at any time for making an exceptional contribution towards the Company.
Such awards will not be applied in securing any corporate acquisitions.
d) Joint Venture Profit Plan
The Committee reserves the right to make awards under the Joint Venture
Profit Plan to Executive Directors and other senior managers who have been
instrumental in securing profits generated from joint ventures.
Awards are made when joint ventures are likely to produce a total profit in any
one year of more than £2.0 million. No more than 10.0 per cent of this profit
is awarded in total. This is calculated once a notional cost of equity of 12.5
per cent is deducted, so that the pool generated only relates to profits over
and above a threshold equity return. In any given year, the Committee
determines which individuals should receive awards and the amount of
the award for each of the joint ventures for the following year.
In assessing the profit from each joint venture, all profits remitted during the
period on successful projects are cumulated and all projects which have
either crystallised or are forecast to make a loss are deducted. Any actual
profits/losses realised in subsequent years will be rationalised against
forecast losses already taken into account.
In awarding annual bonuses, there is no ‘double-counting’. The contribution
of any team and individual performance which leads to awards under the
Joint Venture Profit Plan is disregarded in assessing the annual bonus.
No bonus payments have been made to Executive Directors during the period
in respect of previous awards. Awards for joint ventures have been made to
an Executive Director and a senior manager for the next financial year.
e) Investment Growth Plan
The Committee reserves the right to award bonuses under the Investment
Growth Plan. The performance condition under the award is that the total
investment portfolio return must exceed 120.0 per cent of the All-Fund
Universe Index return as published by the Investment Property Databank,
if the Index return is greater than zero, or at least 0.1 per cent, if the Index is
less than or equal to zero and, in addition, represents at least one percentage
point above the total return under the index. The total investment portfolio
return represents the sum of income return, net of irrecoverable property
expenses, together with capital growth.
The Initial Bonus represents a bonus pool of 5.0 per cent of the value
determined by the excess of the total investment portfolio return over the
benchmark index, up to a cap of £1.0 million, unless otherwise determined.
60 Development Securities PLC / Annual Report 2012
The award is remitted following the end of the financial year when the
award is determined, with an equivalent amount representing a Deferred
Bonus assessed two years thereafter, provided that during the intervening
period the total investment portfolio return exceeds a specified proportion
of the Index.
The performance condition in respect of the financial period has not been
satisfied, and therefore does not give rise to an Initial Bonus. The Deferred
Bonus from the 2009 financial year has satisfied the additional condition,
resulting in a remittance of £249,074 to M S Weiner.
f) Strategic Profit Plan
The Strategic Profit Plan was approved by shareholders in 2010. The Plan
is an incentive scheme designed to incentivise all Executive Directors and
senior management in all the principal activities of the Group, namely
development, joint ventures and the investment portfolio. The Plan introduces
a Group-wide collegiate aspect to rewarding success, and supporting
co-operation as our executives deliver on the significant opportunities that
exist in our portfolio and across our market.
The bonus pool available for distribution represents an additional 4.0 per cent
of the profits achieved (as adjusted) which count towards the maximum
amount under both the Development Profit Plan and Joint Venture Profit Plan
for that financial year and 2.0 per cent of each of the Initial Bonus and
Deferred Bonus pools achieved under the Investment Growth Plan. Awards
are made to individuals at the discretion of the Committee. In doing so, the
Committee takes into account whether individuals are already eligible for
awards under the Development Profit Plan, Joint Venture Profit Plan and
Investment Growth Plan. As a guideline, 75.0 per cent of the bonus pool
would be allocated to the Executive Directors and 25.0 per cent to senior
management.
Awards will be subject to a risk underpin such that the Committee must be
satisfied that performance has not been achieved as a result of inappropriate
financial risk (e.g. very high levels of gearing), and that the level of financial
and business risk is in line with the Company’s stated strategy. In making
awards to individuals, the Committee will also take into account the overall
performance of the Company.
No awards have been approved under the Strategic Profit Plan in respect
of the period ended 29th February 2012.
g) Performance Share Plan
Awards under the Performance Share Plan are made on the basis that shares
will be acquired subject to the satisfaction of performance conditions over a
three year period, with no retesting. For awards made prior to 29th February
2012 performance is measured by comparing the Total Shareholder Return
(TSR) achieved by the Company with the individual constituent members
of the FTSE Real Estate Investment Trust Index and the FTSE Real Estate
Investment Services Index. There is a sliding scale of vesting as follows:
(i) 25.0 per cent of the award will vest if the Company’s TSR equals the
median TSR of the comparator group;
(ii) 100.0 per cent of the award will vest if the Company’s TSR equals
or exceeds the 85th percentile TSR of the comparator group; and
(iii) pro-rata vesting will apply in between the above points.