Directors' remuneration report
Share options
Options granted under the Company's executive share option plans entitle executives to acquire ordinary shares, at an exercise price based market price at the date of grant, from the third until the tenth anniversaries of grant to the extent, normally, that a performance condition set at the time of the grant has been satisfied over a three year performance period.
The performance condition for options granted in the year was as follows:
| Annual percentage compound growth in net asset value per share with dividends re-invested, relative to the annual percentage change in RPI |
Percentage of the grant vesting |
|---|---|
| Below RPI +3 percentage points | 0% |
| At least RPI +3 percentage points | 30% |
| At levels of performance between RPI +3 percentage points and RPI +8 percentage points the grant will vest pro rata | |
| At least RPI +8 percentage points | 100% |
The performance condition is the same as for the year to 31 March 2006. In the year to 31 March 2005 the performance condition was also the same save that the percentage of grant vesting at the minimum performance level was 50% instead of 30%. For options granted after 31 March 2004 there is no opportunity for the performance condition to be retested after the three-year performance period.
For grants made between 1 April 2001 and 31 March 2004 the condition required annual percentage compound growth in the net asset value per share (with dividends re-invested) of RPI plus 5 percentage points to achieve minimum vesting of 50% of the award and growth of RPI plus 10 percentage points for full vesting. For these grants, if the minimum threshold for vesting is not achieved in the three-year performance period, the period is extended to four and then five years but from the same base year. Performance conditions for grants made before 1 April 2001 are set out below.
These conditions are based on increases in net asset value per share to enable a significant proportion of relevant executive Directors' potential remuneration to be linked to an increase in the assets per share of the Company. The intention is to approximate to the performance conditions attached to carried interest schemes in the private equity and venture capital industry whilst retaining the essential feature of aligning executives' interests with those of the Company's shareholders. The performance conditions were chosen as being appropriately demanding in the prevailing market conditions at the time of grant.
Options held by Directors who held office during the year were:
| Year of grant |
Held at 1 April 2006 |
Granted during the year |
Exercised during the year |
Lapsed during the year |
Held at 31 March 2007 |
Exercise price £ |
Market price on date of exercise £ |
Date from which exerciseable |
Expiry date | |
|---|---|---|---|---|---|---|---|---|---|---|
| P E Yea | 2004 | 314,410 | – | – | – | 314,410 | 5.73 | 21.07.07 | 20.07.14 | |
| 2005 | 259,740 | – | – | – | 259,740 | 6.93 | 21.06.08 | 20.06.15 | ||
| 2006 | – | 322,966 | – | – | 322,966 | 8.36 | 14.06.09 | 13.06.16 | ||
| 574,150 | 322,966 | – | – | 897,116 | ||||||
| S P Ball | 2005 | 245,022 | – | – | – | 245,022 | 6.53 | 17.05.08 | 16.05.15 | |
| 2005 | 48,100 | – | – | – | 48,100 | 6.93 | 21.06.08 | 20.06.15 | ||
| 2006 | – | 200,956 | – | – | 200,956 | 8.36 | 14.06.09 | 13.06.16 | ||
| 293,122 | 200,956 | – | – | 494,078 | ||||||
| M J Queen | 1997 | 37,073* | – | (37,073) | – | – | 5.20 | 10.16 | 16.06.00 | 15.06.07 |
| 1998 | 62,177 | – | (62,177) | – | – | 6.64 | 10.16 | 22.06.01 | 21.06.08 | |
| 1999 | 36,002 | – | – | – | 36,002 | 7.28 | 06.07.02 | 05.07.09 | ||
| 2000 | 30,795 | – | – | – | 30,795 | 13.75 | 28.06.03 | 27.06.10 | ||
| 2001 | 114,000 | – | – | (114,000) | – | 10.00 | 09.08.04 | 08.08.11 | ||
| 2002 | 184,318 | – | – | – | 184,318 | 6.73 | 27.06.05 | 26.06.12 | ||
| 2003 | 57,218 | – | – | – | 57,218 | 5.68 | 25.06.06 | 24.06.13 | ||
| 2004 | 89,552 | – | – | – | 89,552 | 6.03 | 23.06.07 | 22.06.14 | ||
| 2005 | 44,733 | – | – | – | 44,733 | 6.93 | 21.06.08 | 20.06.15 | ||
| 655,868 | – | (99,250) | (114,000) | 442,618 |
The performance condition has not yet been met for those options shown in blue.
* Awarded before appointment as a Director.
- The fair values of awards made in the year were as follows: Mr P E Yea, £729,000 and Mr S P Ball, £453,600. These fair values have been calculated by the Committee's remuneration advisers using a Monte Carlo simulation on appropriate assumptions. The fair value of the share options granted during the year was calculated as being of the market value at the date of grant of the shares under option.
- On 17 July 2006, the Company issued one B share for each 531/8p ordinary share existing on 14 July 2006. This was followed by a share consolidation, of 11 new ordinary shares of 6269/88p for every 13 ordinary shares of 531/8p. This was designed to maintain the price per share, other things being equal, at the same level after the issue of B shares as before it. As a result of this consolidation there was no need to adjust the number of shares comprised in option awards or the exercise price per share and options took effect following the consolidation as options over new ordinary shares of 6269/88p.
- Options granted before 1 April 2001 were granted under The 3i Group 1994 Executive Share Option Plan (the "1994 Plan") and are normally exercisable between the third and tenth anniversaries of grant provided a performance condition was met over a rolling three-year period. This required adjusted net asset value per share (after adding back dividends paid during the performance period) at the end of the three-year period to equal or exceed the net asset value per share at the beginning of the period compounded annually over the period by the annual increase in the RPI plus 4%.
- Options granted after 1 April 2001 were granted under the Discretionary Share Plan and the performance conditions are as set out above.
- The Committee determines the fulfilment of performance conditions based on calculations which are independently reviewed by the Company's auditors. These performance conditions require net asset value per share at the beginning and end of the performance period to be calculated on a consistent basis using the same accounting policies. Where accounting policies have altered between the beginning and end of the period, theCommittee adjusts the net asset value calculations appropriately to ensure consistency. The Committee also has power to adjust the calculations to reflect circumstances including changes to the capital of the Company. During the period the Committee made appropriate adjustments to reflect the issue of B shares, the consolidation of the Company's share capital and the repurchase by the Company of its own shares.
- The market price of ordinary shares in the Company at 31 March 2007 was 1136.0p and the range during the period 1 April 2006 to 31 March 2007 was 819.6p to 1194.5p. Aggregate gains made by Directors on share option exercises in the were 402,467 (2006: £199,158). The amount attributable to the highest paid Director during the year was £nil (2006: £nil). Options were granted at no cost to the option holder with exercise prices not less than prevailing market value.
- As at 31 March 2007 there were approximately 2.2 million shares available under the 5% dilution limit applicable to the Discretionary Share Plan arising from the guidelines issued by the Association of British Insurers and approximately 22.9 million shares available under the 10% dilution limit arising from those guidelines applicable to "all employee" plans. In addition, approximately 3.3 million unallocated shares were held in an employee trust and were available for awards under the Discretionary Share Plan.