Directors’ remuneration report
Directors’ share interests
The directors of the company at 31 March 2010 and their beneficial interests in the shares of the company were as follows:
i) Beneficial holdings
| At 1 April 2009 (or date of appointment if later) shares of 9717/19p each | At 31 March 2010 (or date of retirement if earlier) shares of 9717/19p each | At 24 May 2010 shares of 9717/19p each | |
|---|---|---|---|
| Chairman and other non-executive directors | |||
| Sir John Egan (Chairman) | 7610 | 12,610 | 12,610 |
| Dr Bernard Bulkin | 554 | 554 | 554 |
| Richard Davey | 588 | 588 | 588 |
| Martin Lamb | 3,012 | 3,012 | 3,012 |
| Baroness Noakes | 4,018 | 4,018 | 4,018 |
| Gordon Fryett | - | 1,000 | 1,000 |
| Executive directors | |||
| Tony Ballance | 1,985 | 2,032 | 2,032 |
| Martin Kane1 | 7,915 | 8,189 | 8,511 |
| Michael McKeon | 20 | 67 | 67 |
| Andy Smith | 4,034 | 5,217 | 5,217 |
| Tony Wray | 5,874 | 7,057 | 7,057 |
1 Martin Kane acquired 322 shares on 4 May 2010 following the exercise of his 2007 three year Sharesave scheme option.
ii) Long Term Incentive Plan
The executive directors have further interests in the company’s ordinary shares of 9717/19p each by virtue of having received contingent awards of shares under the Severn Trent Plc Long Term Incentive Plan (LTIP). The LTIP operates on a three year rolling basis. The Severn Trent Employee Share Ownership Trust is operated in conjunction with the LTIP. Awards do not vest until they have been held in trust for three years and specific performance criteria have been satisfied.
Executive directors have a technical interest in 606,609 shares held by the Employee Share Ownership Trust. The details of the performance criteria are explained in this report. The individual interests, for the above named directors and for the directors who left during the year, which represent the maximum aggregate number of shares to which each individual could become entitled, are as follows:
| Awards granted | Maximum award | Award vested | Awards lapsed | Maximum outstanding awards as at 31 March 2010 |
|
|---|---|---|---|---|---|
| Tony Ballance | 19 June 2006 | 4,782 | - | 4,782 | - |
| 18 July 2007 | 3,261 | - | - | 3,261 | |
| 14 July 2008 | 5,486 | - | - | 5,486 | |
| 7 July 20091 | 7,405 | - | - | 7,405 | |
| Martin Kane | 19 June 2006 | 4,680 | - | 4,680 | - |
| 18 July 2007 | 3,475 | - | - | 3,475 | |
| 14 July 2008 | 6,001 | - | - | 6,001 | |
| 7 July 20091 | 8,154 | - | - | 8,154 | |
| Michael McKeon | 19 June 20062 | 36,405 | - | 36,405 | - |
| 19 June 2006 | 30,118 | - | 30,118 | - | |
| 18 July 2007 | 12,363 | - | - | 12,363 | |
| 14 July 2008 | 13,717 | - | - | 13,717 | |
| 7 July 20091 | 18,733 | - | - | 18,733 | |
| Andy Smith | 19 June 2006 | 12,210 | - | 12,210 | - |
| 18 July 2007 | 5,881 | - | - | 5,881 | |
| 14 July 2008 | 8,230 | - | - | 8,230 | |
| 7 July 20091 | 11,019 | - | - | 11,019 | |
| Tony Wray | 19 June 2006 | 22,385 | - | 22,385 | - |
| 18 July 2007 | 9,189 | - | - | 9,189 | |
| 14 July 2008 | 19,684 | - | - | 19,684 | |
| 7 July 20091 | 27,769 | - | - | 27,769 |
1 The market price on the date of the 2009 award was 1046p.
2 Michael McKeon received an additional LTIP award in 2006 in accordance with commitments made by the company upon appointment. The award was made pursuant to the exemption provided in Listing Rule 9.4.2.
No further awards have been made under the LTIP as at 27 May 2010.
As disclosed last year, the committee determined that the targets applying to the 2006 awards were not met and that none of the awards vested.
The performance period for awards granted on 18 July 2007 ended on 31 March 2010. The committee has subsequently determined, based on the company’s TSR target over the three year performance period, that participants are entitled to 60.3% of the award. As at 27 May 2010 the shares from the 2007 contingent award had not vested but would do so as soon as practicable.
iii) Annual Bonus Scheme
From 2008 onwards, half of any bonus paid is deferred into shares. The table below shows the directors’ deferred share awards and the vesting dates.
| Date of grant | Annual bonus deferred into shares | Number of shares | Deferred share award vests | |
|---|---|---|---|---|
| Tony Ballance | 27 June 2008 | £24,554 | 1,818 | 26 June 2011 |
| 7 July 2009 | £62,294 | 5,669 | 6 July 2012 | |
| Martin Kane | 27 June 2008 | £26,425 | 1,957 | 26 June 2011 |
| 7 July 2009 | £68,598 | 6,243 | 6 July 2012 | |
| Michael McKeon | 27 June 2008 | £85,667 | 6,345 | 26 June 2011 |
| 7 July 2009 | £157,590 | 14,343 | 6 July 2012 | |
| Andy Smith | 27 June 2008 | £37,732 | 2,794 | 26 June 2011 |
| 7 July 2009 | £92,700 | 8,437 | 6 July 2012 | |
| Tony Wray | 27 June 2008 | £76,029 | 5,631 | 26 June 2011 |
| 7 July 2009 | £166,860 | 15,187 | 6 July 2012 |
iv) Sharesave options over ordinary shares.
| At the start of the year or subsequent date of appointment (No. of shares) | Exercised during the year (No. of shares) | Cancelled during the year ( No. of shares) | Granted during the year (No. of shares) | At the end of the year or an earlier date of leaving (No. of shares) | Year of grant of option | Exercise price (p) | Date from which exercisable | Expiry date | |
|---|---|---|---|---|---|---|---|---|---|
| Sharesave1 | |||||||||
| Tony Ballance | 556 | - | - | - | 556 | 2009 | 862 | May 2012 | Oct 2012 |
| - | - | - | 561 | 561 | 2010 | 808 | May 2013 | Oct 2013 | |
| Martin Kane | 227 | 227 | - | - | - | 2006 | 823 | May 2009 | Oct 2009 |
| 322 | - | - | - | 322 | 2007 | 1172 | May 2010 | Oct 2010 | |
| 314 | - | - | - | 314 | 2008 | 1221 | May 2011 | Oct 2011 | |
| 222 | - | - | - | 222 | 2009 | 862 | May 2012 | Oct 2012 | |
| - | - | - | 449 | 449 | 2010 | 808 | May 2013 | Oct 2013 | |
| Michael McKeon | 1,943 | - | - | - | 1,943 | 2009 | 862 | May 2014 | Oct 2014 |
| Andy Smith | 1,136 | 1,136 | - | - | - | 2006 | 823 | May 2009 | Oct 2009 |
| - | - | - | 1,123 | 1,123 | 2010 | 808 | May 2013 | Oct 2013 | |
| Tony Wray | 1,136 | 1,136 | - | - | - | 2006 | 823 | May 2009 | Oct 2009 |
| - | - | - | 1,123 | 1,123 | 2010 | 808 | May 2013 | Oct 2013 |
1 The executive directors, in common with all eligible UK employees of the group, are entitled to participate in the company’s HMRC approved Sharesave Scheme.
The terms and conditions applicable to these options are those provided in that scheme. The options have no performance conditions as such conditions are not permitted by legislation.
a) No executive share options in respect of executive directors were granted or lapsed during the year. At 31 March 2010 there were five other executives participating in the group’s historical executive Share Option Scheme (31 March 2009: nine other executives).
b) At the close of business on 31 March 2010 the mid-market price of the company’s shares was 1195p and the range during the year was 933p to 1215p.
Signed on behalf of the board which approved the Directors’ remuneration report on 27 May 2010.
Richard Davey
Chairman of the Remuneration Committee