Carphone Warehouse 2016 Annual Report Download - page 110

Notes to the Group financial statements
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5 Employee costs and share-based payments continued
b) Share-based payments
i) Share Plan
During the year ended 29 March 2014, the Group introduced the Share Plan which allows participants to share 10% of the
incremental value created in the Group in excess of an opening value (assessed on the value of CPW over a three-month period
prior to approval of the plan by shareholders in June 2013 and, for new entrants during the 13 months ended 2 May 2015,
assessed on the aggregated value of CPW and Dixons Retail over a one-month period prior to the announcement of preliminary
merger discussions in February 2014) and beyond an annual rate of return of 7% on invested capital. The plan is underpinned
by a minimum annual compound TSR growth of 5% and outperformance of the median TSR of the FTSE 250.
Participants acquired, at market value, participation shares in a subsidiary company that holds the Group’s interests in CPW
Europe and, since the Merger, Dixons Retail. The Group granted loans to participants at a commercial rate of interest to acquire
the shares. Loans are ordinarily repayable in full if performance conditions are met.
The performance of the scheme will ordinarily be measured on or around June 2017, when 60% of the shares vest, with 40%
deferred for a further year. When the awards vest, the value of the shares held by participants will be based on the incremental
value (if any) of Dixons Carphone in excess of the opening valuation together with the minimum return on invested capital. These
shares will then be purchased by the Company for cash and / or the Company’s ordinary shares.
A ‘bad leaver’ will be required to transfer the participation shares to such party as the Company designates for an amount equal
to the total amount outstanding under the loan. If the market value of the shares is less than the amount of the outstanding loan
(and any accrued interest) then the participant may be required to repay up to 20% of the shortfall out of their own resources.
A participant shall be a ‘good leaver’ at the sole discretion of the Remuneration Committee and may be permitted to retain an
award notwithstanding the termination of their employment.
The mechanics of the plan may be varied by the Remuneration Committee if necessary to ensure that participants are neither
advantaged nor disadvantaged by a variation of the share capital of the Company, bona fide merger, reconstruction or similar
reorganisation.
ii) Share option schemes
During the year ended 29 March 2014, the Group introduced a share option scheme which allows nil-priced options to be
offered to senior employees who are not participants in the Share Plan.
Options were first granted under the scheme in January 2014. The options are subject to continuing employment and are subject
to performance conditions based on a combination of absolute TSR performance and relative TSR performance against the
FTSE 250 or FTSE 350.
Following the Merger with Dixons Retail plc on 6 August 2014, the Company assumed the obligation to satisfy outstanding
Dixons share options awarded under the Dixons Retail Employee Share Option Scheme and Executive Share Option Plan, with
employees eligible to acquire 0.155 Dixons Carphone shares for each Dixons option held. All outstanding Dixons awards had
vested before the Merger, and were exercisable within six months post-Merger.
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