Holiday Inn 2007 Annual Report Download - page 83

GROUP FINANCIAL STATEMENTS
Notes to the Group financial statements 81
GROUP FINANCIAL STATEMENTS
Short Term Deferred Incentive Plan
The IHG Short Term Deferred Incentive Plan (STDIP), now called
the Annual Bonus Plan, enables eligible employees, including
Executive Directors, to receive all or part of their bonus in the
form of shares together with, in certain cases, a matching award
of free shares up to half the deferred amount. The bonus and
matching shares in the 2004 and 2005 plans are deferred and
released in three equal tranches on the first, second and third
anniversaries of the award date. The bonus and matching shares
in the 2006 and 2007 plans are released on the third anniversary
of the award date. Under the 2006 and 2007 plans a percentage
of the award (Board members – 100% (2006 80%); other eligible
employees – 50%) must be taken in shares and deferred.
Participants may defer the remaining amount on the same
terms or take it in cash. The awards in all of the plans are
conditional on the participants remaining in the employment
of a participating company. Participation in the STDIP is at the
discretion of the Remuneration Committee. The number of
shares is calculated by dividing a specific percentage of the
participant’s annual performance related bonus by the middle
market quoted prices on the three consecutive dealing days
immediately preceding the date of grant. A number of executives
participated in the plan during the year and conditional rights
over 675,515 (2006 606,573) shares were awarded to participants.
Long Term Incentive Plan
The Long Term Incentive Plan (LTIP), previously called the
Performance Restricted Share Plan (PRSP), allows Executive
Directors and eligible employees to receive share awards,
subject to the satisfaction of a performance condition, set by the
Remuneration Committee, which is normally measured over a
three year period. Awards are normally made annually and, except
in exceptional circumstances, will not exceed three times salary
for Executive Directors and four times salary in the case of other
eligible employees. During the year, conditional rights over
3,538,535 (2006 4,277,550) shares were awarded to employees
under the plan. The plan provides for the grant of ‘nil cost options’
to participants as an alternative to conditional share awards.
Executive Share Option Plan
For options granted, the option price is not less than the market
value of an ordinary share, or the nominal value if higher. The
market value is the quoted price on the business day preceding the
date of grant, or the average of the middle market quoted prices
on the three consecutive dealing days immediately preceding
the date of grant. A performance condition has to be met before
options can be exercised. The performance condition is set by
the Remuneration Committee. The plan was not operated during
2007 and no options were granted in the year under the plan.
The latest date that any options may be exercised is April 2015.
Sharesave Plan
The Sharesave Plan is a savings plan whereby employees contract
to save a fixed amount each month with a savings institution for
three or five years. At the end of the savings term, employees are
given the option to purchase shares at a price set before savings
began. The Sharesave Plan is available to all UK employees
(including Executive Directors) employed by participating Group
companies provided that they have been employed for at least one
year. The plan provides for the grant of options to subscribe for
ordinary shares at the higher of nominal value and not less than
80% of the middle market quotations of the ordinary shares on the
three dealing days immediately preceding the invitation date. The
plan was not operated during 2007 and no options were granted
in the year under the plan. The latest date that any options may
be exercised under the three-year plan is 29 February 2008 and
under the five-year plan is 28 February 2010.
US Employee Stock Purchase Plan
The US Employee Stock Purchase Plan will allow eligible
employees resident in the US an opportunity to acquire Company
American Depositary Shares (ADSs) on advantageous terms. The
plan, when operational, will comply with Section 423 of the US
Internal Revenue Code of 1986. The option to purchase ADSs may
be offered only to employees of designated subsidiary companies.
The option price may not be less than the lesser of either 85%
of the fair market value of an ADS on the date of grant or 85% of
the fair market value of an ADS on the date of exercise. Options
granted under the plan must generally be exercised within 27
months from the date of grant. The plan was not operated during
2007 and at 31 December 2007 no options had been granted
under the plan.
Former Six Continents Share Schemes
Under the terms of the separation of Six Continents PLC in
2003, holders of options under the Six Continents Executive Share
Option Schemes were given the opportunity to exchange their
Six Continents PLC options for equivalent value new options
over IHG shares. As a result of this exchange, 23,195,482 shares
were put under option at prices ranging from 308.5p to 593.3p.
The exchanged options were immediately exercisable and are
not subject to performance conditions. During 2007, 1,358,791
(2006 3,678,239) such options were exercised, leaving a total of
2,696,883 (2006 4,055,674) such options outstanding at prices
ranging from 308.5p to 593.3p. The latest date that any options
may be exercised is October 2012.
25 SHARE-BASED PAYMENTS