National Grid 2008 Annual Report Download - page 619

BOWNE INTEGRATED TYPESETTING SYSTEM
CRC: 24401
Name: NATIONAL GRID
Date: 17-JUN-2008 03:10:51.35Operator: BNY99999TPhone: [phone]Site: BOWNE OF NEW YORK
Y59930.SUB, DocName: EX-15.1, Doc: 16, Page: 94
Description: EXHIBIT 15.1
0/8290.00.00.00Y59930BNY
[E/O] EDGAR 2 *Y59930/290/8*
BOWNE INTEGRATED TYPESETTING SYSTEM
CRC: 24401
Name: NATIONAL GRID
Date: 17-JUN-2008 03:10:51.35Operator: BNY99999TPhone: [phone]Site: BOWNE OF NEW YORK
Y59930.SUB, DocName: EX-15.1, Doc: 16, Page: 94 Description: EXHIBIT 15.1
0/8290.00.00.00Y59930BNY
[E/O] EDGAR 2 *Y59930/290/8*
Table of Contents
102
Directors’ Remuneration Re
p
ort continued
National Grid plc
The grant of PSP awards may only be made within 42 days
from the announcement of either the annual financial results
or interim financial results. Therefore, as shareholder
approval to increase the maximum award in the rules could
only be sought at the time of last year’s Annual General
Meeting in July, the 2007 award was granted in two parts to
Executive Directors; the June award was based on the then
current maximum of 125% of salary and a second award for
75% of salary was granted after the announcement of our
interim financial results. Should the performance criteria be
met, the 2007 award will therefore be released to Executive
Directors in two parts; in June 2011 and November 2011.
Shares awarded vest after three years, conditional upon the
satisfaction of the relevant performance criteria. Vested
shares must then be held for a further period (the retention
period) after which they are released to the participant on the
fourth anniversary of the date of grant. During the retention
period, the Remuneration Committee has discretion to pay
an amount, equivalent in cash or shares, to the dividend
which would have been paid on the vested shares.
Under the terms of the PSP, the Remuneration Committee
may allow shares to vest early to departing participants,
including Executive Directors, to the extent the performance
condition has been met, in which event the number of shares
that vest will be pro-rated to reflect the proportion of the
performance period that has elapsed at the date of
departure.
Awards made in June 2003 and June 2004 were based on
the Company’s Total Shareholder Return (TSR) performance
over a three year period relative to TSR performance of UK
and international utilities. Both of these awards have lapsed
as the performance criterion was not met.
Awards from 2005 onwards vest based on the Company’s
TSR performance when compared to the FTSE 100 at the
date of grant (50% of the award) and the annualised growth
of the Company’s EPS (50% of the award). This approach
will continue
g
oin
g
forward.
These measures are used because the Remuneration
Committee continues to believe they offer a balance
between meeting the needs of shareholders (by measuring
TSR performance against other large UK companies) and
providing a measure of performance (EPS growth) over
which the Executive Directors have direct influence. The
Remuneration Committee considers the PSP performance
conditions to be stretching.
In calculating TSR it is assumed that all dividends are
reinvested. No shares will be released under the TSR part of
the award if the Company’s TSR over the three year
performance period, when ranked against that of the FTSE
100 comparator group, falls below the median. For TSR at
the median, 30% of those shares will be released, 100% will
be released where National Grid’s TSR performance on an
annualised compound basis is 7.5% above that of the
median company in the FTSE 100 (upper target).
The EPS measure is calculated by reference to National
Grid’s real EPS growth, see page 40 for further details.
Where annualised growth in adjusted EPS (on a continuing
basis and excludin
g
exceptional items, remeasurements and
stranded costs) over the three year performance period
exceeds the average annual increase in RPI (the general
index of retail prices
for all items) over the same period by 3% (threshold
performance), 30% of the shares under the EPS part of the
award will be released. 100% of the shares will be released
where EPS
g
rowth exceeds RPI
g
rowth by 8% (upper
target). For awards made prior to 2007, the upper target for
EPS was 6%. The Remuneration Committee considers the
adjusted upper target to be more challenging to achieve.
For performance (under each measure) between threshold
and the upper target, the number of shares released is pro-
rated on a straight-line basis.
If the Remuneration Committee considers, in its absolute
discretion, the underlying financial performance of the
Company does not justify the vesting of awards, even if
either or both the TSR condition and the EPS condition are
satisfied in whole or in part, it can declare that some or all of
the award lapses.
No re-testing of performance is permitted for any of the PSP
awards that do not vest after the three year performance
period and any such awards lapse.
Special Retention Award (SRA)
As part of a contractual commitment made at the time of
Tom King’s recruitment, Tom received a Special Retention
Award in November 2007. This one-off award of National
Grid ADSs will vest in equal tranches, over three years, on
the anniversary of the award (commencing November 2008
through to November 2010) subject to his continued
employment. There are no performance conditions attached
to the award.
Executive Directors’ remuneration package
Illustrated below is the current remuneration package for
Executive Directors (excluding pensions, all-employee share
plans and non-cash benefits) for both ‘maximum stretch’
performance and assuming ‘on target’ performance based
on 40% (60% of salary) for the annual bonus plan; and TSR
and EPS performance such that 30% (60% of salary) of PSP
awards are released to participants at the end of the
performance period and subsequent retention period.
Note: Excludes Tom King’s Special Retention Award.
All-employee share plans
Sharesave: Employees resident in the UK, including UK-
based Executive Directors, are eligible to participate in
HM Revenue & Customs approved all-employee
Sharesave schemes. Under these schemes, participants
may contribute between £5 and £250 in total each month,
for a fixed period of three years, five years or both.
Contributions are taken from net