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GLTI
The extent to which awards vest will continue to depend on two performance conditions:
a underlying operational performance as measured by adjusted free cash ow; and
a relative TSR against a peer group median.
Adjusted free cash ow
The free cash ow performance is based on a three year cumulative adjusted free cash ow gure. The denition ofadjusted free cash ow isfree
cash ow excluding:
a VZW income dividends;
a the impact of any mergers, acquisitions and disposals;
a certain material one-off tax settlements; and
a foreign exchange rate movements over the performance period.
The cumulative adjusted free cash ow target and range for awards in the 2014, 2013, 2012 and 2011 nancial years are shown in the table below:
Performance
2014
£bn
2013
£bn
Vesting percentage
2013–2014 awards
2012
£bn
2011
£bn
Vesting percentage
2011–2012 awards
Below threshold <12.4 <15.4 0% <16.7 <18.0 0%
Threshold 12.4 15.4 50% 16.7 18.0 50%
Target 14.4 17.9 100% 19. 2 20.5 100%
Maximum 16.4 20.4 150% 21.7 23.0 200%
The target adjusted free cash ow level is set by reference to the Company’s three year plan and market expectations. The Remuneration
Committee considers the targets to be critical to the Company’s long-term success and its ability to maximise shareholder value, and to be in line
with the strategic goals of the Company. The Remuneration Committee also considers these targets to be sufciently demanding with signicant
stretch where only outstanding performance will be rewarded with a maximum payout.
TSR outperformance of a peer group median
We have a limited number of appropriate peers and this makes the measurement of a relative ranking system volatile. As such, the outperformance
of the median of a peer group is felt to be the most appropriate TSR measure. The peer group for the performance condition for the 2014 nancial
year is:
a AT&T
a BT Group;
a Deutsche Telekom;
a France Telecom;
a Telecom Italia;
a Telefónica; and
a Emerging market composite (consists of the average TSR performance of Bharti, MTN and Turkcell).
For awards made in the 2013, 2012 and 2011 nancial years the peer group was the same other than for the inclusion of AT&T.
For awards made in the 2014, 2013, 2012 and 2011 nancial years the relative TSR position will determine the performance multiplier. Thiswill
beapplied to the adjusted free cash ow vesting percentage. There will be no multiplier until TSR performance exceeds median. Above median,
thefollowing table will apply (with linear interpolation between points):
Outperformance ofpeer group median Multiplier
Median 0.0% p.a. No increase
65th percentile 4.5% p.a. 1.5 times
80th percentile (upper quintile) 9.0% p.a. 2.0 times
Combined vesting matrix
The combination of the two performance measures for the award granted in the 2014 nancial year gives a combined vesting matrix as follows:
TSR performance
Adjusted free cash ow measure Up to median 65th 80th
Below threshold 0% 0% 0%
Threshold 50% 75% 100%
Target 100% 150% 200%
Maximum 150% 225% 300%
The combined vesting percentages are applied to the target number of shares granted.
76 Vodafone Group Plc
Annual Report 2013
Directors’ remuneration (continued)