Carphone Warehouse 2012 Annual Report Download - page 47

Overview Business review Governance Financial statements
Carphone Warehouse Group plc Annual Report 2012 43
This transaction with participants was effected on 20 January 2012
following approval of the Best Buy Mobile Disposal and the B/C Share
Scheme at a general meeting of the Company and resulted in the issue
to participants of approximately 15.7m shares in the Company, in
exchange for their shares in CPW Retail Holdings Limited, of which
Roger Taylor andNigel Langstaff received 8.4m and 2.9m shares
respectively. Theloans of £5.8m, together with accrued interest, were
repaid byparticipants in February 2012. These shares participated
intheB/CShare Scheme which provided a pre‑tax return of
£1.72pershare. The market price of the shares at 20 January 2012
was £3.25 and at 31 March 2012 was £1.52 per share.
TALKTALK VES
Prior to the Demerger, Old Carphone Warehouse introduced the
TalkTalk VES, in which certain directors and other key management
participate. The scheme has a similar structure to the Best Buy Europe
VES, but is based on the value of TalkTalk Group, with the obligation
to acquire the relevant shares lying with TalkTalk Group. As with the
Best Buy Europe VES, the Group advanced loans to participants to
enable them to purchase TalkTalk VES shares. Loans are ordinarily
repayable in full if performance conditions aremet. Performance is
measured over an initial period to September 2012, at which point
participants have a put option over 60% of their shares, and a
subsequent performance period to September 2013, at which point
participants have a put option over the remainder of their shares.
SHARE GIFTS
In December 2008, shares were gifted to certain senior employees,
including Nigel Langstaff prior to his appointment as a director
ofthe Company. The shares were restricted until 30 June 2010
andwere conditional on meeting various internal performance
conditions. Loans of £288,000 were provided to cover the tax arising
on this gift, of which £144,000 was provided to Nigel Langstaff.
Asdescribed in the Remuneration Report for the year ended
31March 2011, these loans, together with accrued interest,
wereforgiven by the Remuneration Committee during the year
ended 31 March 2012. No other directors of the Company
participated in this scheme.
BEST BUY EUROPE
Best Buy Europe also had a long‑term incentive scheme, in which
certain members of the joint venture’s senior management team
participated, which enabled participants to share in incremental
profits generated by Best Buy Europe (based in part on Best Buy
Mobile) over a base defined in respect of the year to 3 April 2010,
which was to vest over periods to September 2014. As a result
ofthe Best Buy Mobile Disposal, this scheme was cancelled,
inreturn for which the Remuneration Committee allowed the
transfer of 7.0m shares in the Company to senior executives
ofBestBuy Europe.
Best Buy Europe has provided cash compensation of approximately
£11.7m to the Group in respect of this transfer. As part of this
agreement, participants will not be permitted (unless the Remuneration
Committee determines otherwise) to sell these shares until dates
in2015. No directors of the Company participated in this scheme.
SHARE OPTIONS
Old Carphone Warehouse Group had various share option schemes
for executive directors and senior managers. With the exception
ofaTSR‑based scheme which lapsed in June 2010, all schemes
hadvested prior to the Demerger. Following the Demerger,
shareoptions were issued to members of Group management
whodidnotparticipate in the Best Buy Europe VES. The scheme
wasbasedonTSR targets, and had vesting dates in 2013 and 2014.
Nodirectors of the Company participated in this scheme.
In January 2012 the Remuneration Committee allowed these options
to vest early, based on TSR performance to date, in order to avoid
asubstantial loss of value as a result of the Best Buy Mobile Disposal
and the B/C Share Scheme. As part of this agreement, participants
are not permitted (unless the Remuneration Committee determines
otherwise) to sell these shares until June 2015.
BEST BUY EUROPE
Best Buy Europe also had a share option scheme, which was to
vestover periods to September 2014, and in which a broad group
ofsenior Best Buy Europe employees participated. As a result of
the Best Buy Mobile Disposal, the option scheme was cancelled
and replaced by a scheme which will vest in 2015. Under the scheme,
participants will receive options over A shares in New BBED and
each of Best Buy and the Company has an obligation to acquire
50% of these shares atavalue based on the Headline PBT of CPW
Europe over the vesting period. The pool is based on earnings in
excess of minimum growth targets, against the earnings for the
year ended 31 March 2009. The Company and Best Buy have agreed
aminimum value of the pool, in recognition of the value that had
already accrued in the scheme in relation to Best Buy Mobile.
With regards to satisfying the Company’s obligations under the scheme
and in order to align the interests of participants with those of the
Company, the value of the A shares in New BBED will be assessed at
defined points during the vesting period, and nil‑priced options over
shares in the Company will be granted to participants through the
Carphone Warehouse Group plc Participation Plan 2011 (“Participation
Plan”) to match this value, so that participants benefit from any
growth in the market capitalisation of the Company during the vesting
period. The Remuneration Committee has the discretion under the
Participation Plan without needing further shareholder approval
todetermine the conversion price into nil‑priced options over the
Company’s shares. Having now reviewed this in light ofthetiming
of the proposed awards and the overall purpose oftheParticipation
Plan to motivate and retain participants, theRemuneration Committee
has determined that the price to beused for such conversion shall
be the average share price of the Company inApriland May 2012
instead of the period set out in the circular toshareholders of the
Company on 23 December 2011.
VIRGIN MOBILE FRANCE
Virgin Mobile France has issued market‑priced and nil‑priced share
options in Omer Telecom Limited, the parent company of Virgin
Mobile France, to certain employees of the business. These options
vest over periods of two to four years.