Carphone Warehouse 2013 Annual Report Download - page 46

REMUNERATION REPORT continued
PART 1: REMUNERATION COMMITTEE, POLICIES AND STRUCTURE (UNAUDITED)
continued
LONG‑term inCentiveS
As the Best Buy Europe VES vested in the year ended 31 March 2012
and no share options have been granted to directors since the Demerger,
the directors are not participants in any long-term incentive schemes
operated by the Group. The Remuneration Committee considered
that the shareholdings of the directors were sufficient to ensure that
the long-term interests of directors and shareholders were aligned
during the 2013 financial year.
Prior to the Demerger, Old Carphone Warehouse introduced the
TalkTalk VES, a long-term incentive scheme in which certain Company
directors and other key management participate. Whilst the obligation
to settle the scheme lies with TalkTalk Group, the Group advanced
loans to participants to enable them to participate. A market rate of
interest was charged on these loans and they were fully repaid
during the year ended 31 March 2013.
At the general meeting on 24 June 2013 the shareholders approved
the following new or amended long-term incentive schemes:
CPWG SHARE PLAN
The CPWG Share Plan enables participants to share in the incremental
value of CPW Europe in excess of an opening valuation determined
by the Remuneration Committee. Participants will acquire at market
value a fixed number of a separate class of shares in a subsidiary
company that holds the Company’s interests in CPW Europe. Participants
will be offered a loan from the Group at a commercial rate of interest
to acquire the shares.
The vesting of awards will be subject to continued employment,
aminimum compound return on invested capital of 7%, a minimum
TSR compound rate of return of 5% and outperformance of the
FTSE 250 median. The scheme vests over four years, 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 CPW Europe 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.
Loans are ordinarily repayable in full if performance conditions are
met. 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 such proportion of the loan as the Remuneration
Committee determines.
The main participants of the plan will be executive directors
andother senior Group employees.
CARPHONE WAREHOUSE SHARE SCHEME
The Carphone Warehouse Share Scheme will allow nil-priced and
market-priced options to be offered to senior employees who are
not participants in the CPWG Share Plan. The options will be subject
to continuing employment and may also be subject to performance
conditions. The directors will not participate in these schemes.
CPW SAYE SCHEME
The CPW SAYE Scheme is a Save-As-You-Earn share option scheme
under which participants make monthly contributions of between £5
and £250 for a period of three or five years. Options under the plan
will be granted at up to a 20% discount to market value. All UK
employees are eligible to participate in the plan.
BEST BUY EUROPE
Senior Best Buy Europe employees participate in a share option
scheme which was due to vest in 2015. Under the scheme, participants
received options over A shares in New BBED and each of Best Buy
and the Company had 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 was based on earnings in excess of minimum
growth targets, against the earnings for the year ended 31 March 2009.
The Company and Best Buy 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 was to be
assessed at defined points during the vesting period, and nil-priced
options over shares in the Company granted to participants through
the Participation Plan to match this value, so that participants benefited
from any growth in the market capitalisation of the Company during
the vesting period.
During the year ended 31 March 2013, the Company issued 6.9m
nil-priced share options under the Participation Plan. These share options
are not ordinarily exercisable until June 2015. As at 31 March 2013,
5.4m of these nil-priced share options were outstanding. Further
share options were due to be granted in respect of value thathad
accrued in the scheme to 31 March 2013.
At the general meeting on 24 June 2013 the Company’s shareholders
authorised the acceleration of the vesting of this scheme, based on the
value accrued in the scheme at March 2013. Following the acquisition
of Best Buy’s interest in CPW Europe, Best Buy’s obligations under
the scheme will be assumed by the Company. The directors have been
authorised to allot up to 16.3m new ordinary shares in relation to full
and final satisfaction of the Best Buy Europe share option scheme.
The options will be exercised at the point of vesting, and participants
will therefore hold ordinary shares in the Company. These shares
will ordinarily be restricted from sale until 2015.
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. Directors of the Company do
not participate in the share option schemes of Virgin Mobile France.
CARPHONE WAREHOUSE GROUP PLC ANNUAL REPORT 201344