Tesco 2015 Annual Report Download - page 57

Share dealing policy
Tesco has a share dealing policy in place for Executive Directors and for members of the Executive Committee. This policy prevents Executive
Directors and Executive Committee members and their connected persons dealing in shares at times when this would be prohibited by the
UK Listing Authority’s Listing Rules. At all times, Executive Directors and Executive Committee members must seek advance clearance before
dealing in shares on their own behalf or in respect of their connected persons.
Further details on the ‘buyout’ awards
The Committee’s policy is that where appropriate awards forfeited on leaving a previous employer should be ‘bought out’ taking into account
the expected level of performance. Buyout awards should vest over an equivalent period to awards forfeited.
Dave Lewis
On leaving Unilever, Dave Lewis forfeited outstanding awards under the performance-related deferred bonus matching plan (MCIP)
and under the long-term performance plan (GSIP). These awards were subject to performance and were capable of vesting between 0%
and 200% of the initial award granted. Unilever does not disclose targets for long-term incentive awards and therefore it was not possible
to estimate the level of vesting for outstanding awards. The Committee therefore decided that it was appropriate to buy out these awards
assuming that performance was met at target (i.e. 100% vesting of the initial award). The Committee considered that this level of vesting
was appropriate as the average vesting at Unilever over the past three years was 110% of target. These awards vest on the same date as
the original Unilever awards would have vested.
Dave Lewis also received a cash payment of £525,000 reflecting the expected 2014 bonus, which was forfeited on leaving Unilever. This was a
pro-rata payment based on time in employment during the Unilever financial year and the average payout received over the previous three years.
Alan Stewart
On leaving Marks & Spencer (M&S), Alan Stewart forfeited outstanding awards under the deferred bonus plan and the performance-related
long-term incentive plan. Deferred bonus shares were not subject to future performance conditions and therefore these awards were bought
out in full. The level of vesting for 2012, 2013 and 2014 PSP awards was estimated based on performance to date. The estimated levels of
vesting were 12%, 25.8% and 42% respectively. If the 2014 M&S award vests at less than 42% then the corresponding buyout award will be
reduced to reflect this. Awards vest on the same date as the original M&S awards.
Alan Stewart will also receive a further award in respect of his 2014/15 M&S bonus forfeited. This will be based on the payment he would have
received had he remained at M&S (pro-rated for time) and will be paid 50% in cash and 50% in Tesco shares deferred for three years. The
actual value of this award is currently unknown and therefore we have estimated that he would receive a target bonus. This equates to an
amount of £400,000 which is included in the single figure table as an estimated value. This will be adjusted in next year’s report to show the
amount that was actually paid.
The buyout awards made to Dave Lewis and Alan Stewart on 24 October 2014 were granted under Listing Rule 9.4.2. The value of awards
was calculated using the share prices of Tesco, Unilever and M&S (as relevant) over four dealing days immediately after joining Tesco. Awards
were made over nil cost options and are subject to continued employment until the relevant vesting date. The buyout award in respect of
Alan Stewart’s 2014/15 M&S bonus will be made in June 2015 under Listing Rule 9.4.2. The value of this award will be calculated using the
market price of Tesco shares at the date of grant. Awards accrue dividend equivalents and are subject to malus, in the circumstances set out
on page 64, until the shares are transferred.
Pensions
This section has been audited.
Dave Lewis and Alan Stewart receive a cash allowance in lieu of pension of 25% of base salary.
Philip Clarke and Laurie McIlwee are members of the Tesco PLC Pension Scheme, which provides a pension of up to two-thirds of base salary
on retirement, normally at age 60, dependent on service (final salary scheme).
Each year’s pension earned before 1 June 2012 will be increased in line with the Retail Price Index up to a maximum of 5%, and pension
earned after 1 June 2012 in line with the Consumer Price Index up to a maximum of 5%. Pension accrued before 1 June 2012 and drawn
before age 60 will be actuarially reduced to reflect early retirement. Pension accrued from 1 June 2012 will be actuarially reduced if it is drawn
before the age at which a full pension is paid (originally age 62 but subject to adjustment up or down to reflect unexpected changes in life
expectancy).
Since April 2006, following implementation of the regulations contained within the Finance Act 2004, Executive Directors have been
eligible to receive the maximum pension that can be provided from the registered Pension Scheme without incurring additional tax charges.
The balance of any pension entitlement for Executive Directors is delivered through an unfunded retirement benefit scheme (‘SURBS’).
The SURBS is secured by using a fixed and floating charge over a cash deposit in a designated account.
Executive Directors who are members of the final salary scheme are required to contribute 10% of salary.
55Tesco PLC Annual Report and Financial Statements 2015
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