20 AVESCOGROUPPLC ANNUAL REPORT 2009
www.avesco.com
DIRECTORS’ REMUNERATION REPORT
As an AIM listed company, the Company is not required to comply with the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations
2008 in relation to the Directors' Remuneration Report. Nevertheless, the Board prefers to follow best practice and has therefore prepared the following report,
which meets the majority of these regulations and which will be put to shareholders for approval at the Annual General Meeting.
This part of the Directors’ remuneration report is unaudited.
Remuneration Committee
The remuneration committee comprises Mr Gibbins and Mr Murray, who are both non executive Directors and have served throughout the year. Mr Blackall and
Mr Maxwell were also members of the remuneration committee until 5 March 2009, when they ceased to be Directors. The remuneration committee has not
sought professional advice from external consultants during the year. However, the remuneration committee consults with the Chief Executive, as it considers
appropriate, in relation to its proposals relating to the remuneration of the executive Directors.
Remuneration Policy
The remuneration committee makes recommendations to the Board on the executive remuneration policy and determines specific remuneration packages for
each of the executive Directors. The aim of the remuneration committee is to provide total remuneration packages which attract, retain and motivate executive
Directors of the appropriate calibre. The remuneration policy is to reward excellent performance, to be commercially competitive and to align the interests of
employees with those of shareholders to create value.
This report sets out the Company's policy on executive remuneration, its operation in the year and (although the remuneration committee is unable to confirm that
the policy will continue without amendment in future years) how it is intended to be operated going forwards. It is considered that a successful policy should
retain sufficient flexibility to allow account to be taken of future changes in the business environment and remuneration practice. The policy should also allow for
any special arrangements which may be necessary in the future in order to recruit a director of sufficient calibre. However, any changes in the policy for future
years will be described in future reports, which will be subject to shareholder approval.
The principal elements of the remuneration package are as follows:
Basic salary and benefits
The salary of each executive Director is reviewed annually having regard to his individual responsibilities and contribution and to ensure that it is competitive with
salaries of persons in equivalent positions in comparable companies. All executive Directors receive a Company car and fuel benefit (or an allowance in lieu) and
are entitled to pension contributions, medical insurance cover, life assurance cover and permanent health insurance cover.
Annual bonus
Each of the executive Directors is entitled to a non-pensionable annual bonus which is dependent upon the achievement of short-term corporate and personal
performance targets approved by the Remuneration Committee. The annual bonus may not exceed 100% of basic salary. In respect of each of the year ended 30
September 2009 and the year ending 30 September 2010, the annual bonus is based on a range of personal, divisional or Group performance targets, which
will differ between directors according to their respective responsibilities and which will be measured against and conditional upon achievement of the
Company's internal budgets for the year.
Long term incentives
The Company operates an executive share option scheme (“Option Scheme”), which was established in 1997, and a long term incentive plan (“LTIP”), which was
established in 2007 (see Note 29 in these Accounts for further details).
Under the Option Scheme, which is a HM Revenue and Customs unapproved scheme, the Company granted options to its then directors in respect of a total of
1,468,467 ordinary 10p shares, of which options in respect of 1,142,141 remain capable of exercise at a price of 71.1667p per share between 24 February 2007
and 24 February 2011. The right to exercise these options was subject to a performance condition that has now been satisfied. No further grants of options may
be made under the Option Scheme. None of the terms and conditions of the options was varied during the year.
Under the LTIP, awards are made to employees under which they can receive Avesco shares at no cost to themselves based on the achievement of a pre-
determined and stretching performance condition. It is intended that vested allocations will be satisfied in due course by delivery through an employee trust. No
individual may receive awards in any financial year with an aggregate value at the time of grant in excess of 100% of the employee's basic annual salary
although this limit may increase to 200% of the employee's basic annual salary if the remuneration committee decides that exceptional circumstances exist. No
awards may be made under the LTIP more than 10 years after its adoption.
The rules of the LTIP provide that in any 10 year period no more than 15% of Avesco's issued share capital from time to time may be issued or subject to an award
or option to be issued for the purposes of the LTIP or any other employee share scheme. The 15% limit took account of the fact that, as at the date of adoption of
the LTIP, options had been granted under the Option Scheme in respect of 5.65% of the issued share capital to persons who no longer performed an executive
role in the Company and, therefore, less than 10% of the issued share capital would be available for the issue of awards to executives under the LTIP.
Awards were made in August 2007 in respect of a total of 964,000 rights to shares under the LTIP subject to a performance condition that a cumulative adjusted
earnings per share of at least 45p is achieved over the three years ending 30 September 2010. Awards were made in January 2008 in respect of a total of
455,500 rights to shares under the LTIP subject to a performance condition that a cumulative adjusted earnings per share of at least 50p is achieved over the
three years ending 30 September 2010. The remuneration committee has discretion to adjust the earnings per share in relation to exceptional and/or non-
recurring events. Subject to the rules of the LTIP and the fulfilment of the performance condition, 50 per cent of the shares will be released after the preliminary
announcement of the results of the Company for the year ending 30 September 2010 and, subject to continuing service of the award holder, the remaining 50
per cent of the shares will be released on the first anniversary of that announcement date or, if later, the date of announcement by the Company of its results for
the period ending 30 September 2011. None of the terms and conditions of the LTIP awards was varied during the year.
It is intended that further awards will be made under the LTIP in the next 12 months subject to the rules of the LTIP and the fulfilment of a similar performance and
vesting conditions as for the previous awards.
Pensions
Pension contributions relating to the executive Directors of the Company are paid to defined contribution arrangements and are calculated by reference to basic
salary only. Annual bonuses and other benefits are not pensionable.
Contracts
Except as noted below, the service contracts of the executive Directors are subject to a twelve months’ notice period by either party. It is the policy of the
remuneration committee that the Company should not enter into contracts for any executive Director with rolling notice periods exceeding one year.
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