Directors' remuneration report (continued)
2003 Executive Share Option Schemes
The 2003 Schemes replaced the 1998 Schemes. The key points of the
2003
Schemes are as follows:
- options are granted with an exercise price per share based
on the
Company's share price immediately before the date of grant;
- the value of options valued at the date of grant will not
normally exceed
1.5 times basic salary in any financial year; and
- conditions attached to the exercisability of options granted
in 2003 and
2004 to executive directors and other members of the management
team
were based partly on the Company's earnings per share ('EPS')
growth
relative to inflation, and partly on the Company's total
shareholder return
('TSR') relative to the initial comparator group
comprising national and
international chemical companies used in the Performance Share
Plan.
The comparator companies for purposes of grants in 2004 were
the following national and international chemical companies.
Comparator
companies will be revised during 2005.
 |
| FTSE All Share Chemicals Sector |
The BOC Group Plc |
|
| |
Croda International Plc |
|
| |
Imperial Chemical Industries Plc |
|
| |
Porvair Plc |
|
| |
Yule Catto & Co Plc |
|
| FTSE Eurotop 300 Chemicals Sector |
Akzo Nobel NV |
|
| |
Ciba Specialty Chemicals Holdings Inc |
|
| |
DSM NV |
|
| |
Degussa AG |
|
| S&P 500 Chemicals Sector |
Dow Chemical Company |
|
| |
Rohm & Haas Company |
|
| Switzerland: Specialty Chemicals |
Lonza Group AG |
|
| S&P 400 Specialty Chemicals |
Ferro Corp |
|
| |
HB Fuller Co |
|
| |
Minerals Technologies Inc |
|
| |
Arch Chemicals Inc |
|
| |
Quaker Chemical Corp |
|
| France: Chemicals |
Rhodia SA |
|
The following targets applied to executive directors and other
members of
the management team.
The EPS performance condition and TSR condition apply separately
to
options granted under the 2003 Scheme.
- The performance conditions will initially be tested after
three years. If they
are not satisfied, then they may be retested after four years,
from the same
fixed base point. To the extent they are not met after the end
of the fourth
financial year, the options will lapse. The retesting of options
will not be
made for options granted during 2005 or any further options granted.
- The Committee believes that this combination of targets is
the most
appropriate way of measuring both the total returns to shareholders
relative to similar businesses and the Company's underlying
financial
performance. The assessment of the performance targets will be
carried
out by New Bridge Street Consultants LLP who were chosen because
they
are advisors to the Committee.
- The Group will adopt International
Financial Reporting Standards (IFRS) as
from 1 January 2005. The Committee has decided that options
granted before this date, that have an EPS performance condition,
will
continue to
have that condition measured under existing accounting standards.
Options granted after this date will be measured under IFRS.
Share ownership guidelines
Shareholding guidelines have been introduced for executive directors,
who
will be expected to retain in shares 50 per cent of the post-tax
gains made
from the exercise of options under the scheme or annual bonuses
paid in
the form of shares, until they have built up a shareholding equal
to their
basic salaries.
Grants of options were made under the 2003 Schemes in 2003 and
2004. It is
proposed to make a further grant of options under the 2003 Schemes
in 2005.
Savings-Related Share Option Scheme
The 1998 UK Savings-Related Share Option Scheme (the “SAYE
Scheme”) is a
scheme under which all eligible UK employees, including executive
directors, can enter into savings contracts with a building society
or bank for
a period of three or five years and use the proceeds from their
savings
accounts to acquire shares in the Company on the exercise of their
options. The option price at which options may be exercised is the
average market
price over the five working days preceding the invitation date
discounted by
a maximum of 20 per cent.
Options granted to executive directors under
the SAYE Scheme are not
subject to performance conditions. The SAYE Scheme is an Inland
Revenue
approved all-employee scheme, the terms of approval for which do
not
allow the imposition of performance conditions on the exercise
of options.
Total shareholder return performance
The following graph illustrates the Company's total shareholder
return for
the five years ending 31 December, relative to FTSE All Share Index,
in
accordance with paragraph 4 of the Director's Remuneration
Report
Regulations 2002.
This graph looks at the value, by the end of 2004, of £100
invested in
Elementis plc on 31 December 1999 compared with that of £100
invested in
the FTSE All Share Index.
The Company is a member of the FTSE All Share Index and accordingly
this is
considered to be the most appropriate broad equity market index
for the
purpose of measuring the Company's relative performance.
| Total shareholder return |
Source: Datastream |
This graph shows the value, by 31 December 2004, of £100
invested in Elementis plc on 31 December 1999 compared with
the value of £100 invested in the FTSE All Share Index. |
Directors' remuneration
report continues on the next page >
[Page 2 of 5]
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