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64 Tesco PLC Annual Report and Financial Statements 2013
Directors’ remuneration report continued
Table 5 Long Term Performance Share Plan continued
PSP targets 2011 and 2012
The targets for the awards granted on 11 July 2011 and 30 July 2012 are set out below. Performance against these targets will be measured at the end of the 2013/14 and 2014/15 financial years.
% of initial award vesting
EPS growth p.a.
Targets for
2011 awards
Threshold Target Stretch
2011 7% 10% 12%
ROCE 14.6% 45% 75% 100%
13.6% 20% 60% 85%
% of initial award vesting
EPS growth p.a.
Targets for
2012 awards
Threshold Stretch
2012 5% 12%
ROCE 14.6% 45% Straight-line
vesting between
these points
100%
13.6% 20% 85%
Leaving provisions
• Where a Director ceased to be a Director of Tesco PLC in the year, the figures in this table are at the date on which they ceased to be a Director of Tesco PLC.
• No new awards were made to former Directors in the year. In line with the plan rules, existing awards held by former Directors will vest subject to performance in the same proportion
as the other Directors’ awards above.
• Richard Brasher stepped down from the Board on 15 March 2012. His last award (2011) lapsed on leaving the Company on 31 July 2012. His vested awards (2007, 2008 and 2009)
may be exercised for one year after leaving. His 2010 award will lapse on 14 July 2013 as the performance targets were not met.
• Andrew Higginson retired from the Board on 1 September 2012. His last award (2012) lapsed on leaving. His vested awards may be exercised for three years after leaving. His 2010
award will lapse on 14 July 2013 as the performance targets were not met. His 2011 award will vest on 11 July 2014 subject to the achievement of performance conditions and any
vesting portion will be available for exercise for one year.
• Tim Mason stepped down from the Board on 5 December 2012. All of his awards lapsed on leaving the Company on 5 December 2012.
• Lucy Neville-Rolfe retired from the Board on 2 January 2013. Her last award (2012) lapsed on leaving. Her vested awards may be exercised for three years after leaving. Her 2010
award will lapse on 14 July 2013 as the performance targets were not met. Her 2011 award will vest on 11 July 2014 subject to the achievement of performance conditions and any
vesting portion will be available for exercise for one year.
Table 6 Group New Business Incentive Plan
Date of
award/
grant
As at
25 February
2012
Shares
awarded
in year
Options
exercised/
shares
released
in year
As at
23 February
2013 Date from which exercisable Expiry date
Sir Terry Leahy 14.11.2007 2,886,738 152,010 –3,038,748 Four tranches 2011–2014 14.11. 2017
Group New Business Incentive Plan
• The award made under this plan will normally vest in four tranches, four, five, six and seven years after the date of award for nil consideration. The award is in the form of nil cost
options. Awards may be adjusted to take account of any dividends paid or that are payable in respect of the number of shares earned. The former Group CEO, Sir Terry Leahy, retired
on 2 March 2011 and his interest in these awards will continue until their normal vesting dates.
• Awards are increased to reflect dividends as each dividend is paid. These will vest in line with the underlying award based on performance.
Performance against targets
• The vesting of the award made to Sir Terry Leahy under this plan is conditional on achievement against Group and International ROCE performance conditions. Once performance
against the Group and International targets has been determined, the extent to which the award made under this plan is capable of vesting will be conditional on the financial
performance of the US business venture. The targets are set out below.
• The third tranche (2012/13) of the award was subject to testing against US Return on Capital Employed (‘ROCE’) and Earnings Before Interest and Tax (‘EBIT’) targets and the targets
were not met. The 2010/11 and 2011/12 targets were also not met so no part of this award has vested to date. The next and last assessment of performance will be in respect of
2013/14. It is unlikely that any portion of the award will vest.
Targets
• The extent to which the awards will vest is conditional on the financial performance of the US business based on the achievement of stretching EBIT and ROCE targets. A percentage
of the EBIT of the US business for the relevant years may be allocated to an EBIT pool which will be capped at 10% in any one year. The portion of the award which may vest will be
determined by reference to the value of the EBIT pool as well as the ROCE targets.
Summary of US business performance conditions
ROCE hurdle 2010/11 2011/12 2012/13 2013/14
Maximum 6% ROCE 9% ROCE 11% ROCE 12% ROCE
Target performance 4% ROCE 6% ROCE 8% ROCE 10% ROCE
Vesting percentage (% of maximum award)
Vesting levels at maximum performance Up to 25% Up to 50% Up to 75% Up to 100%
Vesting levels at target performance Up to 6.25% Up to 10% Up to 12.5% Up to 18.75%
Following a strategic review, the Group has decided to dispose of its US operations. It is considered that it is highly unlikely that the final
performance test for the Group New Business Incentive Plan will be met and therefore it is expected that this award will lapse in full.