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Status and shareholder approval of report This report has been prepared in accordance with the Directors’ Remuneration Report Regulations 2002. As required by those regulations, the sections entitled ‘Remuneration received’, ‘Executive directors’ pensions’, ‘Details of share option schemes’ and ‘Executive directors’ share options’ have been audited by Deloitte & Touche. The remainder of this report is unaudited. The Notice of Annual General Meeting of the Company, to be held at noon on Thursday 22 May 2003, which is being delivered to shareholders with this Annual Report, contains notice of the intention of the directors to move an ordinary resolution at that meeting approving this report for the year ended 31 December 2002. The Remuneration Committee, its advisers and terms of reference The Remuneration Committee (‘the Committee’) comprises four non-executive directors: Mr Kennedy (the Committee’s Chairman), Mr Kemp, Mr Sanders and Mr Taylor. A fifth non-executive director, Mr Mylvaganam, was also a member of the Committee until September 2001 during which time certain matters affecting remuneration in respect of 2002 were considered. The Committee has appointed New Bridge Street Consultants (‘NBS’) to advise it generally on senior remuneration policy. In particular, NBS has advised the Committee since 1999 regarding its policies on the grants of executive share options and, since its introduction in 2001, on the design and implementation of a long term incentive plan for underwriters, the Capital Builder Plan. NBS also advises the Human Resources department and the Group Chief Executive on other remuneration matters which may not be within the direct purview of the Committee; and advises the Board as a whole on matters relating to the remuneration and terms of appointment of non-executive directors of the Company. Two firms of lawyers, Linklaters and Dechert, advise the Committee from time to time on specific matters. Such firms have not been appointed directly by the Committee as their work is usually a by-product of their appointments as solicitors to companies in the Group on a wide range of matters. The Committee is assisted by the Group’s head of Human Resources and by advice and recommendations from the Group Chief Executive, who usually attends its meetings other than when items specific to himself are being considered. The Company Secretary acts as secretary to the Committee and advises it on certain specialist matters such as aspects of share options. The Committee’s terms of reference are to determine the terms and conditions of employment of each executive director of the Company and the remuneration of certain other senior employees, and to recommend to the Board the policies of the Group in relation to senior executive remuneration generally. The Committee seeks to act in accordance with the Principles of Good Governance and Code of Best Practice (the ‘Combined Code’). Details of the Group’s compliance with the Combined Code, including the position regarding the independence of members of the Committee and the timing of a review of the Committee’s terms of reference in the light of the Higgs Report on the role and effectiveness of non-executive directors, are contained in the Statement on Corporate Governance. Remuneration policies Overall remuneration levels The Group’s policy is to offer appropriate remuneration packages to attract, retain and motivate directors and other Group employees having the experience and quality required by the Group. In determining such remuneration, the Group has regard to the performance of the individual in the role and to remuneration statistics for the non-life insurance sector in which the Group operates and, where applicable for certain roles, wider remuneration statistics. A formal job evaluation process was undertaken during 2002 which is being used in the annual salary review as at April 2003. Certain aspects of remuneration are influenced by the Lloyd’s sector in which the Group operates and competes for staff. Lloyd’s managing agencies tend to relate a significant proportion of potential rewards, particularly those of underwriters, to the profitability of the relevant underwriting unit. Within that context, the Group aims to structure remuneration to encourage superior performance rather than merely average performance. There are no remuneration factors specific to the Group beyond those relating to its sector. Structure of directors’ and employees’ remuneration Remuneration of the executive directors and other senior employees consists of three principal elements: (1) base salary, benefits and pensions; (2) shorter term performance rewards; and (3) longer term performance rewards. A significant proportion of executive directors’ and senior employees’ remuneration is performance related. Except where stated below, no significant changes to remuneration policy or structure are currently planned. Base salary, benefits and pensions In addition to base salary, executive directors and other employees are generally entitled to private health insurance, cover for death in service and disability, and membership of a pension scheme. Senior staff, including executive directors, also receive a car allowance. Company cars, other than those required for frequent business use, have now been fully replaced by car allowances. The Company pays a percentage of base salary into either a Group occupational or personal pension plan. Executive directors participate in the relevant group pension plans on the same basis as other senior employees who are not directors, with the exception of Mr Stace whose pension arrangements from prior to the acquisition by the Group of his own company have been maintained. In all cases, pensionable salary is base salary only and the arrangements include dependants’ pensions and death in service cover. The Group plans are either on a defined contribution or defined benefit basis. The Group’s policy is not to enter into new defined benefit pension commitments and thus the relevant sections of all of such schemes have been closed to new entrants since 1998. In respect of defined contributions, the Group contributes a percentage of base salary depending on seniority, age and the percentage of salary (if any) that the employee chooses to contribute. In respect of those still with defined benefits, the Group contributes at a rate which varies according to actuarial advice in order to achieve the required level of pension in relation to final salary and years of service. All but one closed scheme, in which no current director participates, involve an element of employee contribution. In the case of those higher paid employees, including directors, in respect of whom the Group is unable to contribute the full operative percentages of base salary into the relevant group pension scheme as a result of the Inland Revenue earnings cap, the Group makes extra contributions through a Funded Unapproved Retirement Benefit Scheme set up for each such employee. Shorter term performance rewards: annual bonus scheme for non-underwriting directors and employees The Group’s shorter term performance incentives consist, in the case of those executive directors and other employees who are not part of an underwriting division, of a Group Bonus Scheme, which was introduced in its present form from 2002. The bonus payments for 2002 to Messrs Hextall and Philipps reported below are pursuant to this scheme. The section of the scheme applicable to these executive directors and other participating senior employees is designed to reward and incentivise them against a mixture of business performance, measured as return on equity during the Group’s accounting period, and the individual’s performance against agreed and stretching personal objectives. The mix of business and individual bonus elements varies by seniority, with 70% of the potential target reward at the most senior level, including participating executive directors, being rewarded on Group business performance and 30% on personal performance. The total on-target and maximum bonus levels also vary by seniority, up to a maximum of 100% of base salary for participating executive directors. The scheme does not apply to anyone with an agreed leaving date. The position regarding Mr Stace’s service contract is set out in ‘Executive directors’ service contracts’ below, from which it follows that he does not participate in the scheme. Shorter term performance rewards: profit share for underwriters Shorter term incentives for those directly engaged in underwriting (whether or not they are executive directors of Amlin plc) consist principally of a profit share relating to syndicate profits in respect of each year of account. The current executive directors who participate in this are Messrs Carpenter and Holt. The proportion of syndicate profit paid in respect of the 2000 year of account, which closed on 31 December 2002 and in respect of which payments are therefore included later in this report, was 4.5%, applied on a divisional basis. For the 2001 and subsequent years of account, the profit share scheme divides rewards between those related to the performance of the relevant participant’s division (Amlin Aviation, Amlin Insurance Services, Coles or Harvey Bowring) and those related to the performance of the whole of the Group’s merged managed syndicate (Syndicate 2001). Rewards are also divided between those which are calculated purely as a percentage of underwriting profit and those relating to the achievement of goals and/or service standards. The maximum percentage of each division’s syndicate profits which may be paid out under the scheme is approximately 5.0% of a Lloyd’s year of account’s profit unless the division is determined by the Committee as having achieved a Lloyd’s top quartile result for its sector in which case a slightly higher percentage may apply. Profit share payments are calculated in respect of any particular year of account when it closes after three years and the total payment is, from the 2000 year of account onwards, made in one tranche immediately following closure of the year of account. Payments for earlier years of account had been phased over three years and thus the payments shown in this report for Messrs Carpenter and Holt comprise, if applicable, the second and final installments in relation to the 1999 and 1998 years of account respectively plus the whole of the reward in respect of the 2000 year of account. Whilst the precise structure of the syndicate profit share scheme may vary from year to year, the underlying policy is to reward those directly involved in underwriting, on a year of account basis, according to the performance of both their own division and the syndicate as a whole. Longer term performance rewards: share options Longer term rewards, which apply to executive directors and other senior employees only, are provided through executive share option schemes. The senior underwriters, including executive directors who are underwriters, who participate in the Capital Builder Plan described below may also be granted options, but the Committee’s policy is to grant options to such underwriters over fewer shares than would be the case if they did not participate in the Capital Builder Plan. Any grant of executive share options is at the discretion of the Committee. Generally a grant of options is made each year within a week or two of the preliminary results announcement. At the most senior level, the present policy is that grants are made each year, subject to applicable overall limits, over shares valued at up to around one times salary. At less senior levels, annual grants are over shares representing lesser multiples of salary. This general pattern is likely to be followed in 2003. All grants under the currently operated schemes are subject to performance conditions which are set by the Committee. Details of these are set out in the section entitled ‘Details of share option schemes’ below and have varied from grant to grant, but the intent is to ensure that options may not be exercised (except in special circumstances such as redundancy) unless the performance of the Company has exceeded that of comparable companies and, in addition, the Company has returned a satisfactory overall financial performance. No significant change to performance conditions is anticipated in respect of the 2003 grant. Longer term performance rewards: Capital Builder Long Term Incentive Plan At the 2001 Annual General Meeting, shareholders approved the adoption of a new long term incentive scheme for senior underwriters, the Amlin Capital Builder Long Term Incentive Plan (‘Capital Builder Plan’ or ‘Plan’), to reward them for exceeding long term target underwriting returns. This additional long term performance reward is intended to balance the shorter term profit share arrangements for underwriters described above. The basis of the Plan is that participants will benefit to the extent that, in their particular class of business (or, in some cases, a blend of classes of business), target returns on capital are exceeded over a specified performance period, which is usually five years. Participants will share, at a class of business level, in up to 6% of the underwriting profits (net premiums less net claims, reinsurance costs and short term profit share) which are in excess of the relevant target return over the duration of the performance period. Up to around a further 4% of such excess profits may be allocated at a divisional or whole syndicate level to the heads of each underwriting division. Underwriting profits under the Plan are based on the pro rata proportion of Syndicate 2001’s capacity which is owned by the Group in each relevant year of account. Rewards under the Plan may be paid, at the Company’s discretion, in either cash or shares in three annual tranches following the end of the performance period. The first five year measurement period under the Plan began on 1 January 2001 and, other than possibly for new joiners or promotions, it is not anticipated that further participations will be offered until this five year period has expired. Benchmarks for each relevant class of business have been set for the first measurement period which, on an aggregated basis and after allowing for estimated expenses and syndicate investment income but before tax, are estimated to correspond to an overall benchmark return on allocated capital of at least 15% per annum over a full insurance cycle. The only change made to the Plan rules during 2002 was to allow participants who reach their normal retirement age during a five year measurement period to be rewarded based on the average rate of return over a shorter period ending on their retirement. The Committee believes that the Plan will act as a significant reward, retention and recruitment tool for those underwriters who are likely to be most significant in determining the Group’s future underwriting profitability and development. A total of 25 underwriters were invited in April 2002 to be the first participants in the Plan. Details of the participations by the two underwriters who are directors of the Company, Messrs Carpenter and Holt, including an estimate of their rewards in respect of the 2001 and 2002 years of account, are set out later in this report. Service agreements and their termination The general policy of the Group is not to offer service agreements with notice periods in excess of six months, except in the case of executive directors of the Company and the most senior level of management when up to a twelve month period of notice may be offered. All of the current executive directors of the Company have contracts requiring twelve months’ notice of termination on either side. The Company is mindful of the need to balance the contractual advantages to the Group in some circumstances of longer periods of notice against the potential cost arising from such contracts in the event of termination of employment at the Group’s initiative. In the event of early termination by the Group, employees, including executive directors, are treated fairly and, whilst recognising that each case is different, the Group seeks to reduce, where practicable, the compensation payable by taking account of the duty of the employee to mitigate his or her loss. Details of each director’s service contract are set out in the section entitled ‘Executive directors’ service contracts’ below. Outside appointments The Company allows executive directors and other appropriate senior employees to accept outside non-executive appointments, subject to permission being obtained in each case and to acceptable procedures for managing any potential conflicts of interest, recognising that such appointments can be in both the Company’s and the wider public interest. Except in the case of those with other than full time employment contracts, fees from such appointments would generally be payable to the Company rather than retained by the executive concerned. Table 1: Directors' remuneration received
Executive directors’ service contracts The dates of the current service or employment contracts with the Company (and/or a wholly owned subsidiary) of each executive director during the year, all of whom served throughout the year, are as follows:
In each case salaries have been periodically increased since the original contract date. By a supplemental agreement dated 23 November 2001, Mr Stace’s service contract has been varied so that from 1 November 2001 he was required to commit an average of three days per week to his duties rather than committing on the previous full time basis. It was agreed that this commitment reduces further to two days per week from 1 January 2003. To take account of this, and also to take account of a voluntary termination of his service contract on 31 December 2003 without further compensation, Mr Stace’s base salary reduced from £194,000 per annum to £116,400 per annum on 1 November 2002 and has further reduced on 1 January 2003 to £97,000 per annum. His annual car allowance was also reduced on 1 January 2003 to £6,800. Other than Mr Stace, all of the executive directors’ service or employment contracts are on a full time basis, provide for 12 months’ notice of termination on either side and automatically terminate on the director’s sixtieth birthday. There are no special provisions for compensation on termination other than that the Company has the right to pay salary (and in the case of Mr Holt also an amount equal to other contractual benefits) in lieu of any required period of notice. Remuneration received The remuneration received in respect of the year ended 31 December 2002 by each of the directors, excluding pension contributions, all of whom served throughout the year, was as shown in Table 1 above. The fees of Mr Mylvaganam in 2001 and 2002 include fees of £15,000 and £16,000 respectively paid to him by a subsidiary of the Company, Amlin Underwriting Limited, of which he is also a non-executive director. The fees of Lord Stewartby in 2001 and 2002 include fees of £7,500 and £5,000 respectively paid to him by Stace Barr Angerstein PLC, a company in which the Group has an investment and of which he was a non-executive director appointed by the Group until July 2001 and, since that date, has been an alternate director. The bonuses and/or profit share amounts are those paid or payable in respect of the year. Messrs Hextall and Philipps received performance bonuses under the Group Bonus Scheme described above. Mr Stace received a discretionary bonus payment. Mr Holt’s bonus and/or profit share was profit share in relation to his former Coles division in respect of the 2000 and earlier years of account and Mr Carpenter’s was profit share in relation to his Amlin Insurance Services division in respect of the 2000 and earlier years of account. Other than in relation to Mr Stace as included in his salary arrangements as described above in ‘Executive directors’ service contracts’, no payments were made during the year in respect of any director leaving the Board or ceasing to be employed by the Group. Table 2: Directors' pension details
Executive directors’ pensions The pension details for either defined contribution (including personal pension) schemes or defined benefit schemes, as applicable for each executive director (non-executives not being eligible), all of whom served throughout the year, are shown in Table 2 above. Increases in accrued pensions during the year exclude those due to inflation. Transfer values are calculated in accordance with the guidance dated 6 April 2001 published by the Institute of Actuaries and the Faculty of Actuaries. Executive directors’ Capital Builder Plan participations An outline of the terms of the Capital Builder Plan is set out in the ‘Remuneration policies’ section earlier in this report. The applicable classes and divisions of the business which will determine the rewards payable to each of the directors of the Company participating in the Plan are as follows:
At this stage it is too early to estimate with any degree of accuracy the rewards that any director might receive from the Plan in three to five years’ time in respect of the total measurement period to 31 December 2005. However, on the basis of the current estimated returns in respect of the 2001 and 2002 Lloyd’s years of account only, the rewards in respect of those two years of each of the directors are estimated as follows:
No payments have yet been made pursuant to the Plan and none of the above prospective rewards are payable until early 2006. It is emphasised that the above prospective rewards could be reduced, as well as increased, by changes to the projected performance of the 2001 and 2002 years of account and by underwriting performance over the final three years of account of the five year measurement period. Details of share option schemes Introduction The Group has a number of share option schemes relating to the Company’s shares, in which executive directors and other senior employees participate, and a Sharesave scheme in which all eligible employees, including executive directors, may participate. Where relevant, such schemes have been approved by shareholders. An overview of each scheme in which directors participate, each of their performance conditions, and, where applicable, the current position regarding the fulfilment of performance conditions, is set out below. The schemes set up by the former Murray Lawrence group prior to its merger with the Company in 1998 involve options over existing shares held by the Group’s Employee Share Ownership Trust (‘ESOT’) rather than over new shares in the Company to be issued in the future. Options granted in 1997 and 1998 under the Amlin executive share option schemes (which were set up by the Company) were made entirely over new shares to be issued in the future but, in the cases of grants from 1999 onwards, some of the options granted each year have been on the basis that they would, when exercised, be satisfied out of shares held by the ESOT. The grant expected to be made in 2003 is expected to be over new shares only but use of the ESOT for future grants is likely to resume in due course. None of the schemes require the payment of any consideration for the grant of options other than the Murray Lawrence 1997 scheme when a nominal consideration of £1 per grant of option was paid. Adjustments to options made during 2002 In order to take account of the rights issue which took place in February 2002 and the firm placing and placing and open offer which took place in July 2002, the Committee and, where relevant, the trustee of the ESOT twice during the year adjusted the numbers of shares under option and the exercise prices of all the outstanding options under the Group’s option schemes. The first adjustment increased the numbers of shares under option, and reduced the exercise prices, by approximately 1.5% and the second adjustment was similarly of 2.7%. Such adjustments were in accordance with independent advice and were approved, in the case of the Sharesave scheme where its rules so require, by the Company’s auditors. Performance conditions of the Amlin executive share option schemes (the ‘Amlin schemes’) The Amlin schemes are the only schemes operated by the Group (other than the Sharesave scheme) under which options continue to be granted to executive directors. The Amlin schemes comprise both an Inland Revenue approved and an unapproved executive share option scheme. Both were approved by the Company’s shareholders in 1997 and options have been granted in that and each subsequent year. In May 2002, options were granted at an exercise price of 83.5p per share over a total of 4,226,700 shares, of which 3,326,700 were over new shares and 900,000 over existing shares held by the ESOT. These numbers were adjusted to 4,342,022, 3,417,456 and 924,566 respectively, and the exercise price adjusted to 81.28p per share, as a result of the second adjustment referred to in the previous paragraph. The options granted in 1997 and 1998 may only be exercised if the total shareholder return of the Company, over a three year period, exceeds that of the FTSE 100 index. Additionally, there are secondary targets based on achievement of levels of financial performance. These depend on the role of the executive concerned and are only relevant if the primary condition is fulfilled. For directors of the Company, these targets relate to average returns on capital employed. The options granted in 1999 to 2002 inclusive may only be exercised if (a) the total shareholder return of the Company, over a three year period, exceeds that of the median member of a comparator group of insurance companies and (b) the Remuneration Committee is satisfied that the underlying financial performance of the Company has been satisfactory. The comparator groups of companies agreed by the Committee at the time of the grants in each of these years were, in addition to Amlin, as indicated by the stars in the following table:
The changes in performance conditions set under these schemes have been made to reflect the Company’s development. In 1997 and 1998 the Company was an investment trust with an investment portfolio designed to track the FTSE 100 index, with the purpose of enhancing such equity returns through Lloyd’s underwriting. By 1999 the Company was no longer structured as an investment trust and was suitable to be measured against its peers in the insurance sector. The criteria for inclusion in the comparator groups of companies has been refined each year since 1999, principally to exclude the shares of less comparable companies. All of the secondary performance conditions are intended to provide a measure of absolute financial performance alongside the relative performance measures of the primary conditions. Measurement of performance conditions of the Amlin schemes to date Performance is first measured against the relevant conditions three years after grant. The conditions relating to the options granted in May 1997 and September 1998 have been measured in respect of the relevant three year periods which have elapsed to date. The Company’s total shareholder return exceeded that from the FTSE 100 index over such periods to May 2002 and September 2002 respectively and accordingly all of such options have now met their primary performance conditions. The secondary condition in respect of the 1997 and 1998 grants for holding company executives, including two directors of the Company, Messrs Philipps and Stace, was related to returns on capital employed, adjusted for certain factors relevant to the then structure of the Group. Aspects of this condition have proved difficult to apply to the very changed structure of the present Group and the condition is under review by the Committee. Pending the result of such review, the Committee has determined that the condition has not yet been satisfied and therefore none of the options granted to holding company executives under the Amlin schemes in 1997 or 1998 are yet ordinarily exercisable. It is expected that the review will be concluded, and the secondary performance conditions in respect of these options considered again by the Committee, later in 2003. The first three year measurement periods for the options granted in 1999 and 2000 are to 30 June 2002 and 31 December 2002 respectively. The Company’s total shareholder return over these two periods were 16% and 47% respectively, placing Amlin 4th out of 18 and 2nd out of 12 companies respectively. Accordingly, the Committee has determined that the primary conditions of both the 1999 and 2000 grants of options have been satisfied. However, the Committee concluded during 2002 in respect of the 1999 grants that the underlying financial performance of the Company had not been sufficiently satisfactory over the three years to 30 June 2002 for the secondary condition to have been fulfilled at that date. The Committee will consider this condition again shortly after 30 June 2003, at which time it will also determine the position regarding the similar condition in respect of the 2000 grant for the three year period to 31 December 2002. The Murray Lawrence Discretionary Share Option Scheme 1997 (‘ML 1997’ scheme) The ML 1997 scheme is not an Inland Revenue approved scheme. Options were granted to selected employees and directors of the Murray Lawrence group in 1997. The options became options over the Company’s shares following the merger of the Company with ML (Bermuda) Limited in September 1998. No further options will be granted under the scheme. The grant was divided into three equal tranches, of which the first was exercisable from 2000, the second from 2001 and the third from 2002. Measurement of performance conditions of the ML 1997 scheme to date Except in permitted cases of early exercise, the exercise of each tranche of an option is conditional on Amlin’s share price attaining a specified price per share. The target prices of the first and second tranches, of 69.11p and 103.67p respectively, had already been attained by the relevant first exercise dates in 2000 and 2001 and thus these tranches are currently exercisable. Following each of the two share issues in 2002, the target price for the third tranche was adjusted by the same percentage as the exercise prices, from 138.23p prior to the first share issue to 132.56p. As at the date of this report this target price has not yet quite been attained and thus in usual circumstances this tranche is not yet exercisable. The Murray Lawrence Discretionary Share Option Scheme 1998 (‘ML 1998’ scheme) The details of the structure of the ML 1998 scheme are almost identical to those described above for the ML 1997 scheme except, in this case, options were granted in 1998 (but prior to the merger with the Company). Measurement of performance conditions of the ML 1998 scheme to date Exercise is, as with the ML 1997 scheme, conditional on Amlin’s share price attaining specified prices per share. Such prices were adjusted during 2002, on the same basis as the ML 1997 scheme, to take account of each of the two share issues. For those participants who had also been granted options under the ML 1997 scheme the target prices are now 169.44p for half of the grant and 201.30p for the other half (adjusted from pre-rights issue targets of 176.68p and 209.91p respectively). In the case of those who had not been granted options under the 1997 scheme, such prices are now 155.44p and 184.68p respectively (adjusted from pre-rights issue targets of 162.09p and 192.58p respectively). None of these target prices have yet been attained and accordingly in usual circumstances none of the ML 1998 options are yet exercisable. Amlin Savings-Related Share Option Scheme 1998 (‘Sharesave’ scheme) A Sharesave option scheme was adopted by the Company in September 1998 and grants of options under this scheme, in each case entirely over new shares to be issued in the future, were made in October 1999, June 2001 and October 2002. This scheme is open to all Group employees, including executive directors, who have been employed for more than a number of months which is specified at each grant. Exercises of options under the Sharesave scheme are not subject to any performance condition. Further offers under this scheme are likely to be made periodically in the future. Total shareholder return performance As background to the position regarding options performance conditions, and in accordance with legal requirements, Graphs 1 and 2 below illustrate the total shareholder return performance of the Company’s ordinary shares relative to the FTSE 350 index and the FTSE All Share Insurance index over the five years to 31 December 2002. The graphs show the values, at each year end from 1998 to 2002 inclusive, of £100 invested in the Company’s shares on 31 December 1997 compared with £100 invested in the relevant index. To produce a ‘fair value’, each point on the graphs is a 30 day average of the relevant return index.   Executive directors’ share options Options held over shares in the Company as at 31 December 2002 by executive directors serving at the year end (non-executive directors not being eligible), and changes during the year, are set out in the following two tables: Table 3: Options held
Table 4: Options exercised during 2002
The increases in each directors’ numbers of shares under option shown in Table 3 above include the effects of the adjustments summarised above to the terms of options made as a result of the two share issues during the year. The relevant option exercise prices shown in Table 3 are after such adjustments. The calculations in Table 3 of potential profit on exercise as at 31 December 2002 are based on the year end share price of 119.0p (2001: 86.5p). The high and low during the year were 120.5p and 60.5p. These calculations are before tax and are theoretical as in many cases the relevant options were not exercisable at that date, either because they had not reached the relevant exercise date or because performance conditions had not yet been fully met. The performance conditions applying to each grant of options, and their current status, are summarised above in ‘Details of share option schemes’. Other than adjustments and grants of options, the other directors’ changes during the year reflected in Table 3 resulted from the two exercises of options set out in Table 4. The exercise prices and shares exercised in Table 4 are after the adjustments for the share issues described above. In both cases the directors have to date retained the resultant shares. Non-executive directors’ fees, appointment and removal In line with the recommendations of the current Combined Code, the fees paid to non-executive directors of the Company, including the Chairman, are determined by the full Board, in the light of professional advice on the level of such fees paid by comparable companies for comparable services. Each non-executive director is paid a basic fee and may be paid further for additional services, including for acting as Chairman or Deputy Chairman of the Company, or serving as chairman of a committee or as a member of certain subsidiary boards. Non-executive directors are not offered service contracts, but their terms of appointment are formalised in letters of appointment which are updated from time to time. The latest letters of appointment of the Chairman and all the other non-executive directors who served during the year, all of whom served throughout the whole year, were dated 30 May 2002 and each was subsequently amended by a supplementary letter dated 11 March 2003. Non-executive directors, as is the case with executive directors, are appointed on the recommendation of the Nomination Committee. Non-executive directors may be removed, or not nominated for re-election at the end of their three year term, in each case in accordance with the Articles of Association of the Company. The commencement and expected year of expiry of each of the non-executive directors’ current three year terms are as follows:
If a non-executive director is not nominated for re-election at the end of a term of office, or otherwise ceases to hold office, the director is not entitled to any extra payment on termination. By Order of the Board, on the recommendation of its Remuneration Committee C C T Pender Secretary 26 March 2003 |
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