Notification of Transactions of Directors and Persons Discharging Managerial Responsibility
The Deferred Annual Bonus Plan - Post-Tax Awards
The Deferred Annual Bonus Plan (DABP) was approved by shareholders on 20 May 2009, and allows a performance related opportunity in the form of conditional awards to be made to eligible employees.
All Executive Directors and Corporate Executive Team (CET) members are required to defer 25% of any bonus earned into shares and may choose to invest up to an additional 25% (i.e. Plan maximum of 50%) of any bonus earned into shares for three years on a pre-tax basis (Deferred Bonus Award) and/or post-tax (Co-Investment Shares) basis.
On 13 February 2014 the Company announced the awards made to individuals who had elected to participate in the DABP in respect of their 2013 bonus on a gross or pre-tax basis, and stated that DABP post-tax awards would be the subject of a separate announcement following the award date. This announcement relates to an individual who elected to participate in the DABP in respect of her 2013 bonus on a post-tax basis.
The Company will match Ordinary Shares or American Depositary Shares (ADSs) up to one-for-one depending on the achievement of the performance targets (Matching Award). The performance measures as set out below, vesting schedules and performance period for the Matching Award will be the same as for the PSP awards previously announced on 13 February 2014.
Dividends accrue on the conditionally awarded Matching shares during the performance period, but will only vest to the extent that the Matching shares themselves vest at the end of the relevant performance period. These dividends are not included in the figures that follow.
The vesting of the Matching Award is subject to the following three equally weighted performance measures which directly link to the Company's strategy:
|
Key strategic priorities
|
Performance Measure
|
Proportion of each award
|
|
Deliver value to shareholders
|
Total Shareholder Return (TSR)
|
1/3rd
|
|
Simplify the operating model
|
Adjusted free cash flow
|
1/3rd
|
|
Deliver more products of value
|
Research & Development (R&D) new product performance
|
1/3rd
|
The performance period for the awards is three years from 1 January 2014 to 31 December 2016.
TSR measure
One third of each conditional award is based on relative TSR. This measure compares the TSR of the Company's Ordinary Shares over the performance period with the TSR of the shares of nine (9) other global pharmaceutical companies (i.e. a comparator group of 10 companies including the Company). The vesting schedule is based on delivering 30% vesting for achieving median performance. However, in a group of 10 companies, the median (position 5.5) falls between two companies. Therefore, 0% will vest if the Company's TSR is ranked 6th and 44% will vest if its TSR is ranked 5th, i.e. above median, in the comparator group. The maximum amount will vest for this element, if the Company's TSR is ranked in positions 1, 2 or 3.
The companies in the TSR comparator group are AstraZeneca, Bristol-Myers Squibb, Eli Lilly, Johnson & Johnson, Merck, Novartis, Pfizer, Roche Holdings, Sanofi and GlaxoSmithKline.
Adjusted free cash flow measure
One third of each conditional award is based on adjusted free cash flow. This element of the award will vest as follows:
| |
Adjusted free cash flow performance
|
% vesting
|
|
Below threshold
|
< £ 13.68bn
|
0%
|
|
Threshold
|
£ 13.68bn
|
25%
|
| |
£ 14.10bn
|
50%
|
| |
£ 15.51bn
|
75%
|
|
Maximum
|
£ 16.22bn
|
100%
|
R&D new product measure
One third of each conditional award is based on R&D new product performance. Due to commercial sensitivity, the Remuneration Committee has decided that the R&D new product target cannot be published at the time of grant. The target and vesting outcome will be disclosed in full at the end of the performance period.
25% of this element will vest if the performance threshold level is attained, rising to 100% for stretching performance exceeding 122% of the set threshold. Below the set threshold, none of this element will vest.
To the extent that each element of a conditional award does not vest at the end of the three-year performance period, it will lapse.
For the following UK participant who elected to defer on a post-tax basis, the Matching Award for the Co-Investment Shares has been granted as a nil-cost option over Ordinary Shares. As noted above, the percentage of the Matching Awards over Ordinary Shares ultimately vesting will be dependent on performance.
| |
Number of Co-Investment Shares (Ordinary Shares)
|
|
| |
|
Ms C Thomas
|
2,534
|
|
| |
Number of Ordinary Shares potentially vesting in respect of the the Matching Award subject to the TSR measure
|
|
Ordinary Shares
|
6th position or below
|
5th position
|
Maximum
|
|
Ms C Thomas
|
Nil
|
372
|
845
|
| |
Number of Ordinary Shares potentially vesting in respect of the Matching Award subject to the adjusted free cash flow and R&D new product measures
|
|
Ordinary Shares
|
Below threshold
|
At threshold
|
Maximum
|
|
Ms C Thomas
|
nil
|
422
|
1,689
|
The Co-Investment Shares will cease to be Co-Investment Shares and the Matching Award will vest on the vesting date. The vesting date will be the later of the date, following the end of the three year performance period, on which the Remuneration Committee determines the extent to which the performance conditions have been satisfied, the third anniversary of the Award Date or such date as determined by the Remuneration Committee.
The above award was approved by the Remuneration Committee on 12 February 2014. The Co-Investment Shares were acquired, in accordance with the 2009 Deferred Annual Bonus Plan rules, on 20 March 2014 at an Ordinary Share price of £16.2954.
The Company and Person Discharging Managerial Responsibility were advised of this transaction on 24 March 2014.
This notification is made in accordance with Disclosure and Transparency Rule 3.1.4R(1)(a).
V A Whyte
Company Secretary
24 March 2014