Financial Statements - Chemring Group PLC

2 0 0 3 F I N A N C I A L S T A T E M E N T SThe Committee continues to believethat a performance condition linked togrowth in earnings per share is anappropriate basis upon which to rewardthe executive directors for a measurableincrease in the performance of theGroup. However, taking into accountcurrent market practice and institutionalshareholders’ views on this subject, it islikely that a more demandingperformance condition requiringincreased growth in earnings per sharewill be applied to future option grantsunder the scheme.Long Term IncentiveSchemeThe Company previously operated along term incentive scheme known asThe Chemring Group PLC Share BasedIncentive Scheme. This scheme is notbeing utilised for executive directors atpresent.Performance GraphThe graph alongside shows acomparison of the Company’s totalshareholder return (TSR) over the lastfive financial years against a “broadequity market index”, as required by theRegulations. The FTSE Small CapIndex has been selected by theCommittee for this comparison becauseit provides the most appropriate measureof performance of listed companies of asimilar size to the Company.pension of up to two-thirds of salary,subject to Inland Revenue limits. TheExecutive Scheme also provides lifeassurance cover, dependants’ pensionsand lump sum payments ondeath-in-service.Mr Evans’ benefits under the ExecutiveScheme accrue based on a pension oftwo-thirds final pensionable salary withno cash commutation, and a 50%spouse’s pension, in respect of hismembership of the scheme from10 August 1987 to 5 April 1993. Forservice thereafter, his benefit accrual isbased on a pension of 50% finalpensionable salary plus 1.5 times finalpensionable salary as cash, and atwo-thirds spouse’s pension. For serviceaccrued from 1 February 2004 thespouse’s pension reduces to 50%. Anyexcess of cash over the Inland Revenuepermitted maximum is converted backto pension at the rate of £12 cash toTotal Shareholder ReturnValue(£)40035030025020015010050Mr Rayner’s pension under theExecutive Scheme accrues at 1/80th offinal pensionable salary for each year ofmembership, and he also accrues a cashlump sum of 3/80ths of final pensionablesalary for each year of membership. Atwo-thirds spouse’s pension is payable inrespect of service accrued to31 January 2004, reducing to 50% forservice accrued thereafter, and ondeath-in-service, Mr Rayner’s dependantswould receive a lump sum payment oftwo times basic salary and, in addition aspouse’s pension would be payable, ascalculated above. Mr Rayner is subject tothe earnings cap in respect of hismembership of the Executive Scheme.All pensions in payment in respect ofpensionable service accrued under theExecutive Scheme after 6 April 1993 areincreased by the lower of RPI or5% per annum.031 Oct 98 31 Oct 99 31 Oct 00 31 Oct 01 31 Oct 02 31 Oct 03Chemring Group PLCFTSE Small Cap IndexThe graph shows the value, by 31 October 2003, of £100 invested in the Company’s shares on31 October 1998 compared with the value of £100 invested in the FTSE Small Cap Index.PensionsMr Evans and Mr Rayner are membersof the Chemring Group ExecutivePension Scheme (“the ExecutiveScheme”). This is an approved finalsalary scheme providing, at retirement, a£1 pension. On death-in-service,Mr Evans’ dependants would receive alump sum payment of four times basicsalary and, in addition a spouse’s pensionwould be payable, as calculated above.Mr Evans has a normal retirement age of 60.Prior to 1 October 2003, the ExecutiveScheme was non-contributory. Witheffect from that date, members havebeen required to make monthlycontributions to the scheme at the rateof 6% of pensionable salary.P 15