In 2008, shareholders approved the renewal of the annual bonus share matching plan first approved by shareholders in 1998.
The plan permits executive directors and senior executives around the company to invest up to 50% of any after-tax annual bonus in Pearson shares.
If the participant’s invested shares are held, they are matched subject to earnings per share growth over the three-year performance period on a gross basis i.e. the maximum number of matching shares is equal to the number of shares that could have been acquired with the amount of the pre-tax annual bonus taken in invested shares.
50% of the maximum matching award is released if the company’s adjusted earnings per share increase in real terms by 3% per annum compound over the three-year performance period. 100% of the maximum matching award is released if the company’s adjusted earnings per share increase in real terms by 5% per annum compound over the same period.
For real growth in adjusted earnings per share of between 3% and 5% per annum compound, the rate at which the matching award is released is calculated according to a straight-line sliding scale.
| Real earnings per share growth per annum | Proportion of maximum matching award released |
|---|---|
| Less than 3% | 0% |
| 3% | 50% |
| Between 3% and 5% | Sliding scale between 50% and 100% |
| 5% or more | 100% |
Earnings per share growth is calculated using the point-to-point method. This method compares the adjusted earnings per share in the company’s accounts for the financial year ended prior to the grant date with the adjusted earnings per share for the financial year ending three years later and calculates the implicit compound annual growth rate over the period.
Real growth is calculated by reference to the UK Government’s Retail Prices Index (All Items).
Where matching shares vest in accordance with the plan, participants also receive additional shares representing the gross value of dividends that would have been paid on the matching shares during the performance period and reinvested.
Details of awards made, outstanding, held or released under the annual bonus share matching plan are as follows (subject to audit):
| Date of award | Share price on date of award | Vesting | Status of award |
|---|---|---|---|
| 21 April 2010 | 1,024.1p | 21 April 2013 | Outstanding subject to 2009 to 2012 performance |
| 16 April 2009 | 670.0p | 16 April 2012 | Outstanding subject to 2008 to 2011 performance |
| 4 June 2008 | 670.7p | 4 June 2011 | Performance condition for release of maximum matching award met. Real compound annual growth in earnings per share for 2007 to 2010 of 15.3% against target of 5%. Shares held pending release on 4 June 2011 |
| 22 May 2007 (See note 1) | 899.9p | 50% on 22 May 2010 | Target met as reported in report on directors’ remuneration for 2009. Shares held pending release on 22 May 2012 |
| 100% on 22 May 2012 | Outstanding subject to 2006 to 2011 performance | ||
| 12 April 2006 (See note 1) | 776.2p | 100% on 12 April 2011 | Performance condition for release of 100% of matching award met. Real compound annual growth in earnings per share for 2005 to 2010 of 14.1% against target of 3%. Shares held pending release on 12 April 2011 |
| 15 April 2005 (See note 1) | 631.0p | 100% on 2 March 2010 | Target met as reported in report on directors’ remuneration for 2009. Shares released on 2 March 2010 (see note 2) |
Note 1: For awards made prior to 2008, the annual bonus share matching plan operated on the basis of a 50% match after three years and 100% match after five years, subject to the earnings per share growth targets being met over the relevant performance periods.
Note 2: Having satisfied itself that the necessary performance conditions had been met, the committee agreed that for this award the shares be released earlier than the normal vesting date of the fifth anniversary of the date of the award.
All of the executive directors hold or held awards under this plan in 2010. Details are set out in table 4 and itemised as a or a*.