Directors’ remuneration report
The directors’ remuneration report describes Candover’s remuneration policy, the role of its remuneration committee and its activities for the year ended 31st December, 2007. It has been prepared on behalf of the Board in accordance with the Companies Act 1985 and the Combined Code. It is more succinct than in previous years because the Company did not have any executive directors during 2007. It will be put to shareholders for approval by ordinary resolution at the Annual General Meeting to be held on 14th May, 2008.
The audited section of the directors’ remuneration report is the table of non-executive directors’ remuneration.
Remuneration committee
Composition and operation
The remuneration committee supports the Board by determining the level of remuneration of the chairman of the Company, as well as reviewing the remuneration policy applicable to the senior management of Candover Partners Limited. The Board of the Company is now comprised solely of non-executive directors.
At 31st December, 2007 the members of the remuneration committee were Richard Stone (chairman), Gerry Grimstone, Antony Hichens, Jimmy West and Chris Russell. Lord Jay joined the committee on 1st March, 2008. The remuneration committee, which meets as often as necessary to discharge its duties, met on four occasions in 2007. Attendances have been noted already in the directors’ report. Written terms of reference are available on the Company’s website at www.candoverinvestments.com.
No member of the remuneration committee has any personal financial interests or conflicts of interest (other than as shareholders). In this regard, the remuneration committee gives full consideration to the provisions of the Combined Code.
Professional advice
During the year the remuneration committee received, at the Company’s expense, professional advice from Grant Thornton UK LLP, the Company’s auditors and tax advisors, Ashurst, the Company’s lawyers, and New Bridge Street Consultants, independent remuneration advisors. New Bridge Street Consultants were appointed by the committee to advise on directors’ fees and to provide advice in relation to the implementation and operation of the Company’s employee share schemes. Candover participates in the MM&K remuneration survey of the private equity industry, the results of which are reviewed by the remuneration committee, to ensure that the Company’s remuneration policy remains in line with market trends and practice.
Activities during the year
Following approval by shareholders at the Annual General Meeting of the Company on 16th May, 2007, the remuneration committee launched a share matching plan (SMP) to executives and a company share option plan (CSOP) to support staff. The purpose of the SMP is to encourage executives to own shares in the Company, promoting a better alignment of interests and a focus on Group performance. 94% of Candover’s executives participated in the SMP purchasing 36,293 shares in the Company.
Demanding performance criteria requiring the Company’s net asset per share growth to outperform the FTSE All-Share Index by a fixed margin over a fixed three year period attach to the receipt of any matching shares as follows:
| Out-performance of the FTSE All-Share Index over three financial years |
Level of match |
| Less than 5% per annum | 0 |
| 5% per annum | 0.5:1 |
| 12.5% per annum | 1:1 |
| 25% per annum | 3:1 |
Between 5% and 12.5% and between 12.5% and 25%, straight line pro-rating shall apply.
29,675 options were granted to support staff who play an important role that adds to shareholder value, but who do not participate in incentive schemes linked to funds managed by Candover Partners Limited. Further details can be found in note 2 to the accounts.
As permitted by the SMP and CSOP scheme rules, the remuneration committee intend to invite executives to participate in the SMP and to grant further options to support staff on an annual basis.
The Company’s non-executive directors are not eligible to participate in either of these schemes, and no individual employee will be eligible for both schemes in any given year.
At the beginning of the year the remuneration committee considered the fee paid to the Chairman of the Company. Based on market information, time commitment required and the level of responsibility undertaken, an increase in fee payable to the Chairman was approved by the Remuneration Committee, effective 1st January, 2007.
The remuneration committee reviewed salaries and performance related bonuses payable to Candover Group employees. Salary levels were reviewed after considering relative salary levels within the industry, the estimated movement in net assets and the profits for the year. Performance bonuses were reviewed after consideration of the profit and net asset performance, operational achievements of the Company, including progress on investments and realisations, and the external market.
Remuneration policy
The Group’s remuneration policy is designed to ensure that the Company maintains competitive remuneration packages in order to recruit, retain and motivate executives of exceptional quality in the overall interests of shareholders. As is customary in the private equity industry, the remuneration package for executives comprises both fixed and variable elements, including salary, performance related bonuses, pension contributions and other incentive arrangements.
For non-executive directors the Chairman of the Company recommends the level of fees to be paid based on market information, time commitment required and the level of responsibility undertaken. These recommendations are then put to a meeting of the executive committee of the Company for approval. Having sought advice from New Bridge Street Consultants on current market information, and given that base fees for non-executive directors had not increased since 2002, increases in annual fees payable to non-executive directors were approved by the executive committee of the Company as set out below.
Non-executive directors are not paid performance fees, granted share options or invited to participate in long-term incentive plans.
| Current £ | Former £ | |
| Board member | 35,000 | 27,500 |
| Audit committee Chair | 40,000 | 35,000 |
| Remuneration committee Chair | 40,000 | 35,000 |
| Senior Independent Director | 37,500 | 30,000 |
| Nominations committee Chair | 37,500 | 35,000 |
In general, non-executive directors’ fees payable by investee companies of Candover for the services of Candover directors and executives who sit on their boards are paid to the Company for its benefit or that of the fund investors, whichever is appropriate. However, since ceasing to be an executive director of the Company in May 2006, board fees of $40,000 p.a. paid by DM&E in respect of the services of Stephen Curran have been paid to and retained by him. In October 2007, on completion of the sale of DM&E, Stephen Curran received an additional $400,000 from DM&E which he has agreed to remit to the Company (less any taxes, statutory deductions and professional expenses).
Non-executive directors
Total emoluments received by non-executive directors during the year ended 31st December, 2007 were as follows:
| Salaries/ directors’ fees £ |
Performance related pay £ |
Taxable benefits £ |
Insurance costs £ |
Total emoluments excluding pension contributions 2007 £ |
Total emoluments excluding pension contributions 2006 £ |
|
| Executive directors | ||||||
| Stephen Curran1,2 | – | – | – | – | – | 114,838 |
| Doug Fairservice1,2 | – | – | – | – | – | 88,837 |
| – | – | – | – | – | 203,675 | |
| Non-executive directors3 | ||||||
| Antony Hichens | 35,000 | – | – | – | 35,000 | 35,000 |
| Jimmy West4 | 32,500 | – | – | – | 32,500 | 29,106 |
| Richard Stone | 36,667 | – | – | – | 36,667 | 32,506 |
| Nico Lethbridge5 | 18,333 | – | – | – | 18,333 | 27,500 |
| Gerry Grimstone6 | 100,000 | – | – | – | 100,000 | 66,154 |
| Chris Russell | 36,667 | – | – | – | 36,667 | 39,773 |
| Stephen Curran | 30,000 | – | – | – | 30,000 | 17,840 |
| 289,167 | – | – | – | 289,167 | 247,879 | |
| Total | 289,167 | – | – | – | 289,167 | 451,554 |
| 2006 comparatives | 422,622 | – | 24,138 | 4,794 | 451,554 | |
| 1. Both Stephen Curran and Doug Fairservice retired as executive directors on 8th May, 2006. 2. While Stephen Curran and Doug Fairservice served on the Board of the Company as executive directors in 2006, pension contributions of £46,000 and £35,333 respectively were paid into the Candover Executive Pension Scheme on their behalf. No pension contributions have been made on behalf of any directors in 2007. 3. Non-executive directors fees increased as from 1st September, 2007 as per the table above. These salary increases have been pro rated accordingly. 4. A proportion of Jimmy West’s fee was paid to a third party as shown below. 5. Nico Lethbridge died on 16th August, 2007. 6. Gerry Grimstone’s fee was increased to £100,000 pa as from 1st January, 2007. |
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| Lord Jay was appointed to the Board on 1st January, 2008. He did not receive any remuneration during the year ended 31st December, 2007 | ||||||
| A schedule of directors’ interests in shares is shown in note 18 to the accounts. | ||||||
Termination payments and payments to third parties
No payments were made to a director of the Company for termination of employment.
A payment to a third party for directors’ services during the year was made in the case of Jimmy West, for whom £26,250 was paid to Jimmy West Associates Limited. This amount is included in the directors’ fees shown in the directors’ emoluments schedule above.
Non-executive directors’ letters of appointment
Each non-executive director has a letter of appointment with the Company. Non-executive directors’ appointments are reviewed annually and are subject to the re-election requirements of the Company’s Articles of Association. There are no provisions for directors to receive compensation upon early termination.
| Date of contract | Notice period | Unexpired term | |
| Stephen Curran | 8th May, 2006 | Terminable at the will of the parties | Terminated on his retirement on 6th December, 2007 |
| Gerry Grimstone | 6th July, 1999 | Terminable at the will of the parties | Appointment reviewed annually in June |
| Nico Lethbridge | 17th December, 2002 | Terminable at the will of the parties | Terminated upon his death on 16th August, 2007 |
| Jimmy West | 3rd February, 2004 | Terminable at the will of the parties | Appointment reviewed annually in December |
| Antony Hichens | 3rd February, 2004 | Terminable at the will of the parties | Appointment reviewed annually in December |
| Lord Jay | 4th December, 2007 | Terminable at the will of the parties | Appointment reviewed annually in December |
| Chris Russell | 16th March, 2004 | Terminable at the will of the parties | Appointment reviewed annually in December |
| Richard Stone | 19th March, 2008 | Terminable at the will of the parties | Appointment reviewed annually in December |
It is anticipated that Nicolas Jones will enter into a Letter of Appointment with the Company on the same terms as the other non-executive directors.
Comparative performance
Set out below is a graph showing the Company’s total shareholder return performance assuming an original investment of £1,000 and with dividends reinvested for the five years to 31st December, 2007. This is compared against the return performance achieved by the FTSE All-Share Total Return Index.
Signed on behalf of the Board
Richard Stone
Chairman of the remuneration committee
31st March, 2008