ASOS Plc Annual report and accounts 2013
41
entrepreneur’s relief) should be payable by a
participant on any gain made at vesting, as
the invested award is purchased at the tax
fair value. However, these investments will be
forfeited if the performance conditions of the
ALTIP are not met.
The proportion of any participant’s award that
is not covered by an upfront investment will be
granted as conventional nil-cost options (Option
Scheme Awards). Should a member of senior
management choose not to make the minimum
investment of one-third of the tax fair value
of his or her award, the base value of that
award will be reduced by 25%, to recognise
the significantly lower risk profile, whilst still
providing a market-competitive award value.
At the end of the three-year performance
period on 31 August 2015, awards under
the ALTIP will vest in two tranches, subject
to the achievement of the performance
conditions (which are set out in more detail
below): Option Scheme Awards will vest on
31 October 2015 up to a maximum value of
50% of a participant’s total award; and the
investment, together with any remaining Option
Scheme Award, on 31 October 2016.
The ALTIP is subject to challenging,
interdependent earnings per share (EPS) and
total shareholder return (TSR) targets, which are
aligned to the strategic plans of the Company
and designed to ensure growth is delivered in
a profitable way. The extent to which an award
will vest will depend on those interdependent
EPS and relative TSR performance targets,
measured over a performance period from
1 September 2012 to 31 August 2015 (the
performance period). While the performance
targets will be tested separately, both hurdles
must be achieved for the awards to vest. There
are three performance levels under the EPS
performance target, as set out below.
• The ‘threshold’ performance level, which
delivers a 6.7% maximum vesting (subject
to any scale back as a result of the TSR
performance), will not be met unless the
compound rate of growth in fully-diluted
underlying EPS (before exceptional items,
but after the cost of the ALTIP) equals 17%
per annum over the three years ending
31 August 2015. This equates to fully
diluted EPS for the year to 31 August 2015
of 63.4p per share and implies sales
of £0.9bn.
• The ‘target’ performance level, which
delivers a 70% maximum vesting (subject
to any scale back as a result of the TSR
performance), will not be met unless the
compound rate of growth in fully diluted
underlying EPS (before exceptional items, but
after the cost of the ALTIP) equals 23% per
annum over the same period. This equates
to fully diluted EPS for the year to 31 August
2015 of 73.7p per share and implies sales
of £1.0bn, providing direct alignment with
our previously communicated strategy.
• The ‘stretch’ performance threshold, which
delivers a 100% maximum vesting (subject
to any scale back as a result of the TSR
performance), will not be met unless the
compound rate of growth in fully-diluted
underlying EPS (before exceptional items, but
after the cost of the ALTIP) equals or exceeds
32% per annum over the same period. This
equates to fully diluted EPS for the year to
31 August 2015 of 91.1p per share and
implies sales of £1.3bn.
The TSR performance condition requires
the comparison of TSR on an investment in
ASOS with TSR on a notional investment in
a comparator group during the performance
period. The comparator group comprises
all of the companies in the FTSE All-Share
General Retailers Index, as constituted at the
commencement of the performance period,
plus Mulberry Group plc. The TSR performance
will be applied to the outturn from the EPS
performance condition and may scale back
(potentially to zero) whatever would have
vested solely under the EPS condition. There
will be no scale back to the EPS outturn if the
TSR of ASOS is at the upper quartile or above.
The award will be scaled back progressively in
the event that the TSR of ASOS is below upper
quartile, such that there will be a scale back
of up to one-third if ASOS’s TSR is at median.
There will be zero vesting if ASOS’s TSR is
below median.
Participants of the ALTIP will not receive any
awards under the Company’s existing PSP
from implementation until the end of the
performance period. Shareholding guidelines
were also introduced at the same time as the
implementation of the ALTIP, as set out below.
The actual operation of the ALTIP scheme is
detailed in the remuneration implementation
section of this report.
Shareholding guidelines
Alongside the ALTIP, shareholding guidelines
have been introduced to ensure a continuing
link between Executive Directors’ interests
and those of shareholders following the ALTIP
vesting.
These guidelines require Executive Directors to
retain 50% of any shares acquired on vesting
of the ALTIP, and any subsequent share awards
thereafter (net of tax), until the following
shareholdings are achieved:
• Chief Executive Officer: five times salary
• other Executive Directors: two times salary.
As at 31 August 2013, the Chief Executive
Officer was already compliant with this policy.
The other Executive Directors will become
compliant when the ALTIP vests.
Employee Benefit Trust
The ASOS.com Limited Employee Benefit Trust
(EBT) and the Capita Trust (CT) are used to
facilitate the acquisition of ordinary shares
in the Company for the purpose of satisfying
awards and options granted under the
Company’s share schemes, in particular the
PSP, SAYE Scheme and the SIP. The EBT is a
discretionary trust, the sole beneficiaries being
employees (including Executive Directors)
and former employees of the Group and their
close relations, who have received awards
under the PSP and SAYE Scheme. The Trustee
is Ogier Employee Benefit Trustee Limited, an
independent professional trustee company
based in Jersey. Under the terms of the Trust
Deed, the Company funds the EBT to purchase
on the EBT’s own account ordinary shares in
the Company on the open market in return for
the EBT agreeing to use the ordinary shares
in the Company that it holds to satisfy certain
outstanding awards and options made under
the Company’s share schemes. The CT holds
shares awarded under the SIP solely for
the benefit of current employees (including
Executive Directors) who participate in the
SIP. Under the terms of the Trust Deed the
Company funds the CT to purchase the shares
on the open market and retain those shares
on behalf of the underlying beneficiaries until
such time as they can be removed.
The EBT and CT are both recognised within
the Employee Benefit Trust reserve for
accounting purposes.