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| b. |
Performance Share Plan
Under the Performance Share Plan, the awards granted conditional on performance targets are set based on
medium-term corporate objectives at the start of each rolling three-year performance qualifying period. A specific
number of performance shares shall be awarded at the end of the three-year performance cycle depending on the
extent of the achievement of the performance conditions established at the onset.
The performance levels were calibrated based on Wealth Added and Total Shareholder Return. A minimum
threshold performance must be achieved to trigger an achievement factor, which in turn determines the number
of shares to be finally awarded. Performance shares to be delivered will range between 0% to 150% of the
conditional performance shares awarded.
In 2009, the Performance Share Plan was enhanced to create alignment between senior management and other
employees at the time of vesting by introducing a plan trigger. Under this trigger mechanism, the performance
shares for the performance period 2009 to 2011 will be vested to the senior management participants only if
the restricted stocks for the performance period 2010 to 2011 are vested, subject to the achievement of the
performance conditions for the respective performance periods.
Senior management participants are required to hold a minimum percentage of the shares released to them
under the Performance Share Plan to maintain a beneficial ownership stake in the Group, for the duration of their
employment or tenure with the Group. A maximum cap is set based on a multiple of the individual participant’s
Annual Base Salary. Any excess can be sold off, but in the event of a shortfall, they have a two calendar year period
to meet the minimum percentage requirement. |
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| i. |
Sembcorp Industries Ltd Performance Shares
The details of performance shares of Sembcorp Industries Ltd awarded during the financial year since commencement of the Performance Share Plan (aggregate) are as follows: |
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Performance
shares
participants |
Conditional
performance
shares awarded
during the year |
Aggregate
original
conditional
performance
shares
awarded |
Aggregate
additional
conditional
performance
shares
awarded
due to
modification |
Aggregate
conditional
performance
shares
released |
Aggregate
conditional
performance
shares
lapsed |
Aggregate
conditional
performance
shares
outstanding |
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2009 |
|
|
|
|
|
|
Director of the Company: |
|
|
|
|
|
Tang Kin Fei |
400,000 |
2,640,000 |
73,720 |
(1,201,034) |
(518,364) |
1,208,240 |
Key executives of the Group |
570,000 |
6,125,000 |
69,989 |
(1,630,795) |
(3,313,404) |
1,432,622 |
|
970,000 |
8,765,000 |
143,709 |
(2,831,829) |
(3,831,768) |
2,640,862 |
|
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|
2008 |
|
|
|
|
|
|
Director of the Company: |
|
|
|
|
|
Tang Kin Fei |
400,000 |
2,240,000 |
73,720 |
(931,240) |
(359,914) |
1,236,484 |
Key executives of the Group |
550,000 |
5,555,000 |
69,989 |
(1,423,859) |
(2,878,682) |
1,504,280 |
|
950,000 |
7,795,000 |
143,709 |
(2,355,099) |
(3,238,596) |
2,740,764 |
|
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With the Committee’s approval on the achievement factor for the achievement of the performance targets for the performance period 2006 to 2008, a total of 476,730 (2008: 1,176,549) performance shares were released
via the issuance of treasury shares.
In 2008, there were additional 395,750 performance shares awarded for the over-achievement of the
performance targets.
The total number of performance shares in awards granted conditionally and representing 100% of targets
to be achieved, but not released as at end 2009, was 2,640,862 (2008: 2,740,764). Based on the multiplying
factor, the actual release of the awards could range from zero to a maximum of 3,961,293 (2008: 4,111,146)
performance shares. |
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| ii. |
Performance shares of a listed subsidiary
The details of performance shares of Sembcorp Marine Ltd awarded during the year since commencement of the Performance Share Plan (aggregate) are as follows: |
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|
2009 |
2008 |
|
|
|
Conditional performance shares awarded during the year |
545,000 |
790,000 |
|
|
|
Aggregate original conditional performance shares awarded |
6,560,500 |
5,215,000 |
Aggregate conditional performance shares released |
(3,594,500) |
(2,721,900) |
Aggregate conditional performance shares lapsed |
(1,193,000) |
(425,600) |
Aggregate conditional performance shares outstanding |
2,315,000 |
2,610,000 |
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No performance shares of Sembcorp Marine Ltd were awarded to the directors of the Company.
In 2008, there were additional 542,500 performance shares awarded for the over-achievement of the
performance targets.
The total number of Sembcorp Marine Ltd’s performance shares in awards granted conditionally and
representing 100% of targets to be achieved, but not released as at end 2009 was 2,315,000 (2008: 2,610,000).
Based on the multiplying factor, the actual release of the awards could range from zero to a maximum of
3,472,500 (2008: 3,915,000) performance shares. |
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Fair value of performance shares
The fair values of the performance shares are estimated using a Monte Carlo simulation methodology at the grant
dates.
The fair values of performance shares granted during the year are as follows: |
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|
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Fair value
of Sembcorp
Industries Ltd
performance
shares granted
on April 9, 2009 |
Fair value
of Sembcorp
Industries Ltd
performance
shares granted
on April 7, 2008 |
Fair value
of Sembcorp
Marine Ltd
performance
shares granted
on April 13, 2009 |
Fair value
of Sembcorp
Marine Ltd
performance
shares granted
on April 7, 2008 |
|
|
|
|
|
Fair value at measurement date |
S$2.14 |
S$2.08 |
S$2.28 |
S$2.65 |
|
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Assumptions under the Monte Carlo model |
|
|
|
|
Share price |
S$2.67 |
S$4.26 |
S$2.26 |
S$3.77 |
Expected volatility: |
|
|
|
|
Sembcorp Industries Ltd /
Sembcorp Marine Ltd |
39.9% |
32.4% |
50.3% |
30.9% |
Morgan Stanley Capital International (“MSCI”)
AC Asia Pacific excluding Japan
Industrials Index |
33.9% |
21.9% |
33.9% |
21.9% |
Correlation with MSCI |
77.5% |
60.6% |
76.2% |
61.3% |
Risk-free interest rate |
0.7% |
1.1% |
0.7% |
1.1% |
Expected dividend |
5.8% |
4.7% |
5.3% |
5.0% |
|
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|
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The expected volatility is based on the historical volatility over the most recent period that is close to the expected life of the performance shares.
During the year, the Group charged S$4,284,000 (2008: S$5,981,000) to the income statement based on the fair value of the performance shares at the grant date being expensed over the vesting period. |
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|
| c. |
Restricted Stock Plan
Under the Restricted Stock Plan, the awards granted conditional on performance targets are set based on corporate
objectives at the start of each rolling two-year performance qualifying period. The performance criteria for the
restricted stocks are calibrated based on Return on Total Assets and Total Shareholder Return for awards granted
before 2009 and Return on Total Assets (excluding Sembcorp Marine Ltd) and Earnings Before Interest and Taxes
(excluding Sembcorp Marine Ltd) for awards granted in 2009.
A minimum threshold performance must be achieved to trigger an achievement factor, which in turn determines
the number of shares to be finally awarded. Based on the criteria, restricted stocks to be delivered will range from
0% to 150% of the conditional restricted stocks awarded.
The managerial participants of the Group will be awarded restricted stocks under the Restricted Stock Plan, while
the non-managerial participants of the Group will receive their awards in an equivalent cash value. This cash-settled
notional restricted stocks award for non-managerial participants is known as the Sembcorp Challenge Bonus.
A specific number of restricted stocks shall be awarded at the end of the two-year performance cycle depending
on the extent of the achievement of the performance conditions established at the onset. There is a further vesting
period of three years after the performance period, during which one-third of the awarded shares are released
each year to managerial participants. Non-managerial participants will receive the equivalent in cash at the end of
the two-year performance cycle, with no further vesting conditions.
Senior management participants are required to hold a minimum percentage of the shares released to them
under the Restricted Stock Plan to maintain a beneficial ownership stake in the Group, for the duration of their
employment or tenure with the Group. A maximum cap is set based on a multiple of the individual participant’s
Annual Base Salary. Any excess can be sold off, but in the event of a shortfall, they have a two calendar year period
to meet the minimum percentage requirement. |
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