Directors' Remuneration Report (Information not subject to audit)

The Directors present the Remuneration Report for the year ended 31 March 2012. This Report has been prepared in accordance with Schedule 8 of the Large and Medium Sized Companies and Groups (Accounts and Reports) Regulations 2008 ("the regulations"). The Auditors are required to report on the "auditable" part of this Report and to state whether, in their opinion, that part of the Report has been properly prepared in accordance with the Companies Act 2006 (as amended by the regulations). The Report is therefore divided into separate sections for audited and unaudited information. In accordance with schedule 18 of the Companies Act, this Report has been approved by the Board for approval by Shareholders at the forthcoming Annual General Meeting.

Statement of Compliance

The Board has reviewed the Group's compliance with the Corporate Governance Code and it is their opinion that throughout the year, the Company complied with the Principles and Provisions on remuneration specified in the Corporate Governance Code.

Remuneration Committee

The objective of the Remuneration Committee ("the Committee") is to develop remuneration strategies that drive performance and provide levels of reward which reflect that performance, both for the Executive Directors and other key Executives. It is also responsible for reviewing the overall remuneration policy for all employees.

The Committee is composed entirely of Independent Non-Executive Directors. Members have no day-to-day involvement in the running of the business and no personal financial interest in the Company other than that of Shareholders. No Executive Director sits on the Committee. The Remuneration Committee is formally constituted with written Terms of Reference. A copy of the Terms of Reference is available to Shareholders by writing to the Company Secretary whose details are set out on IBC of the Report and Accounts.

The Committee had three meetings during the year. All members of the Committee at the time attended each meeting.

The Committee is advised on matters relating to Directors as required. It uses independent external advisers (IBC), as and when, to advise on remuneration matters.

The Committee consults with the Company Secretary regarding issues on areas of remuneration and Corporate Governance. With regard to senior Executives in the Company (excluding Board Directors), the Committee also takes advice from the Executive Board.

Remuneration Policy

In deciding on the levels of remuneration for Directors and senior managers, the comparative pay and employment conditions of employees across the Group are taken into account. In particular, the Committee takes into account the level of salary increases across the wider workforce when deciding upon any increases in remuneration for the Directors and senior management.

Actual remuneration to the Directors is shown in the table shown in the notes of this report.

Components of Remuneration Package

In order to achieve the objectives of the Committee's policy on remuneration, the individual components of an Executive Director's remuneration package are determined as follows:

Base Salary

The policy of the Committee during the year ended 31 March 2012 was to set base salaries around the lower quartile of an appropriate comparator group.

Factors taken into account by the Committee when determining base salary levels are:

  • Objective research based on a review of the remuneration in UK quoted companies with similar corporate attributes
  • Experience and responsibilities of each Executive Director
  • Pay and conditions throughout the Group

Salaries are reviewed annually in April. It is the intention of the Committee that base salaries will continue to be benchmarked with the comparator group.

Benefits

In line with other companies, potential benefits are provided in the form of a Company car (or car allowance), private medical insurance, permanent health insurance, critical illness cover and life cover up to a maximum 13.33 times earnings at date of death. This life cover provides a benefit in the form of a four times salary lump sum and a balance to buy a spouse's annuity. The provision of these benefits is in line with market practice.

Pension

Geoff Budd, Mark Belton, Glenda Roberts and Seamus Murphy are members of the Company's non-contributory pension plan. This is an HMRC approved defined contribution scheme. The rate of Company contribution to this scheme is 20% of basic salary.

Malcolm Diamond and Jim Barker do not participate in the Company pension plan.

Annual Bonus Payment

In 2011, due to the improved financial performance of the Company, the Committee felt it appropriate to implement a bonus scheme as part of overall executive compensation. This has been continued into 2012 with an ongoing desire to balance the fixed and variable performance related compensation for the Executive Directors.

In arriving at a bonus scheme the Committee was mindful of the following considerations:

  • The link between the fixed and variable element
  • The desire to reward team rather than individual performance
  • The desire to link maximum payouts to exceptional performance
  • The financial performance of the Group
  • The need to align the rewards with the interests of Shareholders

The 2012 bonus scheme is therefore based on the premise of rewarding exceptional performance measured by reference to the earnings of the Group before interest and tax.

The 2012 bonus is capped at 100% of base salary with maximum payouts only for achieving exceptional performance. The Committee assessed that performance in 2012 justified a payout of 35% for each Executive Director participating in the scheme. In addition to this, the Committee decided that the contribution of certain Board Members in sourcing and completing the acquisition of PSEP warranted a further discretionary bonus.

As in 2011, Geoff Budd did not participate in the bonus scheme. However, having considered his contribution and increased level of responsibilities during the year, the Committee has awarded him a discretionary bonus of £30,000.

For the year ending 31 March 2013 the Committee intends to use the same underlying parameters and for the maximum amount payable to remain at 100% of base salary.

Long-term Incentives

Following approval at the 2005 Annual General Meeting, the Company introduced a long-term incentive arrangement known as the Trifast plc 2005 Long Term Incentive Plan ("LTIP"). Awards under the LTIP were delivered in the form of conditional share awards which were to be released in three years dependent on continued employment and the satisfaction of demanding performance targets.

Full details of the awards held by Executive Directors under the LTIP at the start of the year are contained in the audited section of this Report.

All Company Directors who held LTIPs waived their right to these rewards during 2011.

The Executive Directors may also participate in the Trifast Savings Related Share Option Scheme that is open to all UK employees and is HMRC approved. The Scheme offers three, five and seven-year savings contracts which provide an option to purchase shares after maturity at a discount to the share price on the date the contract is taken out (the maximum discount is 20% of mid-market price).

Contracts

a) Executive Directors

During the year all Executive Directors had rolling service contracts as follows:

M M Diamond 6 months*
J C Barker 6 months*
M R Belton 6 months*
G P Budd 6 months*
S V Murphy 6 months*
G C Roberts 6 months*

* 12 months in the event of a change in control.

The Board is confident that these rolling contracts with the respective contractual termination payments are appropriate for the business and in accordance with Best Practice Corporate Governance.

The dates of the Executive Directors' contracts are:

M M Diamond 18 March 2009
J C Barker 18 March 2009
M R Belton 16 June 2010
G P Budd 17 April 2003
S V Murphy 16 June 2010
G C Roberts 16 June 2010

b) Independent Non-Executive Directors

All Non-Executive Directors are paid fees for their services which are determined by the Board as a whole and reviewed against market levels on an annual basis. They are all on annual contracts which are reviewed each year; their original signing dates were as follows:

N S Chapman 24 March 2009
J Shearman 1 July 2009

All Independent Non-Executive Directors have three-month notice periods (six months in the event of a change in control) and no contractual termination payments.

Their remuneration is not performance related and is not pensionable. The only other payments made to them are mileage allowances at HMRC rates and expenses for items incurred during the fulfilment of their roles.

c) Performance graph

In accordance with the Directors' Remuneration Report Regulations 2002, the graph below shows Trifast's total Shareholder return compared with the FTSE Fledgling Index and the FTSE All-Share Industrial Engineering Index for the last five years. The Board considers these Indices to be a fair measure of the Company's performance against its competitors.

Total Shareholder Return from March 2007 to 2012

The Remuneration Report (including accompanying notes) was approved by the Board of Directors on 18 June 2012 and was signed on its behalf by:

Jonathan Shearman
Remuneration Committee
18 June 2012

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