Report of the Directors
Governance

Remuneration Report

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Other Historical and Statutory Information

Johnson Matthey and FTSE 100 Total Shareholder Return Rebased to 100

The following graph charts total cumulative shareholder return of the company for the five year period from 31st March 2007 to 31st March 2012 against the FTSE 100 as the most appropriate comparator group, rebased to 100 at 1st April 2007. The graph shows significant outperformance by Johnson Matthey against the FTSE 100 group over the five year period.

As at 31st March 2012, Johnson Matthey was ranked 60th by market capitalisation in the FTSE 100.

Share Options

The LTIP is now the company’s single means for the provision of long term awards and from 2007 replaced the granting of share options under the Johnson Matthey 2001 Share Option Scheme (the 2001 Scheme). From 2001 to 2006 options were granted each year under the 2001 Scheme. There have been no option grants since 2006. Options were granted at the market value of the company’s shares at the time of grant and were subject to performance targets over a three year period. Options may be exercised upon satisfaction of the relevant performance targets. Approximately 800 employees were granted options under the 2001 Scheme each year.

Options granted from 2004 to 2006

Grants made in 2004, 2005 and 2006 were subject to a three year performance target of EPS growth of UK RPI plus 3% per annum. If the performance target was not met at the end of the three year performance period, the options lapsed as there was no retesting of the performance target. In addition, to reduce the cost calculated under the International Financial Reporting Standard 2 – ‘Share-based Payment’, gains made on the exercise of options are capped at 100% of the grant price.

The Committee had the discretion to award grants greater than 100% of basic annual salary. Grants which were made above this threshold were, however, subject to increasingly stretching performance targets. Grants between 100% and 125% of basic annual salary were subject to EPS growth of UK RPI plus 4% per annum and grants between 125% and 150% of basic annual salary were subject to EPS growth of UK RPI plus 5% per annum. The executive directors were granted options equal to 150% of basic annual salary. All the options, other than those granted in 2006 which were subject to EPS growth of UK RPI plus 5% per annum, have met their performance targets. The 2006 options which did not meet their performance targets have lapsed.

Options granted prior to 2004

Prior to 2004, options granted to the executive directors under the 2001 Scheme were up to a maximum of 100% of basic annual salary each year. Such options were subject to a performance target of EPS growth of UK RPI plus 4% per annum over any three consecutive years during the life of the option. The performance target was subject to annual retesting until the lapse of the options on the tenth anniversary of grant. All of these options have met their performance targets.

Directors’ Interests

The interests (in respect of which transactions are notifiable to the company under the Financial Services Authority’s Disclosure and Transparency Rules) of the directors as at 31st March 2012 in the shares of the company were:

1.

Ordinary Shares

  31st March 2012 31st March 2011
Tim Stevenson 5,500 5,500*
Neil Carson 188,804 174,374
Alan Ferguson 1,000 1,000
Sir Thomas Harris 1,807 1,807
Robert MacLeod 3,604 3,368
Larry Pentz 25,789 25,383
Michael Roney 3,000 3,000
Bill Sandford 9,165 5,091
Dorothy Thompson 9,721 9,721

* Shares acquired on 3rd March 2011, not disclosed in the 2011 annual report.

All of the above interests were beneficial. The executive directors are also deemed to be interested in shares held by an employee share ownership trust (see note 30).

Directors’ interests as at 31st May 2012 were unchanged from those listed above, other than that the trustees of the Johnson Matthey Share Incentive Plan have purchased on behalf of Neil Carson, Robert MacLeod, Larry Pentz and Bill Sandford a further 33 shares each.

2.

Share Options

As at 31st March 2012, individual holdings by the directors under the company’s executive share option schemes were as set out below. Options are not granted to non-executive directors.

  Date of
grant
Ordinary
shares
under option
Exercise
price
(pence)
Date from
which
exercisable
Expiry
date
Total
number of
ordinary shares
under option
Neil Carson 17.7.03 33,407 898 17.7.06 17.7.13  
  26.7.06 59,481 1,282 26.7.09 26.7.16 92,888
            (2011 218,282)
Larry Pentz 17.7.03 17,185 898 17.7.06 17.7.13  
  26.7.06 28,765 1,282 26.7.09 26.7.16 45,950
            (2011 101,530)
Bill Sandford 26.7.06 3,774 1,282 26.7.09 26.7.16 3,774
            (2011 18,868)

Between 1st April 2011 and 31st March 2012 the following options were exercised by directors:

  Date of
grant
Date of
exercise
Options
exercised
Exercise
price
(pence)
Market price
on exercise
(pence)
Neil Carson 18.7.01 3.6.11 2,770 1,083 2,038
  18.7.01 3.6.11 16,621 1,083 2,034
  20.7.05 1.2.12 77,102 1,070 2,140
  17.7.02 14.2.12 28,901 865 2,281
Larry Pentz 17.7.02 11.1.12 17,730 865 1,998
  20.7.05 1.2.12 37,850 1,070 2,140
Bill Sandford 26.7.06 1.12.11 15,094 1,282 1,874

Gains made on exercise of options by the directors during the year totalled £2,113,928 (2011 £88,138).

The closing market price of the company’s shares at 30th March 2012 was 2,359 pence. The highest and lowest closing market prices during the year ended 31st March 2012 were 2,403 pence and 1,523 pence respectively.

3.

LTIP Allocations

Number of allocated shares:

  As at
31st March
2011
Allocations
during
the year
Market price
at date of
allocation
(pence)
Released
during
the year
Lapsed
during
the year
As at
31st March
2012
Neil Carson 200,243 69,096 1,966 29,480 26,759 213,100
Robert MacLeod 86,469 29,979 1,966 116,448
Larry Pentz 83,084 28,744 1,966 11,455 10,398 89,975
Bill Sandford 67,533 25,429 1,966 8,029 7,289 77,644

On 25th July 2011 shares allocated in 2008 under the LTIP were released to participants. The compound annual growth in the company’s underlying EPS over the three year performance period, commencing in the year of allocation, resulted in a release of 52.42% of the allocated shares and the following gains:

  Number of
shares
released
Share price
when released
(pence)
Gain
(£)
Neil Carson 29,480 2,084 614,233
Larry Pentz 11,455 2,084 238,672
Bill Sandford 8,029 2,084 167,289

The Remuneration Report was approved by the Board of Directors on 6th June 2012 and signed on its behalf by:

Michael Roney
Chairman of the Management Development and Remuneration Committee

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