The structure of the 2007 Annual Bonus Plan was set out in last year’s Remuneration report.
2007 was another very successful year, building on the excellent performances in 2004, 2005 and 2006. Apart from the Australian business, all the major business groupings achieved their stretch targets on profit and cash. As a result, all the financial targets within the 2007 Annual Bonus Plan for executive directors were met at the stretch level apart from that part of Chris Geoghegan’s bonus linked to the profit performance of his group of businesses. In addition, excellent progress was made against most of the key non-financial objectives as set out on as set out on Key Performance Indicators page and, accordingly, bonus payments for 2007, which are set out in Table F on Table F: Directors’ remuneration page, range from 83.9% to 97% of the maximum bonus for the executive directors who served throughout 2007.
In addition, the real growth in EPS over the three years to 2007 exceeded 5% pa so that the awards of share options granted in 2005 vest in full.
The Company’s total shareholder return for awards of shares made in March 2005 under the Performance Share Plan exceeded the upper quintile position when compared against the comparator group of 18 other defence and aerospace companies. The Committee has satisfied itself that there has been a sustainable improvement in the underlying performance of the Group over the three-year performance period and so this award has vested in full.
Value at 31 December 2007 of £100 investment at 31 December 2002
This graph, which has been produced in accordance with the requirements of Schedule 7A to the Companies Act 1985, shows the value by 31 December 2007, on a total shareholder return basis, of £100 invested in BAE Systems on 31 December 2002 compared with the value of £100 invested in the FTSE 100 Index. The other points plotted are the values at intervening financial year ends.
The FTSE 100 is considered to be an appropriate comparator for this purpose as it is a broad equity market index. As BAE Systems is a constituent member of the FTSE 100, it was deemed to be the most appropriate general UK equity index.
Value at 31 December 2007 of £100 investment
The graph above shows the value shareholders have achieved by their investment in BAE Systems over recent years as compared to (i) the FTSE 100 Index; (ii) the companies forming the sectoral peer group for the BAE Systems Performance Share Plan; and (iii) the companies forming the comparator group for the 2007 executive pay review. The graph depicts the value for BAE Systems and the comparators at the end of 2007 of a single £100 investment made at the beginning of each of the last five years.
