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This report has been prepared by the Remuneration Committee (the Committee) in accordance with Section 1 of the Combined Code on Corporate Governance, the Companies Act 1985, as amended by the Directors’ Remuneration Report Regulations 2002 (the Regulations), and the Listing Rules of the Financial Services Authority. In accordance with the Regulations, this report has been approved by the Board and will be submitted to shareholders for approval at the Annual General Meeting to be held on 16 July 2009.

PricewaterhouseCoopers LLP has audited Table 55, Table 56, Table 57, Table 59 and Table 60 and associated footnotes.

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Members of the Committee

The Committee was chaired by Alison Carnwath between 1 April 2008 and 12 November 2008 and thereafter was chaired by David Rough. The other members of the Committee are Alison Carnwath (Chairman of the Board who was an independent Director at the time of her appointment as Chairman), and independent Non-executive Directors Sir Stuart Rose and Bo Lerenius. Details of the membership of the Committee throughout the year to 31 March 2009 are as follows:

David Rough – Chairman from 12 November 2008
Alison Carnwath – Chairman to 12 November 2008
Paul Myners – resigned on 3 October 2008
Sir Winfried Bischoff – retired on 1 April 2008
Sir Stuart Rose
Bo Lerenius

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Responsibilities of the Committee

The key responsibilities of the Committee take full account of the recommendations contained within the Combined Code and include the following:

  • To determine and recommend to the Board an overall strategy for the remuneration of the Chairman, Executive Directors and senior managers
  • To determine and recommend to the Board the individual remuneration packages for the Chairman (who is not present when her own remuneration is discussed), Executive Directors and senior managers
  • To oversee any significant changes to employee benefits, including pensions
  • To approve the design of and targets for performance-related incentive schemes
  • To oversee the operation of all incentive schemes, including the award of incentives, and to determine whether performance criteria have been met.

You can see the Committee’s terms of reference at

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2008/09 Directors’ remuneration

Executive Directors’ remuneration comprises:

  • Fixed pay, including basic salary, together with pension payments/contributions and benefits in kind; and
  • Variable pay, comprising:
    – annual bonus
    – long-term incentives.
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Advisors to the Committee

The Human Resources Director, Angela Williams, provides information and advice to the Committee. The Committee has appointed and receives advice from Hewitt New Bridge Street (HNBS) and also makes use of various published surveys to help determine appropriate remuneration levels. HNBS has no other connection with the Group.

The Chief Executive and Human Resources Director are invited to attend meetings of the Committee but no Director is involved in any decisions relating to their own remuneration.

As detailed in the Corporate Governance report, the Committee’s performance is reviewed annually by the Chairman with the assistance of the Company Secretary.

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Remuneration policy and philosophy

The Group’s remuneration policy seeks to provide remuneration in a form and amount to attract, retain and motivate high quality management, recognising that the Group operates in a competitive market for talent. Emphasis is placed on delivering superior reward for achieving and exceeding the Group’s business plan. A substantial proportion of the Executive Directors’ remuneration is delivered through performance related pay. Executive Directors have substantial incentives to outperform industry performance benchmarks.

A summary of the principal components of Executive Directors’ remuneration is set out below. Chart 45 illustrates the balance between fixed and variable pay at the target and maximum performance levels, assuming maximum participation in the Long-term Incentive Plan (LTIP). This information reflects the policy that operated during the year under review and there was no change in the balance between fixed and variable pay during that period.

The Group’s remuneration policy is reviewed regularly, along with the balance between fixed and variable pay, to ensure that it remains appropriate and recognises developments in corporate governance best practice. Performance targets are set to align with Group strategic objectives and key performance indicators (KPIs) as outlined by our key performance indicators. Table 52 and Table 53 show how these elements are aligned.

During 2008/09, no changes were made either to the bonus arrangements or to the share incentive plans for Executive Directors. For LTIP grants made from June 2009, the Remuneration Committee has decided to make some changes to vesting conditions to improve alignment of executive incentives with shareholder interests. Previously, EPS growth has governed the vesting of half the LTIP grant. However, following Trillium’s departure from the Group, the EPS measure is less relevant, and will be replaced by a relative Total Shareholder Return (TSR) measure. Specifically, Land Securities’ three-year TSR performance (share price increase plus reinvested dividends) will be compared against the TSR performance of an index of a comparator group of FTSE 350 Real Estate Companies, weighted based on their market cap at the beginning of the performance period. If Land Securities’ TSR performance is below this index, this portion of the LTIP grant will lapse in full. If Land Securities matches the index, 30% of this portion (i.e., 15% of the overall grant) will vest. Full vesting will occur if Land Securities’ TSR beats the index by 4% per annum or more, with straight-line vesting in between these points. Chart 46 shows the vesting range.

The Committee may amend the list of comparator companies in the Sector Index, and relative weightings, if circumstances make this necessary (for example, as a result of takeovers or mergers of comparator companies or significant changes in the composition of the Group).

Vesting conditions for the other half of the LTIP grant, based on Total Property Return (TPR) performance relative to a weighted TPR benchmark, are unchanged.

Basic salary

Executive Directors receive a salary which reflects their responsibilities, experience and performance. Salaries are reviewed annually with any changes taking place in July. The review process includes the use of comparator information and reports from the Group’s remuneration consultants.

The Group’s policy is to set salary around the mid-market rate, but the Committee is mindful of the need to treat pay comparisons with caution to avoid an upward ratchet of remuneration levels with no corresponding improvement in performance. The Committee also takes account of pay and employment conditions across the Group, especially when determining annual salary increases. After taking account of market conditions, the Committee decided that the Executive Directors should not receive a salary increase to take effect from 1 July 2009.

The current salaries of the Executive Directors are as shown in Table 51.

Annual bonus

During the year under review, the Executive Directors had individually tailored annual bonus performance targets that provided the potential to earn up to 300% of base salary.

The annual bonus opportunity was structured in two distinct parts:

  • Bonus Opportunity: up to 100% of salary The performance targets that applied to this part of the Executive Directors’ annual bonus opportunity are set out in Table 52.
    The Committee calibrates the bonus targets so that the achievement of a maximum payout under this part of the bonus arrangements would represent performance in excess of the Group budget and individual targets. 25% of any bonus award is compulsorily deferred into the Company’s shares for a period of three years and receives a Matching Award under the terms of the LTIP (see below).
  • Additional Bonus Opportunity: up to 200% of salary
    This part of Executive Directors’ annual bonus opportunity is intended to reward exceptional performance and value creation for shareholders. The performance targets that applied during 2007/08 are set out in Table 53.
    TPR was chosen as a performance measure for the investment portfolio element of the business because it is used both internally and externally within the property sector for measurement of relative performance.
    The Committee calibrated the bonus targets that applied to this part of the Executive Directors’ bonus opportunity so that the performance required was above that required for bonuses of up to 100% of salary. To provide some context as to the challenging nature of the performance targets, the TPR conditions are based on more than 10 years of historic data and require TPR performance to fall broadly within the top 30th percentile of each relevant Investment Property Databank (IPD) performance benchmark if any additional bonus is to be earned. Any payout for beating the IPD benchmark by more than 2% is conditional upon the relative performance in that year and the prior year exceeding the IPD benchmark.

For example:

  • In year one performance is 1% below the IPD benchmark
  • In year two performance is 3% above the IPD benchmark
  • Payout for year two is based on performance in that year as the aggregate performance over the two years is at least equal to the benchmark.

The Committee considers this approach provides a greater individual incentive than targets recalibrated annually based on historic performance. The Committee’s objective in introducing the additional bonus was to encourage a striving for material outperformance every year.

Half of any bonus earned between 100% and 300% of salary is compulsorily deferred into the Company’s shares for a period of three years which is considered highly retentive. Any deferral under this part of the annual bonus arrangements is not the subject of a matching award under the LTIP.

Executive Directors have also been eligible to participate in a discretionary bonus pool for all employees which, if applicable, is normally in the range of 5-30% of salary. Discretionary bonus awards of up to 50% of salary may be granted in exceptional circumstances within the maximum of 130% of base salary for total annual bonus (excluding the additional bonus for exceptional performance). Such discretionary bonus payments are subject to an overall cap of £500,000 for payments to all Executive Directors in any one year. It remains the Committee’s intention not to pay aggregate annual bonuses in excess of 300% of salary.

After taking into account market conditions and the share price performance of the Group, the Committee determined that no bonus payments should be made to the Executive Directors in respect of the financial year to 31 March 2009, with the exception of Ian Ellis who received a bonus in connection with the sale of Trillium.

The actual total bonus payouts, inclusive of the additional bonus opportunity described above, that were earned in respect of the financial year ended 31 March 2008 are set out in Table 54.

Long-term incentives

Executive Directors participate in the Long-term Incentive Plan (LTIP) approved by Shareholders in 2005. The LTIP replaced the share option scheme approved in 2002 and also replaced, from 2006/07, the performance share matching plan, also approved in 2002. No changes were made to the operation of the LTIP in 2008/09. There is no retesting in relation to long-term incentives for Executive Directors.

The LTIP consists of the facility to make annual awards of Performance Shares and Matching Shares.

LTIP Performance Shares

In the year under review, Executive Directors were eligible to receive conditional awards of shares of up to 100% of salary Table 57.

LTIP Matching Shares

Matching share awards are linked to co-investment by participants in shares Table 57.

A Director’s investment can be made through the deferral of an annual bonus award (with the maximum permitted investment by this means of 25% of base salary). Investment can also be made through the pledging of shares purchased in the market. Such additional investment is permitted to bring the Director’s total investment to 50% of base salary (for this purpose the value of pledged shares is taken as the amount of gross salary that would have been required to fund the purchase of the shares). Accordingly, Executive Directors are eligible to receive a matching award of shares under the LTIP which is made at a ratio of up to two for one on a gross to net tax basis (up to 100 shares for every 30 purchased out of net income). The maximum Matching Share award is over shares with a value of 100% of salary.

Awards of LTIP Performance Shares and Matching Shares are subject to the same performance conditions measured over three years. Half of any award will vest based on achieving increases in Normalised Adjusted Diluted Earnings Per Share (NADEPS). The other half will vest dependent on the Group’s TPR equalling, or exceeding, IPD weighted indices that reflect the sector mix of Land Securities’ investment portfolio. The targets:

  • NADEPS target
    – Growth of RPI + 3% per annum – 12.5% of the award vests;
    – Growth of RPI + 5% per annum – 50% of the award vests; and;
    – Straight-line vesting occurs between these points.
  • TPR target
    – Performance equal to the sector weighted IPD index – 12.5% of the award vests
    – Performance equal to the sector weighted IPD index plus 1% per annum – 50% of the initial award vests
    – Straight-line vesting occurs between these points.

An overview example of the vesting range is shown in Chart 47 below.

Chart 47
What is the vesting range for LTIP Performance and Matching Shares?

Chart 47

The maximum number of shares which could potentially vest as a result of historic long-term incentive awards and the number of shares which vested in the financial year are shown in Table 57. The Group’s policy is to use market-purchased shares to satisfy the vesting of LTIP Performance and Matching Shares and for Deferred Share Awards. Future awards are partially hedged through on-market share purchases by an Employee Benefit Trust which held 887,914 shares at 31 March 2009.

While awards of LTIP Performance and Matching Shares are normally made in July of each year, as a consequence of the Executive Directors being ‘insiders’ and prohibited from being granted share awards until the conclusion of the Rights Issue in March 2009, such awards were not made to the Executive Directors until 30 March 2009. Notwithstanding the considerable fall in the Company’s share price between July 2008 and March 2009, the Committee decided that the awards made in March 2009 should be based on the share price prevailing in July 2008 (as adjusted for the Rights Issue in March 2009) in order to maintain a consistent approach and comparability with employees below Board level who were granted share awards in July 2008.

Share options

Land Securities has historically operated share option arrangements for Executive Directors. Vesting of share options was subject to performance tests and was dependent on growth in NADEPS exceeding RPI by at least 2.5% per annum. Following the adoption of the LTIP in 2005/06, no further awards of share options have been made to the Executive Directors.

For grants made over the period 2000 to 2004, the Committee determined that the required level of increase in NADEPS was achieved and as a result the executive share options granted during that period are exercisable in full. Directors’ options over ordinary shares are shown in Table 60.

Directors’ emoluments

Table 55 and Table 56 set out Directors’ emoluments for the year under review and the financial year ended 31 March 2008. The basis of disclosure is on an ‘accruals’ basis, that is the annual bonus and Deferred Bonus Shares columns include the amount that will be paid and awarded respectively for performance achieved in the financial year under review. The Performance Shares 2007/08 column includes the value of Performance Shares which vested in July 2008 as a result of performance measured over a three year period ended 31 March 2008.

Ian Ellis resigned from the Board upon the sale of Trillium on 12 January 2009. Under the terms of the Company’s share incentive schemes, which provide for cases where a participant’s employment is with a company or business which is sold or transferred outside the Group, he received the following:

  • Shares with a market value of £367,025 as a consequence of the early vesting of awards made in 2006 and 2007 of LTIP Performance Shares and LTIP Matching Shares under the LTIP. These awards were subject to pro-rating in respect of the relevant performance conditions and to time pro-rating to the next six month anniversary from the date of the grant, as specified by the rules of this Plan
  • Shares with a market value of £534,632 awarded under the Deferred Bonus Plan as a consequence of the early vesting of these awards – the value has previously been disclosed in the Directors’ emoluments table in the year of award
  • A cash amount of £87,176 in respect of deferred shares which would have been awarded in July 2008, if the Company has not been precluded from granting such awards as a consequence of the Directors being ‘insiders’ between July 2008 and January 2009. This amount was previously disclosed under the heading of Deferred bonus shares in 2007/08.

In addition, the Committee determined that a bonus of £130,410 representing 30% of salary should be paid to Ian Ellis in recognition of his role in securing a sale of Trillium in extremely challenging market conditions.


The Company operates a contributory money purchase pension scheme which was introduced for all staff joining the Group from 1 January 1999. Prior to the introduction of the contributory money purchase arrangement the Company provided pension benefits on a defined benefit basis.

Following a review of pension provision in light of the tax changes that came into effect from 1 April 2006, it was decided that Executive Directors would continue to be entitled to a pension benefit that is equivalent to 25% of their base salary. Executive Directors have the flexibility to determine how this 25% of salary benefit is used, as follows:

  • Pension contributions may be made into the Land Securities contributory money purchase scheme up to the personal level that is advised plus a cash contribution on the balance
  • 25% cash payment on base salary to invest outside Land Securities pension arrangements

Richard Akers participates in a defined benefit pension scheme Table 59 which was open to property management and administration staff until 31 December 1998. This scheme is designed to provide, at normal retirement age, a pension of 1/60th of Pensionable Salary for each year of pensionable service. The scheme also provides lump sum death-in-service benefits on death before normal retirement age of four times Pensionable Salary and pension provision for dependants of members. Only basic salary is treated as Pensionable Salary. The benefits provided to Richard Akers are based on a Pensionable Salary which is subject to the statutory earnings cap. With effect from 1 April 2006 the defined benefit pension scheme has moved to future accrual on a ‘CARE’ (Career Average Revalued Earnings) basis on either a 1/80th accrual or 1/60th accrual subject to employee contributions. Richard Akers chose to accrue benefits on a 1/60th basis with employee contributions of 1% of basic salary in 2006, 3% of basic salary in 2007 and 5% of basic salary thereafter.

The balance of Richard Akers’ pension allowance is paid to him to invest outside Land Securities pension arrangements.

As disclosed in last year’s Directors’ remuneration report, the changes made to pension provision in 2006/07 did not provide a tax advantage to Executives and the changes made were cost neutral to the Company.

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Non-executive Directors

The annual fees of the Chairman of the Board are determined by the Committee having regard to independent advice. The other Non-executive Directors each receive a fee agreed by the Board following a review of fees paid by comparable organisations. The Board also takes into account the time commitments of the Non-executive Directors, which are reviewed annually as part of the Board appraisal process. No increases in the base Non-executive Directors’ fees were awarded during the year under review since as part of a review of such fees in 2006/07 it was agreed to maintain the level of fees for a period of two years. The base Non-executive Directors’ fee remained at £55,000. No additional fees are payable for attendance at Board or Committee meetings or for membership of Board Committees, but the additional fees outlined below are payable in respect of specific responsibilities:

Chair of Audit Committee £17,500
Chair of Remuneration Committee £12,500
Senior Independent Director £7,500

Sir Christopher Bland served as Non-executive Chairman of Trillium until its sale on 12 January 2009 and received additional fees of £100,000 per annum in respect of that role. Neither the Chairman nor the other Non-executive Directors receive any pension benefits from the Company, nor do they participate in any bonus or incentive schemes. Non-executive Directors are appointed under letters of appointment which provide for an initial term of service of three years. A specimen letter of appointment is available on the Company’s website at The dates of the current letters of appointment of the Non-executive Directors are shown in Table 48.

The appointment of the Non-executive Directors can be terminated upon one month’s notice while the appointment of the Chairman can be terminated upon three months’ notice.

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Service agreements

The Committee’s policy on service agreements for Executive Directors is that they should provide for 12 months’ rolling notice of termination by the Company. As a result, the unexpired term and the notice periods (both from the Company and from the Executive Director) are 12 months and there are no service contracts with provisions for predetermined compensation on termination which exceeds 12 months’ salary and benefits in kind. Any proposals for the early termination of the service agreements of Directors or senior executives are considered by the Committee.

The dates of appointment and the dates of the service agreements of the Executive Directors are in Table 49.

The service agreements of the Executive Directors provide for phased payments of amounts payable on termination, in order to mitigate amounts potentially payable by the Company. Bonus, LTIP, redundancy and outplacement payments are considered by the Committee and are dependent on the circumstances of leaving and the rules of the relevant bonus and incentive schemes.

The Chairman and the other Non-executive Directors do not have service agreements with the Company.

Board approval is required before any external appointment may be accepted by an Executive Director. Any fees earned in relation to outside appointments are retained by the Executive Director.

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Directors’ shareholdings

The interests of the Directors in the shares of the Company as at 31 March 2009 are shown in Table 58.

There have been no changes in the shareholdings of the Directors between the end of the financial year and 12 May 2009, save that on 30 April 2009 Alison Carnwath acquired 170 shares under the Company’s Dividend Reinvestment Plan.

No Director had any other interests in contracts or securities of Land Securities Group PLC or any of its subsidiary undertakings during the year.

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Shareholding guidelines

The Committee believes that it is important for a significant part of the compensation of each Executive Director to be tied to ownership of the Company’s shares so that each Executive Director’s interest in the growth and performance of the Company is closely aligned with the interests of our shareholders. The Committee has, therefore, established share ownership guidelines for the Company’s Executive Directors.

These guidelines require the Chief Executive to own shares with a value equal to twice his base salary and for other Executive Directors to own shares with a value equal to 1.5 times their base salary. An Executive Director must normally satisfy the guidelines within five years of his date of appointment or the date of introduction of this requirement in order to qualify for future awards of long-term incentives.

In May 2007, the Committee determined that Francis Salway had met the revised share ownership guidelines and in May 2008 the Committee agreed that Mike Hussey had met the revised guidelines. The Committee continues to monitor the other Executive Directors’ progress against the guidelines on an annual basis.

In addition, Non-executive Directors are required to own shares with a value equal to their annual fees within three years of the date of their appointment.

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Information regarding senior managers below Board level

The Group currently employs 20 senior managers in positions below Board level. None of these senior managers is paid at a rate higher than the Executive Directors and the structure of their remuneration package, including bonuses, is broadly consistent with that of Executive Directors. The senior managers are not eligible to participate in the additional bonus opportunity (that is above 100% of salary) for the delivery of exceptional financial returns described in this report but they are eligible to participate in the discretionary bonus pool of up to 50% of salary. During the year under review, bonuses for this group of employees ranged from 16% to 54% of salary, with an average bonus of 27% of salary.

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Performance graphs

As required by legislation covering the Directors’ remuneration report, Chart 50 below illustrates the performance of the Company measured by total shareholder return (share price growth plus dividends paid) against a ‘broad equity market index’ over a period of five years. As the Company is a constituent of the FTSE All Share Real Estate sector this index is considered to be the most appropriate benchmark for the purposes of the graph.

Chart 50
Historical TSR performance. A hypothetical £100 holding over five years



The Committee also considered that it would be helpful to provide an additional line to illustrate performance compared with the FTSE 100 index over the previous five years of the Company.

Signature - David Rough

  • David Rough
  • Chairman, Remuneration Committee
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