Remuneration outcomes during the year ended 31 March 2006

Sections 1, 2, 3, 4, 5 and 7 comprise the ‘auditable’ part of the Directors’ Remuneration Report, being the information required by Part 3 of Schedule 7A to the Companies Act 1985.

1. Directors’ emoluments

The following tables set out an analysis of the pre-tax emoluments during the years ended 31 March 2006 and 2005, including bonuses but excluding pensions, for individual Directors who held office in National Grid during the year ended 31 March 2006.

Table 1A	Year ended 31 March 2006					Year ended 31 March 2005
	Salary £000s	Annual bonus £000s	Benefits in kind (i) (cash) £000s	Benefits in kind (non-cash) £000s	Total £000s	Total £000s
Executive Directors
Roger Urwin	765	734	-	19	1,518	1,125
Steve Holliday (ii) (iii)	425	425	-	20	870	660
Steve Lucas (iv)	417	407	-	24	848	648
Nick Winser	385	366	-	20	771	531
Mike Jesanis (v) (vi)	469	385	7	13	874	446
Edward Astle	400	336	12	11	759	622
Total	2,861	2,653	19	107	5,640	4,032

1. Benefits in kind comprise benefits such as a fully expensed car, driver, private medical insurance and life assurance.
2. Steve Holliday’s salary was increased to £600,000 on 1 April 2006, on appointment to Deputy Group Chief Executive.
3. The total for 2005 for Steve Holliday includes, as disclosed last year, an additional ex gratia bonus of £80,000 paid on completion of the sales of four of the UK gas distribution networks.
4. Steve Lucas participates in the Flexible Benefits Plan which operates by way of salary sacrifice, therefore his salary is reduced by the value of the benefits he has purchased. The value of these benefits (£3,050) is included in the benefits in kind (non-cash) figure.
5. Mike Jesanis’s values use an exchange rate averaged over the year 1 April 2005 to 31 March 2006 of US$1.79:£1. The exchange rate for the previous year was US$1.87:£1.
6. Mike Jesanis’s bonus includes a payment worth £4,787 in respect of his participation in the USA Goals Program (described under Executive Directors’ remuneration).

Table 1B	Year ended 31 March 2006			Year ended 31 March 2005
	Fees £000s	Other emoluments £000s	Total £000s	Total £000s
Non-executive Directors
Sir John Parker (i)	400	45	445	406
Ken Harvey	67	-	67	58
John Allan (ii)	45	-	45	-
John Grant	67	-	67	65
Paul Joskow	74	-	74	73
Stephen Pettit	68	-	68	58
Maria Richter	61	-	61	66
George Rose	67	-	67	61
Total	849	45	894	787

1. Sir John Parker’s other emoluments comprise benefits in kind such as a fully expensed car, driver, private medical insurance and life assurance.
2. John Allan’s appointment to the Board was effective from 1 May 2005 and he became Chairman of the Remuneration Committee on 1 March 2006.

2. Directors’ pensions

The table below gives details of the Executive Directors’ pension benefits in accordance with both Schedule 7A of the Companies Act 1985 and the UK Listing Authority’s Listing Rules.

Table 2	Additional benefit earned during the year ended 31 March 2006 £000s	Accrued entitlement as at 31 March 2006 £000s	Transfer value of accrued benefits as at 31 March (i)		Increase in transfer value less Director's contributions £000s	Additional benefit earned in the year ended 31 March 2006 (excluding inflation) £000s	Transfer value of increase in accrued benefit in the year ended 31 March 2006 (excluding Directors’ contributions and inflation) £000s
			2006 £000s	2005 £000s
Roger Urwin	59	516	11,291	9,016	2,229	47	990
Steve Holliday (ii)	17	71	1,161	679	466	16	247
Steve Lucas	18	160	2,725	2,261	452	14	224
Nick Winser (iii)	24	132	2,000	1,281	696	21	283
Mike Jesanis (iv)	82	279	2,497	1,687	810	82	583
Edward Astle	16	61	1,086	639	431	15	253

 

1. The transfer values shown at 31 March 2005 and 2006 represent the value of each Executive Director’s accrued benefits based on total service completed to the relevant date. The transfer values for the UK-based Executive Directors have been calculated in accordance with guidance note ‘GN11’ issued by the Institute of Actuaries and the Faculty of Actuaries. The transfer values for the US-based Executive Director have been calculated using discount rates based on high yield US corporate bonds and associated yields at the relevant dates.
2. In addition, as a result of transferring in retained pension benefits during the year, there was an increase in accrued pension of £17,000 per annum and an increase in transfer value at the year-end of £324,000. The transfer in also provides an accrued lump sum entitlement of £50,000.
3. The above information allows for the accrual of a pension benefit of two thirds of salary at age 60 taking into account standard benefits earned prior to 1 September 1998. This means that, as well as the pension stated above, there is an accrued lump sum entitlement of £217,000 as at 31 March 2006. The increase to the accumulated lump sum including inflation was £28,000 and excluding inflation was £23,000 in the year to 31 March 2006. The transfer value information above includes the value of the pension equivalent of the lump sum.
4. Through participation in the Thrift Plan in the US, the Group also made contributions worth £6,058 to a defined contribution pension arrangement. The exchange rate as at 31 March 2006 was US$1.74:£1. The exchange rate as at 31 March 2005 was US$1.89:£1.

3. Directors’ interests in share options

The table below gives details of the Executive Directors’ holdings of share options awarded under the Executive Share Option Plan (ESOP), the Share Matching Plan and Sharesave schemes.

Table 3	Options held at 1 April 2005	Options exercised or lapsed during the year	Market price at date of exercise (pence)	Options granted during the year	Options held at 31 March 2006	Exercise price per share (pence, except*)	Normal exercise period
Roger Urwin
ESOP	169,340	-	-	-	169,340	280.50	Sep 2000	Sep 2007
	91,656	-	-	-	91,656	375.75	June 2001	June 2008
	22,098	-	-	-	22,098	455.25	June 2002	June 2009
	33,867	-	-	-	33,867	531.50	June 2003	June 2010
	133,214	133,214 (i)	-	-	-	563.00	June 2004	June 2011
	186,915	62,305 (ii)	-	-	124,610	481.50	June 2005	June 2012
Share Match	4,047	4,047 (iii)	528.00	-	-	100 in total	June 2001	June 2005
	3,884	3,884 (iii)	528.00	-	-	100 in total	Jan 2002	June 2006
	3,859	3,859 (iii)	528.00	-	-	100 in total	Jan 2002	June 2007
	5,635	5,635 (iii)	528.00	-	-	100 in total	June 2004	June 2008
	18,644	-	-	-	18,644	100 in total	June 2005	June 2012
	25,000	-	-	-	25,000	100 in total	June 2006	June 2013
	30,762	-	-	-	30,762	nil	May 2007	May 2014
	-	-	-	25,570	25,570	nil	June 2008	June 2015
Sharesave	2,910	-	-	-	2,910	317.00	Apr 2007	Sep 2007
Total	731,831	212,944		25,570	544,457
Steve Holliday
ESOP	150,000	150,000 (i)	-	-	-	540.00	Mar 2004	Mar 2011
	71,936	71,936 (i)	-	-	-	563.00	June 2004	June 2011
	101,246	33,749 (iv)	-	-	67,497	481.50	June 2005	June 2012
Share Match	10,350	-	-	-	10,350	100 in total	June 2005	June 2012
	14,083	-	-	-	14,083	100 in total	June 2006	June 2013
	18,713	-	-	-	18,713	nil	May 2007	May 2014
	-	-	-	9,983	9,983	nil	June 2008	June 2015
Sharesave	4,692	-	-	-	4,692	350.00	Mar 2008	Aug 2008
Total	371,020	255,685		9,983	125,318
Steve Lucas
ESOP	54,404	-	-	-	54,404	434.25	Dec 2005	Dec 2012
Share Match	16,909	-	-	-	16,909	nil	May 2007	May 2014
	-	-	-	14,778	14,778	nil	June 2008	June 2015
Sharesave	2,700	2,700	603.00	-	-	350.00	Mar 2006	Aug 2006
Total	74,013	2,700		14,778	86,091
Nick Winser
ESOP	10,633	10,633	610.50	-	-	375.75	June 2001	June 2008
	47,236	47,236	610.50	-	-	455.25	June 2002	June 2009
	19,755	-	-	-	19,755	531.50	June 2003	June 2010
	24,156	24,156 (i)	-	-	-	563.00	June 2004	June 2011
	37,383	37,383	598.00	-	-	481.50	June 2005	June 2012
Share Match	2,509	2,509 (v)	598.00	-	-	100 in total	June 2005	June 2012
	3,937	-	-	-	3,937	100 in total	June 2006	June 2013
	14,059	-	-	-	14,059	nil	May 2007	May 2014
	-	-	-	11,581	11,581	nil	June 2008	June 2015
Total	159,668	121,917		11,581	49,332
Mike Jesanis
ESOP	77,861	-	-	-	77,861	566.50	Mar 2003	Mar 2010
	51,169	51,169 (i)	-	-	-	563.00	June 2004	June 2011
	66,099	-	-	-	66,099	481.50	June 2005	June 2012
Total (shares)	195,129	51,169		-	143,960
Phantom ADSs (vi)	666	-	-	33	699	US$39.590*	-	-
	2,857	-	-	143	3,000	US$34.270*	-	-
	3,288	-	-	164	3,452	US$32.320*	-	-
	2,895	-	-	144	3,039	US$39.376*	-	-
	-	-	-	4,730	4,730	US$47.762*	-	-
Total (Phantom ADSs)	9,706	-		5,214	14,920
Edward Astle
ESOP	193,952	193,952 (i)	-	-	-	479.50	Sep 2004	Sep 2011
	101,246	33,749 (vii)	-	-	67,497	481.50	June 2005	June 2012
	112,262	112,262(vii)	594.50	-	-	434.25	Dec 2005	Dec 2012
	131,086	-	-	-	131,086	400.50	June 2006	June 2013
Share Match	6,553	-	-	-	6,533	100 in total	June 2005	June 2012
	13,812	-	-	-	13,812	100 in total	June 2006	June 2013
	15,716	-	-	-	15,716	nil	May 2007	May 2014
	-	-	-	14,637	14,637	nil	June 2008	June 2015
Sharesave	2,392	2,392	527.00	-	-	397.00	Sep 2005	Feb 2006
Total	577,019	342,355		14,637	249,301

 

1. For Executive Share Options granted in 2001, the performance condition was not satisfied at the end of the first three years of the performance period. It has subsequently been re-tested on 31 March 2004 and 2005 and as a result the options have lapsed in full.
2. For Executive Share Options granted in 2002, the performance condition was partly satisfied at the end of the first three years of the performance period. As a result 62,305 shares of the original 186,915 grant have lapsed.
3. Roger Urwin exercised Share Match awards over 17,425 shares. The market price at the date of exercise was 528p and he was required to pay 100p per award. He also received £15,704 in respect of a cash payment in lieu of dividends on exercise of the four Share Match awards.
4. For Executive Share Options granted in 2002, the performance condition was partly satisfied at the end of the first three years of the performance period. As a result 33,749 shares of the original 101,246 grant have lapsed.
5. Nick Winser exercised a Share Match award over 2,509 shares. The market price at the date of exercise was 598p and he was required to pay 100p in total. He also received £1,976 in respect of a cash payment in lieu of dividends on exercise of the Share Match award.
6. In place of participation in the Share Matching Plan, Mike Jesanis elected to defer the ADS component of his bonus into a deferred compensation plan. For a Phantom award under the deferred compensation plan, the ADS market value is tracked, additional value is accrued for dividends and the value is delivered, net of normal US deductions, depending on the participant’s election ie: in 10 years, on a specified age date from 55 to 75, or on leaving, including retirement. The closing market price of ADSs at 31 March 2006 was US$49.63 (each ADS represents five ordinary shares).
7. For Executive Share Options granted in 2002, the performance condition was partly satisfied at the end of the first three years of the performance period. As a result 33,749 shares of the original 101,246 granted in June have lapsed and a further 37,421 of the original 112,262 granted in December have lapsed. During the year, Edward Astle exercised the remaining options granted in December 2002.

ESOP

No further awards will be made under this plan but there are outstanding options granted in previous years. Such options will normally be exercisable between the third and tenth anniversary of the date of grant, subject to a performance condition. The performance condition attached to the outstanding ESOP options is set out below. If the performance condition is not satisfied after the first three years it will be re-tested as indicated.

Options worth up to 100% of an optionholder’s base salary will become exercisable in full if TSR, measured over the period of three years beginning with the financial year in which the option is granted, is at least median compared with a comparator group of companies. Grants in excess of 100% of salary vest on a sliding scale, becoming fully exercisable if the Group’s TSR is in the top quartile.

Grants made in 2000 and 2001

The performance condition attached to options granted in June 2000 is tested annually throughout the lifetime of the option. These options remain unvested.

The comparator group for the 2000 award is unaudited and this information follows below. The Remuneration Committee at that time believed the group to be an appropriate mix of energy distribution sector companies, including UK and international utilities.

Allegheny Energy, Inc.	Energy East Corporation	NSTAR	Scottish Power plc
BG Group plc	FPL Group, Inc.	Powergen plc	Southern Company TXU, Corp
British Energy plc	GPU, Inc.	Progress Energy, Inc.	United Utilities plc
Central & South West Corporation	Innogy Holdings plc	Public Service Enterprise Group, Inc	Xcel Energy, Inc.
Consolidated Edison, Inc.	International Power plc	Scottish & Southern Energy plc
Duke Energy Corporation	Niagara Mohawk Holdings, Inc.

For options granted in June and September 2001, the performance condition could only be re-tested in years four and five. The final re-test was undertaken in March 2006 and as the performance criterion was not met, all the shares comprised in these awards have lapsed.

Grants made in 2003

Edward Astle received a grant of Executive Share Options on the basis of 1.5 times base salary at that time, as a one-off award, in June 2003 to fulfill an existing contractual commitment made on his recruitment. He was the only participant to receive such an award in 2003. The comparator group used for this award is unaudited and was the same group as that used for the 2003 PSP award (see Performance Share Plan). The first test of the performance criterion was undertaken in March 2006. The performance criterion was not met and therefore it may be re-tested twice, in March 2007, and if required, in March 2008. If the performance criterion has not been met by March 2008, the award will lapse.

No alteration to the advantage of the participant may be made without prior approval of shareholders.

4. Directors’ interests in the PSP

The table below gives details of the Executive Directors’ holdings of conditional shares awarded under the National Grid PSP. Under the PSP, Executive Directors receive a conditional award of shares, up to a maximum of 125% of salary, which is subject to performance criteria over a three-year performance period (under Executive Directors’ remuneration). Shares are then released following a further one-year retention period.

Table 4	Conditional shares at 31 March 2005	Awards exercised/ lapsed during year	Awards granted during year	Market price at award (pence, except*)	Date of award	Vested in year	Lapsed without vesting in year	Conditional shares at 31 March 2006	Release date
Roger Urwin	195,866	-	-	405.25	June 2003	-	-	195,866	June 2007
	198,587	-	-	424.875	June 2004	-	-	198,587	June 2008
	-	-	181,442	527.03	June 2005	-	-	181,442	June 2009
Total	394,453	-	181,442			-	-	575,895
Steve Holliday	115,669	-	-	405.25	June 2003	-	-	115,669	June 2007
	117,681	-	-	424.875	June 2004	-	-	117,681	June 2008
	-	-	100,801	527.03	June 2005	-	-	100,801	June 2009
Total	233,350	-	100,801			-	-	334,151
Steve Lucas	115,669	-	-	405.25	June 2003	-	-	115,669	June 2007
	116,210	-	-	424.875	June 2004	-	-	116,210	June 2008
	-	-	99,615	527.03	June 2005	-	-	99,615	June 2009
Total	231,879	-	99,615			-	-	331,494
Nick Winser	92,535	-	-	405.25	June 2003	-	-	92,535	June 2007
	98,558	-	-	424.875	June 2004	-	-	98,558	June 2008
	-	-	91,314	527.03	June 2005	-	-	91,314	June 2009
Total	191,093	-	91,314			-	-	282,407
Mike Jesanis	41,871	-	-	405.25	June 2003	-	-	41.871	June 2007
	ADSs 19,987 (i)	-	-	US$39.40*	June 2004	-	-	ADSs 19,987	June 2008
	-	-	ADSs 21,634 (i)	US$48.534*	June 2005	-	-	ADSs 21,634	June 2009
Total	Shares 41,871	-	-			-	-	Shares 41,871
	ADSs 19,987	-	ADSs 21,634			-	-	ADSs 41,621
Edward Astle	107,958	-	-	405.25	June 2003	-	-	107,958	June 2007
	110,326	-	-	424.875	June 2004	-	-	110,326	June 2008
	-	-	94,872	527.03	June 2005	-	-	94,872	June 2009
Total	218,284	-	94,872			-	-	313,156

1. Mike Jesanis received awards over ADSs in June 2004 and 2005. Each ADS represents five ordinary shares.

 

5. Directors’ interests under the Lattice Long-Term Incentive Scheme (LTIS)

	Original award date	Award held at 1 April 2005 including dividend reinvestment shares	Adjusted market price for award at rollover	Shares resulting from dividend reinvestment in year	Award released during year	Market price at date of release (pence)	Award held 31 March 2006	Date award released
Steve Lucas	Nov 2001	98,201	388.24	2,856	101,057	511.53	-	Nov 2005
Total		98,201		2,856	101,057		-

 

No awards have been made under the LTIS since November 2001. Under the terms of the LTIS, notional allocations of shares were made to key individuals. The allocations were subject to a performance condition over three years and a further retention period of one year. The number of shares actually released to participants depended on the Group’s TSR compared with that of other regulated utility companies operating in a similar environment.

The 2001 LTIS award held by Steve Lucas was released from trust on 2 November 2005.

6. Directors’ beneficial interests

The Directors’ beneficial interests (which include those of their families) in National Grid ordinary shares of 11 ¹⁷/₄₃ p each are shown below.

	Ordinary shares at 31 March 2006 (i)	Ordinary shares at 1 April 2005	Options/awards over ordinary shares at 31 March 2006 (iv)	Options/awards over ordinary shares at 1 April 2005
Sir John Parker	55,832	52,229	-	-
Roger Urwin (ii) (iii) (v)	247,630	249,517	1,253,566	1,126,284
Steve Holliday (iii) (v)	28,063	25,843	531,405	604,370
Steve Lucas (ii) (iii) (vi) (vii) (viii)	159,379	102,063	417,585	404,093
Nick Winser (ii) (iii)	56,687	36,515	355,895	350,761
Mike Jesanis	3,281	3,557	445,105	336,935
Edward Astle (iii)	28,428	21,118	756,409	795,303
Ken Harvey (ii)	3,399	3,874	-	-
John Allan	2,000	-	-	-
John Grant	8,775	10,000	-	-
Paul Joskow	4,385	5,000	-	-
Stephen Pettit	2,632	3,000	-	-
Maria Richter	1,755	2,000	-	-
George Rose (ii)	4,409	5,025	-	-

1. There has been no other change in the beneficial interests of the Directors in ordinary shares between 1 April 2006 and 17 May 2006, except in respect of routine monthly purchases under the SIP (see note (v) below).
2. Following the Return of Cash and subsequent ordinary share consolidation and issue of B shares in August 2005 (see Directors’ report for further details), the following Directors held B shares at 31 March 2006: Roger Urwin (281,977), Steve Lucas (318), Nick Winser (20,787), Ken Harvey (3,874) and George Rose (5,025).
3. Each of the Executive Directors, with the exception of Mike Jesanis, was for Companies Act purposes deemed to be a potential beneficiary under the National Grid 1996 Employee Benefit Trust and thereby to have an interest in 47 ordinary shares held by the 1996 Employee Benefit Trust as at 31 March 2006.
4. Includes the PSP awards detailed in table 4 above.
5. Beneficial interest includes shares purchased under the monthly operation of the SIP in the year to 31 March 2006. Further shares were purchased in April and May 2006 on behalf of Steve Holliday (22 shares) and Roger Urwin (22 shares).
6. Steve Lucas was, for Companies Act purposes, deemed to be a potential beneficiary in the 21,015 ordinary shares and 23,948 B shares held by Lattice Group Trustees Limited as trustee of the Lattice Group Employee Share Ownership Trust, as at 31 March 2006.
7. Beneficial interest includes shares acquired pursuant to the Lattice All Employee Share Ownership Plan.
8. Includes the LTIS award detailed in table 5 above.

7. National Grid share price range

The closing price of a National Grid share on 31 March 2006 was 572.5p. The range during the year was 613.50p (high) and 489.25p (low). Please note that the Register of Directors’ Interests contains full details of shareholdings and options/awards held by Directors as at 31 March 2006.

On behalf of the Board

Helen Mahy
Group Company Secretary and General Counsel
17 May 2006