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10.3 Long Term Incentive Plan

Conditional awards of shares were made in 2008 to executive directors under the LTIP as shown in Figure 13.

Figure 13: Long Term Incentive Plan
LTIP interests(1)(2) Total beneficial
interest in LTIP at 1 January 2008
Number of shares
conditionally
awarded during 2008
Number
of shares
vested during 2008
Number
of shares lapsed during 2008
Total
beneficial
interest in
LTIP at
31 December 2008
Latest performance period end date
Cynthia Carroll 73,538 66,985 140,523 31/12/2010
René Médori 165,256 45,980 (65,868) 145,368 31/12/2010
(1)
The LTIP awards made in 2008 are conditional on two performance conditions as outlined in long term incentive plan. the first is based on the Company’s TSR relative to a weighted group of international natural resource companies and to the constituents of the FTSE 100; the second is based on an underlying operating measure which focuses on raising the Company’s ROCE in the medium term. Further details on the structure of the LTIP, the required level of performance for the 2008 award and how performance against targets is measured can be found long term incentive plan. The market price of the shares at the date of award was £31.35.
(2)
The performance period applicable to each award is three years. The performance period relating to the LTIP awards in 2005 (which were granted on 5 April) ended on 31 December 2007. Vesting was subject to two performance conditions: the first based on the Company’s TSR relative to a weighted group of international natural resource companies and the FTSE 100; with the second based on an underlying operating measure which focused on improvements in the Company’s ROCE in the medium term. Part of each award was based on the TSR measure and part on the operating measure. These awards are as follows:

Shares vested
Number of
shares vested
Dates of
conditional award
Market price at
date of award £
Market price at
date of vesting £
Money value
at date of vesting £
René Médori 65,868 05/04/2005 12.54 34.39 2,265,201
In the case of the LTIP awards granted in 2005, the determinants for vesting were 50% on relative TSR and 50% on meeting specified Group ROCE targets. The ROCE targets are a function of targeted improvement in returns on existing capital employed at the start of the performance period and targeted returns in excess of the cost of capital on new capital investment over that period. The entry-level target for any LTIP has been the actual return achieved on the capital employed, excluding capital work in progress, in the year immediately preceding the commencement of the performance period. In order to maintain the effectiveness of the plan in driving long-term performance, the actual returns in the final performance year are adjusted for movements in commodity prices, certain foreign exchange rate effects (e.g. translation windfalls), capital in progress (to reflect the fact that mines under construction absorb large amounts of capital before producing a return), for relevant changes in the composition of the Group (e.g. significant acquisitions and disposals) and other one-off factors which would otherwise result in a misleading outcome.
The threshold blended target (i.e. the target on existing and new capital) for the performance period for the 2005 LTIP was 17.80% and the upper blended target 19.80%. The ROCE achieved was 21.71% and the outcome on this element of the LTIP was thus 100%. On the TSR measure, Anglo American achieved a TSR over the three-year performance period of 178 % which generated a 75% vesting in terms of the 2005 Sector Index Comparator Group and a 150% vesting against the FTSE 100 (being above the 90th percentile). The overall vesting level for the director with a 50% Group ROCE, 25% Sectoral TSR and 25% FTSE 100 TSR split was therefore 106.25 %.