Directors' remuneration 2007

With the exception of the dates of the executive Directors’ service agreements shown in the table below, note (a) to the table below, note (g) to the options table below and the table of beneficial interests of the Directors in GKN plc ordinary shares within the ‘Share interests’ section, the information set out below and in the 'Share interests' section represents the auditable disclosures required by Part 3 of Schedule 7A to the Companies Act 1985.

The remuneration of the executive Directors in 2007, excluding pension benefits and long term incentives, was as follows:

	Date of service agreement	salary(a) £000	Performance- related £000	Car allowance £000	Other benefits £000	Total 2007 £000	Total 2006 £000
Sir Kevin Smith	24.1.03	720	691	14	5	1,430(b)	1,230
M J Bryson(c)	1.10.07	192	170	9	7	378(b)	—
A Reynolds Smith(c)	14.11.07	222	153	7	3	385(b)	—
W C Seeger(d)	11.2.08	103	91	3	30	227(b)	—
N M Stein	22.8.01	446	428	12	4	890(b)	733
		1,683	1,533	45	49	3,310	1,963

(a) The executive Directors’ basic salaries at 31 December 2007 were: Sir Kevin Smith £747,579; M J Bryson £330,000; A Reynolds Smith £380,000; W C Seeger £330,000; N M Stein £470,000. The average year end basic salary of those executives in the most senior executive grade below Board level whose remuneration is monitored by the Remuneration Committee was £220,027 (all non-sterling amounts have been translated into sterling at the year end exchange rate for this purpose).

(b) Payments of supplementary allowances to certain executive Directors to assist them towards securing retirement benefits are included in the cash allowances for pension benefit purposes disclosed in the first pension benefits table below. The following allowances have therefore been excluded from the total remuneration shown in the table above although they are part of the Directors’ aggregate emoluments for the purpose of disclosure under the Companies Act 1985: Sir Kevin Smith £287,956 (2006 – £263,691); M J Bryson £17,780 (2006 – £nil); A Reynolds Smith £62,346 (2006 – £nil); W C Seeger £30,758 (2006 – £nil); N M Stein £134,004 (2006 – £118,248).

(c) Appointed to the Board 1 June 2007.

(d) Appointed to the Board 10 September 2007. Under the terms of his service agreement, Mr Seeger’s emoluments are paid semi-monthly in US$, converted at the exchange rate published in the UK Financial Times on the first business day of the relevant month. Mr Seeger is a US National who is relocating to the UK in the role of Group Finance Director. Additional reimbursement has been made by the Company in respect of temporary living costs incurred ahead of such relocation. Mr Seeger continued to have full US Federal and State tax withholding through the US payroll in 2007. As a result of the complicated interaction of the UK and US tax regimes, an additional payment of £47,559 was made by GKN to the UK tax authorities on Mr Seeger’s behalf in order to avoid a period of double taxation. All subsequent tax refunds resulting from the tax paid by GKN will be refunded to the Company in due course. A figure of £9,414 is contained within the benefits figure shown, being the best estimate of the amount which is not expected to be refunded based on information available to date.

The 2007 performance-related payments were triggered by the achievement of a number of Group and, where relevant, divisional targets relating to profit before tax, strategy and cash generation. Profit performance equal to target would have resulted in payments of 40%–50% of salary. The maximum amount that an individual could receive under the profit element was 100% of salary. In addition, cash flow targets were set for the Group as a whole and, where appropriate, divisional cash flow performance for each half of the year. Cash flow targets were substantially achieved, resulting in payments of between 4% and 10% of salary. In relation to profit performance, achievements resulted in payments of between 45% and 86% of salary. In relation to divisional strategy performance, achievements resulted in payments of between 10% and 20% of salary. Actual total payments to executive Directors under the 2007 short term variable remuneration scheme varied between 69% and 96% of salary.

The remuneration of the non-executive Directors in 2007 was as follows:

	Total 2007 £000	Total 2006 £000
R D Brown	270	240
Sir Ian Gibson(a)	50	50
H C-J Mamsch	45	45
Sir Christopher Meyer	45	45
J N Sheldrick	54	54
Sir Peter Williams	53	53
	517	487

(a) Retired 31 December 2007.

Directors’ aggregate emoluments for 2007 amounted to £4.4 million (2006 – £2.9 million).

Conditional and deferred rights to GKN plc ordinary shares under the LTIP held by the executive Directors at 31 December 2007 and 1 January 2007 (or, if later, on date of appointment as a Director), together with awards made and lapsed during the period, were as follows:

	Awards held 31 December 2007				Awards held 1 January 2007(b)
	Conditional	Deferred	Conditional awards made(a)	Conditional awards lapsed	Conditional	Deferred
Sir Kevin Smith	697,080	-	233,800	223,970	687,250	-
M J Bryson(c)	83,889	-	-	-	83,889	-
A Reynolds Smith(c)	105,777	-	-	-	105,777	-
W C Seeger(d)	54,410	-	-	-	54,410	-
N M Stein	410,683	-	139,341	128,540	399,882	-

(a) The closing mid-market price on the date of award of the shares comprising the conditional awards made during the year was 387.75p per share. The measurement period relating to these awards ends on 31December 2009.

(b) Or, if later, at date of appointment as a Director.

(c) Appointed to the Board 1 June 2007.

(d) Appointed to the Board 10 September 2007.

(e) Since 31 December 2007, the following conditional rights to GKN ordinary shares in respect of awards granted in relation to the measurement period 2005 to 2007 have lapsed: Sir Kevin Smith 215,720 shares;        N M Stein 123,800 shares.

(f) During 2007, no conditional rights were converted into deferred awards, no awards vested and no shares were released to Directors.

Interests in GKN plc 50p ordinary shares held by the executive Directors through Company-matched shares under the GKN Bonus Co-Investment Plan (BCIP) as at 31 December 2007 and 1 January 2007 (or, if later, on date of appointment as a Director), together with awards released during the year, are given in the table below. Directors were prohibited from participating in the BCIP; awards detailed below were granted prior to the relevant individual’s appointment as a Director of the Company.

Under the BCIP, participants could elect in 2005 to invest up to 10% of their maximum gross bonus opportunity for the prior year in GKN plc 50p ordinary shares (‘investment shares’). GKN plc granted matching shares on a three and a half for one basis (i.e. seven matching shares for every two investment shares purchased) which will be released to the participant after three years (which commenced 21 April 2005) provided that the participant continues to hold the investment shares and remains an employee of the GKN Group during that period. An additional condition applies to a one for one proportion of the match such that those shares will only be released to the participant after three years provided a Group OPIC (operating profit before exceptional items (as defined for internal reporting purposes) after the application of a notional investment charge) performance condition is achieved. Directors have a beneficial interest in their matching shares during the three year forfeiture period. Any awards deliverable under the BCIP will be satisfied from GKN ordinary shares already in issue.

	Interests held at 31 December 2007	Awards released(a)	Awards made	Interests held at 1 January 2007(b)
Sir Kevin Smith	-	-	-	-
M J Bryson(c)	20,660	12,828	-	33,488
A Reynolds Smith(c)	33,890	17,578	-	51,468
W C Seeger(d)	23,534	-	-	23,534
N M Stein	-	-	-	-

(a) The awards released during the year were granted in 2004 on the basis of two matching shares for every one investment share purchased. The release was conditional upon the participant continuing to hold the investment shares during the three year period following grant and remaining an employee of the GKN Group during that period. The closing mid-market price on the date of release of the shares comprising the awards was 346.5p

(b) Or, if later, at date of appointment as a Director.

(c) Appointed to the Board 1 June 2007.

(d) Appointed to the Board 10 September 2007.

(e) No awards have been made under the BCIP since 2005.

Conditional rights to GKN plc 50p ordinary shares held by the executive Directors under the GKN Profit Growth Incentive Plan (PGIP) as at 31 December 2007 and 1 January 2007 (or, if later, on date of appointment as a Director) are given in the table below. Directors were prohibited from participating in the PGIP; awards set out in the table were granted prior to the relevant individual’s appointment as a Director of the Company.

Under the PGIP, the shares which are the subject of the awards set out in the table, if any, that will become capable of release will depend on the extent to which profit growth targets are satisfied by the Company over a three year performance period which commenced on 1 January 2007; the Company’s reported profit for 2006 forms the baseline for this performance measure.

The number of shares given below will be released following the performance period if the minimum targeted profit growth is achieved. A maximum of twice the amount of shares listed below will be released on achievement of the maximum profit target. No shares will be released and the awards will lapse if the minimum profit target is not achieved. Release is also conditional upon the satisfaction of a personal shareholding requirement. Any awards deliverable under the PGIP will be satisfied from GKN ordinary shares already in issue.

 

	Interests held at 31 December 2007	Interests held at 1 January 2007(a)
Sir Kevin Smith	-	-
M J Bryson(b)	20,383	20,383
A Reynolds Smith(b)	25,340	25,340
W C Seeger(c)	7,283	7,283
N M Stein	-	-

(a) Or, if later, at date of appointment as a Director.

(b) Appointed to the Board 1 June 2007.

(c) Appointed to the Board 10 September 2007.

Options over GKN plc ordinary shares granted under the ESOS and the Save As You Earn (SAYE) share option scheme and held by the executive Directors at 31 December 2007 and 1 January 2007 (or, if later, on date of appointment as a Director) were as follows:

 

	Scheme	Exercisable(a)		Shares under option 31 December 2007	Exercise Price	2007			Shares under option 1 January 2007(b)
		From	To			Granted	Exercised	Lapsed
Sir Kevin Smith	ESOS	21.9.04	20.9.11	—	242.75p	—	—	210,093	210,093
	ESOS	15.3.05	14.3.12	165,584	308p	—	—	—	165,584
	ESOS	19.3.06	18.3.13	793,468	163.05p	—	—	—	793,468
	ESOS	16.9.07	15.9.14	—	219p	—	—	347,332	347,332
	ESOS	5.4.08	4.4.15	300,062	253.5p	—	—	—	300,062
	ESOS	11.4.09	10.4.16	236,816	334.05p	—	—	—	236,816
	ESOS	2.4.10	1.4.11	218,417	380.3p	218,417	—	—	—
M J Bryson(c)	ESOS	15.3.05	14.3.12	25,467	308p	—	—	—	25,467
	ESOS	19.3.06	18.3.13	38,379	163.05p	—	—	—	38,379
	ESOS	5.4.08	4.4.15	38,793	253.5p	—	—	—	38,793
	ESOS	11.4.09	10.4.16	33,677	334.05p	—	—	—	33,677
A Reynolds Smith(c)	ESOS	15.3.05	14.3.12	38,200	308p	—	—	—	38,200
	ESOS	19.3.06	18.3.13	73,482	163.05p	—	—	—	73,482
	ESOS	5.4.08	4.4.15	38,793	253.5p	—	—	—	38,793
	ESOS	11.4.09	10.4.16	42,658	334.05p	—	—	—	42,658
	SAYE	1.12.07	31.5.08	7,141	230p	—	—	—	7,141
W C Seeger(d)	ESOS	5.4.08	4.4.15	52,322	254.75p	—	—	—	52,322
	ESOS	11.4.09	10.4.16	43,378	334.05p	—	—	—	43,378
N M Stein	ESOS	21.9.04	20.9.11	—	242.75p	—	—	169,928	169,928
	ESOS	15.3.05	14.3.12	146,103	308p	—	—	—	146,103
	ESOS	19.3.06	18.3.13	303,587	163.05p	—	—	—	303,587
	ESOS	16.9.07	15.9.14	—	219p	—	—	282,395	282,395
	ESOS	5.4.08	4.4.15	172,209	253.5p	—	—	—	172,209
	ESOS	11.4.09	10.4.16	141,138	334.05p	—	—	—	141,138
	ESOS	2.4.10	1.4.11	130,173	380.3p	130,173	—	—	—

(a) Represents the earliest exercise date (assuming satisfaction of relevant performance criteria and personal shareholding requirements) and latest expiry date of options held by the Director during the year.

(b) Or, if later, at date of appointment as a Director.

(c) Appointed to the Board 1 June 2007.

(d) Appointed to the Board 10 September 2007.

(e) The SAYE share option scheme is open to all UK subsidiary employees with six months’ service or more. Participants save a regular monthly sum of up to £250 for three years (or five years for options granted prior to 2003) and can use these savings and any bonus payable under the scheme to exercise the options. For options granted prior to 2003, the exercise price was set at the maximum discount permitted by the Finance Act 1989 of 20% below the market price before the start of the savings period. For options granted in 2003 this discount was reduced to 10% (no SAYE share options have been granted since 2003).

(f) The closing mid-market price of GKN plc ordinary shares on the London Stock Exchange on 31 December 2007 was 282p and the price range during the year was 272p to 411.75p.

(g) At 31 December 2007, the total number of GKN plc ordinary shares which had been issued on the exercise of options granted by the Company or were the subject of such options remaining outstanding under the ESOS and the SAYE share option schemes was 11.5 million and 8.2 million respectively. This represents approximately 1.5% of the issued share capital of the Company at that date in respect of discretionary (i.e. executive) schemes and 2.6% of the issued share capital of the Company at that date in respect of all (i.e. both executive and all-employee) schemes.

Since 31 December 2007, the following number of shares the subject of ESOS awards granted in relation to the measurement period 2002 to 2004, with an option price of 308p per share, have vested and become capable of exercise or have lapsed:

	Vested	Lapsed
Sir Kevin Smith	99,350	66,234
M J Bryson	15,280	10,187
A Reynolds Smith	22,920	15,280
N M Stein	87,661	58,442

Since 31 December 2007, the following number of shares the subject of ESOS awards granted in relation to the measurement period 2003 to 2005, with an option price of 163.05p per share, have vested and become capable of exercise:

	Vested
Sir Kevin Smith	634,774
M J Bryson	30,703
A Reynolds Smith	58,785
N M Stein	242,869

Since 31 December 2007, the following ESOS awards granted in relation to the measurement period 2005 to 2007 have lapsed:

	Lapsed
Sir Kevin Smith	300,062
M J Bryson	38,793
A Reynolds Smith	38,793
W C Seeger	52,322
N M Stein	172,209

The exercise of options under the ESOS and SAYE share option schemes will normally be satisfied by the issue of new shares or, alternatively, through the transfer of shares held in treasury. In respect of awards that vest under the LTIP, the BCIP and the PGIP, the Company intends to obtain the relevant number of shares through market purchase up to the date of release of the shares which are the subject of awards that vest.

The first table below shows the total amount paid as a money-purchase contribution (paid only in respect of those Directors who are not members of GKN’s defined benefit pension scheme) and supplementary allowances to all executive Directors under the Group’s pension arrangements. The second table below shows pension amounts for those Directors whose pension arrangements are either wholly or partly of the defined benefit type.

 

	Cash allowances for pension benefit purposes
	2007 £000	2006 £000
Sir Kevin Smith	288	270
M J Bryson(a)	18	-
A Reynolds Smith(a)	62	-
W C Seeger(b)	42	-
N M Stein	134	118

 

	Accrued annual pension at 31 December 2007(c) £000	Accrued annual pension at 31 December 2006(c) £000	Transfer value of accrued annual pension at 31 December 2007 £000	Transfer value of accrued annual pension at 31 December 2006 £000	Change in transfer value in 2007(d) £000	Increase in annual pension in 2007(e) £000	Transfer value at 31 December 2007 of increase in annual pension in 2007(d) £000
M J Bryson(a)	121	102	1,955	1,513	425	16	225
A Reynolds Smith(a)	17	13	156	111	38	3	20
N M Stein	48	42	707	584	115	3	40

(a) Appointed to the Board 1 June 2007.

(b) Appointed to the Board 10 September 2007. The difference between the Director’s pension cost shown in this table and the supplementary allowance amount disclosed in note (b) to the Directors' remuneration table above represents GKN’s contribution to the Director’s qualified and non-qualified defined pension arrangement (equivalent, for 2007, to 11% of Mr Seeger’s basic salary).

(c) The accrued annual pension includes entitlements earned as an employee prior to becoming a Director as well as for qualifying services after becoming a Director.

(d) Less any contributions made by the Director.

(e) Increase over the year in accrued pension in excess of inflation to which the Director would have been entitled on leaving service.

(f) A transfer value represents the present value of accrued benefits. It does not represent an amount of money which the individual is entitled to receive. The change in transfer value over the year reflects the additional pension earned and the effect of changes in stock market conditions during the year. Transfer values have been calculated in accordance with version 9.2 of Guidance Note 11 prepared by the Institute/Faculty of Actuaries with effect from 30 December 2005.