An Introduction to Share Options

By Gary Watson

June 2014

Investigo

Do they work?

YES

...AND NO

Share option schemes

Investigo

Why would you implement a Share Scheme?

• TO AID RECRUITMENT

• TO IMPROVE RETENTION

• TO MOTIVATE KEY EMPLOYEES

• COST EFFECTIVE

• TAX EFFICIENT

Investigo

What are the benefits to your employees?

• THEY ACQUIRE A STAKE IN THE BUSINESS

• OPPORTUNITY TO ACCUMULATE WEALTH

• RELATIVELY RISK FREE

Investigo

3 categories of share scheme

1. PURCHASE AND AWARD OF

SHARES

2. AWARD OF OPTIONS

3. PHANTOM SHARE AWARDS

Investigo

What is an Approved Share Scheme?

• EMI

• CSOP

• SAYE

• SIP

A SCHEME FOR WHICH CERTAIN TAX BENEFITS ARE AVAILABLE TO EMPLOYEES AND EMPLOYERS

Investigo

What is an Unapproved Share Scheme?

EVERYTHING ELSE!

Investigo

Enterprise Management Incentive

• AIMED AT SMALLER QUALIFYING TRADING COMPANIES

• OPTION EXERCISE PRICE CAN BE DISCOUNTED TO THE MARKET VALUE OF THE SHARES AT DATE OF GRANT

• ON THE GRANT THERE IS NO INCOME TAX OR NIC

• LESS THAN 250 EMPLOYEES

• GROSS ASSETS OF £30M OR LESS

• AT SALE EMPLOYEES QUALIFY FOR ENTREPRENEUR’S RELIEF AT 10%

Investigo

Company Share Option Plans

• USED WHERE EMI OPTIONS CANNOT BE

GRANTED

• GIVES YOU AN OPTION TO BUY UP TO

£30,000 WORTH OF SHARES AT A FIXED

PRICE

• OPTIONS CANNOT BE EXERCISABLE WITHIN 3

YEARS OF GRANT DATE

• ON THE GRANT THERE IS NO INCOME TAX OR

NIC

• GAINS ARE SUBJECT TO CGT

Investigo

Save As You Earn

• MUST BE AVAILABLE TO ALL EMPLOYEES

WHO’VE BEEN WITH THE COMPANY FOR A

CERTAIN TIME

• THE PRICE IS FIXED AT THE START

• YOU CAN SAVE UP TO £500 A MONTH OUT

OF YOUR TAKE HOME PAY

• AT THE END OF THE SAVINGS CONTRACT (3

OR 5 YEARS) YOU CAN USE THE SAVINGS TO

BUY THE SHARES

• THE INTEREST AND ANY BONUS YOU

RECEIVE AT THE END IS TAX FREE

• GAINS ARE SUBJECT TO CGT UNLESS YOU

PUT THE SHARES INTO AN ISA OR PENSION

AS SOON AS YOU BUY THEM

Investigo

Share Incentive Plan

4 DIFFERENT WAYS YOU CAN RECEIVE

SHARES UNDER SIP:

1. FREE SHARES

2. PARTNERSHIP SHARES

3. MATCHING SHARES

4. DIVIDEND SHARES

• AFTER 5 YEARS THERE IS NO INCOME TAX

OR NIC ON THEIR VALUE WHEN YOU

ACQUIRE THEM

• GAINS ARE SUBJECT TO CGT

Investigo

When do Share Schemes Not Work?

• IF SHARE SCHEMES ARE TO ATTRACT, RETAIN AND MOTIVATE THEN THERE

ARE 4 THINGS THAT HAVE TO BE RIGHT:

• QUALIFYING CRITERIA

• TIMELINE

• TRANSPARENCY

• THE QUANTUM

Change Management Guildford Tax Property Treasury

Launch ofHong Kong office SAP

The Birth of Investigo London

3RD August 2003

Accounting & Finance

St Albans Strategy Reading Milton KeynesProcurement &Supply Chain

HR Launch of Sydney office2014

2006 2008 2010 2012

Time line of Investigo 2003 – 2014

GDP 2003-2013

Investigo

£65 Million

Forecasted for

2013/2014

Investigo Turnover 2003–2013

12/1311/1210/1109/1008-0907-0806-0705-0604-0503-04

£53.1

£47.0

£42.4

£32.0

£26.0

£19.2

£11.5

£6.5£3.3

£0.6

Million

Investigo

Darren BurnsDirector – Banking & Financial Services

“Investigo is a genuine half way house between a large scale recruitment business and starting on your own.

Unlike other ‘Equity’ schemes and empty promises around the market, the EMI scheme at Investigo is very real and very transparent. The scheme is aligned from Day 1. The financial incentive is very attractive and was a huge factor when joining Investigo. This is a huge reward for circa 5 years of hard work.

It’s not for everyone, so you should be confident in building a brand and a profitable business. If you back yourself then Investigo have proven to share wealth amongst the group. I interviewed at 9 companies and Investigo came up trumps!”

Investigo

Stuart BonnerDirector – Property

“Being a qualified accountant before getting into recruitment, understanding company valuations was something I’d trained in. I guess this made me more cynical than most when it came to offers of share schemes worth nothing. The absolute total transparency of the deal at Investigo has been key for me to believe and trust in it’s potential outcome”

Investigo

Ben Cowan Director - Change Solutions

“Apart from the culture and people, a major attraction for me to join Investigo was the transparent and straight forward LTIP. 

The scheme relates directly to the performance of the business I run, not on elements outside of my control, which I found particularly appealing.

The EMI scheme demonstrates Investigo’s commitment to me, and creates loyalty in return, enabling us to focus 100% on delivering on Investigo’s vision.

The EMI scheme, structured as it is, puts my “pay out” destiny in my own hands – something I find extremely motivating.”

Investigo

Terry Dawson Associate Director – SAP

“Leaving my last company and choosing to join Investigo was the biggest decision of my life, one of the reasons I chose to join was the LTIP/ EMI scheme that was presented to me.

Unlike other share option schemes that seemed confusing and less than straight forward, the Investigo scheme was simple. It will reward me based on the results of my own performance and that of my division, so in simple terms I know exactly how much profit I need to generate for the company in a set period of time in order to achieve my financial goals.

This clarity and straight forward approach helps me to focus on my goals and is hugely motivating for me. Investigo has literally given me the opportunity to change my life within a period of 3-4 years!”

3rd December 2013

MBO

Investigo

Any Questions?

If you would like copies of this presentation please email:Gary.Watson@Investigo.co.uk