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Annual Report and Financial Statements 2003
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Summary Director's report continued
 
 
The Board
 
The Board comprises five Executive Directors and six Non-Executive Directors, including the Chairman. Lord Levene is the senior Non-Executive Director and all Non-Executive Directors are considered to be independent. The Board meets 10 times a year, including a two day strategy conference, and is responsible to shareholders for strategic development, the management of the Group’s assets to maximise performance and the control of business operations.
 
Changes to the Board and Board succession
 
The Chairman’s statement describes the Board succession plans announced during the year. Ian Coull retired as a Director on 31 December 2002.
 
Corporate Governance
 
The Company is committed to high standards of corporate governance in its business and has complied throughout the period under review with all the provisions of the Combined Code on Corporate Governance (‘the Code’). The Company has an established system of internal controls.
 
The Remuneration, Nomination and Audit Committees have written terms of reference which define their authorities, duties and membership. These Committees are made up exclusively of the Non-Executive Directors, other than the Group Chief Executive’s membership of the Nomination Committee.
 
Group performance and dividend
 
A review of the performance of the Group and its principal operating subsidiaries during the period is set out in the Chairman’s statement and the Group Chief Executive’s review.
 
The Directors recommend the payment of a final dividend of 11.36 pence per share (2002:10.82 pence), making a total dividend for the year of 15.58 pence per share (2002: 14.84 pence). Subject to shareholders approving this recommendation at the Annual General Meeting, the dividend will be paid on 25 July 2003 to shareholders on 30 May 2003.
 
Annual General Meeting
 
The Annual General Meeting of shareholders will take place at 11.30am on Wednesday 23 July 2003 at The Queen Elizabeth II Conference Centre, Broad Sanctuary, Westminster, London SW1P 3EE. The Notice of the Meeting and explanatory notes are enclosed with this review.
 
Summary remuneration report
 
The full report on Directors’ remuneration is set out in the Remuneration Report section of the Annual Report and Financial Statements.
 
The Remuneration Committee is chaired by Keith Butler-Wheelhouse and comprises all of the Non-Executive Directors. The Committee adopted a remuneration policy in 2002 consistent with the Company’s business objective which:
  • attracts, retains and motivates high calibre Directors;

  • in general terms, sets base salary broadly in line with median market practice, whilst moving total remuneration towards upper quartile market levels for superior performers;

  • creates overall packages in which performance related elements form a significant proportion;

  • reinforces the performance orientated culture by providing enhanced rewards for stretch performance;

  • supports short-term and long-term incentive plans which are targeted at both personal and Company performance;

  • aligns the interests of Directors with those of the shareholders by linking share and cash incentive payments to performance; and

  • is based on information from a range of remuneration sources, which takes into account the retail sector as well as other large companies of a comparable size and complexity.
The main components of Executive Directors’ remuneration are basic salary, pension entitlement and short and long-term incentive arrangements which provide rewards based upon the fulfilment of personal and business performance targets.
 
On 14 March 2003, the Company announced that, at the request of the Board, Sir Peter Davis had agreed to extend his time with the Group and will assume the role of Chairman on 29 March 2004. In conjunction with the appointment, the Board made two conditional awards of shares to Sir Peter under the Share Award Plan. The shares comprised in the conditional awards will be released on 31 July 2005 provided Sir Peter remains Chairman until then and the performance conditions have been met.
 
Performance graph
 
The graph below shows the Total Shareholder Return (TSR) performance of an investment of £100 in J Sainsbury plc shares over the last five years compared with an equivalent investment in the FTSE 100 Index.
 
Graph to show the Total Shareholder Return (TSR) performance of an investment of £100 in J Sainsbury plc shares over the last five years compared with an equivalent investment in the FTSE 100 Index.
 
Over a three year period from 31 March 2000, the Company’s TSR outperformed the FTSE 100 Index by 48 per cent.
 
  Director's remuneration
 
  The Remuneration of the Directors for the year was as follows:
    Note
 Salary
£000 		Bonus6
£000 		Profit 
sharing7
£000 		 Benefits8
£000 		Total
2003
£000 		Total
2002
£000
   
  Executive Directors              
  John Adshead CBE   340 166 4 28 538 476
  Ian Coull 1 258 – 4 21 283 469
  Sir Peter Davis 2 800 408 9 2 1,219 1,098
  Roger Matthews   405 195 4 28 632 562
  Stuart Mitchell 3 350 181 4 21 556 110
  Sara Weller 3 350 167 3 16 536 110
                 
  Non-Executive Directors              
  Sir George Bull   250 – – 27 277 245
  Keith Butler-Wheelhouse   35 – – – 35 29
  June de Moller   30 – – – 30 25
  Jamie Dundas   35 – – – 35 30
  Lord Levene 4 30 – – – 30 23
  Bridget Macaskill 5 30 – – – 30 4
   
 
 
1 Retired as a Director on 31 December 2002.
2 Highest paid Director.
3 Appointed as a Director on 1 January 2002.
4 Appointed as a Director on 1 May 2001.
5 Appointed as a Director on 1 February 2002.
6 Includes performance bonuses earned in the period under review but not paid in the financial year.
7 Profit sharing amounted to 1.17 per cent of qualifying pay.
8 Benefits include company car benefits and medical insurance.
9 The aggregate remuneration of the Directors for the year was £4.2 million (2002: £4.2 million).
   
  Performance Share Plan
   
 
Under the Plan, shares conditionally allotted to individuals are released to them in the form of options if a future performance condition is met at the end of the three year performance period. Sir Peter Davis does not participate in this Plan. The conditional allocations for 2001 and 2002 are shown below, together with the options granted upon the partial satisfaction of the performance condition attached to the allocation made in 1999.
    Conditional
award
7 June 2001 		Conditional
award
30 May 2002 		Option grant
29 May 2002
   
  John Adshead CBE 37,470 68,918 30,067
  Roger Matthews 44,496 82,094 –
  Stuart Mitchell 28,981 70,945 9,977
  Sara Weller 30,035 70,945 –
   
 
 
– The conditional award figures for 2001 show the maximum award that would be released provided that the Company achieves the upper quartile position within the comparator group at the end of the three year performance period.
– The conditional award for 2002 shows the maximum award that would be released provided that the Company achieves first position within the comparator group at the end of the three year performance period.
– The right hand column shows that 83.3 per cent of the conditional allocation of 1999 was released as an option in 2002.
– The conditional allocation made in 2000 has lapsed because the performance condition was not satisfied.
– On 17 September 2002, Ian Coull exercised an option over 31,738 shares at a market price of 324.25 pence per share, making a profit of £102,909. Ian Coull retired as a Director on 31 December 2002 when his conditional awards lapsed.
   
  Options over ordinary shares
   
  Directors' options under the Company's Executive Share Option Plan and Savings
Related Share Option Scheme are summarised below:
    Total
31 March
2002 		Granted
during
the year 		Exercised
during
the year 		Lapsed
during
the year 		Total
29 March 2003
   
  Executive Share Option Plan          
  John Adshead CBE 624,409 236,933 – 45,482 815,860
  Sir Peter Davis 3,009,596 – – – 3,009,596
  Roger Matthews 413,691 282,229 – – 695,920
  Stuart Mitchell 329,675 243,902 – 10,290 563,287
  Sara Weller 316,315 243,902 – – 560,217
             
  Savings Related Share Option Scheme          
  John Adshead CBE 2,080 1,107 – 474 2,713
  Sir Peter Davis 4,384 – – – 4,384
  Roger Matthews 2,571 – – – 2,571
  Stuart Mitchell 4,230 – – – 4,230
   
 
 
– Ian Coull retired as a Director on 31 December 2002 when his options lapsed.
– The performance conditions relating to grants up to and including 2 June 2000 have been met.
   
 
The options outstanding under the Company’s Executive Share Option Plan and Savings Related Share Option Scheme are exercisable at prices between 239 pence and 545 pence. In the period from 31 March 2002 to 29 March 2003, the highest middle market price was 422 pence and the lowest middle market price was 220 pence.
   
  Directors’ interests
   
  Directors' interests in the ordinary shares of the Company and shares held in
trust on behalf of Directors are as follows:
    Ordinary shares1   Ordinary shares3
    30 March
2002		 29 March
2003		     20 May
2003
   
  Executive Directors          
  John Adshead CBE 69,345 72,226     72,323
  Sir Peter Davis 101,106 103,397     103,494
  Roger Matthews 50,391 51,295     51,295
  Stuart Mitchell 12,407 14,393     14,490
  Sara Weller 243 3,472     3,569
             
  Non-Executive Directors          
  Sir George Bull 20,000 25,000     25,000
  Keith Butler-Wheelhouse 3,300 3,300     3,300
  June de Moller 1,500 1,500     1,500
  Jamie Dundas 1,200 1,200     1,200
  Lord Levene 2,500 2,500     2,500
  Bridget Macaskill – 2,500     2,500
   
 
 
1 Ordinary shares are beneficial holdings which include the Directors’ personal holdings and those of their spouses and minor children, as well as holdings in family trusts of which a Director or his minor children are beneficiaries or potential beneficiaries. They also include the beneficial interests in shares which are held in trust under the J Sainsbury Profit Sharing Scheme and the Sainsbury’s Share Purchase Plan.
2 The Company’s Register of Directors’ Interests contains full details of Directors’ interests, shareholdings and options over ordinary shares of the Company.
3 Changes to the Directors’ interests in ordinary shares between 30 March 2003 and 20 May 2003 occurred as a result of purchases under the Company’s Share Purchase Plan.

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