Directors' Report
for the year ended 31 March 2009
In accordance with the requirements of the Companies Acts and UK Listing Authority’s Listing, Disclosure and Transparency Rules, the following sections describe the matters that are required for inclusion in the Directors’ Report and were approved by the Board. Further details of matters to be included in the Directors’ Report that are incorporated by reference into this report, are set out below.
Directors
The biographies of the persons serving as Directors as at the date of this report are set out under Board of Directors. The names of all persons serving as Directors during the financial year are in the Directors' Remuneration Report, detailed in the table setting out Directors’ beneficial interests in the Directors' Remuneration Report. The Directors’ interests in shares and in options to receive shares, and any changes that have occurred since 31 March 2009, are set out in the Directors’ Remuneration Report. Directors’ and Officers’ liability insurance cover is arranged and qualifying third party indemnities are in place for each Director.
Code of Ethics
In accordance with US legal requirements, the Board has adopted a Code of Ethics for senior financial professionals. This code is available on our website at www.nationalgrid.com (where any amendments or waivers will also be posted). There were no amendments to, or waivers of, our Code of Ethics during the year.
Principal activities and business review
A full description of the Company’s principal activities, significant contracts, business and principal risks and uncertainties, environmental, employee and social and community issues are contained in the Operating and Financial Review and the Corporate Governance section, which are incorporated by reference into this report.
Dividends
The Directors are recommending a final dividend of 23.00 pence per ordinary share ($1.7437 per American Depositary Share) to be paid on 19 August 2009 to shareholders on the Register at 5 June 2009. An ordinary resolution will be proposed at the Annual General Meeting to allow for a scrip dividend to be available. A scrip dividend allows a dividend to be taken in shares rather than cash with no dealing costs or stamp duty payable. Further details in respect of dividend payments can be found under financial performance.
Political donations and expenditure
National Grid made no political donations in the UK or European Union during the year (including donations as defined for the purposes of the Political Parties, Elections and Referendums Act 2000). National Grid USA and certain subsidiaries made political donations in the US of $180,000 (£116,959) during the year to affiliated New York State political action committees (PACs). National Grid USA’s federal and state PACs gave $156,975 (£101,998) to political committees in 2008/09. National Grid USA’s affiliated federal PACs were funded wholly by voluntary employee contributions. National Grid USA’s affiliated New York State PACs were funded partly by contributions from National Grid USA and partly by employee contributions.
Charitable donations
During 2008/09, approximately £10 million (2007/08: £9.2 million) was invested in support of community initiatives and relationships. The London Benchmarking Group model was used to assess this overall community investment. Direct donations to charitable organisations amounted to £1.4 million (2007/08: £0.6 million). In addition to our charitable donations, financial support was provided for our affordable warmth programme, education programme, university research and our Young Offenders Programme.
Financial instruments
Details on the use of financial instruments and financial risk management are included under use of derivative financial instruments and choices permitted under IFRS in the Operating and Financial Review.
Contractual arrangements
Details concerning our rate plans and price controls, which we consider to be our primary contractual arrangements, can be found in the Operating and Financial Review under current and future developments sections in Transmission, Gas Distribution, Electricity Distribution & Generation and Non-regulated businesses and other.
Post balance sheet events
On 29 April 2009, the Competition Appeal Tribunal announced its decision not to uphold in full Ofgem’s 2008 decision in relation to Metering contracts. Further information is provided in the Operating and Financial Review under Details of material litigation as at 31 March 2009.
Change of control provisions
The significant agreements that are affected upon a change of control of the Company are incorporated by reference into this report. No compensation would be paid for loss of office of Directors on a change of control of the Company.
Future developments
Details of future developments are contained in the Operating and Financial Review.
Research and development
Expenditure on research and development during the year was £10 million (2007/08: £13 million).
Share capital
At the Company’s 2008 Annual General Meeting (AGM) shareholder authority was given to purchase up to 10% of the Company’s ordinary shares. The Directors intend to seek shareholder approval to renew this authority at this year’s AGM.
The Company’s interim results statement for the six months to 30 September 2006 included the announcement of a share repurchase programme to return around $1.9 billion (£1 billion) to shareholders. The ordinary share repurchase programme commenced on 20 November 2006 and in May 2007 it was extended to return £1.8 billion of the proceeds of the sale of our wireless businesses. As announced with the half year results for 2008/09, we have completed the return of £1.8 billion and the US stranded asset post tax cash flows for 2008/09. During 2008/09, the Company purchased 85,457,497 shares representing 3.3% of the issued ordinary share capital at an aggregate consideration of £593,545,263. In total, as at the date of this report, 307,992,296 ordinary shares (representing approximately 11.9% of our issued ordinary share capital) had been repurchased since November 2006 for an aggregate consideration of £2,270 million. Of the shares repurchased as at 12 May 2009, 149,276,986 were held in treasury and 9,509,217 have been transferred to employees under the employee share plans.
Shares and ADRs purchased on behalf of the Company by the Employee Share Trusts (see notes 25 and 26 to the consolidated financial statements of the accounts) were used for employee share incentive plans.
The share capital of the Company consists of ordinary shares of 1117⁄43 pence nominal value each and American Depositary Shares only. The ordinary and American Depositary Shares allow holders to receive dividends and vote at general meetings of the Company. Shares held in treasury are not entitled to vote or receive dividends. There are no restrictions on the transfer or sale of ordinary shares.
Some of the Company’s employee share plans include restrictions on transfer of shares while the shares are subject to the plan.
Where, under an employee share plan operated by the Company, participants are the beneficial owners of the shares but not the registered owner, the voting rights may be exercised by the registered owner at the direction of the participant.
Employees
The Company employs over 27,500 people. Communication is a key theme both at a corporate and business level. The Company wide internet based publication National Grid One provides employees with an overview of performance and updates on relevant acquisitions, alongside material setting out the strategy and operating model for National Grid. This publication is only one example of the multiple communication channels, including the use of various business specific intranets, which the Company has established and continues to develop to ensure the timely cascade of critical information to employees.
Feedback has been provided by employees in confidence via a Company wide employee engagement survey conducted in 2009; 91.8% of employees took part in the process. Action plans will be developed by each of the businesses to address their key priorities for improvement.
National Grid’s core values are respect, ownership, integrity and working together. National Grid’s inclusion and diversity vision is to develop and operate its business in a way that results in a more inclusive and diverse culture. This supports the attraction and retention of the best people, improves effectiveness, delivers superior performance and enhances the success of the Company. Employees are provided with the opportunity to develop to their full potential regardless of race, gender, nationality, age, disability, sexual orientation, gender identity, religion and background. The employee share schemes, available to encourage the involvement of employees in the Company’s performance, are explained further in the Directors' Remuneration Report.
Policy and practice on payment of creditors
It is National Grid’s policy to include in contracts, or other agreements, terms of payment with suppliers. Once agreed, National Grid aims to abide by these payment terms. The average creditor payment period at 31 March 2009 for National Grid’s principal operations in the UK was 13 days (18 days at 31 March 2008).
Audit information
Having made the requisite enquiries, so far as the Directors in office at the date of the signing of this report are aware, there is no relevant audit information of which the auditors are unaware and each Director has taken all reasonable steps to make themselves aware of any relevant audit information and to establish that the auditors are aware of that information.
Articles of Association
The Articles of Association set out the internal regulation of the Company and cover such matters as the rights of shareholders, the appointment or removal of Directors and the conduct of the Board and general meetings. Copies are available upon request and are displayed on the National Grid website at www.nationalgrid.com. In accordance with the Articles of Association, Directors can be appointed or removed by the Board or shareholders in general meeting. Amendments to the Articles of Association have to be approved by at least 75% of those voting in person or by proxy at a general meeting of the Company. Subject to company law and the Articles of Association, the Directors may exercise all the powers of the Company, and may delegate authorities to Committees and day-to-day management and decision making to individual Executive Directors. Details of the main Board Committees can be found here. In order to update for Companies Act 2006 changes, special resolutions will be put to the 2009 Annual General Meeting to adopt the Articles of Association with effect from the AGM, and to adopt new Articles of Association effective from 1 October 2009.
Material interests in shares
As at the date of this report, National Grid had been notified of the following holdings in voting rights of 3% or more in the issued share capital of the Company:
| % of voting rights | |
|---|---|
| Legal and General Investment Management Ltd | 5.46 |
| Fidelity | 3.06 |
No further notifications have been received.
Annual General Meeting
National Grid’s 2009 AGM will be held on Monday 27 July 2009 at The International Convention Centre in Birmingham. Details are set out in the Notice of AGM.
On behalf of the Board
Helen Mahy
Company Secretary & General Counsel
13 May 2009
National Grid plc, 1-3 Strand, London WC2N 5EH
Registered in England and Wales No. 4031152