Share Plans

(a) The Luxfer Group Employee Share Ownership Plan

The trust

In 1997, the Company established an employee benefit trust ("the ESOP") with independent Trustees, to purchase and hold shares in the Company in trust to be used to satisfy options granted to eligible senior employees under the Company's share plans established from time to time.

The ESOP was established with the benefit of a gift equivalent to the set up and running costs. Purchase monies and costs required by the ESOP Trustees to purchase shares for and under the provisions of the trust are provided by way of an interest free loan from a Company subsidiary. The loan is repayable, in normal circumstances, out of monies received from senior employees when they exercise options granted to them over shares. Surplus shares are held by the ESOP Trustees to satisfy future option awards. The ESOP Trustees have waived their right to receive dividends on shares held in trust. The Remuneration Committee is charged with determining which senior employees are to be granted options and in what number subject to the relevant plan rules.

The current plan

The current share option plan, implemented by the Company in February 2007 is The Luxfer Holdings Executive Share Option Plan ("the Plan"), which consists of two parts. Part A of the Plan is approved by HM Revenue & Customs and Part B is unapproved. Options can be exercised at any time up to the tenth anniversary of their grant subject to the rules of the relevant part of the Plan. As a result of the Company's initial public offering of ordinary shares in 2012, all leaver restrictions over the shares were released. There are no other performance criteria attached to the options.

Changes in the year

The change in the number of shares held by the Trustees of the ESOP and the number of share options held over those shares are shown below:



	Number of shares held by ESOP Trustees
	£0.0001 deferred shares	£0.50 ordinary shares
At January 1, 2018	15,977,968,688	104,709
New shares issued	—	1,863,201
Shares utilized during the year	—	(149,609	)
Shares transferred into ESOP during the year	—	120,000
Shares sold from the ESOP during the year	—	(317,000	)
At December 31, 2018	15,977,968,688	1,621,301

At December 31, 2018, the loan outstanding from the ESOP was $2.0 million (2017: $2.6 million).

The market value of each £0.50 ordinary share held by the ESOP at December 31, 2018, was $17.63 (2017: $15.80).

(b) Share-based compensation

Luxfer Holdings PLC Long-Term Umbrella Incentive Plan and Luxfer Holdings PLC Non-Executive Directors Equity Incentive Plan

As an important retention tool and to align the long-term financial interests of our management with those of our shareholders, the Company adopted the Luxfer Holdings PLC Long-Term Umbrella Incentive Plan (the "LTIP") for the Company's senior employees, and the Luxfer Holdings PLC Non-Executive Directors Equity Incentive Plan (the "Director EIP") for the Non-Executive Directors.

14. Share Plans (continued)

(b) Share-based compensation (continued)

The equity or equity-related awards under the LTIP and the Director EIP are based on the ordinary shares of the Company. The Remuneration Committee administers the LTIP and has the power to determine to whom the awards will be granted, the amount, type and other terms. Awards granted under the LTIP generally vest one-third each year over a three-year period, subject to continuous employment and certain other conditions, with the exercise period expiring five years after grant date. Awards granted under the Director EIP are non-discretionary, are purely time-based and vest over one year, with settlement occurring immediately on vesting.

Share option and restricted stock awards As a tool to retain key people and align their interests with those of shareholders, a one-off award of market-value options was made to a small number of executives and the non-executive directors immediately prior to the Company's initial public offering in 2012. Of this award 40% of the options granted vested immediately and 20% of the options vested upon each of the first, second and third anniversaries of the I.P.O. All awards have therefore fully vested, with 126,000 remaining to be exercised before October 2019.

In March 2018, a combined 432,600 of Restricted Stock Units and Options over ordinary shares were granted under the LTIP, which were all time-based awards vesting over three years and expiring two years later. In April 2018, a combined 11,936 of Restricted Stock Units and Options over ordinary shares were granted under the Director EIP, of which 2,000 would vest over three years and 9,936 would fully vest one year later. The Director EIP are all time-based awards.

In January 2018, Heather Harding was granted share options in respect of her appointment to the role of Chief Financial Officer. These time, and performance-based options were outside the terms of reference of the LTIP but granted in accordance with the provisions of the Remuneration Policy. The details of the awards are as follows:

The Remuneration Committee determined that the new Chief Financial Officer should acquire 21,000 nominal cost RSUs to vest over three years.

Performance-based awards amounting to 30,000 shares should be made to the new Chief Financial Officer which would vest upon achievement of attaining a specified adjusted diluted EPS target at each annual measurement date. Three levels of target have been set:


•	The lower target must be achieved by the measurement date at the end of 2020 and will result in the vesting of 5,000 shares.


•	The mid-point target must be achieved by the measurement date at the end of 2022 and will result in the vesting of a further 10,000 shares.


•	The top target must be achieved by the measurement date at the end of 2024 and will result in the vesting of a further 15,000 shares.

In March 2017, a combined 139,800 of Restricted Stock Units and Options over ordinary shares were granted under the LTIP, which were all time-based awards vesting over three years and expiring two years later. Following the Annual General Meeting on May 23, 2017, a combined 21,814 of Restricted Stock Units and Options over ordinary shares were granted under the Director EIP, which were all time-based awards which will be fully vested and settled one year later in May 2018.

In March 2016, 95,140 Restricted Stock Units and Options over ordinary shares were granted under the LTIP, which were all time-based awards vesting over three years and expiring two years later. Following the Annual General Meeting on May 24, 2016, 12,520 Restricted Stock Units and Options over ordinary shares were granted under the Director EIP, which were all time-based awards. All EIP awards have fully vested and been exercised.

14. Share Plans (continued)

(b) Share-based compensation (continued)

In May 2017 Alok Maskara was granted share options in respect of his appointment to the role of Chief Executive Officer. These time, and performance-based options were outside the terms of reference of the LTIP but granted in accordance with the provisions of the Remuneration Policy. The details of the awards are as follows:


(i)	The Remuneration Committee determined that the new Chief Executive Officer should acquire a minimum quantity of 22,500 shares within twelve months of appointment. Upon the Chief Executive Officer acquiring the shares, the Company matched the purchase by granting an award over 45,000 nominal cost RSUs, to vest over three years.


(ii)	A one-off share award to the new CEO, outside the terms of the LTIP, over 60,000 time-based nominal cost RSUs, to vest over four years.


(iii)	Performance-based Awards made to the new Chief Executive Officer vest upon achievement of attaining a specified adjusted diluted EPS target at each annual measurement date. Three levels of targets have been set:


•	The lower target must be achieved by the measurement date at the end of 2020 and will result in the vesting of 30,000 shares.


•	The mid-point target must be achieved by the measurement date at the end of 2022 and will result in the vesting of a further 40,000 shares.


•	The top target must be achieved by the measurement date at the end of 2024 and will result in the vesting of a further 50,000 shares.

Total share-based compensation expense for 2018, 2017 and 2016 was as follows:



	Years ended December 31,
In millions	2018		2017		2016
Other share-based compensation charges	$	4.8	$	2.2	$	1.4
Restructuring share-based compensation charges	—		0.9		—
Total share-based compensation charges	$	4.8	$	3.1	$	1.4

There were no cancellations or modifications to the awards in 2018, 2017 or 2016.

Cash received from option exercises for the years ended December 31, 2018, 2017 and 2016 was $0.5 million, $0.9 million and $0.1 million, respectively. The actual tax benefit realized for the tax deductions from option exercises totaled $0.2 million, $0.3 million and $0.3 million in 2018, 2017 and 2016, respectively.

The following tables illustrates the number of, and movements in, share options during the year, with each option relating to 1 ordinary share:



	Number of shares		Weighted- average exercise price		Weighted- average remaining contractual life (years)	Aggregate intrinsic value ($M)
At January 1, 2018	1,182,315		$	6.42	2.4	$	11.1
Granted during the year	510,536		$	0.67
Exercised during the year	(833,360	)	$	7.43
Accrued dividend awards	18,776		$	0.66
Lapsed during the year	(29,205	)	$	0.67
At December 31, 2018	849,062		$	2.10	1.9	$	13.3
Options exercisable at December 31, 2018	320,882		$	4.31	2.4	$	4.3
Options expected to vest as of December 31, 2018	528,180		$	0.64	1.5	$	9.0

14. Share Plans (continued)

(b) Share-based compensation (continued)

The weighted average fair value of options granted in 2018, 2017 and 2016 was estimated to be $11.02, $9.82 and $9.39 per share, respectively. The total intrinsic value of options that were exercised during 2018, 2017 and 2016 was $9.3 million, $1.4 million and $1.4 million, respectively. At December 31, 2018, the total unrecognized compensation cost related to share options was $3.8 million (2017: $3.4 million). This cost is expected to be recognized over a weighted average period of 1.8 years.

The following table illustrates the assumptions used in deriving the fair value of share options during the year:



	2018	2017
Dividend yield (%)	4.00	4.00
Expected volatility range (%)	22.65 - 35.77	26.81 - 35.81
Risk-free interest rate (%)	0.12 - 2.57	1.00 - 2.01
Expected life of share options range (years)	0.50 - 6.00	0.50 - 7.36
Weighted average exercise price ($)	$0.65	$0.65
Model used	Black-Scholes & Monte-Carlo	Black-Scholes

The expected life of the share options is based on historical data and current expectations and is not necessarily indicative of exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility over a period similar to the life of the options is indicative of future trends, which may not necessarily be the actual outcome.

Employee share incentive plans The Company operates an all-employee share incentive plan in its U.K. and U.S. operations and may look to implement plans in other geographic regions.