Directors' Report: Governance - British American Tobacco

www.bat.com/annualreport2009
Table 6: Executive Directors’ (1) Long-Term Incentive Plan awards; (2) Deferred Share Bonus Scheme share interests; and (3) share
options – ordinary shares of 25p in British American Tobacco p.l.c. – audited continued
Sharesave Scheme notes:
1 In respect of the Executive Directors, no options lapsed during the year ended 31 December 2009. There have been no variations in the terms and conditions of these
interests in share options during the year. Options granted under the Sharesave Scheme are exercisable in conjunction with a three year or five year savings contract up
to a monthly limit of £250. Options are normally granted at a discount of 20 per cent to the market price at the time of the invitation, as permitted under the rules of
the Sharesave Scheme.
2 There were no Sharesave options exercised by Executive Directors during the year and therefore no aggregate gains were made (2008: £nil).
3 The closing mid-market price of ordinary shares in British American Tobacco p.l.c. on 31 December 2009 was 2,016.5p and the range during the year was 1,495.0p
to 2,032.5p. The market price on 31 December 2009 exceeded the grant price of all the options detailed in the share options tables for the Executive Directors.
Table 7: Executive Directors’ pension entitlements – audited
Transfer value Transfer value Transfer value Total
Total accrued Gross increase Increase in of net increase of accrued of accrued change in
Normal pension at in accrued accrued pension in accrual pension at pension at transfer value
retirement 31 Dec 2009 pension net of inflation over period 31 Dec 2008 31 Dec 2009 during period
age £ £ £ £ £ £ £
Paul Adams 60 567,071 55,771 43,523 992,910 10,478,739 12,936,971 2,458,232
Nicandro Durante 60 384,449 97,344 90,466 1,875,855 5,245,580 7,971,698 2,726,118
Ben Stevens 60 157,464 28,659 25,574 500,557 2,173,058 3,082,063 909,005
Notes:
1 The amount of total accrued pension is the pension that would be paid annually on retirement based on service to the end of the year, excluding any increase granted
under statute before retirement.
2 The value of net increase in accrued pension represents the incremental value to the Executive Director of his service during the year, calculated on the assumption that
service terminated at the year end.
3 Changes in the transfer values reflect both individual Executive Director’s circumstances such as the date of joining the Pension Fund and changes in salary during the year
together with the application of market value adjustments in accordance with actuarial and legislative requirements. Following completion of the ongoing funding valuation
of the Pension Fund in June 2009, the Trustee of the Pension Fund reviewed the method and assumptions used to calculate transfer values and decided to amend the transfer
value basis. The Trustee’s agreed transfer value basis was updated to remain consistent with that used for the ongoing funding of the Pension Fund. The transfer value at
31 December 2008 shown above has been calculated in line with the transfer value basis in force at that time, whereas the transfer value at 31 December 2009 has been
calculated in line with the revised transfer value basis.
The transfer values of the accrued entitlement represent the value of assets that the Pension Fund would need to transfer to another pension provider on transferring the
Pension Fund’s liability in respect of Executive Directors’ pension benefits. They do not represent sums payable to individual Executive Directors and, therefore, cannot be
added meaningfully to annual remuneration. Further, although Nicandro Durante is not a member of the Pension Fund, the transfer values calculated above have been
calculated in accordance with the method used for the Pension Fund. Although Paul Adams and Ben Stevens receive a significant element of their overall entitlement from
an unfunded unapproved retirement benefit scheme, the transfer values calculated above have been calculated in accordance with the method used for the Pension Fund.
4 The Pension Fund is non-contributory. Voluntary contributions paid by Executive Directors and resulting benefits are not shown. No excess retirement benefits have been
paid to or are receivable by any Executive Director or past Executive Director.
5 Nicandro Durante is entitled to a benefit promise of 0.65 per cent of final sterling pensionable salary (calculated as a 12 month average) in relation to service from
1 March 2006. In addition, he is entitled to a pension from the Souza Cruz Pension Scheme based on an accrual rate of 1.85 per cent of final Brazilian real pensionable
salary (calculated as 12 month average) in relation to service from December 1981 (the value of this pension – in terms of £ sterling – has increased during 2009 due to
a 21 per cent strengthening of the Brazilian real). The accrued pension amount and transfer values shown above are based on the sum of these promises (i.e. with accrual
rate since 1 March 2006 being a total of 2.5 per cent). Nicandro Durante is entitled to receive that part of the promise from the Souza Cruz Pension Scheme (based on
1.85 per cent accrual rate) with immediate effect; this entitlement has been ignored for the purposes of the above transfer value.
Status of Remuneration report
This report has been prepared in accordance with the relevant provisions
of the Companies Act 2006 and Schedule 5 and Schedule 8 to the Large
and Medium-sized Companies and Groups (Accounts and Reports)
Regulations 2008. The report also meets the relevant requirements of
the Listing Rules of the UK Listing Authority and describes how the Board
has applied the Principles of Good Governance relating to Directors’
remuneration as set out in the Combined Code on Corporate Governance
referred to in the Corporate governance statement. As required by the
Companies Act 2006, a resolution to approve the Directors’ Remuneration
report (the Report) will be proposed at the Annual General Meeting of
the Company on 28 April 2010, at which the financial statements will
be presented for approval. The vote will have advisory status, will be in
respect of the remuneration policy and overall remuneration packages
Directors’ report: Governance
British American Tobacco Annual Report 2009
and will not be specific to individual levels of remuneration. The
Companies Act 2006 requires the auditors to report to the Company’s
shareholders on the ‘audited information’ within the Report and to
state whether, in their opinion, those parts of the Report have been
prepared in accordance with the Companies Act 2006. The report of
the independent auditors, in respect of the Company, addresses those
aspects of this Report and which have been subject to audit have been
clearly marked: Table 1, Table 2, Table 3, Table 4, Table 6 and Table 7.
On behalf of the Board
Anthony Ruys
Chairman of the Remuneration Committee
24 February 2010
97
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