Annual report 2010 - Imperial Tobacco Group

Directors’ Remuneration Report continuedStrategy Performance Governance FinancialsExecutive Directors’ Share Options (Audited)Market priceat dateExercise priceRange ofexercisableGains on exercise 4Balance at1/10/2009Grantedduringthe yearLapsedduringthe yearExercisedduringthe yearof exercise2/8/2010 1£Balanceat30/09/2010 2 (rebased whereappropriate)£dates ofoptions held at30/9/2010 3 Duringthe year£’0002009£’000Mrs A J Cooper 729 – – – – 729 12.54 01/08/12 – 31/01/13 – –729 – – – – 729 – – 4Mr R Dyrbus 252 – – (252) 18.04 – 14.96 01/08/10 – 31/01/11 1 –437 – – – – 437 12.54 01/08/12 – 31/01/13 – –– 232 – – – 232 15.63 01/08/13 – 31/01/14 – –689 232 – (252) – 669 – 1 2Mr G L Blashill 729 – – – – 729 12.54 01/08/12 – 31/01/13 – –729 – – – – 729 – – 8Mr G Davis 656 – – – – 656 14.96 01/08/12 – 31/01/13 – –291 – – – – 291 12.54 01/08/12 – 31/01/13 – –947 – – – – 947 – –1 Mr R Dyrbus exercised on 2 August 2010.2 Or date of retirement if earlier.3 Any option not exercised by the end of the range of exercisable dates will expire.4 Gains made on exercise, calculated as the difference between the exercise price and the market price on the date of exercise. Aggregate gains during theyear were £776 (2009: £13,948).There have been no changes in any Executive Directors’ share options since 30 September 2010.Our middle market share price at the close of business on 30 September 2010, being the last trading day of the financialyear, was £18.97 and the range of the middle market price during the year was £17.53 to £21.54.Full details of the Directors’ share interests are available for inspection in the Register of Directors’ Interests at our registered office.Award DatesOur policy is to grant awards under all our employee share plans on predetermined dates based on an annual cycle.Share Ownership GuidelinesWe have adopted a set of share ownership guidelines as we believe Executive Directors and other senior managers should beencouraged to hold a substantial portion of their personal wealth in our shares to align their interests with those of our shareholders.Over a period of five years from appointment Executive Directors and other senior managers are required to build a holding inthe Group’s shares to a minimum value broadly equivalent to three times base salary for our Chief Executive and FinanceDirector and twice base salary in respect of the other Executive Directors. Other senior management are expected toinvest at a level equivalent to between once and twice base salary, dependent upon grade. Failure to meet the minimumshareholding requirement is taken into account when determining eligibility for LTIP awards. All Executive Directors currentlyexceed their required shareholding.Revisions to Executive Directors’ RemunerationSubject to consultation with our major shareholders and representative bodies, the Remuneration Committee has revised thepolicy for Executive Directors relating to the annual bonus opportunity and the SMS performance criterion as outlined below.These revisions are designed to further increase the emphasis on driving and rewarding performance, to bring the incentivepay structure more closely into line with our comparator group of FTSE 50 companies and to further support the Group’sstrategy by driving growth in revenues and profit, with high levels of cash conversion. The policy in respect of the LTIP andthe share ownership guidelines remains unchanged.Maximum Annual Bonus OpportunityThe potential maximum annual bonus will increase from 150 per cent to 200 per cent of base salary for the Chief Executiveand from 135 per cent to 150 per cent for the Finance Director, but will remain unchanged at 120 per cent for the GroupSales and Marketing Director.In support of the Group’s KPIs, as set out on pages 22 to 24, the Remuneration Committee also determined that, for thefinancial year ending 30 September 2011, up to 75 per cent of the maximum annual bonus (representing up to 150 per cent ofbase salary for the Chief Executive) can be earned for achieving financial targets based on a matrix including growth in adjustedearnings per share and net revenue growth (which is subject to market share underpins). The remaining 25 per cent of theannual bonus (representing up to 50 per cent of base salary for the Chief Executive) can be earned for performance againststretching, quantifiable non-financial targets, subject to achievement of a minimum threshold in respect of the financial targets.The non-financial targets are designed to support our growth strategy by driving performance against our key growth drivers,including volume targets incentivising sales growth in support of our cigarette volumes and white stick equivalents KPIs, debtreduction targets incentivising performance against our cash utilisation KPI and targets relating to anti-illicit trade activitiessupporting our focus on future foundations.92