Directors' Report: Governance - British American Tobacco
Directors' Report: Governance - British American Tobacco
Directors' Report: Governance - British American Tobacco
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Performance graph<br />
Schedule 8 to the Large and Medium-sized Companies and<br />
Groups (Accounts and <strong>Report</strong>s) Regulations 2008 requires that the<br />
Company must provide a graph comparing the TSR performance of<br />
a hypothetical holding of shares in the Company with a broad equity<br />
market index over a five year period. In this context, the Directors have<br />
again chosen to illustrate the performance of TSR against the FTSE 100<br />
Index over a five year period, commencing on 1 January 2005. In the<br />
opinion of the Directors, the FTSE 100 Index is the most appropriate<br />
index against which TSR should be measured because it is a widely<br />
used and understood index of broadly similar sized UK companies<br />
to the Company. The performance graph is shown below.<br />
Historical total shareholder return performance<br />
Growth in the value of a hypothetical £100 holding over five years<br />
FTSE 100 comparison based on 30 trading day average values.<br />
400<br />
300<br />
200<br />
100<br />
0<br />
Total shareholder return (annual %)<br />
■ <strong>British</strong> <strong>American</strong> <strong>Tobacco</strong><br />
■ FTSE 100<br />
FTSE 100 – 1 January 2007 to 31 December 2009<br />
The FTSE 100 comparison is based on three months’ average values.<br />
30<br />
00<br />
-30<br />
-60<br />
■ Upper quartile<br />
■ Lower quartile<br />
FMCG group – 1 January 2007 to 31 December 2009<br />
The FMCG group comparison is based on three months’ average values.<br />
20<br />
00<br />
-20<br />
www.bat.com/annualreport2009<br />
Dec 04 Dec 05 Dec 06 Dec 07 Dec 08 Dec 09<br />
<strong>British</strong> <strong>American</strong> <strong>Tobacco</strong> 15.5%<br />
<strong>British</strong> <strong>American</strong> <strong>Tobacco</strong> 15.5%<br />
Median 3.2%<br />
Median (1.3)%<br />
■ Upper quartile<br />
■ Lower quartile<br />
LTIPs – change of control<br />
The rules of the 1998 LTIP and the 2007 LTIP both provide that in the<br />
event of a change of control of the Company as a result of a takeover,<br />
reconstruction or winding up of the Company (not being an internal<br />
reorganisation), LTIP awards will become exercisable for a limited<br />
period based on the period of time which has elapsed since the date<br />
of the award and the achievement of the performance conditions at<br />
Directors’ report: <strong>Governance</strong><br />
<strong>British</strong> <strong>American</strong> <strong>Tobacco</strong> Annual <strong>Report</strong> 2009<br />
that date, unless the Remuneration Committee determines this not to<br />
be appropriate in the circumstances. In addition, the 2007 LTIP allows<br />
(as an alternative to early release) that participants may, if permitted,<br />
exchange their LTIP awards for new awards of shares in the acquiring<br />
company on a comparable basis.<br />
Share Option Scheme<br />
No options have been granted under the Share Option Scheme<br />
since March 2004 and no options have been granted to the current<br />
Executive Directors since September 1999. The Share Option Scheme<br />
expired in April 2008. As at 31 December 2009, no Executive Directors<br />
held outstanding options under the Share Option Scheme.<br />
During the life of the Share Option Scheme, options granted were<br />
not issued at a discount to the market price at the time of grant, with<br />
the value of options for that grant being limited to 50 per cent of a<br />
participant’s base salary. All outstanding options have matured and<br />
are exercisable up to March 2014.<br />
All-employee share schemes<br />
The Executive Directors, Management Board members and senior<br />
managers are also eligible to participate in the following all-employee<br />
share schemes which are designed to incentivise employees of the<br />
Group by giving them opportunities to build a shareholding in<br />
the Company: the <strong>British</strong> <strong>American</strong> <strong>Tobacco</strong> Sharesave Scheme<br />
(Sharesave Scheme) and the Employee Share Ownership Plan.<br />
Sharesave Scheme<br />
The Sharesave Scheme is approved by HM Revenue & Customs<br />
(HMRC). Eligible employees, including the Executive Directors and<br />
Management Board members, have been granted employee savingsrelated<br />
share options to subscribe for ordinary shares in the Company.<br />
In November 2009, the Company made a further grant of options<br />
under the Sharesave Scheme which allows for options granted to be<br />
exercisable in conjunction with either a three year or five year savings<br />
contract up to a monthly limit of £250. Options are normally granted<br />
at a discount of 20 per cent to the market price at the time of the<br />
invitation, as permitted under the rules of the Sharesave Scheme.<br />
At 31 December 2009, all the Executive Directors held options under<br />
the Sharesave Scheme.<br />
Employee Share Ownership Plan<br />
The Employee Share Ownership Plan is an HMRC approved share<br />
incentive plan, which incorporates a Partnership and Free Shares element.<br />
The Partnership Share Scheme is open to all eligible employees, including<br />
Executive Directors and Management Board members. Employees can<br />
allocate part of their pre-tax salary to purchase shares in the Company.<br />
The maximum amount that can be allocated in this way is £1,500 in<br />
any year. Shares purchased are held in a UK-based trust, normally<br />
capable of transfer to participants tax-free after a five year holding<br />
period. At 31 December 2009, of the Executive Directors, Paul Adams<br />
and Nicandro Durante, participated in the Partnership Share Scheme.<br />
85<br />
From the Chairman<br />
Performance<br />
and strategy Regional review Financial review <strong>Governance</strong><br />
Group financial<br />
statements<br />
Parent Company<br />
financial statements<br />
Shareholder<br />
information