48 Dialog Semiconductor Plc | Annual report and accounts 2012 |  Section 3 | Management and governance Directors’ remuneration report continued Base pay Other benefits Pension Annual bonus Long-term incentives Performance is split into the following metrics: This mechanism is considered  appropriate because: These three financial metrics make up 50% of the annual bonus (the remainder being  commercial and organisational goals, see  below). Pay is therefore closely aligned with the financial performance of the Company. As described above, the CEO receives base pay,  which is reviewed annually, with any increases  effective in July. The CEO’s current annual salary  level is £331,800, an increase of 5% on his  prior salary. The CEO receives a cash allowance in lieu of a Company car of £10,200 per annum, medical  insurance for himself and his spouse and life  and disability insurance. Consistent with the approach adopted for all of the Company’s eligible UK employees, the  Company contributes 9% of the CEO’s base pay to a defined contribution pension scheme. The annual bonus is entirely performance-  based and is paid based on the achievement of stretching performance objectives set by the Committee. As noted above, prior to 2012, performance  above the predetermined target performance  level was determined at the discretion of the  Committee. We recognise that this approach  raised some concerns with Shareholders. As a result, the annual bonus provided for payment of up to 200% of salary for maximum performance, with 100% of salary being paid for target performance. Any deferred shares, whether compulsorily or voluntarily deferred, form the basis for  determining the award under the Company’s  long-term incentive plan, the Executive Incentive  Plan (EIP). Further details of this are set out below. Deferred shares are held for three years then  released. The CEO can request that up to 100%  of his bonus be paid in the form of deferred  shares. The first deferral will occur in 2013. Performance above target  Paid in deferred shares Performance up to target  Paid in cash In order to ensure consistency with our  approach to align remuneration with  Shareholder interests, a deferral element was  introduced in 2012, which operates as follows: For the financial metrics, target performance is set consistent with the annual budget, which the Committee considers to be a stretch. In addition to the above metrics, no bonus is  payable if a minimum profitability gate is not  met and the Committee retains discretion to  adjust the overall bonus to take account of  performance outside the normal bounds. The exercise of any such discretion will be  disclosed in the normal way. The Company currently operates one long-term  incentive plan, the Executive Incentive Plan (EIP).  The EIP was approved by Shareholders in 2010  (with a five-year life) and the first annual awards were made in 2012. The EIP incentivises  participants (the executive team and selected  other key senior managers) to deliver  Shareholder value through long-term  profitability and share price growth. The main features of the EIP are  summarised below: Deferred awards will also be subject to financial  clawback provisions in the case of material  financial misstatement. Any annual bonus (whether paid in cash and/or  shares) is non-pensionable. The Committee determined that establishing a separate bonus matching plan was an  unnecessary complication and preferred to  retain a single, active long-term incentive plan.  This approach also provides for clarity of  long-term performance metrics. ■ It creates a more tangible link between  annual performance and long-term pay  opportunity and performance. ■ It encourages the CEO to invest and hold  Company shares beyond that required under  the bonus rules; and ■ It mandates a certain part of the bonus can  be deferred into Company shares; Metric  Bonus weighting Financial goals Revenue 16.67% Gross margin  16.67% EBIT 16.67% 50% Commercial goals Product related  12.5% Customer related  12.5% 25% Organisation and employee goals 25% Total 100% Design feature  Description Delivery medium  Performance shares (as nominal price options) Performance  3 years, based on period  three annual targets Performance  75% EBIT and revenue, metrics  equally weighted 25% share price growth Vesting  20% at threshold 40% at target 100% at maximum Dilution limit  0.75% of issued share capital per annum Revenue:  +47% Gross margin  -170bps/-1.7% EBIT  +48% Key financial performance achieved during the year was as follows: