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Report & Accounts 2005

Directors' Remuneration Report


All the Executive Directors (other than John Sunderland who was not eligible to do so) invested their total AIP award in the Company's shares through the Bonus Share Retention Plan rather than taking it as cash.

In the following tables, references to CEC members mean the individuals who are members of the Chief Executive's Committee (our senior management) but who are not Executive Directors. Three CEC members left the Group in 2005 and three new members were appointed. Remuneration shown for the CEC includes remuneration paid to one CEC member as part of his termination package after he left the CEC but does not include remuneration paid to any individual prior to their joining the CEC. In 2005, there were a maximum of nine individuals at any one time who were members of the CEC but who were not Executive Directors.

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Directors' remuneration summary (table one)


  2005
£000		 2004
£000
Total remuneration:    
Fees as Directors (a) 534 309
Salaries and other benefits 3,493 3,611
Annual Incentive Plan/Bonus Share Retention Plan awards (b) 2,994 2,725
Gains made on exercise of share options 2,734 612
Payments made to former Executive Directors or their dependants (c) – 249
Pensions paid to former Executive Directors 32 31
Notes
(a) The highest paid Director was John Sunderland: £3,513,000 (2004: John Sunderland: £2,200,000). Most of this remuneration is notional or actual gains on the exercise of share options. All of John Sunderland's share options must be exercised by 24 August 2006.
(b) These amounts relate to the Annual Incentive Plan awards for each year. The total shown includes the service related match to be awarded under the Bonus Share Retention Plan to each Director based on the AIP award which they have invested and which will vest (normally) in three years' time. The performance related matching award is shown in table six.
(c) David Kappler resigned as a Director on 13 April 2004. From 14 April to 18 June 2004, he continued to be employed by the Company, and during this time he was paid £249,231. This included benefits and AIP earned in respect of that period.

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Executive Directors' and CEC members' remuneration (table two)


  Base Salary
£000		 Allowances (a)
£000		 Other
Benefits (b)
£000		 AIP/BSRP (c)
£000		 2005
total
£000		 2004
total
£000
Ken Hanna 519 180 8 671 1,378 1,037
Bob Stack (d) 419 257 87 623 1,386 1,145
Todd Stitzer (d) 783 284 187 1,127 2,381 2,148
John Sunderland (e) 614 146 9 573 1,342 1,721
CEC members (f) 2,996 1,471 1,360 3,387 9,214 7,234

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Executive Directors' and CEC members' gains on share plans (table three)


  LTIP awards
earned in
2005
£000		 Gains on
exercise of
share options
£000		 2005
total
£000		 2004
total
£000
Ken Hanna – – – –
Bob Stack – 429 429 132
Todd Stitzer – 266 266 –
John Sunderland – 2,039 2,039 479
CEC members (f) – 660 660 389
Notes to tables two and three above
(a) The majority of the amount shown as Allowances for expatriate Directors (Bob Stack and Todd Stitzer) and expatriate CEC members relates to income tax payments. As taxation rates in the US are lower than in the UK, US tax payers are protected from a higher tax burden by means of a tax equalisation programme funded by the Company. Under this programme, we pay an amount equal to the incremental tax resulting from the assignment of individuals to the UK. This ensures that they are not penalised financially by accepting roles of an international nature which would result in higher taxation costs than would have been the case if they had remained in their home country. Due to the nature of taxation payments, some of the amounts shown are in respect of previous financial years. For all Directors and CEC members, Allowances include flexible benefits and pension allowances. Ken Hanna's Allowances include an amount equal to 30% of his base salary in lieu of a pension contribution.
(b) Other Benefits include car allowances and, for expatriates, housing support and other allowances necessary to ensure that they are not penalised financially by accepting roles of an international nature which result in higher costs than would have been the case if they had remained in their home country.
(c) The total Annual Incentive Plan award shown was awarded in respect of 2005 performance and invested in the Bonus Share Retention Plan on 4 March 2006 by each eligible Director. The AIP and BSRP are described in the Overview of current remuneration elements for executives including Executive Directors. The amount shown includes the service related matching award to be awarded under the Bonus Share Retention Plan to each Director and the aggregate for CEC members. The performance related conditional matching awards are shown in table six.
(d) Todd Stitzer's and Bob Stack's base salaries are calculated in US dollars as follows: Todd Stitzer – salary US$1,426,923; Bob Stack – salary US$763,654.
(e) John Sunderland was an Executive Director until 24 August 2005 when he became a Non-Executive. His remuneration prior to that date is shown in table two, and since that date is shown on table four. Gains on share plans for the whole year are shown in table three. His total remuneration for the year (including notional gains on share plans) is shown below table one.
(f) During the year, three CEC members resigned or retired and three new members were appointed. For all remuneration except AIP/BSRP, the aggregate amounts shown for the CEC are only those amounts paid to individuals whilst they were CEC members. AIP/BSRP amounts are shown in full and reflect payments made to a total of 11 individuals. Other Benefits for CEC members includes payments made in connection with the cessation of employment.

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Non-Executive Directors' fees (table four)

  Board fee
£000		 Fee for chairing
a committee
£000		 2005
total
£000		 2004
total
£000
Wolfgang Berndt 46 – 46 41
Rick Braddock 74 8 82 71
Roger Carr 93 – 93 83
David Thompson 46 11 57 51
Lord Patten (a) 24 – 24 –
John Sunderland (b) 132 – 132 –
Rosemary Thorne 46 – 46 14
Baroness Wilcox 46 8 54 49
Notes
(a) Lord Patten was appointed as a Non-Executive Director on 1 July 2005.
(b) John Sunderland was appointed as Non-Executive Chairman on 25 August 2005. Tables two and three show his remuneration prior to that date, and other benefits he received in the year.
(c) None of the Non-Executives (other than John Sunderland) received any other emoluments during the 2005 financial year.

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Executive Directors' and CEC members' interests in the Long Term Incentive Plan (table five)


  Interest
in shares
at 2 January
2005 (or date
of appointment
if later) (a)		 Interest
in shares
awarded in
2005 (b)		 Shares
vested in
2005 (c)		 Interest
in shares
lapsed in
2005 (c)		 Interest
in shares
as at 1 January
2006 (or date
of resignation
if earlier) (d)
Ken Hanna 198,979 129,896 – – 328,875
Bob Stack 410,023 102,132 – 64,949 447,206
Todd Stitzer 634,330 191,414 – 84,844 740,900
John Sunderland (e) 875,972 51,692 – 309,491 618,173
CEC members 2,266,015 562,810 – 630,717 2,198,108
Notes
(a) Interests as at 2 January 2005 are potential interests shown at their maximum number in respect of the extended 2000–2002, 2001–2003 and the 2002–2004 cycles, and the 2003–2005, and 2004–2006 cycles.
(b) The interests in shares awarded in 2005 relate to the 2005–2007 cycle. The mid-market price on 8 April 2005 when these awards were made was £4.85.
(c) The criteria under which these awards would vest in full are explained in the table under Long Term Incentive Plan. All interests in shares in respect of the 2000–2002 cycle lapsed at the end of the financial year.
(d) Interests as at 1 January 2006 are potential interests shown at their maximum number in respect of the extended 2001–2003, 2002–2004 and 2003–2005 cycles, and the 2004–2006 and 2005–2007 cycles. The current status of each cycle is shown in the Discretionary Share Option Plans. At the present time it is anticipated that no cycle will vest at maximum.
(e) John Sunderland's employment ceased on 24 August 2005 and a proportion of his outstanding LTIP awards lapsed in accordance with the rules of the plan.
(f) All awards are in shares. Qualifying conditions for the awards shown above have to be fulfilled by 31 December 2008 at the latest.

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Executive Directors' and CEC members' performance related interests in the Bonus Share Retention Plan (table six)


This table shows the maximum performance related matching award granted to each Director in respect of the investment made by the Director of his AIP award in the BSRP in 2005 and 2006.

  Maximum performance
related award in
respect of
2004 (a)		 Maximum performance
related award in
respect of
2005 (b)		 Shares vested in
2005		 Interest in shares
lapsed in
2005		 Total of maximum
performance related
awards in respect of
2004 and 2005 (c)
Ken Hanna 54,680 51,759 – – 106,439
Bob Stack 42,451 45,297 – – 87,748
Todd Stitzer 78,626 81,940 – – 160,566
CEC members 177,132 133,273 – – 310,405
Notes
(a) The monetary value of the service-related awards for 2004 and 2005 is included in the AIP/BSRP awards shown in tables one and two. The interests shown in this table are performance related awards shown at their maximum number in respect of the 2004–2006 and 2005–2007 cycles. Performance related matching awards are made in March in respect of the previous year's AIP investment (i.e. in March 2006 for 2005 AIP).
(b) The mid-market price on 4 March 2006 when these awards were made was £5.87. Qualifying conditions for these awards are set out in the table under Long Term Incentive Plan.
(c) All awards are in shares. Qualifying conditions for the awards shown above have to be fulfilled by 31 December 2007 at the latest.

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Executive Directors' pensions and retirement benefit arrangements (table seven)


  Accrued
pension
at 1 January
2006
(or date of
retirement
if earlier)
£000		 Increase in
accrued
pension
during
the year
£000		 Transfer
value of
accrued
pension at
1 January 2006
(or date of
retirement
if earlier)
£000		 Transfer
value of
accrued
pension at
2 January 2005
£000		 Increase
in transfer
value
over the
year, (or to
the date of
retirement if
earlier) less
Directors'
contributions
£000		 Increase
in
accrued
pension
during the
year (or to
the date of
retirement
if earlier)
(net of
inflation)
£000		 Transfer
value of
the
increase
in accrued
pension
(net of
inflation)
less
Directors'
contributions
£000
UK Pension Arrangements (a)              
John Sunderland (b) 762 57 15,265 13,832 1,395 57 1,117
               
US Pension Arrangements              
Bob Stack (c) 331 50 2,957 2,368 589 41 364
Todd Stitzer (c) 623 172 5,132 3,502 1,629 156 1,283
Notes
(a) As noted in Retirement benefits, Ken Hanna receives an amount equal to 30% of his base salary in lieu of a pension contribution.
(b) John Sunderland retired on his normal retirement date as an executive on 24 August 2005 but remained as Chairman on the Board of Directors and no further pension accrued from that date.
(c) The pension arrangements for Bob Stack and Todd Stitzer are made in US dollars and converted, for the purpose of this table only, at the rate of US$1.72 = £1.
(d) The accrued pensions represent the amount of the deferred pension that would be payable from the member's normal retirement date on the basis of leaving service at the relevant date.
(e) The transfer values have been calculated in accordance with the guidance note GN11: Retirement Benefit Schemes – Transfer Values published by the Institute of Actuaries and Faculty of Actuaries, and by reference to investment market conditions at the relevant date. Under the Stock Exchange Listing Rules, the transfer value of the increase in accrued pension has been calculated using investment conditions at the date of retirement. Where appropriate, allowance has been made for the fact that the pension has been put into payment.
(f) The aggregate amount set aside in 2005 to provide for pensions and post retirement medical benefits for the Executive Directors and CEC members was £1.323m. This consists of approved pension arrangements of £0.787m, unapproved pension arrangements of £0.525m and post medical retirement benefits of £11,000. Arrangements made in euros were converted, for the purposes of this table, at the rate of €1.46 = £1 and arrangements made in US dollars were converted at a rate of US$1.72 = £1.

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Executive Directors' and CEC members' options over ordinary shares of 12.5p each (table eight)


Name of
Director
and Scheme		 As at
2 Jan 2005
(or date of
appointment
if later) 		Granted Exercised As at
1 Jan 2006
(or date of
resignation
if earlier) 		Exercise
price £		 Market
price at
exercise
date £ 		Gain
made on
exercise
£(i) 		Exercisable
From To
Ken Hanna                  
SOP94 (a) 125,000 – – 125,000 4.2475     27 Mar 2007 26 Mar 2014
SOP04 (b) 205,000 – – 205,000 4.395     28 Aug 2007 27 Aug 2014
SOP04 (b) – 200,000 – 200,000 5.255     2 Apr 2008 1 Apr 2015
SAYE (c) 4,699 – – 4,699 3.5160     1 Feb 2010 31 Jul 2010
  334,699 200,000 – 534,699          
Bob Stack                  
SOP94 (a) 250,000 – – 250,000 4.09     2 Sep 2003 1 Sep 2010
SOP94 (a) 250,000 – – 250,000 4.77     1 Sep 2004 31 Aug 2011
SOP94 (a) 250,000 – – 250,000 4.825     24 Aug 2005 23 Aug 2012
SOP94 (a) 350,000 – – 350,000 3.515     10 May 2006 9 May 2013
SOP94 (a) 54,000 – 54,000 – 2.425 5.12 145,427 28 Sep 1998 27 Sep 2005
SOP94 (a) 90,000 – 90,000 – 2.595 5.68 277,830 28 Sep 1999 27 Sep 2006
SOP04 (b) 177,000 – – 177,000 4.395     28 Aug 2007 27 Aug 2014
SOP04 (b) – 151,500 – 151,500 5.255     2 Apr 2008 1 Apr 2015
ESPP (d) 2,140 28 2,168 – $4.665 5.25 6,065 18 Apr 2005 29 Apr 2005
ESPP (d) 1,512 – – 1,512 $6.613     17 Apr 2006 28 Apr 2006
  1,424,652 151,528 146,168 1,430,012     429,322    
Todd Stitzer                  
SOP94 (a) 275,000 – 275,000 – 4.09 5.06 265,705 2 Sep 2003 2 Sep 2010
SOP94 (a) 275,000 – – 275,000 4.77     1 Sep 2004 31 Aug 2011
SOP94 (a) 300,000 – – 300,000 4.825     24 Aug 2005 23 Aug 2012
SOP94 (a) 500,000 – – 500,000 3.515     10 May 2006 9 May 2013
SOP04 (b) 327,000 – – 327,000 4.395     28 Aug 2007 27 Aug 2014
SOP04 (b) – 284,000 – 284,000 5.255     2 Apr 2008 1 Apr 2015
  1,677,000 284,000 275,000 1,686,000     265,705    
John Sunderland (g)                
SOP94 (a) 500,000 – 500,000 – 4.09 5.43 672,480 2 Sep 2003 1 Sep 2010
SOP94 (a) 500,000 – 300,000 200,000 4.77 5.51 221,220 1 Sep 2004 31 Aug 2011
SOP94 (a) 500,000 – – 500,000 4.825     24 Aug 2005 23 Aug 2012
SOP94 (a)(e) 500,000 – 381,410 – 3.515 5.66 819,471 10 May 2006 9 May 2013
SOP94 (a) 125,000 – 125,000 – 2.595 5.20 325,560 28 Sep 1999 27 Sep 2006
SAYE (c) 3,117 – – 3,117 3.248     1 Feb 2006 31 July 2006
(e) 2,128,117 – 1,306,410 703,117     2,038,731    
CEC                  
members 6,646,287 921,246 374,000 7,193,533 4.32 5.21 660,365 28 Sep 1999 25 Nov 2015
Notes
(a) Share Option Plan 1994.
(b) Share Option Plan 2004.
(c) Savings-Related Share Option Scheme 1982.
(d) US and Canada Employee Stock Purchase Plan 1994.
(e) 118,590 options granted to John Sunderland lapsed during the year on his retirement as an Executive Director at which time all his options became immediately exercisable. No other options lapsed during the year.
(f) No payment was made on the granting of any of these options.
(g) Non-Executive Directors are not granted share options. John Sunderland has until 24 August 2006 to exercise his remaining share options following his retirement as an employee.
(h) The market price of an ordinary share on 30 December 2005 (the last dealing day in the financial year) was £5.50. The highest and lowest market prices of an ordinary share in the year were £4.66 and £5.95 respectively.
(i) Where some or all of the shares were sold immediately after the exercise of an option, the gain shown is the actual gain made by the Director or CEC member. If some or all of the shares were retained, the gain is a notional gain calculated using the market price on the date of exercise. When an option was exercised or shares were sold in parts on a number of different days in the year, the gain shown is the aggregate gain from all those exercises.

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Share ownership (table nine)


  As at
2 January 2005
(or date of appointment
if later)		 As at
1 January 2006
(or date of resignation
if earlier)		 As at
13 March 2006
(unaudited)
Wolfgang Berndt 70,972 76,072 77,403
Rick Braddock 40,296 47,528 49,496
Roger Carr 29,923 38,423 40,642
Ken Hanna (a)(c) 250,212 378,143 498,988
Lord Patten (b) – 1,021 2,108
Bob Stack (c) 699,451 764,725 837,038
Todd Stitzer (c) 417,557 551,835 647,244
John Sunderland (c) 1,304,056 938,658 941,775
David Thompson 34,656 39,825 41,267
Rosemary Thorne 315 4,564 5,673
Baroness Wilcox 21,967 27,343 28,674
  2,869,405 2,868,137 3,170,308
CEC members (d) 2,141,929 2,391,990 1,167,540
Notes
(a) Ken Hanna's shareholding includes an award of 225,000 restricted shares, vesting in three tranches of 75,000 shares each if he remains with the Company for three, four and five years respectively after his joining the Company.
(b) Lord Patten was appointed as a Director on 1 July 2005.
(c) Holdings of ordinary shares include shares awarded under the BSRP and the all-employee share incentive plan.
(d) Shareholdings of CEC members include restricted share awards, the release of which is dependent upon specified performance conditions.
(e) To accurately reflect the share ownership for each Director, as shown in the Register of Directors' Interests (maintained under Section 325 of the Companies Act 1985) the holdings for each Director in tables eight and nine should be added together.

The Executive Directors, as potential beneficiaries, were treated as being interested in any dealings in the Company's ordinary shares by the Cadbury Schweppes plc Qualifying Employee Share Ownership Trust ("QUEST") (see Note 26Opens in a new window to the Financial Statements). During the period 3 January 2005 to 1 February 2005 the QUEST acquired a total of 853,287 ordinary shares in the Company by subscription at prices between £4.70 and £4.85 per share. Those ordinary shares were all transferred by the QUEST to individuals who had exercised options under the Savings-Related Share Option Scheme 1982. Since February 2005 the QUEST has neither acquired nor held any ordinary shares in the Company and there is no present intention that it should do so in the future.

The following Executive Directors have interests in the Common Stock of US$0.01 each of Dr Pepper/Seven Up Bottling Group, Inc (DPSUBG) (the holding company of the Group's American bottling operations) in which the Company has an ultimate 45% interest:

Bob Stack 250
Todd Stitzer 2,500