REPORT OF THE REMUNERATION COMMITTEE
ON DIRECTORS’ REMUNERATION


INTRODUCTION
The following pages set out the Board’s remuneration policy as it applies to the executive Directors. In the interests of good governance, (whilst this is not a legal requirement) the Directors are proposing at the 2011 Annual General Meeting an advisory non-binding vote to receive and consider this report of the Remuneration Committee on Directors’ Remuneration.

COMPOSITION AND TERMS OF REFERENCE OF COMMITTEE
The Remuneration Committee of the Board, whose membership is set out on page 32, consists solely of non-executive Directors.

Philip Lynch is Chairman of the Committee. The Chairman and Chief Executive are fully consulted on remuneration proposals but neither is present when his own remuneration is discussed. The Remuneration Committee obtains external advice from benefit consultants and other independent firms on compensation when necessary. The consultants have no other connection with the Group. During the year ended 28 February 2011 the Committee obtained advice from Aon Hewitt.

The Committee’s terms of reference include making recommendations to the Board in respect of Group policy on executive and senior management remuneration; and the consideration and determination of the remuneration of the executive Directors and senior management. It also oversees all employee share schemes.

REMUNERATION POLICY
The main aim of the Group’s remuneration policy is to reward the Group’s executive Directors and senior management competitively, having regard to the need to ensure that they are properly remunerated and motivated to perform in the best interests of shareholders. Performance-related rewards, based on measured and stretching targets, are therefore an important component of remuneration packages.

The main elements of the remuneration package for senior management are basic salary and benefits (including contributions to, or in lieu of, pension, company car and health benefits), performance-related annual bonus and longer term share incentives.

In order to secure the services of John Dunsmore, Stephen Glancey and Kenny Neison in November 2008, a remuneration package was agreed, which, in addition to the above, included a high level of share-based incentives. These were granted under the C&C Joint Share Ownership Plan. Further details of this scheme are given below.

During the forthcoming year the Committee, in consultation with its external remuneration advisors, will be reviewing aspects of the remuneration policy, including the operation of the Group’s employee share schemes, in the light of current best practice and guidance and experience gained from previous awards. As part of this review, the Committee intends to recommence awards under the Long Term Incentive Plan and the Approved Profit Sharing Scheme within existing limits and also to introduce a deferred bonus share scheme, which will not be open to executive Directors.

EXECUTIVE DIRECTORS’ REMUNERATION
A summary of the remuneration policy for the executive Directors is as follows:

Fixed Remuneration Performance-linked remuneration
Base salary – with fixed 3% annual increases, waived by the executive Directors for the past two years.

Benefits – a 7.5% cash allowance for car and health benefits.

Pension – allowance of 25% of basic salary as cash or pension contribution.
Annual incentives

Cash bonus – up to a maximum of 80% of basic salary, subject to the achievement of a Group operating profit target. No bonus payments were awarded FY11.
Long term incentives Annual share option grants - 150% of basic salary with a pre-vesting earnings per share performance target; no retesting permitted.

Joint Share Ownership Plan
– awards, subject to the achievement of performance conditions, granted in December 2008 to facilitate recruitment. Plan approved by shareholders at an EGM in December 2008.

Service Contracts
Each of the executive Directors is employed on a service contract. None of these service contracts has a notice period in excess of one year.

Details of the service contracts of the executive Directors are as follows:

  Contract
date
Notice
period
Unexpired
term of
contract
       
John Dunsmore 9 November 2008 12 months n/a
Stephen Glancey 9 November 2008 12 months n/a
Kenny Neison 9 November 2008 12 months n/a

The service contracts do not contain any pre-determined compensation payments in the event of termination of office or employment.

Basic Salary and Benefits
The salary levels of executive Directors and senior management are reviewed annually in January. No increases were granted in January 2011.

The employment contracts of the executive Directors entitle each of them to a 3% increase in basic salary on the first and second anniversaries of their appointment. The executive Directors waived their entitlement to this increase in November 2009 and again in November 2010.

Benefits to senior managers include a company car or car allowance and health benefits. The executive Directors receive a cash allowance of 7.5% of basic salary in lieu of these benefits.

Pensions
No current executive Director or member of senior management accrues any benefits under a defined benefit pension scheme. Payments in respect of pensions are calculated on basic salary only and no incentive or benefit elements are included.

John Dunsmore and Stephen Glancey receive a cash payment of 25% of basic salary, in order to provide their own pension benefits, and the Group makes a fixed sterling payment equivalent to 25% of basic salary into Kenny Neison’s personal pension plan.

Performance Related Annual Bonus
The Group operates a performance-related cash bonus scheme for executive Directors, senior management and other employees. The maximum annual bonus payable is 80% of basic salary for the executive Directors, 70% for senior management and lesser amounts for other employees. The performance metric for bonuses for the executive Directors is Group operating profit. The bonus is split into a basic bonus when a target threshold is achieved and a tiered bonus for performance above the threshold. For the year ended 28 February 2011 the target threshold for the executive Directors was not achieved and no bonuses were paid to them. The target thresholds for divisional management and staff were met in some cases and not in others.

The Remuneration Committee has approved a bonus scheme for the year ending 29 February 2012.

The bonus scheme and the payment of bonuses are subject to annual approval by the Remuneration Committee. The Committee reserves the right to vary, amend, replace or discontinue the bonus scheme at any time depending on business needs and/or financial viability or as appropriate by reference to any changes in corporate structure during the financial year.

Share Options
The service contracts of the executive Directors entitle them to an annual grant of share options of 150% of basic salary under the Executive Share Option Scheme.

Details of the interests of the Directors in share options granted under the Executive Share Option Scheme are set out on page 51 and note 5 on pages 75 to 77.

C&C JOINT SHARE OWNERSHIP PLAN
The C&C Joint Share Ownership Plan was approved by shareholders at an Extraordinary General Meeting (‘EGM’) on 18 December 2008. The Remuneration Committee supervises the operation of the Plan. The main terms of the plan are as follows:

Participants
Awards were granted to John Dunsmore, Stephen Glancey and Kenny Neison in December 2008. In total they acquired interests in 12.8 million ordinary shares, out of the 16.0 million shares allocated to the Plan. Interests in the remaining 3.2 million shares were granted in June and December 2009 to existing and new members of senior management.

Nature of interests
Interests take the form of a restricted interest in ordinary shares in the Company (“Interest”). An Interest permits a participant to benefit from the increase (if any) in the value of a number of ordinary shares in the Company (“Shares”) over which the Interest is acquired. In order to acquire an Interest, a participant must enter into a joint share ownership agreement with the trustees of an employee benefit trust under which the participant and the trustee jointly acquire the Shares. Under the terms of the plan participants must contribute funding equal to 10% of the issue price on the acquisition of the Interest (the “Entry Price”) with the balancing amount (the “Hurdle Value”) being funded by the employee benefit trust.

The Notice of the EGM specified that the Entry Price would remain at €0.115 per share and the Hurdle Value would remain at €1.035 per share (being 90% of the issue price of the Shares of €1.15, the Share’s closing price on 7 November 2008) for any Interest acquired within the period of six months from date of the adoption of the Plan on 18 December 2008, after which they would be reviewed by the Remuneration Committee. Therefore, for the Interests acquired in December 2008 and June 2009, the Entry Price was €0.115 per share and the Hurdle Value was €1.035 per share and for the Interests acquired in December 2009, the Entry Price was €0.247 per share and the Hurdle Value was €2.223, being 90% of the issue price of the Shares of €2.47 (the Share’s closing price on 18 November 2009, the closing share price prior to consideration of the awards by the Remuneration Committee).

When an Interest vests, the trustees may, at the request of the participant and on payment of the balance of the further amount, transfer shares to the participant of equal value to the participant’s Interest or the Shares may be sold by the trustees, who will account to the participant for the difference between the sale proceeds (less expenses) and the Hurdle Value.

Rights attaching to Interests
The voting rights attaching to the shares subject to the Interests will be exercised by the trustees of the employee benefit trust as they consider appropriate and in the best interests of the beneficiaries of the employee benefit trust, save that each participant may direct the votes on his vested Interests or if greater 10% of the Shares relevant to his Interest.

Dividends on the Shares subject to the Interests accrue solely to the trustees of the employee benefit trust but have been waived by them.

Vesting conditions
All of the Interests are subject to a time-vesting condition with one-third of the Interest in the Shares vesting on the first anniversary of acquisition, one-third on the second anniversary and the final one-third on the third anniversary. In addition, half of the Interests in the Shares are subject to a pre-vesting share price target. In order for these latter Interests to vest, for the Interests granted in December 2008 and June 2009 the Company’s share price must be greater than €2.50 for at least 20 days out of 40 consecutive dealing days during the five-year period commencing on the date of acquisition of the Interest. This share price performance condition was met during 2009. For the Interests granted in December 2009 to vest, the share price performance condition was set at €4.00 for at least 20 days out of 40 consecutive dealing days during the five-year period commencing on the date of acquisition of the Interest. At the date of this report this vesting condition had not been met.

Accordingly as at 28 February 2011, two thirds of the Interests awarded to the executive Directors in December 2008 had vested and the remaining one third are due to vest in December 2011. Of the Interests awarded to senior management in June 2009 one third has vested and the remaining two thirds are due to vest in June 2011 and June 2012. Of the Interests awarded to senior management in December 2009 (save where a participant had left the Group before the vesting date) one sixth has vested, one sixth will vest if the share-price vesting condition is met and the remaining two thirds are due to vest in December 2011 and December 2012 or, if later, upon the share-price vesting condition being met.

In the event of a takeover of the Company the time vesting conditions for half of the Interests may be accelerated in accordance with certain conditions.

Loans and further amounts
When an award is granted to an executive, its value is assessed for tax purposes with the resulting value being deemed to fall due for payment on the date of grant. Under the terms of the plan, the executive must pay the Entry Price at the date of grant and, if the tax value of the award (i.e. the initial unrestricted market value) exceeds the Entry Price, the executive must pay a further amount, equating to the amount of such excess, before a sale of the awarded Interests. The deferral of the payment of the further amount is considered to be an interest-free loan by the Company to the executive repayable before sale of the Interests and a taxable benefit-in-kind arises, charged at the Revenue stipulated rates. When the further amount is paid, the Company compensates the executive for the obligation to pay this further amount by paying him an equivalent amount, which is, however, subject to income tax in the hands of the participant.

EXECUTIVE SHARE OPTION SCHEME
The C&C Executive Share Option Scheme was established in May 2004. It is policy to grant options under this scheme to key executives across the Group to encourage identification with shareholders’ interests. Options are granted solely at the discretion of the Remuneration Committee. Under the scheme rules, options cannot be granted to non-executive Directors. In respect of grants since admission, the maximum grant that can normally be made to any individual in any one year is an award of 150% of basic salary in that year.

Options will not normally be exercisable until three years after the date of grant and are subject to meeting a specific performance target. This performance target requires the Group’s earnings per share (before exceptional items, and including any other adjustments authorised by the Remuneration Committee) to increase by 5% in excess of the change in the Irish Consumer Price Index over the three year period, on a compound basis from date of grant, in order for options to vest. The options lapse if the performance target is not met after the relevant three year period; there is no re-testing provision in the event of a change of control of the Company, however, in certain circumstances the performance target may be measured over a shorter time period, and if the target is met, the options may be exercised within a reduced time period.

The fair value cost of the share options is amortised over the vesting period to the extent that the Directors believe that the options will vest. The fair value of each award is disclosed in note 5 to the Financial Statements (Share Based Payments) on pages 75 to 77.

LONG TERM INCENTIVE PLAN
The C&C share-based Long Term Incentive Plan for executive Directors and senior management was established at the time of the Group’s admission to listing in May 2004.

Under the plan, awards of up to 100% of basic salary may be granted. Awards are in the form of nil-cost options over shares, based on the closing share price on the day before the grant date.

The performance condition adopted by the Remuneration Committee for awards to date has been that, for awards to vest fully, C&C’s total shareholder return must be in the top quartile of a comparator group over a three-year period; no part of the award vests for below median performance; 30% of the award vests for median performance with straight-line pro-rating between the median and upper quartile. In addition to the total shareholder return condition, either earnings per share growth (before exceptional items and including any other adjustments authorised by the Remuneration Committee) must increase by 5% in excess of the change in the Irish Consumer Price Index on a compound basis over the same three-year period or the Remuneration Committee must otherwise be satisfied that the Group’s underlying financial performance over the performance period warrants that level of vesting. If neither of these latter conditions is met at the end of the relevant period, the award lapses.

The Directors in office at 28 February 2011 have no outstanding awards granted under the Long Term Incentive Plan.

OTHER SCHEMES
Prior to flotation, the Group entered into an agreement with trade unions representing the majority of its then employees, which provided for an initial grant of free shares to eligible employees, the establishment of an approved Save As You Earn scheme and the establishment of an Approved Profit Sharing Scheme, all after the completion of an initial public offering. On admission, 9.4 million ordinary shares with an aggregate value of €21.3 million were issued to fulfil the Group’s obligations under the free share arrangements.

A discretionary share scheme was put in place during the year ended 28 February 2007. The Board approved a share allocation of between 3% and 4% of basic salary remuneration to employees subject to a minimum allocation of €1,000 per employee. The Group purchased 189,061 shares and placed these shares in Irish/ UK Revenue approved employee trusts, where they are held for the benefit of each employee and where each employee has full voting rights and dividend entitlements. However employees face tax penalties should they dispose of the shares before the expiry of the vesting period.

The executive Directors are eligible to participate in the UK Revenue-approved share incentive plans that the Company operates on the same terms as all other eligible employees.

Details of other share-based schemes, in which Directors are not eligible to participate, are also given in note 5 to the Financial Statements (Share Based Payments) on pages 75 to 77.

DILUTION LIMITS
Full details of the share awards and the maximum dilution are given in note 5 to the Financial Statements (Share Based Payments) on pages 75 to 77. All share plans with the exception of the Joint Share Ownership Plan, which was specifically approved by shareholders in December 2008, contain the share dilution limits recommended in institutional guidance.

NON-EXECUTIVE DIRECTORS’ REMUNERATION
Non-executive Directors are appointed by way of letters of appointment, which are all effective for a period of three years (but now subject to annual re-election by the members in General Meeting). The appointment of each of the non-executive Directors can be terminated on one month’s notice.

The remuneration of the non-executive Directors is determined by the Board of Directors as a whole. The Chairman is not involved in determining his own remuneration.

The fees paid to non-executive Directors are set at a level which aims to attract individuals with the necessary experience and ability to make a significant contribution to the Group.



This graph shows the value, at 28 February 2011, of €100 invested in C&C Group on 28 February 2006 compared with the value of €100 invested in the ISEQ General Index. The other points plotted are the values at intervening financial year-ends. Source: Datastream

Non-executive Directors receive no additional remuneration from the Company apart from a Director’s fee and fees directly relating to their membership of Board sub-committees. Non-executive Directors are not eligible to participate in the Group’s share option scheme. None of the remuneration of the non-executive Directors is performance related. Non-executive Directors’ fees are not pensionable and non-executive Directors are not eligible to join any Group pension plan.

5 YEAR TOTAL SHAREHOLDER RETURN
For information only, by reference to the rules applicable to UK companies listed on the London Stock Exchange, this graph shows the value as at 28 February 2011 of a €100 investment in C&C Group plc shares on 28 February 2006 compared with the ISEQ General Index.

DIRECTORS’ REMUNERATION AND INTERESTS IN SHARE CAPITAL
Details of the overall Directors’ remuneration charged to the Group income statement are shown in note 29 to the Financial Statements on page 107. Individual Directors’ remuneration and pension benefits for the year ended 28 February 2011 are given on this page. The interests of the Directors and Secretary in the share capital of the Company and in share options are shown on this page and page 51. Loans to Directors are shown on page 51.

DIRECTORS’ REMUNERATION – 2011

  Basic
salary/fees
€000
Other
remuneration
fees (iv)
€000
Further
amount (iii)
€000
Benefits
in kind (iii)
€000
Pension
contribution
(or
equivalent)
€000
Total
2011
€000
Total
2010
€000
               
Executive Directors              
John Dunsmore (i) 700 53 55 6 175 989 934
Stephen Glancey 500 38 55 6 125 724 669
Kenny Neison (ii) 300 22 - 4 79 405 124
Sub-total 1,500 113 110 16 379 2,118 1,727
               
Non-Executive Directors              
John Burgess 65 - - - - 65 65
Liam FitzGerald 65 - - - - 65 65
John Hogan 65 25 - - - 90 90
Richard Holroyd 65 10 - - - 75 75
Philip Lynch 65 20 - - - 85 85
Tony O’Brien (v) 78 - - 31 - 109 211
Breege O’Donoghue 65 - - - - 65 65
Sir Brian Stewart (vi) 178 - - - - 178 -
Sub-total 646 55 - 31 - 732 656
               
Equity settled share based employee benefits           1,386 969
Total 2,146 168 110 47 379 4,236 3,352
Average number of executive Directors           3 3
Average number of non-executive Directors           7.5 7

(i) The Board has released John Dunsmore to serve on the Board of Fuller Smith & Turner Plc as a non-executive director and chairman of the Remuneration Committee. He receives and retains an annual fee of £45,000 in relation to this role.
(ii) Kenny Neison’s income for the previous financial year relates to the period from the date of his appointment as executive Director on 10 November 2009 to 28 February 2010.
(iii) See below ‘Loans to Directors’.
(iv) Other fees paid to John Hogan, Richard Holroyd and Philip Lynch in 2011 and 2010 represent fees paid as Chairman of the Audit Committee, Senior Independent Director and Chairman of the Remuneration Committee respectively.
(v) Tony O’Brien’s income relates to the period from 1 March 2010 to 5 August 2010, when he retired from the Board. The benefit in kind in respect of Tony O’Brien relates to the provision of health benefits and the provision and transfer of ownership on retirement from the Board of a company car.
(vi) Sir Brian Stewart’s income relates to the period from the date of his appointment as a Director with effect from 9 March 2010 to 28 February 2011.

No sums were paid to third parties for any Director’s services.

Directors and their interests
The interests of the Directors and Secretary in office at 28 February 2011 in the share capital of Group companies at the beginning of the year (or date of appointment if later) and the end of the year were:

INTERESTS IN ORDINARY SHARES OF €0.01 EACH IN C&C GROUP PLC (i)

  28
February
2011
1 March
2010
(or date of
appointment
if later)
     
Directors    
John Burgess 102,299 100,698
John Dunsmore 5,120,000 (ii) 5,120,000 (ii)
Liam FitzGerald 35,000 35,000
Stephen Glancey 5,120,000 (ii) 5,120,000 (ii)
John Hogan 10,147 9,989
Richard Holroyd 22,349 22,000
Philip Lynch 807,913 793,786
Kenny Neison 2,561,530 (ii) 2,561,530 (ii)(iii)
Breege O’Donoghue 58,790 57,870
Sir Brian Stewart 60,000 -
Total 13,898,028 13,820,873
Company Secretary    
Sinead Gillen - -

Notes

(i) All the above holdings are beneficial interests except as stated in (ii) below.
(ii) Each shareholding of the executive Directors includes Interests in shares acquired and held under the Company’s Joint Share Ownership Plan which at 28 February 2011 was 3,413,334 shares in respect of each of John Dunsmore and Stephen Glancey and 2,560,000 shares in respect of Kenny Neison (2010: 5,120,000 shares in respect of each of John Dunsmore and Stephen Glancey; 2,560,000 shares in respect of Kenny Neison) (see C&C Joint Share Ownership Plan on pages 47 and 48 and note 5 on pages 75 to 77 for further details). The Company has been notified that the balance of the holding in which each of J. Dunsmore and S. Glancey is interested is beneficially owned by his respective wife.
(iii) Kenny Neison’s shareholding includes a shareholding of 1,530 ordinary shares omitted in error in the 2010 Annual Report.

The Directors and Secretary have no beneficial interests in any of the Group’s subsidiary undertakings.

There was no movement in the Directors’ or the Secretary’s interests in C&C Group plc ordinary shares between 28 February 2011 and 18 May 2011.

INTERESTS IN SHARE OPTIONS – EXECUTIVE SHARE OPTION SCHEME
OPTIONS OVER ORDINARY SHARES OF €0.01 EACH IN C&C GROUP PLC

Year ended 28 February   2010 2011 Total Weighted
Average
Price
           
No of Options Exercise Price €1.94 €3.205    
Executive Directors          
John Dunsmore   541,300 327,700 869,000 €2.42
Stephen Glancey   386,600 234,100 620,700 €2.42
Kenny Neison   232,000 140,500 372,500 €2.42
Total   1,159,900 702,300 1,862,200  
           
Company Secretary Exercise Price   €3.32    
Sinead Gillen   - 42,200 42,200 €3.32

Subject to meeting the performance condition, options granted at €1.94 in May 2009 are exercisable in the period 13 May 2012 to 12 May 2016. Subject to meeting the performance condition, options granted at €3.205 in May 2010 are exercisable in the period 26 May 2013 to 25 May 2017 and options granted at €3.32 in July 2010 are exercisable in the period 20 July 2013 to 19 July 2017.

There was no movement in the interests of any of the Directors or the Secretary in options over C&C Group plc ordinary shares between 28 February 2011 and 18 May 2011.

LOANS TO DIRECTORS
When an award is granted to an executive under the Joint Share Ownership Plan, its value is assessed for tax purposes with the resulting value being deemed to fall due for payment on the date of grant. Under the terms of the plan, the executive must pay the Entry Price at the date of grant and, if the tax value of the award (i.e. the initial unrestricted market value) exceeds the Entry Price, the executive must pay a further amount, equating to the amount of such excess, before a sale of the awarded interests. The deferral of the payment of the further amount is considered to be an interest-free loan by the Company to the executive repayable before sale of the Interests. The resulting loans by the Company to the executive Directors are required to be disclosed under the Companies Act 1990. The three executive Directors acquired Interests under the Joint Share Ownership Plan in December 2008. A valuation for tax purposes was commissioned during 2009, which indicates that the tax value of certain of these Interests is higher than the Entry Price, giving rise to a disclosable loan under the Companies Act 1990 and a taxable benefit in kind.

The taxable benefits-in-kind, charged at the Revenue stipulated rates (Ireland 12.5%; UK 4.75% to 5 April 2010 and thereafter 4%), in respect of the loans are disclosed under benefits in kind in Directors’ Remuneration.

The balances of the loans outstanding as at 28 February 2011 and 28 February 2010 are as follows:

  28
February
2011
€’000
28
February
2010
(as restated)
€’000
     
John Dunsmore 111 166
Stephen Glancey 111 166
Kenny Neison 83 83
Total 305 415

The values of loans outstanding at 28 February 2010 have been restated following clarification from the HM Revenue & Customs that, where the tax value of certain Interests awarded to an executive exceeds the Entry Price but the tax value of other Interests awarded to him falls short of the Entry Price, the shortfall cannot be set off against the excess. As discussed on pages 47 to 48, 50% of the Interests awarded to Directors are subject to time vesting conditions only, while the remaining 50% are subject to both time vesting and market based performance conditions. The differing conditions give rise to distinct tax values which, in the case of Interests subject to time vesting conditions only, is in excess of the Entry Price paid and, for Interests subject to both time vesting and market based performance conditions, is less than the Entry Price paid. The disclosable loan therefore comprises the whole of the excess amount without set off of the shortfall.

When the further amount is paid, the Company compensates the executive for the obligation to pay this further amount. During the financial year ended 28 February 2011, John Dunsmore and Stephen Glancey each sold 1,706,666 vested Interests and paid a further amount of €55,467, for which the Company compensated them (subject to deduction of tax). The compensation is disclosed under Further Amount in Directors’ Remuneration.

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